TY - JOUR AU - Lichtenberg,Frank R. AU - Duflos,Gautier TI - Pharmaceutical innovation and the longevity of Australians: a first look JF - National Bureau of Economic Research Working Paper Series VL - No. 14009 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w14009 L1 - http://www.nber.org/papers/w14009.pdf N1 - Author contact info: Frank R. Lichtenberg Graduate School of Business Columbia University 3022 Broadway, 614 Uris Hall New York, NY 10027 Tel: 212/854-4408 Fax: 212/316-9219 E-Mail: frank.lichtenberg@columbia.edu Gautier Duflos University Of Paris 1 Pantheon Sorbonne 106 - 112 Boulevard De L'Hopital Paris CEDEX 13 FRANCE E-Mail: gduflos@univ-paris1.fr AB - We examine the impact of pharmaceutical innovation on the longevity of Australians during the period 1995-2003. Due to the government's Pharmaceutical Benefits Scheme, Australia has much better data on drug utilization than most other countries. We find that mean age at death increased more for diseases with larger increases in mean drug vintage. The estimates indicate that increasing the mean vintage of drugs by 5 years would increase mean age at death by almost 11 months. The estimates also indicate that using newer drugs reduced the number of years of potential life lost before the ages of 65 and 70 (but not before age 75). During the period 1995-2003, mean age at death increased by about 2.0 years, from 74.4 to 76.4. The estimates imply that, in the absence of any increase in drug vintage, mean age at death would have increased by only 0.7 years. The increase in drug vintage accounts for about 65% of the total increase in mean age at death. We obtain a rough estimate of the cost per life-year gained from using newer drugs. Under our assumptions, using newer drugs (increasing drug vintage) increased life expectancy by 1.23 years and increased lifetime drug expenditure by $12,976; the cost per life-year gained from using newer drugs is $10,585. An estimate made by other investigators of the value of a statistical Australian life-year ($70,618) is 6.7 times as large as our estimate of the cost per life-year gained from using newer drugs. We discuss several reasons why our estimate of the cost per life-year gained from using newer drugs could be too high or too low. ER - TY - JOUR AU - Lichtenberg,Frank R. TI - Have Newer Cardiovascular Drugs Reduced Hospitalization? Evidence From Longitudinal Country-Level Data on 20 OECD Countries, 1995-2003 JF - National Bureau of Economic Research Working Paper Series VL - No. 14008 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w14008 L1 - http://www.nber.org/papers/w14008.pdf N1 - Author contact info: Frank R. Lichtenberg Graduate School of Business Columbia University 3022 Broadway, 614 Uris Hall New York, NY 10027 Tel: 212/854-4408 Fax: 212/316-9219 E-Mail: frank.lichtenberg@columbia.edu AB - This study examines the effect of changes in the vintage distribution of cardiovascular system drugs on hospitalization and mortality due to cardiovascular disease using longitudinal country-level data. The vintage of a drug is the first year in which it was marketed anywhere in the world. We use annual data on the utilization of over 1100 cardiovascular drugs (active ingredients) in 20 OECD countries during the period 1995-2003. Countries with larger increases in the share of cardiovascular drug doses that contained post-1990 or post-1995 ingredients had smaller increases in the cardiovascular disease hospital discharge rate, controlling for the quantity of cardiovascular medications consumed per person, the use of other medical innovations (CT scanners & MRI units), potential risk factors (average consumption of calories, tobacco, and alcohol), and demographic variables (population size & age structure, income, and educational attainment). The estimates also indicate that use of newer cardiovascular drugs has reduced average length of stay and the age-adjusted cardiovascular mortality rate, but not the number of potential years of life lost due to cardiovascular disease before age 70 per 100,000 population. The estimates indicate that if drug vintage had not increased during 1995-2004, hospitalization and mortality would have been higher in 2004. We estimate that per capita expenditure on cardiovascular hospital stays would have been 70% ($89) higher in 2004 had drug vintage not increased during 1995-2004. Per capita expenditure on cardiovascular drugs would have been lower in 2004 had drug vintage not increased during 1995-2004. But our estimate of the increase in expenditure on cardiovascular hospital stays is about 3.7 times as large as our estimate of the reduction in per capita expenditure for cardiovascular drugs that would have occurred ($24). ER - TY - JOUR AU - Case,Anne AU - Paxson,Christina AU - Islam,Mahnaz TI - Making Sense of the Labor Market Height Premium: Evidence From the British Household Panel Survey JF - National Bureau of Economic Research Working Paper Series VL - No. 14007 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w14007 L1 - http://www.nber.org/papers/w14007.pdf N1 - Author contact info: Anne Case 367 Wallace Hall Princeton University Princeton, NJ 08544 Tel: 609/258-2177 Fax: 609/258-5974 E-Mail: accase@princeton.edu Christina Paxson 316 Wallace Hall Princeton University Princeton, NJ 08544-1022 Tel: 609/258-6474 Fax: 609/258-5974 E-Mail: cpaxson@princeton.edu Mahnaz Islam 365 Wallace Hall Princeton University Princeton NJ 08544 E-Mail: mislam@princeton.edu AB - We use nine waves of the British Household Panel Survey (BHPS) to investigate the large labor market height premium observed in the BHPS, where each inch of height is associated with a 1.5 percent increase in wages, for both men and women. We find that half of the premium can be explained by the association between height and educational attainment among BHPS participants. Of the remaining premium, half can be explained by taller individuals selecting into higher status occupations and industries. These effects are consistent with our earlier findings that taller individuals on average have greater cognitive function, which manifests in greater educational attainment, and better labor market opportunities. ER - TY - JOUR AU - DeSimone,Jeffrey S. TI - The Impact of Employment during School on College Student Academic Performance JF - National Bureau of Economic Research Working Paper Series VL - No. 14006 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w14006 L1 - http://www.nber.org/papers/w14006.pdf N1 - Author contact info: Jeffrey S. DeSimone Department of Economics University of Texas at Arlington 701 S. West St. Arlington, TX 76019 Tel: 817/272-3061 Fax: 817/272-3145 E-Mail: jdesimone@uta.edu AB - This paper estimates the effect of paid employment on grades of full-time, four-year students from four nationally representative cross sections of the Harvard College Alcohol Study administered during 1993–2001. The relationship could be causal in either direction and is likely contaminated by unobserved heterogeneity. Two-stage GMM regressions instrument for work hours using paternal schooling and being raised Jewish, which are hypothesized to reflect parental preferences towards education manifested in additional student financial support but not influence achievement conditional on maternal schooling, college and class. Extensive empirical testing supports the identifying assumptions of instrument strength and orthogonality. GMM results show that an additional weekly work hour reduces current year GPA by about 0.011 points, roughly five times more than the OLS coefficient but somewhat less than recent estimates. Effects are stable across specifications, time, gender, class and age, but vary by health status, maternal schooling, religious background and especially race/ethnicity. ER - TY - JOUR AU - Galenson,David TI - The Globalization of Advanced Art in the Twentieth Century JF - National Bureau of Economic Research Working Paper Series VL - No. 14005 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w14005 L1 - http://www.nber.org/papers/w14005.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 AB - The twentieth century was a time of rapid globalization for advanced art. Artists from a larger number of countries made important contributions than in earlier periods, and they did so in a larger number of places. Many important innovations also diffused more rapidly, and more widely, than in earlier times. The dominance for much of the century of conceptual forms of art, from Cubism and Dada to Pop and Conceptual Art, was largely responsible for the greater speed with which innovations spread: conceptual techniques are communicated more readily, and are generally more versatile in their uses, than experimental methods. There is no longer a single dominant place in the art world, comparable to Paris for the first century of modern art, but it is unlikely that a large number of places will join New York and London as centers of artistic innovation in the future. ER - TY - JOUR AU - Richardson,Gary AU - McBride,Michael TI - Religion, Longevity, and Cooperation: The Case of the Craft Guild. JF - National Bureau of Economic Research Working Paper Series VL - No. 14004 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w14004 L1 - http://www.nber.org/papers/w14004.pdf N1 - Author contact info: Gary Richardson Department of Economics University of California, Irvine Irvine, CA 92697-5100 Tel: 949/824-5089 Fax: 949/824-2182 E-Mail: garyr@uci.edu Michael McBride 3151 Social Science Plaza University of California Irvine, CA 92697-5100 E-Mail: mcbride@uci.edu AB - When the mortality rate is high, repeated interaction alone may not sustain cooperation, and religion may play an important role in shaping economic institutions. This insight explains why during the fourteenth century, when plagues decimated populations and the church promoted the doctrine of purgatory, guilds that bundled together religious and occupational activities dominated manufacturing and commerce. During the sixteenth century, the disease environment eased, and the Reformation dispelled the doctrine of purgatory, necessitating the development of new methods of organizing industry. The logic underlying this conclusion has implications for the study of institutions, economics, and religion throughout history and in the developing world today. ER - TY - JOUR AU - Moser,Petra TI - An Empirical Test of Taste-based Discrimination Changes in Ethnic Preferences and their Effect on Admissions to the NYSE during World War I JF - National Bureau of Economic Research Working Paper Series VL - No. 14003 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w14003 L1 - http://www.nber.org/papers/w14003.pdf N1 - Author contact info: Petra Moser Department of Economics Stanford University 579 Serra Mall Stanford, CA 94305-6072 Tel: (650) 725-3266 Fax: (650) 725-5702 E-Mail: pmoser@stanford.edu AB - A significant challenge to empirically testing theories of discrimination has been the difficulty of identifying taste-based discrimination and of distinguishing it clearly from statistical discrimination. This paper addresses this problem through a two-part empirical test of taste-based discrimination. First, it constructs measures of revealed preferences, which establish that World War I created a strong and persistent shock to ethnic preferences that effectively switched the status of German Americans to an ethnic minority. Second, the paper uses this shock to ethnic preferences to identify the effects of taste-based discrimination at the example of traders at the New York Stock Exchange (NYSE). A new data set of more than 4,000 applications for seats on the NYSE reveals that the War more than doubled the probability that German applicants would be rejected (relative to Anglo-Saxons). The mechanism of taste-based discrimination is surprising: Prices are unaffected by ethnic preferences, and discrimination operates instead entirely through admissions. ER - TY - JOUR AU - Florens,Jean-Pierre AU - Heckman,James J. AU - Meghir,Costas AU - Vytlacil,Edward J. TI - Identification of Treatment Effects Using Control Functions in Models with Continuous, Endogenous Treatment and Heterogeneous Effects JF - National Bureau of Economic Research Working Paper Series VL - No. 14002 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w14002 L1 - http://www.nber.org/papers/w14002.pdf N1 - Author contact info: Jean-Pierre Florens Manufacture des Tabacs Bâtiment F – 4ème étage 21, allée de Brienne 31000 Toulouse – France E-Mail: florens@cict.fr 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: jheckman@uchicago.edu Costas Meghir Department of Economics University College London Gower Street London WC1E 6BT ENGLAND E-Mail: c.meghir@ucl.ac.uk Edward J. Vytlacil Department of Economics Yale University Box 208281 New Haven, CT 06520-8281 Tel: 203-432-3244 Fax: (203) 432-6167 E-Mail: edward.vytlacil@yale.edu AB - We use the control function approach to identify the average treatment effect and the effect of treatment on the treated in models with a continuous endogenous regressor whose impact is heterogeneous. We assume a stochastic polynomial restriction on the form of the heterogeneity but, unlike alternative nonparametric control function approaches, our approach does not require large support assumptions. ER - TY - JOUR AU - Nakamura,Emi AU - Steinsson,Jon TI - Monetary Non-Neutrality in a Multi-Sector Menu Cost Model JF - National Bureau of Economic Research Working Paper Series VL - No. 14001 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w14001 L1 - http://www.nber.org/papers/w14001.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 AB - Empirical evidence suggests that roughly 1/3 of the U.S. business cycle is due to nominal shocks. We calibrate a multi-sector menu cost model using new evidence on the cross-sectional distribution of the frequency and size of price changes in the U.S. economy. We augment the model to incorporate intermediate inputs. We show that the introduction of heterogeneity in the frequency of price change triples the degree of monetary non-neutrality generated by the model. We furthermore show that the introduction of intermediate inputs raises the degree of monetary non-neutrality by another factor of three, without adversely affecting the model's ability to match the large average size of price changes. Our multi-sector menu cost model with intermediate inputs generates variation in real output in response to calibrated aggregate nominal shocks that can account for roughly 26% of the U.S. business cycle. ER - TY - JOUR AU - Jovanovic,Boyan TI - When Should Firms Invest in Old Capital? JF - National Bureau of Economic Research Working Paper Series VL - No. 14000 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w14000 L1 - http://www.nber.org/papers/w14000.pdf N1 - Author contact info: Boyan Jovanovic New York University Department of Economics 19 W. 4th Street, 6th Floor New York, NY 10012 Tel: 212/998-8953 Fax: 212/995-4186 E-Mail: Boyan.Jovanovic@nyu.edu AB - This paper studies optimal investment policies when the production function depends on capital of various vintages. In such an environment it is natural to ask whether the firm will invest in old-vintage capital at all. In this paper I derive such a condition. Predictably, investment in old capital takes place if the elasticity of substitution between old and new capital is low, and when the depreciation of capital is high. But other parameters such as the rates of technological progress and depreciation matter as well. ER - TY - JOUR AU - Bó,Pedro Dal AU - Foster,Andrew AU - Putterman,Louis TI - Institutions and Behavior: Experimental Evidence on the Effects of Democracy JF - National Bureau of Economic Research Working Paper Series VL - No. 13999 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13999 L1 - http://www.nber.org/papers/w13999.pdf N1 - Author contact info: Pedro Dal Bó Department of Economics Brown University 64 Waterman Street Providence, RI 02912 Tel: 401/863-2953 E-Mail: pdalbo@brown.edu Andrew Foster Economics Department Brown University 64 Waterman St. Providence RI 02912 E-Mail: Andrew_Foster@brown.edu Louis Putterman Department of Economics Brown University 64 Waterman Street Providence, RI 02912 E-Mail: Louis_Putterman@brown.edu AB - A novel experiment is used to show that the effect of a policy on the level of cooperation is greater when it is chosen democratically by the subjects than when it is exogenously imposed. In contrast to the previous literature, our experimental design allows us to control for selection effects (e.g. those who choose the policy may be affected differently by it). Our finding implies that democratic institutions may affect behavior directly in addition to having effects through the choice of policies. Our findings have implications for the generalizability of the results of randomized policy interventions. ER - TY - JOUR AU - Jovanovic,Boyan AU - Rousseau,Peter L. TI - Specific Capital and Technological Variety JF - National Bureau of Economic Research Working Paper Series VL - No. 13998 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13998 L1 - http://www.nber.org/papers/w13998.pdf N1 - Author contact info: Boyan Jovanovic New York University Department of Economics 19 W. 4th Street, 6th Floor New York, NY 10012 Tel: 212/998-8953 Fax: 212/995-4186 E-Mail: Boyan.Jovanovic@nyu.edu Peter L. Rousseau Department of Economics Vanderbilt University VU Station B #351819 2301 Vanderbilt Place Nashville, TN 37235-1819 Tel: 615/343-2466 E-Mail: peter.l.rousseau@vanderbilt.edu AB - Growth of technological variety offers more scope for the division of labor. And when a division of labor requires some specific training, the technological specificity of human capital grows and, with it, probably the firm specificity of that capital. We build a simple model that captures this observation. The model implies that a rising specialization of human and physical capital raises the rents in the average match between a firm and its human and physical capital. We document that in the last 40 years the firm’s share of those rents has also grown, and we use the model to explain why this shift may have taken place. ER - TY - JOUR AU - Draca,Mirko AU - Machin,Stephen AU - Reenen,John Van TI - Minimum Wages and Firm Profitability JF - National Bureau of Economic Research Working Paper Series VL - No. 13996 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13996 L1 - http://www.nber.org/papers/w13996.pdf N1 - Author contact info: Mirko Draca London School of Economics Centre for Economic Performance Houghton Street London WC2A 2AE ENGLAND E-Mail: m.draca@lse.ac.uk Stephen Machin London School of Economics Centre for Economic Performance Houghton Street London WC2A 2AE ENGLAND and University College London E-Mail: s.machin@ucl.ac.uk John Van Reenen London School of Economics Centre for Economic Performance Houghton Street London WC2A 2AE ENGLAND Tel: 00 44 207/955-6976 Fax: 00 44 207/955-6848 E-Mail: j.vanreenen@lse.ac.uk AB - Although there is a large literature on the economic effects of minimum wages on labour market outcomes (especially employment), there is much less evidence on their impact on firm performance. In this paper we consider a very under-studied area - the impact of minimum wages on firm profitability. The analysis exploits the changes induced by the introduction of a national minimum wage to the UK labour market in 1999, using pre-policy information on the distribution of wages to construct treatment and comparison groups and implement a difference in differences approach. We report evidence showing that firm profitability was significantly reduced (and wages significantly raised) by the minimum wage introduction. This emerges from separate analyses of two distinct types of firm level panel data (one on firms in a very low wage sector, UK residential care homes, and a second on firms across all sectors). We find that net entry rates have fallen, but that the changes in exit and entry rates are statistically insignificant. ER - TY - JOUR AU - Albouy,David Y. TI - The Unequal Geographic Burden of Federal Taxation JF - National Bureau of Economic Research Working Paper Series VL - No. 13995 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13995 L1 - http://www.nber.org/papers/w13995.pdf N1 - Author contact info: David Y. Albouy Department of Economics University of Michigan 611 Tappan Street 351C Lorch Hall Ann Arbor, MI 48109-1220 Tel: 734/763-9619 E-Mail: albouy@umich.edu AB - In the United States, workers in cities offering above-average nominal wages – cities with high productivity, low quality-of-life, or inefficient housing sectors – pay 30 percent more in federal taxes than otherwise identical workers in cities offering below-average wages. According to simulation results, federal taxes lower long-run employment levels in high-wage areas by 15 percent and land and housing prices by 25 and 4 percent, leading to locational inefficiencies costing 0.28 percent of income, or $34 billion in 2005. Indexing taxes to local wage-levels eliminates these locational inefficiencies. Tax deductions index taxes partially to local cost-of-living and improve locational efficiency. ER - TY - JOUR AU - Dee,Thomas AU - West,Martin TI - The Non-Cognitive Returns to Class Size JF - National Bureau of Economic Research Working Paper Series VL - No. 13994 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13994 L1 - http://www.nber.org/papers/w13994.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 Martin West Box 1938, 21 Manning Walk Brown University Providence, RI 02912 Tel: 401-863-6467 E-Mail: martin_west@brown.edu AB - Although recent evidence suggests that non-cognitive skills such as engagement matter for academic and economic success, there is little evidence on how key educational inputs affect the development of these skills. We present a re-analysis of follow-up data from the Project STAR class-size experiment and find evidence that early-grade class-size reductions did improve subsequent student initiative. However, these effects did not persist into the 8th grade. Furthermore, the external and, possibly, the internal validity of these inferences is compromised by non-random attrition. We also present a complementary analysis based on nationally representative survey data and a research design that relies on contemporaneous within-student and within-teacher comparisons across two academic subjects. Our results indicate that smaller classes in 8th grade lead to improvements in measures of student engagement with effect sizes ranging from 0.05 to 0.09 and smaller effects persisting two years later. Using the estimated earnings impact of these non-cognitive skills and the direct cost of a class-size reduction, the implied internal rate of return from an 8th-grade class-size reduction is 4.6 percent overall, but 7.9 percent in urban schools. ER - TY - JOUR AU - Guryan,Jonathan AU - Hurst,Erik AU - Kearney,Melissa Schettini TI - Parental Education and Parental Time With Children JF - National Bureau of Economic Research Working Paper Series VL - No. 13993 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13993 L1 - http://www.nber.org/papers/w13993.pdf N1 - Author contact info: Jonathan Guryan University of Chicago Graduate School of Business 5807 S. Woodlawn Ave. Chicago, IL 60637 Tel: 773/834-5967 Fax: 773/702-0458 E-Mail: jonathan.guryan@chicagoGSB.edu Erik Hurst Graduate School of Business University of Chicago Hyde Park Center Chicago, IL 60637 Tel: 773/834-4073 Fax: 773/702-0458 E-Mail: erik.hurst@gsb.uchicago.edu Melissa Schettini Kearney Department of Economics University of Maryland 3105 Tydings Hall College Park, MD 20742 Tel: 202/797-6406 Fax: 202/797-6181 E-Mail: kearney@econ.umd.edu AB - Parents invest both their material resources and their time into raising their children. Time investment in children is thought to be critical to the development of "quality" children who will become productive adults. This paper has three goals related to the examination of parental time allocated to the care of their children. First, using data from the recent American Time Use Surveys (ATUS), we highlight what we think are the most interesting, and perhaps surprising, cross sectional patterns in time spent with children by parents within the United States. Second, we interpret our results in a Beckerian framework of time allocation with a view toward establishing whether parental childcare appears to be more akin to leisure or home production. Third, we examine data from a sample of 14 countries to establish whether the patterns we observe in the United States hold across countries and within other countries. We show that both within countries and across countries there is a strong positive relationship between parental education, or earnings, and time spent with children. We then show that time spent with children does not follow patterns typical of leisure or home production, suggesting an important difference. We speculate that one reason for this positive education gradient relates to the investment aspect of time spent with children. ER - TY - JOUR AU - Easterly,William AU - Satyanath,Shanker AU - Berger,Daniel TI - Superpower Interventions and their Consequences for Democracy: An Empirical Inquiry JF - National Bureau of Economic Research Working Paper Series VL - No. 13992 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13992 L1 - http://www.nber.org/papers/w13992.pdf N1 - Author contact info: William Easterly Department of Economics New York University 19 West 4th Street, 6th Floor New York, NY 10012 Tel: 212/992-8684 Fax: 212/995-4186 E-Mail: william.easterly@nyu.edu Shanker Satyanath New York University Department of Politics 19 West 4th Street New York, NY 10012 E-Mail: ss284@nyu.edu Daniel Berger Department of Politics New York University, 19 West 4th Street New York NY 10012 E-Mail: db1299@nyu.edu AB - Do superpower interventions to install and prop up political leaders in other countries subsequently result in more or less democracy, and does this effect vary depending on whether the intervening superpower is democratic or authoritarian? While democracy may be expected to decline contemporaneously with superpower interference, the effect on democracy after a few years is far from obvious. The absence of reliable information on covert interventions has hitherto served as an obstacle to seriously addressing these questions. The recent declassification of Cold War CIA and KGB documents now makes it possible to systematically address these questions in the Cold War context. We thus develop a new panel dataset of superpower interventions during the Cold War. We find that superpower interventions are followed by significant declines in democracy, and that the substantive effects are large. Perhaps surprisingly, once endogeneity is addressed, US and Soviet interventions have equally detrimental effects on the subsequent level of democracy; both decrease democracy by about 33%. Our findings thus suggest that one should not expect significant differences in the adverse institutional consequences of superpower interventions based on whether the intervening superpower is a democracy or a dictatorship. ER - TY - JOUR AU - Newell,Richard G. AU - Pizer,William A. TI - Indexed Regulation JF - National Bureau of Economic Research Working Paper Series VL - No. 13991 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13991 L1 - http://www.nber.org/papers/w13991.pdf N1 - Author contact info: Richard 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 William Pizer Resources for the Future 1616 P Street, NW Washington, DC 20036 Tel: 202-328-5000 Fax: 202-939-3460 E-Mail: pizer@rff.org AB - Seminal work by Weitzman (1974) revealed prices are preferred to quantities when marginal benefits are relatively flat compared to marginal costs. We extend this comparison to indexed policies, where quantities are proportional to an index, such as output. We find that policy preferences hinge on additional parameters describing the first and second moments of the index and the ex post optimal quantity level. When the ratio of these variables' coefficients of variation divided by their correlation is less than approximately two, indexed quantities are preferred to fixed quantities. A slightly more complex condition determines when indexed quantities are preferred to prices. Applied to climate change policy, we find that the range of variation and correlation in country-level carbon dioxide emissions and GDP suggests the ranking of an emissions intensity cap (indexed to GDP) compared to a fixed emission cap is not uniform across countries; neither policy clearly dominates the other. ER - TY - JOUR AU - Galvarriato,Aurora Gómez AU - Williamson,Jeffrey G. TI - Was It Prices, Productivity or Policy? The Timing and Pace of Latin American Industrialization after 1870 JF - National Bureau of Economic Research Working Paper Series VL - No. 13990 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13990 L1 - http://www.nber.org/papers/w13990.pdf N1 - Author contact info: Aurora Gomez Division of Economics CIDE Lomas de Sta. Santa Fe 12010 Mexico D.F. Mexico E-Mail: aurora.gomez@amadeus.cide.edu Jeffrey G. Williamson #1002 Nolen Shore 350 South Hamilton Street Madison, WI 53703 Tel: 617/495-2438 Fax: 617/496-7352 E-Mail: jwilliam@fas.harvard.edu AB - Brazil, Mexico and a few other Latin American republics enjoyed faster industrialization after 1870 than did the rest of Latin America and even faster than the rest of the poor periphery (except East Asia). How much of this economic performance was due to more accommodating institutions and greater political stability, changes that would have facilitated greater technology transfer and accumulation? That is, how much to changing fundamentals? How much instead to a cessation in the secular rise in the net barter terms of trade which reversed de-industrialization forces, thus favoring manufacturing? How much instead to cheaper foodstuffs coming from more open commercial policies ('grain invasions'), and from railroad-induced integration of domestic grain markets, serving to keep urban grain prices and thus nominal wages in industry low, helping to maintain competitiveness? How much instead to more pro-industrial real exchange rate and tariff policy? Which of these forces contributed most to industrialization among the Latin American leaders, long before their mid 20th century adoption of ISI policies? Changing fundamentals, changing market conditions, or changing policies? ER - TY - JOUR AU - Reinhardt,Forest L. AU - Stavins,Robert N. AU - Vietor,Richard H. K. TI - Corporate Social Responsibility Through an Economic Lens JF - National Bureau of Economic Research Working Paper Series VL - No. 13989 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13989 L1 - http://www.nber.org/papers/w13989.pdf N1 - Author contact info: Forest L.. Reinhardt Harvard Business School Boston, Massachusetts E-Mail: freinhardt@hbs.edu Robert Stavins JFK School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617/495-1820 Fax: 617/496-3783 E-Mail: robert_stavins@harvard.edu richard vietor Harvard Business School Boston, Massachusetts E-Mail: rvietor@hbs.edu AB - Business leaders, government officials, and academics are focusing considerable attention on the concept of "corporate social responsibility" (CSR), particularly in the realm of environmental protection. Beyond complete compliance with environmental regulations, do firms have additional moral or social responsibilities to commit resources to environmental protection? How should we think about the notion of firms sacrificing profits in the social interest? May they do so within the scope of their fiduciary responsibilities to their shareholders? Can they do so on a sustainable basis, or will the forces of a competitive marketplace render such efforts and their impacts transient at best? Do firms, in fact, frequently or at least sometimes behave this way, reducing their earnings by voluntarily engaging in environmental stewardship? And finally, should firms carry out such profit-sacrificing activities (i.e., is this an efficient use of social resources)? We address these questions through the lens of economics, including insights from legal analysis and business scholarship. ER - TY - JOUR AU - Rose,Andrew K. AU - Spiegel,Mark M. TI - Non-Economic Engagement and International Exchange: The Case of Environmental Treaties JF - National Bureau of Economic Research Working Paper Series VL - No. 13988 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13988 L1 - http://www.nber.org/papers/w13988.pdf N1 - Author contact info: Andrew K. Rose Haas School of Business Administration University of California 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 AB - We examine the role of non-economic partnerships in promoting international economic exchange. Since far-sighted countries are more willing to join costly international partnerships such as environmental treaties, environmental engagement tends to encourage international lending. Countries with such non-economic partnerships also find it easier to engage in economic exchanges since they face the possibility that debt default might also spill over to hinder their non-economic relationships. We present a theoretical model of these ideas, and then verify their empirical importance using a bilateral cross-section of data on international cross-holdings of assets and environmental treaties. Our results support the notion that international environmental cooperation facilitates economic exchange. ER - TY - JOUR AU - Currie,Janet TI - Healthy, Wealthy, and Wise Socioeconomic Status, Poor Health in Childhood, and Human Capital Development JF - National Bureau of Economic Research Working Paper Series VL - No. 13987 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13987 L1 - http://www.nber.org/papers/w13987.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 AB - There are many possible pathways between parental education, income, and health, and between child health and education, but only some of them have been explored in the literature. This essay focuses on links between parental socioeconomic status (as measured by education, income, occupation, or in some cases area of residence) and child health, and between child health and adult education or income. Specifically, I ask two questions: What is the evidence regarding whether parental socioeconomic status affects child health? And, what is the evidence relating child health to future educational and labor market outcomes? I show that there is now strong evidence of both links, suggesting that health could play a role in the intergenerational transmission of economic status. ER - TY - JOUR AU - Benigno,Pierpaolo AU - Ricci,Luca Antonio TI - The Inflation-Unemployment Trade-Off at Low Inflation JF - National Bureau of Economic Research Working Paper Series VL - No. 13986 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13986 L1 - http://www.nber.org/papers/w13986.pdf N1 - Author contact info: Pierpaolo Benigno Dipartimento di Scienze Economiche e Aziendali Luiss Guido Carli Viale Romania 32 00197 Rome - Italy Tel: 39-0685225-552 E-Mail: pbenigno@luiss.it Luca A. Ricci International Monetary Fund Research Department 700 19th Street, N.W. Washington, D.C. 20431 E-Mail: lricci@imf.org AB - Wage setters take into account the future consequences of their current wage choices in the presence of downward nominal wage rigidities. Several interesting implications arise. First, nominal wages tend to be endogenously rigid also upward, at low inflation. Second, a closed-form solution for a long run Phillips curve relates average unemployment to average wage inflation; the curve is virtually vertical for high inflation rates but becomes flatter as inflation declines. Third, macroeconomic volatility shifts the Phillips curve outward, implying that stabilization policies can play an important role in shaping the trade-off. Fourth, when inflation decreases, volatility of unemployment increases whereas the volatility of inflation decreases: this implies a long-run trade-off also between the volatility of unemployment and that of wage inflation. ER - TY - JOUR AU - Ramey,Valerie A. TI - Time Spent in Home Production in the 20th Century: New Estimates from Old Data JF - National Bureau of Economic Research Working Paper Series VL - No. 13985 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13985 L1 - http://www.nber.org/papers/w13985.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 AB - This paper presents new estimates of time spent in home production in the U.S. during the 20th Century. Regressions based on detailed tabulations from early time diary studies are used to construct estimates for housewives that are closer to being nationally representative for the first half of the 20th Century. These estimates are then linked to estimates from individual-level data from 1965 to the present. Time diary studies of other groups such as employed women, men, and children are also compiled and analyzed. The new estimates suggest that time spent in home production by prime-age women fell by around six hours from 1900 to 1965 and by another 12 hours from 1965 to 2005. Time spent by prime-age men rose by 13 hours from 1900 to 2005. Considering the entire population, including children and older individuals, per capita time spent in home production increased slightly over the century. The new estimates are used to assess leading theories about long-run trends in home production. ER - TY - JOUR AU - Ju,Jiandong AU - Wei,Shang-Jin TI - When Is Quality of Financial System a Source of Comparative Advantage? JF - National Bureau of Economic Research Working Paper Series VL - No. 13984 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13984 L1 - http://www.nber.org/papers/w13984.pdf N1 - Author contact info: Jiandong Ju Research Department International Monetary Fund 700 19th Street NW Washington, DC 20431 and University of Oklahoma E-Mail: jju@imf.org Shang-Jin Wei Graduate School of Business Columbia University Uris Hall, Room 619 3022 Broadway New York, NY 10027-6902 Tel: 212/854-9139 E-Mail: sw2446@columbia.edu AB - Does finance follow the real economy, or the other way around? This paper unites the two competing schools of thought in a general equilibrium framework. Our key result is that there are threshold effects defined by a set of deep institutional parameters (cost of financial intermediation, quality of corporate governance, and level of property rights protection) which can be used to separate economies of high-quality institutions from those of low-quality institutions. On one hand, for economies with high-quality institutions, the view that finance follows the real economy is essentially correct. Equilibrium output and prices are determined by factor endowment. Further improvement in the institutions does not affect patterns of output. On the other hand, for economies with low-quality institutions, the view that finance is a key driver of the real economy is essentially correct. Not only is finance a source of comparative advantage, but an increase in capital endowment has no effect on outputs and prices. Our model extends a standard one-sector, partial equilibrium model of corporate finance to a multi-sector, general equilibrium analysis. Surprisingly, but consistent with data, we show that the size of financial markets (relative to GDP) does not change monotonically with either the quality of institutions or with the factor endowment. Free trade may reduce the aggregate income of an economy with low-quality institutions. Financial capital tends to flow from economies with low-quality institutions to those with high-quality institutions. ER - TY - JOUR AU - McGrattan,Ellen R. AU - Prescott,Edward C. TI - Technology Capital and the U.S. Current Account JF - National Bureau of Economic Research Working Paper Series VL - No. 13983 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13983 L1 - http://www.nber.org/papers/w13983.pdf N1 - Author contact info: Ellen McGrattan Research Department Federal Reserve Bank of Minneapolis 90 Hennepin Avenue Minneapolis, MN 55480 Tel: 612/204-5523 Fax: 612/204-5515 E-Mail: erm@mcgrattan.mpls.frb.fed.us Edward C. Prescott Economics Department ASU / Main Campus PO BOX 873806 Tempe, AZ 85287-3806 Tel: 480/727-7977 Fax: 480/965/0748 E-Mail: edward.prescott@asu.edu AB - The U.S. Bureau of Economic Analysis (BEA) estimates the return on investments of foreign subsidiaries of U.S. multinational companies over the period 1982--2006 averaged 9.4 percent annually after taxes; U.S. subsidiaries of foreign multinationals averaged only 3.2 percent. Two factors distort BEA returns: technology capital and plant-specific intangible capital. Technology capital is accumulated know-how from intangible investments in R&D, brands, and organizations that can be used in foreign and domestic locations. Used abroad, it generates profits for foreign subsidiaries with no foreign direct investment (FDI). Plant-specific intangible capital in foreign subsidiaries is expensed abroad, lowering current profits on FDI and increasing future profits. We develop a multicountry general equilibrium model with an essential role for FDI and apply the BEA's methodology to construct economic statistics for the model economy. We estimate that mismeasurement of intangible investments accounts for over 60 percent of the difference in BEA returns. ER - TY - JOUR AU - Gordon,Robert J. AU - Dew-Becker,Ian TI - Controversies about the Rise of American Inequality: A Survey JF - National Bureau of Economic Research Working Paper Series VL - No. 13982 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13982 L1 - http://www.nber.org/papers/w13982.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 Ian Dew-Becker Ian Dew-Becker Department of Economics Harvard University Cambridge, MA 02138 idew@fas.harvard.edu E-Mail: idew@fas.harvard.edu AB - This paper provides a comprehensive survey of seven aspects of rising inequality that are usually discussed separately: changes in labor's share of income; inequality at the bottom of the income distribution, including labor mobility; skill-biased technical change; inequality among high incomes; consumption inequality; geographical inequality; and international differences in the income distribution, particularly at the top. We conclude that changes in labor's share play no role in rising inequality of labor income; by one measure labor's income share was almost the same in 2007 as in 1950. Within the bottom 90 percent as documented by CPS data, movements in the 50-10 ratio are consistent with a role of decreased union density for men and of a decrease in the real minimum wage for women, particularly in 1980-86. There is little evidence on the effects of imports, and an ambiguous literature on immigration which implies a small overall impact on the wages of the average native American, a significant downward effect on high-school dropouts, and potentially a large impact on previous immigrants working in occupations in which immigrants specialize. The literature on skill-biased technical change (SBTC) has been valuably enriched by a finer grid of skills, switching from a two-dimension to a three- or five-dimensional breakdown of skills. We endorse the three-way "polarization" hypothesis that seems a plausible way of explaining differentials in wage changes and also in outsourcing. To explain increased skewness at the top, we introduce a three-way distinction between market-driven superstars where audience magnification allows a performance to reach one or ten million people, a second market-driven segment consisting of occupations like lawyers and investment bankers, and a third segment consisting of top corporate officers. Our review of the CEO debate places equal emphasis on the market in showering capital gains through stock options and an arbitrary management power hypothesis based on numerous non-market aspects of executive pay. Data on consumption inequality are too fragile to reach firm conclusions. We introduce two new issues, disparities in the growth of price indexes and also of life expectancy between the rich and the poor. We conclude with a perspective on international differences that blends institutional and market-driven explanations. ER - TY - JOUR AU - Egel,Daniel AU - Graham,Bryan S. AU - Pinto,Cristine Campos de Xavier TI - Inverse Probability Tilting and Missing Data Problems JF - National Bureau of Economic Research Working Paper Series VL - No. 13981 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13981 L1 - http://www.nber.org/papers/w13981.pdf N1 - Author contact info: Daniel Egel Department of Economics University of California, Berkeley Berkeley , CA 94720 E-Mail: egel@berkeley.edu Bryan S. Graham UC, Berkeley Department of Economics 508-1 Evans Hall #3880 Berkeley, CA 94720-3880 Tel: 510/642-4752 Fax: 510/642-6615 E-Mail: bgraham@econ.berkeley.edu Cristine Campos de Xavier Pinto Department of Economics University of California Berkely 508-1 Evans Hall #3880 Berkeley, CA 94720 AB - This paper outlines a new minimum empirical discrepancy (MD) estimator for missing data, sample combination and related problems: inverse probability tilting (IPT). Covered examples include estimation of the average treatment effect (ATE), the average treatment effect on the treated (ATT) and the two sample instrumental variables (TSIV) model. The proposed estimator attains the semiparametric efficiency bound under two auxiliary parametric restrictions (local efficiency), but is consistent so long as one or the other holds (double robustness). A novel feature of IPT is its 'exact balancing' property: after reweighting, sample moments of always-observed covariates in the complete-case subsample equal their corresponding (unweighted) full sample means. We also show how prior restrictions on the marginal distribution of always-observed covariates can be efficiently incorporated into our procedure. We use our methods, and compare them to several alternatives, in an evaluation of the National Supported Work (NSW) demonstration using 'non-experimental' comparison groups drawn from the Panel Study of Income Dynamics (PSID) and the Current Population Survey (CPS) as in LaLonde (1986) and Dehejia and Wahba (1999). We explore the small sample properties of IPT in a Monte Carlo study. IPT performs well, relative to several alternative estimators, across a variety of data generating processes. ER - TY - JOUR AU - Metcalf,Gilbert E. AU - Paltsev,Sergey AU - Reilly,John AU - Jacoby,Henry AU - Holak,Jennifer F. TI - Analysis of U.S. Greenhouse Gas Tax Proposals JF - National Bureau of Economic Research Working Paper Series VL - No. 13980 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13980 L1 - http://www.nber.org/papers/w13980.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 Sergey Paltsev Joint Program on the Science and Policy of Global change Massachusetts Institute of Technology 1 Amherst St. (Bldg. E40) Cambridge, MA 02139 E-Mail: paltsev@MIT.EDU John Reilly Joint Program on the Science and Policy of Global Change Massachusetts Institute of Technology 1 Amherst St. (Bldg. E40) Cambridge, MA 02139 E-Mail: jreilly@mit.edu Henry Jacoby Joint Program on the Science and Policy of Global Change Massachusetts Institute of Technology 1 Amherst St. (Bldg. E40) Cambridge, MA 02139 E-Mail: hjacoby@MIT.EDU Jennifer F. Holak Joint Program on the Science and Policy of Global Change Massachusetts Institute of Technology 1 Amherst St. (Bldg. E40) Cambridge, MA, 02138 E-Mail: holak@mit.edu AB - The U.S. Congress is considering a set of bills designed to limit the nation's greenhouse gas (GHG) emissions. This paper complements the analysis by Paltsev et al. (2007) of cap-and-trade bills and applies the MIT Emissions Prediction and Policy Analysis (EPPA) model to carry out an analysis of the tax proposals. Several lessons emerge from this analysis. First, a low starting tax rate combined with a low rate of growth in the tax rate will not reduce emissions significantly. Second, the costs of GHG reductions are reduced with the inclusion of non-CO2 gases in the carbon tax scheme. Third, welfare costs of the policies can be affected by the rate of growth of the tax, even after controlling for cumulative emissions. Fourth, a carbon tax -- like any form of carbon pricing -- is regressive. However, general equilibrium considerations suggest that the short-run measured regressivity may be overstated. Additionally, the regressivity can be offset with a carefully designed rebate of some or all of the revenue. Finally, the carbon tax bills that have been proposed or submitted are for the most part comparable to many of the carbon cap-and-trade proposals that have been suggested. Thus the choice between a carbon tax and cap-and-trade system can be made on the basis of considerations other than their effectiveness at reducing emissions over some control period. ER - TY - JOUR AU - Geanakoplos,John AU - Zeldes,Stephen P. TI - Reforming Social Security with Progressive Personal Accounts JF - National Bureau of Economic Research Working Paper Series VL - No. 13979 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13979 L1 - http://www.nber.org/papers/w13979.pdf N1 - Author contact info: John Geanakoplos Department of Economics Yale University Box 208281 New Haven, CT 06520-8281 Tel: 203/432-3397 Fax: 203/432-6167 E-Mail: john.geanakoplos@yale.edu Stephen P. Zeldes Graduate School of Business Columbia University 3022 Broadway, Uris 825 New York, NY 10027-6902 Tel: 212/854-2492 Fax: 212/208-4699 E-Mail: stephen.zeldes@columbia.edu M3 - presented at "Retirement Research", October 19-22, 2006 AB - The heated debate about how to reform Social Security has come to a standstill because the view of most Democrats (that Social Security must be a defined benefits plan similar in spirit to the current system) seems irreconcilable with the proposals supported by many Republicans (to create a defined contribution system of personal accounts holding marketed assets). We describe a system of "progressive personal accounts" that preserves the core goals of both parties, and that is self-balancing on an ongoing basis. Progressive personal accounts have two critical features: (1) accruals into the personal accounts would be exclusively in a new kind of derivative security (which we call a PAAW for Personal Annuitized Average Wage security) that pays its owner one inflation-corrected dollar during every year of life after his statutory retirement date, multiplied by the economy wide average wage at the retirement date and (2) households would buy their new PAAWs each year with their social security contributions, augmented or reduced by a government match that would add to contributions from households with low lifetime incomes by taking from households with high lifetime incomes. PAAWS define benefits and achieve risk sharing across generations, as Democrats would like, yet can be held in personal accounts with market valuations, as Republicans propose. ER - TY - JOUR AU - Dooley,Michael P. AU - Folkerts-Landau,David AU - Garber,Peter M. TI - Will Subprime be a Twin Crisis for the United States? JF - National Bureau of Economic Research Working Paper Series VL - No. 13978 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13978 L1 - http://www.nber.org/papers/w13978.pdf N1 - Author contact info: Michael P. Dooley Department of Economics Engineering II University of California, Santa Cruz Santa Cruz, CA 95064 Tel: 347/408-5582 Fax: 831/459-5077 E-Mail: mdooley@cabezoncapital.com David Folkerts-Landau Deutsche Bank Deutsche Bank AG London 1 Great Winchester Street London EC2 2EQ United Kingdom E-Mail: david.folkerts-landau@db.com Peter M. Garber Deutsche Bank 60 Wall Street New York, NY 10005 Tel: 212/250-5466 Fax: 212/250-2628 E-Mail: peter.garber@db.com AB - We identify incentives generated by the Bretton Woods II system that may have contributed to the sub-prime liquidity crisis now working its way through the international monetary system. We then evaluate the persistent conjecture that the liquidity crisis is or will become a balance of payments crisis for the United States. Given that it happens, the additional costs associated with a sudden stop of net capital flows to the United States could be quite substantial. But we observe that emerging market governments have continued to acquire US assets even as yields have fallen, and the incentives for continuing to do so remain strong. Moreover, the Bretton Woods II system, which has clearly been the most resilient of the forces driving current markets, continues to generate low real interest rates in industrial countries and growth in emerging markets that will help limit the damage from the liquidity crisis. ER - TY - JOUR AU - Dupont,Brandon AU - Gandhi,Alka AU - Weiss,Thomas J. TI - The American Invasion of Europe: The Long Term Rise in Overseas Travel, 1820-2000 JF - National Bureau of Economic Research Working Paper Series VL - No. 13977 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13977 L1 - http://www.nber.org/papers/w13977.pdf N1 - Author contact info: Brandon Dupont Department of Economics Western Washington University Parks Hall 206B 516 High Street Bellingham, WA 98225 E-Mail: brandon.dupont@wwu.edu Alka Gandhi Department of Economics University of Maryland College Park, MD Tel: 570-321-4154 E-Mail: Gandhi@econ.umd.edu Thomas J. Weiss 3128 Campfire Ct Lawrence, KS 66049 Tel: 785/843-7354 Fax: 785/864-5270 E-Mail: t-weiss@ku.edu AB - Tourism today is an activity of substantial economic importance worldwide, and has been for some time. Tourism is also of substantial economic importance in the United States, sufficient to warrant the Bureau of Economic Analysis's establishing special accounts on travel and tourism. In this paper we investigate the long term rise in overseas travel by Americans. Over the course of the nineteenth and twentieth centuries the number of Americans going abroad rose from less than 2,000 travelers to over 26 million. The industry went from one confined to the elite of American society to what some have described as mass tourism. We document this rise by compiling a long term series on overseas travel, and describe the changes in the composition of the travelers, their destinations, and their mode of travel. We use an Error Correction Model to explain how the increase came about. ER - TY - JOUR AU - Beshears,John AU - Choi,James J. AU - Laibson,David AU - Madrian,Brigitte C. TI - How are Preferences Revealed? JF - National Bureau of Economic Research Working Paper Series VL - No. 13976 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13976 L1 - http://www.nber.org/papers/w13976.pdf N1 - Author contact info: John Beshears Department of Economics Littauer Center Harvard University Cambridge, MA 02138 E-Mail: beshears@fas.harvard.edu James J. Choi Yale School of Management 135 Prospect Street P.O. Box 208200 New Haven, CT 06520-8200 E-Mail: james.choi@yale.edu David Laibson Department of Economics Littauer M-14 Harvard University Cambridge, MA 02138 Tel: 617/496-3402 Fax: 617/495-8570 E-Mail: dlaibson@harvard.edu Brigitte C. Madrian John F. Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617-495-8917 Fax: 617-496-5960 E-Mail: Brigitte_Madrian@Harvard.edu AB - Revealed preferences are tastes that rationalize an economic agent’s observed actions. Normative preferences represent the agent's actual interests. It sometimes makes sense to assume that revealed preferences are identical to normative preferences. But there are many cases where this assumption is violated. We identify five factors that increase the likelihood of a disparity between revealed preferences and normative preferences: passive choice, complexity, limited personal experience, third- party marketing, and intertemporal choice. We then discuss six approaches that jointly contribute to the identification of normative preferences: structural estimation, active decisions, asymptotic choice, aggregated revealed preferences, reported preferences, and informed preferences. Each of these approaches uses consumer behavior to infer some property of normative preferences without equating revealed and normative preferences. We illustrate these issues with evidence from savings and investment outcomes. ER - TY - JOUR AU - Dobbelaere,Sabien AU - Mairesse,Jacques TI - Panel Data Estimates Of The Production Function And Product And Labor Market Imperfections JF - National Bureau of Economic Research Working Paper Series VL - No. 13975 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13975 L1 - http://www.nber.org/papers/w13975.pdf N1 - Author contact info: Sabien Dobbelaere Faculty of Economics and Business Administration Ghent University Tweekerkenstraat 2 9000 GENT, BELGIUM E-Mail: sabien.dobbelaere@UGent.be Jacques Mairesse INSEE, CREST 15, Boulevard Gabriel PERI 92245 MALAKOFF CEDEX FRANCE Tel: 33-1-41-17-35-50 Fax: 33-1-41-17-76-34 E-Mail: mairesse@ensae.fr AB - Embedding the efficient bargaining model into the R. Hall (1988) approach for estimating price-cost margins shows that both imperfections in the product and labor markets generate a wedge between factor elasticities in the production function and their corresponding shares in revenue. This article investigates these two sources of discrepancies both at the industry level and the firm level using an unbalanced panel of 10646 French firms in 38 manufacturing industries over the period 1978-2001. By estimating standard production functions and comparing the estimated factor elasticities for labor and materials and their shares in revenue, we are able to derive estimates of average price-cost mark-up and extent of rent sharing parameters. For manufacturing as a whole, our estimates of these parameters are of an order of magnitude of 1.17 and 0.44 respectively. Our industry-level results indicate that industry differences in these parameters and in the underlying estimated factor elasticities and shares are quite sizeable. Since firm production function, behavior and market environment are very likely to vary even within industries, we also investigate firm-level heterogeneity in estimated mark-up and rent-sharing parameters. To determine the degree of true heterogeneity in these parameters, we adopt the P.A. Swamy (1970) methodology allowing to correct the observed variance in the firm-level estimates from their sampling variance. The median of the firm estimates of the price-cost mark-up ignoring labor market imperfections is of 1.10, while as expected it is higher of 1.20 when taking them into account and the median of the corresponding firm estimates of the extent of rent sharing is of 0.62. The Swamy corresponding robust estimates of true dispersion are of about 0.18, 0.37 and 0.35, showing indeed very sizeable within-industry firm heterogeneity. We find that firm size, capital intensity, distance to the industry technology frontier and investing in R&D seem to account for a significant part of this heterogeneity. ER - TY - JOUR AU - Grubb,Farley TI - Creating Maryland's Paper Money Economy, 1720-1739: The Role of Power, Print, and Markets JF - National Bureau of Economic Research Working Paper Series VL - No. 13974 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13974 L1 - http://www.nber.org/papers/w13974.pdf N1 - Author contact info: Farley Grubb University of Delaware Economics Department Newark, DE 19716 Tel: 302/831-1905 Fax: 302/831-6968 E-Mail: grubbf@lerner.udel.edu AB - The British North American colonies were the first western economies to rely on legislature-issued fiat paper money as their principal internal medium of exchange. This system arose piecemeal across the colonies making the paper money creation story for each colony unique. It was true monetary experimentation on a grand scale. The creation story for Maryland, perhaps the most unique among the colonies, is analyzed to evaluate how market forces, media influences, and the power of various constituents combined to shape its particular paper money system. ER - TY - JOUR AU - Frazzini,Andrea AU - Malloy,Christopher AU - Cohen,Lauren TI - Sell Side School Ties JF - National Bureau of Economic Research Working Paper Series VL - No. 13973 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13973 L1 - http://www.nber.org/papers/w13973.pdf N1 - Author contact info: Andrea Frazzini Graduate School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-8471 Fax: 773/702-0458 E-Mail: andrea.frazzini@chicagogsb.edu Christopher Malloy Harvard Business School Baker Library 277 Boston, MA 02163 Tel: 617-495-4383 E-Mail: cmalloy@hbs.edu Lauren Cohen Harvard Business School Baker Library 273 Soldiers Field Boston, MA 02163 Tel: 617/495-3888 E-Mail: lcohen@hbs.edu AB - We study the impact of social networks on agents’ ability to gather superior information about firms. Exploiting novel data on the educational backgrounds of sell side equity analysts and senior officers of firms, we test the hypothesis that analysts’ school ties to senior officers impart comparative information advantages in the production of analyst research. We find evidence that analysts outperform on their stock recommendations when they have an educational link to the company. A simple portfolio strategy of going long the buy recommendations with school ties and going short buy recommendations without ties earns returns of 5.40% per year. We test whether Regulation FD, targeted at impeding selective disclosure, constrained the use of direct access to senior management. We find a large effect: pre-Reg FD the return premium from school ties was 8.16% per year, while post-Reg FD the return premium is nearly zero and insignificant. In contrast, in an environment that did not change selective disclosure regulation (the UK), the analyst school-tie premium has remained large and significant over the entire sample period. ER - TY - JOUR AU - Blanchflower,David G. TI - Minority Self-Employment in the United States and the Impact of Affirmative Action Programs JF - National Bureau of Economic Research Working Paper Series VL - No. 13972 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13972 L1 - http://www.nber.org/papers/w13972.pdf N1 - Author contact info: David G. Blanchflower Bruce V. Rauner Professor of Economics 309B Silsby Hall Dartmouth College Hanover, NH 03755-3514 Tel: 603/646-2536 Fax: 603/646-2122 E-Mail: david.g.blanchflower@dartmouth.edu M3 - presented at "China and World Trade Conference", August 3-4, 2007 AB - n this paper I examine changes in self-employment that have occurred since the early 1980s in the United States. It is a companion paper to a recent equivalent paper that related to the UK. Data on random samples of approximately twenty million US workers are examined taken from the Basic Monthly files of the CPS (BMCPS), the 2000 Census and the 2006 American Community Survey (ACS). In contrast to the official definition of self-employment which simply counts the numbers of unincorporated self-employed, we also include the incorporated self-employed who are paid wages and salaries. The paper presents evidence on trends in self-employment for the US by race, ethnicity and gender. Evidence is also presented for construction which has self-employment rates roughly double the national rates and where there are strikingly high racial and gender disparities in self-employment rates. The construction sector is also important given the existence of public sector affirmative action programs at the federal, state and local levels directed at firms owned by women and minorities. I document the fact that disparities between the self-employment rates of white men and white women and minorities in construction narrowed in the 1980s, widened during the 1990s after the US Supreme Court's decision in Croson but then narrowed again since 2000 after a number of legal cases, which found such programs constitutional. Despite this substantial disparities remain, particularly in earnings. I also find evidence of discrimination in the small business credit market. Firms owned by minorities in general and blacks in particular are much more likely to have their loans denied and pay higher interest than is the case for white males. This is only partially explained by their lack of creditworthiness and is consistent with a finding of discrimination in the credit market by banks. ER - TY - JOUR AU - Oster,Emily AU - Chen,Gang TI - Hepatitis B Does Not Explain Male-Biased Sex Ratios in China JF - National Bureau of Economic Research Working Paper Series VL - No. 13971 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13971 L1 - http://www.nber.org/papers/w13971.pdf N1 - Author contact info: Emily Oster University of Chicago Department of Economics 1126 East 59th Street Chicago, IL 60637 Tel: 773/834-1552 Fax: 773-834-8172 E-Mail: eoster@uchicago.edu Gang Chen Hepatitis B Foundation Philadelphia, PA E-Mail: gang.chen@drexel.edu AB - Earlier work (Oster, 2005) has argued, based on existing medical literature and analysis of cross country data and vaccination programs, that parents who are carriers of hepatitis B have a higher offspring sex ratio (more boys) than non-carrier parents. Further, since a number of Asian countries, China in particular, have high hepatitis B carrier rates, Oster (2005) suggested that hepatitis B could explain a large share { approximately 50% { of Asia's \missing women". Subsequent work has questioned this conclusion. Most notably, Lin and Luoh (2008) use data from a large cohort of births in Taiwan and find only a very tiny effect of maternal hepatitis carrier status on offspring sex ratio. Although this work is quite conclusive for the case of mothers, it leaves open the possibility that paternal carrier status is driving higher sex offspring sex ratios. To test this, we collected data on the offspring gender for a cohort of 67,000 people in China who are being observed in a prospective cohort study of liver cancer; approximately 15% of these individuals are hepatitis B carriers. In this sample, we find no effect of either maternal or paternal hepatitis B carrier status on offspring sex. Carrier parents are no more likely to have male children than non-carrier parents. This finding leads us to conclude that hepatitis B cannot explain skewed sex ratios in China. ER - TY - JOUR AU - Mishkin,Frederic S. TI - Does Stabilizing Inflation Contribute To Stabilizing Economic Activity? JF - National Bureau of Economic Research Working Paper Series VL - No. 13970 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13970 L1 - http://www.nber.org/papers/w13970.pdf N1 - Author contact info: Frederic S. Mishkin Federal Reserve Board 20th Street and Constitution Ave., N.W. Washington, DC 20551 Tel: 202-452-3000 Fax: 202-452-3819 E-Mail: fsm3@columbia.edu AB - This paper discusses recent economic research that demonstrates that the objectives of price stability and stabilizing economic activity are often likely to be mutually reinforcing. Thus, the answer to the title of this paper--"Does stabilizing inflation contribute to stabilizing economic activity?"--is, for the most part, yes. ER - TY - JOUR AU - Mishkin,Frederic S. TI - Exchange Rate Pass-Through And Monetary Policy JF - National Bureau of Economic Research Working Paper Series VL - No. 13889 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w13889 L1 - http://www.nber.org/papers/w13889.pdf N1 - Author contact info: Frederic S. Mishkin Federal Reserve Board 20th Street and Constitution Ave., N.W. Washington, DC 20551 Tel: 202-452-3000 Fax: 202-452-3819 E-Mail: fsm3@columbia.edu AB - This paper discusses what recent economic research tells us about exchange rate pass-through and what this suggests for the control of monetary policy. It first focuses on exchange rate pass-through from a macroeconomic perspective and then examines the microeconomic evidence. In light of this evidence, it then discusses the implications of exchange rate movements on the conduct of monetary policy. ER - TY - JOUR AU - Arkolakis,Costas AU - Demidova,Svetlana AU - Klenow,Peter J. AU - Rodríguez-Clare,Andrés TI - Endogenous Variety and the Gains from Trade JF - National Bureau of Economic Research Working Paper Series VL - No. 13933 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13933 L1 - http://www.nber.org/papers/w13933.pdf N1 - Author contact info: Costas Arkolakis Department of Economics Yale University P.O. Box 208264 New Haven, CT 06520-8264 Tel: 203/432-3547 Fax: 203/432-6323 E-Mail: costas.arkolakis@yale.edu Svetlana Demidova Department of Economics University of Georgia Athens, GA 30602 E-Mail: demidova@terry.uga.edu Peter J. Klenow Department of Economics 579 Serra Mall Stanford University Stanford, CA 94305-6072 Tel: 650/725-8169 Fax: NA E-Mail: Pete@Klenow.net 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 AB - We explore the implications of models with increasing returns, endogenous variety and firm-level heterogeneity for the quantification of the gains from trade. We first focus on the impact of trade liberalization on imported variety by analyzing the experience of Costa Rica from 1986 to 1992. We find that although liberalization triggered a sizable increase in variety, the resulting welfare gains were small because of strong heterogeneity across imported goods. Upon trade liberalization, the new varieties are imported in small quantities, and hence contribute little to welfare. We then present a model with firm-level increasing returns, differentiated goods, monopolistic competition, endogenous variety and free entry to show that total variety (domestic plus imported) can either increase, decrease or remain constant with trade liberalization. More importantly, the gains from trade do not depend on what happens to total variety. In fact, we find that, conditional on the estimated elasticities of trade with respect to trade costs, models with increasing returns, endogenous variety, free or restricted entry, and firm-level heterogeneity have exactly the same implications for welfare gains from trade liberalization as traditional models. ER - TY - JOUR AU - Barro,Robert J. AU - Ursúa,José F. TI - Macroeconomic Crises since 1870 JF - National Bureau of Economic Research Working Paper Series VL - No. 13940 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13940 L1 - http://www.nber.org/papers/w13940.pdf N1 - Author contact info: Robert J. Barro Department of Economics Littauer Center 218 Harvard University Cambridge, MA 02138 Tel: 617/495-3203 Fax: 617/496-8629 E-Mail: rbarro@harvard.edu Jose Ursua Department of Economics Littauer Center 218 Harvard University Cambridge, MA 02138 E-Mail: jfursua@fas.harvard.edu AB - We build on the Maddison GDP data to assemble international time series from before 1914 on real per capita personal consumer expenditure, C. We also improve the GDP data in many cases. The C variable comes closer than GDP to the consumption concept that enters into usual asset-pricing equations. (A separation of consumer expenditure into durables and non-durables is feasible for only a minority of cases.) We have essentially full annual data on C for 22 countries and GDP for 35 countries, and we plan to complete the long-term time series for a few more countries. For samples that start as early as 1870, we apply a peak-to-trough method for each country to isolate economic crises, defined as cumulative declines in C or GDP by at least 10%. The principal world economic crises ranked by importance are World War II, World War I and the Great Depression, the early 1920s (possibly reflecting the influenza epidemic of 1918-20), and post-World War II events such as the Latin American debt crisis and the Asian financial crisis. We find 87 crises for C and 148 for GDP, implying disaster probabilities around 3.6% per year. The disaster size has a mean of 21-22% and an average duration of 3.5 years. A comparison of C and GDP declines shows roughly coincident timing. The average fractional decline in C exceeds that in GDP during wartime crises but is similar for non-war crises. We simulate a Lucas-tree model with i.i.d. growth shocks and Epstein-Zin-Weil preferences. This simulation accords with the observed average equity premium of around 7% on levered equity, using a "reasonable" coefficient of relative risk aversion of 3.5. This result is robust to a number of perturbations, except for limiting the sample to non-war crises, a selection that eliminates most of the largest declines in C and GDP. We plan a statistical analysis that uses all the time-series data and includes estimation of long-run effects of crises on levels and growth rates of C and GDP. We will also study the bond-bill premium (empirically around 1%) and allow for time-varying disaster probabilities. ER - TY - JOUR AU - Black,Sandra E. AU - Devereux,Paul J. AU - Salvanes,Kjell G. TI - Too Young to Leave the Nest: The Effects of School Starting Age JF - National Bureau of Economic Research Working Paper Series VL - No. 13969 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13969 L1 - http://www.nber.org/papers/w13969.pdf N1 - Author contact info: Sandra Black Department of Economics 8283 Bunche Hall UCLA Los Angeles, CA 90095 Tel: 310/825-5665 Fax: 310/825-9528 E-Mail: sblack@econ.ucla.edu Paul J.. Devereux School of Economics University College Dublin Belfield, Dublin 4 Ireland IZA and CEPR E-Mail: devereux@ucd.ie 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 AB - Does it matter when a child starts school? While the popular press seems to suggest it does, there is limited evidence of a long-run effect of school starting age on student outcomes. This paper uses data on the population of Norway to examine the role of school starting age on longer-run outcomes such as IQ scores at age 18, educational attainment, teenage pregnancy, and earnings. Unlike much of the recent literature, we are able to separate school starting age from test age effects using scores from IQ tests taken outside of school, at the time of military enrolment, and measured when students are around age 18. Importantly, there is variation in the mapping between year and month of birth and the year the test is taken, allowing us to distinguish the effects of school starting age from pure age effects. We find evidence for a small positive effect of starting school younger on IQ scores measured at age 18. In contrast, we find evidence of much larger positive effects of age at test, and these results are very robust. We also find that starting school younger has a significant positive effect on the probability of teenage pregnancy, but has little effect on educational attainment of boys or girls. There appears to be a short-run positive effect on earnings of beginning school at a younger age; however, this effect has essentially disappeared by age 30. This pattern is consistent with the idea that starting school later reduces potential labor market experience at a given age for a given level of education; however, this becomes less important as individuals age. ER - TY - JOUR AU - Miguel,Edward AU - Saiegh,Sebastián M. AU - Satyanath,Shanker TI - National Cultures and Soccer Violence JF - National Bureau of Economic Research Working Paper Series VL - No. 13968 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13968 L1 - http://www.nber.org/papers/w13968.pdf N1 - Author contact info: Edward Miguel Department of Economics 508-1 Evans Hall #3880 Berkeley, CA 94705-3880 Tel: 510/642-7162 Fax: 510/642-6615 E-Mail: emiguel@econ.berkeley.edu Sebastian M. Saiegh Department of Political Science, Social Sciences B 9500 Gilman Drive La Jolla, CA 92093 E-Mail: ssaiegh@ucsd.edu Shanker Satyanath New York University Department of Politics 19 West 4th Street New York, NY 10012 E-Mail: ss284@nyu.edu AB - Can some acts of violence be explained by a society's "culture"? Scholars have found it hard to empirically disentangle the effects of culture, legal institutions, and poverty in driving violence. We address this problem by exploiting a natural experiment offered by the presence of thousands of international soccer (football) players in the European professional leagues. We find a strong relationship between the history of civil conflict in a player's home country and his propensity to behave violently on the soccer field, as measured by yellow and red cards. This link is robust to region fixed effects, country characteristics (e.g., rule of law, per capita income), player characteristics (e.g., age, field position, quality), outliers, and team fixed effects. Reinforcing our claim that we isolate cultures of violence rather than simple rule-breaking or something else entirely, there is no meaningful correlation between a player's home country civil war history and soccer performance measures not closely related to violent conduct. ER - TY - JOUR AU - Chetty,Raj TI - Moral Hazard vs. Liquidity and Optimal Unemployment Insurance JF - National Bureau of Economic Research Working Paper Series VL - No. 13967 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13967 L1 - http://www.nber.org/papers/w13967.pdf N1 - Author contact info: Raj Chetty Department of Economics UC, Berkeley 521 Evans Hall #3880 Berkeley, CA 94720 Tel: 510/643-0708 Fax: 510/643-0413 E-Mail: chetty@econ.berkeley.edu AB - This paper presents new evidence on why unemployment insurance (UI) benefits affect search behavior and develops a simple method of calculating the welfare gains from UI using this evidence. I show that 60 percent of the increase in unemployment durations caused by UI benefits is due to a "liquidity effect" rather than distortions in marginal incentives to search ("moral hazard") by combining two empirical strategies. First, I find that increases in benefits have much larger effects on durations for liquidity constrained households. Second, lump-sum severance payments increase durations substantially among constrained households. I derive a formula for the optimal benefit level that depends only on the reduced-form liquidity and moral hazard elasticities. The formula implies that the optimal UI benefit level exceeds 50 percent of the wage. The "exact identification" approach to welfare analysis proposed here yields robust optimal policy results because it does not require structural estimation of primitives. ER - TY - JOUR AU - Gomes,Francisco J. AU - Kotlikoff,Laurence J. AU - Viceira,Luis M. TI - Optimal Life-Cycle Investing with Flexible Labor Supply: A Welfare Analysis of Life-Cycle Funds JF - National Bureau of Economic Research Working Paper Series VL - No. 13966 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13966 L1 - http://www.nber.org/papers/w13966.pdf N1 - Author contact info: Francisco Gomes London Business School Regent's Park London NW1 4SA UK E-Mail: fgomes@london.edu Laurence J. Kotlikoff Department of Economics Boston University 270 Bay State Road Boston, MA 02215 Tel: 617/353-4002 Fax: 617/353-4001 E-Mail: kotlikoff@bu.edu Luis M. Viceira Baker Library 367 Graduate School of Business Administration Harvard University Boston, MA 02163 Tel: 617/495-6331 Fax: 617/496-6593 E-Mail: lviceira@hbs.edu AB - We investigate optimal consumption, asset accumulation and portfolio decisions in a realistically calibrated life-cycle model with flexible labor supply. Our framework allows for wage rate uncertainly, variable labor supply, social security benefits and portfolio choice over safe bonds and risky equities. Our analysis reinforces prior findings that equities are the preferred asset for young households, with the optimal share of equities generally declining prior to retirement. However, variable labor materially alters pre-retirement portfolio choice by significantly raising optimal equity holdings. Using this model, we also investigate the welfare costs of constraining portfolio allocations over the life cycle to mimic popular default investment choices in defined-contribution pension plans, such as stable value funds, balanced funds, and life-cycle (or target date) funds. We find that life-cycle funds designed to match the risk tolerance and investment horizon of investors have small welfare costs. All other choices, including life-cycle funds which do not match investors' risk tolerance, can have substantial welfare costs. ER - TY - JOUR AU - Nakamura,Emi TI - Pass-Through in Retail and Wholesale JF - National Bureau of Economic Research Working Paper Series VL - No. 13965 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13965 L1 - http://www.nber.org/papers/w13965.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 AB - This paper studies how prices comove across products, firms and locations to gauge the relative importance of retailer versus manufacturer-level shocks in determining prices. I make use of a large panel data set on prices for a cross-section of retailers in the U.S. I analyze prices at the barcode or "Universal Product Code'' (UPC) level for individual stores. I find that only 16% of the variation in prices is common across stores selling an identical product. 65% of the price variation is common to stores within a particular retail chain (but not across retail chains), while 17% is completely idiosyncratic to the store and product. Product categories with frequent temporary "sales'' exhibit a disproportionate amount of completely idiosyncratic price variation. My results suggest that most of the observed price variation arises from retail-level rather than manufacturer-level demand and supply shocks. However, the behavior of prices is difficult to relate to observed variation in costs and demand at the retail level. This suggests that retail prices may vary largely as a consequence of dynamic pricing strategies on the part of retailers or manufacturers, rather than static demand and supply shocks. ER - TY - JOUR AU - Chassang,Sylvain AU - Miquel,Gerard Padro i TI - Conflict and Deterrence under Strategic Risk JF - National Bureau of Economic Research Working Paper Series VL - No. 13964 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13964 L1 - http://www.nber.org/papers/w13964.pdf N1 - Author contact info: Sylvain Chassang Department of Economics Bendheim Hall 316 Princeton University Princeton, NJ 08544-1021 E-Mail: chassang@MIT.EDU Gerard Padro i Miquel STICERD London School of Economics Houghton Street London, WC2A 2AE United Kingdom Tel: (44) (0) 2078523554 E-Mail: g.padro@lse.ac.uk AB - We examine the mechanics of deterrence and intervention when fear is a motive for conflict. We contrast results obtained in a complete information setting, where coordination is easy, to those obtained in a setting with strategic risk, where players have different assessments of their environment. These two strategic settings allow us to define and distinguish predatory and preemptive incentives as determinants of conflict. We show that while weapons have an unambiguous deterrent effect under complete information, this does not hold anymore under strategic risk. Rather, we find that increases in weapon stocks can have a non-monotonic effect on the sustainability of peace. We also show that under strategic risk, inequality in military strength can ac- tually facilitate peace and that anticipated peace-keeping interventions may improve incentives for peaceful behavior. ER - TY - JOUR AU - Harrigan,James AU - Deng,Haiyan TI - China's Local Comparative Advantage JF - National Bureau of Economic Research Working Paper Series VL - No. 13963 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13963 L1 - http://www.nber.org/papers/w13963.pdf N1 - Author contact info: James Harrigan International Research Department Federal Reserve Bank-New York 33 Liberty Street New York, NY 10045 Tel: 212/720-8951 Fax: 212/720-6831 E-Mail: harrigan@nber.org Haiyan Deng The Conference Board, Inc. 845 Third Ave New York, New York 10022-6679 E-Mail: haiyand@gmail.com M3 - presented at "China and World Trade Conference", August 3-4, 2007 AB - China's trade pattern is influenced not just by its overall comparative advantage in labor intensive goods but also by geography. We use two variants of the Eaton-Kortum (2002) model to study China's local comparative advantage. The theory predicts that China's share of export markets should grow most rapidly where China's share is initially large. A corollary is that exporters that have a big market share where China's share is initially large should see the largest fall in their market shares. These market share change predictions are strongly supported in the data from 1996 to 2006. We also show theoretically that since trade costs are proportional to weight rather than value, relative distance affects local comparative advantage as well as the overall volume of trade. The model predicts that China has a comparative advantage in heavy goods in nearby markets, and lighter goods in more distant markets. This theory motivates a simple empirical prediction: within a product, China's export unit values should be increasing in distance. We find strong support for this effect in our empirical analysis on product-level Chinese exports in 2006. ER - TY - JOUR AU - Shiller,Robert J. TI - Derivatives Markets for Home Prices JF - National Bureau of Economic Research Working Paper Series VL - No. 13962 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13962 L1 - http://www.nber.org/papers/w13962.pdf N1 - Author contact info: Robert J. Shiller Yale University, Cowles Foundation Box 208281 30 Hillhouse Avenue, Room 11a New Haven, CT 06520-8281 Tel: 203/432-3708 Fax: 203/432-6167 E-Mail: robert.shiller@yale.edu AB - The establishment recently of risk management vehicles for home prices is described. The potential value of such vehicles, once they become established, is seen in consideration of the inefficiency of the market for single family homes. Institutional changes that might derive from the establishment of these new markets are described. An important reason for these beginnings of real estate derivative markets is the advance in home price index construction methods, notably the repeat sales method, that have appeared over the last twenty years. Psychological barriers to the full success of such markets are discussed. ER - TY - JOUR AU - Falk,Armin AU - Huffman,David AU - MacLeod,W. Bentley TI - Institutions and Contract Enforcement JF - National Bureau of Economic Research Working Paper Series VL - No. 13961 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13961 L1 - http://www.nber.org/papers/w13961.pdf N1 - Author contact info: Armin Falk Department of Economics University of Bonn Adenauerallee 24-42, 53113 Bonn E-Mail: armin.falk@uni-bonn.de David Huffman Department of Economics 500 College Avenue Swarthmore, PA 19081-1397 E-Mail: dhuffma1@swarthmore.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 AB - We provide evidence on how two important types of institutions -- dismissal barriers, and bonus pay -- affect contract enforcement behavior in a market with incomplete contracts and repeated interactions. Dismissal barriers are shown to have a strong negative impact on worker performance, and market efficiency, by interfering with firms' use of firing threat as an incentive device. Dismissal barriers also distort the dynamics of worker effort levels over time, cause firms to rely more on the spot market for labor, and create a distribution of relationship lengths in the market that is more extreme, with more very short and more very long relationships. The introduction of a bonus pay option dramatically changes the market outcome. Firms are observed to substitute bonus pay for threat of firing as an incentive device, almost entirely offsetting the negative incentive and efficiency effects of dismissal barriers. Nevertheless, contract enforcement behavior remains fundamentally changed, because the option to pay bonuses causes firms to rely less on long-term relationships. Our results show that market outcomes are the result of a complex interplay between contract enforcement policies and the institutions in which they are embedded. ER - TY - JOUR AU - Chakravarty,Surajeet AU - MacLeod,W. Bentley TI - Contracting in the Shadow of the Law JF - National Bureau of Economic Research Working Paper Series VL - No. 13960 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13960 L1 - http://www.nber.org/papers/w13960.pdf N1 - Author contact info: Surajeet Chakravarty University of Exeter E-Mail: s.chakravarty@exeter.ac.uk 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 AB - Economic models of contract typically assume that courts enforce obligations on the basis of verifiable events. As a matter of law, this is not the case. This leaves open the question of optimal contract design given the available remedies that are enforced by a court of law. This paper shows that standard form construction contracts can be viewed as an optimal solution to this problem. It is shown that a central feature of construction contracts is the inclusion of governance covenants that shape the scope of authority, and regulate the ex post bargaining power of parties. Our model also provides a unified framework for the study of the legal remedies of mistake, impossibility and the doctrine limiting damages for unforeseen events developed in the case of Hadley vs. Baxendale. ER - TY - JOUR AU - Cherkashin,Ivan AU - Demidova,Svetlana AU - Imai,Susumu AU - Krishna,Kala TI - The Inside Scoop: Acceptance and Rejection at the Journal of International Economics JF - National Bureau of Economic Research Working Paper Series VL - No. 13957 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13957 L1 - http://www.nber.org/papers/w13957.pdf N1 - Author contact info: Ivan Cherkashin Department of Economics Pennsylvania State University University Park, PA 16802 E-Mail: ivt101@psu.edu Svetlana Demidova University of Georgia Department of Economics Brooks Hall 528 Athens, GA 30602 E-Mail: demidova@terry.uga.edu Susumu Imai Department of Economics Queen's University Kingston, Ontario, Canada E-Mail: imais@econ.queensu.ca Kala Krishna Department of Economics 523 Kern Graduate Building The Pennsylvania State University University Park, PA 16802 Tel: 814/865-1106 Fax: 814/863-4775 E-Mail: kmk4@psu.edu AB - There is little work on the inner workings of journals. What factors seem to affect the ability to publish in a journal? Could simple rules (which are already used by some journals) like the immediate rejection of a significant minority of papers, help to streamline the process? At what cost? How well do journals seem to do in choosing papers? What can we say about the extent of type 1 and type 2 errors? Do editors seem to have uniform standards or are some harsher than others? We use data on submissions to the Journal of International Economics to help answer these questions. ER - TY - JOUR AU - Jaeger,David A. AU - Klor,Esteban F. AU - Miaari,Sami H. AU - Paserman,M. Daniele TI - The Struggle for Palestinian Hearts and Minds: Violence and Public Opinion in the Second Intifada JF - National Bureau of Economic Research Working Paper Series VL - No. 13956 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13956 L1 - http://www.nber.org/papers/w13956.pdf N1 - Author contact info: David Jaeger College of William and Mary Department of Economics P.O. Box 8795 Williamsburg, VA 23187-8795 Tel: 757 221 2375 E-Mail: djaeger@wm.edu Esteban Klor Dept. of Economics Hebrew University Mount Scopus Jerusalem ISRAEL 91905 E-Mail: eklor@mscc.huji.ac.il Sami H. Miaari Dept. of Economics Hebrew University Mount Scopus Jerusalem ISRAEL 91905 E-Mail: smiaari@gmail.com Daniele Paserman Department of Economics Boston University 270 Bay State Road Boston, MA 02215 Tel: 1-617-3535695 Fax: 1-617-3534449 E-Mail: paserman@bu.edu AB - his paper examines how violence in the Second Intifada influences Palestinian public opinion. Using micro data from a series of opinion polls linked to data on fatalities, we find that Israeli violence against Palestinians leads them to support more radical factions and more radical attitudes towards the conflict. This effect is temporary, however, and vanishes completely within 90 days. We also find some evidence that Palestinian fatalities lead to the polarization of the population and to increased disaffection and a lack of support for any faction. Geographically proximate Palestinian fatalities have a larger effect than those that are distant, while Palestinian fatalities in targeted killings have a smaller effect relative to other fatalities. Although overall Israeli fatalities do not seem to affect Palestinian public opinion, when we divide those fatalities by the different factions claiming responsibility for them, we find some evidence that increased Israeli fatalities are effective in increasing support for the faction that claimed them. ER - TY - JOUR AU - Farhi,Emmanuel AU - Tirole,Jean TI - Competing Liquidities: Corporate Securities, Real Bonds and Bubbles JF - National Bureau of Economic Research Working Paper Series VL - No. 13955 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13955 L1 - http://www.nber.org/papers/w13955.pdf N1 - Author contact info: Emmanuel Farhi Harvard University Department of Economics Littauer Center Cambridge, MA 02138 Tel: 617/496-1835 Fax: 617/495-8570 E-Mail: efarhi@harvard.edu Jean Tirole Institut d'Economie Industrielle Bureau MF529 - Bat. F 21 allees de Brienne 31000 Toulouse FRANCE Tel: 33-561-128642 E-Mail: tirole@cict.fr AB - We explore the link between liquidity and investment in a an overlapping generation model with a standard asynchronicity between firms' access to and need for cash. Imperfect pledgeability hinders the capacity of capital markets to resolve this asynchronicity, resulting in credit rationing and a net demand for stores of value -- liquidity -- by the corporate sector. At the heart of the model is a distinction between inside liquidity -- liquidity created within the private sector -- and outside liquidity -- assets that do not originate in private investment decisions. In the model, outside liquidity comes in two forms: rents and asset bubbles. We make four contributions. First, we show that imperfect pledgeability severs the link between dynamic efficiency and the level of the interest rate. Bubbles are possible even when the economy is dynamically efficient. Second, we demonstrate that the link between outside liquidity and investment is ambiguous: on the one hand, outside liquidity eases the asynchronicity problem of firms, boosting investment -- the liquidity effect; on the other hand it competes with inside liquidity, reduces the value of firms' collateral and lowers investment -- the competition effect. We characterize precisely the conditions under which outside liquidity and investment are complements or substitutes. Third, we explore the possibility of stochastic bubbles. We show that they trade at a liquidity discount. Bubble bursts can be endogenously triggered by bad shocks to corporate balance sheets and have potentially amplified effects on investment through liquidity dry-ups. Fourth, in an extension where corporate governance is endogenously determined by a trade-off striked by firms between collateral and value, we show that bubbles are accompanied by loose corporate governance. ER - TY - JOUR AU - Bernheim,B. Douglas TI - Neuroeconomics: A Sober (but Hopeful) Appraisal JF - National Bureau of Economic Research Working Paper Series VL - No. 13954 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13954 L1 - http://www.nber.org/papers/w13954.pdf N1 - Author contact info: B. Douglas Bernheim Department of Economics Stanford University Stanford, CA 94305-6072 Tel: 650/725-8732 Fax: 650/725-5702 E-Mail: bernheim@stanford.edu AB - This paper evaluates the prospects for the emerging field of neuroeconomics to shed light on traditional positive and normative economic questions. It argues that the potential for meaningful contributions, though often misunderstood and frequently overstated, is nevertheless present. ER - TY - JOUR AU - Crespi,Gustavo AU - Criscuolo,Chiara AU - Haskel,Jonathan E. AU - Slaughter,Matthew TI - Productivity Growth, Knowledge Flows, and Spillovers JF - National Bureau of Economic Research Working Paper Series VL - No. 13959 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13959 L1 - http://www.nber.org/papers/w13959.pdf N1 - Author contact info: Gustavo A. Crespi, Dr The Freeman Centre University of Sussex Brighton, East Sussex BN1 9QE United Kingdom E-Mail: g.a.crespi@sussex.ac.uk Chiara Criscuolo Centre for Economic Performance London School of Economics Houghton Street London WC2A 2AE United Kingdom Tel: 004420 7955 6973 E-Mail: c.criscuolo@lse.ac.uk Jonathan Haskel Economics Department Queen Mary, University of London Mile End Road, London E1 4NS Tel: +44-20-7882-5365 Fax: +44-20-8983-3580 E-Mail: j.e.haskel@qmul.ac.uk Matthew J. Slaughter Tuck School of Business Dartmouth College 100 Tuck Hall Hanover, NH 03755 Tel: 603/646-2939 Fax: 603/646-0995 E-Mail: matthew.j.slaughter@dartmouth.edu AB - This paper explores the role of knowledge flows and productivity growth by linking direct survey data on knowledge flows to firm-level data on TFP growth. Our data measure the information flows often considered important, especially by policy-makers, such as from within the firm and from suppliers, customers, and competitors. We examine (a) what are the empirically important sources of knowledge flows? (b) to what extent do such flows contribute to TFP growth? (c) do such flows constitute a spillover of free knowledge? (d) how do such flows correspond to suggested spillover sources, such as multinational or R&D presence? We find that: (a) the main sources of knowledge are competitors; suppliers; and plants that belong to the same business group ; (b) these three flows together account for about 50% of TFP growth; (c) the main "free" information flow spillover is from competitors; and (d) multinational presence contributes to this spillover. ER - TY - JOUR AU - Huang,Jikun AU - Liu,Yu AU - Martin,Will AU - Rozelle,Scott TI - Agricultural Trade Reform and Rural Prosperity: Lessons from China JF - National Bureau of Economic Research Working Paper Series VL - No. 13958 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13958 L1 - http://www.nber.org/papers/w13958.pdf N1 - Author contact info: Jikun Huang Center for Chinese Agricultural Policy Rm 3826 Chinese Academy of Sciences Jia 11, Datun Road, Anwai Beijing 100101 CHINA Fax: 86-10-64856533 E-Mail: jkhuang.ccap@igsnrr.ac.cn Yu Liu Center for Chinese Agricultural Policy Jia 11, Datun Rd, Anwai Beijing 100101 CHINA E-Mail: liuy.04b@igsnrr.ac.cn Will Martin Development Research Group, MSN3-303 World Bank 1818 H St NW Washington DC 20433 Tel: 202-473-3853 E-Mail: wmartin1@worldbank.org Scott Rozelle Stanford University Encina Hall East, E301 Stanford, CA 94305-6055 E-Mail: rozelle@stanford.edu M3 - presented at "18th Annual East Asian Seminar on Economics", June 22-24, 2007 AB - Tariffs on agricultural products fell sharply in China both prior to, and as a consequence of, China's accession to the WTO. The paper examines the nature of agricultural trade reform in China since 1981, and finds that protection was quite strongly negative for most commodities, and particularly for exported goods, at the beginning of the reforms. Since then, the taxation of agriculture has declined sharply, with the abolition of production quotas and procurement pricing, and reductions in trade distortions for both imported and exported goods. Rural well-being has improved partly because of these reforms, and also because of strengthening of markets, public investment in infrastructure, research and development, health and education, and reductions in barriers to mobility of labor out of agriculture. Many challenges remain in improving rural incomes and reducing rural poverty. ER - TY - JOUR AU - Feldstein,Martin S. TI - Did Wages Reflect Growth in Productivity? JF - National Bureau of Economic Research Working Paper Series VL - No. 13953 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13953 L1 - http://www.nber.org/papers/w13953.pdf N1 - Author contact info: Martin S. Feldstein President and Chief Executive Officer NBER 1050 Massachusetts Avenue Cambridge, MA 02138-5398 Tel: 617/868-3905 Fax: 617/868-7194 E-Mail: msfeldst@nber.org AB - The level of productivity doubled in the U.S. nonfarm business sector between 1970 and 2006. Wages, or more accurately total compensation per hour, increased at approximately the same annual rate during that period if nominal compensation is adjusted for inflation in the same way as the nominal output measure that is used to calculate productivity. Total employee compensation as a share of national income was 66 percent of national income in 1970 and 64 percent in 2006. This measure of the labor compensation share has been remarkably stable since the 1970s. It rose from an average of 62 percent in the decade of the 1960s to 66 percent in the decades of the 1970s and 1980s and then declined to 65 percent in the decade of the 1990s where it has again been from 2000 until the most recent quarter. ER - TY - JOUR AU - Feldstein,Martin S. TI - Resolving the Global Imbalance: The Dollar and the U.S. Saving Rate JF - National Bureau of Economic Research Working Paper Series VL - No. 13952 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13952 L1 - http://www.nber.org/papers/w13952.pdf N1 - Author contact info: Martin S. Feldstein President and Chief Executive Officer NBER 1050 Massachusetts Avenue Cambridge, MA 02138-5398 Tel: 617/868-3905 Fax: 617/868-7194 E-Mail: msfeldst@nber.org AB - The large trade and current account deficits of the United States cannot continue indefinitely because doing so would constitute a permanent gift to the U.S. economy. The process that will cause this gift to shrink and that will eventually cause it to reverse is a fall in the dollar. The dollar will fall as private investors and governments become unwilling to accept the risk of increasing amounts of dollars in their portfolios, especially in a context in which they realize that the dollar must fall to reduce the trade imbalance. Although a more competitive dollar is the mechanism that will cause the U.S. trade deficit to decline, the fundamental requirement for a lower trade deficit is an increase in the U.S. national saving rate. So a rise will be driven by higher household savings of the coming years as the two primary forces that depressed savings in recent years are reversed: the exceptionally rapid rise in household wealth and the high level of mortgage refinancing with equity withdrawal. ER - TY - JOUR AU - Arcidiacono,Peter AU - Bayer,Patrick AU - Hizmo,Aurel TI - Beyond Signaling and Human Capital: Education and the Revelation of Ability JF - National Bureau of Economic Research Working Paper Series VL - No. 13951 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13951 L1 - http://www.nber.org/papers/w13951.pdf N1 - Author contact info: Peter Arcidiacono Department of Economics 201A Social Science Duke University Durham, NC 27708 Tel: 919/660-1816 Fax: 919/684-8974 E-Mail: psarcidi@econ.duke.edu Patrick Bayer Department of Economics Duke University 213 Social Sciences Durham, NC 27708 Tel: 919/660-1832 E-Mail: patrick.bayer@duke.edu Aurel Hizmo Department of Economics Duke University 213 Social Sciences Durham, NC 27708 E-Mail: ah66@duke.edu AB - In traditional signaling models, education provides a way for individuals to sort themselves by ability. Employers in turn use education to statistically discriminate, paying wages that reflect the average productivity of workers with the same given level of education. In this paper, we provide evidence that education (specifically, attending college) plays a much more direct role in revealing ability to the labor market. We use the NLSY79 to examine returns to ability early in careers; our results suggest that ability is observed nearly perfectly for college graduates but is revealed to the labor market much more gradually for high school graduates. As a result, from very beginning of the career, college graduates are paid in accordance with their own ability, while the wages of high school graduates are initially completely unrelated to their own ability. This view of ability revelation in the labor market has considerable power in explaining racial differences in wages, education, and the returns to ability. In particular, we find no racial differences in wages or returns to ability in the college labor market, but a 6-10 percent wage penalty for blacks (conditional on ability) in the high school market. These results are consistent with the notion that employers use race to statistically discriminate in the high school market but have no need to do so in the college market. That blacks face a wage penalty in the high school but not the college labor market also helps to explains why, conditional on ability, blacks are more likely to earn a college degree, a fact that has been documented in the literature but for which a full explanation has yet to emerge. ER - TY - JOUR AU - Dimand,Robert W. AU - Spencer,Barbara J. TI - Trevor Swan And The Neoclassical Growth Model JF - National Bureau of Economic Research Working Paper Series VL - No. 13950 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13950 L1 - http://www.nber.org/papers/w13950.pdf N1 - Author contact info: Robert W. Dimand Department of Economics Brock University St. Catherines, Ontario L2S3A1 E-Mail: dimand@brocku.ca Barbara J. Spencer University of British Columbia Sauder School of Business 2053 Main Mall Vancouver, BC V6T 1Z2 CANADA Tel: 604/822-8479 Fax: 604/822-8477 E-Mail: barbara.spencer@sauder.ubc.ca AB - Trevor Swan independently developed the neoclassical growth model, publishing Swan (1956) ten months later than Solow (1956), but analyzing technical progress before Solow (1957). These independent contributions are sometimes recognized by reference to the "Solow-Swan growth model", but more commonly reference is made only to the "Solow growth model". This paper examines the history of Swan's development of the growth model, the similarities and differences between the approaches of Swan and Solow and the reasons why Swan's contribution has been overshadowed. We draw on unpublished work to show that in 1950, Swan had set out a number of the basic ideas of his growth model in a verbal format. In 1956, Swan published only a simplified version of his model based on a Cobb-Douglas production function. Swan's original and more general model (circulated in July 1956), was published only posthumously in 2002. This reluctance to publish was consistent with his perhaps counterproductive modesty and perfectionism. His well known paper, "Longer run problems of the Balance of Payments" was circulated in 1955, eight years before publication in 1963. His pioneering work in 1945, developing the first macroeconomic model of the Australian economy, was published posthumously in 1989. ER - TY - JOUR AU - Bayer,Patrick AU - Khan,Shakeeb AU - Timmins,Christopher TI - Nonparametric Identification and Estimation in a Generalized Roy Model JF - National Bureau of Economic Research Working Paper Series VL - No. 13949 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13949 L1 - http://www.nber.org/papers/w13949.pdf N1 - Author contact info: Patrick Bayer Department of Economics Duke University 213 Social Sciences Durham, NC 27708 Tel: 919/660-1832 E-Mail: patrick.bayer@duke.edu Shakeeb Khan Department of Economics Duke University 213 Social Sciences Durham, NC 27708 E-Mail: shakeeb.khan@duke.edu Christopher Timmins Department of Economics Duke University 209 Social Sciences Building P.O. Box 90097 Durham, NC 27708-0097 Tel: 919/660-1809 Fax: 919/684-8974 E-Mail: christopher.timmins@duke.edu AB - This paper considers nonparametric identification and estimation of a generalized Roy model that includes a non-pecuniary component of utility associated with each choice alternative. Previous work has found that, without parametric restrictions or the availability of covariates, all of the useful content of a cross-sectional dataset is absorbed in a restrictive specification of Roy sorting behavior that imposes independence on wage draws. While this is true, we demonstrate that it is also possible to identify (under relatively innocuous assumptions and without the use of covariates) a common non-pecuniary component of utility associated with each choice alternative. We develop nonparametric estimators corresponding to two alternative assumptions under which we prove identification, derive asymptotic properties, and illustrate small sample properties with a series of Monte Carlo experiments. We demonstrate the usefulness of one of these estimators with an empirical application. Micro data from the 2000 Census are used to calculate the returns to a college education. If high-school and college graduates face different costs of migration, this would be reflected in different degrees of Roy-sorting-induced bias in their observed wage distributions. Correcting for this bias, the observed returns to a college degree are cut in half. ER - TY - JOUR AU - Mishkin,Frederic S. TI - Globalization, Macroeconomic Performance, and Monetary Policy JF - National Bureau of Economic Research Working Paper Series VL - No. 13948 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13948 L1 - http://www.nber.org/papers/w13948.pdf N1 - Author contact info: Frederic S. Mishkin Federal Reserve Board 20th Street and Constitution Ave., N.W. Washington, DC 20551 Tel: 202-452-3000 Fax: 202-452-3819 E-Mail: fsm3@columbia.edu AB - The paper argues that many of the exaggerated claims that globalization has been an important factor in lowering inflation in recent years just do not hold up. Globalization does, however, have the potential to be stabilizing for individual economies and has been a key factor in promoting economic growth. The paper then examines four questions about the impact of globalization on the monetary transmission mechanism and arrives at the following answers: (1) Has globalization led to a decline in the sensitivity of inflation to domestic output gaps and thus to domestic monetary policy? No. (2) Are foreign output gaps playing a more prominent role in the domestic inflation process, so that domestic monetary policy has more difficulty stabilizing inflation? No. (3) Can domestic monetary policy still control domestic interest rates and so stabilize both inflation and output? Yes. (4) Are there other ways, besides possible influences on inflation and interest rates, in which globalization may have affected the transmission mechanism of monetary policy? Yes. ER - TY - JOUR AU - Jayachandran,Seema AU - Lleras-Muney,Adriana TI - Life Expectancy and Human Capital Investments: Evidence From Maternal Mortality Declines JF - National Bureau of Economic Research Working Paper Series VL - No. 13947 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13947 L1 - http://www.nber.org/papers/w13947.pdf N1 - Author contact info: Seema Jayachandran Department of Economics Stanford University 579 Serra Mall Stanford, CA 94305-6072 Tel: 650/725-1870 Fax: 650/725-5702 E-Mail: jayachan@stanford.edu Adriana Lleras-Muney Department of Economics 320 Wallace Hall Princeton University Princeton, NJ 08544 Tel: 607/258-6993 Fax: NA E-Mail: alleras@princeton.edu AB - Longer life expectancy should encourage human capital accumulation, since a longer time horizon increases the value of investments that pay out over time. Previous work has been unable to determine the empirical importance of this life-expectancy effect due to the difficulty of isolating it from other effects of health on education. We examine a sudden drop in maternal mortality risk in Sri Lanka between 1946 and 1953, which creates a sharp increase in life expectancy for school-age girls without contemporaneous effects on health, and which also allows for the use of boys as a control group. Using additional geographic variation, we find that the 70% reduction in maternal mortality risk over the sample period increased female life expectancy at age 15 by 4.1%, female literacy by 2.5%, and female years of education by 4.0%. ER - TY - JOUR AU - Reinhart,Carmen M. AU - Rogoff,Kenneth S. TI - The Forgotten History of Domestic Debt JF - National Bureau of Economic Research Working Paper Series VL - No. 13946 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13946 L1 - http://www.nber.org/papers/w13946.pdf N1 - Author contact info: Carmen M. Reinhart University of Maryland School of Public Policy and Department of Economic 4105 Van Munching Hall College Park, MD 20742 Tel: 301/405-7006 Fax: 301/403-8107 E-Mail: creinhar@umd.edu Kenneth S. Rogoff Thomas D Cabot Professor of Public Policy Economics Department Harvard University Littauer Center 232 Cambridge, MA 02138-3001 Tel: 617-495-4022 Fax: 617/495-7730 E-Mail: krogoff@harvard.edu AB - There is a rich scholarly literature on sovereign default on external debt. Comparatively little is known about sovereign defaults on domestic debt. Even today, cross-country data on domestic public debt remains curiously exotic, particularly prior to the 1980s. We have filled this gap in the literature by compiling a database on central government public debt (external and domestic). The data span 1914 to 2007 for most countries, reaching back into the nineteenth century for many. Our findings on debt sustainability, sovereign defaults, the temptation to inflate, and the hierarchy of creditors only scratch the surface of what the domestic public debt data can reveal. First, domestic debt is big -- for the 64 countries for which we have long time series, domestic debt accounts for almost two-thirds of total public debt. For most of the sample, this debt carries a market interest rate (except for the financial repression era between WWII and financial liberalization). Second, the data go a long ways toward explaining the puzzle of why countries so often default on their external debts at seemingly low debt thresholds. Third, domestic debt has largely been ignored in the vast empirical work on inflation. In fact, domestic debt (a significant portion of which is long term and non-indexed) is often much larger than the monetary base in the run-up to high inflation episodes. Last, the widely-held view that domestic residents are strictly junior to external creditors does not find broad support. ER - TY - JOUR AU - Conley,Dalton AU - McCabe,Brian J. TI - Bribery or Just Desserts? Evidence on the Influence of Congressional Voting Patterns on PAC Contributions from Exogenous Variation in the Sex Mix of Legislator Offspring JF - National Bureau of Economic Research Working Paper Series VL - No. 13945 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13945 L1 - http://www.nber.org/papers/w13945.pdf N1 - Author contact info: Dalton Conley Department of Sociology New York University 295 Lafayette Street, 4th Floor New York, NY 10012 Tel: 212/998-7580 Fax: 212/995-4140 E-Mail: dalton.conley@nyu.edu Brian J. McCabe New York University 295 Lafayette Street 4th Floor New York, NY 10001 E-Mail: bjmcc@nyu.edu AB - Evidence on the relationship between political contributions and legislators' voting behavior is marred by concerns about endogeneity in the estimation process. Using a legislator's offspring sex mix as an exogenous variable, we employ a two-stage least squares estimation procedure to predict the effect of voting behavior on political contributions. Following previous research, we find that a legislator's proportion daughters has a significant effect on voting behavior for women's issues, as measured by score in the "Congressional Record on Choice" issued by NARAL Pro-Choice America. In the second stage, we make a unique contribution by demonstrating a significant impact of exogenous voting behavior on PAC contributions, lending credibility to the hypothesis that Political Action Committees respond to legislators' voting patterns by "rewarding" political candidates that vote in line with the positions of the PAC, rather than affecting or "bribing" those same votes -- at least in this high profile policy domain. ER - TY - JOUR AU - Ang,Andrew AU - Rhodes-Kropf,Matthew AU - Zhao,Rui TI - Do Funds-of-Funds Deserve Their Fees-on-Fees? JF - National Bureau of Economic Research Working Paper Series VL - No. 13944 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13944 L1 - http://www.nber.org/papers/w13944.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 Matthew Rhodes-Kropf Columbia University Graduate School of Business 3022 Broadway, Room 418A New York, NY 10027-6902 Tel: 212-854-7480 E-Mail: mattrk1@gmail.com Rui Zhao BlackRock E-Mail: Rui.Zhao@blackrock.com AB - Since the after-fee returns of funds-of-funds are, on average, lower than hedge fund returns, it is easy to conclude that funds-of-funds do not add value compared to hedge funds. However, funds-of-funds should not be evaluated relative to hedge fund returns in publicly reported databases. Instead, the correct fund-of-funds benchmark is the set of direct hedge fund investments an investor could achieve on her own without recourse to funds-of-funds. We use asset allocation concepts to estimate characteristics of the fund-of-funds benchmark distribution. Since the benchmark characteristics are reasonable, we conclude that funds-of-funds, on average, deserve their fees-on-fees. ER - TY - JOUR AU - Taylor,John B. AU - Williams,John C. TI - A Black Swan in the Money Market JF - National Bureau of Economic Research Working Paper Series VL - No. 13943 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13943 L1 - http://www.nber.org/papers/w13943.pdf N1 - Author contact info: John B. Taylor Herbert Hoover Memorial Building Stanford University Stanford, CA 94305-6010 Tel: 650/723-9677 Fax: 650-723-1687 E-Mail: John.Taylor@stanford.edu John Williams Federal Reserve Bank of San Francisco Research Department 101 Market St. San Francisco, CA 94105 Tel: (415) 974-2240 E-Mail: john.c.williams@sf.frb.org AB - At the center of the financial market crisis of 2007-2008 was a highly unusual jump in spreads between the overnight inter-bank lending rate and term London inter-bank offer rates (Libor). Because many private loans are linked to Libor rates, the sharp increase in these spreads raised the cost of borrowing and interfered with monetary policy. The widening spreads became a major focus of the Federal Reserve, which took several actions -- including the introduction of a new term auction facility (TAF) --- to reduce them. This paper documents these developments and, using a no-arbitrage model of the term structure, tests various explanations, including increased risk and greater liquidity demands, while controlling for expectations of future interest rates. We show that increased counterparty risk between banks contributed to the rise in spreads and find no empirical evidence that the TAF has reduced spreads. The results have implications for monetary policy and financial economics. ER - TY - JOUR AU - Weinstein,David AU - Broda,Christian TI - Exporting Deflation? Chinese Exports and Japanese Prices JF - National Bureau of Economic Research Working Paper Series VL - No. 13942 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13942 L1 - http://www.nber.org/papers/w13942.pdf N1 - Author contact info: David Weinstein Columbia University, Department of Economics 420 W. 118th Street MC 3308 New York, NY 10027 Tel: 212/854-6880 Fax: 212/854-8059 E-Mail: dew35@columbia.edu Christian Broda University of Chicago Graduate School of Business 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-1990 Fax: 773/702-0458 E-Mail: cbroda@chicagogsb.edu AB - Between 1992 and 2002, the Japanese Import Price Index registered a decline of almost 9 percent and Japan entered a period of deflation. We show that much of the correlation between import prices and domestic prices was due to formula biases. Had the IPI been computed using a pure Laspeyres index like the CPI, the IPI would have hardly moved at all. A Laspeyres version of the IPI would have risen 1 percentage point per year faster than the official index. Second we show that Chinese prices did not behave differently from the prices of other importers. Although Chinese prices are substantially lower than the prices of other exporters, they do not exhibit a differential trend. However, we estimate that the typical price per unit quality of a Chinese exporter fell by half between 1992 and 2005. Thus the explosive growth in Chinese exports is attributable to growth in the quality of Chinese exports and the increase in new products being exported by China. ER - TY - JOUR AU - Larrimore,Jeff AU - Burkhauser,Richard V. AU - Feng,Shuaizhang AU - Zayatz,Laura TI - Consistent Cell Means for Topcoded Incomes in the Public Use March CPS (1976-2007) JF - National Bureau of Economic Research Working Paper Series VL - No. 13941 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13941 L1 - http://www.nber.org/papers/w13941.pdf N1 - Author contact info: Jeff Larrrimore Department of Economics Cornell University Ithaca NY E-Mail: jhl42@cornell.edu 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 Department of Economics Shanghia University of Finance and Economics Shanghia China E-Mail: shuaizhang.feng@gmail.com Laura Zayatz U.S. Census Bureau E-Mail: Laura.zayatz@census.gov AB - Using the internal March CPS, we create and in this paper distribute to the larger research community a cell mean series that provides the mean of all income values above the topcode for any income source of any individual in the public use March CPS that has been topcoded since 1976. We also describe our construction of this series. When we use this series together with the public use March CPS, we closely match the yearly mean income levels and income inequalities of the U.S. population found using the internal March CPS data. ER - TY - JOUR AU - Galenson,David W. TI - Portraits of the Artist: Personal Visual Art in the Twentieth Century JF - National Bureau of Economic Research Working Paper Series VL - No. 13939 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13939 L1 - http://www.nber.org/papers/w13939.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 AB - Scholars of literature have devoted considerable attention to what they have called confessional or personal poetry, in which Robert Lowell, Sylvia Plath, and a series of other poets, from the 1950s on, made their art out of the experiences of their own lives. Yet art scholars have not analyzed a parallel practice in the visual arts, in which painters and sculptors have used motifs drawn largely or exclusively from their own lives. This practice was begun by Vincent van Gogh in the late nineteenth century, and it subsequently influenced a diverse group of major artists, including such conceptual artists as Edvard Munch, Frida Kahlo, Joseph Beuys, Bruce Nauman, Cindy Sherman, and Tracey Emin, and the experimental artists Francis Bacon and Louise Bourgeois. Although van Gogh did not think of his practice of painting himself and the people and things he cared most about as novel, others soon recognized it as an innovation that would help them to achieve their artistic goals, and personal art became a distinctive feature of the advanced art of the twentieth century. That personal art first appeared in the late nineteenth century, and became more common in the twentieth, reflects the increased autonomy of painters that was a consequence of the development of a competitive market for advanced art after the Impressionists' successful challenge to the monopoly of the official Salon. ER - TY - JOUR AU - Serrano,Carlos J. TI - The Dynamics of the Transfer and Renewal of Patents JF - National Bureau of Economic Research Working Paper Series VL - No. 13938 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13938 L1 - http://www.nber.org/papers/w13938.pdf N1 - Author contact info: Carlos J. Serrano Department of Economics University of Toronto 150 St. George Street Toronto, Ontario M5S 3G7 CANADA Tel: 416/946-3404 E-Mail: carlos.serrano@utoronto.ca AB - This paper explores the dynamics of the transfer of U.S. patents and the significance of the initial missallocation of patent property rights. Here we find that the initial missallocation of patent property rights is large and differs substantially across patentees and technology fields. We also find that the probability of a patent being traded depends on a number of factors - the age of the patent, the number of citations received by a given age, the patent generality and whether the patent has been previously traded or not. We will also analyze and interpret this new evidence using a theoretical model of patent transfers and renewal. ER - TY - JOUR AU - Meer,Jonathan AU - Rosen,Harvey S. TI - The Impact of Athletic Performance on Alumni Giving: An Analysis of Micro Data JF - National Bureau of Economic Research Working Paper Series VL - No. 13937 PY - 2008 Y2 - April 2008 UR - http://www.nber.org/papers/w13937 L1 - http://www.nber.org/papers/w13937.pdf N1 - Author contact info: Jonathan Meer Department of Economics Stanford University Stanford, CA 94305 E-Mail: jmeer@s