TY - JOUR AU - Kamenica,Emir AU - Gentzkow,Matthew TI - Bayesian Persuasion JF - National Bureau of Economic Research Working Paper Series VL - No. 15540 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15540 L1 - http://www.nber.org/papers/w15540.pdf N1 - Author contact info: Emir Kamenica University of Chicago Graduate School of Business 5807 S. Woodlawn Ave. Chicago, IL 60637 Tel: 773.834.8690 E-Mail: emir@uchicago.edu Matthew Gentzkow University of Chicago Graduate School of Business 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-2177 Fax: 773/702-0458 E-Mail: gentzkow@chicagogsb.edu M1 - published as AB - When is it possible for one person to persuade another to change her action? We take a mechanism design approach to this question. Taking preferences and initial beliefs as given, we introduce the notion of a persuasion mechanism: a game between Sender and Receiver defined by an information structure and a message technology. We derive necessary and sufficient conditions for the existence of a persuasion mechanism that strictly benefits Sender. We characterize the optimal mechanism. Finally, we analyze several examples that illustrate the applicability of our results. ER - TY - JOUR AU - Millimet,Daniel L. AU - Tchernis,Rusty TI - Estimation of Treatment Effects Without an Exclusion Restriction: with an Application to the Analysis of the School Breakfast Program JF - National Bureau of Economic Research Working Paper Series VL - No. 15539 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15539 L1 - http://www.nber.org/papers/w15539.pdf N1 - Author contact info: 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 Rusty Tchernis Department of Economics Andrew Young School of Policy Studies Georgia State University P.O. Box 3992 Atlanta, GA 30302-3992 Tel: 404/413/0154 Fax: 404/413-0145 E-Mail: rtchernis@gsu.edu M1 - published as AB - While the rise in childhood obesity is clear, the policy ramifications are not. School nutrition programs such as the School Breakfast Program (SBP) have come under much scrutiny. However, the lack of experimental evidence, combined with non-random selection into these programs, makes identification of the causal effects of such programs difficult. In the case of the SBP, this difficulty is exacerbated by the apparent lack of exclusion restrictions. Here, we compare via Monte Carlo study several existing estimators that do not rely on exclusion restrictions for identification. In addition, we propose two new estimation strategies. Simulations illustrate the usefulness of our new estimators, as well as provide applied researchers several practical guidelines when analyzing the causal effects of binary treatments. More importantly, we find consistent evidence of a beneficial causal effect of SBP participation on childhood obesity when applying estimators designed to circumvent selection on unobservables. ER - TY - JOUR AU - Kacperczyk,Marcin AU - Schnabl,Philipp TI - When Safe Proved Risky: Commercial Paper During the Financial Crisis of 2007-2009 JF - National Bureau of Economic Research Working Paper Series VL - No. 15538 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15538 L1 - http://www.nber.org/papers/w15538.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 Leonard N. Stern School of Business Kaufman Management Center 44 West 4th Street, Room 9-76 New York, NY 10012 E-Mail: schnabl@stern.nyu.edu M1 - published as AB - Commercial paper is one of the largest money market instruments and has long been viewed as a safe haven for investors seeking low risk. However, during the financial crisis of 2007-2009, the commercial paper market experienced twice the modern-day equivalent of a bank run with investors unwilling to refinance maturing commercial paper. We analyze the supply of and demand for commercial paper and show that, in contrast to previous turbulent episodes, the crisis centered on commercial paper issued by, or guaranteed by, financial institutions. We describe the importance of Federal Reserve’s interventions in restoring stability of the market. Finally, we propose three possible explanations for the sharp decline of the commercial paper market: substitution to alternative sources of financing by commercial paper issuers, adverse selection, and institutional constraints among money market funds. ER - TY - JOUR AU - Bebchuk,Lucian A. AU - Weisbach,Michael S. TI - The State of Corporate Governance Research JF - National Bureau of Economic Research Working Paper Series VL - No. 15537 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15537 L1 - http://www.nber.org/papers/w15537.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 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@fisher.osu.edu M1 - published as AB - This paper, which introduces the special issue on corporate governance co-sponsored by the Review of Financial Studies and the National Bureau of Economic Research (NBER), reviews and comments on the state of corporate governance research. The special issue features seven papers on corporate governance that were presented in a meeting of the NBER’s corporate governance project. Each of the papers represents state-of-the-art research in an important area of corporate governance research. For each of these areas, we discuss the importance of the area and the questions it focuses on, how the paper in the special issue makes a significant contribution to this area, and what we do and do not know about the area. We discuss in turn work on shareholders and shareholder activism, directors, executives and their compensation, controlling shareholders, comparative corporate governance, cross-border investments in global capital markets, and the political economy of corporate governance. ER - TY - JOUR AU - Boylan,Richard T. AU - Mocan,Naci H. TI - Intended and Unintended Consequences of Prison Reform JF - National Bureau of Economic Research Working Paper Series VL - No. 15535 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15535 L1 - http://www.nber.org/papers/w15535.pdf N1 - Author contact info: Richard Boylan Rice University Department of Economics MS#22, 6100 S. Main Str. Houston, TX 77005-1892 E-Mail: rboylan@rice.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 M1 - published as AB - Since the 1970s, U.S. federal courts have issued court orders condemning state prison crowding. However, the impact of these court orders on prison spending and prison conditions is theoretically ambiguous because it is unclear if these court orders are enforceable. We examine states' responses to court interventions and show that these interventions generate higher per inmate incarceration costs, lower inmate mortality rates, and a reduction in prisoners per capita. If states seek to minimize the cost of crime through deterrence, an increase in prison costs should lead states to shift resources from corrections to other means of deterring crime such as welfare and education spending. However, we find that court interventions, that are associated with higher corrections expenditures, lead to lower welfare expenditures. This suggests that the burden of increased correctional spending is borne by the poor. Furthermore, states do not increase welfare spending after their release from court order; making the reduction in welfare spending permanent. Thus, our results suggest that states do not respond to prison reform in the manner prescribed by the deterrence model. States' responses to prison reform are most consistent with the predictions in the empirical public finance literature that indicate stickiness in expenditure categories and that increases in spending in programs that affect the poor generate declines in expenditures in other program that are also targeted to the poor. ER - TY - JOUR AU - Bordo,Michael D. AU - Meissner,Christopher M. AU - Stuckler,David TI - Foreign Currency Debt, Financial Crises and Economic Growth: A Long Run View JF - National Bureau of Economic Research Working Paper Series VL - No. 15534 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15534 L1 - http://www.nber.org/papers/w15534.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 David Stuckler Christ Church Oxford, OX1 1DP UK E-Mail: David.Stuckler@Aya.Yale.Edu M1 - published as AB - Foreign currency debt is widely believed to increase risks of financial crisis, especially after being implicated as a cause of the East Asian crisis in the late 1990s. In this paper, we study the effects of foreign currency debt on currency and debt crises and its indirect short and long run effects on output between 1880-1913 and 1973-2003 for 45 countries. Greater ratios of foreign currency debt to total debt are associated with increased risks of currency and debt crises, although the strength of the association depends crucially on the size of a country’s reserve base and its policy credibility. We find that financial crises, driven by exposure to foreign currency, resulted in significant permanent output losses. We evaluate our findings by looking at the risk posed by high levels of foreign currency liabilities in eastern Europe in late 2008. ER - TY - JOUR AU - Andersen,Torben G. AU - Dobrev,Dobrislav AU - Schaumburg,Ernst TI - Jump-Robust Volatility Estimation using Nearest Neighbor Truncation JF - National Bureau of Economic Research Working Paper Series VL - No. 15533 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15533 L1 - http://www.nber.org/papers/w15533.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 M1 - published as AB - We propose two new jump-robust estimators of integrated variance based on high-frequency return observations. These MinRV and MedRV estimators provide an attractive alternative to the prevailing bipower and multipower variation measures. Specifically, the MedRV estimator has better theoretical efficiency properties than the tripower variation measure and displays better finite-sample robustness to both jumps and the occurrence of "zero'' returns in the sample. Unlike the bipower variation measure, the new estimators allow for the development of an asymptotic limit theory in the presence of jumps. Finally, they retain the local nature associated with the low order multipower variation measures. This proves essential for alleviating finite sample biases arising from the pronounced intraday volatility pattern which afflict alternative jump-robust estimators based on longer blocks of returns. An empirical investigation of the Dow Jones 30 stocks and an extensive simulation study corroborate the robustness and efficiency properties of the new estimators. ER - TY - JOUR AU - Arora,Ashish AU - Nandkumar,Anand TI - Cash-out or flame-out! Opportunity cost and entrepreneurial strategy: Theory, and evidence from the information security industry JF - National Bureau of Economic Research Working Paper Series VL - No. 15532 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15532 L1 - http://www.nber.org/papers/w15532.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 Anand Nandkumar Indian School of Business E-Mail: Anand_Nandkumar@isb.edu M1 - published as AB - We analyze how entrepreneurial opportunity cost conditions performance. We depart from the literature on entrepreneurship which identifies survival with performance. Instead, many entrepreneurs aim for a cash-out (IPO or acquisition), especially in innovation based industries. Striving for a cash-out makes mistakes more likely and increases the probability of failure. High opportunity cost entrepreneurs will attempt to cash-out (IPO or friendly acquisition) quickly, even if it implies a higher risk of failure. Entrepreneurs with fewer outside alternatives may tend to linger on longer. We formalize this intuition with a simple model. Using a novel dataset of information security startups we find that entrepreneurs with high opportunity costs are not only more likely to cash-out but they are also more likely to fail. As well, our results confirm the predicted role of venture quality in conditioning the relationship between entrepreneurial opportunity cost and entrepreneurial performance. ER - TY - JOUR AU - Dee,Thomas AU - Jacob,Brian TI - The Impact of No Child Left Behind on Student Achievement JF - National Bureau of Economic Research Working Paper Series VL - No. 15531 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15531 L1 - http://www.nber.org/papers/w15531.pdf N1 - Author contact info: Thomas Dee Department of Economics Swarthmore College Swarthmore, PA 19081 Tel: 610/690-5767 Fax: 610/328-7352 E-Mail: dee@swarthmore.edu 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 M1 - published as AB - The No Child Left Behind (NCLB) Act compelled states to design school-accountability systems based on annual student assessments. The effect of this Federal legislation on the distribution of student achievement is a highly controversial but centrally important question. This study presents evidence on whether NCLB has influenced student achievement based on an analysis of state-level panel data on student test scores from the National Assessment of Educational Progress (NAEP). The impact of NCLB is identified using a comparative interrupted time series analysis that relies on comparisons of the test-score changes across states that already had school-accountability policies in place prior to NCLB and those that did not. Our results indicate that NCLB generated statistically significant increases in the average math performance of 4th graders (effect size = 0.22 by 2007) as well as improvements at the lower and top percentiles. There is also evidence of improvements in 8th grade math achievement, particularly among traditionally low-achieving groups and at the lower percentiles. However, we find no evidence that NCLB increased reading achievement in either 4th or 8th grade. ER - TY - JOUR AU - Markusen,James R. AU - Stähler,Frank TI - Endogenous Market Structure and Foreign Market Entry JF - National Bureau of Economic Research Working Paper Series VL - No. 15530 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15530 L1 - http://www.nber.org/papers/w15530.pdf N1 - Author contact info: James R. Markusen Department of Economics University of Colorado Boulder, CO 80309-0256 Tel: 303/492-0748 Fax: 303/492-8960 E-Mail: james.markusen@colorado.edu Frank Staehler Dept of Economics, University of Würzburg Sanderring 2, D–97070 Würzburg Germany E-Mail: frank.staehler@uniwuerzburg.de M1 - published as AB - Models dealing with cross-border acquisitions versus greenfield investment usually assume that the entry of a foreign firm into a market has effects on the outputs of all domestic firms in that market, but exit or entry of local firms is not considered. The purpose of this paper is to re-examine the acquisition versus greenfield versus exporting question under fixed versus free entry assumptions for local firms. Our finding is that greenfield entry and exporting options are more attractive relative to acquisition when the local market structure adjusts to foreign entry through local entry or exit than when it is fixed. The entering foreign firm may do better or worse under free entry versus a fixed market structure depending on its optimal choice under the latter assumption. ER - TY - JOUR AU - Brown,Stephen AU - Goetzmann,William AU - Liang,Bing AU - Schwarz,Christopher TI - Trust and Delegation JF - National Bureau of Economic Research Working Paper Series VL - No. 15529 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15529 L1 - http://www.nber.org/papers/w15529.pdf N1 - Author contact info: Stephen J. Brown Stern School of Business New York University New York, NY 10012 Tel: 718 273 0317 Fax: 718 981 7239 E-Mail: sbrown@stern.nyu.edu William N. Goetzmann School of Management Yale University Box 208200 New Haven, CT 06520-8200 Tel: 203/432-5950 Fax: 203/432-3003 E-Mail: william.goetzmann@yale.edu Bing Liang Isenberg School of Management University of Massachusetts Amherst Amherst, MA 01002 Tel: (413) 545-3180 Fax: (413) 545-3858 E-Mail: bliang@som.umass.edu Christopher Schwarz University of California at Irvine Irvine, CA 92697-3125 E-Mail: cschwarz@uci.edu M1 - published as AB - Due to imperfect transparency and costly auditing, trust is an essential component of financial intermediation. In this paper we study a sample of 444 due diligence (DD) reports from a major hedge fund DD firm. A routine feature of due diligence is an assessment of integrity. We find that misrepresentation about past legal and regulatory problems is frequent (21%), as is incorrect or unverifiable representations about other topics (28%). Misrepresentation, the failure to use a major auditing firm, and the use of internal pricing are significantly related to legal and regulatory problems, indices of operational risk. We find that DD reports are typically performed after positive performance and investor inflows. We control for potential bias due to this and other potential conditioning. An operational risk score based on information contained in the DD reports significantly predicts subsequent fund failure and statistical performance characteristics out of sample. Finally we find that observed operational risk characteristics do not appear to moderate fund flow. ER - TY - JOUR AU - Russ,Katheryn N. AU - Valderrama,Diego TI - Financial Choice in a Non-Ricardian Model of Trade JF - National Bureau of Economic Research Working Paper Series VL - No. 15528 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15528 L1 - http://www.nber.org/papers/w15528.pdf N1 - Author contact info: Katheryn Russ Department of Economics University of California, Davis One Shields Avenue Davis, CA 95616 Tel: 530/754-8744 Fax: 530/752-9382 E-Mail: knruss@ucdavis.edu Diego Valderrama Federal Reserve Bank of San Francisco 101 Market Street MS 1130 San Francisco, CA 94010 Tel: 415-974-3225 Fax: 415-974-2168 E-Mail: dv10@cornell.edu M1 - published as AB - We join the new trade theory with a model of choice between bank and bond financing to show the differential effects of financial policy on the distribution of firm size, welfare, aggregate output, gains from trade, and the real exchange rate in a small open economy. Increasing bank efficiency and reducing bond transaction costs both increase welfare but have opposite effects on the extensive margin of trade, aggregate exports, and the real exchange rate. Increasing the degree of trade openness increases firms' relative demand for bond versus bank financing. We identify a financial switching channel for gains from trade where increasing access to export markets allows firms to overcome high fixed costs of bond issuance to secure a lower marginal cost of capital. ER - TY - JOUR AU - Hamermesh,Daniel S. AU - Pfann,Gerard A. TI - Markets for Reputation: Evidence on Quality and Quantity in Academe JF - National Bureau of Economic Research Working Paper Series VL - No. 15527 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15527 L1 - http://www.nber.org/papers/w15527.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 Gerard A.. Pfann Faculty of Quantitative Economics Maastricht University Maastricht, THE NETHERLANDS E-Mail: g.pfann@maastrichtuniversity.nl M1 - published as AB - We develop a theory of the market for individual reputation, an indicator of regard by one’s peers and others. The central questions are: 1) Does the quantity of exposures raise reputation independent of their quality? and 2) Assuming that overall quality matters for reputation, does the quality of an individual’s most important exposure have an extra effect on reputation? Using evidence for academic economists, we find that, conditional on its impact, the quantity of output has no or even a negative effect on each of a number of proxies for reputation, and very little evidence that a scholar’s most influential work provides any extra enhancement of reputation. Quality ranking matters more than absolute quality. Data on mobility and salaries show, on the contrary, substantial positive effects of quantity, independent of quality. We test various explanations for the differences between the determinants of reputation and salary. ER - TY - JOUR AU - Guvenen,Fatih AU - Kuruscu,Burhanettin AU - Ozkan,Serdar TI - Taxation of Human Capital and Wage Inequality: A Cross-Country Analysis JF - National Bureau of Economic Research Working Paper Series VL - No. 15526 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15526 L1 - http://www.nber.org/papers/w15526.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 Burhanettin Kuruscu University of Texas at Austin Deparment of Economics Office BRB 3.122 Austin, Texas 78712 E-Mail: kuruscu@gmail.com Serdar Ozkan University of Pennsylvania Department of Economics 419 McNeil 3718 Locust Walk Philadelphia, PA, 19104 E-Mail: ozkan@econ.upenn.edu M1 - published as AB - Wage inequality has been significantly higher in the United States than in continental European countries (CEU) since the 1970s. Moreover, this inequality gap has further widened during this period as the US has experienced a large increase in wage inequality, whereas the CEU has seen only modest changes. This paper studies the role of labor income tax policies for understanding these facts. We begin by documenting two new empirical facts that link these inequality differences to tax policies. First, we show that countries with more progressive labor income tax schedules have significantly lower before-tax wage inequality at different points in time. Second, progressivity is also negatively correlated with the rise in wage inequality during this period. We then construct a life cycle model in which individuals decide each period whether to go to school, work, or be unemployed. Individuals can accumulate skills either in school or while working. Wage inequality arises from differences across individuals in their ability to learn new skills as well as from idiosyncratic shocks. Progressive taxation compresses the (after-tax) wage structure, thereby distorting the incentives to accumulate human capital, in turn reducing the cross-sectional dispersion of (before-tax) wages. We find that these policies can account for half of the difference between the US and the CEU in overall wage inequality and 76% of the difference in inequality at the upper end (log 90-50 differential). When this economy experiences skill-biased technological change, progressivity also dampens the rise in wage dispersion over time. The model explains 41% of the difference in the total rise in inequality and 58% of the difference at the upper end. ER - TY - JOUR AU - Backus,David AU - Henriksen,Espen AU - Lambert,Frederic AU - Telmer,Christopher TI - Current Account Fact and Fiction JF - National Bureau of Economic Research Working Paper Series VL - No. 15525 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15525 L1 - http://www.nber.org/papers/w15525.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 Espen Henriksen Department of Economics University of Oslo N-0851 Oslo, Norway E-Mail: espen.henriksen@econ.uio.no Frederic Lambert Banque de France International Macroeconomics Division 46-1374 SEMSI 75049 Paris Cedex 01 France E-Mail: frederic.lambert@banque-france.fr Christopher Telmer Tepper School of Business Frew and Tech Streets Carnegie-Mellon University Pittsburgh, PA 15213 E-Mail: chris.telmer@cmu.edu M1 - published as AB - With US trade and current account deficits approaching 6% of GDP, some have argued that the country is "on the comfortable path to ruin" and that the required "adjustment'' may be painful. We suggest instead that things are fine: although national saving is low, the ratios of household and consolidated net worth to GDP remain high. In our view, the most striking features of the world at present are the low rates of investment and growth in some of the richest countries, whose surpluses account for about half of the US deficit. The result is that financial capital is flowing out of countries with low investment and growth and into the US and other fast-growing countries. Oil exporters account for much of the rest. ER - TY - JOUR AU - Almunia,Miguel AU - Bénétrix,Agustín S. AU - Eichengreen,Barry AU - O'Rourke,Kevin H. AU - Rua,Gisela TI - From Great Depression to Great Credit Crisis: Similarities, Differences and Lessons JF - National Bureau of Economic Research Working Paper Series VL - No. 15524 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15524 L1 - http://www.nber.org/papers/w15524.pdf N1 - Author contact info: Miguel Almunia Department of Economics University of California, Berkeley E-Mail: malmunia@econ.berkeley.edu Agustín S. Bénétrix Department of Economics and IIIS Trinity College Dublin E-Mail: benetria@tcd.ie 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 Department of Economics and IIIS Trinity College Dublin 2, IRELAND Tel: 00353 1 896 3594 Fax: 353-1-6772503 E-Mail: kevin.orourke@tcd.ie Gisela Rua Department of Economics University of California, Berkeley E-Mail: grua@econ.berkeley.edu M1 - published as AB - The Great Depression of the 1930s and the Great Credit Crisis of the 2000s had similar causes but elicited strikingly different policy responses. It may still be too early to assess the effectiveness of current policy responses, but it is possible to analyze monetary and fiscal policies in the 1930s as a “natural experiment” or “counterfactual” capable of shedding light on the impact of recent policies. We employ vector autoregressions, instrumental variables, and qualitative evidence for a panel of 27 countries in the period 1925-1939. The results suggest that monetary and fiscal stimulus was effective – that where it did not make a difference it was not tried. The results also shed light on the debate over fiscal multipliers in episodes of financial crisis. They are consistent with multipliers at the higher end of those estimated in the recent literature, consistent with the idea that the impact of fiscal stimulus will be greater when banking system are dysfunctional and monetary policy is constrained by the zero bound. ER - TY - JOUR AU - Clarida,Richard AU - Davis,Josh AU - Pedersen,Niels TI - Currency Carry Trade Regimes: Beyond the Fama Regression JF - National Bureau of Economic Research Working Paper Series VL - No. 15523 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15523 L1 - http://www.nber.org/papers/w15523.pdf N1 - Author contact info: Richard H. Clarida Columbia University 420 West 118th Street Room 826, IAB New York, NY 10027 Tel: 212/854-3676 Fax: 212/854-8059 E-Mail: rhc2@columbia.edu Josh Davis PIMCO 840 Newport Center Drive Newport Beach CA 92660 E-Mail: josh.davis@pimco.com Niels Pedersen PIMCO 840 Newport Center Drive Newport Beach CA 92660 E-Mail: niels.pedersen@pimco.com M1 - published as AB - We examine the factors that account for the returns on currency carry trade strategies. Using a dataset of daily returns spanning 18 years for 5 different long - short currency carry portfolios, we first document a robust empirical relationship between carry trade excess returns and exchange rate volatility, both realized and implied. Specifically, we extend and refine the results in Bhansali (2007) by documenting that currency carry trade strategies implemented with forward contracts have payoff and risk characteristics that are similar to those of currency option strategies that sell out of the money puts on high interest rates currencies. Both strategies have the feature of collecting premiums or carry to generate persistent excess returns that unwind sharply resulting in losses when actual and implied volatility rise. We next also document significant volatility regime sensitivity for Fama regressions estimated over low and high volatility periods. Specifically we find that the well known result that a regression of the realized exchange rate depreciation on the lagged interest rate differential produces a negative slope coefficient (instead of unity as predicted by uncovered interest parity) is an artifact of the volatility regime: when volatility is in the top quartile, the Fama regression produces a positive coefficient that is greater than unity. The third section of the paper documents the existence of an intuitive and significant co-movement between currency risk premium and risk premia in yield curve factors that drive bond yields in the countries that comprise carry trade pairs. We show that yield curve level factors are positively correlated with carry trade excess returns while yield curve slope factors are negatively correlated with carry trade excess returns. Importantly, we show that this correlation is robust to the current crisis and to the inclusion of equity volatility in the model. What distinguishes carry trade returns in the current crisis from non crisis periods is not changed loading on yield curve factors but a much larger loading on the equity factor. ER - TY - JOUR AU - Malamud,Ofer TI - Discovering One's Talent: Learning from Academic Specialization JF - National Bureau of Economic Research Working Paper Series VL - No. 15522 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15522 L1 - http://www.nber.org/papers/w15522.pdf N1 - Author contact info: Ofer Malamud Harris School of Public Policy Studies University of Chicago 1155 East 60th Street Chicago, IL 60637 Tel: 773/702-3382 Fax: 773/702-0926 E-Mail: malamud@uchicago.edu M1 - published as AB - In addition to providing useful skills, education may also yield valuable information about one's tastes and talents. This paper exploits an exogenous difference in the timing of academic specialization within the British system of higher education to test whether education provides such information. I develop a model in which individuals, by taking courses in different fields of study, accumulate field-specific skills and receive noisy signals of match quality to these fields. Distinguishing between educational regimes with early and late specialization, I derive comparative static predictions about the likelihood of switching to an occupation that is unrelated to one's field of study. If higher education serves mainly to provide specific skills, the model predicts more switching in a regime with late specialization because the cost of switching is lower in terms of foregone skills. Using survey and administrative data on university graduates, I find that individuals from Scotland, where specialization occurs relatively late, are less likely to switch to an unrelated occupation compared to their English counterparts who specialize early. This implies that the benefits to increased match quality are sufficiently large to outweigh the greater loss in skills from specializing early, and thus confirms the important role of higher education in helping students discover their own tastes and talents. ER - TY - JOUR AU - Card,David AU - Dustmann,Christian AU - Preston,Ian TI - Immigration, Wages, and Compositional Amenities JF - National Bureau of Economic Research Working Paper Series VL - No. 15521 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15521 L1 - http://www.nber.org/papers/w15521.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 Christian Dustmann Department of Economics University College London Gower Street, London WC1E 6BT, UK E-Mail: c.dustmann@ucl.ac.uk Ian Preston Department of Economics University College London Gower Street, London WC1E 6BT, UK E-Mail: i.preston@ucl.ac.uk M1 - published as AB - Economists are often puzzled by the stronger public opposition to immigration than trade, since the two policies have similar effects on wages. Unlike trade, however, immigration can alter the composition of the local population, imposing potential externalities on natives. While previous studies have addressed fiscal spillover effects, a broader class of externalities arise because people value the 'compositional amenities' associated with the characteristics of their neighbors and co-workers. In this paper we present a new method for quantifying the relative importance of these amenities in shaping attitudes toward immigration. We use data for 21 countries in the 2002 European Social Survey, which included a series of questions on the economic and social impacts of immigration, as well as on the desirability of increasing or reducing immigrant inflows. We find that individual attitudes toward immigration policy reflect a combination of concerns over conventional economic impacts (i.e., wages and taxes) and compositional amenities, with substantially more weight on the latter. Most of the difference in attitudes toward immigration between more and less educated natives is attributable to heightened concerns over compositional amenities among the less-educated. ER - TY - JOUR AU - Atack,Jeremy AU - Margo,Robert A. TI - Agricultural Improvements and Access to Rail Transportation: The American Midwest as a Test Case, 1850-1860 JF - National Bureau of Economic Research Working Paper Series VL - No. 15520 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15520 L1 - http://www.nber.org/papers/w15520.pdf N1 - Author contact info: Jeremy Atack Department of Economics Vanderbilt University VU Station B #351819 2301 Vanderbilt Place Nashville, TN 37235-1819 Tel: 615/322-2871 Fax: 615/343-8495 E-Mail: jeremy.atack@vanderbilt.edu Robert A. Margo Department of Economics Boston University 270 Bay State Road Boston, MA 02215 Tel: 617/353-6819 Fax: 617/343-8495 E-Mail: margora@bu.edu M1 - published as AB - During the 1850s, land in U.S. farms surged by more than 100 million acres while almost 50 million acres of land were transformed from their raw, natural state into productive farmland. The time and expense of transforming this land into a productive resource represented a significant fraction of domestic capital formation at the time and was an important contributor to American economic growth. Even more impressive, however, was the fact that almost half of these total net additions to cropland occurred in just seven Midwestern states which comprised barely less than one-eighth of the land area of the country at that time. Using a new GIS-based transportation database linked to county-level census, we estimate that at least a quarter (and possibly two-thirds or more) of this increase can be linked directly to the coming of the railroad to the region. Farmers responded to the shrinking transportation wedge and rising revenue productivity by rapidly expanding the area under cultivation and these changes, in turn, drove rising farm and land values. ER - TY - JOUR AU - Giannone,Domenico AU - Lenza,Michele TI - The Feldstein-Horioka fact JF - National Bureau of Economic Research Working Paper Series VL - No. 15519 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15519 L1 - http://www.nber.org/papers/w15519.pdf N1 - Author contact info: Domenico Giannone ECARES - Université Libre de Bruxelles Avenue F. D. Roosevelt, 50 1050 Bruxelles Belgium Tel: +49 (0)69 1344 7849 E-Mail: dgiannon@ulb.ac.be Michele Lenza European Central Bank Directorate General Research Kaiserstrasse 29 D-60311 Frankfurt am Main GERMANY E-Mail: michele.lenza@ecb.int M1 - published as M3 - presented at "ISOM", June 12-13, 2009 AB - This paper shows that general equilibrium effects can partly rationalize the high correlation between saving and investment rates observed in OECD countries. We find that once controlling for general equilibrium effects the saving-retention coefficient remains high in the 70’s but decreases considerably since the 80’s, consistently with the increased capital mobility in OECD countries. ER - TY - JOUR AU - Jordà,Òscar AU - Taylor,Alan M. TI - The Carry Trade and Fundamentals: Nothing to Fear But FEER Itself JF - National Bureau of Economic Research Working Paper Series VL - No. 15518 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15518 L1 - http://www.nber.org/papers/w15518.pdf N1 - Author contact info: Òscar Jordà Dept. of Economics UC, Davis One Shields Ave. Davis, CA 95616 Tel: 530-752-7021 Fax: 530-752-9382 E-Mail: ojorda@ucdavis.edu Alan M. Taylor Department of Economics University of California, Davis One Shields Avenue Davis, CA 95616 Tel: 530/754-7464 Fax: 530/752-9382 E-Mail: amtaylor@ucdavis.edu M1 - published as AB - The carry trade is the investment strategy of going long in high-yield target currencies and short in low-yield funding currencies. Recently, this naive trade has seen very high returns for long periods, followed by large crash losses after large depreciations of the target currencies. Based on low Sharpe ratios and negative skew, these trades could appear unattractive, even when diversified across many currencies. But more sophisticated conditional trading strategies exhibit more favorable payoffs. We apply novel (within economics) binary-outcome classification tests to show that our directional trading forecasts are informative, and out-of-sample loss-function analysis to examine trading performance. The critical conditioning variable, we argue, is the fundamental equilibrium exchange rate (FEER). Expected returns are lower, all else equal, when the target currency is overvalued. Like traders, researchers should incorporate this information when evaluating trading strategies. When we do so, some questions are resolved: negative skewness is purged, and market volatility (VIX) is uncorrelated with returns; other puzzles remain: the more sophisticated strategy has a very high Sharpe ratio, suggesting market inefficiency. ER - TY - JOUR AU - Bärnighausen,Till AU - Bloom,David E. AU - Humair,Salal TI - A Mathematical Model for Estimating the Number of Health Workers Required for Universal Antiretroviral Treatment JF - National Bureau of Economic Research Working Paper Series VL - No. 15517 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15517 L1 - http://www.nber.org/papers/w15517.pdf N1 - Author contact info: Till Bärnighausen Harvard School of Public Health Department of Global Health and Population 665 Huntington Ave. Boston, MA 02115 E-Mail: tbaernig@hsph.harvard.edu David E. Bloom Harvard School of Public Health Department of Global Health and Population 665 Huntington Ave. Boston, MA 02115 Tel: 617/432-0866 Fax: 617/432-6733 E-Mail: dbloom@hsph.harvard.edu Salal Humair Harvard School of Public Health Department of Global Health and Population 665 Huntington Ave. Boston, MA 02115 E-Mail: shumair@hsph.harvard.edu M1 - published as AB - Despite recent international efforts to increase antiretroviral treatment (ART) coverage, it is estimated that more than 5 million people who need ART in developing countries do not receive such treatment. Shortages of human resources to treat HIV/AIDS (HRHA) are one of the main constraints to scaling up ART. We develop a discrete-time Markovian model to project the numbers of HRHA required to achieve universal ART coverage, taking into account the positive feedback from HRHA numbers to future HRHA need. Feedback occurs because ART is effective in prolonging the lives of HIV-positive people who need treatment, so that an increase in the number of people receiving treatment leads to an increase in the number of people needing it in future periods. We investigate the steady-state behavior of our model and apply it to different regions in the developing world. We find that taking into account the feedback from the current supply of HRHA to the future HRHA need substantially increases the projected numbers of HRHA required to achieve universal ART coverage. We discuss the policy implications of our model. ER - TY - JOUR AU - Bosetti,Valentina AU - Frankel,Jeffrey A. TI - Global Climate Policy Architecture and Political Feasibility: Specific Formulas and Emission Targets to Attain 460 ppm CO2 Concentrations JF - National Bureau of Economic Research Working Paper Series VL - No. 15516 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15516 L1 - http://www.nber.org/papers/w15516.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 M1 - published as AB - Many analysts have identified three important gaps in the Kyoto Protocol: the absence of emission targets extending far into the future, the absence of participation by the United States, China, and other developing countries, and the absence of reason to think that members will abide by commitments. It appears that political constraints on the country-by-country distribution of economic costs are a key stumbling block to filling these gaps. This paper investigates formulas that assign quantitative allocations of emissions, across countries, one budget period at a time, to see if it is possible to satisfy the constraints. The two-part plan: (i) China and other developing countries accept targets at 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 formula which sums up a Progressive Reductions Factor, a Latecomer Catch-up Factor, and a Gradual Equalization Factor. An earlier plan for specific parameter values in the formulas – Frankel (2009), as analyzed by Bosetti, et al (2009) – achieved the environmental goal that concentrations of CO2 plateau at 500 ppm by 2100. It succeeded in obeying our political constraints, such as keeping the economic cost for every country below the thresholds of Y=1% of income in Present Discounted Value, and X=5% of income in the worst period. In pursuit of more aggressive environmental goals, we now advance the dates at which some countries are asked to begin cutting below BAU, within our framework. We also tinker with the values for the parameters in the formulas. The resulting target paths for emissions are run through the WITCH model to find their economic and environmental effects. We find that it is not possible to attain a 380 ppm CO2 goal (roughly in line with the 2°C target) without violating our political constraints. We were however, able to attain a concentration goal of 460 ppm CO2 with looser political constraints. The most important result is that we had to raise the threshold of costs above which a country drops out, to as high as Y =3.4% of income in PDV terms, or X =12 % in the worst budget period. Whether one concludes from these results that the more aggressive environmental goals are, or are not, attainable at reasonable economic costs, the approach developed here provides a framework for exploring maximization of the tradeoff between the benefits of cutting global emissions and the political feasibility of getting individual countries to share the burden. ER - TY - JOUR AU - Laux,Christian AU - Leuz,Christian TI - Did Fair-Value Accounting Contribute to the Financial Crisis? JF - National Bureau of Economic Research Working Paper Series VL - No. 15515 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15515 L1 - http://www.nber.org/papers/w15515.pdf N1 - Author contact info: Christian Laux Finance Department Goethe University Frankfurt Mertonstrasse 17 - 21 60325 Frankfurt am Main GERMANY E-Mail: laux@finance.uni-frankfurt.de Christian Leuz Graduate School of Business University of Chicago 5807 S. Woodlawn Avenue Chicago, IL 60637-1610 Tel: 773/834-1996 Fax: 773-834-4585 E-Mail: cleuz@chicagobooth.edu M1 - published as AB - The recent financial crisis has led to a major debate about fair-value accounting. Many critics have argued that fair-value accounting, often also called mark-to-market accounting, has significantly contributed to the financial crisis or, at least, exacerbated its severity. In this paper, we assess these arguments and examine the role of fair-value accounting in the financial crisis using descriptive data and empirical evidence. Based on our analysis, it is unlikely that fair-value accounting added to the severity of the current financial crisis in a major way. While there may have been downward spirals or asset-fire sales in certain markets, we find little evidence that these effects are the result of fair-value accounting. We also find little support for claims that fair-value accounting leads to excessive write-downs of banks’ assets. If anything, empirical evidence to date points in the opposite direction, that is, towards overvaluation of bank assets. ER - TY - JOUR AU - Leeper,Eric M. TI - Anchors Away: How Fiscal Policy Can Undermine the Taylor Principle JF - National Bureau of Economic Research Working Paper Series VL - No. 15514 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15514 L1 - http://www.nber.org/papers/w15514.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 M1 - published as AB - Slow moving demographics are aging populations around the world and pushing many countries into an extended period of heightened fiscal stress. In some countries, taxes alone cannot or likely will not fully fund projected pension and health care expenditures. If economic agents place sufficient probability on the economy hitting its "fiscal limit" at some point in the future--after which further tax revenues are not forthcoming--it may no longer be possible for monetary policy behavior that obeys the Taylor principle to control inflation or anchor inflation expectations. In the period leading up to the fiscal limit, the more aggressively that monetary policy leans against inflationary winds, the more expected inflation becomes unhinged from the inflation target. Problems confronting monetary policy are exacerbated when policy institutions leave fiscal objectives and targets unspecified and, therefore, fiscal expectations unanchored. In light of this theory, the paper contrasts monetary-fiscal policy frameworks in the United States and Chile. ER - TY - JOUR AU - Golosov,Mikhail AU - Lorenzoni,Guido AU - Tsyvinski,Aleh TI - Decentralized Trading with Private Information JF - National Bureau of Economic Research Working Paper Series VL - No. 15513 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15513 L1 - http://www.nber.org/papers/w15513.pdf N1 - Author contact info: Mikhail Golosov Department of Economics Yale University Box 208268 New Haven, CT 06520-8269 Tel: 203/436-8475 Fax: 203/436-2696 E-Mail: m.golosov@yale.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 Aleh Tsyvinski Department of Economics Yale University Box 208268 New Haven, CT 06520-8268 Tel: 310/500-9321 E-Mail: a.tsyvinski@yale.edu M1 - published as AB - The paper studies asset pricing in informationally decentralized markets. These markets have two key frictions: trading is decentralized (bilateral), and some agents have private information. We analyze how uninformed agents acquire information over time from their bilateral trades. In particular, we show that uninformed agents can learn all the useful information in the long run and that the long-run allocation is Pareto efficient. We then explore how informed agents can exploit their informational advantage in the short run and provide sufficient conditions for the value of information to be positive. Finally, we provide a numerical analysis of the equilibrium trading dynamics and prices. ER - TY - JOUR AU - Schularick,Moritz AU - Taylor,Alan M. TI - Credit Booms Gone Bust: Monetary Policy, Leverage Cycles and Financial Crises, 1870–2008 JF - National Bureau of Economic Research Working Paper Series VL - No. 15512 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15512 L1 - http://www.nber.org/papers/w15512.pdf N1 - Author contact info: 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 California, Davis One Shields Avenue Davis, CA 95616 Tel: 530/754-7464 Fax: 530/752-9382 E-Mail: amtaylor@ucdavis.edu M1 - published as AB - The crisis of 2008–09 has focused attention on money and credit fluctuations, financial crises, and policy responses. In this paper we study the behavior of money, credit, and macroeconomic indicators over the long run based on a newly constructed historical dataset for 12 developed countries over the years 1870– 2008, utilizing the data to study rare events associated with financial crisis episodes. We present new evidence that leverage in the financial sector has increased strongly in the second half of the twentieth century as shown by a decoupling of money and credit aggregates, and we also find a decline in safe assets on banks' balance sheets. We also show for the first time how monetary policy responses to financial crises have been more aggressive post-1945, but how despite these policies the output costs of crises have remained large. Importantly, we can also show that credit growth is a powerful predictor of financial crises, suggesting that such crises are “credit booms gone wrong” and that policymakers ignore credit at their peril. It is only with the long-run comparative data assembled for this paper that these patterns can be seen clearly. ER - TY - JOUR AU - Galenson,David TI - Innovators: Songwriters JF - National Bureau of Economic Research Working Paper Series VL - No. 15511 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15511 L1 - http://www.nber.org/papers/w15511.pdf N1 - Author contact info: David Galenson Department of Economics University of Chicago 1126 East 59th Street Chicago, IL 60637 Tel: 773/702-8258 Fax: 773/702-8490 E-Mail: galenson@uchicago.edu M1 - published as AB - Irving Berlin and Cole Porter were two of the great experimental songwriters of the Golden Era. They aimed to create songs that were clear and universal. Their ability to do this improved throughout much of their careers, as their skill in using language to create simple and poignant images improved with experience, and their greatest achievements came in their 40s and 50s. During the 1960s, Bob Dylan and the team of John Lennon and Paul McCartney created a conceptual revolution in popular music. Their goal was to express their own ideas and emotions in novel ways. Their creativity declined with age, as increasing experience produced habits of thought that destroyed their ability to formulate radical new departures from existing practices, so their most innovative contributions appeared early in their careers. ER - TY - JOUR AU - Ardagna,Silvia AU - Lusardi,Annamaria TI - Heterogeneity in the effect of regulation on entrepreneurship and entry size JF - National Bureau of Economic Research Working Paper Series VL - No. 15510 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15510 L1 - http://www.nber.org/papers/w15510.pdf N1 - Author contact info: Silvia Ardagna Department of Economics Harvard University Littauer Center Cambridge, MA 02138 E-Mail: sardagna@fas.harvard.edu Annamaria Lusardi Department of Economics Dartmouth College Hanover, NH 03755 Tel: 603-646-2099 Fax: 603-646-2122 E-Mail: a.lusardi@dartmouth.edu M1 - published as AB - We use cross-national harmonized micro data from a broad sample of developed and developing countries and investigate the heterogeneity of the effect of entry, contract enforcement regulation, and financial development on both the decision to become an entrepreneur and the level of employment of newly created businesses. We focus on the interaction between the level of regulation and financial development and some individual characteristics that are important determinants of entrepreneurship, such as gender, business skills, and social networks. We find that entry regulation moderates the effect of business skills, while accentuating the effect of gender, even after accounting for the level of financial development. Specifically, women are more likely to enter into entrepreneurship in countries with higher levels of entry regulation, but mainly because they cannot find better work. This effect is also more pronounced in countries that are less financially developed. Furthermore, individuals who report having business skills are less likely to enter entrepreneurship in countries with higher entry regulation. Finally, we also find that individuals who know other entrepreneurs are less likely to start large businesses in countries with higher levels of entry and contract enforcement regulation. ER - TY - JOUR AU - Keller,Wolfgang AU - Yeaple,Stephen R. TI - Gravity in the Weightless Economy JF - National Bureau of Economic Research Working Paper Series VL - No. 15509 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15509 L1 - http://www.nber.org/papers/w15509.pdf N1 - Author contact info: Wolfgang Keller Department of Economics University of Colorado at Boulder Boulder, CO 80309-0256 Tel: 303/735 5507 Fax: 303/492 8960 E-Mail: Wolfgang.Keller@colorado.edu Stephen Yeaple Department of Economics The Pennsylvania State University 520 Kern Building University Park, PA 16802-3306 Tel: 8148655452 E-Mail: sry3@psu.edu M1 - published as AB - This paper studies the international mobility of technology through the lens of multinational firms. We show that gravity applies to the activity of multinational firms, and the strength of gravity is greatest in technologically-complex, research and development intensive industries. To explain gravity in the weightless economy, we develop a model in which a multinational's production can be fragmented into intermediates that vary in the codifiability of their technology. Poorly codified technology requires face-to-face communication to transfer accurately, leading to production inefficiencies that can be avoided if an affiliate instead imports intermediates embodying this technology from its parent firm. Because intermediate input trade incurs shipping costs, affiliates' sales are subject to the force of gravity, and this force is strongest in technologically complex industries. An additional implication of this mechanism is that affiliates are more constrained in their ability to substitute local production for intermediate imports in technologically complex industries. We confirm these predictions and show that trade costs increase the average technological complexity of intra-firm trade. Our analysis offers a new perspective on the mobility of technology, which is a topic crucial to a wide range of fields in economics. ER - TY - JOUR AU - Davies,James B. AU - Sandström,Susanna AU - Shorrocks,Anthony B. AU - Wolff,Edward N. TI - The Level and Distribution of Global Household Wealth JF - National Bureau of Economic Research Working Paper Series VL - No. 15508 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15508 L1 - http://www.nber.org/papers/w15508.pdf N1 - Author contact info: James B. Davies The University of Western Ontario Department of Economics Social Science Centre, Room 4071 London, Ontario, Canada, N6A 5C2 E-Mail: jdavies@uwo.ca Susanna Sandström UNU/WIDER Katajanokanlaituri 6 B 00160 Helsinki, Finland E-Mail: Susanna.Sandstrom@wfp.org Anthony B.. Shorrocks UNU/WIDER Katajanokanlaituri 6 B 00160 Helsinki, Finland E-Mail: shorrocks@wider.unu.edu 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 M1 - published as AB - We estimate the level and distribution of global household wealth. The levels of assets and debts for 39 countries are measured using household balance sheet and survey data centred on the year 2000. The determinants of mean financial assets, non-financial assets, and liabilities are studied empirically, and the results used to estimate average wealth holdings for countries lacking direct evidence. Data on the pattern of household distribution of wealth are assembled for 20 countries, which together account for 59 per cent of the global population and 75 per cent of global wealth. The observed relation between wealth and income distribution in these 20 countries allows estimates of wealth inequality to be produced for many other nations. Combining the figures for individual countries reveals that net worth averaged US$44,024 per adult in PPP terms across the globe. Wealth of US$8,635 was needed to be in the top half of the global distribution, and US$518,364 to be in the top one per cent. The top 10 per cent owned 71 per cent of world wealth, and the Gini coefficient for the global distribution of wealth is estimated to be 0.802, indicating greater inequality than that observed in the global distribution of consumption or income. ER - TY - JOUR AU - Peri,Giovanni TI - The Effect of Immigration on Productivity: Evidence from US States JF - National Bureau of Economic Research Working Paper Series VL - No. 15507 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15507 L1 - http://www.nber.org/papers/w15507.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 M1 - published as AB - Using the large variation in the inflow of immigrants across US states we analyze the impact of immigration on state employment, average hours worked, physical capital accumulation and, most importantly, total factor productivity and its skill bias. We use the location of a state relative to the Mexican border and to the main ports of entry, as well as the existence of communities of immigrants before 1960, as instruments. We find no evidence that immigrants crowded-out employment and hours worked by natives. At the same time we find robust evidence that they increased total factor productivity, on the one hand, while they decreased capital intensity and the skill-bias of production technologies, on the other. These results are robust to controlling for several other determinants of productivity that may vary with geography such as R&D spending, computer adoption, international competition in the form of exports and sector composition. Our results suggest that immigrants promoted efficient task specialization, thus increasing TFP and, at the same time, promoted the adoption of unskilled-biased technology as the theory of directed technologial change would predict. Combining these effects, an increase in employment in a US state of 1% due to immigrants produced an increase in income per worker of 0.5% in that state. ER - TY - JOUR AU - Borovička,Jaroslav AU - Hansen,Lars Peter AU - Hendricks,Mark AU - Scheinkman,José A. TI - Risk Price Dynamics JF - National Bureau of Economic Research Working Paper Series VL - No. 15506 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15506 L1 - http://www.nber.org/papers/w15506.pdf N1 - Author contact info: Jaroslav Borovička Department of Economics The University of Chicago 1126 East 59th Street Chicago, IL 60637 E-Mail: borovicka@uchicago.edu Lars P. Hansen Department of Economics The University of Chicago 1126 East 59th Street Chicago, IL 60637 Tel: 773/702-8170 Fax: 773/702-8490 E-Mail: l-hansen@uchicago.edu Mark Hendricks Department of Economics University of Chicago 1126 East 59th Street Chicago, IL 60637 E-Mail: hendricks@uchicago.edu Jose A. Scheinkman Department of Economics Princeton University Princeton, NJ 08544-1021 Tel: 609/258-4020 Fax: 609/258-0771 E-Mail: joses@princeton.edu M1 - published as AB - We present a novel approach to depicting asset pricing dynamics by characterizing shock exposures and prices for alternative investment horizons. We quantify the shock exposures in terms of elasticities that measure the impact of a current shock on future cash-flow growth. The elasticities are designed to accommodate nonlinearities in the stochastic evolution modeled as a Markov process. Stochastic growth in the underlying macroeconomy and stochastic discounting in the representation of asset values are central ingredients in our investigation. We provide elasticity calculations in a series of examples featuring consumption externalities, recursive utility, and jump risk. ER - TY - JOUR AU - Schmitt-Grohe,Stephanie AU - Uribe,Martin TI - On Quality Bias and Inflation Targets JF - National Bureau of Economic Research Working Paper Series VL - No. 15505 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15505 L1 - http://www.nber.org/papers/w15505.pdf N1 - Author contact info: Stephanie Schmitt-Grohe Department of Economics Columbia University New York, NY 10027 Fax: 919/684-8974 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 M1 - published as AB - A policy issue central banks are confronted with is whether inflation targets should be adjusted to account for the systematic upward bias in measured inflation due to quality improvements in consumption goods. We show that in the context of a Ramsey equilibrium the answer to this question depends on what prices are assumed to be sticky. If nonquality-adjusted prices are assumed to be sticky, then the Ramsey plan predicts that the inflation target should not be corrected. If, on the other hand, quality-adjusted (or hedonic) prices are assumed to be sticky, then the Ramsey plan calls for raising the inflation target by the magnitude of the bias. ER - TY - JOUR AU - Bansal,Ravi AU - Kiku,Dana AU - Yaron,Amir TI - An Empirical Evaluation of the Long-Run Risks Model for Asset Prices JF - National Bureau of Economic Research Working Paper Series VL - No. 15504 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15504 L1 - http://www.nber.org/papers/w15504.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 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 M1 - published as AB - We provide an empirical evaluation of the forward-looking long-run risks (LRR) model and highlight model differences with the backward-looking habit based asset pricing model. We feature three key results: (i) Consistent with the LRR model, there is considerable evidence in the data of time-varying expected consumption growth and volatility, (ii) The LRR model matches the key asset markets data features, (iii) In the data and in the LRR model accordingly, past consumption growth does not predict future asset prices, whereas lagged consumption in the habit model forecasts future price-dividend ratios with an R2 of over 40%. Overall, our evidence implies that the LRR model provides a coherent framework to analyze and interpret asset prices. ER - TY - JOUR AU - Amiti,Mary AU - Khandelwal,Amit K. TI - Competition and Quality Upgrading JF - National Bureau of Economic Research Working Paper Series VL - No. 15503 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15503 L1 - http://www.nber.org/papers/w15503.pdf N1 - Author contact info: Mary Amiti International Research Federal Reserve Bank of New York 33 Liberty St New York, NY 10045-0001 E-Mail: Mary.Amiti@ny.frb.org 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 M1 - published as AB - How does competition affect innovation? We address this question by using a novel approach to measure quality -- an important component of innovation -- using highly disaggregated product data for a large set of countries. Constructing an internationally comparable measure of quality enables us to separate the effect of reducing import tariffs, our measure of competition, on quality upgrading from other country level differences in competitive environments, and product demand shocks. We base our analysis on recent theoretical frameworks that predict that the effect of competition on innovation depends on firms' proximity to the world technological frontier. As predicted by theory, we find that lower tariffs are associated with quality upgrading for products close to the world frontier; whereas lower tariffs discourage quality upgrading for varieties distant from the frontier. ER - TY - JOUR AU - Goetzmann,William N. AU - Renneboog,Luc AU - Spaenjers,Christophe TI - Art and Money JF - National Bureau of Economic Research Working Paper Series VL - No. 15502 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15502 L1 - http://www.nber.org/papers/w15502.pdf N1 - Author contact info: William N. Goetzmann School of Management Yale University Box 208200 New Haven, CT 06520-8200 Tel: 203/432-5950 Fax: 203/432-3003 E-Mail: william.goetzmann@yale.edu Luc Renneboog PO Box 90153 5000 LE Tilburg the Netherlands E-Mail: Luc.Renneboog@uvt.nl Christophe Spaenjers PO Box 90153 5000 LE Tilburg the Netherlands E-Mail: c.spaenjers@uvt.nl M1 - published as AB - This paper investigates the impact of equity markets and top incomes on art prices. Using a long-term art market index that incorporates information on repeated sales since the eighteenth century, we demonstrate that both same-year and lagged equity market returns have a significant impact on the price level in the art market. Over a shorter time frame, we also find empirical evidence that an increase in income inequality may lead to higher prices for art, in line with the results of a numerical simulation analysis. Finally, the results of Johansen cointegration tests strongly suggest the existence of a long-term relation between top incomes and art prices. ER - TY - JOUR AU - Kerr,William TI - The Agglomeration of US Ethnic Inventors JF - National Bureau of Economic Research Working Paper Series VL - No. 15501 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15501 L1 - http://www.nber.org/papers/w15501.pdf N1 - Author contact info: William Kerr Harvard Business School Rock Center 212 Soldiers Field Boston, MA 02163 Tel: 617/496-7021 E-Mail: wkerr@hbs.edu M1 - published as AB - The ethnic composition of US inventors is undergoing a significant transformation, with deep impacts for the overall agglomeration of US innovation. This study applies an ethnic-name database to individual US patent records to explore these trends with greater detail. The contributions of Chinese and Indian scientists and engineers to US technology formation increase dramatically in the 1990s. At the same time, these ethnic inventors became more spatially concentrated across US cities. The combination of these two factors helps stop and reverse long-term declines in overall inventor agglomeration evident in the 1970s and 1980s. The heightened ethnic agglomeration is particularly evident in industry patents for high-tech sectors, and similar trends are not found in institutions constrained from agglomerating (e.g., universities, government). ER - TY - JOUR AU - Li,Haizheng AU - Fraumeni,Barbara M. AU - Liu,Zhiqiang AU - Wang,Xiaojun TI - Human Capital In China JF - National Bureau of Economic Research Working Paper Series VL - No. 15500 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15500 L1 - http://www.nber.org/papers/w15500.pdf N1 - Author contact info: Haizheng Li School of Economics Georgia Institute of Technology Atlanta, GA 30332 E-Mail: haizheng.li@econ.gatech.edu Barbara M. Fraumeni Muskie School of Public Service University of Southern Maine P.O. Box 9300 Portland, ME 04104-9300 Tel: 207/228-8245 Fax: 207/780-5646 E-Mail: bfraumeni@usm.maine.edu Zhiqiang Liu SUNY Buffalo, Dept. of Economics 445 Fronczak Hall Buffalo, NY 14260 E-Mail: zqliu@buffalo.edu Xiaojun Wang University of Hawaii at Manoa, Dept. of Economics 2424 Maile Way SSB 527 Honolulu, HI 96822 E-Mail: xiaojun@hawaii.edu M1 - published as AB - In this paper we estimate China’s human capital stock from 1985 to 2007 based on the Jorgenson-Fraumeni lifetime income approach. An individual’s human capital stock is equal to the discounted present value of all future incomes he or she can generate. In our model, human capital accumulates through formal education as well as on-the-job training. The value of human capital is assumed to be zero upon reaching the mandatory retirement ages. China’s total real human capital increased from 26.98 billion yuan in 1985 (i.e., the base year) to 118.75 billion yuan in 2007, implying an average annual growth rate of 6.78%. The annual growth rate increased from 5.11% during 1985-1994 to 7.86% during 1995-2007. Per capita real human capital increased from 28,044 yuan in 1985 to 106,462 yuan in 2007, implying an average annual growth rate of 6.25%. The annual growth rate also increased from 3.9% during 1985-1994 to 7.5% during 1995-2007. Therefore, although population growth contributed significantly to the total human capital accumulation before 1994, per capita human capital growth was primary driving force after 1995. The substantial increase in educational attainment during 1985-2007 contributed significantly to the growth in total and per capita real human capital. ER - TY - JOUR AU - Kerr,William AU - Nanda,Ramana TI - Banking Deregulations, Financing Constraints, and Firm Entry Size JF - National Bureau of Economic Research Working Paper Series VL - No. 15499 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15499 L1 - http://www.nber.org/papers/w15499.pdf N1 - Author contact info: William Kerr Harvard Business School Rock Center 212 Soldiers Field Boston, MA 02163 Tel: 617/496-7021 E-Mail: wkerr@hbs.edu Ramana Nanda Harvard Business School Rock Center 221 Boston MA 02163 E-Mail: rnanda@hbs.edu M1 - published as AB - We examine the effect of US branch banking deregulations on the entry size of new firms using micro-data from the US Census Bureau. We find that the average entry size for startups did not change following the deregulations. However, among firms that survived at least four years, a greater proportion of firms entered either at their maximum size or closer to the maximum size in the first year. The magnitude of these effects were small compared to the much larger changes in entry rates of small firms following the reforms. Our results highlight that this large-scale entry at the extensive margin can obscure the more subtle intensive margin effects of changes in financing constraints. ER - TY - JOUR AU - Kerr,William AU - Nanda,Ramana TI - Financing Constraints and Entrepreneurship JF - National Bureau of Economic Research Working Paper Series VL - No. 15498 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15498 L1 - http://www.nber.org/papers/w15498.pdf N1 - Author contact info: William Kerr Harvard Business School Rock Center 212 Soldiers Field Boston, MA 02163 Tel: 617/496-7021 E-Mail: wkerr@hbs.edu Ramana Nanda Harvard Business School Rock Center 221 Boston MA 02163 E-Mail: rnanda@hbs.edu M1 - published as AB - Financing constraints are one of the biggest concerns impacting potential entrepreneurs around the world. Given the important role that entrepreneurship is believed to play in the process of economic growth, alleviating financing constraints for would-be entrepreneurs is also an important goal for policymakers worldwide. We review two major streams of research examining the relevance of financing constraints for entrepreneurship. We then introduce a framework that provides a unified perspective on these research streams, thereby highlighting some important areas for future research and policy analysis in entrepreneurial finance. ER - TY - JOUR AU - Card,David AU - Dahl,Gordon TI - Family Violence and Football: The Effect of Unexpected Emotional Cues on Violent Behavior JF - National Bureau of Economic Research Working Paper Series VL - No. 15497 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15497 L1 - http://www.nber.org/papers/w15497.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 Gordon Dahl Department of Economics University of California, San Diego 9500 Gilman Drive #0508 La Jolla, CA 92093-0508 Tel: 858-822-0644 E-Mail: gdahl@ucsd.edu M1 - published as AB - Family violence is a pervasive and costly problem, yet there is no consensus on how to interpret the phenomenon of violence by one family member against another. Some analysts assume that violence has an instrumental role in intra-family incentives. Others argue that violent episodes represent a loss of control that the offender immediately regrets. In this paper we specify and test a behavioral model of the latter form. Our key hypothesis is that negative emotional cues – benchmarked relative to a rationally expected reference point – make a breakdown of control more likely. We test this hypothesis using data on police reports of family violence on Sundays during the professional football season. Controlling for location and time fixed effects, weather factors, the pre-game point spread, and the size of the local viewing audience, we find that upset losses by the home team (losses in games that the home team was predicted to win by more than 3 points) lead to an 8 percent increase in police reports of at-home male-on-female intimate partner violence. There is no corresponding effect on female-on-male violence. Consistent with the behavioral prediction that losses matter more than gains, upset victories by the home team have (at most) a small dampening effect on family violence. We also find that unexpected losses in highly salient or frustrating games have a 50% to 100% larger impact on rates of family violence. The evidence that payoff-irrelevant events affect the rate of family violence leads us to conclude that at least some fraction of family violence is better characterized as a breakdown of control than as rationally directed instrumental violence. ER - TY - JOUR AU - Hall,Robert E. TI - By How Much Does GDP Rise if the Government Buys More Output? JF - National Bureau of Economic Research Working Paper Series VL - No. 15496 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15496 L1 - http://www.nber.org/papers/w15496.pdf N1 - Author contact info: Robert E. Hall Hoover Institution Stanford University Stanford, CA 94305-6010 Tel: 650/723-2215 Fax: 650/618-2035 E-Mail: rehall@gmail.com M1 - published as AB - During World War II and the Korean War, real GDP grew by about half the amount of the increase in government purchases. With allowance for other factors holding back GDP growth during those wars, the multiplier linking government purchases to GDP may be in the range of 0.7 to 1.0, a range generally supported by research based on vector autoregressions that control for other determinants, but higher values are not ruled out. New Keynesian macro models have multipliers in that range as well. On the other hand, neoclassical models have a much lower multiplier, because they predict that consumption falls when purchases rise. The key features of a model that delivers a higher multiplier are (1) the decline in the markup ratio of price over cost that occurs in those models when output rises, and (2) the elastic response of employment to an increase in demand. These features alone deliver a fairly high multiplier and they are complementary to another feature associated with Keynes, the linkage of consumption to current income. Multipliers are higher—perhaps around 1 .7—when the nominal interest rate is at its lower bound of zero, as it was during 2009. ER - TY - JOUR AU - Bushnell,James B. AU - Chen,Yihsu TI - Regulation, Allocation, and Leakage in Cap-and-Trade Markets for CO2 JF - National Bureau of Economic Research Working Paper Series VL - No. 15495 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15495 L1 - http://www.nber.org/papers/w15495.pdf N1 - Author contact info: James B. Bushnell Department of Economics 468H Heady Hall Iowa State University Ames, IA 50011 Tel: 515/294-0702 Fax: 515/294-0221 E-Mail: jimb@iastate.edu Yihsu Chen UC, Merced E-Mail: ychen26@ucmerced.edu M1 - published as M3 - presented at "RRC", August 10-11, 2009 AB - The allocation of emissions allowances is among the most contentious elements of the design of cap-and-trade systems. In this paper we develop a detailed representation of the US western electricity market to assess the potential impacts of various allocation proposals. Several proposals involve the "updating'' of permit allocation, where the allocation is tied to the ongoing output, or input use, of plants. These allocation proposals are designed with the goals of limiting the pass-through of carbon costs to product prices, mitigating leakage, and of mitigating costs to high-emissions firms. However, some forms of updating can also inflate permit prices, thereby limiting the benefits of such schemes to high emissions firms. Rather than mitigating the impact on high carbon producers, the net operating profit of such firms can actually be lower under input-based updating than under auctioning. This is due to the fact that product prices (and therefore revenues) are lower under input-based updating, but overall compliance costs are relatively comparable between auctioning and input-based updating. In this way, the anticipated benefits from allocation updating are reduced and further distortions are introduced into the trading system. ER - TY - JOUR AU - Schmitt-Grohé,Stephanie AU - Uribe,Martín TI - Foreign Demand for Domestic Currency and the Optimal Rate of Inflation JF - National Bureau of Economic Research Working Paper Series VL - No. 15494 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15494 L1 - http://www.nber.org/papers/w15494.pdf N1 - Author contact info: Stephanie Schmitt-Grohe Department of Economics Columbia University New York, NY 10027 Fax: 919/684-8974 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 M1 - published as AB - More than half of U.S. currency circulates abroad. As a result, much of the seignorage income of the United States is generated outside of its borders. In this paper we characterize the Ramsey-optimal rate of inflation in an economy with a foreign demand for its currency. In the absence of such demand, the model implies that the Friedman rule—deflation at the real rate of interest—maximizes the utility of the representative domestic consumer. We show analytically that once a foreign demand for domestic currency is taken into account, the Friedman rule ceases to be Ramsey optimal. Calibrated versions of the model that match the range of empirical estimates of the size of foreign demand for U.S. currency deliver Ramsey optimal rates of inflation between 2 and 10 percent per annum. The domestically benevolent government finds it optimal to impose an inflation tax as a way to extract resources from the rest of the world in the form of seignorage revenue. ER - TY - JOUR AU - Meer,Jonathan AU - Rosen,Harvey S. TI - Family Bonding with Universities JF - National Bureau of Economic Research Working Paper Series VL - No. 15493 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15493 L1 - http://www.nber.org/papers/w15493.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 M1 - published as AB - One justification offered for legacy admissions policies at universities is that that they bind entire families to the university. Proponents maintain that these policies have a number of benefits, including increased donations from members of these families. We use a rich set of data from an anonymous selective research institution to investigate which types of family members have the most important effect upon donative behavior. We find that the effects of attendance by members of the younger generation (children, children-in-law, nieces and nephews) are greater than the effects of attendance by the older generations (parents, parents-in-law, aunts and uncles). Previous research has indicated that, in a variety of contexts, men and women differ in their altruistic behavior. However, we find that there are no statistically discernible differences between men and women in the way their donations depends on the alumni status of various types of relatives. Neither does the gender of the various types of relatives who attended the university seem to matter. Thus, for example, the impact of having a son attend the univer-sity is no different from the effect of a daughter. ER - TY - JOUR AU - Bagwell,Kyle AU - Staiger,Robert W. TI - The Economics of Trade Agreements in the Linear Cournot Delocation Model JF - National Bureau of Economic Research Working Paper Series VL - No. 15492 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15492 L1 - http://www.nber.org/papers/w15492.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 M1 - published as AB - Existing theories of trade agreements suggest that GATT/WTO efforts to reign in export subsidies represent an inefficient victory for exporting governments that comes at the expense of importing governments. Building from the Cournot delocation model first introduced by Venables (1985), we demonstrate that it is possible to develop a formal treatment of export subsidies in trade agreements in which a more benign interpretation of efforts to restrain export subsidies emerges. And we suggest that the gradual tightening of restraints on export subsidies that has occurred in the GATT/WTO may be interpreted as deriving naturally from the gradual reduction in import barriers that member countries have negotiated. Together with existing theories, the Cournot delocation model may help to provide a more nuanced and complete understanding of the treatment of export subsidies in trade agreements. ER - TY - JOUR AU - Lindert,Peter H. TI - Revealing Failures in the History of School Finance JF - National Bureau of Economic Research Working Paper Series VL - No. 15491 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15491 L1 - http://www.nber.org/papers/w15491.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 M1 - published as AB - This essay proposes a set of non-econometric tests using data on wage structure, school resource costs, public expenditures, taxes, and rates of return to explain anomalies in which richer political units deliver less education than poorer ones. Both the anomalies of education history, and its less surprising contrasts, fit broad patterns that can be revealed and partially explained using low-tech methods. Over most of human history, contrasts in the output of education were driven mainly by contrasts in the supply of tax support for mass education. Exogenous influences on the demand for, and the private supply of, education played only lesser roles. Pro-growth public education could have emerged a century or two earlier than it did, had the leading countries of Western Europe mustered the political will to fund it. Government underinvestment in mass education is demonstrated for England and Wales between 1717 and 1891. Differences in political support still account for most of today’s education anomalies where the contrasts involve less developed regions. In today’s highest-income settings, however, differences in tax funding lose their previous explanatory power. The postwar shift away from strong effects of school resources calls for a renewed introduction of historical context into the “does money matter” debate. ER - TY - JOUR AU - Bartelsman,Eric J. AU - Haltiwanger,John C. AU - Scarpetta,Stefano TI - Cross-Country Differences in Productivity: The Role of Allocation and Selection JF - National Bureau of Economic Research Working Paper Series VL - No. 15490 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15490 L1 - http://www.nber.org/papers/w15490.pdf N1 - Author contact info: Eric J. Bartelsman Dept. of Economics, 2E-66 Vrije Universiteit Amsterdam De Boelelaan 1105 1081 HV Amsterdam The Netherlands Tel: +31 20 598 6167 Fax: +31 20 598 6127 E-Mail: ebartelsman@alum.mit.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 Stefano Scarpetta OECD Directorate for Employment, Labour and Social Affairs 2, rue Andrè-Pascal 75775 Paris Cedex 16, France E-Mail: stefano.scarpetta@oecd.org M1 - published as AB - This paper combines different strands of the productivity literature to investigate the effect of idiosyncratic (firm-level) policy distortions on aggregate outcomes. On the one hand, a growing body of empirical research has been relating cross-country differences in key economic outcomes, such as productivity or output per capita, to differences in policies and institutions that shape the business environment. On the other hand, a branch of empirical research has attempted to shed light on the determinants of productivity at the firm level and the evolution of the distribution of productivity across firms within each industry. In this paper, we exploit a rich source of data with harmonized statistics on firm level variation within industries for a number of countries. Our key empirical finding is that there is substantial variation in the within-industry covariance between size and productivity across countries, but this covariance varies significantly across countries and is affected by the presence of idiosyncratic distortions. We develop a model in which heterogeneous firms face adjustment frictions (overhead labor and quasi-fixed capital) and idiosyncratic distortions. We show that the model can be readily calibrated to match the observed cross-country patterns of the within-industry covariance between productivity and size and thus help to explain the observed differences in aggregate performance. ER - TY - JOUR AU - Adams,James D. AU - Clemmons,J. Roger TI - The Role of Search in University Productivity: Inside, Outside, and Interdisciplinary Dimensions JF - National Bureau of Economic Research Working Paper Series VL - No. 15489 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15489 L1 - http://www.nber.org/papers/w15489.pdf N1 - Author contact info: James D. Adams Department of Economics Rensselaer Polytechnic Institute 3406 Russell Sage Laboratory Troy, NY 12180-3590 Tel: 518/276-2523 Fax: 518/276-2235 E-Mail: adamsj@rpi.edu J. Roger Clemmons Institute for Child Health Policy College of Medicine The University of Florida PO Box 100147 Gainesville, FL 32610-0147 E-Mail: jrc@ichp.ufl.edu M1 - published as AB - Due to improving information technology, the growing complexity of research problems, and policies designed to foster interdisciplinary research, the practice of science in the United States has undergone significant structural change. Using a sample of 110 top U.S. universities observed during the late 20th century we find that knowledge flows, both in total and in their major components, are a significant and positive determinant of research output. Outside knowledge-flows from other universities have increased at a faster rate than inside flows from the same university. Over time, the importance of outside flows for research output has risen, and it has done so at a faster rate than the importance of inside flows has decreased. Thus the overall contribution of knowledge-flows has increased and has shifted towards outside flows. Turning to knowledge-flows by field, we find that interdisciplinary knowledge-flows have increased only slightly relative to same field flows, despite policy initiatives that favor interdisciplinary research. Moreover, the importance of interdisciplinary flows for research output, while positive and statistically highly significant, has stayed about the same, even as same field flows have become more important, probably because of growth in cyber infrastructure. Although a final verdict is yet to be reached, one interpretation is that interdisciplinary research is still in its early stages. While interdisciplinary flows have begun to increase, the resulting discoveries, and their influence on subsequent research, may still lie in the future. ER - TY - JOUR AU - Moffitt,Robert A. AU - Scholz,John Karl TI - Trends in the Level and Distribution of Income Support JF - National Bureau of Economic Research Working Paper Series VL - No. 15488 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15488 L1 - http://www.nber.org/papers/w15488.pdf N1 - Author contact info: 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 M1 - published as M3 - presented at "Tax Policy & the Economy", September 24, 2009 AB - Means-tested and social insurance programs in the U.S. have been transformed over the last 25 years, with expansions in Medicare and Medicaid, the Earned Income Tax Credit, and Supplemental Security Income, and with contractions in Temporary Assistance for Needy Families. We examine the effect of these changes on benefits received by families. We find that transfer program expenditures in total rose from 1984 to 2004 but the increase was spread unevenly across different demographic groups and income classes. Very poor elderly, disabled, and childless families received greatly increased expenditures, mostly arising from Social Security, SSDI, SSI, and the health programs. Very poor single parent and two-parent households experienced declines in expenditures, driven largely by lower recipiency rates, benefit receipt, or both in the AFDC/TANF and Food Stamp programs. For example, AFDC-TANF participation for one-adult families with children and market income below 50 percent of the poverty line fell from 62 percent in 1984 to 24 percent in 2004. However, expenditures received by one- and two-parent households further up the income scale increased, largely because of expansions of the EITC. Thus there was a redistribution of income from the very poor to the near-poor and nonpoor for these one- and two-parent households, as well as an overall relative redistribution from them to the elderly, disabled, and childless. ER - TY - JOUR AU - Vayanos,Dimitri AU - Vila,Jean-Luc TI - A Preferred-Habitat Model of the Term Structure of Interest Rates JF - National Bureau of Economic Research Working Paper Series VL - No. 15487 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15487 L1 - http://www.nber.org/papers/w15487.pdf N1 - Author contact info: Dimitri Vayanos Department of Finance, A350 London School of Economics Houghton Street London WC2A 2AE UNITED KINGDOM Tel: +44 (0)20 7955 6382 Fax: +44 (0)20 7955 7420 E-Mail: d.vayanos@lse.ac.uk Jean-Luc Vila Bank of America Merrill Lynch 2 King Edward Street London EC1A 1HQ United Kingdom E-Mail: Jean-Luc.Vila@baml.com M1 - published as AB - We model the term structure of interest rates as resulting from the interaction between investor clienteles with preferences for specific maturities and risk-averse arbitrageurs. Because arbitrageurs are risk averse, shocks to clienteles' demand for bonds affect the term structure---and constitute an additional determinant of bond prices to current and expected future short rates. At the same time, because arbitrageurs render the term structure arbitrage-free, demand effects satisfy no-arbitrage restrictions and can be quite different from the underlying shocks. We show that the preferred-habitat view of the term structure generates a rich set of implications for bond risk premia, the effects of demand shocks and of shocks to short-rate expectations, the economic role of carry trades, and the transmission of monetary policy. ER - TY - JOUR AU - McAusland,Carol AU - Kuhn,Peter J. TI - Bidding for Brains: Intellectual Property Rights and the International Migration of Knowledge Workers JF - National Bureau of Economic Research Working Paper Series VL - No. 15486 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15486 L1 - http://www.nber.org/papers/w15486.pdf N1 - Author contact info: Carol McAusland Food and Resource Economics 337-2357 Main Mall University of British Columbia Vancouver BC Canada V6T 1Z4 E-Mail: carol.mcausland@ubc.ca 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 M1 - published as AB - We introduce international mobility of knowledge workers into a model of Nash equilibrium IPR policy choice among countries. We show that governments have incentives to use IPRs in a bidding war for global talent, resulting in Nash equilibrium IPRs that can be too high, rather than too low, from a global welfare perspective. These incentives become stronger as developing countries grow in size and wealth, thus allowing them to prevent the 'poaching' of their 'brains' by larger, wealthier markets. ER - TY - JOUR AU - Meltzer,David O. AU - Chen,Zhuo TI - The Impact of Minimum Wage Rates on Body Weight in the United States JF - National Bureau of Economic Research Working Paper Series VL - No. 15485 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15485 L1 - http://www.nber.org/papers/w15485.pdf N1 - Author contact info: David Meltzer Section of General Internal Medicine University of Chicago 5841 S. Maryland, MC 2007 Chicago, IL 60637 Tel: 773/702-0836 Fax: 773/834-2238 E-Mail: dmeltzer@medicine.bsd.uchicago.edu Zhuo (Adam) Chen Office of Workforce and Career Development Centers for Disease Control and Prevention 1600 Clifton Rd NE, MS-E94 Atlanta, GA 30333 Tel: 404-498-6317 Fax: 404-498-6505 E-Mail: fov7@cdc.gov M1 - published as M3 - presented at "Economic Aspects of Obesity", November 10-11, 2008 AB - Growing consumption of increasingly less expensive food, and especially “fast food”, has been cited as a potential cause of increasing rate of obesity in the United States over the past several decades. Because the real minimum wage in the United States has declined by as much as half over 1968-2007 and because minimum wage labor is a major contributor to the cost of food away from home we hypothesized that changes in the minimum wage would be associated with changes in bodyweight over this period. To examine this, we use data from the Behavioral Risk Factor Surveillance System from 1984-2006 to test whether variation in the real minimum wage was associated with changes in body mass index (BMI). We also examine whether this association varied by gender, education and income, and used quantile regression to test whether the association varied over the BMI distribution. We also estimate the fraction of the increase in BMI since 1970 attributable to minimum wage declines. We find that a $1 decrease in the real minimum wage was associated with a 0.06 increase in BMI. This relationship was significant across gender and income groups and largest among the highest percentiles of the BMI distribution. Real minimum wage decreases can explain 10% of the change in BMI since 1970. We conclude that the declining real minimum wage rates has contributed to the increasing rate of overweight and obesity in the United States. Studies to clarify the mechanism by which minimum wages may affect obesity might help determine appropriate policy responses. ER - TY - JOUR AU - Aizenman,Joshua TI - Hoarding International Reserves Versus a Pigovian Tax-Cum-Subsidy Scheme: Reflections on the Deleveraging Crisis of 2008-9, and a Cost Benefit Analysis JF - National Bureau of Economic Research Working Paper Series VL - No. 15484 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15484 L1 - http://www.nber.org/papers/w15484.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 M1 - published as AB - In this paper we outline a Pigovian tax-cum-subsidy scheme that deals with concerns about the costs and efficacy of hoarding international reserves (IR) as a means of self-insurance against a deleveraging crisis. We overview the degree to which IR provided self-insurance to Emerging Markets (EMs) during the 2008-9 crisis, pointing out that the fear of losing IR constrained the use of a pre-crisis IR war-chest. EMs found that their initial large stock of IR were not enough to prevent runs on their IR and large currency depreciations, runs that were abated in some countries only with the proliferation of deep swap-lines. The experience of EMs during the crisis raises concerns regarding the efficacy of hoarding IR as means of self-insurance. We outline the case for supporting self-insurance by imposing a tax on external borrowing. We focus on a model of an emerging market, where entrepreneurs finance tangible investments via bank intermediation of foreign borrowing. Bank intermediation exposes the economy to the risk of deleveraging, inducing a costly premature liquidation of tangible investments; a risk that increases with the ratio of aggregate external borrowing to IR. In these circumstances, price taking economic agents ignore their marginal impact on the expected cost of a deleveraging crisis, and external borrowing is associated with negative fire-sale congestion externalities. We show that an optimal borrowing tax reduces the distorted activity (external borrowing), and induces borrowers to finance the precautionary hoarding of international reserves. ER - TY - JOUR AU - Heathcote,Jonathan AU - Perri,Fabrizio AU - Violante,Giovanni L. TI - Unequal We Stand: An Empirical Analysis of Economic Inequality in the United States, 1967-2006 JF - National Bureau of Economic Research Working Paper Series VL - No. 15483 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15483 L1 - http://www.nber.org/papers/w15483.pdf N1 - Author contact info: Jonathan Heathcote Federal Reserve Bank of Minneapolis Research Department 90 Hennepin Ave. Minneapolis, MN 55401 Tel: (612) 204-6385 E-Mail: heathcote@minneapolisfed.org 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 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 M1 - published as AB - We conduct a systematic empirical study of cross-sectional inequality in the United States, integrating data from the Current Population Survey, the Panel Study of Income Dynamics, the Consumer Expenditure Survey, and the Survey of Consumer Finances. In order to understand how different dimensions of inequality are related via choices, markets, and institutions, we follow the mapping suggested by the household budget constraint from individual wages to individual earnings, to household earnings, to disposable income, and, ultimately, to consumption and wealth. We document a continuous and sizable increase in wage inequality over the sample period. Changes in the distribution of hours worked sharpen the rise in earnings inequality before 1982, but mitigate its increase thereafter. Taxes and transfers compress the level of income inequality, especially at the bottom of the distribution, but have little effect on the overall trend. Finally, access to financial markets has limited both the level and growth of consumption inequality. ER - TY - JOUR AU - He,Zhiguo AU - Xiong,Wei TI - Dynamic Debt Runs JF - National Bureau of Economic Research Working Paper Series VL - No. 15482 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15482 L1 - http://www.nber.org/papers/w15482.pdf N1 - Author contact info: Zhiguo He University of Chicago Booth School of Business E-Mail: Zhiguo.He@chicagogsb.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 M1 - published as AB - We develop a dynamic model of debt runs on a firm, which invests in an illiquid asset by rolling over staggered short-term debt contracts. We derive a unique threshold equilibrium, in which creditors coordinate their asynchronous rollover decisions based on the firm's publicly observable and time-varying fundamental. Fear of the firm's future rollover risk motivates each maturing creditor to run ahead of others even when the firm is still solvent. Our model provides implications on the roles played by volatility, illiquidity and debt maturity in driving debt runs, as well as on firms' capital adequacy standards and credit risk. ER - TY - JOUR AU - Xiong,Wei AU - Yu,Jialin TI - The Chinese Warrants Bubble JF - National Bureau of Economic Research Working Paper Series VL - No. 15481 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15481 L1 - http://www.nber.org/papers/w15481.pdf N1 - Author contact info: 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 Jialin Yu 421 Uris Hall Graduate School of Business Columbia University 3022 Broadway New York, NY 10027 Tel: 212/854-9140 Fax: 212/316-9180 E-Mail: jy2167@columbia.edu M1 - published as AB - In 2005-08, over a dozen put warrants traded in China went so deep out of the money that they were certain to expire worthless. Nonetheless, each warrant was traded nearly three times each day at substantially inflated prices. This bubble is unique, because the underlying stock prices make the zero warrant fundamentals publicly observable. We find evidence supporting the resale option theory of bubbles: investors overpay for a warrant hoping to resell it at an even higher price to a greater fool. Our study confirms key findings of the experimental bubble literature and provides useful implications for market development. ER - TY - JOUR AU - Stevens,Ann Huff AU - Schaller,Jessamyn TI - Short-run Effects of Parental Job Loss on Children's Academic Achievement JF - National Bureau of Economic Research Working Paper Series VL - No. 15480 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15480 L1 - http://www.nber.org/papers/w15480.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 Jessamyn Schaller Department of Economics One Shields Avenue University of California, Davis Davis, CA 95616 E-Mail: jschaller@ucdavis.edu M1 - published as AB - We study the relationship between parental job loss and children’s academic achievement using data on job loss and grade retention from the 1996, 2001, and 2004 panels of the Survey of Income and Program Participation. We find that a parental job loss increases the probability of children’s grade retention by 0.8 percentage points, or around 15 percent. After conditioning on child fixed effects, there is no evidence of significantly increased grade retention prior to the job loss, suggesting a causal link between the parental employment shock and children’s academic difficulties. These effects are concentrated among children whose parents have a high school education or less. ER - TY - JOUR AU - Caballero,Ricardo J. AU - Simsek,Alp TI - Fire Sales in a Model of Complexity JF - National Bureau of Economic Research Working Paper Series VL - No. 15479 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15479 L1 - http://www.nber.org/papers/w15479.pdf N1 - Author contact info: Ricardo J. Caballero MIT Department of Economics Room E52-373a Cambridge, MA 02142-1347 Tel: 617/253-0489 Fax: 617/253-6915 E-Mail: caball@mit.edu Alp Simsek MIT E-Mail: alpstein@MIT.EDU M1 - published as AB - Financial assets provide return and liquidity services to their holders. However, during severe financial crises many asset prices plummet, destroying their liquidity provision function at the worst possible time. In this paper we present a model of fire sales and market breakdowns, and of the financial amplification mechanism that follows from them. The distinctive feature of our model is the central role played by endogenous complexity: As asset prices implode, more “banks” within the financial network become distressed, which increases each (non-distressed) bank’s likelihood of being hit by an indirect shock. As this happens, banks face an increasingly complex environment since they need to understand more and more interlinkages in making their financial decisions. This complexity brings about confusion and uncertainty, which makes relatively healthy banks, and hence potential asset buyers, reluctant to buy since they now fear becoming embroiled in a cascade they do not control or understand. The liquidity of the market quickly vanishes and a financial crisis ensues. The model exhibits a powerful “complexity-externality.” As a potential asset buyer chooses to pull back, the size of the cascade grows, which increases the degree of complexity of the environment. This rise in perceived complexity induces other healthy banks to pull back, which exacerbates the fire sale and the cascade. ER - TY - JOUR AU - Kaminsky,Graciela AU - Mati,Amine AU - Choueiri,Nada TI - Thirty Years of Currency Crises in Argentina: External Shocks or Domestic Fragility? JF - National Bureau of Economic Research Working Paper Series VL - No. 15478 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15478 L1 - http://www.nber.org/papers/w15478.pdf N1 - Author contact info: Graciela L. Kaminsky Department of Economics George Washington University Washington, DC 20052 Tel: 202/994-6686 Fax: 202/994-6147 E-Mail: graciela@gwu.edu Amine Mati International Monetary Fund 700 19th Street, N.W. Washington, D.C. 20431 E-Mail: amati@imf.org Nada Choueiri International Monetary Fund 700 19th Street, N.W. Washington, D.C. 20431 E-Mail: nchoueiri@imf.org M1 - published as AB - This paper examines Argentina’s currency crises from 1970 to 2001, with particular attention to the role of domestic and external factors. Using VAR estimations, we find that deteriorating domestic fundamentals matter. For example, at the core of the late 1980s crises was excessively loose monetary policy while a sharp output contration triggered the collapse of the currency board in January 2002. In contrast, adverse external shocks were at the heart of the 1995 crisis, with spillovers from the Mexican crisis and high world interest rates being key sources of financial distress. ER - TY - JOUR AU - Salcedo,Alejandrina AU - Schoellman,Todd AU - Tertilt,Michèle TI - Families as Roommates: Changes in U.S. Household Size from 1850 to 2000 JF - National Bureau of Economic Research Working Paper Series VL - No. 15477 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15477 L1 - http://www.nber.org/papers/w15477.pdf N1 - Author contact info: Alejandrina Salcedo Mexican Central Bank Research Department Mexico City E-Mail: alejandrina.salcedo@gmail.com Todd Schoellman Clemson University Department of Economics Clemson, SC E-Mail: tschoel@CLEMSON.EDU Michèle Tertilt Department of Economics Stanford University 579 Serra Mall Stanford, CA 94305-6072 Tel: 650/724-4903 Fax: 650/725-5702 E-Mail: tertilt@stanford.edu M1 - published as AB - Living arrangements have changed enormously over the last two centuries. While the average American today lives in a household of only three people, in 1850 household size was twice that figure. Further, both the number of children and the number of adults in a household have fallen dramatically. We develop a simple theory of household size where living with others is beneficial solely because the costs of household public goods can be shared. In other words, we abstract from intra-family relations and focus on households as collections of roommates. The model's mechanism is that rising income leads to a falling expenditure share on household public goods, which endogenously makes household formation less beneficial and privacy more attractive. To assess the magnitude of this mechanism, we first calibrate the model to match the relationship between household size, consumption patterns, and income in the cross-section at the end of the 20th century. We then project the model back to 1850 by changing income. We find that our proposed mechanism can account for 37 percent of the decline in the number of adults in a household between 1850 and 2000, and for 16 percent of the decline in the number of children. ER - TY - JOUR AU - Leslie,Phillip AU - Sorensen,Alan TI - The Welfare Effects of Ticket Resale JF - National Bureau of Economic Research Working Paper Series VL - No. 15476 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15476 L1 - http://www.nber.org/papers/w15476.pdf N1 - Author contact info: Phillip Leslie Stanford University Graduate School of Business 518 Memorial Way Stanford, CA 94305 Tel: 650/723-8382 Fax: 650/725-7979 E-Mail: pleslie@stanford.edu Alan Sorensen Graduate School of Business Stanford University 518 Memorial Way Stanford, CA 94305-5015 Tel: 650/724-0446 Fax: 650/725-7979 E-Mail: asorensen@stanford.edu M1 - published as AB - We develop an equilibrium model of ticket resale in which buyers' decisions in the primary market, including costly efforts to "arrive early" to buy underpriced tickets, are based on rational expectations of resale market outcomes. We estimate the parameters of the model using a novel dataset that combines transaction data from both the primary and secondary markets for a sample of major rock concerts. Our estimates indicate that while resale improves allocative efficiency, half of the welfare gain from reallocation is offset by increases in costly effort in the arrival game and transaction costs in the resale market. ER - TY - JOUR AU - Taylor,Alan M. TI - The Global 1970s and the Echo of the Great Depression JF - National Bureau of Economic Research Working Paper Series VL - No. 15475 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15475 L1 - http://www.nber.org/papers/w15475.pdf N1 - Author contact info: Alan M. Taylor Department of Economics University of California, Davis One Shields Avenue Davis, CA 95616 Tel: 530/754-7464 Fax: 530/752-9382 E-Mail: amtaylor@ucdavis.edu M1 - published as AB - The Great Depression ushered in a long era of deglobalization that lasted for many decades. An old conventional wisdom (e.g. Polanyi) argues that the common aspect of this shock across all countries, a deep depression, can explain the large and persistent global shift away from orthodox liberal economic policies—including, for example, the collapse of free trade. Yet there is substantial unexplored variation, since not all countries experienced the same depth of shock in the 1930s. Hence, if the “policy path dependence” argument is correct, we should be able to detect it using this variation. Those countries with deeper slumps ought to have seen policy shifts that were larger and more persistent. A fuller economic history of the reglobalization of the postwar period should confront this question, and we present some preliminary evidence for the path dependence hypothesis. ER - TY - JOUR AU - Feyrer,James TI - The US Productivity Slowdown, the Baby Boom, and Management Quality JF - National Bureau of Economic Research Working Paper Series VL - No. 15474 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15474 L1 - http://www.nber.org/papers/w15474.pdf N1 - Author contact info: James Feyrer Department of Economics Dartmouth College 6106 Rockefeller Hall Hanover, NH 03755-3514 Tel: 603/646-2533 Fax: 603/646-2122 E-Mail: james.feyrer@dartmouth.edu M1 - published as AB - This paper examines whether management changes caused by the entry of the baby boom into the workforce explain the US productivity slowdown in the 1970s and resurgence in the 1990s. Lucas (1978) suggests that the quality of managers plays a significant role in determining output. If there is heterogeneity across workers and management skill improves with experience, an influx of young workers will lower the overall quality of management and lower total factor productivity. Census data shows that the entry of the baby boom resulted in more managers being hired from the smaller, pre baby boom cohorts. These marginal managers were necessarily of lower quality. As the boomers aged and gained experience, this effect was reversed, increasing managerial quality and raising total factor productivity. Using the Lucas model as a framework, a calibrated model of managers, workers, and firms suggests that the management effects of the baby boom may explain roughly 20 percent of the observed productivity slowdown and resurgence. ER - TY - JOUR AU - Dobbie,Will AU - Fryer,Roland G., Jr TI - Are High Quality Schools Enough to Close the Achievement Gap? Evidence from a Social Experiment in Harlem JF - National Bureau of Economic Research Working Paper Series VL - No. 15473 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15473 L1 - http://www.nber.org/papers/w15473.pdf N1 - Author contact info: Will Dobbie Education Innovation Laboratory Harvard University 44 Brattle Street, 5th Floor Cambridge, MA 02138 E-Mail: dobbiew@nber.org 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 M1 - published as AB - Harlem Children’s Zone (HCZ), which combines community investments with reform minded charter schools, is one of the most ambitious social experiments to alleviate poverty of our time. We provide the first empirical test of the causal impact of HCZ on educational outcomes, with an eye toward informing the long-standing debate whether schools alone can eliminate the achievement gap or whether the issues that poor children bring to school are too much for educators alone to overcome. Both lottery and instrumental variable identification strategies lead us to the same story: Harlem Children’s Zone is effective at increasing the achievement of the poorest minority children. Taken at face value, the effects in middle school are enough to close the black-white achievement gap in mathematics and reduce it by nearly half in English Language Arts. The effects in elementary school close the racial achievement gap in both subjects. We conclude by presenting four pieces of evidence that high-quality schools or high-quality schools coupled with community investments generate the achievement gains. Community investments alone cannot explain the results. ER - TY - JOUR AU - Li,Wenli AU - White,Michelle J. TI - Mortgage Default, Foreclosure, and Bankruptcy JF - National Bureau of Economic Research Working Paper Series VL - No. 15472 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15472 L1 - http://www.nber.org/papers/w15472.pdf N1 - Author contact info: Wenli Li Federal Reserve Bank of Philadelphia E-Mail: wenli.li@phil.frb.org 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 M1 - published as AB - In this paper we examine the relationship between homeowners’ bankruptcy decisions and their mortgage default decisions and the relationship between homeowners’ bankruptcy decisions and lenders’ decisions to foreclose. In theory, both relationships could be either substitutes or complements. Bankruptcy and default tend to be substitutes because homeowners’ budgets are limited and, if they spend less on payments to unsecured lenders, then they have more money to pay their mortgages. But bankruptcy and default may also be complements if homeowners use bankruptcy to reduce the cost of defaulting on their mortgages. Bankruptcy and foreclosure similarly may be either substitutes or complements. In fact we show that both relationships are complementary, although homeowners reacted to the 2005 bankruptcy reform by treating them as substitutes. We also show that bankruptcies, defaults and foreclosures all tend to spread, i.e., higher bankruptcy rates in the neighborhood raise homeowners’ probability of filing, higher default rates raise homeowners’ probability of defaulting, and higher foreclosure rates raise homeowners’ probability of foreclosure. We provide estimates of the size of these effects. The paper argues that these relationships have important public policy implications. In particular, foreclosures have very high social costs, and some of these costs are external to both borrowers and lenders. As a result, there is a social gain from discouraging bankruptcies, since fewer bankruptcies mean fewer defaults and foreclosures. We show that these considerations shift optimal bankruptcy law in a pro-creditor direction, because pro-creditor bankruptcy policies reduce the number of filings and therefore reduce foreclosures. But the same considerations shift other policies that affect bankruptcy in a pro-debtor direction. This is because pro-debtor shifts in, for example, wage garnishment policy reduce the number of bankruptcy filings and therefore reduce foreclosures. ER - TY - JOUR AU - Heckman,James J. AU - Moon,Seong Hyeok AU - Pinto,Rodrigo AU - Savelyev,Peter A. AU - Yavitz,Adam TI - The Rate of Return to the High/Scope Perry Preschool Program JF - National Bureau of Economic Research Working Paper Series VL - No. 15471 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15471 L1 - http://www.nber.org/papers/w15471.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 Seong Moon Department of Economics The University of Chicago 1126 E. 59th Street Chicago, IL 60637 E-Mail: moon@uchicago.edu Rodrigo Pinto Department of Economics The University of Chicago 1126 E. 59th Street Chicago, IL 60637 E-Mail: rodrig@uchicago.edu Peter A. Savelyev Department of Economics University of Chicago 1126 E. 59th Street Chicago, IL 60637 E-Mail: psavel@uchicago.edu Adam Yavitz Department of Economics 1126 E. 59th Street Chicago, IL 60637 E-Mail: adamy@uchicago.edu M1 - published as AB - This paper estimates the rate of return to the High/Scope Perry Preschool Program, an early intervention program targeted toward disadvantaged African-American youth. Estimates of the rate of return to the Perry program are widely cited to support the claim of substantial economic benefits from preschool education programs. Previous studies of the rate of return to this program ignore the compromises that occurred in the randomization protocol. They do not report standard errors. The rates of return estimated in this paper account for these factors. We conduct an extensive analysis of sensitivity to alternative plausible assumptions. Estimated social rates of return generally fall between 7-10 percent, with most estimates substantially lower than those previously reported in the literature. However, returns are generally statistically significantly different from zero for both males and females and are above the historical return on equity. Estimated benefit-to-cost ratios support this conclusion. ER - TY - JOUR AU - Goldberg,Linda S. AU - Tille,Cédric TI - Micro, Macro, and Strategic Forces in International Trade Invoicing JF - National Bureau of Economic Research Working Paper Series VL - No. 15470 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15470 L1 - http://www.nber.org/papers/w15470.pdf N1 - Author contact info: Linda S. Goldberg Research Department, 3rd Floor 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 Cédric Tille Graduate Institute for International and Development Studies Department of Economics Pavillon Rigot, Avenue de la Paix 11 A 1202 Geneve, Switzerland Tel: 41229085928 Fax: 41227333049 E-Mail: cedric.tille@graduateinstitute.ch M1 - published as AB - The use of different currencies in the invoicing of international trade transactions plays a major role in the international transmission of economic fluctuations. Existing studies argue that an exporter’s invoicing choice reflects structural aspects of her industry, such as market share and the price-sensitivity of demand, the hedging of marginal costs, due for instance to the use of imported inputs, and macroeconomic volatility. We use a new highly disaggregated dataset to assess the roles of the various invoicing determinants. We find support for the factors identified in the literature, and document a new feature, in the form of a link between shipments size and invoicing. Specifically, larger transactions are more likely to be invoiced in the importer’s currency. We offer a potential theoretical explanation for the empirical link between transaction size and invoicing by allowing invoicing to be set through a bargaining between exporters and importers, a feature that is absent from existing models despite its empirical relevance. ER - TY - JOUR AU - Lusardi,Annamaria AU - Mitchell,Olivia S. AU - Curto,Vilsa TI - Financial Literacy and Financial Sophistication Among Older Americans JF - National Bureau of Economic Research Working Paper Series VL - No. 15469 PY - 2009 Y2 - November 2009 UR - http://www.nber.org/papers/w15469 L1 - http://www.nber.org/papers/w15469.pdf N1 - Author contact info: Annamaria Lusardi Department of Economics Dartmouth College Hanover, NH 03755 Tel: 603-646-2099 Fax: 603-646-2122 E-Mail: a.lusardi@dartmouth.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 Harvard University Cambridge, MA 02138 E-Mail: vilsa.curto@post.harvard.edu M1 - published as AB - This paper analyzes new data on financial literacy and financial sophistication from the 2008 Health and Retirement Study. We show that financial literacy is lacking among older individuals and for the first time explore additional questions on financial sophistication which proves even scarcer. For this sample of older respondents over the age of 55, we find that people lack even a rudimentary understanding of stock and bond prices, risk diversification, portfolio choice, and investment fees. In view of the fact that individuals are increasingly required to take on responsibility for their own retirement security, this lack of knowledge has serious implications. ER - TY - JOUR AU - Kyle,Margaret AU - McGahan,Anita TI - Investments in Pharmaceuticals Before and After TRIPS JF - National Bureau of Economic Research Working Paper Series VL - No. 15468 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15468 L1 - http://www.nber.org/papers/w15468.pdf N1 - Author contact info: Margaret Kyle Toulouse School of Economics 21 allèe de Brienne 31000 Toulouse FRANCE E-Mail: margaret.kyle@tse-fr.eu Anita McGahan University of Toronto 105 St George Toronto, ON M5S 3E6 Canada Tel: 617 767 9063 E-Mail: amcgahan@rotman.utoronto.ca M1 - published as AB - We examine the relationship between patent protection for pharmaceuticals and investment in development of new drugs. Patent protection has increased around the world as a consequence of the TRIPS Agreement, which specifies minimum levels of intellectual property protection for members of the World Trade Organization. It is generally argued that patents are critical for pharmaceutical research efforts, and so greater patent protection in developing and least-developed countries might result in greater effort by pharmaceutical firms to develop drugs that are especially needed in those countries. Since patents also have the potential to reduce access to treatments through higher prices, it is imperative to assess whether the benefits of increased incentives have materialized in research on diseases that particularly affect the poor. We find that patent protection is associated with increases in research and development (R&D) effort when adopted in high income countries. However, the introduction of patents in developing countries has not been followed by greater investment. Particularly for diseases that primarily affect the poorest countries, our results suggest that alternative mechanisms for inducing R&D may be more appropriate than patents. ER - TY - JOUR AU - Blanchard,Olivier J. AU - Riggi,Marianna TI - Why are the 2000s so different from the 1970s? A structural interpretation of changes in the macroeconomic effects of oil prices JF - National Bureau of Economic Research Working Paper Series VL - No. 15467 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15467 L1 - http://www.nber.org/papers/w15467.pdf N1 - Author contact info: Oliver J. Blanchard Marianna Riggi University of Rome "La Sapienza" E-Mail: marianna.riggi@uniroma1.it M1 - published as AB - In the 1970s, large increases in the price of oil were associated with sharp decreases in output and large increases in inflation. In the 2000s, and at least until the end of 2007, even larger increases in the price of oil were associated with much milder movements in output and inflation. Using a structural VAR approach Blanchard and Gali (2007a) argued that this has reflected in large part a change in the causal relation from the price of oil to output and inflation. In order to shed light on the possible factors behind the decrease in the macroeconomic effects of oil price shocks, we develop a new-Keynesian model, with imported oil used both in production and consumption, and we use a minimum distance estimator that minimizes, over the set of structural parameters and for each of the two samples (pre and post 1984), the distance between the empirical SVAR-based impulse response functions and those implied by the model. Our results point to two relevant changes in the structure of the economy, which have modified the transmission mechanism of the oil shock: vanishing wage indexation and an improvement in the credibility of monetary policy. The relative importance of these two structural changes depends however on how we formalize the process of expectations formation by economic agents. ER - TY - JOUR AU - Azoulay,Pierre AU - Zivin,Joshua S. Graff AU - Manso,Gustavo TI - Incentives and Creativity: Evidence from the Academic Life Sciences JF - National Bureau of Economic Research Working Paper Series VL - No. 15466 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15466 L1 - http://www.nber.org/papers/w15466.pdf N1 - Author contact info: Pierre Azoulay MIT Sloan School of Management 50 Memorial Drive E522-555 Cambridge, MA 02142 Tel: 617/258-9766 Fax: 617/253-2660 E-Mail: pazoulay@mit.edu Joshua S. Graff Zivin International Relations & Pacific Studies University of California, San Diego 9500 Gilman Drive, MC 0519 La Jolla, CA 92093-0519 Tel: 858/822-6438 E-Mail: jgraffzivin@ucsd.edu Gustavo Manso MIT Sloan School E-Mail: manso@mit.edu M1 - published as AB - Despite its presumed role as an engine of economic growth, we know surprisingly little about the drivers of scientific creativity. In this paper, we exploit key differences across funding streams within the academic life sciences to estimate the impact of incentives on the rate and direction of scientific exploration. Specifically, we study the careers of investigators of the Howard Hughes Medical Institute (HHMI), which tolerates early failure, rewards long-term success, and gives its appointees great freedom to experiment; and grantees from the National Institute of Health, which are subject to short review cycles, pre-defined deliverables, and renewal policies unforgiving of failure. Using a combination of propensity-score weighting and difference-in-differences estimation strategies, we find that HHMI investigators produce high-impact papers at a much higher rate than two control groups of similarly-accomplished NIH-funded scientists. Moreover, the direction of their research changes in ways that suggest the program induces them to explore novel lines of inquiry. ER - TY - JOUR AU - Benmelech,Efraim AU - Berrebi,Claude AU - Klor,Esteban F. TI - The Economic Cost of Harboring Terrorism JF - National Bureau of Economic Research Working Paper Series VL - No. 15465 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15465 L1 - http://www.nber.org/papers/w15465.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 Claude Berrebi Rand Corporation 1776 Main Street P.O. Box 2138 Santa Monica, CA 90407-2138 E-Mail: Claude_Berrebi@rand.org Esteban Klor Dept. of Economics Hebrew University Mount Scopus Jerusalem ISRAEL 91905 E-Mail: eklor@mscc.huji.ac.il M1 - published as AB - The literature on conflict and terrorism has paid little attention to the economic costs of terrorism for the perpetrators. This paper aims to fill that gap by examining the economic costs of committing suicide terror attacks. Using data covering the universe of Palestinian suicide terrorists during the second Palestinian uprising, combined with data from the Palestinian Labor Force Survey, we identify and quantify the impact of a successful attack on unemployment and wages. We find robust evidence that terror attacks have important economic costs. The results suggest that a successful attack causes an increase of 5.3 percent in unemployment, increases the likelihood that the district’s average wages fall in the quarter following an attack by more than 20 percent, and reduces the number of Palestinians working in Israel by 6.7 percent relative to its mean. Importantly, these effects are persistent and last for at least six months after the attack. ER - TY - JOUR AU - Ramey,Valerie A. TI - Identifying Government Spending Shocks: It's All in the Timing JF - National Bureau of Economic Research Working Paper Series VL - No. 15464 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15464 L1 - http://www.nber.org/papers/w15464.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 AB - Do shocks to government spending raise or lower consumption and real wages? Standard VAR identification approaches show a rise in these variables, whereas the Ramey-Shapiro narrative identification approach finds a fall. I show that a key difference in the approaches is the timing. Both professional forecasts and the narrative approach shocks Granger-cause the VAR shocks, implying that the VAR shocks are missing the timing of the news. Simulations from a standard neoclassical model in which government spending is anticipated by several quarters demonstrate that VARs estimated with faulty timing can produce a rise in consumption even when it decreases in the model. Motivated by the importance of measuring anticipations, I construct two new variables that measure anticipations. The first is based on narrative evidence that is much richer than the Ramey-Shapiro military dates and covers 1939 to 2008. The second is from the Survey of Professional Forecasters, and covers the period 1969 to 2008. All news measures suggest that most components of consumption fall after a positive shock to government spending. The implied government spending multipliers range from 0.6 to 1.1. ER - TY - JOUR AU - Heckman,James J. AU - Schmierer,Daniel A. AU - Urzua,Sergio S. TI - Testing the Correlated Random Coefficient Model JF - National Bureau of Economic Research Working Paper Series VL - No. 15463 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15463 L1 - http://www.nber.org/papers/w15463.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 Daniel A. Schmierer Department of Economics University of Chicago 1126 E. 59th Street Chicago IL 60637 E-Mail: dschmier@uchicago.edu Sergio S. Urzua Northwestern University Department of Economics 2001 Sheridan Road #3225 Evanston, IL 60208 E-Mail: s-urzua@northwestern.edu M1 - published as AB - The recent literature on instrumental variables (IV) features models in which agents sort into treatment status on the basis of gains from treatment as well as on baseline-pretreatment levels. Components of the gains known to the agents and acted on by them may not be known by the observing economist. Such models are called correlated random coefficient models. Sorting on unobserved components of gains complicates the interpretation of what IV estimates. This paper examines testable implications of the hypothesis that agents do not sort into treatment based on gains. In it, we develop new tests to gauge the empirical relevance of the correlated random coefficient model to examine whether the additional complications associated with it are required. We examine the power of the proposed tests. We derive a new representation of the variance of the instrumental variable estimator for the correlated random coefficient model. We apply the methods in this paper to the prototypical empirical problem of estimating the return to schooling and find evidence of sorting into schooling based on unobserved components of gains. ER - TY - JOUR AU - Sinai,Todd M. AU - Souleles,Nicholas S. TI - Can Owning a Home Hedge the Risk of Moving? JF - National Bureau of Economic Research Working Paper Series VL - No. 15462 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15462 L1 - http://www.nber.org/papers/w15462.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 Nicholas S. Souleles Finance Department The Wharton School 2300 SH-DH University of Pennsylvania Philadelphia, PA 19104-6367 Tel: 215/898-9466 Fax: 215/898-6200 E-Mail: souleles@wharton.upenn.edu M1 - published as AB - Conventional wisdom holds that one of the riskiest aspects of owning a house is the uncertainty surrounding its sale price, especially if one moves to another housing market. However, households who sell a house typically buy another house, whose purchase price is also uncertain. We show that for such households, home owning often hedges their net exposure to housing market risk, because their sale price covaries positively with house prices in their likely new market. That expected covariance is much higher than previously recognized because there is considerable heterogeneity across city pairs in how much house prices covary and households tend to move between the highly correlated housing markets. Taking these two considerations into account increases the estimated median expected correlation in real house price growth across MSAs from 0.35 to 0.60. Moreover, we show that households’ decisions whether to own or rent are sensitive to this “moving-hedge” value. We find that the likelihood of home owning for a mobile household is more than one percentage point higher when the expected house price covariance rises by 38 percent (one standard deviation). This effect attenuates as a household’s probability of moving diminishes and thus the moving-hedge value declines. ER - TY - JOUR AU - Dynarski,Susan AU - Gruber,Jonathan AU - Li,Danielle TI - Cheaper By the Dozen: Using Sibling Discounts at Catholic Schools to Estimate the Price Elasticity of Private School Attendance JF - National Bureau of Economic Research Working Paper Series VL - No. 15461 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15461 L1 - http://www.nber.org/papers/w15461.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 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 Danielle Li 58 Plympton St #518 Cambridge, MA 02138 Tel: 617 721 3270 E-Mail: d_li@mit.edu M1 - published as AB - The effect of vouchers on sorting between private and public schools depends upon the price elasticity of demand for private schooling. Estimating this elasticity is empirically challenging because prices and quantities are jointly determined in the market for private schooling. We exploit a unique and previously undocumented source of variation in private school tuition to estimate this key parameter. A majority of Catholic elementary schools offer discounts to families that enroll more than one child in the school in a given year. Catholic school tuition costs therefore depend upon the interaction of the number and spacing of a family’s children with the pricing policies of the local school. This within-neighborhood variation in tuition prices allows us to control for unobserved determinants of demand with a set fine geographic group fixed effects while still identifying the price parameter. We analyze this variation by using data on over 3700 school tuition schedules collected from Catholic schools around the nation, matched to restricted Census data that identifies precise location that can be matched to the nearest Catholic school. We find that a standard deviation decrease in tuition prices increases the probability that a family will send its children to private school by one half percentage point, which translates into an elasticity of Catholic school attendance with respect to tuition costs of -0.19. Our subgroup results suggest that a voucher program would disproportionately induce into private schools those who, along observable dimensions, are unlike those who currently attend private school. ER - TY - JOUR AU - Maggi,Giovanni AU - Staiger,Robert W. TI - Breach, Remedies and Dispute Settlement in Trade Agreements JF - National Bureau of Economic Research Working Paper Series VL - No. 15460 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15460 L1 - http://www.nber.org/papers/w15460.pdf N1 - Author contact info: Giovanni Maggi Department of Economics Yale University 37 Hillhouse Avenue Rm 27 New Haven, CT 06511 Tel: 203/432-3569 Fax: 203/432-6323 E-Mail: giovanni.maggi@yale.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 M1 - published as AB - We provide a simple but novel model of trade agreements that highlights the role of transaction costs, renegotiation and dispute settlement. The model allows us to characterize the appropriate remedy for breach and whether the agreement should be structured as a system of "property rights" or "liability rules." We then study how the optimal rules depend on the underlying economic and contracting environment. Our model also delivers predictions about the outcome of trade disputes, and in particular about the propensity of countries to settle early versus "fighting it out." ER - TY - JOUR AU - Cochrane,John H. TI - Can Learnability Save New-Keynesian Models? JF - National Bureau of Economic Research Working Paper Series VL - No. 15459 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15459 L1 - http://www.nber.org/papers/w15459.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@gsb.uchicago.edu M1 - published as AB - Bennett McCallum (2009), applying Evans and Honkapohja's (2001) results, argues that "learnability" can save New-Keynesian models from their indeterminacies. He claims the unique bounded equilibrium is learnable, and the explosive equilibria are not. However, he assumes that agents can directly observe the monetary policy shock. Reversing this assumption, I find the opposite result: the bounded equilibrium is not learnable and the unbounded equilibria are learnable. More generally, I argue that a threat by the Fed to move to an "unlearnable" equilibrium for all but one value of inflation is a poor foundation for choosing the bounded equilibrium of a New-Keynesian model. ER - TY - JOUR AU - Veronesi,Pietro AU - Zingales,Luigi TI - Paulson's Gift JF - National Bureau of Economic Research Working Paper Series VL - No. 15458 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15458 L1 - http://www.nber.org/papers/w15458.pdf N1 - Author contact info: 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@gsb.uchicago.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 M1 - published as AB - We calculate the costs and benefits of the largest ever U.S. Government intervention in the financial sector announced the 2008 Columbus-day weekend. We estimate that this intervention increased the value of banks’ financial claims by $131 billion at a taxpayers’ cost of $25 -$47 billions with a net benefit between $84bn and $107bn. By looking at the limited cross section we infer that this net benefit arises from a reduction in the probability of bankruptcy, which we estimate would destroy 22% of the enterprise value. The big winners of the plan were the three former investment banks and Citigroup, while the loser was JP Morgan. ER - TY - JOUR AU - Gârleanu,Nicolae AU - Kogan,Leonid AU - Panageas,Stavros TI - The Demographics of Innovation and Asset Returns JF - National Bureau of Economic Research Working Paper Series VL - No. 15457 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15457 L1 - http://www.nber.org/papers/w15457.pdf N1 - Author contact info: Nicolae B. Garleanu Haas School of Business F628 University of California, Berkeley Berkeley, CA 94720 Tel: (1) 510 642 3421 Fax: (1) 510 643 1420 E-Mail: garleanu@haas.berkeley.edu Leonid Kogan MIT Sloan School of Management 50 Memorial Drive, E52-434 Cambridge, MA 02142 Tel: 617/504-9728 Fax: 617/258-6855 E-Mail: lkogan@mit.edu Stavros Panageas University of Chicago Booth School of Business 5807 South Woodlawn Avenue Chicago, IL, 60637 Tel: (773) 834 4711 E-Mail: stavros.panageas@chicagobooth.edu M1 - published as AB - We study asset-pricing implications of innovation in a general-equilibrium overlapping-generations economy. Innovation increases the competitive pressure on existing firms and workers, reducing the profits of existing firms and eroding the human capital of older workers. Due to the lack of inter-generational risk sharing, innovation creates a systematic risk factor, which we call "displacement risk.'' This risk helps explain several empirical patterns, including the existence of the growth-value factor in returns, the value premium, and the high equity premium. We assess the magnitude of displacement risk using estimates of inter-cohort consumption differences across households and find support for the model. ER - TY - JOUR AU - Miller,Grant AU - Pinto,Diana M. AU - Vera-Hernández,Marcos TI - High-Powered Incentives in Developing Country Health Insurance: Evidence from Colombia’s Régimen Subsidiado JF - National Bureau of Economic Research Working Paper Series VL - No. 15456 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15456 L1 - http://www.nber.org/papers/w15456.pdf N1 - Author contact info: Grant Miller CHP/PCOR Stanford University 117 Encina Commons Stanford, CA 94305-6019 Tel: 650/723-2714 Fax: 650/723-1919 E-Mail: ngmiller@stanford.edu Diana M. Pinto Department of Clinical Epidemiology and Biostatistics Faculty of Medicine Pontificia Universidad Javeriana 7th Avenue, #40-62, Second Floor Bogotá, Colombia Tel: 3208320 ext2804 E-Mail: dmpinto@gmail.com Marcos Vera-Hernández University College London Department of Economics Gower St. London WC1E 6BT United Kingdom E-Mail: m.vera@ucl.ac.uk M1 - published as AB - Despite current emphasis on health insurance expansions in developing countries, inefficient consumer incentives for over-use of medical care are an important counterbalancing concern. However, three factors that are more acute in poor countries (credit constraints, principal-agent problems, and positive externalities) result in substantial under-use and misuse as well. This paper studies Colombia’s Régimen Subsidiado, the first major developing country effort to expand insurance in a way that purposefully addresses these inefficiencies. Using a regression discontinuity design, we find that Colombia’s insurance program has provided risk protection while substantially increasing the use of traditionally under-utilized preventive services (with measurable health gains) through high-powered supply-side incentives. ER - TY - JOUR AU - Johnson,Simon AU - Larson,William AU - Papageorgiou,Chris AU - Subramanian,Arvind TI - Is Newer Better? Penn World Table Revisions and Their Impact on Growth Estimates JF - National Bureau of Economic Research Working Paper Series VL - No. 15455 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15455 L1 - http://www.nber.org/papers/w15455.pdf N1 - Author contact info: Simon Johnson Sloan School of Management MIT E52-562 50 Memorial Drive Cambridge, MA 02142 Tel: 617/290-9618 Fax: 617/253-2660 E-Mail: sjohnson@mit.edu William D. Larson Department of Economics The George Washington University 2115 G ST NW Washington, DC 20052 Tel: 202-557-9930 Fax: 202-994-6147 E-Mail: larsonwd@gmail.com Chris Papageorgiou Research Department International Monetary Fund 700 19th St. N.W. Washington, DC 20431 Tel: (202) 623-7503 Fax: (202) 589-7503 E-Mail: cpapageorgiou@imf.org Arvind Subramanian Peterson Institute for International Economics 1750 Massachusetts Ave, NW Washington, DC 20036 E-Mail: asubramanian@piie.com M1 - published as AB - This paper sheds light on two problems in the Penn World Table (PWT) GDP estimates. First, we show that these estimates vary substantially across different versions of the PWT despite being derived from very similar underlying data and using almost identical methodologies; that this variability is systematic; and that it is intrinsic to the methodology deployed by the PWT to estimate growth rates. Moreover, this variability matters for the cross-country growth literature. While growth studies that use low frequency data remain robust to data revisions, studies that use annual data are less robust. Second, the PWT methodology leads to GDP estimates that are not valued at purchasing power parity (PPP) prices. This is surprising because the raison d'être of the PWT is to adjust national estimates of GDP by valuing output at common international (purchasing power parity [PPP]) prices so that the resulting PPP-adjusted estimates of GDP are comparable across countries. We propose an approach to address these two problems of variability and valuation. ER - TY - JOUR AU - Russ,Katheryn N. AU - Valderrama,Diego TI - A Theory of Banks, Bonds, and the Distribution of Firm Size JF - National Bureau of Economic Research Working Paper Series VL - No. 15454 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15454 L1 - http://www.nber.org/papers/w15454.pdf N1 - Author contact info: Katheryn Russ Department of Economics University of California, Davis One Shields Avenue Davis, CA 95616 Tel: 530/754-8744 Fax: 530/752-9382 E-Mail: knruss@ucdavis.edu Diego Valderrama Federal Reserve Bank of San Francisco 101 Market Street MS 1130 San Francisco, CA 94010 Tel: 415-974-3225 Fax: 415-974-2168 E-Mail: dv10@cornell.edu M1 - published as AB - We draw on stylized facts from the finance literature to build a model where altering the relative costs of bank and bond financing changes the entire distribution of firm size, with implications for the aggregate capital stock, output, and welfare. Reducing transactions costs in the bond market increases the output and profits of mid-sized firms at the expense of both the largest and smallest firms. In contrast, reducing the frictions involved in bank lending promotes the expansion of the smallest firms while all other firms shrink, even as it increases the profitability of both small and mid-size firms. Although both policies increase aggregate output and welfare, they have opposite effects on the extensive margin of production---promoting bond issuance causes exit while cheaper bank credit induces entry. When reducing transactions costs in one market, the resulting increase in output and welfare are largest when transactions costs in the other market are very high. ER - TY - JOUR AU - List,John AU - Mason,Charles TI - Are CEOs Expected Utility Maximizers? JF - National Bureau of Economic Research Working Paper Series VL - No. 15453 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15453 L1 - http://www.nber.org/papers/w15453.pdf N1 - Author contact info: 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 Charles Mason Department of Economics and Finance University of Wyoming 1000 E. University Avenue Laramie, WY 82071-3985 E-Mail: bambuzlr@uwyo.edu M1 - published as AB - Are individuals expected utility maximizers? This question represents much more than academic curiosity. In a normative sense, at stake are the fundamental underpinnings of the bulk of the last half-century’s models of choice under uncertainty. From a positive perspective, the ubiquitous use of benefit-cost analysis across government agencies renders the expected utility maximization paradigm literally the only game in town. In this study, we advance the literature by exploring CEO’s preferences over small probability, high loss lotteries. Using undergraduate students as our experimental control group, we find that both our CEO and student subject pools exhibit frequent and large departures from expected utility theory. In addition, as the extreme payoffs become more likely CEOs exhibit greater aversion to risk. Our results suggest that use of the expected utility paradigm in decision making substantially underestimates society’s willingness to pay to reduce risk in small probability, high loss events. ER - TY - JOUR AU - Borensztein,Eduardo AU - Jeanne,Olivier AU - Sandri,Damiano TI - Macro-Hedging for Commodity Exporters JF - National Bureau of Economic Research Working Paper Series VL - No. 15452 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15452 L1 - http://www.nber.org/papers/w15452.pdf N1 - Author contact info: Eduardo Borensztein Inter-American Development Bank 1300 New York Avenue N.W. Washington D.C. 20577 E-Mail: borensztein@iadb.org Olivier Jeanne Department of Economics Johns Hopkins University 454 Mergenthaler Hall 3400 N. Charles Street Baltimore, MD 21218 Tel: 410/516-7604 Fax: 410/516-7600 E-Mail: ojeanne@jhu.edu Damiano Sandri International Monetary Fund 700 19th Street N.W. Washington D.C. 20431 E-Mail: dsandri@imf.org M1 - published as AB - This paper uses a dynamic optimization model to estimate the welfare gains of hedging against commodity price risk for commodity-exporting countries. We show that the introduction of hedging instruments such as futures and options enhances domestic welfare through two channels. First, by reducing export income volatility and allowing for a smoother consumption path. Second, by reducing the country's need to hold foreign assets as precautionary savings (or by improving the country's ability to borrow against future export income). Under plausibly calibrated parameters, the second channel may lead to much larger welfare gains, amounting to several percentage points of annual consumption. ER - TY - JOUR AU - Acemoglu,Daron AU - Aghion,Philippe AU - Bursztyn,Leonardo AU - Hemous,David TI - The Environment and Directed Technical Change JF - National Bureau of Economic Research Working Paper Series VL - No. 15451 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15451 L1 - http://www.nber.org/papers/w15451.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 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 Leonardo A. Bursztyn Department of Economics Littauer Center, Room 200 Harvard University Cambridge, MA 02138 E-Mail: bursztyn@fas.harvard.edu David Hemous Harvard University 581 Franklin st Cambridge, MA 02139 Tel: 8579288078 E-Mail: hemous@fas.harvard.edu M1 - published as AB - This paper introduces endogenous and directed technical change in a growth model with environmental constraints and limited resources. A unique final good is produced by combining inputs from two sectors. One of these sectors uses "dirty" machines and thus creates environmental degradation. Research can be directed to improving the technology of machines in either sector. We characterize dynamic tax policies that achieve sustainable growth or maximize intertemporal welfare, as a function of the degree of substitutability between clean and dirty inputs, environmental and resource stocks, and cross-country technological spillovers. We show that: (i) in the case where the inputs are sufficiently substitutable, sustainable long-run growth can be achieved with temporary taxation of dirty innovation and production; (ii) optimal policy involves both "carbon taxes" and research subsidies, so that excessive use of carbon taxes is avoided; (iii) delay in intervention is costly: the sooner and the stronger is the policy response, the shorter is the slow growth transition phase; (iv) the use of an exhaustible resource in dirty input production helps the switch to clean innovation under laissez-faire when the two inputs are substitutes. Under reasonable parameter values (corresponding to those used in existing models with exogenous technology) and with sufficient substitutability between inputs, it is optimal to redirect technical change towards clean technologies immediately and optimal environmental regulation need not reduce long-run growth. We also show that in a two-country extension, even though optimal environmental policy involves global policy coordination, when the two inputs are sufficiently substitutable environmental regulation only in the North may be sufficient to avoid a global disaster. ER - TY - JOUR AU - Kacperczyk,Marcin AU - Nieuwerburgh,Stijn Van AU - Veldkamp,Laura TI - Attention Allocation Over the Business Cycle JF - National Bureau of Economic Research Working Paper Series VL - No. 15450 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15450 L1 - http://www.nber.org/papers/w15450.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 M1 - published as AB - The invisibility of information precludes a direct test of attention allocation theories. To surmount this obstacle, we develop a model that uses an observable variable -- the state of the business cycle -- to predict attention allocation. Attention allocation, in turn, predicts aggregate investment patterns. Because the theory begins and ends with observable variables, it becomes testable. We apply our theory to a large information-based industry, actively managed equity mutual funds, and study its investment choices and returns. Consistent with the theory, which predicts cyclical changes in attention allocation, we find that in recessions, funds' portfolios (1) covary more with aggregate payoff-relevant information, (2) exhibit more cross-sectional dispersion, and (3) generate higher returns. The results suggest that some, but not all, fund managers process information in a value-maximizing way for their clients and that these skilled managers outperform others. ER - TY - JOUR AU - Cremers,Martijn AU - Romano,Roberta TI - Institutional Investors and Proxy Voting on Compensation Plans: The Impact of the 2003 Mutual Fund Voting Disclosure Regulation JF - National Bureau of Economic Research Working Paper Series VL - No. 15449 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15449 L1 - http://www.nber.org/papers/w15449.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 Roberta Romano Yale Law School P.O. Box 208215 Yale Station New Haven, CT 06520-8215 Tel: 203/432-4965 Fax: 203/436-4660 E-Mail: roberta.romano@yale.edu M1 - published as AB - This paper examines the impact on shareholder voting of the mutual fund voting disclosure regulation adopted by the SEC in 2003, using a paired sample of management proposals on executive equity incentive compensation plans submitted before and after the rule change. While voting support for management has decreased over time, we find no evidence that mutual funds’ support for management declined after the rule change, as expected by advocates of disclosure. In fact, we find evidence of increased support for management by mutual funds after the change. There is some evidence that firms sponsoring such proposals both before and after the rule change differ from those sponsoring a proposal only before the change. For example, firms are more likely to sponsor a proposal both before and after the rule change if they have higher mutual fund ownership. Such endogeneity could partly explain our findings of increased support after the rule. ER - TY - JOUR AU - Alfaro,Laura AU - Chari,Anusha TI - India Transformed? Insights from the Firm Level 1988-2005 JF - National Bureau of Economic Research Working Paper Series VL - No. 15448 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15448 L1 - http://www.nber.org/papers/w15448.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 Anusha Chari 301 Gardner Hall CB#3305, Department of Economics University of North Carolina at Chapel Hill Chapel Hill, NC 27599 Tel: 919/966-5346 E-Mail: achari@unc.edu M1 - published as AB - Using firm-level data this paper analyzes the transformation of India’s economic structure following the implementation of economic reforms. The focus of the study is on publicly-listed and unlisted firms in manufacturing and services industries. Detailed balance sheet and ownership information permit an investigation of a range of variables. We analyze firm characteristics shown by industry before and after liberalization and investigate how industrial concentration, number, and size of firms evolved between 1988 and 2005. We find great dynamism displayed by foreign and private firms as reflected in the growth in their numbers, assets, sales and profits. Yet, closer scrutiny reveals no dramatic transformation in the wake of liberalization. The story rather is one of an economy still dominated by the incumbents (state-owned firms) and to a lesser extent, traditional private firms (firms incorporated before 1985). Sectors dominated by state-owned and traditional private firms before 1988-1990, with assets, sales and profits representing shares higher than 50%, generally remained so in 2005. The exception to this broad pattern is the growing importance of new private firms in the services sector. Rates of return also have remained stable over time and show low dispersion across sectors and across ownership groups within sectors. ER - TY - JOUR AU - Carbo-Valverde,Santiago AU - Kane,Edward J. AU - Rodriguez-Fernandez,Francisco TI - Evidence of Regulatory Arbitrage in Cross-Border Mergers of Banks in the EU JF - National Bureau of Economic Research Working Paper Series VL - No. 15447 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15447 L1 - http://www.nber.org/papers/w15447.pdf N1 - Author contact info: Santiago Carbo-Valverde Departamento de Teoría e Historia Económica Facultad de CCEE y Empresariales Universidad de Granada s/n E-18071, Granada, Spain E-Mail: scarbo@ugr.es Edward J. Kane 2325 E Calle Los Altos Tucson, AZ 85718 Tel: 617/552-3986 Fax: 617/552-0431 E-Mail: edward.kane@bc.edu Francisco Rodriguez-Fernandez Departamento de Teoría e Historia Económica Facultad de CCEE y Empresariales Universidad de Granada s/n E-18071, Granada, Spain E-Mail: franrod@ugr.es M1 - published as AB - Banks are in the business of taking calculated risks. Expanding the geographic footprint of an organization’s profit-making activities changes the geographic pattern of its exposure to loss in ways that are hard for regulators and supervisors to observe. This paper tests and confirms the hypothesis that differences in the character of safety-net benefits that are available to banks in individual EU countries help to explain the nature of cross-border merger activity. If they wish to protect taxpayers from potentially destabilizing regulatory arbitrage, central bankers need to develop statistical procedures for assessing supervisory strength and weakness in partner countries. We believe that the methods and models used here can help in this task. ER - TY - JOUR AU - Hoxby,Caroline M. TI - The Changing Selectivity of American Colleges JF - National Bureau of Economic Research Working Paper Series VL - No. 15446 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15446 L1 - http://www.nber.org/papers/w15446.pdf N1 - Author contact info: Caroline Minter Hoxby Department of Economics Stanford University Landau Building, 579 Serra Mall Stanford, CA 94305 Tel: 650-725-8719 Fax: 650-725-5702 E-Mail: choxby@stanford.edu M1 - published as AB - This paper shows that although the top ten percent of colleges are substantially more selective now than they were 5 decades ago, most colleges are not more selective. Moreover, at least 50 percent of colleges are substantially less selective now than they were then. This paper demonstrates that competition for space--the number of students who wish to attend college growing faster than the number of spaces available--does not explain changing selectivity. The explanation is, instead, that the elasticity of a student's preference for a college with respect to its proximity to his home has fallen substantially over time and there has been a corresponding increase in the elasticity of his preference for a college with respect to its resources and peers. In other words, students used to attend a local college regardless of their abilities and its characteristics. Now, their choices are driven far less by distance and far more by a college's resources and student body. It is the consequent re-sorting of students among colleges that has, at once, caused selectivity to rise in a small number of colleges while simultaneously causing it to fall in other colleges. I show that the integration of the market for college education has had profound implications on the peers whom college students experience, the resources invested in their education, the tuition they pay, and the subsidies they enjoy. An important finding is that, even though tuition has been rising rapidly at the most selective schools, the deal students get there has arguably improved greatly. The result is that the "stakes" associated with admission to these colleges are much higher now than in the past. ER - TY - JOUR AU - Bagwell,Kyle AU - Staiger,Robert W. TI - The WTO: Theory and Practice JF - National Bureau of Economic Research Working Paper Series VL - No. 15445 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15445 L1 - http://www.nber.org/papers/w15445.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 M1 - published as AB - We consider the purpose and design of the World Trade Organization (WTO) and its predecessor, GATT. We review recent developments in the relevant theoretical and empirical literature. And we describe the GATT/WTO architecture and briefly trace its historical antecedents. We suggest that the existing literature provides a useful framework for understanding and interpreting central features of the design and practice of the GATT/WTO, and we identify key unresolved issues. ER - TY - JOUR AU - Bagwell,Kyle AU - Staiger,Robert W. TI - Delocation and Trade Agreements in Imperfectly Competitive Markets JF - National Bureau of Economic Research Working Paper Series VL - No. 15444 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15444 L1 - http://www.nber.org/papers/w15444.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 M1 - published as AB - We consider the purpose and design of trade agreements in imperfectly competitive environments featuring firm-delocation effects. In both the segmented-market Cournot and the integrated-market monopolistic competition settings where these effects have been identified, we show that the only rationale for a trade agreement is to remedy the inefficiency attributable to the terms-of-trade externality, the same rationale that arises in perfectly competitive markets. Furthermore, and again as in the perfectly competitive benchmark case, we show that the principle of reciprocity is efficiency enhancing, as it serves to "undo" the terms-of-trade driven inefficiency that occurs when governments pursue unilateral trade policies. Our results therefore indicate that the terms-of-trade theory of trade agreements applies to a broader set of market structures than previously thought. ER - TY - JOUR AU - Kerr,William R. TI - Breakthrough Inventions and Migrating Clusters of Innovation JF - National Bureau of Economic Research Working Paper Series VL - No. 15443 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15443 L1 - http://www.nber.org/papers/w15443.pdf N1 - Author contact info: William Kerr Harvard Business School Rock Center 212 Soldiers Field Boston, MA 02163 Tel: 617/496-7021 E-Mail: wkerr@hbs.edu M1 - published as AB - We investigate the speed at which clusters of invention for a technology migrate spatially following breakthrough inventions. We identify breakthrough inventions as the top one percent of US inventions for a technology during 1975-1984 in terms of subsequent citations. Patenting growth is significantly higher in cities and technologies where breakthrough inventions occur after 1984 relative to peer locations that do not experience breakthrough inventions. This growth differential in turn depends on the mobility of the technology's labor force, which we model through the extent that technologies depend upon immigrant scientists and engineers. Spatial adjustments are faster for technologies that depend heavily on immigrant inventors. The results qualitatively confirm the mechanism of industry migration proposed in models like Duranton (2007). ER - TY - JOUR AU - Keller,Wolfgang TI - International Trade, Foreign Direct Investment, and Technology Spillovers JF - National Bureau of Economic Research Working Paper Series VL - No. 15442 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15442 L1 - http://www.nber.org/papers/w15442.pdf N1 - Author contact info: Wolfgang Keller Department of Economics University of Colorado at Boulder Boulder, CO 80309-0256 Tel: 303/735 5507 Fax: 303/492 8960 E-Mail: Wolfgang.Keller@colorado.edu M1 - published as AB - This paper examines how international flows of technological knowledge affect economic performance across industries and firms in different countries. Motivated by the large share of the world's technology investments made by firms that are active across borders, we focus on international trade and multinational enterprise activity as conduits for technological externalities, or spillovers. In addition to reviewing the recent empirical research on technology spillovers, the discussion is guided by a new model of foreign direct investment, trade, and endogenous technology transfer. We find evidence for technology spillovers through international trade and the activity of multinational enterprises. The analysis also highlights challenges for future empirical research, as well as the need for additional data on technology and innovation. ER - TY - JOUR AU - Chatterji,Shurojit AU - Ghosal,Sayantan AU - Walsh,Sean AU - Whalley,John TI - Unilateral Measures and Emissions Mitigation JF - National Bureau of Economic Research Working Paper Series VL - No. 15441 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15441 L1 - http://www.nber.org/papers/w15441.pdf N1 - Author contact info: Shurojit Chatterji School of Economics Singapore Management University 90 Stamford Road Singapore 178903 E-Mail: shurojitc@smu.edu.sg Sayantan Ghosal University of Warwick E-Mail: S.Ghosal@warwick.ac.uk Sean Walsh Centre for International Governance Innovation 57 Erb Street West Waterloo, Ontario N2L 6C2 Canada E-Mail: swalsh@cigionline.org John Whalley Department of Economics Social Science Centre University of Western Ontario London, Ontario N6A 5C2 CANADA Tel: 519/661-3509 Fax: 519/661-3666 E-Mail: jwhalley@uwo.ca M1 - published as AB - We discuss global climate mitigation that builds on existing unilateral measures to cut emissions. We document and discuss the rationale for such unilateral measures argue that such measures have the potential to generate positive spillover effects both within and across countries. In a simple dynamic model of learning we show that while single countries on their own may never get to the point of switching completely to low emission activities, a learning process with positive spillovers across nations is more likely to deliver a global switch to low emissions. We discuss the key features of a new global Intellectual Property (IP) regime that builds on the positive spillovers inherent in unilateral initiatives and accelerates global convergence to low emissions. ER - TY - JOUR AU - Lamoreaux,Naomi R. AU - Sokoloff,Kenneth L. AU - Sutthiphisal,Dhanoos TI - The Reorganization of Inventive Activity in the United States during the Early Twentieth Century JF - National Bureau of Economic Research Working Paper Series VL - No. 15440 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15440 L1 - http://www.nber.org/papers/w15440.pdf N1 - Author contact info: Naomi R. Lamoreaux Department of Economics UCLA 405 Hilgard Avenue Los Angeles, CA 90095-1477 Tel: 310/825-0225 Fax: 310/825-9528 E-Mail: lamoreaux@econ.ucla.edu Kenneth L. Sokoloff Department of Economics UCLA 405 Hilgard Avenue Los Angeles, CA 90095-1477 Tel: 310/825-4249 Fax: 310/825-9528 E-Mail: sokoloff@ucla.edu Dhanoos Sutthiphisal McGill University Department of Economics 855 Sherbrooke Street West Montreal, Quebec H3A, 2T7 CANADA Tel: 514/398-5500 Fax: 514/398-4938 E-Mail: dhanoos.sutthiphisal@mcgill.ca M1 - published as M3 - presented at "Understanding Long-Run Economic Growth", November 7-8, 2008 AB - The standard view of U.S. technological history is that the locus of invention shifted during the early twentieth century to large firms whose in-house research laboratories were superior sites for advancing the complex technologies of the second industrial revolution. In recent years this view has been subject to increasing criticism. At the same time, new research on equity markets during the early twentieth century suggests that smaller, more entrepreneurial enterprises were finding it easier to gain financial backing for technological discovery. We use data on the assignment (sale or transfer) of patents to explore the extent to which, and how, inventive activity was reorganized during this period. We find that two alternative modes of technological discovery developed in parallel during the early twentieth century. The first, concentrated in the Middle Atlantic region, centered on large firms with in-house R&D labs and superior access to the region’s rapidly growing equity markets. The other, located mainly in the East North Central region, consisted of smaller, more entrepreneurial enterprises that drew primarily on local sources of funds. Both modes seem to have made roughly equivalent contributions to technological change through the 1920s. The subsequent dominance of large firms seems to have been propelled by a differential access to capital during the Great Depression that was subsequently reinforced by the regulatory and military procurement policies of the federal government. ER - TY - JOUR AU - Kaestner,Robert AU - Yarnoff,Benjamin TI - Long Term Effects of Minimum Legal Drinking Age Laws on Adult Alcohol Use and Driving Fatalities JF - National Bureau of Economic Research Working Paper Series VL - No. 15439 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15439 L1 - http://www.nber.org/papers/w15439.pdf N1 - Author contact info: Robert Kaestner Institute of Government and Public Affairs University of Illinois 815 West Van Buren Street, Suite 525 Chicago, IL 60607 Tel: 312/996-8227 E-Mail: kaestner@uic.edu Ben Yarnoff Department of Economics University of Illinois at Chicago 601 South Morgan Street Chicago, IL 60607 E-Mail: byarno2@uic.edu M1 - published as AB - We examine whether adult alcohol consumption and traffic fatalities are associated with the legal drinking environment when a person was between the ages of 18 and 20. We find that moving from an environment in which a person was never allowed to drink legally to one in which a person could always drink legally was associated with a 20 to 30 percent increase in alcohol consumption and a ten percent increase in fatal accidents for adult males. There were no statistically significant or practically important associations between the legal drinking environment when young and adult female alcohol consumption and driving fatalities. ER - TY - JOUR AU - Alesina,Alberto F. AU - Ardagna,Silvia TI - Large Changes in Fiscal Policy: Taxes Versus Spending JF - National Bureau of Economic Research Working Paper Series VL - No. 15438 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15438 L1 - http://www.nber.org/papers/w15438.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 Silvia Ardagna Department of Economics Harvard University Littauer Center Cambridge, MA 02138 E-Mail: sardagna@fas.harvard.edu M1 - published as M3 - presented at "Tax Policy & the Economy", September 24, 2009 AB - We examine the evidence on episodes of large stances in fiscal policy, both in cases of fiscal stimuli and in that of fiscal adjustments in OECD countries from 1970 to 2007. Fiscal stimuli based upon tax cuts are more likely to increase growth than those based upon spending increases. As for fiscal adjustments, those based upon spending cuts and no tax increases are more likely to reduce deficits and debt over GDP ratios than those based upon tax increases. In addition, adjustments on the spending side rather than on the tax side are less likely to create recessions. We confirm these results with simple regression analysis. ER - TY - JOUR AU - Agrawal,Ajay K. AU - Cockburn,Iain M. AU - Rosell,Carlos TI - Not Invented Here? Innovation in Company Towns JF - National Bureau of Economic Research Working Paper Series VL - No. 15437 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15437 L1 - http://www.nber.org/papers/w15437.pdf N1 - Author contact info: Ajay K. Agrawal Rotman School of Management University of Toronto 105 St. George Street Toronto, Ontario 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 Carlos Rosell Department of Finance Canada L'Esplanade Laurier, 18th Floor East Tower 140 O'Connor Street Ottawa, Canada K1A 0G5 Tel: 613-947-5480 Fax: 613-992-5773 E-Mail: carlos.rosell@fin.gc.ca M1 - published as AB - We examine variation in the concentration of inventive activity across 72 of North America's most highly innovative locations. In 12 of these areas, innovation is particularly concentrated in a single, large firm; we refer to such locations as "company towns.'' We find that inventors employed by large firms in these locations tend to draw disproportionately from their firm's own prior inventions (as measured by citations to their own prior patents) relative to what would be expected given the underlying distribution of innovative activity across all inventing firms in a particular technology field. Furthermore, we find such inventors are more likely to build upon the same prior inventions year after year. However, smaller firms in company towns do not exhibit this myopic behavior; they draw upon prior inventions as broadly as their small-firm counterparts in more diverse locations. In addition, we find that inventions by large firms in company towns have less impact than those produced elsewhere, although the difference is modest, and that the impact is disproportionately appropriated by the inventing firms themselves. Finally, the geographic scope of impact realized by company town inventions is narrower, whether produced by large or small firms. ER - TY - JOUR AU - Zhao,Zhenxiang AU - Kaestner,Robert TI - Effects of Urban Sprawl on Obesity JF - National Bureau of Economic Research Working Paper Series VL - No. 15436 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15436 L1 - http://www.nber.org/papers/w15436.pdf N1 - Author contact info: zhenxiang zhao Department of Economics University of Illinois at Chicago Chicago, Illinois E-Mail: zzhao5@uic.edu Robert Kaestner Institute of Government and Public Affairs University of Illinois 815 West Van Buren Street, Suite 525 Chicago, IL 60607 Tel: 312/996-8227 E-Mail: kaestner@uic.edu M1 - published as AB - In this paper, we examine the effect of changes in population density—urban sprawl—between 1970 and 2000 on BMI and obesity of residents in metropolitan areas in the US. We address the possible endogeneity of population density by using a two-step instrumental variables approach. We exploit the plausibly exogenous variation in population density caused by the expansion of the U.S. Interstate Highway System, which largely followed the original 1947 plan for the Interstate Highway System. We find a negative association between population density and obesity and estimates are robust across a wide range of specifications. Estimates indicate that if the average metropolitan area had not experienced the decline in the proportion of population living in dense areas over the last 30 years, the rate of obesity would have been reduced by approximately 13%. ER - TY - JOUR AU - Gustman,Alan L. AU - Steinmeier,Thomas L. AU - Tabatabai,Nahid TI - What the Stock Market Decline Means for the Financial Security and Retirement Choices of the Near-Retirement Population JF - National Bureau of Economic Research Working Paper Series VL - No. 15435 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15435 L1 - http://www.nber.org/papers/w15435.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 M1 - published as AB - This paper investigates the effect of the current recession on the near-retirement age population. Data from the Health and Retirement Study suggest that those approaching retirement age (early boomers ages 53 to 58 in 2006) have only 15.2 percent of their wealth in stocks, held directly or in defined contribution plans or IRAs. Their vulnerability to a stock market decline is limited by the high value of their Social Security wealth, which represents over a quarter of the total household wealth of the early boomers. In addition, their defined contribution plans remain immature, so their defined benefit plans represent sixty five percent of their pension wealth. Simulations with a structural retirement model suggest the stock market decline will lead the early boomers to postpone their retirement by only 1.5 months on average. Health and Retirement Study data also show that those approaching retirement are not likely to be greatly or immediately affected by the decline in housing prices. We end with a discussion of important difficulties facing those who would use labor market policies to increase the employment of older workers. ER - TY - JOUR AU - Dafny,Leemore AU - Duggan,Mark AU - Ramanarayanan,Subramaniam TI - Paying a Premium on Your Premium? Consolidation in the U.S. Health Insurance Industry JF - National Bureau of Economic Research Working Paper Series VL - No. 15434 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15434 L1 - http://www.nber.org/papers/w15434.pdf N1 - Author contact info: Leemore Dafny Department of Management and Strategy Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, IL 60208-2001 Tel: 847/467-7511 Fax: 847/467-1777 E-Mail: l-dafny@kellogg.northwestern.edu Mark Duggan University of Maryland Department of Economics 3115L Tydings Hall College Park, MD 20742 Tel: 301/405-3532 Fax: 301/405-3542 E-Mail: duggan@econ.bsos.umd.edu Subramaniam Ramanarayanan UCLA Anderson School of Management 110 Westwood Plaza, D-513 Los Angeles, CA 90095 E-Mail: subbu@anderson.ucla.edu M1 - published as AB - We examine whether and to what extent consolidation in the U.S. health insurance industry is leading to higher employer-sponsored insurance premiums. We make use of a proprietary, panel dataset of employer-sponsored healthplans enrolling over 10 million Americans annually between 1998 and 2006 to explore the relationship between premium growth and changes in market concentration. We exploit the differential impact of a large national merger of two insurance firms across local markets to estimate the causal effect of concentration on market-level premiums. We estimate real premiums increased by 2 percentage points (in a typical market) due to the rise in concentration during our study period. We also find evidence that consolidation facilitates the exercise of monopsonistic power vis a vis physicians, whose absolute employment and relative earnings decline in its wake. ER - TY - JOUR AU - Pinkovskiy,Maxim AU - Sala-i-Martin,Xavier TI - Parametric Estimations of the World Distribution of Income JF - National Bureau of Economic Research Working Paper Series VL - No. 15433 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15433 L1 - http://www.nber.org/papers/w15433.pdf N1 - Author contact info: Maxim Pinkovskiy 50 Memorial Drive Cambridge, MA 02142 E-Mail: maximpinkovskiy@yahoo.com Xavier Sala-i-Martin Department of Economics Columbia University 420 West 118th Street, 1005 New York, NY 10027 Tel: 212/854-7055 Fax: 212/854-8059 E-Mail: xs23@columbia.edu M1 - published as AB - We use a parametric method to estimate the income distribution for 191 countries between 1970 and 2006. We estimate the World Distribution of Income and estimate poverty rates, poverty counts and various measures of income inequality and welfare. Using the official $1/day line, we estimate that world poverty rates have fallen by 80% from 0.268 in 1970 to 0.054 in 2006. The corresponding total number of poor has fallen from 403 million in 1970 to 152 million in 2006. Our estimates of the global poverty count in 2006 are much smaller than found by other researchers. We also find similar reductions in poverty if we use other poverty lines. We find that various measures of global inequality have declined substantially and measures of global welfare increased by somewhere between 128% and 145%. We analyze poverty in various regions. Finally, we show that our results are robust to a battery of sensitivity tests involving functional forms, data sources for the largest countries, methods of interpolating and extrapolating missing data, and dealing with survey misreporting. ER - TY - JOUR AU - Mendoza,Enrique G. AU - Quadrini,Vincenzo TI - Financial Globalization, Financial Crises and Contagion JF - National Bureau of Economic Research Working Paper Series VL - No. 15432 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15432 L1 - http://www.nber.org/papers/w15432.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 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 M1 - published as AB - Two observations suggest that financial globalization played an important role in the recent financial crisis. First, more than half of the rise in net borrowing of the U.S. nonfinancial sectors since the mid 1980s has been financed by foreign lending. Second, the collapse of the U.S. housing and mortgage-backed-securities markets had worldwide effects on financial institutions and asset markets. Using an open-economy model where financial intermediaries play a central role, we show that financial integration leads to a sharp rise in net credit in the most financially developed country and leads to large asset price spillovers of country-specific shocks to bank capital. The impact of these shocks on asset prices are amplified by bank capital requirements based on mark-to-market. ER - TY - JOUR AU - Cook,Philip J. AU - Ludwig,Jens AU - Samaha,Adam TI - Gun Control after Heller: Litigating against Regulation JF - National Bureau of Economic Research Working Paper Series VL - No. 15431 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15431 L1 - http://www.nber.org/papers/w15431.pdf N1 - Author contact info: Philip J. Cook Sanford School of Public Policy Duke University Room 215 Durham, NC 27708-0245 Tel: 919/260-4338 Fax: 919/681-8288 E-Mail: pcook@duke.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 Adam Samaha University of Chicago Law School E-Mail: asamaha@uchicago.edu M1 - published as M3 - presented at "Regulation and Litigation Conference", September 11-12, 2009 AB - The “core right” established in D.C. vs. Heller (2008) is to keep an operable handgun in the home for self-defense purposes. If the Court extends this right to cover state and local jurisdictions, the result is likely to include the elimination of the most stringent existing regulations – such as Chicago’s handgun ban – and could also possibly ban regulations that place substantial restrictions or costs on handgun ownership. We find evidence in support of four conclusions: The effect of Heller may be to increase the prevalence of handgun ownership in jurisdictions that currently have restrictive laws; Given the best evidence on the consequences of increased prevalence of gun ownership, these jurisdictions will experience a greater burden of crime due to more lethal violence and an increased burglary rate; Nonetheless, a regime with greater scope for gun rights is not necessarily inferior – whether restrictive regulations would pass a cost benefit test may depend on whether we accept the Heller viewpoint that there is a legal entitlement to possess a handgun; In any event, the core right defined by Heller leaves room for some regulation that would reduce the negative externalities of gun ownership. ER - TY - JOUR AU - Fryer,Roland G., Jr AU - Levitt,Steven D. TI - An Empirical Analysis of the Gender Gap in Mathematics JF - National Bureau of Economic Research Working Paper Series VL - No. 15430 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15430 L1 - http://www.nber.org/papers/w15430.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 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 M1 - published as AB - We document and analyze the emergence of a substantial gender gap in mathematics in the early years of schooling using a large, recent, and nationally representative panel of children in the United States. There are no mean differences between boys and girls upon entry to school, but girls lose more than two-tenths of a standard deviation relative to boys over the first six years of school. The ground lost by girls relative to boys is roughly half as large as the black-white test score gap that appears over these same ages. We document the presence of this gender math gap across every strata of society. We explore a wide range of possible explanations in the U.S. data, including less investment by girls in math, low parental expectations, and biased tests, but find little support for any of these theories. Moving to cross-country comparisons, we find that earlier results linking the gender gap in math to measures of gender equality are sensitive to the inclusion of Muslim countries, where in spite of women’s low status, there is little or no gender gap in math. ER - TY - JOUR AU - Metcalf,Gilbert E. TI - Investment in Energy Infrastructure and the Tax Code JF - National Bureau of Economic Research Working Paper Series VL - No. 15429 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15429 L1 - http://www.nber.org/papers/w15429.pdf N1 - Author contact info: Gilbert E. Metcalf Department of Economics Tufts University Medford, MA 02155 Tel: 617/627-3685 Fax: 617/627-3917 E-Mail: gilbert.metcalf@tufts.edu M1 - published as M3 - presented at "Tax Policy & the Economy", September 24, 2009 AB - Federal tax policy provides a broad array of incentives for energy investment. I review those policies and construct estimates of marginal effective tax rates for different energy capital investments as of 2007. Effective tax rates vary widely across investment classes. I then consider investment in wind generation capital and regress investment against a user cost of capital measure along with other controls. I find that wind investment is strongly responsive to changes in tax policy. Based on the coefficient estimates the elasticity of investment with respect to the user cost of capital is in the range of -1 to -2. I also demonstrate that the federal production tax credit plays a key role in driving wind investment over the past eighteen years. ER - TY - JOUR AU - Comin,Diego A. AU - Loayza,Norman AU - Pasha,Farooq AU - Serven,Luis TI - Medium Term Business Cycles in Developing Countries JF - National Bureau of Economic Research Working Paper Series VL - No. 15428 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15428 L1 - http://www.nber.org/papers/w15428.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 Norman Loayza The World Bank 1818 H St., NW Washington, DC 20433 E-Mail: nloayza@worldbank.org Farooq Pasha Boston College Department of Economics 140 Commonwealth Avenue Chestnut Hill MA 02467-3806 USA E-Mail: pasha@bc.edu Luis Serven The World Bank 1818 H St NW Washington DC 20433 Tel: 202 473 7451 E-Mail: lserven@worldbank.org M1 - published as AB - We build a two country asymmetric DSGE model with two features: (i) a product cycle structure determines the range of intermediate goods used to produce new capital in each country and (ii) there are investment flow adjustment costs in the developing economy. We calibrate the model to match the Mexico-US trade and FDI flows. The model is able to explain (i) why US shocks have a larger effect on Mexico than in the US and hence why the Mexican economy is more volatile than the US; (ii) why US business cycles lead over medium term fluctuations in Mexico and (iii) why Mexican consumption is not less volatile than output. ER - TY - JOUR AU - Howitt,Peter AU - Özak,Ömer TI - Adaptive Consumption Behavior JF - National Bureau of Economic Research Working Paper Series VL - No. 15427 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15427 L1 - http://www.nber.org/papers/w15427.pdf N1 - Author contact info: 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 Ömer Özak Department of Economics Brown University, Box B Providence, RI 02912 E-Mail: ozak@brown.edu M1 - published as AB - This paper proposes and studies a theory of adaptive consumption behavior under income uncertainty and liquidity constraints. We assume that consumption is governed by a linear function of wealth, whose coefficients are revised each period by a procedure, which, although sophisticated, places few informational or computational demands on the consumer. We show that under a variety of settings, our procedure converges quickly to a set of coefficients with low welfare cost relative to a fully optimal nonlinear consumption function. ER - TY - JOUR AU - Clementi,Gian Luca AU - Cooley,Thomas F. TI - Executive Compensation: Facts JF - National Bureau of Economic Research Working Paper Series VL - No. 15426 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15426 L1 - http://www.nber.org/papers/w15426.pdf N1 - Author contact info: Gian Luca Clementi New York University Stern School of Business 44 West Fourth Street New York, NY 10012 E-Mail: gclement@stern.nyu.edu Thomas F. Cooley Department of Economics Stern School of Business 44 West 4th Street, Room 7-88 New York, NY 10012-1126 Tel: 212/998-0870 Fax: 212/995-4218 E-Mail: tcooley@stern.nyu.edu M1 - published as AB - In this paper we describe the important features of executive compensation in the US from 1993 to 2006. Some confirm what has been found for earlier periods and some are novel. Important facts about compensation are that: the compensation distribution is highly skewed; each year, a sizeable fraction of chief executives lose money; the use of equity grants has increased; the income accruing to CEOs from the sale of stock has increased; regardless of the measure we adopt, compensation responds strongly to innovations in shareholder wealth; measured as dollar changes in compensation, incentives have strengthened over time, measured as percentage changes in wealth, they have not changed in any appreciable way. ER - TY - JOUR AU - Calvo,Guillermo A. TI - FINANCIAL CRISES AND LIQUIDITY SHOCKS: A Bank-Run Perspective JF - National Bureau of Economic Research Working Paper Series VL - No. 15425 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15425 L1 - http://www.nber.org/papers/w15425.pdf N1 - Author contact info: Guillermo A. Calvo Columbia University School of International and Public Affairs 420 West 118th St, Room 1303B MC3332 New York, NY 10027 Tel: 212/854-4264 E-Mail: gc2286@columbia.edu M1 - published as AB - This note is motivated by trying to understand the macroeconomic implications of assuming that periods of financial bonanza and turmoil are driven by financial innovation and collapse in line with the “bank run” literature of the Diamond-Dybvig (1983) variety. Bypassing a host of important but, for the present purposes, secondary details the note assumes that the initial effects of financial innovation and crash can be summarized by a parameter that determines the “liquidity” or “moneyness” of land or capital. This simplification helps to shed light on some issues that are at the center of the policy debate. In particular, one can show that preventing price deflation is not enough to offset asset meltdown. Furthermore, lower policy interest rates increase asset prices and steady-state output which, however, gets reversed as liquidity is destroyed. An interesting result is that, in the neighborhood of a first-best capital allocation, an increase in the moneyness of capital may lower the welfare of the representative individual, even if the higher liquidity of capital is sustainable and, hence, not destroyed by future crash. Moreover, an extension of the basic model supports the conjecture that low policy interest rates may have given incentives to the development of “shadow banking.” ER - TY - JOUR AU - Cecchetti,Stephen G. AU - Hakkio,Craig TI - Inflation targeting and private sector forecasts JF - National Bureau of Economic Research Working Paper Series VL - No. 15424 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15424 L1 - http://www.nber.org/papers/w15424.pdf N1 - Author contact info: Stephen G. Cecchetti Monetary and Economic Department Bank for International Settlements Centralbahnplatz 2 4002 Basel Switzerland Tel: +41 61 280 8350 Fax: +41 61 280 9113 E-Mail: stephen.cecchetti@bis.org Craig Hakkio Federal Reserve Bank of Kansas City 925 Grand Avenue Kansas City, MO 64198 E-Mail: craig.s.hakkio@kc.frb.org M1 - published as AB - Transparency is one of the biggest innovations in central bank policy of the past quarter century. Modern central bankers believe that they should be as clear about their objectives and actions as possible. However, is greater transparency always beneficial? Recent work suggests that when private agents have diverse sources of information, public information can cause them to overreact to the signals from the central bank, leading the economy to be too sensitive to common forecast errors. Greater transparency could be destabilizing. While this theoretical result has clear intuitive appeal, it turns on a combination of assumptions and conditions, so it remains to be established that it is of empirical relevance. In this paper we study the degree to which increased information about monetary policy might lead to individuals coordinating their forecasts. Specifically, we estimate a series of simple models to measure the impact of inflation targeting on the dispersion of private sector forecasts of inflation. Using a panel data set that includes 15 countries over 20 years we find no convincing evidence that adopting an inflation targeting regime leads to a reduction in the dispersion of private sector forecasts of inflation. While for some specifications adoption of inflation target does seem to reduce the standard deviation of inflation forecasts, the impact is rarely precise and always small. ER - TY - JOUR AU - Popp,David AU - Newell,Richard G. TI - Where Does Energy R&D Come From? Examining Crowding Out from Environmentally-Friendly R&D JF - National Bureau of Economic Research Working Paper Series VL - No. 15423 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15423 L1 - http://www.nber.org/papers/w15423.pdf N1 - Author contact info: David Popp Associate Professor of Public Administration Syracuse University The Maxwell School 426 Eggers Syracuse, NY 13244-1020 Tel: 315/443-2482 Fax: 315/443-1081 E-Mail: dcpopp@maxwell.syr.edu Richard G. Newell Nicholas School of the Environment Duke University Box 90227 Durham, NC 27708 Tel: 919/681-8865 Fax: 919/684-5833 E-Mail: richard.newell@duke.edu M1 - published as AB - Recent efforts to endogenize technological change in climate policy models demonstrate the importance of accounting for the opportunity cost of climate R&D investments. Because the social returns to R&D investments are typically higher than the social returns to other types of investment, any new climate mitigation R&D that comes at the expense of other R&D investment may dampen the overall gains from induced technological change. Unfortunately, there has been little empirical work to guide modelers as to the potential magnitude of such crowding out effects. This paper considers both the private and social opportunity costs of climate R&D. Addressing private costs, we ask whether an increase in climate R&D represents new R&D spending, or whether some (or all) of the additional climate R&D comes at the expense of other R&D. Addressing social costs, we use patent citations to compare the social value of alternative energy research to other types of R&D that may be crowded out. Beginning at the industry level, we find some evidence of crowding out in sectors active in energy R&D, but not in sectors that do not perform energy R&D. This suggests that funds for energy R&D do not come from other sectors, but may come from a redistribution of research funds in sectors that are likely to perform energy R&D. Given this, we proceed with a detailed look at climate R&D in two sectors – alternative energy and automotive manufacturing. Linking patent data and financial data by firm, we ask whether an increase in alternative energy patents leads to a decrease in other types of patenting activity. We find crowding out for alternative energy firms, but no evidence of crowding out for automotive firms. Finally, we use patent citation data to compare the social value of alternative energy patents to other patents by these firms. Alternative energy patents are cited more frequently, and by a wider range of other technologies, than other patents by these firms, suggesting that their social value is higher. ER - TY - JOUR AU - Viscusi,W. Kip AU - Hersch,Joni TI - Tobacco Regulation through Litigation: The Master Settlement Agreement JF - National Bureau of Economic Research Working Paper Series VL - No. 15422 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15422 L1 - http://www.nber.org/papers/w15422.pdf N1 - Author contact info: W. Kip Viscusi Vanderbilt Law School 131 21st Avenue South Nashville, TN 37203-1181 Tel: 615/343-7715 E-Mail: kip.viscusi@vanderbilt.edu Joni Hersch Vanderbilt Law School 131 21st Avenue South Nashville, TN 37203-1181 E-Mail: joni.hersch@vanderbilt.edu M1 - published as M3 - presented at "Regulation and Litigation Conference", September 11-12, 2009 AB - The 1998 Master Settlement Agreement resolved the unprecedented litigation in which the states sought to recoup the cigarette-related Medicaid costs. The litigation was settled through a combination of negotiated regulatory requirements and financial payments of about $250 billion over 25 years. Settlement payments received by states are strongly related to smoking-related medical costs but are also related to political factors. The payments largely took the form of an excise tax equivalent, raising potential antitrust concerns. The regulatory restrictions imposed by the agreement also raised antitrust concerns. However, there has been no evident shift in industry concentration. The increase in advertising and marketing expenses has largely taken the form of price discounts. The settlement sidestepped the usual procedures pertaining to the imposition of taxes and the promulgation of new regulations. ER - TY - JOUR AU - Sahm,Claudia R. AU - Shapiro,Matthew D. AU - Slemrod,Joel B. TI - Household Response to the 2008 Tax Rebate: Survey Evidence and Aggregate Implications JF - National Bureau of Economic Research Working Paper Series VL - No. 15421 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15421 L1 - http://www.nber.org/papers/w15421.pdf N1 - Author contact info: Claudia R. Sahm Federal Reserve Board 21st and C Street NW Washington DC 20551 Tel: 571-490-2223 E-Mail: Claudia.R.Sahm@frb.gov Matthew D. Shapiro Department of Economics University of Michigan 611 Tappan St Ann Arbor, MI 48109-1220 Tel: 734/764-5419 Fax: 734 764-2769 E-Mail: shapiro@umich.edu Joel B. Slemrod University of Michigan Business School Room R5396 Ann Arbor, MI 48109-1234 Tel: 734/936-3914 Fax: 734-615-4323 E-Mail: jslemrod@umich.edu M1 - published as M3 - presented at "Tax Policy & the Economy", September 24, 2009 AB - Only about one-fifth of respondents in the Reuters/University of Michigan survey report that the 2008 tax rebates led them to mostly increase spending, while over half said it would lead them to mostly pay off debt. Of those in the mostly-spend category, the response was swift, with over 80 percent reporting increasing their spending within three months of receiving their rebate. Older households, households with higher wealth and higher income, and those expecting future income growth were generally more likely to spend the rebates. A review of other surveys confirms the general pattern of results and suggests that small changes in survey design do not have a major effect on the distribution of responses. The distribution of survey answers corresponds to an aggregate MPC after one year of about one-third. The paper combines this survey-based estimate of the MPC and the survey-based estimate of the timing of spending to show that the rebates help explain the aggregate movements in saving, spending, and debt in 2008. Because the rebate was large and distributed over a short period, it had a non-trivial effect on total spending in the second and third quarters of 2008. Nonetheless, the results imply that the rebates provided only a modest stimulus to spending per dollar of rebate. ER - TY - JOUR AU - List,John A. TI - The Economics of Open Air Markets JF - National Bureau of Economic Research Working Paper Series VL - No. 15420 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15420 L1 - http://www.nber.org/papers/w15420.pdf N1 - Author contact info: 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 M1 - published as AB - Despite their current prevalence and historical significance, little is known about the economics of open air markets. This paper uses open air markets as a natural laboratory to provide initial insights into the underlying operation of such markets. Using data on thousands of individual transactions gathered from May 2005- August 2008, I report several insights. First, the natural pricing and allocation mechanism in open air markets is capable of approaching full efficiency, even in quite austere conditions. Yet, a second result highlights the fragility of this finding: allowance of explicit seller communication frustrates market efficiency in a broad array of situations. Making use of insights gained from a “mole” in the marketplace, a third set of results revolves around economic questions pertaining to collusive arrangements that are otherwise quite difficult to investigate. Overall, I find data patterns that are consistent with certain theoretical predictions, as the evidence suggests that i) cheating rates increase as the coalition is expanded, ii) sellers cheat less when they have collusive arrangements in several spatially differentiated markets, and iii) sellers cheat more when they are experiencing periods of abnormally high profits. These results follow from a combination of insights gained from building a bridge between the lab and the naturally-occurring environment. By doing so, the study showcases that in developing a deeper understanding of economic science, it is desirable to take advantage of the myriad settings in which economic phenomena present themselves. ER - TY - JOUR AU - Frankel,Jeffrey A. TI - Are Bilateral Remittances Countercyclical? JF - National Bureau of Economic Research Working Paper Series VL - No. 15419 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15419 L1 - http://www.nber.org/papers/w15419.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 M1 - published as AB - By putting together a relatively large data set on bilateral remittances of emigrants, this paper is able to shed light on the important hypothesis of smoothing. The smoothing hypothesis is that remittances are countercyclical with respect to income in the worker’s country of origin (the recipient of the remittance), while procyclical with respect to income in the migrant’s host country (the sender of the remittance). The econometric results confirm the hypothesis. This affirmation of smoothing is important for two reasons. First, it suggests that remittances should be placed on the list of criteria for an optimum currency area. Second, it sheds light on plans by governments in some developing countries to harness remittances for their own use, in that government spending in these countries generally fails the test of countercyclicality that remittances pass. ER - TY - JOUR AU - Imbs,Jean AU - Mumtaz,Haroon AU - Ravn,Morten O. AU - Rey,Hélène TI - One TV, One Price? JF - National Bureau of Economic Research Working Paper Series VL - No. 15418 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15418 L1 - http://www.nber.org/papers/w15418.pdf N1 - Author contact info: Jean Imbs HEC Lausanne Lausanne, Switzerland E-Mail: jimbs@unil.ch Haroon Mumtaz Bank of England London UK E-Mail: hmumtaz@london.edu Morten Ravn Department of Economics University College London London UK E-Mail: morten.ravn@eui.eu Helene Rey London Business School Regents Park London NW1 4SA UK Tel: 44 2070008412 E-Mail: hrey@london.edu M1 - published as AB - We use a unique dataset on television prices across European countries and regions to investigate the sources of differences in price levels. Our findings are as follows: (i) Quality is a crucial determinant of price differences. Even in an integrated economic zone as Europe, rich economies tend to consume higher quality goods. This effect accounts for the lion’s share of international price dispersion. (ii) Sizable international price differentials subsist even for the same television sets. The average bilateral price difference is as high as 80 euros, or 8% of the average TV price in our sample. (iii) EMU countries display lower price dispersion than non-EMU countries. (iv) absolute price differentials and relative price volatility are positively correlated with exchange rate volatility, but not with conventional measures of transport costs. (v) Importantly we show brand premia are sizable. They differ markedly across borders, in a way that does not correlate with transport costs, nor exchange rate movements. Taken together, the evidence is consistent firms exploiting market power through brand values to price discriminate across borders. ER - TY - JOUR AU - Giavazzi,Francesco AU - Schiantarelli,Fabio AU - Serafinelli,Michel TI - Culture, Policies and Labor Market Outcomes JF - National Bureau of Economic Research Working Paper Series VL - No. 15417 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15417 L1 - http://www.nber.org/papers/w15417.pdf N1 - Author contact info: Francesco Giavazzi Department of Economics Bocconi University and I.G.I.E.R room 5-D1-07 Via. G. Rontgen 1 20136, Milan Italy Tel: 0039-02-5836-3304 Fax: 0039-02-5836-3302 E-Mail: francesco.giavazzi@unibocconi.it Fabio Schiantarelli Department of Economics Boston College Chestnut Hill, MA 02467 Tel: 617-5524512 Fax: 617-5522308 E-Mail: schianta@bc.edu Michel Serafinelli Department of Economics University of California, Berkeley 508-1 Evans Hall # 3880 Berkeley, CA 94720-3880 E-Mail: serafine@econ.berkeley.edu M1 - published as AB - We study whether cultural attitudes towards gender, the young, and leisure are significant determinants of the evolution over time of the employment rates of women and of the young, and of hours worked in OECD countries. Beyond controlling for a larger menu of policies, institutions and structural characteristics of the economy than has been done so far, our analysis improves upon existing studies of the role of "culture" for labor market outcomes by dealing explicitly with the endogeneity of attitudes, policies and institutions, and by allowing for the persistent nature of labor market outcomes. When we do all this we find that culture still matters for women employment rates and for hours worked. However, policies and other institutional or structural characteristics are also important. Attitudes towards youth independence, however, do not appear to be important in explaining the employment rate of the young. In the case of women employment rates, the policy variable that is significant along with attitudes, is the OECD index of employment protection legislation. For hours worked the policy variables that play a role, along with attitudes, are the tax wedge and unemployment benefits. The quantitative impact of these policy variables is such that changes in policies have at least the potential to undo the effect of variations in cultural traits on labor market outcomes. ER - TY - JOUR AU - Herrendorf,Berthold AU - Rogerson,Richard AU - Valentinyi,Ákos TI - Two Perspectives on Preferences and Structural Transformation JF - National Bureau of Economic Research Working Paper Series VL - No. 15416 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15416 L1 - http://www.nber.org/papers/w15416.pdf N1 - Author contact info: Berthold Herrendorf W.P. Carey School of Business Department of Economics Arizona State University Tempe, AZ 85287-3806 Tel: 480-965-1462 Fax: 480-965-0748 E-Mail: berthold.Herrendorf@asu.edu Richard Rogerson Department of Economics College of Business Arizona State University Tempe, AZ 85287 Tel: 480/727-6671 Fax: 215/573-4217 E-Mail: richard.rogerson@asu.edu Akos Valentinyi Magyar Nemzeti Bank, 1850 Budapest Szabadsag ter 8-9 Hungary E-Mail: valentinyi.a@gmail.com M1 - published as AB - We ask what specification of preferences can account for the changes in the expenditure shares of broad sectors that are associated with the process of structural transformation in the U.S. since 1947. Following the tradition of the expenditure systems literature, we first calibrate utility function parameters using NIPA data on final consumption expenditure. We find that a Stone-Geary specification fits the data well. While useful, this exercise does not tell the researcher what utility function to use in a model that posits sectoral production functions in value added form. We therefore develop a method to calculate the value added components of consumption categories that are consistent with value added production functions, and use these data to calibrate a utility function over sectoral consumption value added. We find that a Leontief specification fits the data well. Interestingly, the two specifications display very different properties: for final consumption expenditure income effects are the dominant force behind changes in expenditure shares whereas for consumption value added relative price effects are dominant. ER - TY - JOUR AU - Alesina,Alberto F. AU - Giuliano,Paola TI - Family Ties and Political Participation JF - National Bureau of Economic Research Working Paper Series VL - No. 15415 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15415 L1 - http://www.nber.org/papers/w15415.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 M1 - published as AB - We establish an inverse relationship between family ties and political participation, such that the more individuals rely on the family as a provider of services, insurance, transfer of resources, the lower is one’s civic engagment and political participation. We also show that strong family ties appear to be a substitute for generalized trust, rather than a complement to it. These three constructs-civic engagement, political participation, and trust- are part of what is known as social capital; therefore, in this paper, we contribute to the investigation of the origin and evolution of social capital. We establish these results using within-country evidence and looking at the behavior of immigrants from various countries in 32 different destination places. ER - TY - JOUR AU - Lagos,Ricardo AU - Rocheteau,Guillaume AU - Weill,Pierre-Olivier TI - Crises and Liquidity in Over-the-Counter Markets JF - National Bureau of Economic Research Working Paper Series VL - No. 15414 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15414 L1 - http://www.nber.org/papers/w15414.pdf N1 - Author contact info: Ricardo Lagos Department of Economics New York University 19 W. 4th Street, 6th Floor New York, NY 10012 E-Mail: ricardo.lagos@nyu.edu Guillaume Rocheteau Department of Economics University of California at Irvine 3151 Social Science Plaza Irvine, California 9269 E-Mail: ecsrg@nus.edu.sg 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 M1 - published as AB - We study the efficiency of dealers’ liquidity provision and the desirability of policy intervention in over-the-counter (OTC) markets during crises. Our theory emphasizes two key frictions in OTC markets: finding counterparties takes time, and trade is bilateral, with quantities and prices determined by bargaining. We model a crisis as a negative shock to investors’ asset demands that lasts until a random recovery time. In this context, dealers can provide liquidity to outside investors by acting as counterparties in trades and by accumulating asset inventories. We find that, when frictions are severe, even well capitalized dealers may not find it optimal to accumulate inventories, given that investors choose asset positions that require small reallocations. In such circumstances, the market allocative efficiency can increase if the government steps in, purchases private assets on its own account, and resells them when the economy recovers. ER - TY - JOUR AU - Currie,Janet AU - Walker,Reed TI - Traffic Congestion and Infant Health: Evidence from E-ZPass JF - National Bureau of Economic Research Working Paper Series VL - No. 15413 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15413 L1 - http://www.nber.org/papers/w15413.pdf N1 - Author contact info: Janet Currie International Affairs Building Department of Economics Columbia University - Mail code 3308 420 W 118th Street New York, NY 10027 Tel: 212/854-4520 Fax: 212/854-8059 E-Mail: jc2663@columbia.edu Reed Walker Graduate School of Arts and Sciences Department of Economics Columbia University 1022 International Affairs Building New York, NY 10027 Tel: 212-854-3680 E-Mail: rw2157@columbia.edu M1 - published as AB - This paper provides evidence of the significant negative health externalities of traffic congestion. We exploit the introduction of electronic toll collection, or E-ZPass, which greatly reduced traffic congestion and emissions from motor vehicles in the vicinity of highway toll plazas. Specifically, we compare infants born to mothers living near toll plazas to infants born to mothers living near busy roadways but away from toll plazas with the idea that mothers living away from toll plazas did not experience significant reductions in local traffic congestion. We also examine differences in the health of infants born to the same mother, but who differ in terms of whether or not they were “exposed” to E-ZPass. We find that reductions in traffic congestion generated by E-ZPass reduced the incidence of prematurity and low birth weight among mothers within 2km of a toll plaza by 10.8% and 11.8% respectively. Estimates from mother fixed effects models are very similar. There were no immediate changes in the characteristics of mothers or in housing prices in the vicinity of toll plazas that could explain these changes, and the results are robust to many changes in specification. The results suggest that traffic congestion is a significant contributor to poor health in affected infants. Estimates of the costs of traffic congestion should account for these important health externalities. ER - TY - JOUR AU - Carvell,Daniel AU - Currie,Janet AU - MacLeod,W. Bentley TI - Accidental Death and the Rule of Joint and Several Liability JF - National Bureau of Economic Research Working Paper Series VL - No. 15412 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15412 L1 - http://www.nber.org/papers/w15412.pdf N1 - Author contact info: Daniel Carvell Department of Economics Columbia University 420 W 118th St., New York NY 10027 E-Mail: dnc2101@columbia.edu Janet Currie International Affairs Building Department of Economics Columbia University - Mail code 3308 420 W 118th Street New York, NY 10027 Tel: 212/854-4520 Fax: 212/854-8059 E-Mail: jc2663@columbia.edu W. Bentley MacLeod Department of Economics Columbia University 420 West 118th Street, MC 3308 New York, NY 10027 Tel: 212/854-4212 Fax: 212/854-4782 E-Mail: bentley.macleod@columbia.edu M1 - published as AB - Reforms to the Joint and Several Liability rule (JSL) are one of the most common tort reforms and have been implemented by most US states. JSL allows plaintiffs to claim full recovery from one of the defendants, even if that defendant is only partially responsible for the tort. We develop a theoretical model that shows that the efficiency of the JSL rule depends critically on both whether the care taken by potential tortfeasors is observed, and on how the actions of the potential tortfeasors interact to cause the harm. We then provide evidence that reforms of the JSL rule have been accompanied by reductions in the accidental death rate in the U. S. This result is consistent with the hypothesis that the reform of JSL causes potential tortfeasors to take more care. ER - TY - JOUR AU - Fritscher,André C. Martínez AU - Musacchio,Aldo TI - Endowments, Fiscal Federalism, and the Cost of Capital for States: Evidence from Brazil, 1891-1930 JF - National Bureau of Economic Research Working Paper Series VL - No. 15411 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15411 L1 - http://www.nber.org/papers/w15411.pdf N1 - Author contact info: Andre Martinez Banco de Mexico Av. 5 de Mayo No. 18 Col. Centro C.P.06059 México Tel: 52372000, ext. 3540 E-Mail: amartinez@banxico.org.mx Aldo Musacchio Harvard Business School Morgan Hall 279 Soldiers Field Boston, MA 02163 Tel: 617/496-0995 E-Mail: amusacchio@hbs.edu M1 - published as AB - In the last few years there has been an explosion in the number of papers that aim to explain what determines country risk (defined as the difference between the yield of a sovereign’s bonds and the risk free rate). In this paper, we contribute to the discussion using by showing that Brazilian states with natural endowments that allowed them to export commodities that were in high demand (e.g., rubber and coffee) between 1891 and 1930 ended up having higher revenues per capita and, thus, lower cost of capital. The link between exports and state government revenues works in the Brazilian case because of the extreme form of fiscal federalism that the Brazilian government adopted in the Constitution of 1891, giving state governments the sole right to tax exports. We create a panel of state debt risk premia and a series of state level fiscal variables and we show, using OLS, that having specific commodities gave states access capital in better terms (i.e., lower risk premium) in international markets. We also confirm our results that states with better commodities had lower risk premia when we use export price indices for each of the states as instruments for state revenue per capita. ER - TY - JOUR AU - Abraham,Jean Marie AU - DeLeire,Thomas AU - Royalty,Anne Beeson TI - Moral Hazard Matters: Measuring Relative Rates of Underinsurance Using Threshold Measures JF - National Bureau of Economic Research Working Paper Series VL - No. 15410 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15410 L1 - http://www.nber.org/papers/w15410.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 Thomas DeLeire Department of Population Health Sciences University of Wisconsin-Madison 760A WARF Madison, WI 53726-2397 Tel: 608-263-6998 Fax: 608/263-2820 E-Mail: deleire@wisc.edu Anne Beeson Royalty Department of Economics Indiana University - Purdue University at Indianap 425 University Blvd. Indianapolis, IN 46202-5140 E-Mail: royalty@iupui.edu M1 - published as AB - This paper illustrates the impact of moral hazard for estimating relative rates of underinsurance and to present an adjustment method to correct for this source of bias. Individuals or households are often classified as underinsured if out-of-pocket spending on medical care relative to income exceeds some threshold. We show that, without adjustment, this common threshold measure of underinsurance will underestimate the number with low levels of insurance coverage due to moral hazard. We propose an adjustment method and apply it to the specific case of estimating the difference in rates of underinsurance among small- versus large-firm workers with full-year, employer-sponsored insurance. Using data from the 2005 Medical Expenditure Panel Survey, we find that after applying the adjustment, the underinsurance rate of small-firm households increases by approximately 20% with the adjustment for moral hazard and the difference in underinsurance rates between large firm and small firm households widens substantially. Adjusting for moral hazard makes a sizeable difference in the estimated prevalence of underinsurance using a threshold measure. ER - TY - JOUR AU - Rozenfeld,Hernán D. AU - Rybski,Diego AU - Gabaix,Xavier AU - Makse,Hernán A. TI - The Area and Population of Cities: New Insights from a Different Perspective on Cities JF - National Bureau of Economic Research Working Paper Series VL - No. 15409 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15409 L1 - http://www.nber.org/papers/w15409.pdf N1 - Author contact info: Hernán D. Rozenfeld Levich Institute City College of New York 140th Street & Convent Avenue New York, NY 10031 E-Mail: hernanrozenfeld@gmail.com Diego Rybski City College of New York 140th Street & Convent Avenue New York, NY 10031 E-Mail: diego.rybski@pik-potsdam.de 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 Hernan Makse 140th Street & Convent Avenue New York, NY 10031 E-Mail: hmakse@lev.ccny.cuny.edu M1 - published as AB - The distribution of the population of cities has attracted a great deal of attention, in part because it sharply constrains models of local growth. However, to this day, there is no consensus on the distribution below the very upper tail, because available data need to rely on the “legal” rather than “economic” definition of cities for medium and small cities. To remedy this difficulty, in this work we construct cities “from the bottom up” by clustering populated areas obtained from high-resolution data. This method allows us to investigate the population and area of cities for urban agglomerations of all sizes. We find that Zipf’s law (a power law with exponent close to 1) for population holds for cities as small as 12,000 inhabitants in the USA and 5,000 inhabitants in Great Britain. In addition the distribution of city areas is also close to a Zipf’s law. We provide a parsimonious model with endogenous city area that is consistent with those findings. ER - TY - JOUR AU - Atkinson,Anthony B. AU - Piketty,Thomas AU - Saez,Emmanuel TI - Top Incomes in the Long Run of History JF - National Bureau of Economic Research Working Paper Series VL - No. 15408 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15408 L1 - http://www.nber.org/papers/w15408.pdf N1 - Author contact info: Anthony Atkinson Dept. of Economics Oxford Unviersity Manor Road Building, Manor Rd. Oxford, OX1 3BJ, United Kingdom E-Mail: tony.atkinson@nuffield.ox.ac.uk Thomas Piketty Paris School of Economics E-Mail: piketty@ens.fr Emmanuel Saez Department of Economics University of California, Berkeley 549 Evans Hall #3880 Berkeley, CA 94720 Tel: 510/642-4631 Fax: 510/642-6615 E-Mail: saez@econ.berkeley.edu M1 - published as AB - This paper summarizes the main findings of a recent literature that has constructed top income shares time series over the long-run for more than 20 countries using income tax statistics. Top incomes represent a small share of the population but a very significant share of total income and total taxes paid. Hence, aggregate economic growth per capita and Gini inequality indexes are very sensitive to excluding or including top incomes. We discuss the estimation methods and issues that arise when constructing top income share series, including income definition and comparability over time and across countries, tax avoidance and tax evasion. We provide a summary of the key empirical findings. Most countries experience a dramatic drop in top income shares in the first part of the 20th century in general due to shocks to top capital incomes during the wars and depression shocks. Top income shares do not recover in the immediate post war decades. However, over the last 30 years, top income shares have increased substantially in English speaking countries and in India and China but not in continental Europe countries or Japan. This increase is due in part to an unprecedented surge in top wage incomes. As a result, wage income comprises a larger fraction of top incomes than in the past. Finally, we discuss the theoretical and empirical models that have been proposed to account for the facts and the main questions that remain open. ER - TY - JOUR AU - Auerbach,Alan J. AU - Gale,William G. TI - Activist Fiscal Policy to Stabilize Economic Activity JF - National Bureau of Economic Research Working Paper Series VL - No. 15407 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15407 L1 - http://www.nber.org/papers/w15407.pdf N1 - Author contact info: Alan J. Auerbach Department of Economics 508-1 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 William Gale Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Tel: 202/797-6148 Fax: 202/797-6181 E-Mail: wgale@brookings.edu M1 - published as AB - We review the evidence on the practice and effects of discretionary fiscal policy, particularly in the context of recent efforts to stimulate the economy, reaching two main conclusions. First, policy interventions have increased in this decade, pre-dating the 2009 stimulus. Second, despite a large economic literature on the topic, the state of theory and evidence is not as "shovel ready" as one would like. Although consumption and investment clearly respond to tax incentives and structural vector autoregressions show that lower taxes and higher government purchases can boost output, it is difficult to apply the findings in the current context, in part because multipliers and policy lags are likely to vary with economic conditions. Dynamic stochastic general equilibrium models can be adapted to address extreme economic conditions, but yield an extremely wide range of predicted impacts. The experience from large downturns – the U.S. Great Depression and the Japanese Lost Decade – is illuminating, but provides little evidence about policy effectiveness because systematic and sustained fiscal interventions were not attempted in either case. ER - TY - JOUR AU - Borjas,George J. AU - Friedberg,Rachel M. TI - Recent Trends in the Earnings of New Immigrants to the United States JF - National Bureau of Economic Research Working Paper Series VL - No. 15406 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15406 L1 - http://www.nber.org/papers/w15406.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 Rachel M. Friedberg Department of Economics Brown University 64 Waterman Street Providence, RI 02912 Tel: 401/863-7578 Fax: 401/863-1970 E-Mail: rachel_friedberg@brown.edu M1 - published as AB - This paper studies long-term trends in the labor market performance of immigrants in the United States, using the 1960-2000 PUMS and 1994-2009 CPS. While there was a continuous decline in the earnings of new immigrants 1960-1990, the trend reversed in the 1990s, with newcomers doing as well in 2000, relative to natives, as they had 20 years earlier. This improvement in immigrant performance is not explained by changes in origin-country composition, educational attainment or state of residence. Changes in labor market conditions, including changes in the wage structure which could differentially impact recent arrivals, can account for only a small portion of it. The upturn appears to have been caused in part by a shift in immigration policy toward high-skill workers matched with jobs, an increase in the earnings of immigrants from Mexico, and a decline in the earnings of native high school dropouts. However, most of the increase remains a puzzle. Results from the CPS suggest that, while average entry wages fell again after 2000, correcting for simple changes in the composition of new immigrants, the unexplained rise in entry wages has persisted. ER - TY - JOUR AU - Panageas,Stavros TI - Optimal taxation in the presence of bailouts JF - National Bureau of Economic Research Working Paper Series VL - No. 15405 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15405 L1 - http://www.nber.org/papers/w15405.pdf N1 - Author contact info: Stavros Panageas University of Chicago Booth School of Business 5807 South Woodlawn Avenue Chicago, IL, 60637 Tel: (773) 834 4711 E-Mail: stavros.panageas@chicagobooth.edu M1 - published as AB - The termination of a representative financial firm due to excessive leverage may lead to substantial bankruptcy costs. A government in the tradition of Ramsey (1927) may be inclined to provide transfers to the firm so as to prevent its liquidation and the associated deadweight costs. It is shown that the optimal taxation policy to finance such transfers exhibits countercyclicality and history dependence, even in a complete market. These results are in contrast with pre-existing literature on optimal fiscal policy, and are driven by the endogeneity of the transfer payments that are required to salvage the financial firm. ER - TY - JOUR AU - Jagannathan,Ravi AU - Kapoor,Mudit AU - Schaumburg,Ernst TI - Why are we in a recession? The Financial Crisis is the Symptom not the Disease! JF - National Bureau of Economic Research Working Paper Series VL - No. 15404 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15404 L1 - http://www.nber.org/papers/w15404.pdf N1 - Author contact info: Ravi Jagannathan Kellogg School of Management Northwestern University 2001 Sheridan Road 431 Jacobs Center Evanston, IL 60208-2001 Tel: 847/491-8338 Fax: 847/491-5719 E-Mail: rjaganna@northwestern.edu Mudit Kapoor Indian School of Business Gachibowli Hyderabad - 500032 India E-Mail: mudit.kapoor@gmail.com Ernst Schaumburg Federal Reserve Bank of New York 33 Liberty Street New York, NY 10045 E-Mail: ernst.schaumburg@ny.frb.org M1 - published as AB - Globalization has brought a sharp increase in the developed world’s labor supply. Labor in developing countries – countries with vast pools of underemployed people – can now more easily augment labor in the developed world, without having to relocate, in ways not thought possible only a few decades ago. We argue that the large increase in the developed world’s labor supply, triggered by geo-political events and technological innovations, is the major underlying cause of the global macro economic imbalances that led to the great recession. The inability of existing institutions in the US and the rest of the world to cope with this shock set the stage for the great recession: The inability of emerging economies to absorb savings through domestic investment and consumption due to inadequate national financial markets and difficulties in enforcing financial contracts; the currency controls motivated by immediate national objectives; and the inability of the US economy to adjust to the perverse incentives caused by huge money inflows leading to a breakdown of checks and balances at various financial institutions. The financial crisis in the US was but the first acute symptom that had to be treated. A sustainable recovery will only occur when the natural flow of capital from developed to developing nations is restored. ER - TY - JOUR AU - Calomiris,Charles TI - Banking Crises and the Rules of the Game JF - National Bureau of Economic Research Working Paper Series VL - No. 15403 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15403 L1 - http://www.nber.org/papers/w15403.pdf N1 - Author contact info: Charles 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 M1 - published as AB - When and why do banking crises occur? Banking crises properly defined consist either of panics or waves of costly bank failures. These phenomena were rare historically compared to the present. A historical analysis of the two phenomena (panics and waves of failures) reveals that they do not always coincide, are not random events, cannot be seen as the inevitable result of human nature or the liquidity transforming structure of bank balance sheets, and do not typically accompany business cycles or monetary policy errors. Rather, risk-inviting microeconomic rules of the banking game that are established by government have always been the key additional necessary condition to producing a propensity for banking distress, whether in the form of a high propensity for banking panics or a high propensity for waves of bank failures. Some risk-inviting rules took the form of visible subsidies for risk taking, as in the historical state-level deposit insurance systems in the U.S., Argentina’s government guarantees for mortgages in the 1880s, Australia’s government subsidization of real estate development prior to 1893, the Bank of England’s discounting of paper at low interest rates prior to 1858, and the expansion of government-sponsored deposit insurance and other bank safety net programs throughout the world in the past three decades, including the generous government subsidization of subprime mortgage risk taking in the U.S. leading up to the recent crisis. Other risk-inviting rules historically have involved government-imposed structural constraints on banks, which include entry restrictions like unit banking laws that constrain competition, prevent diversification of risk, and limit the ability to deal with shocks. Another destabilizing rule of the banking game is the absence of a properly structured central bank to act as a lender of last resort to reduce liquidity risk without spurring moral hazard. Regulatory policy often responds to banking crises, but not always wisely. The British response to the Panic of 1857 is an example of effective learning, which put an end to the subsidization of risk through reforms to Bank of England policies in the bills market. Counterproductive responses to crises include the decision in the U.S. not to retain its early central banks, which reflected misunderstandings about their contributions to financial instability in 1819 and 1825, and the adoption of deposit insurance in 1933, which reflected the political capture of regulatory reform. ER - TY - JOUR AU - Tella,Rafael Di AU - Franceschelli,Ignacio TI - Government Advertising and Media Coverage of Corruption Scandals JF - National Bureau of Economic Research Working Paper Series VL - No. 15402 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15402 L1 - http://www.nber.org/papers/w15402.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 Ignacio Franceschelli Department of Economics Northwestern University E-Mail: nacho@northwestern.edu M1 - published as AB - We construct measures of the extent to which the 4 main newspapers in Argentina report government corruption in their front page during the period 1998-2007 and correlate them with the extent to which each newspaper is a recipient of government advertising. The correlation is negative. The size is considerable: a one standard deviation increase in monthly government advertising (0.26 million pesos of 2000) is associated with a reduction in the coverage of the government’s corruption scandals by almost half of a front page per month, or 37% of a standard deviation in our measure of coverage. The results control for newspaper, month and individual corruption scandal fixed effects. ER - TY - JOUR AU - Mitchener,Kris James AU - Weidenmier,Marc D. TI - Are Hard Pegs Ever Credible in Emerging Markets? Evidence from the Classical Gold Standard JF - National Bureau of Economic Research Working Paper Series VL - No. 15401 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15401 L1 - http://www.nber.org/papers/w15401.pdf N1 - Author contact info: 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 M1 - published as AB - Using a new database of weekly sovereign debt prices of paper currency and pound sterling (or gold) denominated debt, we identify the currency-risk component of sovereign yield spreads for nine of the largest emerging market borrowers for the period 1870-1913. Five years after a country joined the gold standard, paper currency bonds traded at significantly higher interest rates (more than 400 basis points on average) than a country’s foreign currency debt denominated in pound sterling. Investors also expected exchange rates to fall by roughly 20 percent even after emerging market borrowers had joined the gold standard. The presence of persistent positive currency risk premiums long after gold standard adoption suggests that hard pegs for emerging market borrowers may never be fully credible. ER - TY - JOUR AU - Acemoglu,Daron AU - Golosov,Mikhail AU - Tsyvinski,Aleh TI - Power Fluctuations and Political Economy JF - National Bureau of Economic Research Working Paper Series VL - No. 15400 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15400 L1 - http://www.nber.org/papers/w15400.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 Mikhail Golosov Department of Economics Yale University Box 208268 New Haven, CT 06520-8269 Tel: 203/436-8475 Fax: 203/436-2696 E-Mail: m.golosov@yale.edu Aleh Tsyvinski Department of Economics Yale University Box 208268 New Haven, CT 06520-8268 Tel: 310/500-9321 E-Mail: a.tsyvinski@yale.edu M1 - published as AB - We study the constrained Pareto efficient allocations in a dynamic production economy in which the group that holds political power decides the allocation of resources. We show that Pareto efficient allocations take a quasi-Markovian structure and can be represented recursively as a function of the identity of the group in power and updated Pareto weights. For high discount factors, the economy converges to a first-best allocation in which labor supply decisions are not distorted and the levels of labor supply and consumption are constant over time (though there may be transfers from one group to another). For low discount factors, the economy converges to an invariant stochastic distribution in which distortions do not disappear and labor supply and consumption levels fluctuate over time. The labor supply of groups that are not in power are taxed in order to reduce the deviation payoff of the party in power and thus relax the political economy/sustainability constraints. We also show that the set of sustainable first-best allocations is larger when there is less persistence in the identity of the party in power. This result contradicts a common conjecture that there will be fewer distortions when the political system creates a “stable ruling group”. In contrast, political economy distortions are less important when there are frequent changes in power (because this encourages compromise between social groups). Despite this result, it remains true that distortions decrease along sample paths where a particular group remains in power for a longer span of time. ER - TY - JOUR AU - Gourio,François TI - Disasters Risk and Business Cycles JF - National Bureau of Economic Research Working Paper Series VL - No. 15399 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15399 L1 - http://www.nber.org/papers/w15399.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 M1 - published as AB - To construct a business cycle model consistent with the observed behavior of asset prices, and study the effect of shocks to aggregate uncertainty, I introduce a small, time-varying risk of economic disaster in a standard real business cycle model. The paper establishes two simple theoretical results: first, when the probability of disaster is constant, the risk of disaster does not affect the path of macroeconomic aggregates - a "separation theorem" between macroeconomic quantities and asset prices in the spirit of Tallarini (2000). Second, shocks to the probability of disaster, which generate variation in risk premia over time, are observationally equivalent to preference shocks. An increase in the perceived probability of disaster leads to a collapse of investment and a recession, an increase in risk spreads, and a decrease in the yield on safe assets. To assess the empirical validity of the model, I infer the probability of disaster from observed asset prices and feed it into the model. The variation over time in this probability appears to account for a significant fraction of business cycle dynamics, especially sharp downturns in investment and output such as 2008-IV. ER - TY - JOUR AU - Hellerstein,Judith K. AU - McInerney,Melissa AU - Neumark,David TI - Spatial Mismatch, Immigrant Networks, and Hispanic Employment in the United States JF - National Bureau of Economic Research Working Paper Series VL - No. 15398 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15398 L1 - http://www.nber.org/papers/w15398.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 Melissa McInerney College of William and Mary and U.S. Census Bureau Economics Department P.O. Box 8795 Williamsburg, VA 23187 E-Mail: mcinerney@econ.umd.edu David Neumark Department of Economics UCI 3151 Social Science Plaza Irvine, CA 92697 Tel: 949-824-8496 Fax: 949/824-2182 E-Mail: dneumark@uci.edu M1 - published as AB - We study the relationship between Hispanic employment and location-specific measures of the distribution of jobs. We find that it is only the local density of jobs held by Hispanics that matters for Hispanic employment, that measures of local job density defined for Hispanic poor English speakers or immigrants are more important, and that the density of jobs held by Hispanic poor English speakers are most important for the employment of these less-skilled Hispanics than for other Hispanics. This evidence is consistent with labor market networks being an important influence on the employment of less-skilled Hispanics, as is evidence from other sources. We also find that in MSAs where the growth rates of the Hispanic immigrant population have been highest, which are also MSAs with historically low Hispanic populations, localized job density for low-skilled jobs is even more important for Hispanic employment than in the full sample. We interpret this evidence as consistent with the importance of labor market networks, as strong labor market networks are likely to have been especially important in inducing Hispanics to migrate, and because of these networks employment in these “new immigrant” cities is especially strongly tied to the local availability of jobs. ER - TY - JOUR AU - Baldwin,Robert E. TI - U.S. Trade Policy Since 1934: An Uneven Path Toward Greater Trade Liberalization JF - National Bureau of Economic Research Working Paper Series VL - No. 15397 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15397 L1 - http://www.nber.org/papers/w15397.pdf N1 - Author contact info: Robert E. Baldwin University of Wisconsin-Madison Department of Economics 7321 Social Science Building 1180 Observatory Drive Madison, WI 53706 Tel: 608/263-7397 Fax: 608/263-3876;608/233-8284 E-Mail: rebaldwi@facstaff.wisc.edu M1 - published as AB - This paper presents a comprehensive but relatively brief historical survey of U.S. trade-policy over the last 75 years. It is aimed at individuals who are not already familiar with the concepts and terminology used in discussions of trade policy and the domestic and international institutional framework within which U.S. trade policies are formulated and implemented. Particular attention is devoted to exploring the underlying economic and political conditions that have shaped U.S. trade policies over the period. ER - TY - JOUR AU - Cai,Hongbin AU - Chen,Yuyu AU - Fang,Hanming AU - Zhou,Li-An TI - Microinsurance, Trust and Economic Development: Evidence from a Randomized Natural Field Experiment JF - National Bureau of Economic Research Working Paper Series VL - No. 15396 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15396 L1 - http://www.nber.org/papers/w15396.pdf N1 - Author contact info: Hongbin Cai Guanghua School of Management and IEPR Peking University Beijing 100871 China E-Mail: hbcai@gsm.pku.edu.cn yuyu chen Guanghua School of Management and IEPR Peking University Beijing, China E-Mail: chenyuyu@gsm.pku.edu.cn 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 Li-An Zhou Guanghua School of Management and IEPR Peking University Beijing 100871 CHINA E-Mail: zhoula@gsm.pku.edu.cn M1 - published as AB - We report results from a large randomized natural field experiment conducted in southwestern China in the context of insurance for sows. Our study sheds light on two important questions about microinsurance. First, how does access to formal insurance affect farmers' production decisions? Second, what explains the low takeup rate of formal insurance, despite substantial premium subsidy from the government? We find that providing access to formal insurance significantly increases farmers' tendency to raise sows. We argue that this finding also suggests that farmers are not previously insured efficiently through informal mechanisms. We also provide several pieces of evidence suggesting that trust, or lack thereof, for government-sponsored insurance products is a significant barrier for farmers' willingness to participate in the insurance program. ER - TY - JOUR AU - Coile,Courtney AU - Levine,Phillip B. TI - The Market Crash and Mass Layoffs: How the Current Economic Crisis May Affect Retirement JF - National Bureau of Economic Research Working Paper Series VL - No. 15395 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15395 L1 - http://www.nber.org/papers/w15395.pdf N1 - Author contact info: Courtney Coile Department of Economics Wellesley College 106 Central Street Wellesley, MA 02481 Tel: 781/283-2408 Fax: 781/283-2177 E-Mail: ccoile@wellesley.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 M1 - published as AB - Recent dramatic declines in U.S. stock and housing markets have led to widespread speculation that shrinking retirement accounts and falling home equity will lead workers to delay retirement. Yet the weakness in the labor market and its impact on retirement is often overlooked. If older job seekers have difficulty finding work, they may retire earlier than expected. The net effect of the current economic crisis on retirement is thus far from clear. In this paper, we use 30 years of data from the March Current Population Survey to estimate models relating retirement decisions to fluctuations in equity, housing, and labor markets. We find that workers age 62 to 69 are responsive to the unemployment rate and to long-run fluctuations in stock market returns. Less-educated workers are more sensitive to labor market conditions and more-educated workers are more sensitive to stock market conditions. We find no evidence that workers age 55 to 61 respond to these fluctuations or that workers at any age respond to fluctuating housing markets. On net, we predict that the increase in retirement attributable to the rising unemployment rate will be almost 50 percent larger than the decrease in retirement brought about by the stock market crash. ER - TY - JOUR AU - Christiano,Lawrence AU - Eichenbaum,Martin AU - Rebelo,Sergio TI - When is the government spending multiplier large? JF - National Bureau of Economic Research Working Paper Series VL - No. 15394 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15394 L1 - http://www.nber.org/papers/w15394.pdf N1 - Author contact info: Lawrence Christiano Department of Economics Northwestern University 2003 Sheridan Road Evanston, IL 60208 Tel: 847/491-8231 Fax: 847/491-7001 E-Mail: l-christiano@northwestern.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 M1 - published as AB - When the nominal interest rate is constant. ER - TY - JOUR AU - Branstetter,Lee AU - Saggi,Kamal TI - Intellectual Property Rights, Foreign Direct Investment, and Industrial Development JF - National Bureau of Economic Research Working Paper Series VL - No. 15393 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15393 L1 - http://www.nber.org/papers/w15393.pdf N1 - Author contact info: Lee G. Branstetter Heinz School of Policy and Management and Department of Social and Decision Sciences Carnegie Mellon University 2504B Hamburg Hall Pittsburgh, PA 15213 Tel: 412/268-4649 E-Mail: branstet@andrew.cmu.edu Kamal Saggi Southern Methodist University Department of Economics PO Box 750496 Dallas, TX 75275-0496 Tel: (214) 768 3274 Fax: (214) 768 1821 E-Mail: ksaggi@smu.edu M1 - published as AB - This paper develops a North-South product model in which Southern imitation and the North-South flow of foreign direct investment (FDI) are endogenously determined. In the model, a strengthening of IPR protection in the South reduces the rate of imitation, which, in turn, increases the flow of FDI. The increase in FDI more than offsets the decline in production undertaken by Southern imitators, so that the South’s share of goods produced by the global economy increases. Furthermore, real wages of Southern workers increase even though prices of goods produced by multinationals exceed those of Southern imitators. The preceding results hold when Northern innovation is endogenously determined; in addition, the rate of innovation increases with a strengthening of Southern IPR protection. ER - TY - JOUR AU - Heiss,Florian AU - McFadden,Daniel AU - Winter,Joachim TI - Regulation of private health insurance markets: Lessons from enrollment, plan type choice, and adverse selection in Medicare Part D JF - National Bureau of Economic Research Working Paper Series VL - No. 15392 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15392 L1 - http://www.nber.org/papers/w15392.pdf N1 - Author contact info: Florian Heiss Department of Economics University of Munich Ludwigstr. 28 (RG) D-80539 Munich Germany E-Mail: florian.heiss@lrz.uni-muenchen.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 University of Munich Ludwigstr. 28 (RG) D-80539 Munich Germany E-Mail: joachim.winter@lrz.uni-muenchen.de M1 - published as AB - We study the Medicare Part D prescription drug insurance program as a bellwether for designs of private, non-mandatory health insurance markets that control adverse selection and assure adequate access and coverage. We model Part D enrollment and plan choice assuming a discrete dynamic decision process that maximizes life-cycle expected utility, and perform counterfactual policy simulations of the effect of market design on participation and plan viability. Our model correctly predicts high Part D enrollment rates among the currently healthy, but also strong adverse selection in choice of level of coverage. We analyze alternative designs that preserve plan variety. ER - TY - JOUR AU - Almond,Douglas AU - Edlund,Lena AU - Milligan,Kevin TI - Son Preference and the Persistence of Culture: Evidence from Asian Immigrants to Canada JF - National Bureau of Economic Research Working Paper Series VL - No. 15391 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15391 L1 - http://www.nber.org/papers/w15391.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: 212/854-3680 Fax: 212/854-3239 E-Mail: da2152@columbia.edu Lena Edlund Department of Economics Columbia University 1002A IAB, MC 3308 420 West 118th Street New York, NY 10027 Tel: 212/854-4513 Fax: 212/854-8059 E-Mail: le93@columbia.edu Kevin S. Milligan Department of Economics University of British Columbia #997-1873 East Mall Vancouver, B.C. CANADA V6T1Z1 Tel: 604/822-6747 Fax: 604/822-5915 E-Mail: kevin.milligan@ubc.ca M1 - published as AB - Sex ratios at birth are above the biologically normal level in a number of Asian countries, notably India and China. Standard explanations include poverty and a cultural emphasis on male offspring. We study Asian immigrants to Canada using Census data, focussing on sex ratios across generations and religious groups. We find sex ratios to be normal at first parity, but rising with parity if there were no previous son. Since these immigrants are neither poor nor live in a society tolerant of sex discrimination/sex selection, our findings are more consistent with a preference for sons per se (and not for sons as a means to, e.g., old age support). Additionally, we uncover strong differences by religious affiliation that align with historical differences in doctrine concerning infanticide. Comparing across generations of Asian immigrants, we find fertility responds strongly to the sex composition of older children for first generation families. For the second generation, expression of son preference through the fertility channel is muted whereas sex selection seems to persist. ER - TY - JOUR AU - Shiller,Ben AU - Waldfogel,Joel TI - Music for a Song: An Empirical Look at Uniform Song Pricing and its Alternatives JF - National Bureau of Economic Research Working Paper Series VL - No. 15390 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15390 L1 - http://www.nber.org/papers/w15390.pdf N1 - Author contact info: Ben Shiller University of Pennsylvania E-Mail: bshiller@wharton.upenn.edu Joel Waldfogel Business and Public Policy University of Pennsylvania, Wharton School 1400 Steinberg Hall-Dietrich Hall Philadelphia, PA 19104-6372 Tel: 215/898-7148 Fax: 215/898-7635 E-Mail: waldfogj@wharton.upenn.edu M1 - published as AB - Economists have well-developed theories that challenge the wisdom of the common practice of uniform pricing. With digital music as its context, this paper explores the profit and welfare implications of various alternatives, including song-specific pricing, various forms of bundling, two-part tariffs, nonlinear pricing, and third-degree price discrimination. Using survey-based data on nearly 1000 students’ valuations of 100 popular songs in early 2008 and early 2009. We find that various alternatives – including simple schemes such as pure bundling and two-part tariffs – can raise both producer and consumer surplus. Revenue could be raised by between a sixth and a third relative to profit-maximizing uniform pricing. While person-specific uniform pricing can raise revenue by over 50 percent, none of the non-discriminatory schemes raise revenue’s share of surplus above 40 percent of total surplus. Even with sophisticated pricing, much of the area under the demand curve for this product cannot be appropriated as revenue. ER - TY - JOUR AU - Aizenman,Joshua AU - Sun,Yi TI - The financial crisis and sizable international reserves depletion: From 'fear of floating' to the 'fear of losing international reserves'? JF - National Bureau of Economic Research Working Paper Series VL - No. 15308 PY - 2009 Y2 - October 2009 UR - http://www.nber.org/papers/w15308 L1 - http://www.nber.org/papers/w15308.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 Yi Sun Economics E2 UCSC Santa Cruz, CA, 95064 E-Mail: ysun@ucsc.edu M1 - published as AB - This paper studies the degree to which Emerging Markets (EMs) adjusted to the global liquidity crisis by drawing down their international reserves (IR). Overall, we find a mixed and complex picture. Intriguingly, only about half of the EMs relied on depleting their international reserves as part of the adjustment mechanism. To gain further insight, we compare the pre-crisis demand for IR/GDP of countries that experienced sizable depletion of their IR, to that of courtiers that didn’t, and find different patterns between the two groups. Trade related factors (trade openness, primary goods export ratio, especially large oil export) seem to be much more significant in accounting for the pre-crisis IR/GDP level of countries that experienced a sizable depletion of their IR in the first phase of the crisis. These findings suggest that countries that internalized their large exposure to trade shocks before the crisis, used their IR as a buffer stock in the first phase of the crisis. Their reserves loses followed an inverted logistical curve – after a rapid initial depletion of reverses, they reached within 7 months a markedly declining rate of IR depletion, losing not more than one-third of their pre crisis IR. In contrast, for countries that refrained from a sizable depletion of their IR during the first crisis phase, financial factors account more than trade factors in explaining their initial level of IR/GDP. Our results indicate that the adjustment of Emerging Markets was constrained more by their fear of losing international reserves than by their fear of floating. ER - TY - JOUR AU - Bordo,Michael D. AU - Haubrich,Joseph G. TI - Credit Crises, Money and Contractions: an historical view JF - National Bureau of Economic Research Working Paper Series VL - No. 15389 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15389 L1 - http://www.nber.org/papers/w15389.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 Joseph G. Haubrich Federal Reserve Bank ofCleveland 1455 East 6th Street Cleveland, Ohio 44114 Tel: 216/579-2000 E-Mail: jhaubrich@clev.frb.org M1 - published as AB - The relatively infrequent nature of major credit distress events makes an historical approach particularly useful. Using a combination of historical narrative and econometric techniques, we identify major periods of credit distress from 1875 to 2007, examine the extent to which credit distress arises as part of the transmission of monetary policy, and document the subsequent effect on output. Using turning points defined by the Harding-Pagan algorithm, we identify and compare the timing, duration, amplitude and co-movement of cycles in money, credit and output. Regressions show that financial distress events exacerbate business cycle downturns both in the nineteenth and twentieth centuries and that a confluence of such events makes recessions even worse. ER - TY - JOUR AU - Blanchflower,David G. AU - MacCoille,Conall TI - The formation of inflation expectations: an empirical analysis for the UK JF - National Bureau of Economic Research Working Paper Series VL - No. 15388 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15388 L1 - http://www.nber.org/papers/w15388.pdf N1 - Author contact info: D Blanchflower Department of Economics Dartmouth College Hanover NH 03755 Tel: 6036431821 E-Mail: david.blanchflower@bankofengland.co.uk Conall MacCoille Bank of England E-Mail: conall.maccoille@bankofengland.co.uk M1 - published as AB - This paper uses micro-data from three surveys for the UK to consider how individuals form inflation expectations. Generally, we find significant non-response bias in all surveys, with non-respondents especially likely to be young, female, less educated and with lower incomes. A number of demographic generalizations can be made based on the surveys. Inflation expectations rise with age, but the more highly educated and home owners tend to have lower inflation expectations. These groups are also more likely to be accurate in their estimates of official inflation twelve months ahead, and have less backward-looking expectations. ER - TY - JOUR AU - Deming,David AU - Dynarski,Susan TI - Into College, Out of Poverty? Policies to Increase the Postsecondary Attainment of the Poor JF - National Bureau of Economic Research Working Paper Series VL - No. 15387 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15387 L1 - http://www.nber.org/papers/w15387.pdf N1 - Author contact info: David Deming Harvard University Kennedy School of Government 79 JFK Street Cambridge, MA 02138 Tel: 617-777-0717 E-Mail: demingd@nber.org 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 M1 - published as M3 - presented at "Targeting Investments in Children", September 26, 2008 AB - We review the experimental and quasi-experimental research evidence on the causal relationship between college costs and educational attainment, with a particular focus on low-income populations. The weight of the evidence indicates that reducing college costs can increase college entry and persistence. Simple and transparent programs appear to be most effective. Programs that link money to incentives and/or the takeup of academic support services appear to be particularly effective. ER - TY - JOUR AU - Ayres,Ian AU - Raseman,Sophie AU - Shih,Alice TI - Evidence from Two Large Field Experiments that Peer Comparison Feedback Can Reduce Residential Energy Usage JF - National Bureau of Economic Research Working Paper Series VL - No. 15386 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15386 L1 - http://www.nber.org/papers/w15386.pdf N1 - Author contact info: Ian Ayres Yale Law School P.O. Box 208415 New Haven, CT 06520-8415 Tel: 203/432-7101 Fax: 203/432-8095 E-Mail: ian.ayres@yale.edu Sophie Raseman Yale Law School 127 Wall Street New Haven, CT 06511 E-Mail: sophie.raseman@yale.edu Alice Shih Yale Law School 127 Wall Street New Haven, CT 06511 E-Mail: alice.shih@yale.edu M1 - published as AB - By providing feedback to customers on home electricity and natural gas usage with a focus on peer comparisons, utilities can reduce energy consumption at a low cost. We analyze data from two large-scale, random-assignment field experiments conducted by utility companies providing electricity (the Sacramento Municipal Utility District (SMUD)) and electricity and natural gas (Puget Sound Energy (PSE)), in partnership with a private company, Positive Energy/oPower, which provides monthly or quarterly mailed peer feedback reports to customers. We find reductions in energy consumption of 1.2% (PSE) to 2.1% percent (SMUD), with the decrease sustained over time (seven months (PSE) and twelve months (SMUD)). ER - TY - JOUR AU - Svensson,Lars E.O. TI - Evaluating Monetary Policy JF - National Bureau of Economic Research Working Paper Series VL - No. 15385 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15385 L1 - http://www.nber.org/papers/w15385.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 M1 - published as AB - Evaluating inflation-targeting monetary policy is more complicated than checking whether inflation has been on target, because inflation control is imperfect and flexible inflation targeting means that deviations from target may be deliberate in order to stabilize the real economy. A modified Taylor curve, the forecast Taylor curve, showing the tradeoff between the variability of the inflation-gap and output-gap forecasts can be used to evaluate policy ex ante, that is, taking into account the information available at the time of the policy decisions, and even evaluate policy in real time. In particular, by plotting mean squared gaps of inflation and output-gap forecasts for alternative policy-rate paths, it may be examined whether policy has achieved an efficient stabilization of both inflation and the real economy and what relative weight on the stability of inflation and the real economy has effectively been applied. Ex ante evaluation may be more relevant than evaluation ex post, after the fact. Publication of the interest-rate path also allows the evaluation of its credibility and the effectiveness of the implementation of monetary policy. ER - TY - JOUR AU - Stulz,René M. TI - Credit Default Swaps and the Credit Crisis JF - National Bureau of Economic Research Working Paper Series VL - No. 15384 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15384 L1 - http://www.nber.org/papers/w15384.pdf N1 - Author contact info: Rene M. Stulz The Ohio State University Fisher College of Business 806A Fisher Hall 2100 Neil Avenue Columbus, OH 43210-1144 Tel: 614/292-1970 Fax: 614/292-2359 E-Mail: stulz_1@cob.osu.edu M1 - published as AB - Many observers have argued that credit default swaps contributed significantly to the credit crisis. Of particular concern to these observers are that credit default swaps trade in the largely unregulated over-the-counter market as bilateral contracts involving counterparty risk and that they facilitate speculation involving negative views of a firm’s financial strength. Some observers have suggested that credit default swaps would not have made the crisis worse had they been traded on exchanges. I conclude that credit default swaps did not cause the dramatic events of the credit crisis, that the over-the-counter credit default swaps market worked well during much of the first year of the credit crisis, and that exchange trading has both advantages and costs compared to over-the-counter trading. Though I argue that eliminating over-the-counter trading of credit default swaps could reduce social welfare, I also recognize that much research is needed to understand better and quantify the social gains and costs of derivatives in general and credit default swaps in particular. ER - TY - JOUR AU - Lakdawalla,Darius N. AU - Seabury,Seth A. TI - The Welfare Effects of Medical Malpractice Liability JF - National Bureau of Economic Research Working Paper Series VL - No. 15383 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15383 L1 - http://www.nber.org/papers/w15383.pdf N1 - Author contact info: Darius N. Lakdawalla Schaeffer Center for Health Policy and Economics University of Southern California Los Angeles, CA 90089-0626 Tel: 213/740-6012 E-Mail: Darius.Lakdawalla@usc.edu Seth Seabury RAND 1776 Main Street Santa Monica, CA 90407 Tel: 310-393-0411 x6261 Fax: 310-393-4818 E-Mail: Seth_Seabury@rand.org M1 - published as AB - Policymakers and the public are concerned about the role of medical malpractice liability in the rising cost of medical care. We use variation in the generosity of local juries to identify the causal impact of malpractice liability on medical costs, mortality, and social welfare. The effect of malpractice on medical costs is large relative to its share of medical expenditures, but relatively modest in absolute terms—growth in malpractice payments over the last decade and a half contributed at most 5.0% to the total real growth in medical expenditures, which topped 33% over this period. On the other side of the ledger, malpractice liability leads to modest reductions in patient mortality; the value of these more than likely exceeds the cost impacts of malpractice liability. Therefore, policies that reduce expected malpractice costs are unlikely to have a major impact on health care spending for the average patient, and are also unlikely to be cost-effective over conventionally accepted ranges for the value of a statistical life. ER - TY - JOUR AU - Chien,Yi-Li AU - Cole,Harold L. AU - Lustig,Hanno TI - Is the Volatility of the Market Price of Risk due to Intermittent Portfolio Re-balancing? JF - National Bureau of Economic Research Working Paper Series VL - No. 15382 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15382 L1 - http://www.nber.org/papers/w15382.pdf N1 - Author contact info: Yi-Li Chien 403 West State Street Krannert School of Management Purdue University West Lafayette IN 47907 Tel: 765-494-4438 E-Mail: yilichien@gmail.com 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 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 M1 - published as AB - Our paper examines whether intermittent portfolio re-balancing on the part of some stock market investors can help to explain the counter-cyclical volatility of aggregate risk compensation in financial markets. To answer this question, we set up an incomplete markets model in which CRRA-utility investors are subject to aggregate and idiosyncratic shocks and have heterogeneous trading technologies. In our model, a large mass of passive investors do not re-balance their portfolio shares in response to aggregate shocks, while a smaller mass of active investors adjust their portfolio each period to respond to changes in the investment opportunity set. We find that intermittent re-balancers amplify the effect of aggregate shocks on the time variation in risk premia by a factor of three in a calibrated version of our model. ER - TY - JOUR AU - Brown,David B. AU - Carlin,Bruce Ian AU - Lobo,Miguel Sousa TI - On the Scholes Liquidation Problem JF - National Bureau of Economic Research Working Paper Series VL - No. 15381 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15381 L1 - http://www.nber.org/papers/w15381.pdf N1 - Author contact info: David B. Brown Duke University One Towerview Drive Durham, NC 27708 E-Mail: dbbrown@duke.edu Bruce I. Carlin Anderson Graduate School of Management UCLA 110 Westwood Plaza, Suite C519 Los Angeles, CA 90095-1481 Tel: 310/825-7246 E-Mail: bruce.carlin@anderson.ucla.edu Miguel S. Lobo INSEAD Centre for Executive Education and Research Box 48049 Abu Dhabi, UAE E-Mail: miguel.lobo@insead.edu M1 - published as AB - How should an investor unwind a portfolio in the face of recurring and uncertain liquidity needs? We propose a model of portfolio liquidation in two periods to investigate this question, initially posed by Myron Scholes following the fall of Long Term Capital Management. We show that when the expectation of future liquidity needs is low, the optimal solution involves selling assets that have low permanent and temporary price impacts of trading. However, when there is a high probability of a large future liquidity need, the optimal solution involves retaining assets that have a small temporary impact of trading. In the face of potential future adversity, there is a high option-value to the temporary component of liquidity. The permanent component of liquidity does not share this feature, so that investors will prefer to sell assets with a low ratio of permanent to temporary price impact in the early stages of a crisis, and to hold on to assets with a high ratio of permanent to temporary price impact to protect themselves against an aggravation of the crisis. ER - TY - JOUR AU - Weiner,David A. AU - Lutz,Byron F. AU - Ludwig,Jens TI - The Effects of School Desegregation on Crime JF - National Bureau of Economic Research Working Paper Series VL - No. 15380 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15380 L1 - http://www.nber.org/papers/w15380.pdf N1 - Author contact info: David A. Weiner University of Pennsylvania 3718 Locust Walk McNeil Building Philadelphia, PA 19140 E-Mail: wdavid@sas.upenn.edu Byron Lutz Federal Reserve Board of Governors Research Division 20th and C Streets, NW Washington, DC 20551-0001 http://byron.marginalq.com/ E-Mail: Byron.F.Lutz@frb.gov 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 M1 - published as AB - One of the most striking features of crime in America is its disproportionate concentration in disadvantaged, racially segregated communities. In this paper we estimate the effects of court-ordered school desegregation on crime by exploiting plausibly random variation in the timing of when these orders go into effect across the set of large urban school districts ever subject to such orders. For black youth, we find that homicide victimization declines by around 25 percent when court orders are implemented and homicide arrests also decline significantly, which seem to be due at least in part to increased schooling attainment. We also find positive spillover effects to other groups, with beneficial changes in homicide involvement for black adults and perhaps whites as well. Our estimates imply that imposition of these court orders in the nation’s largest school districts lowered the homicide rate to black teens and young adults nationwide by around 13 percent, and might account for around one-quarter of the convergence in black-white homicide rates over the period from 1970 to 1980. ER - TY - JOUR AU - Cecchetti,Stephen G. AU - Kohler,Marion AU - Upper,Christian TI - Financial Crises and Economic Activity JF - National Bureau of Economic Research Working Paper Series VL - No. 15379 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15379 L1 - http://www.nber.org/papers/w15379.pdf N1 - Author contact info: Stephen G. Cecchetti Monetary and Economic Department Bank for International Settlements Centralbahnplatz 2 4002 Basel Switzerland Tel: +41 61 280 8350 Fax: +41 61 280 9113 E-Mail: stephen.cecchetti@bis.org Marion Kohler Bank for International Settlements Centralbahnplatz 2 4002 Basel Switzerland E-Mail: marion.kohler@bis.org Christian Upper Bank for International Settlements Centralbahnplatz 2 4002 Basel Switzerland E-Mail: christian.upper@bis.org M1 - published as AB - We study the output costs of 40 systemic banking crises since 1980. Most, but not all, crises in our sample coincide with a sharp contraction in output from which it took several years to recover. Our main findings are as follows. First, the current financial crisis is unlike any others in terms of a wide range of economic factors. Second, the output losses of past banking crises were higher when they were accompanied by a currency crisis or when growth was low at the onset of the crisis. When accompanied by a sovereign debt default, a systemic banking crisis was less costly. And, third, there is a tendency for systemic banking crises to have lasting negative output effects. ER - TY - JOUR AU - Acemoglu,Daron AU - Ticchi,Davide AU - Vindigni,Andrea TI - Persistence of Civil Wars JF - National Bureau of Economic Research Working Paper Series VL - No. 15378 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15378 L1 - http://www.nber.org/papers/w15378.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 Davide Ticchi Department of Economics University of Urbino via Saffi, 42 61029 Urbino ITALY E-Mail: davide.ticchi@uniurb.it Andrea Vindigni Princeton University Department of Politics 037 Corwin Hall Princeton, NJ 08544 Tel: 0039 011 8995890 Fax: 0039 011 3130 424 E-Mail: vindigni@Princeton.EDU M1 - published as AB - A notable feature of post-World War II civil wars is their very long average duration. We provide a theory of the persistence of civil wars. The civilian government can successfully defeat rebellious factions only by creating a relatively strong army. In weakly-institutionalized polities this opens the way for excessive influence or coups by the military. Civilian governments whose rents are largely unaffected by civil wars then choose small and weak armies that are incapable of ending insurrections. Our framework also shows that when civilian governments need to take more decisive action against rebels, they may be forced to build over-sized armies, beyond the size necessary for fighting the insurrection, as a commitment to not reforming the military in the future. ER - TY - JOUR AU - Glaeser,Edward L. AU - Kerr,William R. AU - Ponzetto,Giacomo A.M. TI - Clusters of Entrepreneurship JF - National Bureau of Economic Research Working Paper Series VL - No. 15377 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15377 L1 - http://www.nber.org/papers/w15377.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 William Kerr Harvard Business School Rock Center 212 Soldiers Field Boston, MA 02163 Tel: 617/496-7021 E-Mail: wkerr@hbs.edu Giacomo Ponzetto CREI - 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 M1 - published as AB - Employment growth is strongly predicted by smaller average establishment size, both across cities and across industries within cities, but there is little consensus on why this relationship exists. Traditional economic explanations emphasize factors that reduce entry costs or raise entrepreneurial returns, thereby increasing net returns and attracting entrepreneurs. A second class of theories hypothesizes that some places are endowed with a greater supply of entrepreneurship. Evidence on sales per worker does not support the higher returns for entrepreneurship rationale. Our evidence suggests that entrepreneurship is higher when fixed costs are lower and when there are more entrepreneurial people. ER - TY - JOUR AU - Duranton,Gilles AU - Turner,Matthew A. TI - The Fundamental Law of Road Congestion: Evidence from US cities JF - National Bureau of Economic Research Working Paper Series VL - No. 15376 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15376 L1 - http://www.nber.org/papers/w15376.pdf N1 - Author contact info: Gilles Duranton Department of Economics University of Toronto 150 St. George Street Toronto, ON M5S 3G7 CANADA E-Mail: gilles.duranton@utoronto.ca Matthew Turner Department of Economics University of Toronto 150 St. George Street Toronto, ON M5S 3G7 CANADA Tel: 416/978-5110 E-Mail: mturner@chass.utoronto.ca M1 - published as M3 - presented at "SI 2009 Environmental and Energy Economics", July 20-21, 2009 AB - We investigate the relationship between interstate highways and highway vehicle kilometers traveled (VKT) in US cities. We find that VKT increases proportionately to highways and identify three important sources for this extra VKT: an increase in driving by current residents; an increase in transportation intensive production activity; and an inflow of new residents. The provision of public transportation has no impact on VKT. We also estimate the aggregate city level demand for VKT and find it to be very elastic. We conclude that an increased provision of roads or public transit is unlikely to relieve congestion. ER - TY - JOUR AU - Ríos-Rull,José-Víctor AU - Schorfheide,Frank AU - Fuentes-Albero,Cristina AU - Kryshko,Maxym AU - Santaeulàlia-Llopis,Raül TI - Methods versus Substance: Measuring the Effects of Technology Shocks on Hours JF - National Bureau of Economic Research Working Paper Series VL - No. 15375 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15375 L1 - http://www.nber.org/papers/w15375.pdf N1 - Author contact info: Jose-Victor Rios-Rull University of Minnesota 1035 Heller Hall 271 19th Avenue South Minneapolis, MN 55455 E-Mail: vr0j@umn.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 Cristina Fuentes-Albero University of Pennsylvania Department of Economics 3718 Locust Walk Philadelphia, PA 19104-6297 E-Mail: fuentesa@econ.upenn.edu Maxym Kryshko University of Pennsylvania Department of Economics 3718 Locust Walk Philadelphia, PA 19104-6297 E-Mail: mkryshko@sas.upenn.edu Raul Santaeulalia-Llopis Department of Economics Washington University in St. Louis Campus Box 1208; St. Louis MO 63130-4899 E-Mail: rauls@wustl.edu M1 - published as AB - In this paper, we employ both calibration and modern (Bayesian) estimation methods to assess the role of neutral and investment-specific technology shocks in generating fluctuations in hours. Using a neoclassical stochastic growth model, we show how answers are shaped by the identification strategies and not by the statistical approaches. The crucial parameter is the labor supply elasticity. Both a calibration procedure that uses modern assessments of the Frisch elasticity and the estimation procedures result in technology shocks accounting for 2% to 9% of the variation in hours worked in the data. We infer that we should be talking more about identification and less about the choice of particular quantitative approaches. ER - TY - JOUR AU - Huberman,Michael AU - Meissner,Christopher M. TI - Riding the Wave of Trade: Explaining the Rise of Labor Regulation in the Golden Age of Globalization JF - National Bureau of Economic Research Working Paper Series VL - No. 15374 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15374 L1 - http://www.nber.org/papers/w15374.pdf N1 - Author contact info: Michael Huberman Département d'Histoire Université de Montréal Pavillon Lionel-Groulx, local C-6105 C.P. 6128, succursale Centre-ville Montréal, Québec H3C 3J7 E-Mail: Michael.Huberman@umontreal.ca 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 M1 - published as AB - This paper challenges the received view that pins the adoption of labor regulation before 1914 on domestic forces, particularly the rises in income and voter turnout. Building on standard state-year event history analysis, we find that trade was also a main pathway of diffusion. Countries that traded with each other were more likely to establish a level playing field. The transmission mechanism was strongest in north-west Europe because intra-industry trade was significant in the region. When states failed to emulate the superior labor regulations of their most important trading partners, they left themselves vulnerable to embargos and sanctions on their exports. Threats of market loss were not credible in the New World because it exported mainly primary products and prices were fixed by world demand and supply. Domestic forces trumped international pressures to converge, with the result that labor regulation developed more slowly in regions of new settlement than in the European core. ER - TY - JOUR AU - Pindyck,Robert S. AU - Wang,Neng TI - The Economic and Policy Consequences of Catastrophes JF - National Bureau of Economic Research Working Paper Series VL - No. 15373 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15373 L1 - http://www.nber.org/papers/w15373.pdf N1 - Author contact info: Robert S. Pindyck Sloan School of Management MIT, Room E52-453 50 Memorial Drive Cambridge, MA 02139 Tel: 617/253-6641 Fax: 617/258-6855 E-Mail: RPINDYCK@MIT.EDU Neng Wang Columbia Business School 3022 Broadway, Uris Hall 812 New York, NY 10027 Tel: 212/854-3869 Fax: 212/662-8474 E-Mail: nw2128@columbia.edu M1 - published as AB - What is the likelihood that the U.S. will experience a devastating catastrophic event over the next few decades -- something that would substantially reduce the capital stock, GDP and wealth? What does the possibility of such an event imply for the behavior of economic variables such as investment, interest rates, and equity prices? And how much should society be willing to pay to reduce the probability or likely impact of such an event? We address these questions using a general equilibrium model that describes production, capital accumulation, and household preferences, and includes as an integral part the possible arrival of catastrophic shocks. Calibrating the model to average values of economic and financial variables yields estimates of the implied expected mean arrival rate and impact distribution of catastrophic shocks. We also use the model to calculate the tax on consumption society would accept to reduce the probability or impact of a shock. ER - TY - JOUR AU - Evans,Mary F. AU - Smith,V. Kerry TI - Measuring How Risk Tradeoffs Adjust With Income JF - National Bureau of Economic Research Working Paper Series VL - No. 15372 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15372 L1 - http://www.nber.org/papers/w15372.pdf N1 - Author contact info: Mary F. Evans The Robert Day School of Economics and Finance Claremont McKenna College 500 E. Ninth Street Claremont, CA 91711 E-Mail: Mary.Evans@ClaremontMcKenna.edu V. Kerry Smith Department of Economics W.P. Carey School of Business P.O. Box 873806 Arizona State University Tempe, AZ 85287-3806 Tel: 480/727-9812 Fax: 480/965-0748 E-Mail: kerry.smith@asu.edu M1 - published as AB - Efforts to reconcile inconsistencies between theory and estimates of the income elasticity of the value of a statistical life (IEVSL) overlook important restrictions implied by a more complete description of the individual choice problem. We develop a more general model of the IEVSL that reconciles some of the observed discrepancies. Our framework describes how exogenous income shocks, such as unexpected medical expenditures, may affect labor supply decisions which in turn influence both the coefficient of relative risk aversion and the IEVSL. The presence of a consumption commitment, such as a home mortgage, also alters this labor supply adjustment. We use data from the Health and Retirement Study to explore the responsiveness of labor force exit decisions to spousal health shocks and the role of a home mortgage as a constraint on this response. ER - TY - JOUR AU - Avraham,Ronen AU - Dafny,Leemore S. AU - Schanzenbach,Max M. TI - The Impact of Tort Reform on Employer-Sponsored Health Insurance Premiums JF - National Bureau of Economic Research Working Paper Series VL - No. 15371 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15371 L1 - http://www.nber.org/papers/w15371.pdf N1 - Author contact info: Ronen Avraham The University of Texas School of Law 727 E. Dean Keeton Street Austin, TX 78705 E-Mail: ravraham@law.utexas.edu Leemore Dafny Department of Management and Strategy Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, IL 60208-2001 Tel: 847/467-7511 Fax: 847/467-1777 E-Mail: l-dafny@kellogg.northwestern.edu Max Schanzenbach Northwestern University School of Law 357 East Chicago Ave Chicago, IL 60611 Tel: 3125034425 E-Mail: m-schanzenbach@law.northwestern.edu M1 - published as AB - We evaluate the effect of tort reform on employer-sponsored health insurance premiums by exploiting state-level variation in the timing of reforms. Using a dataset of healthplans representing over 10 million Americans annually between 1998 and 2006, we find that caps on non-economic damages, collateral source reform, and joint and several liability reform reduce premiums by 1 to 2 percent each. These reductions are concentrated in PPOs rather than HMOs, suggesting that can HMOs can reduce “defensive” healthcare costs even absent tort reform. The results are the first direct evidence that tort reform reduces healthcare costs in aggregate; prior research has focused on particular medical conditions. ER - TY - JOUR AU - Tian,Huifang AU - Whalley,John TI - Level versus Equivalent Intensity Carbon Mitigation Commitments JF - National Bureau of Economic Research Working Paper Series VL - No. 15370 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15370 L1 - http://www.nber.org/papers/w15370.pdf N1 - Author contact info: Huifang Tian Institute of World Economics and Politics, Chinese Centre for International Governance Innovation (CI University of Western Ontario E-Mail: tianhf@cass.org.cn John Whalley Department of Economics Social Science Centre University of Western Ontario London, Ontario N6A 5C2 CANADA Tel: 519/661-3509 Fax: 519/661-3666 E-Mail: jwhalley@uwo.ca M1 - published as AB - Large population / rapidly growing economies such as China and India have argued that in the upcoming UNFCCC negotiations in Copenhagen, any emission reduction targets they take on should be based on their intensity of emissions (emissions/$GDP) on a target date not the level of emissions. They argue that this will allow room for their continued high growth, and level commitments in the presence of sharply differential growth between OECD and non-OECD economies represent asymmetric and unacceptable arrangements. Much of the policy literature agrees with this position, also arguing that while there is equivalence between commitments if growth rates are certain, where growth rates are uncertain equivalence breaks down. However, no explicit models or experimental design are used to support this claim. Here we use a modeling framework in which countries face a business as usual (BAU) growth profile under no mitigation, and can mitigate (reduce consumption) and lower temperature change but with a utility loss. International trade enters through trade in country differentiated goods, and the impact of mitigation on country welfare depends critically on the assumed severity of climate related damage. We then consider cases where country growth rates are uncertain, and compare the impacts of levels versus intensity commitments, with the latter made equivalent in the sense that expected emissions are the same. There are different senses of this equivalence; global equivalence with differing country impacts, or strict country by country equivalence. Under intensity commitments there is more variation in both consumption and emissions than is the case with level commitments, and we show cases where level commitments are preferred to intensity commitments by all countries. Whether this is the case also depends upon how growth rate uncertainty is specified. We are also able to consider packages of mixed level and intensity commitments by country which might be the outcome of UNFCCC negotiations. Outcomes can thus be opposite to prevailing opinion, but it depends on how the equivalent targets are specified. ER - TY - JOUR AU - Barro,Robert J. AU - Redlick,Charles J. TI - Macroeconomic Effects from Government Purchases and Taxes JF - National Bureau of Economic Research Working Paper Series VL - No. 15369 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15369 L1 - http://www.nber.org/papers/w15369.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 Charles Redlick Bain Capital, LLC 111 Huntington Avenue Boston MA 02199 E-Mail: charles.redlick@post.harvard.edu M1 - published as AB - For U.S. annual data that include WWII, the estimated multiplier for defense spending is 0.6-0.7 at the median unemployment rate. There is some evidence that this multiplier rises with the extent of economic slack and reaches 1.0 when the unemployment rate is around 12%. Multipliers for non-defense purchases cannot be reliably estimated because of the lack of good instruments. For samples that begin in 1950, increases in average marginal income-tax rates (measured by a newly constructed time series) have a significantly negative effect on real GDP. Increases in taxes seem to reduce real GDP with mainly a one-year lag due to income effects and mostly a two-year lag due to substitution (tax-rate) effects. Since the defense-spending multiplier is typically less than one, greater spending tends to crowd out other components of GDP. The largest effects are on private investment, but non-defense purchases and net exports tend also to fall. The response of private consumer expenditure differs insignificantly from zero. ER - TY - JOUR AU - Brender,Adi AU - Drazen,Allan TI - Do Leaders Affect Government Spending Priorities? JF - National Bureau of Economic Research Working Paper Series VL - No. 15368 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15368 L1 - http://www.nber.org/papers/w15368.pdf N1 - Author contact info: Adi Brender Research Department Bank of Israel Jerusalem 91007 ISRAEL E-Mail: adib@bankisrael.gov.il Allan Drazen Department of Economics University of Maryland College Park, MD 20742 Tel: 301/405-3477 Fax: 301/405-7835 E-Mail: drazen@econ.umd.edu M1 - published as AB - Since a key function of competitive elections is to allow voters to express their policy preferences, one might take it for granted that when leadership changes, policy change follows. Using a dataset we created on the composition of central government expenditures in a panel of 71 democracies over 1972-2003, we test whether changes in leadership induce significant changes in spending composition, as well as looking at the effect of other political and economic variables. We find that the replacement of a leader tends to have no significant effect on expenditure composition in the short-run. This remains true after controlling for a host of political and economic variables. However, over the medium-term leadership changes are associated with larger changes in expenditure composition, mostly in developed countries. We also find that in established democracies, election years are associated with larger changes in expenditure composition while new democracies, which were found by Brender and Drazen (2005) to raise their overall level of expenditures in election years, tend not to have such changes. ER - TY - JOUR AU - Lucca,David O. AU - Trebbi,Francesco TI - Measuring Central Bank Communication: An Automated Approach with Application to FOMC Statements JF - National Bureau of Economic Research Working Paper Series VL - No. 15367 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15367 L1 - http://www.nber.org/papers/w15367.pdf N1 - Author contact info: David Lucca Mailstop 84 Board of Governors of the Federal Reserve System Washington, D.C. 20551 Tel: 202-452-3363 E-Mail: david.o.lucca@frb.gov Francesco Trebbi Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-1868 Fax: 773/702-0458 E-Mail: ftrebbi@chicagobooth.edu M1 - published as AB - We present a new automated, objective and intuitive scoring technique to measure the content of central bank communication about future interest rate decisions based on information from the Internet and news sources. We apply the methodology to statements released by the Federal Open Market Committee (FOMC) after its policy meetings starting in 1999. Using intra-day financial quotes, we find that short-term nominal Treasury yields respond to changes in policy rates around policy announcements, whereas longer-dated Treasuries mainly react to changes in policy communication. Using lower frequency data, we find that changes in the content of the statements lead policy rate decisions by more than a year in univariate interest rate forecasting and vector autoregression (VAR) models. When we estimate Treasury yield responses to the shocks identified in the VAR, we find communication to be a more important determinant of Treasury rates than contemporaneous policy rate decisions. These results are consistent with the view that the FOMC releases information about future policy rate actions in its statements and that market participants incorporate this information when pricing longer-dated Treasuries. Finally, we decompose realized policy rate decisions using a forward-looking Taylor rule model. Based on this decomposition, we find that FOMC statements contain significant information regarding both the predicted rule-based interest rate and the Taylor-rule residual component, and that content of the statements leads the residual by a few quarters. ER - TY - JOUR AU - Evans,Mary F. AU - Poulos,Christine AU - Smith,V. Kerry TI - Who Counts in Evaluating the Effects of Air Pollution Policies on Households? Non-Market Valuation in the Presence of Dependencies JF - National Bureau of Economic Research Working Paper Series VL - No. 15366 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15366 L1 - http://www.nber.org/papers/w15366.pdf N1 - Author contact info: Mary F. Evans The Robert Day School of Economics and Finance Claremont McKenna College 500 E. Ninth Street Claremont, CA 91711 E-Mail: Mary.Evans@ClaremontMcKenna.edu Christine Poulos RTI International Public Health and Environment Division Research Triangle Park, N.C. E-Mail: cpoulos@rti.org V. Kerry Smith Department of Economics W.P. Carey School of Business P.O. Box 873806 Arizona State University Tempe, AZ 85287-3806 Tel: 480/727-9812 Fax: 480/965-0748 E-Mail: kerry.smith@asu.edu M1 - published as AB - Individuals who are likely to realize the largest benefits from improvements in air quality often depend on other members of their households to make time or monetary contributions to their care. The presence of these dependency relationships among household members poses challenges for benefit estimation since it is unlikely that the conditions necessary for recovering the underlying individual preferences from household choices are satisfied in this setting. We propose a conceptual framework that highlights the role of these dependencies in the choice models used to estimate the willingness to pay for environmental quality improvements. We design a complementary stated preference survey that describes hypothetical dependency relationships for household members of different ages to test the implications of our conceptual model. Respondents’ choices take into account the care-giving responsibilities for young children and teenagers but not for older adults. ER - TY - JOUR AU - Gerber,Alan S. AU - Huber,Gregory A. AU - Washington,Ebonya TI - Party Affiliation, Partisanship, and Political Beliefs: A Field Experiment JF - National Bureau of Economic Research Working Paper Series VL - No. 15365 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15365 L1 - http://www.nber.org/papers/w15365.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 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 M1 - published as AB - Political partisanship is strongly correlated with attitudes and behavior, but it is unclear from this pattern whether partisan identity has a causal effect on political behavior and attitudes. We report the results of a field experiment designed to investigate the causal effect of party identification. Prior to the February 2008 Connecticut presidential primary, researchers sent a mailing to a random sample of unaffiliated registered voters informing them of the need to register in order to participate in the upcoming primary. Comparing post-treatment survey responses to subjects’ baseline survey responses, we find that those informed of the need to register with a party were more likely to affiliate with a party and subsequently showed stronger partisanship. Further, we find that the treatment group also demonstrated greater concordance than the control group between their pre-treatment latent partisanship and their post-treatment reported voting behavior and intentions and evaluations of partisan figures. Thus our treatment, which caused a strengthening of partisan identity, also caused a shift in subjects’ candidate preferences and evaluations of salient political figures. This finding is consistent with the claim that partisanship is an active force changing how citizens behave in and perceive the political world. ER - TY - JOUR AU - Kim,Beomsoo AU - Ruhm,Christopher J. TI - Inheritances, Health and Death JF - National Bureau of Economic Research Working Paper Series VL - No. 15364 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15364 L1 - http://www.nber.org/papers/w15364.pdf N1 - Author contact info: Beomsoo Kim Department of Economics Korea University Anam-dong, Seongbuk-Gu Seoul, 136-701 Korea Tel: 301/405-3520 E-Mail: kimecon@korea.ac.kr Christopher Ruhm Department of Economics Bryan School, UNCG P.O. Box 26165 Greensboro, NC 27402-6165 Tel: 336/334-5148 Fax: 336/334-4089 E-Mail: chrisruhm@uncg.edu M1 - published as AB - We examine how wealth shocks, in the form of inheritances, affect the mortality rates, health status and health behaviors of older adults, using data from eight waves of the Health and Retirement Survey (HRS). Our main finding is that bequests do not have substantial effects on health, although some improvements in quality-of-life are possible. This absence occurs despite increases in out-of-pocket (OOP) spending on health care and in the utilization of medical services, especially discretionary and non-lifesaving types such as dental care. Nor can we find a convincing indication of changes in lifestyles that offset the benefits of increased medical care. Inheritances are associated with higher alcohol consumption, but with no change in smoking or exercise and a possible decrease in obesity. ER - TY - JOUR AU - Dong,Yan AU - Whalley,John TI - Model Structure and the Combined Welfare and Trade Effects of China's Trade Related Policies JF - National Bureau of Economic Research Working Paper Series VL - No. 15363 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15363 L1 - http://www.nber.org/papers/w15363.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, Ontario N6A 5C2 CANADA Tel: 519/661-3509 Fax: 519/661-3666 E-Mail: jwhalley@uwo.ca M1 - published as AB - Because China's economic structure is different from that in OECD countries, using conventional neo-classical competitive trade models to analyze the welfare and trade impacts of trade related policy change can be misleading. In particular, both the exchange rate regime and output and pricing policies of state owned enterprises (SOE's) will have effects on trade and welfare which differ from a classical competitive model. This paper present a numerical model that captures the combined and interactive effects of three policy elements in prototype form of tariffs, policy towards SOEs in the industrial sector, and an exchange rate regime supporting large trade surpluses and additions to foreign reserves. The model has non neutral monetary features, endogenous trade imbalances and average product pricing of labor in goods. We do not claim it to be fully representative of modern China, but it does go some way beyond simple competitive models used elsewhere and points to different conclusions of policy impact. We calibrate our model to 2006 data, and then evaluate the impacts both singly and in combination of: tariff liberalization, a move to more freely floating exchange rates, and SOE enterprise reform. Results show that large differences in policy impacts relative to a classical competitive model. SOE reform and a freely floating Chinese exchange rate have more impact on China's welfare than tariff liberalization. Policies of RMB appreciation and increasing China's money stock reduce China's trade surplus. In the traditional competitive model, trade liberalization impacts both imports and exports, while in our central case model, with endogenously determined trade surplus, trade liberalization has little effect on exports. Most of the policy impact is on imports and the trade surplus. SOE reform of China's manufacturing sector significantly decreases production of China's manufacturing sector and increases production in China's other sectors. ER - TY - JOUR AU - Khandani,Amir E. AU - Lo,Andrew W. AU - Merton,Robert C. TI - Systemic Risk and the Refinancing Ratchet Effect JF - National Bureau of Economic Research Working Paper Series VL - No. 15362 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15362 L1 - http://www.nber.org/papers/w15362.pdf N1 - Author contact info: Amir Khandani Laboratory for Financial Engineering MIT Sloan School of Management One Broadway, Bldg E70-800 Cambridge, MA 02142 Tel: 617/452-3365 E-Mail: khandani@mit.edu Andrew W. Lo Sloan School of Management MIT 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-0920 Fax: 781/891-9783 E-Mail: alo@mit.edu Robert C. Merton Graduate School of Business Administration Harvard University, Baker Library 353 Soldiers Field Road Boston, MA 02163 Tel: 617/495-6678 Fax: 617/495-8863 E-Mail: rmerton@hbs.edu M1 - published as AB - The confluence of three trends in the U.S. residential housing market---rising home prices, declining interest rates, and near-frictionless refinancing opportunities---led to vastly increased systemic risk in the financial system. Individually, each of these trends is benign, but when they occur simultaneously, as they did over the past decade, they impose an unintentional synchronization of homeowner leverage. This synchronization, coupled with the indivisibility of residential real estate that prevents homeowners from deleveraging when property values decline and homeowner equity deteriorates, conspire to create a "ratchet" effect in which homeowner leverage is maintained or increased during good times without the ability to decrease leverage during bad times. If refinancing-facilitated homeowner-equity extraction is sufficiently widespread---as it was during the years leading up to the peak of the U.S. residential real-estate market---the inadvertent coordination of leverage during a market rise implies higher correlation of defaults during a market drop. To measure the systemic impact of this ratchet effect, we simulate the U.S. housing market with and without equity extractions, and estimate the losses absorbed by mortgage lenders by valuing the embedded put-option in non-recourse mortgages. Our simulations generate loss estimates of $1.5 trillion from June 2006 to December 2008 under historical market conditions, compared to simulated losses of $280 billion in the absence of equity extractions. ER - TY - JOUR AU - Bettinger,Eric P. AU - Long,Bridget Terry AU - Oreopoulos,Philip AU - Sanbonmatsu,Lisa TI - The Role of Simplification and Information in College Decisions: Results from the H&R Block FAFSA Experiment JF - National Bureau of Economic Research Working Paper Series VL - No. 15361 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15361 L1 - http://www.nber.org/papers/w15361.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 Bridget T. Long Harvard University Graduate School of Education Gutman Library 465 6 Appian Way Cambridge, MA 02138 Tel: 617/496-4355 Fax: 617/496-3095 E-Mail: longbr@gse.harvard.edu Philip Oreopoulos Department of Economics University of Toronto 150 St. George Street Toronto, Ontario M5S 3G7 CANADA Tel: 416/904-6736 E-Mail: philip.oreopoulos@utoronto.ca Lisa Sanbonmatsu NBER 1050 Massachusetts Avenue, 3rd Floor Cambridge, MA 02138 Tel: 617/613-1201 E-Mail: lsanbonm@nber.org M1 - published as AB - Growing concerns about low awareness and take-up rates for government support programs like college financial aid have spurred calls to simplify the application process and enhance visibility. This project examines the effects of two experimental treatments designed to test of the importance of simplification and information using a random assignment research design. H&R Block tax professionals helped low- to moderate-income families complete the FAFSA, the federal application for financial aid. Families were then given an estimate of their eligibility for government aid as well as information about local postsecondary options. A second randomly-chosen group of individuals received only personalized aid eligibility information but did not receive help completing the FAFSA. Comparing the outcomes of participants in the treatment groups to a control group using multiple sources of administrative data, the analysis suggests that individuals who received assistance with the FAFSA and information about aid were substantially more likely to submit the aid application, enroll in college the following fall, and receive more financial aid. These results suggest that simplification and providing information could be effective ways to improve college access. However, only providing aid eligibility information without also giving assistance with the form had no significant effect on FAFSA submission rates. ER - TY - JOUR AU - Desmet,Klaus AU - Ortuño-Ortín,Ignacio AU - Wacziarg,Romain TI - The Political Economy of Ethnolinguistic Cleavages JF - National Bureau of Economic Research Working Paper Series VL - No. 15360 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15360 L1 - http://www.nber.org/papers/w15360.pdf N1 - Author contact info: Klaus Desmet Department of Economics Universidad Carlos III 28903 Getafe (Madrid) SPAIN E-Mail: klaus.desmet@uc3m.es Ignacio Ortuno-Ortin Universidad Carlos III 28903 Getafe Madrid Spain E-Mail: iortuno@eco.uc3m.es 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 M1 - published as AB - This paper proposes a new method to measure ethnolinguistic diversity and offers new results linking such diversity with a range of political economy outcomes -- civil conflict, redistribution, economic growth and the provision of public goods. We use linguistic trees, describing the genealogical relationship between the entire set of 6,912 world languages, to compute measures of fractionalization and polarization at different levels of linguistic aggregation. By doing so, we let the data inform us on which linguistic cleavages are most relevant, rather than making ad hoc choices of linguistic classifications. We find drastically different effects of linguistic diversity at different levels of aggregation: deep cleavages, originating thousands of years ago, lead to measures of diversity that are better predictors of civil conflict and redistribution than those that account for more recent and superficial divisions. The opposite pattern holds when it comes to the impact of linguistic diversity on growth and public goods provision, where finer distinctions between languages matter. ER - TY - JOUR AU - Nakamura,Emi AU - Steinsson,Jón TI - Lost in Transit: Product Replacement Bias and Pricing to Market JF - National Bureau of Economic Research Working Paper Series VL - No. 15359 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15359 L1 - http://www.nber.org/papers/w15359.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 Jon 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 M1 - published as AB - Product replacement is frequent in the micro-data that underlie U.S. import and export price indices, while price changes are infrequent. Consequently, over 40% of price series in the data have no price changes and roughly 70% have two price changes or less. In constructing price indices, price adjustments that occur at the time of product replacements tend to be dropped. If price adjustments disproportionately occur at the time of product replacements then price adjustments are disproportionately unobserved. We show that this \product replacement bias" may distort the measured long-run relationship between import and export prices and the exchange rate by a factor of between 1.7 and 2.2. Accounting for this bias, we find that the price of non-oil U.S. imports (relative to domestic consumption) responds by 0.6-0.7% for each 1% change in the U.S. real exchange rate, while the price of U.S. exports (relative to foreign consumption) responds by roughly 0.8%. This contrasts with conventional pass-through estimates of 0.2-0.4% for non-oil import prices and 0.9% for export prices. Thus, we find that the degree of pricing to market for U.S. imports and exports is more symmetric and the degree of pricing to market for U.S. imports more moderate than conventional measures suggest. Adjusting for product replacement bias also substantially raises the volatility of the terms of trade. These results improve the fit of the data to standard models. ER - TY - JOUR AU - Rose,Andrew K. AU - Spiegel,Mark M. TI - Cross-Country Causes and Consequences of the 2008 Crisis: International Linkages and American Exposure JF - National Bureau of Economic Research Working Paper Series VL - No. 15358 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15358 L1 - http://www.nber.org/papers/w15358.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 Spiegel Federal Reserve Bank of San Francisco 101 Market Street San Francisco, CA 94105 E-Mail: mark.spiegel@sf.frb.org M1 - published as AB - This paper models the causes of the 2008 financial crisis together with its manifestations, using a Multiple Indicator Multiple Cause (MIMIC) model. Our analysis is conducted on a cross-section of 85 countries; we focus on international linkages that may have allowed the crisis to spread across countries. Our model of the cross-country incidence of the crisis combines 2008 changes in real GDP, the stock market, country credit ratings, and the exchange rate. We explore the linkages between these manifestations of the crisis and a number of its possible causes from 2006 and earlier. The causes we consider are both national (such as equity market run-ups that preceded the crisis) and, critically, international financial and real linkages between countries and the epicenter of the crisis. We consider the United States to be the most natural origin of the 2008 crisis, though we also consider six alternative sources of the crisis. A country holding American securities that deteriorate in value is exposed to an American crisis through a financial channel. Similarly, a country which exports to the United States is exposed to an American downturn through a real channel. Despite the fact that we use a wide number of possible causes in a flexible statistical framework, we are unable to find strong evidence that international linkages can be clearly associated with the incidence of the crisis. In particular, countries heavily exposed to either American assets or trade seem to behave little differently than other countries; if anything, countries seem to have benefited slightly from American exposure. ER - TY - JOUR AU - Rose,Andrew K. AU - Spiegel,Mark M. TI - Cross-Country Causes and Consequences of the 2008 Crisis: Early Warning JF - National Bureau of Economic Research Working Paper Series VL - No. 15357 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15357 L1 - http://www.nber.org/papers/w15357.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 Spiegel Federal Reserve Bank of San Francisco 101 Market Street San Francisco, CA 94105 E-Mail: mark.spiegel@sf.frb.org M1 - published as AB - This paper models the causes of the 2008 financial crisis together with its manifestations, using a Multiple Indicator Multiple Cause (MIMIC) model. Our analysis is conducted on a cross-section of 107 countries; we focus on national causes and consequences of the crisis, ignoring cross-country “contagion” effects. Our model of the incidence of the crisis combines 2008 changes in real GDP, the stock market, country credit ratings, and the exchange rate. We explore the linkages between these manifestations of the crisis and a number of its possible causes from 2006 and earlier. We include over sixty potential causes of the crisis, covering such categories as: financial system policies and conditions; asset price appreciation in real estate and equity markets; international imbalances and foreign reserve adequacy; macroeconomic policies; and institutional and geographic features. Despite the fact that we use a wide number of possible causes in a flexible statistical framework, we are unable to link most of the commonly-cited causes of the crisis to its incidence across countries. This negative finding in the cross-section makes us skeptical of the accuracy of “early warning” systems of potential crises, which must also predict their timing. ER - TY - JOUR AU - Michalopoulos,Stelios AU - Laeven,Luc AU - Levine,Ross TI - Financial Innovation and Endogenous Growth JF - National Bureau of Economic Research Working Paper Series VL - No. 15356 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15356 L1 - http://www.nber.org/papers/w15356.pdf N1 - Author contact info: Stelios Michalopoulos Tufts University Department of Economics E-Mail: Stelios.Michalopoulos@tufts.edu Luc Laeven Senior Economist 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 M1 - published as AB - We model technological and financial innovation as reflecting the decisions of profit maximizing agents and explore the implications for economic growth. We start with a Schumpeterian endogenous growth model where entrepreneurs earn monopoly profits by inventing better goods and financiers arise to screen entrepreneurs. A novel feature of the model is that financiers also engage in the costly, risky, and potentially profitable process of innovation: Financiers can invent more effective processes for screening entrepreneurs. Every existing screening process, however, becomes less effective as technology advances. Consequently, technological innovation and, thus, economic growth stop unless financiers continually innovate. Historical observations and empirical evidence are more consistent with this dynamic model of financial innovation and endogenous growth than with existing models of financial development and growth. ER - TY - JOUR AU - Fernández,Raquel TI - Women's Rights and Development JF - National Bureau of Economic Research Working Paper Series VL - No. 15355 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15355 L1 - http://www.nber.org/papers/w15355.pdf N1 - Author contact info: Raquel Fernandez 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 M1 - published as AB - Why has the expansion of women's economic and political rights coincided with economic development? This paper investigates this question, focusing on a key economic right for women: property rights. The basic hypothesis is that the process of development (i.e., capital accumulation and declining fertility) exacerbated the tension in men's conflicting interests as husbands versus fathers, ultimately resolving them in favor of the latter. As husbands, men stood to gain from their privileged position in a patriarchal world whereas, as fathers, they were hurt by a system that afforded few rights to their daughters. The model predicts that declining fertility would hasten reform of women's property rights whereas legal systems that were initially more favorable to women would delay them. The theoretical relationship between capital and the relative attractiveness of reform is non-monotonic but growth inevitably leads to reform. I explore the empirical validity of the theoretical predictions by using cross-state variation in the US in the timing of married women obtaining property and earning rights between 1850 and 1920. ER - TY - JOUR AU - Marcotte,Dave E. AU - Markowitz,Sara TI - A Cure for Crime? Psycho-Pharmaceuticals and Crime Trends JF - National Bureau of Economic Research Working Paper Series VL - No. 15354 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15354 L1 - http://www.nber.org/papers/w15354.pdf N1 - Author contact info: Dave Marcotte Department of Public Policy UMBC 1000 Hilltop Circle Baltimore, MD 21250 Tel: 410/455-1455 Fax: 410/455-1172 E-Mail: marcotte@umbc.edu Sara Markowitz Department of Economics Emory University Rich Building, 3rd floor 1602 Fishburne Dr. Atlanta, GA 30322 Tel: (404) 712-8167 E-Mail: sara.markowitz@emory.edu M1 - published as AB - In this paper we consider possible links between the advent and diffusion of a number of new psychiatric pharmaceutical therapies and crime rates. We describe recent trends in crime and review the evidence showing mental illness as a clear risk factor both for criminal behavior and victimization. We then briefly summarize the development of a number of new pharmaceutical therapies for the treatment of mental illness which diffused during the “great American crime decline.” We examine limited international data, as well as more detailed American data to assess the relationship between crime rates and rates of prescriptions of the main categories of psychotropic drugs, while controlling for other factors which may explain trends in crime rates. We find that increases in prescriptions for psychiatric drugs in general are associated with decreases in violent crime, with the largest impacts associated with new generation antidepressants and stimulants used to treat ADHD. Our estimates imply that about 8.5 percent of the recent crime drop was due to expanded mental health treatment. ER - TY - JOUR AU - Mayordomo,Sergio AU - Peña,Juan Ignacio AU - Schwartz,Eduardo S. TI - Towards a Common European Monetary Union Risk Free Rate JF - National Bureau of Economic Research Working Paper Series VL - No. 15353 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15353 L1 - http://www.nber.org/papers/w15353.pdf N1 - Author contact info: Sergio Mayordomo Universidad Carlos III Madrid 126 28903 Getafe Madrid, Spain E-Mail: smayordo@emp.uc3m.es Juan Ignacio Pena Universidad Carlos III Madrid 126 28903 Getafe Madrid, Spain E-Mail: ypenya@eco.uc3m.es Eduardo S. Schwartz Anderson Graduate School of Management UCLA 110 Westwood Plaza Los Angeles, CA 90095 Tel: 310/825-2873 Fax: 310/825-6384 E-Mail: eduardo.schwartz@anderson.ucla.edu M1 - published as AB - A common European bond would yield a common European Monetary Union risk free rate. We present tentative estimates of this common risk free for the European Monetary Union countries from 2004 to 2009 using variables motivated by a theoretical portfolio selection model. First, we analyze the determinants of EMU sovereign yield spreads and find significant effects of the credit quality, macro, correlation, and liquidity variables. However, their effects are different before and after the current financial crisis, being stronger in the latter period. Robustness tests with different data frequencies, benchmarks, liquidity variables, cross section regressions and balanced panels confirm the initial results. We propose four different estimates of the common risk free rate and show that, in most cases, this common rate could imply savings in borrowing costs for all the countries involved. ER - TY - JOUR AU - Lusardi,Annamaria AU - Mitchell,Olivia S. AU - Curto,Vilsa TI - Financial Literacy among the Young: Evidence and Implications for Consumer Policy JF - National Bureau of Economic Research Working Paper Series VL - No. 15352 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15352 L1 - http://www.nber.org/papers/w15352.pdf N1 - Author contact info: Annamaria Lusardi Department of Economics Dartmouth College Hanover, NH 03755 Tel: 603-646-2099 Fax: 603-646-2122 E-Mail: a.lusardi@dartmouth.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 Harvard University Cambridge, MA 02138 E-Mail: vilsa.curto@post.harvard.edu M1 - published as AB - We examined financial literacy among the young using data from the 1997 National Longitudinal Survey of Youth. We showed that financial literacy is low among the young; fewer than one-third of young adults possess basic knowledge of interest rates, inflation, and risk diversification. Financial literacy is strongly related to sociodemographic characteristics and family financial sophistication. Specifically, a college-educated male whose parents had stocks and retirement savings is about 50 percentage points more likely to know about risk diversification than a female with less than a high school education whose parents were not wealthy. These findings have implications for consumer policy. ER - TY - JOUR AU - Gordon,Robert J. TI - Misperceptions About the Magnitude and Timing of Changes in American Income Inequality JF - National Bureau of Economic Research Working Paper Series VL - No. 15351 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15351 L1 - http://www.nber.org/papers/w15351.pdf N1 - Author contact info: Robert J. Gordon Department of Economics Northwestern University Evanston, IL 60208-2600 Tel: 847/491-3616 Fax: 847/869-7343 E-Mail: rjg@northwestern.edu M1 - published as AB - The rise in American inequality has been exaggerated both in magnitude and timing. Commentators lament the large gap between the growth rates of real median household income and of private sector productivity. This paper shows that a conceptually consistent measure of this growth gap over 1979 to 2007 is only one-tenth of the conventional measure. Further, the timing of the rise of inequality is often misunderstood. By some measures inequality stopped growing after 2000 and by others inequality has not grown since 1993. This cessation of inequality’s secular rise in 2000 is evident from the growth of Census mean vs. median income, and in the income share of the top one percent of the income distribution. The income share of the 91st to 95th percentile has not increased since 1983, and the income ratio of the 90th to 10th percentile has barely increased since 1986. Further, despite a transient decline in labor’s income share in 2000-06, by mid-2009 labor’s share had returned virtually to the same value as in 1983, 1991, and 2001. Recent contributions in the inequality literature have raised questions about previous research on skill-biased technical change and the managerial power of CEOs. Directly supporting our theme of prior exaggeration of the rise of inequality is new research showing that price indexes for the poor rise more slowly than for the rich, causing most empirical measures of inequality to overstate the growth of real income of the rich vs. the poor. Further, as much as two-thirds of the post-1980 increase in the college wage premium disappears when allowance is made for the faster rise in the cost of living in cities where the college educated congregate and for the lower quality of housing in those cities. A continuing tendency for life expectancy to increase faster among the rich than among the poor reflects the joint impact of education on both economic and health outcomes, some of which are driven by the behavioral choices of the less educated. ER - TY - JOUR AU - Lusardi,Annamaria AU - Mitchell,Olivia S. TI - How Ordinary Consumers Make Complex Economic Decisions: Financial Literacy and Retirement Readiness JF - National Bureau of Economic Research Working Paper Series VL - No. 15350 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15350 L1 - http://www.nber.org/papers/w15350.pdf N1 - Author contact info: Annamaria Lusardi Department of Economics Dartmouth College Hanover, NH 03755 Tel: 603-646-2099 Fax: 603-646-2122 E-Mail: a.lusardi@dartmouth.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 M1 - published as AB - This paper reports on several self-assessed and objective measures of financial literacy newly added to the American Life Panel (ALP), and it links these performance measures to efforts consumers make to plan for retirement. We evaluate the causal relationship between financial literacy and retirement planning by exploiting information about respondents’ financial knowledge acquired in school - before entering the labor market and certainly before starting to plan for retirement. Results show that those with more advanced financial knowledge are those more likely to be retirement-ready. ER - TY - JOUR AU - Desmet,Klaus AU - Rossi-Hansberg,Esteban TI - Spatial Development JF - National Bureau of Economic Research Working Paper Series VL - No. 15349 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15349 L1 - http://www.nber.org/papers/w15349.pdf N1 - Author contact info: Klaus Desmet Department of Economics Universidad Carlos III 28903 Getafe (Madrid) SPAIN E-Mail: klaus.desmet@uc3m.es 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 M1 - published as AB - We present a theory of spatial development. A continuum of locations in a geographic area choose each period how much to innovate (if at all) in manufacturing and services. Locations can trade subject to transport costs and technology diffuses spatially across locations. The result is an endogenous growth theory that can shed light on the link between the evolution of economic activity over time and space. We apply the model to study the evolution of the U.S. economy in the last few decades and find that the model can generate the reduction in the employment share in manufacturing, the increase in service productivity in the second part of the 1990s, the increase in land rents in the same period, as well as several other spatial and temporal patterns. ER - TY - JOUR AU - Haltiwanger,John C. AU - Jarmin,Ron S. AU - Krizan,C. J. TI - Mom-and-Pop Meet Big-Box: Complements or Substitutes? JF - National Bureau of Economic Research Working Paper Series VL - No. 15348 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15348 L1 - http://www.nber.org/papers/w15348.pdf N1 - Author contact info: 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 C. J. Krizan Center for Economic Studies U.S. Census Bureau 4600 Silver Hill Road Washington, DC 20233 E-Mail: Cornell.J.Krizan@census.gov M1 - published as AB - In part due to the popular perception that Big-Boxes displace smaller, often family owned (a.k.a. Mom-and-Pop) retail establishments, several empirical studies have examined the evidence on how Big-Boxes’ impact local retail employment but no clear consensus has emerged. To help shed light on this debate, we exploit establishment-level data with detailed location information from a single metropolitan area to quantify the impact of Big-Box store entry and growth on nearby single unit and local chain stores. We incorporate a rich set of controls for local retail market conditions as well as whether or not the Big-Boxes are in the same sector as the smaller stores. We find a substantial negative impact of Big-Box entry and growth on the employment growth at both single unit and especially smaller chain stores – but only when the Big-Box activity is both in the immediate area and in the same detailed industry. ER - TY - JOUR AU - Kovash,Kenneth AU - Levitt,Steven D. TI - Professionals Do Not Play Minimax: Evidence from Major League Baseball and the National Football League JF - National Bureau of Economic Research Working Paper Series VL - No. 15347 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15347 L1 - http://www.nber.org/papers/w15347.pdf N1 - Author contact info: Kenneth Kovash 5807 s woodlawn ave chicago, il 60637 E-Mail: kkovash@gmail.com 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 M1 - published as AB - Game theory makes strong predictions about how individuals should behave in two player, zero sum games. When players follow a mixed strategy, equilibrium payoffs should be equalized across actions, and choices should be serially uncorrelated. Laboratory experiments have generated large and systematic deviations from the minimax predictions. Data gleaned from real-world settings have been more consistent with minimax, but these latter studies have often been based on small samples with low power to reject. In this paper, we explore minimax play in two high stakes, real world settings that are data rich: choice of pitch type in Major League Baseball and whether to run or pass in the National Football League. We observe more than three million pitches in baseball and 125,000 play choices for football. We find systematic deviations from minimax play in both data sets. Pitchers appear to throw too many fastballs; football teams pass less than they should. In both sports, there is negative serial correlation in play calling. Back of the envelope calculations suggest that correcting these decision making errors could be worth as many as two additional victories a year to a Major League Baseball franchise, and more than a half win per season for a professional football team. ER - TY - JOUR AU - Suri,Tavneet TI - Selection and Comparative Advantage in Technology Adoption JF - National Bureau of Economic Research Working Paper Series VL - No. 15346 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15346 L1 - http://www.nber.org/papers/w15346.pdf N1 - Author contact info: Tavneet Suri MIT Sloan School of Management 50 Memorial Drive E52-457 Cambridge, MA 02142 Tel: 617/253-7159 Fax: 617/258-6855 E-Mail: tavneet@mit.edu M1 - published as AB - This paper investigates an empirical puzzle in technology adoption for developing countries: the low adoption rates of technologies like hybrid maize that increase average farm profits dramatically. I offer a simple explanation for this: benefits and costs of technologies are heterogeneous, so that farmers with low net returns do not adopt the technology. I examine this hypothesis by estimating a correlated random coefficient model of yields and the corresponding distribution of returns to hybrid maize. This distribution indicates that the group of farmers with the highest estimated gross returns does not use hybrid, but their returns are correlated with high costs of acquiring the technology (due to poor infrastructure). Another group of farmers has lower returns and adopts, while the marginal farmers have zero returns and switch in and out of use over the sample period. Overall, adoption decisions appear to be rational and well explained by (observed and unobserved) variation in heterogeneous net benefits to the technology. ER - TY - JOUR AU - Edmonds,Eric V. AU - Schady,Norbert TI - Poverty Alleviation and Child Labor JF - National Bureau of Economic Research Working Paper Series VL - No. 15345 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15345 L1 - http://www.nber.org/papers/w15345.pdf N1 - Author contact info: 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 Norbert Schady The World Bank 1818 H. Street, NW Washington, DC 20433 E-Mail: nschady@worldbank.org M1 - published as AB - How important are subsistence concerns in a family’s decision to send a child to work? We consider this question in Ecuador, where poor families are selected at random to receive a cash transfer that is equivalent to 7 percent of monthly expenditures. Winning the cash transfer lottery is associated with a decline in work for pay away from the child's home. The cash transfer is greater than the rise in schooling costs that comes with the end of primary school, but it is less than 20 percent of the income paid to child laborers in the labor market. Despite being less than foregone earnings, poor families seem to use the lottery award to delay the child's entry into paid employment and protect the child's schooling status. Schooling expenditures rise with the lottery, but total expenditures in the household decline relative to the control population because of foregone child labor earnings. ER - TY - JOUR AU - Butler,Jeffrey AU - Giuliano,Paola AU - Guiso,Luigi TI - The Right Amount of Trust JF - National Bureau of Economic Research Working Paper Series VL - No. 15344 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15344 L1 - http://www.nber.org/papers/w15344.pdf N1 - Author contact info: Jeffrey Butler EIEF Via Due Macelli, 73 00187 Roma Italy E-Mail: jeff.butler@eief.it 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 Luigi Guiso European University Institute Economics Department Villa San Paolo 50133 Florence ITALY Fax: 39-055-4685-902 E-Mail: luigi.guiso@eui.eu M1 - published as AB - A vast literature has investigated the relationship between trust and aggregate economic performance. We investigate the relationship between individual trust and individual economic performance. We find that individual income is hump-shaped in a measure of intensity of trust beliefs available in the European Social Survey. We show that heterogeneity of trust beliefs in the population, coupled with the tendency of individuals to extrapolate beliefs about others from their own level of trustworthiness, could generate the non-monotonic relationship between trust and income. Highly trustworthy individuals think others are like them and tend to form beliefs that are too optimistic, causing them to assume too much social risk, to be cheated more often and ultimately perform less well than those who happen to have a trustworthiness level close to the mean of the population. On the other hand, the low-trustworthiness types form beliefs that are too conservative and thereby avoid being cheated, but give up profitable opportunities too often and, consequently, underperform. Our estimates imply that the cost of either excessive or too little trust is comparable to the income lost by foregoing college. Furthermore, we find that people who trust more are cheated more often by banks as well as when purchasing goods second hand, when relying on the services of a plumber or a mechanic and when buying food. We complement the survey evidence with experimental evidence showing that own trustworthiness and expectations of others' trustworthiness in a trust game are strongly correlated and that performance in the game is hump-shaped. ER - TY - JOUR AU - Trabandt,Mathias AU - Uhlig,Harald TI - How Far Are We From The Slippery Slope? The Laffer Curve Revisited JF - National Bureau of Economic Research Working Paper Series VL - No. 15343 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15343 L1 - http://www.nber.org/papers/w15343.pdf N1 - Author contact info: Mathias Trabandt European Central Bank Kaiserstrasse 29 60311 Frankfurt am Main GERMANY E-Mail: Mathias.Trabandt@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 M1 - published as AB - We characterize the Laffer curves for labor taxation and capital income taxation quantitatively for the US, the EU-14 and individual European countries by comparing the balanced growth paths of a neoclassical growth model featuring ”constant Frisch elasticity” (CFE) preferences. We derive properties of CFE preferences. We provide new tax rate data. For benchmark parameters, we find that the US can increase tax revenues by 30% by raising labor taxes and 6% by raising capital income taxes. For the EU-14 we obtain 8% and 1%. Denmark and Sweden are on the wrong side of the Laffer curve for capital income taxation. ER - TY - JOUR AU - Manova,Kalina AU - Zhang,Zhiwei TI - Export Prices and Heterogeneous Firm Models JF - National Bureau of Economic Research Working Paper Series VL - No. 15342 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15342 L1 - http://www.nber.org/papers/w15342.pdf N1 - Author contact info: Kalina Manova Department of Economics Stanford University 579 Serra Mall Stanford, CA 94305 Tel: 650/725-9967 Fax: 650/725-5702 E-Mail: manova@stanford.edu Zhiwei Zhang E-Mail: zzhang@hkma.gov.hk M1 - published as AB - This paper examines the variation in export prices across firms, products and destinations to distinguish between alternative heterogeneous firm models of international trade. We establish five stylized facts using new data on the universe of Chinese trading firms. First, firms charging higher export prices earn larger revenues within each destination, have greater worldwide sales, and export to more markets. Second, firms that pay higher import prices set higher export prices, have greater worldwide sales, and export to more markets. Third, firms offer higher prices in larger, richer and more distant markets. Fourth, there is a positive correlation between export price and revenue across destinations within a firm. Finally, firms that export more to more countries pay a wider range of import prices and offer a broader menu of export prices. None of the heterogeneous firm models in the literature can match all of these patterns. Our results are instead consistent with quality differentiation across firms (stylized facts 1 and 2) and firms adjusting both quality and mark-ups across destinations in response to market toughness (stylized facts 3, 4 and 5). ER - TY - JOUR AU - Hulten,Charles R. TI - Growth Accounting JF - National Bureau of Economic Research Working Paper Series VL - No. 15341 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15341 L1 - http://www.nber.org/papers/w15341.pdf N1 - Author contact info: Charles R. Hulten Department of Economics University of Maryland Room 3105, Tydings Hall College Park, MD 20742 Tel: 301/405-3549 Fax: 301/405-3542 E-Mail: hulten@econ.umd.edu M1 - published as AB - Incomes per capita have grown dramatically over the past two centuries, but the increase has been unevenly spread across time and across the world. Growth accounting is the principal quantitative tool for understanding this phenomenon, and for assessing the prospects for further increases in living standards. This paper sets out the general growth accounting model, with its methods and assumptions, and traces its evolution from a simple index-number technique that decomposes economic growth into capital-deepening and productivity components, to a more complex account of the growth process. In the more complex account, capital and productivity interact, both are endogenous, and quality change in inputs and output matters. New developments in micro-level productivity analysis are also reviewed, and the long-standing question of net versus gross output as the appropriate indicator of economic growth is addressed. ER - TY - JOUR AU - Gârleanu,Nicolae B. AU - Panageas,Stavros AU - Yu,Jianfeng TI - Technological Growth and Asset Pricing JF - National Bureau of Economic Research Working Paper Series VL - No. 15340 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15340 L1 - http://www.nber.org/papers/w15340.pdf N1 - Author contact info: Nicolae B. Garleanu Haas School of Business F628 University of California, Berkeley Berkeley, CA 94720 Tel: (1) 510 642 3421 Fax: (1) 510 643 1420 E-Mail: garleanu@haas.berkeley.edu Stavros Panageas University of Chicago Booth School of Business 5807 South Woodlawn Avenue Chicago, IL, 60637 Tel: (773) 834 4711 E-Mail: stavros.panageas@chicagobooth.edu Jianfeng Yu University of Minnesota E-Mail: jianfeng@umn.edu M1 - published as AB - In this paper we study the implications of general-purpose technological growth for asset prices. The model features two types of shocks: "small", frequent, and disembodied shocks to productivity and "large" technological innovations, which are embodied into new vintages of the capital stock. While the former affect the economy on impact, the latter affect the economy with lags, since firms need to first adopt the new technologies through investment. The process of adoption leads to cycles in asset valuations and risk premia as firms convert the growth options associated with the new technologies into assets in place. This process can help provide a unified, investment-based view of some well documented phenomena such as the asset-valuation patterns around major technological innovations, the countercyclical behavior of returns, the lead-lag relationship between the stock market and output, and the increasing patterns of consumption-return correlations over longer horizons. ER - TY - JOUR AU - Oreopoulos,Philip AU - Salvanes,Kjell G. TI - How large are returns to schooling? Hint: Money isn't everything JF - National Bureau of Economic Research Working Paper Series VL - No. 15339 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15339 L1 - http://www.nber.org/papers/w15339.pdf N1 - Author contact info: Philip Oreopoulos Department of Economics University of Toronto 150 St. George Street Toronto, Ontario M5S 3G7 CANADA Tel: 416/904-6736 E-Mail: philip.oreopoulos@utoronto.ca Kjell Salvanes Department of Economics Norwegian School of Economics & Business Hellev. 30, N-5035 Bergen, NORWAY IZA and CEP E-Mail: kjell.salvanes@nhh.no M1 - published as AB - This paper explores the many avenues by which schooling affects lifetime well-being. Experiences and skills acquired in school reverberate throughout life, not just through higher earnings. Schooling also affects the degree one enjoys work and the likelihood of being unemployed. It leads individuals to make better decisions about health, marriage, and parenting. It also improves patience, making individuals more goal-oriented and less likely to engage in risky behavior. Schooling improves trust and social interaction, and may offer substantial consumption value to some students. We discuss various mechanisms to explain how these relationships may occur independent of wealth effects, and present evidence that non-pecuniary returns to schooling are at least as large as pecuniary ones. Ironically, one explanation why some early school leavers miss out on these high returns is that they lack the very same decision making skills that more schooling would help improve. ER - TY - JOUR AU - Jermann,Urban AU - Quadrini,Vincenzo TI - Macroeconomic Effects of Financial Shocks JF - National Bureau of Economic Research Working Paper Series VL - No. 15338 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15338 L1 - http://www.nber.org/papers/w15338.pdf N1 - Author contact info: Urban Jermann Finance Department Wharton School of the University of Pennsylvania 3620 Locust Walk Philadelphia, PA 19104 Tel: 215/898-4184 Fax: 215/898-6200 E-Mail: jermann@wharton.upenn.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 M1 - published as AB - In this paper we document the cyclical properties of U.S. firms' financial flows. Equity payouts are procyclical and debt payouts are countercyclical. We develop a model with explicit roles for debt and equity financing and explore how the observed dynamics of real and financial variables are affected by `financial shocks', that is, shocks that affect the firms' capacity to borrow. Standard productivity shocks can only partially explain the movements in real and financial variables. The addition of financial shocks brings the model much closer to the data. The recent events in the financial sector show up clearly in our model as a tightening of firms' financing conditions causing the GDP decline in 2008-09. Our analysis also suggests that the downturns in 1990-91 and 2001 were strongly influenced by changes in credit conditions. ER - TY - JOUR AU - Goulder,Lawrence H. AU - Jacobsen,Mark R. AU - Benthem,Arthur A. van TI - Unintended Consequences from Nested State & Federal Regulations: The Case of the Pavley Greenhouse-Gas-per-Mile Limits JF - National Bureau of Economic Research Working Paper Series VL - No. 15337 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15337 L1 - http://www.nber.org/papers/w15337.pdf N1 - Author contact info: Lawrence H. Goulder Department of Economics Landau Economics Building 328 Stanford University Stanford, CA 94305 Tel: 650/723-3706 Fax: 650/725-5702 E-Mail: goulder@stanford.edu 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 Arthur van Benthem Department of Economics Stanford University 579 Serra Mall Stanford, CA 94305-6072 E-Mail: arthurvb@stanford.edu M1 - published as AB - Fourteen U.S. states recently pledged to adopt limits on greenhouse gases (GHGs) per mile of light-duty automobiles. Previous analyses predicted this action would significantly reduce emissions from new cars in these states, but ignored possible offsetting emissions increases from policy-induced adjustments in new car markets in other (non-adopting) states and in the used car market. Such offsets (or “leakage”) reflect the fact that the state-level effort interacts with the national corporate average fuel economy (CAFE) standard: the state-level initiative effectively loosens the national standard and gives automakers scope to profitably increase sales of high-emissions automobiles in non-adopting states. In addition, although the state-level effort may well spur the invention of fuel- and emissions-saving technologies, interactions with the federal CAFE standard limit the nationwide emissions reductions from such advances. Using a multi-period numerical simulation model, we find that 70-80 percent of the emissions reductions from new cars in adopting states are offset by emissions leakage. This research examines a particular instance of a general issue of policy significance – namely, problems from “nested” federal and state environmental regulations. Such nesting implies that similar leakage difficulties are likely to arise under several newly proposed state-level initiatives. ER - TY - JOUR AU - Aragon,George O. AU - Strahan,Philip E. TI - Hedge Funds as Liquidity Providers: Evidence from the Lehman Bankruptcy JF - National Bureau of Economic Research Working Paper Series VL - No. 15336 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15336 L1 - http://www.nber.org/papers/w15336.pdf N1 - Author contact info: George O. Aragon Arizona State University Tempe, AZ E-Mail: George.Aragon@asu.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 M1 - published as AB - Using the September 15, 2008 bankruptcy of Lehman Brothers as an exogenous shock to funding costs, we show that hedge funds act as liquidity providers. Hedge funds using Lehman as prime broker could not trade after the bankruptcy, and these funds failed twice as often as otherwise-similar funds after September 15 (but not before). Stocks traded by the Lehman-connected hedge funds in turn experienced greater declines in market liquidity following the bankruptcy than other stocks; and, the effect was larger for ex ante illiquid stocks. We conclude that shocks to traders’ funding liquidity reduce the market liquidity of the assets that they trade. ER - TY - JOUR AU - Jegadeesh,Narasimhan AU - Kräussl,Roman AU - Pollet,Joshua TI - Risk and Expected Returns of Private Equity Investments: Evidence Based on Market Prices JF - National Bureau of Economic Research Working Paper Series VL - No. 15335 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15335 L1 - http://www.nber.org/papers/w15335.pdf N1 - Author contact info: Narasimhan Jegadeesh Goizueta Business School Emory University 1300 Clifton Road Suite 507 Atlanta, GA 30322 Tel: 404/727-4821 E-Mail: narasimhan_jegadeesh@bus.emory.edu Roman Kraussl FEWEB VU University Amsterdam de Boelelaan 1105 1081 HV Amsterdam The Netherlands E-Mail: rkraeussl@feweb.vu.nl Joshua Pollet Eli Broad College of Business 315 Eppley Center Michigan State University E. Lansing, MI 48824 E-Mail: pollet@msu.edu M1 - published as AB - We estimate the risk and expected returns of private equity investments based on the market prices of exchange-traded funds of funds that invest in unlisted private equity funds. Our results indicate that the market expects unlisted private equity funds to earn abnormal returns of approximately 1% per year. We also find that the market expects listed private equity funds to earn zero or marginally negative abnormal returns net of fees. Both listed and unlisted private equity funds have market betas close to one and positive factor loadings on the Fama-French SMB factor. Private equity fund returns are positively related to GDP growth and negatively related to the credit spread. In addition, we find that market returns of exchange traded funds of funds and listed private equity funds predict changes in self-reported book values of unlisted private equity funds. ER - TY - JOUR AU - Goetzmann,William N. AU - Peng,Liang AU - Yen,Jacqueline TI - The Subprime Crisis and House Price Appreciation JF - National Bureau of Economic Research Working Paper Series VL - No. 15334 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15334 L1 - http://www.nber.org/papers/w15334.pdf N1 - Author contact info: William N. Goetzmann School of Management Yale University Box 208200 New Haven, CT 06520-8200 Tel: 203/432-5950 Fax: 203/432-3003 E-Mail: william.goetzmann@yale.edu Liang Peng University of Colorado at Boulder 419 UCB Boulder, CO 80309-419 E-Mail: liang.peng@colorado.edu Jacqueline Yen Yale School of Management 135 Prospect Street P.O. Box 208200 New Haven, CT 06520-8200 E-Mail: Jacqueline.yen@yale.edu M1 - published as AB - This paper argues that econometric analysis of housing price indexes before 2006 generated forecasts of future long-term price growth and low estimated probabilities of extreme price decreases. These forecasts of future increases in home-loan collateral values may have affected both the demand and the supply of mortgages. Standard time series models using repeat-sales indices suggested that positive trends had a long half-life. Expectations based on such models supported expectations that could lead to an asset bubble. Analysis of data from the HMDA loan data base and LoanPerformance.com at the MSA level and at the loan level substantiates both supply and demand effects of past price trends in housing markets, particularly with respect to subprime mortgage applications and approvals. At the MSA level, past home price increases are associated with higher subprime applications and loan to value ratios. Approval probability of subprime loans was not affected by higher loan to value ratios. At the loan level, the approval probability of subprime applications is also positively associated with past home price appreciation. These results differ for prime mortgages. ER - TY - JOUR AU - Blackburn,Douglas W. AU - Goetzmann,William N. AU - Ukhov,Andrey D. TI - Risk Aversion and Clientele Effects JF - National Bureau of Economic Research Working Paper Series VL - No. 15333 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15333 L1 - http://www.nber.org/papers/w15333.pdf N1 - Author contact info: Douglas W. Blackburn Graduate School of Business Administration Fordham University 113 West 60th Street 6th floor New York, NY 10023 E-Mail: blackburn@fordham.edu William N. Goetzmann School of Management Yale University Box 208200 New Haven, CT 06520-8200 Tel: 203/432-5950 Fax: 203/432-3003 E-Mail: william.goetzmann@yale.edu Andrey Ukhov Kelley School of Business Indiana University 1309 East Tenth St. Bloomington, IN 47405 E-Mail: aukhov@indiana.edu M1 - published as AB - We use traded options on growth and value indices to test for clientele differences in risk preferences. Value investors appear to have exhibited a higher average level of risk aversion than growth investors for two different time periods in the late 1990’s and early 2000’s. We construct a model of time-varying clientele preferences that allows investors with different levels of risk-aversion to switch between investment styles conditional upon the evolution of returns and risk. The model makes predictions about the autocorrelations structure of measured risk parameters and also about the autocorrelation and cross-autocorrelation of fund flows by style. Empirical tests of the model provide evidence consistent with the existence of style switchers—investors who move funds between growth and value securities. We construct trading strategies in the value and growth index options markets that effectively buy risk from one clientele and sell it to another. These strategies generated modest positive returns over the period of study. ER - TY - JOUR AU - Frehen,Rik G.P. AU - Goetzmann,William N. AU - Rouwenhorst,K. Geert TI - New Evidence on the First Financial Bubble JF - National Bureau of Economic Research Working Paper Series VL - No. 15332 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15332 L1 - http://www.nber.org/papers/w15332.pdf N1 - Author contact info: Rik G.P.. Frehen University of Maastricht Limburg Institute of Finance P.O. Box 616 6200 MD Maastricht Netherlands E-Mail: r.frehen@finance.unimaas.nl William N. Goetzmann School of Management Yale University Box 208200 New Haven, CT 06520-8200 Tel: 203/432-5950 Fax: 203/432-3003 E-Mail: william.goetzmann@yale.edu K. Geert Rouwenhorst School of Management Yale University Box 208200 New Haven, CT 06520-8200 E-Mail: k.rouwenhorst@yale.edu M1 - published as AB - The first global financial bubble in stock prices occurred 1720 in Paris, London and the Netherlands. Explanations for these linked bubbles primarily focus on the irrationality of investor speculation and the corresponding stock price behavior of two large firms: the South Sea Company in Great Britain and the Mississippi Company in France. In this paper we examine a broad cross‐section of security price data to evaluate the causes of the bubbles. Using newly collected stock prices for British and Dutch firms in 1720, we find evidence against indiscriminate irrational exuberance and evidence in favor of speculation about two factors: the Atlantic trade and the incorporation of insurance companies. We study the role of innovation in the insurance market by examining market betas and volatilities of new insurance company shares, like (Pastor & Veronesi, Technological Revolutions and Stock Prices, 2009). We find strong evidence for a revolution in the insurance business in 1720. Our findings are consistent with the hypothesis that financial bubbles require a plausible story to justify investor optimism. ER - TY - JOUR AU - Bongaerts,Dion AU - Cremers,K.J. Martijn AU - Goetzmann,William N. TI - Multiple Ratings and Credit Spreads JF - National Bureau of Economic Research Working Paper Series VL - No. 15331 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15331 L1 - http://www.nber.org/papers/w15331.pdf N1 - Author contact info: Dion Bongaerts Roetersstraat 18 1018 WB Amsterdam, Netherlands E-Mail: d.g.j.bongaerts@uva.nl 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 William N. Goetzmann School of Management Yale University Box 208200 New Haven, CT 06520-8200 Tel: 203/432-5950 Fax: 203/432-3003 E-Mail: william.goetzmann@yale.edu M1 - published as AB - This paper explores the role played by multiple credit rating agencies (CRAs) in the market for corporate bonds. Moody's, S&P and Fitch operate in a competitive setting with market demand for both credit information and the certification value of a high rating. We empirically document the outcome of this competitive interaction over the period 2002 to 2007. Virtually all bonds in our sample are rated by both Moody's and Standard and Poors (S&P), and between 40% and 60% of the bonds are also rated by Fitch. This apparent redundancy in information production has long been a puzzle. We consider three explanations for why issuers apply for a third rating: 'information production,' 'adverse selection' and 'certification' with respect to regulatory and rules-based constraints. Using ratings and credit spread regressions, we find evidence in favor of Certification only. Additional evidence shows that the reported certification effects are consistent with an equilibrium outcome in a market with information-sensitive and insensitive bonds. In such a setting, ratings help to prevent market breakdowns. ER - TY - JOUR AU - Lakdawalla,Darius AU - Yin,Wesley TI - Insurer Bargaining and Negotiated Drug Prices in Medicare Part D JF - National Bureau of Economic Research Working Paper Series VL - No. 15330 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15330 L1 - http://www.nber.org/papers/w15330.pdf N1 - Author contact info: Darius N. Lakdawalla Schaeffer Center for Health Policy and Economics University of Southern California Los Angeles, CA 90089-0626 Tel: 213/740-6012 E-Mail: Darius.Lakdawalla@usc.edu Wesley Yin Department of Economics Boston University 270 Bay State Rd., Rm 501 Boston, MA 02215 Tel: 617-353-6150 E-Mail: wyin@bu.edu M1 - published as AB - A controversial feature of Medicare Part D is its reliance on private insurers to negotiate drug prices and rebates with retail pharmacies and drug manufacturers. Central to this controversy is whether increases in market power—an undesirable feature in most settings—confer benefits in health insurance markets, where larger buyers may obtain better prices for their members. We test whether insurers that experience larger enrollment increases due to Part D negotiate lower drug prices with pharmacies. Overall, we find that 100,000 additional insureds lead to 2.5-percent lower pharmacy prices negotiated by the insurer, and 5-percent reductions in pharmacy profits earned on prescriptions filled by enrollees of that insurer. Estimated enrollment effects are much larger for drugs with therapeutic substitutes, and virtually zero for branded drugs without therapeutic substitutes. We also present evidence that most insurer savings are, on the margin, passed on as lower premiums. Out-of-sample estimation suggests that modest insurer consolidation would generate significant savings to Medicare, along with premium reductions and enrollment increases. Finally, we find that greater enrollment leads to lower pharmacy prices negotiated by insurers for their non-Part D market—an external benefit to the commercially enrolled associated with administering Part D through private insurers. ER - TY - JOUR AU - Fajgelbaum,Pablo D. AU - Grossman,Gene M. AU - Helpman,Elhanan TI - Income Distribution, Product Quality, and International Trade JF - National Bureau of Economic Research Working Paper Series VL - No. 15329 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15329 L1 - http://www.nber.org/papers/w15329.pdf N1 - Author contact info: Pablo D. Fajgelbaum Department of Economics Princeton University Princeton, NJ 08544 E-Mail: pfajgelb@princeton.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 M1 - published as AB - We develop a framework for studying trade in horizontally and vertically differentiated products. In our model, consumers have heterogeneous incomes and heterogeneous tastes. They purchase a homogeneous good as well as making a discrete choice of quality and brand of a differentiated product. The distribution of preferences in the population generates a nested logit demand structure. These demands are such that the fraction of consumers who buy a higher-quality product rises with income. We use the model to study the pattern of trade between countries that differ in size and income distributions but are otherwise identical. Trade---which is driven primarily by demand factors---derives from "home market effects" in the presence of transport costs. When these costs are sufficiently small, goods of a given quality are produced in a single country. The model provides a tractable framework for studying the welfare consequences of trade, transport costs, and trade policy for different income groups in an economy. ER - TY - JOUR AU - Congdon,William AU - Kling,Jeffrey R. AU - Mullainathan,Sendhil TI - Behavioral Economics and Tax Policy JF - National Bureau of Economic Research Working Paper Series VL - No. 15328 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15328 L1 - http://www.nber.org/papers/w15328.pdf N1 - Author contact info: William Congdon The Brookings Institution 1775 Massachusetts Ave NW Washington, DC 20036 E-Mail: wcongdon@brookings.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 208 Harvard University Cambridge, MA 02138 Tel: 617/496-2720 Fax: 617/495-7730 E-Mail: mullain@fas.harvard.edu M1 - published as AB - Behavioral economics is changing our understanding of how economic policy operates, including tax policy. In this paper, we consider some implications of behavioral economics for tax policy, such as how it changes our understanding of the welfare consequences of taxation, the relative desirability of using the tax system as a platform for policy implementation, and the role of taxes as an element of policy design. We do so by reviewing the logic of specific features of tax policy in light of recent findings in areas such as tax salience, program take-up, and fiscal stimulus. ER - TY - JOUR AU - Sialm,Clemens AU - Starks,Laura TI - Mutual Fund Tax Clienteles JF - National Bureau of Economic Research Working Paper Series VL - No. 15327 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15327 L1 - http://www.nber.org/papers/w15327.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 Laura Starks University of Texas at Austin McCombs School of Business 1 University Station; B6600 Austin, TX 78712 E-Mail: laura.starks@mccombs.utexas.edu M1 - published as AB - Mutual funds are pooled investment vehicles with diverse tax clienteles. Whereas many mutual funds are held primarily by taxable investors, a significant fraction of mutual fund assets are held in tax-qualified retirement accounts. Our paper investigates whether the characteristics, investment strategies, and performance of mutual funds held by diverse tax clienteles differ. Examining both mutual fund income distributions and mutual fund holdings, we find that funds held primarily by taxable investors tend to be more tax-efficient than funds held primarily in tax-deferred retirement accounts. Despite these differences, we find no evidence that any investment constraints that may arise from the funds that pursue tax efficient management strategies result in performance differences between funds held by different tax clienteles. ER - TY - JOUR AU - Oster,Emily AU - Shoulson,Ira AU - Quaid,Kimberly AU - Dorsey,E. Ray TI - Genetic Adverse Selection: Evidence from Long-Term Care Insurance and Huntington Disease JF - National Bureau of Economic Research Working Paper Series VL - No. 15326 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15326 L1 - http://www.nber.org/papers/w15326.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 University of Rochester School of Medicine and Dentistry Department of Neurology 601 Elmwood Ave, Box 673 Rochester, New York 14642 E-Mail: Ira.Shoulson@ctcc.rochester.edu Kimberly Quaid IUPUI E-Mail: kquaid@iupui.edu E. Ray Dorsey University of Rochester School of Medicine and Dentistry Department of Neurology 601 Elmwood Ave, Box 673 Rochester, New York 14642 E-Mail: Ray.Dorsey@ctcc.rochester.edu M1 - published as AB - Individual, personalized genetic information is increasingly available, leading to the possibility of greater adverse selection over time, particularly in individual-payer insurance markets; this selection could impact the viability of these markets. We use data on individuals at risk for Huntington disease (HD), a degenerative neurological disorder with significant effects on morbidity, to estimate adverse selection in long-term care insurance. We find strong evidence of adverse selection: individuals who carry the HD genetic mutation are up to 5 times as likely as the general population to own long-term care insurance. We use these estimates to make predictions about the future of this market as genetic information increases. We argue that even relatively limited increases in genetic information may threaten the viability of private long-term care insurance. ER - TY - JOUR AU - Hall,Bronwyn H. AU - Lerner,Josh TI - The Financing of R&D and Innovation JF - National Bureau of Economic Research Working Paper Series VL - No. 15325 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15325 L1 - http://www.nber.org/papers/w15325.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 Josh Lerner Harvard Business School Rock Center 214 Boston, MA 02163 Tel: 617/495-6065 Fax: 617/496-7357 E-Mail: jlerner@hbs.edu M1 - published as AB - Evidence on the “funding gap“ for investment innovation is surveyed. The focus is on financial market reasons for underinvestment that exist even when externality-induced underinvestment is absent. We conclude that while small and new innovative firms experience high costs of capital that are only partly mitigated by the presence of venture capital, the evidence for high costs of R&D capital for large firms is mixed. Nevertheless, large established firms do appear to prefer internal funds for financing such investments and they manage their cash flow to ensure this. Evidence shows that there are limits to venture capital as a solution to the funding gap, especially in countries where public equity markets for VC exit are not highly developed. We conclude by suggesting areas for further research. ER - TY - JOUR AU - Edmans,Alex AU - Gabaix,Xavier AU - Sadzik,Tomasz AU - Sannikov,Yuliy TI - Dynamic Incentive Accounts JF - National Bureau of Economic Research Working Paper Series VL - No. 15324 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15324 L1 - http://www.nber.org/papers/w15324.pdf N1 - Author contact info: Alex Edmans The Wharton School University of Pennsylvania 2428 Steinberg Hall-Dietrich Hall 3620 Locust Walk Philadelphia, PA 19104 E-Mail: aedmans@wharton.upenn.edu 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 Tomasz Sadzik Department of Economics 19 West 4 Street, Suite 612 New York, NY 10012 E-Mail: tsadzik@nyu.edu Yuliy Sannikov Department of Economics 208 Fisher Hall Princeton University Princeton, NJ 08544 E-Mail: sannikov@gmail.com M1 - published as AB - Contracts in a dynamic model must address a number of issues absent from static frameworks. Shocks to firm value may weaken the incentive effects of securities (e.g. cause options to fall out of the money), and the impact of some CEO actions may not be felt until far in the future. We derive the optimal contract in a setting where the CEO can affect firm value through both productive effort and costly manipulation, and may undo the contract by privately saving. The optimal contract takes a surprisingly simple form, and can be implemented by a "Dynamic Incentive Account." The CEO's expected pay is escrowed into an account, a fraction of which is invested in the firm's stock and the remainder in cash. The account features state-dependent rebalancing and time-dependent vesting. It is constantly rebalanced so that the equity fraction remains above a certain threshold; this threshold sensitivity is typically increasing over time even in the absence of career concerns. The account vests gradually both during the CEO's employment and after he quits, to deter short-termist actions before retirement. ER - TY - JOUR AU - Muralidharan,Karthik AU - Sundararaman,Venkatesh TI - Teacher Performance Pay: Experimental Evidence from India JF - National Bureau of Economic Research Working Paper Series VL - No. 15323 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15323 L1 - http://www.nber.org/papers/w15323.pdf N1 - Author contact info: Karthik Muralidharan Department of Economics, 0508 University of California, San Diego 9500 Gilman Drive La Jolla, CA 92093-0508 Tel: 858/534-2425 Fax: 858/534-7040 E-Mail: kamurali@ucsd.edu Venkatesh Sundararaman South Asia Human Development Unit The World Bank 1818 H Street, NW Washington, DC 20433 E-Mail: vsundararaman@worldbank.org M1 - published as AB - Performance pay for teachers is frequently suggested as a way of improving education outcomes in schools, but the theoretical predictions regarding its effectiveness are ambiguous and the empirical evidence to date is limited and mixed. We present results from a randomized evaluation of a teacher incentive program implemented across a large representative sample of government-run rural primary schools in the Indian state of Andhra Pradesh. The program provided bonus payments to teachers based on the average improvement of their students' test scores in independently administered learning assessments (with a mean bonus of 3% of annual pay). At the end of two years of the program, students in incentive schools performed significantly better than those in control schools by 0.28 and 0.16 standard deviations in math and language tests respectively. They scored significantly higher on "conceptual" as well as "mechanical" components of the tests, suggesting that the gains in test scores represented an actual increase in learning outcomes. Incentive schools also performed better on subjects for which there were no incentives, suggesting positive spillovers. Group and individual incentive schools performed equally well in the first year of the program, but the individual incentive schools outperformed in the second year. Incentive schools performed significantly better than other randomly-chosen schools that received additional schooling inputs of a similar value. ER - TY - JOUR AU - Fox,Jeremy T. TI - Estimating the Employer Switching Costs and Wage Responses of Forward-Looking Engineers JF - National Bureau of Economic Research Working Paper Series VL - No. 15322 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15322 L1 - http://www.nber.org/papers/w15322.pdf N1 - Author contact info: Jeremy T. Fox Department of Economics University of Chicago 1126 East 59th Street Chicago, IL 60637 Tel: 773/702-4862 Fax: 773/702-8490 E-Mail: fox@uchicago.edu M1 - published as AB - I estimate the relative magnitudes of worker switching costs and how much the employer switching of experienced engineers responds to outside wage offers. Institutional features imply that voluntary turnover dominates switching in the market for Swedish engineers from 1970--1990. I use data on the allocation of engineers across a large fraction of Swedish private sector firms to estimate the relative importance of employer wage policies and switching costs in a dynamic programming, discrete choice model of voluntary employer choice. The differentiated firms are modeled in employer characteristic space and each firm has its own age-wage profile. I find that a majority of engineers have moderately high switching costs and that a minority of experienced workers are responsive to outside wage offers. Younger workers are more sensitive to outside wage offers than older workers. ER - TY - JOUR AU - Giuliano,Paola AU - Spilimbergo,Antonio TI - Growing Up in a Recession: Beliefs and the Macroeconomy JF - National Bureau of Economic Research Working Paper Series VL - No. 15321 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15321 L1 - http://www.nber.org/papers/w15321.pdf N1 - Author contact info: 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 Antonio Spilimbergo International Monetary Fund 700 19th Street, N.W. Washington, DC 20431 E-Mail: aspilimbergo@imf.org M1 - published as AB - Do generations growing up during recessions have different socio-economic beliefs than generations growing up in good times? We study the relationship between recessions and beliefs by matching macroeconomic shocks during early adulthood with self-reported answers from the General Social Survey. Using time and regional variations in macroeconomic conditions to identify the effect of recessions on beliefs, we show that individuals growing up during recessions tend to believe that success in life depends more on luck than on effort, support more government redistribution, but are less confident in public institutions. Moreover, we find that recessions have a long-lasting effect on individuals’ beliefs. ER - TY - JOUR AU - Burkhauser,Richard V. AU - Feng,Shuaizhang AU - Jenkins,Stephen P. AU - Larrimore,Jeff TI - Recent Trends in Top Income Shares in the USA: Reconciling Estimates from March CPS and IRS Tax Return Data JF - National Bureau of Economic Research Working Paper Series VL - No. 15320 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15320 L1 - http://www.nber.org/papers/w15320.pdf N1 - Author contact info: Richard V. Burkhauser Cornell University Department of Policy Analysis & Management 125 MVR Hall Ithaca, NY 14853-4401 Tel: 607/255-2097 Fax: 607/255-4071 E-Mail: rvb1@cornell.edu Shuaizhang Feng E-Mail: shuaizhang.feng@gmail.com Stephen Jenkins University of Essex Institute for Social and Economic Research Colchester, ENGLAND CO4 3SQ E-Mail: stephenj@essex.ac.uk Jeff Larrimore Cornell University Department of Economics 404 Uris Hall Ithaca NY, 14853 E-Mail: jhl42@cornell.edu M1 - published as AB - Although the vast majority of US research on trends in the inequality of family income is based on public-use March Current Population Survey (CPS) data, a new wave of research based on Internal Revenue Service (IRS) tax return data reports substantially higher levels of inequality and faster growing trends. We show that these apparently inconsistent estimates can largely be reconciled once one uses internal CPS data (which better captures the top of the income distribution than public-use CPS data) and defines the income distribution in the same way. Using internal CPS data for 1967–2006, we closely match the IRS data-based estimates of top income shares reported by Piketty and Saez (2003), with the exception of the share of the top 1 percent of the distribution during 1993–2000. Our results imply that, if inequality has increased substantially since 1993, the increase is confined to income changes for those in the top 1 percent of the distribution. ER - TY - JOUR AU - Comin,Diego A. AU - Hobijn,Bart TI - The CHAT Dataset JF - National Bureau of Economic Research Working Paper Series VL - No. 15319 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15319 L1 - http://www.nber.org/papers/w15319.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 Bart Hobijn Federal Reserve Bank of San Francisco Economic Research Department, Mailstop 1130 101 Market Street, 11th floor San Francisco, CA 94105 Tel: 415 974 2314 Fax: 415 974 2168 E-Mail: bart.hobijn@sf.frb.org M1 - published as AB - This note accompanies the Cross-country Historical Adoption of Technology (CHAT) dataset. CHAT is an unbalanced panel dataset with information on the adoption of over 100 technologies in more than 150 countries since 1800. The data is available for download at: http://www.nber.org/data/chat We discuss the main aim of CHAT, its scope and limitations, as well as several ways in which we have used the data so far and ways to potentially use the data for other research. ER - TY - JOUR AU - Chen,Yong AU - Ferson,Wayne AU - Peters,Helen TI - Measuring the Timing Ability and Performance of Bond Mutual Funds JF - National Bureau of Economic Research Working Paper Series VL - No. 15318 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15318 L1 - http://www.nber.org/papers/w15318.pdf N1 - Author contact info: Yong Chen Department of Finance Pamplin College of Business 1016 Pamplin Hall (0221) Virginia Tech Blacksburg, VA 24061 Tel: 540-231-4377 Fax: 540-231-3155 E-Mail: yong.chen@vt.edu 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 Helen Peters Department of Finance Boston College 140 Commonwealth Ave Chestnut Hill, MA. 02467 E-Mail: helen.peters.1@bc.edu M1 - published as AB - This paper evaluates the ability of bond funds to "market time" nine common factors related to bond markets. Timing ability generates nonlinearity in fund returns as a function of common factors, but there are several non-timing-related sources of nonlinearity. Controlling for the non-timing-related nonlinearity is important. Funds' returns are more concave than benchmark returns, and this would appear as poor timing ability in naive models. With controls, the timing coefficients appear neutral to weakly positive. Adjusting for nonlinearity the performance of many bond funds is significantly negative on an after-cost basis, but significantly positive on a before-cost basis. ER - TY - JOUR AU - Tang,Ning AU - Mitchell,Olivia S. AU - Mottola,Gary R. AU - Utkus,Stephen TI - The Efficiency of Sponsor and Participant Portfolio Choices in 401(k) Plans JF - National Bureau of Economic Research Working Paper Series VL - No. 15317 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15317 L1 - http://www.nber.org/papers/w15317.pdf N1 - Author contact info: Ning Tang University of Pennsylvania Wharton School 3620 Locust Walk 3000 SH-DH Philadelphia, PA 19104 E-Mail: tangn@wharton.upenn.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 Gary R. Mottola Vanguard Center for Retirement Research 100 Vanguard Boulevard, M38 Malvern, PA 19355 E-Mail: gmottola@vanguard.com Stephen Utkus Vanguard Center for Retirement Research 100 Vanguard Boulevard, M38 Malvern, PA 19355 E-Mail: steve_utkus@vanguard.com M1 - published as AB - Portfolio performance in 401(k) plans depends on both the investment menu made available by plan sponsors and participants portfolio decisions. We use a unique dataset of nearly 1 million participants in one thousand pension plans to identify key portfolio inefficiencies in 401(k) plans,attributing them either to the sponsor’s menu design or to participants’ own portfolio choices. We show that most sponsors offer efficient investment menus. However, many participants fail to construct efficient portfolios, leading to retirement wealth that could be one-fifth lower due to poor portfolio decisions. Because participants are the main source of inefficient DC portfolio choices, strategies targeting their portfolio choices, such as improved default investment strategies or advice programs, may help. Also, in sponsors’ design of 401(k) menus, the number of options offered is less important than the range of funds provided. ER - TY - JOUR AU - Cutler,David M. AU - Meara,Ellen AU - Richards,Seth TI - Induced Innovation and Social Inequality: Evidence from Infant Medical Care JF - National Bureau of Economic Research Working Paper Series VL - No. 15316 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15316 L1 - http://www.nber.org/papers/w15316.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 Ellen Meara Department of Health Care Policy Harvard Medical School 180 Longwood Avenue Boston, MA 02115-5899 Tel: 617/432-3537 Fax: 617/432-0173 E-Mail: meara@hcp.med.harvard.edu Seth Richards Department of Economics University of Pennsylvania 3718 Locust Walk Philadelphia, PA 19104 Tel: 215-983-9477 E-Mail: serichar@econ.upenn.edu M1 - published as AB - We develop a model of induced innovation where research effort is a function of the death rate, and thus the potential to reduce deaths in the population. We also consider potential social consequences that arise from this form of induced innovation based on differences in disease prevalence across population subgroups (i.e. race). Our model yields three empirical predictions. First, initial death rates and subsequent research effort should be positively correlated. Second, research effort should be associated with more rapid mortality declines. Third, as a byproduct of targeting the most common conditions in the population as a whole, induced innovation leads to growth in mortality disparities between minority and majority groups. Using information on infant deaths in the U.S. between 1983 and 1998, we find support for all three empirical predictions. We estimate that induced innovation predicts about 20 percent of declines in infant mortality over this period. At the same time, innovation that occurred in response to the most common causes of death favored the majority racial group in the U.S., whites. We estimate that induced innovation contributed about one third of the rise in the black-white infant mortality ratio during our period of study. ER - TY - JOUR AU - Haeussler,Carolin AU - Jiang,Lin AU - Thursby,Jerry AU - Thursby,Marie C. TI - Specific and General Information Sharing Among Academic Scientists JF - National Bureau of Economic Research Working Paper Series VL - No. 15315 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15315 L1 - http://www.nber.org/papers/w15315.pdf N1 - Author contact info: Carolin Haeussler Institut für Innovationsforschung Technologiemana und Entrepreneurship Ludwig-Maximilians-Universität München (LMU) Kaulbachstr. 45 80539 München E-Mail: haeussler@lmu.de Lin Jiang Georgia Institute of Technology College of Management 800 West Peachtree Street NW Atlanta, Georgia 30308-0520 E-Mail: lin.jiang@mgt.gatech.edu Jerry Thursby Georgia Institute of Technology E-Mail: jerry.thursby@mgt.gatech.edu Marie C. Thursby College of Management Georgia Institute of Technology 800 West Peachtree street, NW Atlanta, GA 30332-0520 Tel: 404/894-6249 Fax: 404/385-4894 E-Mail: marie.thursby@mgt.gatech.edu M1 - published as AB - We provide theoretical and empirical evidence on the factors that influence the willingness of academic scientists to share research results. We distinguish between two types of sharing, specific sharing in which a researcher shares her data or materials with another and general sharing in which scientists report results to the entire community (as in conference presentations). We present two simple games in which scientists research a problem of scientific merit (with an associated prize of academic and/or commercial value). In both cases, the scientists have intermediate research results but none has solved the entire problem.We test these models using a unique survey of bio-scientists in the UK and Germany regarding their willingness to "share." Our results generally support both models. In both, sharing is negatively related to competition and the importance of patents. In other respects they differ markedly. For example, large teams are more likely to share specifically but less likely to share generally. Rank does not matter for general sharing, but it does for specific sharing, where untenured faculty are less likely to share. One important implication is that policies designed to enhance sharing must be tailored to the type of sharing. ER - TY - JOUR AU - Frank,Richard G. AU - Meara,Ellen TI - The Effect of Maternal Depression and Substance Abuse on Child Human Capital Development JF - National Bureau of Economic Research Working Paper Series VL - No. 15314 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15314 L1 - http://www.nber.org/papers/w15314.pdf N1 - Author contact info: Richard Frank Department of Health Care Policy Harvard Medical School 180 Longwood Avenue Boston, MA 02115 Tel: 617/432-0178 Fax: 617/432-1219 E-Mail: frank@hcp.med.harvard.edu Ellen Meara Department of Health Care Policy Harvard Medical School 180 Longwood Avenue Boston, MA 02115-5899 Tel: 617/432-3537 Fax: 617/432-0173 E-Mail: meara@hcp.med.harvard.edu M1 - published as AB - Recent models of human capital formation represent a synthesis of the human capital approach and a life cycle view of human development that is grounded in neuroscience (Heckman 2007). This model of human development, the stability of the home and parental mental health can have notable impacts on skill development in children that may affect the stock of human capital in adults (Knudsen, Heckman et al. 2006; Heckman 2007). We study effects of maternal depression and substance abuse on children born to mothers in the initial cohort of the 1979 National Longitudinal Survey of Youth (NLSY), a national household survey of high school students aged 14-22 in 1979. We follow 1587 children aged 1-5 in 1987, observing them throughout childhood and into high school. We employ a variety of methods to identify the effect of maternal depression and substance abuse on child behavioral, cognitive, and educational related outcomes. We find no evidence that maternal symptoms of depression affect contemporaneous cognitive scores in children. However, maternal depression symptoms have a moderately large effect on child behavioral problems. These findings suggest that the social benefits of effective behavioral health interventions may be understated. Based on evidence linking early life outcomes to later well-being, efforts to prevent and/or treat mental and addictive disorders in mothers and other women of childbearing age have the potential to improve outcomes of their children not only early in life, but throughout the life cycle. ER - TY - JOUR AU - Dunne,Timothy AU - Klimek,Shawn D. AU - Roberts,Mark J. AU - Xu,Daniel Yi TI - Entry, Exit, and the Determinants of Market Structure JF - National Bureau of Economic Research Working Paper Series VL - No. 15313 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15313 L1 - http://www.nber.org/papers/w15313.pdf N1 - Author contact info: Timothy Dunne Department of Economics Hester Hall University of Oklahoma Norman, OK 73019 Tel: 405 325 2863 E-Mail: tdunne@ou.edu Shawn D. Klimek Center for Economic Studies U.S. Census Bureau 4600 Silver Hill Rd Washington, DC 20233 Tel: (301) 763-2861 Fax: (301) 763-5935 E-Mail: shawn.d.klimek@census.gov 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 New York University 19 West Fourth Street, Sixth Floor New York, NY 10012 Tel: 212/998-8926 E-Mail: daniel.xu@nyu.edu M1 - published as AB - Market structure is determined by the entry and exit decisions of individual producers. These decisions are driven by expectations of future profits which, in turn, depend on the nature of competition within the market. In this paper we estimate a dynamic, structural model of entry and exit in an oligopolistic industry and use it to quantify the determinants of market structure and long-run firm values for two U.S. service industries, dentists and chiropractors. We find that entry costs faced by potential entrants, fixed costs faced by incumbent producers, and the toughness of short-run price competition are all important determinants of long run firm values and market structure. As the number of firms in the market increases, the value of continuing in the market and the value of entering the market both decline, the probability of exit rises, and the probability of entry declines. The magnitude of these effects differ substantially across markets due to differences in exogenous cost and demand factors and across the dentist and chiropractor industries. Simulations using the estimated model for the dentist industry show that pressure from both potential entrants and incumbent firms discipline long-run profits. We calculate that a seven percent reduction in the mean sunk entry cost would reduce a monopolist's long-run profits by the same amount as if the firm operated in a duopoly. ER - TY - JOUR AU - Barsky,Robert B. AU - Sims,Eric R. TI - News Shocks JF - National Bureau of Economic Research Working Paper Series VL - No. 15312 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15312 L1 - http://www.nber.org/papers/w15312.pdf N1 - Author contact info: Robert B. Barsky Department of Economics University of Michigan Ann Arbor, MI 48109-1220 Tel: 734/764-9476 Fax: 734/764-2769 E-Mail: barsky@umich.edu Eric Sims University of Notre Dame Department of Economics and Econometrics 723 Flanner Hall Notre Dame, IN 46556 http://www.nd.edu/~esims1/ Tel: 574-631-6309 E-Mail: esims1@nd.edu M1 - published as AB - We implement a new approach for the identification of "news shocks" about future technology. In a VAR featuring a measure of aggregate technology and several forward-looking variables, we identify the news shock as the shock orthogonal to technology innovations that best explains future variation in technology. In the data, news shocks account for the bulk of low frequency variation in technology. News shocks are positively correlated with consumption, stock price, and consumer confidence innovations, and negatively correlated with inflation innovations. The disinflationary nature of news shocks is consistent with the implications of sensibly modified versions of a New Keynesian model. ER - TY - JOUR AU - Evans,William N. AU - Moore,Timothy J. TI - The Short-Term Mortality Consequences of Income Receipt JF - National Bureau of Economic Research Working Paper Series VL - No. 15311 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15311 L1 - http://www.nber.org/papers/w15311.pdf N1 - Author contact info: William N. Evans Keough-Hesburgh Professor of Economics Department of Economics and Econometrics 447 Flanner Hall University of Notre Dame Notre Dame, IN 46556 Tel: 574-631-7039 E-Mail: wevans1@nd.edu Timothy J. Moore Department of Economics University of Maryland Tydings Hall College Park, MD 20742 E-Mail: moore@econ.umd.edu M1 - published as AB - Many studies find that households increase their consumption after the receipt of expected income payments, a result inconsistent with the life-cycle/permanent income hypothesis. Consumption can increase adverse health events, such as traffic accidents, heart attacks and strokes. In this paper, we examine the short-term mortality consequences of income receipt. We find that mortality increases following the arrival of monthly Social Security payments, regular wage payments for military personnel, the 2001 tax rebates, and Alaska Permanent Fund dividend payments. The increase in short-run mortality is large, potentially eliminating some of the protective benefits of additional income. ER - TY - JOUR AU - Evans,William N. AU - Moore,Timothy J. TI - Liquidity, Activity, Mortality JF - National Bureau of Economic Research Working Paper Series VL - No. 15310 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15310 L1 - http://www.nber.org/papers/w15310.pdf N1 - Author contact info: William N. Evans Keough-Hesburgh Professor of Economics Department of Economics and Econometrics 447 Flanner Hall University of Notre Dame Notre Dame, IN 46556 Tel: 574-631-7039 E-Mail: wevans1@nd.edu Timothy J. Moore Department of Economics University of Maryland Tydings Hall College Park, MD 20742 E-Mail: moore@econ.umd.edu M1 - published as AB - We document a within-month mortality cycle where deaths decline before the 1st day of the month and then spike after the 1st. This cycle is present across a wide variety of causes and demographic groups. A similar cycle exists for a range of activities, suggesting the mortality cycle may be due to short-term variation in levels of activity. We provide evidence that the within-month activity cycle is generated by liquidity. Our results suggest a causal pathway whereby liquidity problems reduce activity, which in turn reduces mortality. These relationships help explain the pro-cyclic nature of mortality. ER - TY - JOUR AU - Evans,William N. AU - Garthwaite,Craig L. TI - Estimating Heterogeneity in the Benefits of Medical Treatment Intensity JF - National Bureau of Economic Research Working Paper Series VL - No. 15309 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15309 L1 - http://www.nber.org/papers/w15309.pdf N1 - Author contact info: William N. Evans Keough-Hesburgh Professor of Economics Department of Economics and Econometrics 447 Flanner Hall University of Notre Dame Notre Dame, IN 46556 Tel: 574-631-7039 E-Mail: wevans1@nd.edu Craig L. Garthwaite Craig Garthwaite Department of Management and Strategy Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, IL 60208 E-Mail: c-garthwaite@kellogg.northwestern.edu M1 - published as AB - Federal and state laws passed in the late 1990 increased considerably postpartum stays for newborns. Using all births in California over the 1995-2001 period, 2SLS estimates suggest that for the average newborn impacted by the law, increased treatment intensity had modest and statistically insignificant (p-value>0.05) impacts on readmission probabilities. Allowing the treatment effect to vary by pre-existing conditions or the pre-law propensity score of being discharged early, two objective measures of medical need, demonstrates that the law had large and statistically significant impacts for those with the greatest likelihood of a readmission. These results demonstrate heterogeneity in the returns to greater treatment intensity, and the returns to the average and marginal patient vary considerably. ER - TY - JOUR AU - Yogo,Motohiro TI - Portfolio Choice in Retirement: Health Risk and the Demand for Annuities, Housing, and Risky Assets JF - National Bureau of Economic Research Working Paper Series VL - No. 15307 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15307 L1 - http://www.nber.org/papers/w15307.pdf N1 - Author contact info: Motohiro Yogo University of Pennsylvania The Wharton School Finance Department 3620 Locust Walk Philadelphia, PA 19104-6367 Tel: 215/898-3609 Fax: 215/898-6200 E-Mail: yogo@wharton.upenn.edu M1 - published as AB - This paper develops a consumption and portfolio-choice model of a retiree who allocates wealth in four asset classes: a riskless bond, a risky asset, a real annuity, and housing. The retiree chooses health expenditure endogenously in response to stochastic depreciation of health. The model is calibrated to explain the joint dynamics of health expenditure, health, and asset allocation for retirees in the Health and Retirement Study, aged 65 and older. The calibrated model is used to assess the welfare gain from private annuitization. The welfare gain ranges from 13 percent of wealth at age 65 for those in worst health, to 18 percent for those in best health. ER - TY - JOUR AU - Lee,Junhee AU - Song,Joonhyuk TI - Nature of Oil Price Shocks and Monetary Policy JF - National Bureau of Economic Research Working Paper Series VL - No. 15306 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15306 L1 - http://www.nber.org/papers/w15306.pdf N1 - Author contact info: Junhee Lee Yeungnam University School of International Economics and Business 214-1 Dae-Dong Kyeongsan-Si Kyeongsangbuk-Do E-Mail: lee1838@ynu.ac.kr Joonhyuk Song Korea Development Institute P.O. Box 113 Cheongnyang, Seoul 130-012 Korea E-Mail: jhsong@kdi.re.kr M1 - published as M3 - presented at "East Asian Seminar on Economics", June 26-27, 2009 AB - We investigate the nature of oil price shocks to the Korean economy in recent years and find that the recent hike in oil price is induced by the increase in oil demand in contrast to the previous years when oil price run-up is mostly from supply disruptions. We also study how monetary responses to oil price shocks affect economic stability and find that an accommodative policy yields more stable outcomes. ER - TY - JOUR AU - Alston,Lee J. AU - Harris,Edwyna AU - Mueller,Bernardo TI - De Facto and De Jure Property Rights: Land Settlement and Land Conflict on the Australian, Brazilian and U.S. Frontiers JF - National Bureau of Economic Research Working Paper Series VL - No. 15264 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15264 L1 - http://www.nber.org/papers/w15264.pdf N1 - Author contact info: Lee J. Alston Program on Environment and Society Institute of Behavioral Science Department of Economics University of Colorado at Boulder Boulder, CO 80309-0483 Tel: 303/492-4257 Fax: 303/492-1231 E-Mail: Lee.Alston@colorado.edu Edwyna Harris Monash University E-Mail: Edwyna.Harris@BusEco.monash.edu.au Bernardo Mueller University of Brasila E-Mail: bmueller@unb.br M1 - published as AB - We present a conceptual framework to better understand the interaction between settlement and the emergence of de facto property rights on frontiers prior to governments establishing and enforcing de jure property rights. In this framework, potential rents associated with more exclusivity drives “demand” for commons arrangements but demand is not a sufficient explanation; norms and politics matter. At some point enhanced scarcity will drive demand for more exclusivity beyond which can be sustained with commons arrangements. Claimants will therefore petition government for de jure property rights to their claims – formal titles. Land conflict will be minimal when governments supply property rights to first possessors. But, governments may not allocate de jure rights to these claimants because they face differing political constituencies. Moreover, governments may assign de jure rights but be unwilling to enforce the right. This generates potential or actual conflict over land depending on the violence potentials of de facto and de jure claimants. We examine land settlement and conflict on the frontiers of Australia, the U.S. and Brazil. We are interested in examining the emergence, sustainability, and collapse of commons arrangements in specific historical contexts. Our analysis indicates the emergence of de facto property rights arrangements will be relatively peaceful where claimants have reasons to organize collectively (Australia and the U.S.). The settlement process will be more prone to conflict when fewer collective activities are required. Consequently, claimants resort to periodic violent self-enforcement or third party enforcement (Brazil). In all three cases the movement from de facto to de jure property rights led to potential or actual conflict because of insufficient government enforcement. ER - TY - JOUR AU - Williamson,Jeffrey G. TI - Five Centuries of Latin American Inequality JF - National Bureau of Economic Research Working Paper Series VL - No. 15305 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15305 L1 - http://www.nber.org/papers/w15305.pdf N1 - Author contact info: Jeffrey G. Williamson The University of Wisconsin 350 South Hamilton Street #1002 Madison, WI 53703 Tel: 608-441-0023 Fax: 608-204-0783 E-Mail: jwilliam@fas.harvard.edu M1 - published as AB - Most analysts of the modern Latin American economy hold to a pessimistic belief in historical persistence -- they believe that Latin America has always had very high levels of inequality, suggesting it will be hard for modern social policy to create a more egalitarian society. This paper argues that this conclusion is not supported by what little evidence we have. The persistence view is based on an historical literature which has made little or no effort to be comparative. Modern analysts see a more unequal Latin America compared with Asia and the rich post-industrial nations and then assume that this must always have been true. Indeed, some have argued that high inequality appeared very early in the post-conquest Americas, and that this fact supported rent-seeking and anti-growth institutions which help explain the disappointing growth performance we observe there even today. This paper argues to the contrary. Compared with the rest of the world, inequality was not high in pre-conquest 1491, nor was it high in the post-conquest decades following 1492. Indeed, it was not even high in the mid-19th century just prior Latin America's belle époque. It only became high thereafter. Historical persistence in Latin American inequality is a myth. ER - TY - JOUR AU - Belenzon,Sharon AU - Berkovitz,Tomer AU - Bolton,Patrick TI - Intracompany Governance and Innovation JF - National Bureau of Economic Research Working Paper Series VL - No. 15304 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15304 L1 - http://www.nber.org/papers/w15304.pdf N1 - Author contact info: Sharon Belenzon Duke University Fuqua School of Business 1 Towerview Drive, Durham, NC United States E-Mail: sharon.belenzon@duke.edu Tomer Berkovitz Columbia University Graduate School of Business New York, NY 10027 E-Mail: tb2122@columbia.edu 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 M1 - published as AB - This paper examines the relation between ownership, corporate form, and innovation for a cross-section of private and publicly traded innovating firms in the US and 15 European countries. A striking novel observation emerges from our analysis: while most innovating firms in the US are publicly traded conglomerates, a substantial fraction of innovation is concentrated in private firms and in business groups in continental European countries. We find virtually no variation across US industries in the corporate form of innovating firms, but a substantial variation across industries in continental European countries, where business groups tend to be concentrated in industries with a slower and more fundamental innovation cycle and where intellectual protection of innovators seems to be of paramount importance. Our findings suggest that innovative companies choose the corporate form most conducive to R&D, as predicted by the Coasian view of how firms form. This is especially true in Europe, where there are fewer regulatory hurdles to the formation of business groups and hybrid corporate forms. It is less the case in the US, where conglomerates are generally favored. ER - TY - JOUR AU - Favero,Carlo AU - Giavazzi,Francesco TI - How large are the effects of tax changes? JF - National Bureau of Economic Research Working Paper Series VL - No. 15303 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15303 L1 - http://www.nber.org/papers/w15303.pdf N1 - Author contact info: Carlo Favero Department of Finance Bocconi University and IGIER Via Röntgen, 1 20136 Milano, ITALY E-Mail: carlo.favero@uni-bocconi.it Francesco Giavazzi Department of Economics Bocconi University and I.G.I.E.R room 5-D1-07 Via. G. Rontgen 1 20136, Milan Italy Tel: 0039-02-5836-3304 Fax: 0039-02-5836-3302 E-Mail: francesco.giavazzi@unibocconi.it M1 - published as AB - We use the time series of shifts in U.S. Federal tax liabilities constructed by Romer and Romer to estimate tax multipliers. Differently from the single-equation approach adopted by Romer and Romer, our estimation strategy (a Var that includes output, government spending and revenues, inflation and the nominal interest rate) does not rely upon the assumption that tax shocks are orthogonal to each other as well as to lagged values of other macro variables. Our estimated multiplier is much smaller: one, rather than three at a three-year horizon. When we split the sample in two sub-samples (before and after 1980) we find, before 1980, a multiplier whose size is never greater than one, after 1980 a multiplier not significantly different from zero. Following the findings in Bohn (1998), we also experiment with a model that includes debt and the non-linear government budget constraint. We find that, while in general not very important, the non-linearity that arises from the budget constraint makes a difference after 1980, when the response of fiscal variables to the level of the debt becomes stronger. ER - TY - JOUR AU - Acemoglu,Daron AU - Golosov,Mikhail AU - Tsyvinski,Aleh TI - Political Economy of Ramsey Taxation JF - National Bureau of Economic Research Working Paper Series VL - No. 15302 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15302 L1 - http://www.nber.org/papers/w15302.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 Mikhail Golosov Department of Economics Yale University Box 208268 New Haven, CT 06520-8269 Tel: 203/436-8475 Fax: 203/436-2696 E-Mail: m.golosov@yale.edu Aleh Tsyvinski Department of Economics Yale University Box 208268 New Haven, CT 06520-8268 Tel: 310/500-9321 E-Mail: a.tsyvinski@yale.edu M1 - published as AB - We study the dynamic taxation of capital and labor in the Ramsey model under the assumption that taxes and public good provision are decided by a self-interested politician who cannot commit to policies. We show that, as long as the discount factor of the politician is equal to or greater than that of the citizens, the Chamley-Judd result of zero long-run taxes holds. In contrast, if the politician is less patient than the citizens, the best (subgame perfect) equilibrium from the viewpoint of the citizens involves long-run capital taxation. ER - TY - JOUR AU - Abadie,Alberto AU - Imbens,Guido W. TI - Matching on the Estimated Propensity Score JF - National Bureau of Economic Research Working Paper Series VL - No. 15301 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15301 L1 - http://www.nber.org/papers/w15301.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 M1 - published as AB - Propensity score matching estimators (Rosenbaum and Rubin, 1983) are widely used in evaluation research to estimate average treatment effects. In this article, we derive the large sample distribution of propensity score matching estimators. Our derivations take into account that the propensity score is itself estimated in a first step, prior to matching. We prove that first step estimation of the propensity score affects the large sample distribution of propensity score matching estimators. Moreover, we derive an adjustment to the large sample variance of propensity score matching estimators that corrects for first step estimation of the propensity score. In spite of the great popularity of propensity score matching estimators, these results were previously unavailable in the literature. ER - TY - JOUR AU - Engel,Eduardo AU - Fischer,Ronald AU - Galetovic,Alexander TI - Soft Budgets and Renegotiations in Public-Private Partnerships JF - National Bureau of Economic Research Working Paper Series VL - No. 15300 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15300 L1 - http://www.nber.org/papers/w15300.pdf N1 - Author contact info: Eduardo Engel Yale University Department of Economics P.O. Box 208268 New Haven, CT 06520-8268 Tel: 203/432-5595 Fax: 203/432-5779 E-Mail: eduardo.engel@yale.edu Ronald Fischer Centro de Economia Aplicada (CEA) Departamento de Ingenieria Industrial Universidad de Chile Republica 701 Santiago CHILE E-Mail: rfischer@dii.uchile.cl Alexander Galetovic Fac. Cs. Economicas y Empresariales Universidad de Los Andes Av. San Carlos de Apoquindo 2200 Santiago CHILE E-Mail: alexander@galetovic.cl M1 - published as AB - Public-private partnerships (PPPs) are increasingly used to provide infrastructure services. Even though PPPs have the potential to increase efficiency and improve resource allocation, contract renegotiations have been pervasive. We show that existing accounting standards allow governments to renegotiate PPP contracts and elude spending limits. Our model of renegotiations leads to observable predictions: (i) in a competitive market, firms lowball their offers, expecting to break even through renegotiation, (ii) renegotiations compensate lowballing and pay for additional expenditure, (iii) governments use renegotiation to increase spending and shift the burden of payments to future administrations, and (iv) there are significant renegotiations in the early stages of the contract, e.g. during construction. We use data on Chilean renegotiations of PPP contracts to examine these predictions and find that the evidence is consistent with the predictions of our model. Finally, we show that if PPP investments are counted as current government spending, the incentives to renegotiate contracts to increase spending disappear. ER - TY - JOUR AU - Kantor,Shawn AU - Whalley,Alexander TI - Do Universities Generate Agglomeration Spillovers? Evidence from Endowment Value Shocks JF - National Bureau of Economic Research Working Paper Series VL - No. 15299 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15299 L1 - http://www.nber.org/papers/w15299.pdf N1 - Author contact info: 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 Alexander T. Whalley School of Social Sciences, Humanities and Arts University of California, Merced 5200 N. Lake Road Merced, CA 95343 Tel: 209/228-4027 E-Mail: awhalley@ucmerced.edu M1 - published as AB - In this paper we quantify the extent and magnitude of agglomeration spillovers from a formal institution whose sole mission is the creation and dissemination of knowledge -- the research university. We use the fact that universities follow a fixed endowment spending policy based on the market value of their endowments to identify the causal effect of the density of university activity on labor income in the non-education sector in large urban counties. Our instrument for university expenditures is based on the interaction between each university's initial endowment level at the start of the study period and the variation in stock market shocks over the course of the study period. We find modest but statistically significant spillover effects of university activity. The estimates indicate that a 10% increase in higher education spending increases local non-education sector labor income by about 0.5%. As the implied elasticity is no larger than what previous work finds for agglomeration spillovers arising from local economic activity in general, university activity does not appear to make a place any more productive than other forms of economic activity. We do find, however, that the magnitude of the spillover is significantly larger for firms that are technologically closer to universities in terms of citing patents generated by universities in their own patents and sharing a labor market with higher education. ER - TY - JOUR AU - DellaVigna,Stefano AU - Gentzkow,Matthew TI - Persuasion: Empirical Evidence JF - National Bureau of Economic Research Working Paper Series VL - No. 15298 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15298 L1 - http://www.nber.org/papers/w15298.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 Matthew Gentzkow University of Chicago Graduate School of Business 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-2177 Fax: 773/702-0458 E-Mail: gentzkow@chicagogsb.edu M1 - published as AB - We provide a selective survey of empirical evidence on the effects as well as the drivers of persuasive communication. We consider persuasion directed at consumers, voters, donors, and investors. We organize our review around four questions. First, to what extent does persuasion affect the behavior of each of these groups? Second, what models best capture the response to persuasive communication? In particular, we distinguish information-based models from preference-based models. Third, what are persuaders' incentives and what limits their ability to distort communications? Finally, what evidence exists on the equilibrium outcomes of persuasion in economics and politics? ER - TY - JOUR AU - Pedersen,Lasse Heje TI - When Everyone Runs for the Exit JF - National Bureau of Economic Research Working Paper Series VL - No. 15297 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15297 L1 - http://www.nber.org/papers/w15297.pdf N1 - Author contact info: Lasse H. Pedersen NYU Stern Finance 44 West Fouth Street Suite 9-190 New York, NY 10012 Tel: 212/998-0359 Fax: 212/995-4233 E-Mail: lpederse@stern.nyu.edu M1 - published as AB - The dangers of shouting "fire" in a crowded theater are well understood, but the dangers of rushing to the exit in the financial markets are more complex. Yet, the two events share several features, and I analyze why people crowd into theaters and trades, why they run, what determines the risk, whether to return to the theater or trade when the dust settles, and how much to pay for assets (or tickets) in light of this risk. These theoretical considerations shed light on the recent global liquidity crisis and, in particular, the quant event of 2007. ER - TY - JOUR AU - Judd,Kenneth AU - Maliar,Lilia AU - Maliar,Serguei TI - Numerically Stable Stochastic Simulation Approaches for Solving Dynamic Economic Models JF - National Bureau of Economic Research Working Paper Series VL - No. 15296 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15296 L1 - http://www.nber.org/papers/w15296.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 Department of Economics University of Alicante Campus San Vicente del Raspeig Ap. Correos 99, 03080 Alicante, Spain E-Mail: maliarl@merlin.fae.ua.es Serguei Maliar Department of Economics University of Alicante Campus San Vicente del Raspeig Ap. Correos 99, 03080 Alicante, Spain E-Mail: maliars@merlin.fae.ua.es M1 - published as AB - We develop numerically stable stochastic simulation approaches for solving dynamic economic models. We rely on standard simulation procedures to simultaneously compute an ergodic distribution of state variables, its support and the associated decision rules. We differ from existing methods, however, in how we use simulation data to approximate decision rules. Instead of the usual least-squares approximation methods, we examine a variety of alternatives, including the least-squares method using SVD, Tikhonov regularization, least-absolute deviation methods, principal components regression method, all of which are numerically stable and can handle ill-conditioned problems. These new methods enable us to compute high-order polynomial approximations without encountering numerical problems. Our approaches are especially well suitable for high-dimensional applications in which other methods are infeasible. ER - TY - JOUR AU - Malevergne,Yannick AU - Santa-Clara,Pedro AU - Sornette,Didier TI - Professor Zipf goes to Wall Street JF - National Bureau of Economic Research Working Paper Series VL - No. 15295 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15295 L1 - http://www.nber.org/papers/w15295.pdf N1 - Author contact info: Yannick Malevergne University of Saint-Etienne EM-Lyon Business School Coactis – 6 Rue Basse des Rives 42023 Saint-Etienne cedex 2 France E-Mail: ymalevergne@ethz.ch Pedro Santa-Clara Faculdade de Economia Universidade Nova de Lisboa Rua Marques de Fronteira, 20 1099-038 LISBOA PORTUGAL Tel: +351-91-493-4313 E-Mail: psc@fe.unl.pt Didier Sornette ETH Zurich Kreuzplatz 5 Zurich Switzerland E-Mail: dsornette@ethz.ch M1 - published as AB - The heavy-tailed distribution of firm sizes first discovered by Zipf (1949) is one of the best established empirical facts in economics. We show that it has strong implications for asset pricing. Due to the concentration of the market portfolio when the distribution of the capitalization of firms is sufficiently heavy-tailed, an additional risk factor generically appears even for very large economies. Our two-factor model is as successful empirically as the three-factor Fama-French model. ER - TY - JOUR AU - Conte,Marc N. AU - Kotchen,Matthew J. TI - Explaining the Price of Voluntary Carbon Offsets JF - National Bureau of Economic Research Working Paper Series VL - No. 15294 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15294 L1 - http://www.nber.org/papers/w15294.pdf N1 - Author contact info: Marc N.. Conte Woods Institute for the Environment Stanford University Stanford, CA 94305-5020 E-Mail: mconte@stanford.edu Matthew Kotchen School of Forestry & Environmental Studies Yale University 195 Prospect Street New Haven, CT 06511 Tel: 203-432-9533 Fax: 203-436-9150 E-Mail: matthew.kotchen@yale.edu M1 - published as AB - This paper investigates factors that explain the large variability in the price of voluntary carbon offsets. We estimate hedonic price functions using a variety of provider- and project-level characteristics as explanatory variables. We find that providers located in Europe sell offsets at prices that are approximately 30 percent higher than providers located in either North America or Australasia. Contrary to what one might expect, offset prices are generally higher, by roughly 20 percent, when projects are located in developing or least-developed nations. But this result does not hold for forestry-based projects. We find evidence that forestry-based offsets sell at lower prices, and the result is particularly strong when projects are located in developing or least-developed nations. Offsets that are certified under the Clean Development Mechanism or the Gold Standard, and therefore qualify for emission reductions under the Kyoto Protocol, sell at a premium of more than 30 percent; however, third-party certification from the Voluntary Carbon Standard, one of the largest certifiers, is associated with a price discount. Variables that have no effect on offset prices are the number of projects that a provider manages and a provider’s status as for-profit or not-for-profit. ER - TY - JOUR AU - Goulder,Lawrence H. AU - Hafstead,Marc A. C. AU - Dworsky,Michael S. TI - Impacts of Alternative Emissions Allowance Allocation Methods under a Federal Cap-and-Trade Program JF - National Bureau of Economic Research Working Paper Series VL - No. 15293 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15293 L1 - http://www.nber.org/papers/w15293.pdf N1 - Author contact info: Lawrence H. Goulder Department of Economics Landau Economics Building 328 Stanford University Stanford, CA 94305 Tel: 650/723-3706 Fax: 650/725-5702 E-Mail: goulder@stanford.edu Marc Hafstead Department of Economics Stanford University 579 Serra Mall Stanford, CA 94305-6072 Tel: 650-725-7483 E-Mail: mha337@stanford.edu Michael S. Dworsky Department of Economics Stanford University 579 Serra Mall Stanford, CA 94305-6072 E-Mail: mdworsky@stanford.edu M1 - published as AB - This paper examines the implications of alternative allowance allocation designs under a federal cap-and-trade program to reduce emissions of greenhouse gases. We focus on the impacts on industry profits and overall economic output, employing a dynamic general equilibrium model of the U.S. economy. The model's unique treatment of capital dynamics permits close attention to profit impacts. We find that the effects on profits depend critically on the method of allowance allocation. Freely allocating fewer than 15 percent of the emissions allowances generally suffices to prevent profit losses among the eight industries that, without free allowances or other compensation, would suffer the largest percentage losses of profit. Freely allocating 100 percent of the allowances substantially overcompensates these industries, in many cases causing more than a doubling of profits. These results indicate that profit preservation is consistent with substantial use of auctioning and the generation of considerable auction revenue. GDP costs of cap and trade depend critically on how such revenues are used. When these revenues are employed to finance cuts in marginal income tax rates, the resulting GDP costs are about 33 percent lower than when all allowances are freely allocated and no auction revenue is generated. On the other hand, when auction proceeds are returned to the economy in lump-sum fashion (for example, as rebate checks to households), the potential cost-advantages of auctioning are not realized. Our results are robust to cap-and-trade policies that differ according to policy stringency, the availability of offsets, and the extent of opportunities for intertemporal trading of allowances. ER - TY - JOUR AU - Müller,Ulrich AU - Watson,Mark W. TI - Low-Frequency Robust Cointegration Testing JF - National Bureau of Economic Research Working Paper Series VL - No. 15292 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15292 L1 - http://www.nber.org/papers/w15292.pdf N1 - Author contact info: Ulrich Mueller Department of Economics Princeton University Princeton, NJ 08544-1013 E-Mail: umueller@princeton.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 M1 - published as AB - Standard inference in cointegrating models is fragile because it relies on an assumption of an I(1) model for the common stochastic trends, which may not accurately describe the data's persistence. This paper discusses efficient low-frequency inference about cointegrating vectors that is robust to this potential misspecification. A simple test motivated by the analysis in Wright (2000) is developed and shown to be approximately optimal in the case of a single cointegrating vector. ER - TY - JOUR AU - Imberman,Scott AU - Kugler,Adriana D. AU - Sacerdote,Bruce TI - Katrina's Children: Evidence on the Structure of Peer Effects from Hurricane Evacuees JF - National Bureau of Economic Research Working Paper Series VL - No. 15291 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15291 L1 - http://www.nber.org/papers/w15291.pdf N1 - Author contact info: Scott Imberman University of Houston Department of Economics 204 McElhinney Hall Houston, TX 77204-5019 Tel: 713-743-3839 E-Mail: simberman@uh.edu Adriana D. Kugler University of Houston Department of Economics 204 McElhinney Hall Houston, TX 77204-5019 Tel: 713/743-3832 Fax: 713/743-3798 E-Mail: adkugler@uh.edu Bruce Sacerdote 6106 Rockefeller Hall Department of Economics Dartmouth College Hanover, NH 03755-3514 Tel: 603/646-2121 Fax: 603/646-2122 E-Mail: Bruce.I.Sacerdote@dartmouth.edu M1 - published as AB - In 2005, hurricanes Katrina and Rita forced many children to relocate across the Southeast. While schools quickly enrolled evacuees, receiving families worried about the impact of evacuees on non-evacuee students. Data from Houston and Louisiana show that, on average, the influx of evacuees moderately reduced elementary math test scores in Houston. We reject linear-in-means models of peer effects and find evidence of a highly non-linear but monotonic model - student achievement improves with high ability and worsens with low ability peers. Moreover, exposure to undisciplined evacuees increased native absenteeism and disciplinary problems, supporting a "bad apple" model in behavior. ER - TY - JOUR AU - Feldstein,Martin S. TI - Economic Conditions and U.S. National Security in the 1930s and Today JF - National Bureau of Economic Research Working Paper Series VL - No. 15290 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15290 L1 - http://www.nber.org/papers/w15290.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 M1 - published as AB - This paper comments on the experience of the U.S. economy in the 1930s, its lessons for managing the current economic downturn, and the relation of U.S. economic conditions to our future national security. Some of the conclusions are: (1) Although the current recession will be long and very damaging, it is not likely to deteriorate into conditions similar to the Depression of the 1930s. Policy makers now understand better than they did in the 1930s what needs to be done and what needs to be avoided. (2) The focus on domestic economic policies in the 1930s and the desire to remain militarily neutral delayed the major military buildup that eventually achieved the economic recovery. (3) A well-functioning system of bank lending is necessary for economic expansion. We have yet to achieve that in the current situation. (4) Raising taxes, even future taxes, can depress economic activity. The administration's budget proposes to raise tax rates on higher income individuals, on dividends and capital gains, on corporate profits and on all consumers through the cap and trade system of implicit CO2 taxes. (5) Inappropriate trade policies and domestic policies that affect the exchange rate can hurt our allies, leading to conflicts that spill over from economics to impair national security cooperation. Reducing long-term U.S. fiscal deficits would reduce the risk of inflation and thereby reduce the fear among foreign investors that their dollar investments will lose their purchasing power. (6) The possibilities for domestic terrorism and of cyber attacks creates risks that did not exist in the 1930s or even in more recent decades. The scale and funding of the FBI and the Department of Homeland Security is not consistent with these new risks. ER - TY - JOUR AU - Cúrdia,Vasco AU - Woodford,Michael TI - Credit Spreads and Monetary Policy JF - National Bureau of Economic Research Working Paper Series VL - No. 15289 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15289 L1 - http://www.nber.org/papers/w15289.pdf N1 - Author contact info: Vasco Curdia Federal Reserve Bank of New York 33 Liberty Street, 3rd Floor New York, NY 10045 Tel: 2127205994 E-Mail: Vasco.Curdia@ny.frb.org 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: michael.woodford@columbia.edu M1 - published as AB - We consider the desirability of modifying a standard Taylor rule for a central bank's interest-rate policy to incorporate either an adjustment for changes in interest-rate spreads (as proposed by Taylor [2008] and by McCulley and Toloui [2008]) or a response to variations in the aggregate volume of credit (as proposed by Christiano et al. [2007]). We consider the consequences of such adjustments for the way in which policy would respond to a variety of types of possible economic disturbances, including (but not limited to) disturbances originating in the financial sector that increase equilibrium spreads and contract the supply of credit. We conduct our analysis using the simple DSGE model with credit frictions developed in Curdia and Woodford (2009), and compare the equilibrium responses to a variety of disturbances under the modified Taylor rules to those under a policy that would maximize average expected utility. According to our model, a spread adjustment can improve upon the standard Taylor rule, but the optimal size is unlikely to be as large as the one proposed, and the same type of adjustment is not desirable regardless of the source of the variation in credit spreads. A response to credit is less likely to be helpful, and the desirable size (and even the right sign) of the response to credit is less robust to alternative assumptions about the nature and persistence of disturbances. ER - TY - JOUR AU - Ohanian,Lee E. TI - What - or Who - Started the Great Depression? JF - National Bureau of Economic Research Working Paper Series VL - No. 15258 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15258 L1 - http://www.nber.org/papers/w15258.pdf N1 - Author contact info: Lee E. Ohanian 8283 Bunch 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 M1 - published as AB - Herbert Hoover. I develop a theory of labor market failure for the Depression based on Hoover's industrial labor program that provided industry with protection from unions in return for keeping nominal wages fixed. I find that the theory accounts for much of the depth of the Depression and for the asymmetry of the depression across sectors. The theory also can reconcile why deflation/low nominal spending apparently had such large real effects during the 1930s, but not during other periods of significant deflation. ER - TY - JOUR AU - Tuljapurkar,Shripad AU - Edwards,Ryan D. TI - Variance in Death and Its Implications for Modeling and Forecasting Mortality JF - National Bureau of Economic Research Working Paper Series VL - No. 15288 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15288 L1 - http://www.nber.org/papers/w15288.pdf N1 - Author contact info: Shripad Tuljapurkar Stanford University Center on Longevity Herrin Labs, Room 454 Stanford, CA 94305 Tel: 650/724-4171 E-Mail: tulja@stanford.edu Ryan D. Edwards Department of Economics Queens College - CUNY Powdermaker Hall 300-S Flushing, NY 11367 Tel: 718/997-5189 Fax: 718/997-5466 E-Mail: redwards@qc.cuny.edu M1 - published as AB - Entropy, or the gradual decline through age in the survivorship function, reflects the considerable amount of variance in length of life found in any human population. Part is due to the well-known variation in life expectancy between groups: large differences according to race, sex, socioeconomic status, or other covariates. But within-group variance is very large even in narrowly defined groups, and it varies strongly and inversely with the group average length of life. We show that variance in length of life is inversely related to the Gompertz slope of log mortality through age, and we reveal its relationship to variance in a multiplicative frailty index. Our findings bear a variety of implications for modeling and forecasting mortality. In particular, we examine how the assumption of proportional hazards fails to account adequately for differences in subgroup variance, and we discuss how several common forecasting models treat the variance along the temporal dimension. ER - TY - JOUR AU - Blinder,Alan S. AU - Krueger,Alan B. TI - Alternative Measures of Offshorability: A Survey Approach JF - National Bureau of Economic Research Working Paper Series VL - No. 15287 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15287 L1 - http://www.nber.org/papers/w15287.pdf N1 - Author contact info: Alan S. Blinder Department of Economics Princeton University Princeton, NJ 08544-1021 Tel: 609/258-3358 Fax: 609/258-5398 E-Mail: blinder@princeton.edu 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 M1 - published as AB - This paper reports on a household survey specially designed to measure what we call the “offshorability” of jobs, defined as the ability to perform the work duties from abroad. We develop multiple measures of offshorability, using both self-reporting and professional coders. All the measures find that roughly 25% of U.S. jobs are offshorable. Our three preferred measures agree between 70% and 80% of the time. Furthermore, professional coders appear to provide the most accurate assessments, which is good news because the Census Bureau could collect data on offshorability without adding a single question to the CPS. Empirically, more educated workers appear to hold somewhat more offshorable jobs, and offshorability does not have systematic effects on either wages or the probability of layoff. Perhaps most surprisingly, routine work is no more offshorable than other work. ER - TY - JOUR AU - Gabaix,Xavier TI - The Granular Origins of Aggregate Fluctuations JF - National Bureau of Economic Research Working Paper Series VL - No. 15286 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15286 L1 - http://www.nber.org/papers/w15286.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 M1 - published as AB - This paper proposes that idiosyncratic firm-level fluctuations can explain an important part of aggregate shocks, and provide a microfoundation for aggregate productivity shocks. Existing research has focused on using aggregate shocks to explain business cycles, arguing that individual firm shocks average out in aggregate. I show that this argument breaks down if the distribution of firm sizes is fat-tailed, as documented empirically. The idiosyncratic movements of the largest 100 firms in the US appear to explain about one third of variations in output and the Solow residual. This "granular" hypothesis suggests new directions for macroeconomic research, in particular that macroeconomic questions can be clarified by looking at the behavior of large firms. This paper's ideas and analytical results may also be useful to think about the fluctuations of other economic aggregates, such as exports or the trade balance. ER - TY - JOUR AU - Ding,Waverly W. AU - Levin,Sharon G. AU - Stephan,Paula E. AU - Winkler,Anne E. TI - The Impact of Information Technology on Scientists' Productivity, Quality and Collaboration Patterns JF - National Bureau of Economic Research Working Paper Series VL - No. 15285 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15285 L1 - http://www.nber.org/papers/w15285.pdf N1 - Author contact info: Waverly Ding Haas School of Business University of California, Berkeley Berkeley, CA 94720-1900 E-Mail: wding@haas.berkeley.edu Sharon G. Levin University of Missouri-St. Louis St. Louis, MO 63121 Tel: 3149972319 E-Mail: slevin@umsl.edu 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 Anne E. Winkler University of Missouri-St. Louis St. Louis, MO 63121 E-Mail: awinkler@umsl.edu M1 - published as AB - This study advances the prior literature concerning the impact of information technology on productivity in academe in two important ways. First, it utilizes a dataset that combines information on the diffusion of two noteworthy and early innovations in IT -- BITNET and the Domain Name System (DNS) -- with career history data on research-active life scientists. This research design allows for proper identification of the availability of access to IT as well as a means to directly identify causal effects. Second, the fine-grained nature of the data set allows for an investigation of three publishing outcomes: counts, quality, and co-authorship. Our analysis of a random sample of 3,771 research-active life scientists from 430 U.S. institutions over a 25-year period supports the hypothesis of a differential return to IT across subgroups of the scientific labor force. Women scientists, early-to-mid-career scientists, and those employed by mid-to-lower-tier institutions benefit from access to IT in terms of overall research output and an increase in the number of new co-authors they work with. Early-career scientists and those in top-tier institutions gain in terms of research quality when IT becomes available at their campuses. ER - TY - JOUR AU - Ramey,Garey AU - Ramey,Valerie A. TI - The Rug Rat Race JF - National Bureau of Economic Research Working Paper Series VL - No. 15284 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15284 L1 - http://www.nber.org/papers/w15284.pdf N1 - Author contact info: Garey Ramey Department of Economics, 0508 University of California, San Diego La Jolla, CA 92093-0508 Tel: 619/534-5721; gramey@weber.ucsd.edu E-Mail: gramey@ucsd.edu 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 AB - After three decades of decline, the amount of time spent by parents on childcare in the U.S. began to rise dramatically in the mid-1990s. Moreover, the rise in childcare time was particularly pronounced among college-educated parents. Why would highly educated parents increase the amount of time they allocate to childcare at the same time that their own market returns have skyrocketed? After finding no empirical support for standard explanations, such as selection or income effects, we offer a new explanation. We argue that increased competition for college admissions may be an important source of these trends. The number of college-bound students has surged in recent years, coincident with the rise in time spent on childcare. The resulting “cohort crowding” has led parents to compete more aggressively for college slots by spending increasing amounts of time on college preparation. Our theoretical model shows that, since college-educated parents have a comparative advantage in college preparation, rivalry leads them to increase preparation time by a greater amount than less-educated parents. We provide empirical support for our explanation with a comparison of trends between the U.S. and Canada, and a comparison across racial groups in the U.S. ER - TY - JOUR AU - Mian,Atif R. AU - Sufi,Amir TI - House Prices, Home Equity-Based Borrowing, and the U.S. Household Leverage Crisis JF - National Bureau of Economic Research Working Paper Series VL - No. 15283 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15283 L1 - http://www.nber.org/papers/w15283.pdf N1 - Author contact info: Atif R. Mian University of Chicago Booth School of Business 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-8266 Fax: 773/702-0458 E-Mail: atif@chicagogsb.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@chicagogsb.edu M1 - published as AB - Using individual-level data on homeowner debt and defaults from 1997 to 2008, we show that borrowing against the increase in home equity by existing homeowners is responsible for a significant fraction of both the sharp rise in U.S. household leverage from 2002 to 2006 and the increase in defaults from 2006 to 2008. Employing land topology-based housing supply elasticity as an instrument for house price growth, we estimate that the average homeowner extracts 25 to 30 cents for every dollar increase in home equity. Money extracted from increased home equity is not used to purchase new real estate or pay down high credit card balances, which suggests that borrowed funds may be used for real outlays (i.e., consumption or home improvement). Home equity-based borrowing is stronger for younger households, households with low credit scores, and households with high initial credit card utilization rates. Homeowners in high house price appreciation areas experience a relative decline in default rates from 2002 to 2006 as they borrow heavily against their home equity, but experience very high default rates from 2006 to 2008. Our estimates suggest that home equity-based borrowing is equal to 2.8% of GDP every year from 2002 to 2006, and accounts for at least 34% of new defaults from 2006 to 2008. ER - TY - JOUR AU - Krusell,Per AU - Mukoyama,Toshihiko AU - Sahin,Aysegul TI - Labor-Market Matching with Precautionary Savings and Aggregate Fluctuations JF - National Bureau of Economic Research Working Paper Series VL - No. 15282 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15282 L1 - http://www.nber.org/papers/w15282.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 Charlottesville VA 22904 E-Mail: tm5hs@virginia.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 M1 - published as AB - We analyze a Bewley-Huggett-Aiyagari incomplete-markets model with labor-market frictions. Consumers are subject to idiosyncratic employment shocks against which they cannot insure directly. The labor market has a Diamond-Mortensen-Pissarides structure: firms enter by posting vacancies and match with workers bilaterally, with match probabilities given by an aggregate matching function. Wages are determined through Nash bargaining. We also consider aggregate productivity shocks, and a complete set of contingent claims conditional on this risk. We use the model to evaluate a tax-financed unemployment insurance scheme. Higher insurance is beneficial for consumption smoothing, but because it raises workers' outside option value, it discourages firm entry. We find that the latter effect is more potent for welfare outcomes; we tabulate the effects quantitatively for different kinds of consumers. We also demonstrate that productivity changes in the model---in steady state as well as stochastic ones---generate rather limited unemployment effects, unless workers are close to indifferent between working and not working; thus, recent findings are corroborated in our more general setting. ER - TY - JOUR AU - Mulligan,Casey B. TI - Means-Tested Mortgage Modification: Homes Saved or Income Destroyed? JF - National Bureau of Economic Research Working Paper Series VL - No. 15281 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15281 L1 - http://www.nber.org/papers/w15281.pdf N1 - Author contact info: Casey 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 M1 - published as AB - This paper uses the theories of price discrimination and optimal taxation to investigate effects of underwater mortgages on foreclosures and the incentives to earn income, and the degree to which those effects are shaped by public policy. I find that the federal government’s means-tested mortgage modification plan creates a massive implicit tax that may be significant even from a macroeconomic perspective. An alternative of modifying mortgages to maximize lender collections would also feature means tests, but with less effort distortion and perhaps fewer foreclosures. The paper also considers the consequences of a public policy that left mortgage modification to lenders, subject to a requirement that modification would not be conditioned on borrower income. ER - TY - JOUR AU - Kremer,Michael AU - Leino,Jessica AU - Miguel,Edward AU - Zwane,Alix Peterson TI - Spring Cleaning: Rural Water Impacts, Valuation and Property Rights Institutions JF - National Bureau of Economic Research Working Paper Series VL - No. 15280 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15280 L1 - http://www.nber.org/papers/w15280.pdf N1 - Author contact info: 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 Jessica Leino The World Bank 1818 H Street, NW Washington DC 20433 USA E-Mail: jessica.leino@gmail.com Edward Miguel Department of Economics University of California, Berkeley 508-1 Evans Hall #3880 Berkeley, CA 94720 Tel: 510/642-7162 Fax: 510/642-6615 E-Mail: emiguel@econ.berkeley.edu Alix Zwane Bill and Melinda Gates Foundation PO Box 23350 Seattle, WA 98102 E-Mail: azwane@gmail.com M1 - published as AB - In many societies, social norms create common property rights in natural resources, limiting incentives for private investment. This paper uses a randomized evaluation in Kenya to measure the health impacts of investments to improve source water quality through spring protection, estimate the value that households place on spring protection, and simulate the welfare impacts of alternative water property rights norms and institutions, including common property, freehold private property, and alternative “Lockean” property rights norms. We find that infrastructure investments reduce fecal contamination by 66% at naturally occurring springs, cutting child diarrhea by one quarter. While households increase their use of protected springs, travel-cost based revealed preference estimates of households’ valuations are only one-half stated preference valuations and are much smaller than levels implied by health planners’ typical valuations of child mortality, consistent with models in which the demand for health is highly income elastic. Simulations suggest that, at current income levels, private property norms would generate little additional investment while imposing large static costs due to spring owners’ local market power, but that private property norms might function better than common property at higher income levels. Alternative institutions, such as “modified Lockean” property rights, government investment or vouchers for improved water, could yield higher social welfare. ER - TY - JOUR AU - Schauer,Frederick AU - Zeckhauser,Richard TI - The Trouble with Cases JF - National Bureau of Economic Research Working Paper Series VL - No. 15279 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15279 L1 - http://www.nber.org/papers/w15279.pdf N1 - Author contact info: Frederick Schauer University of Virginia School of Law 580 Massie Rd. Charlottesville, VA 22903 E-Mail: schauer@virginia.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 M1 - published as AB - For several decades now a debate has raged about policy-making by litigation. Spurred by the way in which tobacco, environmental, and other litigation has functioned as an alternative form of regulation, the debate asks whether policy-making or regulation by litigation is more or less socially desirable than more traditional policy-making by ex ante rule-making by legislatures or administrative agencies. In this paper we step into this debate, but not to come down on one side or another, all things considered. Rather, we seek to show that any form of regulation that is dominated by high-salience particular cases is highly likely, to make necessarily general policy on the basis of unwarranted assumptions about the typicality of one or a few high-salience cases or events. Two cornerstone concepts of behavioral decision – the availability heuristic and related problems of representativeness – explain this bias. This problem is virtually inevitable in regulation by litigation, yet it is commonly found as well in ex ante rule-making, because such rule-making increasingly takes place in the wake of, and dominated by, particularly notorious and often unrepresentative outlier events. In weighing the net advantages of regulation by ex ante rule-making against those of regulation by litigation, society must recognize that any regulatory form is less effective insofar as it is unable to transcend the distorting effect of high-salience unrepresentative examples. ER - TY - JOUR AU - Galenson,David TI - The Greatest Photographers of the Twentieth Century JF - National Bureau of Economic Research Working Paper Series VL - No. 15278 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15278 L1 - http://www.nber.org/papers/w15278.pdf N1 - Author contact info: David Galenson Department of Economics University of Chicago 1126 East 59th Street Chicago, IL 60637 Tel: 773/702-8258 Fax: 773/702-8490 E-Mail: galenson@uchicago.edu M1 - published as AB - A survey of textbooks reveals that scholars consider Alfred Stieglitz to have been the greatest photographer of the twentieth century, followed in order by Walker Evans, Cindy Sherman, Man Ray, and Eugène Atget. Stieglitz, Evans, and Atget were experimental artists, who were committed to realism, whereas Man Ray and Sherman were conceptual innovators, who constructed images to express ideas. During much of the twentieth century, photography was dominated by the experimental approach and aesthetic of Stieglitz and his followers, but late in the century this changed; as photography grew increasingly central to advanced art in general, it came to be dominated by conceptual innovators. Sherman’s celebrated creation of artificial scenes is characteristic of the almost exclusively conceptual uses that today’s advanced artists make of its techniques and images, as technical and aesthetic considerations are generally subordinated to conceptual concerns. ER - TY - JOUR AU - Hamermesh,Daniel S. TI - Grazing, Goods and Girth: Determinants and Effects JF - National Bureau of Economic Research Working Paper Series VL - No. 15277 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15277 L1 - http://www.nber.org/papers/w15277.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 M1 - published as AB - Using the 2006-07 American Time Use Survey and its Eating and Health Module, I show that over half of adult Americans report grazing (secondary eating/drinking) on a typical day, with grazing time almost equaling primary eating/drinking time. An economic model predicts that higher wage rates (price of time) will lead to substitution of grazing for primary eating/drinking, especially by raising the number of grazing incidents relative to meals. This prediction is confirmed in these data. Eating meals more frequently is associated with lower BMI and better self-reported health, as is grazing more frequently. Food purchases are positively related to time spent eating—substitution of goods for time is difficult—but are lower when eating time is spread over more meals. ER - TY - JOUR AU - Berry,Steven T. AU - Haile,Philip A. TI - Nonparametric Identification of Multinomial Choice Demand Models with Heterogeneous Consumers JF - National Bureau of Economic Research Working Paper Series VL - No. 15276 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15276 L1 - http://www.nber.org/papers/w15276.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 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 M1 - published as AB - We consider identification of nonparametric random utility models of multinomial choice using "micro data," i.e., observation of the characteristics and choices of individual consumers. Our model of preferences nests random coefficients discrete choice models widely used in practice with parametric functional form and distributional assumptions. However, the model is nonparametric and distribution free. It allows choice-specific unobservables, endogenous choice characteristics, unknown heteroskedasticity, and high-dimensional correlated taste shocks. Under standard "large support" and instrumental variables assumptions, we show identifiability of the random utility model. We demonstrate robustness of these results to relaxation of the large support condition and show that when it is replaced with a weaker "common choice probability" condition, the demand structure is still identified. We show that key maintained hypotheses are testable. ER - TY - JOUR AU - Demirguc-Kunt,Asli AU - Levine,Ross TI - Finance and Inequality: Theory and Evidence JF - National Bureau of Economic Research Working Paper Series VL - No. 15275 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15275 L1 - http://www.nber.org/papers/w15275.pdf N1 - Author contact info: Asli Demirguc-Kunt World Bank 1818 H Street Washington, DC 20433 E-Mail: ademirguckunt@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 M1 - published as AB - This paper critically reviews the literature on finance and inequality, highlighting substantive gaps in the literature. Finance plays a crucial role in most theories of persistent inequality. Unsurprisingly, therefore, economic theory provides a rich set of predictions concerning both the impact of finance on inequality and about the relevant mechanisms. Although subject to ample qualifications, the bulk of empirical research suggests that improvements in financial contracts, markets, and intermediaries expand economic opportunities and reduce inequality. Yet, there is a shortage of theoretical and empirical research on the potentially enormous impact of formal financial sector policies, such as bank regulations and securities law, on persistent inequality. Furthermore, there is no conceptual framework for considering the joint and endogenous evolution of finance, inequality, and economic growth. ER - TY - JOUR AU - Aizenman,Joshua AU - Geng,Nan TI - Adjustment of State Owned and Foreign-Funded Enterprises in China to Economic Reforms,1980s-2007: a logistic smooth transition regression (LSTR) approach JF - National Bureau of Economic Research Working Paper Series VL - No. 15274 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15274 L1 - http://www.nber.org/papers/w15274.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 Nan Geng Economics E2, UCSC 1156 High St., Santa Cruz, CA, 95064 E-Mail: ngeng@ucsc.edu M1 - published as AB - This paper applies a logistic smooth transition regression approach to the estimation of a homogenous aggregate value added production function of the State Owned (SOE) and Foreign-Funded Enterprises (FFE) in China, 1980s-2007. The transition associated with the economic reforms in China is estimated applying a curvilinear logistic function, where the speed and the timing of the transition are endogenously determined by the data. We find high but gradually declining markups in both SOEs and FFEs during the early stages of the adjustment, with SOEs having a much larger scale and market size than the FFEs. However, over the transition process, returns to scale in industrial SOEs dropped sharply. For both FFEs and SOEs the transition is slow, with a midpoint about 7 and 14 years, respectively. We find significant increase of TFP growth rate for both FFEs and SOEs, by 0.1436 and 0.1971, respectively. ER - TY - JOUR AU - Gorton,Gary B. AU - Metrick,Andrew TI - Haircuts JF - National Bureau of Economic Research Working Paper Series VL - No. 15273 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15273 L1 - http://www.nber.org/papers/w15273.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 M1 - published as AB - When "confidence" is lost, "liquidity dries up." We investigate the meaning of "confidence" and "liquidity" in the context of the current financial crisis. The financial crisis is a manifestation of an age-old problem with private money creation, banking panics. We explain this and provide some evidence with respect to the current crisis. ER - TY - JOUR AU - Bound,John AU - Hershbein,Brad AU - Long,Bridget Terry TI - Playing the Admissions Game: Student Reactions to Increasing College Competition JF - National Bureau of Economic Research Working Paper Series VL - No. 15272 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15272 L1 - http://www.nber.org/papers/w15272.pdf N1 - Author contact info: John Bound Department of Economics University of Michigan Ann Arbor, MI 48109-1220 Tel: 734/998-7149 Fax: 734/998-7415 E-Mail: jbound@umich.edu Brad Hershbein Department of Economics University of Michigan Ann Arbor, MI 48109-1220 E-Mail: bjhersh@umich.edu Bridget T. Long Harvard University Graduate School of Education Gutman Library 465 6 Appian Way Cambridge, MA 02138 Tel: 617/496-4355 Fax: 617/496-3095 E-Mail: longbr@gse.harvard.edu M1 - published as AB - Gaining entrance to a four-year college or university, particularly a selective institution, has become increasingly competitive over the last several decades. We document this phenomenon and show how it has varied across different parts of the student ability distribution and across region, with the most pronounced increases in competition being found among higher-ability students and in the Northeast. Additionally, we explore how the college preparatory behavior of high school seniors has changed in response to the growth in competition. We also discuss the theoretical implications of increased competition on longer-term measures of learning and achievement and attempt to test them empirically; the evidence and related literature, while limited, suggests little long-term benefit. ER - TY - JOUR AU - Deaton,Angus S. TI - Aging, religion, and health JF - National Bureau of Economic Research Working Paper Series VL - No. 15271 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15271 L1 - http://www.nber.org/papers/w15271.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 M1 - published as M3 - presented at "Conference on Aging", May 7-10, 2009 AB - Durkheim’s famous study of suicide is a precursor of a large contemporary literature that investigates the links between religion and health. The topic is particularly germane for the health of women and of the elderly, who are much more likely to be religious. In this paper, I use data from the Gallup World Poll to study the within and between country relationships between religiosity, age, and gender, as well as the effects of religiosity on a range of health measures and health-related behaviors. The main contribution of the current study comes from the coverage and richness of the data, which allow me to use nationally representative samples to study the correlates of religion within and between more than 140 countries using more than 300,000 observations. It is almost universally true that the elderly and women are more religious, and I find evidence in favor of a genuine aging effect, not simply a cohort effect associated with secularization. As in previous studies, it is not clear why women are so much more religious than men. In most countries, religious people report better health; they say they have more energy, that their health is better, and that they experience less pain. Their social lives and personal behaviors are also healthier; they are more likely to be married, to have supportive friends, they are more likely to report being treated with respect, they have greater confidence in the healthcare and medical system and they are less likely to smoke. But these effects do not all hold in all countries, and they tend to be stronger for men than for women. ER - TY - JOUR AU - Ang,Andrew AU - Boivin,Jean AU - Dong,Sen AU - Loo-Kung,Rudy TI - Monetary Policy Shifts and the Term Structure JF - National Bureau of Economic Research Working Paper Series VL - No. 15270 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15270 L1 - http://www.nber.org/papers/w15270.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 Jean Boivin Bank of Canada 234 Wellington Street Ottawa Ontario K1A 0G9 Canada Tel: 613-782-8278 E-Mail: jean.boivin@hec.ca Sen Dong Ortus Capital Management Ltd 27th Floor, The Center 99 Queen’s Road Central Hong Kong E-Mail: sen.dong@ortuscapital.com Rudy Loo-Kung Columbia University 420 West 118th Street New York NY 10027 E-Mail: rjl2119@columbia.edu M1 - published as AB - We estimate the effect of shifts in monetary policy using the term structure of interest rates. In our no-arbitrage model, the short rate follows a version of the Taylor (1993) rule where the coefficients on the output gap and inflation vary over time. The monetary policy loading on the output gap has averaged around 0.4 and has not changed very much over time. The overall response of the yield curve to output gap components is relatively small. In contrast, the inflation loading has changed substantially over the last 50 years and ranges from close to zero in 2003 to a high of 2.4 in 1983. Long-term bonds are sensitive to inflation policy shifts with increases in inflation loadings leading to higher short rates and widening yield spreads. ER - TY - JOUR AU - Leeper,Eric M. TI - Anchoring Fiscal Expectations JF - National Bureau of Economic Research Working Paper Series VL - No. 15269 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15269 L1 - http://www.nber.org/papers/w15269.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 M1 - published as AB - In this lecture, I argue that there are remarkable parallels between how monetary and fiscal policies operate on the macro economy and that these parallels are sufficient to lead us to think about transforming fiscal policy and fiscal institutions as many countries have transformed monetary policy and monetary institutions. Making fiscal transparency comparable to monetary transparency requires fiscal authorities to discuss future possible fiscal policies explicitly. Enhanced fiscal transparency can help anchor expectations of fiscal policy and make fiscal actions more predictable and effective. As advanced economies move into a prolonged period of heightened fiscal activity, anchoring fiscal expectations will become an increasingly important aspect of macroeconomic policy. ER - TY - JOUR AU - Buera,Francisco J. AU - Shin,Yongseok TI - Productivity Growth and Capital Flows: The Dynamics of Reforms JF - National Bureau of Economic Research Working Paper Series VL - No. 15268 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15268 L1 - http://www.nber.org/papers/w15268.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 Yongseok Shin Department of Economics Washington University in St. Louis 1 Brookings Dr Saint Louis, MO 63130 Tel: 314-935-7138 E-Mail: yshin@wustl.edu M1 - published as AB - Why doesn’t capital flow into fast-growing countries? In this paper, we provide a quantitative framework incorporating heterogeneous producers and underdeveloped domestic financial markets to study the joint dynamics of total factor productivity (TFP) and capital flows. When an unexpected once-and-for-all reform eliminates non-financial distortions and liberalizes capital flows, the TFP of our model economy rises gradually and capital flows out of it. The rise in TFP reflects efficient reallocation of capital and talent, a process drawn out by frictions in domestic financial markets. The concurrent capital outflows are driven by the positive response of domestic saving to higher returns, and by the sluggish response of domestic investment to the higher TFP—the latter being another ramification of domestic financial frictions. We use our model to analyze the welfare consequences of opening up capital accounts. We find that the marginal welfare effect of capital account liberalization is negative for workers and positive for entrepreneurs and wealthy individuals. ER - TY - JOUR AU - Jacks,David S. AU - Meissner,Christopher M. AU - Novy,Dennis TI - Trade Booms, Trade Busts, and Trade Costs JF - National Bureau of Economic Research Working Paper Series VL - No. 15267 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15267 L1 - http://www.nber.org/papers/w15267.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 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 Dennis Novy Department of Economics University of Warwick Coventry CV4 7AL United Kingdom E-Mail: d.novy@warwick.ac.uk M1 - published as AB - What has driven trade booms and trade busts in the past and present? We derive a micro-founded measure of trade frictions from leading trade theories and use it to gauge the importance of bilateral trade costs in determining international trade flows. We construct a new balanced sample of bilateral trade flows for 130 country pairs across the Americas, Asia, Europe, and Oceania for the period from 1870 to 2000 and demonstrate an overriding role for declining trade costs in the pre-World War I trade boom. In contrast, for the post-World War II trade boom we identify changes in output as the dominant force. Finally, the entirety of the interwar trade bust is explained by increases in trade costs. ER - TY - JOUR AU - McArdle,John J. AU - Smith,James P. AU - Willis,Robert TI - Cognition and Economic Outcomes in the Health and Retirement Survey JF - National Bureau of Economic Research Working Paper Series VL - No. 15266 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15266 L1 - http://www.nber.org/papers/w15266.pdf N1 - Author contact info: John McArdle USC College of Letters, Arts and Sciences 3551 Trousdale Pkwy. Los Angeles, CA 90089-4012 E-Mail: mcardlej@verizon.net James Smith Labor and Pop Studies Program The RAND Corporation 1776 Main Street Santa Monica, CA 90406 Tel: 310-451-6925 E-Mail: smith@rand.org Robert Willis Health and Retirement Study 426 Thompson St., 3048 ISR Ann Arbor, MI 48104 E-Mail: rjwillis@umich.edu M1 - published as M3 - presented at "Conference on Aging", May 7-10, 2009 AB - Dimensions of cognitive skills are potentially important but often neglected determinants of the central economic outcomes that shape overall well-being over the life course. There exists enormous variation among households in their rates of wealth accumulation, their holdings of financial assets, and the relative risk in their chosen asset portfolios that have proven difficult to explain by conventional demographic factors, the amount of bequests they receive or anticipating giving, and the level of economic resources of the household. These may be cognitively demanding decisions at any age but especially so at older ages. This research examines the association of cognitive skills with wealth, wealth growth, and wealth composition for people in their pre and post-retirement years. ER - TY - JOUR AU - Carroll,Christopher D. AU - Toche,Patrick TI - A Tractable Model of Buffer Stock Saving JF - National Bureau of Economic Research Working Paper Series VL - No. 15265 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15265 L1 - http://www.nber.org/papers/w15265.pdf N1 - Author contact info: Christopher D. Carroll Department of Economics Mergenthaler 440 Johns Hopkins University Baltimore, MD 21218 Tel: 410/516-7602 Fax: 410/516-7600 E-Mail: ccarroll@jhu.edu Patrick Toche Department of Economics and Finance City University of Hong Kong Tat Chee Avenue, Kowloon Tong, Hong Kong E-Mail: p@toche.net M1 - published as AB - We present a tractable model of the effects of nonfinancial risk on intertemporal choice. Our purpose is to provide a simple framework that can be adopted in fields like representative-agent macroeconomics, corporate finance, or political economy, where most modelers have chosen not to incorporate serious nonfinancial risk because available methods were too complex to yield transparent insights. Our model produces an intuitive analytical formula for target assets, and we show how to analyze transition dynamics using a familiar Ramsey-style phase diagram. Despite its starkness, our model captures most of the key implications of nonfinancial risk for intertemporal choice. ER - TY - JOUR AU - Felix,R. Alison AU - Hines,James R., Jr. TI - Corporate Taxes and Union Wages in the United States JF - National Bureau of Economic Research Working Paper Series VL - No. 15263 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15263 L1 - http://www.nber.org/papers/w15263.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, Jr. 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 M1 - published as AB - This paper evaluates the effect of U.S. state corporate income taxes on union wages. American workers who belong to unions are paid more than their non-union counterparts, and this difference is greater in low-tax locations, reflecting that unions and employers share tax savings associated with low tax rates. In 2000 the difference between average union and non-union hourly wages was $1.88 greater in states with corporate tax rates below four percent than in states with tax rates of nine percent and above. Controlling for observable worker characteristics, a one percent lower state tax rate is associated with a 0.36 percent higher union wage premium, suggesting that workers in a fully unionized firm capture roughly 54 percent of the benefits of low tax rates. ER - TY - JOUR AU - Holland,Stephen P. TI - Taxes and Trading versus Intensity Standards: Second-Best Environmental Policies with Incomplete Regulation (Leakage) or Market Power JF - National Bureau of Economic Research Working Paper Series VL - No. 15262 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15262 L1 - http://www.nber.org/papers/w15262.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 M1 - published as AB - This paper investigates whether an emissions tax (equivalent to an emissions cap) maximizes social welfare (defined as the sum of consumer and producer surplus) in the presence of incomplete regulation (leakage) or market power by analyzing an intensity standard regulating emissions per unit of output. With no other market failures, an intensity standard indeed yields lower welfare, although combining it with a consumption tax eliminates this discrepancy. For incomplete regulation, I show that under certain conditions an intensity standard can yield higher welfare than any emissions tax (including the optimal emissions tax). This result persists even with the addition of a consumption tax, which ameliorates output distortions and can sometimes help the intensity standard attain the first best (when an emissions tax/consumption tax combination cannot). Comparing intensity standards to output-based updating shows that the latter yields higher welfare because of its additional flexibility. Finally, I show that with market power an intensity standard can yield higher welfare than the optimal emissions tax. The intuition of these results is relatively straightforward. The weakness of an intensity standard is that it relies more on substitution effects than output effects to reduce emissions. With incomplete regulation or market power, this disadvantage may be helpful since leakage may offset gains from reducing output and since market power already inefficiently reduces output. ER - TY - JOUR AU - Harrison,Ann AU - Rodríguez-Clare,Andrés TI - Trade, Foreign Investment, and Industrial Policy for Developing Countries JF - National Bureau of Economic Research Working Paper Series VL - No. 15261 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15261 L1 - http://www.nber.org/papers/w15261.pdf N1 - Author contact info: Ann Harrison University of California, Berkeley 329 Giannini Hall Berkeley, CA 94720 Tel: 510/643-9676 Fax: 510/643-8911 E-Mail: harrison@are.berkeley.edu Andres Rodriguez-Clare Pennsylvania State University Department of Economics University Park, PA 16802 Tel: 814/863-1295 Fax: 814/863-8775 E-Mail: andres1000@gmail.com M1 - published as AB - In this paper we explore the popular but controversial idea that developing countries benefit from abandoning policy neutrality vis-a-vis trade, FDI and resource allocation across industries. Are developing countries justified in imposing tariffs, subsidies, and tax breaks that imply distortions beyond the ones associated with optimal taxes or revenue constraints? We refer to this set of government interventions as "industrial policy". We explore the theoretical foundation for industrial policy and then review the related empirical literature. We follow this with a broader look at the empirical work on the relationship between trade and FDI and growth. In this review, we find little evidence that countries benefit from "hard" interventions that distort prices to deal with Marshallian externalities, learning-by-exporting, and knowledge spillovers from FDI. We discuss an alternative set of "soft" industrial policies that deal directly with the coordination failures that may arise within the sectors or clusters where the country has a comparative advantage. ER - TY - JOUR AU - Baele,Lieven AU - Bekaert,Geert AU - Inghelbrecht,Koen TI - The Determinants of Stock and Bond Return Comovements JF - National Bureau of Economic Research Working Paper Series VL - No. 15260 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15260 L1 - http://www.nber.org/papers/w15260.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 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 M1 - published as AB - We study the economic sources of stock-bond return comovements and its time variation using a dynamic factor model. We identify the economic factors employing a semi-structural regime-switching model for state variables such as interest rates, inflation, the output gap, and cash flow growth. We also view risk aversion, uncertainty about inflation and output, and liquidity proxies as additional potential factors. We find that macro-economic fundamentals contribute little to explaining stock and bond return correlations, but that other factors, especially liquidity proxies, play a more important role. The macro factors are still important in fitting bond return volatility; whereas the "variance premium" is critical in explaining stock return volatility. However, the factor model primarily fails in fitting covariances. ER - TY - JOUR AU - Pindyck,Robert S. TI - Uncertain Outcomes and Climate Change Policy JF - National Bureau of Economic Research Working Paper Series VL - No. 15259 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15259 L1 - http://www.nber.org/papers/w15259.pdf N1 - Author contact info: Robert S. Pindyck Sloan School of Management MIT, Room E52-453 50 Memorial Drive Cambridge, MA 02139 Tel: 617/253-6641 Fax: 617/258-6855 E-Mail: RPINDYCK@MIT.EDU M1 - published as AB - Focusing on tail effects, I incorporate distributions for temperature change and its economic impact in an analysis of climate change policy. I estimate the fraction of consumption w*(tau) that society would be willing to sacrifice to ensure that any increase in temperature at a future point is limited to tau. Using information on the distributions for temperature change and economic impact from studies assembled by the IPCC and from “integrated assessment models” (IAMs), I fit displaced gamma distributions for these variables. Unlike existing IAMs, I model economic impact as a relationship between temperature change and the growth rate of GDP as opposed to its level, so that warming has a permanent impact on future GDP. The fitted distributions for temperature change and economic impact generally yield values of w*(tau) below 2%, even for small values of tau, unless one assumes extreme parameter values and/or substantial shifts in the temperature distribution. These results are consistent with moderate abatement policies. ER - TY - JOUR AU - Heathcote,Jonathan AU - Storesletten,Kjetil AU - Violante,Giovanni L. TI - Consumption and Labor Supply with Partial Insurance: An Analytical Framework JF - National Bureau of Economic Research Working Paper Series VL - No. 15257 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15257 L1 - http://www.nber.org/papers/w15257.pdf N1 - Author contact info: Jonathan Heathcote Federal Reserve Bank of Minneapolis Research Department 90 Hennepin Ave. Minneapolis, MN 55401 Tel: (612) 204-6385 E-Mail: heathcote@minneapolisfed.org Kjetil Storesletten Federal Reserve Bank of Minneapolis Research Department 90 Hennepin Ave. Minneapolis, MN 55401 Tel: +47 22844009 E-Mail: kjetil.storesletten@econ.uio.no 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 M1 - published as AB - This paper studies consumption and labor supply in a model where agents have partial insurance and face risk and initial heterogeneity in wages and preferences. Equilibrium allocations and variances and covariances of wages, hours and consumption are solved for analytically. We prove that all parameters of the structural model are identified given panel data on wages and hours, and cross-sectional data on consumption. The model is estimated on US data. Second moments involving hours and consumption show that the rise in wage dispersion in the 1970s was effectively insured by households, while the rise in the 1980s was not. ER - TY - JOUR AU - Fletcher,Jason M. AU - Sindelar,Jody L. TI - Estimating Causal Effects of Early Occupational Choice on Later Health: Evidence Using the PSID JF - National Bureau of Economic Research Working Paper Series VL - No. 15256 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15256 L1 - http://www.nber.org/papers/w15256.pdf N1 - Author contact info: Jason Fletcher Yale University School of Public Health 60 College Street, #303 New Haven, CT 06510 Tel: (203) 785-5670 Fax: (203) 785-6287 E-Mail: jason.fletcher@yale.edu Jody L. Sindelar Yale School of Public Health Yale University School of Medicine 60 College Street, P.O. Box 208034 New Haven, CT 06520-8034 Tel: 203/785-5287 Fax: 203/785-6287 E-Mail: jody.sindelar@yale.edu M1 - published as AB - In this paper, we provide some of the first empirical evidence of whether early occupational choices are associated with lasting effects on health status, affecting individuals as they age. We take advantage of data on occupational histories available in the Panel Study of Income Dynamics (PSID) to examine this issue. To the PSID data, we merge historical Census data that reflect the labor market conditions when each individual in the PSID made his first occupational choice. These data on labor market conditions (e.g. state-level share of blue collar workers) allow us to instrument for occupational choice in order to alleviate endogeneity bias. We use parental occupation as additional instruments. Since our instruments may have indirect effects on later health, we also control for respondent’s pre-labor market health, education and several family and state background characteristics in order to make the instruments more plausibly excludable. We find substantial evidence that a blue collar occupation at labor force entry is associated with decrements to later health status, ceteris paribus. These health effects are larger after controlling for endogeneity and are similar across sets of instruments. We also find differences in the effects of occupation by gender, race, and age. ER - TY - JOUR AU - Nakamura,Emi AU - Zerom,Dawit TI - Accounting for Incomplete Pass-Through JF - National Bureau of Economic Research Working Paper Series VL - No. 15255 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15255 L1 - http://www.nber.org/papers/w15255.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 Dawit Zerom California State University, Fullerton E-Mail: dzerom@fullerton.edu M1 - published as AB - Recent theoretical work has suggested a number of potentially important factors in causing incomplete pass-through of exchange rates to prices, including markup adjustment, local costs and barriers to price adjustment. We empirically analyze the determinants of incomplete pass-through in the coffee industry. The observed pass-through in this industry replicates key features of pass-through documented in aggregate data: prices respond sluggishly and incompletely to changes in costs. We use microdata on sales and prices to uncover the role of markup adjustment, local costs, and barriers to price adjustment in determining incomplete pass-through using a structural oligopoly model that nests all three potential factors. The implied pricing model explains the main dynamic features of short and long-run pass-through. Local costs reduce long-run pass-through (after 6 quarters) by a factor of 59% relative to a CES benchmark. Markup adjustment reduces pass-through by an additional factor of 33%, where the extent of markup adjustment depends on the estimated "super-elasticity" of demand. The estimated menu costs are small 0.23% of revenue) and have a negligible effect on long-run pass-through, but are quantitatively successful in explaining the delayed response of prices to costs. The estimated strategic complementarities in pricing do not, therefore, substantially delay the response of prices to costs. We find that delayed pass-through in the coffee industry occurs almost entirely at the wholesale rather than the retail level. ER - TY - JOUR AU - Edmond,Chris AU - Weill,Pierre-Olivier TI - Aggregate Implications of Micro Asset Market Segmentation JF - National Bureau of Economic Research Working Paper Series VL - No. 15254 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15254 L1 - http://www.nber.org/papers/w15254.pdf N1 - Author contact info: Chris Edmond Department of Economics Stern School of Business New York University 44 West 4th Street New York NY 10012 Tel: 212-998-0288 E-Mail: cedmond@stern.nyu.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 M1 - published as AB - This paper develops a consumption-based asset pricing model to explain and quantify the aggregate implications of a frictional financial system, comprised of many financial markets partially integrated with one-another. Each of our micro financial markets is inhabited by traders who are specialized in that market's type of asset. We specify exogenously the level of segmentation that ultimately determines how much idiosyncratic risk traders bear in their micro market and derive aggregate asset pricing implications. We pick segmentation parameters to match facts about systematic and idiosyncratic return volatility. We find that if the same level of segmentation prevails in every market, traders bear 20% of their idiosyncratic risk. With otherwise standard parameters, this benchmark model delivers an unconditional equity premium of 3.3% annual. We further disaggregate the model by allowing the level of segmentation to differ across markets. This version of the model delivers the same aggregate asset pricing implications but with only half the amount of segmentation: on average traders bear 10% of their idiosyncratic risk. ER - TY - JOUR AU - Athey,Susan AU - Ellison,Glenn TI - Position Auctions with Consumer Search JF - National Bureau of Economic Research Working Paper Series VL - No. 15253 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15253 L1 - http://www.nber.org/papers/w15253.pdf N1 - Author contact info: Susan Athey Department of Economics Harvard University 1875 Cambridge St. Cambridge, MA 02138 Tel: 650/725-8696 Fax: 650/725-5702 E-Mail: athey@fas.harvard.edu Glenn Ellison Department of Economics Massachusetts Institute of Technology 50 Memorial Drive, E52-380A Cambridge, MA 02142-1347 Tel: 617/253-8702 Fax: 617/253-1330 E-Mail: gellison@mit.edu M1 - published as AB - This paper examines a model in which advertisers bid for "sponsored-link" positions on a search engine. The value advertisers derive from each position is endogenized as coming from sales to a population of consumers who make rational inferences about firm qualities and search optimally. Consumer search strategies, equilibrium bidding, and the welfare benefits of position auctions are analyzed. Implications for reserve prices and a number of other auction design questions are discussed. ER - TY - JOUR AU - Krusell,Per AU - Mukoyama,Toshihiko AU - Rogerson,Richard AU - Sahin,Aysegul TI - Aggregate Labor Market Outcomes: The Role of Choice and Chance JF - National Bureau of Economic Research Working Paper Series VL - No. 15252 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15252 L1 - http://www.nber.org/papers/w15252.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 Charlottesville VA 22904 E-Mail: tm5hs@virginia.edu Richard Rogerson Department of Economics College of Business Arizona State University Tempe, AZ 85287 Tel: 480/727-6671 Fax: 215/573-4217 E-Mail: richard.rogerson@asu.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 M1 - published as AB - Commonly used frictional models of the labor market imply that changes in frictions have large effects on steady state employment and unemployment. We use a model that features both frictions and an operative labor supply margin to examine the robustness of this feature to the inclusion of a empirically reasonable labor supply channel. The response of unemployment to changes in frictions is similar in both models. But the labor supply response present in our model greatly attenuates the effects of frictions on steady state employment relative to the simplest matching model, and two common extensions. We also find that the presence of empirically plausible frictions has virtually no impact on the response of aggregate employment to taxes. ER - TY - JOUR AU - Krusell,Per AU - Mukoyama,Toshihiko AU - Rogerson,Richard AU - Sahin,Aysegul TI - A Three State Model of Worker Flows in General Equilibrium JF - National Bureau of Economic Research Working Paper Series VL - No. 15251 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15251 L1 - http://www.nber.org/papers/w15251.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 Charlottesville VA 22904 E-Mail: tm5hs@virginia.edu Richard Rogerson Department of Economics College of Business Arizona State University Tempe, AZ 85287 Tel: 480/727-6671 Fax: 215/573-4217 E-Mail: richard.rogerson@asu.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 M1 - published as AB - We develop a simple model featuring search frictions and a nondegenerate labor supply decision along the extensive margin. The model is a standard version of the neoclassical growth model with indivisible labor with idiosyncratic shocks and frictions characterized by employment loss and employment opportunity arrival shocks. We argue that it is able to account for the key features of observed labor market flows for reasonable parameter values. Persistent idiosyncratic productivity shocks play a key role in allowing the model to match the persistence of the employment and out of the labor force states found in individual labor market histories. ER - TY - JOUR AU - Jacks,David S. TI - On the Death of Distance and Borders: Evidence from the Nineteenth Century JF - National Bureau of Economic Research Working Paper Series VL - No. 15250 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15250 L1 - http://www.nber.org/papers/w15250.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 M1 - published as AB - In this paper, we investigate time-dependent border and distance effects in the nineteenth century and document clear declines in the importance of these variables through time. What this suggests, in light of the work for the post-1950 era, is that researchers might have correctly identified the increasing effect of distance on bilateral trade over time. In other words, trade costs may have not declined nearly as dramatically in the late twentieth century as has been supposed, especially in light of the nineteenth century, a time of documented trade cost decline and commodity market integration. ER - TY - JOUR AU - Manova,Kalina AU - Zhang,Zhiwei TI - China's Exporters and Importers: Firms, Products and Trade Partners JF - National Bureau of Economic Research Working Paper Series VL - No. 15249 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15249 L1 - http://www.nber.org/papers/w15249.pdf N1 - Author contact info: Kalina Manova Department of Economics Stanford University 579 Serra Mall Stanford, CA 94305 Tel: 650/725-9967 Fax: 650/725-5702 E-Mail: manova@stanford.edu Zhiwei Zhang E-Mail: zzhang@hkma.gov.hk M1 - published as AB - This paper uses newly available data on Chinese trade flows to establish novel and confirm existing stylized facts about firm heterogeneity in trade. First, the bulk of exports and imports are captured by a few multi-product firms that transact with a large number of countries. Second, the average importer imports more products than the average exporter exports, but exporters trade with more countries than importers do. Third, compared to private domestic firms, foreign affiliates and joint ventures trade more and import more products from more source countries, but export fewer products to fewer destinations. Fourth, the relationship between firms' intensive and extensive margin of trade is non-monotonic, differs between exporters and importers, and depends on the ownership structure of the firm. Fifth, firms frequently exit and re-enter into trade and regularly change their product mix and trade partners, but foreign firms exhibit less churning. Finally, most of the growth in Chinese exports between 2003-2005 was driven by deepening and broadening of trade relationships by surviving firms, while reallocations across firms contributed only 30%. These stylized facts shed light on the cost structure of international trade and the importance of foreign ownership for firms' export and import decisions. ER - TY - JOUR AU - Faulkender,Michael AU - Petersen,Mitchell TI - Investment and Capital Constraints: Repatriations Under the American Jobs Creation Act JF - National Bureau of Economic Research Working Paper Series VL - No. 15248 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15248 L1 - http://www.nber.org/papers/w15248.pdf N1 - Author contact info: Michael Faulkender University of Maryland RH Smith School of Business 4411 Van Munching Hall College Park, MD 20742 Tel: 301-405-1064 E-Mail: mfaulken@rhsmith.umd.edu Mitchell A. Petersen Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, IL 60208 Tel: 847/467-1281 Fax: 847/491-5719 E-Mail: mpetersen@northwestern.edu M1 - published as AB - The American Jobs Creation Act (AJCA) significantly lowered the tax cost at which US firms could access their unrepatriated foreign earnings. We use this temporary shock to the cost of financing investment and its variation across firms, to examine the role of financial constraints in the firm’s investment decisions. Controlling for the ability to repatriate foreign earnings in a more tax efficient way under the AJCA, we find that for a majority of firms there was little change in domestic investment – the policy objective of the law. We do find, however, that for a subset of firms which are financially constrained, that a majority of the repatriated funds were invested in approved domestic investment. We find little change in financial policy (e.g. leverage and equity payouts) once we control for the ability to repatriate funds under the AJCA. These findings point out the importance of understanding finance theory when designing optimally targeted tax incentives. ER - TY - JOUR AU - Barro,Robert J. AU - Jin,Tao TI - On the Size Distribution of Macroeconomic Disasters JF - National Bureau of Economic Research Working Paper Series VL - No. 15247 PY - 2009 Y2 - August 2009 UR - http://www.nber.org/papers/w15247 L1 - http://www.nber.org/papers/w15247.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 Tao Jin Department of Economics Harvard University Cambridge, MA 02138 Tel: 857-654-5000 E-Mail: tjin@fas.harvard.edu M1 - published as AB - In the rare-disasters setting, a key determinant of the equity premium is the size distribution of macroeconomic disasters, gauged by proportionate declines in per capita consumption or GDP. The long-term national-accounts data for up to 36 countries provide a large sample of disaster events of magnitude 10% or more. For this sample, a power-law density provides a good fit to the distribution of the rati