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Template-Type: ReDIF-Paper 1.0
Title: Neighborhoods and Academic Achievement: Results from the Moving to Opportunity Experiment
Classification-JEL: I28; I38
Author-Name: Lisa Sanbonmatsu
Author-Name: Jeffrey R. Kling
Author-Person: pkl126
Author-Name: Greg J. Duncan
Author-Person: pdu397
Author-Name: Jeanne Brooks-Gunn
Note: CH ED
Number: 11909
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11909
File-URL: http://www.nber.org/papers/w11909.pdf
File-Format: application/pdf
Publication-Status: published as Revised and published in the Journal of Human Resources, 41:4 (Fall 2006), 649-691.
Abstract: Families originally living in public housing were assigned housing vouchers by lottery, encouraging moves to neighborhoods with lower poverty rates. Although we had hypothesized that reading and math test scores would be higher among children in families offered vouchers (with larger effects among younger children), the results show no significant effects on test scores for any age group among over 5000 children ages 6 to 20 in 2002 who were assessed four to seven years after randomization. Program impacts on school environments were considerably smaller than impacts on neighborhoods, suggesting that achievement-related benefits from improved neighborhood environments are alone small.
Handle: RePEc:nbr:nberwo:11909
Template-Type: ReDIF-Paper 1.0
Title: Sticking with Your Vote: Cognitive Dissonance and Voting
Classification-JEL: D0; H0
Author-Name: Sendhil Mullainathan
Author-Person: pmu103
Author-Name: Ebonya Washington
Note: PE POL
Number: 11910
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11910
File-URL: http://www.nber.org/papers/w11910.pdf
File-Format: application/pdf
Publication-Status: published as Sendhil Mullainathan & Ebonya Washington, 2009. "Sticking with Your Vote: Cognitive Dissonance and Political Attitudes," American Economic Journal: Applied Economics, American Economic Association, vol. 1(1), pages 86-111, January.
Abstract: In traditional models, votes are an expression of preferences and beliefs. Psychological theories of cognitive dissonance suggest, however, that behavior may shape preferences. In this view, the very act of voting may influence political attitudes. A vote for a candidate may lead to more favorable interpretations of his actions in the future. We test the empirical relevance of cognitive dissonance in US Presidential elections. The key problem in such a test is the endogeneity of voter choice which leads to a mechanical relationship between voting and preferences. We use the voting age restrictions to help surmount this difficulty. We examine the Presidential opinion ratings of nineteen and twenty year olds two years after the President's election. Consistent with cognitive dissonance, we find that twenty year olds (who were eligible to vote in the election) show greater polarization of opinions than comparable nineteen year olds (who were ineligible to vote). We rule out that aging drives these results in two ways. First, we find no polarization differences in years in which twenty and nineteen year olds would not have differed in their eligibility to vote in the prior Presidential election. Second, we show a similar effect when we compare polarization (for all age groups) in opinions of Senators elected during high turnout Presidential campaign years with Senators elected during low turnout non-Presidential campaign years. Thus we find empirical support for the relevance of cognitive dissonance to voting behavior. This finding has at least three implications for the dynamics of voting behavior. First, it offers a new rationale for the incumbency advantage. Second, it suggests that there is an efficiency argument for term limits. And finally, our results demonstrate that efficiency may not be increasing in turnout level.
Handle: RePEc:nbr:nberwo:11910
Template-Type: ReDIF-Paper 1.0
Title: The Scots may be Brave but They are Neither Healthy Nor Happy
Classification-JEL: J4
Author-Name: David Bell
Author-Name: David Blanchflower
Author-Person: pbl22
Note: EH
Number: 11911
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11911
File-URL: http://www.nber.org/papers/w11911.pdf
File-Format: application/pdf
Publication-Status: published as Bell, David and David Blanchflower. ‘The Scots may be brave but they are neither healthy nor happy." Scottish Journal of Political Economy 54,2 (May 2007): 151-307.
Abstract: On almost all measures of physical health, Scots fare worse than residents of any other region of the UK and often worse than the rest of Europe. Deaths from chronic liver disease and lung cancer are particularly prevalent in Scotland. The self-assessed wellbeing of Scots is lower than that of the English or Welsh, even after taking into account any differences in characteristics. Scots also suffer from higher levels of self-assessed depression or phobia, accidental death and suicide than those in other parts of Great Britain. This result is particularly driven by outcomes in Strathclyde and is consistent with the high scores for other measures of social deprivation in this area. On average, indicators of social capital in Scotland are no worse than in England or Wales. Detailed analysis within Scotland, however, shows that social capital indicators for the Strathclyde area are relatively low. We argue that these problems seem unlikely to be fixed by indirect policies aimed at raising economic growth.
Handle: RePEc:nbr:nberwo:11911
Template-Type: ReDIF-Paper 1.0
Title: Financial Globalization, Corporate Governance, and Eastern Europe
Classification-JEL: G11; G15; G32; F30
Author-Name: Rene M. Stulz
Note: AP CF
Number: 11912
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11912
File-URL: http://www.nber.org/papers/w11912.pdf
File-Format: application/pdf
Publication-Status: published as Stulz, Rene M. "Financial Globalization, Corporate Governance and Eastern Europe." Financial Development, Integration and Stability: Evidence from Central, Eastern and South-Eastern Europe (2006): 16-40.
Abstract: For many countries, the most significant barriers to trade in financial assets have been knocked down. Yet, the financial world is not flat because poor governance prevents firms from being widely held and from taking full advantage of financial globalization. Poor governance has implications for corporate finance as well as for macroeconomics. I show that poor governance in Eastern Europe is accompanied, as expected, by high corporate ownership concentration, low firm valuation, poor financial development, and low foreign participation.
Handle: RePEc:nbr:nberwo:11912
Template-Type: ReDIF-Paper 1.0
Title: On Overborrowing
Classification-JEL: F4
Author-Name: Martin Uribe
Note: EFG IFM
Number: 11913
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11913
File-URL: http://www.nber.org/papers/w11913.pdf
File-Format: application/pdf
Publication-Status: published as Uribe, Martin. "On Overborrowing," American Economic Review, 2006, v96(2,May), 417-421.
Abstract: This paper characterizes the equilibrium dynamics in an economy facing an aggregate debt ceiling. This borrowing limit is intended to capture an environment in which foreign investors base their lending decisions predominantly upon macro indicators. Individual agents do not internalize the borrowing constraint. Instead, a country interest-rate premium emerges to clear the financial market. The implied equilibrium dynamics are compared to those arising from a model in which the debt ceiling is imposed at the level of each individual agent. The central finding of the paper is that the economy with the aggregate borrowing limit does not generate higher levels of debt than the economy with the individual borrowing limit. That is, there is no overborrowing in equilibrium.
Handle: RePEc:nbr:nberwo:11913
Template-Type: ReDIF-Paper 1.0
Title: Financial Expertise of Directors
Classification-JEL: D82; G21; G24; G31
Author-Name: A. Burak Güner
Author-Name: Ulrike Malmendier
Author-Person: pma1397
Author-Name: Geoffrey Tate
Note: CF LS
Number: 11914
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11914
File-URL: http://www.nber.org/papers/w11914.pdf
File-Format: application/pdf
Publication-Status: published as Güner, A. Burak, Ulrike Malmendier, and Geoffrey Tate. "Financial expertise of directors." Journal of Financial Economics 88, 2 (May 2008): 323-354.
Abstract: The composition and functioning of corporate boards is at the core of the academic and policy debate on optimal corporate governance. But does board composition matter for corporate decisions? In this paper, we analyze the role of financial experts on boards. In a novel panel data set on board composition, we find that financial experts significantly affect corporate decisions, though not necessarily in the interest of shareholders. First, when commercial bankers join boards, external funding increases and investment-cash flow sensitivity diminishes. But, the increased financing affects mostly firms with good credit and poor investment opportunities. Second, investment bankers on the board are associated with larger bond issues, but also worse acquisitions. Third, we find little evidence that financial expertise matters for compensation policy or for experts without affiliation to a financial institution. The results suggest a tradeoff between outside incentives (e.g. bank profits) and the incentive to maximize firm value. Requiring financial expertise on boards, as mandated by regulatory proposals, may not benefit shareholders if conflicting interests are neglected.
Handle: RePEc:nbr:nberwo:11914
Template-Type: ReDIF-Paper 1.0
Title: How Black Candidates Affect Voter Turnout
Classification-JEL: H0; J15; P48
Author-Name: Ebonya Washington
Note: PE POL
Number: 11915
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11915
File-URL: http://www.nber.org/papers/w11915.pdf
File-Format: application/pdf
Publication-Status: published as Washington, Ebonya. "How Black Candidates Affect Voter Turnout," Quarterly Journal of Economics, 2006, v121(3,Aug), 973-998.
Abstract: Both Black and White voter turnout increases 2-3 percentage points with each Black Democrat on the ballot. Given the groups' representations in the population, the White response is numerically greater. Whites of both parties are less likely to vote for their parties' candidate when s/he is Black. The turnout findings are not explained away by voter, election, or politician characteristics. However the fact that there is no turnout response to Black Republicans suggests that a perception of Blacks' ideology may be a factor.
Handle: RePEc:nbr:nberwo:11915
Template-Type: ReDIF-Paper 1.0
Title: Measuring the Value of a Statistical Life: Problems and Prospects
Classification-JEL: J17; H43; I18; R4
Author-Name: Orley Ashenfelter
Author-Person: pas9
Note: LS LE PE EEE
Number: 11916
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11916
File-URL: http://www.nber.org/papers/w11916.pdf
File-Format: application/pdf
Publication-Status: published as Ashenfelter, Orley. "Measuring The Value Of A Statistical Life: Problems And Prospects," Economic Journal, 2006, v116(510,Mar), C10-C23.
Abstract: Tradeoffs between monetary wealth and fatal safety risks are summarized in the value of a statistical life (VSL), a measure that is widely used for the evaluation of public policies in medicine, the environment, and transportation safety. This paper demonstrates the widespread use of this concept and summarizes the major issues, both theoretical and empirical, that must be confronted in order to provide a credible estimate of a VSL. The paper concludes with an application of these issues to a particular study of speed limits and highway safety.
Handle: RePEc:nbr:nberwo:11916
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Academic Patenting on the Rate, Quality, and Direction of (Public) Research Output
Classification-JEL: O31; O32; O34
Author-Name: Pierre Azoulay
Author-Name: Waverly Ding
Author-Name: Toby Stuart
Note: PR
Number: 11917
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11917
File-URL: http://www.nber.org/papers/w11917.pdf
File-Format: application/pdf
Publication-Status: published as Pierre Azoulay & Waverly Ding & Toby Stuart, 2009. "THE IMPACT OF ACADEMIC PATENTING ON THE RATE, QUALITY AND DIRECTION OF (PUBLIC) RESEARCH OUTPUT -super-* ," Journal of Industrial Economics, Blackwell Publishing, vol. 57(4), pages 637-676, December.
Abstract: We examine the influence of faculty patenting activity on the rate, quality, and content of public research outputs in a panel dataset spanning the careers of 3,862 academic life scientists. Using inverse probability of treatment weights (IPTW) to account for the dynamics of self-selection into patenting, we find that patenting has a positive effect on the rate of publication of journal articles, but no effect on the quality of these publications. Using several measures of the "patentability" of the content of research papers, we also find that patenters may be shifting their research focus to questions of commercial interest. We conclude that the often-voiced concern that patenting in academe has a nefarious effect on public research output is, at least in its simplest form, misplaced.
Handle: RePEc:nbr:nberwo:11917
Template-Type: ReDIF-Paper 1.0
Title: When to Start a Fight and When to Fight Back: Liability Disputes in the Workers' Compensation System
Classification-JEL: K41; J28
Author-Name: David Card
Author-Person: pca271
Author-Name: Brian P. McCall
Author-Person: pmc15
Note: LS
Number: 11918
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11918
File-URL: http://www.nber.org/papers/w11918.pdf
File-Format: application/pdf
Publication-Status: published as David Card & Brian P. McCall, 2009. "When to Start a Fight and When to Fight Back: Liability Disputes in the Workers' Compensation System," Journal of Labor Economics, University of Chicago Press, vol. 27(2), pages 149-178, 04.
Abstract: Despite the adoption of no-fault Workers' Compensation legislation in most states, there is substantial litigation over the issue of employer liability for injury claims. We develop a sequential asymmetric information model of liability disputes and estimate the model using data on injury claims from the state of Minnesota. The key insight of our model is that when workers differ in their costs of pursuing a injury claim, employers have an incentive to deny liability and force those with higher costs to abandon their claim. Likewise, workers who expect a bigger return from pursuing their claim are more likely to fight back when liability is denied. Estimates of the structural model confirm that the decision rules of both parties depend on the expected costs and benefits of continuing the dispute. The model provides a parsimonious but relatively successful explanation for the distribution of liability disputes across different workers and types of injuries.
Handle: RePEc:nbr:nberwo:11918
Template-Type: ReDIF-Paper 1.0
Title: Capitalizing Patriotism: The Liberty Loans of World War I
Classification-JEL: N2
Author-Name: Sung Won Kang
Author-Name: Hugh Rockoff
Author-Person: pro65
Note: DAE
Number: 11919
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11919
File-URL: http://www.nber.org/papers/w11919.pdf
File-Format: application/pdf
Publication-Status: published as Sung Won Kang & Hugh Rockoff, 2015. "Capitalizing patriotism: the Liberty loans of World War I," Financial History Review, vol 22(01), pages 45-78.
Abstract: In World War I the Secretary of the Treasury, William Gibbs McAdoo, hoped to create a broad market for government bonds, the famous Liberty Loans, by following an aggressive policy of "capitalizing patriotism." He called on everyone from Wall Street bankers to the Boy Scouts to volunteer for the campaigns to sell the bonds. He helped recruit the nation's best known artists to draw posters depicting the contribution to the war effort to be made by buying bonds, and he organized giant bond rallies featuring Hollywood stars such as Douglas Fairbanks, Mary Pickford, and Charlie Chaplin. These efforts, however, enjoyed little success. The yields on the Liberty bonds were kept low mainly by making the bonds tax exempt and by making sure that a large proportion of them was purchased directly or indirectly by the Federal Reserve. Patriotism proved to be a weak offset to normal market forces.
Handle: RePEc:nbr:nberwo:11919
Template-Type: ReDIF-Paper 1.0
Title: Early Decisions: A Regulatory Framework
Classification-JEL: D11; D69; D91; H21; H31
Author-Name: John Beshears
Author-Name: James J. Choi
Author-Name: David Laibson
Author-Person: pla164
Author-Name: Brigitte Madrian
Author-Person: pma384
Note: IFM PE AG
Number: 11920
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11920
File-URL: http://www.nber.org/papers/w11920.pdf
File-Format: application/pdf
Publication-Status: published as Beshears, John, James Choi, David Laibson, and Brigitte C. Madrian. “Early Decisions: A Regulatory Framework." Swedish Economic Policy Review 12,2 (2005): 41-60.
Abstract: We describe a regulatory framework that helps consumers who have difficulty sticking to their own long-run plans. Early Decision regulations help long-run preferences prevail by allowing consumers to partially commit to their long-run goals, making it harder for a momentary impulse to reverse past decisions. In the cigarette market, examples of Early Decision regulations include restricting the locations or times at which cigarettes are sold, delaying the receipt of cigarettes following purchase, and allowing a consumer to choose in advance the legal restrictions on her own cigarette purchases. A formal model of Early Decision regulations demonstrates that Early Decisions are optimal when consumer preferences are heterogeneous. Intuitively, each consumer knows his own preferences, so self-rationing - which is what Early Decisions enable - is better than a one-size-fits-all regulation like a sin tax. Of course, Early Decision regulations incur social costs and therefore require empirical evaluation to determine their net social value.
Handle: RePEc:nbr:nberwo:11920
Template-Type: ReDIF-Paper 1.0
Title: The U.S. Current Account Deficit and the Expected Share of World Output
Classification-JEL: F3; F4
Author-Name: Charles Engel
Author-Person: pen14
Author-Name: John H. Rogers
Author-Person: pro248
Note: IFM
Number: 11921
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11921
File-URL: http://www.nber.org/papers/w11921.pdf
File-Format: application/pdf
Publication-Status: published as Engel, Charles, and John H. Rogers. “The US Current Account Deficit and the Expected Share of World Output.” Journal of Monetary Economics 53 (2006): 1063-1093.
Publication-Status: published as Charles Engel & John H. Rogers, 2006. "The U.S. current account deficit and the expected share of world output," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
Abstract: We investigate the possibility that the large current account deficits of the U.S. are the outcome of optimizing behavior. We develop a simple long-run world equilibrium model in which the current account is determined by the expected discounted present value of its future share of world GDP relative to its current share of world GDP. The model suggests that under some reasonable assumptions about future U.S. GDP growth relative to the rest of the advanced countries -- more modest than the growth over the past 20 years -- the current account deficit is near optimal levels. We then explore the implications for the real exchange rate. Under some plausible assumptions, the model implies little change in the real exchange rate over the adjustment path, though the conclusion is sensitive to assumptions about tastes and technology. Then we turn to empirical evidence. A test of current account sustainability suggests that the U.S. is not keeping on a long-run sustainable path. A direct test of our model finds that the dynamics of the U.S. current account -- the increasing deficits over the past decade -- are difficult to explain under a particular statistical model (Markov-switching) of expectations of future U.S. growth. But, if we use survey data on forecasted GDP growth in the G7, our very simple model appears to explain the evolution of the U.S. current account remarkably well. We conclude that expectations of robust performance of the U.S. economy relative to the rest of the advanced countries is a contender -- though not the only legitimate contender -- for explaining the U.S.
Handle: RePEc:nbr:nberwo:11921
Template-Type: ReDIF-Paper 1.0
Title: Overconfidence, Subjective Perception and Pricing Behavior
Classification-JEL: D4; D8; E3
Author-Name: Pierpaolo Benigno
Author-Person: pbe203
Author-Name: Anastasios Karantounias
Author-Person: pka492
Note: ME
Number: 11922
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11922
File-URL: http://www.nber.org/papers/w11922.pdf
File-Format: application/pdf
Publication-Status: published as Benigno, Pierpaolo & Karantounias, Anastasios G., 2019. "Overconfidence, subjective perception and pricing behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 164(C), pages 107-132.
Abstract: We study the implications of a particular form of irrationality on the pricing behavior of firms in a monopolistic-competitive market with incomplete information. We assume that firms are overconfident, meaning that they over-estimate their abilities to understand the correct model of the economy. However, we allow firms to obtain information by paying a fixed cost. We find two important implications: i) overconfident firms are less inclined to acquire information; ii) prices might exhibit excess volatility driven by non-fundamental disturbances. We use our model to match some facts related to recent empirical evidence on disaggregated price data for the US economy.
Handle: RePEc:nbr:nberwo:11922
Template-Type: ReDIF-Paper 1.0
Title: The Economics of Climate Change
Classification-JEL: D62; H23; N50; Q20
Author-Name: Lawrence H. Goulder
Author-Name: William A. Pizer
Author-Person: ppi108
Note: PE EEE
Number: 11923
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11923
File-URL: http://www.nber.org/papers/w11923.pdf
File-Format: application/pdf
Publication-Status: published as Blume, Lawrence and Steven Durlauf (eds.) The New Palgrave Dictionary of Economics, Palgrave MacMillan, Ltd., May 2008.
Abstract: Global climate change poses a threat to the well-being of humans and other living things through impacts on ecosystem functioning, biodiversity, capital productivity, and human health. This paper briefly surveys recent research on the economics of climate change, including theoretical insights and empirical findings that offer guidance to policy makers. Section 1 frames the climate change problem and indicates the ways that economic research can address it. Section 2 describes approaches to measuring the benefits and costs associated with reducing greenhouse gas emissions. In Section 3 we discuss the implications of uncertainty for the timing and stringency of policies to address possible climate change. We then present issues related to policy design, including instrument choice (Section 4), flexibility (Section 5), and international coordination (Section 6). The final section offers general conclusions.
Handle: RePEc:nbr:nberwo:11923
Template-Type: ReDIF-Paper 1.0
Title: Female Socialization: How Daughters Affect Their Legislator Fathers' Voting on Women's Issues
Classification-JEL: H0; J16; D72
Author-Name: Ebonya Washington
Note: CH POL
Number: 11924
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11924
File-URL: http://www.nber.org/papers/w11924.pdf
File-Format: application/pdf
Publication-Status: published as Washington, Ebonya Lia. “Female Socialization: How Daughters Affect Their Legislator Fathers’ Voting on Women’s Issues.” American Economic Review 98, 1 (2008): 311-332.
Abstract: Economists have long concerned themselves with environmental influences, such as neighborhood, peers and family on individuals' beliefs and behaviors. However, the impact of children on parents' behavior has been little studied. Parenting daughters, psychologists have shown, increases feminist sympathies. I test the hypothesis that children, much like neighbors or peers, can influence adult behavior. I demonstrate that the propensity to vote liberally on reproductive rights is significantly increasing in a congress person's proportion of daughters. The result demonstrates not only the relevance of child to parent behavioral influence, but also the importance of personal ideology in a legislator's voting decisions as it is not explained away by voter preferences.
Handle: RePEc:nbr:nberwo:11924
Template-Type: ReDIF-Paper 1.0
Title: Happiness and the Human Development Index: Australia is Not a Paradox
Classification-JEL: I31; O57
Author-Name: Andrew Leigh
Author-Person: ple119
Author-Name: Justin Wolfers
Author-Person: pwo9
Note: LS
Number: 11925
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11925
File-URL: http://www.nber.org/papers/w11925.pdf
File-Format: application/pdf
Publication-Status: published as Leigh, Andrew and Justin Wolfers. “Happiness and the Human Development Index: Australia is Not a Paradox.” Australian Economic Review 39, 2 (June 2006): 176-184.
Abstract: In "Happiness and the Human Development Index: The Paradox of Australia," Blanchflower and Oswald (2005) observe an apparent puzzle: they claim that Australia ranks highly in the Human Development Index (HDI), but relatively poorly in happiness. However, when we compare their happiness data with the HDI, Australia appears happier, not sadder, than its HDI score would predict. This conclusion also holds when we turn to a larger cross-national dataset than the one used by Blanchflower and Oswald, when we analyse life satisfaction in place of happiness, and when we measure development using GDP per capita in place of the HDI. Indeed, in the World Values Survey, only one other country (Iceland) has a significantly higher level of both life satisfaction and happiness than Australia. Our findings accord with numerous cross-national surveys conducted since the 1940s, which have consistently found that Australians report high levels of wellbeing.
Handle: RePEc:nbr:nberwo:11925
Template-Type: ReDIF-Paper 1.0
Title: Service Offshoring and Productivity: Evidence from the United States
Classification-JEL: F1; F2
Author-Name: Mary Amiti
Author-Person: pam39
Author-Name: Shang-Jin Wei
Author-Person: pwe20
Note: ITI PR
Number: 11926
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11926
File-URL: http://www.nber.org/papers/w11926.pdf
File-Format: application/pdf
Publication-Status: published as Mary Amiti & Shang-Jin Wei, 2009. "Service Offshoring and Productivity: Evidence from the US," The World Economy, Blackwell Publishing, vol. 32(2), pages 203-220, 02.
Publication-Status: published as Mary Amiti & Shang-Jin Wei, 2005. "Service offshoring, Productivity, and Employment: Evidence From the United States," IMF Working Papers, vol 05(238).
Abstract: The practice of sourcing service inputs from overseas suppliers has been growing in response to new technologies that have made it possible to trade in some business and computing services that were previously considered non-tradable. This paper estimates the effects of offshoring on productivity in US manufacturing industries between 1992 and 2000. It finds that service offshoring has a significant positive effect on productivity in the US, accounting for around 10 percent of labor productivity growth during this period. Offshoring material inputs also has a positive effect on productivity, but the magnitude is smaller accounting for approximately 5 percent of productivity growth.
Handle: RePEc:nbr:nberwo:11926
Template-Type: ReDIF-Paper 1.0
Title: The Political Economy of "Truth-in-Advertising" Regulation During the Progressive Era
Classification-JEL: M37; K20; N41; N42
Author-Name: Zeynep Hansen
Author-Name: Marc T. Law
Author-Person: pla238
Note: DAE POL
Number: 11927
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11927
File-URL: http://www.nber.org/papers/w11927.pdf
File-Format: application/pdf
Publication-Status: published as Hansen, Zeynep K. and Marc T. Law. “The Political Economy of Truth-in-Advertising Regulation during the Progressive Era.” Journal of Law and Economics 51, 2 (May 2008): 251-69.
Abstract: This paper explores the origins and impact of "truth-in-advertising" regulation during the Progressive era. Was advertising regulation adopted in response to rent-seeking on the part of firms who sought to limit the availability of advertising as a competitive device? Or was advertising regulation desired because it furnished a mechanism through which firms could improve the credibility of advertising? We find the available qualitative and quantitative evidence to be more consistent with the latter hypothesis.
Handle: RePEc:nbr:nberwo:11927
Template-Type: ReDIF-Paper 1.0
Title: Five Facts You Need to Know About Technology Diffusion
Classification-JEL: O33; O47; O57
Author-Name: Diego Comin
Author-Person: pco55
Author-Name: Bart Hobijn
Author-Person: pho54
Author-Name: Emilie Rovito
Note: EFG PR
Number: 11928
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11928
File-URL: http://www.nber.org/papers/w11928.pdf
File-Format: application/pdf
Abstract: This paper presents a new data set on the diffusion of about 115 technologies in over 150 countries over the last 200 years. We use this comprehensive data set to uncover general patterns of technology diffusion. Our main 5 findings are as follows: (i) Once the intensive margin is measured, technologies do not diffuse in a logistic way. (ii) Within a typical technology, the dispersion in the adoption levels across countries is about 5 times larger than the cross-country dispersion in income per capita. (iii) The rankings of countries by level of technology adoption are very highly correlated across technologies. (iv) Within a typical technology, there has been convergence at an average rate of 4 percent per year. (v) The speed of convergence for technologies developed since 1925 has been three times higher than the speed of convergence for technologies developed before 1925.
Handle: RePEc:nbr:nberwo:11928
Template-Type: ReDIF-Paper 1.0
Title: Macroeconomic Derivatives: An Initial Analysis of Market-Based Macro Forecasts, Uncertainty, and Risk
Classification-JEL: C5; C82; D8; E3; E4; G15
Author-Name: Refet Gurkaynak
Author-Person: pgu93
Author-Name: Justin Wolfers
Author-Person: pwo9
Note: AP EFG
Number: 11929
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11929
File-URL: http://www.nber.org/papers/w11929.pdf
File-Format: application/pdf
Publication-Status: published as Frankel, Jeffrey A. and Christopher A. Pissarides (eds.) NBER International Seminar on Macroeconomics 2005 (NBER International Seminar on Macroeconomics Series). Cambridge, MA: The MIT Press, July 31, 2007.
Publication-Status: published as Macroeconomic Derivatives: An Initial Analysis of Market-Based Macro Forecasts, Uncertainty, and Risk, Refet Gürkaynak, Justin Wolfers. in NBER International Seminar on Macroeconomics 2005, Frankel and Pissarides. 2007
Abstract: In September 2002, a new market in "Economic Derivatives" was launched allowing traders to take positions on future values of several macroeconomic data releases. We provide an initial analysis of the prices of these options. We find that market-based measures of expectations are similar to survey-based forecasts although the market-based measures somewhat more accurately predict financial market responses to surprises in data. These markets also provide implied probabilities of the full range of specific outcomes, allowing us to measure uncertainty, assess its driving forces, and compare this measure of uncertainty with the dispersion of point-estimates among individual forecasters (a measure of disagreement). We also assess the accuracy of market-generated probability density forecasts. A consistent theme is that few of the behavioral anomalies present in surveys of professional forecasts survive in equilibrium, and that these markets are remarkably well calibrated. Finally we assess the role of risk, finding little evidence that risk-aversion drives a wedge between market prices and probabilities in this market.
Handle: RePEc:nbr:nberwo:11929
Template-Type: ReDIF-Paper 1.0
Title: Health Care, Technological Change, and Altruistic Consumption Externalities
Classification-JEL: I1
Author-Name: Tomas Philipson
Author-Person: pph37
Author-Name: Stephane Mechoulan
Author-Name: Anupam Jena
Author-Person: pje47
Note: EH PE
Number: 11930
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11930
File-URL: http://www.nber.org/papers/w11930.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Law and Economics Vol. 53, No. 3. The University of Chicago Press. August 2010
Abstract: Traditional economic analysis has proposed well known remedies to deal with consumption externalities and inefficient technological change in isolation, but lacks a general framework for addressing them jointly. We argue that the joint determination of R&D and consumption externalities is central to health care industries around the world generally, and for the pharmaceutical industry in particular. This is because technological change drives the expansion of the health care sector and altruism seems to motivate many public subsidies such as Medicaid in the US. We stress that standard remedies to the two problems in isolation are inefficient -- Pigouvian corrections to consumption externalities are inefficient under technological change and standard R&D stimuli are inefficient because they focus only on consumer and producer surplus, not the altruistic surplus accruing to non-consumers. We provide illustrative calculations of the dynamic inefficiency in the level of US R&D spending due to the inability of innovators to appropriate the altruistic surplus. We find that altruistic gains amount to about a quarter of consumer surplus in the baseline scenario. Our analysis implies that total R&D could be under-provided by as much as 60 percent.
Handle: RePEc:nbr:nberwo:11930
Template-Type: ReDIF-Paper 1.0
Title: Steam Power, Establishment Size, and Labor Productivity Growth in Nineteenth Century American Manufacturing
Classification-JEL: N61
Author-Name: Jeremy Atack
Author-Person: pat28
Author-Name: Fred Bateman
Author-Name: Robert Margo
Author-Person: pma319
Note: DAE PR
Number: 11931
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11931
File-URL: http://www.nber.org/papers/w11931.pdf
File-Format: application/pdf
Publication-Status: published as Atack, Jeremy, Fred Bateman, and Robert Margo. “Steam Power, Establishment Size, and Labor Productivity Growth in Nineteenth Century American Manufacturing.” Explorations in Economic History 45, 2 (April 2008): 185-98.
Abstract: We use establishment level data from the 1850-80 censuses of manufacturing to study the correlates of the use of steam power and the impact of steam power on labor productivity growth in nineteenth century American manufacturing. A key result is that establishment size mattered: large establishments, as measured by employment, were much more likely to use steam power than smaller establishments. Controlling for firm size, location, industry, and other establishment characteristics, steam powered establishments had higher labor productivity than establishments using hand or animal power, or water power. We also find that the impact of steam on labor productivity was increasing in establishment size. The diffusion of steam power was an important factor behind the growth of labor productivity, accounting for 22 to 41 percent of that growth between 1850 and 1880, depending on establishment size.
Handle: RePEc:nbr:nberwo:11931
Template-Type: ReDIF-Paper 1.0
Title: The Long-Term Effects of a Generous Income Support Program: Unemployment Insurance in New Brunswick and Maine, 1940-1991
Classification-JEL: J22; J64
Author-Name: Peter Kuhn
Author-Person: pku26
Author-Name: Chris Riddell
Author-Person: pri97
Note: LS PE
Number: 11932
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11932
File-URL: http://www.nber.org/papers/w11932.pdf
File-Format: application/pdf
Publication-Status: published as Kuhn, Peter and Chris Riddell. "The Long-Run Effects of Unemployment Insurance: Evidence from New Brunswick and Maine, 1940-1991." Industrial and Labor Relations Review 63, 2 (January 2010): 183-204.
Abstract: Using data spanning a half century for adjacent jurisdictions in the U.S. and Canada, we study the long-term effects of a very generous unemployment insurance (UI)program on weeks worked. We find large effects. For example, in 1990, about 6 percent of employed men in Maine's northernmost counties worked fewer than 26 weeks per year; just across the border in New Brunswick that figure was over 20 percent. According to our estimates, New Brunswick's much more generous UI system accounts for about two thirds of this differential. Even greater effects are found among women and less-educated men. We argue that our longer-run, crossnational perspective generates more substantial estimates of program effects because it captures workers' abilities to make a wider variety of adjustments to programs they expect to be permanent.
Handle: RePEc:nbr:nberwo:11932
Template-Type: ReDIF-Paper 1.0
Title: Globalization and Developing Countries - A Shrinking Tax Base?
Classification-JEL: F15; H21
Author-Name: Joshua Aizenman
Author-Person: pai8
Author-Name: Yothin Jinjarak
Note: ITI PE
Number: 11933
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11933
File-URL: http://www.nber.org/papers/w11933.pdf
File-Format: application/pdf
Publication-Status: published as Aizenman, Joshua and Y. Jinjarak. “Globalization and Developing Countries: A Shrinking Tax Base?" Journal of Development Studies 45, 5: 653–671. 2009.
Abstract: This paper evaluates the impact of globalization on the tax bases of countries at varying stages of development. We see globalization as a process that induces countries to embrace greater trade and financial integration. This in turn should shift their tax revenue from "easy to collect" taxes (tariffs and seigniorage) towards "hard to collect" taxes (value added and income taxes). We find that trade and financial openness have a positive association with the "hard to collect" taxes, and a negative association with the "easy to collect" taxes.
Handle: RePEc:nbr:nberwo:11933
Template-Type: ReDIF-Paper 1.0
Title: Regulation of Health, Safety, and Environmental Risks
Classification-JEL: K32; Q2; J28; J17
Author-Name: W. Kip Viscusi
Author-Person: pvi69
Note: EH EEE
Number: 11934
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11934
File-URL: http://www.nber.org/papers/w11934.pdf
File-Format: application/pdf
Publication-Status: published as Polinsky, A. Mitchell and Steven Shavell (eds). Handbook of Law and Economics, Volume 1. Amsterdam: Elsevier, North-Holland, 2007.
Abstract: This paper provides a systematic review of the economic analysis of health, safety, and environmental regulations. Although the market failures that give rise to a rationale for intervention are well known, not all market failures imply that market risk levels are too great. Hazard warnings policies often can address informational failures. Some market failures may be exacerbated by government policies, particularly those embodying conservative risk assessment practices. Labor market estimates of the value of statistical life provide a useful reference point for the efficient risk tradeoffs for government regulation. Guided by restrictive legislative mandates, regulatory policies often strike a quite different balance with an inordinately high cost per life saved. The risk-risk analysis methodology enables analysts to assess the net safety implications of policy efforts. Inadequate regulatory enforcement and behavioral responses to regulation may limit their effectiveness, while rising societal wealth will continue to generate greater levels of health and safety.
Handle: RePEc:nbr:nberwo:11934
Template-Type: ReDIF-Paper 1.0
Title: Hyperbolic Discounting of Public Goods
Classification-JEL: Q20; D90; H40
Author-Name: W. Kip Viscusi
Author-Person: pvi69
Author-Name: Joel Huber
Note: EH LE PE EEE
Number: 11935
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11935
File-URL: http://www.nber.org/papers/w11935.pdf
File-Format: application/pdf
Abstract: This article examines revealed rates of time preference for public goods, using environmental quality as the case study. A nationally representative panel-based sample of 2,914 respondents considered a series of 5 conjoint policy choices, yielding 14,570 decisions. Both the conditional fixed effect logit estimates of the random utility model and mixed logit estimates implied that the rate of time preference is very high for immediate improvements and drops off substantially thereafter, which is inconsistent with exponential discounting but consistent with hyperbolic discounting. The implied marginal rate of time preference declines and then rises. Estimates of the quasi-hyperbolic discounting parameter range from 0.48 to 0.61. People who are older are especially likely to have a high disutility from delays in improving water quality.
Handle: RePEc:nbr:nberwo:11935
Template-Type: ReDIF-Paper 1.0
Title: Teacher-Student Matching and the Assessment of Teacher Effectiveness
Classification-JEL: I2; J4
Author-Name: Charles T. Clotfelter
Author-Person: pcl34
Author-Name: Helen F. Ladd
Author-Person: pla158
Author-Name: Jacob L. Vigdor
Author-Person: pvi23
Note: ED
Number: 11936
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11936
File-URL: http://www.nber.org/papers/w11936.pdf
File-Format: application/pdf
Publication-Status: published as Charles T. Clotfelter & Helen F. Ladd & Jacob L. Vigdor, 2006. "Teacher-Student Matching and the Assessment of Teacher Effectiveness," Journal of Human Resources, University of Wisconsin Press, vol. 41(4).
Abstract: We use administrative data on North Carolina public schools to document the tendency for more highly qualified teachers to be matched with more advantaged students, and we measure the bias this pattern generates in estimates of the impacts of various teacher qualifications on student achievement. One of the strategies we use to minimize this bias is to restrict the analysis to schools that assign students to classrooms in a manner statistically indistinguishable from random assignment. Using data for 5th grade, we consistently find significant returns to teacher experience in both math and reading and to licensure test scores in math achievement. We also find that the returns in math are greater for socioeconomically advantaged students, a finding that may help explain why the observed form of teacher-student matching persists in equilibrium.
Handle: RePEc:nbr:nberwo:11936
Template-Type: ReDIF-Paper 1.0
Title: Strategic Information Disclosure: The Case of Multi-Attribute Products with Heterogeneous Consumers
Classification-JEL: L15; L5
Author-Name: V. Joseph Hotz
Author-Person: pho4
Author-Name: Mo Xiao
Note: IO
Number: 11937
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11937
File-URL: http://www.nber.org/papers/w11937.pdf
File-Format: application/pdf
Publication-Status: published as V. Joseph Hotz & Mo Xiao, 2013. "Strategic Information Disclosure: The Case Of Multiattribute Products With Heterogeneous Consumers," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 865-881, 01.
Abstract: We examine the incentives for firms to voluntarily disclose otherwise private information about the quality attributes of their products. In particular, we focus on the case of differentiated products with multiple attributes and heterogeneous consumers. We show that there exist certain configurations of consumers' multi-dimensional preferences under which a firm, no matter whether producing a high- or low-quality product, may choose not to reveal the quality even with zero disclosure costs. The failure of information unraveling arises when providing consumers with more information results in more elastic demand, which triggers more intensive price competition and leads to lower prices and profits for competing firms. As a result, the equilibrium in which disclosure is voluntary may diverge from that in which disclosure is mandatory.
Handle: RePEc:nbr:nberwo:11937
Template-Type: ReDIF-Paper 1.0
Title: Private Profits and Public Health: Does Advertising Smoking Cessation Products Encourage Smokers to Quit?
Classification-JEL: I1; L1
Author-Name: Rosemary Avery
Author-Name: Donald Kenkel
Author-Person: pke44
Author-Name: Dean R. Lillard
Author-Name: Alan Mathios
Author-Person: pma2278
Note: EH
Number: 11938
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11938
File-URL: http://www.nber.org/papers/w11938.pdf
File-Format: application/pdf
Publication-Status: published as Avery, R.J., D.S. Kenkel, D.Lillard, and A. Mathios. "Private Profits and Public Health: Does Advertising Smoking Cessation Products Encourage Smokers to Quit?" Journal of Political Economy 115, 3 (2007): 447-481.
Abstract: To shed new light on the role private profit incentives play in promoting public health, in this paper we conduct an empirical study of the impact of pharmaceutical industry advertising on smoking cessation decisions. We link survey data on individual smokers with an archive of magazine advertisements. The rich survey data allow us to measure smokers' exposure to smoking cessation advertisements based on their magazine-reading habits. Because we observe the same information about the consumers that the advertisers observe, we can control for the potential endogeneity of advertising due to firms' targeting decisions. We find that when smokers are exposed to more advertising, they are more likely to attempt to quit and are more likely to have successfully quit. While some of the increased quitting behavior involves purchases of smoking cessation products, our results indicate that advertisements for smoking cessation products also increase the probability of quitting without the use of any product. Thus, the public health returns to smoking cessation product advertisements exceed the private returns to the manufacturers. Because advertising of a wide range of consumer products may have important and under-studied spillover effects on various non-market behaviors, our results have broad implications for the economics of advertising.
Handle: RePEc:nbr:nberwo:11938
Template-Type: ReDIF-Paper 1.0
Title: Evaluating the Differential Effects of Alternative Welfare-to-Work Training Components: A Re-Analysis of the California GAIN Program
Classification-JEL: C1; C5; I3
Author-Name: V. Joseph Hotz
Author-Person: pho4
Author-Name: Guido W. Imbens
Author-Person: pim4
Author-Name: Jacob A. Klerman
Note: LS
Number: 11939
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11939
File-URL: http://www.nber.org/papers/w11939.pdf
File-Format: application/pdf
Publication-Status: published as Hotz, V. Joseph, Guido W. Imbens and Jacob A. Klerman. "Evaluating The Differential Effects Of Alternative Welfare-to-Work Training Components: A Reanalysis Of The California GAIN Program," Journal of Labor Economics, 2006, v24(3,Jul), 521-566.
Abstract: In this paper, we explore ways of combining experimental data and non-experimental methods to estimate the differential effects of components of training programs. We show how data from a multi-site experimental evaluation in which subjects are randomly assigned to any treatment versus a control group who receives no treatment can be combined with non-experimental regression-adjustment methods to estimate the differential effects of particular types of treatments. We also devise tests of the validity of using the latter methods. We use these methods and tests to re-analyze data from the MDRC Evaluation of California's Greater Avenues to Independence (GAIN) program. While not designed to estimate the differential effects of the Labor Force Attachment (LFA) training and Human Capital Development (HCD) training components used in this program, we show how data from this experimental evaluation can be used in conjunction with non-experimental methods to estimate such effects. We present estimates of both the short- and long-term differential effects of these two training components on employment and earnings. We find that while there are short-term positive differential effects of LFA versus HCD, the latter training component is relatively more beneficial in the longer-term.
Handle: RePEc:nbr:nberwo:11939
Template-Type: ReDIF-Paper 1.0
Title: Modeling Inefficient Institutions
Classification-JEL: H2; N10; N40; O1; O10; P16
Author-Name: Daron Acemoglu
Author-Person: pac16
Note: EFG POL
Number: 11940
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11940
File-URL: http://www.nber.org/papers/w11940.pdf
File-Format: application/pdf
Publication-Status: published as Blundell, Richard, Whitney K. Newey, and Torsten Persson (eds.) Advances in Economics and Econometrics: Volume 1: Theory and Applications, Ninth World Congress (Econometric Society Monographs). Cambridge: Cambridge University Press, (2006).
Abstract: Why do inefficient — non-growth enhancing — institutions emerge and persist? This paper develops a simple framework to provide some answers to this question. Political institutions determine the allocation of political power, and economic institutions determine the framework for policy-making and place constraints on various policies. Groups with political power, the elite, choose policies to increase their income and to directly or indirectly transfer resources from the rest of society to themselves. The baseline model encompasses various distinct sources of inefficient policies, including revenue extraction, factor price manipulation and political consolidation. Namely, the elite may pursue inefficient policies to extract revenue from other groups, to reduce their demand for factors, thus indirectly benefiting from changes in factor prices, and to impoverish other groups competing for political power. The elite's preference over inefficient policies translates into inefficient economic institutions. Institutions that can restrict inefficient policies will in general not emerge, and the elite may manipulate economic institutions in order to further increase their income or facilitate rent extraction. The exception is when there are commitment (holdup) problems, so that equilibrium taxes and regulations are worse than the elite would like them to be from an ex ante point of view. In this case, economic institutions that provide additional security of property rights to other groups can be useful. The paper concludes by providing a framework for the analysis of institutional change and institutional persistence.
Handle: RePEc:nbr:nberwo:11940
Template-Type: ReDIF-Paper 1.0
Title: Estimating the Intertemporal Risk-Return Tradeoff Using the Implied Cost of Capital
Classification-JEL: G1
Author-Name: Lubos Pastor
Author-Person: ppa276
Author-Name: Meenakshi Sinha
Author-Name: Bhaskaran Swaminathan
Note: AP
Number: 11941
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11941
File-URL: http://www.nber.org/papers/w11941.pdf
File-Format: application/pdf
Publication-Status: published as Pastor, Lubos, Meenakshi Sinha and Bhaskaran Swaminathan. “Estimating the Intertemporal Risk-Return Tradeoff Using the Implied Cost of Capital.” Journal of Finance 63 (2008): 2859–2897.
Abstract: We reexamine the time-series relation between the conditional mean and variance of stock market returns. To proxy for the conditional mean return, we use the implied cost of capital, computed using analyst forecasts. The usefulness of this proxy is shown in simulations. In empirical analysis, we construct the time series of the implied cost of capital for the G-7 countries. We find strong support for a positive intertemporal mean-variance relation at both the country level and the world market level. Some of our evidence is consistent with international integration of the G-7 financial markets.
Handle: RePEc:nbr:nberwo:11941
Template-Type: ReDIF-Paper 1.0
Title: Robust Optimal Policy in a Forward-Looking Model with Parameter and Shock Uncertainty
Classification-JEL: C61; D81; E42; E52
Author-Name: Marc Giannoni
Author-Person: pgi36
Note: ME
Number: 11942
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11942
File-URL: http://www.nber.org/papers/w11942.pdf
File-Format: application/pdf
Publication-Status: published as Gionnoni, Marc. “Robust Optimal Monetary Policy in a Forward-Looking Model with Parameter and Shock Uncertainty.” Journal of Applied Econometrics 22,1 (January/February 2007): 179-213.
Abstract: This paper characterizes a robust optimal policy rule in a simple forward-looking model, when the policymaker faces uncertainty about model parameters and shock processes. We show that the robust optimal policy rule is likely to involve a stronger response of the interest rate to fluctuations in inflation and the output gap than is the case in the absence of uncertainty. Thus parameter uncertainty alone does not necessarily justify a small response of monetary policy to perturbations. However uncertainty may amplify the degree of "super-inertia" required by optimal monetary policy. We finally discuss the sensitivity of the results to alternative assumptions.
Handle: RePEc:nbr:nberwo:11942
Template-Type: ReDIF-Paper 1.0
Title: Life-Cycle Variation in the Association between Current and Lifetime Earnings
Classification-JEL: D3; J3
Author-Name: Steven Haider
Author-Person: pha224
Author-Name: Gary Solon
Author-Person: pso215
Note: EFG LS
Number: 11943
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11943
File-URL: http://www.nber.org/papers/w11943.pdf
File-Format: application/pdf
Publication-Status: published as Haider, Steven and Gary Solon. "Life-Cycle Variation In The Association Between Current And Lifetime Earnings," American Economic Review, 2006, v96(4,Sep), 1308-1320.
Abstract: Researchers in a variety of important economic literatures have assumed that current income variables as proxies for lifetime income variables follow the textbook errors-in-variables model. In an analysis of Social Security records containing nearly career-long earnings histories for the Health and Retirement Study sample, we find that the relationship between current and lifetime earnings departs substantially from the textbook model in ways that vary systematically over the life cycle. Our results can enable more appropriate analysis of and correction for errors-in-variables bias in a wide range of research that uses current earnings to proxy for lifetime earnings.
Handle: RePEc:nbr:nberwo:11943
Template-Type: ReDIF-Paper 1.0
Title: Innovation and Incentives: Evidence from Corporate R&D
Classification-JEL: O3; J3
Author-Name: Josh Lerner
Author-Person: ple60
Author-Name: Julie Wulf
Note: CF PR
Number: 11944
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11944
File-URL: http://www.nber.org/papers/w11944.pdf
File-Format: application/pdf
Publication-Status: published as Lerner, Josh and Julie Wulf. "Innovation and Incentives: Evidence from Corporate R&D." Review of Economics and Statistics 89 (2007): 634-644.
Abstract: Beginning in the late 1980s, American corporations began increasingly linking the compensation of central research personnel to the economic objectives of the corporation. This paper examines the impact of the shifting compensation of the heads of corporate research and development. Among firms with centralized R&D organizations, a clear relationship emerges: more long-term incentives (e.g. stock options and restricted stock) are associated with more heavily cited patents. These incentives also appear to be somewhat associated with more patent filings and patents of greater generality. We address endogeniety concerns in a variety of ways, including examining the impact of compensation for other key managers and utilizing an instrument based on spawning activity in the region. While we cannot determine whether the effect is due to better project selection or better people selection, the results continue to be consistent with our interpretation that performance pay of corporate R&D heads is associated with more innovative firms.
Handle: RePEc:nbr:nberwo:11944
Template-Type: ReDIF-Paper 1.0
Title: A Tax-Based Estimate of the Elasticity of Intertemporal Substitution
Classification-JEL: H2; E2; E6
Author-Name: Jonathan Gruber
Author-Person: pgr20
Note: EFG PE
Number: 11945
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11945
File-URL: http://www.nber.org/papers/w11945.pdf
File-Format: application/pdf
Publication-Status: published as Jonathan Gruber, 2013. "A Tax-Based Estimate of the Elasticity of Intertemporal Substitution," Quarterly Journal of Finance, vol 03(01).
Abstract: One of the most important behavioral parameters in macroeconomics is the elasticity of intertemporal substitution (EIS). Starting with the seminal work of Hall (1978), researchers have used an Euler equation framework to estimate the EIS, relating the growth rate of consumption to the after-tax interest rate facing consumers. This large literature has, however, produced very mixed results, perhaps due to an important limitation: the impact of the interest rate on consumption or savings is identified by time series movements in interest rates. Yet the factors that cause time series movements in interest rates may themselves be correlated with consumption or savings decisions. I address this problem by using variation across individuals in the capital income tax rate. Conditional on observable characteristics of individuals, tax rate movements cause exogenous shifts in the after-tax interest rate. Using data on total non-durable consumption from the Consumer Expenditure Survey over two decades, I estimate a surprisingly high EIS of 2. This finding is robust to a variety of specification checks.
Handle: RePEc:nbr:nberwo:11945
Template-Type: ReDIF-Paper 1.0
Title: Assessing the Sources of Changes in the Volatility of Real Growth
Classification-JEL: E32; E44
Author-Name: Stephen G. Cecchetti
Author-Person: pce4
Author-Name: Alfonso Flores-Lagunes
Author-Person: pfl60
Author-Name: Stefan Krause
Note: EFG IFM ME
Number: 11946
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11946
File-URL: http://www.nber.org/papers/w11946.pdf
File-Format: application/pdf
Publication-Status: published as Stephen G Cecchetti & Alfonso Flores-Lagunes & Stefan Krause, 2005. "Assessing the Sources of Changes in the Volatility of Real Growth," RBA Annual Conference Volume, in: Christopher Kent & David Norman (ed.), The Changing Nature of the Business Cycle Reserve Bank of Australia.
Abstract: In much of the world, growth is more stable than it once was. Looking at a sample of twentyfive countries, we find that in sixteen, real GDP growth is less volatile today than it was twenty years ago. And these declines are large, averaging more than fifty per cent. What accounts for the fact that real growth has been more stable in recent years? We survey the evidence and competing explanations and find support for the view that improved inventory management policies, coupled with financial innovation, adopting an inflation targeting scheme and increased central bank independence have all been associated with more stable real growth. Furthermore, we find weak evidence suggesting that increased commercial openness has coincided with increased output volatility.
Handle: RePEc:nbr:nberwo:11946
Template-Type: ReDIF-Paper 1.0
Title: What's So Special about China's Exports?
Classification-JEL: F1; O4
Author-Name: Dani Rodrik
Author-Person: pro60
Note: ITI
Number: 11947
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11947
File-URL: http://www.nber.org/papers/w11947.pdf
File-Format: application/pdf
Publication-Status: published as Rodrik, Dani. "What's So Special about China's Exports?." China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences 14, 5 (2006) 1-19.
Abstract: Much more than comparative advantage and free markets have been at play in shaping China's export success. Government policies have helped nurture domestic capabilities in consumer electronics and other advanced areas that would most likely not have developed in their absence. As a result, China has ended up with an export basket that is significantly more sophisticated than what would be normally expected for a country at its income level. This has been an important determinant of China's rapid growth. What matters for China's future growth is not the volume of exports, but whether China will continue to latch on to higher-income products over time.
Handle: RePEc:nbr:nberwo:11947
Template-Type: ReDIF-Paper 1.0
Title: Intangible Capital and Economic Growth
Classification-JEL: O47; E22; E01
Author-Name: Carol A. Corrado
Author-Name: Charles R. Hulten
Author-Name: Daniel E. Sichel
Author-Person: psi394
Note: EFG PR
Number: 11948
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11948
File-URL: http://www.nber.org/papers/w11948.pdf
File-Format: application/pdf
Publication-Status: published as Corrado, Carol, Charles Hulten and Daniel Sichel. "Intangible Capital and Economic Growth." Review of Income and Wealth September 2009
Abstract: Published macroeconomic data traditionally exclude most intangible investment from measured GDP. This situation is beginning to change, but our estimates suggest that as much as $800 billion is still excluded from U.S. published data (as of 2003), and that this leads to the exclusion of more than $3 trillion of business intangible capital stock. To assess the importance of this omission, we add capital to the standard sources-of-growth framework used by the BLS, and find that the inclusion of our list of intangible assets makes a significant difference in the observed patterns of U.S. economic growth. The rate of change of output per worker increases more rapidly when intangibles are counted as capital, and capital deepening becomes the unambiguously dominant source of growth in labor productivity. The role of multifactor productivity is correspondingly diminished, and labor's income share is found to have decreased significantly over the last 50 years.
Handle: RePEc:nbr:nberwo:11948
Template-Type: ReDIF-Paper 1.0
Title: Did Medicare Induce Pharmaceutical Innovation?
Classification-JEL: H51; I18; O33; O38; L65
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: David Cutler
Author-Person: pcu64
Author-Name: Amy Finkelstein
Author-Person: pfi264
Author-Name: Joshua Linn
Author-Person: pli288
Note: EH PR
Number: 11949
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11949
File-URL: http://www.nber.org/papers/w11949.pdf
File-Format: application/pdf
Publication-Status: published as Acemoglu, Daron, David Cutler, Amy Finkelstein and Joshua Linn. "Did Medicare Induce Pharmaceutical Innovation?," American Economic Review, 2006, v96(2,May), 103-107.
Abstract: The introduction of Medicare in 1965 was the single largest change in health insurance coverage in U.S. history. Many economists and commentators have conjectured that the introduction of Medicare may have also been an important impetus for the development of new drugs that are now commonly used by the elderly and have substantially extended their life expectancy. In this paper, we investigate whether Medicare induced pharmaceutical innovations directed towards the elderly. Medicare could have played such a role only if two conditions were met. First, Medicare would have to increase drug spending by the elderly. Second, the pharmaceutical companies would have to respond to the change in market size for drugs caused by Medicare by changing the direction of their research. Our empirical work finds no evidence of a "first-stage" effect of Medicare on prescription drug expenditure by the elderly. Correspondingly, we also find no evidence of a shift in pharmaceutical innovation towards therapeutic categories most used by the elderly. On the whole, therefore, our evidence does not provide support for the hypothesis that Medicare had a major effect on the direction of pharmaceutical innovation.
Handle: RePEc:nbr:nberwo:11949
Template-Type: ReDIF-Paper 1.0
Title: The Value of Stock Options to Non-Executive Employees
Classification-JEL: J3; G3
Author-Name: Kevin F. Hallock
Author-Person: pha176
Author-Name: Craig Olson
Note: CF LS
Number: 11950
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11950
File-URL: http://www.nber.org/papers/w11950.pdf
File-Format: application/pdf
Abstract: This study empirically investigates the value employees place on stock options using information from the option exercise behavior of individuals. Employees hold options for another period if the value from holding them and reserving the right to exercise them later is higher than the value of exercising them immediately and collecting a profit equal to the stock price minus the exercise price. This simple model implies the hazard describing employee exercise behavior reveals information about the value to employees of holding options another time period. We show the parameters of this model are identified with data on multiple option grants per employee and we apply this model to the disposition of options received in the 1990s by a sample of over 2000 middle-level managers from a large, established firm outside of manufacturing. Exercise behavior is modeled using a random effects probit model of monthly exercise behavior that is estimated using simulated maximum likelihood estimation methods. Our estimates show there is substantial heterogeneity (observed and unobserved) among employees in the value they place on their options. Our estimates show most employees value their options at a value greater than the option's Black-Scholes value.
Handle: RePEc:nbr:nberwo:11950
Template-Type: ReDIF-Paper 1.0
Title: Health Insurance Take-up by the Near Elderly
Classification-JEL: D12; H51; I11; J26; J32
Author-Name: Thomas C. Buchmueller
Author-Person: pbu179
Author-Name: Sabina Ohri
Note: AG EH
Number: 11951
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11951
File-URL: http://www.nber.org/papers/w11951.pdf
File-Format: application/pdf
Publication-Status: published as Buchmueller, Thomas C. and Sabina Ohri. “Health Insurance Take-up by the Near-Elderly.” Health Services Research 41, 6 ((December 2006): 2054-2073.
Abstract: This study examines the effect of price on the demand for health insurance by early retirees between the ages of 55 and 64. The analysis is based on administrative data from a medium sized employer and takes advantage of a natural experiment created by the firm's health insurance contribution policy. The amount the firm contributes toward retiree health insurance coverage depends on when a person retired and her years of service at that date. As a result of this policy, there is considerable variation in out-of-pocket premiums faced by individuals in the data, but this variation is independent of the non-price attributes of the health insurance plans offered, and plausibly exogenous to individual characteristics that are likely to affect the demand for insurance. We find that price has a statistically significant but small effect on the decision to take up coverage. The implied elasticities are very similar to results found in previous studies using very different data.
Handle: RePEc:nbr:nberwo:11951
Template-Type: ReDIF-Paper 1.0
Title: The Social Cost of Foreign Exchange Reserves
Classification-JEL: F3
Author-Name: Dani Rodrik
Author-Person: pro60
Note: IFM
Number: 11952
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11952
File-URL: http://www.nber.org/papers/w11952.pdf
File-Format: application/pdf
Publication-Status: published as Rodrik, Dani. “The Social Cost of Foreign Exchange Reserves.” International Economic Journal 20, 3 (September 2006).
Abstract: There has been a very rapid rise since the early 1990s in foreign reserves held by developing countries. These reserves have climbed to almost 30 percent of developing countries' GDP and 8 months of imports. Assuming reasonable spreads between the yield on reserve assets and the cost of foreign borrowing, the income loss to these countries amounts to close to 1 percent of GDP. Conditional on existing levels of short-term foreign borrowing, this does not represent too steep a price as an insurance premium against financial crises. But why developing countries have not tried harder to reduce short-term foreign liabilities in order to achieve the same level of liquidity (thereby paying a smaller cost in terms of reserve accumulation) remains an important puzzle.
Handle: RePEc:nbr:nberwo:11952
Template-Type: ReDIF-Paper 1.0
Title: The Quiet Revolution that Transformed Women's Employment, Education, and Family
Classification-JEL: J1; J2; N3
Author-Name: Claudia Goldin
Author-Person: pgo601
Note: CH DAE ED LS
Number: 11953
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11953
File-URL: http://www.nber.org/papers/w11953.pdf
File-Format: application/pdf
Publication-Status: published as Goldin, Claudia. "The Quiet Revolution That Transformed Women's Employment, Education, And Family," American Economic Review, 2006, v96(2,May), 1-21.
Abstract: The modern economic role of women emerged in four phases. The first three were evolutionary; the last was revolutionary. Phase I occurred from the late nineteenth century to the 1920s; Phase II was from 1930 to 1950; Phase III extended from 1950 to the late 1970s; and Phase IV, the "quiet revolution," began in the late 1970s and is still ongoing. Three aspects of women's choices distinguish the evolutionary from the revolutionary phases: horizon, identity, and decision-making. The evolutionary phases are apparent in time-series data on labor force participation. The revolutionary phase is discernible using time-series evidence on women's more predictable attachment to the workplace, greater identity with career, and better ability to make joint decisions with their spouses. Each of these series has a sharp break or inflection point signifying social and economic change. These changes, moreover, coincide by birth cohort or period. The relationship between the development of modern labor economics and the reality of women's changing economic role is explored. The paper concludes by assessing whether the revolution has stalled or is being reversed. Women who graduated college in the early 1980s did not "opt-out,"but recent cohorts are too young to evaluate.
Handle: RePEc:nbr:nberwo:11953
Template-Type: ReDIF-Paper 1.0
Title: The Long Run Impact of Bombing Vietnam
Classification-JEL: E2; O5; P5; H7
Author-Name: Edward Miguel
Author-Person: pmi499
Author-Name: Gerard Roland
Author-Person: pro20
Note: EFG
Number: 11954
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11954
File-URL: http://www.nber.org/papers/w11954.pdf
File-Format: application/pdf
Publication-Status: published as Miguel, Edward & Roland, Gérard, 2011. "The long-run impact of bombing Vietnam," Journal of Development Economics, Elsevier, vol. 96(1), pages 1-15, September.
Abstract: We investigate the impact of U.S. bombing on later economic development in Vietnam. The Vietnam War featured the most intense bombing campaign in military history and had massive humanitarian costs. We use a unique U.S. military dataset containing bombing intensity at the district level (N=584). We compare the heavily bombed districts to other districts controlling for baseline demographic characteristics and district geographic factors, and use an instrumental variable approach exploiting distance to the 17th parallel demilitarized zone. U.S. bombing does not have a robust negative impact on poverty rates, consumption levels, infrastructure, literacy or population density through 2002. This finding suggests that local recovery from war damage can be rapid under certain conditions, although further work is needed to establish the generality of the finding in other settings.
Handle: RePEc:nbr:nberwo:11954
Template-Type: ReDIF-Paper 1.0
Title: The Evolution of Top Incomes: A Historical and International Perspective
Classification-JEL: D3; J3
Author-Name: Thomas Piketty
Author-Person: ppi17
Author-Name: Emmanuel Saez
Author-Person: psa117
Note: PE
Number: 11955
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11955
File-URL: http://www.nber.org/papers/w11955.pdf
File-Format: application/pdf
Publication-Status: published as Piketty, Thomas and Emmanuel Saez. “The Evolution of Top Incomes: A Historical and International Perspective.” American Economic Review: Papers and Proceedings, 96, 2 (May 2006): 200-205.
Publication-Status: published as Manza, Jeff and Michael Sauder. Inequalities and Societies Reader, First Edition. New York: W.W. Norton & Company, February 2009.
Abstract: This paper summarizes the main findings of the recent studies that have constructed top income and wealth shares series over the century for a number of countries using tax statistics. Most countries experience a dramatic drop in top income shares in the first part of the century due to a precipitous drop in large wealth holdings during the wars and depression shocks. Top income shares do not recover in the immediate post war decades. However, over the last 30 years, top income shares have increased substantially in English speaking countries but not at all in continental Europe countries or Japan. This increase is due to an unprecedented surge in top wage incomes starting in the 1970s and accelerating in the 1990s. As a result, top wage earners have replaced capital income earners at the top of the income distribution in English speaking countries. We discuss the proposed explanations and the main questions that remain open.
Handle: RePEc:nbr:nberwo:11955
Template-Type: ReDIF-Paper 1.0
Title: Nutrition Labels and Obesity
Classification-JEL: I18
Author-Name: Jayachandran N. Variyam
Author-Name: John Cawley
Author-Person: pca6
Note: EH
Number: 11956
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11956
File-URL: http://www.nber.org/papers/w11956.pdf
File-Format: application/pdf
Abstract: The Nutrition Labeling and Education Act (NLEA) imposed significant changes in the information about calories and nutrients that manufacturers of packaged foods must provide to consumers. This paper tests whether the release of this information impacted body weight and obesity among American adults. We estimate the effect of the new label using a difference-in-differences method. We compare the change before and after the implementation of NLEA in body weight among those who use labels when food shopping to that among those who do not use labels. In National Health Interview Survey data we find, among non-Hispanic white women, that the implementation of the new labels was associated with a decrease in body weight and the probability of obesity. Using NLEA regulatory impact analysis benchmarks, we estimate that the total monetary benefit of this decrease in body weight was $63 to $166 billion over a 20-year period, far in excess of the costs of the NLEA.
Handle: RePEc:nbr:nberwo:11956
Template-Type: ReDIF-Paper 1.0
Title: Structural Estimation of Caloric Intake, Exercise, Smoking, and Obesity
Classification-JEL: I10; I12
Author-Name: Inas Rashad
Author-Person: pke191
Note: EH
Number: 11957
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11957
File-URL: http://www.nber.org/papers/w11957.pdf
File-Format: application/pdf
Publication-Status: published as Rashad, Inas. "Structural Estimation Of Caloric Intake, Exercise, Smoking, And Obesity," Quarterly Review of Economics and Finance, 2006, v46(2,May), 268-283.
Abstract: The escalating rate of obesity in the US highlights the importance of understanding the causes for this rise. In this paper I employ the First, Second, and Third National Health and Nutrition Examination Surveys to estimate a structural model of the determinants of adult obesity. To control for the potential endogeneity of some explanatory variables, such as caloric intake (adjusted for activity level) and smoking, a set of reduced form equations for these outcomes is estimated simultaneously with the obesity equation. To identify each equation, I use an array of state-level characteristics as instrumental variables. Trends in these variables shed light on the sources of the rapid increase in obesity since 1980.
Handle: RePEc:nbr:nberwo:11957
Template-Type: ReDIF-Paper 1.0
Title: Production Targets
Classification-JEL: C72; C73; D43; L13; L62
Author-Name: Guillermo Caruana
Author-Person: pca170
Author-Name: Liran Einav
Author-Person: pei64
Note: IO
Number: 11958
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11958
File-URL: http://www.nber.org/papers/w11958.pdf
File-Format: application/pdf
Publication-Status: published as Caruana, Guillermo and Liran Einav. “Production Targets.” Rand Journal of Economics 39, 4 (Winter 2008): 990-1017.
Abstract: We present a dynamic quantity setting game, where players may continuously adjust their quantity targets, but incur convex adjustment costs when they do so. These costs allow players to use quantity targets as a partial commitment device. We show that the equilibrium path of such a game is hump-shaped and that the final equilibrium outcome is more competitive than its static analog. We then test the theory using monthly production targets of the Big Three U.S. auto manufacturers during 1965-1995 and show that the hump-shaped dynamic pattern is present in the data. Initially, production targets steadily increase until they peak about 2-3 months before production. Then, they gradually decline to eventual production levels. This qualitative pattern is fairly robust across a range of similar exercises. We conclude that strategic considerations play a role in the planning phase in the auto industry, and that static models may therefore under-estimate the industry's competitiveness.
Handle: RePEc:nbr:nberwo:11958
Template-Type: ReDIF-Paper 1.0
Title: Dividend Taxes and Firm Valuation: New Evidence
Classification-JEL: G12; H22
Author-Name: Alan J. Auerbach
Author-Person: pau33
Author-Name: Kevin A. Hassett
Author-Person: pha378
Note: PE
Number: 11959
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11959
File-URL: http://www.nber.org/papers/w11959.pdf
File-Format: application/pdf
Publication-Status: published as Auerbach, Alan J. and Kevin Hassett. "Dividend Taxes and Firm Valuation: New Evidence." American Economic Review (May 2006): 119-123.
Abstract: This paper extends our previous analysis (Auerbach and Hassett 2005) of the effects of the "Jobs and Growth Tax Relief Act of 2003" on firm valuation. That paper found that firms with higher dividend yields benefited more than other dividend paying firms, a result that, in itself, is consistent with both new and traditional views of dividend taxation. But further evidence favored the new view. We also found that non-dividend-paying "immature" firms experienced larger abnormal returns than other firms and that a similar bonus accrued to firms likely to issue new shares, two results that are consistent with an anticipated transition to higher dividend payments. Here, we extend our earlier analysis in two ways. First, we consider the impact of the 2004 Presidential election on option prices, to gain further insight into and confirmation of the mechanism through which the 2003 legislation affected firm values. Second, we explore in more detail the determinants of the "immaturity premium" noted above. In contrast to claims in a recent paper by Amromin et al. (2005), we find that the premium is associated with the likelihood of new share issuance, as inferred but not demonstrated in our original analysis.
Handle: RePEc:nbr:nberwo:11959
Template-Type: ReDIF-Paper 1.0
Title: The Negative Trade-off Between Risk and Incentives: Evidence from the American Whaling Industry
Classification-JEL: N5; L2; J3
Author-Name: Eric Hilt
Author-Person: phi104
Note: DAE
Number: 11960
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11960
File-URL: http://www.nber.org/papers/w11960.pdf
File-Format: application/pdf
Publication-Status: published as Hilt, Eric. "Incentives In Corporations: Evidence From The American Whaling Industry," Journal of Law and Economics, 2006, v49(1,Apr), 197-227.
Publication-Status: published as Hilt, Eric, 2008. "The negative trade-off between risk and incentives: Evidence from the american whaling industry," Explorations in Economic History, Elsevier, vol. 45(4), pages 424-444, September.
Abstract: This paper analyzes the trade-off between risk and incentives in the share contracts of the American whaling industry. Using a newly-collected panel of 5,378 individuals who sailed on whaling voyages from 1855-68, the response of sailors' compensation to an increase in risk is estimated. The risks used to identify this response resulted from the commerce-raiding naval vessels of the Confederacy during the Civil War. As the Confederate cruisers sailed primarily in the Atlantic, and therefore posed far less of a threat to whaling voyages to other oceans, a quasi-experimental approach, focussing on the differences between Atlantic voyages compared to others, is implemented. The results support the existence of a negative trade-off between risk and incentives in the industry's contracts. Moreover, evidence is found of selection among less risk-averse sailors and merchants into riskier voyages during the war.
Handle: RePEc:nbr:nberwo:11960
Template-Type: ReDIF-Paper 1.0
Title: Common Failings: How Corporate Defaults are Correlated
Classification-JEL: G3
Author-Name: Sanjiv Das
Author-Person: pda527
Author-Name: Darrell Duffie
Author-Person: pdu341
Author-Name: Nikunj Kapadia
Author-Person: pka483
Author-Name: Leandro Saita
Note: AP CF
Number: 11961
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11961
File-URL: http://www.nber.org/papers/w11961.pdf
File-Format: application/pdf
Publication-Status: published as Das, Sanjiv R., Darrell Duffie, Nikunj Kapadia, and Leandro Saita. "Common Failings: How Corporate Defoults are Correlated." Journal of Finance 62, 1 (February 2007): 93-117.
Abstract: We develop, and apply to data on U.S. corporations from 1979-2004, tests of the standard doubly-stochastic assumption under which firms'default times are correlated only as implied by the correlation of factors determining their default intensities. This assumption is violated in the presence of contagion or "frailty" (unobservable explanatory variables that are correlated across firms). Our tests do not depend on the time-series properties of default intensities. The data do not support the joint hypothesis of well specified default intensities and the doubly-stochastic assumption. There is also some evidence of default clustering in excess of that implied by the doubly-stochastic model with the given intensities.
Handle: RePEc:nbr:nberwo:11961
Template-Type: ReDIF-Paper 1.0
Title: Multi-Period Corporate Default Prediction With Stochastic Covariates
Classification-JEL: C41; G33; E44
Author-Name: Darrell Duffie
Author-Person: pdu341
Author-Name: Leandro Siata
Author-Name: Ke Wang
Note: AP CF
Number: 11962
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11962
File-URL: http://www.nber.org/papers/w11962.pdf
File-Format: application/pdf
Publication-Status: published as Duffie, Darrell, Leandro Saita and Ke Wang. "Multi-Period Corporate Default Prediction with Stochastic Covariates." Journal of Financial Economics 83 (2007): 635-665.
Abstract: We provide maximum likelihood estimators of term structures of conditional probabilities of corporate default, incorporating the dynamics of firm-specific and macroeconomic covariates. For U.S. Industrial firms, based on over 390,000 firm-months of data spanning 1979 to 2004, the level and shape of the estimated term structure of conditional future default probabilities depends on a firm's distance to default (a volatility-adjusted measure of leverage), on the firm's trailing stock return, on trailing S&P 500 returns, and on U.S. interest rates, among other covariates. Distance to default is the most influential covariate. Default intensities are estimated to be lower with higher short-term interest rates. The out-of-sample predictive performance of the model is an improvement over that of other available models.
Handle: RePEc:nbr:nberwo:11962
Template-Type: ReDIF-Paper 1.0
Title: The Determinants of Mortality
Classification-JEL: I1; J1; O1; N3
Author-Name: David M. Cutler
Author-Person: pcu64
Author-Name: Angus S. Deaton
Author-Person: pde30
Author-Name: Adriana Lleras-Muney
Author-Person: pll45
Note: AG EH
Number: 11963
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11963
File-URL: http://www.nber.org/papers/w11963.pdf
File-Format: application/pdf
Publication-Status: published as Cutler, David, Angus Deaton and Adriana Lleras-Muney. "The Determinants Of Mortality," Journal of Economic Perspectives, 2006, v20(3,Summer), 97-120.
Abstract: Mortality rates have fallen dramatically over time, starting in a few countries in the 18th century, and continuing to fall today. In just the past century, life expectancy has increased by over 30 years. At the same time, mortality rates remain much higher in poor countries, with a difference in life expectancy between rich and poor countries of also about 30 years. This difference persists despite the remarkable progress in health improvement in the last half century, at least until the HIV/AIDS pandemic. In both the time-series and the cross-section data, there is a strong correlation between income per capita and mortality rates, a correlation that also exists within countries, where richer, better-educated people live longer. We review the determinants of these patterns: over history, over countries, and across groups within countries. While there is no consensus about the causal mechanisms, we tentatively identify the application of scientific advance and technical progress (some of which is induced by income and facilitated by education) as the ultimate determinant of health. Such an explanation allows a consistent interpretation of the historical, cross-country, and within-country evidence. We downplay direct causal mechanisms running from income to health.
Handle: RePEc:nbr:nberwo:11963
Template-Type: ReDIF-Paper 1.0
Title: Household Ownership of Variable Annuities
Classification-JEL: G22; J14; J32; H24
Author-Name: Jeffrey Brown
Author-Person: pbr264
Author-Name: James Poterba
Author-Person: ppo19
Note: AG AP PE
Number: 11964
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11964
File-URL: http://www.nber.org/papers/w11964.pdf
File-Format: application/pdf
Publication-Status: published as Poterba, James (ed.) Tax Policy and the Economy. Cambridge, MA: The MIT Press, 2006.
Publication-Status: published as Household Ownership of Variable Annuities , Jeffrey R. Brown, James M. Poterba. in Tax Policy and the Economy, Volume 20, Poterba. 2006
Abstract: Variable annuities have been one of the most rapidly growing financial products of the last two decades. Between 1996 and 2004, nominal sales of variable annuities in the U.S. more than doubled, from $51 billion to $130 billion. Variable annuities now account for approximately nearly two thirds of annuity sales. The investment returns associated with variable annuities resemble those from mutual funds, and variable annuity buyers can select among a range of asset allocation options. Variable annuities are considered insurance products under the tax law, so buyers are not taxed on their investment returns until they make withdrawals from their variable annuity accounts. This paper describes the tax treatment of variable annuities, presents summary information on their ownership patterns, and explores the importance of several distinct motives for household purchase of variable annuities. The discussion of tax treatment examines the impact of the 2001 and 2003 tax bills on the relative tax treatment of variable annuities and other financial products. Household data from the 1998 and 2001 Survey of Consumer Finances shows that variable annuity ownership is highly concentrated among high income and high net wealth sub-groups of the population. Variable annuity ownership is less concentrated, however, than ownership of several other types of financial assets. Evidence on the role of tax incentives in encouraging ownership of variable annuities is mixed. The probability of owning a variable annuity rises with the marginal tax rate throughout most of the income distribution, but it is lower for households in the top tax bracket than for those with slightly lower tax rates.
Handle: RePEc:nbr:nberwo:11964
Template-Type: ReDIF-Paper 1.0
Title: Changing the Boston School Choice Mechanism
Classification-JEL: C7; I2
Author-Name: Atila Abdulkadiroglu
Author-Name: Parag Pathak
Author-Name: Alvin E. Roth
Author-Person: pro40
Author-Name: Tayfun Sonmez
Note: LE
Number: 11965
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11965
File-URL: http://www.nber.org/papers/w11965.pdf
File-Format: application/pdf
Abstract: In July 2005 the Boston School Committee voted to replace the existing Boston school choice mechanism with a deferred acceptance mechanism that simplifies the strategic choices facing parents. This paper presents the empirical case against the previous Boston mechanism, a priority matching mechanism, and the case in favor of the change to a strategy-proof mechanism. Using detailed records on student choices and assignments, we present evidence both of sophisticated strategic behavior among some parents, and of unsophisticated strategic behavior by others. We find evidence that some parents pay close attention to the capacity constraints of different schools, while others appear not to. In particular, we show that many unassigned students could have been assigned to one of their stated choices with a different strategy under the current mechanism. This interaction between sophisticated and unsophisticated players identifies a new rationale for strategy-proof mechanisms based on fairness, and was a critical argument in Boston's decision to change the mechanism. We then discuss the considerations that led to the adoption of a deferred acceptance mechanism as opposed to the (also strategy-proof) top trading cycles mechanism.
Handle: RePEc:nbr:nberwo:11965
Template-Type: ReDIF-Paper 1.0
Title: Lessons From the Debt-Deflation Theory of Sudden Stops
Classification-JEL: F41; F32; E44; D52
Author-Name: Enrique G. Mendoza
Author-Person: pme30
Note: IFM
Number: 11966
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11966
File-URL: http://www.nber.org/papers/w11966.pdf
File-Format: application/pdf
Publication-Status: published as Mendoza, Enrique G. "Lessons From The Debt-Deflation Theory Of Sudden Stops," American Economic Review, 2006, v96(2,May), 411-416.
Abstract: This paper reports results for a class of dynamic, stochastic general equilibrium models with credit constraints that can account for some of the empirical regularities of the Sudden Stop phenomenon of recent emerging markets crises. In these models, credit constraints set in motion Irving Fisher's debt-deflation mechanism and they bind as an endogenous equilibrium outcome when agents are highly indebted. The quantitative predictions of these models yield three key lessons: (1) Sudden Stops can occur as an endogenous response to typical realizations of adverse shocks to fundamentals, in environments in which agents plan their actions taking credit constraints and expectations of Sudden Stops into account. (2) Credit constraints cause output declines during Sudden Stops when collateral constraints limit debt to a fraction of the market value of capital, when there are limits on access to working capital, or when debt-deflation lowers the value of the marginal product of factors of production. (3) The debt-deflation mechanism has significant quantitative effects in terms of the amplification, asymmetry and persistence of the responses of macroeconomic aggregates to standard shocks, and in the occurrence of Sudden Stops as infrequent events nested within regular business cycles. Precautionary saving rules out the largest Sudden Stops from the stochastic stationary state, but Sudden Stops remain a positive-probability event in the long run.
Handle: RePEc:nbr:nberwo:11966
Template-Type: ReDIF-Paper 1.0
Title: Private Information, Wage Bargaining and Employment Fluctuations
Classification-JEL: E3; J6; D8
Author-Name: John Kennan
Author-Person: pke13
Note: EFG
Number: 11967
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11967
File-URL: http://www.nber.org/papers/w11967.pdf
File-Format: application/pdf
Publication-Status: published as "Private Information, Wage Bargaining and Employment Fluctuations," Review of Economic Studies, 77, April 2010, 633-664.
Abstract: Shimer (2005) pointed out that although we have a satisfactory theory of why some workers are unemployed at any given time, we don?t know why the number of unemployed workers varies so much over time. The basic Mortensen-Pissarides (1994) model does not generate nearly enough volatility in unemployment, for plausible parameter values. This paper extends the Mortensen-Pissarides model to allow for informational rents. Productivity is subject to publicly observed aggregate shocks, and to idiosyncratic shocks that are seen only by the employer. It is shown that there is a unique equilibrium, provided that the idiosyncratic shocks are not too large. The main result is that small fluctuations in productivity that are privately observed by employers can give rise to a kind of wage stickiness in equilibrium, and the informational rents associated with this stickiness are sufficient to generate relatively large unemployment fluctuations.
Handle: RePEc:nbr:nberwo:11967
Template-Type: ReDIF-Paper 1.0
Title: Examining the Effect of the Earned Income Tax Credit on the Labor Market Participation of Families on Welfare
Classification-JEL: H2; J2
Author-Name: V. Joseph Hotz
Author-Person: pho4
Author-Name: John Karl Scholz
Note: CH PE
Number: 11968
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11968
File-URL: http://www.nber.org/papers/w11968.pdf
File-Format: application/pdf
Abstract: This paper examines the employment effects of the earned income tax credit (EITC). We use a unique dataset, created by matching administrative data from public assistance records, unemployment insurance records, and federal tax returns for a sample of California residents. We conduct a set of four tests to assess our ability to isolate the causal effects of the EITC on employment. The first test is based on the intuition that if the EITC alters employment, all else being equal, employment rates for two-or-more child families should grow relative to the employment rates of one-child families, as credit amounts available to these groups of families diverged over the 1990s. The second test examines whether or not people eligible for the EITC actually file tax returns and claim it. The third test is based on the intuition that, if the EITC, and not other factors such as the strong economy in the 1990s, is causing employment differences between families with two or more children relative to those with one child, we should expect to see no employment differences (after conditioning on other characteristics) between families with two children and families with three or more children, since the EITC did not change differentially for the latter two groups. The fourth test conditions the sample on those who do not file tax returns and again examines employment changes in the 1990s for families with two or more children relative to families with one child. Using fixed-effects empirical employment models estimated on a sample of single-parent families, our coefficient estimates are consistent with the EITC having a substantial, positive effect on the employment of families who have used or will use welfare.
Handle: RePEc:nbr:nberwo:11968
Template-Type: ReDIF-Paper 1.0
Title: From Forced Busing to Free Choice in Public Schools: Quasi-Experimental Evidence of Individual and General Effects
Classification-JEL: I20; J24
Author-Name: Victor Lavy
Author-Person: pla111
Note: ED LS CH
Number: 11969
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11969
File-URL: http://www.nber.org/papers/w11969.pdf
File-Format: application/pdf
Abstract: In 1994 the city of Tel Aviv replaced its existing school integration program based on inter-district busing, with a new program that allowed students to choose freely between schools in and out of district. This paper explores the impact of this program on high school outcomes while distinguishing the effect of choice on individual students from general equilibrium effects on affected districts. The identification is based on a regression discontinuity design that yields comparison groups drawn from untreated tangent neighborhoods in adjacent cities and on instrumental variables. The results suggest that the choice program had significant general equilibrium effects on high school dropout rates, matriculation rates and program of study. The gains are more pronounced among disadvantaged children but not among students who took advantage of the option to attend out of district schools with higher mean outcomes. These results and other evidence related to the behavioral responses of schools and students to the program suggest that the positive impact of the program is mainly due to better matching between students and schools and to productivity effects of choice and competition among schools.
Handle: RePEc:nbr:nberwo:11969
Template-Type: ReDIF-Paper 1.0
Title: Incentives and Effort in the Public Sector: Have U.S. Education Reforms Increased Teachers' Work Hours?
Classification-JEL: I21; I28; J22; J44; J45
Author-Name: Christiana Stoddard
Author-Name: Peter Kuhn
Author-Person: pku26
Note: ED LS
Number: 11970
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11970
File-URL: http://www.nber.org/papers/w11970.pdf
File-Format: application/pdf
Publication-Status: published as “Incentives and Effort in the Public Sector: Have U.S. Education Reforms Increased Teachers’ Work Hours?” Economics of Education Review 27 (1) (February 2008): 1-13 (with Christiana Stoddard)
Abstract: Beyond some contracted minimum, salaried workers' hours are largely chosen at the worker's discretion and should respond to the strength of contract incentives. Accordingly, we consider the response of teacher hours to accountability and school choice laws introduced in U.S. public schools over the past two decades. Total weekly hours of full-time teachers have risen steadily since 1983 by about an hour, and after-school instructional hours have increased 34 percent since 1987. Average hours and the rate of increase also vary widely across states. However, after accounting for a common time trend in hours, we find no association between the introduction of accountability legislation and the change in teacher hours. We conjecture that the weak link between effort and compensation in most school reforms helps explain the lack of such an association.
Handle: RePEc:nbr:nberwo:11970
Template-Type: ReDIF-Paper 1.0
Title: A Phillips Curve with an Ss Foundation
Classification-JEL: E1; E3
Author-Name: Mark Gertler
Author-Person: pge11
Author-Name: John Leahy
Author-Person: ple189
Note: EFG ME
Number: 11971
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11971
File-URL: http://www.nber.org/papers/w11971.pdf
File-Format: application/pdf
Publication-Status: published as Gertler, Mark and John Leahy. "A Phillips Curve with an Ss Foundation." Journal of Political Economy 116, 3 (2008).
Abstract: We develop an analytically tractable Phillips curve based on state-dependent pricing. We differ from the existing literature by considering a local approximation around a zero inflation steady state and introducing idiosyncratic shocks. The resulting Phillips curve is a simple variation of the conventional time-dependent Calvo formulation, but with some important differences. First, the model is able to match the micro evidence on both the magnitude and timing of price adjustments. Second, holding constant the frequency of price adjustment, our state-dependent model exhibits greater flexibility in the aggregate price level than does the time-dependent model. On the other hand, with real rigidities present, our state-dependent pricing framework can exhibit considerable nominal stickiness, of the same order by a conventional time-dependent model.
Handle: RePEc:nbr:nberwo:11971
Template-Type: ReDIF-Paper 1.0
Title: The Median Voter and the Median Consumer: Local Private Goods and Residential Sorting
Classification-JEL: L1; L8; R3
Author-Name: Joel Waldfogel
Author-Person: pwa46
Note: IO
Number: 11972
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11972
File-URL: http://www.nber.org/papers/w11972.pdf
File-Format: application/pdf
Publication-Status: published as Waldfogel, Joel. “The Median Voter and the Median Consumer: Local Private Goods and Residential Sorting.” Journal of Urban Economics (March 2008).
Abstract: When a product's product provision entails fixed costs, it will be made available only if a sufficient number of people want it. Some products are produced and consumed locally, so that provision requires not only a large group favoring the product but a large number nearby. Just as one has an incentive to sort into community whose median voter shares his preferences for local public goods, product markets may provide an analogous incentive to sort into a community whose consumers tend to share his preferences in private goods. Using zip code level data on chain restaurants and restaurants overall, this paper documents how the mix of locally available restaurants responds to the local mix of consumers, with three findings. First, based on survey data on chain restaurant patronage, restaurant preferences differ substantially by race and education. Second, there is a strong relationship between restaurants and population at the zip code level, suggesting that restaurants' geographic markets are small. Finally, the mix of locally available chain restaurants is sensitive to the zipcode demographic mix by race and by education. Hence, differentiated product markets provide a benefit -- proximity to preferred restaurants -- to persons in geographic markets whose customers tend to share their preferences.
Handle: RePEc:nbr:nberwo:11972
Template-Type: ReDIF-Paper 1.0
Title: Capital Controls: An Evaluation
Classification-JEL: F21; F31
Author-Name: Nicolas Magud
Author-Person: pma2505
Author-Name: Carmen M. Reinhart
Author-Person: pre33
Note: IFM
Number: 11973
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11973
File-URL: http://www.nber.org/papers/w11973.pdf
File-Format: application/pdf
Publication-Status: published as Edwards, Sebastian (ed.) Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences. , University of Chicago: University of Chicago Press, 2007.
Publication-Status: published as Capital Controls: An Evaluation, Nicolas Magud, Carmen M. Reinhart. in Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences, Edwards. 2007
Abstract: The literature on capital controls has (at least) four very serious apples-to-oranges problems: (i) There is not unified theoretical framework to analyze the macroeconomic consequences of controls; (ii) there is significant heterogeneity across countries and time in the control measures implemented; (iii) there are multiple definitions of what constitutes a "success" and (iv) the empirical studies lack a common methodology -- furthermore these are significantly "overweighted" by a couple of country cases (Chile and Malaysia). In this paper, we attempt to address some of these shortcomings by: being very explicit about what measures are construed as capital controls. Also, given that success is measured so differently across studies, we sought to "standardize" the results of over 30 empirical studies we summarize in this paper. The standardization was done by constructing two indices of capital controls: Capital Controls Effectiveness Index (CCE Index), and Weighted Capital Control Effectiveness Index (WCCE Index). The difference between them lies only in that the WCCE controls for the differentiated degree of methodological rigor applied to draw conclusions in each of the considered papers. Inasmuch as possible, we bring to bear the experiences of less well known episodes than those of Chile and Malaysia.
Handle: RePEc:nbr:nberwo:11973
Template-Type: ReDIF-Paper 1.0
Title: Lifecycle Asset Allocation Strategies and the Distribution of 401(k) Retirement Wealth
Classification-JEL: J14; J32; G11; G23
Author-Name: James Poterba
Author-Person: ppo19
Author-Name: Joshua Rauh
Author-Name: Steven Venti
Author-Name: David Wise
Author-Person: pwi45
Note: AG PE
Number: 11974
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11974
File-URL: http://www.nber.org/papers/w11974.pdf
File-Format: application/pdf
Publication-Status: published as Wise, David (ed.) Developments in the Economics of Aging. Chicago, IL: University of Chicago Press, 2009.
Publication-Status: published as Lifecycle Asset Allocation Strategies and the Distribution of 401(k) Retirement Wealth, James M. Poterba, Joshua Rauh, Steven F. Venti, David A. Wise. in Developments in the Economics of Aging, Wise. 2009
Abstract: This paper examines how different asset allocation strategies over the course of a worker's career affect the distribution of retirement wealth and the expected utility of wealth at retirement. It considers both rules that allocate a constant portfolio fraction to various assets at all ages, as well as "lifecycle" rules that vary the mix of portfolio assets as the worker ages. The analysis simulates retirement wealth using asset returns that are drawn from the historical return distribution. The results suggest that the distribution of retirement wealth associated with typical lifecycle investment strategies is similar to that from age-invariant asset allocation strategies that set the equity share of the portfolio equal to the average equity share in the lifecycle strategies. There is substantial variation across workers with different characteristics in the expected utility from following different asset allocation strategies. The expected utility associated with different 401(k) asset allocation strategies, and the ranking of these strategies, is very sensitive to three parameters: the expected return on corporate stock, the worker's relative risk aversion, and the amount of non-401(k) wealth that the worker will have available at retirement. At modest levels of risk aversion, or in the presence of substantial non-401(k) wealth at retirement, the historical pattern of stock and bond returns implies that the expected utility of an all-stock investment allocation rule is greater than that from any of the more conservative strategies. Higher risk aversion or lower expected returns on stocks raise the expected utility of following lifecycle strategies or other strategies that reduce equity exposure throughout the lifetime.
Handle: RePEc:nbr:nberwo:11974
Template-Type: ReDIF-Paper 1.0
Title: Health Insurance and the Wage Gap
Classification-JEL: I1; J3
Author-Name: Helen Levy
Author-Person: ple728
Note: EH LS
Number: 11975
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11975
File-URL: http://www.nber.org/papers/w11975.pdf
File-Format: application/pdf
Abstract: Estimates of labor market inequality usually focus only on wages, even though fringes account for almost one-third of total compensation. Using data from the Current Population Survey, I analyze coverage by own-employer health insurance coverage among full-time workers for women versus men, blacks versus whites and Hispanics versus whites. I find significant gaps in coverage for each of these groups. About two-thirds of the gap for blacks or Hispanics is explained by differences in observable characteristics (primarily education and occupation). The gap for women is not explained by controlling for observables. Looking over the 20 year period from 1980 to 2000, I find that the adjusted gap in own-employer coverage for women has been relatively flat over this period and is consistently much smaller than the male/female wage gap (about half as large), so that measuring inequality in wages plus health insurance would result in a smaller estimate of male/female compensation inequality than measuring wages alone. The same is generally true for blacks although their health insurance gap is much closer in magnitude to their wage gap. For Hispanics, the health insurance gap is nearly identical to the wage gap and both are increasing over time.
Handle: RePEc:nbr:nberwo:11975
Template-Type: ReDIF-Paper 1.0
Title: Consumption, Income, and Material Well-Being After Welfare Reform
Classification-JEL: D31; I31; I32; I38
Author-Name: Bruce D. Meyer
Author-Person: pme273
Author-Name: James X. Sullivan
Note: LS PE
Number: 11976
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11976
File-URL: http://www.nber.org/papers/w11976.pdf
File-Format: application/pdf
Abstract: This paper investigates how material well-being has changed over time for those at the bottom of the distributions of income and consumption. We document the sharp differences between recent trends in measured income and consumption, focusing on families headed by a single mother. Since the early 1990s, income in the bottom decile has fallen by nearly 30 percent, while income has risen by more than 15 percent for the fourth and fifth deciles. The trends for consumption, on the other hand, show neither a sharp decline at low percentiles nor a large increase at higher percentiles. These patterns are evident in two income and two consumption data sources. We then examine several explanations for these differences. We argue that it is unlikely that reported income provides a consistent measuring stick in recent years due to large changes in both the sources of income and the reporting rates of the main income sources for single mothers during this period. Accounting for changes in the characteristics of single mothers can reconcile most of the income consumption difference above the bottom decile. For the bottom decile, simulations accounting for transfer under- reporting can account for much of the reported income decline. Finally, we consider how these trends translate into changes in well-being by investigating changes in disaggregated consumption and time use. Increases in spending on housing account for much of the increase in consumption in the bottom quintile, while increases in transportation spending account for much of the rise in the second quintile. Two datasets indicate modest improvement in housing quality, but the evidence is less strong at the very bottom. Although expenditures on food away from home and child care also rise, these categories are small, on average. The consumption of non-market time for those in the bottom half of the consumption distribution falls sharply indicating a loss in utility for those families if non-market time is valued above $3/hour. Evidence from time-use surveys suggests that the lost non-market time reflects a shift away from shopping, food production, and housework.
Handle: RePEc:nbr:nberwo:11976
Template-Type: ReDIF-Paper 1.0
Title: The Health Care Safety Net and Crowd-Out of Private Health Insurance
Classification-JEL: I10; I11; I18
Author-Name: Anthony T. Lo Sasso
Author-Person: plo241
Author-Name: Bruce D. Meyer
Author-Person: pme273
Note: EH PE
Number: 11977
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11977
File-URL: http://www.nber.org/papers/w11977.pdf
File-Format: application/pdf
Abstract: There is an extensive literature on the extent to which public health insurance coverage through Medicaid induces less private health insurance coverage. However, little is known about the effect of other components of the health care safety net in crowding out private coverage. We examine the effect of Medicaid and uncompensated care provided by clinics and hospitals on insurance coverage. We construct a long panel of metropolitan area and state-level data on hospital uncompensated care and free and reduced price care offered by Federally Qualified Health Centers. We match this information to individual level data on coverage from the Current Population Survey for two distinct groups: children aged 14 and under and single, childless adults aged 18 to 64. Our results provide mixed evidence on the extent of crowd-out. Hospital uncompensated care does not appear to crowd-out health insurance coverage and health center uncompensated care appears to crowd-out private coverage for adults and, in some specifications, children.
Handle: RePEc:nbr:nberwo:11977
Template-Type: ReDIF-Paper 1.0
Title: Comparing the Point Predictions and Subjective Probability Distributions of Professional Forecasters
Classification-JEL: C42; E27; E47
Author-Name: Joseph Engelberg
Author-Person: pen132
Author-Name: Charles F. Manski
Author-Person: pma111
Author-Name: Jared Williams
Note: EFG
Number: 11978
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11978
File-URL: http://www.nber.org/papers/w11978.pdf
File-Format: application/pdf
Publication-Status: published as Engelberg, Joseph, Charles F. Manski and “Comparing the Point Predictions and Subjective Probability Distributions of Professional Forecasters." Journal of Business and Economic Statistics 165 (2009): 146-158.
Abstract: We use data from the Survey of Professional Forecasters to compare point forecasts of GDP growth and inflation with the subjective probability distributions held by forecasters. We find that SPF forecasters summarize their underlying distributions in different ways and that their summaries tend to be favorable relative to the central tendency of the underlying distributions. We also find that those forecasters who report favorable point estimates in the current survey tend to do so in subsequent surveys. These findings, plus the inescapable fact that point forecasts reveal nothing about the uncertainty that forecasters feel, suggest that the SPF and similar surveys should not ask for point forecasts. It seems more reasonable to elicit probabilistic expectations and derive measures of central tendency and uncertainty, as we do here.
Handle: RePEc:nbr:nberwo:11978
Template-Type: ReDIF-Paper 1.0
Title: Reducing the Complexity Costs of 401(k) Participation Through Quick Enrollment(TM)
Classification-JEL: D0; E21; G23
Author-Name: James Choi
Author-Name: David Laibson
Author-Person: pla164
Author-Name: Brigitte Madrian
Author-Person: pma384
Note: AG EFG PE
Number: 11979
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11979
File-URL: http://www.nber.org/papers/w11979.pdf
File-Format: application/pdf
Publication-Status: published as Wise, David A. (ed.) Developments in the Economics of Aging. Chicago: University of Chicago Press, 2009.
Abstract: The complexity of the retirement savings decision may overwhelm employees, encouraging procrastination and reducing 401(k) enrollment rates. We study a low-cost manipulation designed to simplify the 401(k) enrollment process. Employees are given the option to make a Quick Enrollment(TM) election to enroll in their 401(k) plan at a pre-selected contribution rate and asset allocation. By decoupling the participation decision from the savings rate and asset allocation decisions, the Quick Enrollment(TM) mechanism simplifies the savings plan decision process. We find that at one company, Quick Enrollment(TM) tripled 401(k) participation rates among new employees three months after hire. When Quick Enrollment(TM) was offered to previously hired non-participating employees at two firms, participation increased by 10 to 20 percentage points among those employees affected.
Handle: RePEc:nbr:nberwo:11979
Template-Type: ReDIF-Paper 1.0
Title: The U.S. Health Care System and Labor Markets
Classification-JEL: I10; J3; J6
Author-Name: Brigitte Madrian
Author-Person: pma384
Note: AG EH LS PE
Number: 11980
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11980
File-URL: http://www.nber.org/papers/w11980.pdf
File-Format: application/pdf
Publication-Status: published as Brigitte C. Madrian, 2005. "The U.S. health care system and labor markets," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 50(Jun), pages 137-163.
Abstract: This paper provides a broad and general overview of the relationship between the U.S. health care system and the labor market. The paper first describes some of the salient features of and facts about the system of health insurance coverage in the U.S., particularly the role of employers. It then summarizes the empirical evidence on how health insurance impacts labor market outcomes such as wages, labor supply (including retirement, female labor supply, part-time vs. full-time work, and formal vs. informal sector work), labor demand (including hours worked and the composition of employment across full-time, part-time and temporary workers), and job turnover. It then discusses the implications of having a fragmented system of health insurance delivery--in which employers play a central role--on the health care system and health care outcomes.
Handle: RePEc:nbr:nberwo:11980
Template-Type: ReDIF-Paper 1.0
Title: Consumer Boycotts: The Impact of the Iraq War on French Wine Sales in the U.S.
Classification-JEL: L0
Author-Name: Larry Chavis
Author-Name: Phillip Leslie
Note: IO
Number: 11981
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11981
File-URL: http://www.nber.org/papers/w11981.pdf
File-Format: application/pdf
Publication-Status: published as Larry Chavis & Phillip Leslie, 2009. "Consumer boycotts: The impact of the Iraq war on French wine sales in the U.S," Quantitative Marketing and Economics (QME), Springer, vol. 7(1), pages 37-67, March.
Abstract: The French Opposition to the war in Iraq in early 2003, prompted calls for a boycott of French wine in the US. We measure the magnitude of consumers' participation in the boycott, and look at basic evidence of who participates. Conservative estimates indicate that the boycott resulted in 26% lower weekly sales at its peak, and 13% lower sales over the six month period that we estimate the boycott lasted for. These findings suggest that business should be concerned that their actions may provoke a boycott which hurts their profits. We also find that neither political preferences or media attention are important determinants of boycott participation.
Handle: RePEc:nbr:nberwo:11981
Template-Type: ReDIF-Paper 1.0
Title: Uses and Abuses of Empirical Evidence in the Death Penalty Debate
Classification-JEL: K14; K42
Author-Name: John J. Donohue III
Author-Person: pdo40
Author-Name: Justin Wolfers
Author-Person: pwo9
Note: LE
Number: 11982
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11982
File-URL: http://www.nber.org/papers/w11982.pdf
File-Format: application/pdf
Publication-Status: published as Donohue, John and Justin J. Wolfers. "The Death Penalty: No Evidence For Deterrence," The Economists' Voice, 2006, v3(5,Apr), Article 3.
Abstract: Does the death penalty save lives? A surge of recent interest in this question has yielded a series of papers purporting to show robust and precise estimates of a substantial deterrent effect of capital punishment. We assess the various approaches that have been used in this literature, testing the robustness of these inferences. Specifically, we start by assessing the time series evidence, comparing the history of executions and homicides in the United States and Canada, and within the United States, between executing and non-executing states. We analyze the effects of the judicial experiments provided by the Furman and Gregg decisions and assess the relationship between execution and homicide rates in state panel data since 1934. We then revisit the existing instrumental variables approaches and assess two recent state-specific execution morartoria. In each case we find that previous inferences of large deterrent effects based upon specific examples, functional forms, control variables, comparison groups, or IV strategies are extremely fragile and even small changes in the specifications yield dramatically different results. The fundamental difficulty is that the death penalty -- at least as it has been implemented in the United States -- is applied so rarely that the number of homicides that it can plausibly have caused or deterred cannot be reliably disentangled from the large year-to-year changes in the homicide rate caused by other factors. As such, short samples and particular specifications may yield large but spurious correlations. We conclude that existing estimates appear to reflect a small and unrepresentative sample of the estimates that arise from alternative approaches. Sampling from the broader universe of plausible approaches suggests not just "reasonable doubt" about whether there is any deterrent effect of the death penalty, but profound uncertainty -- even about its sign.
Handle: RePEc:nbr:nberwo:11982
Template-Type: ReDIF-Paper 1.0
Title: Securitization and the Declining Impact of Bank Finance on Loan Supply: Evidence from Mortgage Acceptance Rates
Classification-JEL: G2
Author-Name: Elena Loutskina
Author-Name: Philip E. Strahan
Note: CF ME
Number: 11983
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11983
File-URL: http://www.nber.org/papers/w11983.pdf
File-Format: application/pdf
Publication-Status: published as Loutskina Elena and Philip E. Strahan. "SECURITIZATION AND THE DECLINING IMPACT OF BANK FINANCIAL CONDITION ON LOAN SUPPLY: EVIDENCE FROM MORTGAGE ORIGINATIONS." Journal of Finance 64, 2 (2009): 861-922.
Abstract: This paper shows that securitization reduces the influence of bank financial condition on loan supply. Low-cost funding and increased balance-sheet liquidity raise bank willingness to approve mortgages that are hard to sell (jumbo mortgages), while having no effect on their willingness to approve mortgages easy to sell (non-jumbos). Thus, the increasing depth of the mortgage secondary market fostered by securitization has reduced the impact of local funding shocks on credit supply. By extension, securitization has weakened the link from bank funding conditions to credit supply in aggregate, thereby mitigating the real effects of monetary policy.
Handle: RePEc:nbr:nberwo:11983
Template-Type: ReDIF-Paper 1.0
Title: Life is Cheap: Using Mortality Bonds to Hedge Aggregate Mortality Risk
Classification-JEL: G12; G22; G23; J11; J14
Author-Name: Leora Friedberg
Author-Name: Anthony Webb
Author-Person: pwe498
Note: AG CF PE
Number: 11984
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11984
File-URL: http://www.nber.org/papers/w11984.pdf
File-Format: application/pdf
Publication-Status: published as Friedberg Leora & Webb Anthony, 2007. "Life Is Cheap: Using Mortality Bonds to Hedge Aggregate Mortality Risk," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-33, July.
Abstract: Using the widely-cited Lee-Carter mortality model, we quantify aggregate mortality risk as the risk that the average annuitant lives longer than is predicted by the model, and we conclude that annuity business exposes insurance companies to substantial mortality risk. We calculate that a markup of 3.7% on an annuity premium (or else shareholders' capital equal to 3.7% of the expected present value of annuity payments) would reduce the probability of insolvency resulting from uncertain aggregate mortality trends to 5% and a markup of 5.4% would reduce the probability of insolvency to 1%. Using the same model, we find that a projection scale commonly referred to by the insurance industry underestimates aggregate mortality improvements. Annuities that are priced on that projection scale without any conservative margin appear to be substantially underpriced. Insurance companies could deal with aggregate mortality risk by transferring it to financial markets through mortality-contingent bonds, one of which has recently been offered. We calculate the returns that investors would have obtained on such bonds had they been available over a long period. Using both the Capital and the Consumption Capital Asset Pricing Models, we determine the risk premium that investors would have required on such bonds. At plausible coefficients of risk aversion, annuity providers should be able to hedge aggregate mortality risk via such bonds at a very low cost.
Handle: RePEc:nbr:nberwo:11984
Template-Type: ReDIF-Paper 1.0
Title: People People: Social Capital and the Labor-Market Outcomes of Underrepresented Groups
Classification-JEL: J16; J21; J24; J31
Author-Name: Lex Borghans
Author-Person: pbo190
Author-Name: Bas ter Weel
Author-Person: pte14
Author-Name: Bruce A. Weinberg
Author-Person: pwe74
Note: LS
Number: 11985
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11985
File-URL: http://www.nber.org/papers/w11985.pdf
File-Format: application/pdf
Abstract: Despite indications that people skills are important for understanding individual labor-market outcomes and have become more important over the last decades, there is little analysis by economists. This paper shows that people skills are important determinants of labor-market outcomes, including occupations and wages. We show that technological and organizational changes have increased the importance of people skills in the workplace. We particularly focus on how the increased importance of people skills has affected the labor-market outcomes of under represented groups. We show that the acceleration rate of increase in the importance of people skills between the late 1970s and early 1990s can help explain why women's wages increased more rapidly while the wages of blacks grew more slowly over these years relative to earlier years.
Handle: RePEc:nbr:nberwo:11985
Template-Type: ReDIF-Paper 1.0
Title: The Polarization of the U.S. Labor Market
Classification-JEL: J3; D3; O3
Author-Name: David H. Autor
Author-Person: pau9
Author-Name: Lawrence F. Katz
Author-Person: pka266
Author-Name: Melissa S. Kearney
Note: LS
Number: 11986
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11986
File-URL: http://www.nber.org/papers/w11986.pdf
File-Format: application/pdf
Publication-Status: published as Autor, David H., Lawrence F. Katz and Melissa S. Kearney. "The Polarization Of The U.S. Labor Market," American Economic Review, 2006, v96(2,May), 189-194.
Abstract: This paper analyzes a marked change in the evolution of the U.S. wage structure over the past fifteen years: divergent trends in upper-tail (90/50) and lower-tail (50/10) wage inequality. We document that wage inequality in the top half of distribution has displayed an unchecked and rather smooth secular rise for the last 25 years (since 1980). Wage inequality in the bottom half of the distribution also grew rapidly from 1979 to 1987, but it has ceased growing (and for some measures actually narrowed) since the late 1980s. Furthermore we find that occupational employment growth shifted from monotonically increasing in wages (education) in the 1980s to a pattern of more rapid growth in jobs at the top and bottom relative to the middles of the wage (education) distribution in the 1990s. We characterize these patterns as the "polarization" of the U.S. labor market, with employment polarizing into high-wage and low-wage jobs at the expense of middle-wage work. We show how a model of computerization in which computers most strongly complement the non-routine (abstract) cognitive tasks of high-wage jobs, directly substitute for the routine tasks found in many traditional middle-wage jobs, and may have little direct impact on non-routine manual tasks in relatively low-wage jobs can help explain the observed polarization of the U.S. labor market.
Handle: RePEc:nbr:nberwo:11986
Template-Type: ReDIF-Paper 1.0
Title: Measurement Error, Legalized Abortion, and the Decline in Crime: A Response to Foote and Goetz (2005)
Classification-JEL: K4
Author-Name: John J. Donohue
Author-Person: pdo40
Author-Name: Steven D. Levitt
Author-Person: ple59
Note: EH LE LS PE
Number: 11987
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11987
File-URL: http://www.nber.org/papers/w11987.pdf
File-Format: application/pdf
Publication-Status: published as Donohue, John J. and Steven D. Levitt. "Measurement Error, Legalized Abortion, and the Decline in Crime: A Response to Foote and Goetz." Quarterly Journal of Economics 123, 1 (2008): 425-440.
Abstract: Donohue and Levitt (2001) argue that the legalization of abortion in the United States in the 1970s played an important role in explaining the observed decline in crime approximately two decades later. Foote and Goetz (2005) challenge the results presented in one of the tables in that original paper. In this reply, we regretfully acknowledge the omission of state-year interactions in the published version of that table, but show that their inclusion does not alter the qualitative results (or their statistical significance), although it does reduce the magnitude of the estimates. When one uses a more carefully constructed measure of abortion (e.g. one that takes into account cross-state mobility, or doing a better job of matching dates of birth to abortion exposure), however, the evidence in support of the abortion-crime hypothesis is as strong or stronger than suggested in our original work.
Handle: RePEc:nbr:nberwo:11987
Template-Type: ReDIF-Paper 1.0
Title: How's Your Government? International Evidence Linking Good Government and Well-Being
Classification-JEL: H11; I31; P52
Author-Name: John F. Helliwell
Author-Person: phe368
Author-Name: Haifang Huang
Author-Person: phu198
Note: EFG POL
Number: 11988
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11988
File-URL: http://www.nber.org/papers/w11988.pdf
File-Format: application/pdf
Publication-Status: published as Helliwell, John F. and Haifang Huang. "How's Your Government? International Evidence Linking Good Government and Well-Being." British Journal of Political Science 38 (2008): 595-619.
Abstract: In this paper we employ World Values Survey measures of life satisfaction as though they were direct measures of utility, and use them to evaluate alternative features and forms of government in large international samples. We find that life satisfaction is more closely linked to several World Bank measures of the quality of government than to real per capita incomes, in simple correlations and more fully specified models explaining international differences in life satisfaction. We test for differences in the relative importance of different aspects of good government, and find a hierarchy of preferences that depends on the level of development. The ability of governments to provide a trustworthy environment, and to deliver services honestly and efficiently, appears to be of paramount importance for countries with worse governance and lower incomes. The balance changes once acceptable levels of efficiency, trust and incomes are achieved, when more value is attached to building and maintaining the institutions of electoral democracy.
Handle: RePEc:nbr:nberwo:11988
Template-Type: ReDIF-Paper 1.0
Title: Diagnosing Discrimination: Stock Returns and CEO Gender
Classification-JEL: G14; G3; J16; J4
Author-Name: Justin Wolfers
Author-Person: pwo9
Note: AP CF LE LS
Number: 11989
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11989
File-URL: http://www.nber.org/papers/w11989.pdf
File-Format: application/pdf
Publication-Status: published as Wolfers, Justin. “Diagnosing Discrimination: Stock Returns and CEO Gender.” Journal of the European Economic Association 4, 2/3 (May 2006): 531-541.
Abstract: A vast labor literature has found evidence of a "glass ceiling", whereby women are under-represented among senior management. A key question remains the extent to which this reflects unobserved differences in productivity, preferences, prejudice, or systematically biased beliefs about the ability of female managers. Disentangling these theories would require data on productivity, on the preferences of those who interact with managers, and on perceptions of productivity. Financial markets provide continuous measures of the market's perception of the value of firms, taking account of the beliefs of market participants about the ability of men and women in senior management. As such, financial data hold the promise of potentially providing insight into the presence of mistake-based discrimination. Specifically if female-headed firms were systematically under-estimated, this would suggest that female-headed firms would outperform expectations, yielding excess returns. Examining data on S&P 1500 firms over the period 1992-2004 I find no systematic differences in returns to holding stock in female-headed firms, although this result reflects the weak statistical power of our test, rather than a strong inference that financial markets either do or do not under-estimate female CEOs.
Handle: RePEc:nbr:nberwo:11989
Template-Type: ReDIF-Paper 1.0
Title: The Roles of High School Completion and GED Receipt in Smoking and Obesity
Classification-JEL: I1; I2
Author-Name: Donald S. Kenkel
Author-Person: pke44
Author-Name: Dean R. Lillard
Author-Name: Alan D. Mathios
Author-Person: pma2278
Note: CH EH
Number: 11990
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11990
File-URL: http://www.nber.org/papers/w11990.pdf
File-Format: application/pdf
Publication-Status: published as Kenkel, Donald, Dean Lillard and Alan Mathios. "The Roles Of High School Completion and GED Receipt In Smoking and Obesity," Journal of Labor Economics, 2006, v24(3,Jul), 635-660.
Abstract: We analyze data from the National Longitudinal Survey of Youth 1979 to explore the relationships between high school completion and the two leading preventable causes of death - smoking and obesity. We focus on three issues that have received a great deal of attention in research on the pecuniary returns to schooling. First, we investigate whether GED recipients differ from other high school graduates in their smoking and obesity behaviors. Second, we explore the extent to which the relationships between schooling and these health-related behaviors are sensitive to controlling for family background measures and cognitive ability. Third, we estimate instrumental variables (IV) models of the impact of schooling on smoking and obesity. Although our IV estimates are imprecise, both the OLS and IV results tend to suggest that the returns to high school completion include a reduction in smoking. We find little evidence that high school completion is associated with a lower probability of being overweight or obese for either men or women. The results also suggest that the health returns to GED receipt are much smaller than the returns to high school completion.
Handle: RePEc:nbr:nberwo:11990
Template-Type: ReDIF-Paper 1.0
Title: Vying for Foreign Direct Investment: A EU-type Model of Tax Competition
Classification-JEL: F0
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Efraim Sadka
Author-Person: psa492
Note: IFM ITI PE
Number: 11991
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11991
File-URL: http://www.nber.org/papers/w11991.pdf
File-Format: application/pdf
Abstract: This paper brings out the special mechanism through which taxes influence bilateral FDI, when investment decisions are two-fold in the presence of fixed setup flows costs. For each pair of source-host countries, there is a set of factors determining whether aggregate FDI flows will occur at all, and a different set of factors determining the volume of FDI flows (provided they occur). We develop a two-country tax competition model which yield an asymmetric Nash-equilibrium with high corporate tax rate and high level of public good provision in the rich source country for FDI outflows and with low corporate tax rate and low level of public good provision in the poor host country for FDI outflows. This is akin to the asymmetry among the EU 15 and EU 10 in the enlarged European Union, as of 2004. We also demonstrate that the notion that the mere international tax differentials are a key factor behind the direction and magnitude of FDI flows, the traditional race to the bottom argument in tax competition are too simple.
Handle: RePEc:nbr:nberwo:11991
Template-Type: ReDIF-Paper 1.0
Title: Growth, Initial Conditions, Law and Speed of Privatization in Transition Countries: 11 Years Later
Classification-JEL: P2
Author-Name: Sergio Godoy
Author-Name: Joseph Stiglitz
Note: EFG LE
Number: 11992
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11992
File-URL: http://www.nber.org/papers/w11992.pdf
File-Format: application/pdf
Publication-Status: published as Estrin, S. et al (eds.) Transition and Beyond. Hampshire, England: Palgrave Macmillian, 2007.
Abstract: This paper examines alternative hypotheses concerning the determinants of success in the transition from Communism to the market. In particular, we look at whether speed of privatization, legal institutions or initial conditions are more important in explaining the growth of the transition countries in the years since the end of the Cold War. In the mid 90s a large empirical literature attempted to relate growth to policy measures. A standard conclusion of this literature was the faster countries privatized and liberalized, the better. We now have more data, so we can check whether these conclusions are still valid six years later. Furthermore, much of the earlier work was flawed since it did not adequately treat problems of endogeneity, confused issues of speed and level of privatization, and did not face up to the problems of multicollinearity. Our results suggest that, contrary to the earlier literature, the speed of privatization is negatively associated with growth, but is confirms the result of the few earlier studies that have found that legal institutions are very important. Other variables, which seemed to play a large role in the earlier literature, appear to have at most a marginal positive effect.
Handle: RePEc:nbr:nberwo:11992
Template-Type: ReDIF-Paper 1.0
Title: Democracy and Development: The Devil in the Details
Classification-JEL: P0; O1; E0
Author-Name: Torsten Persson
Author-Person: ppe28
Author-Name: Guido Tabellini
Author-Person: pta37
Note: EFG POL
Number: 11993
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w11993
File-URL: http://www.nber.org/papers/w11993.pdf
File-Format: application/pdf
Publication-Status: published as Persson, Torsten and Guido Tabellini. "Democracy and development: The devil in the details." American Economic Review 96 (2006): 319-324.
Abstract: Does democracy promote economic development? We review recent attempts to address this question, which exploit the within-country variation associated with historical transitions in and out of democracy. The answer is positive, but depends - in a subtle way - on the details of democratic reforms. First, democratizations and economic liberalizations in isolation each induce growth accelerations, but countries liberalizing their economy before extending political rights do better than those carrying out the opposite sequence. Second, different forms of democratic government and different electoral systems lead to different fiscal trade policies: this might explain why new presidential democracies grow faster than new parliamentary democracies. Third, it is important to distinguish between expected and actual political reforms: expectations of regime change have an independent effect on growth, and taking expectations into account helps identify a stronger growth effect of democracy.
Handle: RePEc:nbr:nberwo:11993
Template-Type: ReDIF-Paper 1.0
Title: The Value of Broadband and the Deadweight Loss of Taxing New Technology
Classification-JEL: H2; D6
Author-Name: Austan Goolsbee
Author-Person: pgo49
Note: IO PR PE
Number: 11994
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w11994
File-URL: http://www.nber.org/papers/w11994.pdf
File-Format: application/pdf
Publication-Status: published as Goolsbee Austan, 2006. "The Value of Broadband and the Deadweight Loss of Taxing New Technology," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-31, April.
Abstract: With fixed costs of developing technology, taxes can generate large efficiency costs by slowing the rate of diffusion and these costs are not accounted for in conventional analyses. This paper illustrates this by analyzing the impact that taxes would have had on broadband Internet access at an early stage of its diffusion around the country, combining data on individual demand by area with data on supplier entry in those markets. Applying a tax to broadband in 1998 would have reduced the quantity and generate a large deadweight loss in the conventional model but when the analysis accounts for the fixed costs of entering new markets, taxes would have also delayed entry in several markets. In these places, the lost consumer surplus from delay is an additional deadweight loss and it more than doubles the estimated efficiency costs of taxation. The conventional model also dramatically understates the share of tax burden that would have been borne by customers.
Handle: RePEc:nbr:nberwo:11994
Template-Type: ReDIF-Paper 1.0
Title: Valuing Consumer Products by the Time Spent Using Them: An Application to the Internet
Classification-JEL: D6; L0
Author-Name: Austan Goolsbee
Author-Person: pgo49
Author-Name: Peter J. Klenow
Note: EFG IO PR
Number: 11995
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w11995
File-URL: http://www.nber.org/papers/w11995.pdf
File-Format: application/pdf
Publication-Status: published as Goolsbee, Austan and Peter J. Klenow. "Valuing Consumer Products By The Time Spend Using Them: An Application To The Internet," American Economic Review, 2006, v96(2,May), 108-113.
Abstract: For some goods, the main cost of buying the product is not the price but rather the time it takes to use them. Only about 0.2% of consumer spending in the U.S., for example, went for Internet access in 2004 yet time use data indicates that people spend around 10% of their entire leisure time going online. For such goods, estimating price elasticities with expenditure data can be difficult, and, therefore, estimated welfare gains highly uncertain. We show that for time-intensive goods like the Internet, a simple model in which both expenditure and time contribute to consumption can be used to estimate the consumer gains from a good using just the data on time use and the opportunity cost of people's time (i.e., the wage). The theory predicts that higher wage internet subscribers should spend less time online (for non-work reasons) and the degree to which that is true identifies the elasticity of demand. Based on expenditure and time use data and our elasticity estimate, we calculate that consumer surplus from the Internet may be around 2% of full-income, or several thousand dollars per user. This is an order of magnitude larger than what one obtains from a back-of-the-envelope calculation using data from expenditures.
Handle: RePEc:nbr:nberwo:11995
Template-Type: ReDIF-Paper 1.0
Title: An Equilibrium Model of "Global Imbalances" and Low Interest Rates
Classification-JEL: E0; F3; F4; G1
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Author-Name: Emmanuel Farhi
Author-Person: pfa207
Author-Name: Pierre-Olivier Gourinchas
Author-Person: pgo28
Note: EFG IFM
Number: 11996
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w11996
File-URL: http://www.nber.org/papers/w11996.pdf
File-Format: application/pdf
Publication-Status: published as Caballero, Ricardo, Emmanuel Farhi and Pierre-Olivier Gourinchas. “An Equilibrium Model of Global Imbalances and Low Interest Rates." American Economic Review 98, 1 (March 2008).
Abstract: Three of the most important recent facts in global macroeconomics -- the sustained rise in the US current account deficit, the stubborn decline in long run real rates, and the rise in the share of US assets in global portfolio -- appear as anomalies from the perspective of conventional wisdom and models. Instead, in this paper we provide a model that rationalizes these facts as an equilibrium outcome of two observed forces: a) potential growth differentials among different regions of the world and, b) heterogeneity in these regions' capacity to generate financial assets from real investments. In extensions of the basic model, we also generate exchange rate and FDI excess returns which are broadly consistent with the recent trends in these variables. Unlike the conventional wisdom, in the absence of a large change in (a) or (b), our model does not augur any catastrophic event. More generally, the framework is flexible enough to shed light on a range of scenarios in a global equilibrium environment.
Handle: RePEc:nbr:nberwo:11996
Template-Type: ReDIF-Paper 1.0
Title: How Rapidly Does Science Leak Out?
Classification-JEL: O3; L3
Author-Name: James D. Adams
Author-Person: pad11
Author-Name: J. Roger Clemmons
Author-Name: Paula E. Stephan
Author-Person: pst458
Note: PR
Number: 11997
Creation-Date: 2006-01
Order-URL: http://www.nber.org/papers/w11997
File-URL: http://www.nber.org/papers/w11997.pdf
File-Format: application/pdf
Abstract: In science as well as technology, the diffusion of new ideas influences innovation and productive efficiency. With this as motivation we use citations to scientific papers to measure the diffusion of science through the U.S. economy. To indicate the speed of diffusion we rely primarily on the modal or most frequent lag. Using this measure we find that diffusion between universities as well as between firms and universities takes an average of three years. The lag on science diffusion between firms is 3.3 years, compared with 4.8 years in technology for the same companies using the same methodology. Industrial science diffuses fifty per cent more rapidly than technology, and academic science diffuses still faster. Thus the priority publication system in science appears to distribute information more rapidly than the patent system, although other interpretations are possible. We also find that the speed of science diffusion in the same field varies by a factor of two across industries. The industry variation turns out to be driven by frictional publication lags and firm size in R&D and science. Friction increases the lag, but firm size in R&D and science decrease it. Industries having a lot of R&D or science and composed of fields with little friction exhibit rapid diffusion. Industries where the reverse is true exhibit slow diffusion.
Handle: RePEc:nbr:nberwo:11997
Template-Type: ReDIF-Paper 1.0
Title: Short, Medium, and Long Term Consequences of Poor Infant Health: An Analysis using Siblings and Twins
Classification-JEL: I1; I2
Author-Name: Phil Oreopoulos
Author-Person: por38
Author-Name: Mark Stabile
Author-Person: pst179
Author-Name: Randy Walld
Author-Name: Leslie Roos
Note: CH EH
Number: 11998
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w11998
File-URL: http://www.nber.org/papers/w11998.pdf
File-Format: application/pdf
Publication-Status: published as Oreopoulos, Philip, Mark Stabile, Leslie Roos, and Randy Walld. “The Short, Medium, and Long Term Effects of Poor Infant Health.” Journal of Human Resources 43, 1 (2008): 88-138.
Abstract: We use administrative data on a sample of births between 1978 and 1985 to investigate the short, medium and long-term consequences of poor infant health. Our findings offer several advances to the existing literature on the effects of early infant health on subsequent health, education, and labor force attachment. First, we use a large sample of both siblings and twins, second we use a variety of measures of infant health, and finally we track children through their schooling years and into the labor force. Our findings suggest that poor infant health is a strong predictor of educational and labor force outcomes. In particular, infant health is found to predict both high school completion and social assistance (welfare) take-up and length.
Handle: RePEc:nbr:nberwo:11998
Template-Type: ReDIF-Paper 1.0
Title: Does Culture Affect Economic Outcomes?
Classification-JEL: Z1; A1
Author-Name: Paola Sapienza
Author-Person: psa155
Author-Name: Luigi Zingales
Author-Name: Luigi Guiso
Author-Person: pgu58
Note: CF EFG
Number: 11999
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w11999
File-URL: http://www.nber.org/papers/w11999.pdf
File-Format: application/pdf
Publication-Status: published as Luigi Guiso & Paola Sapienza & Luigi Zingales, 2006. "Does Culture Affect Economic Outcomes?," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 23-48, Spring.
Abstract: Economists have been reluctant to rely on culture as a possible determinant of economic phenomena. The notion of culture is so broad and the channels through which it can enter the economic discourse so vague that it is difficult to design testable hypotheses. In this paper we show this does need to be the case. We introduce a narrower definition of culture that allows for a simple methodology to develop and test cultural-based explanations. We also present several applications of this methodology: from the choice to become entrepreneur to that of how much to save, to end with the political decision on income redistribution.
Handle: RePEc:nbr:nberwo:11999
Template-Type: ReDIF-Paper 1.0
Title: Equilibrium Exhaustible Resource Price Dynamics
Classification-JEL: Q4; G1
Author-Name: Murray Carlson
Author-Name: Zeigham Khokher
Author-Name: Sheridan Titman
Author-Person: pti51
Note: AP CF
Number: 12000
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12000
File-URL: http://www.nber.org/papers/w12000.pdf
File-Format: application/pdf
Publication-Status: published as Carlson, Murray, Zeigham Khokher, and Sheridan Titman. "Equilibrium Exhaustible Resource Price Dynamics." Journal of Finance (2007).
Abstract: We develop equilibrium models of an exhaustible resource market where both prices and extraction choices are determined endogenously. Our analysis highlights a role for adjustment costs in generating price dynamics that are consistent with observed oil and gas forward prices as well as with the two-factor prices processes that were calibrated in Schwartz and Smith (2000). Stochastic volatility aries in our two-factor model as a natural consequence of production for oil and natural gas prices. Differences between the endogenous price processes considered in earlier papers can generate significant differences in both financial and real option values.
Handle: RePEc:nbr:nberwo:12000
Template-Type: ReDIF-Paper 1.0
Title: Regulating Advertisements: The Case of Smoking Cessation Products
Classification-JEL: I1; L5
Author-Name: Rosemary J. Avery
Author-Name: Donald S. Kenkel
Author-Person: pke44
Author-Name: Dean R. Lillard
Author-Name: Alan D. Mathios
Author-Person: pma2278
Note: EH
Number: 12001
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12001
File-URL: http://www.nber.org/papers/w12001.pdf
File-Format: application/pdf
Publication-Status: published as Avery, Rosemary, Donald Kenkel, Dean Lillard, and Alan Mathios. “Regulating Advertisements: The Case of Smoking Cessation Products” Journal of Regulatory Economics 31, 2 (2007): 185-208.
Abstract: In this paper we investigate how direct-to-consumer (DTC) advertising of pharmaceutical products in affected by regulations of the Food and Drug Administration and by market conditions. We focus on a relatively under-studied segment of the pharmaceutical market -- the market for smoking cessation products. Because of their proven effectiveness, these products could be the key to meeting public health goals to reduce smoking. However, in many ways, smoking cessation products have been more heavily regulated than cigarettes. Our empirical analysis uses data on advertising expenditures and data from an archive of print advertisements. The archive includes all smoking cessation product advertisements that appeared in over 13,000 issues of 28 magazines between January 1985 and May 2002. Our study period begins shortly atfer the first nicotine replacement product was introduced, and covers the evolution of the market as new products are introduced while some of the older products move from prescription to over-the-counter (OTC) status. OTC status eases the disclosure requirements imposed on advertisements of prescription pharmaceuticals, substantially reducing the costs of a print advertisement. Our results suggest that OTC status is associated with an increase in advertising expenditures and the number and pages of magazine advertisements. A current proposal to reduce disclosure requirements on all DTC advertisements of prescription drugs could have similar effects. Our results also suggest that advertising increase with the introduction of new products and with market competition.
Handle: RePEc:nbr:nberwo:12001
Template-Type: ReDIF-Paper 1.0
Title: Time to Eat: Household Production Under Increasing Income Inequality
Classification-JEL: J22; Q11
Author-Name: Daniel S. Hamermesh
Author-Person: pha78
Note: LS
Number: 12002
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12002
File-URL: http://www.nber.org/papers/w12002.pdf
File-Format: application/pdf
Publication-Status: published as American Journal of Agricultural Economics, vol. 89, no 4, November 2007, pp. 852-863 under the same title.
Publication-Status: published as Partial, as "Direct Estimates of Household Production", Economics Letters, vol 98, no 1, January 2008, pp. 31-34.
Abstract: Eating requires the food materials that make up meals and also time devoted to buying food, preparing meals and eating them, and cleaning up afterwards. Using time-diary and expenditure data for the U.S. for 1985 and 2003, I examine how income and time prices affect time and goods input into this household-produced commodity. Focusing on these two years, between which income and earnings inequality increased, allows examining how household production is affected by changing economic opportunities. The results demonstrate that both inputs into eating increase with income, and that higher time prices at a given level of income reduce time inputs. Over this period the goods intensity of producing this commodity increased, especially at the lower part of the income distribution, and the average time input dropped substantially. The results are consistent with goods-time substitution in eating being relatively difficult and with substitution becoming relatively more difficult as production expands. This is confirmed by direct estimates using matched time-use and food spending data on the same households for 2003 and 2004. The findings imply that projecting food expenditures alone overestimates the amount spent on food in a growing economy.
Handle: RePEc:nbr:nberwo:12002
Template-Type: ReDIF-Paper 1.0
Title: Incarceration Length, Employment, and Earnings
Classification-JEL: J24; K42
Author-Name: Jeffrey R. Kling
Author-Person: pkl126
Note: LS
Number: 12003
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12003
File-URL: http://www.nber.org/papers/w12003.pdf
File-Format: application/pdf
Publication-Status: published as Revised and published in the American Economic Review, 96:3 (June 2006), 863-876.
Abstract: This paper estimates effects of increases in incarceration length on employment and earnings prospects of individuals after their release from prison. I utilize a variety of research designs including controlling for observable factors and using instrumental variables for incarceration length based on randomly assigned judges with different sentencing propensities. The results show no consistent evidence of adverse labor market consequences of longer incarceration length using any of the analytical methods in either the state system in Florida or the federal system in California.
Handle: RePEc:nbr:nberwo:12003
Template-Type: ReDIF-Paper 1.0
Title: Typically Unobserved Variables (TUVs) and Selection into Prenatal Inputs: Implications for Estimating Infant Health Production Functions
Classification-JEL: I1
Author-Name: Nancy E. Reichman
Author-Name: Hope Corman
Author-Name: Kelly Noonan
Author-Name: Dhaval Dave
Author-Person: pda245
Note: EH
Number: 12004
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12004
File-URL: http://www.nber.org/papers/w12004.pdf
File-Format: application/pdf
Publication-Status: published as Reichman, N., Corman, H., Noonan, D., Dave, D. 2009. "Infant Health Production Functions: What a Difference the Data Make." Health Economics 18(7): 761–782.
Abstract: We examine the extent to which infant health production functions are sensitive to model specification and measurement error. We focus on the importance of typically unobserved but theoretically important variables (TUVs), other non-standard covariates (NSCs), input reporting, and characterization of infant health. The TUVs represent wantedness, taste for risky behavior, and maternal health endowment. The NSCs include father and family structure characteristics. We estimate effects of prenatal drug use, prenatal cigarette smoking, and first trimester prenatal care on birth weight, low birth weight, and a measure of abnormal infant health conditions. We compare estimates using self-reported inputs versus input measures that combine information from medical records and self-reports. We find that TUVs and NSCs are significantly associated with both inputs and outcomes, but that excluding them from infant health production functions does not appreciably affect the input estimates. However, using self-reported inputs leads to overestimated effects of inputs, particularly prenatal care, on outcomes, and using a direct measure of infant health does not always yield input estimates similar to those when using birth weight outcomes. The findings have implications for research, data collection, and public health policy.
Handle: RePEc:nbr:nberwo:12004
Template-Type: ReDIF-Paper 1.0
Title: Is Spanish-Only Schooling Responsible for the Puerto Rican Language Gap?
Classification-JEL: I28; O15; J15; J24
Author-Name: Joshua Angrist
Author-Person: pan29
Author-Name: Aimee Chin
Author-Person: pch902
Author-Name: Ricardo Godoy
Note: CH ED
Number: 12005
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12005
File-URL: http://www.nber.org/papers/w12005.pdf
File-Format: application/pdf
Publication-Status: published as Angrist, Joshua, Aimee Chin, and Ricardo Godoy. “Is Spanish-only Schooling Responsible for the Puerto Rican Language Gap?” Journal of Development Economics 85 (February 2008): 105-128.
Abstract: Between 1898 and 1948, English was the language of instruction for most post-primary grades in Puerto Rican public schools. Since 1949, the language of instruction in all grades has been Spanish. We use this policy change to estimate the effect of English-intensive instruction on the English-language skills of Puerto Ricans. Although naive estimates suggest that English instruction increased English-speaking ability among Puerto Rican natives, estimates that allow for education-specific cohort trends show no effect. This result is surprising in light of the strong presumption by American policymakers at the time that instruction in English was the best way to raise English proficiency. This has implications for medium of instruction policy in former colonies as well as U.S. education policy toward immigrant children.
Handle: RePEc:nbr:nberwo:12005
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Cognitive and Noncognitive Abilities on Labor Market Outcomes and Social Behavior
Classification-JEL: C31
Author-Name: James J. Heckman
Author-Name: Jora Stixrud
Author-Name: Sergio Urzua
Note: CH ED LS
Number: 12006
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12006
File-URL: http://www.nber.org/papers/w12006.pdf
File-Format: application/pdf
Publication-Status: published as Heckman, James J., Jora Stixrud and Sergio Urzua. "The Effects Of Cognitive and Noncognitive Abilities On Labor Market Outcomes and Social Behavior," Journal of Labor Economics, 2006, v24(3,Jul), 411-482.
Abstract: This paper establishes that a low dimensional vector of cognitive and noncognitive skills explains a variety of labor market and behavioral outcomes. For many dimensions of social performance cognitive and noncognitive skills are equally important. Our analysis addresses the problems of measurement error, imperfect proxies, and reverse causality that plague conventional studies of cognitive and noncognitive skills that regress earnings (and other outcomes) on proxies for skills. Noncognitive skills strongly influence schooling decisions, and also affect wages given schooling decisions. Schooling, employment, work experience and choice of occupation are affected by latent noncognitive and cognitive skills. We study a variety of correlated risky behaviors such as teenage pregnancy and marriage, smoking, marijuana use, and participation in illegal activities. The same low dimensional vector of abilities that explains schooling choices, wages, employment, work experience and choice of occupation explains these behavioral outcomes.
Handle: RePEc:nbr:nberwo:12006
Template-Type: ReDIF-Paper 1.0
Title: Trends in Intergenerational Income Mobility
Classification-JEL: D31; D63; J31
Author-Name: Chul-In Lee
Author-Name: Gary Solon
Author-Person: pso215
Note: LS
Number: 12007
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12007
File-URL: http://www.nber.org/papers/w12007.pdf
File-Format: application/pdf
Publication-Status: published as Chul-In Lee, Gary Solon. "Trends in Intergenerational Income Mobility." Review of Economics and Statistics November 2009, Vol. 91, No. 4, Pages 766-772: 766-772.
Abstract: Previous studies of recent U.S. trends in intergenerational income mobility have produced widely varying results, partly because of large sampling errors. By making more efficient use of the available information in the Panel Study of Income Dynamics, we generate more reliable estimates of the recent time-series variation in intergenerational mobility. Our results, which pertain to the cohorts born between 1952 and 1975, do not reveal major changes in intergenerational mobility.
Handle: RePEc:nbr:nberwo:12007
Template-Type: ReDIF-Paper 1.0
Title: Perverse Incentives in the Medicare Prescription Drug Benefit
Classification-JEL: I1
Author-Name: David McAdams
Author-Person: pmc52
Author-Name: Michael Schwarz
Note: EH PE
Number: 12008
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12008
File-URL: http://www.nber.org/papers/w12008.pdf
File-Format: application/pdf
Publication-Status: published as David McAdams & Michael Schwarz, 2007. "Perverse Incentives in the Medicare Prescription Drug Benefit," INQUIRY: The Journal of Health Care Organization, Provision, and Financing, vol 44(2), pages 157-166.
Abstract: We analyze some of the perverse incentives that may arise under the current Medicare prescription drug benefit design. In particular, risk adjustment for a stand-alone prescription drug benefit creates perverse incentives for prescription drug plans' coverage decisions and/or pharmaceutical companies' pricing decisions. This problem is new in that it does not arise with risk adjustment for other types of health care coverage. For this and other reasons, Medicare's drug benefit requires especially close regulatory oversight, now and in the future. We also consider a relatively minor change in how the benefit is financed that could lead to significant changes in how it functions. In particular, if all plans were required to charge the same premium, there would be less diversity in quality but also less budgetary uncertainty and less upward pressure on drug prices.
Handle: RePEc:nbr:nberwo:12008
Template-Type: ReDIF-Paper 1.0
Title: The Importance of Default Options for Retirement Savings Outcomes: Evidence from the United States
Classification-JEL: D0; E21; G23
Author-Name: John Beshears
Author-Name: James J. Choi
Author-Name: David Laibson
Author-Person: pla164
Author-Name: Brigitte C. Madrian
Author-Person: pma384
Note: AG EFG PE
Number: 12009
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12009
File-URL: http://www.nber.org/papers/w12009.pdf
File-Format: application/pdf
Publication-Status: published as in "Lessons from Pension Reform in the Americas," Kay, Stephen J. and Tapen Sinha (eds.) Oxford: Oxford University Press, 2008.
Publication-Status: published as The Importance of Default Options for Retirement Saving Outcomes: Evidence from the United States, John Beshears, James J. Choi, David Laibson, Brigitte C. Madrian. in Social Security Policy in a Changing Environment, Brown, Liebman, and Wise. 2009
Abstract: This paper summarizes the empirical evidence on how defaults impact retirement savings outcomes. After outlining the salient features of the various sources of retirement income in the U.S., the paper presents the empirical evidence on how defaults impact retirement savings outcomes at all stages of the savings lifecycle, including savings plan participation, savings rates, asset allocation, and post-retirement savings distributions. The paper then discusses why defaults have such a tremendous impact on savings outcomes. The paper concludes with a discussion of the role of public policy towards retirement saving when defaults matter.
Handle: RePEc:nbr:nberwo:12009
Template-Type: ReDIF-Paper 1.0
Title: Piracy on the Silver Screen
Classification-JEL: L8; K2
Author-Name: Rafael Rob
Author-Name: Joel Waldfogel
Author-Person: pwa46
Note: IO LE
Number: 12010
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12010
File-URL: http://www.nber.org/papers/w12010.pdf
File-Format: application/pdf
Publication-Status: published as Rob, Rafael and Joel Waldfogel. “Piracy on the Silver Screen.” Journal of Industrial Economics (Sept. 2007).
Abstract: New information technology has reduced marginal production and distribution costs of information goods to negligible levels and promises to revolutionize many industries. Unpaid copies of digital products can be as good as paid first-generation copies, and their availability can undermine the ability of sellers to cover first-copy costs. As a result, unpaid distribution has emerged as a major issue facing the music and movie industries in the past few years. Using survey data on movie consumption by about 500 University of Pennsylvania college students, we ask whether unpaid consumption of movies displaces paid consumption. Employing a variety of cross-sectional and longitudinal empirical approaches, we find large and statistically significant evidence of displacement. In what we view as the most appropriate empirical specifications, we find that unpaid first consumption reduces paid consumption by about 1 unit. Unpaid second consumption has a smaller effect, about 0.20 units. These estimates indicate that unpaid consumption, which makes up 5.2 percent of movie viewing in our sample, reduced paid consumption in our sample by 3.5 percent.
Handle: RePEc:nbr:nberwo:12010
Template-Type: ReDIF-Paper 1.0
Title: A Short Note on the Size of the Dot-Com Bubble
Classification-JEL: G1
Author-Name: J. Bradford DeLong
Author-Name: Konstantin Magin
Note: AP ME
Number: 12011
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12011
File-URL: http://www.nber.org/papers/w12011.pdf
File-Format: application/pdf
Abstract: A surprisingly large amount of commentary today marks the beginning of the dot-com bubble of the late 1990s from either the Netscape Communications initial public offering of 1995 or Alan Greenspan's "irrational exuberance" speech of 1996. We believe that this is wrong: we see little sign that the aggregate U.S. stock market was in any way in a significant bubble until 1998 or so.
Handle: RePEc:nbr:nberwo:12011
Template-Type: ReDIF-Paper 1.0
Title: State Casket Sales and Restrictions: A Pointless Undertaking?
Classification-JEL: L0
Author-Name: Judith Chevalier
Author-Person: pch151
Author-Name: Fiona Scott Morton
Note: IO
Number: 12012
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12012
File-URL: http://www.nber.org/papers/w12012.pdf
File-Format: application/pdf
Publication-Status: published as Chevalier, Judith A. and Fiona M. Scott Morton. “State Casket Sales Restrictions: a Pointless Undertaking?” The Journal of Law and Economics 51, 1 (2008): 1-23.
Abstract: We utilize a new micro dataset of prices of funeral goods and services at individual funeral homes, plus data from the Census to examine the effects of state regulations that restrict entry into funeral goods market. In particular, some states have regulations that allow only licensed funeral homes to sell caskets, while others allow unlicensed retailers, such as Costco, to compete with funeral homes in the sale of caskets. However, as caskets and funeral services are complements, generally purchased in one-to-one proportions, it is not a priori clear that casket sale restrictions can expand the rent extraction capabilities of licensed funeral homes. Our results suggest that when courts lift funeral goods sales restrictions the prices of funeral goods fall but the prices of funeral services rise by nearly as much. Overall, our results support the "one monopoly rent" hypothesis; we do not find that overall funeral home revenues decline when funeral goods sales are lifted.
Handle: RePEc:nbr:nberwo:12012
Template-Type: ReDIF-Paper 1.0
Title: Estimating Static Models of Strategic Interaction
Classification-JEL: L0; L5; C1
Author-Name: Patrick Bajari
Author-Name: Han Hong
Author-Name: John Krainer
Author-Person: pkr64
Author-Name: Denis Nekipelov
Author-Person: pne42
Note: IO
Number: 12013
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12013
File-URL: http://www.nber.org/papers/w12013.pdf
File-Format: application/pdf
Publication-Status: published as Estimating Static Models of Strategic Interactions (with Han Hong, John Krainer and Denis Nekipelov), Journal of Business and Economic Statistics Oct 2010, Vol. 28, No. 4, 469-482
Abstract: We propose a method for estimating static games of incomplete information. A static game is a generalization of a discrete choice model, such as a multinomial logit or probit, which allows the actions of a group of agents to be interdependent. Unlike most earlier work, the method we propose is semiparametric and does not require the covariates to lie in a discrete set. While the estimator we propose is quite flexible, we demonstrate that in most cases it can be easily implemented using standard statistical packages such as STATA. We also propose an algorithm for simulating the model which finds all equilibria to the game. As an application of our estimator, we study recommendations for high technology stocks between 1998-2003. We find that strategic motives, typically ignored in the empirical literature, appear to be an important consideration in the recommendations submitted by equity analysts.
Handle: RePEc:nbr:nberwo:12013
Template-Type: ReDIF-Paper 1.0
Title: Optimal Market Timing
Classification-JEL: E13; E22; E32; E44
Author-Name: Erica X. N. Li
Author-Person: pli899
Author-Name: Dmitry Livdan
Author-Person: pli1379
Author-Name: Lu Zhang
Author-Person: pzh29
Note: AP
Number: 12014
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12014
File-URL: http://www.nber.org/papers/w12014.pdf
File-Format: application/pdf
Abstract: We use a fully-specified neoclassical model augmented with costly external equity as a laboratory to study the relations between stock returns and equity financing decisions. Simulations show that the model can simultaneously and in many cases quantitatively reproduce: procyclical equity issuance; the negative relation between aggregate equity share and future stock market returns; long-term underperformance following equity issuance and the positive relation of its magnitude with the volume of issuance; the mean-reverting behavior in the operating performance of issuing firms; and the positive long-term stock price drift of firms distributing cash and its positive relation with book-to-market. We conclude that systematic mispricing seems unnecessary to generate the return-related evidence often interpreted as behavioral underreaction to market timing.
Handle: RePEc:nbr:nberwo:12014
Template-Type: ReDIF-Paper 1.0
Title: Do Hot Hands Exist Among Hedge Fund Managers? An Empirical Evaluation
Classification-JEL: I1
Author-Name: Ravi Jagannathan
Author-Person: pja91
Author-Name: Alexey Malakhov
Author-Name: Dmitry Novikov
Note: AP
Number: 12015
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12015
File-URL: http://www.nber.org/papers/w12015.pdf
File-Format: application/pdf
Publication-Status: published as “Do Hot Hands Exist Among Hedge Fund Managers? An Empirical Evaluation.” forthcoming in Journal of Finance 2009
Abstract: We examine whether hot hands exist among hedge fund managers. In measuring performance persistence, we use hedge fund style benchmarks. This allows us to identify managers with valuable skills, and also to control for option-like features inherent in returns from hedge fund strategies. We take into account the possibility that reported asset values may be based on stale prices. We develop a statistical model that relates a hedge fund's performance to its decision to liquidate or close in order to infer the performance of a hedge fund that left the database. While we find significant performance persistence among superior funds we find little evidence of persistence among inferior funds.
Handle: RePEc:nbr:nberwo:12015
Template-Type: ReDIF-Paper 1.0
Title: Surplus Appropriation from R&D and Health Care Technology Assessment Procedures
Classification-JEL: I1
Author-Name: Tomas J. Philipson
Author-Person: pph37
Author-Name: Anupam B. Jena
Author-Person: pje47
Note: EH IO
Number: 12016
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12016
File-URL: http://www.nber.org/papers/w12016.pdf
File-Format: application/pdf
Abstract: Given the rapid growth in health care spending that is often attributed to technological change, many private and public institutions are grappling with how to best assess and adopt new health care technologies. The leading technology adoption criteria proposed in theory and used in practice involve so called "cost-effectiveness" measures. However, little is known about the dynamic efficiency implications of such criteria, in particular how they influence the R&D investments that make technologies available in the first place. We argue that such criteria implicitly concern maximizing consumer surplus, which many times is consistent with maximizing static efficiency after an innovation has been developed. Dynamic efficiency, however, concerns aligning the social costs and benefits of R&D and is therefore determined by how much of the social surplus from the new technology is appropriated as producer surplus. We analyze the relationship between cost-effectiveness measures and the degree of surplus appropriation by innovators driving dynamic efficiency. We illustrate how to estimate the two for the new HIV/AIDS therapies that entered the market after the late 1980's and find that only 5% of the social surplus is appropriated by innovators. We show how this finding can be generalized to other existing cost-effectiveness estimates by deriving how those estimates identify innovator appropriation for a set of studies of over 200 drugs. We find that these studies implicitly support a low degree of appropriation as well. Despite the high annual cost of drugs to patients, very low shares of social surplus may go to innovators, which may imply that cost-effectiveness is too high in a dynamic efficiency sense.
Handle: RePEc:nbr:nberwo:12016
Template-Type: ReDIF-Paper 1.0
Title: Optimal Value and Growth Tilts in Long-Horizon Portfolios
Classification-JEL: G12
Author-Name: Jakub W. Jurek
Author-Name: Luis M. Viceira
Author-Person: pvi31
Note: AP
Number: 12017
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12017
File-URL: http://www.nber.org/papers/w12017.pdf
File-Format: application/pdf
Publication-Status: published as Jakub W. Jurek & Luis M. Viceira, 2011. "Optimal Value and Growth Tilts in Long-Horizon Portfolios," Review of Finance, European Finance Association, vol. 15(1), pages 29-74.
Abstract: We develop an analytical solution to the dynamic portfolio choice problem of an investor with power utility defined over wealth at a finite horizon who faces an investment opportunity set with time-varying risk premia, real interest rates and inflation. The variation in investment opportunities is captured by a flexible vector autoregressive parameterization, which readily accommodates a large number of assets and state variables. We find that the optimal dynamic portfolio strategy is an affine function of the vector of state variables describing investment opportunities, with coefficients that are a function of the investment horizon. We apply our method to the optimal portfolio choice problem of an investor who can choose between value and growth stock portfolios, and among these equity portfolios plus bills and bonds. For equity-only investors, the optimal mean allocation of short-horizon investors is heavily tilted away from growth stocks regardless of their risk aversion. However, the mean allocation to growth stocks increases dramatically with the investment horizon, implying that growth is less risky than value at long horizons for equity-only investors. By contrast, long-horizon conservative investors who have access to bills and bonds do not hold equities in their portfolio. These investors are concerned with interest rate risk, and empirically growth stocks are not particularly good hedges for bond returns. We also explore the welfare implications of adopting the optimal dynamic rebalancing strategy vis a vis other intuitive, but suboptimal, portfolio choice schemes and find significant welfare gains for all long-horizon investors.
Handle: RePEc:nbr:nberwo:12017
Template-Type: ReDIF-Paper 1.0
Title: Bias Corrected Estimates of GED Returns
Classification-JEL: C61
Author-Name: James J. Heckman
Author-Name: Paul LaFontaine
Note: CH ED LS PE
Number: 12018
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12018
File-URL: http://www.nber.org/papers/w12018.pdf
File-Format: application/pdf
Publication-Status: published as Heckman, James J. and Paul A. LaFontaine. "Bias-Corrected Estimates Of GED Returns," Journal of Labor Economics, 2006, v24(3,Jul), 661-800.
Abstract: Using three sources of data, this paper examines the direct economic return to GED certification for both native and immigrant high school dropouts. One data source - the CPS - is plagued by non-response and allocation bias from the hot-deck procedure that biases upward the estimated return to the GED. Correcting for allocation bias and ability bias, there is no direct economic return to GED certification. An apparent return to GED certification with age found in the raw CPS data is due to dropouts becoming more skilled over time. These results apply to native born as well as immigrant populations.
Handle: RePEc:nbr:nberwo:12018
Template-Type: ReDIF-Paper 1.0
Title: Ugly Criminals
Classification-JEL: I1; I2; K4; J2; J3
Author-Name: Naci Mocan
Author-Person: pmo270
Author-Name: Erdal Tekin
Author-Person: pte12
Note: CH EH LS
Number: 12019
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12019
File-URL: http://www.nber.org/papers/w12019.pdf
File-Format: application/pdf
Publication-Status: published as Mocan, Naci and Erdal Tekin. "Ugly Criminals." The Review of Economics and Statistics 92, 1 (2010): 15-30.
Abstract: Using data from three waves of Add Health we find that being very attractive reduces a young adult's (ages 18-26) propensity for criminal activity and being unattractive increases it for a number of crimes, ranging from burglary to selling drugs. A variety of tests demonstrate that this result is not because beauty is acting as a proxy for socio-economic status. Being very attractive is also positively associated adult vocabulary test scores, which suggests the possibility that beauty may have an impact on human capital formation. We demonstrate that, especially for females, holding constant current beauty, high school beauty (pre-labor market beauty) has a separate impact on crime, and that high school beauty is correlated with variables that gauge various aspects of high school experience, such as GPA, suspension or having being expelled from school, and problems with teachers. These results suggest two handicaps faced by unattractive individuals. First, a labor market penalty provides a direct incentive for unattractive individuals toward criminal activity. Second, the level of beauty in high school has an effect on criminal propensity 7-8 years later, which seems to be due to the impact of the level of beauty in high school on human capital formation, although this second avenue seems to be effective for females only.
Handle: RePEc:nbr:nberwo:12019
Template-Type: ReDIF-Paper 1.0
Title: Valuation in Over-the-Counter Markets
Classification-JEL: G0; G1; G12
Author-Name: Darrell Duffie
Author-Person: pdu341
Author-Name: Nicolae Garleanu
Author-Name: Lasse Heje Pedersen
Author-Person: ppe174
Note: AP
Number: 12020
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12020
File-URL: http://www.nber.org/papers/w12020.pdf
File-Format: application/pdf
Publication-Status: published as Duffie, Darrell, Nicolae Garleanu, and Lasse Heje Pedersen. "Valuation in Over-the-Counter Markets." Review of Financial Studies 20, 5 (2007): 1865-1900.
Abstract: We provide the impact on asset prices of search-and-bargaining frictions in over-the-counter markets. Under certain conditions, illiquidity discounts are higher when counterparties are harder to find, when sellers have less bargaining power, when the fraction of qualified owners is smaller, or when risk aversion, volatility, or hedging demand are larger. Supply shocks cause prices to jump, and then "recover" over time, with a time signature that is exaggerated by search frictions. We discuss a variety of empirical implications.
Handle: RePEc:nbr:nberwo:12020
Template-Type: ReDIF-Paper 1.0
Title: Does Television Rot Your Brain? New Evidence from the Coleman Study
Classification-JEL: I21; J13; J24
Author-Name: Matthew Gentzkow
Author-Person: pge43
Author-Name: Jesse M. Shapiro
Author-Person: psh70
Note: CH ED LS
Number: 12021
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12021
File-URL: http://www.nber.org/papers/w12021.pdf
File-Format: application/pdf
Abstract: We use heterogeneity in the timing of television's introduction to different local markets to identify the effect of preschool television exposure on standardized test scores later in life. Our preferred point estimate indicates that an additional year of preschool television exposure raises average test scores by about .02 standard deviations. We are able to reject negative effects larger than about .03 standard deviations per year of television exposure. For reading and general knowledge scores, the positive effects we find are marginally statistically significant, and these effects are largest for children from households where English is not the primary language, for children whose mothers have less than a high school education, and for non-white children. To capture more general effects on human capital, we also study the effect of childhood television exposure on school completion and subsequent labor market earnings, and again find no evidence of a negative effect.
Handle: RePEc:nbr:nberwo:12021
Template-Type: ReDIF-Paper 1.0
Title: The Time Varying Volatility of Macroeconomic Fluctuations
Classification-JEL: E30; C32
Author-Name: Alejandro Justiniano
Author-Person: pju154
Author-Name: Giorgio E. Primiceri
Author-Person: ppr18
Note: EFG ME
Number: 12022
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12022
File-URL: http://www.nber.org/papers/w12022.pdf
File-Format: application/pdf
Publication-Status: published as Justiniano, Alejandro and Giorgio E. Primiceri. “The Time Varying Volatility of Macroeconomic Fluctuations.” The American Economic Review 98, 3 (June 2008): 604-641.
Abstract: In this paper we investigate the sources of the important shifts in the volatility of U.S. macroeconomic variables in the postwar period. To this end, we propose the estimation of DSGE models allowing for time variation in the volatility of the structural innovations. We apply our estimation strategy to a large-scale model of the business cycle and find that investment specific technology shocks account for most of the sharp decline in volatility of the last two decades.
Handle: RePEc:nbr:nberwo:12022
Template-Type: ReDIF-Paper 1.0
Title: India's Patterns of Development: What Happened, What Follows
Classification-JEL: O14; O53
Author-Name: Kalpana Kochhar
Author-Person: pko127
Author-Name: Utsav Kumar
Author-Name: Raghuram Rajan
Author-Person: pra149
Author-Name: Arvind Subramanian
Author-Person: psu108
Note: EFG IFM
Number: 12023
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12023
File-URL: http://www.nber.org/papers/w12023.pdf
File-Format: application/pdf
Publication-Status: published as Kochhar, Kalpana, Utsav Kumar, Raghuram Rajan, Arvind Subramanian, and Ioannis Tokatlidis. “India’s Pattern of Development: What Happened, What Follows?” Journal of Monetary Economics 53 (2006): 981-1019.
Abstract: India seems to have followed an idiosyncratic pattern of development, certainly compared to other fast-growing Asian economies. While the emphasis on services rather than manufacturing has been widely noted, within manufacturing India has emphasized skill-intensive rather than labor-intensive manufacturing, and industries with typically higher average scale. We show that some of these distinctive patterns existed even prior to the beginning of economic reforms in the 1980s, and argue they stem from the idiosyncratic policies adopted soon after India's independence. We then look to the future, using the growth of fast-moving Indian states as a guide. Despite recent reforms that have removed some of the policy impediments that might have sent India down its distinctive path, it appears unlikely that India will revert to the pattern followed by other countries.
Handle: RePEc:nbr:nberwo:12023
Template-Type: ReDIF-Paper 1.0
Title: Pervasive Stickiness (Expanded Version)
Classification-JEL: E30; E10
Author-Name: N. Gregory Mankiw
Author-Name: Ricardo Reis
Author-Person: pre73
Note: EFG ME
Number: 12024
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12024
File-URL: http://www.nber.org/papers/w12024.pdf
File-Format: application/pdf
Publication-Status: published as Mankiw, N. Gregory and Ricardo Reis. "Pervasive Stickiness," American Economic Review, 2006, v96(2,May), 164-169.
Abstract: This paper explores a macroeconomic model of the business cycle in which stickiness of information is pervasive. We start from a familiar benchmark classical model and add to it the assumption that there is sticky information on the part of consumers, workers, and firms. We evaluate the model against three key facts that describe short-run fluctuations: the acceleration phenomenon, the smoothness of real wages, and the gradual response of real variables to shocks. We find that pervasive stickiness is required to fit the facts. We conclude that models based on stickiness of information offer the promise of fitting the facts on business cycles while adding only one new plausible ingredient to the classical benchmark.
Handle: RePEc:nbr:nberwo:12024
Template-Type: ReDIF-Paper 1.0
Title: Geographic Spillover of Unionism
Classification-JEL: J5; R0
Author-Name: Thomas J. Holmes
Author-Person: pho45
Note: LS
Number: 12025
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12025
File-URL: http://www.nber.org/papers/w12025.pdf
File-Format: application/pdf
Abstract: Unionism in the United States is contagious; it spills out of coal mines and steel mills into other establishments in the neighborhood, like hospitals and supermarkets. The geographic spillover of unionism is documented here using a newly constructed establishment level data on unionism that is rich in geographic detail. A strong connection is found between unionism of health care establishments today and proximity to unionized coal mines and steel mills from the 1950s.
Handle: RePEc:nbr:nberwo:12025
Template-Type: ReDIF-Paper 1.0
Title: The Dog That Did Not Bark: A Defense of Return Predictability
Classification-JEL: G0; G1
Author-Name: John H. Cochrane
Author-Person: pco57
Note: AP
Number: 12026
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12026
File-URL: http://www.nber.org/papers/w12026.pdf
File-Format: application/pdf
Publication-Status: published as Cochrane, John. "The Dog That Did Not Bark: A Defense of Return Predictability.” Review of Financial Studies 21, 4 (2008): 1533-1575.
Abstract: To question the statistical significance of return predictability, we cannot specify a null that simply turns off that predictability, leaving dividend growth predictability at its essentially zero sample value. If neither returns nor dividend growth are predictable, then the dividend-price ratio is a constant. If the null turns off return predictability, it must turn on the predictability of dividend growth, and then confront the evidence against such predictability in the data. I find that the absence of dividend growth predictability gives much stronger statistical evidence against the null, with roughly 1-2% probability values, than does the presence of return predictability, which only gives about 20% probability values. I argue that tests based on long-run return and dividend growth regressions provide the cleanest and most interpretable evidence on return predictability, again delivering about 1-2% probability values against the hypothesis that returns are unpredictable. I show that Goyal and Welch's (2005) finding of poor out-of-sample R2 does not reject return forecastability. Out-of-sample R2 is poor even if all dividend yield variation comes from time-varying expected returns.
Handle: RePEc:nbr:nberwo:12026
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Entry on Incumbent Innovation and Productivity
Classification-JEL: E2
Author-Name: Philippe Aghion
Author-Person: pag175
Author-Name: Richard Blundell
Author-Person: pbl81
Author-Name: Rachel Griffith
Author-Person: pgr70
Author-Name: Peter Howitt
Author-Person: pho22
Author-Name: Susanne Prantl
Note: EFG IO PR
Number: 12027
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12027
File-URL: http://www.nber.org/papers/w12027.pdf
File-Format: application/pdf
Publication-Status: published as Philippe Aghion & Richard Blundell & Rachel Griffith & Peter Howitt & Susanne Prantl, 2009. "The Effects of Entry on Incumbent Innovation and Productivity," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 20-32, October.
Abstract: How does firm entry affect innovation incentives and productivity growth in incumbent firms? Micro-data suggests that there is heterogeneity across industries--incumbents in technologically advanced industries react positively to foreign firm entry, but not in laggard industries. To explain this pattern, we introduce entry into a Schumpeterian growth model with multiple sectors which differ by their distance to the technological frontier. We show that technologically advanced entry threat spurs innovation incentives in sectors close to the technological frontier--successful innovation allows incumbents to prevent entry. In laggard sectors it discourages innovation--increased entry threat reduces incumbents' expected rents from innovating. We find that the empirical patterns hold using rich micro-level productivity growth and patent panel data for the UK, and controlling for the endogeneity of entry by exploiting the large number of policy reforms undertaken during the Thatcher era.
Handle: RePEc:nbr:nberwo:12027
Template-Type: ReDIF-Paper 1.0
Title: Durable Goods and Conformity
Classification-JEL: L0
Author-Name: Christopher L. House
Author-Person: pho56
Author-Name: Emre Ozdenoren
Author-Person: poz43
Note: IO
Number: 12028
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12028
File-URL: http://www.nber.org/papers/w12028.pdf
File-Format: application/pdf
Publication-Status: published as House, Christopher L. and Emre Ozdenoren. “Durable Goods and Conformity.” RAND Journal of Economics 39, 2 (Summer 2008): 452-468.
Abstract: Is the variety of products supplied in markets a reflection of the diversity of consumers' preferences? In this paper, we argue that the distribution of durable goods offered in markets tends to be compressed relative to the distribution of consumers' underlying preferences. In particular, there are strong incentives for conformity in markets for durable goods. The reason for conformity is natural: durables (for example houses) are traded and as a result, demand for these goods is influenced by their resale value. Agents may like one product, but purchase another because of resale concerns. We show that (1) there is a tendency to conform to the average preference; (2) conformity depends primarily on the number of people with extreme preferences; (3) conformity increases with increases in durability, patience, and the likelihood of trade; and (4) equilibrium conformity is not necessarily optimal. Surprisingly, there tends to be too little conformity in equilibrium. Conformity also creates a demand for rental markets. Renting does not necessarily decrease conformity however. Instead, renting tends to exaggerate conformity in the owner-occupied market.
Handle: RePEc:nbr:nberwo:12028
Template-Type: ReDIF-Paper 1.0
Title: Cost Should Be No Barrier: An Evaluation of the First Year of Harvard's Financial Aid Initiative
Classification-JEL: I20; I21; I22; J24; L3
Author-Name: Christopher Avery
Author-Person: pav7
Author-Name: Caroline Hoxby
Author-Person: pho46
Author-Name: Clement Jackson
Author-Person: pja222
Author-Name: Kaitlin Burek
Author-Name: Glenn Pope
Author-Name: Mridula Raman
Note: ED
Number: 12029
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12029
File-URL: http://www.nber.org/papers/w12029.pdf
File-Format: application/pdf
Abstract: This paper evaluates the first year of Harvard's Financial Aid Initiative, which increased aid and recruiting for students from low income backgrounds. Using rich data from the Census and administrative sources, we estimate family incomes for the vast major of plausible applicants from the U.S. We find that the Initiative had a significant effect almost entirely because it attracted a pool of applicants that was larger and slightly poorer. It appears that very similar standards of admission were used for this group as had been used in previous years. This group, once admitted, enrolled at a rate very similar to that of previous years. Thus, there are a greater number of low income students in the Class of 2009 than in the Class of 2008 simply because more well-qualified, low income students applied. Many apparently qualified students still do not apply, and many of these "missing applicants" come from high schools that have little or no tradition of sending applications to selective private colleges. Targeted outreach to such "one offs" -- that is, students who are one of only a few qualified students from their school in recent years -- may be a way for selective private colleges to increase their income diversity.
Handle: RePEc:nbr:nberwo:12029
Template-Type: ReDIF-Paper 1.0
Title: Down or Out: Assessing the Welfare Costs of Household Investment Mistakes
Classification-JEL: D5; D9; E3; O1
Author-Name: Laurent E. Calvet
Author-Person: pca582
Author-Name: John Y. Campbell
Author-Person: pca54
Author-Name: Paolo Sodini
Author-Person: pso124
Note: AP EFG
Number: 12030
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12030
File-URL: http://www.nber.org/papers/w12030.pdf
File-Format: application/pdf
Publication-Status: published as Calvet, Laurent, John Campbell, and Paolo Sodini. "Down or Out: Assessing the Welfare Costs of Household Investment Mistakes.” Journal of Political Economy 115 (October 2007): 707-747.
Abstract: This paper investigates the efficiency of household investment decisions in a unique dataset containing the disaggregated wealth and income of the entire population of Sweden. The analysis focuses on two main sources of inefficiency in the financial portfolio: underdiversification of risky assets ("down") and nonparticipation in risky asset markets ("out"). We find that while a few households are very poorly diversified, the cost of diversification mistakes is quite modest for most of the population. For instance, a majority of participating Swedish households are sufficiently diversified internationally to outperform the Sharpe ratio of their domestic stock market. We document that households with greater financial sophistication tend to invest more efficiently but also more aggressively, so the welfare cost of portfolio inefficiency tends to be greater for these households. The welfare cost of nonparticipation is smaller by almost one half when we take account of the fact that nonparticipants would be unlikely to invest efficiently if they participated in risky asset markets.
Handle: RePEc:nbr:nberwo:12030
Template-Type: ReDIF-Paper 1.0
Title: The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India
Classification-JEL: L10
Author-Name: Philippe Aghion
Author-Person: pag175
Author-Name: Robin Burgess
Author-Person: pbu12
Author-Name: Stephen Redding
Author-Person: pre64
Author-Name: Fabrizio Zilibotti
Author-Person: pzi3
Note: EFG
Number: 12031
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12031
File-URL: http://www.nber.org/papers/w12031.pdf
File-Format: application/pdf
Publication-Status: published as Aghion P, Burgess R, Redding S and Zilibotti F. "The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India." American Economic Review 94, 4 (2008): 1397-1412.
Abstract: We study the effects of the progressive elimination of the system of industrial regulations on entry and production, known as the "license raj," on registered manufacturing output, employment, entry and investment across Indian states with different labor market regulations. The effects are found to be unequal depending on the institutional environment in which industries are embedded. In particular, following delicensing, industries located in states with pro-employer labor market institutions grew more quickly than those in pro-worker environments.
Handle: RePEc:nbr:nberwo:12031
Template-Type: ReDIF-Paper 1.0
Title: Turbulent Firms, Turbulent Wages?
Classification-JEL: J3; J5
Author-Name: Diego Comin
Author-Person: pco55
Author-Name: Erica L. Groshen
Author-Person: pgr213
Author-Name: Bess Rabin
Note: EFG LS
Number: 12032
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12032
File-URL: http://www.nber.org/papers/w12032.pdf
File-Format: application/pdf
Publication-Status: published as Comin, Diego, Erica Groshen and Bess Rabin. "Turbulent firms, turbulent wages?" Journal of Monetary Economics, vol. 56(1), pages 109-133, January 2009.
Abstract: Has greater turbulence among firms fueled rising wage instability in the U.S.? Gottschalk and Moffitt ([1994]) find that rising earnings instability was responsible for one third to one half of the rise in wage inequality during the 1980s. These growing transitory fluctuations remain largely unexplained. To help fill this gap, this paper further documents the recent rise in transitory fluctuations in compensation and investigates its linkage to the concurrent rise in volatility of firm performance documented by Comin and Mulani [2005] among others. After examining models that explain the relationship between firm and wage volatility, we investigate the linkage in three complementary panel data sets, each with its own virtues and limitations: the Panel Study of Income Dynamics (detailed information on workers, but no information on employers), COMPUSTAT (detailed firm information, but only average wage and employment levels about workers), and the Federal Reserve Bank of Cleveland's Community Salary Survey (wages and employment for specific occupations for identified firms). We find complementary support for the hypothesis in all three data sets. We can rule out straightforward compositional churning as an explanation for the link to firm performance in high-frequency (over spans of 5 years) wage volatility, although not in more persistent fluctuations (between successive 5-year averages). We conclude that the rise in firm turbulence explains about sixty percent of the recent the rise in the high frequency (5-year) volatility of wages.
Handle: RePEc:nbr:nberwo:12032
Template-Type: ReDIF-Paper 1.0
Title: Optimal Tariffs: The Evidence
Classification-JEL: F13; H21; F14
Author-Name: Christian Broda
Author-Name: Nuno Limão
Author-Person: pli22
Author-Name: David Weinstein
Author-Person: pwe34
Note: ITI
Number: 12033
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12033
File-URL: http://www.nber.org/papers/w12033.pdf
File-Format: application/pdf
Publication-Status: published as Broda, Christian, Nuno Limão, and David Weinstein. “Optimal Tariffs and Market Power: The Evidence.” American Economic Review 98, 5 (December 2008): 2032-65.
Abstract: The theoretical debate over whether countries can and should set tariffs in response to the foreign export elasticities they face goes back to Edgeworth (1894). Despite the centrality of the optimal tariff argument in trade policy, there exists no evidence about whether countries actually exploit their market power in trade by setting higher tariffs on goods that are supplied inelastically. We estimate disaggregate foreign export supply elasticities and find evidence that countries that are not members of the World Trade Organization systematically set higher tariffs on goods that are supplied inelastically. The typical country in our sample sets tariffs 9 percentage points higher in goods with high market power relative to those with low market power. This large effect is of a magnitude similar to the average tariffs in the data and market power explains more of the tariff variation than a commonly used political economy variable. The result is robust to the inclusion of other determinants of tariffs and a variety of model specifications. We also find that U.S. trade restrictions that are not covered by the WTO are significantly higher in goods where the U.S. has more market power. In short, we find strong evidence that these importers have market power and use it in setting non-cooperative trade policy.
Handle: RePEc:nbr:nberwo:12033
Template-Type: ReDIF-Paper 1.0
Title: And Now for Something Completely Different: The Versatility of Conceptual Innovators
Classification-JEL: J0
Author-Name: David W. Galenson
Note: LS
Number: 12034
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12034
File-URL: http://www.nber.org/papers/w12034.pdf
File-Format: application/pdf
Publication-Status: published as Galenson, David W. "And Now for Something Completely Different: The Versatility of Conceptual Innovators." Historical Methods: A Journal of Quantitative and Interdisciplinary History 40, 1 (Winter 2007): 17 - 27.
Publication-Status: published as And Now for Something Completely Different: The Versatility of Conceptual Innovators, David W. Galenson. in Conceptual Revolutions in Twentieth-Century Art, Galenson. 2009
Abstract: Art scholars have puzzled over the behavior of Pablo Picasso, Gerhard Richter, and Sigmar Polke - important modern painters who have made frequent and abrupt changes of style. Yet in each case the scholars have assumed this behavior to be idiosyncratic, and have consequently failed to recognize its common basis. Versatility is in fact often a characteristic of conceptual innovators, whose ability to solve specific problems can free them to pursue new goals. This contrasts sharply with the practice of experimental artists, whose inability to achieve their goals often ties them to a single style for a whole career. The phenomenon of the conceptual innovator who produces diverse innovations is an important feature of twentieth-century art; Picasso was the prototype, and he was followed by a series of others, from Marcel Duchamp through Damien Hirst. Versatility has furthermore been a characteristic not only of modern conceptual painters, but also of conceptual innovators in other arts, and conceptual scholars. Recognizing the common basis of this behavior increases our understanding of human creativity.
Handle: RePEc:nbr:nberwo:12034
Template-Type: ReDIF-Paper 1.0
Title: Legal-Political Factors and the Historical Evolution of the Finance-Growth Link
Classification-JEL: E44; F3; N1; N2
Author-Name: Michael D. Bordo
Author-Person: pbo243
Author-Name: Peter L. Rousseau
Author-Person: pro64
Note: DAE EFG LE
Number: 12035
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12035
File-URL: http://www.nber.org/papers/w12035.pdf
File-Format: application/pdf
Publication-Status: published as Bordo, Michael D. and Peter L. Rousseau. "Legal-Political Factors and the Historical Evolution of the Finance-Growth Link." European Review of Economic History 10, 3 (December 2006): 421 - 444.
Abstract: Recent cross-country investigations of the role of institutional fundamentals such as the protection of property rights in promoting financial development have extended a literature that has for decades maintained that financial factors can affect real outcomes. In this paper we pursue this new direction by considering relationships between finance, growth, legal origin, and political environment in a historical cross-section of 17 countries covering the period from 1880 to 1997. We find that relationships between a county's legal origin (i.e., English, French, German, or Scandinavian) and financial development are roughly consistent with earlier findings but are not persistent. At the same time, political variables such as proportional representation election systems, frequent elections, universal female suffrage, and infrequent revolutions or coups seem linked to larger financial sectors and higher conditional rates of economic growth. Despite the explanatory power of some of our measures of the deeper "fundamentals," however, a significant part of the growth-enhancing role of financial development remains unexplained by them.
Handle: RePEc:nbr:nberwo:12035
Template-Type: ReDIF-Paper 1.0
Title: Housing, Consumption, and Asset Pricing
Classification-JEL: G0
Author-Name: Monika Piazzesi
Author-Person: ppi37
Author-Name: Martin Schneider
Author-Person: psc69
Author-Name: Selale Tuzel
Note: AP EFG ME
Number: 12036
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12036
File-URL: http://www.nber.org/papers/w12036.pdf
File-Format: application/pdf
Publication-Status: published as Piazzesi, Monika, Martin Schneider and Selale Tuzel. “Housing, Consumption, and Asset Pricing.” Journal of Financial Economics 83 (March 2007): 531-569.
Abstract: This paper considers a consumption-based asset pricing model where housing is explicitly modeled both as an asset and as a consumption good. Nonseparable preferences describe households' concern with composition risk, that is, fluctuations in the relative share of housing in their consumption basket. Since the housing share moves slowly, a concern with composition risk induces low frequency movements in stock prices that are not driven by news about cash flow. Moreover, the model predicts that the housing share can be used to forecast excess returns on stocks. We document that this indeed true in the data. The presence of composition risk also implies that the riskless rate is low which further helps the model improve on the standard CCAPM.
Handle: RePEc:nbr:nberwo:12036
Template-Type: ReDIF-Paper 1.0
Title: Special Interest Groups and the Allocation of Public Funds
Classification-JEL: H7; D7; H1
Author-Name: Monica Singhal
Author-Person: psi159
Note: PE
Number: 12037
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12037
File-URL: http://www.nber.org/papers/w12037.pdf
File-Format: application/pdf
Publication-Status: published as Singhal, Monica. "Special Interest Groups and the Allocation of Public Funds." Journal of Public Economics 92, 3-4(April 2008): 548-564.
Abstract: A long-standing puzzle in the fiscal federalism literature is the empirical non-equivalence in government spending from grants and other income. I propose a fully rational model in which violations of fungibility arise from dynamic interactions between politicians and interest groups with the ability to raise funds for local government. The predictions of the model are tested by exploiting unique features of windfalls received by states under a settlement with the tobacco industry. Although windfalls are unrestricted, the median state increased spending on tobacco control programs from zero to $2.30 per capita upon receipt of funds. The marginal propensity to spend on such programs is 0.20 from settlement revenue and zero from overall income. States which were not involved in the settlement lawsuits spend less. The findings are consistent with the predictions of the model when political partisanship is introduced: Republican governors spend less and factors which should lead to political convergence increase spending for Republicans and decrease spending for Democrats. These results cannot be explained by existing models in the literature.
Handle: RePEc:nbr:nberwo:12037
Template-Type: ReDIF-Paper 1.0
Title: Economic Transformation, Population Growth and the Long-Run World Income Distribution
Classification-JEL: J11; F43; O41
Author-Name: Marcos Chamon
Author-Person: pch173
Author-Name: Michael Kremer
Author-Person: pkr20
Note: EFG LS
Number: 12038
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12038
File-URL: http://www.nber.org/papers/w12038.pdf
File-Format: application/pdf
Publication-Status: published as Chamon, Marcos & Kremer, Michael, 2009. "Economic transformation, population growth and the long-run world income distribution," Journal of International Economics, Elsevier, vol. 79(1), pages 20-30, September.
Abstract: We construct and calibrate a model of the world economy in which countries' opportunities to develop depend on their trade with advanced economies. Trade opportunities in turn depend on the relative population of the advanced and developing world. As developing countries become advanced, they further improve the trade prospects for the remaining developing countries. As long as the population growth differential between developing and advanced countries is not too large, the rate at which countries transition to prosperity accelerates over time. However, if population growth differentials are large relative to the transition rate, the world economy converges to widespread prosperity if and only if the proportion of the world population in advanced countries is above a critical level. The model suggests that countries which become more open are more likely to grow, but that increased openness by developing countries as a whole may lead to only modest increases in growth for developing countries in aggregate. The rapid rise of China may hurt some developing countries in the short-run, but will open tremendous opportunities for the remaining developing countries in the long-run.
Handle: RePEc:nbr:nberwo:12038
Template-Type: ReDIF-Paper 1.0
Title: PublicationHarvester: An Open-Source Software Tool for Science Policy Research
Classification-JEL: O32
Author-Name: Pierre Azoulay
Author-Name: Andrew Stellman
Author-Name: Joshua Graff Zivin
Author-Person: pgr314
Note: EH
Number: 12039
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12039
File-URL: http://www.nber.org/papers/w12039.pdf
File-Format: application/pdf
Publication-Status: published as Azoulay, Pierre, Andrew Stellman and Joshua Graff Zivin. "Publication-Harvester: An Open-Source Software Tool For Science Policy Research," Research Policy, 2006, v35(7,Sep), 970-974.
Abstract: We present PublicationHarvester, an open-source software tool for gathering publication information on individual life scientists. The software interfaces with MEDLINE, and allows the end-user to specify up to four MEDLINE-formatted names for each researcher. Using these names along with a user-specified search query, PublicationHarvester generates yearly publication counts, optionally weighted by Journal Impact Factors. These counts are further broken-down by order on the authorship list (first, last, second, next-to-last, middle) and by publication type (clinical trials, regular journal articles, reviews, letters/editorials, etc.) The software also generates a keywords report at the scientist-year level, using the Medical Subject Headings (MeSH) assigned by the National Library of Medicine to each publication indexed by Medline. The software, source code, and user manual can be downloaded at http://www.stellman-greene.com/PublicationHarvester/
Handle: RePEc:nbr:nberwo:12039
Template-Type: ReDIF-Paper 1.0
Title: How Do the Better Educated Do It? Socioeconomic Status and the Ability to Cope with Underlying Impairment
Classification-JEL: I1; J1
Author-Name: David M. Cutler
Author-Person: pcu64
Author-Name: Mary Beth Landrum
Author-Name: Kate A. Stewart
Note: AG EH
Number: 12040
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12040
File-URL: http://www.nber.org/papers/w12040.pdf
File-Format: application/pdf
Publication-Status: published as "How Do The Better Educated Do It? Socioeconomic Status and Ability to Cope with Underlying Impairment," forthcoming in D. Wise, ed., Developments in the Economics of Aging, Chicago: University of Chicago Press, 2009 (with Mary Beth Landrum and Kate Stewart).
Publication-Status: published as How Do The Better Educated Do It? Socioeconomic Status and the Ability to Cope With Underlying Impairment, David M. Cutler, Mary Beth Landrum, Kate A. Stewart. in Developments in the Economics of Aging, Wise. 2009
Abstract: There is a pronounced gradient in disability across socioeconomic groups, with better educated and higher income groups reporting substantially less disability. In this paper, we consider why that is the case, focusing on impairments in basic physical and cognitive aspects of living for the elderly. Our empirical work has two parts. First, we consider how much of this gradient in disability is a result of underlying differences in functioning versus the ability to cope with impairments. We show differences in functioning are the major part of the difference in disability, but both are important. Second, we consider how the better educated elderly cope with disability. Better educated people use substantially more assistive technology than the less educated and are more likely to use paid help. But use of these services is not the primary reason that the better educated are better able to cope. We conclude with thoughts about other potential factors that may explain differential coping.
Handle: RePEc:nbr:nberwo:12040
Template-Type: ReDIF-Paper 1.0
Title: Sorting, Prices, and Social Preferences
Classification-JEL: B41; C90; D64
Author-Name: Edward Lazear
Author-Person: pla64
Author-Name: Ulrike Malmendier
Author-Person: pma1397
Author-Name: Roberto Weber
Note: LS PE
Number: 12041
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12041
File-URL: http://www.nber.org/papers/w12041.pdf
File-Format: application/pdf
Abstract: What impact do social preferences have in market-type settings where individuals can sort in response to relative prices? We show that sorting behavior can distinguish between individuals who like to share and those who share but prefer to avoid the sharing environment altogether. In four laboratory experiments, prices and social preferences interact to determine the composition of sharing environments: Costless sorting reduces the number of sharers, even after inducing positive reciprocity. Subsidized sharing increases entry, but mainly by the least generous sharers. Costly sharing reduces entry, but attracts those who share generously. We discuss implications for real-world giving with sorting.
Handle: RePEc:nbr:nberwo:12041
Template-Type: ReDIF-Paper 1.0
Title: Investment Under Uncertainty and Time-Inconsistent Preferences
Classification-JEL: G11; G31; D9
Author-Name: Steven R. Grenadier
Author-Name: Neng Wang
Author-Person: pwa390
Note: AP
Number: 12042
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12042
File-URL: http://www.nber.org/papers/w12042.pdf
File-Format: application/pdf
Publication-Status: published as Grenadier, Steven and Neng Wang. “Investment under uncertainty and time-inconsistent preferences.’’ Journal of Financial Economics 84, 1 (2007): 2-39.
Abstract: The real options framework has been used extensively to analyze the timing of investment under uncertainty. While standard real options models assume that agents possess a constant rate of time preference, there is substantial evidence that agents are very impatient about choices in the short-term, but are quite patient when choosing between long-term alternatives. We extend the real options framework to model the investment timing decisions of entrepreneurs with such time-inconsistent preferences. Two opposing forces determine investment timing: while evolving uncertainty induces entrepreneurs to defer investment in order to take advantage of the option to wait, their time-inconsistent preferences motivate them to invest earlier in order to avoid the time-inconsistent behavior they will display in the future. We find that the precise trade-off between these two forces depends on such factors as whether entrepreneurs are sophisticated or naive in their expectations regarding their future time-inconsistent behavior, as well as whether the payoff from investment occurs all at once or over time. We extend the model to consider equilibrium investment behavior for an industry comprised of time-inconsistent entrepreneurs. Such an equilibrium involves the dual problem of entrepreneurs playing dynamic games against competitors as well as against their own future selves.
Handle: RePEc:nbr:nberwo:12042
Template-Type: ReDIF-Paper 1.0
Title: Urban Poverty, School Attendance, and Adolescent Labor Force Attachment: Some Historical Evidence
Classification-JEL: I1; I3; N3
Author-Name: Howard Bodenhorn
Author-Person: pbo547
Note: DAE CH ITI
Number: 12043
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12043
File-URL: http://www.nber.org/papers/w12043.pdf
File-Format: application/pdf
Abstract: It is well known that children raised in poverty demonstrate lower academic achievement than children raised in affluence. This study extends previous studies in three ways. First, it estimates structural instead of reduced-form models of child academic attainment. Such structural models explicitly account for choices made by children themselves, given choices made by parents and governments. Second, it provides an historical insight into the connections between poverty, child choices and educational outcomes. Nearly all extent work considers the late 20th century. This study uses a unique data set from the mid-nineteenth century. And, third, this study documents the choices underlying adolescent labor force participation. Youth in poor households are more likely than affluent youth to be asked to contribute income to the household. The choice to do so is influenced by parental choices and the expected reduction in the child's later-life wealth attributable to choosing work over additional schooling.
Handle: RePEc:nbr:nberwo:12043
Template-Type: ReDIF-Paper 1.0
Title: Offshore Financial Centers: Parasites or Symbionts?
Classification-JEL: F23; F36
Author-Name: Andrew K. Rose
Author-Person: pro71
Author-Name: Mark Spiegel
Author-Person: psp18
Note: IFM ME PR
Number: 12044
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12044
File-URL: http://www.nber.org/papers/w12044.pdf
File-Format: application/pdf
Publication-Status: published as Rose, Andrew and Mark Spiegel. “Offshore Financial Centers: Parasites or Symbionts?” Economic Journal 117, 523 (2007): 1310-1335.
Abstract: This paper analyzes the causes and consequences of offshore financial centers (OFCs). Since OFCs are likely to be tax havens and money launderers, they encourage bad behavior in source countries. Nevertheless, OFCs may also have unintended positive consequences for their neighbors, since they act as a competitive fringe for the domestic banking sector. We derive and simulate a model of a home country monopoly bank facing a representative competitive OFC which offers tax advantages attained by moving assets offshore at a cost that is increasing in distance between the OFC and the source. Our model predicts that proximity to an OFC is likely to have pro-competitive implications for the domestic banking sector, although the overall effect on welfare is ambiguous. We test and confirm the predictions empirically. OFC proximity is associated with a more competitive domestic banking system and greater overall financial depth.
Handle: RePEc:nbr:nberwo:12044
Template-Type: ReDIF-Paper 1.0
Title: Exports and Slow Economic Growth in the Lower South Region, 1720-1800
Classification-JEL: N0; N1; N7; O1; O4
Author-Name: Peter C. Mancall
Author-Name: Joshua Rosenbloom
Author-Person: pro664
Author-Name: Thomas Weiss
Author-Person: pwe260
Note: DAE
Number: 12045
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12045
File-URL: http://www.nber.org/papers/w12045.pdf
File-Format: application/pdf
Publication-Status: published as Field, Alexander J. (ed.) Research in Economic History, vol 25. Amsterdam: Elsevier, 2008.
Abstract: For the past generation scholars have emphasized that the Lower South was one of the most economically successful regions of British mainland North America, and perhaps the most successful. Planters, the primary economic actors, made extensive use of slave labor and created a successful staple-export sector, which by 1774 produced the highest levels of private wealth per capita in the colonies. Focusing on the rapid growth of the primary exports of the Lower South in the colonial period - rice and indigo - most scholars have concluded that standards of living for colonists in the region must have been rising rapidly. Elsewhere we have argued that the conventional view of the economy of the Lower South prior to 1800 is mistaken. Rather, per capita incomes were essentially stagnant from 1720 to 1770, and did not change appreciably between 1770 and 1800. Central to our interpretation is a revised understanding of the behavior of regional exports that indicates that they were much less important as a stimulus to economic growth than has heretofore been believed. This paper describes in greater detail our estimation of regional exports, and documents the reasons why they could not have been a stimulus to intensive growth within the region.
Handle: RePEc:nbr:nberwo:12045
Template-Type: ReDIF-Paper 1.0
Title: Why Did U.S. Market Hours Boom in the 1990s?
Classification-JEL: E3; O4
Author-Name: Ellen McGrattan
Author-Person: pmc46
Author-Name: Edward Prescott
Author-Person: ppr10
Note: EFG LS
Number: 12046
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12046
File-URL: http://www.nber.org/papers/w12046.pdf
File-Format: application/pdf
Abstract: During the 1990s, market hours in the United States rose dramatically. The rise in hours occurred as gross domestic product (GDP) per hour was declining relative to its historical trend, an occurrence that makes this boom unique, at least for the postwar U.S. economy. We find that expensed plus sweat investment was large during this period and critical for understanding the movements in hours and productivity. Expensed investments are expenditures that increase future profits but, by national accounting rules, are treated as operating expenses rather than capital expenditures. Sweat investments are uncompensated hours in a business made with the expectation of realizing capital gains when the business goes public or is sold. Incorporating expensed and sweat equity into an otherwise standard business cycle model, we find that there was rapid technological progress during the 1990s, causing a boom in market hours and actual productivity.
Handle: RePEc:nbr:nberwo:12046
Template-Type: ReDIF-Paper 1.0
Title: The Causes of Political Integration: An Application to School Districts
Classification-JEL: H4; H7; I2; C7
Author-Name: Nora Gordon
Author-Person: pgo146
Author-Name: Brian Knight
Author-Person: pkn7
Note: ED PE
Number: 12047
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12047
File-URL: http://www.nber.org/papers/w12047.pdf
File-Format: application/pdf
Publication-Status: published as Nora Gordon and Brian Knight. “A Spatial Merger Estimator with an Application to School District Consolidation”, Journal of Public Economics 93(5-6), 752-765, 2009.
Abstract: This paper examines the forces behind political integration through the lens of school district consolidations, which reduced the number of school districts in the United States from around 130,000 in 1930 to under 15,000 at present. Despite this large observed decline, many districts resisted consolidation before ultimately merging and others never merged, choosing to remain at enrollment levels that nearly any education cost function would deem inefficiently small. Why do some districts voluntarily integrate while others remain small, and how do those districts that do merge choose with which of their neighbors to do so? In addressing these questions, we empirically examine the role of potential economies and diseconomies of scale, heterogeneity between merger partners, and the role of state governments. We first develop a simulation-based estimator that is rooted in the economics of matching and thus accounts for three important features of typical merger protocol: two-sided decision making, multiple potential partners, and spatial interdependence. We then apply this methodology to a wave of school district mergers in the state of Iowa during the 1990s. Our results highlight the importance of economies of scale, diseconomies of scale, state financial incentives for consolidation, and a variety of heterogeneity measures.
Handle: RePEc:nbr:nberwo:12047
Template-Type: ReDIF-Paper 1.0
Title: State Age Protection Laws and the Age Discrimination in Employment Act
Classification-JEL: J1; J7
Author-Name: Joanna Lahey
Author-Person: pla533
Note: AG LS
Number: 12048
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12048
File-URL: http://www.nber.org/papers/w12048.pdf
File-Format: application/pdf
Publication-Status: published as Lahey, Joanna. “State Age Protection Laws and the Age Discrimination in Employment Act.” Journal of Law and Economics 51, 3 (2008): 433-460.
Abstract: Some anti-discrimination laws have the perverse effect of harming the very class they were meant to protect. This paper provides evidence that age discrimination laws belong to this perverse class. Prior to the enforcement of the federal law, state laws had little effect on older workers, suggesting that firms either knew little about these laws or did not see them as a threat. After the enforcement of the federal Age Discrimination in Employment Act (ADEA) in 1979, white male workers over the age of 50 in states with age discrimination laws worked between 1 and 1.5 fewer weeks per year than workers in states without laws. These men are also .3 percentage points more likely to be retired and .2 percentage points less likely to be hired. These findings suggest that in an anti-age discrimination environment, firms seek to avoid litigation through means not intended by the legislation -- by not employing older workers in the first place.
Handle: RePEc:nbr:nberwo:12048
Template-Type: ReDIF-Paper 1.0
Title: Who Adjusts and When? On the Political Economy of Reforms
Classification-JEL: G0; H0
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Silvia Ardagna
Author-Name: Francesco Trebbi
Author-Person: ptr40
Note: EFG PE POL
Number: 12049
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12049
File-URL: http://www.nber.org/papers/w12049.pdf
File-Format: application/pdf
Publication-Status: published as Alesina, Alberto, Silvia Ardagna, and Francesco Trebbi. “Who Adjusts and When? On the Political Economy of Stabilizations.” IMF Staff Papers, Mundell-Fleming Lecture, 53: 1-49, 2006 .
Abstract: Why do countries delay stabilizations of large and increasing budget deficits and inflation? And what explains the timing of reforms? We use the war of attrition model as a guidance for our empirical study on a vast sample of countries. We find that stabilizations are more likely to occur when time of crisis occur, at the beginning of term of office of a new government, in countries with "strong" governments (i.e. presidential systems and unified governments with a large majority of the party in office), and when the executive faces less constraints. The role of external inducements like IMF programs has at best a weak effect, but problem of reverse causality are possible.
Handle: RePEc:nbr:nberwo:12049
Template-Type: ReDIF-Paper 1.0
Title: A Framework for Assessing Corporate Governance Reform
Classification-JEL: G30; G38; L51
Author-Name: Benjamin E. Hermalin
Author-Person: phe59
Author-Name: Michael S. Weisbach
Note: CF
Number: 12050
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12050
File-URL: http://www.nber.org/papers/w12050.pdf
File-Format: application/pdf
Abstract: In light of recent corporate scandals, numerous proposals have been introduced for reforming corporate governance. This paper provides a theoretical framework through which to evaluate these reforms. Unlike various ad hoc arguments, this framework recognizes that governance structures arise endogenously in response to the constrained optimization problems faced by the relevant parties. Contract theory provides a set of necessary conditions under which governance reform can be welfare-improving: 1) There is asymmetric information at the time of contracting; or 2) Governance failures impose externalities on third parties; or 3) The state has access to remedies or punishments that are not available to third parties. We provide a series of models that illustrate the importance of these conditions and what can go wrong if they are not met.
Handle: RePEc:nbr:nberwo:12050
Template-Type: ReDIF-Paper 1.0
Title: Bidding for Incomplete Contracts: An Empirical Analysis
Classification-JEL: D23; D82; H57; L14; L22
Author-Name: Patrick Bajari
Author-Name: Stephanie Houghton
Author-Name: Steve Tadelis
Author-Person: pta314
Note: IO
Number: 12051
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12051
File-URL: http://www.nber.org/papers/w12051.pdf
File-Format: application/pdf
Abstract: Procurement contracts are often incomplete because the initial plans and specifications are changed and refined after the contract is awarded to the lowest bidder. This results in a final cost to the buyer that differs from the low bid, and may also involve significant adaptation and renegotiation costs. We propose a stylized model of bidding for incomplete contracts and apply it to data from highway paving contracts. Reduced form regressions suggest that bidders respond strategically to contractual incompleteness and that adaptation costs, broadly defined, are an important determinant of the observed bids. We then estimate the costs of adaptation and bidder markups using a structural auction model. The estimates suggest that adaptation costs on average account for about ten percent of the winning bid. The distortions from private information and local market power, which are the focus on much of the literature on optimal procurement mechanisms, are much smaller by comparison.
Handle: RePEc:nbr:nberwo:12051
Template-Type: ReDIF-Paper 1.0
Title: New Measures of Port Efficiency Using International Trade Data
Classification-JEL: F10; L92
Author-Name: Bruce A. Blonigen
Author-Person: pbl165
Author-Name: Wesley Wilson
Author-Person: pwi277
Note: ITI
Number: 12052
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12052
File-URL: http://www.nber.org/papers/w12052.pdf
File-Format: application/pdf
Abstract: As the clearinghouses for a major portion of the world's rapidly increasing international trade flows, ocean ports and the efficiency with which they process cargo have become an ever more important topic. Yet, there exist very little data that allows one to compare port efficiency measures of any kind across ports and, especially, over time. This paper provides a new statistical method of uncovering port efficiency measures using U.S. Census data on imports into U.S. ports. Unlike previous measures, this study's methodology can provide such estimates for a much broader sample of countries and years with little cost. Thus, such data can be used by future researchers to examine a myriad of new issues, including the evolution of port efficiencies over time and its effects on international trade flows and country-level growth.
Handle: RePEc:nbr:nberwo:12052
Template-Type: ReDIF-Paper 1.0
Title: Competing Approaches to Forecasting Elections: Economic Models, Opinion Polling and Prediction Markets
Classification-JEL: D72; D84
Author-Name: Andrew Leigh
Author-Person: ple119
Author-Name: Justin Wolfers
Author-Person: pwo9
Note: AP EFG POL
Number: 12053
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12053
File-URL: http://www.nber.org/papers/w12053.pdf
File-Format: application/pdf
Publication-Status: published as Leigh, Andrew and Justin Wolfers. “Competing Approaches to Forecasting Elections: Economic Models, Opinion Polling and Prediction Markets.” Economic Record 82, 258 (September 2006): 325-337.
Abstract: We review the efficacy of three approaches to forecasting elections: econometric models that project outcomes on the basis of the state of the economy; public opinion polls; and election betting (prediction markets). We assess the efficacy of each in light of the 2004 Australian election. This election is particularly interesting both because of innovations in each forecasting technology, and also because the increased majority achieved by the Coalition surprised most pundits. While the evidence for economic voting has historically been weak for Australia, the 2004 election suggests an increasingly important role for these models. The performance of polls was quite uneven, and predictions both across pollsters, and through time, vary too much to be particularly useful. Betting markets provide an interesting contrast, and a slew of data from various betting agencies suggests a more reasonable degree of volatility, and useful forecasting performance both throughout the election cycle and across individual electorates.
Handle: RePEc:nbr:nberwo:12053
Template-Type: ReDIF-Paper 1.0
Title: The Economic Costs of the Iraq War: An Appraisal Three Years After the Beginning of the Conflict
Classification-JEL: H5
Author-Name: Linda Bilmes
Author-Name: Joseph Stiglitz
Note: PE
Number: 12054
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12054
File-URL: http://www.nber.org/papers/w12054.pdf
File-Format: application/pdf
Abstract: This paper attempts to provide a more complete reckoning of the costs of the Iraq War, using standard economic and accounting/ budgetary frameworks. As of December 30, 2005, total spending for combat and support operations in Iraq is $251bn, and the CBO's estimates put the projected total direct costs at around $500bn. These figures, however, greatly underestimate the War's true costs. We estimate a range of present and future costs, by including expenditures not in the $500bn CBO projection, such as lifetime healthcare and disability payments to returning veterans, replenishment of military hardware, and increased recruitment costs. We then make adjustments to reflect the social costs of the resources deployed, (e.g. reserve pay is less than the opportunity wage and disability pay is less than forgone earnings). Finally, we estimate the effects of the war on the overall performance of the economy. Even taking a conservative approach and assuming all US troops return by 2010, we believe the true costs exceed a trillion dollars. Using the CBO's projection of maintaining troops in Iraq through 2015, the true costs may exceed $2 trillion. In either case, the cost is much larger than the administration's original estimate of $50-$60bn. The costs estimated do not include those borne by other countries, either directly (military expenditures) or indirectly (the increased price of oil). Most importantly, we have not included the costs to Iraq, either in terms of destruction of infrastructure or the loss of lives. These would all clearly raise the costs significantly.
Handle: RePEc:nbr:nberwo:12054
Template-Type: ReDIF-Paper 1.0
Title: Estimating and Testing Beta Pricing Models: Alternative Methods and their Performance in Simulations
Classification-JEL: G12
Author-Name: Jay Shanken
Author-Person: psh114
Author-Name: Guofu Zhou
Author-Person: pzh420
Note: AP
Number: 12055
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12055
File-URL: http://www.nber.org/papers/w12055.pdf
File-Format: application/pdf
Publication-Status: published as Shanken, Jay and Guofu Zhou. “Estimating and Testing Beta Pricing Models: Alternative Methods and Their Performance in Simulations.” Journal of Financial Economics 84, 1 (April 2007): 40-86.
Abstract: In this paper, we conduct a simulation analysis of the Fama and MacBeth (1973) two-pass procedure, as well as maximum likelihood (ML) and generalized method of moments estimators of cross-sectional expected return models. We also provide some new analytical results on computational issues, the relations between estimators, and asymptotic distributions under model misspecification. The GLS estimator is often much more precise than the usual OLS estimator, but it displays more bias as well. A "truncated" form of ML performs quite well overall in terms of bias and precision, but produces less reliable inferences than the OLS estimator.
Handle: RePEc:nbr:nberwo:12055
Template-Type: ReDIF-Paper 1.0
Title: Single Parenthood and Childhood Outcomes in the Mid-Nineteenth Century Urban South
Classification-JEL: I2; J1; N3
Author-Name: Howard Bodenhorn
Author-Person: pbo547
Note: CH DAE
Number: 12056
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12056
File-URL: http://www.nber.org/papers/w12056.pdf
File-Format: application/pdf
Publication-Status: published as Bodenhorn, Howard. "Single Parenthood and Childhood Outcomes in the Mid-Nineteenth-Century Urban South." Journal of Interdisciplinary History 38, 1 (Summer 2007): 33-64.
Abstract: Families are the core social institution and a growing body of research documents the costs of single parenthood for children in the twentieth century. This study documents racial differences in the incidence and costs of single parenthood in the mid-nineteenth century. Data from the urban South reveal two notable consequences of single parenthood. First, white children residing with single mothers left school earlier than children residing with two parents. Black children in single mother homes started school later and left school earlier. Single motherhood is therefore associated with less lifetime schooling for both races, but the consequences of living in a nontraditional home was larger for blacks. Second, single motherhood was associated with an increased incidence of labor force participation for white youth, but not for blacks. Single parenthood imposed costs, in terms of foregone human capital formation, on children in the mid-nineteenth century, but the consequences of single motherhood were mitigated by social norms toward childhood education.
Handle: RePEc:nbr:nberwo:12056
Template-Type: ReDIF-Paper 1.0
Title: Some Answers to the Retirement-Consumption Puzzle
Classification-JEL: D91; J26
Author-Name: Michael D. Hurd
Author-Person: phu137
Author-Name: Susann Rohwedder
Author-Person: pro270
Note: AG EFG
Number: 12057
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12057
File-URL: http://www.nber.org/papers/w12057.pdf
File-Format: application/pdf
Abstract: The simple one-good model of life-cycle consumption requires "consumption smoothing." According to previous results based on partial spending and on synthetic panels, British and U.S. households apparently reduce consumption at retirement. The reduction cannot be explained by the simple one-good life-cycle model, so it has been referred to as the retirement-consumption puzzle. An interpretation is that at retirement individuals discover they have fewer economic resources than they had anticipated prior to retirement, and as a consequence reduce consumption. This interpretation challenges the life-cycle model where consumers are assumed to be forward-looking. Using panel data, we find that prior to retirement workers anticipated on average a decline of 13.3% in spending and after retirement they recollected a decline of 12.9%: widespread surprise is not the explanation for the retirement-consumption puzzle. Workers with substantial wealth both anticipated and recollected a decline. Therefore, for many workers the decline is not necessitated by the fall in income that accompanies retirement. Poor health is associated with above-average declines. At retirement time spent in activities that could substitute for market-purchased goods increases. Apparently a number of factors contribute to the decline in spending, which, for most of the population, can be accommodated in conventional models of economic behavior.
Handle: RePEc:nbr:nberwo:12057
Template-Type: ReDIF-Paper 1.0
Title: The Most Important Works of Art of the Twentieth Century
Classification-JEL: J0; J4
Author-Name: David W. Galenson
Note: LS PR
Number: 12058
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12058
File-URL: http://www.nber.org/papers/w12058.pdf
File-Format: application/pdf
Publication-Status: published as The Most Important Works of Art of the Twentieth Century, David W. Galenson. in Conceptual Revolutions in Twentieth-Century Art, Galenson. 2009
Abstract: A survey of art history textbooks identifies and ranks the eight most important works of the 20th century. The most important painting of the century was Les Demoiselles d'Avignon, executed by Picasso at the age of 26, which began the development of Cubism. Among the other seven works, a collage, an earthwork, and a ready-made all represent new genres that had not existed at the start of the century. All eight works were made by conceptual artists, at a median age of just 32. The results underline the importance of young conceptual innovators, who made radical departures from existing conventions, in the advanced art of the century. Four of the eight works were made by Picasso and Marcel Duchamp, and this highlights the importance of the versatile conceptual innovators who became a prominent feature of twentieth-century art.
Handle: RePEc:nbr:nberwo:12058
Template-Type: ReDIF-Paper 1.0
Title: The Making of an Investment Banker: Macroeconomic Shocks, Career Choice, and Lifetime Income
Classification-JEL: M5; J31; J44
Author-Name: Paul Oyer
Author-Person: poy2
Note: CF LS
Number: 12059
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12059
File-URL: http://www.nber.org/papers/w12059.pdf
File-Format: application/pdf
Publication-Status: published as Oyer, Paul. "The Making of an Investment Banker: Macroeconomic Shocks, Career Choice, and Lifetime Income." The Journal of Finance 63 (December 2008): 2601-2628.
Abstract: New graduates of elite MBA programs flock to Wall Street during bull markets and start their careers elsewhere when the stock market is weak. Given the transferability of MBA skills, it seems likely that any effect of stock returns on MBA placement would be short-lived. In this paper, I use a survey of Stanford MBAs from the classes of 1960 through 1997 to analyze the relationship between the state of the stock market at graduation, initial job placement, and long-term labor market outcomes. Using stock market conditions at graduation as an instrument for first job, I show that there is a strong causal effect of initial placement in investment banking on the likelihood of working on Wall Street anywhere from three to twenty years later. I then measure the investment banking compensation premium relative to other jobs and estimate the additional income generated by an MBA cohort where a higher fraction starts in higher-paid jobs relative to a cohort that starts in lower-paid areas. The results lead to several conclusions. First, random factors play a large role in determining the industries and incomes of members of this high-skill group. Second, there is a deep pool of potential investment bankers in any given Stanford MBA class. During the time these people are in school, factors beyond their control sort them into or out of banking upon graduation. Finally, industry-specific or task-specific human capital appears to be important for young investment bankers.
Handle: RePEc:nbr:nberwo:12059
Template-Type: ReDIF-Paper 1.0
Title: Five Open Questions About Prediction Markets
Classification-JEL: C9; D7; D8; G1; M2
Author-Name: Justin Wolfers
Author-Person: pwo9
Author-Name: Eric Zitzewitz
Author-Person: pzi23
Note: AP EFG
Number: 12060
Creation-Date: 2006-02
Order-URL: http://www.nber.org/papers/w12060
File-URL: http://www.nber.org/papers/w12060.pdf
File-Format: application/pdf
Publication-Status: published as Hahn, Robert and Paul Tetlock (eds.) Information Markets: A New Way of Making Decisions in the Public and Private Sectors. Washington DC: AEI-Brookings Press, 2006.
Abstract: Interest in prediction markets has increased in the last decade, driven in part by the hope that these markets will prove to be valuable tools in forecasting, decision-making and risk management -- in both the public and private sectors. This paper outlines five open questions in the literature, and we argue that resolving these questions is crucial to determining whether current optimism about prediction markets will be realized.
Handle: RePEc:nbr:nberwo:12060
Template-Type: ReDIF-Paper 1.0
Title: Taxation
Classification-JEL: H20; H21; D61; I38; K34
Author-Name: Louis Kaplow
Author-Person: pka44
Note: LE PE
Number: 12061
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12061
File-URL: http://www.nber.org/papers/w12061.pdf
File-Format: application/pdf
Publication-Status: published as Polinsky, A. Mitchell and Steven Shavell (eds.) HANDBOOK OF LAW AND ECONOMICS vol. 1. Amsterdam :Elsevier, 2007.
Abstract: This Handbook entry presents a conceptual, normative overview of the subject of taxation. It emphasizes the relationships among the main functions of taxation -- notably, raising revenue, redistributing income, and correcting externalities -- and the mapping between these functions and various forms of taxation. Different types of taxation as well as expenditures on transfers and public goods are each integrated into a common optimal tax framework with the income tax and commodity taxes at the core. Additional topics addressed include a range of dynamic issues, the unit of taxation, tax administration and enforcement, and tax equity.
Handle: RePEc:nbr:nberwo:12061
Template-Type: ReDIF-Paper 1.0
Title: Unhappiness after Hurricane Katrina
Classification-JEL: D6
Author-Name: Miles Kimball
Author-Person: pki97
Author-Name: Helen Levy
Author-Person: ple728
Author-Name: Fumio Ohtake
Author-Person: poh7
Author-Name: Yoshiro Tsutsui
Note: EFG EH
Number: 12062
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12062
File-URL: http://www.nber.org/papers/w12062.pdf
File-Format: application/pdf
Abstract: In August, September and October of 2005, the Monthly Surveys of Consumers fielded by the University of Michigan included questions about the happiness of a nationally representative sample of U.S. adults. The date of each interview is known. Looking at the data week by week, reported happiness dipped significantly in the first week of September, after the seriousness of the damage done by Katrina became clear. The impulse response of happiness is especially strong in the South Central region, closest to the devastation of Katrina. The dip in happiness lasted two or three weeks in the South Central region; in the rest of the country, reported happiness returned to normal after one or two weeks. In addition to the reaction to Katrina, happiness dipped significantly after the October 2005 earthquake in Pakistan. These results illustrate the potential of high-frequency happiness data to yield information about preferences over regional, national and international conditions by indicating the magnitude of the good or bad news conveyed by events.
Handle: RePEc:nbr:nberwo:12062
Template-Type: ReDIF-Paper 1.0
Title: Putting Behavioral Economics to Work: Testing for Gift Exchange in Labor Markets Using Field Experiments
Classification-JEL: J2; J30; J41; C93
Author-Name: Uri Gneezy
Author-Person: pgn18
Author-Name: John A. List
Author-Person: pli176
Note: LS PE
Number: 12063
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12063
File-URL: http://www.nber.org/papers/w12063.pdf
File-Format: application/pdf
Publication-Status: published as Gneezy, Uri, and John A. List. “Putting Behavioral Economics to Work: Testing for Gift Exchange in Labor Markets Using Field Experiments.” Econometrica 74, 5 (September 2006): 1365-1384.
Abstract: Recent discoveries in behavioral economics have led scholars to question the underpinnings of neoclassical economics. We use insights gained from one of the most influential lines of behavioral research -- gift exchange -- in an attempt to maximize worker effort in two quite distinct tasks: data entry for a university library and door-to-door fundraising for a research center. In support of the received literature, our field evidence suggests that worker effort in the first few hours on the job is considerably higher in the "gift" treatment than in the "non-gift treatment." After the initial few hours, however, no difference in outcomes is observed, and overall the gift treatment yielded inferior aggregate outcomes for the employer: with the same budget we would have logged more data for our library and raised more money for our research center by using the market-clearing wage rather than by trying to induce greater effort with a gift of higher wages.
Handle: RePEc:nbr:nberwo:12063
Template-Type: ReDIF-Paper 1.0
Title: Program Design and Student Outcomes in Graduate Education
Classification-JEL: I2
Author-Name: Jeffrey Groen
Author-Name: George Jakubson
Author-Name: Ronald G. Ehrenberg
Author-Person: peh2
Author-Name: Scott Condie
Author-Name: Albert Yung-Hsu Liu
Author-Person: pli226
Note: ED LS
Number: 12064
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12064
File-URL: http://www.nber.org/papers/w12064.pdf
File-Format: application/pdf
Publication-Status: published as Groen, J., G. Jakubson, R. Ehrenberg, S. Condie, and A. Liu. “Program Design and Student Outcomes in Graduate Education.” Economics of Education Review (April 2008).
Abstract: Doctoral programs in the humanities and related social sciences are characterized by high attrition and long times-to-degree. In response to these problems, the Andrew W. Mellon Foundation launched the Graduate Education Initiative (GEI) to improve the quality of graduate programs and in turn reduce attrition and shorten times-to-degree. Over a 10-year period starting in 1991, the Foundation provided a total of over $80 million to 51 departments at 10 major research universities. We estimate the impact of the GEI on attrition rates and times-to-degree using competing risk duration models and student-level data. The data span the start of the GEI and include information for students at a set of control departments. We estimate that the GEI had modest impacts on student outcomes in the expected directions: reducing attrition rates, reducing times-to-degree and increasing completion rates. The impacts of the GEI appear to have been driven in part by reductions in entering cohort size, improvements in financial support and increases in student quality.
Handle: RePEc:nbr:nberwo:12064
Template-Type: ReDIF-Paper 1.0
Title: Inside the Black Box of Doctoral Education: What Program Characteristics Influence Doctoral Students' Attrition and Graduation Probabilities?
Classification-JEL: I2
Author-Name: Ronald G. Ehrenberg
Author-Person: peh2
Author-Name: George Jakubson
Author-Name: Jeffrey Groen
Author-Name: Eric So
Author-Name: Joseph Price
Author-Person: ppr64
Note: ED LS
Number: 12065
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12065
File-URL: http://www.nber.org/papers/w12065.pdf
File-Format: application/pdf
Publication-Status: published as Ehrenberg, R., G. Jakubson, J. Groen, E. So, and J. Price. “Inside the Black Box of Doctoral Education: What Program Characteristics Influence Doctoral Students Attention and Graduation Probabilities.” Educational Evaluation and Policy Analysis (June 2007).
Abstract: The Andrew W. Mellon Foundation's Graduate Education Initiative (GEI) provided over $80 million to 51 treatment departments in the humanities and related social sciences during the 1990s to improve their PhD programs. Using survey data collected from students who entered the treatment and 50 control departments during a 15 year period that spanned the start of the GEI, we use factor analysis to group multiple aspects of PhD programs into a smaller number of characteristics and then estimate which aspects of PhD programs the GEI influenced and how these different aspects influenced attrition and graduation probabilities. From these analyses, we identify the routes via which the GEI influenced attrition and graduation rates and also indicate which aspects of PhD programs departments should concentrate on if they want to improve their programs' performance.
Handle: RePEc:nbr:nberwo:12065
Template-Type: ReDIF-Paper 1.0
Title: Testing for Racial Differences in the Mental Ability of Young Children
Classification-JEL: J15; I20
Author-Name: Roland G. Fryer
Author-Person: pfr43
Author-Name: Steven D. Levitt
Author-Person: ple59
Note: LS
Number: 12066
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12066
File-URL: http://www.nber.org/papers/w12066.pdf
File-Format: application/pdf
Publication-Status: published as Roland G Fryer & Steven D Levitt, 2013. "Testing for Racial Differences in the Mental Ability of Young Children," American Economic Review, vol 103(2), pages 981-1005.
Abstract: On tests of intelligence, Blacks systematically score worse than Whites, whereas Asians frequently outperform Whites. Some have argued that genetic differences across races account for the gap. Using a newly available nationally representative data set that includes a test of mental function for children aged eight to twelve months, we find only minor racial differences in test outcomes (0.06 standard deviation units in the raw data) between Blacks and Whites that disappear with the inclusion of a limited set of controls. The only statistically significant racial difference is that Asian children score slightly worse than those of other races. To the extent that there are any genetically-driven racial differences in intelligence, these gaps must either emerge after the age of one, or operate along dimensions not captured by this early test of mental cognition.
Handle: RePEc:nbr:nberwo:12066
Template-Type: ReDIF-Paper 1.0
Title: A Bound on Risk Aversion Using Labor Supply Elasticities
Classification-JEL: D80; J20; J60
Author-Name: Raj Chetty
Author-Person: pch161
Note: AP EFG LS PE
Number: 12067
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12067
File-URL: http://www.nber.org/papers/w12067.pdf
File-Format: application/pdf
Abstract: This paper shows that existing evidence on labor supply behavior places an upper bound on risk aversion in the expected utility model. I derive a formula for the coefficient of relative risk aversion (g) in terms of (1) the ratio of the income elasticity of labor supply to the wage elasticity and (2) the degree of complementarity between consumption and labor. I bound the degree of complementarity using data on consumption choices when labor supply varies randomly across states. Using labor supply elasticity estimates from thirty-three studies, I find a mean estimate of g = 1. I then show that generating g > 2 would require that wage increases cause sharper reductions in labor supply than estimated in any of the studies.
Handle: RePEc:nbr:nberwo:12067
Template-Type: ReDIF-Paper 1.0
Title: CEO Turnover and Relative Performance Evaluation
Classification-JEL: G30; G34; D20; D23; M51
Author-Name: Dirk Jenter
Author-Person: pje55
Author-Name: Fadi Kanaan
Note: CF LS
Number: 12068
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12068
File-URL: http://www.nber.org/papers/w12068.pdf
File-Format: application/pdf
Publication-Status: published as Dirk Jenter & Fadi Kanaan, 2015. "CEO Turnover and Relative Performance Evaluation," Journal of Finance, American Finance Association, vol. 70(5), pages 2155-2184, October.
Abstract: This paper examines whether CEOs are fired after bad firm performance caused by factors beyond their control. Standard economic theory predicts that corporate boards filter out exogenous industry and market shocks to firm performance when deciding on CEO retention. Using a new hand-collected sample of 1,590 CEO turnovers from 1993 to 2001, we document that CEOs are significantly more likely to be dismissed from their jobs after bad industry and bad market performance. A decline in the industry component of firm performance from its 75th to its 25th percentile increases the probability of a forced CEO turnover by approximately 50 percent. This finding is robust to controls for firm-specific performance. The result is at odds with the prior empirical literature which showed that corporate boards filter exogenous shocks from CEO dismissal decisions in samples from the 1970s and 1980s. Our findings suggest that the standard CEO turnover model is too simple to capture the empirical relation between performance and forced CEO turnovers, and we evaluate several extensions to the standard model.
Handle: RePEc:nbr:nberwo:12068
Template-Type: ReDIF-Paper 1.0
Title: Looking Beyond TRIA: A Clinical Examination of Potential Terrorism Loss Sharing
Classification-JEL: H56; G22; G28
Author-Name: Howard Kunreuther
Author-Name: Erwann Michel-Kerjan
Author-Person: pmi64
Note: PE
Number: 12069
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12069
File-URL: http://www.nber.org/papers/w12069.pdf
File-Format: application/pdf
Publication-Status: published as Auerswald, Philip E., Lewis M. Branscomb, Todd M. La Porte, and Erwann O. Michel-Kerjan (eds.) Seeds of Disaster, Roots of Response: How Private Action Can Reduce Public Vulnerability. Cambridge and New York: Cambridge University Press, 2006.
Abstract: The Terrorism Risk Insurance Act of 2002 (TRIA) established a public-private program to cover commercial enterprises against foreign terrorism on US soil. It was a temporary measure to increase the availability of risk coverage for terrorist acts by requiring insurers to provide coverage. Initially established to sunset on December 31, 2005, a two-year extension has been voted by Congress and signed by the President in December. This paper provides an extensive series of empirical analyses of loss sharing under this program in 2005, and a prospective analysis for 2006. Using data collected on the top 451 insurers operating in the United States, we examine the impact of TRIA on loss sharing between the key stakeholders: victims, insurers and their policyholders, and the taxpayers. By simulating the explosion of a 5-ton truck bomb in major cities in the United States, we conclude that taxpayers are likely not to pay anything for losses below $15 billion. For a $25 billion loss, insurers and policyholders would handle between 80 and 100 percent of the loss depending on the property take up rate. Only for terrorist attacks where insured losses were $100 billion would taxpayers have to pay 50 percent of the claims. Recent modifications of TRIA will transfer an even larger part of the risk to the private sector. We also show that if TRIA were made permanent in its current form some very large insurers could strategize by collecting large amount of premiums for terrorism insurance but only would be financially responsible for a small portion of the claims. Commercial policyholders from all insurers (whether or not covered against terrorism) and the federal government would absorb the residual insured losses, raising equity issues. The paper also reviews a set of possible long-term alternatives or complementary options to the current design of TRIA that could be important features of a more permanent program. We conclude that more than four years after 9/11, the question as to who should pay for the economic consequences of a terrorist attack on the US has not yet received the attention it deserves. Congress or the White House should consider establishing a national commission on terrorism risk coverage before permanent legislation is enacted.
Handle: RePEc:nbr:nberwo:12069
Template-Type: ReDIF-Paper 1.0
Title: Environmental Investment and Policy with Distortionary Taxes and Endogenous Growth
Classification-JEL: O41; Q20; H41; H23
Author-Name: Don Fullerton
Author-Person: pfu10
Author-Name: Seung-Rae Kim
Note: PE EEE
Number: 12070
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12070
File-URL: http://www.nber.org/papers/w12070.pdf
File-Format: application/pdf
Publication-Status: published as Fullerton, Don and S.R. Kim. “Environmental Investment and Policy with Distortionary Taxes and Endogenous Growth.” Journal of Environmental Economics and Management (September 2008).
Abstract: Recent studies consider public R&D spending that affects abatement knowledge and endogenous growth, distortionary taxes that affect physical and human capital formation, pollution taxes that affect environmental degradation, and regeneration that restores natural capital. Our model combines all of those elements. We show how the combination affects results from each prior model, focusing on two parameters that represent the need for distorting taxes, and the productivity of abatement knowledge relative to pollution. First, either of these two extensions can reverse the prior finding that pollution tax revenue is more than enough to pay for public abatement R&D. Second, tax distortions and externalities substantially alter prior findings that the ratio of public to private capital is based only on output elasticities. Third, our dynamic model affects prior static findings about how other public spending "crowds out" provision of the environmental public good. Fourth, we show whether a greater need for public spending leads to greater increases in the distorting tax or pollution tax. Fifth, while prior research is optimistic that environmental regulation can boost economic growth, we show how it may increase or decrease the growth rate --even if it raises welfare.
Handle: RePEc:nbr:nberwo:12070
Template-Type: ReDIF-Paper 1.0
Title: Employee Screening: Theory and Evidence
Classification-JEL: J2; J3
Author-Name: Fali Huang
Author-Person: phu135
Author-Name: Peter Cappelli
Note: LS
Number: 12071
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12071
File-URL: http://www.nber.org/papers/w12071.pdf
File-Format: application/pdf
Abstract: Arguably the fundamental problem faced by employers is how to elicit effort from employees. Most models suggest that employers meet this challenge by monitoring employees carefully to prevent shirking. But there is another option that relies on heterogeneity across employees, and that is to screen job candidates to find workers with a stronger work ethic who require less monitoring. This should be especially useful in work systems where monitoring by supervisors is more difficult, such as teamwork systems. We analyze the relationship between screening and monitoring in the context of a principal-agent model and test the theoretical results using a national sample of U.S. establishments, which includes information on employee selection. We find that employers screen applicants more intensively for work ethic where they make greater use of systems such as teamwork where monitoring is more difficult. This screening is also associated with higher productivity and higher wages and benefits, as predicted by the theory: The synergies between reduced monitoring costs and high performance work systems enable the firm to pay higher wages to attract and retain such workers. Screening for other attributes, such as cognitive ability, does not produce these results.
Handle: RePEc:nbr:nberwo:12071
Template-Type: ReDIF-Paper 1.0
Title: Recent Chinese Buyout Activity and the Implications for Global Architecture
Classification-JEL: F02; F20; F21; O24
Author-Name: Agata Antkiewicz
Author-Name: John Whalley
Author-Person: pwh8
Note: ITI
Number: 12072
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12072
File-URL: http://www.nber.org/papers/w12072.pdf
File-Format: application/pdf
Publication-Status: published as Whalley, John and Agata Antkiewicz. "Recent Chinese Buyout Activity and the Implications for Global Architecture." Canadian Public Policy 33, 2(June 2007): 207-226.
Abstract: We discuss recent cases of Chinese buyout activity in the OECD (especially in the US and the EU) in resource and manufacturing sectors. While most of the buyout attempts have been unsuccessful, they can serve as a catalyst for a wider discussion on the implications for global arrangements over cross border acquisitions. Three specific issues are discussed. The first is the subsidization of purchase raised in the OECD in response to the advancing of low- or no-interest loans by the Chinese Central Bank to companies investing abroad. The second is the transparency of entities involved in the buyout attempt. Most Chinese companies have close ties to the multiple levels of government and are not subject to the standard reporting requirements as required of OECD companies. The third involves national security concerns in the OECD and the possibility of acquiring sensitive technology by Chinese companies when they purchase companies abroad. These issues have not been addressed in the existing OECD/WTO investment policy initiatives and have yet to be discussed in the global fora.
Handle: RePEc:nbr:nberwo:12072
Template-Type: ReDIF-Paper 1.0
Title: Partisan Impacts on the Economy: Evidence from Prediction Markets and Close Elections
Classification-JEL: D72; E3; E6; G13; G14; H6
Author-Name: Erik Snowberg
Author-Person: psn15
Author-Name: Justin Wolfers
Author-Person: pwo9
Author-Name: Eric Zitzewitz
Author-Person: pzi23
Note: AP EFG POL
Number: 12073
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12073
File-URL: http://www.nber.org/papers/w12073.pdf
File-Format: application/pdf
Publication-Status: published as Snowberg, Erik, Justin Wolfers and Erik Zitzewitz. “Partisan Impacts on the Economy: Evidence from Prediction Markets and Close Elections.” Quarterly Journal of Economics 122, 2 (May 2007): 807-829.
Abstract: Analyses of the effects of election outcomes on the economy have been hampered by the problem that economic outcomes also influence elections. We sidestep these problems by analyzing movements in economic indicators caused by clearly exogenous changes in expectations about the likely winner during Election Day. Analyzing high frequency financial fluctuations following the release of flawed exit poll data on Election Day 2004, and then during the vote count, we find that markets anticipated higher equity prices, interest rates and oil prices and a stronger dollar under a Bush presidency than under Kerry. A similar Republican-Democrat differential was also observed for the 2000 Bush-Gore contest. Prediction market based analyses of all Presidential elections since 1880 also reveal a similar pattern of partisan impacts, suggesting that electing a Republican President raises equity valuations by 2 3 percent, and that since Reagan, Republican Presidents have tended to raise bond yields.
Handle: RePEc:nbr:nberwo:12073
Template-Type: ReDIF-Paper 1.0
Title: Are Prudential Supervision and Regulation Pillars of Financial Stability? Evidence from the Great Depression
Classification-JEL: N2; E44; G21
Author-Name: Kris James Mitchener
Note: DAE
Number: 12074
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12074
File-URL: http://www.nber.org/papers/w12074.pdf
File-Format: application/pdf
Publication-Status: published as Mitchener, Kris James. "Are Prudential Supervision and Regulation Pillars of Financial Stability? Evidence from the Great Depression." The Journal of Law and Economics 50 (May 2007).
Abstract: Drawing on the variation in financial distress across U.S. states during the Great Depression, this article suggests how bank supervision and regulation affected banking stability during the Great Depression. In response to well-organized interest groups and public concern over the bank failures of the 1920s, many U.S. states adopted supervisory and regulatory standards that undermined the stability of state banking systems in the 1930s. Those states that prohibited branch banking, had higher reserve requirements, granted their supervisors longer term lengths, or restricted the ability of supervisors to liquidate banks quickly experienced higher state bank suspension rates from 1929 to 1933.
Handle: RePEc:nbr:nberwo:12074
Template-Type: ReDIF-Paper 1.0
Title: Asset Prices When Agents are Marked-to-Market
Author-Name: Gary Gorton
Author-Person: pgo458
Author-Name: Ping He
Author-Person: phe155
Author-Name: Lixin Huang
Author-Person: phu108
Note: AP CF
Number: 12075
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12075
File-URL: http://www.nber.org/papers/w12075.pdf
File-Format: application/pdf
Abstract: "Risk management" in securities markets refers to the oversight of portfolio managers and professional traders when they trade on behalf of investors in security markets. Monitoring of their trading performance, profit and loss, and risk-taking behavior, is measured by principals using security market prices. We study the optimality of the practice of marking-to-market and provide conditions under which investing principals should optimally monitor their agent traders using market prices to measure traders' performance. Asset prices, however, can be affected by mark-to-market contracts. We show that such contracts introduce an externality when there are many traders. Traders may rationally herd, trading on irrelevant information. Ironically, this causes asset prices to be less informative than they would be without the mark-to-market feature.
Handle: RePEc:nbr:nberwo:12075
Template-Type: ReDIF-Paper 1.0
Title: Discretionary Policy and Multiple Equilibria
Classification-JEL: E5; E6
Author-Name: Robert G. King
Author-Person: pki21
Note: EFG
Number: 12076
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12076
File-URL: http://www.nber.org/papers/w12076.pdf
File-Format: application/pdf
Publication-Status: published as King, Robert G. "Discretionary Policy And Multiple Equilibria," FRB Richmond - Economic Quarterly, 2006, v92(1,Winter), 1-15.
Abstract: Discretionary policymaking can foster strategic complementarities between private sector decisions, thus leading to multiple equilibria. This article studies a simple example, originating with Kydland and Prescott, of a government which must decide whether to build a dam to prevent adverse effects on floods on the incomes of residents of a floodplain. In this example, it is socially inefficient to build the dam and for people to live on the floodplain, with this outcome being the unique equilibrium under policy commitment. Under discretion, there are two equilibria. First, if agents believe that few of their fellow citizens will move to the floodplain, then they know that the government will choose not to build the dam and there is therefore no incentive for any individual to locate on the floodplain. Second, if agents believe that there will be many floodplain residents, then they know that the government will choose to build the dam and even small benefits of living on the floodplain will lead them to choose that location. In this second equilibrium, all individuals are worse off.
Handle: RePEc:nbr:nberwo:12076
Template-Type: ReDIF-Paper 1.0
Title: Post-Secondary Education and Increasing Wage Inequality
Classification-JEL: J3
Author-Name: Thomas Lemieux
Author-Person: ple92
Note: ED LS
Number: 12077
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12077
File-URL: http://www.nber.org/papers/w12077.pdf
File-Format: application/pdf
Publication-Status: published as Lemieux, Thomas. "Postsecondary Education And Increasing Wage Inequality," American Economic Review, 2006, v96(2,May), 195-199.
Abstract: The paper presents descriptive evidence from quantile regressions and more "structural" estimates from a human capital model with heterogenous returns to show that most of the increase in wage inequality between 1973 and 2005 is due to a dramatic increase in the return to post-secondary education. The model with heterogenous returns also helps explain why both the relative wages and the within-group dispersion among highly-educated workers have increased in tandem over time. These findings add to the growing evidence that, far from being ubiquitous, changes in wage inequality are increasingly concentrated in the very top end of the wage distribution.
Handle: RePEc:nbr:nberwo:12077
Template-Type: ReDIF-Paper 1.0
Title: Racial Segregation and the Black-White Test Score Gap
Classification-JEL: H73; I20; J18; J24; R20
Author-Name: David Card
Author-Person: pca271
Author-Name: Jesse Rothstein
Author-Person: pro180
Note: CH ED
Number: 12078
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12078
File-URL: http://www.nber.org/papers/w12078.pdf
File-Format: application/pdf
Publication-Status: published as Card, David and Jesse Rothstein. “Racial Segregation and the Black-White Test Score Gap.” Journal of Public Economics 91, 11-12 (December 2007): 2158-2184.
Abstract: Racial segregation is often blamed for some of the achievement gap between blacks and whites. We study the effects of school and neighborhood segregation on the relative SAT scores of black students across different metropolitan areas, using large microdata samples for the 1998-2001 test cohorts. Our models include detailed controls for the family background of individual test-takers, school-level controls for selective participation in the test, and city-level controls for racial composition, income, and region. We find robust evidence that the black-white test score gap is higher in more segregated cities. Holding constant family background and other factors, a shift from a fully segregated to a completely integrated city closes about one-quarter of the raw black-white gap in SAT scores. Specifications that distinguish between school and neighborhood segregation suggest that neighborhood segregation has a consistently negative impact but that school segregation has no independent effect (though we cannot reject equality of the two effects). We find similar results using Census-based data on schooling outcomes for youth in different cities. Data on enrollment in honors courses suggest that within-school segregation increases when schools are more highly integrated, potentially offsetting the benefits of school desegregation and accounting for our findings.
Handle: RePEc:nbr:nberwo:12078
Template-Type: ReDIF-Paper 1.0
Title: Why Have Business Cycle Fluctuations Become Less Volatile?
Classification-JEL: E3
Author-Name: Andres Arias
Author-Name: Gary D. Hansen
Author-Person: pha52
Author-Name: Lee E. Ohanian
Author-Person: poh1
Note: EFG
Number: 12079
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12079
File-URL: http://www.nber.org/papers/w12079.pdf
File-Format: application/pdf
Publication-Status: published as Arias, Andres, Gary D. Hansen and Lee Ohanian. “Why Have Business Cycle Fluctuations Become Less Volatile?” Economic Theory 32 (July 2007): 43-58.
Abstract: This paper shows that a standard Real Business Cycle model driven by productivity shocks can successfully account for the 50 percent decline in cyclical volatility of output and its components, and labor input that has occurred since 1983. The model is successful because the volatility of productivity shocks has also declined significantly over the same time period. We then investigate whether the decline in the volatility of the Solow Residual is due to changes in the volatility of some other shock operating through a channel that is absent in the standard model. We therefore develop a model with variable capacity and labor utilization. We investigate whether government spending shocks, shocks that affect the household's first order condition for labor, and shocks that affect the household's first order condition for saving can plausibly account for the change in TFP volatility and in the volatility of output, its components, and labor. We find that none of these shocks are able to do this. This suggests that successfully accounting for the post-1983 decline in business cycle volatility requires a change in the volatility of a productivity-like shock operating within a standard growth model.
Handle: RePEc:nbr:nberwo:12079
Template-Type: ReDIF-Paper 1.0
Title: Insurance and Incentives for Medical Innovation
Classification-JEL: I1; O30
Author-Name: Alan M. Garber
Author-Name: Charles I. Jones
Author-Person: pjo24
Author-Name: Paul M. Romer
Author-Person: pro45
Note: AG EH PR
Number: 12080
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12080
File-URL: http://www.nber.org/papers/w12080.pdf
File-Format: application/pdf
Publication-Status: published as "Insurance and Incentives for Medical Innovation" (with Alan Garber and Paul Romer), Forum for Health Economics & Policy, 2006, Forum: Biomedical Research and the Economy: Article 4
Abstract: This paper studies the interactions between health insurance and the incentives for innovation. Although we focus on pharmaceutical innovation, our discussion applies to other industries producing novel technologies for sale in markets with subsidized demand. Standard results in the growth and productivity literatures suggest that firms in many industries may possess inadequate incentives to innovate. Standard results in the health literature suggest that health insurance leads to the overutilization of health care. Our study of innovation in the pharmaceutical industry emphasizes the interaction of these incentives. Because of the large subsidies to demand from health insurance, limits on the lifetime of patents and possibly limits on monopoly pricing may be necessary to ensure that pharmaceutical companies do not possess excess incentives for innovation.
Handle: RePEc:nbr:nberwo:12080
Template-Type: ReDIF-Paper 1.0
Title: The Depressing Effect of Agricultural Institutions on the Prewar Japanese Economy
Classification-JEL: E1; O1; O4; N3
Author-Name: Fumio Hayashi
Author-Person: pha83
Author-Name: Edward C. Prescott
Author-Person: ppr10
Note: EFG PR
Number: 12081
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12081
File-URL: http://www.nber.org/papers/w12081.pdf
File-Format: application/pdf
Publication-Status: published as Hayashi, Fumio and Edward C. Prescott. “The Depressing Effect of Agricultural Institutions on the Prewar Japanese Economy.” Journal of Political Economy 116, 4 (August 2008): 573-632.
Abstract: The question we address in this paper is why the Japanese miracle didn't take place until after World War II. For much of the pre-WWII period, Japan's real GNP per worker was not much more than a third of that of the U.S., with falling capital intensity. We argue that its major cause is a barrier that kept agricultural employment constant at about 14 million throughout the prewar period. In our two-sector neoclassical growth model, the barrier-induced sectoral mis-allocation of labor and a resulting disincentive for capital accumulation account well for the depressed output level. Were it not for the barrier, Japan's prewar GNP per worker would have been close to a half of the U.S. The labor barrier existed because, we argue, the prewar patriarchy, armed with paternalistic clauses in the prewar Civil Code, forced the son designated as heir to stay in agriculture.
Handle: RePEc:nbr:nberwo:12081
Template-Type: ReDIF-Paper 1.0
Title: Measuring Trends in Leisure: The Allocation of Time Over Five Decades
Classification-JEL: D12; D13; J22
Author-Name: Mark Aguiar
Author-Person: pag57
Author-Name: Erik Hurst
Author-Person: phu87
Note: EFG LS
Number: 12082
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12082
File-URL: http://www.nber.org/papers/w12082.pdf
File-Format: application/pdf
Publication-Status: published as Aguiar, Mark and Erik Hurst. “Measuring Leisure: The Allocation of Time over Five Decades.” Quarterly Journal of Economics 122, 3 (August 2007): 969-1006.
Abstract: In this paper, we use five decades of time-use surveys to document trends in the allocation of time. We find that a dramatic increase in leisure time lies behind the relatively stable number of market hours worked (per working-age adult) between 1965 and 2003. Specifically, we show that leisure for men increased by 6-8 hours per week (driven by a decline in market work hours) and for women by 4-8 hours per week (driven by a decline in home production work hours). This increase in leisure corresponds to roughly an additional 5 to 10 weeks of vacation per year, assuming a 40-hour work week. Alternatively, the "consumption equivalent" of the increase in leisure is valued at 8 to 9 percent of total 2003 U.S. consumption expenditures. We also find that leisure increased during the last 40 years for a number of sub-samples of the population, with less-educated adults experiencing the largest increases. Lastly, we document a growing "inequality" in leisure that is the mirror image of the growing inequality of wages and expenditures, making welfare calculation based solely on the latter series incomplete.
Handle: RePEc:nbr:nberwo:12082
Template-Type: ReDIF-Paper 1.0
Title: Prediction Markets in Theory and Practice
Classification-JEL: C53; D8; G14
Author-Name: Justin Wolfers
Author-Person: pwo9
Author-Name: Eric Zitzewitz
Author-Person: pzi23
Note: AP EFG
Number: 12083
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12083
File-URL: http://www.nber.org/papers/w12083.pdf
File-Format: application/pdf
Publication-Status: published as Blume, Larry and Steven Durlauf (eds.) The New Palgrave Dictionary of Economics, 2nd ed. London: Palgrave, 2008.
Abstract: Prediction Markets, sometimes referred to as "information markets," "idea futures" or "event futures", are markets where participants trade contracts whose payoffs are tied to a future event, thereby yielding prices that can be interpreted as market-aggregated forecasts. This article summarizes the recent literature on prediction markets, highlighting both theoretical contributions that emphasize the possibility that these markets efficiently aggregate disperse information, and the lessons from empirical applications which show that market-generated forecasts typically outperform most moderately sophisticated benchmarks. Along the way, we highlight areas ripe for future research.
Handle: RePEc:nbr:nberwo:12083
Template-Type: ReDIF-Paper 1.0
Title: Agency-Based Asset Pricing
Classification-JEL: G1
Author-Name: Gary Gorton
Author-Person: pgo458
Author-Name: Ping He
Author-Person: phe155
Note: AP CF
Number: 12084
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12084
File-URL: http://www.nber.org/papers/w12084.pdf
File-Format: application/pdf
Publication-Status: published as Gorton, Gary B. & He, Ping & Huang, Lixin, 2014. "Agency-based asset pricing," Journal of Economic Theory, Elsevier, vol. 149(C), pages 311-349.
Abstract: We analyze the interaction between managerial decisions and firm value/asset prices by embedding the standard agency model of the firm into an otherwise standard asset pricing model. When the manager-agent's compensation depends on the firm's stock price performance, stock prices are set to induce the creation of future cash flows, instead of representing the discounted value of exogenous cash flows, as in the standard model. In our case, stock prices are formed via trading in the market to induce the managers to hold the number of shares consistent with the optimal effort level desired by the outside investors. We compare two price formation mechanisms, corresponding to two firm ownership structures. In the first, stock prices are formed competitively among a continuum of dispersed investors. In the second, stock prices are set by a single block shareholder, as a bargaining solution. Under both mechanisms there are persistent, dynamic, patterns of asst prices, The level of the equity premium and the return volatility depend on the risk aversion of the agents in the economy and the ownership structure of firms.
Handle: RePEc:nbr:nberwo:12084
Template-Type: ReDIF-Paper 1.0
Title: Immigration in High-Skill Labor Markets: The Impact of Foreign Students on the Earnings of Doctorates
Classification-JEL: J23; J61
Author-Name: George J. Borjas
Author-Person: pbo44
Note: LS
Number: 12085
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12085
File-URL: http://www.nber.org/papers/w12085.pdf
File-Format: application/pdf
Publication-Status: published as Borjas, George J. "Native Internal Migration and The Labor Market Impact Of Immigration," Journal of Human Resources, 2006, v41(2,Spring), 221-258.
Publication-Status: published as Immigration in High-Skill Labor Markets: The Impact of Foreign Students on the Earnings of Doctorates, George J. Borjas. in Science and Engineering Careers in the United States: An Analysis of Markets and Employment, Freeman and Goroff. 2009
Abstract: The rapid growth in the number of foreign students enrolled in American universities has transformed the higher education system, particularly at the graduate level. Many of these newly minted doctorates remain in the United States after receiving their doctoral degrees, so that the foreign student influx can have a significant impact in the labor market for high-skill workers. Using data drawn from the Survey of Earned Doctorates and the Survey of Doctoral Recipients, the study shows that a foreign student influx into a particular doctoral field at a particular time had a significant and adverse effect on the earnings of doctorates in that field who graduated at roughly the same time. A 10 percent immigration-induced increase in the supply of doctorates lowers the wage of competing workers by about 3 to 4 percent. About half of this adverse wage effect can be attributed to the increased prevalence of low-pay postdoctoral appointments in fields that have softer labor market conditions because of large-scale immigration.
Handle: RePEc:nbr:nberwo:12085
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Tort Reform on Medical Malpractice Insurers' Ultimate Losses
Classification-JEL: K13; G22
Author-Name: Patricia Born
Author-Name: W. Kip Viscusi
Author-Person: pvi69
Author-Name: Tom Baker
Note: LE
Number: 12086
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12086
File-URL: http://www.nber.org/papers/w12086.pdf
File-Format: application/pdf
Publication-Status: published as Born, Patricia, W. Kip Viscusi and Tom Baker. “The Effects of Tort Reform on Medical Malpractice Insurers’ Ultimate Losses.” Journal of Risk and Insurance 76, 1 (March 2009): 197-219.
Abstract: Whereas the literature evaluating the effect of tort reforms has focused on reported incurred losses, this paper examines the long run effects using a comprehensive sample by state of individual firms writing medical malpractice insurance from 1984-2003. The long run effects of reforms are greater than insurers' expected effects, as five year developed losses and ten year developed losses are below the initially reported incurred losses for those years following reform measures. The quantile regressions show the greatest effects of joint and several liability limits, noneconomic damages caps, and punitive damages reforms for the firms that are at the high end of the loss distribution. These quantile regression results show stronger, more concentrated effects of the reforms than do the OLS and fixed effects estimates for the entire sample.
Handle: RePEc:nbr:nberwo:12086
Template-Type: ReDIF-Paper 1.0
Title: Financial Constraints, Asset Tangibility, and Corporate Investment
Classification-JEL: G31
Author-Name: Heitor Almeida
Author-Name: Murillo Campello
Author-Person: pca164
Note: CF
Number: 12087
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12087
File-URL: http://www.nber.org/papers/w12087.pdf
File-Format: application/pdf
Publication-Status: published as Almeida, Heitor and Murillo Campello. “Financial Constraints, Asset Tangibility and Corporate Investment.” Review of Financial Studies 20 (2007): 1429-1460.
Abstract: When firms are able to pledge their assets as collateral, investment and borrowing become endogenous: pledgeable assets support more borrowings that in turn allow for further investment in pledgeable assets. We show that this credit multiplier has an important impact on investment when firms face credit constraints: investment-cash flow sensitivities are increasing in the degree of tangibility of constrained firms' assets. If firms are unconstrained, however, investment-cash flow sensitivities are unaffected by asset tangibility. Crucially, asset tangibility itself may determine whether a firm faces credit constraints - firms with more tangible assets may have greater access to external funds. This implies that the relationship between capital spending and cash flows is non-monotonic in the firm's asset tangibility. Our theory allows us to use a differences-in-differences approach to identify the effect of financing frictions on corporate investment: we compare the differential effect of asset tangibility on the sensitivity of investment to cash flow across different regimes of financial constraints. We implement this testing strategy on a large sample of manufacturing firms drawn from COMPUSTAT between 1985 and 2000. Our tests allow for the endogeneity of the firm's credit status, with asset tangibility influencing whether a firm is classified as credit constrained or unconstrained in a switching regression framework. The data strongly support our hypothesis about the role of asset tangibility on corporate investment under financial constraints.
Handle: RePEc:nbr:nberwo:12087
Template-Type: ReDIF-Paper 1.0
Title: Making it in America: Social Mobility in the Immigrant Population
Classification-JEL: J61
Author-Name: George J. Borjas
Author-Person: pbo44
Note: LS
Number: 12088
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12088
File-URL: http://www.nber.org/papers/w12088.pdf
File-Format: application/pdf
Publication-Status: published as Borjas, George J. "Making It in America: Social Mobility in the Immigrant Population." The Future of Children Vol. 16, No. 2 Opportunity in America (Fall 2006): 55-71.
Abstract: The ultimate impact of immigration on the United States obviously depends not only on the economic, social, political, and cultural shifts that take place during the life cycle of the immigrant population, but also on the adjustment process experienced by the immigrant household across generations. This paper documents the evidence on social mobility in the immigrant population and summarizes some of the lessons implied by the evidence. There is significant economic "catching up" between the first and second generations, with the relative wage of the second generation being, on average, about 5 to 10 percent higher than that of the first generation. At the same time, there is a strong positive correlation between the socioeconomic outcomes experienced by ethnic groups in the immigrant generation and the outcomes experienced by their children, and a weaker correlation between the immigrants and their grandchildren. In rough terms, about half of the differences in relative economic status across ethnic groups observed in one generation persist into the next. As a result, the very large ethnic differences in economic status that characterize the current immigrant population will likely dominate discussions of American social policy for much of the 21st century.
Handle: RePEc:nbr:nberwo:12088
Template-Type: ReDIF-Paper 1.0
Title: Monetary and Fiscal Theories of the Price Level: The Irreconcilable Differences
Classification-JEL: E5; E6; D8
Author-Name: Bennett T. McCallum
Author-Name: Edward Nelson
Author-Person: pne58
Note: EFG ME
Number: 12089
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12089
File-URL: http://www.nber.org/papers/w12089.pdf
File-Format: application/pdf
Publication-Status: published as Bennett T. McCallum & Edward Nelson, 2005. "Monetary and Fiscal Theories of the Price Level: The Irreconcilable Differences," Oxford Review of Economic Policy, Oxford University Press, vol. 21(4), pages 565-583, Winter.
Abstract: The fiscal theory of the price level (FTPL) has attracted much attention but disagreement remains concerning its defining characteristics. Some writers have emphasized implications regarding interest-rate pegging and determinacy of RE solutions, whereas others have stressed its capacity to generate equilibria in which price level trajectories mimic those of bonds and differ drastically from those of money supplies. We argue that the FTPL attained prominence precisely because it appeared to provide a theory whose implications differ greatly from conventional monetary analysis; accordingly we review monetarist writings to identify the primary distinctions. In addition, we review recent findings concerning learnability - and therefore plausibility - of competing RE equilibria. These indicate that when FTPL and monetarist equilibria differ, the latter are more plausible in the vast majority of cases. Under Ricardian assumptions, necessary for clear distinctions, theoretical analysis indicates that fiscal and monetary coordination is not necessary for macroeconomic stability.
Handle: RePEc:nbr:nberwo:12089
Template-Type: ReDIF-Paper 1.0
Title: Is There Hedge Fund Contagion?
Classification-JEL: G11; G12; G18
Author-Name: Nicole M. Boyson
Author-Name: Christof W. Stahel
Author-Name: Rene M. Stulz
Note: AP CF
Number: 12090
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12090
File-URL: http://www.nber.org/papers/w12090.pdf
File-Format: application/pdf
Abstract: We examine whether hedge funds experience contagion. First, we consider whether extreme movements in equity, fixed income, and currency markets are contagious to hedge funds. Second, we investigate whether extreme adverse returns in one hedge fund style are contagious to other hedge fund styles. To conduct this examination, we estimate binomial and multinomial logit models of contagion using daily returns on hedge fund style indices as well as monthly returns on indices with a longer history. Our main finding is that there is no evidence of contagion from equity, fixed income, and foreign exchange markets to hedge funds, except for weak evidence of contagion for one single daily hedge fund style index. By contrast, we find strong evidence of contagion across hedge fund styles, so that hedge fund styles tend to have poor coincident returns.
Handle: RePEc:nbr:nberwo:12090
Template-Type: ReDIF-Paper 1.0
Title: Trade, FDI, and the Organization of Firms
Classification-JEL: D23; F1; F2
Author-Name: Elhanan Helpman
Author-Person: phe205
Note: ITI
Number: 12091
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12091
File-URL: http://www.nber.org/papers/w12091.pdf
File-Format: application/pdf
Publication-Status: published as Helpman, Elhanan. "Trade, FDI, and The Organization Of Firms," Journal of Economic Literature, 2006, v44(3,Sep), 589-630.
Abstract: New developments in the world economy have triggered research designed to better understand the changes in trade and investment patterns, and the reorganization of production across national borders. Although traditional trade theory has much to offer in explaining parts of this puzzle, other parts required new approaches. Particularly acute has been the need to model alternative forms of involvement of business firms in foreign activities, because organizational change has been central in the transformation of the world economy. This paper reviews the literature that has emerged from these efforts. The theoretical refinements have focused on the individual firm, studying its choices in response to its own characteristics, the nature of the industry in which it operates, and the opportunities afforded by foreign trade and investment. Important among these choices are organizational features, such as sourcing strategies. But the theory has gone beyond the individual firm, studying the implications of firm behavior for the structure of industries. It provides new explanations for trade structure and patterns of FDI, both within and across industries, and has identified new sources of comparative advantage.
Handle: RePEc:nbr:nberwo:12091
Template-Type: ReDIF-Paper 1.0
Title: War in Iraq versus Containment
Classification-JEL: H56
Author-Name: Steven J. Davis
Author-Person: pda15
Author-Name: Kevin M. Murphy
Author-Person: pmu108
Author-Name: Robert H. Topel
Author-Person: pto111
Note: EFG PE
Number: 12092
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12092
File-URL: http://www.nber.org/papers/w12092.pdf
File-Format: application/pdf
Publication-Status: published as Guns and Butter: The Economic Causes and Consequences of Conflict, CESifo Seminar Series. Cambridge and London: MIT Press, 2009.
Abstract: We consider three questions related to the choice between war in Iraq and a continuation of the pre-war containment policy. First, in terms of military resources, casualties and expenditures for humanitarian assistance and reconstruction, is war more or less costly for the United States than containment? Second, compared to war and forcible regime change, would a continuation of the containment policy have saved Iraqi lives? Third, is war likely to bring about an improvement or deterioration in the economic well-being of Iraqis? We address these questions from an ex ante perspective as of early 2003. According to our analysis, pre-invasion views about the likely course of the Iraq intervention imply present value costs for the United States in the range of $100 to $870 billion. Our estimated present value cost for the containment policy is nearly $300 billion and ranges upward to $700 billion when we account for several risks stressed by national security analysts. Our analysis also indicates that war and forcible regime change will yield large improvements in the economic well-being of most Iraqis relative to their prospects under the containment policy, and that the Iraqi death toll would likely be greater under containment.
Handle: RePEc:nbr:nberwo:12092
Template-Type: ReDIF-Paper 1.0
Title: Rent Preservation and the Persistence of Underdevelopment
Classification-JEL: O1; O15; P5; I2; K0
Author-Name: Raghuram G. Rajan
Author-Person: pra149
Note: CF EFG LE
Number: 12093
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12093
File-URL: http://www.nber.org/papers/w12093.pdf
File-Format: application/pdf
Publication-Status: published as Raghuram G. Rajan, 2009. "Rent Preservation and the Persistence of Underdevelopment," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 178-218, January.
Abstract: When citizens in a poor constrained society are very unequally endowed, they are likely to find it hard to agree on reforms, even though the status quo hurts them collectively. Each citizen group or constituency prefers reforms that expand its opportunities, but in an unequal society, this will typically hurt another constituency’s rents. Competitive rent preservation ensures no comprehensive reform path may command broad support. The roots of underdevelopment may therefore lie in the natural tendency towards rent preservation in a divided society.
Handle: RePEc:nbr:nberwo:12093
Template-Type: ReDIF-Paper 1.0
Title: Innovation, Competition and Welfare-Enhancing Monopoly
Classification-JEL: D40; D24; O31; L1
Author-Name: Michael R. Darby
Author-Name: Lynne G. Zucker
Author-Person: pzu2
Note: PR
Number: 12094
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12094
File-URL: http://www.nber.org/papers/w12094.pdf
File-Format: application/pdf
Publication-Status: published as Lynne G. Zucker and Michael R. Darby, “Socio-economic Impact of Nanoscale Science: Initial Results and NanoBank,” in Mihail C. Roco and William S. Bainbridge, eds., Nanotechnology: Societal Implications II — Individual Perspectives, Dordrecht, The Netherlands: Springer, 2007. [ISBN 1-4020-4658-8, pp. 7-23]
Abstract: The basic competitive model with freely available technology is suited for static industries but misleading as applied to major innovative economies for which development of new technologies equals in magnitude around 10% of gross domestic investment. We distinguish free generic technology from proprietary technologies resulting from risky investment with uncertain outcome. The totality of possible outcomes drives the national innovation system and the returns to a particular successful technology cannot be compared to its own direct investment costs. Eureka moments are hardly ever self-enabling and incentives are required to motivate investment attempting to turn them into an innovation. The alternative to a valuable proprietary innovation is not the same innovation freely available but the unchanged generic technology. Growth is concentrated in any country at any time in a few firms in a few industries that are achieving metamorphic technological progress as a result of breakthrough innovations. So long as the entry and exit of firms using the generic technology sets the price in an industry, one or more price-taking firms can coexist with proprietary technologies yielding more or less substantial quasi-rents to the sunk development costs. Consumer welfare is increased if an innovator creates a proprietary technology such that the market equilibrium price is reduced and output increased. If the technological breakthrough is sufficiently large for the innovator to drive all generic producers out of the industry and increase output as a wealth-maximizing monopolist, consumer welfare is surely increased. After some time, the innovative technology will diffuse into an imitative generic technology. The best innovators develop a stream of innovations so that technological leaders can maintain their status as dominant firm or monopolist for extended periods of time despite lagged diffusion, and consumers benefit from this stream as well. The economics of an innovative nation are different from those of the no-growth stationary state which we teach and fall back on. We propose an ambitious agenda to integrate major research streams treating innovation as an object of economic analysis into our standard models.
Handle: RePEc:nbr:nberwo:12094
Template-Type: ReDIF-Paper 1.0
Title: Sticky Borders
Classification-JEL: F30
Author-Name: Gita Gopinath
Author-Name: Roberto Rigobon
Author-Person: pri12
Note: IFM ITI
Number: 12095
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12095
File-URL: http://www.nber.org/papers/w12095.pdf
File-Format: application/pdf
Publication-Status: published as Gita Gopinath & Roberto Rigobon, 2008. "Sticky Borders," The Quarterly Journal of Economics, MIT Press, vol. 123(2), pages 531-575, 05.
Abstract: The stickiness and currency of pricing of traded goods play a central role in international macroeconomics, however empirical evidence on these features is seriously limited. To address this we use microdata on U.S. import and export prices at-the-dock for the period 1994-2005, and present four main results: First, the median price duration in the currency of pricing is 10.6 (12.8) months for imports (exports). Second, 90% (97%) of imports (exports) are priced in dollars. Consequently, contrary to standard modeling assumptions, for the U.S, there is producer currency pricing in exports and local currency pricing in imports. Third, import price rigidity has increased by 10 percentage points, with increasing rigidity in differentiated goods prices. Fourth, even conditioning on a price change, exchange rate pass-through into U.S. import prices is low, at 22%.
Handle: RePEc:nbr:nberwo:12095
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Antihypertensive Drugs on the Number and Risk of Death, Stroke and Myocardial Infarction in the United States
Classification-JEL: I1; O3
Author-Name: Genia Long
Author-Name: David Cutler
Author-Person: pcu64
Author-Name: Ernst R. Berndt
Author-Name: Jimmy Royer
Author-Name: Andrée-Anne Fournier
Author-Name: Alicia Sasser
Author-Person: pmo1225
Author-Name: Pierre Cremieux
Note: AG EH
Number: 12096
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12096
File-URL: http://www.nber.org/papers/w12096.pdf
File-Format: application/pdf
Abstract: Estimating the value of medical innovation is a continual challenge. In this research, we quantify the impact of antihypertensive therapy on U.S. blood pressures, risk and number of heart attacks, strokes, and deaths. We also consider the potential for further improvements. We estimate the value of innovation using equations relating blood pressure to adverse outcomes from the Framingham Heart Study. Our results show that without antihypertensive therapy, 1999-2000 average blood pressure for the U.S. population age 40 plus would have been 10-13 percent higher. 86,000 excess premature deaths from cardiovascular disease (2001), and 833,000 hospital discharges for stroke and heart attacks (2002) would have occurred. Life expectancy would be 0.5 (men) and 0.4 (women) years lower. At guideline care, there would have been 89,000 fewer premature deaths (2001) and 420,000 fewer hospital discharges for stroke and heart attack (2002) than observed. Our analysis suggests that antihypertensive therapy has had a significant impact on cardiovascular health outcomes but that mortality gains would have been approximately twice as high if guideline care had been achieved for all.
Handle: RePEc:nbr:nberwo:12096
Template-Type: ReDIF-Paper 1.0
Title: Friend or Foe? A Natural Experiment of the Prisoner's Dilemma
Classification-JEL: C9; C72
Author-Name: John A. List
Author-Person: pli176
Note: PE
Number: 12097
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12097
File-URL: http://www.nber.org/papers/w12097.pdf
File-Format: application/pdf
Publication-Status: published as List, John A. "Friend Or Foe? A Natural Experiment Of The Prisoner's Dilemma," Review of Economics and Statistics, 2006, v88(3,Aug), 463-471.
Abstract: This study examines data drawn from the game show Friend or Foe?, which is similar to the classic prisoner's dilemma tale: partnerships are endogenously determined, players work together to earn money, after which, they play a one-shot prisoner's dilemma game over large stakes: varying from $200 to (potentially) more than $22,000. If one were to conduct such an experiment in the laboratory, the cost to gather the data would be well over $350,000. The data reveal several interesting insights; perhaps most provocatively, they suggest that even though the game is played in front of an audience of millions of viewers, there is some evidence consistent with a model of discrimination. The observed patterns of social discrimination are unanticipated, however. For example, there is evidence consistent with the notion that certain populations have a general "distaste" for older participants.
Handle: RePEc:nbr:nberwo:12097
Template-Type: ReDIF-Paper 1.0
Title: Testing Portfolio Efficiency with Conditioning Information
Classification-JEL: C12; C51; C52; G12
Author-Name: Wayne E. Ferson
Author-Person: pfe32
Author-Name: Andrew F. Siegel
Note: AP
Number: 12098
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12098
File-URL: http://www.nber.org/papers/w12098.pdf
File-Format: application/pdf
Publication-Status: published as "Testing Portfolio Efficiency with Conditioning Information," with Andrew F. Siegel, 2009, Review of Financial Studies (forthcoming).
Abstract: We develop asset pricing models' implications for portfolio efficiency when there is conditioning information in the form of a set of lagged instruments. A model of expected returns identifies a portfolio that should be minimum variance efficient with respect to the conditioning information. Our tests refine previous tests of portfolio efficiency, using the conditioning information optimally. We reject the efficiency of all static or time-varying combinations of the three Fama-French (1996) factors with respect to the conditioning information and also the conditional efficiency of time-varying combinations of the factors, given standard lagged instruments.
Handle: RePEc:nbr:nberwo:12098
Template-Type: ReDIF-Paper 1.0
Title: Political Conflict and Power-sharing in the Origins of Modern Colombia
Classification-JEL: D7
Author-Name: Sebastián Mazzuca
Author-Name: James A. Robinson
Author-Person: pro179
Note: DAE POL
Number: 12099
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12099
File-URL: http://www.nber.org/papers/w12099.pdf
File-Format: application/pdf
Publication-Status: published as Mazzuca, Sebastián and James A. Robinson. “Political Conflict and Power-sharing in the Origins of Modern Colombia." Hispanic American Historical Review 89 (2009): 285-321.
Abstract: In this paper we present historical evidence and a theoretical analysis of the origins of political stability and instability in Colombia for the period 1850-1950, and their relationship to political, particularly electoral, institutions. We show that the driving force behind institutional change over this period, specifically the move to proportional representation (PR), was the desire of the Conservative and Liberal parties to come up with a way of credibly dividing power to avoid civil war and conflict, a force intensified by the brutal conflict of the War of a Thousand days between 1899 and 1902. The problem with majoritarian electoral institutions was that they did not allocate power in a way which matched the support of the parties in the population, thus encouraging conflict. The strategic advantage of PR was that it avoided such under-representation. The parties however could not initially move to PR because it was not `fraud proof' so instead, in 1905, adopted the "incomplete vote" which simply allocated 2/3 of the legislative seats to the winning party and 1/3 to the loser. This formula brought peace. The switch to PR arose when the Liberals became confident that they could solve problems of fraud. But it only happened because they were able to exploit a division within the Conservatives. The switch also possibly reflected a concern with the rising support for socialism and the desire to divide power more broadly. Our findings shed new light on the origins of electoral systems and the nature of political conflict and its resolution.
Handle: RePEc:nbr:nberwo:12099
Template-Type: ReDIF-Paper 1.0
Title: A Dynamic Theory of Public Spending, Taxation and Debt
Classification-JEL: H6
Author-Name: Marco Battaglini
Author-Person: pba170
Author-Name: Stephen Coate
Author-Person: pco66
Note: PE POL
Number: 12100
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12100
File-URL: http://www.nber.org/papers/w12100.pdf
File-Format: application/pdf
Publication-Status: published as Marco Battaglini & Stephen Coate, 2008. "A Dynamic Theory of Public Spending, Taxation, and Debt," American Economic Review, American Economic Association, vol. 98(1), pages 201-36, March.
Abstract: This paper presents a dynamic political economy theory of public spending, taxation and debt. Policy choices are made by a legislature consisting of representatives elected by geographically-defined districts. The legislature can raise revenues via a distortionary income tax and by borrowing. These revenues can be used to finance a national public good and district-specific transfers (interpreted as pork-barrel spending). The value of the public good is stochastic, reflecting shocks such as wars or natural disasters. In equilibrium, policy-making cycles between two distinct regimes: "business-as-usual" in which legislators bargain over the allocation of pork, and "responsible-policy-making" in which policies maximize the collective good. Transitions between the two regimes are brought about by shocks in the value of the public good. In the long run, equilibrium tax rates are too high and too volatile, public good provision is too low and debt levels are too high. In some environments, a balanced budget requirement can improve citizen welfare.
Handle: RePEc:nbr:nberwo:12100
Template-Type: ReDIF-Paper 1.0
Title: Phoenix Miracles in Emerging Markets: Recovering without Credit from Systemic Financial Crises
Classification-JEL: F31; F32; F34; F41
Author-Name: Guillermo A. Calvo
Author-Person: pca694
Author-Name: Alejandro Izquierdo
Author-Person: piz6
Author-Name: Ernesto Talvi
Note: IFM
Number: 12101
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12101
File-URL: http://www.nber.org/papers/w12101.pdf
File-Format: application/pdf
Publication-Status: published as Guillermo A. Calvo & Alejandro Izquierdo & Ernesto Talvi, 2006. "Sudden Stops and Phoenix Miracles in Emerging Markets," American Economic Review, American Economic Association, vol. 96(2), pages 405-410, May.
Abstract: Using a sample of emerging markets that are integrated into global bond markets, we analyze the collapse and recovery phase of output collapses that coincide with systemic sudden stops, defined as periods of skyrocketing aggregate bond spreads and large capital flow reversals. Our findings indicate the presence of a very similar pattern across different episodes: output recovers with virtually no recovery in either domestic or foreign credit, a phenomenon that we call Phoenix Miracle, where output "rises from its ashes", suggesting that firms go through a process of financial engineering to restore liquidity outside the formal credit markets. Moreover, we show that the US Great Depression could be catalogued as a Phoenix Miracle. However, in contrast to the US Great Depression, EM output collapses occur in a context of accelerating price inflation and falling real wages, casting doubts on price deflation and nominal wage rigidity as key elements in explaining output collapse, and suggesting that financial factors are prominent for understanding these collapses.
Handle: RePEc:nbr:nberwo:12101
Template-Type: ReDIF-Paper 1.0
Title: A Healthy Economy Can Break Your Heart
Classification-JEL: E32; I12
Author-Name: Christopher J. Ruhm
Author-Person: pru7
Note: EH
Number: 12102
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12102
File-URL: http://www.nber.org/papers/w12102.pdf
File-Format: application/pdf
Publication-Status: published as Ruhm, Christopher. “A Healthy Economy Can Break Your Heart.” Demography 44, 4 (November 2007): 829-848.
Abstract: Panel data econometric methods are used to investigate how the risk of death from acute myocardial infarction (AMI) varies with macroeconomic conditions after controlling for demographic factors, fixed state characteristics, general time effects and state-specific time trends. The sample includes residents of the 20 largest states over the 1979 to 1998 period. A one percentage point reduction in unemployment is predicted to raise AMI mortality by 1.3 percent, with a larger increase in relative risk for 20-44 year olds than older adults, particularly if the economic upturn is sustained. Nevertheless, the much higher absolute AMI fatality rate of senior citizens implies that they account for most of the additional deaths. This suggests the importance of factors like air pollution and traffic congestion that increase with economic activity, are linked to coronary heart disease and may have particularly strong effects on vulnerable segments of the population, such as the frail elderly. AMI mortality risk quickly rises when the economy strengthens and increases further if the favorable economic conditions persist. This is consistent with strong effects of other short-term factors on heart attack risk and with health being a durable capital stock that is affected by flows of lifestyle behaviors and environmental conditions whose effects accumulate over time.
Handle: RePEc:nbr:nberwo:12102
Template-Type: ReDIF-Paper 1.0
Title: Dynamic Scoring: Alternative Financing Schemes
Classification-JEL: E1; H3; H6
Author-Name: Eric M. Leeper
Author-Person: ple3
Author-Name: Shu-Chun Susan Yang
Author-Person: pya89
Note: EFG PE
Number: 12103
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12103
File-URL: http://www.nber.org/papers/w12103.pdf
File-Format: application/pdf
Publication-Status: published as Leeper, Eric M. & Yang, Shu-Chun Susan, 2008. "Dynamic scoring: Alternative financing schemes," Journal of Public Economics, Elsevier, vol. 92(1-2), pages 159-182, February.
Abstract: Neoclassical growth models predict that reductions in capital or labor tax rates are expansionary when lump-sum transfers are used to balance the government budget. This paper explores the consequences of bond-financed tax reductions that bring forth a range of possible offsetting policies, including future government consumption, capital tax rates, or labor tax rates. Through the resulting intertemporal distortions, current tax cuts can be contractionary. The paper also finds that more aggressive responses of offsetting policies to debt engender less debt accumulation and less costly tax cuts.
Handle: RePEc:nbr:nberwo:12103
Template-Type: ReDIF-Paper 1.0
Title: Taxes and Growth in a Financially Underdeveloped Country: Evidence from the Chilean Investment Boom
Classification-JEL: H32; E22; D92; O54; O16
Author-Name: Chang-Tai Hsieh
Author-Name: Jonathan A. Parker
Author-Person: ppa21
Note: CF EFG PE
Number: 12104
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12104
File-URL: http://www.nber.org/papers/w12104.pdf
File-Format: application/pdf
Publication-Status: published as Chang-Tai Hsieh & Jonathan A. Parker, 2007. "Taxes and Growth in a Financially Underdevelopped Country: Evidence from the Chilean Investment Boom," ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
Abstract: This paper argues that taxation of retained profits is particularly distortionary in an economy with good growth prospects and poorly developed financial markets because it primarily reduces the investment of financially constrained firms, investment that has marginal product greater than the after-tax market real interest rate. Contrarily, taxes on distributed profits or capital gains primarily reduce the investment of financially unconstrained firms. Chile experienced a banking crisis over the period from 1982 to 1986 and in 1984 reduced its tax rate on retained profits from 50 percent to 10 percent. We show that, consistent with our theory, there was a large increase in aggregate investment after the reform which was entirely funded by an increase in retained profits. Further, we show that investment grew by more in industries that depend more on external financing, according to the Rajan and Zingales (1998) measure. Finally, we present some weak evidence from comparisons of investment rates across firms for several different measures of their likelihood of being financially constrained.
Handle: RePEc:nbr:nberwo:12104
Template-Type: ReDIF-Paper 1.0
Title: Public Health Insurance, Program Take-Up, and Child Health
Classification-JEL: I12; I18; I38; J13
Author-Name: Anna Aizer
Author-Person: pai9
Note: CH EH
Number: 12105
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12105
File-URL: http://www.nber.org/papers/w12105.pdf
File-Format: application/pdf
Publication-Status: published as Anna Aizer, 2007. "Public Health Insurance, Program Take-Up, and Child Health," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 400-415, 03.
Abstract: Of the ten million uninsured children in 1996, nearly half were eligible for Medicaid, the public health insurance program for poor families, but not enrolled. In response, policy efforts to improve coverage have shifted to increasing Medicaid take-up among those already eligible rather than expanding eligibility. However, little is known about the reasons poor families fail to use public programs or the consequences of failing to enroll. The latter is of particular relevance to Medicaid given that children are typically enrolled when they become sufficiently sick as to require hospitalization. Using new data on Medicaid outreach, enrollment and child hospitalizations in California, I find that information and administrative costs are important barriers to program enrollment, with the latter particularly true for Hispanic and Asian families. In addition, enrolling children in Medicaid before they get sick promotes the use of preventative care, reduces the need for hospitalization and improves health.
Handle: RePEc:nbr:nberwo:12105
Template-Type: ReDIF-Paper 1.0
Title: Migration and Hedonic Valuation: The Case of Air Quality
Classification-JEL: H5; Q2; Q5; R1
Author-Name: Patrick Bayer
Author-Person: pba636
Author-Name: Nathaniel Keohane
Author-Person: pke48
Author-Name: Christopher Timmins
Note: PE EEE
Number: 12106
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12106
File-URL: http://www.nber.org/papers/w12106.pdf
File-Format: application/pdf
Publication-Status: published as Bayer, Patrick & Keohane, Nathaniel & Timmins, Christopher, 2009. "Migration and hedonic valuation: The case of air quality," Journal of Environmental Economics and Management, Elsevier, vol. 58(1), pages 1-14, July.
Abstract: Conventional hedonic techniques for estimating the value of local amenities rely on the assumption that households move freely among locations. We show that when moving is costly, the variation in housing prices and wages across locations may no longer reflect the value of differences in local amenities. We develop an alternative discrete-choice approach that models the household location decision directly, and we apply it to the case of air quality in U.S. metro areas in 1990 and 2000. Because air pollution is likely to be correlated with unobservable local characteristics such as economic activity, we instrument for air quality using the contribution of distant sources to local pollution - excluding emissions from local sources, which are most likely to be correlated with local conditions. Our model yields an estimated elasticity of willingness to pay with respect to air quality of 0.34 to 0.42. These estimates imply that the median household would pay $149 to $185 (in constant 1982-1984 dollars) for a one-unit reduction in average ambient concentrations of particulate matter. These estimates are three times greater than the marginal willingness to pay estimated by a conventional hedonic model using the same data. Our results are robust to a range of covariates, instrumenting strategies, and functional form assumptions. The findings also confirm the importance of instrumenting for local air pollution.
Handle: RePEc:nbr:nberwo:12106
Template-Type: ReDIF-Paper 1.0
Title: Pay for Short-Term Performance: Executive Compensation in Speculative Markets
Classification-JEL: G1; G3
Author-Name: Patrick Bolton
Author-Person: pbo544
Author-Name: Jose Scheinkman
Author-Person: psc26
Author-Name: Wei Xiong
Author-Person: pxi88
Note: AP CF
Number: 12107
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12107
File-URL: http://www.nber.org/papers/w12107.pdf
File-Format: application/pdf
Publication-Status: published as Bolton, Patrick, Jos Scheinkman and Wei Xiong. "Executive Compensation And Short-Termist Behaviour In Speculative Markets," Review of Economic Studies, 2006, v73(3,Jul), 577-610.
Abstract: We argue that the root cause behind the recent corporate scandals associated with CEO pay is the technology bubble of the latter half of the 1990s. Far from rejecting the optimal incentive contracting theory of executive compensation, the recent evidence on executive pay can be reconciled with classical agency theory once one expands the framework to allow for speculative stock markets.
Handle: RePEc:nbr:nberwo:12107
Template-Type: ReDIF-Paper 1.0
Title: Persistence of Power, Elites and Institutions
Classification-JEL: H2; N10; N40; P16
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: James A. Robinson
Author-Person: pro179
Note: DAE EFG
Number: 12108
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12108
File-URL: http://www.nber.org/papers/w12108.pdf
File-Format: application/pdf
Publication-Status: published as Daron Acemoglu & James A. Robinson, 2008. "Persistence of Power, Elites, and Institutions," American Economic Review, American Economic Association, vol. 98(1), pages 267-93, March.
Abstract: We construct a model of simultaneous change and persistence in institutions. The model consists of landowning elites and workers, and the key economic decision concerns the form of economic institutions regulating the transaction of labor (e.g., competitive markets versus labor repression). The main idea is that equilibrium economic institutions are a result of the exercise of de jure and de facto political power. A change in political institutions, for example a move from nondemocracy to democracy, alters the distribution of de jure political power, but the elite can intensify their investments in de facto political power, such as lobbying or the use of paramilitary forces, to partially or fully offset their loss of de jure power. In the baseline model, equilibrium changes in political institutions have no effect on the (stochastic) equilibrium distribution of economic institutions, leading to a particular form of persistence in equilibrium institutions, which we refer to as invariance. When the model is enriched to allow for limits on the exercise of de facto power by the elite in democracy or for costs of changing economic institutions, the equilibrium takes the form of a Markov regime-switching process with state dependence. Finally, when we allow for the possibility that changing political institutions is more difficult than altering economic institutions, the model leads to a pattern of captured democracy, whereby a democratic regime may survive, but choose economic institutions favoring the elite. The main ideas featuring in the model are illustrated using historical examples from the U.S. South, Latin America and Liberia.
Handle: RePEc:nbr:nberwo:12108
Template-Type: ReDIF-Paper 1.0
Title: Reconciling the Return Predictability Evidence
Classification-JEL: G1; G12; G11; C53
Author-Name: Martin Lettau
Author-Person: ple572
Author-Name: Stijn Van Nieuwerburgh
Author-Person: pva368
Note: AP
Number: 12109
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12109
File-URL: http://www.nber.org/papers/w12109.pdf
File-Format: application/pdf
Publication-Status: published as Martin Lettau & Stijn Van Nieuwerburgh, 2008. "Reconciling the Return Predictability Evidence," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 21(4), pages 1607-1652, July.
Abstract: Evidence of stock return predictability by financial ratios is still controversial, as documented by inconsistent results for in-sample and out-of-sample regressions and by substantial parameter instability. This paper shows that these seemingly incompatible results can be reconciled if the assumption of a fixed steady-state mean of the economy is relaxed. We find strong empirical evidence in support of shifts in the steady-state and propose simple methods to adjust financial ratios for such shifts. The forecasting relationship of adjusted price ratios and future returns is statistically significant and stable over time. We also show that shifts in the steady-state are responsible for the parameter instability and poor out-of-sample performance of unadjusted price ratios that are found in the data. Our conclusions hold for a variety of financial ratios and are robust to changes in the econometric technique used to estimate shifts in the steady-state.
Handle: RePEc:nbr:nberwo:12109
Template-Type: ReDIF-Paper 1.0
Title: "Sick of Local Government Corruption? Vote Islamic"
Classification-JEL: H7; O1; P16; R5
Author-Name: J. Vernon Henderson
Author-Person: phe30
Author-Name: Ari Kuncoro
Author-Person: pku258
Note: PE POL
Number: 12110
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12110
File-URL: http://www.nber.org/papers/w12110.pdf
File-Format: application/pdf
Abstract: Indonesia has a tradition of corruption among local officials who harass and collect bribes from firms. Corruption flourished in the Suharto, pre-democracy era. This paper asks whether local democratization that occurred after Suharto reduced corruption and whether specific local politics, over and above the effects of local culture, affect corruption. We have a firm level data set for 2001 that benchmarks bribing activity and harassment at the time when Indonesia decentralized key responsibilities to local democratically elected governments. We have a second data set for 2004 on corruption at the end of the first democratic election cycle. We find that, overall, corruption declines between these time periods. But specific politics matter. Islamic parties in Indonesia are perceived as being anti-corruption. Our data show voting patterns reflect this belief and voters' perceptions have some degree of accuracy. In the first democratic election, localities that voted in legislatures dominated by secular parties, including Megawati's party, experienced significant relative increases in corruption, while the reverse was the case for those voting in Islamic parties. But in the second election in 2004, in those localities where corruption had increased under secular party rule, voters "threw the bums out of office" and voted in Islamic parties.
Handle: RePEc:nbr:nberwo:12110
Template-Type: ReDIF-Paper 1.0
Title: Deprivation and Disease in Early Twentieth-Century America
Classification-JEL: I3; N3
Author-Name: Karen Clay
Author-Person: pcl25
Author-Name: Werner Troesken
Author-Person: ptr352
Note: AG EH DAE
Number: 12111
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12111
File-URL: http://www.nber.org/papers/w12111.pdf
File-Format: application/pdf
Abstract: This paper explores how early life exposure to poverty and want adversely affects later life health outcomes. In particular, it examines how exposure to crowded housing conditions and impure drinking water undermines long-term health prospects and increases the risk of age-related pathologies such as cancer, heart disease, kidney disease, and stroke. Exploiting city-level data from early-twentieth century America, evidence is presented that cities with unusually high rates of typhoid fever in 1900 had elevated rates of heart and kidney disease fifteen years later; also cities with unusually high rates of tuberculosis in 1900 had elevated rates of cancer and stroke fifteen years later. The estimated coefficients suggest that eradicating typhoid fever (through water purification) and tuberculosis (through improved housing and nutrition) would have reduced later death rates from heart disease, cancer, stroke, and kidney disease by 23 to 35 percent.
Handle: RePEc:nbr:nberwo:12111
Template-Type: ReDIF-Paper 1.0
Title: Testing for Asymmetric Information Using 'Unused Observables' in Insurance Markets: Evidence from the U.K. Annuity Market
Classification-JEL: D82; G22
Author-Name: Amy Finkelstein
Author-Person: pfi264
Author-Name: James Poterba
Author-Person: ppo19
Note: AP PE POL
Number: 12112
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12112
File-URL: http://www.nber.org/papers/w12112.pdf
File-Format: application/pdf
Publication-Status: published as Amy Finkelstein & James Poterba, 2014. "Testing for Asymmetric Information Using “Unused Observables” in Insurance Markets: Evidence from the U.K. Annuity Market," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 81(4), pages 709-734, December.
Abstract: This paper tests for asymmetric information in the U.K. annuity market of the 1990s by trying to identify 'unused observables,' attributes of individual insurance buyers that are correlated both with subsequent claims experience and with insurance demand but that insurance companies did not use to set insurance prices. Unlike the widely-used positive correlation test for asymmetric information, which searches for a positive correlation between insurance demand and risk experience, the unused observables test is not confounded by heterogeneity in individual preference parameters that may affect insurance demand. We identify residential location as an unused observable in the U.K. annuity market of this period, and show that this variable was correlated both with annuity demand and with prospective mortality. Thus even though residential location was observed by all market participants, the decision not to condition prices on it created the same types of market inefficiencies that arise when annuity buyers have private information about mortality risk. Our findings raise interesting questions about how insurance companies select the set of buyer attributes that they use in setting policy prices. In the decade following the period that we study, U.K. insurance companies changed their pricing practices and began to condition annuity prices on a buyer's postcode.
Handle: RePEc:nbr:nberwo:12112
Template-Type: ReDIF-Paper 1.0
Title: Effects of Title IX and Sports Participation on Girls' Physical Activity and Weight
Classification-JEL: I12; I18
Author-Name: Robert Kaestner
Author-Person: pka42
Author-Name: Xin Xu
Note: EH CH
Number: 12113
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12113
File-URL: http://www.nber.org/papers/w12113.pdf
File-Format: application/pdf
Publication-Status: published as Kaestner, Robert and Xin Xu. “Effects of Title IX and Sports Participation on Girls’ Physical Activity and Weight." Advances in Health Economics and Health Services Research 17 (2006): 79-111.
Abstract: In this study, we examined the association between girls' participation in high school sports and the physical activity, weight, body mass and body composition of adolescent females during the 1970s when girls' sports participation was dramatically increasing as a result of Title IX. We found that increases in girls' participation in high school sports, a proxy for expanded athletic opportunities for adolescent females, were associated with an increase in physical activity and an improvement in weight and body mass among girls. In contrast, adolescent boys experienced a decline in physical activity and an increase in weight and body mass during the period when girls' athletic opportunities were expanding. Taken together, these results strongly suggest that Title IX and the increase in athletic opportunities among adolescent females it engendered had a beneficial effect on the health of adolescent girls.
Handle: RePEc:nbr:nberwo:12113
Template-Type: ReDIF-Paper 1.0
Title: Prison-Based Education and Re-Entry into the Mainstream Labor Market
Classification-JEL: J31; J38
Author-Name: John H. Tyler
Author-Person: pty2
Author-Name: Jeffrey R. Kling
Author-Person: pkl126
Note: ED LS
Number: 12114
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12114
File-URL: http://www.nber.org/papers/w12114.pdf
File-Format: application/pdf
Publication-Status: published as Revised and published in "Barriers to Reentry? The Labor Market for Released Prisoners in Post-Industrial America". Edited by Shawn Bushway, Michael Stoll, and David Weiman (New York: Russell Sage Foundation Press, 2007, 227-256)
Abstract: We estimate the post-release economic effects of participation in prison-based General Educational Development (GED) programs using a panel of earnings records and a rich set of individual information from administrative data in the state of Florida. Fixed effects estimates of the impact of participating in the GED education program show post-release quarterly earnings gains of about 15 percent for program participants relative to observationally similar non-participants. We also show, however, that these earnings gains accrue only to racial/ethnic minority offenders and any GED-related earnings gains for this group seem to fade in the third year after release from prison. Estimates comparing offenders who obtained a GED to those who participated in GED-related prison education programs but left prison without a GED show no systematic evidence of an independent impact of the credential itself on post-release quarterly earnings.
Handle: RePEc:nbr:nberwo:12114
Template-Type: ReDIF-Paper 1.0
Title: The Narrowing of the U.S. Gender Earnings Gap, 1959-1999: A Cohort-Based Analysis
Classification-JEL: J7
Author-Name: Catherine Weinberger
Author-Name: Peter Kuhn
Author-Person: pku26
Note: LS
Number: 12115
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12115
File-URL: http://www.nber.org/papers/w12115.pdf
File-Format: application/pdf
Abstract: Using Census and Current Population Survey data spanning 1959 through 1999, we assess the relative contributions of two factors to the decline in the gender wage gap: changes across cohorts in the relative slopes of men's and women's age-earnings profiles, versus changes in relative earnings levels at labor market entry. We find that changes in relative slopes account for about one-third of the narrowing of the gender wage gap over the past 40 years. Under quite general conditions, we argue that this provides an upper bound estimate of the contribution of changes in work experience and other post-school investments (PSIs) to the decline of the gender wage gap.
Handle: RePEc:nbr:nberwo:12115
Template-Type: ReDIF-Paper 1.0
Title: Learning from Other Economies: The Unique Institutional and Policy Experiments Down Under
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: LS
Number: 12116
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12116
File-URL: http://www.nber.org/papers/w12116.pdf
File-Format: application/pdf
Publication-Status: published as Freeman, Richard B. "Learning From Other Economies: The Unique Institutional And Policy Experiments Down Under," Economic Record, 2006, v82(257,Jun), 195-206.
Abstract: This paper argues that detailed studies of particular economies, such as Bob Gregory's work on Australia, are relevant to all of economics. The paper builds on the concept of a model species from biology to develop the notion of a model economy - one whose experiences illuminate fundamental economic issues; examines the criterion for an economy to serve as a model economy; and describes three areas - labour relations and the awards system of wage-setting, marketizing public services and growth through immigration and natural resources - where Australian experience provides insights into economic behaviour and the operation of markets broadly.
Handle: RePEc:nbr:nberwo:12116
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rate Volatility and Productivity Growth: The Role of Financial Development
Author-Name: Philippe Aghion
Author-Person: pag175
Author-Name: Philippe Bacchetta
Author-Person: pba111
Author-Name: Romain Ranciere
Author-Person: pra52
Author-Name: Kenneth Rogoff
Author-Person: pro164
Note: EFG IFM ME
Number: 12117
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12117
File-URL: http://www.nber.org/papers/w12117.pdf
File-Format: application/pdf
Publication-Status: published as Aghion, Philippe & Bacchetta, Philippe & Rancière, Romain & Rogoff, Kenneth, 2009. "Exchange rate volatility and productivity growth: The role of financial development," Journal of Monetary Economics, Elsevier, vol. 56(4), pages 494-513, May.
Abstract: This paper offers empirical evidence that real exchange rate volatility can have a significant impact on long-term rate of productivity growth, but the effect depends critically on a country's level of financial development. For countries with relatively low levels of financial development, exchange rate volatility generally reduces growth, whereas for financially advanced countries, there is no significant effect. Our empirical analysis is based on an 83country data set spanning the years 1960-2000; our results appear robust to time window, alternative measures of financial development and exchange rate volatility, and outliers. We also offer a simple monetary growth model in which real exchange rate uncertainty exacerbates the negative investment effects of domestic credit market constraints. Our approach delivers results that are in striking contrast to the vast existing empirical exchange rate literature, which largely finds the effects of exchange rate volatility on real activity to be relatively small and insignificant.
Handle: RePEc:nbr:nberwo:12117
Template-Type: ReDIF-Paper 1.0
Title: The Greenspan Era: Discretion, Rather Than Rules
Classification-JEL: E52
Author-Name: Benjamin M. Friedman
Note: EFG ME
Number: 12118
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12118
File-URL: http://www.nber.org/papers/w12118.pdf
File-Format: application/pdf
Publication-Status: published as Friedman, Benjamin M. "The Greenspan Era: Discretion, Rather Than Rules," American Economic Review, 2006, v96(2,May), 174-177.
Abstract: What stands out in retrospect about U.S. monetary policy during the Greenspan Era is the ongoing movement away from mechanistic restrictions on the conduct of policy, together with a willingness on occasion to depart even from what more flexible guidelines dictated by contemporary conventional wisdom would imply, in the interest of carrying out the Federal Reserve System's dual mandate to pursue both stable prices and maximum employment. Part of this change was procedural - for example, the elimination of money growth targets. The most substantive demonstration of policy flexibility came in the latter half of the 1990s, as unemployment fell below 6% (in 1994), then below 5% (in 1997), and then remained below 5% for more than four years, yet the Federal Reserve did not tighten monetary policy. This policy stance was consistent with a view of the economy, including faster productivity growth and increased exposure to international competition, that Chairman Greenspan had articulated nearly a decade before.
Handle: RePEc:nbr:nberwo:12118
Template-Type: ReDIF-Paper 1.0
Title: Exploring Links Between Innovation and Diffusion: Adoption of NOx Control Technologies at U.S. Coal-Fired Power Plants
Classification-JEL: L94; O31; O33; Q53; Q55
Author-Name: David Popp
Note: PR EEE
Number: 12119
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12119
File-URL: http://www.nber.org/papers/w12119.pdf
File-Format: application/pdf
Publication-Status: published as Popp, David. "International Innovation And Diffusion Of Air Pollution Control Technologies: The Effects Of NOx And SO2 Regulation In The US, Japan, And Germany," Journal of Environmental Economics and Management, 2006, v51(1,Jan), 46-71.
Abstract: While many studies have looked at innovation and adoption of technologies separately, the two processes are linked. Advances (and expected advances) in a single technology should affect both its adoption rate and the adoption of alternative technologies. Moreover, advances made abroad may affect adoption differently than improvements developed domestically. This paper combines plant-level data on U.S. coal-fired electric power plants with patent data pertaining to NOx pollution control techniques to study these links. I show that technological advances, particularly those made abroad, are important for the adoption of newer post-combustion treatment technologies, but have little effect on the adoption of older combustion modification techniques. Moreover, I provide evidence that adaptive R&D by U.S. firms is necessary before foreign innovations are adopted in the U.S. Expectations of future technological advances delay adoption. Nonetheless, as in other studies of environmental technologies, the effect of other explanatory variables is dominated by the effect of environmental regulations, demonstrating that the mere presence of environmental technologies is not enough to encourage its usage.
Handle: RePEc:nbr:nberwo:12119
Template-Type: ReDIF-Paper 1.0
Title: The Impact of New Laboratory Procedures and Other Medical Innovations on the Health of Americans, 1990-2003: Evidence from Longitudinal, Disease-Level Data
Classification-JEL: I12; J1; O33
Author-Name: Frank R. Lichtenberg
Author-Person: pli76
Note: EH PR
Number: 12120
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12120
File-URL: http://www.nber.org/papers/w12120.pdf
File-Format: application/pdf
Publication-Status: published as Frank R. Lichtenberg, 2007. "The Impact of New Drugs on US Longevity and Medical Expenditure, 1990–2003: Evidence from Longitudinal, Disease-Level Data," American Economic Review, American Economic Association, vol. 97(2), pages 438-443, May.
Abstract: This study examines the effect of the introduction of new laboratory procedures and other medical goods and services on the health of Americans during the period 1990-2003. We hypothesize that, the more medical innovation there is related to a medical condition, the greater the improvement in the average health of people with that condition. To test this hypothesis, we estimate models of health outcomes using longitudinal disease-level data. We measure innovation in five types of medical procedures or products: pathology & laboratory procedures, outpatient prescription drugs, inpatient prescription drugs, surgical procedures, and diagnostic radiology procedures. We examine two kinds of (inverse) indicators of health: mortality and disability. The mortality indicator we analyze is the mean age at death of people whose underlying cause of death is medical condition i. The disability measures we analyze are the fraction of people with medical condition i who (1) missed work, or (2) spent one or more days in bed, due to that condition. Our estimates indicate that conditions with higher rates of lab and outpatient drug innovation had larger increases in mean age at death, controlling for other medical innovation rates and initial mean age at death. The 1990-1998 increase in mean age at death attributable to use of new lab procedures is estimated to be about 6 months. This is 42% of the total increase in mean age at death (1.18 years) in our sample of diseases. New laboratory procedures introduced during 1990-1998 are estimated to have saved 1.13 million life-years in 1998. Expenditure per life-year gained from new lab procedures is estimated to be $6093. Treatments that cost this amount are generally considered to be quite cost-effective. In the analysis of disability, when we don't control for the initial level of disability, we find that conditions with higher rates of lab and outpatient innovation had greater declines in the probability of missing work during 1996-2003. This suggests that the use of new laboratory procedures reduced the number of work-loss days in 2003 by 42 million. When we control for initial disability, the inverse relationship between lab innovation and disability changes disappears. This is because there is a significant inverse relationship between initial health and the extent of laboratory innovation. But due to errors in measuring initial health, controlling for this variable may cause the impact of innovation on health to be underestimated.
Handle: RePEc:nbr:nberwo:12120
Template-Type: ReDIF-Paper 1.0
Title: Distribution Margins, Imported Inputs, and the Sensitivity of the CPI to Exchange Rates
Classification-JEL: F3; F4
Author-Name: Linda S. Goldberg
Author-Person: pgo256
Author-Name: José Manuel Campa
Author-Person: pca393
Note: IFM ITI
Number: 12121
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12121
File-URL: http://www.nber.org/papers/w12121.pdf
File-Format: application/pdf
Abstract: Border prices of traded goods are highly sensitive to exchange rates, but the CPI, and the retail prices of these goods, are more stable. Our paper decomposes the sources of this stability for twenty-one OECD countries, focusing on the important roles of distribution margins and imported inputs in transmitting exchange rate fluctuations into consumption prices. We provide rich cross-country and cross-industry details on distribution margins and their sensitivity to exchange rates, imported inputs used in different categories of consumption goods, and weights in consumption of nontradables, home tradables and imported goods. While distribution margins damp the sensitivity of consumption prices of tradable goods to exchange rates, they also lead to enhanced pass through when nontraded goods prices are sensitive to exchange rates. Such price sensitivity arises because imported inputs are used in production of home nontradables. Calibration exercises show that, at under 5 percent, the United States has the lowest expected CPI sensitivity to exchange rates of all countries examined. On average, calibrated exchange rate pass through into CPIs is expected to be closer to 15 percent.
Handle: RePEc:nbr:nberwo:12121
Template-Type: ReDIF-Paper 1.0
Title: Why China is Likely to Achieve its Growth Objectives
Classification-JEL: O1
Author-Name: Robert W. Fogel
Note: EFG
Number: 12122
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12122
File-URL: http://www.nber.org/papers/w12122.pdf
File-Format: application/pdf
Abstract: In 2002, the Chinese Communist Party announced a goal of quadrupling per capita income by the year 2020. Starting at income levels of the year 2000, this would require a growth rate of 7.2 percent per annum in per capita income or close to 8.0 percent in GDP. Such unresolved and emerging problems as growing income disparities, increasing pollution, pressures on infrastructure, the inefficiency of state owned enterprises, and political instability are often cited as reasons to doubt the attainability of the CCP's goal. However, China's progress in addressing fundamental constraints that might limit rapid economic growth augurs well for the success of its economic goals. Although there are disagreements about economic policy among top leaders, the continued transformation into a market economy and the promotion of increasing local autonomy in economic matters are not in doubt. In education, China has substantially increased the percentage of its workforce receiving a college education, and continuing growth in this investment in human capital could account for a large portion of the desired growth rate. In addition, the value of improvements in the quality of economic output unmeasured by GDP, such as advances in the quality of health care and education, could raise reported growth rates by as much as 60 percent. Finally, the government's increasing sensitivity to public opinion and issues of inequality and corruption, combined with improving living conditions, have resulted in a level of popular confidence in the government that makes political instability unlikely.
Handle: RePEc:nbr:nberwo:12122
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Retirement on Physical and Mental Health Outcomes
Classification-JEL: I1; J0
Author-Name: Dhaval Dave
Author-Person: pda245
Author-Name: Inas Rashad
Author-Person: pke191
Author-Name: Jasmina Spasojevic
Note: AG EH
Number: 12123
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12123
File-URL: http://www.nber.org/papers/w12123.pdf
File-Format: application/pdf
Publication-Status: published as Dhaval Dave & R. Inas Rashad & Jasmina Spasojevic, 2008. "The Effects of Retirement on Physical and Mental Health Outcomes," Southern Economic Journal, Southern Economic Association, vol. 75(2), pages 497-523, October.
Abstract: While numerous studies have examined how health affects retirement behavior, few have analyzed the impact of retirement on subsequent health outcomes. This study estimates the effects of retirement on health status as measured by indicators of physical and functional limitations, illness conditions, and depression. The empirics are based on seven longitudinal waves of the Health and Retirement Study, spanning 1992 through 2005. To account for biases due to unobserved selection and endogeneity, panel data methodologies are used. These are augmented by counterfactual and specification checks to gauge the robustness and plausibility of the estimates. Results indicate that complete retirement leads to a 5-16 percent increase in difficulties associated with mobility and daily activities, a 5-6 percent increase in illness conditions, and 6-9 percent decline in mental health, over an average post-retirement period of six years. Models indicate that the effects tend to operate through lifestyle changes including declines in physical activity and social interactions. The adverse health effects are mitigated if the individual is married and has social support, continues to engage in physical activity post-retirement, or continues to work part-time upon retirement. Some evidence also suggests that the adverse effects of retirement on health may be larger in the event of involuntary retirement. With an aging population choosing to retire at earlier ages, both Social Security and Medicare face considerable shortfalls. Eliminating the embedded incentives in public and private pension plans, which discourage work beyond some point, and enacting policies that prolong the retirement age may be desirable, ceteris paribus. Retiring at a later age may lessen or postpone poor health outcomes for older adults, raise well-being, and reduce the utilization of health care services, particularly acute care.
Handle: RePEc:nbr:nberwo:12123
Template-Type: ReDIF-Paper 1.0
Title: Why Do Europeans Smoke More than Americans?
Classification-JEL: I1; J1; P5
Author-Name: David M. Cutler
Author-Person: pcu64
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Note: AG EH
Number: 12124
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12124
File-URL: http://www.nber.org/papers/w12124.pdf
File-Format: application/pdf
Publication-Status: published as David Wise (ed.) Developments in the Economics of Aging. Chicago: University of Chicago Press, 2009..
Publication-Status: published as Why Do Europeans Smoke More than Americans?, David M. Cutler, Edward L. Glaeser. in Developments in the Economics of Aging, Wise. 2009
Abstract: While Americans are less healthy than Europeans along some dimensions (like obesity), Americans are significantly less likely to smoke than their European counterparts. This difference emerged in the 1970s and it is biggest among the most educated. The puzzle becomes larger once we account for cigarette prices and anti-smoking regulations, which are both higher in Europe. There is a nonmonotonic relationship between smoking and income; among richer countries and people, higher incomes are associated with less smoking. This can account for about one-fifth of the U.S./Europe difference. Almost one-half of the smoking difference appears to be the result of differences in beliefs about the health effects of smoking; Europeans are generally less likely to think that cigarette smoking is harmful.
Handle: RePEc:nbr:nberwo:12124
Template-Type: ReDIF-Paper 1.0
Title: On the Theory of Ethnic Conflict
Classification-JEL: P48; Q34; Z13
Author-Name: Francesco Caselli
Author-Person: pca205
Author-Name: Wilbur John Coleman II
Author-Person: pco73
Note: EFG
Number: 12125
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12125
File-URL: http://www.nber.org/papers/w12125.pdf
File-Format: application/pdf
Publication-Status: published as Francesco Caselli & Wilbur John Coleman II, 2013. "On The Theory Of Ethnic Conflict," Journal of the European Economic Association, European Economic Association, vol. 11, pages 161-192, 01.
Abstract: We present a theory of ethnic conflict in which coalitions formed along ethnic lines compete for the economy's resources. The role of ethnicity is to enforce coalition membership: in ethnically homogeneous societies members of the losing coalition can defect to the winners at low cost, and this rules out conflict as an equilibrium outcome. We derive a number of implications of the model relating social, political, and economic indicators such as the incidence of conflict, the distance among ethnic groups, group sizes, income inequality, and expropriable resources.
Handle: RePEc:nbr:nberwo:12125
Template-Type: ReDIF-Paper 1.0
Title: Empirical Models of Auctions
Classification-JEL: C5; L1; D4
Author-Name: Susan Athey
Author-Person: pat6
Author-Name: Philip A. Haile
Author-Person: pha381
Note: IO
Number: 12126
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12126
File-URL: http://www.nber.org/papers/w12126.pdf
File-Format: application/pdf
Publication-Status: published as Blundell, Richard, Whitney Newey, and Torsten Persson (eds.) Advances in Economics and Econometrics, The- ory and Applications: Ninth World Congress, Volume II. Cambridge: Cambridge University Press, 2006, ch. 1, 1-45.
Abstract: Many important economic questions arising in auctions can be answered only with knowledge of the underlying primitive distributions governing bidder demand and information. An active literature has developed aiming to estimate these primitives by exploiting restrictions from economic theory as part of the econometric model used to interpret auction data. We review some highlights of this recent literature, focusing on identification and empirical applications. We describe three insights that underlie much of the recent methodological progress in this area and discuss some of the ways these insights have been extended to richer models allowing more convincing empirical applications. We discuss several recent empirical studies using these methods to address a range of important economic questions.
Handle: RePEc:nbr:nberwo:12126
Template-Type: ReDIF-Paper 1.0
Title: Institutional Weakness and Stock Price Volatility
Classification-JEL: F3; G3
Author-Name: Galina Hale
Author-Person: pha89
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Hui Tong
Author-Person: pto159
Note: IFM AP
Number: 12127
Creation-Date: 2006-03
Order-URL: http://www.nber.org/papers/w12127
File-URL: http://www.nber.org/papers/w12127.pdf
File-Format: application/pdf
Abstract: We find an empirical regularity that stronger creditor protection reduces the volatility of stock market prices. We analyze two distinct mechanisms that characterize equity price volatility: government guarantees and creditor protection. Using a Tobin q model, we demonstrate that weak creditor protection that gives rise to government guarantees and tightens credit constraints, increases stock price volatility. Empirically, accounting for the probability of financial crises, we find that government guarantees and weak institutions that tighten credit constraints increase aggregated stock price volatility.
Handle: RePEc:nbr:nberwo:12127
Template-Type: ReDIF-Paper 1.0
Title: Why Does Democracy Need Education?
Classification-JEL: D72; D74; H11
Author-Name: Edward Glaeser
Author-Person: pgl9
Author-Name: Giacomo Ponzetto
Author-Person: ppo323
Author-Name: Andrei Shleifer
Author-Person: psh93
Note: EFG LE PE POL
Number: 12128
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12128
File-URL: http://www.nber.org/papers/w12128.pdf
File-Format: application/pdf
Publication-Status: published as Edward Glaeser & Giacomo Ponzetto & Andrei Shleifer, 2007. "Why does democracy need education?," Journal of Economic Growth, Springer, vol. 12(2), pages 77-99, June.
Abstract: Across countries, education and democracy are highly correlated. We motivate empirically and then model a causal mechanism explaining this correlation. In our model, schooling teaches people to interact with others and raises the benefits of civic participation, including voting and organizing. In the battle between democracy and dictatorship, democracy has a wide potential base of support but offers weak incentives to its defenders. Dictatorship provides stronger incentives to a narrower base. As education raises the benefits of civic participation, it raises the support for more democratic regimes relative to dictatorships. This increases the likelihood of democratic revolutions against dictatorships, and reduces that of successful anti-democratic coups.
Handle: RePEc:nbr:nberwo:12128
Template-Type: ReDIF-Paper 1.0
Title: Zombie Lending and Depressed Restructuring in Japan
Classification-JEL: E44; G34; L16; O53
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Author-Name: Takeo Hoshi
Author-Person: pho107
Author-Name: Anil K. Kashyap
Author-Person: pka35
Note: EFG CF ME
Number: 12129
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12129
File-URL: http://www.nber.org/papers/w12129.pdf
File-Format: application/pdf
Publication-Status: published as Ricardo J. Caballero & Takeo Hoshi & Anil K. Kashyap, 2008. "Zombie Lending and Depressed Restructuring in Japan," American Economic Review, American Economic Association, vol. 98(5), pages 1943-77, December.
Abstract: In this paper, we propose a bank-based explanation for the decade-long Japanese slowdown following the asset price collapse in the early 1990s. We start with the well-known observation that most large Japanese banks were only able to comply with capital standards because regulators were lax in their inspections. To facilitate this forbearance the banks often engaged in sham loan restructurings that kept credit flowing to otherwise insolvent borrowers (that we call zombies). Thus, the normal competitive outcome whereby the zombies would shed workers and lose market share was thwarted. Our model highlights the restructuring implications of the zombie problem. The counterpart of the congestion created by the zombies is a reduction of the profits for healthy firms, which discourages their entry and investment. In this context, even solvent banks do not find good lending opportunities. We confirm our story's key predictions that zombie-dominated industries exhibit more depressed job creation and destruction, and lower productivity. We present firm-level regressions showing that the increase in zombies depressed the investment and employment growth of non-zombies and widened the productivity gap between zombies and non-zombies.
Handle: RePEc:nbr:nberwo:12129
Template-Type: ReDIF-Paper 1.0
Title: Does Neoclassical Theory Account for the Effects of Big Fiscal Shocks? Evidence From World War II
Classification-JEL: E0; E6
Author-Name: Ellen R. McGrattan
Author-Person: pmc46
Author-Name: Lee E. Ohanian
Author-Person: poh1
Note: EFG
Number: 12130
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12130
File-URL: http://www.nber.org/papers/w12130.pdf
File-Format: application/pdf
Publication-Status: published as Ellen R. McGrattan & Lee E. Ohanian, 2010. "Does Neoclassical Theory Account For The Effects Of Big Fiscal Shocks? Evidence From World War Ii," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(2), pages 509-532, 05.
Abstract: There is much debate about the usefulness of the neoclassical growth model for assessing the macro-economic impact of fiscal shocks. We test the theory using data from World War II, which is by far the largest fiscal shock in the history of the United States. We take observed changes in fiscal policy during the war as inputs into a parameterized, dynamic general equilibrium model and compare the values of all variables in the model to the actual values of these variables in the data. Our main finding is that the theory quantitatively accounts for macroeconomic activity during this big fiscal shock.
Handle: RePEc:nbr:nberwo:12130
Template-Type: ReDIF-Paper 1.0
Title: Complementarities in Automobile Production
Classification-JEL: L23; L11; L62; M11
Author-Name: Johannes Van Biesebroeck
Author-Person: pva139
Note: PR
Number: 12131
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12131
File-URL: http://www.nber.org/papers/w12131.pdf
File-Format: application/pdf
Publication-Status: published as Johannes Van Biesebroeck, 2007. "Complementarities in automobile production," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(7), pages 1315-1345.
Abstract: The number of different car and light truck models produced in North America has increased enormously over the last decades. The data suggests that producing this increased variety of vehicles is associated with a productivity penalty. We show that manufacturers can adopt complementary activities to reduce this penalty. Flexible technology, defined as the ability to assemble models derived from different "platforms" on the same assembly line, and bringing previously outsourced activities in-house are two such activities that we identify. Both are costly themselves, in terms of lower productivity, but they reduce the cost of producing greater variety. The results are robust to controlling for the endogeneity of the adoption decisions using activity-specific instruments, as proposed by Athey and Stern (2003).
Handle: RePEc:nbr:nberwo:12131
Template-Type: ReDIF-Paper 1.0
Title: Antitrust in the Not-For-Profit Sector
Classification-JEL: K2
Author-Name: Tomas J. Philipson
Author-Person: pph37
Author-Name: Richard A. Posner
Author-Person: ppo25
Note: EH LE
Number: 12132
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12132
File-URL: http://www.nber.org/papers/w12132.pdf
File-Format: application/pdf
Publication-Status: published as Tomas J. Philipson & Richard A. Posner, 2009. "Antitrust in the Not-for-Profit Sector," Journal of Law & Economics, University of Chicago Press, vol. 52(1), pages 1-18, 02.
Abstract: Despite the conceptual differences between for-profit and non-profit firms stressed in conventional economic analyses of the non-profit sector, U.S. antitrust law generally does not distinguish between these two organizational forms. This paper argues that the same incentives to restrain trade exist in the non-profit sector as in the for-profit sector. Altruistic firms benefit from exploiting market power, just as non-altruistic ones do, even when they would price below cost without regard to competition. Therefore, promoting competition is socially valuable regardless of the particular objectives of producers, and the fact that antitrust law does not distinguish between the two sectors is efficient.
Handle: RePEc:nbr:nberwo:12132
Template-Type: ReDIF-Paper 1.0
Title: A Political Economy Theory of the Soft Budget Constraint
Classification-JEL: H20; H50; O20
Author-Name: James A. Robinson
Author-Person: pro179
Author-Name: Ragnar Torvik
Author-Person: pto24
Note: PE POL
Number: 12133
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12133
File-URL: http://www.nber.org/papers/w12133.pdf
File-Format: application/pdf
Publication-Status: published as Robinson, James A. & Torvik, Ragnar, 2009. "A political economy theory of the soft budget constraint," European Economic Review, Elsevier, vol. 53(7), pages 786-798, October.
Abstract: Why do soft budget constraints exist and persist? In this paper we argue that the prevalence of soft budget constraints can be best explained by the political desirability of softness. We develop a political economy model where politicians cannot commit to policies that are not ex post optimal. We show that because of the dynamic commitment problem inherent in the soft budget constraint, politicians can in essence commit to make transfers to entrepreneurs which otherwise they would not be able to do. This encourages such entrepreneurs to vote for them. Though the soft budget constraint may induce economic inefficiency, it may be politically rational because it influences the outcomes of elections. In consequence, even when information is complete, politicians may fund bad projects which they anticipate they will have to bail out in the future.
Handle: RePEc:nbr:nberwo:12133
Template-Type: ReDIF-Paper 1.0
Title: The Thick Market Effect on Housing Markets Transactions
Classification-JEL: R0; R3
Author-Name: Li Gan
Author-Person: pga94
Author-Name: Qinghua Zhang
Author-Person: pzh354
Note: AP
Number: 12134
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12134
File-URL: http://www.nber.org/papers/w12134.pdf
File-Format: application/pdf
Publication-Status: published as Gan, Li and Qinghua Zhang. “The Thick Market Effect of Local Unemployment Rate Fluctuations.” Journal of Econometrics 133(2006): 127-152.
Abstract: This paper provides a search model for housing market where the number of buyers and/or sellers plays very important role. The model makes three testable predictions: (1) the unemployment rate has a negative impact on the trading volume and the sale prices of the housing market; (2) a larger housing market has a lower average sale price, shorter time-to-sale and smaller price dispersion, in addition to a lower vacancy rate. (3) In a larger housing market, when the unemployment rate goes up (or down), the sale price decreases (or increases) by a smaller percentage than in a smaller market. All three predictions are supported by a panel dataset of the Texas city-level housing markets.
Handle: RePEc:nbr:nberwo:12134
Template-Type: ReDIF-Paper 1.0
Title: Political Risk Versus Market Risk in Social Security
Author-Name: John B. Shoven
Author-Name: Sita N. Slavov
Author-Person: pna81
Note: AG PE POL
Number: 12135
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12135
File-URL: http://www.nber.org/papers/w12135.pdf
File-Format: application/pdf
Abstract: Pay-as-you-go Social Security is typically characterized as a universal defined benefit pension program. Implicit in this characterization is a sense that the participant's investment in future benefits is somehow guaranteed, or safe from risk. This study develops the concept of "political risk" as the possibility that some future legislature will be forced to change the tax and benefit provisions of pay-as-you-go social security programs, when there are changes in the demographic and macroeconomic variables that support it. Thus there is a "political risk" to participants that might be compared to the "market risk" in a personal accounts retirement scheme. In this paper, we carry out a detailed quantitative analysis of political risk in the U.S. Social Security system, as well as an overview of policy reforms in several European countries that demonstrate political risk more broadly across social security systems. For the U.S., we compute the internal rates of return (IRRs) from Social Security for various age groups and income levels, using the existing law in effect each year since 1939. We find considerable variation in IRRs through time for any birth cohort. Participants experienced significant declines in IRRs as a result of adjustments made to restore the system's solvency in 1983 and 1994. If the system were brought into actuarial balance in 2005, younger cohorts would experience another significant decline in their lifetime IRR. Our review of other countries demonstrates political risk in other social security systems as well. Law changes necessitated by actuarial imbalances pass demographic risk on to participants. The debate over personal accounts, therefore, is not one of "safe" versus "risky" benefits, but one of portfolio choice.
Handle: RePEc:nbr:nberwo:12135
Template-Type: ReDIF-Paper 1.0
Title: Flight to Quality and Collective Risk Management
Classification-JEL: E30; E44; E5; F34; G
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Author-Name: Arvind Krishnamurthy
Author-Person: pkr393
Note: CF EFG IFM ME
Number: 12136
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12136
File-URL: http://www.nber.org/papers/w12136.pdf
File-Format: application/pdf
Publication-Status: published as Ricardo J. Caballero & Arvind Krishnamurthy, 2008. "Collective Risk Management in a Flight to Quality Episode," Journal of Finance, American Finance Association, vol. 63(5), pages 2195-2230, October.
Abstract: We present a model of flight to quality episodes that emphasizes systemic risk and the Knightian uncertainty surrounding these episodes. Agents make risk management decisions with incomplete knowledge. They understand their own shocks, but are uncertain of how correlated their shocks are with systemwide shocks. Aversion to this uncertainty leads them to question whether their private risk management decisions are robust to aggregate events, generating conservatism and excessive demand for safety. We show that agents' actions lock-up the capital of the financial system in a manner that is wasteful in the aggregate and can trigger and amplify a financial accelerator. The scenario that the collective of conservative agents are guarding against is impossible, and known to be so even given agents' incomplete knowledge. A lender of last resort, even if less knowledgeable than private agents about individual shocks, does not suffer from this collective bias and finds that pledging intervention in extreme events is valuable. The benefit of such intervention exceeds its direct value because it unlocks private capital markets.
Handle: RePEc:nbr:nberwo:12136
Template-Type: ReDIF-Paper 1.0
Title: How Occupied France Financed Its Own Exploitation in World War II
Classification-JEL: E1; E6; N1; N4
Author-Name: Filippo Occhino
Author-Person: poc4
Author-Name: Kim Oosterlinck
Author-Person: poo7
Author-Name: Eugene N. White
Author-Person: pwh5
Note: DAE
Number: 12137
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12137
File-URL: http://www.nber.org/papers/w12137.pdf
File-Format: application/pdf
Publication-Status: published as Filippo Occhino & Kim Oosterlinck & Eugene N. White, 2007. "How Occupied France Financed Its Own Exploitation in World War II," American Economic Review, American Economic Association, vol. 97(2), pages 295-299, May.
Abstract: The occupation payments made by France to Nazi Germany between 1940 and 1944 represent one of the largest recorded international transfers and contributed significantly to financing the overall German war effort. Using a neoclassical growth model that incorporates essential features of the occupied economy and the postwar stabilization, we assess the welfare costs of French policies that funded payments to Germany. Occupation payments required a 16 percent reduction of consumption for twenty years, with the draft of labor to Germany and wage and price controls adding substantially to this burden. Vichy's postwar debt overhang would have demanded large budget surpluses; but inflation, which erupted after Liberation, reduced the debt well below its steady state level and redistributed the adjustment costs. The Marshall Plan played only a minor direct role, and international credits helped to substantially lower the nation's burden.
Handle: RePEc:nbr:nberwo:12137
Template-Type: ReDIF-Paper 1.0
Title: Bubbles and Busts: The 1990s in the Mirror of the 1920s
Classification-JEL: E5; G1; N1; N2
Author-Name: Eugene N. White
Author-Person: pwh5
Note: AP DAE ME
Number: 12138
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12138
File-URL: http://www.nber.org/papers/w12138.pdf
File-Format: application/pdf
Publication-Status: published as White, Eugene. “Bubbles and Busts: The great bull markets of the 1920s and 1930s,” Financial History 89 (Fall 2007): 12-15, 27.
Abstract: This paper surveys the twentieth century booms and crashes in the American stock market, focusing on a comparison of the two most similar events in the 1920s and 1990s. In both booms, claims were made that they were the consequence a "new economy" or "irrational exuberance." Neither boom can be readily explained by fundamentals, represented by expected dividend growth or changes in the equity premium. The difficulty of identifying the fundamentals implies that central banks would not be successful in preventing pre-emptive policies, although they still would have a critical role to play in preventing crashes from disrupting the payments system or sparking an intermediation crisis.
Handle: RePEc:nbr:nberwo:12138
Template-Type: ReDIF-Paper 1.0
Title: The Homecoming of American College Women: The Reversal of the College Gender Gap
Classification-JEL: I2; J1; J2; N3
Author-Name: Claudia Goldin
Author-Person: pgo601
Author-Name: Lawrence F. Katz
Author-Person: pka266
Author-Name: Ilyana Kuziemko
Note: CH DAE ED LS
Number: 12139
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12139
File-URL: http://www.nber.org/papers/w12139.pdf
File-Format: application/pdf
Publication-Status: published as Claudia Goldin & Lawrence F. Katz & Ilyana Kuziemko, 2006. "The Homecoming of American College Women: The Reversal of the College Gender Gap," Journal of Economic Perspectives, American Economic Association, vol. 20(4), pages 133-156, Fall.
Abstract: Women are currently the majority of U.S. college students and of those receiving a bachelor's degree, but were 39 percent of undergraduates in 1960. We use three longitudinal data sets of high school graduates in 1957, 1972, and 1992 to understand the narrowing of the gender gap in college and its reversal. From 1972 to 1992 high school girls narrowed the gap with boys in math and science course taking and in achievement test scores. These variables, which we term the proximate determinants, can account for 30 to 60 percent of the relative increase in women's college completion rate. Behind these changes were several others: the future work expectations of young women increased greatly between 1968 and 1979 and the age at first marriage for college graduate women rose by 2.5 years in the 1970s, allowing them to be more serious students. The reversal of the college gender gap, rather than just its elimination, was due in part to the persistence of behavioral and developmental differences between males and females.
Handle: RePEc:nbr:nberwo:12139
Template-Type: ReDIF-Paper 1.0
Title: The Dynamics of the Age Structure, Dependency, and Consumption
Classification-JEL: E10; E21; H55; J11
Author-Name: Heinrich Hock
Author-Name: David N. Weil
Author-Person: pwe24
Note: AG PE
Number: 12140
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12140
File-URL: http://www.nber.org/papers/w12140.pdf
File-Format: application/pdf
Publication-Status: published as Heinrich Hock & David Weil, 2012. "On the dynamics of the age structure, dependency, and consumption," Journal of Population Economics, Springer, vol. 25(3), pages 1019-1043, July.
Abstract: We examine the dynamic interaction of the population age structure, economic dependency, and fertility, paying particular attention to the role of intergenerational transfers. In the short run, a reduction in fertility produces a "demographic dividend" that allows for higher consumption. In the long run, however, higher old-age dependency can more than offset this effect. To analyze these dynamics we develop a highly tractable continuous-time overlapping generations model in which population is divided into three groups (young, working age, and old) and transitions between groups take place in a probabilistic fashion. We show that most highly developed countries have fertility below the rate that maximizes steady state consumption. Further, the dependency-minimizing response to increased longevity is to raise fertility. In the face of the high taxes required to support transfers to a growing aged population, we demonstrate that the actual response of fertility will likely be exactly the opposite, leading to increased population aging.
Handle: RePEc:nbr:nberwo:12140
Template-Type: ReDIF-Paper 1.0
Title: Illegal Migration from Mexico to the United States
Classification-JEL: F2; J6
Author-Name: Gordon H. Hanson
Author-Person: pha80
Note: ITI LS
Number: 12141
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12141
File-URL: http://www.nber.org/papers/w12141.pdf
File-Format: application/pdf
Publication-Status: published as Gordon H. Hanson, 2006. "Illegal Migration from Mexico to the United States," Journal of Economic Literature, American Economic Association, vol. 44(4), pages 869-924, December.
Abstract: In this paper, I selectively review recent literature on illegal migration from Mexico to the United States. I begin by discussing methods for estimating stocks and flows of illegal migrants. While there is uncertainty about the size of the unauthorized population, new data sources make it possible to examine the composition of legal and illegal populations and the time-series covariates of illegal labor flows. I then consider the supply of and demand for illegal migrants. Wage differentials between the United States and Mexico are hardly a new phenomenon, yet illegal migration from Mexico did not reach high levels until recently. An increase in the relative size of Mexico's working-age population, greater volatility in U.S.-Mexico relative wages, and changes in U.S. immigration policies are all candidate explanations for increasing labor flows from Mexico. Finally, I consider policies that regulate the cross-border flow of illegal migrants. While U.S. laws mandate that authorities prevent illegal entry and punish firms that hire unauthorized immigrants, these laws are imperfectly enforced. Lax enforcement may reflect political pressure by employers and other interests that favor open borders.
Handle: RePEc:nbr:nberwo:12141
Template-Type: ReDIF-Paper 1.0
Title: The Causes of Japan's "Lost Decade": The Role of Household Consumption
Classification-JEL: D12; E21; E32; O47
Author-Name: Charles Yuji Horioka
Author-Person: pho41
Note: EFG PE
Number: 12142
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12142
File-URL: http://www.nber.org/papers/w12142.pdf
File-Format: application/pdf
Publication-Status: published as Horioka, Charles Yuji, 2006. "The causes of Japan's `lost decade': The role of household consumption," Japan and the World Economy, Elsevier, vol. 18(4), pages 378-400, December.
Abstract: In this paper, I analyze the causes of the prolonged slowdown of the Japanese economy in the 1990s and find that the stagnation of investment, especially private fixed investment, was the primary culprit. I then investigate the causes of the stagnation of household consumption during the 1990s and find that the stagnation of household disposable income, the decline in household wealth, and increased uncertainty about the future are among the contributing factors. Finally, I consider whether demand side factors or supply side factors were more important as causes of the prolonged slowdown of the Japanese economy in the 1990s and conclude that the former (especially misguided government policies) were probably more important.
Handle: RePEc:nbr:nberwo:12142
Template-Type: ReDIF-Paper 1.0
Title: The New Promised Land: Black-White Convergence in the American South, 1960-2000
Classification-JEL: J15; J71; N32; N92
Author-Name: Jacob L. Vigdor
Author-Person: pvi23
Note: ED LS
Number: 12143
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12143
File-URL: http://www.nber.org/papers/w12143.pdf
File-Format: application/pdf
Abstract: The black-white earnings gap has historically been larger in the South than in other regions of the United States. Since 1970, however, the male annual earnings gap outside the South has increased - dramatically, when the analysis factors in non-participants - while the gap within the South has narrowed, to the point where 2000 Census figures indicate significantly lower racial inequality in the South. Three proposed explanations for this trend focus on changing patterns of selective migration, labor market trends including reduced discrimination and the decline of manufacturing employment, and reductions in school segregation and school resource disparities in the South relative to the North. Evidence suggests that selective migration can explain about 40% of the South's relative advance, and virtually all of the relative advance after 1980. Earlier declines can be attributed in large part to reduced industrial segregation and other labor market advances in the South. Relative improvements in school quality for Southern blacks explain at most 20% of the overall trend.
Handle: RePEc:nbr:nberwo:12143
Template-Type: ReDIF-Paper 1.0
Title: Optimal Decentralized Investment Management
Classification-JEL: G10; G11
Author-Name: Jules H. van Binsbergen
Author-Person: pva668
Author-Name: Michael W. Brandt
Author-Name: Ralph S.J. Koijen
Author-Person: pko589
Note: AP
Number: 12144
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12144
File-URL: http://www.nber.org/papers/w12144.pdf
File-Format: application/pdf
Publication-Status: published as van Binsbergen, Jules H., Michael W. Brandt, and Ralph S.J. Koijen, Optimal Decentralized Investment Managament, Journal of Finance 63(4) (2008): 1849-1895.
Abstract: We study a decentralized investment problem in which a CIO employs multiple asset managers to implement and execute investment strategies in separate asset classes. The CIO allocates capital to the managers who, in turn, allocate these funds to the assets in their asset class. This two-step investment process causes several misalignments of objectives between the CIO and his managers and can lead to large utility costs on the part of the CIO. We focus on i) loss of diversification ii) different appetites for risk, iii) different investment horizons, and iv) the presence of liabilities. We derive an optimal unconditional linear performance benchmark and show that this benchmark can be used to better align incentives within the firm. The optimal benchmark substantially mitigates the utility costs of decentralized investment management. These costs can be further reduced when the CIO can screen asset managers on the basis of their risk appetites. Each manager's optimal level of risk aversion depends on the asset class he manages and can differ substantially from the CIO's level of risk aversion.
Handle: RePEc:nbr:nberwo:12144
Template-Type: ReDIF-Paper 1.0
Title: Preferences and Heterogeneous Treatment Effects in a Public School Choice Lottery
Classification-JEL: I0; I2; I20; I28
Author-Name: Justine S. Hastings
Author-Person: pha804
Author-Name: Thomas J. Kane
Author-Name: Douglas O. Staiger
Author-Person: pst466
Note: CH ED PE IO
Number: 12145
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12145
File-URL: http://www.nber.org/papers/w12145.pdf
File-Format: application/pdf
Abstract: This paper combines a model of parental school choice with randomized school lotteries in order to understand the effects of being assigned to a first-choice school on academic outcomes. We outline a simple framework in which those who place the highest weight on academics when choosing a school benefit the most academically when admitted. Although the average student does not improve academically when winning a school lottery, this average impact conceals a range of impacts for identifiable subgroups of students. Children of parents whose choices revealed a strong preference for academic quality experienced significant gains in test scores as a result of attending their chosen school, while children whose parents weighted academic characteristics less heavily experienced academic losses. This differential effect is largest for children of parents who forfeit the most in terms of utility gains from proximity and racial match to choose a school with stronger academics. Depending on one's own race and neighborhood, a preference for academic quality can either conflict with or be reinforced by other objectives, such as a desire for proximity and same-race peers.
Handle: RePEc:nbr:nberwo:12145
Template-Type: ReDIF-Paper 1.0
Title: Investment Taxes and Equity Returns
Classification-JEL: G12; H20; E44
Author-Name: Clemens Sialm
Author-Person: psi59
Note: AP CF PE
Number: 12146
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12146
File-URL: http://www.nber.org/papers/w12146.pdf
File-Format: application/pdf
Abstract: This paper investigates whether investors are compensated for the tax burden of equity securities. Effective tax rates on equity securities vary due to frequent tax reforms and due to persistent differences in propensities to pay dividends. The paper finds an economically and statistically significant relationship between risk-adjusted stock returns and effective personal tax rates using a new data set covering tax burdens on a cross-section of equity securities between 1927 and 2004. Consistent with tax capitalization, stocks facing higher effective tax rates tend to compensate taxable investors by generating higher before-tax returns.
Handle: RePEc:nbr:nberwo:12146
Template-Type: ReDIF-Paper 1.0
Title: Population Aging
Classification-JEL: J10; J11; H55
Author-Name: David N. Weil
Author-Person: pwe24
Note: AG LS PE
Number: 12147
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12147
File-URL: http://www.nber.org/papers/w12147.pdf
File-Format: application/pdf
Publication-Status: published as Weil, David. “Population Aging,” in New Palgrave Encyclopedia of Economics, second edition, 2008.
Abstract: Population aging is primarily the result of past declines in fertility, which produced a decades long period in which the ratio of dependents to working age adults was reduced. Rising old-age dependency in many countries represents the inevitable passing of this "demographic dividend." Societies use three methods to transfer resources to people in dependent age groups: government, family, and personal saving. In developed countries, families are predominant in supporting children, while government is the main source of support for the elderly. The most important means by which aging will affect aggregate output is the distortion from taxes to fund PAYGO pensions.
Handle: RePEc:nbr:nberwo:12147
Template-Type: ReDIF-Paper 1.0
Title: Open Source Software: The New Intellectual Property Paradigm
Classification-JEL: K; L
Author-Name: Stephen M. Maurer
Author-Name: Suzanne Scotchmer
Author-Person: psc49
Note: PR LE
Number: 12148
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12148
File-URL: http://www.nber.org/papers/w12148.pdf
File-Format: application/pdf
Publication-Status: published as Hendershott, Terrence (ed.) Economics and Information Systems, Volume 1. Amsterdam: Elsevier Science, 2006.
Abstract: Open source methods for creating software rely on developers who voluntarily reveal code in the expectation that other developers will reciprocate. Open source incentives are distinct from earlier uses of intellectual property, leading to different types of inefficiencies and different biases in R&D investment. Open source style of software development remedies a defect of intellectual property protection, namely, that it does not generally require or encourage disclosure of source code. We review a considerable body of survey evidence and theory that seeks to explain why developers participate in open source collaborations instead of keeping their code proprietary, and evaluates the extent to which open source may improve welfare compared to proprietary development.
Handle: RePEc:nbr:nberwo:12148
Template-Type: ReDIF-Paper 1.0
Title: Household Finance
Classification-JEL: G12
Author-Name: John Y. Campbell
Author-Person: pca54
Note: AP EFG ME
Number: 12149
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12149
File-URL: http://www.nber.org/papers/w12149.pdf
File-Format: application/pdf
Publication-Status: published as Campbell, John Y. "Household Finance," Journal of Finance, 2006, v61(4,Aug), 1553-1604.
Abstract: The welfare benefits of financial markets depend in large part on how effectively households use these markets. The study of household finance is challenging because household behavior is difficult to measure accurately, and because households face constraints that are not captured by textbook models, including fixed costs, uninsurable income risk, borrowing constraints, and contracts that are non-neutral with respect to inflation. Evidence on participation, diversification, and the exercise of mortgage refinancing options suggests that many households are reasonably effective investors, but a minority make significant mistakes. This minority appears to be poorer and less well educated than the majority of more successful investors. There is some evidence that households understand their own limitations, and try to avoid financial strategies that require them to make decisions they do not feel qualified to make. Some financial products involve a cross-subsidy from naive households to sophisticated households, and this can inhibit the emergence of products that would promote effective financial decision making by households.
Handle: RePEc:nbr:nberwo:12149
Template-Type: ReDIF-Paper 1.0
Title: Abortion and Selection
Classification-JEL: J1
Author-Name: Elizabeth Oltmans Ananat
Author-Name: Jonathan Gruber
Author-Person: pgr20
Author-Name: Phillip B. Levine
Author-Person: ple553
Author-Name: Douglas Staiger
Author-Person: pst466
Note: CH PE
Number: 12150
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12150
File-URL: http://www.nber.org/papers/w12150.pdf
File-Format: application/pdf
Publication-Status: published as Ananat, Elizabeth, Jonathan Gruber, Phillip Levine, and Douglas Staiger. “Abortion and Selection.” Review of Economics and Statistics 91,1 (2009): 124–136.
Abstract: The introduction of legalized abortion in the early 1970s led to dramatic changes in fertility behavior. Some research has suggested as well that there were important impacts on cohort outcomes, but this literature has been limited and controversial. In this paper, we provide a framework for understanding the mechanisms through which abortion access affects cohort outcomes, and use that framework to both address inconsistent past methodological approaches, and provide evidence on the long-run impact on cohort characteristics. Our results provide convincing evidence that abortion legalization altered young adult outcomes through selection. In particular, we find evidence that lower costs of abortion led to improved outcomes in the birth cohort in the form of an increased likelihood of college graduation, lower rates of welfare use, and lower odds of being a single parent. We also find that our empirical innovations do not substantially alter earlier results regarding the relationship between abortion and crime, although most of that relationship appears to reflect cohort size effects rather than selection.
Handle: RePEc:nbr:nberwo:12150
Template-Type: ReDIF-Paper 1.0
Title: Why Do IPO Auctions Fail?
Classification-JEL: G24; G28; G32
Author-Name: Ravi Jagannathan
Author-Person: pja91
Author-Name: Ann E. Sherman
Author-Person: psh151
Note: AP CF IO
Number: 12151
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12151
File-URL: http://www.nber.org/papers/w12151.pdf
File-Format: application/pdf
Abstract: We document a somewhat surprising regularity: of the many countries that have used IPO auctions, virtually all have abandoned them. The common explanations given for the lack of popularity of the auction method in the US, viz., issuer reluctance to try a new experimental method, and underwriter pressure towards methods that lead to higher fees, do not fit the evidence. We examine why auctions have failed and verify, to the extent possible, that they are consistent with what academic theory predicts. Both uniform price and discriminatory auctions are plagued by unexpectedly large fluctuations in the number of participants. The free rider problem and the winner's curse hamper price discovery and discourage investors from participating in auctions. Calculating the optimal bids in large multi-unit common value auctions with endogenous entry imposes a huge computational burden. With IPOs taking place sporadically, and each firm being different, auctions are likely to end up being unstable.
Handle: RePEc:nbr:nberwo:12151
Template-Type: ReDIF-Paper 1.0
Title: An Economist Sells Bagels: A Case Study in Profit Maximization
Classification-JEL: L2
Author-Name: Steven D. Levitt
Author-Person: ple59
Note: IO
Number: 12152
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12152
File-URL: http://www.nber.org/papers/w12152.pdf
File-Format: application/pdf
Abstract: Profit maximizing behavior on the part of firms is a fundamental, but rarely tested, assumption of economics. In this paper, I analyze the decisions made by an MIT trained economist running a company that delivers bagels and donuts. The simplicity and transparency of the business (e.g. marginal cost is easily observed) allow for direct tests of profit maximization in the quantities delivered each day and the prices that are charged. Using thirteen years of data representing more than 80,000 deliveries, I find that the company is extremely adept at determining how many bagels and donuts to deliver to a particular customer on a given day. In stark contrast, the company appears to price on the inelastic portion of the demand curve for the entire period, thereby foregoing a substantial share of available profits. I argue that these results generalize well beyond this particular case study: firms are likely to be close to the efficient frontier on dimensions for which there is frequent and informative feedback regarding profits, but absent that feedback, systematic deviations from profit maximization are more likely.
Handle: RePEc:nbr:nberwo:12152
Template-Type: ReDIF-Paper 1.0
Title: The Diffusion of Development
Classification-JEL: O11; O57
Author-Name: Enrico Spolaore
Author-Person: psp27
Author-Name: Romain Wacziarg
Author-Person: pwa67
Note: EFG IFM
Number: 12153
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12153
File-URL: http://www.nber.org/papers/w12153.pdf
File-Format: application/pdf
Publication-Status: published as Enrico Spolaore & Romain Wacziarg, 2009. "The Diffusion of Development," The Quarterly Journal of Economics, MIT Press, vol. 124(2), pages 469-529, May.
Abstract: This paper studies the barriers to the diffusion of development across countries over the very long-run. We find that genetic distance, a measure associated with the amount of time elapsed since two populations' last common ancestors, bears a statistically and economically significant correlation with pairwise income differences, even when controlling for various measures of geographical isolation, and other cultural, climatic and historical difference measures. These results hold not only for contemporary income differences, but also for income differences measured since 1500 and for income differences within Europe. We uncover similar patterns of coefficients for the proximate determinants of income differences, particularly for differences in human capital and institutions. The paper discusses the economic mechanisms that are consistent with these facts. We present a framework in which differences in human characteristics transmitted across generations - including culturally transmitted characteristics - can affect income differences by creating barriers to the diffusion of innovations, even when they have no direct effect on productivity. The empirical evidence over time and space is consistent with this "barriers" interpretation.
Handle: RePEc:nbr:nberwo:12153
Template-Type: ReDIF-Paper 1.0
Title: The U.S. Current Account Deficit: Gradual Correction or Abrupt Adjustment?
Classification-JEL: F02; F43; O11
Author-Name: Sebastian Edwards
Author-Person: ped3
Note: IFM
Number: 12154
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12154
File-URL: http://www.nber.org/papers/w12154.pdf
File-Format: application/pdf
Publication-Status: published as Edwards, Sebastian, 2006. "The U.S. current account deficit: Gradual correction or abrupt adjustment?," Journal of Policy Modeling, Elsevier, vol. 28(6), pages 629-643, September.
Abstract: In this paper I use a large multi-country data set to analyze the determinants of abrupt and large "current account reversals." The results from a variance-component probit model indicate that the probability of experiencing a major current account reversal is positively affected by larger current account deficits, lower prices of exports relative to imports, and expansive monetary policies. On the other hand, this probability is lower for more advanced countries, and for countries with flexible exchange rates. An analysis of the marginal effects of current account deficits and of the predicted probability of reversal indicates that both have increased significantly for the U.S. since 1999. However, the level of this probability is still on the low side. I estimate that the predicted probability of a current account reversal in the U.S. has increased from 1.7% in 1999, to 14.9% in 2006.
Handle: RePEc:nbr:nberwo:12154
Template-Type: ReDIF-Paper 1.0
Title: What Does Certification Tell Us About Teacher Effectiveness? Evidence from New York City
Classification-JEL: I2; J0
Author-Name: Thomas J. Kane
Author-Name: Jonah E. Rockoff
Author-Name: Douglas O. Staiger
Author-Person: pst466
Note: ED
Number: 12155
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12155
File-URL: http://www.nber.org/papers/w12155.pdf
File-Format: application/pdf
Publication-Status: published as Thomas J. Kane, Jonah E. Rockoff and Douglas O. Staiger. Economics of Education Review Volume 27, Issue 6, December 2008, Pages 615-631
Abstract: We use six years of data on student test performance to evaluate the effectiveness of certified, uncertified, and alternatively certified teachers in the New York City public schools. On average, the certification status of a teacher has at most small impacts on student test performance. However, among those with the same certification status, there are large and persistent differences in teacher effectiveness. This evidence suggests that classroom performance during the first two years, rather than certification status, is a more reliable indicator of a teacher's future effectiveness. We also evaluate turnover among teachers with different certification status, and the impact on student achievement of hiring teachers with predictably high turnover. Given relatively modest estimates of experience differentials, even high turnover groups (such as Teach for America participants) would have to be only slightly more effective in their first year to offset the negative effects of their high exit rates.
Handle: RePEc:nbr:nberwo:12155
Template-Type: ReDIF-Paper 1.0
Title: Consumer Demand under Price Uncertainty: Empirical Evidence from the Market for Cigarettes
Classification-JEL: C8; D8; I1
Author-Name: Mark Coppejans
Author-Name: Donna Gilleskie
Author-Name: Holger Sieg
Author-Name: Koleman Strumpf
Note: CH EH
Number: 12156
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12156
File-URL: http://www.nber.org/papers/w12156.pdf
File-Format: application/pdf
Publication-Status: published as Coppejans, M., Gilleskie, D., Sieg, H. and K. Strumpf. "Consumer Demand under Price Uncertainty: Empirical Evidence from the Market for Cigarettes.” Review of Economics and Statistics 89,3 (2007): 510-521.
Abstract: The goal of this paper is to analyze consumer demand in markets with large price uncertainty. We develop a demand model for goods that are subject to habit formation. We show that consumption plans of forward looking individuals depend not only on preferences and current period prices, but also on individual beliefs about the evolution of future prices. Moreover, a mean preserving spread in the price distribution and, hence, an increase in price uncertainty reduces consumption along the optimal path. With smoking as our application, we test the predictions of our model. We use a unique data set of prices for cigarettes collected by the Bureau of Labor Statistics to characterize price uncertainty and price expectations of individuals. We have also obtained access to the restricted use version of the National Education Longitudinal Study, which provides detailed information on smoking behavior of teenagers in the U.S. Our estimation results suggest that teenagers who live in metropolitan areas with a large amount of cigarette price volatility have, on average, significantly lower levels of cigarette consumption. Moreover, these individuals are less likely to start consuming cigarettes. Our results also provide evidence that young individuals are forward looking. Myopic individuals would not respond to an increase in uncertainty about future prices by reducing consumption.
Handle: RePEc:nbr:nberwo:12156
Template-Type: ReDIF-Paper 1.0
Title: The Macro-Foundations of Microeconomics: Initial Labor Market Conditions and Long-Term Outcomes for Economists
Classification-JEL: J24; J44; A11; M50
Author-Name: Paul Oyer
Author-Person: poy2
Note: LE LS
Number: 12157
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12157
File-URL: http://www.nber.org/papers/w12157.pdf
File-Format: application/pdf
Publication-Status: published as Oyer, Paul. "Initial Labor Market Conditions and Long-Term Outcomes For Economics," Journal of Economic Perspectives, 2006, v20(3,Summer), 143-160.
Abstract: Each year, graduate students entering the academic job market worry that they will suffer due to uncontrollable macroeconomic risk. Given the importance of general human capital and the relative ease of publicly observing productivity in academia, one might expect unlucky graduating cohorts' long-term labor market outcomes to resemble those who graduate in favorable climates. In this paper, I analyze the relationship between macroeconomic conditions at graduation, initial job placement, and long-term outcomes for PhD economists from seven programs. Using macro conditions as an instrument for initial placement, I show a causal effect of quality and type of initial job on long-term job characteristics. I also show that better initial placement increases research productivity, which helps to limit the set of economic models that can explain the effect of initial placement on long-term jobs.
Handle: RePEc:nbr:nberwo:12157
Template-Type: ReDIF-Paper 1.0
Title: Optimal Inflation Targeting under Alternative Fiscal Regimes
Classification-JEL: E52; E63
Author-Name: Pierpaolo Benigno
Author-Person: pbe203
Author-Name: Michael Woodford
Author-Person: pwo3
Note: EFG IFM ME
Number: 12158
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12158
File-URL: http://www.nber.org/papers/w12158.pdf
File-Format: application/pdf
Publication-Status: published as Schmidt-Hebbel, K. and F. Mishkin (eds.) Monetary Policy Under Inflation Targeting. Chile: Central Bank of Chile, 2007.
Abstract: Standard discussions of flexible inflation targeting as an optimal monetary policy abstract completely from the consequences of monetary policy for the government budget. But at least some of the countries now adopting inflation targeting have substantial difficulty in controlling fiscal imbalances, so that the additional strains resulting from strict control of inflation are of substantial concern, and some (notably Sims 2005) have argued that inflation targeting can even be counterproductive under some fiscal regimes. Here, therefore, we analyze welfare-maximizing monetary policy taking explicit account of the consequences of monetary policy for the government budget, and under a variety of assumptions about the nature of the fiscal regime. The paper contrasts the optimal monetary policies under three alternative assumptions about fiscal policy: (i) the case in which little distortion is required to raise additional government revenue, and the fiscal authority can be relied upon to ensure intertemporal government solvency [the implicit assumption in standard analyses]; (ii) the case in which only distorting sources of revenue exist, but distorting taxes are adjusted optimally; and (iii) the case in which tax rates cannot be expected to change in response to a change in monetary policy [the problematic case emphasized by Sims]. In both of cases (ii) and (iii), it is optimal for monetary policy to allow the inflation rate to respond to fiscal developments (and the optimal responses to other shocks are somewhat different than in the classic analysis, which assumes case (I)). Nonetheless, optimal monetary policy can still be implemented through a form of flexible inflation targeting, and it remains critical, even in the most pessimistic case (case (iii)), that inflation expectations (beyond some very short horizon) not be allowed to vary in response to shocks.
Handle: RePEc:nbr:nberwo:12158
Template-Type: ReDIF-Paper 1.0
Title: The Short- and Long-Term Career Effects of Graduating in a Recession: Hysteresis and Heterogeneity in the Market for College Graduates
Classification-JEL: J0; J3; J6; E3
Author-Name: Philip Oreopoulos
Author-Person: por38
Author-Name: Till von Wachter
Author-Person: pvo196
Author-Name: Andrew Heisz
Note: CH LS
Number: 12159
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12159
File-URL: http://www.nber.org/papers/w12159.pdf
File-Format: application/pdf
Publication-Status: published as Philip Oreopoulos & Till von Wachter & Andrew Heisz, 2012. "The Short- and Long-Term Career Effects of Graduating in a Recession," American Economic Journal: Applied Economics, vol 4(1), pages 1-29.
Abstract: The standard neo-classical model of wage setting predicts short-term effects of temporary labor market shocks on careers and low costs of recessions for both more and less advantaged workers. In contrast, a vast range of alternative career models based on frictions in the labor market suggests that labor market shocks can have persistent effects on the entire earnings profile. This paper analyzes the long-term effects of graduating in a recession on earnings, job mobility, and employer characteristics for a large sample of Canadian college graduates with different predicted earnings using matched university-employer-employee data from 1982 to 1999, and uses its results to assess the importance of alternative career models. We find that young graduates entering the labor market in a recession suffer significant initial earnings losses that eventually fade, but after 8 to 10 years. We also document substantial heterogeneity in the costs of recessions and important effects on job mobility and employer characteristics, but small effects on time worked. These adjustment patterns are neither consistent with a neo-classical spot market nor a complete scarring effect, but could be explained by a combination of time intensive search for better employers and long-term wage contracting. All results are robust to an extensive sensitivity analysis including controls for correlated business cycle shocks after labor market entry, endogenous timing of graduation, permanent cohort differences, and selective labor force participation.
Handle: RePEc:nbr:nberwo:12159
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Federation on Australia's Trade Flows
Classification-JEL: F1; N7
Author-Name: Douglas A. Irwin
Author-Person: pir25
Note: DAE ITI
Number: 12160
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12160
File-URL: http://www.nber.org/papers/w12160.pdf
File-Format: application/pdf
Publication-Status: published as Douglas A. Irwin, 2006. "The Impact of Federation on Australia's Trade Flows," The Economic Record, The Economic Society of Australia, vol. 82(258), pages 315-324, 09.
Abstract: In 1901, six Australian states joined together in political and economic union, creating an internal free trade area and adopting a common external tariff. This paper investigates the impact of federation on Australia's internal and international trade flows by studying changes in the "border effect" over this time. This is possible because Australian states reported intra-Australian trade prior to 1901 and for eight years after federation. The results indicate that federation itself produced little change in Australia's trade patterns, but that the border effect increased substantially between 1906 and 1909 when the protectionist Lyne Tariff was imposed.
Handle: RePEc:nbr:nberwo:12160
Template-Type: ReDIF-Paper 1.0
Title: Antebellum Tariff Politics: Coalition Formation and Shifting Regional Interests
Classification-JEL: F1; N7
Author-Name: Douglas A. Irwin
Author-Person: pir25
Note: DAE ITI
Number: 12161
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12161
File-URL: http://www.nber.org/papers/w12161.pdf
File-Format: application/pdf
Publication-Status: published as Irwin, Douglas. “Antebellum Tariff Politics: Regional Coalitions and Shifting Economic Interests.” Journal of Law and Economics 51(November 2008): 715-742.
Abstract: Throughout U.S. history, import tariffs have been put on a sustained downward path in only two instances: from the early-1830s until the Civil War and from the mid-1930s to the present. This paper analyzes how the movement toward higher tariffs in the 1820s was reversed for the rest of the antebellum period. Tariff politics in Congress during this period was highly sectional: the North supported high tariffs, the South favored low tariffs, and the West was a "swing" region. In the 1820s, a coalition between the North and West raised tariffs by exchanging votes on import duties for spending on internal improvements. President Andrew Jackson effectively delinked these issues and destroyed the North-West alliance by vetoing several internal improvements bills. South Carolina's refusal to enforce the existing high tariffs sparked the nullification crisis and paved the way for the Compromise Tariff of 1833, which promised to phase out tariffs above 20 percent over a nine year period. Although Congress could not credibly commit itself to the staged reductions or maintaining the lower duties, the growing export interests of the West — due, ironically, to transportation improvements that made agricultural shipments economically viable — gave the region a stake with the South in maintaining a low tariff equilibrium. Thus, the West's changing position on trade policy helps explain the rise and fall of tariffs over this period.
Handle: RePEc:nbr:nberwo:12161
Template-Type: ReDIF-Paper 1.0
Title: Tariff Incidence in America's Gilded Age
Classification-JEL: F1; N7
Author-Name: Douglas A. Irwin
Author-Person: pir25
Note: DAE ITI
Number: 12162
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12162
File-URL: http://www.nber.org/papers/w12162.pdf
File-Format: application/pdf
Publication-Status: published as Irwin, Douglas A., 2007. "Tariff Incidence in America's Gilded Age," The Journal of Economic History, Cambridge University Press, vol. 67(03), pages 582-607, September.
Abstract: In the late nineteenth century, the United States imposed high tariffs to protect domestic manufacturers from foreign competition. This paper examines the magnitude of protection given to import-competing producers and the costs imposed on export-oriented producers by focusing on changes in the domestic prices of traded goods relative to non-traded goods. Because the tariffs tended to increase the prices of non-traded goods, the degree of protection was much less than indicated by nominal rates of protection; the results here suggest that the 30 percent average tariff on imports yielded a 15 percent implicit subsidy to import-competing producers while effectively taxing exporters at a rate of 11 percent. The paper also finds that tariff policy redistributed large amounts of income (about 9 percent of GDP) across groups, although the impact on consumers was only slightly negative because they devoted a sizeable share of their expenditures to exportable goods. These findings may explain why import-competing producers pressed for even greater protection in the face of already high tariffs and why consumers (as voters) did not strongly oppose the policy.
Handle: RePEc:nbr:nberwo:12162
Template-Type: ReDIF-Paper 1.0
Title: The Relationship Between Exchange Rates and Inflation Targeting Revisited
Classification-JEL: F02; F43
Author-Name: Sebastian Edwards
Author-Person: ped3
Note: IFM ME
Number: 12163
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12163
File-URL: http://www.nber.org/papers/w12163.pdf
File-Format: application/pdf
Publication-Status: published as Mishkin, Frederic S. and Klaus Schmidt-Hebbel (eds.) Monetary Policy under Inflation Targeting, Series on Central Banking, Analysis, and Economic Policies, vol. 11. Santiago: Central Bank of Chile, 2007.
Abstract: This paper deals with the relationship between inflation targeting and exchange rates. I address three specific issues: first, I analyze the effectiveness of nominal exchange rates as shock absorbers in countries with inflation targeting. This issue is closely related to the magnitude of the "pass-through" coefficient. Second, I investigate whether exchange rate volatility is different in countries with an inflation targeting regime than in countries with alternative monetary policy arrangements. And third, I discuss whether the exchange rate should play a role in determining the monetary policy stance under inflation targeting. An alternative way of posing this question is whether the exchange rate should have an independent role in an open economy Taylor rule.
Handle: RePEc:nbr:nberwo:12163
Template-Type: ReDIF-Paper 1.0
Title: Putting the Lid on Lobbying: Tariff Structure and Long-Term Growth when Protection is for Sale
Classification-JEL: F10; F14; O24; O40
Author-Name: Nathan Nunn
Author-Person: pnu17
Author-Name: Daniel Trefler
Author-Person: ptr44
Note: ITI
Number: 12164
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12164
File-URL: http://www.nber.org/papers/w12164.pdf
File-Format: application/pdf
Abstract: It has long been recognized that a country's tariffs are the endogenous outcome of a rent-seeking game whose equilibrium reflects national institutions. Thus, the structure of tariffs across industries provides insights into how institutions, as reflected in tariff policies, affect long-term growth. We start with the commonplace perception among politicians that protection of skill-intensive industries generates a growth-enhancing externality. Modifying the Grossman-Helpman protection for sale model to allow for this, we make two predictions. First, a country with good institutions will tolerate high average tariffs provided tariffs are biased towards skill-intensive industries. Second, there need not be any relationship between average tariffs and good institutions. Using data for 17 manufacturing industries in 59 countries over approximately 25 years, we find that average tariffs are uncorrelated with output growth and that the skill-bias of tariff structure is positively correlated with output growth. We interpret this to mean that countries grow faster if they are able and willing to put a lid on the rent-seeking behaviour of special interest lobby groups. We show that our results are not compatible with explanations that appeal to (1) externalities per se, (2) initial industrial structure that is skewed towards skill-intensive industries, or (3) the effects of broader institutions such as rule of law and control of corruption.
Handle: RePEc:nbr:nberwo:12164
Template-Type: ReDIF-Paper 1.0
Title: Execution Risk
Classification-JEL: G2
Author-Name: Robert Engle
Author-Name: Robert Ferstenberg
Note: AP
Number: 12165
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12165
File-URL: http://www.nber.org/papers/w12165.pdf
File-Format: application/pdf
Publication-Status: published as Engle, Robert and Robert Ferstenberg. “Execution Risk.” Journal of Portfolio Management 33, 2 (Winter 2007): 34-45.
Abstract: Transaction costs in trading involve both risk and return. The return is associated with the cost of immediate execution and the risk is a result of price movements during a more gradual trading. The paper shows that the trade-off between risk and return in optimal execution should reflect the same risk preferences as in ordinary investment. The paper develops models of the joint optimization of positions and trades, and shows conditions under which optimal execution does not depend upon the other holdings in the portfolio. Optimal execution however may involve trades in assets other than those listed in the order; these can hedge the trading risks. The implications of the model for trading with reversals and continuations are developed. The model implies a natural measure of liquidity risk
Handle: RePEc:nbr:nberwo:12165
Template-Type: ReDIF-Paper 1.0
Title: Identification of Search Models with Initial Condition Problems
Classification-JEL: J64; C14
Author-Name: Gadi Barlevy
Author-Person: pba129
Author-Name: H.N. Nagaraja
Note: EFG LS
Number: 12166
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12166
File-URL: http://www.nber.org/papers/w12166.pdf
File-Format: application/pdf
Abstract: This paper extends previous work on the identification of search models in which observed worker productivity is imperfectly observed. In particular, it establishes that these models remain identified even when employment histories are left-censored (i.e. we do not get to follow workers from their initial job out of unemployment), as well as when workers set different reservation wages from one another. We further show that allowing for heterogeneity in reservation can affect the empirical estimates we obtain, specifically estimates of the rate at which workers receive job offers.
Handle: RePEc:nbr:nberwo:12166
Template-Type: ReDIF-Paper 1.0
Title: The Flow Approach to Labor Markets: New Data Sources and Micro-Macro Links
Classification-JEL: J23; J64; E24
Author-Name: Steven J. Davis
Author-Person: pda15
Author-Name: R. Jason Faberman
Author-Person: pfa260
Author-Name: John Haltiwanger
Author-Person: pha231
Note: EFG LS
Number: 12167
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12167
File-URL: http://www.nber.org/papers/w12167.pdf
File-Format: application/pdf
Publication-Status: published as Steven J. Davis, R. Jason Faberman and John Haltiwanger. "The Flow Approach to Labor Markets: New Data Sources and Micro-Macro Links", Journal of Economic Perspectives. Volume 20, Issue 3. 2006
Abstract: New data sources and products developed by the Bureau of Labor Statistics and the Bureau of the Census highlight the fluid character of U.S. labor markets. Private-sector job creation and destruction rates average nearly 8% of employment per quarter. Worker flows in the form of hires and separations are more than twice as large. The data also underscore the lumpy nature of micro-level employment adjustments. More than two-thirds of job destruction occurs at establishments that shrink by more than 10% within the quarter, and more than one-fifth occurs at those that shut down. Our study also uncovers highly nonlinear relationships of worker flows to employment growth and job flows at the micro level. These micro relations interact with movements over time in the cross-sectional density of establishment growth rates to produce recurring cyclical patterns in aggregate labor market flows. Cyclical movements in the layoffs-separation ratio, for example, and the propensity of separated workers to become unemployed reflect distinct micro relations for quits and layoffs. A dominant role for the job-finding rate in accounting for unemployment movements in mild downturns and a bigger role for the job-loss rate in severe downturns reflect distinct micro relations for hires and layoffs.
Handle: RePEc:nbr:nberwo:12167
Template-Type: ReDIF-Paper 1.0
Title: The 2006 Economic Report of the President: Comment on Chapter One (The Year in Review) and Chapter Six (The Capital Account Surplus)
Classification-JEL: E0; F3; F4
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: EFG IFM ME
Number: 12168
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12168
File-URL: http://www.nber.org/papers/w12168.pdf
File-Format: application/pdf
Publication-Status: published as Feldstein, Martin. 350. "The 2006 Economic Report of the President: Comment on Chapter One (The Year in Review) and Chapter Six (The Capital Account Surplus)." Journal of Economic Literature 44, 3 (September 2006): 673-79.
Abstract: This paper is an analytic comment on two chapters of the Economic Report of the President for 2006. Chapter One deals with the economy in 2005 and the outlook for the future. The chapter provides a detailed analysis of the expansion in 2005 but not an explanation of why the expansion occurred despite the sharp rise in oil prices. I discuss the role of easy money in stimulating mortgage borrowing which generated negative savings in 2005. Looking ahead, I comment on the risk to inflation implied by the rising unit labor costs over the past four years. Chapter six deals with the international position of the United States. It provides a useful analysis of capital flows to the United States and the reasons why other countries have current account surpluses. It does not deal with the role of the dollar or the nature of the adjustment that might occur to reduce the US current account deficit. I present some comments on those issues.
Handle: RePEc:nbr:nberwo:12168
Template-Type: ReDIF-Paper 1.0
Title: The Fox News Effect: Media Bias and Voting
Classification-JEL: J0; D0; H0
Author-Name: Stefano DellaVigna
Author-Person: pde710
Author-Name: Ethan Kaplan
Author-Person: pka532
Note: POL
Number: 12169
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12169
File-URL: http://www.nber.org/papers/w12169.pdf
File-Format: application/pdf
Publication-Status: published as DellaVigna, Stefano and Ethan Kaplan. “The Fox News Effect: Media Bias and Voting.” Quarterly Journal of Economics 122 (August 2007): 1187-1234.
Abstract: Does media bias affect voting? We address this question by looking at the entry of Fox News in cable markets and its impact on voting. Between October 1996 and November 2000, the conservative Fox News Channel was introduced in the cable programming of 20 percent of US towns. Fox News availability in 2000 appears to be largely idiosyncratic. Using a data set of voting data for 9,256 towns, we investigate if Republicans gained vote share in towns where Fox News entered the cable market by the year 2000. We find a significant effect of the introduction of Fox News on the vote share in Presidential elections between 1996 and 2000. Republicans gain 0.4 to 0.7 percentage points in the towns which broadcast Fox News. The results are robust to town-level controls, district and county fixed effects, and alternative specifications. We also find a significant effect of Fox News on Senate vote share and on voter turnout. Our estimates imply that Fox News convinced 3 to 8 percent of its viewers to vote Republican. We interpret the results in light of a simple model of voter learning about media bias and about politician quality. The Fox News effect could be a temporary learning effect for rational voters, or a permanent effect for voters subject to non-rational persuasion.
Handle: RePEc:nbr:nberwo:12169
Template-Type: ReDIF-Paper 1.0
Title: Inadequacy of Nation-Based and VaR-Based Safety Nets in the European Union
Classification-JEL: G21; G28; P51
Author-Name: Edward J. Kane
Author-Person: pka853
Note: CF ME
Number: 12170
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12170
File-URL: http://www.nber.org/papers/w12170.pdf
File-Format: application/pdf
Publication-Status: published as Kane, Edward. "Inadequacy of nation-based and VaR-based safety nets in the European Union." The North American Journal of Economics and Finance 17, 3 (December 2006): 375-387.
Abstract: Considered as a social contract, a financial safety net imposes duties and confers rights on different sectors of the economy. Within a nation, elements of incompleteness inherent in this contract generate principal-agent conflicts that are mitigated by formal agreements, norms, laws, and the principle of democratic accountability. Across nations, additional gaps emerge that are hard to bridge. This paper shows that nationalistic biases and leeway in principles used to measure value-at-risk and bank capital make it unlikely that the crisis-prevention and crisis-resolution schemes incorporated in Basel II and EU Directives could allocate losses imbedded in troubled institutions efficiently or fairly across member nations.
Handle: RePEc:nbr:nberwo:12170
Template-Type: ReDIF-Paper 1.0
Title: Does Child Abuse Cause Crime?
Classification-JEL: I1; K4
Author-Name: Janet Currie
Author-Person: pcu13
Author-Name: Erdal Tekin
Author-Person: pte12
Note: CH ED
Number: 12171
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12171
File-URL: http://www.nber.org/papers/w12171.pdf
File-Format: application/pdf
Abstract: Child maltreatment, which includes both child abuse and child neglect, is a major social problem. This paper focuses on measuring the effects of child maltreatment on crime using data from the National Longitudinal Study of Adolescent Health (Add Health). We focus on crime because it is one of the most socially costly potential outcomes of maltreatment, and because the proposed mechanisms linking maltreatment and crime are relatively well elucidated in the literature. Our work addresses many limitations of the existing literature on child maltreatment. First, we use a large national sample, and investigate different types of abuse in a similar framework. Second, we pay careful attention to identifying the causal impact of abuse, by using a variety of statistical methods that make differing assumptions. These methods include: Ordinary Least Squares (OLS), propensity score matching estimators, and twin fixed effects. Finally, we examine the extent to which the effects of maltreatment vary with socio-economic status (SES), gender, and the severity of the maltreatment. We find that maltreatment approximately doubles the probability of engaging in many types of crime. Low SES children are both more likely to be mistreated and suffer more damaging effects. Boys are at greater risk than girls, at least in terms of increased propensity to commit crime. Sexual abuse appears to have the largest negative effects, perhaps justifying the emphasis on this type of abuse in the literature. Finally, the probability of engaging in crime increases with the experience of multiple forms of maltreatment as well as the experience of Child Protective Services (CPS) investigation.
Handle: RePEc:nbr:nberwo:12171
Template-Type: ReDIF-Paper 1.0
Title: Movement of Star Scientists and Engineers and High-Tech Firm Entry
Classification-JEL: O31; J61; 033; J44; M13
Author-Name: Lynne G. Zucker
Author-Person: pzu2
Author-Name: Michael R. Darby
Note: PR
Number: 12172
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12172
File-URL: http://www.nber.org/papers/w12172.pdf
File-Format: application/pdf
Publication-Status: published as Annals of Economics and Statistics No. 115-116, SPECIAL ISSUE ON KNOWLEDGE CAPITAL IN NANOTECHNOLOGY AND OTHER HIGH TECHNOLOGY INDUSTRIES (December 2014), pp. 125-175
Abstract: This paper analyzes the effects of top nanoscale scientists on industry entry in the comparative context of 5 major areas of science and technology, extending the concept of star scientist to all areas of science and technology. The results for nanotechnology are replicated using the comprehensive list of firms from NanoBank.org that provide an alternative industry entry measure not available for other high-tech fields. We follow careers 1981-2004 for 5,401 stars as identified in ISIHighlyCited.comSM, using their publication history to locate them each year. The number of stars in a U.S. region or in one of the top-25 science and technology countries generally has a consistently significant and quantitatively large positive effect on the probability of firm entry in the same area of science and technology. Other measures of academic knowledge stocks have weaker and less consistent effects. Thus the stars themselves rather than their potentially disembodied discoveries play a key role in the formation or transformation of high-tech industries. We identify separate economic geography effects in poisson regressions for the 179 BEA-defined U.S. regions, but not for the 25 countries analysis. Stars become more concentrated over time, moving from areas with relatively few peers to those with many in their discipline. A counter-flow operating on the U.S. versus the other 24 countries is the tendency of foreign-born American stars to return to their homeland when it develops sufficient strength in their area of science and technology. In contrast high impact articles and university articles and patents all tend to diffuse, becoming more equally distributed over time.
Handle: RePEc:nbr:nberwo:12172
Template-Type: ReDIF-Paper 1.0
Title: The Relative Sophistication of Chinese Exports
Classification-JEL: F1; F2; F4
Author-Name: Peter K. Schott
Author-Person: psc98
Note: ITI
Number: 12173
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12173
File-URL: http://www.nber.org/papers/w12173.pdf
File-Format: application/pdf
Publication-Status: published as Peter K. Schott, 2008. "The relative sophistication of Chinese exports," Economic Policy, CEPR, CES, MSH, vol. 23, issue 53, pages 5-49, 01.
Abstract: This paper examines the relative "sophistication" of China's exports to the United States along two dimensions. First, I compare China's export bundle to those of the relatively skill- and capital-abundant members of the OECD as well as to similarly endowed U.S. trading partners. Second, I examine prices within product categories to determine if China's varieties command a premium relative to its level of development.
Handle: RePEc:nbr:nberwo:12173
Template-Type: ReDIF-Paper 1.0
Title: Belief Flipping in a Dynamic Model of Statistical Discrimination
Classification-JEL: J7
Author-Name: Roland G. Fryer, Jr.
Author-Person: pfr43
Note: LS
Number: 12174
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12174
File-URL: http://www.nber.org/papers/w12174.pdf
File-Format: application/pdf
Publication-Status: published as Fryer, Ronald G. Jr. "Belief flipping in a dynamic model of statistical discrimination." Journal of Public Economics 91, 5-6 (June 2007): 1151-1166.
Abstract: The literature on statistical discrimination shows that ex-ante identical groups may be differentially treated in discriminatory equilibria. This paper constructs a dynamic model of statistical discrimination and explores what happens to the individuals who nonetheless overcome the initial discrimination. If an employer discriminates against a group of workers in her initial hiring, she may actually favor the successful members of that group when she promotes from within the firm. The worker's welfare implications (i.e. who benefits from an employer's discriminatory hiring practices) are unclear. Even though agents face discrimination initially, some may be better off because of it.
Handle: RePEc:nbr:nberwo:12174
Template-Type: ReDIF-Paper 1.0
Title: Democratic Capital: The Nexus of Political and Economic Change
Classification-JEL: D70; H11; N10; O11
Author-Name: Torsten Persson
Author-Person: ppe28
Author-Name: Guido Tabellini
Author-Person: pta37
Note: IFM
Number: 12175
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12175
File-URL: http://www.nber.org/papers/w12175.pdf
File-Format: application/pdf
Publication-Status: published as Torsten Persson & Guido Tabellini, 2009. "Democratic Capital: The Nexus of Political and Economic Change," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(2), pages 88-126, July.
Abstract: We study the joint dynamics of economic and political change. Predictions of the simple model that we formulate in the paper get considerable support in a panel of data on political regimes and GDP per capita for about 150 countries over 150 years. Democratic capital -- measured by a nation's historical experience with democracy and by the incidence of democracy in its neighborhood -- reduces the exit rate from democracy and raises the exit rate from autocracy. In democracies, a higher stock of democratic capital stimulates growth in an indirect way by decreasing the probability of a successful coup. Our results suggest a virtuous circle, where the accumulation of physical and democratic capital reinforce each other, promoting economic development jointly with the consolidation of democracy.
Handle: RePEc:nbr:nberwo:12175
Template-Type: ReDIF-Paper 1.0
Title: Comprehensive versus Selective Schooling in England in Wales: What Do We Know?
Classification-JEL: I21; I28
Author-Name: Jörn-Steffen Pischke
Author-Person: ppi29
Author-Name: Alan Manning
Author-Person: pma218
Note: ED LS
Number: 12176
Creation-Date: 2006-04
Order-URL: http://www.nber.org/papers/w12176
File-URL: http://www.nber.org/papers/w12176.pdf
File-Format: application/pdf
Abstract: British secondary schools moved from a system of extensive and early selection and tracking in secondary schools to one with comprehensive schools during the 1960s and 70s. Before the reform, students would take an exam at age eleven, which determined whether they would attend an academically oriented grammar school or a lower level secondary school. The reform proceeded at an uneven pace in different areas, so that both secondary school systems coexist during the 1960s and 70s. The British transition therefore provides an excellent laboratory for the study of the impact of a comprehensive versus a selective school system on student achievement. Previous studies analyzing this transition have typically used a value-added methodology: they compare outcomes for students passing through either type of school controlling for achievement levels at the time of entering secondary education. While this seems like a reasonable research design, we demonstrate that it is unlikely to successfully eliminate selection effects in who attends what type of school. Very similar results are obtained by looking at the effect of secondary school environment on achievement at age 11 and controlling for age 7 achievement. Since children only enter secondary school at age 11, these effects are likely due to selection bias. Careful choice of treatment and control areas, and using political control of the county as an instrument for early implementation of the comprehensive regime do not solve this problem.
Handle: RePEc:nbr:nberwo:12176
Template-Type: ReDIF-Paper 1.0
Title: Scarcity Rents in Car Retailing: Evidence from Inventory Fluctuations at Dealerships
Classification-JEL: L0; L1
Author-Name: Florian Zettelmeyer
Author-Name: Fiona Scott Morton
Author-Name: Jorge Silva-Risso
Note: IO
Number: 12177
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12177
File-URL: http://www.nber.org/papers/w12177.pdf
File-Format: application/pdf
Abstract: Price variation for identical cars at the same dealership is commonly assumed to arise because dealers with market power are able to price discriminate among their customers. In this paper we show that while price discrimination may be one element of price variation, price variation also arises from inventory fluctuations. Inventory fluctuations create scarcity rents for cars that are in short supply. The price variation due to inventory fluctuations thus functions to efficiently allocate particular cars that are in restricted supply to those customers who value them most highly. Our empirical results show that a dealership moving from a situation of inventory shortage to an average inventory level lowers transaction prices by about 1% ceteris paribus, corresponding to 15% of dealers' average per vehicle profit margin or $250 on the average car. Shorter resupply times also decrease transaction prices for cars in high demand. For traditional dealerships, inventory explains 49% of the combined inventory and demographic components of the predicted price. For so-called 'no-haggle' dealerships, the percentage explained by inventory increases to 74%.
Handle: RePEc:nbr:nberwo:12177
Template-Type: ReDIF-Paper 1.0
Title: The Post MFA Performance of Developing Asia
Classification-JEL: F00; F13; O24
Author-Name: John Whalley
Author-Person: pwh8
Note: ITI
Number: 12178
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12178
File-URL: http://www.nber.org/papers/w12178.pdf
File-Format: application/pdf
Abstract: This paper assesses the impact thus far that the termination of trade restrictions under the Multi Fibre Arrangement (MFA) which up to the end of 2004 applied to exports of clothing and textiles in key OECD markets has had on Asian suppliers. The speculation prior to MFA termination had been that large increases of Chinese exports would ensue, and at the expense of other Asian suppliers. Using data from US, EU Chinese and other sources, the picture that emerges is only small impacts on aggregate US and EU imports of clothing and textiles, and equally only small impacts on aggregate Chinese exports of clothing and textiles. There are, however, large changes in the country pattern of trade, and also within more narrowly defined product categories. There are large increases in shipments from China to both the US and the EU, and for the US proportionally more so in textiles than in clothing. But the US accounts for only 20% of China's exports of clothing and textiles, and exports to Japan (comparable in size to the US) hardly change, and to Hong Kong fall sharply. There are also large price falls for shipments to the US and to certain EU countries (Germany). The shares of other Asian suppliers in US markets generally hold up well, with the largest falls occurring in preferentially treated non Asian suppliers such as Mexico. In EU markets, with the exception of India, all non Chinese Asian suppliers experience falls in their market share.
Handle: RePEc:nbr:nberwo:12178
Template-Type: ReDIF-Paper 1.0
Title: Public Preschool and Maternal Labor Supply: Evidence from the Introduction of Kindergartens into American Public Schools
Classification-JEL: H52; I20; J13; J22
Author-Name: Elizabeth Cascio
Author-Person: pca757
Note: CH LS
Number: 12179
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12179
File-URL: http://www.nber.org/papers/w12179.pdf
File-Format: application/pdf
Publication-Status: published as Cascio, Elizabeth, 2009. "Maternal Labor Supply and the Introduction of Kindergartens into American Public Schools." The Journal of Human Resources, 44(1), 140-170, Winter 2009.
Abstract: Beginning in the mid-1960s, many state governments, particularly in the South and West, began to subsidize kindergartens for the first time. These initiatives generated wide variation across states over time in the supply of seats for five year olds in public schools. This paper uses the staggered timing and age-targeting of these preschool expansions to examine how the provision of universal child care through public schools affects maternal labor supply. I find that single women with five year olds but no younger children were more likely to be employed once kindergartens were available. The estimated effect is large, implying that three mothers entered the labor force for every ten children enrolled in public school. By contrast, I detect no significant labor supply response among other single women with eligible children or among married mothers of five year olds. These findings complement other research suggesting that preschools targeted toward at-risk populations, such as children in single-parent families, are more cost effective than universal programs.
Handle: RePEc:nbr:nberwo:12179
Template-Type: ReDIF-Paper 1.0
Title: Peer Effects in European Primary Schools: Evidence from PIRLS
Classification-JEL: I21; J24
Author-Name: Andreas Ammermueller
Author-Name: Jörn-Steffen Pischke
Author-Person: ppi29
Note: ED
Number: 12180
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12180
File-URL: http://www.nber.org/papers/w12180.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Labor Economics 27, July 2009, 315-348
Abstract: We estimate peer effects for fourth graders in six European countries. The identification relies on variation across classes within schools. We argue that classes within primary schools are formed roughly randomly with respect to family background. Similar to previous studies, we find sizeable estimates of peer effects in standard OLS specifications. The size of the estimate is much reduced within schools. This could be explained either by selection into schools or by measurement error in the peer background variable. When we correct for measurement error we find within school estimates close to the original OLS estimates. Our results suggest that the peer effect is modestly large, measurement error is important in our survey data, and selection plays little role in biasing peer effects estimates. We find no significant evidence of non-linear peer effects.
Handle: RePEc:nbr:nberwo:12180
Template-Type: ReDIF-Paper 1.0
Title: AIDS, "Reversal" of the Demographic Transition and Economic Development: Evidence from Africa
Classification-JEL: O11; I12; J11; J13
Author-Name: Sebnem Kalemli-Ozcan
Author-Person: pka37
Note: EFG EH
Number: 12181
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12181
File-URL: http://www.nber.org/papers/w12181.pdf
File-Format: application/pdf
Publication-Status: published as Sebnem Kalemli-Ozcan, 2012. "AIDS, “reversal” of the demographic transition and economic development: evidence from Africa," Journal of Population Economics, Springer, vol. 25(3), pages 871-897, July.
Abstract: Using country- and region-level data, I investigate the effect of HIV/AIDS on fertility in Africa during 1985-2000. Results differ depending on the variation used and the estimation method. Between estimates that exploit cross-sectional variation suggest a positive significant effect of HIV/AIDS on fertility, whereas within estimates that are identified of off time-series variation show both positive and negative results depending on the HIV/AIDS variable used. These within estimates are insignificant in most of the specifications.
Handle: RePEc:nbr:nberwo:12181
Template-Type: ReDIF-Paper 1.0
Title: The Diffusion of the Internet and the Geography of the Digital Divide in the United States
Classification-JEL: O3; L8; R0
Author-Name: Shane Greenstein
Author-Person: pgr134
Author-Name: Jeff Prince
Author-Person: ppr63
Note: IO PR
Number: 12182
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12182
File-URL: http://www.nber.org/papers/w12182.pdf
File-Format: application/pdf
Publication-Status: published as Mansell, Robin, Danny Quah, and Roger Silverstone (eds.) Oxford Handbook on ICTs. Oxford: Oxford University Press, 2007.
Abstract: This paper analyses the rapid diffusion of the Internet across the United States over the past decade for both households and firms. We put the Internet's diffusion into the context of economic diffusion theory where we consider costs and benefits on the demand and supply side. We also discuss several pictures of the Internet's physical presence using some of the current main techniques for Internet measurement. We highlight different economic perspectives and explanations for the digital divide, that is, unequal availability and use of the Internet.
Handle: RePEc:nbr:nberwo:12182
Template-Type: ReDIF-Paper 1.0
Title: The Expected Value Premium
Classification-JEL: G1
Author-Name: Long Chen
Author-Name: Ralitsa Petkova
Author-Name: Lu Zhang
Author-Person: pzh29
Note: AP
Number: 12183
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12183
File-URL: http://www.nber.org/papers/w12183.pdf
File-Format: application/pdf
Publication-Status: published as Chen, Long & Petkova, Ralitsa & Zhang, Lu, 2008. "The expected value premium," Journal of Financial Economics, Elsevier, vol. 87(2), pages 269-280, February.
Abstract: Fama and French (2002) estimate the equity premium using dividend growth rates to measure the expected rate of capital gain. We use similar methods to study the value premium. From 1941 to 2002, the expected HML return is on average 5.1% per annum, consisting of an expected-dividend-growth component of 3.5% and an expected-dividend-to-price component of 1.6%. The ex-ante HML return is also countercyclical: a positive, one-standard-deviation shock to real consumption growth rate lowers this premium by about 0.45%. Unlike the equity premium, there is only mixed evidence suggesting that the value premium has declined over time.
Handle: RePEc:nbr:nberwo:12183
Template-Type: ReDIF-Paper 1.0
Title: Intensive Medical Care and Cardiovascular Disease Disability Reductions
Classification-JEL: I1; J1
Author-Name: David M. Cutler
Author-Person: pcu64
Author-Name: Mary Beth Landrum
Author-Name: Kate A. Stewart
Note: AG EH
Number: 12184
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12184
File-URL: http://www.nber.org/papers/w12184.pdf
File-Format: application/pdf
Publication-Status: published as Cutler, David and David Wise (eds.) Health at Older Ages: The Causes and Consequences of Declining Disability Among the Elderly. Chicago: University of Chicago Press, 2009
Publication-Status: published as Intensive Medical Care and Cardiovascular Disease Disability Reductions, David M. Cutler, Mary Beth Landrum, Kate A. Stewart. in Health at Older Ages: The Causes and Consequences of Declining Disability among the Elderly, Cutler and Wise. 2008
Abstract: There is little empirical evidence to explain why disability declined among the elderly over the past 20 years. In this paper, we explore the role of improved medical care for cardiovascular disease on health status improvements over time. We show that the incidence of cardiovascular disease hospitalizations remained relatively constant between 1984 and 1999 at the same time that post-event survival improved and disability declined. We find that use of appropriate therapies, including pharmaceuticals such as beta-blockers, aspirin, and ace-inhibitors, and invasive procedures, explains up to 50% and 70% of the reductions in disability and death over time, respectively. Elderly patients living in regions with high use of appropriate medical therapies had better health outcomes than patients living in low-use areas. Finally, we estimate that preventing disability after an acute event can add as much as 3.7 years of quality-adjusted life expectancy, or $316,000 of value.
Handle: RePEc:nbr:nberwo:12184
Template-Type: ReDIF-Paper 1.0
Title: Analyzing Artistic Innovation: The Greatest Breakthroughs of the Twentieth Century
Author-Name: David W. Galenson
Note: LS PR
Number: 12185
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12185
File-URL: http://www.nber.org/papers/w12185.pdf
File-Format: application/pdf
Publication-Status: published as Galenson, David. "Analyzing Artistic Innovation: The Greatest Breakthroughs of the Twentieth Century." Historical Methods: A Journal of Quantitative and Interdisciplinary History 41, 3 (Summer 2008): 111-120.
Abstract: This paper considers not only when in their careers the greatest artists of the twentieth century made their greatest discoveries, but also how quickly they made them. The results underscore the dominant position of Picasso and Cubism in twentieth-century art: Picasso alone accounts for the two best three-year periods produced by any artist, and he and Braque account for three of the best five-year periods, all for the work the two young artists did in developing Cubism. Warhol's innovations in Pop art and Matisse's development of Fauvism also rank among the century's most important breakthroughs. In general, identifying the most important short periods of artistic creativity emphasizes the differing methods of conceptual and experimental artists: great conceptual innovators, like Picasso, Matisse, and Warhol, made their greatest discoveries abruptly, whereas great experimental innovators, like Mondrian, Kandinsky, and Pollock, made their discoveries more gradually. The finding that artists who innovate early in their lives do so suddenly, while those who innovate late do so more gradually, adds an important dimension to our understanding of human creativity.
Handle: RePEc:nbr:nberwo:12185
Template-Type: ReDIF-Paper 1.0
Title: Firm-Specific Information and the Efficiency of Investment
Classification-JEL: E; F; G
Author-Name: Anusha Chari
Author-Person: pch288
Author-Name: Peter Blair Henry
Author-Person: phe166
Note: CF IFM
Number: 12186
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12186
File-URL: http://www.nber.org/papers/w12186.pdf
File-Format: application/pdf
Publication-Status: published as Chari, Anusha & Blair Henry, Peter, 2008. "Firm-specific information and the efficiency of investment," Journal of Financial Economics, Elsevier, vol. 87(3), pages 636-655, March.
Abstract: We use a new firm-level dataset to examine the efficiency of investment in emerging economies. In the three-year period following stock market liberalizations, the growth rate of the typical firm's capital stock exceeds its pre-liberalization mean by an average of 5.4 percentage points. Cross-sectional changes in investment are significantly correlated with the signals about fundamentals embedded in the stock price changes that occur upon liberalization. Panel data estimations show that a 1-percentage point increase in a firm's expected future sales growth predicts a 4.1-percentage point increase in its investment; country-specific changes in the cost of capital predict a 2.3-percentage point increase in investment; firm-specific changes in risk premia do not affect investment.
Handle: RePEc:nbr:nberwo:12186
Template-Type: ReDIF-Paper 1.0
Title: Debt Relief
Classification-JEL: E; F; O
Author-Name: Serkan Arslanalp
Author-Name: Peter Blair Henry
Author-Person: phe166
Note: IFM
Number: 12187
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12187
File-URL: http://www.nber.org/papers/w12187.pdf
File-Format: application/pdf
Publication-Status: published as Arslanalp, Serkan and Peter Blair Henry. "Debt Relief," Journal of Economic Perspectives, 2006, v20(1,Winter), 207-220.
Abstract: The G-8 Multilateral Debt Relief Initiative (MDRI) is the next step of the Highly Indebted Poor Countries Initiative (HIPC). There are two reasons why MDRI is unlikely to help poor countries. First, the amount of money at stake is trivial. The roughly $2 billion of annual debt payments to be relieved under MDRI amounts to roughly 0.01 percent of the GDP of the OECD countries—a mere one-seventieth (1/70) of the quantity of official development assistance agreed to by world leaders on at least three separate occasions (1970, 1992, 2002). Second, the existence of debt overhang is a necessary condition for debt relief to generate economic gains. Since the world's poorest countries do not suffer from debt overhang, debt relief is unlikely to stimulate their investment and growth. The principal obstacle to investment and growth in the world's poorest countries is the fundamental inadequacy in these countries of the basic institutions that provide the foundation for profitable economic activity. In light of these facts, the MDRI may amount to a Pyrrhic victory: A symbolic win for advocates of debt relief that clears the conscience of the rich countries but leaves the real problems of the poor countries unaddressed.
Handle: RePEc:nbr:nberwo:12187
Template-Type: ReDIF-Paper 1.0
Title: What Determines Bilateral Trade Flows?
Classification-JEL: F10; C23; O24
Author-Name: Marianne Baxter
Author-Person: pba102
Author-Name: Michael A. Kouparitsas
Author-Person: pko63
Note: ITI
Number: 12188
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12188
File-URL: http://www.nber.org/papers/w12188.pdf
File-Format: application/pdf
Abstract: This paper undertakes an exhaustive search for robust determinants of international trade, where "robustness" is tested using three popular empirical methods. The paper is frankly atheoretical: our goal is solely to establish statistically robust relationships. Along the way, however, we relate our results to the empirical results obtained by prior researchers and to the received theory of international trade. We find that robust variables include a measure of the scale of factor endowments; fixed exchange rates; the level of development; and current account restrictions. Variables that are robust under certain methods and sample periods include exchange rate volatility, an index of sectoral similarity, and currency union. However, the estimated coefficient n currency union is much smaller than estimates obtained by prior researchers.
Handle: RePEc:nbr:nberwo:12188
Template-Type: ReDIF-Paper 1.0
Title: One World Money, Then and Now
Classification-JEL: N20; F33; E42
Author-Name: Michael Bordo
Author-Person: pbo243
Author-Name: Harold James
Author-Person: pja546
Note: DAE ME
Number: 12189
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12189
File-URL: http://www.nber.org/papers/w12189.pdf
File-Format: application/pdf
Publication-Status: published as Bordo, Michael and Harold James. "One World Money, Then and Now." International Economics and Economic Policy 3, 3-4 (December 2006): 395-407.
Abstract: The case for monetary simplification and unification has been made since the middle of the nineteenth century. It rests on four principal arguments ;reduced transaction costs; establishing credibility; preventing bad policy in other states; political integration via money. In this paper we argue that the case for monetary integration is becoming increasingly less persuasive. In making our case we posit a different concept of money to the one that underlay the nineteenth century discussions which we term "Newtonian" since it was based on the assumption of a single reference external to the state reflected in the definition of value in terms of precious metals. In the twentieth century, views of money have shifted to a more " Einsteinian" or relativistic conception. Measures of value that move relative to each other are helpful in terms of dealing with large shifts in relative prices that affect different countries very differently. In the current age of globalization, "Einsteinian" money is capable of accommodating shifts that were politically destructive in the " Newtonian" world.
Handle: RePEc:nbr:nberwo:12189
Template-Type: ReDIF-Paper 1.0
Title: Pork Barrel Cycles
Classification-JEL: D72; E62; D78
Author-Name: Allan Drazen
Author-Person: pdr25
Author-Name: Marcela Eslava
Author-Person: pes57
Note: EFG PE POL
Number: 12190
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12190
File-URL: http://www.nber.org/papers/w12190.pdf
File-Format: application/pdf
Abstract: We present a model of political budget cycles in which incumbents influence voters by targeting government spending to specific groups of voters at the expense of other voters or other expenditures. Each voter faces a signal extraction problem: being targeted with expenditure before the election may reflect opportunistic manipulation, but may also reflect a sincere preference of the incumbent for the types of spending that voter prefers. We show the existence of a political equilibrium in which rational voters support an incumbent who targets them with spending before the election even though they know it may be electorally motivated. In equilibrium voters in the more "swing" regions are targeted at the expense of types of spending not favored by these voters. This will be true even if they know they live in swing regions. However, the responsiveness of these voters to electoral manipulation depends on whether they face some degree of uncertainty about the electoral importance of the group they are in. Use of targeted spending also implies voters can be influenced without election-year deficits, consistent with recent findings for established democracies.
Handle: RePEc:nbr:nberwo:12190
Template-Type: ReDIF-Paper 1.0
Title: Size Really Doesn't Matter: In Search of a National Scale Effect
Classification-JEL: O57
Author-Name: Andrew K. Rose
Author-Person: pro71
Note: ITI
Number: 12191
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12191
File-URL: http://www.nber.org/papers/w12191.pdf
File-Format: application/pdf
Publication-Status: published as Rose, Andrew. "Size Really Doesn't Matter: In Search of a National Scale Effect." Journal of the Japanese and International Economies 20, 4 (December 2006): 482-507.
Abstract: I search for a "scale" effect in countries. I use a panel data set that includes 200 countries over forty years and link the population of a country to a host of economic and social phenomena. Using both graphical and statistical techniques, I search for an impact of size on the level of income, inflation, material well-being, health, education, the quality of a country's institutions, heterogeneity, and a number of different international indices and rankings. I have little success; small countries are more open to international trade than large countries, but are not systematically different otherwise.
Handle: RePEc:nbr:nberwo:12191
Template-Type: ReDIF-Paper 1.0
Title: Trade Liberalization with Heterogenous Firms
Classification-JEL: H32; P16
Author-Name: Richard E. Baldwin
Author-Person: pba124
Author-Name: Rikard Forslid
Note: ITI
Number: 12192
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12192
File-URL: http://www.nber.org/papers/w12192.pdf
File-Format: application/pdf
Publication-Status: published as Richard E. Baldwin & Rikard Forslid, 2010. "Trade Liberalization with Heterogeneous Firms," Review of Development Economics, Blackwell Publishing, vol. 14(2), pages 161-176, 05.
Abstract: This paper examines the impact of trade liberalization with heterogeneous firms using the Melitz (2003) model. We find a number of novel results and effects including a Stolper-Samuelson like result and several results related to the volume of trade, which are empirically testable. We also find what might be called an anti-variety effect as the result of trade liberalization. This resonates with the often voiced criticism from antiglobalists that globalization leads the world to become more homogenous by eliminating local specialities. Nevertheless, we find that trade liberalization always leads to welfare gains in the model.
Handle: RePEc:nbr:nberwo:12192
Template-Type: ReDIF-Paper 1.0
Title: Are There Thresholds of Current Account Adjustment in the G7?
Classification-JEL: F3; F4
Author-Name: Richard H. Clarida
Author-Person: pcl69
Author-Name: Manuela Goretti
Author-Name: Mark P. Taylor
Note: IFM ITI
Number: 12193
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12193
File-URL: http://www.nber.org/papers/w12193.pdf
File-Format: application/pdf
Publication-Status: published as Clarida, Richard H. (ed.) G7 Current Account Imbalances: Sustainability and Adjustment (National Bureau of Economic Research Conference Report). Chicago: University of Chicago Press, 2007.
Publication-Status: published as Are There Thresholds of Current Account Adjustment in the G7?, Richard H. Clarida, Manuela Goretti, Mark P. Taylor. in G7 Current Account Imbalances: Sustainability and Adjustment, Clarida. 2007
Abstract: We find evidence of threshold behavior in current account adjustment for the G7 countries, such that the dynamics of adjustment towards equilibrium depend upon whether the current-account/ net-output ratio breaches estimated, country specific current account surplus or deficit thresholds. Both the speeds of adjustment and the size of the thresholds are found to differ significantly across countries. In addition, we also find evidence of shifts in means and variances of exchange rate changes, stock returns, and interest differentials that coincide with the current account adjustment regimes identified by the model.
Handle: RePEc:nbr:nberwo:12193
Template-Type: ReDIF-Paper 1.0
Title: G7 Current Account Imbalances: Sustainability and Adjustment
Classification-JEL: F3; F4
Author-Name: Richard H. Clarida
Author-Person: pcl69
Note: IFM ITI
Number: 12194
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12194
File-URL: http://www.nber.org/papers/w12194.pdf
File-Format: application/pdf
Publication-Status: published as Introduction to "G7 Current Account Imbalances: Sustainability and Adjustment", Richard H. Clarida. in G7 Current Account Imbalances: Sustainability and Adjustment, Clarida. 2007
Abstract: This volume collects the eleven original papers that were written for the NBER Project on G7 Current Account Imbalances. Four major themes emerged from the papers written for the project. First, there was broad agreement that the current account imbalances that prevailed among the G7 countries as of June 2005 would ultimately decline, although there was no consensus on when or how this would occur . Second, there was agreement that adjustments in global currency markets would likely be associated with the shifts in global saving and investment patterns that would be required to bring about the ultimate decline in G7 current account imbalances. Third, while the focus of the conference was on current account imbalances in the G7 countries, it was recognized that the aggregate excess of saving over investment that existed among the emerging market economies at the time of the conference, as well as the currency intervention policies of some of these countries, were contributing to the current imbalances in the G7 that prevailed as of June 2005. Fourth, there was a consensus that re-valuation of the evolving foreign asset and liability positions of the G7 countries would play a role during process by which current account imbalances narrowed, although there was range of opinion concerning how large a role such revaluation effects would play.
Handle: RePEc:nbr:nberwo:12194
Template-Type: ReDIF-Paper 1.0
Title: The Private Value of Software Patents
Classification-JEL: O34; L63; L86
Author-Name: Bronwyn H. Hall
Author-Person: pha54
Author-Name: Megan MacGarvie
Author-Person: pma1307
Note: PR
Number: 12195
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12195
File-URL: http://www.nber.org/papers/w12195.pdf
File-Format: application/pdf
Publication-Status: published as Hall, Bronwyn H. & MacGarvie, Megan, 2010. "The private value of software patents," Research Policy, Elsevier, vol. 39(7), pages 994-1009, September.
Abstract: We investigate the value creation or destruction associated with the introduction of software patents in the United States in two ways. The first looks at the cumulative abnormal returns to Information and Communication Technology (ICT) firms around the time of important court decisions that impacted software patents, and the second analyzes the relationship between firms' stock market value, the sector in which they operate, and their holdings of software patents. We conclude that the market evaluated software patents as a negative development ex ante. Ex post, a greater number of firms in all ICT sectors invested in these patents, and these firms had slightly higher market values than those with no software patents. However, while we obtain clear evidence that the technological importance or quality of patented innovation mattered for the market value of hardware firms both before and after the legal changes, it is less clear that the marginal patent right per se was associated with increases in market value, and there are no significant valuation effects associated with patents for pure software firms after the change.
Handle: RePEc:nbr:nberwo:12195
Template-Type: ReDIF-Paper 1.0
Title: Organizing Offshoring: Middle Managers and Communication Costs
Classification-JEL: D2; F1; F2; J3; L2
Author-Name: Pol Antràs
Author-Person: pan181
Author-Name: Luis Garicano
Author-Person: pga77
Author-Name: Esteban Rossi-Hansberg
Author-Person: pro72
Note: ITI
Number: 12196
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12196
File-URL: http://www.nber.org/papers/w12196.pdf
File-Format: application/pdf
Publication-Status: published as Antras, Pol, Esteban Rossi-Hansberg, In Helpman, E., Marin D., Verdier T. (eds. The Organization of Firms in the Global Economy. Cambridge: Harvard University Press, 2007.
Abstract: Why do firms decide to offshore certain parts of their production process? What qualifies certain countries as particularly attractive locations to offshore? In this paper we address these questions with a theory of international production hierarchies in which organizations arise endogenously to make efficient use of agents' knowledge. Our theory highlights the role of host-country management skills (middle management) in bringing about the emergence of international offshoring. By shielding top management in the source country from routine problems faced by host country workers, the presence of middle managers improves the efficiency of the transmission of knowledge across countries. The model further delivers the prediction that the positive effect of middle skills on offshoring is weaker, the more advanced are communication technologies in the host country. We provide evidence consistent with this prediction.
Handle: RePEc:nbr:nberwo:12196
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Health on Health Insurance Status in Fragile Families
Classification-JEL: I1; I3
Author-Name: Hope Corman
Author-Name: Anne Carroll
Author-Name: Kelly Noonan
Author-Name: Nancy E. Reichman
Note: EH
Number: 12197
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12197
File-URL: http://www.nber.org/papers/w12197.pdf
File-Format: application/pdf
Publication-Status: published as Carroll, A., Corman, H., Noonan, K., Reichman, N. 2007. Why Do Poor Children Lose Health Insurance in the SCHIP Era? The Role of Family Health. American Economic Review Papers and Proceedings 97(2): 398–401.
Publication-Status: published as Noonan, K., Carroll, A., Reichman, N., Corman, H. 2010. Mental Illness as a Risk Factor for Uninsurance Among Mothers of Infants. Maternal and Child Health Journal 14(1): 36–46.
Publication-Status: published as Corman, H., Noonan, K., Carroll, A., Reichman, N. 2009. Low-Income Fathers’ Access to Health Insurance. Journal of Health Care for the Poor and Underserved 20(1): 152–164.
Abstract: We use data from the Fragile Families and Child Wellbeing study to estimate the effects of poor infant health, pre-pregnancy health conditions of the mother, and the father's health status on health insurance status of urban, mostly unmarried, mothers and their one-year-old children. Virtually all births were covered by health insurance, but one year later about one third of mothers and over 10 percent of children were uninsured. We separately examine births that were covered by public insurance and those that were covered by private insurance. The child's health status had no effect, for the most part, on whether the mother or child became uninsured. For publicly insured births, a maternal physical health condition made it less likely that both the mother and child became uninsured, while maternal mental illness made it more likely that both the mother and child lost insurance coverage. For privately insured births, the father's suboptimal physical health made it more likely that the mother, but not the child, became uninsured.
Handle: RePEc:nbr:nberwo:12197
Template-Type: ReDIF-Paper 1.0
Title: Stabilization of Effective Exchange Rates Under Common Currency Basket Systems
Classification-JEL: E6; F3; F4
Author-Name: Eiji Ogawa
Author-Name: Junko Shimizu
Note: ITI
Number: 12198
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12198
File-URL: http://www.nber.org/papers/w12198.pdf
File-Format: application/pdf
Publication-Status: published as Ogawa, Eiji and Junko Shimizu. "Stabilization of Effective Exchange Rates under Common Currency Basket Systems." Journal of the Japanese and International Economies 20, 4 (December 2006): 590-611.
Abstract: We investigate the extent to which a common currency basket peg would stabilize effective exchange rates of East Asian currencies. We use an AMU (Asian Monetary Unit), which is a weighted average of ASEAN10 plus 3 (Japan, China, and Korea) currencies, as a common currency basket to investigate the stabilization effects. We compare our results with another result on stabilization effects of the common G3 currency (the US dollar, the Japanese yen, and the euro) basket in the East Asian countries (Williamson (2005)). We obtained the following results: first, the AMU peg system would be more effective in reducing fluctuations of the effective exchange rates as more countries applied the AMU peg system in East Asia. Second, the AMU peg system would more effectively stabilize the effective exchange rates than a common G-3 currency basket peg system for four (Indonesia, the Philippines, South Korea and Thailand) of the seven countries. The results suggest that the AMU basket peg would be useful for the East Asian countries whose trade weights on Japan are relatively higher than others.
Handle: RePEc:nbr:nberwo:12198
Template-Type: ReDIF-Paper 1.0
Title: Do High School Exit Exams Influence Educational Attainment or Labor Market Performance?
Classification-JEL: I2; J3
Author-Name: Thomas S. Dee
Author-Name: Brian A. Jacob
Note: CH ED
Number: 12199
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12199
File-URL: http://www.nber.org/papers/w12199.pdf
File-Format: application/pdf
Publication-Status: published as Gamoran, Adam (ed.) Standards-Based Reform and Children in Poverty: Lessons for "No Child Left Behind." Brookings Institution Press, 2007.
Abstract: State requirements that high school graduates pass exit exams were the leading edge of the movement towards standards-based reform and continue to be adopted and refined by states today. In this study, we present new empirical evidence on how exit exams influenced educational attainment and labor market experiences using data from the 2000 Census and the National Center for Education Statistics' Common Core of Data (CCD). Our results suggest that the effects of these reforms have been heterogeneous. For example, our analysis of the Census data suggests that exit exams significantly reduced the probability of completing high school, particularly for black students. Similarly, our analysis of grade-level dropout data from the CCD indicates that Minnesota's recent exit exam increased the dropout rate in urban and high-poverty school districts as well as in those with a relatively large concentration of minority students. This increased risk of dropping out was concentrated among 12th grade students. However, we also found that Minnesota's exit exam lowered the dropout rate in low-poverty and suburban school districts, particularly among students in the 10th and 11th grades. These results suggest that exit exams have the capacity to improve student and school performance but also appear to have exacerbated the inequality in educational attainment.
Handle: RePEc:nbr:nberwo:12199
Template-Type: ReDIF-Paper 1.0
Title: Interpreting Prediction Market Prices as Probabilities
Classification-JEL: D4; D8; G13
Author-Name: Justin Wolfers
Author-Person: pwo9
Author-Name: Eric Zitzewitz
Author-Person: pzi23
Note: AP EFG
Number: 12200
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12200
File-URL: http://www.nber.org/papers/w12200.pdf
File-Format: application/pdf
Abstract: While most empirical analysis of prediction markets treats prices of binary options as predictions of the probability of future events, Manski (2004) has recently argued that there is little existing theory supporting this practice. We provide relevant analytic foundations, describing sufficient conditions under which prediction markets prices correspond with mean beliefs. Beyond these specific sufficient conditions, we show that for a broad class of models prediction market prices are usually close to the mean beliefs of traders. The key parameters driving trading behavior in prediction markets are the degree of risk aversion and the distribution of beliefs, and we provide some novel data on the distribution of beliefs in a couple of interesting contexts. We find that prediction markets prices typically provide useful (albeit sometimes biased) estimates of average beliefs about the probability an event occurs.
Handle: RePEc:nbr:nberwo:12200
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Taxes on Efficiency and Growth
Classification-JEL: H2
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: PE
Number: 12201
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12201
File-URL: http://www.nber.org/papers/w12201.pdf
File-Format: application/pdf
Publication-Status: published as Feldstein, Martin. "The Effect of Taxes on Efficiency and Growth." Tax Notes (May 8, 2006).
Abstract: This nontechnical paper discusses the adverse effects of high marginal tax rates on labor income and on investment income. It explains that the deadweight loss of a tax on labor income depends on the response of taxable income and not just the change in labor supply. An across the board increase in personal tax rates involves a deadweight loss of 76 cents per dollar of revenue and only collects about two-thirds of the revenue implied by a "static" calculation. A tax on investment income brings a deadweight loss even if household saving does not respond to taxes and the net rate of return. What matters is the response of future consumption. The tax on investment income is also effectively a tax on labor supply because current work effort produces income that will be spent on future consumption and the tax on investment income reduces the future consumption that results from more work today. An appendix shows for a simple log utility case that the tax on labor income has a smaller deadweight loss than a tax on investment income with the same present value of revenue. There is a further discussion of the various ways in which capital income taxes distort economic activity.
Handle: RePEc:nbr:nberwo:12201
Template-Type: ReDIF-Paper 1.0
Title: Pay, Reference Points, and Police Performance
Classification-JEL: J0; J5; D0; H7
Author-Name: Alexandre Mas
Author-Person: pma2363
Note: LS
Number: 12202
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12202
File-URL: http://www.nber.org/papers/w12202.pdf
File-Format: application/pdf
Publication-Status: published as Mas, Alexandre. "Pay, Reference Points, And Police Performance," Quarterly Journal of Economics, 2006, v121(3,Aug), 783-821.
Abstract: Several theories suggest that pay raises below a reference point will reduce job performance. Final offer arbitration for police unions provides a unique opportunity to examine these theories, as the police officers either receive their requested wage or receive a lower one. In the months after New Jersey police officers lose in arbitration, arrest rates and average sentence length decline and crime reports rise relative to when they win. These declines are larger when the awarded wage is further from the police union's demand. The findings support the idea that considerations of fairness, disappointment, and, more generally, reference points affect workplace behavior.
Handle: RePEc:nbr:nberwo:12202
Template-Type: ReDIF-Paper 1.0
Title: Is IPO Underperformance a Peso Problem?
Classification-JEL: G12; G14; G32
Author-Name: Andrew Ang
Author-Person: pan374
Author-Name: Li Gu
Author-Name: Yael V. Hochberg
Note: AP
Number: 12203
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12203
File-URL: http://www.nber.org/papers/w12203.pdf
File-Format: application/pdf
Publication-Status: published as Ang, Andrew, Li Gu and Yael Hochberg. “Is IPO Underperformance a Peso Problem?” Journal of Financial and Quantitative Analysis 42, 3 (2007): 565-594.
Abstract: Recent studies suggest that the underperformance of IPOs in the post-1970 sample may be a small sample effect or "Peso" problem. That is, IPO underperformance may result from observing too few star performers ex-post than were expected ex-ante. We develop a model of IPO performance that captures this intuition by allowing returns to be drawn from mixtures of outstanding, benchmark, or poor performing states. We estimate the model under the null of no ex-ante average IPO underperformance and construct small sample distributions of various statistics measuring IPO relative performance. We find that small sample biases are extremely unlikely to account for the magnitude of the post-1970 IPO underperformance observed in data.
Handle: RePEc:nbr:nberwo:12203
Template-Type: ReDIF-Paper 1.0
Title: Intergenerational Risksharing and Equilibrium Asset Prices
Classification-JEL: G1; H3
Author-Name: John Y. Campbell
Author-Person: pca54
Author-Name: Yves Nosbusch
Author-Person: pno84
Note: AG AP PE
Number: 12204
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12204
File-URL: http://www.nber.org/papers/w12204.pdf
File-Format: application/pdf
Publication-Status: published as Campbell, John Y. & Nosbusch, Yves, 2007. "Intergenerational risksharing and equilibrium asset prices," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2251-2268, November.
Abstract: In the presence of overlapping generations, markets are incomplete because it is impossible to engage in risksharing trades with the unborn. In such an environment the government can use a social security system, with contingent taxes and benefits, to improve risksharing across generations. An interesting question is how the form of the social security system affects asset prices in equilibrium. In this paper we set up a simple model with two risky factors of production: human capital, owned by the young, and physical capital, owned by all older generations. We show that a social security system that optimally shares risks across generations exposes future generations to a share of the risk in physical capital returns. Such a system reduces precautionary saving and increases the risk-bearing capacity of the economy. Under plausible conditions it increases the riskless interest rate, lowers the price of physical capital, and reduces the risk premium on physical capital.
Handle: RePEc:nbr:nberwo:12204
Template-Type: ReDIF-Paper 1.0
Title: Redistribution by Insurance Market Regulation: Analyzing a Ban on Gender-Based Retirement Annuities
Classification-JEL: D82; H55; L51
Author-Name: Amy Finkelstein
Author-Person: pfi264
Author-Name: James Poterba
Author-Person: ppo19
Author-Name: Casey Rothschild
Author-Person: pro404
Note: AG AP CF EH PE
Number: 12205
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12205
File-URL: http://www.nber.org/papers/w12205.pdf
File-Format: application/pdf
Publication-Status: published as Finkelstein, Amy & Poterba, James & Rothschild, Casey, 2009. "Redistribution by insurance market regulation: Analyzing a ban on gender-based retirement annuities," Journal of Financial Economics, Elsevier, vol. 91(1), pages 38-58, January.
Abstract: This paper shows how models of insurance markets with asymmetric information can be calibrated and solved to yield quantitative estimates of the consequences of government regulation. We estimate the impact of restricting gender-based pricing in the United Kingdom retirement annuity market, a market in which individuals are required to annuitize tax-preferred retirement savings but are allowed considerable choice over the annuity contract they purchase. After calibrating a lifecycle utility model and estimating a model of annuitant mortality that allows for unobserved heterogeneity, we solve for the range of equilibrium contract structures with and without gender-based pricing. Eliminating gender-based pricing is generally thought to redistribute resources from men to women, since women have longer life expectancies. We find that allowing insurers to offer a menu of contracts may reduce the amount of redistribution from men to women associated with gender-blind pricing requirements to half the level that would occur if insurers were required to sell a single pre-specified policy. The latter "one policy" scenario corresponds loosely to settings in which governments provide compulsory annuities as part of their Social Security program. Our findings suggest that recognizing the endogenous structure of insurance contracts is important for analyzing the economic effects of insurance market regulations. More generally, our results suggest that theoretical models of insurance market equilibrium can be used for quantitative policy analysis, not simply to derive qualitative findings.
Handle: RePEc:nbr:nberwo:12205
Template-Type: ReDIF-Paper 1.0
Title: Technology, Information and the Decentralization of the Firm
Classification-JEL: O31; O32; O33; F23
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Philippe Aghion
Author-Person: pag175
Author-Name: Claire Lelarge
Author-Person: ple907
Author-Name: John Van Reenen
Author-Person: pva45
Author-Name: Fabrizio Zilibotti
Author-Person: pzi3
Note: EFG LS
Number: 12206
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12206
File-URL: http://www.nber.org/papers/w12206.pdf
File-Format: application/pdf
Publication-Status: published as Daron Acemoglu & Philippe Aghion & Claire Lelarge & John Van Reenen & Fabrizio Zilibotti, 2007. "Technology, Information, and the Decentralization of the Firm," The Quarterly Journal of Economics, MIT Press, vol. 122(4), pages 1759-1799, November.
Abstract: This paper develops a framework to analyze the relationship between the diffusion of new technologies and the decentralization decisions of firms. Centralized control relies on the information of the principal, which we equate with publicly available information. However, the manager can use her informational advantage to make choices that are not in the best interest of the principal. As the available public information about the specific technology increases, the trade-off shifts in favor of centralization. We show that firms closer to the technological frontier, firms in more heterogeneous environments and younger firms are more likely to choose decentralization. Using three datasets of French and British firms in the 1990s we report robust correlations consistent with these predictions.
Handle: RePEc:nbr:nberwo:12206
Template-Type: ReDIF-Paper 1.0
Title: The Academic Achievement Gap in Grades 3 to 8
Classification-JEL: I21; J15
Author-Name: Charles T. Clotfelter
Author-Person: pcl34
Author-Name: Helen F. Ladd
Author-Person: pla158
Author-Name: Jacob L. Vigdor
Author-Person: pvi23
Note: ED
Number: 12207
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12207
File-URL: http://www.nber.org/papers/w12207.pdf
File-Format: application/pdf
Publication-Status: published as Charles T Clotfelter & Helen F Ladd & Jacob L Vigdor, 2009. "The Academic Achievement Gap in Grades 3 to 8," The Review of Economics and Statistics, MIT Press, vol. 91(2), pages 398-419, October.
Abstract: Using data for North Carolina public school students in grades 3 to 8, we examine achievement gaps between white students and students from other racial and ethnic groups. We focus on successive cohorts of students who stay in the state's public schools for all six years, and study both differences in means and in quantiles. Our results on achievement gaps between black and white students are consistent with those from other longitudinal studies: the gaps are sizable, are robust to controls for measures of socioeconomic status, and show no monotonic trend between 3rd and 8th grade. In contrast, both Hispanic and Asian students tend to gain on whites as they progress through these grades. Looking beyond simple mean differences, we find that the racial gaps in math between low-performing students have tended to shrink as students progress through school, while racial gaps between high-performing students have widened for black and American Indian students.
Handle: RePEc:nbr:nberwo:12207
Template-Type: ReDIF-Paper 1.0
Title: The Effects of State Medicaid Policies on the Dynamic Savings Patterns of the Elderly
Classification-JEL: I1; I3
Author-Name: Lara Gardner
Author-Name: Donna Gilleskie
Note: EH PE
Number: 12208
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12208
File-URL: http://www.nber.org/papers/w12208.pdf
File-Format: application/pdf
Abstract: States have considerable flexibility in determining Medicaid policies such as financial eligibility criteria, subsidies for home- and community-based services, and reimbursements rates to skilled nursing facilities, among other things. An understanding of how differences in Medicaid programs across states and time affect the elderlys' demand for Medicaid coverage of long-term care is necessary for evaluating future changes in the Medicaid program structure. We use data from the 1993, 1995, 1998, and 2000 waves of the Asset and Health Dynamics of the Elderly and variation in state Medicaid policies over time to estimate our dynamic framework capturing the sequential asset and gift decisions that determine eligibility for Medicaid. We also model the long-term care decisions of married and single individuals conditional on endogenous insurance coverage and health transitions. To control for the impact of unobserved heterogeneity in all outcomes, the structural equations of the empirical model are estimated jointly, allowing for correlation in the error structure across equations and over time. In this paper we focus on the asset and gifting decisions of the elderly over time. We find that many of the Medicaid policy variables that differ across states have a significant but small effect on the savings decisions of the elderly, with single elderly individuals exhibiting more response than married elderly individuals.
Handle: RePEc:nbr:nberwo:12208
Template-Type: ReDIF-Paper 1.0
Title: Buy, Lobby or Sue: Interest Groups' Participation in Policy Making - A Selective Survey
Classification-JEL: H; K; L
Author-Name: Pablo T. Spiller
Author-Person: psp34
Author-Name: Sanny Liao
Note: LE
Number: 12209
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12209
File-URL: http://www.nber.org/papers/w12209.pdf
File-Format: application/pdf
Publication-Status: published as Brousseau, Eric and Jean-Michel Glachant (eds.) New Institutional Economics: A Guidebook. Cambridge and New York: Cambridge University Press, 2008.
Abstract: The participation of interest groups in public policy making is unavoidable. Its unavoidable nature is only matched by the universal suspicion with which it has been seen by both policy makers and the public. Recently, however, there has been a growing literature that examines the participation of interest groups in public policy making from a New Institutional Economics perspective. The distinguishing feature of the New Institutional Economics Approach is its emphasis in opening up the black box of decision-making, whether in understanding the rules of the game, or the play of the game. In this paper we do not attempt to fairly describe the vast literature on interest group's behavior. Instead, the purpose of this essay for the New Institutional Economics Guide Book is to review recent papers that follow the NIE mantra. That is, they attempt to explicate the micro-analytic features of the way interest groups actually interact with policy-makers, rather than providing an abstract high-level representation. We emphasize the role of the institutional environment in understanding interest groups' strategies.
Handle: RePEc:nbr:nberwo:12209
Template-Type: ReDIF-Paper 1.0
Title: An Empirical Analysis of the Pricing of Collateralized Debt Obligations
Classification-JEL: G1
Author-Name: Francis A. Longstaff
Author-Person: plo283
Author-Name: Arvind Rajan
Note: AP
Number: 12210
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12210
File-URL: http://www.nber.org/papers/w12210.pdf
File-Format: application/pdf
Publication-Status: published as Longstaff, Francis A. and Arvind Rajan. "An Empirical Analysis of the Pricing of Collateralized Debt Obligations." Journal of Finance 63, 2 (April 2008): 529-63.
Abstract: We study the pricing of collateralized debt obligations (CDOs) using an extensive new data set for the actively-traded CDX credit index and its tranches. We find that a three-factor portfolio credit model allowing for firm-specific, industry, and economywide default events explains virtually all of the time-series and crosssectional variation in CDX index tranche prices. These tranches are priced as if losses of 0.4, 6, and 35 percent of the portfolio occur with expected frequencies of 1.2, 41.5, and 763 years, respectively. On average, 65 percent of the CDX spread is due to firm-specific default risk, 27 percent to clustered industry or sector default risk, and 8 percent to catastrophic or systemic default risk. Recently, however, firm-specific default risk has begun to play a larger role.
Handle: RePEc:nbr:nberwo:12210
Template-Type: ReDIF-Paper 1.0
Title: Identifying Individual and Group Effects in the Presence of Sorting: A Neighborhood Effects Application
Classification-JEL: J41; R14
Author-Name: Patrick Bayer
Author-Person: pba636
Author-Name: Stephen L. Ross
Note: ED
Number: 12211
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12211
File-URL: http://www.nber.org/papers/w12211.pdf
File-Format: application/pdf
Abstract: Researchers have long recognized that the non-random sorting of individuals into groups generates correlation between individual and group attributes that is likely to bias naïve estimates of both individual and group effects. This paper proposes a non-parametric strategy for identifying these effects in a model that allows for both individual and group unobservables, applying this strategy to the estimation of neighborhood effects on labor market outcomes. The first part of this strategy is guided by a robust feature of the equilibrium in vertical sorting models - a monotonic relationship between neighborhood housing prices and neighborhood quality. This implies that under certain conditions a non-parametric function of neighborhood housing prices serves as a suitable control function for the neighborhood unobservable in the labor market outcome regression. This control function transforms the problem to a model with one unobservable so that traditional instrumental variables solutions may be applied. In our application, we instrument for each individual's observed neighborhood attributes with the average neighborhood attributes of a set of observationally identical individuals. The neighborhood effects model is estimated using confidential microdata from the 1990 Decennial Census for the Boston MSA. The results imply that the direct effects of geographic proximity to jobs, neighborhood poverty rates, and average neighborhood education are substantially larger than the conditional correlations identified using OLS, although the net effect of neighborhood quality on labor market outcomes remains small. These findings are robust across a wide variety of specifications and robustness checks.
Handle: RePEc:nbr:nberwo:12211
Template-Type: ReDIF-Paper 1.0
Title: Home Production, Market Production and the Gender Wage Gap: Incentives and Expectations
Classification-JEL: J2; J3
Author-Name: Stefania Albanesi
Author-Person: pal30
Author-Name: Claudia Olivetti
Author-Person: pol63
Note: EFG LS
Number: 12212
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12212
File-URL: http://www.nber.org/papers/w12212.pdf
File-Format: application/pdf
Publication-Status: published as Stefania Albanesi & Claudia Olivetti, 2008. "Code and data files for "Home Production, Market Production and the Gender Wage Gap: Incentives and Expectations"," Computer Codes 06-236, Review of Economic Dynamics.
Publication-Status: published as Albanesi, Stefania and Claudia Olivetti. "Home Production, Market Production and the Gender Wage Gap: Incentives and Expectations." Review of Economic Dynamics 12, 1 (January 2009): 80-107.
Abstract: The purpose of this paper is to study the joint determination of gender differentials in labor market outcomes and in the household division of labor. Specifically, we explore the hypothesis that incentive problems in the labor market amplify differences in earnings due to gender differentials in home hours. In turn, earnings differentials reinforce the division of labor within the household, leading to a potentially self-fulfilling feedback mechanism. The workings of the labor market are key in our story. The main assumptions are that the utility cost of work effort is increasing in home hours, and that higher effort should correspond to higher incentive pay. Household decisions are Pareto efficient, leading to a negative correlation between relative home hours and earnings across spouses. We use the Census and the PSID to study these predictions and find that they are supported by the data.
Handle: RePEc:nbr:nberwo:12212
Template-Type: ReDIF-Paper 1.0
Title: Expectations and Exchange Rate Policy
Classification-JEL: F3; F4; E5
Author-Name: Michael B. Devereux
Author-Person: pde32
Author-Name: Charles Engel
Author-Person: pen14
Note: IFM
Number: 12213
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12213
File-URL: http://www.nber.org/papers/w12213.pdf
File-Format: application/pdf
Abstract: Both empirical evidence and theoretical discussion have long emphasized the impact of "news" on exchange rates. In most exchange rate models, the exchange rate acts as an asset price, and as such responds to news about future returns on assets. But the exchange rate also plays a role in determining the relative price of non-durable goods when nominal goods prices are sticky. In this paper we argue that these two roles may conflict with one another. If news about future asset returns causes movements in current exchange rates, then when nominal prices are slow to adjust, this may cause changes in current relative goods prices that have no efficiency rationale. In this sense, anticipations of future shocks to fundamentals can cause current exchange rate misalignments. Friedman's (1953) case for unfettered flexible exchange rates is overturned when exchange rates are asset prices. We outline a series of models in which an optimal policy eliminates the effects of news on exchange rates.
Handle: RePEc:nbr:nberwo:12213
Template-Type: ReDIF-Paper 1.0
Title: Portfolio Choice in a Monetary Open-Economy DSGE Model
Classification-JEL: F31; F41; G11
Author-Name: Charles Engel
Author-Person: pen14
Author-Name: Akito Matsumoto
Author-Person: pma364
Note: IFM
Number: 12214
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12214
File-URL: http://www.nber.org/papers/w12214.pdf
File-Format: application/pdf
Abstract: This paper develops a two-country monetary DSGE model in which households choose a portfolio of home and foreign equities, and a forward position in foreign exchange. Some goods prices are set without full information of the state. We show that temporarily sticky nominal goods prices can have large effects on equity portfolios. Home and foreign portfolios are not identical in equilibrium. In response to technology shocks, sticky prices generate a negative correlation between labor income and the profits of domestic firms, biasing portfolios in favor of home equities. In contrast, under flexible prices, labor income and the profits of the domestic firms are positively correlated. Even a small amount of nominal price stickiness can generate these portfolio differences, depending on the diversification role played by the terms of trade. Returns on human capital and equities may be positively correlated under sticky prices when the source of shocks is monetary, but this risk is hedged through nominal assets rather than through equities.
Handle: RePEc:nbr:nberwo:12214
Template-Type: ReDIF-Paper 1.0
Title: Expenditure Switching vs. Real Exchange Rate Stabilization: Competing Objectives for Exchange Rate Policy
Classification-JEL: F3; F4; E5
Author-Name: Michael B. Devereux
Author-Person: pde32
Author-Name: Charles Engel
Author-Person: pen14
Note: IFM
Number: 12215
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12215
File-URL: http://www.nber.org/papers/w12215.pdf
File-Format: application/pdf
Publication-Status: published as Devereux, Michael B. and Charles Engel. “Expenditure Switching vs. Real Exchange Rate Stabilization: Competing Objectives for Exchange-Rate Policy.” Journal of Monetary Economics 54 (2007): 2346-2374.
Abstract: This paper develops a view of exchange rate policy as a trade-off between the desire to smooth fluctuations in real exchange rates so as to reduce distortions in consumption allocations, and the need to allow flexibility in the nominal exchange rate so as to facilitate terms of trade adjustment. We show that optimal nominal exchange rate volatility will reflect these competing objectives. The key determinants of how much the exchange rate should respond to shocks will depend on the extent and source of price stickiness, the elasticity of substitution between home and foreign goods, and the amount of home bias in production. Quantitatively, we find the optimal exchange rate volatility should be significantly less than would be inferred based solely on terms of trade considerations. Moreover, we find that the relationship between price stickiness and optimal exchange rate volatility may be non-monotonic.
Handle: RePEc:nbr:nberwo:12215
Template-Type: ReDIF-Paper 1.0
Title: Measuring and Explaining Management Practices Across Firms and Countries
Classification-JEL: L2; M2; O32; O33
Author-Name: Nick Bloom
Author-Person: pbl55
Author-Name: John Van Reenen
Author-Person: pva45
Note: PR
Number: 12216
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12216
File-URL: http://www.nber.org/papers/w12216.pdf
File-Format: application/pdf
Publication-Status: published as Nicholas Bloom & John Van Reenen, 2007. "Measuring and Explaining Management Practices Across Firms and Countries," The Quarterly Journal of Economics, MIT Press, vol. 122(4), pages 1351-1408, November.
Abstract: We use an innovative survey tool to collect management practice data from 732 medium sized manufacturing firms in the US, France, Germany and the UK. These measures of managerial practice are strongly associated with firm-level productivity, profitability, Tobin's Q, sales growth and survival rates. Management practices also display significant cross-country differences with US firms on average better managed than European firms, and significant within-country differences with a long tail of extremely badly managed firms. We find that poor management practices are more prevalent when (a) product market competition is weak and/or when (b) family-owned firms pass management control down to the eldest sons (primo geniture). European firms report lower levels of competition, while French and British firms also report substantially higher levels of primo geniture due to the influence of Norman legal origin and generous estate duty for family firms. We calculate that product market competition and family firms account for about half of the long tail of badly managed firms and up to two thirds of the American advantage over Europe in management practices.
Handle: RePEc:nbr:nberwo:12216
Template-Type: ReDIF-Paper 1.0
Title: Multinationals, Technology, and the Introduction of Varieties of Goods
Classification-JEL: F23; F12; F14
Author-Name: Irene Brambilla
Note: ITI PR
Number: 12217
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12217
File-URL: http://www.nber.org/papers/w12217.pdf
File-Format: application/pdf
Publication-Status: published as Brambilla, Irene, 2009. "Multinationals, technology, and the introduction of varieties of goods," Journal of International Economics, Elsevier, vol. 79(1), pages 89-101, September.
Abstract: Multiproduct firms and product turnover are widespread phenomena. This paper develops a theoretical framework that links advantages in R&D and variable costs with firm's ability to expand its portfolio of products. The framework is then applied to explain systematic differences in product introduction by affiliates of multinationals and firms that only operate domestically. Using firm-level data for the Chinese manufacturing sector during 1998-2000, I compare the performance of foreign and domestic firms in terms of the new varieties that they introduce and I estimate the quantitative relevance of technological factors as a determinant. I find that firms with more than 50 percent of foreign ownership introduce on average more than twice as many more new varieties of goods as private domestic firms. Advantages in productivity account for 32 to 62 percent of the difference in the number and sales of new varieties, while advantages in the cost of development account for 3 to 6 percent of these differences.
Handle: RePEc:nbr:nberwo:12217
Template-Type: ReDIF-Paper 1.0
Title: Baumol's Diseases: A Macroeconomic Perspective
Classification-JEL: D4; O3; O4
Author-Name: William D. Nordhaus
Author-Person: pno115
Note: EFG PR
Number: 12218
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12218
File-URL: http://www.nber.org/papers/w12218.pdf
File-Format: application/pdf
Publication-Status: published as Nordhaus William D, 2008. "Baumol's Diseases: A Macroeconomic Perspective," The B.E. Journal of Macroeconomics, De Gruyter, vol. 8(1), pages 1-39, February.
Abstract: William Baumol and his co-authors have analyzed the impact of differential productivity growth on the health of different sectors and on the overall economy. They argued that technologically stagnant sectors experience above average cost and price increases, take a rising share of national output, and slow aggregate productivity growth. Using industry data for the period 1948-2001, the present study investigates Baumol's diseases for the overall economy. It finds that technologically stagnant sectors clearly have rising relative prices and declining relative real outputs. Additionally, technologically progressive sectors tend to have slower hours and employment growth outside of manufacturing. Finally, sectoral shifts have tended to lower overall productivity growth as the share of stagnant sectors has risen over the second half of the twentieth century.
Handle: RePEc:nbr:nberwo:12218
Template-Type: ReDIF-Paper 1.0
Title: Are Valuation Effects Desirable from a Global Perspective?
Classification-JEL: F32; F41; F42
Author-Name: Pierpaolo Benigno
Author-Person: pbe203
Note: IFM ME
Number: 12219
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12219
File-URL: http://www.nber.org/papers/w12219.pdf
File-Format: application/pdf
Publication-Status: published as Beigno, Pierpaolo. “Are Valuation Effects Desirable from a Global Perspective?” Journal of Development Economics 89 (2009): 170-180.
Abstract: Recent studies have emphasized the role of valuation effects due to exchange rate movements in easing the process of adjustment of the external balance of a country. This paper asks to what extent valuation effects are desirable from a global perspective as a mean to achieve an efficient allocation of resources. In a frictionless world, it is desirable to have large movements in prices and exchange rates. But once a small concern for price stability is introduced not only should prices be stabilized but also the response of the exchange rate should be muted. There is a minor role for valuation effects that depends both on the size and composition of assets and liabilities.
Handle: RePEc:nbr:nberwo:12219
Template-Type: ReDIF-Paper 1.0
Title: International Diversification at Home and Abroad
Classification-JEL: G11; G15; G3
Author-Name: Fang Cai
Author-Name: Francis E. Warnock
Note: IFM
Number: 12220
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12220
File-URL: http://www.nber.org/papers/w12220.pdf
File-Format: application/pdf
Publication-Status: published as “Foreign Exposure through Domestic Equities”. Finance Research Letters.
Abstract: It is an established fact that investors favor the familiar—be it domestic securities or, within a country, the securities of nearby firms—and avoid investments that would provide the greatest diversification benefits. While we do not rule out familiarity as an important driver of portfolio allocations, we provide new evidence of investors' international diversification motive. In particular, our analysis of the security-level U.S. equity holdings of foreign and domestic institutional investors indicates that institutional investors reveal a preference for domestic multinationals (MNCs), even after controlling for familiarity factors. We attribute this revealed preference to the desire to obtain "safe" international diversification. We then show that holdings of domestic MNCs are substantial and, after accounting for this home-grown foreign exposure, that the share of "foreign" equities in investors' portfolios roughly doubles, reducing (but not eliminating) the observed home bias.
Handle: RePEc:nbr:nberwo:12220
Template-Type: ReDIF-Paper 1.0
Title: Crime and Young Men: The Role of Arrest, Criminal Experience, and Heterogeneity
Classification-JEL: K42; J24
Author-Name: Susumu Imai
Author-Name: Hajime Katayama
Author-Name: Kala Krishna
Author-Person: pkr26
Note: LS PE
Number: 12221
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12221
File-URL: http://www.nber.org/papers/w12221.pdf
File-Format: application/pdf
Abstract: Using National Youth Survey (NYS) data, we examine the relationship of current criminal activity and past arrests using an ordered probit model with unobserved heterogeneity. Past arrests raise current criminal activity only for the non-criminal type, while past criminal experience raises current criminal activity for both types. Also, the age crime profile peaks at age 18 for non-criminal type individuals, but for criminal type individuals, it continues to rise with age. Past research indicates that age arrest profiles rise till age 18 and then fall for both types, suggesting lower apprehension rates for criminal type individuals.
Handle: RePEc:nbr:nberwo:12221
Template-Type: ReDIF-Paper 1.0
Title: Do Foreigners Invest Less in Poorly Governed Firms?
Classification-JEL: G3; F3
Author-Name: Christian Leuz
Author-Person: ple259
Author-Name: Karl V. Lins
Author-Name: Francis E. Warnock
Note: CF IFM ITI
Number: 12222
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12222
File-URL: http://www.nber.org/papers/w12222.pdf
File-Format: application/pdf
Publication-Status: published as Review of Financial Studies 2009 Vol 22, Issue 8: pp. 3245-3285
Publication-Status: published as Do Foreigners Invest Less in Poorly Governed Firms?, Christian Leuz, Karl V. Lins, Francis E. Warnock. in Corporate Governance, Weisbach. 2010
Abstract: As domestic sources of outside finance are limited in many countries around the world, it is important to understand the factors that influence whether foreign outside investors provide capital to a country's firms. This study examines whether and why investor concern about corporate governance results in fewer foreign holdings. We use a comprehensive set of foreign holdings by U.S. investors as a proxy for foreign investment and analyze a sample of 4,411 firms from 29 emerging market and developed economies. We find that foreigners invest significantly less in firms that are poorly governed, i.e., firms that have ownership structures that are more conducive to outside investor expropriation. Interestingly, this finding is not simply a matter of a country's economic development but appears to be directly related to a country's information rules and legal institutions. We therefore argue that information problems faced by foreign investors play an important role in this result. Supporting this explanation, we show that foreign investment is lower in firms that appear to engage in more earnings management.
Handle: RePEc:nbr:nberwo:12222
Template-Type: ReDIF-Paper 1.0
Title: Sensation Seeking, Overconfidence, and Trading Activity
Classification-JEL: G10; G11
Author-Name: Mark Grinblatt
Author-Person: pgr231
Author-Name: Matti Keloharju
Author-Person: pke264
Note: AP
Number: 12223
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12223
File-URL: http://www.nber.org/papers/w12223.pdf
File-Format: application/pdf
Publication-Status: published as Mark Grinblatt & Matti Keloharju, 2009. "Sensation Seeking, Overconfidence, and Trading Activity," Journal of Finance, American Finance Association, vol. 64(2), pages 549-578, 04.
Abstract: This study analyzes the role that two psychological attributes—sensation seeking and overconfidence—play in the tendency of investors to trade stocks. Equity trading data are combined with data from an investor's tax filings, driving record, and psychological profile. We use the data to construct measures of overconfidence and sensation seeking tendencies. Controlling for a host of variables, including wealth, income, age, number of stocks owned, marital status, and occupation, we find that overconfident investors and those investors most prone to sensation seeking trade more frequently.
Handle: RePEc:nbr:nberwo:12223
Template-Type: ReDIF-Paper 1.0
Title: Markets Versus Governments: Political Economy of Mechanisms
Classification-JEL: H11; H21; E61; P16
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Michael Golosov
Author-Person: pgo200
Author-Name: Aleh Tsyvinski
Note: EFG PE POL
Number: 12224
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12224
File-URL: http://www.nber.org/papers/w12224.pdf
File-Format: application/pdf
Publication-Status: published as Acemoglu, Daron, Mike Golosov, and Oleg Tsyvinski. "Markets Versus Governments." Journal of Monetary Economics 55 (January 2008): 159-189.
Abstract: We study the optimal Mirrlees taxation problem in a dynamic economy with idiosyncratic (productivity or preference) shocks. In contrast to the standard approach, which implicitly assumes that the mechanism is operated by a benevolent planner with full commitment power, we assume that any centralized mechanism can only be operated by a self-interested ruler/government without commitment power, who can therefore misuse the resources and the information it collects. An important result of our analysis is that there will be truthful revelation along the equilibrium path (for all positive discount factors), which shows that truth-telling mechanisms can be used despite the commitment problems and the different interests of the government. Using this tool, we show that if the government is as patient as the agents, the best sustainable mechanism leads to an asymptotic allocation where the aggregate distortions arising from political economy disappear. In contrast, when the government is less patient than the citizens, there are positive aggregate distortions and positive aggregate capital taxes even asymptotically. Under some additional assumptions on preferences, these results generalize to the case when the government is benevolent but unable to commit to future tax policies. We conclude by providing a brief comparison of centralized mechanisms operated by self-interested rulers to anonymous markets.
Handle: RePEc:nbr:nberwo:12224
Template-Type: ReDIF-Paper 1.0
Title: Tax Competition With Parasitic Tax Havens
Classification-JEL: H26; H87
Author-Name: Joel Slemrod
Author-Person: psl10
Author-Name: John D. Wilson
Note: PE
Number: 12225
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12225
File-URL: http://www.nber.org/papers/w12225.pdf
File-Format: application/pdf
Publication-Status: published as Slemrod, Joel & Wilson, John D., 2009. "Tax competition with parasitic tax havens," Journal of Public Economics, Elsevier, vol. 93(11-12), pages 1261-1270, December.
Abstract: We develop a tax competition framework in which some jurisdictions, called tax havens, are parasitic on the revenues of other countries. The havens use real resources to help companies camouflage their home-country tax avoidance, and countries use resources in an attempt to limit the transfer of tax revenues to the havens. The equilibrium price for this service depends on the demand and supply for such protection. Recognizing that taxes on wage income are also evaded, we solve for the equilibrium tax rates on mobile capital and immobile labor, and we demonstrate that the full or partial elimination of tax havens would improve welfare in non-haven countries, in part because countries would be induced to increase their tax rates, which they have set at inefficiently low levels in an attempt to attract mobile capital. We also demonstrate that the smaller countries choose to become tax havens, and we show that the abolishment of a sufficiently small number of the relatively large havens leaves all countries better off, including the remaining havens.
Handle: RePEc:nbr:nberwo:12225
Template-Type: ReDIF-Paper 1.0
Title: Prizes for Basic Research -- Human Capital, Economic Might and the Shadow of History
Classification-JEL: F15; F21; O3; N4
Author-Name: Joshua Aizenman
Author-Person: pai8
Author-Name: Ilan Noy
Author-Person: pno49
Note: ITI PR
Number: 12226
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12226
File-URL: http://www.nber.org/papers/w12226.pdf
File-Format: application/pdf
Publication-Status: published as Joshua Aizenman & Ilan Noy, 2007. "Prizes for basic research: Human capital, economic might and the shadow of history," Journal of Economic Growth, Springer, vol. 12(3), pages 261-282, September.
Abstract: This paper studies the impact of several factors on the geographical distribution of basic scientific research across countries and time, and explains the dynamics of the process that has resulted in the United States becoming the undisputed leader in basic research. Our study is based on the records of major scientific awards, and on data dealing with global economic and historical trends. We investigate the degree to which scale or threshold effects account for the number of major prizes (Nobel, Fields, Kyoto, Wolf) won by different countries. We constructed a stylized model, predicting that lagged relative GDP of a country relative to the GDP of all countries engaging in basic research is an important explanatory variable of a country?s share of prizes. Scale effects imply that the association between the GDP share of a country and its prize share can be logistic -- above a certain threshold, there is a take-off range, where the prize share increases at an accelerating rate relative to the GDP share of the country, until it reaches "maturity" stage. Our empirical research findings confirm the importance of lagged relative GDP in accounting for a country's prize shares, and the presence of a "winner-takes-all" scale effect benefiting the leader. We found that U.S. basic research take-off started during the 1920s, with this research being done in the United States by U.S. scholars, prior to the immigration of scientists after Hitler's rise to power in Germany (1932-33). This is consistent with the notion that World War II set in motion forces that did not start, but hastened, the U.S. take-off, triggering immigration that contributed to the speed and intensity of U.S. research dominance. Using more recent data, we also documented the growing importance of countries that used to be at the periphery of global research, but are now possibly advancing towards the take-off stage.
Handle: RePEc:nbr:nberwo:12226
Template-Type: ReDIF-Paper 1.0
Title: The Cost of Complexity in Federal Student Aid: Lessons from Optimal Tax Theory and Behavioral Economics
Classification-JEL: D0; H0; I0; J0
Author-Name: Susan M. Dynarski
Author-Person: pdy1
Author-Name: Judith E. Scott-Clayton
Note: ED PE
Number: 12227
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12227
File-URL: http://www.nber.org/papers/w12227.pdf
File-Format: application/pdf
Publication-Status: published as Dynarski, Susan M. and Judith E. Scott-Clayton. "The Cost Of Complexity In Federal Student Aid: Lessons From Optimal Tax Theory And Behavioral Economics," National Tax Journal, 2006, v59(2,Jun), 319-356.
Abstract: The federal system for distributing student financial aid rivals the tax code in its complexity. Both have been a source of frustration and a focus of reform efforts for decades, yet the complexity of the student aid system has received comparatively little attention from economists. We describe the complexity of the aid system, and apply lessons from optimal tax theory and behavioral economics to show that complexity is a serious obstacle to both efficiency and equity in the distribution of student aid. We show that complexity disproportionately burdens those with the least ability to pay and undermines redistributive goals. We use detailed data from federal student aid applications to show that a radically simplified aid process can reproduce the current distribution of aid using a fraction of the information now collected.
Handle: RePEc:nbr:nberwo:12227
Template-Type: ReDIF-Paper 1.0
Title: An Elephant in the Garden: The Allies, Spain, and Oil in World War II
Classification-JEL: H4
Author-Name: Leonard Caruana
Author-Name: Hugh Rockoff
Author-Person: pro65
Note: DAE
Number: 12228
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12228
File-URL: http://www.nber.org/papers/w12228.pdf
File-Format: application/pdf
Publication-Status: published as Caruana, Leonard & Rockoff, Hugh, 2007. "An elephant in the garden: The Allies, Spain, and oil in World War II," European Review of Economic History, Cambridge University Press, vol. 11(02), pages 159-187, August.
Abstract: During World War II the Allies controlled Spain's oil supply in order to limit Spain's support for the Axis. This experiment with sanctions is unusually informative because a wide range of policies was tried over a long period. Three episodes are of special interest: (1) a total embargo on oil for Spain in 1940 that was surprisingly successful in dissuading Spain from joining the Axis; (2) a period of reduced supplies in 1941-42 that we call "the Squeeze" that was only partially successful; and (3) a second total embargo in 1944 that was a disappointment for the Allies, given the course of the war, that produced a rift between Churchill and Roosevelt. Our analysis is based on new monthly estimates of Spain's imports of gasoline and other petroleum products, which we describe in the text and report in the appendix. These estimates allow us to draw a clearer picture of the oil sanctions than has been possible in the past.
Handle: RePEc:nbr:nberwo:12228
Template-Type: ReDIF-Paper 1.0
Title: Monetary Unions, External Shocks and Economic Performance: A Latin American Perspective
Classification-JEL: F02; F43; O11
Author-Name: Sebastian Edwards
Author-Person: ped3
Note: IFM
Number: 12229
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12229
File-URL: http://www.nber.org/papers/w12229.pdf
File-Format: application/pdf
Publication-Status: published as Sebastian Edwards, 2006. "Monetary unions, external shocks and economic performance: A Latin American perspective," International Economics and Economic Policy, Springer, vol. 3(3), pages 225-247, December.
Abstract: During the last few years there has been a renewed analysis in currency unions as a form of monetary arrangement. This new interest has been largely triggered by the Euro experience. Scholars and policy makers have asked about the optimal number of currencies in the world economy. They have analyzed whether different countries satisfy the traditional "optimal currency area" criteria. These include, among other: (a) the synchronization of the business cycle; (b) the degree of factor mobility; and (c) the extent of trade and financial integration. In this paper I analyze the desirability of a monetary union from a Latin American perspective. First, I review the existing literature on the subject. Second, I use a large data set to analyze the evidence on economic performance in currency union countries. I investigate these countries' performance on four dimensions: (a) whether countries without a national currency have a lower occurrence of "sudden stop" episodes; (b) whether they have a lower occurrence of "current account reversal" episodes; (c) what is their ability to absorb international terms of trade shocks; and (d) what is their ability to absorb "sudden stops" and "current account reversals" shocks. I find that belonging to a currency union has not lower the probability of facing a sudden stop or a current account reversal. I also find that external shocks have been amplified in currency union countries. The degree of amplification is particularly large when compared to flexible exchange rate countries.
Handle: RePEc:nbr:nberwo:12229
Template-Type: ReDIF-Paper 1.0
Title: On the Optimal Timing of Benefits with Heterogeneous Workers and Human Capital Depreciation
Classification-JEL: J6
Author-Name: Robert Shimer
Author-Person: psh9
Author-Name: Iván Werning
Author-Person: pwe141
Note: EFG LS PE
Number: 12230
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12230
File-URL: http://www.nber.org/papers/w12230.pdf
File-Format: application/pdf
Abstract: This paper studies the optimal timing of unemployment insurance subsidies in a McCall search model. Risk-averse workers sequentially sample random job opportunities. Our model distinguishes unemployment subsidies from consumption during unemployment by allowing workers to save and borrow freely. When the insurance agency faces a group of homogeneous workers solving stationary search problems, the optimal subsidies are independent of unemployment duration. In contrast, when workers are heterogeneous or when human capital depreciates during the spell, the optimal subsidy is no longer constant. We explore the main determinants of the shape of the optimal subsidy schedule, isolating forces for subsidies to optimally rise or fall with duration.
Handle: RePEc:nbr:nberwo:12230
Template-Type: ReDIF-Paper 1.0
Title: Prices, Spatial Competition, and Heterogenous Producers: An Empirical Test
Classification-JEL: L0; L1; D4; L6
Author-Name: Chad Syverson
Author-Person: psy13
Note: EFG IO PR
Number: 12231
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12231
File-URL: http://www.nber.org/papers/w12231.pdf
File-Format: application/pdf
Publication-Status: published as Syverson, Chad. “Prices, Spatial Competition, and Heterogeneous Producers: An Empirical Test.” Journal of Industrial Economics 55, 2 (June 2007): 197-222.
Abstract: In markets where spatial competition is important, many models predict that average prices are lower in denser markets (i.e., those with more producers per unit area). Homogeneous-producer models attribute this effect solely to lower optimal markups. However, when producers instead differ in their production costs, a second mechanism also acts to lower equilibrium prices: competition-driven selection on costs. Consumers' greater substitution possibilities in denser markets make it more difficult for high-cost firms to profitably operate, truncating the equilibrium cost (and price) distributions from above. This selection process can be empirically distinguished from the homogenous-producer case because it implies that not only do average prices fall as density rises, but that upper-bound prices and price dispersion should also decline as well. I find empirical support for this process using a rich set of price data from U.S. readymixed concrete plants. Features of the industry offer an arguably exogenous source of producer density variation with which to identify these effects. I also show that the findings do not simply result from lower factor prices in dense markets, but rather because dense-market producers have low costs because they are more efficient.
Handle: RePEc:nbr:nberwo:12231
Template-Type: ReDIF-Paper 1.0
Title: Medicaid Policy Changes in Mental Health Care and Their Effect on Mental Health Outcomes
Classification-JEL: I0
Author-Name: Alison Cuellar
Author-Name: Sara Markowitz
Author-Person: pma138
Note: EH
Number: 12232
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12232
File-URL: http://www.nber.org/papers/w12232.pdf
File-Format: application/pdf
Publication-Status: published as Cuellar, Alison Evans & Markowitz, Sara, 2007. "Medicaid policy changes in mental health care and their effect on mental health outcomes," Health Economics, Policy and Law, Cambridge University Press, vol. 2(01), pages 23-49, January.
Abstract: In recent years, Medicaid has experienced a dramatic increase in spending on prescription drugs in general and psychotropic medications in particular. The purpose of this study is to examine the effects of increased Medicaid spending on psychotropic drugs on improving the mental health and well-being of participants at the population level. Specifically, we study the effect on outcomes that are strongly correlated with mood disorders, including depression, and Attention Deficit/Hyperactivity disorder, controlling for concomitant increases in Medicaid eligibility thresholds and expansion into managed care for mental health services. Knowledge of the effects of changes in the Medicaid program is crucial to policymakers as they consider implementing and expanding mental health services. Our results show that increased spending on antidepressants and stimulants are associated with improvements in some outcomes, but not in others.
Handle: RePEc:nbr:nberwo:12232
Template-Type: ReDIF-Paper 1.0
Title: The International CAPM and a Wavelet-Based Decomposition of Value at Risk
Classification-JEL: C22; G15
Author-Name: Viviana Fernandez
Note: AP
Number: 12233
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12233
File-URL: http://www.nber.org/papers/w12233.pdf
File-Format: application/pdf
Publication-Status: published as Fernandez Viviana P, 2005. "The International CAPM and a Wavelet-Based Decomposition of Value at Risk," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 9(4), pages 1-37, December.
Abstract: In this article, we formulate a time-scale decomposition of an international version of the CAPM that accounts for both market and exchange-rate risk. In addition, we derive an analytical formula for time-scale value at risk and marginal value at risk (VaR) of a portfolio. We apply our methodology to stock indices of seven emerging economies belonging to Latin America and Asia, for the sample period 1990-2004. Our main conclusions are the following. First, the estimation results hinge upon the choice of the world market portfolio. In particular, the stock markets of the sampled countries appear to be more integrated with other emerging countries than with developed ones. Second, value at risk depends on the investor's time horizon. In the short run, potential losses are greater than in the long run. Third, additional exposure to some specific stock indices will increase value at risk to a greater extent, depending on the investment horizon. Our results go in line with recent research in asset pricing that stresses the importance of heterogeneous investors.
Handle: RePEc:nbr:nberwo:12233
Template-Type: ReDIF-Paper 1.0
Title: Managing Bank Liquidity Risk: How Deposit-Loan Synergies Vary with Market Conditions
Classification-JEL: G18; G21
Author-Name: Evan Gatev
Author-Name: Til Schuermann
Author-Person: psc73
Author-Name: Philip E. Strahan
Note: CF ME
Number: 12234
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12234
File-URL: http://www.nber.org/papers/w12234.pdf
File-Format: application/pdf
Publication-Status: published as Evan Gatev & Til Schuermann & Philip E. Strahan, 2009. "Managing Bank Liquidity Risk: How Deposit-Loan Synergies Vary with Market Conditions," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 22(3), pages 995-1020, March.
Abstract: Liquidity risk in banking has been attributed to transactions deposits and their potential to spark runs or panics. We show instead that transactions deposits help banks hedge liquidity risk from unused loan commitments. Bank stock-return volatility increases with unused commitments, but the increase is smaller for banks with high levels of transactions deposits. This deposit-lending risk management synergy becomes more powerful during periods of tight liquidity, when nervous investors move funds into their banks. Our results reverse the standard notion of liquidity risk at banks, where runs from depositors had been seen as the cause of trouble.
Handle: RePEc:nbr:nberwo:12234
Template-Type: ReDIF-Paper 1.0
Title: Sudden Stops and IMF-Supported Programs
Classification-JEL: F02; F32; F34
Author-Name: Barry Eichengreen
Author-Person: pei2
Author-Name: Poonam Gupta
Author-Person: pgu151
Author-Name: Ashoka Mody
Note: IFM
Number: 12235
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12235
File-URL: http://www.nber.org/papers/w12235.pdf
File-Format: application/pdf
Publication-Status: published as Sudden Stops and IMF-Supported Programs, Barry Eichengreen, Poonam Gupta, Ashoka Mody. in Financial Markets Volatility and Performance in Emerging Markets, Edwards and Garcia. 2008
Publication-Status: published as Barry J. Eichengreen & Poonam Gupta & Ashoka Mody, 2006. "Sudden Stops and IMF-Supported Programs," IMF Working Papers, vol 06(101).
Abstract: Could a high-access, quick-disbursing "insurance facility" in the IMF help to reduce the incidence of sharp interruptions in capital flows ("sudden stops")? We contribute to the debate on this question by analyzing the impact of conventional IMF-supported programs on the incidence of sudden stops. Correcting for the non-random assignment of programs, we find that sudden stops are fewer and generally less severe when an IMF arrangement exists and that this form of "insurance" works best for countries with strong fundamentals. In contrast there is no evidence that a Fund-supported program attenuates the output effects of capital account reversals if these nonetheless occur.
Handle: RePEc:nbr:nberwo:12235
Template-Type: ReDIF-Paper 1.0
Title: Econometric Risk Adjustment, Endogeneity, and Extrapolation Bias
Classification-JEL: I1
Author-Name: John Mullahy
Note: EH
Number: 12236
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12236
File-URL: http://www.nber.org/papers/w12236.pdf
File-Format: application/pdf
Abstract: In econometric risk-adjustment exercises, models estimated with one or more included endogenous explanatory variables ("risk adjusters") will generally result in biased predictions of outcomes of interest, e.g. unconditional mean healthcare expenditures. This paper shows that a first-order contributor to this prediction bias is the difference between the distribution of explanatory variables in the estimation sample and the prediction sample -- a form of "extrapolation bias." In the linear model context, a difference in the means of the respective joint marginal distributions of observed covariates suffices to produce bias when endogenous explanatory variables are used in estimation. If these means do not differ, then the "endogeneity-related" extrapolation bias disappears although a form of "standard" extrapolation bias may persist. These results are extended to some of the nonlinear models in common use in this literature with some provisionally-similar conclusions. In general the bias problem will be most acute where risk adjustment is most useful, i.e. when estimated risk-adjustment models are applied in populations whose characteristics differ from those from which the estimation data are drawn.
Handle: RePEc:nbr:nberwo:12236
Template-Type: ReDIF-Paper 1.0
Title: Early Retirement and Public Disability Insurance Applications: Exploring the Impact of Depression
Classification-JEL: I12; J21
Author-Name: Rena M. Conti
Author-Name: Ernst R. Berndt
Author-Name: Richard G. Frank
Note: AG EH PE
Number: 12237
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12237
File-URL: http://www.nber.org/papers/w12237.pdf
File-Format: application/pdf
Abstract: This paper investigates the impact of depression on labor force participation among older workers. Empirically, we use two analytic strategies and rely on a sample drawn from the Health and Retirement Survey. Depression directly and indirectly increases individuals' probability of retiring early and applying for DI benefits, after accounting for other predictors of labor force exit. Accounting for the independent effects of depression, disability associated with physical illness may be smaller than the official statistics suggest. There may be great economic gains in increasing depression treatment awareness and access to treatment for individuals, employers and society.
Handle: RePEc:nbr:nberwo:12237
Template-Type: ReDIF-Paper 1.0
Title: U.S.-Based Private Voluntary Organizations: Religious and Secular PVOs Engaged in International Relief & Development
Classification-JEL: O1; L3; Z1
Author-Name: Rachel M. McCleary
Author-Name: Robert J. Barro
Author-Person: pba251
Note: PE
Number: 12238
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12238
File-URL: http://www.nber.org/papers/w12238.pdf
File-Format: application/pdf
Abstract: We have constructed a new and substantial data set from 1939 to 2004 on U.S.-based private voluntary organizations (PVOs) engaged in international relief and development. The universe comprises PVOs registered with the federal government (U.S. Agency for International Development since the early 1960s). PVOs are classified by type among secular and 14 types of religious categories. Classifications were made for the date of founding and in 2004 (or last date of existence). We can therefore examine shifts in classification over time—among religion types and between religious and secular. The data set has information on revenue and expenditure for each year. We distinguish revenue by source: federal, international organization, and private. We distinguish within these sources by grants, contracts, in-kind and cash donations, and so on. We break down expenditure into categories, including a division between international and domestic programs. This data set allows us to track trends in the overall universe of PVOs and by type of PVO in terms of numbers registered, income, expenditure, and sub-categories of income and expenditure. Analysis can now be conducted at the individual agency and aggregate levels for PVOs engaged in international relief and development and registered with the U.S. federal government from 1939 to 2004.
Handle: RePEc:nbr:nberwo:12238
Template-Type: ReDIF-Paper 1.0
Title: Discounting Dollars, Discounting Lives: Intergenerational Distributive Justice and Efficiency
Classification-JEL: D31; D61; D63; D81; D99; H23; H43; K32; Q38; Q58
Author-Name: Louis Kaplow
Author-Person: pka44
Note: LE PE
Number: 12239
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12239
File-URL: http://www.nber.org/papers/w12239.pdf
File-Format: application/pdf
Abstract: The view that intergenerational distributive justice and efficiency should be treated separately is familiar, yet controversial. This article elaborates the often-implicit justifications for separate treatment and provides a more express statement of how and when such treatment is appropriate. Substantial attention is devoted to an approach that holds constant the intra- and intergenerational distribution of well-being, which proves to be a valuable analytical device even for intergenerational policies that are not distribution neutral. Also explored are possible interrelationships between intergenerational distributive justice and efficiency, the choice of interest rate for discounting dollars, and how the present approach relates to those that would employ direct social weights to dollars at different points in time.
Handle: RePEc:nbr:nberwo:12239
Template-Type: ReDIF-Paper 1.0
Title: Tax Law Changes, Income Shifting and Measured Wage Inequality: Evidence from India
Classification-JEL: H32; H25; F14; O24
Author-Name: Jagadeesh Sivadasan
Author-Person: psi292
Author-Name: Joel Slemrod
Author-Person: psl10
Note: PE
Number: 12240
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12240
File-URL: http://www.nber.org/papers/w12240.pdf
File-Format: application/pdf
Publication-Status: published as Sivadasan, Jagadeesh & Slemrod, Joel, 2008. "Tax law changes, income-shifting and measured wage inequality: Evidence from India," Journal of Public Economics, Elsevier, vol. 92(10-11), pages 2199-2224, October.
Abstract: We use a large dataset covering all registered plants in the manufacturing sector in India over the period 1986 to 1995 to examine the effects of a 1992 income tax law change that eliminated the double taxation of wages paid to partners in partnership firms. This tax law change provides a unique opportunity to identify the effects of tax policy changes on firm behavior in a developing country context. Since the change provided incentives for shifting income from wages to profits, it also has important implications for certain measures of wage inequality. We find an immediate and pervasive response by partnership firms to the tax law change, reflected in a significant shifting of income from profits to managerial wages. Since about 50 percent of registered manufacturing plants are incorporated in the form of partnerships (including most family-run businesses), income shifting by these firms could have a significant impact on measured wage inequality. We find a sizeable jump in the mean and median relative wage of skilled workers (which includes managers and partners) following the tax law change in 1992. This sudden increase in measured wage inequality follows major trade liberalization and deregulation reforms announced earlier (in July 1991). We find that the income shifting induced by the tax law change explains almost all of the observed increase in measured wage inequality following these reforms. This finding is robust to inclusion of controls for a number of other potential sources of post-liberalization increases in wage inequality. Our results show that firms respond strongly to tax incentives for income shifting, and highlight the need to control for the potential effects of tax incentives in studies of wage inequality.
Handle: RePEc:nbr:nberwo:12240
Template-Type: ReDIF-Paper 1.0
Title: Hospital Ownership and Quality of Care: What Explains the Different Results?
Classification-JEL: I1
Author-Name: Karen Eggleston
Author-Person: peg13
Author-Name: Yu-Chu Shen
Author-Name: Joseph Lau
Author-Name: Christopher H. Schmid
Author-Name: Jia Chan
Note: EH
Number: 12241
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12241
File-URL: http://www.nber.org/papers/w12241.pdf
File-Format: application/pdf
Publication-Status: published as Karen Eggleston & Yu-Chu Shen & Joseph Lau & Christopher H. Schmid & Jia Chan, 2008. "Hospital ownership and quality of care: what explains the different results in the literature?," Health Economics, John Wiley & Sons, Ltd., vol. 17(12), pages 1345-1362.
Abstract: Does quality of care systematically differ among government-owned, private not-for-profit, and for-profit hospitals? A large empirical literature provides conflicting evidence. Through quantitative review of 46 studies since 1990, we find that several study features that can explain divergent results: analytic methods, disease studied, and data sources. For unprofitable care, how studies handle market competition and regional differences account for substantial variation. Policymakers should be aware that differences in results appear to arise predominantly from differences between studies' analytic methods. Moreover, conventional methods of meta-analytic synthesis should be applied with great caution given the considerable overlap among studied hospitals.
Handle: RePEc:nbr:nberwo:12241
Template-Type: ReDIF-Paper 1.0
Title: Internet Retail Demand: Taxes, Geography, and Online-Offline Competition
Classification-JEL: L8; D1; H2
Author-Name: Glenn Ellison
Author-Person: pel10
Author-Name: Sara Fisher Ellison
Note: IO PE
Number: 12242
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12242
File-URL: http://www.nber.org/papers/w12242.pdf
File-Format: application/pdf
Abstract: Data on sales of memory modules are used to explore several aspects of e-retail demand. There is a strong relationship between e-retail sales to a given state and sales tax rates that apply to purchases from online retailers. This suggests that there is substantial substitution between online and online retail, and tax avoidance may be an important contributor to e-retail activity. Geography matters in two ways: we find some evidence that consumers prefer purchasing from firms in nearby states to benefit from faster shipping times as well as evidence of a separate preference for buying from in-state firms. Consumers appear fairly rational in some ways, but boundedly rational in others.
Handle: RePEc:nbr:nberwo:12242
Template-Type: ReDIF-Paper 1.0
Title: Intertemporal Disturbances
Classification-JEL: E30; E32; E44
Author-Name: Giorgio E. Primiceri
Author-Person: ppr18
Author-Name: Ernst Schaumburg
Author-Person: psc490
Author-Name: Andrea Tambalotti
Author-Person: pta51
Note: EFG
Number: 12243
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12243
File-URL: http://www.nber.org/papers/w12243.pdf
File-Format: application/pdf
Abstract: Disturbances affecting agents intertemporal substitution are the key driving force of macroeconomic fluctuations. We reach this conclusion exploiting the bond pricing implications of an estimated general equilibrium model of the U.S. business cycle with a rich set of real and nominal frictions.
Handle: RePEc:nbr:nberwo:12243
Template-Type: ReDIF-Paper 1.0
Title: The Welfare Consequences of Hospital Mergers
Classification-JEL: I11; L11; L41
Author-Name: Robert Town
Author-Person: pto430
Author-Name: Douglas Wholey
Author-Name: Roger Feldman
Author-Name: Lawton R. Burns
Note: EH
Number: 12244
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12244
File-URL: http://www.nber.org/papers/w12244.pdf
File-Format: application/pdf
Abstract: In the 1990s the US hospital industry consolidated. This paper estimates the impact of the wave of hospital mergers on welfare focusing on the impact on consumer surplus for the under-65 population. For the purposes of quantifying the price impact of consolidations, hospitals are modeled as an input to the production of health insurance for the under-65 population. The estimates indicate that the aggregate magnitude of the impact of hospital mergers is modest but not trivial. In 2001, average HMO premiums are estimated to be 3.2% higher than they would have been absent any hospital merger activity during the 1990s. In 2003, we estimate that because of hospital mergers private insurance rolls declined by approximately .3 percentage points or approximately 695,000 lives with the vast majority of those who lost private insurance joining the ranks of the uninsured. Our estimates imply that hospital mergers resulted in a cumulative consumer surplus loss of over $42.2 billion between 1990 and 2001. It is estimated that all but a modest $95.4 million of the loss in consumer surplus is transferred from consumers to providers.
Handle: RePEc:nbr:nberwo:12244
Template-Type: ReDIF-Paper 1.0
Title: Are Elite Universities Losing Their Competitive Edge?
Classification-JEL: D85; I23; J24; J31; J62; L23; L31; O33
Author-Name: E. Han Kim
Author-Name: Adair Morse
Author-Name: Luigi Zingales
Note: CF
Number: 12245
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12245
File-URL: http://www.nber.org/papers/w12245.pdf
File-Format: application/pdf
Publication-Status: published as Kim, E. Han & Morse, Adair & Zingales, Luigi, 2009. "Are elite universities losing their competitive edge?," Journal of Financial Economics, Elsevier, vol. 93(3), pages 353-381, September.
Abstract: We study the location-specific component in research productivity of economics and finance faculty who have ever been affiliated with the top 25 universities in the last three decades. We find that there was a positive effect of being affiliated with an elite university in the 1970s; this effect weakened in the 1980s and disappeared in the 1990s. We decompose this university fixed effect and find that its decline is due to the reduced importance of physical access to productive research colleagues. We also find that salaries increased the most where the estimated externality dropped the most, consistent with the hypothesis that the de-localization of this externality makes it more difficult for universities to appropriate any rent. Our results shed some light on the potential effects of the internet revolution on knowledge-based industries.
Handle: RePEc:nbr:nberwo:12245
Template-Type: ReDIF-Paper 1.0
Title: Division of Labor and the Rise of Cities: Evidence from U.S. Industrialization, 1850-1880
Classification-JEL: N6; N9; R3
Author-Name: Sukkoo Kim
Note: DAE
Number: 12246
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12246
File-URL: http://www.nber.org/papers/w12246.pdf
File-Format: application/pdf
Publication-Status: published as Sukkoo Kim, 2006. "Division of labor and the rise of cities: evidence from US industrialization, 1850--1880," Journal of Economic Geography, Oxford University Press, vol. 6(4), pages 469-491, August.
Abstract: Industrial revolution in the United States first took hold in rural New England as factories arose and grew in a handful of industries such as textiles and shoes. However, as factory scale economies rose and factory production techniques were adopted by an ever growing number of industries, industrialization became concentrated in cities throughout the Northeastern region which came to be known as the manufacturing belt. While it is extremely difficult to rule out other types of agglomeration economies such as spillovers, this paper suggests that these geographic developments associated with industrial revolution in the U.S. are most consistent with explanations based on division of labor, job search and matching costs.
Handle: RePEc:nbr:nberwo:12246
Template-Type: ReDIF-Paper 1.0
Title: Stock and Bond Returns with Moody Investors
Classification-JEL: G12; G15; E44
Author-Name: Geert Bekaert
Author-Person: pbe52
Author-Name: Eric Engstrom
Author-Name: Steven R. Grenadier
Note: AP
Number: 12247
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12247
File-URL: http://www.nber.org/papers/w12247.pdf
File-Format: application/pdf
Publication-Status: published as Bekaert, Geert & Engstrom, Eric & Grenadier, Steven R., 2010. "Stock and bond returns with Moody Investors," Journal of Empirical Finance, Elsevier, vol. 17(5), pages 867-894, December.
Abstract: We present a tractable, linear model for the simultaneous pricing of stock and bond returns that incorporates stochastic risk aversion. In this model, analytic solutions for endogenous stock and bond prices and returns are readily calculated. After estimating the parameters of the model by the general method of moments, we investigate a series of classic puzzles of the empirical asset pricing literature. In particular, our model is shown to jointly accommodate the mean and volatility of equity and long term bond risk premia as well as salient features of the nominal short rate, the dividend yield, and the term spread. Also, the model matches the evidence for predictability of excess stock and bond returns. However, the stock-bond return correlation implied by the model is somewhat higher than in the data.
Handle: RePEc:nbr:nberwo:12247
Template-Type: ReDIF-Paper 1.0
Title: Risk, Uncertainty and Asset Prices
Classification-JEL: G12; G15; E44
Author-Name: Geert Bekaert
Author-Person: pbe52
Author-Name: Eric Engstrom
Author-Name: Yuhang Xing
Author-Person: pxi126
Note: AP
Number: 12248
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12248
File-URL: http://www.nber.org/papers/w12248.pdf
File-Format: application/pdf
Publication-Status: published as Bekaert, Geert & Engstrom, Eric & Xing, Yuhang, 2009. "Risk, uncertainty, and asset prices," Journal of Financial Economics, Elsevier, vol. 91(1), pages 59-82, January.
Abstract: We identify the relative importance of changes in the conditional variance of fundamentals (which we call "uncertainty") and changes in risk aversion ("risk" for short) in the determination of the term structure, equity prices and risk premiums. Theoretically, we introduce persistent time-varying uncertainty about the fundamentals in an external habit model. The model matches the dynamics of dividend and consumption growth, including their volatility dynamics and many salient asset market phenomena. While the variation in dividend yields and the equity risk premium is primarily driven by risk, uncertainty plays a large role in the term structure and is the driver of counter-cyclical volatility of asset returns.
Handle: RePEc:nbr:nberwo:12248
Template-Type: ReDIF-Paper 1.0
Title: China's FDI and Non-FDI Economies and the Sustainability of Future High Chinese Growth
Classification-JEL: F43; O40
Author-Name: John Whalley
Author-Person: pwh8
Author-Name: Xian Xin
Author-Person: pxi37
Note: ITI
Number: 12249
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12249
File-URL: http://www.nber.org/papers/w12249.pdf
File-Format: application/pdf
Publication-Status: published as Whalley, John and Xian Xin. "China's FDI and Non-FDI Economies and the Sustainability of Future High Chinese Growth." China Economic Review 21, 1 (March 2010): 123-135.
Abstract: This paper presents assesses of the contribution of inward FDI to China's recent rapid economic growth using a two stage growth accounting approach. Recent econometric literature focuses on testing whether Chinese growth depends on inward FDI rather than measuring the contribution. Foreign Invested Enterprises (FIEs), often (but not exclusively) are joint ventures between foreign companies and Chinese enterprises, and can be thought of as forming a distinctive subpart of the Chinese economy. These enterprises account for over 50% of China's exports and 60% of China's imports. Their share in Chinese GDP has been over 20% in the last two years, but they employ only 3% of the workforce, since their average labor productivity exceeds that of Non-FIEs by around 9:1. Their production is more heavily for export rather than the domestic market because FIEs provide access to both distribution systems abroad and product design for export markets. Our decomposition results indicate that China's FIEs may have contributed over 40% of China's economic growth in 2003 and 2004, and without this inward FDI, China's overall GDP growth rate could have been around 3.4 percentage points lower. We suggest that the sustainability of both China' export and overall economic growth may be questionable if inward FDI plateaus in the future.
Handle: RePEc:nbr:nberwo:12249
Template-Type: ReDIF-Paper 1.0
Title: Democracy and Protectionism
Classification-JEL: F11; F13; N70
Author-Name: Kevin H. O'Rourke
Author-Person: por7
Author-Name: Alan M. Taylor
Author-Person: pta46
Note: DAE ITI
Number: 12250
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12250
File-URL: http://www.nber.org/papers/w12250.pdf
File-Format: application/pdf
Publication-Status: published as Hatton, Timothy J., Kevin H. O’Rourke and Alan M. Taylor (eds.) The New Comparative Economic History: Essays in Honor of Jeffrey G. Williamson. MIT Press, 2007.
Abstract: Does democracy encourage free trade? It depends. Broadening the franchise involves transferring power from non-elected elites to the wider population, most of whom will be workers. The Hecksher-Ohlin-Stolper-Samuelson logic says that democratization should lead to more liberal trade policies in countries where workers stand to gain from free trade; and to more protectionist policies in countries where workers will benefit from the imposition of tariffs and quotas. We test and confirm these political economy implications of trade theory hypothesis using data on democracy, factor endowments, and protection in the late nineteenth century.
Handle: RePEc:nbr:nberwo:12250
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Group Diversity on Performance and Knowledge Spillover -- An Experiment in a College Classroom
Classification-JEL: D2; I2
Author-Name: Zeynep Hansen
Author-Name: Hideo Owan
Author-Name: Jie Pan
Note: ED
Number: 12251
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12251
File-URL: http://www.nber.org/papers/w12251.pdf
File-Format: application/pdf
Abstract: An important yet under-explored question in the teamwork literature concerns how group characteristics affect productivity. Within a given teamwork setting, it is not obvious how group member diversity affects the performance of the individual and the group. The group may gain from knowledge transfer and sharing while it may be crippled by communication and coordination problems that are prevalent in heterogeneous groups. In this study, we combine class performance data from an undergraduate management class with students' personal records to explore diversity and knowledge spillover effects. A major advantage of our dataset is the exogenous assignment of groups, which rules out the troublesome yet common self-selection issue in team literature. Our results indicate that male-dominant groups performed worse both in group work and in individually taken exams than female-dominant and equally-mixed gender groups after controlling for other group characteristics. Individual members from a group with more diversity in age and gender scored higher in exams. However, we did not find any significance of a group's racial composition over group and individual performances. Another novel aspect of this natural experiment is that each group chooses their own group contract form - members of "autonomous" groups receive equal grade for their group work while those in "democratic" groups can adopt differentiated point allocation, thus, providing a proper mechanism to punish free riders. Our estimation results show a significant correlation between the choice of a democratic contract and the group and individual performance. To address the endogeneity problem in groups' contract choices, we use a maximum likelihood treatment effect model and found that the democratic group contract has a positive and significant effect on group performance.
Handle: RePEc:nbr:nberwo:12251
Template-Type: ReDIF-Paper 1.0
Title: Judicial Risk and Credit Market Performance: Micro Evidence from Brazilian Payroll Loans
Classification-JEL: L19; G21; D86; O16
Author-Name: Ana Carla A. Costa
Author-Name: Joao M.P. De Mello
Author-Person: pde297
Note: CF
Number: 12252
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12252
File-URL: http://www.nber.org/papers/w12252.pdf
File-Format: application/pdf
Publication-Status: published as Judicial Risk and Credit Market Performance: Micro Evidence from Brazilian Payroll Loans, Ana Carla A. Costa, João M. P. De Mello. in Financial Markets Volatility and Performance in Emerging Markets, Edwards and Garcia. 2008
Abstract: A large body of literature has stressed the institution-development nexus as critical in explaining differences in countries' economic performance. The empirical evidence, however, has been mainly at the aggregate level, associating macro performance with measures of quality of institutions. This paper, by relating a judicial decision on the legality of payroll loans in Brazil to bank-level decision variables, provides micro evidence on how creditor legal protection affects market performance. Payroll loans are personal loans with principal and interests payments directly deducted from the borrowers' payroll check, which, in practice, makes a collateral out of future income. In June 2004, a high-level federal court upheld a regional court ruling that had declared payroll deduction illegal. Using personal loans without payroll deduction as a control group, we assess whether the ruling had an impact on market performance. Evidence indicates that it had an adverse impact on risk perception, interest rates, and amount lent.
Handle: RePEc:nbr:nberwo:12252
Template-Type: ReDIF-Paper 1.0
Title: There Goes the Neighborhood? Estimates of the Impact of Crime Risk on Property Values From Megan's Laws
Classification-JEL: R2; K4
Author-Name: Leigh L. Linden
Author-Person: pli719
Author-Name: Jonah E. Rockoff
Note: LE PE
Number: 12253
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12253
File-URL: http://www.nber.org/papers/w12253.pdf
File-Format: application/pdf
Publication-Status: published as Linden, Leigh L. and Jonah Rockoff. “Estimates of the Impact of Crime Risk on Property Values from Megan’s Laws." American Economic Review 98, 3 (2008): 1103‐27.
Abstract: We combine data from the housing market with data from the North Carolina Sex Offender Registry to estimate how individuals value living in close proximity to a convicted criminal. We use the exact location of sex offenders to exploit variation in the threat of crime within small homogenous groupings of homes, and we use the timing of sex offenders' arrivals to control for baseline property values in the area. We find statistically and economically significant negative effects of sex offenders' locations that are extremely localized. Houses within a one-tenth mile area around the home of a sex offender fall by 4 percent on average (about $5,500). We also find evidence that the effect varies with distance within this range -- houses next to an offender sell for about 12 percent less while those a tenth of a mile away or more show no decline. We combine our willingness-to-pay estimates with data on sexual crimes against neighbors to estimate the costs to victims of sexual offenses. We estimate costs of over $1 million per victim -- far in excess of estimates taken from the criminal justice literature. However, we cannot reject the alternative hypotheses that individuals overestimate the risk posed by offenders or view living near an offender as having costs exclusive of crime risk.
Handle: RePEc:nbr:nberwo:12253
Template-Type: ReDIF-Paper 1.0
Title: Input and Technology Choices in Regulated Industries: Evidence From the Health Care Sector
Classification-JEL: H51; I18; L50; L51; O31; O33
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Amy Finkelstein
Author-Person: pfi264
Note: EH LS PE
Number: 12254
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12254
File-URL: http://www.nber.org/papers/w12254.pdf
File-Format: application/pdf
Publication-Status: published as Daron Acemoglu & Amy Finkelstein, 2008. "Input and Technology Choices in Regulated Industries: Evidence from the Health Care Sector," Journal of Political Economy, University of Chicago Press, vol. 116(5), pages 837-880, October.
Abstract: This paper examines the implications of regulatory change for the input mix and technology choices of regulated industries. We present a simple neoclassical framework that emphasizes the change in relative factor prices associated with the regulatory change from full cost to partial cost reimbursement, and investigate how this affects firms' technology choices through substitution of (capital embodied) technologies for tasks previously performed by labor. We examine these implications empirically by studying the change from full cost to partial cost reimbursement under the Medicare Prospective Payment System (PPS) reform, which increased the relative price of labor faced by U.S. hospitals. Using the interaction of hospitals' pre-PPS Medicare share of patient days with the introduction of these regulatory changes, we document a substantial increase in capital-labor ratios and a large decline in labor inputs associated with PPS. Most interestingly, we find that the PPS reform seems to have encouraged the adoption of a range of new medical technologies. We also show that the reform was associated with an increase in the skill composition of these hospitals, which is consistent with technology-skill or capital-skill complementarities.
Handle: RePEc:nbr:nberwo:12254
Template-Type: ReDIF-Paper 1.0
Title: Private Investment and Government Protection
Classification-JEL: D81; D92; H54; Q54; R10
Author-Name: Carolyn Kousky
Author-Person: pko374
Author-Name: Erzo F.P. Luttmer
Author-Person: plu27
Author-Name: Richard J. Zeckhauser
Author-Person: pze7
Note: PE
Number: 12255
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12255
File-URL: http://www.nber.org/papers/w12255.pdf
File-Format: application/pdf
Publication-Status: published as Carolyn Kousky & Erzo Luttmer & Richard Zeckhauser, 2006. "Private investment and government protection," Journal of Risk and Uncertainty, Springer, vol. 33(1), pages 73-100, September.
Abstract: Hurricane Katrina did massive damage because New Orleans and the Gulf Coast were not appropriately protected. Wherever natural disasters threaten, the government -- in its traditional role as public goods provider -- must decide what level of protection to provide to an area. It does so by purchasing protective capital, such as levees for a low-lying city. We show that if private capital is more likely to locate in better-protected areas, then the marginal social value of protection will increase with the level of protection provided. That is, the benefit function is convex, contrary to the normal assumption of concavity. When the government protects and the private sector invests, due to the ill-behaved nature of the benefit function, there may be multiple Nash equilibria. Policy makers must compare them, rather than merely follow local optimality conditions, to find the equilibrium offering the highest social welfare. There is usually considerable uncertainty about the amount of investment that will accompany any level of protection, further complicating the government's choice problem. We show that when deciding on the current level of protection, the government must take account of the option value of increasing the level of protection in the future.
Handle: RePEc:nbr:nberwo:12255
Template-Type: ReDIF-Paper 1.0
Title: Noise Traders
Classification-JEL: G1; G12; G14
Author-Name: James Dow
Author-Person: pdo106
Author-Name: Gary Gorton
Author-Person: pgo458
Note: AP CF
Number: 12256
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12256
File-URL: http://www.nber.org/papers/w12256.pdf
File-Format: application/pdf
Abstract: Noise traders are agents whose theoretical existence has been hypothesized as a way of solving certain fundamental problems in Financial Economics. We briefly review the literature on noise traders. The is an entry for The New Palgrave: A Dictionary of Economics, 2nd Edition (Palgrave Macmillan: New York), edited by Steven N. Durlauf and Lawrence E. Blume, forthcoming in 2008.
Handle: RePEc:nbr:nberwo:12256
Template-Type: ReDIF-Paper 1.0
Title: Education and Labor-Market Discrimination
Classification-JEL: J7
Author-Name: Kevin Lang
Author-Person: pla83
Author-Name: Michael Manove
Note: LS
Number: 12257
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12257
File-URL: http://www.nber.org/papers/w12257.pdf
File-Format: application/pdf
Publication-Status: published as Kevin Lang & Michael Manove, 2011. "Education and Labor Market Discrimination," American Economic Review, American Economic Association, vol. 101(4), pages 1467-96, June.
Abstract: We propose a model that combines statistical discrimination and educational sorting that explains why blacks get more education than do whites of similar cognitive ability. Our model explains the difference between blacks and whites in the relations between education and AFQT and between wages and education. It cannot easily explain why, conditional only on AFQT, blacks earn no more than do whites. It does, however, suggest, that when comparing the earnings of blacks and whites, one should control for both AFQT and education in which case a substantial black-white wage differential reemerges. We explore and reject the hypothesis that differences in school quality between blacks and whites explain the wage and education differentials. Our findings support the view that some of the black-white wage differential reflects the operation of the labor market.
Handle: RePEc:nbr:nberwo:12257
Template-Type: ReDIF-Paper 1.0
Title: Protection for Sale or Surge Protection?
Classification-JEL: F13; D72; B41
Author-Name: Susumu Imai
Author-Name: Hajime Katayama
Author-Name: Kala Krishna
Author-Person: pkr26
Note: ITI
Number: 12258
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12258
File-URL: http://www.nber.org/papers/w12258.pdf
File-Format: application/pdf
Publication-Status: published as Imai, Susumu & Katayama, Hajime & Krishna, Kala, 2009. "Protection for sale or surge protection?," European Economic Review, Elsevier, vol. 53(6), pages 675-688, August.
Abstract: This paper asks whether the results obtained from using the standard approach to testing the influential Grossman and Helpman "protection for sale (PFS)" model of political economy might arise from a simpler setting. A model of imports and quotas with protection occurring in response to import surges, but only for organized industries, is simulated and shown to provide parameter estimates consistent with the protection for sale framework. This suggests that the standard approach may be less of a test than previously thought.
Handle: RePEc:nbr:nberwo:12258
Template-Type: ReDIF-Paper 1.0
Title: Capital Levies and Transition to a Consumption Tax
Classification-JEL: H21; H23; H24; H25; K34
Author-Name: Louis Kaplow
Author-Person: pka44
Note: PE
Number: 12259
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12259
File-URL: http://www.nber.org/papers/w12259.pdf
File-Format: application/pdf
Publication-Status: published as Auerbach, Alan J. and Daniel N. Shaviro (eds.) Institutional Foundations of Public Finance: Economic and Legal Perspectives. Cambridge and London: Harvard University Press, 2008.
Abstract: The merits of capital levies depend on the likelihood of repetition, the extent of anticipation, and its effects on distribution. The relevance of these features, which in varying degrees is underdeveloped or underappreciated in pertinent literatures, is elaborated and then considered with regard to the problem of transition to a consumption tax. Other transition issues are distinguished, and specific attention is devoted to rate changes under a consumption tax and whether owners of preexisting capital are effectively compensated through higher net-of-tax returns due to repeal of the income tax. The analysis is also related to literature that examines dynamic models of taxation, particularly work simulating consumption tax transitions and assessing the optimality of capital taxation in the long run.
Handle: RePEc:nbr:nberwo:12259
Template-Type: ReDIF-Paper 1.0
Title: Individual Versus Aggregate Collateral Constraints and the Overborrowing Syndrome
Classification-JEL: F41
Author-Name: Martín Uribe
Note: EFG IFM
Number: 12260
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12260
File-URL: http://www.nber.org/papers/w12260.pdf
File-Format: application/pdf
Abstract: This paper compares the equilibrium dynamics of an economy facing an aggregate collateral constraint on external debt to the dynamics of an economy facing a collateral constraint imposed at the level of each individual agent. The aggregate collateral constraint is intended to capture an environment in which foreign investors base their lending decisions predominantly upon macro indicators as opposed to individual abilities to pay. Individual agents do not internalize the aggregate borrowing constraint. Instead, in this economy a country interest-rate premium emerges to clear the financial market. The central finding of the paper is that the economy with the aggregate borrowing limit does not generate higher levels of debt than the economy with the individual borrowing limit. That is, there is no overborrowing in equilibrium.
Handle: RePEc:nbr:nberwo:12260
Template-Type: ReDIF-Paper 1.0
Title: Why Does the Law of One Price Fail? An Experiment on Index Mutual Funds
Classification-JEL: D14; D18; D43; D83
Author-Name: James J. Choi
Author-Name: David Laibson
Author-Person: pla164
Author-Name: Brigitte C. Madrian
Author-Person: pma384
Note: AP
Number: 12261
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12261
File-URL: http://www.nber.org/papers/w12261.pdf
File-Format: application/pdf
Publication-Status: published as Choi, James J., David Laibson, and Brigitte C. Madrian. “Why Does the Law of One Price Fail? An Experiment on Index Mutual Funds." Review of Financial Studies 23, 4 (April 2010): 1405-1432.
Abstract: Experimental subjects allocate $10,000 across four S&P 500 index funds. Subject rewards depend on the chosen portfolio's subsequent return. Because the investments are not actually intermediated by the fund companies, portfolio returns are unbundled from non-portfolio services. The optimal portfolio therefore invests 100% in the lowest-cost fund. Nonetheless, subjects overwhelmingly fail to minimize fees. When we make fees transparent and salient, portfolios shift towards cheaper funds, but fees are still not minimized. Instead, subjects place high weight on normatively irrelevant historical returns. Subjects who choose high-cost index funds are relatively much less confident about their asset allocation choices.
Handle: RePEc:nbr:nberwo:12261
Template-Type: ReDIF-Paper 1.0
Title: New Evidence on Real Wage Cyclicality within Employer-Employee Matches
Classification-JEL: E3; J3
Author-Name: Donggyun Shin
Author-Person: psh933
Author-Name: Gary Solon
Author-Person: pso215
Note: LS
Number: 12262
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12262
File-URL: http://www.nber.org/papers/w12262.pdf
File-Format: application/pdf
Publication-Status: published as Donggyun Shin & Gary Solon, 2007. "New Evidence On Real Wage Cyclicality Within Employer-Employee Matches," Scottish Journal of Political Economy, Scottish Economic Society, vol. 54(5), pages 648-660, November.
Abstract: In the most thorough study to date on wage cyclicality among job stayers, Devereux's (2001) analysis of men in the Panel Study of Income Dynamics produced two puzzling findings: (1) the real wages of salaried workers are noncyclical, and (2) wage cyclicality among hourly workers differs between two alternative wage measures. We examine these puzzles with additional evidence from other sources. Devereux's finding of noncyclical real wages among salaried job stayers is not replicated in the National Longitudinal Survey of Youth data. The NLSY data, however, do corroborate his finding of a discrepancy for hourly workers between the cyclicality of the two alternative wage measures. Evidence from the PSID Validation Study contradicts Devereux's conjecture that the discrepancy might be due to a procyclical bias from measurement error in average hourly earnings. Evidence from the Bureau of Labor Statistics establishment survey supports his hypothesis that overtime work accounts for part (but not all) of the discrepancy. We conclude that job stayers' real average hourly earnings are substantially procyclical and that an important portion of that procyclicality probably is due to compensation beyond base wages.
Handle: RePEc:nbr:nberwo:12262
Template-Type: ReDIF-Paper 1.0
Title: Information Spillovers in the Market for Recorded Music
Classification-JEL: D83; L15; L82
Author-Name: Ken Hendricks
Author-Name: Alan Sorensen
Note: IO
Number: 12263
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12263
File-URL: http://www.nber.org/papers/w12263.pdf
File-Format: application/pdf
Abstract: This paper studies the role of consumer learning in the demand for recorded music by examining the impact of an artist's new album on sales of past and future albums. Using detailed album sales data for a sample of 355 artists, we show that the release of a new album increases sales of old albums, and the increase is substantial and permanent—especially if the new release is a hit. Various patterns in the data suggest the source of the spillover is information: a new release causes some uninformed consumers to learn about their preferences for the artist's past albums. These information spillovers suggest that the high concentration of success across artists may partly result from a lack of information, and they have significant implications for investment and the structure of contracts between artists and record labels.
Handle: RePEc:nbr:nberwo:12263
Template-Type: ReDIF-Paper 1.0
Title: A Century of Work and Leisure
Classification-JEL: E2; N1; N3
Author-Name: Valerie A. Ramey
Author-Person: pra154
Author-Name: Neville Francis
Note: EFG LS
Number: 12264
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12264
File-URL: http://www.nber.org/papers/w12264.pdf
File-Format: application/pdf
Publication-Status: published as Valerie A. Ramey & Neville Francis, 2009. "A Century of Work and Leisure," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(2), pages 189-224, July.
Abstract: Has leisure increased over the last century? Standard measures of hours worked suggest that it has. In this paper, we develop a comprehensive measure of non-leisure hours that includes market work, home production, commuting and schooling for the last 105 years. We also present empirical and theoretical arguments for a definition of "per capita" that encompasses the entire population. The new measures reveal a number of interesting 20th Century trends. First, 70 percent of the decline in hours worked has been offset by an increase in hours spent in school. Second, contrary to conventional wisdom, average hours spent in home production are actually slightly higher now than they were in the early part of the 20th Century. Finally, leisure per capita is approximately the same now as it was in 1900.
Handle: RePEc:nbr:nberwo:12264
Template-Type: ReDIF-Paper 1.0
Title: Population Aging, Fiscal Policies, and National Saving: Predictions for Korean Economy
Classification-JEL: H3; H60; E21
Author-Name: Young Jun Chun
Note: AG PE
Number: 12265
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12265
File-URL: http://www.nber.org/papers/w12265.pdf
File-Format: application/pdf
Abstract: This paper evaluates the effects of population aging and fiscal policies on national saving in Korean situation. For the prediction of the national savings rate of Korea for the next several decades, we employ a life-cycle model, which incorporates the generational accounting approach needed to assess the distribution of fiscal burden across generations. We found that the rapid population aging and long-term budgetary imbalance will substantially lower the national savings rate in Korea. A sensitivity analysis based on an alternative model, an altruistic family model, shows that these predictions are robust to the specification of altruism among generations. In addition, the estimation results of consumption functions with respect to various kinds of wealth suggest that the annuitization of wealth due to maturing of public pensions and introduction of reverse annuity mortgage is likely to further decrease the savings rate in the future.
Handle: RePEc:nbr:nberwo:12265
Template-Type: ReDIF-Paper 1.0
Title: $2.00 Gas! Studying the Effects of a Gas Tax Moratorium
Classification-JEL: H2
Author-Name: Joseph J. Doyle, Jr.
Author-Name: Krislert Samphantharak
Author-Person: psa1581
Note: PE EEE
Number: 12266
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12266
File-URL: http://www.nber.org/papers/w12266.pdf
File-Format: application/pdf
Publication-Status: published as Doyle Jr., Joseph J. & Samphantharak, Krislert, 2008. "$2.00 Gas! Studying the effects of a gas tax moratorium," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 869-884, April.
Abstract: There are surprisingly few estimates of the effect of sales taxes on retail prices, especially at the firm level. Further, along both sides of a state border, a change in one state's sales tax can shed light on the nature of competition, as a subset of firms effectively experiences a change in its marginal cost. This paper considers the suspension, and subsequent reinstatement, of the 5% gasoline sales tax in Illinois and Indiana following a temporary price spike in the spring of 2000. Earlier laws set the timing of the reinstatements, providing plausibly exogenous changes in the tax rates. Using a unique dataset of daily, gas station-level data, retail gas prices are found to drop by 3% following the suspension, and increase by 4% following the reinstatements. After linking the stations to driving distance data, some evidence suggests that the tax increases are associated with higher prices up to an hour's drive into neighboring states.
Handle: RePEc:nbr:nberwo:12266
Template-Type: ReDIF-Paper 1.0
Title: Socioeconomic Status and Health in Childhood: A Comment on Chen, Martin and Matthews (2006)
Classification-JEL: I1
Author-Name: Anne Case
Author-Person: pca108
Author-Name: Christina Paxson
Author-Person: ppa335
Author-Name: Tom Vogl
Note: CH EH
Number: 12267
Creation-Date: 2006-05
Order-URL: http://www.nber.org/papers/w12267
File-URL: http://www.nber.org/papers/w12267.pdf
File-Format: application/pdf
Publication-Status: published as Case, Anne, Christina Paxson and Tom Vogl. “Socioeconomic Status and Health in Childhood: A Comment on Chen, Martin and Matthews (2006).” Social Science & Medicine 64, 4 (2007): : 757-761.
Abstract: Understanding whether the gradient in children's health becomes steeper with age is an important first step in uncovering the mechanisms that connect economic and health status, and in recommending sensible interventions to protect children's health. To that end, this paper examines why two sets of authors, Chen et al (2006) and Case et al (2002), using data from the same source, reach markedly different conclusions about income-health gradients in childhood. We find that differences can be explained primarily by the inclusion (exclusion) of a handful of younger adults living independently.
Handle: RePEc:nbr:nberwo:12267
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy When Potential Output is Uncertain: Understanding the Growth Gamble of the 1990s
Classification-JEL: E52; E58
Author-Name: Yuriy Gorodnichenko
Author-Person: pgo175
Author-Name: Matthew D. Shapiro
Author-Person: psh144
Note: EFG ME PR
Number: 12268
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12268
File-URL: http://www.nber.org/papers/w12268.pdf
File-Format: application/pdf
Publication-Status: published as Gorodnichenko, Yuriy & Shapiro, Matthew D, 2007. "Monetary policy when potential output is uncertain: Understanding the growth gamble of the 1990s," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1132-1162, May.
Abstract: The Fed kept interest rates low and essentially unchanged during the late 1990s despite a booming economy and record-low unemployment. These interest rates were accommodative by historical standards. Nonetheless, inflation remained low. How did the Fed succeed in sustaining rapid economic growth without fueling inflation and inflationary expectations? In retrospect, it is evident that the productive capacity of the economy increased. Yet as events unfolded, there was uncertainty about the expansion of the capacity of the economy and therefore about the sustainability of the Fed's policy. This paper provides an explanation for the success of the Fed in accommodating growth with stable inflation in the late 1990s. It shows that if the central bank is committed to reverse policy errors it makes because of unwarranted optimism, inflation can remain in check even if the central bank keeps interest rates low because of this optimism. In particular, a price level target -- which is a simple way to model a commitment to offset errors -- can serve to anchor inflation even if the public does not share the central bank's optimism about shifts in potential output. The paper shows that price level targeting is superior to inflation targeting in a wide range of situations. The paper also provides econometric evidence that, in contrast to earlier periods, the Fed has recently put substantial weight on the price level in setting interest rates. Moreover, it shows that CPI announcement surprises lead to reversion in the price level. Finally, it provides textual evidence that Alan Greenspan puts relatively more weight on the price level than inflation.
Handle: RePEc:nbr:nberwo:12268
Template-Type: ReDIF-Paper 1.0
Title: Disease and Development: The Effect of Life Expectancy on Economic Growth
Classification-JEL: I10; O40; J11
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Simon Johnson
Author-Person: pjo44
Note: EFG
Number: 12269
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12269
File-URL: http://www.nber.org/papers/w12269.pdf
File-Format: application/pdf
Publication-Status: published as Daron Acemoglu & Simon Johnson, 2007. "Disease and Development: The Effect of Life Expectancy on Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 115(6), pages 925-985, December.
Abstract: What is the effect of increasing life expectancy on economic growth? To answer this question, we exploit the international epidemiological transition, the wave of international health innovations and improvements that began in the 1940s. We obtain estimates of mortality by disease before the 1940s from the League of Nations and national public health sources. Using these data, we construct an instrument for changes in life expectancy, referred to as predicted mortality, which is based on the pre-intervention distribution of mortality from various diseases around the world and dates of global interventions. We document that predicted mortality has a large and robust effect on changes in life expectancy starting in 1940, but no effect on changes in life expectancy before the interventions. The instrumented changes in life expectancy have a large effect on population; a 1% increase in life expectancy leads to an increase in population of about 1.5%. Life expectancy has a much smaller effect on total GDP both initially and over a 40-year horizon, however. Consequently, there is no evidence that the large exogenous increase in life expectancy led to a significant increase in per capita economic growth. These results confirm that global efforts to combat poor health conditions in less developed countries can be highly effective, but also shed doubt on claims that unfavorable health conditions are the root cause of the poverty of some nations.
Handle: RePEc:nbr:nberwo:12269
Template-Type: ReDIF-Paper 1.0
Title: Resolving Macroeconomic Uncertainty in Stock and Bond Markets
Classification-JEL: G1
Author-Name: Alessandro Beber
Author-Person: pbe677
Author-Name: Michael W. Brandt
Note: AP
Number: 12270
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12270
File-URL: http://www.nber.org/papers/w12270.pdf
File-Format: application/pdf
Publication-Status: published as Alessandro Beber & Michael W. Brandt, 2008. "Resolving Macroeconomic Uncertainty in Stock and Bond Markets," Review of Finance, Oxford University Press for European Finance Association, vol. 13(1), pages 1-45.
Abstract: We establish an empirical link between the ex-ante uncertainty about macroeconomic fundamentals and the ex-post resolution of this uncertainty in financial markets. We measure macroeconomic uncertainty using prices of economic derivatives and relate this measure to changes in implied volatilities of stock and bond options when the economic data is released. We also examine the relationship between our measure of macroeconomic uncertainty and trading activity in stock and bond option markets before and after the announcements. Higher macroeconomic uncertainty is associated with greater reduction in implied volatilities. Higher macroeconomic uncertainty is also associated with increased volume in option markets after the release, consistent with market participants waiting to trade until economic uncertainty is resolved, and with decreased open interest in option markets after the release, consistent with market participants using financial options to hedge macroeconomic uncertainty. The empirical relationships are strongest for long-term bonds and weakest for non-cyclical stocks.
Handle: RePEc:nbr:nberwo:12270
Template-Type: ReDIF-Paper 1.0
Title: Measuring International Trade in Services
Classification-JEL: F10; F23; F30; F40
Author-Name: Robert E. Lipsey
Author-Person: pli259
Note: ITI
Number: 12271
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12271
File-URL: http://www.nber.org/papers/w12271.pdf
File-Format: application/pdf
Publication-Status: published as Measuring International Trade in Services, Robert E. Lipsey. in International Trade in Services and Intangibles in the Era of Globalization, Reinsdorf and Slaughter. 2009
Abstract: World trade in services has recently been a little under $US2 trillion, about a quarter of world trade in goods. That ratio does not appear to have changed much in the last 50 years. For the US, exports of services have recently been over 40% and imports about 20% of exports and imports of goods, a return, for exports to the ratios of the early 1800s. Imports of services are now increasing more rapidly than exports, but not faster than goods imports. Because measures of service trade are not anchored in any observation of physical movement, they are dependent on definitions of residence. An example of that dependence and the ambiguities it creates is exports of educational services, a domestic activity that becomes an export because students are defined as foreign residents. Since many students later become US residents, the supposedly exported service never leaves the US, or returns to the US unobserved and uncounted. A particularly serious problem of measurement is the growing transfer of intangible US corporate assets to foreign affiliates of US firms, some of which use virtually no foreign factors of production. These transfers, mainly for tax saving purposes, give rise to phantom flows of services from the foreign affiliates to the US and to other countries and remove the exports from the U.S. balance of payments. They make the meaning of measures of the current balances and GDP ambiguous. One possible solution to the measurement problems would be to use measures assigning at least intangible assets to countries of ownership, rather than nominal residence.
Handle: RePEc:nbr:nberwo:12271
Template-Type: ReDIF-Paper 1.0
Title: Energy Conservation in the United States: Understanding its Role in Climate Policy
Classification-JEL: Q4
Author-Name: Gilbert E. Metcalf
Note: PE EEE
Number: 12272
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12272
File-URL: http://www.nber.org/papers/w12272.pdf
File-Format: application/pdf
Abstract: Efforts to reduce carbon emissions significantly will require considerable improvements in energy intensity, the ratio of energy consumption to economic activity. Improvements in energy intensity over the past thirty years suggest great possibilities for energy conservation: current annual energy consumption avoided due to declines in energy intensity since 1970 substantially exceed current annual domestic energy supply. While historic improvements in energy intensity suggest great scope for energy conservation in the future, I argue that optimistic estimates of avoided energy costs due to energy conservation are likely biased downward. I then analyze a data set on energy intensity in the United States at the state level between 1970 and 2001 to disentangle the key elements of energy efficiency and economic activity that drive changes in energy intensity.
Handle: RePEc:nbr:nberwo:12272
Template-Type: ReDIF-Paper 1.0
Title: Love or Money? Health Insurance and Retirement Among Married Couples
Classification-JEL: I1; J32
Author-Name: Kanika Kapur
Author-Person: pka399
Author-Name: Jeannette Rogowski
Note: AG EH LS
Number: 12273
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12273
File-URL: http://www.nber.org/papers/w12273.pdf
File-Format: application/pdf
Abstract: This paper examines the role of employer provided health insurance in the retirement decisions of dual working couples. The near elderly have high-expected medical expenditures; therefore, availability of health insurance is an important factor in their retirement decisions. We determine if access to retiree health insurance for early retirement enables couples to time their retirement together - a behavior called "joint retirement." We find that wives' retiree health insurance more than doubles the propensity to retire jointly, suggesting that health insurance is an important consideration in coordinating retirement decisions among couples. Even though retiree health insurance has a substantial effect on joint retirement, its effect on overall employment patterns is modest, accounting for a 2 percentage point fall in employment.
Handle: RePEc:nbr:nberwo:12273
Template-Type: ReDIF-Paper 1.0
Title: Does Corruption Produce Unsafe Drivers?
Author-Name: Marianne Bertrand
Author-Person: pbe697
Author-Name: Simeon Djankov
Author-Person: pdj4
Author-Name: Rema Hanna
Author-Person: pha883
Author-Name: Sendhil Mullainathan
Author-Person: pmu103
Note: CF LS
Number: 12274
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12274
File-URL: http://www.nber.org/papers/w12274.pdf
File-Format: application/pdf
Publication-Status: published as Bertrand, Marianne, Simeon Djankov, Rema Hanna and Sendhil Mullainathan. “Obtaining a Driving License in India: An Experimental Approach to Studying Corruption." Quarterly Journal of Economics (November 2007).
Abstract: We follow 822 applicants through the process of obtaining a driver's license in New Delhi, India. To understand how the bureaucracy responds to individual and social needs, participants were randomly assigned to one of three groups: bonus, lesson, and comparison groups. Participants in the bonus group were offered a financial reward if they could obtain their license fast; participants in the lesson group were offered free driving lessons. To gauge driving skills, we performed a surprise driving test after participants had obtained their licenses. Several interesting facts regarding corruption emerge. First, the bureaucracy responds to individual needs. Those who want their license faster (e.g. the bonus group), get it 40% faster and at a 20% higher rate. Second, the bureaucracy is insensitive to social needs. The bonus group does not learn to drive safely in order to obtain their license: in fact, 69% of them were rated as "failures" on the independent driving test. Those in the lesson group, despite superior driving skills, are only slightly more likely to obtain a license than the comparison group and far less likely (by 29 percentage points) than the bonus group. Detailed surveys allow us to document the mechanisms of corruption. We find that bureaucrats arbitrarily fail drivers at a high rate during the driving exam, irrespective of their ability to drive. To overcome this, individuals pay informal "agents" to bribe the bureaucrat and avoid taking the exam altogether. An audit study of agents further highlights the insensitivity of agents' pricing to driving skills. Together, these results suggest that bureaucrats raise red tape to extract bribes and that this corruption undermines the very purpose of regulation.
Handle: RePEc:nbr:nberwo:12274
Template-Type: ReDIF-Paper 1.0
Title: When Does Domestic Saving Matter for Economic Growth?
Classification-JEL: E2; O2; O3
Author-Name: Philippe Aghion
Author-Person: pag175
Author-Name: Diego Comin
Author-Person: pco55
Author-Name: Peter Howitt
Author-Person: pho22
Note: EFG
Number: 12275
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12275
File-URL: http://www.nber.org/papers/w12275.pdf
File-Format: application/pdf
Publication-Status: published as Philippe Aghion & Diego Comin & Peter Howitt & Isabel Tecu, 2016. "When Does Domestic Savings Matter for Economic Growth?," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 64(3), pages 381-407, August.
Abstract: Can a country grow faster by saving more? We address this question both theoretically and empirically. In our model, growth results from innovations that allow local sectors to catch up with the frontier technology. In relatively poor countries, catching up with the frontier requires the involvement of a foreign investor, who is familiar with the frontier technology, together with effort on the part of a local bank, who can directly monitor local projects to which the technology must be adapted. In such a country, local saving matters for innovation, and therefore growth, because it allows the domestic bank to cofinance projects and thus to attract foreign investment. But in countries close to the frontier, local firms are familiar with the frontier technology, and therefore do not need to attract foreign investment to undertake an innovation project, so local saving does not matter for growth. In our empirical exploration we show that lagged savings is significantly associated with productivity growth for poor but not for rich countries. This effect operates entirely through TFP rather than through capital accumulation. Further, we show that savings is significantly associated with higher levels of FDI inflows and equipment imports and that the effect that these have on growth is significantly larger for poor countries than rich.
Handle: RePEc:nbr:nberwo:12275
Template-Type: ReDIF-Paper 1.0
Title: Capital Structure with Risky Foreign Investment
Classification-JEL: F23; G32; G15; G18
Author-Name: Mihir A. Desai
Author-Name: C. Fritz Foley
Author-Name: James R. Hines Jr.
Author-Person: phi111
Note: CF ITI
Number: 12276
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12276
File-URL: http://www.nber.org/papers/w12276.pdf
File-Format: application/pdf
Publication-Status: published as Desai, Mihir A. & Fritz Foley, C. & Hines Jr., James R., 2008. "Capital structure with risky foreign investment," Journal of Financial Economics, Elsevier, vol. 88(3), pages 534-553, June.
Abstract: American multinational firms respond to politically risky environments by adjusting their capital structures abroad and at home. Foreign subsidiaries located in politically risky countries have significantly more debt than do other foreign affiliates of the same parent companies. American firms further limit their equity exposures in politically risky countries by sharing ownership with local partners and by serving foreign markets with exports rather than local production. The residual political risk borne by parent companies leads them to use less domestic leverage, resulting in lower firm-wide leverage. Multinational firms with above-average exposures to politically risky countries have 8.4 percent less domestic leverage than do other firms. These findings illustrate the impact of risk exposures on capital structure.
Handle: RePEc:nbr:nberwo:12276
Template-Type: ReDIF-Paper 1.0
Title: Stability First: Reflections Inspired by Otmar Issing's Success as the ECB's Chief Economist
Classification-JEL: E31; E52; E58; E44
Author-Name: Vitor Gaspar
Author-Name: Anil K. Kashyap
Author-Person: pka35
Note: ME
Number: 12277
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12277
File-URL: http://www.nber.org/papers/w12277.pdf
File-Format: application/pdf
Abstract: In this paper, we review Otmar Issing's career as the ECB's inaugural chief economist and we document many notable successes. We try to infer some general principles that contributed to these successes and draw some lessons. In doing so, we review the evidence using Woodford's (2003) recent revival of the Wicksellian approach to monetary policy making. Suitably interpreted the baseline model can rationalize Issing's three guiding principles for successful policymaking. This baseline model, however, fails to account for the important role that monetary and financial analysis played in the conduct of policy during Issing's tenure. We propose an extension of the model to account for financial developments and show that this extended model substantially improves our understanding of ECB practice. We conclude by listing six open questions, relevant for the future of central banking in Europe that Issing may want to consider in case leisure allows.
Handle: RePEc:nbr:nberwo:12277
Template-Type: ReDIF-Paper 1.0
Title: Willpower and the Optimal Control of Visceral Urges
Classification-JEL: D9; J2; I1
Author-Name: Emre Ozdenoren
Author-Person: poz43
Author-Name: Stephen Salant
Author-Person: psa604
Author-Name: Dan Silverman
Author-Person: psi181
Note: EH PE
Number: 12278
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12278
File-URL: http://www.nber.org/papers/w12278.pdf
File-Format: application/pdf
Publication-Status: published as Emre Ozdenoren & Stephen W. Salant & Dan Silverman, 2012. "Willpower And The Optimal Control Of Visceral Urges," Journal of the European Economic Association, European Economic Association, vol. 10(2), pages 342-368, 04.
Abstract: Common intuition and experimental psychology suggest that the ability to self-regulate, willpower, is a depletable resource. We investigate the behavior of an agent who optimally consumes a cake (or paycheck or workload) over time and who recognizes that restraining his consumption too much would exhaust his willpower and leave him unable to manage his consumption. Unlike prior models of self-control, a model with willpower depletion can explain the increasing consumption sequences observable in high frequency data (and corresponding laboratory findings), the apparent links between unrelated self-control behaviors, and the altered economic behavior following imposition of cognitive loads. At the same time, willpower depletion provides an alternative explanation for a taste for commitment, intertemporal preference reversals, and procrastination. Accounting for willpower depletion thus provides a more unified theory of time preference. It also provides an explanation for anomalous intratemporal behaviors such as low correlations between health-related activities.
Handle: RePEc:nbr:nberwo:12278
Template-Type: ReDIF-Paper 1.0
Title: Balancing the Goals of Health Care Provision
Classification-JEL: I1; H2
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: EH PE
Number: 12279
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12279
File-URL: http://www.nber.org/papers/w12279.pdf
File-Format: application/pdf
Publication-Status: published as Feldstein, Martin. "Balancing The Goals of Health Care Provision and Financing." Health Affairs Vol 25, No 6, 1603-1611. November/December 2006
Abstract: A desirable system for providing and financing health care would achieve three goals: (1) preventing the deprivation of care because of a patient's inability to pay; (2) avoiding wasteful spending; and (3) allowing care to reflect the different tastes of individual patients. Although it is not possible to realize fully all three of these goals, they can condition and inform the design of a good system for financing health care. This paper discusses the application of these goals in more detail and use them to consider a reform of the system of Health Savings Accounts that was enacted as part of the 2003 Medicare legislation and, separately, the challenge posed by the very expensive treatments for rare diseases that are becoming more common.
Handle: RePEc:nbr:nberwo:12279
Template-Type: ReDIF-Paper 1.0
Title: Innovativity: A Comparison Across Seven European Countries
Classification-JEL: C35; L60; O31; O33
Author-Name: Pierre Mohnen
Author-Person: pmo6
Author-Name: Jacques Mairesse
Author-Person: pma712
Author-Name: Marcel Dagenais
Note: PR
Number: 12280
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12280
File-URL: http://www.nber.org/papers/w12280.pdf
File-Format: application/pdf
Publication-Status: published as Pierre Mohnen & Jacques Mairesse & Marcel Dagenais, 2006. "Innovativity: A comparison across seven European countries," Economics of Innovation and New Technology, Taylor and Francis Journals, vol. 15(4-5), pages 391-413, June.
Abstract: This paper proposes a framework to account for innovation similar to the usual accounting framework in production analysis and a measure of innovativity comparable to that of total factor productivity. This innovation accounting framework is illustrated using micro-aggregated firm data from the first Community Innovation Surveys (CIS1) for seven European countries: Belgium, Denmark, Ireland, Germany, the Netherlands, Norway and Italy for the year 1992. Based on the estimation of a generalized Tobit model and measuring innovation as the share of total sales due to improved or new products, it compares the propensity to innovate, and the innovation intensity conditional and unconditional on being innovative, across the seven countries and low- and high-tech manufacturing sectors. Even with relatively few explanatory variables our innovation framework already accounts for sizeable differences in country innovation intensity. It also shows that differences in innovativity across countries can be nonetheless very large.
Handle: RePEc:nbr:nberwo:12280
Template-Type: ReDIF-Paper 1.0
Title: Supermodularity and Tipping
Classification-JEL: C72; D80; H23
Author-Name: Geoffrey Heal
Author-Person: phe40
Author-Name: Howard Kunreuther
Note: PE
Number: 12281
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12281
File-URL: http://www.nber.org/papers/w12281.pdf
File-Format: application/pdf
Abstract: We model tipping as a game-theoretic phenomenon and investigate the connection between supermodular games, tipping of equilibria and cascading, and apply the results to issues that arise in the context of homeland security and computer security. We show that tipping and cascading can occur in supermodular games and that "increasing differences" is a sufficient condition for tipping. Supermodularity and tipping of equilibria are closely related. We relate our results to Schelling's early work on tipping.
Handle: RePEc:nbr:nberwo:12281
Template-Type: ReDIF-Paper 1.0
Title: Educational Debt Burden and Career Choice: Evidence from a Financial Aid Experiment at NYU Law School
Classification-JEL: I22; J24; D11; D12; H24
Author-Name: Erica Field
Note: LS
Number: 12282
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12282
File-URL: http://www.nber.org/papers/w12282.pdf
File-Format: application/pdf
Publication-Status: published as Erica Field, 2009. "Educational Debt Burden and Career Choice: Evidence from a Financial Aid Experiment at NYU Law School," American Economic Journal: Applied Economics, American Economic Association, vol. 1(1), pages 1-21, January.
Abstract: This paper examines the influence of educational debt aversion on the career choice of law school students, including the decision to attend law school and the decision to work in public interest law. To isolate the role of debt aversion, I analyze experimental data from NYU Law School's Innovative Financial Aid Study in which two career-contingent financial aid packages were randomly assigned to participating admits. Because the packages had equivalent monetary value and differed only in the duration of indebtedness, differences in career choices associated with financial aid assignment can be attributed to psychological debt aversion. The results indicate that debt aversion matters: In classes for which the lottery was announced prior to enrollment, participants randomly assigned to the low-debt package are nearly twice as likely to enroll. In classes without selective matriculation, lottery winners have a 36-45% higher rate of first job placement in public interest law. Both results are consistent with a simple model of debt aversion in which psychic costs of holding debt during and after school generate differences in the discounted lifetime utility of the financial aid packages and, hence, in the value of attending law school and of working in public interest law.
Handle: RePEc:nbr:nberwo:12282
Template-Type: ReDIF-Paper 1.0
Title: Ineffective Controls on Capital Inflows Under Sophisticated Financial Markets: Brazil in the Nineties
Classification-JEL: E44; F32; F34; F36; G15
Author-Name: Bernardo S. de M. Carvalho
Author-Name: Márcio G.P. Garcia
Author-Person: pga111
Note: IFM
Number: 12283
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12283
File-URL: http://www.nber.org/papers/w12283.pdf
File-Format: application/pdf
Publication-Status: published as Ineffective Controls on Capital Inflows under Sophisticated Financial Markets: Brazil in the Nineties, Bernardo S. de M. Carvalho, Márcio G. P. Garcia. in Financial Markets Volatility and Performance in Emerging Markets, Edwards and Garcia. 2008
Abstract: We analyze the Brazilian experience in the 1990s to assess the effectiveness of controls on capital inflows in restricting financial inflows and changing their composition towards long term flows. Econometric exercises (VARs) showed that controls on capital inflows were effective in deterring financial inflows for only a brief period, from two to six months. The hypothesis to explain the ineffectiveness of the controls is that financial institutions performed several operations aimed at avoiding capital controls. To check this hypothesis, we conducted interviews with market players. We collected several examples of the financial strategies engineered to avoid the capital controls and invest in the Brazilian fixed income market. The main conclusion is that controls on capital inflows, while they may be desirable, are of very limited effectiveness under sophisticated financial markets.
Handle: RePEc:nbr:nberwo:12283
Template-Type: ReDIF-Paper 1.0
Title: Optimal Income Transfers
Classification-JEL: H21; H53; I38
Author-Name: Louis Kaplow
Author-Person: pka44
Note: PE
Number: 12284
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12284
File-URL: http://www.nber.org/papers/w12284.pdf
File-Format: application/pdf
Publication-Status: published as Louis Kaplow, 2007. "Optimal income transfers," International Tax and Public Finance, Springer, vol. 14(3), pages 295-325, June.
Abstract: A substantial literature addresses the design of transfer programs and policies, including the negative income tax, other means-tested transfers, the earned income tax credit, categorical assistance, and work inducements. This work is largely independent of that on the optimal nonlinear income tax, yet formulations of such a tax necessarily address how low-income individuals should be treated. This paper draws on the optimal income taxation literature to illuminate the analysis of transfer programs, including the level and shape of marginal tax rates (including phase-outs), the structure of categorical assistance, and the role of work inducements in an optimal income transfer scheme.
Handle: RePEc:nbr:nberwo:12284
Template-Type: ReDIF-Paper 1.0
Title: Would Higher Salaries Keep Teachers in High-Poverty Schools? Evidence from a Policy Intervention in North Carolina
Classification-JEL: I2; J33; J45
Author-Name: Charles Clotfelter
Author-Person: pcl34
Author-Name: Elizabeth Glennie
Author-Name: Helen Ladd
Author-Person: pla158
Author-Name: Jacob Vigdor
Author-Person: pvi23
Note: ED
Number: 12285
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12285
File-URL: http://www.nber.org/papers/w12285.pdf
File-Format: application/pdf
Publication-Status: published as Clotfelter, Charles & Glennie, Elizabeth & Ladd, Helen & Vigdor, Jacob, 2008. "Would higher salaries keep teachers in high-poverty schools? Evidence from a policy intervention in North Carolina," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1352-1370, June.
Abstract: For a three-year time period beginning in 2001, North Carolina awarded an annual bonus of $1,800 to certified math, science and special education teachers working in high poverty or academically failing public secondary schools. Using longitudinal data on teachers, we estimate hazard models that identify the impact of this differential pay by comparing turnover patterns before and after the program's implementation, across eligible and ineligible categories of teachers, and across eligible and barely-ineligible schools. Results suggest that this bonus payment was sufficient to reduce mean turnover rates of the targeted teachers by 12%. Experienced teachers exhibited the strongest response to the program. Finally, the effect of the program may have been at least partly undermined by the state's failure to fully educate teachers regarding the eligibility criteria. Our estimates most likely underpredict the potential outcome of a program of permanent salary differentials operating under complete information.
Handle: RePEc:nbr:nberwo:12285
Template-Type: ReDIF-Paper 1.0
Title: Tinkering Toward Accolades: School Gaming Under a Performance Accountability System
Classification-JEL: D82; H39; I28
Author-Name: Julie Berry Cullen
Author-Person: pcu44
Author-Name: Randall Reback
Author-Person: pre97
Note: CH ED
Number: 12286
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12286
File-URL: http://www.nber.org/papers/w12286.pdf
File-Format: application/pdf
Publication-Status: published as Gronberg. T. and D. Jansen (eds.) Improving School Accountability: Check-Ups or Choice, Advances in Applied Microeconomics 14. Amsterdam: Elsevier Science, 2006.
Abstract: We explore the extent to which schools manipulate the composition of students in the test-taking pool in order to maximize ratings under Texas' accountability system in the 1990s. We first derive predictions from a static model of administrators' incentives given the structure of the ratings criteria, and then test these predictions by comparing differential changes in exemption rates across student subgroups within campuses and across campuses and regimes. Our analyses uncover evidence of a moderate degree of strategic behavior, so that there is some tension between designing systems that account for heterogeneity in student populations and that are manipulation-free.
Handle: RePEc:nbr:nberwo:12286
Template-Type: ReDIF-Paper 1.0
Title: Home Production and the Macro Economy-Some Lessons from Pollak and Wachter and from Transition Russia
Classification-JEL: D13; E32; J22; P36
Author-Name: Reuben Gronau
Author-Person: pgr333
Note: LS
Number: 12287
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12287
File-URL: http://www.nber.org/papers/w12287.pdf
File-Format: application/pdf
Abstract: Recent years witnessed a flourishing of literature on the implication of shifts from home- production to market production on the macro economy, and in particular, the real business cycle. This literature employs calibration techniques to emulate the fluctuations in market output, labor and capital inputs and productivity over the business cycle, assuming a representative consumer and using stylized parameters of the substitution elasticity between home and market goods, and of the home production function. This paper argues that the parameters used in this literature cannot be verified empirically because of econometric identification problems. Furthermore, using data from the late 90s from transition Russia, it is argued that one cannot capture the fluctuation between the home and the market by using a representative consumer, since there is a distinct difference between males and females in their reaction to loss of employment: men shift most of the time released from market work to leisure while women divide it almost equally between work at home and leisure. Finally it is shown that the switch from a controlled economy to a market economy resulted in significant increase in home productivity and an increase in the free time enjoyed by both Russian men and women.
Handle: RePEc:nbr:nberwo:12287
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Dividends on Consumption
Classification-JEL: E2; G3; D1
Author-Name: Malcolm Baker
Author-Person: pba735
Author-Name: Stefan Nagel
Author-Person: pna176
Author-Name: Jeffrey Wurgler
Author-Person: pwu8
Note: CF EFG
Number: 12288
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12288
File-URL: http://www.nber.org/papers/w12288.pdf
File-Format: application/pdf
Publication-Status: published as Malcolm Baker & Stefan Nagel & Jeffrey Wurgler, 2007. "The Effect of Dividends on Consumption," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 38(2007-1), pages 231-292.
Abstract: Classical models predict that the division of stock returns into dividends and capital appreciation does not affect investor consumption patterns, while mental accounting and other economic frictions predict that investors have a higher propensity to consume from stock returns in the form of dividends. Using two micro data sets, we show that investors are indeed far more likely to consume from dividends than capital gains. In the Consumer Expenditure Survey, household consumption increases with dividend income, controlling for total wealth, total portfolio returns, and other sources of income. In a sample of household investment accounts data from a brokerage, net withdrawals from the accounts increase one-for-one with ordinary dividends of moderate size, controlling for total portfolio returns, and also increase with mutual fund and special dividends. We comment on several potential explanations for the results.
Handle: RePEc:nbr:nberwo:12288
Template-Type: ReDIF-Paper 1.0
Title: Sources of Advantageous Selection: Evidence from the Medigap Insurance Market
Classification-JEL: D82; G22; I11
Author-Name: Hanming Fang
Author-Person: pfa17
Author-Name: Michael P. Keane
Author-Person: pke18
Author-Name: Dan Silverman
Author-Person: psi181
Note: CH PE
Number: 12289
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12289
File-URL: http://www.nber.org/papers/w12289.pdf
File-Format: application/pdf
Publication-Status: published as Hanming Fang & Michael P. Keane & Dan Silverman, 2008. "Sources of Advantageous Selection: Evidence from the Medigap Insurance Market," Journal of Political Economy, University of Chicago Press, vol. 116(2), pages 303-350, 04.
Abstract: We provide strong evidence of advantageous selection in the Medigap insurance market, and analyze its sources. Using Medicare Current Beneficiary Survey (MCBS) data, we find that, conditional on controls for the price of Medigap, medical expenditures for senior citizens with Medigap coverage are, on average, about $4,000 less than for those without. But, if we condition on health, expenditures for seniors on Medigap are about $2,000 more. These two findings can only be reconciled if those with less health expenditure risk are more likely to purchase Medigap, implying advantageous selection. By combining the MCBS and the Health and Retirement Study (HRS), we investigate the sources of this advantageous selection. These include income, education, longevity expectations and financial planing horizons, as well as cognitive ability. Once we condition on all these factors, seniors with higher expected medical expenditure are indeed more likely to purchase Medigap. Surprisingly, risk preferences do not appear to be a source of advantageous selection. But cognitive ability emerges as a particularly important factor, consistent with a view that many senior citizens have difficulty understanding Medicare and Medigap rules.
Handle: RePEc:nbr:nberwo:12289
Template-Type: ReDIF-Paper 1.0
Title: Equity Premia with Benchmark Levels of Consumption: Closed-Form Results
Classification-JEL: G12
Author-Name: Andrew B. Abel
Author-Person: pab10
Note: AP EFG ME
Number: 12290
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12290
File-URL: http://www.nber.org/papers/w12290.pdf
File-Format: application/pdf
Publication-Status: published as Mehra, Rajnish (ed.) Handbook of the Equity Risk Premium, Handbooks in Finance. Amsterdam and Boston: Elsevier, North-Holland, 2008.
Abstract: I calculate exact expressions for risk premia, term premia, and the premium on levered equity in a framework that includes habit formation, keeping/catching up with the Joneses, and possible departures from rational expectations. Closed-form expressions for the first and second moments of returns and for the R2 of a regression of stock returns on the dividend-price ratio are derived under lognormality for the case that includes keeping/catching up with the Joneses. Linear approximations illustrate how these moments of returns are affected by parameter values and illustrate quantitatively how well the model can account for values of the equity premium, the term premium, and the standard deviations of the riskless return and the rate of return on levered equity. For empirically relevant parameter values, the linear approximations yield values of the various moments that are close to those obtained from the exact solutions.
Handle: RePEc:nbr:nberwo:12290
Template-Type: ReDIF-Paper 1.0
Title: Beyond BMI: The Value of More Accurate Measures of Fatness and Obesity in Social Science Research
Classification-JEL: I2; J2
Author-Name: John Cawley
Author-Person: pca6
Author-Name: Richard V. Burkhauser
Author-Person: pbu180
Note: EH
Number: 12291
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12291
File-URL: http://www.nber.org/papers/w12291.pdf
File-Format: application/pdf
Publication-Status: published as Burkhauser, Richard V., and John Cawley. "Beyond BMI: The Value of More Accurate Measures of Fatness and Obesity in Social Science Research." Journal of Health Economics, March 2008, 27(2): 519-529.
Abstract: Virtually all social science research related to obesity uses body mass index (BMI), usually calculated using self-reported values of weight and height, or clinical weight classifications based on BMI. Yet there is wide agreement in the medical literature that such measures are seriously flawed because they do not distinguish fat from fat-free mass such as muscle and bone. Here we evaluate more accurate measures of fatness (total body fat, percent body fat, and waist circumference) that have greater theoretical support in the medical literature. We provide conversion formulas based on NHANES data so that researchers can calculate the estimated values of these more accurate measures of fatness using the self-reported weight and height available in many social science datasets. To demonstrate the benefits of these alternative measures of fatness, we show that using them significantly impacts who is classified as obese. For example, when the more accurate measures of fatness are used, the gap in obesity between white and African American men increases substantially, with white men significantly more likely to be obese. In addition, the gap in obesity between African American and white women is cut in half (with African American women still significantly more likely to be obese). As an example of the value of fatness in predicting social science outcomes, we show that while BMI is positively correlated with the probability of employment disability in the PSID, when body mass is divided into its components, fatness is positively correlated with disability while fat-free mass (such as muscle) is negatively correlated with disability.
Handle: RePEc:nbr:nberwo:12291
Template-Type: ReDIF-Paper 1.0
Title: Dividends and Taxes
Classification-JEL: H25; G35
Author-Name: Roger Gordon
Author-Person: pgo95
Author-Name: Martin Dietz
Note: CF PE
Number: 12292
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12292
File-URL: http://www.nber.org/papers/w12292.pdf
File-Format: application/pdf
Publication-Status: published as Auerbach, Alan J. and Daniel N. Shaviro. Institutional Foundations of Public Finance: Economic and Legal Perspectives. Cambridge and London: Harvard University Press, 2008.
Abstract: How do dividend taxes affect firm behavior and what are their distributional and efficiency effects? To answer these questions, the first problem is coming up with an explanation for why firms pay dividends, in spite of their tax penalty. This paper surveys three different models for why firms pay dividends, and then uses each model to examine the behavioral and efficiency effects of dividend taxes. The three models examined are: the "new view," an agency cost explanation, and a signaling model. While all three models forecast dividends, their forecasts regarding other firm behavior, and their forecasts for the efficiency and distributional effects of a dividend tax, often differ. Given the evidence to date, we find the agency model is the one most consistent with the data.
Handle: RePEc:nbr:nberwo:12292
Template-Type: ReDIF-Paper 1.0
Title: Multi-Product Firms and Product Switching
Classification-JEL: D21; E23; L11; L60
Author-Name: Andrew B. Bernard
Author-Name: Stephen J. Redding
Author-Person: pre64
Author-Name: Peter K. Schott
Author-Person: psc98
Note: ITI
Number: 12293
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12293
File-URL: http://www.nber.org/papers/w12293.pdf
File-Format: application/pdf
Publication-Status: published as Bernard, Andrew B., Stephen J. Redding, Peter K. Schott. "Multi-Product Firms and Product Switching." American Economic Review 100(March 2010): 70-97.
Abstract: This paper examines the frequency, pervasiveness and determinants of product switching among U.S. manufacturing firms. We find that two-thirds of firms alter their mix of five-digit SIC products every five years, that one-third of the increase in real U.S. manufacturing shipments between 1972 and 1997 is due to the net adding and dropping of products by survivors, and that firms are more likely to drop products which are younger and have smaller production volumes relative to other firms producing the same product. The product-switching behavior we observe is consistent with an extended model of industry dynamics emphasizing firm heterogeneity and self-selection into individual product markets. Our findings suggest that product switching contributes towards a reallocation of economic activity within firms towards more productive uses.
Handle: RePEc:nbr:nberwo:12293
Template-Type: ReDIF-Paper 1.0
Title: Rational Discounting for Regulatory Analysis
Classification-JEL: Q50; D90; H10; L50
Author-Name: W. Kip Viscusi
Author-Person: pvi69
Note: EH LE PE EEE
Number: 12294
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12294
File-URL: http://www.nber.org/papers/w12294.pdf
File-Format: application/pdf
Publication-Status: published as Viscusi, W. Kip. “Rational Discounting for Regulatory Analysis." University of Chicago Law Review 74, 1 (Winter 2007): 209-246.
Abstract: This article examines the economic basis for what is termed "rational discounting," which entails full recognition of policy effects over time and exponential discounting at a riskless rate of return. Policies often cannot be ranked unambiguously in terms of their present or future orientation. Both failure to discount and preferential intergenerational discounting generate inconsistencies and economic anomalies. Office of Management and Budget discounting guidelines now stipulate more reasonable discount rates than earlier guidelines, but err in permitting open-ended preferential rates for intergenerational effects. The article presents a methodology for monetizing the value of statistical life for people of different ages and at different points in time. Review of regulatory analyses indicates increased consistency of discounting practices. However, examination of two policies with intergenerational effects, stratospheric ozone regulation and nuclear waste storage at Yucca Mountain, reveal failures to adopt a rational discounting approach. The influence of behavioral anomalies such as hyperbolic discounting may make full recognition of intertemporal effects in benefit-cost analysis more consequential than the use of preferential discount rates.
Handle: RePEc:nbr:nberwo:12294
Template-Type: ReDIF-Paper 1.0
Title: The Variability of IPO Initial Returns
Classification-JEL: G32; G24; G14
Author-Name: Michelle Lowry
Author-Name: Micah S. Officer
Author-Name: G. William Schwert
Author-Person: psc116
Note: AP
Number: 12295
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12295
File-URL: http://www.nber.org/papers/w12295.pdf
File-Format: application/pdf
Publication-Status: published as Michelle Lowry & Micah S. Officer & G. William Schwert, 2010. "The Variability of IPO Initial Returns," Journal of Finance, American Finance Association, vol. 65(2), pages 425-465, 04.
Abstract: The monthly volatility of IPO initial returns is substantial, fluctuates dramatically over time, and is considerably larger during "hot" IPO markets. Consistent with IPO theory, the volatility of initial returns is higher among firms whose value is more difficult to estimate, i.e., among firms with higher information asymmetry. Our findings highlight underwriters' difficulty in valuing companies characterized by high uncertainty, and, as a result, raise serious questions about the efficacy of the traditional firm commitment underwritten IPO process. One implication of our results is that alternate mechanisms, such as auctions, may be beneficial, particularly for firms that value price discovery over the auxiliary services provided by underwriters.
Handle: RePEc:nbr:nberwo:12295
Template-Type: ReDIF-Paper 1.0
Title: Baumol-Tobin and the Welfare Costs of National Security Border Delays
Classification-JEL: F1; F10; F13; F19
Author-Name: Hui Huang
Author-Name: John Whalley
Author-Person: pwh8
Note: ITI
Number: 12296
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12296
File-URL: http://www.nber.org/papers/w12296.pdf
File-Format: application/pdf
Publication-Status: published as Huang, Hui & Whalley, John, 2008. "Baumol-Tobin and the welfare costs of national security border delays," Economics Letters, Elsevier, vol. 99(2), pages 290-292, May.
Abstract: The implications of national security related procedures for trade flows at border points in OECD countries has become a major topic of commentary in popular press. We discuss whether the economic costs of border delays are represented solely by time spent in awaiting processing. This has been the basis of calculations in Canada-US-Ontario (2004) and Ontario Chamber of Commerce (2004, 2005) of advalorem equivalent tariff representations of the time delays involved. While time can be a significant part of the social cost of security related delays in customs clearance, added costs also arise from the behavioral response to delays and looking only at the time delays at the border can be misleading. We use a formulation where border delays occur with certainty and add to the fixed costs of importing in any period. We develop analytics for the case where there is endogeneity both in the frequency of transactions and in the size of individual transactions across the border in the tradition of the well known Baumol (1952) and Tobin (1952) inventory theoretical analysis of the demand for money.
Handle: RePEc:nbr:nberwo:12296
Template-Type: ReDIF-Paper 1.0
Title: The Industry Life Cycle and Acquisitions and Investment: Does Firm Organization Matter?
Classification-JEL: G0; G2; G3
Author-Name: Vojislav Maksimovic
Author-Person: pma549
Author-Name: Gordon Phillips
Author-Person: pph31
Note: CF IO
Number: 12297
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12297
File-URL: http://www.nber.org/papers/w12297.pdf
File-Format: application/pdf
Publication-Status: published as Maksimovic, Vojislav and Gordon Phillips. “The Industry Life-Cycle, Acquisitions and Investment: Does Firm Organization Matter?” Journal of Finance 63 (April 2008): 629-64.
Abstract: We examine the effect of financial dependence on acquisition and investment within existing industries by single-segment and conglomerate firms for industries undergoing different long run changes in industry conditions. Conglomerates and single-segment firms differ more in rates of within-industry acquisitions than in capital expenditure rates, which are similar across organizational type. In particular, 36 percent of within-industry growth by conglomerate firms in growth industries is from intra-industry acquisitions, compared to nine percent for single segment firms. Financial dependence, a deficit in a segment's internal financing, decreases the likelihood of within-industry acquisitions and opening new plants, especially for single-segment firms. These effects are mitigated for conglomerates in growth industries. The findings persist after controlling for firm size and segment productivity. Acquisitions lead to increased efficiency as plants acquired by conglomerate firms in growth industries increase in productivity post acquisition. The results are consistent with the comparative advantages of different firm organizations differing across long-run industry conditions.
Handle: RePEc:nbr:nberwo:12297
Template-Type: ReDIF-Paper 1.0
Title: Economic, Neurobiological and Behavioral Perspectives on Building America's Future Workforce
Classification-JEL: J24
Author-Name: Eric I. Knudsen
Author-Name: James J. Heckman
Author-Name: Judy L. Cameron
Author-Name: Jack P. Shonkoff
Note: ED LS
Number: 12298
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12298
File-URL: http://www.nber.org/papers/w12298.pdf
File-Format: application/pdf
Publication-Status: published as Knudsen, E., J. Heckman, J. Cameron and J. Shonkoff. “Economic, Neurobiological, and Behavioral Perspectives on Building America’s Future Workforce." Proceedings of the National Academy of Sciences 103, 27 (July 2006): 10155-10162.
Publication-Status: published as Eric Knudsen & James J. Heckman & Judy Cameron & Jack P. Shonkoff, 2006. "Economic, Neurobiological and Behavioral Perspectives on Building Americaâs Future Workforce," World Economics, World Economics, Economic & Financial Publishing, PO Box 69, Henley-on-Thames, Oxfordshire, United Kingdom, RG9 1GB, vol. 7(3), pages 17-41, July.
Abstract: A growing proportion of the U.S. workforce will have been raised in disadvantaged environments that are associated with relatively high proportions of individuals with diminished cognitive and social skills. A cross-disciplinary examination of research in economics, developmental psychology, and neurobiology reveals a striking convergence on a set of common principles that account for the potent effects of early environment on the capacity for human skill development. Central to these principles are the findings that early experiences have a uniquely powerful influence on the development of cognitive and social skills, as well as on brain architecture and neurochemistry; that both skill development and brain maturation are hierarchical processes in which higher level functions depend on, and build on, lower level functions; and that the capacity for change in the foundations of human skill development and neural circuitry is highest earlier in life and decreases over time. These findings lead to the conclusion that the most efficient strategy for strengthening the future workforce, both economically and neurobiologically, and for improving its quality of life is to invest in the environments of disadvantaged children during the early childhood years.
Handle: RePEc:nbr:nberwo:12298
Template-Type: ReDIF-Paper 1.0
Title: Currency Mismatches, Default Risk, and Exchange Rate Depreciation: Evidence from the End of Bimetallism
Classification-JEL: N1; N2; F3
Author-Name: Michael D. Bordo
Author-Person: pbo243
Author-Name: Christopher M. Meissner
Author-Person: pme45
Author-Name: Marc D. Weidenmier
Author-Person: pwe14
Note: DAE IFM ME
Number: 12299
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12299
File-URL: http://www.nber.org/papers/w12299.pdf
File-Format: application/pdf
Abstract: It is generally very difficult to measure the effects of a currency depreciation on a country’s balance sheet and financing costs given the endogenous properties of the exchange rate. History provides at least one natural experiment to test whether an exogenous exchange rate depreciation can be contractionary (via an increased real debt burden) or expansionary (via an improved current account). France’s decision to suspend the free coinage of silver in 1876 played a paramount role in causing a large exogenous depreciation of the nominal exchange rates of all silver standard countries versus gold-backed currencies such as the British pound—the currency in which much of their debt was payable. Our identifying assumption is that France’s decision to end bimetallism was exogenous from the viewpoint of countries on the silver standard. To deal with heterogeneity we implement a difference in differences estimator. Sovereign yield spreads for countries on the silver standard increased in proportion to the potential currency mismatch. Yield spreads for silver countries increased ten to fifteen percent in the wake of the depreciation. Basic growth models suggest that the accompanying reduction in investment could have decreased output per capita by between one and four percent relative to the pre-shock trajectory. This also illustrates that a substantial proportion of the decrease in spreads gold standard countries identified in the “Good Housekeeping” literature could be attributable to the increase in exchange rate stability. Finally, if emerging markets are going to embrace international capital flows, the most export oriented countries will manage to mitigate the negative effects of a currency mismatch.
Handle: RePEc:nbr:nberwo:12299
Template-Type: ReDIF-Paper 1.0
Title: Even For Teenagers, Money Does Not Grow on Trees: Teenage Substance Use and Budget Constraints
Classification-JEL: I0; D0
Author-Name: Sara Markowitz
Author-Person: pma138
Author-Name: John Tauras
Author-Person: pta136
Note: EH
Number: 12300
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12300
File-URL: http://www.nber.org/papers/w12300.pdf
File-Format: application/pdf
Publication-Status: published as Markowitz, S and Tauras, J "Even For Teenagers, Money Does Not Grow on Trees: Teenage Substance Use and Budget Constraints" Cited in London Financial Times, September 23, 2006.
Abstract: This paper is about the spending choices of youth, with a particular focus on how the demand for cigarettes, alcohol and marijuana are influenced by changes in the prices of other products. Youth tend to have small incomes and limited wants, with the result that many students spend the bulk of their income on only a few items. Fast food, clothing and entertainment make up the majority of products purchased by teenagers. The hypothesis to be tested in this project is that changes in the prices of the other goods commonly bought by teenagers will affect budget allocations and thereby affect the demand for substances. We estimate own and cross price effects using the prices of cigarettes, alcohol, marijuana and other consumer products including gasoline, clothing, entertainment, and fast food. Income effects are also estimated and show that teens with higher incomes and allowances are more likely to use substances. The policy implications of the results are discussed.
Handle: RePEc:nbr:nberwo:12300
Template-Type: ReDIF-Paper 1.0
Title: What Do We Know About Competition and Quality in Health Care Markets?
Classification-JEL: I1; L1; L3
Author-Name: Martin Gaynor
Author-Person: pga1
Note: EH
Number: 12301
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12301
File-URL: http://www.nber.org/papers/w12301.pdf
File-Format: application/pdf
Abstract: The goal of this paper is to identify key issues concerning the nature of competition in health care markets and its impacts on quality and social welfare and to identify pertinent findings from the theoretical and empirical literature on this topic. The theoretical literature in economics on competition and quality, the theoretical literature in health economics on this topic, and the empirical findings on competition and quality in health care markets are surveyed and their findings assessed. Theory is clear that competition increases quality and improves consumer welfare when prices are regulated (for prices above marginal cost), although the impacts on social welfare are ambiguous. When firms set both price and quality, both the positive and normative impacts of competition are ambiguous. The body of empirical work in this area is growing rapidly. At present it consists entirely of work on hospital markets. The bulk of the empirical evidence for Medicare patients shows that quality is higher in more competitive markets. The empirical results for privately insured patients are mixed across studies.
Handle: RePEc:nbr:nberwo:12301
Template-Type: ReDIF-Paper 1.0
Title: Australian Government Balance Sheet Management
Classification-JEL: H5; H6
Author-Name: Wilson Au-Yeung
Author-Name: Jason McDonald
Author-Name: Amanda Sayegh
Note: PE
Number: 12302
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12302
File-URL: http://www.nber.org/papers/w12302.pdf
File-Format: application/pdf
Publication-Status: published as Ito, Takatoshi and Andrew K. Rose (eds.) Fiscal Policy and Management in East Asia, NBER-East Asia Seminar on Economics series, vol 16. Chicago and London: University of Chicago Press, 2007.
Publication-Status: published as Australian Government Balance Sheet Management, Wilson Au-Yeung, Jason McDonald, Amanda Sayegh. in Fiscal Policy and Management in East Asia, Ito and Rose. 2007
Abstract: Since almost eliminating net debt, the Australian Government's attention has turned to the financing of broader balance sheet liabilities, such as public sector superannuation. Australia will be developing a significant financial asset portfolio in the 'Future Fund' to smooth the financing of expenses through time. This raises the significant policy question of how best to manage the government balance sheet to reduce risk. This paper provides a framework for optimal balance sheet management. The major conclusions are that: - fiscal sustainability depends on both the expected path of future taxation and the risks around that path; - optimal balance sheet management requires knowledge of how risks affect the balance sheet (and therefore volatility in tax rates); and - the government's financial investment strategy should reduce the risk to government finances from macroeconomic shocks that permanently affect the budget. Based on this framework, we find that a Future Fund portfolio that included (amongst other potential investments) domestic nominal securities and equities of selected countries would reduce overall balance sheet risk.
Handle: RePEc:nbr:nberwo:12302
Template-Type: ReDIF-Paper 1.0
Title: Early Retirement, Social Security and Well-Being in Germany
Author-Name: Axel Börsch-Supan
Author-Name: Hendrik Jürges
Author-Person: pju13
Note: AG LS PE
Number: 12303
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12303
File-URL: http://www.nber.org/papers/w12303.pdf
File-Format: application/pdf
Publication-Status: published as Wise, David A. (ed.) Developments in the Economics of Aging, A National Bureau of Economic Research Conference Report. Chicago and London: University of Chicago Press, 2009.
Publication-Status: published as Early Retirement, Social Security and Well-Being in Germany, Axel Börsch-Supan, Hendrik Jürges. in Developments in the Economics of Aging, Wise. 2009
Abstract: Germans retire early. On the one hand, early retirement is very costly and amplifies the burden which the German public pension system has to carry due to population aging. On the other hand, however, early retirement is also seen as a much appreciated social achievement which increases the well-being especially of those workers who suffer from work-related health problems. This paper investigates the relation between early retirement and well-being using the GSOEP panel data. The general picture that emerges from our analysis is that early retirement as such seems to be related to subjective well-being, in fact more so than normal retirement. Early retirement most probably is a reaction to a health shock. Individuals are less happy in the year of early retirement than in the years before and after retirement. After retirement, individuals attain their pre-retirement satisfaction levels after a relatively short while. Hence, the early retirement effect on well-being appears to be negative and short-lived rather than positive and long. Whether this is an effect of retirement itself or a psychological adaptation to an underlying shock cannot be identified in our data and remains an open research issue waiting for a more objective measurement of health.
Handle: RePEc:nbr:nberwo:12303
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Poor Health on Education: New Evidence Using Genetic Markers
Classification-JEL: I2; I1
Author-Name: Weili Ding
Author-Person: pdi95
Author-Name: Steven F. Lehrer
Author-Person: ple208
Author-Name: J. Niels Rosenquist
Author-Name: Janet Audrain-McGovern
Note: ED EH
Number: 12304
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12304
File-URL: http://www.nber.org/papers/w12304.pdf
File-Format: application/pdf
Publication-Status: published as Ding, W., S. Lehrer, N. Rosenquist and J. Audrain-McGovern. "The Impact of Poor Health on Academic Performance: New Evidence Using Genetic Markers." Journal of Health Economics 28, 3 (May 2009): 578-597.
Abstract: This paper examines the influence of health conditions on academic performance during adolescence. To account for the endogeneity of health outcomes and their interactions with risky behaviors we exploit natural variation within a set of genetic markers across individuals. We present strong evidence that these genetic markers serve as valid instruments with good statistical properties for ADHD, depression and obesity. They help to reveal a new dynamism from poor health to lower academic achievement with substantial heterogeneity in their impacts across genders. Our investigation further exposes the considerable challenges in identifying health impacts due to the prevalence of comorbid health conditions and endogenous health behaviors.
Handle: RePEc:nbr:nberwo:12304
Template-Type: ReDIF-Paper 1.0
Title: Do Peers Affect Student Achievement in China's Secondary Schools?
Classification-JEL: I2; Z13; P36
Author-Name: Weili Ding
Author-Person: pdi95
Author-Name: Steven F. Lehrer
Author-Person: ple208
Note: ED
Number: 12305
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12305
File-URL: http://www.nber.org/papers/w12305.pdf
File-Format: application/pdf
Publication-Status: published as Weili Ding & Steven F Lehrer, 2007. "Do Peers Affect Student Achievement in China's Secondary Schools?," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 300-312, 02.
Abstract: Peer effects have figured prominently in debates on school vouchers, desegregation, ability tracking and anti-poverty programs. Compelling evidence of their existence remains scarce for plaguing endogeneity issues such as selection bias and the reflection problem. This paper firmly establishes a link between peer performance and student achievement, using a unique dataset from China. We find strong evidence that peer effects exist and operate in a positive and nonlinear manner; reducing the variation of peer performance increases achievement; and our semi-parametric estimates clarify the tradeoffs facing policymakers in exploiting positive peers effects to increase future achievement.
Handle: RePEc:nbr:nberwo:12305
Template-Type: ReDIF-Paper 1.0
Title: Searching for the EU Social Dialogue Model
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: LS POL
Number: 12306
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12306
File-URL: http://www.nber.org/papers/w12306.pdf
File-Format: application/pdf
Publication-Status: published as Acocella, Nicola and Riccardo Leoni (eds.) Social Pacts, Employment and Growth: A Reappraisal of Ezio Tarantelli's Thought. Heidelberg: Physica-Verlag, 2007.
Abstract: The European Union and the United States operate different variants of market capitalism. The EU model uses social dialogue institutions to help determine economic outcomes, particularly in the labor market, whereas the US relies more on market forces. The theory of competitive markets provides a powerful framework for analyzing market driven economies and for assessing the conditions under which unfettered markets yield desirable outcomes. But there is no comparable framework for analyzing institution driven economies. This paper argues that models of efficient bargaining/the Coase Theorem offer the best framework for analyzing social dialogue economies and for identifying policies and institutional reforms to improve their functioning.
Handle: RePEc:nbr:nberwo:12306
Template-Type: ReDIF-Paper 1.0
Title: The Choice Between Income and Consumption Taxes: A Primer
Classification-JEL: H20
Author-Name: Alan J. Auerbach
Author-Person: pau33
Note: PE
Number: 12307
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12307
File-URL: http://www.nber.org/papers/w12307.pdf
File-Format: application/pdf
Publication-Status: published as Auerbach. A. and D. Shaviro (eds.) Institutional Foundations of Public Finance: Economic and Legal Perspectives. Harvard University Press, 2009.
Abstract: It has now been nearly three decades since the publication of two important volumes that laid out many of the details of how one might implement a progressive consumption tax (Institute for Fiscal Studies, 1978; U.S. Treasury, 1977). Over the years since, many contributions have analyzed the mechanics of the different variants of consumption taxation, the potential efficiency and distributional effects of their adoption, the issues of administration and transition from the current tax system, and the problems relating to certain types of transactions. But much of what we "know" is not part of the general policy discussion and there are important issues that the literature has recognized but still not resolved. The aim of this paper is to lay out the key economic issues involved in deciding whether and how to adopt a consumption tax and to discuss what theory and evidence have told us and could tell us about these issues.
Handle: RePEc:nbr:nberwo:12307
Template-Type: ReDIF-Paper 1.0
Title: Financial Innovations and Macroeconomic Volatility
Classification-JEL: E3; G1; G3
Author-Name: Urban Jermann
Author-Person: pje4
Author-Name: Vincenzo Quadrini
Author-Person: pqu2
Note: EFG
Number: 12308
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12308
File-URL: http://www.nber.org/papers/w12308.pdf
File-Format: application/pdf
Publication-Status: published as Urban Jermann & Vincenzo Quadrini, 2006. "Financial innovations and macroeconomic volatility," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
Abstract: The volatility of US business cycles has declined during the last two decades. During the same period the financial structure of firms has become more volatile. In this paper we develop a model in which financial factors play a key role in generating economic fluctuations. Innovations in financial markets allow for greater financial flexibility and generate a lower volatility of output together with a higher volatility in the financial structure of firms.
Handle: RePEc:nbr:nberwo:12308
Template-Type: ReDIF-Paper 1.0
Title: Collateralized Borrowing and Life-Cycle Portfolio Choice
Classification-JEL: G11; D14
Author-Name: Paul Willen
Author-Person: pwi457
Author-Name: Felix Kubler
Author-Person: pku6
Note: EFG
Number: 12309
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12309
File-URL: http://www.nber.org/papers/w12309.pdf
File-Format: application/pdf
Abstract: We examine the effects of collateralized borrowing in a realistically parameterized life-cycle portfolio choice problem. We provide basic intuition in a two-period model and then solve a multi-period model computationally. Our analysis provides insights into life-cycle portfolio choice relevant for researchers in macroeconomics and finance. In particular, we show that standard models with unlimited borrowing at the riskless rate dramatically overstate the gains to holding equity when compared with collateral-constrained models. Our results do not depend on the specification of the collateralized borrowing regime: the gains to trading equity remain relatively small even with the unrealistic assumption of unlimited leverage. We argue that our results strengthen the role of borrowing constraints in explaining the portfolio participation puzzle, that is, why most investors do not own stock.
Handle: RePEc:nbr:nberwo:12309
Template-Type: ReDIF-Paper 1.0
Title: Worker Needs and Voice in the US and the UK
Author-Name: Alex Bryson
Author-Person: pbr105
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: LS
Number: 12310
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12310
File-URL: http://www.nber.org/papers/w12310.pdf
File-Format: application/pdf
Publication-Status: published as Bryson, A. and Freeman, R. B. (2013) 'Employee Perceptions of Working Conditions and the Desire for Worker Representation in Britain and the US', Journal of Labor Research, 34, 1: 1-29
Abstract: Workers have responded differently to declining union density in the US and UK. US workers have unfilled demand for unions whereas many UK workers free-ride at unionized workplaces. To explain this difference, we create a scalar measure of worker needs for representation and relate desire for unionism to this measure and to the choices that the US and UK labor relations systems offer workers. Our measure of needs has similar properties across countries and is the single most important determinant of worker desire for unions and collective representation. Conditional on needs, we find that in both countries workers are more favourable to unions when management is positive toward unions, but also favor them when management strongly opposes unionism, compared to management having a neutral view. Much of the difference in the response of US and UK workers to declining unionism appears to be due to the different institutional arrangements for voice that the countries offer to workers.
Handle: RePEc:nbr:nberwo:12310
Template-Type: ReDIF-Paper 1.0
Title: The Boskin Commission Report: A Retrospective One Decade Later
Classification-JEL: I1; I11
Author-Name: Robert J. Gordon
Author-Person: pgo50
Note: EFG
Number: 12311
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12311
File-URL: http://www.nber.org/papers/w12311.pdf
File-Format: application/pdf
Publication-Status: published as Robert J. Gordon, 2006. "The Boskin Commission Report: A Retrospective One Decade Later," International Productivity Monitor, Centre for the Study of Living Standards, vol. 12, pages 7-22, Spring.
Abstract: This paper provides a retrospective on the 1996 Boskin Commission Report, Toward a More Accurate Measure of the Cost of Living, and its famous estimate that the CPI in 1995-96 was upward biased by 1.1 percent per year. The paper summarizes the report's methods, findings, and recommendations, and then reviews the criticisms that appeared soon after the Report was issued. Post-Boskin changes in the CPI are summarized and assessed, as is recent research on related issues. The paper sharply distinguishes two questions. First, with what we know now, what should the Commission have concluded about CPI bias in 1995-96? Second, what is the bias now after the many improvements introduced into the CPI since the Commission's Report? About the first question, my own recent research on apparel and rental housing indicates a substantial downward bias in the CPI over much of the twentieth century, diminishing in size after 1985. Incorporating these findings into the Boskin matrix would reduce its 0.6 percent annual upward bias due to quality change and new products to a smaller 0.4 percent bias. However, this is more than offset by the stunning discrepancy over 2000-06 in the chain-weighted C-CPI-U compared to the traditional CPI-U, indicating that the Commission greatly understated the magnitude of upper-level substitution bias. This retrospective evaluation suggests that the Boskin bias estimate for 1995-96 should have been 1.2 to 1.3 percent, not 1.1 percent. Current upward bias in the CPI is estimated to have declined from the revised 1.2-1.3 percent in the Boskin era to about 0.8 percent today. Yet the Boskin report, like most contemporary studies of quality change, failed to place sufficient value on the value of new products and on increased longevity. Allowing for these, today's bias is at least 1.0 percent per year or perhaps even higher.
Handle: RePEc:nbr:nberwo:12311
Template-Type: ReDIF-Paper 1.0
Title: Cultures of Corruption: Evidence From Diplomatic Parking Tickets
Classification-JEL: K42; Z13; D73; P48
Author-Name: Raymond Fisman
Author-Person: pfi257
Author-Name: Edward Miguel
Author-Person: pmi499
Note: LE
Number: 12312
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12312
File-URL: http://www.nber.org/papers/w12312.pdf
File-Format: application/pdf
Publication-Status: published as Fisman, Raymond and Edward Miguel. “Corruption, Norms and Legal Enforcement: Evidence from Diplomatic Parking Tickets." Journal of Political Economy 115, 6 (2007): 1020-1048.
Abstract: Corruption is believed to be a major factor impeding economic development, but the importance of legal enforcement versus cultural norms in controlling corruption is poorly understood. To disentangle these two factors, we exploit a natural experiment, the stationing of thousands of diplomats from around the world in New York City. Diplomatic immunity means there was essentially zero legal enforcement of diplomatic parking violations, allowing us to examine the role of cultural norms alone. This generates a revealed preference measure of government officials' corruption based on real-world behavior taking place in the same setting. We find strong persistence in corruption norms: diplomats from high corruption countries (based on existing survey-based indices) have significantly more parking violations, and these differences persist over time. In a second main result, officials from countries that survey evidence indicates have less favorable popular views of the United States commit significantly more parking violations, providing non-laboratory evidence on sentiment in economic decision-making. Taken together, factors other than legal enforcement appear to be important determinants of corruption.
Handle: RePEc:nbr:nberwo:12312
Template-Type: ReDIF-Paper 1.0
Title: Socially Optimal Districting: An Empirical Investigation
Classification-JEL: D7; H7
Author-Name: Stephen Coate
Author-Person: pco66
Author-Name: Brian Knight
Author-Person: pkn7
Note: PE POL
Number: 12313
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12313
File-URL: http://www.nber.org/papers/w12313.pdf
File-Format: application/pdf
Publication-Status: published as Stephen Coate & Brian Knight, 2007. "Socially Optimal Districting: A Theoretical and Empirical Exploration," The Quarterly Journal of Economics, MIT Press, vol. 122(4), pages 1409-1471, November.
Abstract: This paper provides an empirical exploration of the potential gains from socially optimal districting. As emphasized in the political science literature, districting matters because it determines the seat-vote curve, which relates the fraction of seats parties obtain to their share of the aggregate vote. Building on the theoretical work of Coate and Knight (2006), which develops and analyzes the optimal seat-vote curve, this paper develops a methodology for computing actual and optimal seat-vote curves and for measuring the potential welfare gains that would emerge from implementing optimal seat-vote curves. This method is then applied to analyze districting plans in place during the 1990s to elect U.S. State legislators. The analysis shows that the plans used by the states in our data set generate seat-vote curves that are overly responsive to changes in voters' preferences. While there is significant variation across states, the potential welfare gains from implementing optimal seat-vote curves are on average small relative to the overall surplus generated by legislatures. This appears to be because seat-vote curves are reasonably close to optimal rather than because aggregate welfare is insensitive to varying districting plans. Interestingly, implementing proportional representation would produce welfare levels quite close to those achieved by implementing optimal seat-vote curves.
Handle: RePEc:nbr:nberwo:12313
Template-Type: ReDIF-Paper 1.0
Title: An Exploration of Technology Diffusion
Classification-JEL: E13; O14; O33; O41
Author-Name: Diego Comin
Author-Person: pco55
Author-Name: Bart Hobiijn
Author-Person: pho54
Note: EFG PR
Number: 12314
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12314
File-URL: http://www.nber.org/papers/w12314.pdf
File-Format: application/pdf
Publication-Status: published as Diego Comin & Bart Hobijn, 2010. "An Exploration of Technology Diffusion," American Economic Review, American Economic Association, vol. 100(5), pages 2031-59, December.
Abstract: We develop and estimate a model where technology diffusion depends on the level of productivity embodied in capital and where this is, in turn, determined by two key mechanisms: the rate at which the quality embodied in new technology vintages increases (embodiment) and the gains from varieties induced by the introduction of new vintages (variety). In our model, these two effects are related to technology adoption decisions taken at two different levels. The capital goods suppliers' decisions of when to adopt a given vintage determines the embodiment margin. The workers' decisions of which of the adopted vintages to use in production determines the variety margin. Estimation of our model for a sample of 19 technologies, 21 countries, and the period 1870-1998 reveals that embodied productivity growth is large for many of the technologies in our sample. On average, increases in the variety of vintages available is a more important source of growth than the increases in the embodiment margin. There is, however, substantial heterogeneity across technologies. Where adoption lags matter, they are largely determined by lack of educational attainment and lack of trade openness.
Handle: RePEc:nbr:nberwo:12314
Template-Type: ReDIF-Paper 1.0
Title: People Flows in Globalization
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: ITI LS
Number: 12315
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12315
File-URL: http://www.nber.org/papers/w12315.pdf
File-Format: application/pdf
Publication-Status: published as Freeman, Richard B. "People Flows In Globalization," Journal of Economic Perspectives, 2006, v20(2,Spring), 145-170.
Abstract: People flows refers to the movement of people across international borders in the form of immigration, international student flows, business travel, and tourism. Despite its peripheral status in debates over globalization, the movement of people from low income to high income countries is fundamental in global economic development, with consequences for factor endowments, trade patterns, and transfer of technology. In part because people flows are smaller than trade and capital flows, the dispersion of pay for similarly skilled workers around the world exceeds the dispersion of the prices of goods and cost of capital. This suggests that policies that give workers in developing countries greater access to advanced country labor markets could raise global economic well-being considerably. The economic problem is that immigrants rather than citizens of immigrant-receiving countries benefit most from immigration. The paper considers "radically economic policies" such as auctioning immigration visas or charging sizeable fees and spending the funds on current residents to increase the economic incentive for advanced countries to accept greater immigration.
Handle: RePEc:nbr:nberwo:12315
Template-Type: ReDIF-Paper 1.0
Title: Globalization, De-Industrialization and Mexican Exceptionalism 1750-1879
Classification-JEL: F1; N7; O2
Author-Name: Rafael Dobado González
Author-Name: Aurora Gómez Galvarriato
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: DAE ITI
Number: 12316
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12316
File-URL: http://www.nber.org/papers/w12316.pdf
File-Format: application/pdf
Publication-Status: published as Dobado Gonzalez, Rafael, Aurora Gomez Galvarriato, and Jeffrey G. Williamson. "Mexican Exceptionalism: Globalization and De-Industrialization, 1750-1877." Journal of Economic History 68, 3 (September 2008): 758-811.
Abstract: Like the rest of the poor periphery, Mexico had to deal with de-industrialization forces between 1750 and 1913, those critical 150 years when the economic gap between the industrial core and the primary-product-producing periphery widened to such huge dimensions. Yet, from independence to mid-century Mexico did better on this score than did most countries around the periphery. This paper explores the sources of Mexican exceptionalism with de-industrialization. It decomposes those sources into those attributable to productivity events in the core and to globalization forces connecting core to periphery, and to those attributable to domestic forces specific to Mexico. It uses a neo-Ricardian model (with non-tradable foodstuffs) to implement the decomposition, and advocates a price dual approach, and develops a new price and wage data base 1750-1878. There were three forces at work that account for Mexican exceptionalism: first, the terms of trade and Dutch disease effects were much weaker; second, Mexico maintained secular wage competitiveness with the core; and third, Mexico had the autonomy to devise effective ways to foster industry. The first appears to have been the most important.
Handle: RePEc:nbr:nberwo:12316
Template-Type: ReDIF-Paper 1.0
Title: Media Markets and Localism: Does Local News en Español Boost Hispanic Voter Turnout?
Classification-JEL: L82; D72
Author-Name: Felix Oberholzer-Gee
Author-Name: Joel Waldfogel
Author-Person: pwa46
Note: POL
Number: 12317
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12317
File-URL: http://www.nber.org/papers/w12317.pdf
File-Format: application/pdf
Publication-Status: published as Felix Oberholzer-Gee & Joel Waldfogel, 2009. "Media Markets and Localism: Does Local News en Espanol Boost Hispanic Voter Turnout?," American Economic Review, American Economic Association, vol. 99(5), pages 2120-28, December.
Abstract: Since the dawn of broadcasting, and especially in the past decade, Americans have turned their attention from local to more distant sources of news and entertainment. While the integration of media markets will raise the private welfare of many consumers, a globalized information and entertainment industry can undermine civic engagement, transforming locally engaged citizens into viewers consuming programming from distant sources. In response to such concerns, many regulatory agencies, including the Federal Communication Commission in the United States, curtail the integration of media markets to promote "localism." Determining the right balance between the private benefits of integrated markets and the public value of civic engagement requires evidence on the size of the positive spillovers from local media. In this paper, we exploit the rapid growth of Hispanic communities in the United States to test whether the presence of local television news affects local civic behavior. We find that Hispanic voter turnout increased by 5 to 10 percentage points, relative to non-Hispanic voter turnout, in markets where local Spanish-language television news became available. Thus, the tradeoff between integrated media markets and civic engagement is real, and our results provide a basis for the continued pursuit of regulatory policies that promote localism.
Handle: RePEc:nbr:nberwo:12317
Template-Type: ReDIF-Paper 1.0
Title: Contributions of Zvi Griliches
Classification-JEL: B31; D24; O33
Author-Name: James Heckman
Note: IO ED LS PR
Number: 12318
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12318
File-URL: http://www.nber.org/papers/w12318.pdf
File-Format: application/pdf
Publication-Status: published as James HECKMAN, 2005. "Contributions of Zvi Griliches," Annales d'Economie et de Statistique, ENSAE, issue 79-80, pages 5-22.
Publication-Status: published as Contributions of Zvi Griliches, James Heckman. in Contributions in Memory of Zvi Griliches, Mairesse and Trajtenberg. 2010
Abstract: This paper summarizes the major research contributions of Zvi Griliches.
Handle: RePEc:nbr:nberwo:12318
Template-Type: ReDIF-Paper 1.0
Title: Inflation as a Redistribution Shock: Effects on Aggregates and Welfare
Classification-JEL: D31; D58; E31; E50
Author-Name: Matthias Doepke
Author-Person: pdo8
Author-Name: Martin Schneider
Author-Person: psc69
Note: EFG
Number: 12319
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12319
File-URL: http://www.nber.org/papers/w12319.pdf
File-Format: application/pdf
Abstract: Episodes of unanticipated inflation reduce the real value of nominal claims and thus redistribute wealth from lenders to borrowers. In this study, we consider redistribution as a channel for aggregate and welfare effects of inflation. We model an inflation episode as an unanticipated shock to the wealth distribution in a quantitative overlapping-generations model of the U.S. economy. While the redistribution shock is zero sum, households react asymmetrically, mostly because borrowers are younger on average than lenders. As a result, inflation generates a decrease in labor supply as well as an increase in savings. Even though inflation-induced redistribution has a persistent negative effect on output, it improves the weighted welfare of domestic households.
Handle: RePEc:nbr:nberwo:12319
Template-Type: ReDIF-Paper 1.0
Title: Empirical Studies of Innovation in the Knowledge Driven Economy
Classification-JEL: O3; M2
Author-Name: Bronwyn H. Hall
Author-Person: pha54
Author-Name: Jacques Mairesse
Author-Person: pma712
Note: PR
Number: 12320
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12320
File-URL: http://www.nber.org/papers/w12320.pdf
File-Format: application/pdf
Publication-Status: published as Bronwyn Hall & Jacques Mairesse, 2006. "Empirical studies of innovation in the knowledge-driven economy," Economics of Innovation and New Technology, Taylor and Francis Journals, vol. 15(4-5), pages 289-299, June.
Abstract: This introduction to a special issue of EINT surveys a collection of ten papers that study various aspects of innovation and knowledge management and their impact on performance at the firm level for a number of countries. These studies have been conducted using data drawn from innovation surveys combined with data from a number of other sources. The issue illustrates the value of these surveys in improving our understanding of innovation in firms and raises a number of questions for future work in this area.
Handle: RePEc:nbr:nberwo:12320
Template-Type: ReDIF-Paper 1.0
Title: New Evidence on Gender Difference in Promotion Rates: An Empirical Analysis of a Sample of New Hires
Classification-JEL: J1; J3; J7
Author-Name: Francine D. Blau
Author-Person: pbl16
Author-Name: Jed DeVaro
Author-Person: pde171
Note: LS
Number: 12321
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12321
File-URL: http://www.nber.org/papers/w12321.pdf
File-Format: application/pdf
Publication-Status: published as Blau, Francine D. and Jed DeVaro. “New Evidence on Gender Differences in Promotion Rates: An Empirical Analysis of a Sample of New Hires." Industrial Relations (July 2007).
Abstract: Using a large sample of establishments drawn from the Multi-City Study of Urban Inequality (MCSUI) employer survey, we study gender differences in promotion rates and in the wage gains attached to promotions. Several unique features of our data distinguish our analysis from the previous literature on this topic. First, we have information on the wage increases attached to promotions, and relatively few studies on gender differences have considered promotions and wage increases together. Second, our data include job-specific worker performance ratings, allowing us to control for performance and ability more precisely than through commonly-used skill indicators such as educational attainment or tenure. Third, in addition to standard information on occupation and industry, we have data on a number of other firm characteristics, enabling us to control for these variables while still relying on a broad, representative sample, as opposed to a single firm or a similarly narrowly-defined population. Our results indicate that women have lower probabilities of promotion and expected promotion than do men but that there is essentially no gender difference in wage growth with or without promotions.
Handle: RePEc:nbr:nberwo:12321
Template-Type: ReDIF-Paper 1.0
Title: Globalization and Endogenous Firm Scope
Classification-JEL: F12; F15; L11; L25
Author-Name: Volker Nocke
Author-Person: pno17
Author-Name: Stephen Yeaple
Author-Person: pye37
Note: ITI
Number: 12322
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12322
File-URL: http://www.nber.org/papers/w12322.pdf
File-Format: application/pdf
Abstract: We develop a theory of multiproduct firms to analyze the effects of globalization on the distributions of firm size, scope, and productivity. Our model explains two puzzles. First, it explains the well-known size-discount puzzle: large firms have lower values of Tobin's Q than small firms. Second, it explains the globalization-skewness puzzle documented in the empirical part of our paper: a multilateral reduction in trade costs leads to a flattening of the size distribution of firms. In our model, globalization not only affects the distribution of observed productivities but also productivity at the firm level.
Handle: RePEc:nbr:nberwo:12322
Template-Type: ReDIF-Paper 1.0
Title: Federal Policy and the Rise in Disability Enrollment: Evidence for the VA's Disability Compensation Program
Classification-JEL: H55; H56; I10; I38
Author-Name: Mark Duggan
Author-Person: pdu194
Author-Name: Robert Rosenheck
Author-Name: Perry Singleton
Author-Person: psi330
Note: EH PE
Number: 12323
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12323
File-URL: http://www.nber.org/papers/w12323.pdf
File-Format: application/pdf
Abstract: The U.S. Department of Veterans' Affairs (VA) currently provides disability benefits to 2.72 million veterans of U.S. military service through the Disability Compensation (DC) program. Until recently, the medical eligibility criteria for this program were the same across service eras, with the key condition being that the disability was caused or aggravated by military service. But in July of 2001, the VA relaxed the eligibility criteria for Vietnam veterans by including diabetes in the list of conditions covered by DC. This change was motivated by an Institute of Medicine report, which linked exposure to Agent Orange and other herbicides used by the U.S. military in Vietnam, to the onset of diabetes. In this paper, we investigate the impact of this policy change on DC enrollment, expenditures, and the sensitivity of the program to economic conditions. Our findings demonstrate that the Agent Orange decision increased DC enrollment by 7.6 percentage points among Vietnam veterans and that an additional 3.3 percent enjoyed an increase in their DC benefits. Our estimates further suggest that the policy change increased program expenditures by $2.69 billion during the 2006 fiscal year and by $45 billion in present value terms. After the policy took effect, we find that the sensitivity of the program to local economic conditions increased substantially. Taken together, our results suggest that even relatively narrow changes in the medical eligibility criteria for federal disability programs can have a powerful effect on program enrollment and expenditures.
Handle: RePEc:nbr:nberwo:12323
Template-Type: ReDIF-Paper 1.0
Title: Why Has U.S. Inflation Become Harder to Forecast?
Classification-JEL: C53; E37
Author-Name: James H. Stock
Author-Person: pst148
Author-Name: Mark W. Watson
Author-Person: pwa582
Note: EFG ME
Number: 12324
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12324
File-URL: http://www.nber.org/papers/w12324.pdf
File-Format: application/pdf
Publication-Status: published as Stock, James H. and Mark W. Watson. "Why Has U.S. Inflation Become Harder to Forecast?" Journal of Money, Credit and Banking 39, s1 (2007): 13 - 33.
Publication-Status: published as JAMES H. STOCK & MARK W. WATSON, 2007. "Erratum to "Why Has U.S. Inflation Become Harder to Forecast?"," Journal of Money, Credit and Banking, vol 39(7), pages 1849-1849.
Publication-Status: published as JAMES H. STOCK & MARK W. WATSON, 2007. "Erratum to "Why Has U.S. Inflation Become Harder to Forecast?"," Journal of Money, Credit and Banking, vol 39(7), pages 1849-1849.
Abstract: Forecasts of the rate of price inflation play a central role in the formulation of monetary policy, and forecasting inflation is a key job for economists at the Federal Reserve Board. This paper examines whether this job has become harder and, to the extent that it has, what changes in the inflation process have made it so. The main finding is that the univariate inflation process is well described by an unobserved component trend-cycle model with stochastic volatility or, equivalently, an integrated moving average process with time-varying parameters; this model explains a variety of recent univariate inflation forecasting puzzles. It appears currently to be difficult for multivariate forecasts to improve on forecasts made using this time-varying univariate model.
Handle: RePEc:nbr:nberwo:12324
Template-Type: ReDIF-Paper 1.0
Title: International Migration, Remittances, and Household Investment: Evidence from Philippine Migrants' Exchange Rate Shocks
Classification-JEL: D13; F22; I2; I3; J22; J23; J24; O12; O15
Author-Name: Dean Yang
Author-Person: pya75
Note: IFM ITI LS
Number: 12325
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12325
File-URL: http://www.nber.org/papers/w12325.pdf
File-Format: application/pdf
Publication-Status: published as Yang, Dean. "Why Do Immigrants Return To Poor Countries? Evidence From Philippine Migrants' Responses To Exchange Rate Shocks," Review of Economics and Statistics, 2006, v88(4,Nov), 715-735.
Publication-Status: published as Yang, Dean. "International Migration, Remittances and Household Investment: Evidence from Philippine Migrants' Exchange Rate Shocks," Economic Journal, Royal Economic Society, vol. 118(528), pages 591-630.
Abstract: Millions of households in developing countries receive financial support from family members working overseas. How do migrant earnings affect origin-household investments? This paper examines Philippine households' responses to overseas members' economic shocks. Overseas Filipinos work in dozens of foreign countries, which experienced sudden (and heterogeneous) changes in exchange rates due to the 1997 Asian financial crisis. Appreciation of a migrant's currency against the Philippine peso leads to increases in household remittances received from overseas. The estimated elasticity of Philippine-peso remittances with respect to the Philippine/foreign exchange rate is 0.60. These positive income shocks lead to enhanced human capital accumulation and entrepreneurship in migrants' origin households. Child schooling and educational expenditure rise, while child labor falls. In the area of entrepreneurship, households raise hours worked in self-employment, and become more likely to start relatively capital-intensive household enterprises.
Handle: RePEc:nbr:nberwo:12325
Template-Type: ReDIF-Paper 1.0
Title: Trade and Growth with Heterogenous Firms
Classification-JEL: H32; P16
Author-Name: Richard E. Baldwin
Author-Person: pba124
Author-Name: Frédéric Robert-Nicoud
Author-Person: pro136
Note: ITI
Number: 12326
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12326
File-URL: http://www.nber.org/papers/w12326.pdf
File-Format: application/pdf
Publication-Status: published as Baldwin, Richard E. & Robert-Nicoud, Frederic, 2008. "Trade and growth with heterogeneous firms," Journal of International Economics, Elsevier, vol. 74(1), pages 21-34, January.
Abstract: This paper explores the impact of trade on growth when firms are heterogeneous. We find that greater openness produces anti-and pro-growth effects. The Melitz-model selection effects raises the expected cost of introducing a new variety and this tends to slow the rate of new-variety introduction and hence growth. The pro-growth effect stems from the impact that freer trade has on the marginal cost of innovating. The balance of the two effects is ambiguous with the sign depending upon the exact nature of the innovation technology and its connection to international trade in goods and ideas. We consider five special cases (these include the Grossman-Helpman, the Coe-Helpman and Rivera-Batiz-Romer models) two of which suggest that trade harms growth; the others predicting the opposite.
Handle: RePEc:nbr:nberwo:12326
Template-Type: ReDIF-Paper 1.0
Title: A Comparative Analysis of the Labor Market Impact of International Migration: Canada, Mexico, and the United States
Classification-JEL: J31; J61
Author-Name: Abdurrahman Aydemir
Author-Person: pay7
Author-Name: George J. Borjas
Author-Person: pbo44
Note: ITI LS
Number: 12327
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12327
File-URL: http://www.nber.org/papers/w12327.pdf
File-Format: application/pdf
Abstract: Using data drawn from the Canadian, Mexican, and U.S. Censuses, we find a numerically comparable and statistically significant inverse relation between immigrant-induced shifts in labor supply and wages in each of the three countries: A 10 percent labor supply shift is associated with a 3 to 4 percent opposite-signed change in wages. Despite the similarity in the wage response, the impact of migration on the wage structure differs significantly across countries. International migration narrowed wage inequality in Canada; increased it in the United States; and reduced the relative wage of workers at the bottom of the skill distribution in Mexico.
Handle: RePEc:nbr:nberwo:12327
Template-Type: ReDIF-Paper 1.0
Title: Artificial States
Classification-JEL: F43; F50
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: William Easterly
Author-Person: pea1
Author-Name: Janina Matuszeski
Note: POL
Number: 12328
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12328
File-URL: http://www.nber.org/papers/w12328.pdf
File-Format: application/pdf
Publication-Status: published as Alberto Alesina & William Easterly & Janina Matuszeski, 2011. "Artificial States," Journal of the European Economic Association, John Wiley & Sons, Ltd., vol. 9(2), pages 246-277, 04.
Abstract: Artificial states are those in which political borders do not coincide with a division of nationalities desired by the people on the ground. We propose and compute for all countries in the world two new measures how artificial states are. One is based on measuring how borders split ethnic groups into two separate adjacent countries. The other one measures how straight land borders are, under the assumption the straight land borders are more likely to be artificial. We then show that these two measures seem to be highly correlated with several measures of political and economic success.
Handle: RePEc:nbr:nberwo:12328
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Female Education on Fertility and Infant Health: Evidence from School Entry Policies Using Exact Date of Birth
Classification-JEL: C3; D1; I1; J2
Author-Name: Justin McCrary
Author-Name: Heather Royer
Author-Person: pro423
Note: ED LS
Number: 12329
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12329
File-URL: http://www.nber.org/papers/w12329.pdf
File-Format: application/pdf
Publication-Status: published as McCrary, Justin, and Heather Royer. 2011. "The Effect of Female Education on Fertility and Infant Health: Evidence from School Entry Policies Using Exact Date of Birth." American Economic Review, 101(1): 158–95. DOI:10.1257/aer.101.1.158
Abstract: This paper uses age-at-school-entry policies to identify the effect of female education on fertility and infant health. We focus on sharp contrasts in schooling, fertility, and infant health between women born just before and after the school entry date. School entry policies affect female education and the quality of a woman's mate and have generally small, but possibly heterogeneous, effects on fertility and infant health. We argue that school entry policies manipulate primarily the education of young women at risk of dropping out of school.
Handle: RePEc:nbr:nberwo:12329
Template-Type: ReDIF-Paper 1.0
Title: Do Borrowing Constraints Matter? An Analysis of Why the Permanent Income Hypothesis Does Not Apply in Japan
Classification-JEL: D1; D9; E2; G1
Author-Name: Miki Kohara
Author-Person: pko899
Author-Name: Charles Yuji Horioka
Author-Person: pho41
Note: EFG
Number: 12330
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12330
File-URL: http://www.nber.org/papers/w12330.pdf
File-Format: application/pdf
Publication-Status: published as Kohara, Miki & Horioka, Charles Yuji, 2006. "Do borrowing constraints matter? An analysis of why the permanent income hypothesis does not apply in Japan," Japan and the World Economy, Elsevier, vol. 18(4), pages 358-377, December.
Abstract: We use micro data on young married households from the Japanese Panel Survey of Consumers in order to analyze the importance of borrowing constraints in Japan. We find (1) that 8 to 15 percent of young married Japanese households are borrowing-constrained, (2) that household assets and the husband's educational attainment are the most important determinants of whether or not a household is borrowing-constrained, and (3) that the Euler equation implication is rejected for both the full sample and for the subsample of unconstrained households. These results suggest that the life cycle/permanent income hypothesis does not apply in Japan and that the presence of borrowing constraints is not the main reason why it does not apply.
Handle: RePEc:nbr:nberwo:12330
Template-Type: ReDIF-Paper 1.0
Title: Do Rising Tides Lift All Prices? Income Inequality and Housing Affordability
Classification-JEL: D12; D31; I31; R21
Author-Name: Janna L. Matlack
Author-Name: Jacob L. Vigdor
Author-Person: pvi23
Note: AP EFG
Number: 12331
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12331
File-URL: http://www.nber.org/papers/w12331.pdf
File-Format: application/pdf
Publication-Status: published as Matlack, Janna L. & Vigdor, Jacob L., 2008. "Do rising tides lift all prices? Income inequality and housing affordability," Journal of Housing Economics, Elsevier, vol. 17(3), pages 212-224, September.
Abstract: Simple partial-equilibrium models suggest that income increases at the high end of the distribution can raise price paid by those at the low end of the income distribution. This prediction does not universally hold in a general equilibrium model, or in models where the rich and poor consume distinct products. We use Census microdata to evaluate these predictions empirically, using data on housing markets in American metropolitan areas between 1970 and 2000. Evidence clearly and unsurprisingly shows that decreases in one's own income lead to less housing consumption and less income left over after paying for housing. The effect of increases in others' income, holding one's own income constant, is more nuanced. In tight housing markets, the poor do worse when the rich get richer. In slack markets, at least some evidence suggests that increases in others' income, holding own income constant, may be beneficial.
Handle: RePEc:nbr:nberwo:12331
Template-Type: ReDIF-Paper 1.0
Title: Separation of Powers and the Budget Process
Classification-JEL: H61; D78; H41
Author-Name: Gene M. Grossman
Author-Person: pgr21
Author-Name: Elhanan Helpman
Author-Person: phe205
Note: PE POL
Number: 12332
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12332
File-URL: http://www.nber.org/papers/w12332.pdf
File-Format: application/pdf
Publication-Status: published as Grossman, Gene M. & Helpman, Elhanan, 2008. "Separation of powers and the budget process," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 407-425, April.
Abstract: We study budget formation in a model featuring separation of powers. In our model, the legislature designs a budget bill that can include a cap on total spending and earmarked allocations to designated public projects. Each project provides random benefits to one of many interest groups. The legislature can delegate spending decisions to the executive, who can observe the productivity of all projects before choosing which to fund. However, the ruling coalition in the legislature and the executive serve different constituencies, so their interests are not perfectly aligned. We consider settings that differ in terms of the breadth and overlap in the constituencies of the two branches, and associate these with the political systems and circumstances under which they most naturally arise. Earmarks are more likely to occur when the executive serves broad interests, while a binding budget cap arises when the executive's constituency is more narrow than that of the powerful legislators.
Handle: RePEc:nbr:nberwo:12332
Template-Type: ReDIF-Paper 1.0
Title: Optimal Currency Shares in International Reserves: The Impact of the Euro and the Prospects for the Dollar
Classification-JEL: F02; F30; G11; G15
Author-Name: Elias Papaioannou
Author-Person: ppa701
Author-Name: Richard Portes
Author-Person: ppo132
Author-Name: Gregorios Siourounis
Note: IFM
Number: 12333
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12333
File-URL: http://www.nber.org/papers/w12333.pdf
File-Format: application/pdf
Publication-Status: published as Papaioannou, Elias & Portes, Richard & Siourounis, Gregorios, 2006. "Optimal currency shares in international reserves: The impact of the euro and the prospects for the dollar," Journal of the Japanese and International Economies, Elsevier, vol. 20(4), pages 508-547, December.
Abstract: Foreign exchange reserve accumulation has risen dramatically in recent years. The introduction of the euro, greater liquidity in other major currencies, and the rising current account deficits and external debt of the United States have increased the pressure on central banks to diversify away from the US dollar. A major portfolio shift would significantly affect exchange rates and the status of the dollar as the dominant international currency. We develop a dynamic mean-variance optimization framework with portfolio rebalancing costs to estimate optimal portfolio weights among the main international currencies. Making various assumptions on expected currency returns and the variance-covariance structure, we assess how the euro has changed this allocation. We then perform simulations for the optimal currency allocations of four large emerging market countries (Brazil, Russia, India and China), adding constraints that reflect a central bank's desire to hold a sizable portion of its portfolio in the currencies of its peg, its foreign debt and its international trade. Our main results are: (i) The optimizer can match the large share of the US dollar in reserves, when the dollar is the reference (risk-free) currency. (ii) The optimum portfolios show a much lower weight for the euro than is observed. This suggests that the euro may already enjoy an enhanced role as an international reserve currency ("punching above its weight"). (iii) Growth in issuance of euro-denominated securities, a rise in euro zone trade with key emerging markets, and increased use of the euro as a currency peg, would all work towards raising the optimal euro shares, with the last factor being quantitatively the most important.
Handle: RePEc:nbr:nberwo:12333
Template-Type: ReDIF-Paper 1.0
Title: Competitive Wages in a Match with Ordered Contracts
Classification-JEL: D4; J3; J4
Author-Name: Muriel Niederle
Author-Person: pni95
Note: LS
Number: 12334
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12334
File-URL: http://www.nber.org/papers/w12334.pdf
File-Format: application/pdf
Publication-Status: published as Muriel Niederle, 2007. "Competitive Wages in a Match with Ordered Contracts," American Economic Review, American Economic Association, vol. 97(5), pages 1957-1969, December.
Abstract: A recent antitrust lawsuit against the National Residency Matching Program renewed interest in understanding the effects of a centralized match on wages of medical residents. Bulow and Levin (forthcoming) propose a simple model of the NRMP, in which firms set impersonal salaries simultaneously, before matching with workers, and show that a match leads to lower aggregate wages compared to any competitive outcome. This paper models a feature present in the NRMP, ordered contracts, that allows firms to set several contracts while determining the order in which they try to fill these contracts. I show that the low wage equilibrium of Bulow and Levin is not robust to this feature of the NRMP, and competitive wages are once more an equilibrium outcome. Furthermore, a match with ordered contracts has different properties than former models of centralized matches with multiple contracts.
Handle: RePEc:nbr:nberwo:12334
Template-Type: ReDIF-Paper 1.0
Title: Hospital Competition, Managed Care and Mortality After Hospitalization for Medical Conditions: Evidence From Three States
Classification-JEL: I1
Author-Name: José J. Escarce
Author-Name: Arvind K. Jain
Author-Name: Jeannette Rogowski
Note: EH
Number: 12335
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12335
File-URL: http://www.nber.org/papers/w12335.pdf
File-Format: application/pdf
Publication-Status: published as Escarce, Jose J., Arvind K. Jain, and Jeannette Rogowski. "Hospital Competition, Managed Care and Mortality After Hospitalization for Medical Conditions: Evidence From Three States." Medical Care Research and Review 63, 6 suppl (2006): 112S-140S.
Abstract: This study assessed the effect of hospital competition and HMO penetration on mortality after hospitalization for six medical conditions in California, New York, and Wisconsin. We used linked hospital discharge and vital statistics data to study adults hospitalized for myocardial infarction, hip fracture, stroke, gastrointestinal hemorrhage, congestive heart failure, or diabetes. We estimated logistic regression models with death within 30 days of admission as the dependent variable and hospital competition, HMO penetration, and hospital and patient characteristics as explanatory variables. Higher hospital competition was associated with lower mortality in California and New York, but not Wisconsin. In addition, higher HMO penetration was associated with lower mortality in California, but higher mortality in New York. In the context of the study states' history with managed care, these findings suggest that hospitals in highly competitive markets compete on quality even in the absence of mature managed care markets. The findings also underscore the need to consider geographic effects in studies of market structure and hospital quality.
Handle: RePEc:nbr:nberwo:12335
Template-Type: ReDIF-Paper 1.0
Title: Aggregate Implications of Lumpy Investment: New Evidence and a DSGE Model
Classification-JEL: E10; E22; E30; E32; E62
Author-Name: Ruediger Bachmann
Author-Person: pba751
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Author-Name: Eduardo M.R.A. Engel
Author-Person: pen3
Note: EFG
Number: 12336
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12336
File-URL: http://www.nber.org/papers/w12336.pdf
File-Format: application/pdf
Publication-Status: published as R?diger Bachmann & Ricardo J. Caballero & Eduardo M. R. A. Engel, 2013. "Aggregate Implications of Lumpy Investment: New Evidence and a DSGE Model," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(4), pages 29-67, October.
Abstract: The sensitivity of U.S. aggregate investment to shocks is procyclical: the initial response increases by approximately 50% from the trough to the peak of the business cycle. This feature of the data follows naturally from a DSGE model with lumpy microeconomic capital adjustment. Beyond explaining this specific time variation, our model and evidence provide a counterexample to the claim that microeconomic investment lumpiness is inconsequential for macroeconomic analysis.
Handle: RePEc:nbr:nberwo:12336
Template-Type: ReDIF-Paper 1.0
Title: A General Stochastic Volatility Model for the Pricing and Forecasting of Interest Rate Derivatives
Classification-JEL: E43; G13
Author-Name: Anders B. Trolle
Author-Name: Eduardo S. Schwartz
Note: AP
Number: 12337
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12337
File-URL: http://www.nber.org/papers/w12337.pdf
File-Format: application/pdf
Publication-Status: published as Anders B. Trolle & Eduardo S. Schwartz, 2009. "A General Stochastic Volatility Model for the Pricing of Interest Rate Derivatives," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 22(5), pages 2007-2057, May.
Abstract: We develop a tractable and flexible stochastic volatility multi-factor model of the term structure of interest rates. It features correlations between innovations to forward rates and volatilities, quasi-analytical prices of zero-coupon bond options and dynamics of the forward rate curve, under both the actual and risk-neutral measure, in terms of a finite-dimensional affine state vector. The model has a very good fit to an extensive panel data set of interest rates, swaptions and caps. In particular, the model matches the implied cap skews and the dynamics of implied volatilities. The model also performs well in forecasting interest rates and derivatives.
Handle: RePEc:nbr:nberwo:12337
Template-Type: ReDIF-Paper 1.0
Title: Does Price Matter in Charitable Giving? Evidence From a Large-Scale Natural Field Experiment
Classification-JEL: C93; D12; D72; H41; L31; M31
Author-Name: Dean Karlan
Author-Person: pka56
Author-Name: John A. List
Author-Person: pli176
Note: PE EEE
Number: 12338
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12338
File-URL: http://www.nber.org/papers/w12338.pdf
File-Format: application/pdf
Publication-Status: published as Dean Karlan & John A. List, 2007. "Does Price Matter in Charitable Giving? Evidence from a Large-Scale Natural Field Experiment," American Economic Review, American Economic Association, vol. 97(5), pages 1774-1793, December.
Abstract: We conducted a natural field experiment to explore the effect of price changes on charitable contributions. To operationalize our tests, we examine whether an offer to match contributions to a non-profit organization changes the likelihood and amount that an individual donates. Direct mail solicitations were sent to over 50,000 prior donors. We find that the match offer increases both the revenue per solicitation and the probability that an individual donates. While comparisons of the match treatments and the control group consistently reveal this pattern, larger match ratios (i.e., $3:$1 and $2:$1) relative to smaller match ratios ($1:$1) had no additional impact. The results have clear implications for practitioners in the design of fundraising campaigns and provide avenues for future empirical and theoretical work on charitable giving. Further, the data provide an interesting test of important methods used in cost-benefit analysis.
Handle: RePEc:nbr:nberwo:12338
Template-Type: ReDIF-Paper 1.0
Title: Optimal Control of Externalities in the Presence of Income Taxation
Classification-JEL: D61; D62; D63; H21; H23; K32
Author-Name: Louis Kaplow
Author-Person: pka44
Note: LE PE
Number: 12339
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12339
File-URL: http://www.nber.org/papers/w12339.pdf
File-Format: application/pdf
Publication-Status: published as By Louis Kaplow, 2012. "OPTIMAL CONTROL OF EXTERNALITIES IN THE PRESENCE OF INCOME TAXATION*," International Economic Review, vol 53(2), pages 487-509.
Abstract: A substantial literature examines second-best environmental policy, focusing particularly on how the Pigouvian directive that marginal taxes should equal marginal external harms needs to be modified in light of the preexisting distortion due to labor income taxation. Additional literature is motivated by the possibility that distributive concerns should amend the internalization prescription. It is demonstrated, however, that simple first-best rules " unmodified for labor supply distortion or distribution " are correct in a natural, basic formulation of the problem. Specifically, setting all commodity taxes equal to marginal harms (and subsidies equal to marginal benefits) can generate a Pareto improvement. Likewise, a marginal reform in the direction of the first-best can yield a Pareto improvement. For other reforms, a simple efficiency test characterizing when a Pareto improvement is possible is offered. Qualifications and explanations for the substantial departure from results in previous work are also elaborated.
Handle: RePEc:nbr:nberwo:12339
Template-Type: ReDIF-Paper 1.0
Title: The Lending Channel in Emerging Economics: Are Foreign Banks Different?
Classification-JEL: E51; G21
Author-Name: Marco Arena
Author-Name: Carmen Reinhart
Author-Person: pre33
Author-Name: Francisco Vázquez
Author-Person: pva557
Note: IFM ME
Number: 12340
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12340
File-URL: http://www.nber.org/papers/w12340.pdf
File-Format: application/pdf
Abstract: This paper assembles a dataset comprising 1,565 banks in 20 Asian and Latin American countries during 1989-2001 and compares the response of the volume of loans, deposits, and bank-specific interest rates on loans and deposits, to various measures of monetary conditions, across domestic and foreign banks. It also looks for systematic differences in the behavior of domestic and foreign banks during periods of financial distress and tranquil times. Using differences in bank ownership as a proxy for financial constraints on banks, the paper finds weak evidence that foreign banks have a lower sensitivity of credit to monetary conditions relative to their domestic competitors, with the differences driven by banks with lower asset liquidity and/or capitalization. At the same time, the lending and deposit rates of foreign banks tend to be smoother during periods of financial distress, albeit the differences with domestic banks do not appear to be strong. These results provide weak support to the existence of supply-side effects in credit markets and suggest that foreign bank entry in emerging economies may have contributed somewhat to stability in credit markets.
Handle: RePEc:nbr:nberwo:12340
Template-Type: ReDIF-Paper 1.0
Title: Consumption Over the Life Cycle: The Role of Annuities
Classification-JEL: E2; D1
Author-Name: Gary D. Hansen
Author-Person: pha52
Author-Name: Selahattin Imrohoroglu
Author-Person: pim3
Note: EFG
Number: 12341
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12341
File-URL: http://www.nber.org/papers/w12341.pdf
File-Format: application/pdf
Publication-Status: published as Gary Hansen & Selahattin Imrohoroglu, 2008. "Consumption over the Life Cycle: The Role of Annuities," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(3), pages 566-583, July.
Abstract: We explore the quantitative implications of uncertainty about the length of life and a lack of annuity markets for life cycle consumption in a general equilibrium overlapping generations model in which markets are otherwise complete. Empirical studies find that consumption tends to rise early in life, peak around age 45-55, and to decline after that. Our calibrated model exhibits life cycle consumption that is consistent with this pattern. This follows from the fact that, due to a lack of annuity markets, households discount the future more heavily as they age and their probability of survival falls. Once an unfunded social security system is introduced, the profile is still hump shaped, but the decline in consumption does not begin until after retirement in our base case. Adding a bequest motive causes this decline to begin at a younger age.
Handle: RePEc:nbr:nberwo:12341
Template-Type: ReDIF-Paper 1.0
Title: Capital Gains Taxes and Asset Prices: Capitalization or Lock-In?
Classification-JEL: H2; G1; D4; M4
Author-Name: Zhonglan Dai
Author-Name: Edward Maydew
Author-Name: Douglas A. Shackelford
Author-Person: psh631
Author-Name: Harold H. Zhang
Author-Person: pzh586
Note: PE
Number: 12342
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12342
File-URL: http://www.nber.org/papers/w12342.pdf
File-Format: application/pdf
Publication-Status: published as Zhonglan Dai & Edward Maydew & Douglas A. Shackelford & Harold H. Zhang, 2008. "Capital Gains Taxes and Asset Prices: Capitalization or Lock-in?," Journal of Finance, American Finance Association, vol. 63(2), pages 709-742, 04.
Abstract: This paper examines the impact on asset prices from a reduction in the long-term capital gains tax rate using an equilibrium approach that considers both demand and supply responses. We demonstrate that the equilibrium impact of capital gains taxes reflects both the capitalization effect (i.e., capital gains taxes decrease demand) and the lock-in effect (i.e., capital gains taxes decrease supply). Depending on time periods and stock characteristics, either effect may dominate. Using the Taxpayer Relief Act of 1997 as our event, we find evidence supporting a dominant capitalization effect in the week following news that sharply increased the probability of a reduction in the capital gains tax rate and a dominant lock-in effect in the week after the rate reduction became effective. Nondividend paying stocks (whose shareholders only face capital gains taxes) experience higher average returns during the week the capitalization effect dominates and stocks with large embedded capital gains and high tax sensitive investor ownership exhibit lower average returns during the week the lock-in effect dominates. We also find that the tax cut increases the trading volume during the week immediately before and after the tax cut becomes effective and in stocks with large embedded capital gains and high tax sensitive ownership during the dominant lock-in week.
Handle: RePEc:nbr:nberwo:12342
Template-Type: ReDIF-Paper 1.0
Title: Competing With the NYSE
Classification-JEL: G1; G2; N2
Author-Name: William O. Brown, Jr.
Author-Name: J. Harold Mulherin
Author-Name: Marc D. Weidenmier
Author-Person: pwe14
Note: AP CF DAE
Number: 12343
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12343
File-URL: http://www.nber.org/papers/w12343.pdf
File-Format: application/pdf
Abstract: We study the stock exchange rivalry between the New York Stock Exchange (NYSE) and the Consolidated Stock Exchange (Consolidated) from 1885 to 1926 using a new database of bid-ask spreads and stock data collected from The New York Times and other primary sources. The magnitude of this important, but largely forgotten rivalry was substantial. From 1885 to 1895, the ratio of Consolidated to NYSE volume averaged 40 percent and reached as high as 60 percent. The market share of the Consolidated averaged 23 percent for approximately 40 years. The Consolidated focused on the relatively liquid securities on the NYSE as measured by bid-ask spreads and trading volume. Our results suggest that NYSE bid-ask spreads fell by more than 10 percent when the Consolidated began to trade NYSE stocks while bid-ask spreads for our quasicontrol group of stocks trading on the Boston Stock Exchange remain unchanged. The effect persisted over the entire history of the stock market rivalry until a series of scandals and investigations of the Consolidated by state regulators led to the demise of the exchange in the 1920s. The analysis suggests three conclusions: (1) the NYSE has faced significant long-run competition (2) the NYSE may be susceptible to a similar level of competition in the future and (3) that the Consolidated may have improved the efficiency of stock prices by contributing to the price discovery process.
Handle: RePEc:nbr:nberwo:12343
Template-Type: ReDIF-Paper 1.0
Title: On the General Relativity of Fiscal Language
Classification-JEL: H3; H6
Author-Name: Jerry Green
Author-Person: pgr476
Author-Name: Laurence J. Kotlikoff
Author-Person: pko44
Note: PE
Number: 12344
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12344
File-URL: http://www.nber.org/papers/w12344.pdf
File-Format: application/pdf
Publication-Status: published as Auerbach, Alan J. and Daniel Shaviro (eds.) Key Issues in Public Finance – A Conference in Memory of David Bradford. Harvard University Press, 2009.
Abstract: A century ago, everyone thought time and distance were well defined physical concepts. But neither proved absolute. Instead, measures/reports of time and distance were found to depend on one's reference point, specifically one's direction and speed of travel, making our apparent physical reality, in Einstein's words, "merely an illusion." Like time and distance, standard fiscal measures, including deficits, taxes, and transfer payments, depend on one's reference point/reporting procedure/language/labels. As such, they too represent numbers in search of concepts that provide the illusion of meaning where none exists. This paper, dedicated to our dear friend, David Bradford, provides a general proof that standard and routinely used fiscal measures, including the deficit, taxes, and transfer payments, are economically ill-defined. Instead these measures reflect the arbitrary labeling of underlying fiscal conditions. Analyses based on these and derivative measures, such as disposable income, private assets, and personal saving, represent exercises in linguistics, not economics.
Handle: RePEc:nbr:nberwo:12344
Template-Type: ReDIF-Paper 1.0
Title: Liquidity Insurance in a Financially Dollarized Economy
Classification-JEL: G2; F3
Author-Name: Eduardo Levy Yeyati
Author-Person: ple99
Note: CF ME
Number: 12345
Creation-Date: 2006-06
Order-URL: http://www.nber.org/papers/w12345
File-URL: http://www.nber.org/papers/w12345.pdf
File-Format: application/pdf
Publication-Status: published as Liquidity Insurance in a Financially Dollarized Economy, Eduardo Levy Yeyati. in Financial Markets Volatility and Performance in Emerging Markets, Edwards and Garcia. 2008
Abstract: Unlike the financial dollarization (FD) of external liabilities, the dollarization of domestic financial assets (domestic FD) has received comparatively less attention until very recently, when it has been increasingly seen as a key source of balance sheet exposure. This paper focuses on a complementary - and often overlooked - angle of domestic FD: the limit it imposes on the central bank as domestic lender of last resort, and the resulting exposure to dollar liquidity runs. The paper discusses the incidence of FD on banking crisis propensity, shows that FD has been an important motive for self insurance in the form of international reserves, and highlights the moral hazard associated with centralized reserve accumulation. Next, it illustrates the authorities' belated recourse to suspension of convertibility in two recent banking crises (Argentina 2001 and Uruguay 2002). Finally, it argues for a combined scheme of decentralized reserves (liquid asset requirements on individual banks) to limit moral hazard, and an ex-ante suspension-of-convertibility clause ("circuit breakers") to reduce self-insurance costs while limiting bank losses in the event of a run.
Handle: RePEc:nbr:nberwo:12345
Template-Type: ReDIF-Paper 1.0
Title: The Performance of International Equity Portfolios
Classification-JEL: G11; G12; F21
Author-Name: Charles P. Thomas
Author-Person: pth302
Author-Name: Francis E. Warnock
Author-Name: Jon Wongswan
Note: AP IFM
Number: 12346
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12346
File-URL: http://www.nber.org/papers/w12346.pdf
File-Format: application/pdf
Abstract: This paper evaluates the ability of U.S. investors to allocate their foreign equity portfolios across 44 countries over a 25-year period. We find that U.S. portfolios achieved a significantly higher Sharpe ratio than foreign benchmarks, especially since 1990. We test whether this strong performance owed to trading expertise or longer-term allocation expertise. The evidence is overwhelmingly against trading expertise. While U.S. investors did abstain from momentum trading and instead sold past winners, we find no evidence that these past winners subsequently underperformed. In addition, conditional performance measures, which directly test reallocating into (out of) markets that subsequently outperformed (underperformed), suggest no significant trading expertise. In contrast, we offer strong evidence of longer-term allocation expertise: If we fix portfolio weights at the end of 1989 and do not allow reallocations, we still find superior performance in the recent period.
Handle: RePEc:nbr:nberwo:12346
Template-Type: ReDIF-Paper 1.0
Title: Globalization and Poverty
Classification-JEL: F1; O1; I3
Author-Name: Ann Harrison
Author-Person: pha441
Note: ITI
Number: 12347
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12347
File-URL: http://www.nber.org/papers/w12347.pdf
File-Format: application/pdf
Publication-Status: published as Ann Harrison, 2007. "Globalization and Poverty," NBER Books, National Bureau of Economic Research, Inc, number harr06-1, 6.
Publication-Status: published as Globalization and Poverty: An Introduction, Ann Harrison. in Globalization and Poverty, Harrison. 2007
Abstract: This essay surveys the evidence on the linkages between globalization and poverty. I focus on two measures of globalization: trade and international capital flows. Past researchers have argued that global economic integration should help the poor since poor countries have a comparative advantage in producing goods that use unskilled labor. The first conclusion of this essay is that such a simple interpretation of general equilibrium trade models is likely to be misleading. Second, the evidence suggests that the poor are more likely to share in the gains from globalization when there are complementary policies in place. Such complementary policies include investments in human capital and infrastructure, as well as policies to promote credit and technical assistance to farmers, and policies to promote macroeconomic stability. Third, trade and foreign investment reforms have produced benefits for the poor in exporting sectors and sectors that receive foreign investment. Fourth, financial crises are very costly to the poor. Finally, the collected evidence suggests that globalization produces both winners and losers among the poor. The fact that some poor individuals are made worse off by trade or financial integration underscores the need for carefully targeted safety nets.
Handle: RePEc:nbr:nberwo:12347
Template-Type: ReDIF-Paper 1.0
Title: The Catastrophic Effects of Natural Disasters on Insurance Markets
Classification-JEL: D8; G22; K13
Author-Name: W. Kip Viscusi
Author-Person: pvi69
Author-Name: Patricia Born
Note: EH LE
Number: 12348
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12348
File-URL: http://www.nber.org/papers/w12348.pdf
File-Format: application/pdf
Publication-Status: published as Patricia Born & W. Viscusi, 2006. "The catastrophic effects of natural disasters on insurance markets," Journal of Risk and Uncertainty, Springer, vol. 33(1), pages 55-72, September.
Abstract: Natural catastrophes often have catastrophic risks on insurance companies as well as on the insured. Using a very large dataset on homeowners' insurance coverage by state, by firm, and by year for the 1984 to 2004 period, this paper documents the positive effect on losses and loss ratios of both unexpected catastrophes as well as large events that the authors term "blockbuster catastrophes." Insurers adapt to these catastrophic risks by raising insurance rates, leading to lower loss ratios after the catastrophic event. There is a widespread event of unexpected catastrophes and blockbuster catastrophes that reduces total premiums earned in the state, reduces the total number writing insurance coverage in the state, and leads to the exit of firms from the state. Firms with low levels of homeowners' premiums are most adversely affected by the catastrophes.
Handle: RePEc:nbr:nberwo:12348
Template-Type: ReDIF-Paper 1.0
Title: The Macroeconomist as Scientist and Engineer
Author-Name: N. Gregory Mankiw
Note: EFG ME
Number: 12349
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12349
File-URL: http://www.nber.org/papers/w12349.pdf
File-Format: application/pdf
Publication-Status: published as N. Gregory Mankiw, 2006. "The Macroeconomist as Scientist and Engineer," Journal of Economic Perspectives, American Economic Association, vol. 20(4), pages 29-46, Fall.
Publication-Status: published as N. G. Mankiw., 2009. "The Macroeconomist as Scientist and Engineer," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 5.
Abstract: This essay offers a brief history of macroeconomics, together with an evaluation of what has been learned over the past several decades. It is based on the premise that the field has evolved through the efforts of two types of macroeconomist— those who understand the field as a type of engineering and those who would like it to be more of a science. While the early macroeconomists were engineers trying to solve practical problems, macroeconomists have more recently focused on developing analytic tools and establishing theoretical principles. These tools and principles, however, have been slow to find their way into applications. As the field of macroeconomics has evolved, one recurrent theme is the interaction—sometimes productive and sometimes not— between the scientists and the engineers.
Handle: RePEc:nbr:nberwo:12349
Template-Type: ReDIF-Paper 1.0
Title: Time Zones as Cues for Coordination: Latitude, Longitude, and Letterman
Classification-JEL: J22; D13
Author-Name: Daniel S. Hamermesh
Author-Person: pha78
Author-Name: Caitlin Knowles Myers
Author-Person: pmy11
Author-Name: Mark L. Pocock
Note: LS
Number: 12350
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12350
File-URL: http://www.nber.org/papers/w12350.pdf
File-Format: application/pdf
Publication-Status: published as "Cues for Timing and Coordination: Latitude, Letterman, and Longitude" Journal of Labor Economics, 2008, vol 26, no. 2 pp. 223-246.
Abstract: Market productivity is often greater, and leisure and other household activities more enjoyable, when people perform them simultaneously. Beyond pointing out the positive externalities of synchronicity, economists have not attempted to identify exogenous determinants of timing. We develop a theory illustrating conditions under which synchronicity will vary and identify three factors — the amount of daylight, the timing of television programming, and differences in time zones — that can alter timing. Using the American Time Use Survey for 2003 and 2004, we first show that an exogenous shock to time in one area due to non-adherence to daylight-saving time leads its residents to alter their work schedules to continue coordinating their activities with those of people elsewhere. With time use data from Australia, we also demonstrate the same response to a similar shock there. We then show that both television timing and the benefits of coordinating across time zones in the U.S. generally affect the timing of market work and sleep, the two most time-consuming activities people undertake. While these impacts do not differ greatly by people's demographic characteristics, workers in industries where we would expect more coordination outside of their local areas are more responsive to the effects of time zones.
Handle: RePEc:nbr:nberwo:12350
Template-Type: ReDIF-Paper 1.0
Title: The Dissaving of the Aged Revisited: The Case of Japan
Classification-JEL: D12; D91; E21
Author-Name: Charles Yuji Horioka
Author-Person: pho41
Note: AG EFG
Number: 12351
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12351
File-URL: http://www.nber.org/papers/w12351.pdf
File-Format: application/pdf
Abstract: In this paper, I survey the previous literature on the saving behavior of the aged in Japan and then present some survey data on the saving behavior of the aged in Japan that became available recently. To summarize the main findings of this paper, all previous studies as well as the newly available data I analyze find that the retired aged dissave and that even the working aged dissave at very advanced ages. These findings are consistent with the life cycle model and suggest that this model is highly applicable in the case of Japan.
Handle: RePEc:nbr:nberwo:12351
Template-Type: ReDIF-Paper 1.0
Title: Education and Health: Evaluating Theories and Evidence
Classification-JEL: I1; I2
Author-Name: David M. Cutler
Author-Person: pcu64
Author-Name: Adriana Lleras-Muney
Author-Person: pll45
Note: ED EH AG
Number: 12352
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12352
File-URL: http://www.nber.org/papers/w12352.pdf
File-Format: application/pdf
Publication-Status: published as House, J., R. Schoeni, G. Kaplan, and H. Pollack (eds.) Making Americans Healthier: Social and Economic Policy as Health Policy. New York: Russell Sage Foundation, 2008.
Abstract: There is a large and persistent association between education and health. In this paper, we review what is known about this link. We first document the facts about the relationship between education and health. The education 'gradient' is found for both health behaviors and health status, though the former does not fully explain the latter. The effect of education increases with increasing years of education, with no evidence of a sheepskin effect. Nor are there differences between blacks and whites, or men and women. Gradients in behavior are biggest at young ages, and decline after age 50 or 60. We then consider differing reasons why education might be related to health. The obvious economic explanations - education is related to income or occupational choice - explain only a part of the education effect. We suggest that increasing levels of education lead to different thinking and decision-making patterns. The monetary value of the return to education in terms of health is perhaps half of the return to education on earnings, so policies that impact educational attainment could have a large effect on population health.
Handle: RePEc:nbr:nberwo:12352
Template-Type: ReDIF-Paper 1.0
Title: Assessing Structural VARs
Classification-JEL: C1
Author-Name: Lawrence J. Christiano
Author-Person: pch45
Author-Name: Martin Eichenbaum
Author-Person: pei4
Author-Name: Robert Vigfusson
Author-Person: pvi18
Note: EFG ME
Number: 12353
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12353
File-URL: http://www.nber.org/papers/w12353.pdf
File-Format: application/pdf
Publication-Status: published as Assessing Structural VARs, Lawrence J. Christiano, Martin Eichenbaum, Robert Vigfusson. in NBER Macroeconomics Annual 2006, Volume 21, Acemoglu, Rogoff, and Woodford. 2007
Abstract: This paper analyzes the quality of VAR-based procedures for estimating the response of the economy to a shock. We focus on two key issues. First, do VAR-based confidence intervals accurately reflect the actual degree of sampling uncertainty associated with impulse response functions? Second, what is the size of bias relative to confidence intervals, and how do coverage rates of confidence intervals compare with their nominal size? We address these questions using data generated from a series of estimated dynamic, stochastic general equilibrium models. We organize most of our analysis around a particular question that has attracted a great deal of attention in the literature: How do hours worked respond to an identified shock? In all of our examples, as long as the variance in hours worked due to a given shock is above the remarkably low number of 1 percent, structural VARs perform well. This finding is true regardless of whether identification is based on short-run or long-run restrictions. Confidence intervals are wider in the case of long-run restrictions. Even so, long-run identified VARs can be useful for discriminating among competing economic models.
Handle: RePEc:nbr:nberwo:12353
Template-Type: ReDIF-Paper 1.0
Title: Volatility and Dispersion in Business Growth Rates: Publicly Traded versus Privately Held Firms
Classification-JEL: D21; E32
Author-Name: Steven J. Davis
Author-Person: pda15
Author-Name: John Haltiwanger
Author-Person: pha231
Author-Name: Ron Jarmin
Author-Person: pja54
Author-Name: Javier Miranda
Author-Person: pmi185
Note: CF EFG
Number: 12354
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12354
File-URL: http://www.nber.org/papers/w12354.pdf
File-Format: application/pdf
Publication-Status: published as Volatility and Dispersion in Business Growth Rates: Publicly Traded versus Privately Held Firms, Steven J. Davis, John Haltiwanger, Ron Jarmin, Javier Miranda. in NBER Macroeconomics Annual 2006, Volume 21, Acemoglu, Rogoff, and Woodford. 2007
Abstract: We study the variability of business growth rates in the U.S. private sector from 1976 onwards. To carry out our study, we exploit the recently developed Longitudinal Business Database (LBD), which contains annual observations on employment and payroll for all U.S. businesses. Our central finding is a large secular decline in the cross sectional dispersion of firm growth rates and in the average magnitude of firm level volatility. Measured the same way as in other recent research, the employment-weighted mean volatility of firm growth rates has declined by more than 40% since 1982. This result stands in sharp contrast to previous findings of rising volatility for publicly traded firms in COMPUSTAT data. We confirm the rise in volatility among publicly traded firms using the LBD, but we show that its impact is overwhelmed by declining volatility among privately held firms. This pattern holds in every major industry group. Employment shifts toward older businesses account for 27 percent or more of the volatility decline among privately held firms. Simple cohort effects that capture higher volatility among more recently listed firms account for most of the volatility rise among publicly traded firms.
Handle: RePEc:nbr:nberwo:12354
Template-Type: ReDIF-Paper 1.0
Title: Superstar Cities
Classification-JEL: R0; J0; D4; N9
Author-Name: Joseph Gyourko
Author-Person: pgy3
Author-Name: Christopher Mayer
Author-Person: pma212
Author-Name: Todd Sinai
Author-Person: psi354
Note: AP PE
Number: 12355
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12355
File-URL: http://www.nber.org/papers/w12355.pdf
File-Format: application/pdf
Publication-Status: published as Joseph Gyourko & Christopher Mayer & Todd Sinai, 2013. "Superstar Cities," American Economic Journal: Economic Policy, American Economic Association, vol. 5(4), pages 167-99, November.
Abstract: Differences in house price and income growth rates between 1950 and 2000 across metropolitan areas have led to an ever-widening gap in housing values and incomes between the typical and highest-priced locations. We show that the growing spatial skewness in house prices and incomes are related and can be explained, at least in part, by inelastic supply of land in some attractive locations combined with an increasing number of high-income households nationally. Scarce land leads to a bidding-up of land prices and a sorting of high-income families relatively more into those desirable, unique, low housing construction markets, which we label "superstar cities." Continued growth in the number of high-income families in the U.S. provides support for ever-larger differences in house prices across inelastically supplied locations and income-based spatial sorting. Our empirical work confirms a number of equilibrium relationships implied by the superstar cities framework and shows that it occurs both at the metropolitan area level and at the sub-MSA level, controlling for MSA characteristics.
Handle: RePEc:nbr:nberwo:12355
Template-Type: ReDIF-Paper 1.0
Title: Inside the Family Firm: The Role of Families in Succession Decisions and Performance
Classification-JEL: G32; G34; M13
Author-Name: Morten Bennedsen
Author-Name: Kasper M. Nielsen
Author-Name: Francisco Pérez-González
Author-Name: Daniel Wolfenzon
Note: CF
Number: 12356
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12356
File-URL: http://www.nber.org/papers/w12356.pdf
File-Format: application/pdf
Publication-Status: published as Bennedsen, Morten, Kasper Meisner Nielsen, Francisco Pérez-González, and Daniel Wolfenzon. "Inside the Family Firm: the Role of Families in Succession Decisions and Performance." Quarterly Journal of Economics 122, 2 (2007): 647-691.
Abstract: This paper uses a unique dataset from Denmark to investigate the impact of family characteristics in corporate decision making and the consequences of these decisions on firm performance. We focus on the decision to appoint either a family or external chief executive officer (CEO). The paper uses variation in CEO succession decisions that result from the gender of a departing CEO's firstborn child. This is a plausible instrumental variable (IV), as male first-child firms are more likely to pass on control to a family CEO than are female first-child firms, but the gender of the first child is unlikely to affect firms' outcomes. We find that family successions have a large negative causal impact on firm performance: operating profitability on assets falls by at least four percentage points around CEO transitions. Our IV estimates are significantly larger than those obtained using ordinary least squares. Furthermore, we show that family-CEO underperformance is particularly large in fast-growing industries, industries with highly skilled labor force and relatively large firms. Overall, our empirical results demonstrate that professional, non-family CEOs provide extremely valuable services to the organizations they head.
Handle: RePEc:nbr:nberwo:12356
Template-Type: ReDIF-Paper 1.0
Title: Sustainability, Debt Management, and Public Debt Policy in Japan
Classification-JEL: H63; H21; E63
Author-Name: Takero Doi
Author-Person: pdo15
Author-Name: Toshihiro Ihori
Author-Name: Kiyoshi Mitsui
Note: IFM PE
Number: 12357
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12357
File-URL: http://www.nber.org/papers/w12357.pdf
File-Format: application/pdf
Publication-Status: published as Sustainability, Debt Management, and Public Debt Policy in Japan, Takero Doi, Toshihiro Ihori, Kiyoshi Mitsui. in Fiscal Policy and Management in East Asia, Ito and Rose. 2007
Abstract: The purpose of this paper is to analyze sustainability issues of Japan's fiscal policy and then to discuss the debt management policy using the theoretical models and numerical studies. We also investigate the desirable coordination of fiscal and monetary authorities toward fiscal reconstruction. We include a potential possibilities of the government bonds in our theoretical model. The public bonds, therefore, cannot be sold when the issuance leads the amount of debt outstanding to be more than a certain level. In this respect, the fiscal authority has to take into account the upper limit of stocks of public debt. This possibility of debt default provides the fiscal authority to issue public bonds strategically in an earlier period. A strategic behavior of fiscal authority induces the monetary authority, in a later period, to boost output and raise seigniorage revenues to eliminate the distortion of resource allocation due to the limitation on debt issuance. Therefore, the monetary policy in a later period suffers from an inflation bias from the ax ante point of view. There are two ways to eliminate this distortion toward successful fiscal restoration. One of them is to make the monetary authority more conservative than society in the sense that the price stability weight of monetary authority is higher than that of society. The other way of eliminating the distortion of the resource allocation is to design an institutional ceiling on the debt issuance. The direct ceiling can provide a binding constraint of the public bond issuance for the fiscal authority of Japan because it has accumulated the debt outstanding much more than other countries.
Handle: RePEc:nbr:nberwo:12357
Template-Type: ReDIF-Paper 1.0
Title: Efficiency in Family Bargaining: Living Arrangements and Caregiving Decisions of Adult Children and Disabled Elderly Parents
Classification-JEL: D1; J1; J2
Author-Name: Liliana E. Pezzin
Author-Name: Robert A. Pollak
Author-Person: ppo36
Author-Name: Barbara S. Schone
Note: AG LS
Number: 12358
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12358
File-URL: http://www.nber.org/papers/w12358.pdf
File-Format: application/pdf
Publication-Status: published as Liliana E. Pezzin & Robert A. Pollak & Barbara S. Schone, 2007. "Efficiency in Family Bargaining: Living Arrangements and Caregiving Decisions of Adult Children and Disabled Elderly Parents," CESifo Economic Studies, Oxford University Press, vol. 53(1), pages 69-96, March.
Abstract: In this paper, we use a two-stage bargaining model to analyze the living arrangement of a disabled elderly parent and the assistance provided to the parent by her adult children. The first stage determines the living arrangement: the parent can live in a nursing home, live alone in the community, or live with any child who has invited coresidence. The second stage determines the assistance provided by each child in the family. Working by backward induction, we first calculate the level of assistance that each child would provide to the parent in each possible living arrangement. Using these calculations, we then analyze the living arrangement that would emerge from the first stage game. A key assumption of our model is that family members cannot or will not make binding agreements at the first stage regarding transfers at the second stage. Because coresidence is likely to reduce the bargaining power of the coresident child relative to her siblings, coresidence may fail to emerge as the equilibrium living arrangement even when it is Pareto efficient. That is, the outcome of the two-stage game need not be Pareto efficient.
Handle: RePEc:nbr:nberwo:12358
Template-Type: ReDIF-Paper 1.0
Title: Agency Conflicts, Asset Substitution, and Securitization
Classification-JEL: D8; G2; G3; L2
Author-Name: Yingjin Hila Gan
Author-Name: Christopher Mayer
Author-Person: pma212
Note: CF IO
Number: 12359
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12359
File-URL: http://www.nber.org/papers/w12359.pdf
File-Format: application/pdf
Abstract: Asset-backed securities represent one of the largest and fastest growing financial markets. Under securitization, agents perform functions (for fees) that would alternatively be performed by a vertically integrated lender with ownership of a whole loan. We examine how outsourcing impacts performance using data on 357 commercial mortgage-backed securities deals with over 46,000 individual loans. To alleviate agency conflicts in managing troubled loans, underwriters often sell the first-loss position to the special servicer, the party who is charged with handling delinquencies and defaults. When holding the first-loss position, special servicers appear to behave more efficiently, making fewer costly transfers of delinquent loans to special servicing, but liquidating a higher percentage of loans that are referred to special servicing. Special servicers are also more likely to own the first loss position in deals that require additional effort (deals with higher delinquencies). Market pricing reflects the existence of agency costs. Despite the apparent reduction of agency costs, the first-loss position is increasingly owned by a party other than the special servicer. We pose a number of explanations, including conflicts between junior and senior securities holders (the asset substitution problem) and risk aversion among special servicers. Consistent with asset substitution, we show that special servicers delay liquidation when they hold the first-loss position in deals with more severe delinquency problems.
Handle: RePEc:nbr:nberwo:12359
Template-Type: ReDIF-Paper 1.0
Title: A Skeptical Appraisal of Asset-Pricing Tests
Classification-JEL: G12
Author-Name: Jonathan Lewellen
Author-Name: Stefan Nagel
Author-Person: pna176
Author-Name: Jay Shanken
Author-Person: psh114
Note: AP
Number: 12360
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12360
File-URL: http://www.nber.org/papers/w12360.pdf
File-Format: application/pdf
Publication-Status: published as Lewellen, Jonathan & Nagel, Stefan & Shanken, Jay, 2010. "A skeptical appraisal of asset pricing tests," Journal of Financial Economics, Elsevier, vol. 96(2), pages 175-194, May.
Abstract: It has become standard practice in the cross-sectional asset-pricing literature to evaluate models based on how well they explain average returns on size- and B/M-sorted portfolios, something many models seem to do remarkably well. In this paper, we review and critique the empirical methods used in the literature. We argue that asset-pricing tests are often highly misleading, in the sense that apparently strong explanatory power (high cross-sectional R2s and small pricing errors) in fact provides quite weak support for a model. We offer a number of suggestions for improving empirical tests and evidence that several proposed models don't work as well as originally advertised.
Handle: RePEc:nbr:nberwo:12360
Template-Type: ReDIF-Paper 1.0
Title: Nursing Home Quality as a Public Good
Classification-JEL: I11; I18
Author-Name: David C. Grabowski
Author-Name: Jonathan Gruber
Author-Person: pgr20
Author-Name: Joseph J. Angelelli
Note: AG EH
Number: 12361
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12361
File-URL: http://www.nber.org/papers/w12361.pdf
File-Format: application/pdf
Publication-Status: published as David C. Grabowski & Jonathan Gruber & Joseph J. Angelelli, 2008. "Nursing Home Quality as a Common Good," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 754-764, 08.
Abstract: There has been much debate among economists about whether nursing home quality is a public good across Medicaid and private-pay patients within a common facility. However, there has been only limited empirical work addressing this issue. Using a unique individual level panel of residents of nursing homes from seven states, we exploit both within-facility and within-patient variation in payer source and quality to examine this issue. We also test the robustness of these results across states with different Medicaid and private-pay rate differentials. Across our various identification strategies, the results generally support the idea that quality is a public good within nursing homes. That is, within a common nursing home, there is very little evidence to suggest that Medicaid-funded residents receive consistently lower quality care relative to their private-paying counterparts.
Handle: RePEc:nbr:nberwo:12361
Template-Type: ReDIF-Paper 1.0
Title: In Search of Distress Risk
Classification-JEL: G1
Author-Name: John Y. Campbell
Author-Person: pca54
Author-Name: Jens Hilscher
Author-Person: phi70
Author-Name: Jan Szilagyi
Note: AP EFG ME
Number: 12362
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12362
File-URL: http://www.nber.org/papers/w12362.pdf
File-Format: application/pdf
Publication-Status: published as John Y. Campbell & Jens Hilscher & Jan Szilagyi, 2008. "In Search of Distress Risk," Journal of Finance, American Finance Association, vol. 63(6), pages 2899-2939, December.
Abstract: This paper explores the determinants of corporate failure and the pricing of financially distressed stocks using US data over the period 1963 to 2003. Firms with higher leverage, lower profitability, lower market capitalization, lower past stock returns, more volatile past stock returns, lower cash holdings, higher market-book ratios, and lower prices per share are more likely to file for bankruptcy, be delisted, or receive a D rating. When predicting failure at longer horizons, the most persistent firm characteristics, market capitalization, the market-book ratio, and equity volatility become relatively more significant. Our model captures much of the time variation in the aggregate failure rate. Since 1981, financially distressed stocks have delivered anomalously low returns. They have lower returns but much higher standard deviations, market betas, and loadings on value and small-cap risk factors than stocks with a low risk of failure. These patterns hold in all size quintiles but are particularly strong in smaller stocks. They are inconsistent with the conjecture that the value and size effects are compensation for the risk of financial distress.
Handle: RePEc:nbr:nberwo:12362
Template-Type: ReDIF-Paper 1.0
Title: Real Exchange Rate and International Reserves in the Era of Growing Financial and Trade Integration
Classification-JEL: F15; F21; F32; F36
Author-Name: Joshua Aizenman
Author-Person: pai8
Author-Name: Daniel Riera-Crichton
Author-Person: pri120
Note: IFM ITI
Number: 12363
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12363
File-URL: http://www.nber.org/papers/w12363.pdf
File-Format: application/pdf
Publication-Status: published as Aizenman, Joshua and Daniel Riera-Crichton. "Real exchange rate and international reserves in the era of growing financial and trade integration." Review of Economics and Statistics 90, 4 (2008): 812-815.
Abstract: This paper evaluates the impact of international reserves, terms of trade shocks and capital flows on the real exchange rate (REER). We observe that international reserves cushions the impact of TOT shocks on the REER, and that this effect is important for developing but not for industrial countries. This buffer effect is especially significant for Asian countries, and for countries exporting natural resources. Financial depth reduces the buffer role of IR in developing countries. Developing countries REER seem to be more sensitive to changes in reserve assets; whereas industrial countries display a significant relationship between hot money and REER.
Handle: RePEc:nbr:nberwo:12363
Template-Type: ReDIF-Paper 1.0
Title: A Model of Social Interactions and Endogenous Poverty Traps
Classification-JEL: J0
Author-Name: Roland G. Fryer, Jr.
Author-Person: pfr43
Note: ED LS PE
Number: 12364
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12364
File-URL: http://www.nber.org/papers/w12364.pdf
File-Format: application/pdf
Abstract: This paper develops a model of social interactions and endogenous poverty traps. The key idea is captured in a framework in which the likelihood of future social interactions with members of one's group is partly determined by group-specific investments made by individuals. I prove three main results. First, some individuals expected to make group-specific capital investments are worse off because their observed decision is used as a litmus test of group loyalty — creating a tradeoff between human capital and cooperation among the group. Second, there exist equilibria which exhibit bi-polar human capital investment behavior by individuals of similar ability. Third, as social mobility increases this bi-polarization increases. The models predictions are consistent with the bifurcation of distinctively black names in the mid-1960s, the erosion of black neighborhoods in the 1970s, accusations of 'acting white,' and the efficacy of certain programs designed to encourage human capital acquisition.
Handle: RePEc:nbr:nberwo:12364
Template-Type: ReDIF-Paper 1.0
Title: Why Has CEO Pay Increased So Much?
Classification-JEL: D2; D3; G34; J3
Author-Name: Xavier Gabaix
Author-Person: pga174
Author-Name: Augustin Landier
Author-Person: pla423
Note: AP EFG LS
Number: 12365
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12365
File-URL: http://www.nber.org/papers/w12365.pdf
File-Format: application/pdf
Publication-Status: published as Xavier Gabaix & Augustin Landier, 2008. "Why Has CEO Pay Increased So Much?," The Quarterly Journal of Economics, MIT Press, vol. 123(1), pages 49-100, 02.
Abstract: This paper develops a simple equilibrium model of CEO pay. CEOs have different talents and are matched to firms in a competitive assignment model. In market equilibrium, a CEO's pay changes one for one with aggregate firm size, while changing much less with the size of his own firm. The model determines the level of CEO pay across firms and over time, offering a benchmark for calibratable corporate finance. The sixfold increase of CEO pay between 1980 and 2003 can be fully attributed to the six-fold increase in market capitalization of large US companies during that period. We find a very small dispersion in CEO talent, which nonetheless justifies large pay differences. The data broadly support the model. The size of large firms explains many of the patterns in CEO pay, across firms, over time, and between countries.
Handle: RePEc:nbr:nberwo:12365
Template-Type: ReDIF-Paper 1.0
Title: Welfare Work Requirements with Paternalistic Government Preferences
Classification-JEL: H21; I38
Author-Name: Robert Moffitt
Author-Person: pmo48
Note: LS PE
Number: 12366
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12366
File-URL: http://www.nber.org/papers/w12366.pdf
File-Format: application/pdf
Publication-Status: published as Robert Moffitt, 2006. "Welfare work Requirements with Paternalistic Government Preferences," Economic Journal, Royal Economic Society, vol. 116(515), pages F441-F458, November.
Abstract: Work requirements in means-tested transfer programs have grown in importance in the U.S. and in some other countries. The theoretical literature which considers their possible optimality generally operates within a traditional welfarist framework where some function of the utility of the poor is maximized. Here we consider a case where society is paternalistic and instead has preferences over the actual work allocations of welfare recipients. With this social welfare function, optimality of work requirements is possible but depends on the accuracy of the screening mechanism which assigns work requirements to some benefit recipients and not others. Numerical simulations show that the accuracy must be high for such optimality to occur. The simulations also show that earnings subsidies can be justified with the type of social welfare function used here.
Handle: RePEc:nbr:nberwo:12366
Template-Type: ReDIF-Paper 1.0
Title: Determinants and Consequences of Bargaining Power in Households
Classification-JEL: D13; D14; D91; G11; J12
Author-Name: Leora Friedberg
Author-Name: Anthony Webb
Author-Person: pwe498
Note: AG
Number: 12367
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12367
File-URL: http://www.nber.org/papers/w12367.pdf
File-Format: application/pdf
Abstract: A growing literature offers indirect evidence that the distribution of bargaining power within a household influences decisions made by the household. The indirect evidence links household outcomes to variables that are assumed to influence the distribution of power within the household. In this paper, we have data on whether a husband or wife in the Health and Retirement Study "has the final say" when making major decisions in a household. We use this variable to analyze determinants and some consequences of bargaining power. Our analysis overcomes endogeneity problems arising in many earlier studies and constitutes a missing link confirming the importance of household bargaining models. We find that decision-making power depends on plausible individual variables and also influences important household outcomes, with the second set of results much stronger than the first set. Current and lifetime earnings have significant but moderate effects on decision-making power. On the other hand, decision-making power has important effects on financial decisions like stock market investment and total wealth accumulation and may help explain, for example, the relatively high poverty rate among widows.
Handle: RePEc:nbr:nberwo:12367
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Court-Ordered Hiring Quotas on the Composition and Quality of Police
Classification-JEL: H4; H7; J1; J4; J7; K3; K4
Author-Name: Justin McCrary
Note: LS PE
Number: 12368
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12368
File-URL: http://www.nber.org/papers/w12368.pdf
File-Format: application/pdf
Publication-Status: published as McCrary, Justin. "The Effect of Court-Ordered Hiring Quotas on the Composition and Quality of Police." American Economic Review 97, 1 (2008): 318-353.
Abstract: Arguably the most aggressive affirmative action program ever implemented in the United States was a series of court-ordered racial hiring quotas imposed on municipal police departments. My best estimate of the effect of court-ordered affirmative action on workforce composition is a 14 percentage point gain in the fraction African American among newly hired officers. Evidence on police performance is mixed. Despite substantial black-white test score differences on police department entrance examinations, city crime rates appear unaffected by litigation. However, litigation lowers slightly both arrests per crime and the fraction black among serious arrestees.
Handle: RePEc:nbr:nberwo:12368
Template-Type: ReDIF-Paper 1.0
Title: Biological Gender Differences, Absenteeism and the Earning Gap
Classification-JEL: J3; J7
Author-Name: Andrea Ichino
Author-Person: pic3
Author-Name: Enrico Moretti
Author-Person: pmo392
Note: LS
Number: 12369
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12369
File-URL: http://www.nber.org/papers/w12369.pdf
File-Format: application/pdf
Publication-Status: published as Andrea Ichino & Enrico Moretti, 2009. "Biological Gender Differences, Absenteeism, and the Earnings Gap," American Economic Journal: Applied Economics, American Economic Association, vol. 1(1), pages 183-218, January.
Abstract: In most Western countries illness-related absenteeism is higher among female workers than among male workers. Using the personnel dataset of a large Italian bank, we show that the probability of an absence due to illness increases for females, relative to males, approximately 28 days after a previous illness. This difference disappears for workers age 45 or older. We interpret this as evidence that the menstrual cycle raises female absenteeism. Absences with a 28-day cycle explain a significant fraction of the male-female absenteeism gap. To investigate the effect of absenteeism on earnings, we use a simple signaling model in which employers cannot directly observe workers' productivity, and therefore use observable characteristics - including absenteeism - to set wages. Since men are absent from work because of health and shirking reasons, while women face an additional exogenous source of health shocks due to menstruation, the signal extraction based on absenteeism is more informative about shirking for males than for females. Consistent with the predictions of the model, we find that the relationship between earnings and absenteeism is more negative for males than for females. Furthermore, this difference declines with seniority, as employers learn more about their workers' true productivity. Finally, we calculate the earnings cost for women associated with menstruation. We find that higher absenteeism induced by the 28-day cycle explains 11.8 percent of the earnings gender differential.
Handle: RePEc:nbr:nberwo:12369
Template-Type: ReDIF-Paper 1.0
Title: Evaluating Welfare with Nonlinear Prices
Classification-JEL: D12; D40; H20; L10
Author-Name: Peter C. Reiss
Author-Name: Matthew W. White
Note: IO
Number: 12370
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12370
File-URL: http://www.nber.org/papers/w12370.pdf
File-Format: application/pdf
Abstract: This paper examines how to evaluate consumer welfare when consumers face nonlinear prices. This problem arises in many settings, such as devising optimal pricing strategies for firms, assessing how price discrimination affects consumers, and evaluating the efficiency costs of many transfer programs in the public sector. We extend prior methods to accommodate a broad range of modern pricing practices, including menus of pricing plans. This analysis yields a simpler and more general technique for evaluating exact consumer surplus changes in settings where consumers face nonlinear prices. We illustrate our method using recent changes in mobile phone service plans.
Handle: RePEc:nbr:nberwo:12370
Template-Type: ReDIF-Paper 1.0
Title: Fifty Million Voters Can't Be Wrong: Economic Self-Interest and Redistributive Politics
Classification-JEL: D31; D72; H31
Author-Name: Jacob L. Vigdor
Author-Person: pvi23
Note: PE POL
Number: 12371
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12371
File-URL: http://www.nber.org/papers/w12371.pdf
File-Format: application/pdf
Abstract: Why do voters at the lower end of the socioeconomic spectrum support political candidates who generally disfavor redistributive policies? Existing explanations often presume that voters are explicitly acting in opposition to their economic self-interest, or that they hold persistently optimistic expectations regarding the probability of moving into the upper ranks of the income distribution. This paper provides an alternative economic explanation. When voters evaluate their well-being by making relative utility comparisons, support for redistribution depends not only on absolute income but on one's status relative to a reference group. When reference groups are defined geographically, support depends on exposure to higher-income neighbors. The predictions of the model are supported by empirical evidence drawn from county-level election returns in 1980 and 2000, and by individual-level polling data following the 2000 election.
Handle: RePEc:nbr:nberwo:12371
Template-Type: ReDIF-Paper 1.0
Title: Outsourcing Jobs? Multinationals and US Employment
Classification-JEL: F16; J01
Author-Name: Ann E. Harrison
Author-Person: pha441
Author-Name: Margaret S. McMillan
Author-Person: pmc26
Note: ITI LS
Number: 12372
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12372
File-URL: http://www.nber.org/papers/w12372.pdf
File-Format: application/pdf
Abstract: Critics of globalization claim that US manufacturing firms are being driven to shift employment abroad by the prospects of cheaper labor. Others argue that the availability of low-wage labor has allowed US based firms to survive and even prosper. Yet evidence for either hypothesis, beyond anecdotes, is slim. Using firm-level data collected by the US Bureau of Economic Analysis (BEA), we estimate the impact on US manufacturing employment of changes in foreign affiliate wages, controlling for changing demand conditions and technological change. We find that the evidence supports both perspectives on globalization. For firms most likely to perform the same tasks in foreign affiliates and at home ("horizontal" foreign investment), foreign and domestic employees appear to be substitutes. For these firms, lower wages in affiliate locations are associated with lower employment in the US. However, for firms which do significantly different tasks at home and abroad ("vertical" foreign investment), foreign and domestic employment are complements. For vertical foreign investment, lower wages abroad are associated with higher US manufacturing employment. These offsetting effects may be combined to show that offshoring is associated with a quantitatively small decline in manufacturing employment. Other factors, such as declining prices for consumer goods, import competition, and falling prices for investment goods (which substitute for labor) play a more important role.
Handle: RePEc:nbr:nberwo:12372
Template-Type: ReDIF-Paper 1.0
Title: China's Embrace of Globalization
Classification-JEL: O53; O19; F43; F14
Author-Name: Lee Branstetter
Author-Person: pbr854
Author-Name: Nicholas Lardy
Note: ITI
Number: 12373
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12373
File-URL: http://www.nber.org/papers/w12373.pdf
File-Format: application/pdf
Publication-Status: published as Brandt, Loren and Thomas Rawski (eds.) China’s Economic Transition: Origins, Mechanisms, and Consequences. Cambridge University Press, 2008.
Abstract: As China has become an increasingly important part of the global trading system over the past two decades, interest in the country and its international economic policies has increased among international economists who are not China specialists. This paper represents an attempt to provide the international economics community with a succinct summary of the major steps in the evolution of Chinese policy toward international trade and foreign direct investment and their consequences since the late 1970s. In doing so, we draw upon and update a number of more comprehensive book-length treatments of the subject. It is our hope that this paper will prove to be a useful resource for the growing numbers of international economists who are exploring China-related issues, either in the classroom or in their own research.
Handle: RePEc:nbr:nberwo:12373
Template-Type: ReDIF-Paper 1.0
Title: The Effects of HMO and Its For-Profit Expansion on the Survival of Specialized Hospital Services
Classification-JEL: I11; L30
Author-Name: Yu-Chu Shen
Note: EH
Number: 12374
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12374
File-URL: http://www.nber.org/papers/w12374.pdf
File-Format: application/pdf
Abstract: This study examines the effect of HMO and for-profit HMO share on the survival of safety net services and profitable services in hospitals. Using data from 1990-2003 and proportional hazard models, I find that hospitals in high HMO markets started out having lower hazard of shutting down services in 1990-1994 than those in low HMO markets, but their hazard rates increase over time. By 2000-2003, hospitals in high HMO markets ended up with higher risk of shutting down profitable services than those in low HMO markets. Conditional on overall HMO penetration, markets with higher for-profit share of HMOs have higher hazard of shutting down services, and the gap in survival between high and low for-profit HMO markets is bigger in high HMO areas. Lastly, I find that the hazard rate of shutting down profitable services is comparable among not-for-profit, for-profit, and government hospitals, while the hazard of shutting down safety net services is the highest in for-profit hospitals and lowest in government hospitals.
Handle: RePEc:nbr:nberwo:12374
Template-Type: ReDIF-Paper 1.0
Title: Divorce, Fertility and the Shot Gun Marriage
Classification-JEL: J12; J13
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Paola Giuliano
Author-Person: pgi66
Note: LE PE
Number: 12375
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12375
File-URL: http://www.nber.org/papers/w12375.pdf
File-Format: application/pdf
Abstract: Total fertility declined in states that introduced unilateral divorce, which makes dissolution of marriage easier. Also the ratio of out-of-wedlock fertility over total declined. We suggest an explanation (and provide supportive evidence for it) based upon the effect of divorce laws on the probability of entering and exiting marriage. Women planning to have children marry more easily with an easier "exit option" from marriage. Thus, more children are born in the first years of marriage, while the total marital fertility does not change, probably as a result of an increase in divorces and marital instability.
Handle: RePEc:nbr:nberwo:12375
Template-Type: ReDIF-Paper 1.0
Title: Flight-to-Quality or Flight-to-Liquidity? Evidence From the Euro-Area Bond Market
Classification-JEL: G0; G12
Author-Name: Alessandro Beber
Author-Person: pbe677
Author-Name: Michael W. Brandt
Author-Name: Kenneth A. Kavajecz
Note: AP IFM
Number: 12376
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12376
File-URL: http://www.nber.org/papers/w12376.pdf
File-Format: application/pdf
Publication-Status: published as Alessandro Beber & Michael W. Brandt & Kenneth A. Kavajecz, 2009. "Flight-to-Quality or Flight-to-Liquidity? Evidence from the Euro-Area Bond Market," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 22(3), pages 925-957, March.
Abstract: Do bond investors demand credit quality or liquidity? The answer is both, but at different times and for different reasons. Using data on the Euro-area government bond market, which features a unique negative correlation between credit quality and liquidity across countries, we show that the bulk of sovereign yield spreads is explained by differences in credit quality, though liquidity plays a non-trivial role especially for low credit risk countries and during times of heightened market uncertainty. In contrast, the destination of large flows into the bond market is determined almost exclusively by liquidity. We conclude that credit quality matters for bond valuation but that, in times of market stress, investors chase liquidity, not credit quality.
Handle: RePEc:nbr:nberwo:12376
Template-Type: ReDIF-Paper 1.0
Title: Using Target Efficiency to Select Program Participants and Risk-Factor Models: An Application to Child Mental Health Interventions for Preventing Future Crime
Classification-JEL: I12; D61
Author-Name: David S. Salkever
Author-Person: psa1313
Author-Name: Stephen Johnston
Author-Name: Mustafa C. Karakus
Author-Person: pka437
Author-Name: Nicholas Ialongo
Author-Name: Eric Slade
Note: EH
Number: 12377
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12377
File-URL: http://www.nber.org/papers/w12377.pdf
File-Format: application/pdf
Abstract: Statistical risk factor models are often proposed for screening high-risk children to participate in early intervention programs. Recent contributions to the program evaluation literature demonstrate the need for incorporating judgments about relative importance of false positives versus false negatives in screening. This paper formalizes these judgments as commensurable economic costs and benefits and applies them to demonstrate an approach to participant selection motivated by the standard cost-benefit criterion of maximizing expected net benefits. Implications of this approach are explored using data from a mental health prevention trial. We illustrate the response of expected net benefits to the choice of a selection risk level, the sensitivity of the optimal selection risk level to per participant cost/benefit magnitudes, and the use of the target-efficiency approach for choosing among alternative risk-factor models. Several strategies that directly incorporate expected net benefit maximization as a criterion in the model estimation process are also examined.
Handle: RePEc:nbr:nberwo:12377
Template-Type: ReDIF-Paper 1.0
Title: The Loss Aversion / Narrow Framing Approach to the Equity Premium Puzzle
Classification-JEL: G11; G12
Author-Name: Nicholas Barberis
Author-Name: Ming Huang
Author-Person: phu425
Note: AP
Number: 12378
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12378
File-URL: http://www.nber.org/papers/w12378.pdf
File-Format: application/pdf
Publication-Status: published as Mehra, R. (ed.) Handbook of the Equity Risk Premium. Elsevier Science, 2008.
Abstract: We review a recent approach to understanding the equity premium puzzle. The key elements of this approach are loss aversion and narrow framing, two well-known features of decision-making under risk in experimental settings. In equilibrium, models that incorporate these ideas can generate a large equity premium and a low and stable risk-free rate, even when consumption growth is smooth and only weakly correlated with the stock market. Moreover, they can do so for parameter values that correspond to sensible attitudes to independent monetary gambles. We conclude by suggesting some possible directions for future research.
Handle: RePEc:nbr:nberwo:12378
Template-Type: ReDIF-Paper 1.0
Title: Charting the Economic Life Cycle
Classification-JEL: J1
Author-Name: Ronald Lee
Author-Person: ple147
Author-Name: Sang-Hyop Lee
Author-Name: Andrew Mason
Author-Person: pma1188
Note: AG
Number: 12379
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12379
File-URL: http://www.nber.org/papers/w12379.pdf
File-Format: application/pdf
Publication-Status: published as Prskawetz, Alexia, David E. Bloom, and Wolfgang Lutz (eds.) Population Aging, Human Capital Accumulation, and Productivity Growth, a supplement to Population and Development Review. 34(Suppl.). Population, 2008.
Abstract: Understanding the economic lifecycle - how it varies and why - is important in its own right, but is also critical to understanding how changes in population age structure influence many features of the macroeconomy. Economic behavior over the life cycle can be summarized by the average levels of consumption and labor earnings at each age, as shaped by biology, culture, institutions and individual choice. Here we present estimates of these in detail for the US and Taiwan, showing the roles played by public and familial transfer systems as well as asset accumulation, and present more basic profiles for selected additional countries drawing on studies from a larger project. Average economic dependency occurs when consumption exceeds labor earnings, typically in childhood and old age. A changing population age distribution alters the relative numbers of weighted consumers and producers, as summarized by the support ratio. The "demographic dividend" occurs during a sustained period of improving support ratios during the demographic transition, as can be shown using these profiles. The estimated cross-sectional age profiles of labor income have a broadly similar hump shape. However, there are striking contrasts in the timing of earnings over the life cycle. The consumption profiles reveal even more striking contrasts, with a flat age profile of total adult consumption in Taiwan and a steeply rising one in the U.S. We believe these differences reflect the extended family versus the state as the primary locus of transfers to the elderly. Profiles for private consumption are also quite variable, with Indonesia peaking early around age 25, Taiwan being essentially flat, and the US peaking late at around 55. Private expenditures on education show wide variations, with unusually high expenditures in some Asian countries. Because of possible public-private substitutions, it is questionable to assign causality to either for differences in total consumption, but it is hard to avoid noticing that without public spending on Medicare and institutional Medicaid in the U.S., total consumption would decline after 55, whereas with them, it rises strongly. There is only a short period of life during which production exceeds consumption barely more than 30 years in the US, Taiwan, and Thailand. The brevity of this phase contrasts sharply with high life expectancy, approaching 80 years in many countries.
Handle: RePEc:nbr:nberwo:12379
Template-Type: ReDIF-Paper 1.0
Title: Using a Hedonic Model of Solar Radiation to Assess the Economic Effect of Climate Change: The Case of Mosel Valley Vineyards
Classification-JEL: C2; Q5
Author-Name: Orley Ashenfelter
Author-Person: pas9
Author-Name: Karl Storchmann
Author-Person: pst141
Note: PE EEE
Number: 12380
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12380
File-URL: http://www.nber.org/papers/w12380.pdf
File-Format: application/pdf
Publication-Status: published as Orley Ashenfelter & Karl Storchmann, 2010. "Using Hedonic Models of Solar Radiation and Weather to Assess the Economic Effect of Climate Change: The Case of Mosel Valley Vineyards," Review of Economics and Statistics, vol 92(2), pages 333-349.
Abstract: In this paper we provide a simple, credible method for assessing the effects of climate change on the quality of agricultural land and then apply this method using a rich set of data on the vineyards of the Mosel Valley in Germany. The basic idea is to use a simple model of solar radiation to measure the amount of energy collected by a vineyard, and then to establish the econometric relation between energy and vineyard quality. Coupling this hedonic function with the elementary physics of heat and energy permits a straightforward calculation of the impact of any climate change on vineyard quality (and prices). We show that the variability in vineyard quality in this region is due primarily to the extent to which each vineyard is able to capture radiant solar energy, so that these data provide a particularly credible "experiment" for identifying and measuring the appropriate hedonic equation. Our empirical results indicate that the vineyards of the Mosel Valley will increase in value under a scenario of global warming, and perhaps by a considerable amount. Vineyard and grape prices increase more than proportionally with greater ripeness, so that we estimate a 3°C increase in temperature would more than double the value of this vineyard area, while a 1°C increase would increase prices by about 20 percent.
Handle: RePEc:nbr:nberwo:12380
Template-Type: ReDIF-Paper 1.0
Title: Railroads and Local Economic Development: The United States in the 1850s
Classification-JEL: N51; N71
Author-Name: Michael R. Haines
Author-Person: pha740
Author-Name: Robert A. Margo
Author-Person: pma319
Note: DAE
Number: 12381
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12381
File-URL: http://www.nber.org/papers/w12381.pdf
File-Format: application/pdf
Publication-Status: published as Rosenbloom, J. (ed.) Quantitative Economic History: The Good of Counting. London: Routledge, 2008.
Abstract: We use county and individual-level data from 1850 and 1860 to examine the economic impact of gaining access to a railroad. Previous studies have found that rail access was positively correlated with the value of agricultural land at a point in time, and have interpreted this correlation as evidence that rail access chiefly benefitted agricultural land owners in the manner predicted by the Hekscher-Ohlin or Von Theunen models. We use a difference-in-difference strategy, comparing changes in outcomes in counties that gained rail access in the 1850s to those that either gained access earlier or did not have access before the Civil War. Most of the estimated effects are small and the signs are not wholly consistent with either model, under the null hypothesis that agriculture was the chief beneficiary of rail access. For example, we find that rail access appears to have increased urbanization, raised the likelihood of participation in the service sector, decreased agricultural yields, and reduced the share of improved acreage in total land area, opposite to the patterns predicted by either the Heckscher-Ohlin or Von Theunen models.
Handle: RePEc:nbr:nberwo:12381
Template-Type: ReDIF-Paper 1.0
Title: ICT Use in the Developing World: An Analysis of Differences in Computer and Internet Penetration
Classification-JEL: O30; L96
Author-Name: Menzie D. Chinn
Author-Person: pch129
Author-Name: Robert W. Fairlie
Author-Person: pfa338
Note: IFM
Number: 12382
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12382
File-URL: http://www.nber.org/papers/w12382.pdf
File-Format: application/pdf
Publication-Status: published as Menzie D. Chinn & Robert W. Fairlie, 2010. "ICT Use in the Developing World: An Analysis of Differences in Computer and Internet Penetration," Review of International Economics, Blackwell Publishing, vol. 18(1), pages 153-167, 02.
Abstract: Computer and Internet use, especially in developing countries, has expanded rapidly in recent years. Even in light of this expansion in technology adoption rates, penetration rates differ markedly between developed and developing countries and across developing countries. To identify the determinants of cross-country disparities in personal computer and Internet penetration, both currently and over time, we examine panel data for 161 countries over the 1999-2004 period. We explore the role of a comprehensive set of economic, demographic, infrastructure, institutional and financial factors in contributing to the global digital divide. We find evidence indicating that income, human capital, the youth dependency ratio, telephone density, legal quality and banking sector development are associated with technology penetration rates. Overall, the factors associated with computer and Internet penetration do not differ substantially between developed and developing countries. Estimates from Blinder-Oaxaca decompositions reveal that the main factors responsible for low rates of technology penetration rates in developing countries are disparities in income, telephone density, legal quality and human capital. In terms of dynamics, our results indicate fairly rapid reversion to long run equilibrium for Internet use, and somewhat slower reversion for computer use, particularly in developed economies. Financial development, either measured as bank lending or the value of stocks traded, is also important to the growth rate of Internet use.
Handle: RePEc:nbr:nberwo:12382
Template-Type: ReDIF-Paper 1.0
Title: Uncertainty and Investment Dynamics
Classification-JEL: D92; E22; D8; C23
Author-Name: Nick Bloom
Author-Person: pbl55
Author-Name: John Van Reenen
Author-Person: pva45
Author-Name: Stephen Bond
Note: EFG PR
Number: 12383
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12383
File-URL: http://www.nber.org/papers/w12383.pdf
File-Format: application/pdf
Publication-Status: published as Nick Bloom & Stephen Bond & John Van Reenen, 2007. "Uncertainty and Investment Dynamics," Review of Economic Studies, Blackwell Publishing, vol. 74(2), pages 391-415, 04.
Abstract: This paper shows that, with (partial) irreversibility, higher uncertainty reduces the impact effect of demand shocks on investment. Uncertainty increases real option values making firms more cautious when investing or disinvesting. This is confirmed both numerically for a model with a rich mix of adjustment costs, time-varying uncertainty, and aggregation over investment decisions and time, and also empirically for a panel of manufacturing firms. These cautionary effects of uncertainty are large - going from the lower quartile to the upper quartile of the uncertainty distribution typically halves the first year investment response to demand shocks. This implies the responsiveness of firms to any given policy stimulus may be much lower in periods of high uncertainty, such as after major shocks like OPEC I and 9/11.
Handle: RePEc:nbr:nberwo:12383
Template-Type: ReDIF-Paper 1.0
Title: Inflation Band Targeting and Optimal Inflation Contracts
Classification-JEL: E52; E58
Author-Name: Frederic S. Mishkin
Author-Person: pmi37
Author-Name: Niklas J. Westelius
Author-Person: pwe132
Note: EFG ME
Number: 12384
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12384
File-URL: http://www.nber.org/papers/w12384.pdf
File-Format: application/pdf
Publication-Status: published as Frederic S. Mishkin & Niklas J. Westelius, 2008. "Inflation Band Targeting and Optimal Inflation Contracts," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(4), pages 557-582, 06.
Abstract: In this paper we examine how target ranges work in the context of a Barro-Gordon (1983) type model, in which the time-inconsistency problem stems from political pressures from the government. We show that target ranges turn out to be an excellent way to cope with the time-inconsistency problem, and achieve many of the benefits that arise under practically less attractive solutions such as the conservative central banker and optimal inflation contracts. Our theoretical model also shows how an inflation targeting range should be set and how it should respond to changes in the nature of shocks to the economy.
Handle: RePEc:nbr:nberwo:12384
Template-Type: ReDIF-Paper 1.0
Title: Innovation, Diffusion, and Trade
Classification-JEL: F1; O3; O4
Author-Name: Jonathan Eaton
Author-Person: pea5
Author-Name: Samuel Kortum
Author-Person: pko74
Note: ITI PR
Number: 12385
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12385
File-URL: http://www.nber.org/papers/w12385.pdf
File-Format: application/pdf
Publication-Status: published as Sheshinski, Eytan, Robert J. Strom, and William J. Baumol (eds.) Entrepreneurship, Innovation, and the Growth Mechanism of the Free-Enterprise Economies. Princeton and Oxford: Princeton University Press, 2007.
Abstract: We explore the determinants of research specialization across countries and its consequences for relative wages. Using a dynamic Ricardian model we examine the effects of faster international technology diffusion and lower trade barriers on the incentive to innovate. In the absence of any diffusion at all, countries devote the same share of resources toward research regardless of trade barriers or research productivity. As long as trade barriers are not too high, faster diffusion shifts research activity toward the country that does it better. This shift in research activity raises the relative wage there. It can even mean that, with more diffusion, the country better at research ends up with a larger share of technologies in its exclusive domain.
Handle: RePEc:nbr:nberwo:12385
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Inheritance Receipt on Retirement
Classification-JEL: J14; J26
Author-Name: Jeffrey R. Brown
Author-Person: pbr264
Author-Name: Courtney C. Coile
Author-Person: pco557
Author-Name: Scott J. Weisbenner
Note: AG LS
Number: 12386
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12386
File-URL: http://www.nber.org/papers/w12386.pdf
File-Format: application/pdf
Publication-Status: published as Jeffrey R Brown & Courtney C Coile & Scott J Weisbenner, 2010. "The Effect of Inheritance Receipt on Retirement," The Review of Economics and Statistics, MIT Press, vol. 92(2), pages 425-434, 08.
Abstract: This paper uses the receipt of an inheritance to measure the effect of wealth shocks on retirement. Using the Health and Retirement Study (HRS), we first document that inheritance receipt is common among older workers - one in five households receives an inheritance over an eight-year period, with a median value of about $30,000. We find that inheritance receipt is associated with a significant increase in the probability of retirement. In particular, we find that receiving an inheritance increases the probability of retiring earlier than expected by 4.4 percentage points, or 12 percent relative to the baseline retirement rate, over an eight-year period. Importantly, this effect is stronger when the inheritance is unexpected and thus more likely to represent an exogenous shock to wealth.
Handle: RePEc:nbr:nberwo:12386
Template-Type: ReDIF-Paper 1.0
Title: Handedness and Earnings
Classification-JEL: J2
Author-Name: Christopher S. Ruebeck
Author-Person: pru128
Author-Name: Joseph E. Harrington, Jr.
Author-Name: Robert Moffitt
Author-Person: pmo48
Note: ED LS
Number: 12387
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12387
File-URL: http://www.nber.org/papers/w12387.pdf
File-Format: application/pdf
Publication-Status: published as Christopher S. Ruebeck & Joseph E. Harrington & Robert Moffitt, 2007. "Handedness and earnings," Laterality: Asymmetries of Body, Brain and Cognition, vol 12(2), pages 101-120.
Abstract: We examine whether handedness is related to performance in the labor market and, in particular, earnings. We find a significant wage effect for left-handed men with high levels of education. This positive wage effect is strongest among those who have lower than average earnings relative to those of similar high education. This effect is not found among women.
Handle: RePEc:nbr:nberwo:12387
Template-Type: ReDIF-Paper 1.0
Title: The Level and Composition of Consumption Over the Business Cycle: The Role of "Quasi-Fixed" Expenditures
Classification-JEL: D12; E21; E24
Author-Name: Kerwin Kofi Charles
Author-Name: Melvin Stephens, Jr.
Author-Person: pst400
Note: EFG LS
Number: 12388
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12388
File-URL: http://www.nber.org/papers/w12388.pdf
File-Format: application/pdf
Publication-Status: published as Blank, Danziger, Schoeni (eds.) Working and the Poor: How Economic and Policy Changes are Affecting Low Wage Workers. Russell Sage, 2006.
Abstract: We study how the level and composition of household expenditures changes over the business cycle for households at different positions in the income distribution. Using data from the Consumer Expenditure Survey, we find that transitory, state-specific increases in unemployment causes lower income groups to lower their total expenditure outlays, contrary to the prediction of the textbook account of consumption behavior. In addition, in bad economic times these groups raise the share of their total outlays devoted to relative fixed outlays like home or car payments. These adjustments are primarily concentrated among reductions in outlays devoted to entertainment and personal care expenditures. We find no similar effects for households at higher positions in the income distribution. It is difficult to attribute these differences across households to differences in credit constraints, both because the specific results for credit holdings are imprecisely estimated and because income losses experienced by higher SES households are so small that there is, for them, little need to adjust consumption.
Handle: RePEc:nbr:nberwo:12388
Template-Type: ReDIF-Paper 1.0
Title: Financial Globalization, Governance, and the Evolution of the Home Bias
Classification-JEL: F36; F30; G32; G30; G11; G15
Author-Name: Bong-Chan Kho
Author-Name: René M. Stulz
Author-Name: Francis E. Warnock
Note: AP CF
Number: 12389
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12389
File-URL: http://www.nber.org/papers/w12389.pdf
File-Format: application/pdf
Publication-Status: published as Kho, B.C., R. Stulz, and F. Warnock, 2009. "Financial globalization, governance, and the evolution of the home bias." Journal of Accounting Research 47: 597-635
Abstract: Despite the disappearance of formal barriers to international investment across countries, we find that the average home bias of U.S. investors towards the 46 countries with the largest equity markets did not fall from 1994 to 2004 when countries are equally weighted but fell when countries are weighted by market capitalization. This evidence is inconsistent with portfolio theory explanations of the home bias, but is consistent with what we call the optimal insider ownership theory of the home bias. Since foreign investors can only own shares not held by insiders, there will be a large home bias towards countries in which insiders own large stakes in corporations. Consequently, for the home bias to fall substantially, insider ownership has to fall in countries where it is high. Poor governance leads to concentrated insider ownership, so that governance improvements make it possible for corporate ownership to become more dispersed and for the home bias to fall. We find that the home bias of U.S. investors decreased the most towards countries in which the ownership by corporate insiders is low and countries in which ownership by corporate insiders fell. Using firm-level data for Korea, we find that portfolio equity investment by foreign investors in Korean firms is inversely related to insider ownership and that the firms that attract the most foreign portfolio equity investment are large firms with dispersed ownership.
Handle: RePEc:nbr:nberwo:12389
Template-Type: ReDIF-Paper 1.0
Title: That's News to Me! Information Revelation in Professional Certification Markets
Classification-JEL: D8; C93
Author-Name: Ginger Zhe Jin
Author-Name: Andrew Kato
Author-Name: John A. List
Author-Person: pli176
Note: IO LS
Number: 12390
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12390
File-URL: http://www.nber.org/papers/w12390.pdf
File-Format: application/pdf
Publication-Status: published as Ginger Zhe Jin & Andrew Kato & John A. List, 2010. "That'S News To Me! Information Revelation In Professional Certification Markets," Economic Inquiry, Western Economic Association International, vol. 48(1), pages 104-122, 01.
Abstract: Using sportscard grading as an example, we employ field experiments to investigate empirically the informational role of professional certifiers. In the past 20 years, professional grading of sportscards has evolved in a way that provides a unique opportunity to measure the information provision of a monopolist certifier and that of subsequent entrants. Empirical results suggest three patterns: the grading certification provided by the first professional certifier offers new information to inexperienced traders but adds little information to experienced dealers. This implies that the certification may reduce the information asymmetry between informed and uninformed parties. Second, compared with the incumbent, new entrants adopt more precise signals and use finer grading cutoffs to differentiate from the incumbent. Third, our measured differentiated grading cutoffs map consistently into prevailing market prices, suggesting that the market recognizes differences across multiple grading criteria.
Handle: RePEc:nbr:nberwo:12390
Template-Type: ReDIF-Paper 1.0
Title: How Household Portfolios Evolve After Retirement: The Effect of Aging and Health Shocks
Classification-JEL: G11; J14
Author-Name: Courtney Coile
Author-Person: pco557
Author-Name: Kevin Milligan
Author-Person: pmi14
Note: AG AP EH
Number: 12391
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12391
File-URL: http://www.nber.org/papers/w12391.pdf
File-Format: application/pdf
Publication-Status: published as Courtney Coile & Kevin Milligan, 2009. "How Household Portfolios Evolve After Retirement: The Effect Of Aging And Health Shocks," Review of Income and Wealth, Blackwell Publishing, vol. 55(2), pages 226-248, 06.
Abstract: In this paper, we study how the portfolios of elderly U.S. households evolve after retirement, using data from the Health and Retirement Study (HRS). In particular, we investigate the influence of aging and health shocks on a household's ownership of various assets and on the dollar value and share of total assets held in each asset class. We find that households decrease their ownership of most asset classes as they age, with the strongest evidence for principal residences and vehicles, while increasing the share of assets held in bank accounts and CDs. Consistent with prior studies, we find that the death of a spouse is a strong predictor of selling the principal residence. However, we find that widowhood also leads households to sell vehicles, businesses, and real estate and to put money into bank accounts and CDs, and further that other health shocks have very similar impacts. Finally, we explore why health shocks affect asset holdings and find that the effect of a shock is greatly magnified when households have physical or mental impairments. This suggests that factors other than standard risk and return considerations may weigh heavily in many older households' portfolio decisions.
Handle: RePEc:nbr:nberwo:12391
Template-Type: ReDIF-Paper 1.0
Title: Optimizing the Retirement Portfolio: Asset Allocation, Annuitization, and Risk Aversion
Author-Name: Wolfram J. Horneff
Author-Name: Raimond Maurer
Author-Name: Olivia S. Mitchell
Author-Person: pmi73
Author-Name: Ivica Dus
Note: AG AP
Number: 12392
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12392
File-URL: http://www.nber.org/papers/w12392.pdf
File-Format: application/pdf
Abstract: Retirees must draw down their accumulated assets in an orderly fashion so as not to exhaust their funds too soon. We derive the optimal retirement portfolio from a menu that includes payout annuities as well as an investment allocation and a withdrawal strategy, assuming risk aversion, stochastic capital markets, and uncertain lifetimes. The resulting portfolio allocation, when fixed as of retirement, is then compared to phased withdrawal strategies such a "self-annuitization" plan or the 401(k) "default" pattern encouraged under US tax law. Surprisingly, the fixed percentage approach proves appealing for retirees across a wide range of risk preferences, supporting financial planning advisors who often recommend this rule. We then permit the retiree to switch to an annuity later, which gives her the chance to invest in the capital market and "bet on death." As risk aversion rises, annuities first crowd out bonds in retiree portfolios; at higher risk aversion still, annuities replace equities in the portfolio. Making annuitization compulsory can also lead to substantial utility losses for less risk-averse investors.
Handle: RePEc:nbr:nberwo:12392
Template-Type: ReDIF-Paper 1.0
Title: Sudden Stops, Financial Crises, and Original Sin in Emerging Countries: Déjà vu?
Classification-JEL: E44; F32; N1; N20
Author-Name: Michael D. Bordo
Author-Person: pbo243
Note: DAE IFM ME
Number: 12393
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12393
File-URL: http://www.nber.org/papers/w12393.pdf
File-Format: application/pdf
Abstract: The current pattern of sudden stops and financial crises in emerging markets has great resonance to events in the first era of globalization, from 1870-1913. In this paper I present descriptive statistics on capital flows, current account reversals and financial crises during the period 1870-1913 and compare them with the recent experience. I analyze the incidence of crises and measure their effects on real output losses. Furthermore, I consider the influence of openness to trade, original sin and currency mismatches on the pattern of sudden stops and financial crises. I find strikingly similar patterns across both eras of globalization. The pre-1914 sudden stops were associated with significant output losses comparable with the recent events, and their effects differed considerably depending on a country's economic circumstances, just as they do today.
Handle: RePEc:nbr:nberwo:12393
Template-Type: ReDIF-Paper 1.0
Title: Big Business Stability and Economic Growth: Is What's Good for General Motors Good for America?
Classification-JEL: O16
Author-Name: Kathy Fogel
Author-Name: Randall Morck
Author-Person: pmo146
Author-Name: Bernard Yeung
Note: CF EFG
Number: 12394
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12394
File-URL: http://www.nber.org/papers/w12394.pdf
File-Format: application/pdf
Publication-Status: published as Fogel, Kathy & Morck, Randall & Yeung, Bernard, 2008. "Big business stability and economic growth: Is what's good for General Motors good for America?," Journal of Financial Economics, Elsevier, vol. 89(1), pages 83-108, July.
Abstract: What is good for big business need not generally advance a country's overall economy. Big business turnover correlates with rising income, productivity, and (in high income countries) faster capital accumulation; consistent with Schumpeter's (1912) creative destruction and recent formalizations like Aghion and Howitt (1992). Turnover appears to "cause" growth; and disappearing behemoths, more than rising stars, drive our results. Stronger findings suggest more intense creative destruction in countries with higher incomes, as well as those with smaller governments, Common Law courts, smaller banking systems, stronger shareholder rights, and more open economies. Only the last matters more in lower income countries.
Handle: RePEc:nbr:nberwo:12394
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rate Changes and Inflation in Post-Crisis Asian Economies: VAR Analysis of the Exchange Rate Pass-Through
Classification-JEL: F12; F31; F41
Author-Name: Takatoshi Ito
Author-Name: Kiyotaka Sato
Note: EFG IFM
Number: 12395
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12395
File-URL: http://www.nber.org/papers/w12395.pdf
File-Format: application/pdf
Publication-Status: published as Ito, Takaytoshi and Kiyotaka Sato. "Exchange Rate Changes and Inflation in Post-Crisis Asian Economies: Vector Autoregression Analysis of the Exchange Rate Pass-Through." Journal of Money, Credit and Banking 40, 7 (October 2008): 1407–1438.
Abstract: Macroeconomic consequences of a large currency depreciation among the crisis-hit Asian economies had varied from one country to another. Inflation did not soar in most Asian countries, including Thailand and Korea, after the exchange rate depreciated during the crisis. Indonesia, however, suffered very high inflation following a very large nominal depreciation of the rupiah. As a result, price competitive advantage by the rupiah depreciation was lost in the real exchange rate terms. The objective of this paper is to examine the pass-through effects of exchange rate changes on the domestic prices in the East Asian economies using a VAR analysis. Main results are as follows: (1) the degree of exchange rate pass-through to import prices was quite high in the crisis-hit economies; (2) the pass-through to CPI was generally low, with a notable exception of Indonesia: and (3) in Indonesia, both the impulse response of monetary policy variables to exchange rate shocks and that of CPI to monetary policy shocks are positive, large, and statistically significant. Thus, Indonesia's accommodative monetary policy, coupled with the high degree of the CPI responsiveness to exchange rate changes was an important factor in the spiraling effects of domestic price inflation and sharp nominal exchange rate depreciation in the post-crisis period.
Handle: RePEc:nbr:nberwo:12395
Template-Type: ReDIF-Paper 1.0
Title: Why Do Migrants Return to Poor Countries? Evidence From Philippine Migrants%u2019 Responses to Exchange Rate Shocks
Classification-JEL: D13; F22; J22; O12; O15
Author-Name: Dean Yang
Author-Person: pya75
Note: ED ITI LS
Number: 12396
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12396
File-URL: http://www.nber.org/papers/w12396.pdf
File-Format: application/pdf
Publication-Status: published as Yang, Dean. "Why Do Immigrants Return To Poor Countries? Evidence From Philippine Migrants' Responses To Exchange Rate Shocks," Review of Economics and Statistics, 2006, v88(4,Nov), 715-735.
Abstract: This paper distinguishes between target-earnings and life-cycle motivations for return migration by examining how Philippine migrants' return decisions respond to major, unexpected exchange rate changes in their overseas locations (due to the Asian financial crisis). Overall, the evidence favors the life-cycle explanation: more favorable exchange rate shocks lead to fewer migrant returns. A 10% improvement in the exchange rate reduces the 12-month return rate by 1.4 percentage points. However, some migrants appear motivated by target-earnings considerations: in households with intermediate foreign earnings, favorable exchange rate shocks have the least effect on return migration, but lead to increases in household investment.
Handle: RePEc:nbr:nberwo:12396
Template-Type: ReDIF-Paper 1.0
Title: What Drives the Disposition Effect? An Analysis of a Long-Standing Preference-Based Explanation
Classification-JEL: G11; G12
Author-Name: Nicholas Barberis
Author-Name: Wei Xiong
Author-Person: pxi88
Note: AP
Number: 12397
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12397
File-URL: http://www.nber.org/papers/w12397.pdf
File-Format: application/pdf
Publication-Status: published as Nicholas Barberis & Wei Xiong, 2009. "What Drives the Disposition Effect? An Analysis of a Long-Standing Preference-Based Explanation," Journal of Finance, American Finance Association, vol. 64(2), pages 751-784, 04.
Abstract: One of the most striking portfolio puzzles is the "disposition effect": the tendency of individuals to sell stocks in their portfolios that have risen in value since purchase, rather than fallen in value. Perhaps the most prominent explanation for this puzzle is based on prospect theory. Despite its prominence, this explanation has received little formal scrutiny. We take up this task, and analyze the trading behavior of investors with prospect theory preferences. We find that, at least for the simplest implementation of prospect theory, the link between these preferences and the disposition effect is not as obvious as previously thought: in some cases, prospect theory does indeed predict a disposition effect, but in others, it predicts the opposite. We provide intuition for these results, and identify the conditions under which the disposition effect holds or fails. We also discuss the implications of our results for other disposition-type effects that have been documented in settings such as the housing market, futures trading, and executive stock options.
Handle: RePEc:nbr:nberwo:12397
Template-Type: ReDIF-Paper 1.0
Title: The Politics and Economics of Offshore Outsourcing
Author-Name: N. Gregory Mankiw
Author-Name: Phillip Swagel
Author-Person: psw34
Note: EFG ITI POL
Number: 12398
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12398
File-URL: http://www.nber.org/papers/w12398.pdf
File-Format: application/pdf
Publication-Status: published as Gregory Mankiw, N. & Swagel, Phillip, 2006. "The politics and economics of offshore outsourcing," Journal of Monetary Economics, Elsevier, vol. 53(5), pages 1027-1056, July.
Abstract: This paper reviews the political uproar over offshore outsourcing connected with the release of the Economic Report of the President (ERP) in February 2004, examines the differing ways in which economists and non-economists talk about offshore outsourcing, and assesses the empirical evidence on the importance of offshore outsourcing in accounting for the weak labor market from 2001 to 2004. Even with important gaps in the data, the empirical literature is able to conclude that offshore outsourcing is unlikely to have accounted for a meaningful part of the job losses in the recent downturn or contributed much to the slow labor market rebound. The empirical evidence to date, while still tentative, actually suggests that increased employment in the overseas affiliates of U.S. multinationals is associated with more employment in the U.S. parent rather than less.
Handle: RePEc:nbr:nberwo:12398
Template-Type: ReDIF-Paper 1.0
Title: Renegotiation Without Holdup: Anticipating Spending and Infrastructure Concessions
Classification-JEL: H21; L51; L91
Author-Name: Eduardo Engel
Author-Person: pen3
Author-Name: Ronald Fischer
Author-Person: pfi53
Author-Name: Alexander Galetovic
Author-Person: pga381
Note: IO
Number: 12399
Creation-Date: 2006-07
Order-URL: http://www.nber.org/papers/w12399
File-URL: http://www.nber.org/papers/w12399.pdf
File-Format: application/pdf
Abstract: Infrastructure concessions are frequently renegotiated after investments are sunk, resulting in better contractual terms for the franchise holders. This paper offers a political economy explanation for renegotiations that occur with no apparent holdup. We argue that they are used by political incumbents to anticipate infrastructure spending and thereby increase the probability of winning an upcoming election. Contract renegotiations allow administrations to replicate the effects of issuing debt. Yet debt issues are incorporated in the budget, must be approved by Congress and are therefore subject to the opposition's review. By contrast, under current accounting standards the obligations created by renegotiations circumvent the budgetary process in most countries. Hence, renegotiations allow incumbents to spend more without being subject to Congressional oversight.
Handle: RePEc:nbr:nberwo:12399
Template-Type: ReDIF-Paper 1.0
Title: The Brevity and Violence of Contractions and Expansions
Classification-JEL: E32; E23; E24; J60
Author-Name: Alisdair McKay
Author-Person: pmc138
Author-Name: Ricardo Reis
Author-Person: pre73
Note: EFG ME
Number: 12400
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12400
File-URL: http://www.nber.org/papers/w12400.pdf
File-Format: application/pdf
Publication-Status: published as McKay, Alisdair & Reis, Ricardo, 2008. "The brevity and violence of contractions and expansions," Journal of Monetary Economics, Elsevier, vol. 55(4), pages 738-751, May.
Abstract: Early studies of business cycles argued that contractions in economic activity were briefer (shorter) and more violent (rapid) than expansions. This paper systematically investigates this claim and in the process discovers a robust new business cycle fact: expansions and contractions in output are equally brief and violent but contractions in employment are briefer and more violent than expansions. The difference arises because employment typically lags output around peaks but both series roughly coincide in their troughs. We discuss the performance of existing business cycle models in accounting for this fact, and conclude that none can fully account for it. We then show that a simple model that combines three familiar ingredients-labor hoarding, a choice of when to scrap old technologies, and job training or job search-can account for the business cycle fact.
Handle: RePEc:nbr:nberwo:12400
Template-Type: ReDIF-Paper 1.0
Title: The Chilean Pension Reform Turns 25: Lessons From the Social Protection Survey
Classification-JEL: G23; H55; J14
Author-Name: Alberto Arenas de Mesa
Author-Name: David Bravo
Author-Person: pbr442
Author-Name: Jere R. Behrman
Author-Person: pbe285
Author-Name: Olivia S. Mitchell
Author-Person: pmi73
Author-Name: Petra E. Todd
Note: AG PE
Number: 12401
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12401
File-URL: http://www.nber.org/papers/w12401.pdf
File-Format: application/pdf
Publication-Status: published as Kay, Stephen and Tapen Sinha (eds.) Lessons from Pension Reform in the Americas. Oxford: OUP, 2008.
Abstract: In 1980, Chile dramatically reformed its retirement system, replacing what was an old insolvent PAYGO program with a new structure that relies heavily on funded defined contribution individual accounts. In addition, eligibility and benefit requirements were standardized, and a safety net for old-age poverty was strengthened. Twenty-five years after this reform, the Chilean model is being re-assessed, in terms of coverage, contribution, investment, and retirement benefit outcomes. This paper introduces a recently-developed longitudinal survey of individual respondents in Chile, the Social Protection Survey (or Encuesta de Previsión Social, EPS), and illustrates some uses of this survey for microeconomic analysis of key aspects of the Chilean system.
Handle: RePEc:nbr:nberwo:12401
Template-Type: ReDIF-Paper 1.0
Title: Optimal Simple and Implementable Monetary and Fiscal Rules: Expanded Version
Classification-JEL: E52; E61; E63
Author-Name: Stephanie Schmitt-Grohé
Author-Person: psc44
Author-Name: Martín Uribe
Note: EFG
Number: 12402
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12402
File-URL: http://www.nber.org/papers/w12402.pdf
File-Format: application/pdf
Publication-Status: published as Schmitt-Grohe, Stephanie & Uribe, Martin, 2007. "Optimal simple and implementable monetary and fiscal rules," Journal of Monetary Economics, Elsevier, vol. 54(6), pages 1702-1725, September.
Abstract: This paper computes welfare-maximizing monetary and fiscal policy rules in a real business cycle model augmented with sticky prices, a demand for money, taxation, and stochastic government consumption. We consider simple feedback rules whereby the nominal interest rate is set as a function of output and inflation, and taxes are set as a function of total government liabilities. We implement a second-order accurate solution to the model. Our main findings are: First, the size of the inflation coefficient in the interest-rate rule plays a minor role for welfare. It matters only insofar as it affects the determinacy of equilibrium. Second, optimal monetary policy features a muted response to output. More importantly, interest rate rules that feature a positive response to output can lead to significant welfare losses. Third, the welfare gains from interest-rate smoothing are negligible. Fourth, optimal fiscal policy is passive. Finally, the optimal monetary and fiscal rule combination attains virtually the same level of welfare as the Ramsey optimal policy.
Handle: RePEc:nbr:nberwo:12402
Template-Type: ReDIF-Paper 1.0
Title: Two Paths to Abstract Art: Kandinsky and Malevich
Author-Name: David W. Galenson
Note: LS
Number: 12403
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12403
File-URL: http://www.nber.org/papers/w12403.pdf
File-Format: application/pdf
Publication-Status: published as DAVID W. GALENSON, 2008. "TWO PATHS TO ABSTRACT ART: KANDINSKYAND MALEVICH," Russian History, vol 35(2), pages 236-250.
Abstract: Wassily Kandinsky and Kazimir Malevich were both great Russian painters who became pioneers of abstract art during the second decade of the twentieth century. Yet the forms of their art differed radically, as did their artistic methods and goals. Kandinsky, an experimental artist, approached abstraction tentatively and visually, by gradually and progressively concealing forms drawn from nature, whereas Malevich, a conceptual innovator, plunged precipitously into abstraction, by creating symbolic elements that had no representational origins. The conceptual Malevich also made his greatest innovations considerably earlier in his life than the experimental Kandinsky. Interestingly, at the age of 50 Kandinsky wrote an essay that clearly described these two categories of artist, contrasting the facile and protean young virtuoso with the single-minded individual who matured more slowly but was ultimately more original.
Handle: RePEc:nbr:nberwo:12403
Template-Type: ReDIF-Paper 1.0
Title: How Progressive is the U.S. Federal Tax System? A Historical and International Perspective
Classification-JEL: H2
Author-Name: Thomas Piketty
Author-Person: ppi17
Author-Name: Emmanuel Saez
Author-Person: psa117
Note: PE
Number: 12404
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12404
File-URL: http://www.nber.org/papers/w12404.pdf
File-Format: application/pdf
Publication-Status: published as Thomas Piketty & Emmanuel Saez, 2007. "How Progressive is the U.S. Federal Tax System? A Historical and International Perspective," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 3-24, Winter.
Abstract: This paper provides estimates of federal tax rates by income groups in the United States since 1960, with special emphasis on very top income groups. We include individual and corporate income taxes, payroll taxes, and estate and gift taxes. The progressivity of the U.S. federal tax system at the top of the income distribution has declined dramatically since the 1960s. This dramatic drop in progressivity is due primarily to a drop in corporate taxes and in estate and gift taxes combined with a sharp change in the composition of top incomes away from capital income and toward labor income. The sharp drop in statutory top marginal individual income tax rates has contributed only moderately to the decline in tax progressivity. International comparisons confirm that is it critical to take into account other taxes than the individual income tax to properly assess the extent of overall tax progressivity, both for time trends and for cross-country comparisons. The pattern for the United Kingdom is similar to the US pattern. France had less progressive taxes than the US or UK in 1970 but has experienced an increase in tax progressivity and has now a more progressive tax system than the US or the UK.
Handle: RePEc:nbr:nberwo:12404
Template-Type: ReDIF-Paper 1.0
Title: Endogenous Monetary Policy Regime Change
Classification-JEL: E31; E32; E52; E58
Author-Name: Troy Davig
Author-Person: pda131
Author-Name: Eric M. Leeper
Author-Person: ple3
Note: EFG ME
Number: 12405
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12405
File-URL: http://www.nber.org/papers/w12405.pdf
File-Format: application/pdf
Publication-Status: published as Endogenous Monetary Policy Regime Change, Troy Davig, Eric M. Leeper. in NBER International Seminar on Macroeconomics 2006, Reichlin and West. 2008
Abstract: This paper makes changes in monetary policy rules (or regimes) endogenous. Changes are triggered when certain endogenous variables cross specified thresholds. Rational expectations equilibria are examined in three models of threshold switching to illustrate that (i) expectations formation effects generated by the possibility of regime change can be quantitatively important; (ii) symmetric shocks can have asymmetric effects; (iii) endogenous switching is a natural way to formally model preemptive policy actions. In a conventional calibrated model, preemptive policy shifts agents' expectations, enhancing the ability of policy to offset demand shocks; this yields a quantitatively significant "preemption dividend."
Handle: RePEc:nbr:nberwo:12405
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Increased Utilization of HIV Drugs on Longevity and Medical Expenditures: An Assessment Based on Aggregate U.S. Time-Series Data
Classification-JEL: I12; J1; O33
Author-Name: Frank R. Lichtenberg
Author-Person: pli76
Note: EH PR
Number: 12406
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12406
File-URL: http://www.nber.org/papers/w12406.pdf
File-Format: application/pdf
Publication-Status: published as Frank R Lichtenberg, 2006. "The impact of increased utilization of HIV drugs on longevity and medical expenditure: an assessment based on aggregate US time-series data," Expert Review of Pharmacoeconomics & Outcomes Research, vol 6(4), pages 425-436.
Abstract: We estimate the medical cost per life-year gained from increased utilization of HIV drugs by estimating the impact of increased drug utilization on the life expectancy and drug and hospital expenditure of HIV/AIDS patients, using aggregate (U.S. national-level) data for the period 1982-2001. We use IMS Health data on the aggregate number of and expenditure on HIV drug prescriptions, the CDC's AIDS Public Information Data Set, and data from AHRQ's Nationwide Inpatient Sample. Estimates of mortality models imply that actual life expectancy of HIV/AIDS patients in 2001 was 13.4 years higher than it would have been if the drug utilization rate had not increased from its 1993 level. Estimates of a model of hospital discharges imply that increased utilization of HIV drugs caused hospital utilization to decline by .25 to .29 discharges per person per year during the period 1993-2001. Medical cost per additional life-year is estimated to have been $17,175. Treatments that cost this amount are widely considered to be cost-effective. The consistency of this estimate with those from previous studies suggests that analysis of aggregate data may be a useful alternative or additional approach to evaluating the cost-effectiveness of new treatments.
Handle: RePEc:nbr:nberwo:12406
Template-Type: ReDIF-Paper 1.0
Title: Signaling Credibility --- Choosing Optimal Debt and International Reserves
Classification-JEL: F31; F34; F36
Author-Name: Joshua Aizenman
Author-Person: pai8
Author-Name: Jorge Fernández-Ruiz
Author-Person: pfe521
Note: IFM
Number: 12407
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12407
File-URL: http://www.nber.org/papers/w12407.pdf
File-Format: application/pdf
Publication-Status: published as Aizenman, Joshua and J. Fernández-Ruiz. “Signaling Credibility — Choosing Optimal Debt and International Reserves." The Journal of the Korean Economy 10, 1 (2009): 1-28.
Abstract: This paper evaluates the challenges facing developing countries when there is uncertainty about the policy maker type. We consider a country characterized by volatile output, inelastic demand for fiscal outlays, high tax collection costs, and sovereign risk, where future output depends on the type of policymaker in place today. There are two policymakers -- type T chooses debt and international reserves to smooth tax collection costs; type S has higher discount factor, aiming at obtaining current resources for narrow interest groups, and preferring not to undertake costly reforms that may enhance future output. Financial markets do not know the type of policymaker in place and try to infer its type by looking at its financial choices. We show that various adverse shocks (lower output, higher real interest rate, etc.) can induce a switch from an equilibrium where each policy maker chooses its preferred policy to another where T distorts its policies in order to separate itself from S in the least costly way. This is accomplished by type T reducing both international reserves and external debt. Further decline in output would induce type T to lower debt, and reserves would fall at a higher rate than otherwise expected.
Handle: RePEc:nbr:nberwo:12407
Template-Type: ReDIF-Paper 1.0
Title: Bond Markets as Conduits for Capital Flows: How Does Asia Compare?
Classification-JEL: F0; F3
Author-Name: Barry Eichengreen
Author-Person: pei2
Author-Name: Pipat Luengnaruemitchai
Author-Person: plu124
Note: IFM
Number: 12408
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12408
File-URL: http://www.nber.org/papers/w12408.pdf
File-Format: application/pdf
Publication-Status: published as Bond Markets as Conduits for Capital Flows: How Does Asia Compare?, Barry Eichengreen, Pipat Luengnaruemitchai. in International Financial Issues in the Pacific Rim: Global Imbalances, Financial Liberalization, and Exchange Rate Policy, Ito and Rose. 2008
Abstract: We use data on the extent to which residents of one country hold the bonds of issuers resident in another as a measure of financial integration or interrelatedness, asking how Asia compares with Europe and Latin America and with the base case in which the purchaser and issuer of the bonds reside in different regions. Not surprisingly, we find that Europe is head and shoulders above other regions in terms of financial integration. More interesting is that Asia already seems to have made some progress on this front compared to Latin America and other parts of the world. The contrast with Latin America is largely explained by stronger creditor and investor rights, more expeditious and less costly contract enforcement, and greater transparency that lead to larger and better developed financial systems in Asia, something that is conducive to foreign participation in local markets and to intra-regional cross holdings of Asian bonds generally. Further results based on a limited sample suggest that one factor holding back investment in foreign bonds in East Asia may be limited geographical diversification by mutual funds, in turn reflecting a dearth of appropriate assets. Asian Bond Fund 2, by creating a passively managed portfolio of local currency bonds potentially attractive to mutual fund managers and investors, may help to relax this constraint.
Handle: RePEc:nbr:nberwo:12408
Template-Type: ReDIF-Paper 1.0
Title: Is Crime Contagious?
Classification-JEL: H43
Author-Name: Jens Ludwig
Author-Name: Jeffrey R. Kling
Author-Person: pkl126
Note: CH LE PE
Number: 12409
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12409
File-URL: http://www.nber.org/papers/w12409.pdf
File-Format: application/pdf
Publication-Status: published as Revised and published in the Journal of Law and Economics, 50:3 (August 2007), forthcoming.
Abstract: Understanding whether criminal behavior is "contagious" is important for law enforcement and for policies that affect how people are sorted across social settings. We test the hypothesis that criminal behavior is contagious by using data from the Moving to Opportunity (MTO) randomized housing-mobility experiment to examine the extent to which lower local-area crime rates decrease arrest rates among individuals. Our analysis exploits the fact that the effect of treatment group assignment yields different types of neighborhood changes across the five MTO demonstration sites. We use treatment-site interactions to instrument for measures of neighborhood crime rates, poverty and racial segregation in our analysis of individual arrest outcomes. We are unable to detect evidence in support of the contagion hypothesis. Neighborhood racial segregation appears to be the most important explanation for across-neighborhood variation in arrests for violent crimes in our sample, perhaps because drug market activity is more common in high-minority neighborhoods.
Handle: RePEc:nbr:nberwo:12409
Template-Type: ReDIF-Paper 1.0
Title: The Church vs the Mall: What Happens When Religion Faces Increased Secular Competition?
Classification-JEL: H1; J2
Author-Name: Jonathan Gruber
Author-Person: pgr20
Author-Name: Daniel M. Hungerman
Author-Person: phu114
Note: LE PE
Number: 12410
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12410
File-URL: http://www.nber.org/papers/w12410.pdf
File-Format: application/pdf
Publication-Status: published as Jonathan Gruber & Daniel M. Hungerman, 2008. "The Church versus the Mall: What Happens When Religion Faces Increased Secular Competition?," The Quarterly Journal of Economics, MIT Press, vol. 123(2), pages 831-862, 05.
Abstract: Recently economists have begun to consider the causes and consequences of religious participation. An unanswered question in this literature is the effect upon individuals of changes in the opportunity cost of religious participation. In this paper we identify a policy-driven change in the opportunity cost of religious participation based on state laws that prohibit retail activity on Sunday, known as "blue laws." Many states have repealed these laws in recent years, raising the opportunity cost of religious participation. We construct a model which predicts, under fairly general conditions, that allowing retail activity on Sundays will lower attendance levels but may increase or decrease religious donations. We then use a variety of datasets to show that when a state repeals its blue laws religious attendance falls, and that church donations and spending fall as well. These results do not seem to be driven by declines in religiosity prior to the law change, nor do we see comparable declines in membership or giving to nonreligious organizations after a state repeals its laws. We then assess the effects of changes in these laws on drinking and drug use behavior in the NLSY. We find that repealing blue laws leads to an increase in drinking and drug use, and that this increase is found only among the initially religious individuals who were affected by the blue laws. The effect is economically significant; for example, the gap in heavy drinking between religious and non religious individuals falls by about half after the laws are repealed.
Handle: RePEc:nbr:nberwo:12410
Template-Type: ReDIF-Paper 1.0
Title: Skill Acquisition, Credit Constraints, and Trade
Classification-JEL: F16; O15; O16
Author-Name: Tatyana Chesnokova
Author-Name: Kala Krishna
Author-Person: pkr26
Note: ITI
Number: 12411
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12411
File-URL: http://www.nber.org/papers/w12411.pdf
File-Format: application/pdf
Publication-Status: published as Chesnokova, Tatyana & Krishna, Kala, 2009. "Skill acquisition, credit constraints, and trade," International Review of Economics & Finance, Elsevier, vol. 18(2), pages 227-238, March.
Abstract: This paper looks at the effect of credit constraints on skill acquisition when agents have heterogeneous abilities and wealth. We use a two factor general equilibrium model and assume credit markets are absent. We explore the effects of trade on factor earnings as well as the evolution of the distribution of income in small and large economies. Our work suggests that developed countries need to ensure access to education when liberalizing trade to ensure they reap the potential gains from trade.
Handle: RePEc:nbr:nberwo:12411
Template-Type: ReDIF-Paper 1.0
Title: Intertemporal Consumption Choices, Transaction Costs and Limited Participation to Financial Markets: Reconciling Data and Theory
Classification-JEL: G11; G12
Author-Name: Orazio P. Attanasio
Author-Person: pat7
Author-Name: Monica Paiella
Note: EFG
Number: 12412
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12412
File-URL: http://www.nber.org/papers/w12412.pdf
File-Format: application/pdf
Publication-Status: published as Orazio P. Attanasio & Monica Paiella, 2011. "Intertemporal consumption choices, transaction costs and limited participation in financial markets: reconciling data and theory," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(2), pages 322-343, March.
Abstract: This paper builds a unifying framework that, within the theory of intertemporal consumption choices, brings together the limited participation -based explanation of the poor empirical performance of the C-CAPM and the transaction costs-based explanation of incomplete portfolios. Using the implications of the consumption model and observed household consumption and portfolio choices, we identify the preference parameters of interest and a lower bound for the costs rationalizing non-participation in financial markets, in the presence of unobserved heterogeneity in tastes for consumption and portfolio allocation. Using the US Consumer Expenditure Survey and assuming isoelastic preferences, we estimate the coefficient of relative risk aversion at 1.7 and a cost bound of 0.4 percent of non-durable consumption. Our estimate of the preference parameter is theoretically plausible and the bound sufficiently small to be likely to be exceeded by the actual total (observable and unobservable) costs of participating to financial markets.
Handle: RePEc:nbr:nberwo:12412
Template-Type: ReDIF-Paper 1.0
Title: Intra-Day Seasonality in Activities of the Foreign Exchange Markets: Evidence From the Electronic Broking System
Classification-JEL: F31; F33; G15
Author-Name: Takatoshi Ito
Author-Name: Yuko Hashimoto
Note: IFM
Number: 12413
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12413
File-URL: http://www.nber.org/papers/w12413.pdf
File-Format: application/pdf
Publication-Status: published as Ito, Takatoshi & Hashimoto, Yuko, 2006. "Intraday seasonality in activities of the foreign exchange markets: Evidence from the electronic broking system," Journal of the Japanese and International Economies, Elsevier, vol. 20(4), pages 637-664, December.
Abstract: This paper examines intra-day patterns of the exchange rate behavior, using the "firm" bid-ask quotes and transactions of USD-JPY and Euro-USD recorded in the electronic broking system of the spot foreign exchange markets. The U-shape of intra-day activities (deals and price changes) and return volatility is confirmed for Tokyo and London participants, but not for New York participants. Activities and volatility do not increase toward the end of business hours in the New York market, even on Fridays (ahead of weekend hours of non-trading). It is found that there exists a high positive correlation between volatility and activities and a negative correlation between volatility and the bid-ask spread. A negative correlation is observed between the number of deals and the width of bid-ask spread during business hours.
Handle: RePEc:nbr:nberwo:12413
Template-Type: ReDIF-Paper 1.0
Title: What Determines Immigration's Impact? Comparing Two Global Centuries
Classification-JEL: N3; F22; J3
Author-Name: Timothy J. Hatton
Author-Person: pha305
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: DAE IFM LS
Number: 12414
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12414
File-URL: http://www.nber.org/papers/w12414.pdf
File-Format: application/pdf
Publication-Status: published as Hatton, Timothy and Jeffrey G. Williamson. "The Impact of Immigration: Comparing Two Global Eras." World Development 36, 3 (March 2008): 345-61.
Abstract: Can history shed light on the modern debate about immigration's labor market impact in high wage economies? This paper examines the relationship between migration and capital flows in the age of mass migration before 1914, the so-called first global century. It then assesses the effects of immigration on wages and employment with and without international capital mobility in first global century and today, that is, the second global century. The paper then explores the links between these economic relationships and immigration policy. It concludes with an explanation for the apparent difference in immigration's impact in the two global centuries, and thus on policy.
Handle: RePEc:nbr:nberwo:12414
Template-Type: ReDIF-Paper 1.0
Title: Cyclical Wages in a Search-and-Bargaining Model with Large Firms
Classification-JEL: E24; E37; J64
Author-Name: Julio J. Rotemberg
Author-Person: pro30
Note: EFG
Number: 12415
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12415
File-URL: http://www.nber.org/papers/w12415.pdf
File-Format: application/pdf
Publication-Status: published as Julio J. Rotemberg, 2006. "Cyclical wages in a search-and-bargaining model with large firms," Proceedings, Federal Reserve Bank of San Francisco.
Publication-Status: published as Cyclical Wages in a Search-and-Bargaining Model with Large Firms, Julio J. Rotemberg. in NBER International Seminar on Macroeconomics 2006, Reichlin and West. 2008
Abstract: This paper presents a complete general equilibrium model with flexible wages where the degree to which wages and productivity change when cyclical employment changes is roughly consistent with postwar U.S. data. Firms with market power are assumed to bargain simultaneously with many employees, each of whom finds himself matched with a firm only after a process of search. When employment increases as a result of reductions in market power, the marginal product of labor falls. This fall tempers the bargaining power of workers and thus dampens the increase in their real wages. The procyclical movement of wages is dampened further if the posting of vacancies is subject to increasing returns.
Handle: RePEc:nbr:nberwo:12415
Template-Type: ReDIF-Paper 1.0
Title: Military Positions and Post-Service Occupational Mobility of Union Army Veterans, 1861-1880
Classification-JEL: J24; J5; N3
Author-Name: Chulhee Lee
Author-Person: ple383
Note: DAE LS
Number: 12416
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12416
File-URL: http://www.nber.org/papers/w12416.pdf
File-Format: application/pdf
Publication-Status: published as Lee, Chulhee, 2007. "Military positions and post-service occupational mobility of Union Army veterans, 1861-1880," Explorations in Economic History, Elsevier, vol. 44(4), pages 680-698, October.
Abstract: Although the Civil War has attracted a great deal of scholarly attention, little is known about how different wartime experiences of soldiers influenced their civilian lives after the war. This paper examines how military rank and duty of Union Army soldiers while in service affected their post-service occupational mobility. Higher ranks and non-infantry duties appear to have provided more opportunities for developing skills, especially those required for white-collar jobs. Among the recruits who were unskilled workers at the time of enlistment, commissioned and non-commissioned officers were much more likely to move up to a white-collar job by 1880. Similarly, unskilled recruits who had served on white-collar military duties were more likely to enter a white-collar occupation by 1880. The higher occupational mobility of higher-ranking soldiers is likely to have resulted from disparate human capital accumulations offered by their military positions rather than from their superior abilities.
Handle: RePEc:nbr:nberwo:12416
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Anticipated Tax Changes on Intertemporal Labor Supply and the Realization of Taxable Income
Classification-JEL: H2; H31; J22
Author-Name: Adam Looney
Author-Name: Monica Singhal
Author-Person: psi159
Note: LS PE
Number: 12417
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12417
File-URL: http://www.nber.org/papers/w12417.pdf
File-Format: application/pdf
Abstract: We use anticipated changes in tax rates associated with changes in family composition to estimate intertemporal labor supply elasticities and elasticities of taxable income with respect to the net-of-tax wage rate. Changes in the ages of children can affect marginal tax rates through provisions of the tax code that are tied to child age and dependent status. We identify behavioral responses to these tax changes by comparing families who experienced a tax rate change to families who had a similar change in dependents but no resulting tax rate change. A primary advantage of our approach is that these changes can be anticipated, allowing us to estimate substitution effects that are not confounded by life-cycle income effects. We estimate an intertemporal elasticity of family labor earnings of 0.75 for families earning between $35,000 and $85,000 in the Survey of Income and Program Participation (SIPP) and find very similar estimates using the IRS-NBER individual tax panel.
Handle: RePEc:nbr:nberwo:12417
Template-Type: ReDIF-Paper 1.0
Title: When Knowledge is not Enough: HIV/AIDS Information and Risky Behavior in Botswana
Classification-JEL: I18; O10
Author-Name: James A. Levinsohn
Author-Person: ple386
Author-Name: Taryn Dinkelman
Author-Person: pdi279
Author-Name: Rolang Majelantle
Note: EH
Number: 12418
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12418
File-URL: http://www.nber.org/papers/w12418.pdf
File-Format: application/pdf
Abstract: The spread of the HIV/AIDS epidemic is still fueled by ignorance in many parts of the world. Filling in knowledge gaps, particularly between men and women, is considered key to preventing future infections and to reducing female vulnerabilities to the disease. However, such knowledge is arguably only a necessary condition for targeting these objectives. In this paper, we describe the extent to which HIV/AIDS knowledge is correlated with less risky sexual behavior. We ask: even when there are no substantial knowledge gaps between men and women, do we still observe sex-specific differentials in sexual behavior that would increase vulnerability to infection? We use data from two recent household surveys in Botswana to address this question. We show that even when men and women have very similar types of knowledge, they have different probabilities of reporting safe sex. Our findings are consistent with the existence of non-informational barriers to behavioral change, some of which appear to be sex-specific. The descriptive exercise in this paper suggests that it may be overly optimistic to hope for reductions in risky behavior through the channel of HIV-information provision alone.
Handle: RePEc:nbr:nberwo:12418
Template-Type: ReDIF-Paper 1.0
Title: Optimal Taxation of Entrepreneurial Capital with Private Information
Classification-JEL: D82; E22; E62; G18; H2; H21; H25; H3
Author-Name: Stefania Albanesi
Author-Person: pal30
Note: EFG PE
Number: 12419
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12419
File-URL: http://www.nber.org/papers/w12419.pdf
File-Format: application/pdf
Publication-Status: published as Optimal Taxation of Entrepreneurial Capital with Private Information, Stefania Albanesi. in Business Taxation (Trans-Atlantic Public Economics Seminar), Devereux and Gordon. 2014
Abstract: This paper studies optimal taxation of entrepreneurial capital with private information and multiple assets. Entrepreneurial activity is subject to a dynamic moral hazard problem and entrepreneurs face idiosyncratic capital risk. We first characterize the optimal allocation subject to the incentive compatibility constraints resulting from the private information. The optimal tax system implements such an allocation as a competitive equilibrium for a given market structure. We consider several market structures that differ in the assets or contracts traded and obtain three novel results. First, differential asset taxation is optimal. Marginal taxes on bonds depend on the correlation of their returns with idiosyncratic capital risk, which determines their hedging value. Entrepreneurial capital always receives a subsidy relative to other assets in the bad states. Second, if entrepreneurs are allowed to sell equity, the optimal tax system embeds a prescription for double taxation of capital income â€" at the firm level and at the investor level. Finally, we show that taxation of assets is essential even with competitive insurance contracts, when entrepreneurial portfolios are also unobserved.
Handle: RePEc:nbr:nberwo:12419
Template-Type: ReDIF-Paper 1.0
Title: Noisy Macroeconomic Announcements, Monetary Policy, and Asset Prices
Classification-JEL: E44; E47; E52
Author-Name: Roberto Rigobon
Author-Person: pri12
Author-Name: Brian Sack
Note: AP IFM ME
Number: 12420
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12420
File-URL: http://www.nber.org/papers/w12420.pdf
File-Format: application/pdf
Publication-Status: published as Noisy Macroeconomic Announcements, Monetary Policy, and Asset Prices, Roberto Rigobon, Brian Sack. in Asset Prices and Monetary Policy, Campbell. 2008
Abstract: The current literature has provided a number of important insights about the effects of macroeconomic data releases on monetary policy expectations and asset prices. However, one puzzling aspect of that literature is that the estimated responses are quite small. Indeed, these studies typically find that the major economic releases, taken together, account for only a small amount of the variation in asset prices—even those closely tied to near-term policy expectations. In this paper we argue that this apparent detachment arises in part from the difficulties associated with measuring macroeconomic news. We propose two new econometric approaches that allow us to account for the noise in measured data surprises. Using these estimators, we find that asset prices and monetary policy expectations are much more responsive to incoming news than previously believed. Our results also clarify the set of facts that should be captured by any model attempting to understand the interactions between economic data, monetary policy, and asset prices.
Handle: RePEc:nbr:nberwo:12420
Template-Type: ReDIF-Paper 1.0
Title: The Consumption-Tightness Puzzle
Classification-JEL: E24; E32; J20; J41; J64
Author-Name: Morten O. Ravn
Author-Person: pra16
Note: EFG
Number: 12421
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12421
File-URL: http://www.nber.org/papers/w12421.pdf
File-Format: application/pdf
Publication-Status: published as The Consumption-Tightness Puzzle, Morten O. Ravn. in NBER International Seminar on Macroeconomics 2006, Reichlin and West. 2008
Abstract: This paper introduces a labor force participation choice into a labor market matching model embedded in a dynamic stochastic general equilibrium set-up with production and savings. The participation choice is modelled as a tradeoff between forgoing the expected benefits of being search active and engaging in costly labor market search. The model induces a symmetry in firms' and workers' search decision since both sides of the labor market vary search effort at the extensive margins. We show that this set-up is of considerable analytical convenience and that it gives rise to a linear relationship between labor market tightness and the marginal utility of consumption. We refer to the latter as the "consumption - tightness puzzle" because (a) it gives rise to a number of counterfactual implications, and (b) it is a robust implication of theory. Amongst the counterfactual implications are very low volatility of tightness, procyclical unemployment, and a positively sloped Beveridge curve. These implications all derive from procyclical variations in participation rates that follow from allowing for the extensive search margin.
Handle: RePEc:nbr:nberwo:12421
Template-Type: ReDIF-Paper 1.0
Title: Cross-Border Acquisitions and Target Firms' Performance: Evidence From Japanese Firm-Level Data
Classification-JEL: C14; D24; F21; F23
Author-Name: Kyoji Fukao
Author-Person: pfu14
Author-Name: Keiko Ito
Author-Person: pit9
Author-Name: Hyeog Ug Kwon
Author-Name: Miho Takizawa
Note: IO
Number: 12422
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12422
File-URL: http://www.nber.org/papers/w12422.pdf
File-Format: application/pdf
Publication-Status: published as Cross-Border Acquisitions and Target Firms' Performance: Evidence from Japanese Firm-Level Data, Kyoji Fukao, Keiko Ito, Hyeog Ug Kwon, Miho Takizawa. in International Financial Issues in the Pacific Rim: Global Imbalances, Financial Liberalization, and Exchange Rate Policy, Ito and Rose. 2008
Abstract: Using Japanese firm-level data for the period from 1994-2002, this paper examines whether a firm is chosen as an acquisition target based on its productivity level, profitability and other characteristics and whether the performance of Japanese firms that were acquired by foreign firms improves after the acquisition. In our previous study for the Japanese manufacturing sector, we found that M&As by foreigners brought a larger and quicker improvement in total factor productivity (TFP) and profit rates than M&As by domestic firms. However, it may argued that firms acquired by foreign firms showed better performance simply because foreign investors acquired more promising Japanese firms than Japanese investors did. In order to address this potential problem of selection bias problem, in this study we combine a difference-in-differences approach with propensity score matching. The basic idea of matching is that we look for firms that were not acquired by foreign firms but had similar characteristics to firms that were acquired by foreigners. Using these firms as control subjects and comparing the acquired firms and the control subjects, we examine whether firms acquired by foreigners show a greater improvement in performance than firms not acquired by foreigners. Both results from unmatched samples and matched samples show that foreign acquisitions improved target firms' productivity and profitability significantly more and quicker than acquisitions by domestic firms. Moreover, we find that there is no positive impact on target firms' profitability in the case of both within-group in-in acquisitions and in-in acquisitions by domestic outsiders. In fact, in the manufacturing sector, the return on assets even deteriorated one year and two years after within-group in-in acquisition, while the TFP growth rate was higher after within-group in-in acquisitions than after in-in acquisitions by outsiders. Our results imply that in the case of within-group in-in acquisitions, parent firms may be trying to quickly restructure acquired firms even at the cost of deteriorating profitability.
Handle: RePEc:nbr:nberwo:12422
Template-Type: ReDIF-Paper 1.0
Title: Parallel Imports and Price Controls
Classification-JEL: O34; F13
Author-Name: Gene M. Grossman
Author-Person: pgr21
Author-Name: Edwin C.-L. Lai
Author-Person: pla349
Note: ITI POL
Number: 12423
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12423
File-URL: http://www.nber.org/papers/w12423.pdf
File-Format: application/pdf
Publication-Status: published as Gene M. Grossman & Edwin L.-C. Lai, 2008. "Parallel imports and price controls," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 378-402.
Abstract: Price controls create opportunities for international arbitrage. Many have argued that such arbitrage, if tolerated, will undermine intellectual property rights and dull the incentives for investment in research-intensive industries such as pharmaceuticals. We challenge this orthodox view and show, to the contrary, that the pace of innovation often is faster in a world with international exhaustion of intellectual property rights than in one with national exhaustion. The key to our conclusion is to recognize that governments will make different choices of price controls when parallel imports are allowed by their trade partners than they will when they are not.
Handle: RePEc:nbr:nberwo:12423
Template-Type: ReDIF-Paper 1.0
Title: Cohort Crowding: How Resources Affect Collegiate Attainment
Classification-JEL: I23; H52
Author-Name: John Bound
Author-Person: pbo406
Author-Name: Sarah Turner
Author-Person: ptu103
Note: ED LS
Number: 12424
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12424
File-URL: http://www.nber.org/papers/w12424.pdf
File-Format: application/pdf
Publication-Status: published as Bound, John & Turner, Sarah, 2007. "Cohort crowding: How resources affect collegiate attainment," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 877-899, June.
Abstract: Analyses of college attainment typically focus on factors affecting enrollment demand, including the financial attractiveness of a college education and the availability of financial aid, while implicitly assuming that resources available per student on the supply side of the market are elastically supplied. The higher education market in the United States is dominated by public and non-profit production, and colleges and universities receive considerable subsidies from state, federal, and private sources. Because consumers pay only a fraction of the cost of production, changes in demand are unlikely to be accommodated fully by colleges and universities without commensurate increases in non-tuition revenue. For this reason, public investment in higher education plays a crucial role in determining the degrees produced and the supply of college-educated workers to the labor market. Using data covering the last half of the twentieth century, we find strong evidence that large cohorts within states have relatively low undergraduate degree attainment, reflecting less than perfect elasticity of supply in the higher education market. That large cohorts receive lower public subsidies per student in higher education explains this result, indicating that resources have large effects on degree production. Our results suggest that reduced resources per student following from rising cohort size and lower state expenditures are likely to have significant negative effects on the supply of college-educated workers entering the labor market.
Handle: RePEc:nbr:nberwo:12424
Template-Type: ReDIF-Paper 1.0
Title: Evaluating Wireless Carrier Consolidation Using Semiparametric Demand Estimation
Classification-JEL: L1; C1
Author-Name: Patrick Bajari
Author-Name: Jeremy T. Fox
Author-Person: pfo144
Author-Name: Stephen Ryan
Author-Person: pry32
Note: IO
Number: 12425
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12425
File-URL: http://www.nber.org/papers/w12425.pdf
File-Format: application/pdf
Publication-Status: published as Patrick Bajari & Jeremy Fox & Stephen Ryan, 2008. "Evaluating wireless carrier consolidation using semiparametric demand estimation," Quantitative Marketing and Economics (QME), Springer, vol. 6(4), pages 299-338, December.
Abstract: The US mobile phone service industry has dramatically consolidated over the last two decades. One justification for consolidation is that merged firms can provide consumers with larger coverage areas at lower costs. We estimate the willingness to pay for national coverage to evaluate this motivation for past consolidation. As market level quantity data is not publicly available, we devise an econometric procedure that allows us to estimate the willingness to pay using market share ranks collected from a popular online retailer, Amazon. Our semiparametric maximum score estimator controls for consumers' heterogeneous preferences for carriers, handsets and minutes of calling time. We find that national coverage is strongly valued by consumers, providing an efficiency justification for across-market mergers. The methods we propose can estimate demand for other products using data from Amazon or other online retailers where quantities are not observed, but product ranks are observed. Since Amazon data can easily be gathered by researchers, these methods may be useful for the analysis of other product markets where high quality data are not publicly available.
Handle: RePEc:nbr:nberwo:12425
Template-Type: ReDIF-Paper 1.0
Title: Reflections on One Year at the Bank of Israel
Classification-JEL: E50; E65
Author-Name: Stanley Fischer
Note: IFM ME
Number: 12426
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12426
File-URL: http://www.nber.org/papers/w12426.pdf
File-Format: application/pdf
Abstract: In this paper I reflect on my first year as Governor of the Bank of Israel, which I joined in May 2005. I start by describing the current state of the Israeli economy and monetary policy and economic developments during the past year. I then review a series of issues that have arisen during the past year. Among them are: the monetary mechanism, which is unusual because exchange rate changes have a very rapid impact on prices; the role of inflation and interest rate expectations in policy decisions; the role of the interest rate gap with the US; the role of the Governor as chief economic adviser to the Government; banking supervision; and management and political issues.
Handle: RePEc:nbr:nberwo:12426
Template-Type: ReDIF-Paper 1.0
Title: Policy Options for Financing the Future Health and Long-Term Care Costs in Japan
Classification-JEL: H55; I10
Author-Name: Tadashi Fukui
Author-Name: Yasushi Iwamoto
Author-Person: piw2
Note: AG PE
Number: 12427
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12427
File-URL: http://www.nber.org/papers/w12427.pdf
File-Format: application/pdf
Publication-Status: published as Itō, Takatoshi and Andrew Rose (eds.) Fiscal policy and management in East Asia. Chicago and London: University of Chicago Press, 2007.
Abstract: As the Japanese population structure changes, health care and long-term care costs will steadily increase. The current style of financing (pay-as-you-go) will create a large increase in future burden of these costs. This paper studies an alternative policy that prefunds the social insurance benefits for the elderly. During a transition process, the proposed scheme maintains a higher contribution rate in order to accumulate sufficient funds. Under our baseline scenario, the sum of the contribution rates toward health insurance and long-term care insurance increases from 5.06 percent of earnings to 12.41 percent of the same. The rate of increase in overall burdens, including taxes and subsidies, is 63 percent. Our sensitivity analysis has shown that the quantitative implications of the increase in total burdens depend on social cost scenarios, the labor force, and the interest rate. However, labor force scenarios do not have a considerable impact on the rate of burden. As against this, the setting of social costs has a significant impact on the same. Even under the most optimistic scenario, the rate of increase in total burden is 34 percent. Even though we cannot predict the exact amount of the necessary contribution rate that is capable enough to transfer the funded system, what we are sure of is that a significant increase in the contribution rate is inevitable.
Handle: RePEc:nbr:nberwo:12427
Template-Type: ReDIF-Paper 1.0
Title: Corruption Perceptions vs. Corruption Reality
Classification-JEL: D73; D83
Author-Name: Benjamin A. Olken
Author-Person: pol170
Note: PE POL
Number: 12428
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12428
File-URL: http://www.nber.org/papers/w12428.pdf
File-Format: application/pdf
Publication-Status: published as Olken, Benjamin A., 2009. "Corruption perceptions vs. corruption reality," Journal of Public Economics, Elsevier, vol. 93(7-8), pages 950-964, August.
Abstract: This paper examines the accuracy of beliefs about corruption, using data from Indonesian villages. Specifically, I compare villagers' stated beliefs about the likelihood of corruption in a road-building project in their village with a more objective measure of 'missing expenditures' in the project, which I construct by comparing the projects' official expenditure reports with an independent estimate of the prices and quantities of inputs used in construction. I find that villagers' beliefs do contain information about corruption in the road project, and that villagers are sophisticated enough to distinguish between corruption in the road project and other types of corruption in the village. The magnitude of their information, however, is small, in part because officials hide corruption where it is hardest for villagers to detect. This may limit the effectiveness of grass-roots monitoring of local officials. I also find evidence of systematic biases in corruption beliefs, particularly when examining the relationship between corruption and variables correlated with trust. For example, ethnically heterogeneous villages have higher perceived corruption levels but lower actual levels of missing expenditures. The findings illustrate the limitations of relying solely on corruption perceptions, whether in designing anti-corruption policies or in conducting empirical research on corruption.
Handle: RePEc:nbr:nberwo:12428
Template-Type: ReDIF-Paper 1.0
Title: Health Insurance Enrollment Decisions: Preferences for Coverage, Worker Sorting, and Insurance Take Up
Classification-JEL: I1; J3
Author-Name: Alan C. Monheit
Author-Name: Jessica Primoff Vistnes
Note: EH
Number: 12429
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12429
File-URL: http://www.nber.org/papers/w12429.pdf
File-Format: application/pdf
Publication-Status: published as Alan C. Monheit & Jessica Primoff Vistnes, 2008. "Health Insurance Enrollment Decisions: Preferences for Coverage, Worker Sorting, and Insurance Take-up," INQUIRY: The Journal of Health Care Organization, Provision, and Financing, vol 45(2), pages 153-167.
Abstract: The weak response by the uninsured to policy initiatives encouraging voluntary enrollment in health insurance has raised concerns regarding the extent to which the uninsured value health insurance. To address this issue, we use data from the 2001 Medical Expenditure Panel Survey to examine the association between health insurance preferences and coverage status. We also consider the role of such preferences in decisions to seek out and enroll in employment-based coverage. We find that adults with weak or uncertain preferences for health insurance are more likely than persons with strong preferences to be uninsured and less likely to acquire coverage. Our econometric work indicates that workers with weak or uncertain preferences are less likely to obtain job offers with insurance, reinforcing prior evidence that workers sort among jobs according to preferences for coverage. We also find that workers with weak or uncertain preferences are less likely to enroll in offered coverage and we estimate the subsidy necessary to compensate such workers for the utility loss were they to enroll. Our results suggest a dual approach to expanding coverage that includes both subsidies and educational efforts to inform targeted groups among the uninsured about the value of health insurance.
Handle: RePEc:nbr:nberwo:12429
Template-Type: ReDIF-Paper 1.0
Title: Employment and Adverse Selection in Health Insurance
Classification-JEL: I1; J10; J33
Author-Name: Jayanta Bhattacharya
Author-Name: William B. Vogt
Author-Person: pvo14
Note: EH LS
Number: 12430
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12430
File-URL: http://www.nber.org/papers/w12430.pdf
File-Format: application/pdf
Abstract: We construct and test a new model of employer-provided health insurance provision in the presence of adverse selection in the health insurance market. In our model, employers cannot observe the health of their employees, but can decide whether to offer insurance. Employees sort themselves among employers who do and do not offer insurance on the basis of their current health status and the probability distribution over future health status changes. We show that there exists a pooling equilibrium in which both sick and healthy employees are covered as long as the costs of job switching are higher than the persistence of health status. We test and verify some of the key implications of our model using data from the Current Population Survey, linked to information provided by the U.S. Department of Labor about the job-specific human capital requirements of jobs.
Handle: RePEc:nbr:nberwo:12430
Template-Type: ReDIF-Paper 1.0
Title: The Direct Substitution Between Government and Private Consumption in East Asia
Classification-JEL: E6; H5
Author-Name: Yum K. Kwan
Note: PE
Number: 12431
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12431
File-URL: http://www.nber.org/papers/w12431.pdf
File-Format: application/pdf
Publication-Status: published as Ito, Takatoshi and Andrew K. Rose (eds.) Fiscal Policy and Management in East Asia, NBER-East Asia Seminar on Economics series, vol 16. Chicago and London: University of Chicago Press, 2007.
Publication-Status: published as The Direct Substitution between Government and Private Consumption in East Asia, Yum K. Kwan. in Fiscal Policy and Management in East Asia, Ito and Rose. 2007
Abstract: We investigate empirically the extent to which government consumption substitutes for private consumption in nine East Asia countries. Panel cointegrating regression uncovers a significantly positive elasticity of substitution between government and private consumption, implying on average government and private consumption are substitutes in East Asia. Country-by-country analysis, however, reveals diversity in the substitutability estimates. The four North East countries - China, Hong Kong, Japan, and Korea - tend to share similar and moderate values of the substitution elasticity. For the five ASEAN countries studied in this paper, the relationship between private and government consumption vary substantially, both in the sign and magnitude of the elasticity of substitution. Private and government consumption in Malaysia and Thailand are strong substitutes, but they are found to be complements in Indonesia and Singapore. In between is the Philippines which has a near zero elasticity of substitution.
Handle: RePEc:nbr:nberwo:12431
Template-Type: ReDIF-Paper 1.0
Title: On the Determinants of Exporters' Currency Pricing: History vs. Expectations
Classification-JEL: F12; F31; F33
Author-Name: Shin-ichi Fukuda
Author-Person: pfu76
Author-Name: Masanori Ono
Author-Person: pon42
Note: IFM ITI
Number: 12432
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12432
File-URL: http://www.nber.org/papers/w12432.pdf
File-Format: application/pdf
Publication-Status: published as Fukuda, Shin-ichi & Ono, Masanori, 2006. "On the determinants of exporters' currency pricing: History vs. expectations," Journal of the Japanese and International Economies, Elsevier, vol. 20(4), pages 548-568, December.
Abstract: The purpose of this paper is to investigate why the choice of invoice currency under exchange rate uncertainty depends not only on expectations but also on history. The analysis is motivated by the fact that the U.S. dollar has historically been the dominant vehicle currency in developing countries. The theoretical analysis is based on an open economy model of monopolistic competition. When the market is competitive enough, the exporting firms tend to set their prices not to deviate from those of the competitors. As a result, a coordination failure can lead the third currency to be a less efficient equilibrium invoice currency. The role of expectations is important in selecting the equilibrium in the static framework. However, in the dynamic model with staggered price-setting, the role of history becomes another key determinant of the equilibrium currency pricing. The role of history may dominate the role of expectations when the firms are myopic, particularly in the competitive local market. It also becomes dominant in the staggered price setting when a small fraction of the new price setters are backward-looking. The result suggests the importance of history in explaining why the firm tends to choose the US dollar as vehicle currency.
Handle: RePEc:nbr:nberwo:12432
Template-Type: ReDIF-Paper 1.0
Title: Recursive Competitive Equilibrium
Classification-JEL: D5; D51; D53; D61; D91; D92; E21; E22; E23; G12
Author-Name: Rajnish Mehra
Author-Person: pme56
Note: AP EFG IFM
Number: 12433
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12433
File-URL: http://www.nber.org/papers/w12433.pdf
File-Format: application/pdf
Publication-Status: published as Rajnish Mehra, 1984. "Recursive competitive equilibrium," Economics Letters, vol 16(3-4), pages 273-278.
Abstract: In this article we define a Recursive Competitive Equilibrium, provide an example and review the related literature. The article is an entry prepared for The New Palgrave: A Dictionary of Economics, 2nd Edition (Palgrave Macmillan: New York).
Handle: RePEc:nbr:nberwo:12433
Template-Type: ReDIF-Paper 1.0
Title: The Equity Premium in India
Classification-JEL: E21; G1; G12
Author-Name: Rajnish Mehra
Author-Person: pme56
Note: AP EFG IFM
Number: 12434
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12434
File-URL: http://www.nber.org/papers/w12434.pdf
File-Format: application/pdf
Publication-Status: published as Basu, Kaushik (ed.) Oxford Companion to Economics in India. Oxford University Press, 2007.
Abstract: In this article we examine the Equity Premium in the Indian context and review the related literature. The equity premium is the returned earned by a well-diversified stock portfolio in excess of that earned by a risk free security such as a Treasury Bill. Consistent with U.S. experience we find that the Indian equity premium has been quite high in the post 1991 period, averaging 9.7% above the corresponding risk free security. It is difficult to justify such a premium based on theoretical considerations. The article is an entry prepared for the Oxford Companion to Economics in India edited by Kaushik Basu
Handle: RePEc:nbr:nberwo:12434
Template-Type: ReDIF-Paper 1.0
Title: Reaching for the Stars: Who Pays for Talent in Innovative Industries?
Classification-JEL: J24; J31; L2; L86
Author-Name: Fredrik Andersson
Author-Name: Matthew Freedman
Author-Person: pfr223
Author-Name: John C. Haltiwanger
Author-Person: pha231
Author-Name: Julia Lane
Author-Person: pla36
Author-Name: Kathryn L. Shaw
Author-Person: psh162
Note: EFG LS PR
Number: 12435
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12435
File-URL: http://www.nber.org/papers/w12435.pdf
File-Format: application/pdf
Publication-Status: published as Fredrik Andersson & Matthew Freedman & John Haltiwanger & Julia Lane & Kathryn Shaw, 2009. "Reaching for the Stars: Who Pays for Talent in Innovative Industries?," Economic Journal, Royal Economic Society, vol. 119(538), pages F308-F332, 06.
Abstract: Innovation in the U.S. economy is about employing and rewarding highly talented workers to produce new products. Using unique longitudinal matched employer-employee data, this paper makes a key connection between talent and firms in markets with risky product innovations. We show that software firms that operate in product markets with highly skewed returns to innovation, or high variance payoffs, are more likely to attract and pay for star workers. Thus, firms in high variance product markets pay more up-front--in starting salaries--to attract and motivate star employees, because if these star workers produce home-run innovations, the firm's winnings will be huge. However, we also find these same firms pay highly for loyalty: star workers that stay with a firm have much higher earnings in firms with high variance product market payoffs. The large effects on earnings are robust to the inclusion of a wide range of controls for both workers and firm characteristics. One key control is that we also show that in firms that have actually hit home runs, with high revenues, the rewards for star talent are even greater. We also find that the dispersion of earnings is higher within firms with high variance product payoffs.
Handle: RePEc:nbr:nberwo:12435
Template-Type: ReDIF-Paper 1.0
Title: The Growth in the Social Security Disability Rolls: A Fiscal Crisis Unfolding
Classification-JEL: H53; H55; I12; I18; J26
Author-Name: David Autor
Author-Person: pau9
Author-Name: Mark Duggan
Author-Person: pdu194
Note: AG EH LS PE
Number: 12436
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12436
File-URL: http://www.nber.org/papers/w12436.pdf
File-Format: application/pdf
Publication-Status: published as Autor, David H. and Mark G. Duggan. "The Growth In The Social Security Disability Rolls: A Fiscal Crisis Unfolding," Journal of Economic Perspectives, 2006, v20(3,Summer), 71-96.
Abstract: More than 80 percent of nonelderly U.S. adults are insured against the risk of disabling physical or mental illness by Social Security Disability Insurance (SSDI). This article evaluates the causes of the extraordinary growth in SSDI enrollment, considers its fiscal ramifications, and discusses potential policy responses. While aggregate population health has improved by most measures in recent decades, the rate of SSDI receipt among nonelderly adults has nearly doubled since 1984. We project that SSDI receipt will rise by an additional seventy percent before reaching a steady state rate of approximately 6.5 percent of adults between the ages of 25 and 64, with cash benefit payments exceeding $150 billion annually (excluding Medicare). We trace the rapid expansion of SSDI to: (1) congressional reforms to disability screening in 1984 that enabled workers with low mortality disorders such as back pain, arthritis and mental illness to more readily qualify for benefits; (2) a rise in the after-tax DI income replacement rate, which strengthened the incentives for workers to seek benefits; (3) and a rapid increase in female labor force participation that expanded the pool of insured workers. Notably, the aging of the baby boom generation has contributed little to the growth of SSDI to date. Among several avenues for reducing SSDI growth, we suggest that the most promising are revamping the disability appeals process--in which the Social Security Administration currently loses nearly three-quarters of all appeals--and reducing the attractiveness of DI benefits for work-capable disabled individuals by providing additional access to public health insurance. By contrast, previous efforts to reduce the SSDI rolls by discontinuing benefits or by providing stronger return-to-work incentives have proved remarkably unsuccessful.
Handle: RePEc:nbr:nberwo:12436
Template-Type: ReDIF-Paper 1.0
Title: How Do Youth with Mental Disorders Fare in the Juvenile Justice System?
Classification-JEL: I1; L5
Author-Name: Pinka Chatterji
Author-Person: pch732
Author-Name: Alison Cuellar
Note: EH
Number: 12437
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12437
File-URL: http://www.nber.org/papers/w12437.pdf
File-Format: application/pdf
Abstract: The purpose of this paper is to examine the relationship between mental health problems and justice outcomes. Several studies have documented that individuals with a variety of mental disorders are overrepresented in the justice system. This pattern could result if persons with mental disorders are more likely to commit crimes, or more likely to commit serious crimes, than persons without disorders. In addition, individuals with mental disorders may be more likely than those without disorders to be sanctioned conditional on committing a particular crime. The major public policy concern is around the latter possibility, which has been interpreted as the justice system being biased against those with mental disorders. In this paper we explore several channels through which mental health problems, measured as ADHD and depression, may lead to over-representation in the criminal justice system. Using a large sample of adolescents, our findings show that youth with ADHD fare worse in the juvenile justice system in terms of the probability of being arrested and the probability of conviction once arrested. We find that elevated ADHD symptoms during adolescence are associated with statistically significant and meaningful increases in the probability of arrest and conviction after controlling for preexisting factors and mechanisms that may arise from the disorder itself.
Handle: RePEc:nbr:nberwo:12437
Template-Type: ReDIF-Paper 1.0
Title: Regulatory Exploitation and the Market for Corporate Controls
Classification-JEL: G3; H51; I11
Author-Name: Leemore Dafny
Author-Name: David Dranove
Author-Person: pdr111
Note: CF EH
Number: 12438
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12438
File-URL: http://www.nber.org/papers/w12438.pdf
File-Format: application/pdf
Publication-Status: published as Leemore Dafny & David Dranove, 2009. "Regulatory Exploitation and Management Changes: Upcoding in the Hospital Industry," Journal of Law & Economics, University of Chicago Press, vol. 52(2), pages 223-250, 05.
Abstract: This paper investigates whether managers who fail to exploit regulatory loopholes are vulnerable to replacement. We use the U.S. hospital industry in 1985-1996 as a case study. A 1988 change in Medicare rules widened a pre-existing loophole in the Medicare payment system, presenting hospitals with an opportunity to increase operating margins by five or more percentage points simply by "upcoding" patients to more lucrative codes. We find that "room to upcode" is a statistically and economically significant predictor of whether a hospital replaces its management with a new team of for-profit managers. We also find that hospitals replacing their management subsequently upcode more than a sample of similar hospitals that did not, as identified by propensity scores.
Handle: RePEc:nbr:nberwo:12438
Template-Type: ReDIF-Paper 1.0
Title: Home and Regional Biases and Border Effects in Armington Type Models
Classification-JEL: F10
Author-Name: John Whalley
Author-Person: pwh8
Author-Name: Xian Xin
Author-Person: pxi37
Note: ITI
Number: 12439
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12439
File-URL: http://www.nber.org/papers/w12439.pdf
File-Format: application/pdf
Publication-Status: published as Whalley, John & Xin, Xian, 2009. "Home and regional biases and border effects in Armington type models," Economic Modelling, Elsevier, vol. 26(2), pages 309-319, March.
Abstract: We discuss biases in preferences and their trade effects in terms of impacts on non-neutral trade flows motivated by recent literature on both home bias and the border effect. These terms take on multiple definitions in the literature and are often used interchangeably even though they differ. The border effect refers to a higher proclivity to trade behind rather than across national borders and is usually defined by the coefficients of regional dummies from an estimated gravity model. It can be present both in data and in counterfactual model solutions. Sometimes the reduced form of the gravity model used is asserted to reflect an Armington type model. For the border effect to occur as a model outcome, a structural model with at least 2 home regions and 1 country abroad is needed. In contrast to current literature, we offer a characterization of various forms of preference bias in trade models and measures of their associated trade effects based on a concept we term trade neutrality. These effects go beyond conventional border effects, and can be both across and within borders. Home bias is typically specified as an Armington preference for domestic over comparable foreign products in a trade model where goods are heterogeneous across countries. It is reflected in both model structure and parameterization, but defined in several different ways in the literature. We assess the contribution of each form of bias to the set of possible trade effects using a calibrated model with 3 Canadian regions, the U.S., and the rest of the world using 2001 data. We also evaluate how much of the conventional border effect is accounted for when model biases are modified in various ways.
Handle: RePEc:nbr:nberwo:12439
Template-Type: ReDIF-Paper 1.0
Title: Schooling Externalities, Technology and Productivity: Theory and Evidence from U.S. States
Classification-JEL: J24; J31; O41; R11
Author-Name: Susana Iranzo
Author-Person: pir38
Author-Name: Giovanni Peri
Author-Person: ppe210
Note: ITI LS PR
Number: 12440
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12440
File-URL: http://www.nber.org/papers/w12440.pdf
File-Format: application/pdf
Publication-Status: published as Susana Iranzo & Giovanni Peri, 2009. "Schooling Externalities, Technology, and Productivity: Theory and Evidence from U.S. States," The Review of Economics and Statistics, MIT Press, vol. 91(2), pages 420-431, November.
Abstract: The recent literature on local schooling externalities in the U.S. is rather mixed: positive external effects of average education levels are hardly to be found but, in contrast, positive externalities from the share of college graduates can often be identified. This paper proposes a simple model to reconcile this mixed evidence. The key idea is that advanced technologies are complementary to highly educated workers, as opposed to traditional technologies which are complementary to less educated workers. Our calibrated model predicts that workers with high school education or less are employed in the traditional sector, while more educated workers are employed in the advanced sector. As the advanced sector is associated with the production of differentiated goods and services this generates a positive pecuniary externality (positive TFP effect) of college educated workers. By contrast, as no externalities are associated with the traditional technology, high school education only increases private returns. The model predictions are tested using data on U.S. states. We use compulsory attendance and child labor laws, push-driven immigration of highly educated workers and the location of Land Grant colleges as instruments for schooling attainments of workers in different states. The empirical estimates confirm that an increase in college education, but not an increase in high school education, had significant positive production externalities in U.S. states during the period 1960-2000.
Handle: RePEc:nbr:nberwo:12440
Template-Type: ReDIF-Paper 1.0
Title: E-Stability vis-a-vis Determinacy Results for a Broad Class of Linear Rational Expectations Models
Classification-JEL: C62; C63; D84; E00
Author-Name: Bennett T. McCallum
Note: EFG ME
Number: 12441
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12441
File-URL: http://www.nber.org/papers/w12441.pdf
File-Format: application/pdf
Publication-Status: published as McCallum, Bennett T., 2007. "E-stability vis-a-vis determinacy results for a broad class of linear rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 31(4), pages 1376-1391, April.
Abstract: It is argued that learnability/E-stability is a necessary condition for a RE solution to be plausible. A class of linear models considered by Evans and Honkapohja (2001) is shown to include all models of the form used by King and Watson (1998) and Klein (2000), which permits any number of lags, leads, and lags of leads. For this broad class it is shown that, if current-period information is available in the learning process, determinacy is a sufficient condition for E-stability. It is not a necessary condition, however; there exist cases with more than one stable solution in which the solution based on the decreasing-modulus ordering of the system's eigenvalues is E-stable. If in such a case the other stable solution(s) are not E-stable, then the condition of indeterminacy may not be important for practical issues.
Handle: RePEc:nbr:nberwo:12441
Template-Type: ReDIF-Paper 1.0
Title: Expectations, Asset Prices, and Monetary Policy: The Role of Learning
Classification-JEL: E44; E52; O41
Author-Name: Simon Gilchrist
Author-Person: pgi28
Author-Name: Masashi Saito
Note: ME
Number: 12442
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12442
File-URL: http://www.nber.org/papers/w12442.pdf
File-Format: application/pdf
Publication-Status: published as Expectations, Asset Prices, and Monetary Policy: The Role of Learning, Simon Gilchrist, Masashi Saito. in Asset Prices and Monetary Policy, Campbell. 2008
Abstract: This paper studies the implications of financial market imperfections represented by a countercyclical external finance premium and the gradual recognition of changes in the drift of technology growth for the design of an interest rate rule. Asset price movements induced by changes in trend growth influence balance-sheet conditions that determine the external finance premium. Such movements are magnified when the private sector is imperfectly informed regarding the trend growth rate of technology. The presence of financial market imperfections provides a motivation for responding to the gap between the observed asset prices and the potential level of asset prices in addition to responding strongly to inflation. This is because the asset price gap represents distortions in the resource allocation induced by financial market imperfections more distinctly than inflation. The policymaker's imperfect information about the drift of technology growth renders imprecise the calculation of the potential and thus reduces the benefit of responding to the asset price gap. A policy that responds to the level of asset prices which does not take into account changes in potential tends to be welfare reducing.
Handle: RePEc:nbr:nberwo:12442
Template-Type: ReDIF-Paper 1.0
Title: The Welfare Consequences of ATM Surcharges: Evidence from a Structural Entry Model
Classification-JEL: G21; L13; L5
Author-Name: Gautam Gowrisankaran
Author-Name: John Krainer
Author-Person: pkr64
Note: IO PR
Number: 12443
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12443
File-URL: http://www.nber.org/papers/w12443.pdf
File-Format: application/pdf
Abstract: We estimate a structural model of the market for automatic teller machines (ATMs) in order to evaluate the implications of regulating ATM surcharges on ATM entry and consumer and producer surplus. We estimate the model using data on firm and consumer locations, and identify the parameters of the model by exploiting a source of local quasi-experimental variation, that the state of Iowa banned ATM surcharges during our sample period while the state of Minnesota did not. We develop new econometric methods that allow us to estimate the parameters of equilibrium models without computing equilibria. Monte Carlo evidence shows that the estimator performs well. We find that a ban on ATM surcharges reduces ATM entry by about 12 percent, increases consumer welfare by about 35 percent and lowers producer profits by about 20 percent. Total welfare remains about the same under regimes that permit or prohibit ATM surcharges and is about 17 percent lower than the surplus maximizing level. This paper can help shed light on the theoretically ambiguous implications of free entry on consumer and producer welfare for differentiated products industries in general and ATMs in particular.
Handle: RePEc:nbr:nberwo:12443
Template-Type: ReDIF-Paper 1.0
Title: Financial Innovation for an Aging World
Classification-JEL: G22; G23; J11; J14; J18; J21; J26; N2
Author-Name: Olivia S. Mitchell
Author-Person: pmi73
Author-Name: John Piggott
Author-Person: ppi34
Author-Name: Michael Sherris
Author-Name: Shaun Yow
Note: AG LS PE
Number: 12444
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12444
File-URL: http://www.nber.org/papers/w12444.pdf
File-Format: application/pdf
Publication-Status: published as Olivia S Mitchell & John Piggott & Michael Sherris & Shaun Yow, 2006. "Financial Innovation for an Ageing World," RBA Annual Conference Volume, in: Christopher Kent & Anna Park & Daniel Rees (ed.), Demography and Financial Markets Reserve Bank of Australia.
Abstract: Over the last half-century, around the world, many nations have seen plummeting fertility rates and mounting life expectancies. These two factors are the engine behind unprecedented global aging. In this paper, we explore how the demographic transition may influence financial markets and, in turn, how financial market innovation might help resolve concerns flowing from global aging trends. We first provide context by reviewing the economics, finance, and insurance-related literature on how global aging patterns may influence capital markets. We then turn to insurance markets, and discuss a range of products and policies, including both retail and wholesale financial offerings for various forms of life annuities, long-term care benefits, reverse mortgages, securitization of longevity risk, inflation-protected assets, reinsurance, guarantees, derivative contracts on residential property price indices, mortality swaps and longevity derivative contracts. We also indicate how new public-private partnerships might be beneficial in enhancing the future environment for old-age risk management.
Handle: RePEc:nbr:nberwo:12444
Template-Type: ReDIF-Paper 1.0
Title: Moral Hazard, Adverse Selection and Health Expenditures: A Semiparametric Analysis
Classification-JEL: C14; D82; I11
Author-Name: Patrick Bajari
Author-Name: Han Hong
Author-Name: Ahmed Khwaja
Note: IO EH PE
Number: 12445
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12445
File-URL: http://www.nber.org/papers/w12445.pdf
File-Format: application/pdf
Publication-Status: published as Patrick Bajari & Christina Dalton & Han Hong & Ahmed Khwaja, 2014. "Moral hazard, adverse selection, and health expenditures: A semiparametric analysis," The RAND Journal of Economics, vol 45(4), pages 747-763.
Abstract: Theoretical models predict asymmetric information in health insurance markets may generate inefficient outcomes due to adverse selection and moral hazard. However, previous empirical research has found it difficult to disentangle adverse selection from moral hazard in health care. We empirically study this question by using data from the Health and Retirement Study to estimate a structural model of the demand for health insurance and medical care. Using a two-step semi-parametric estimation strategy we find significant evidence of moral hazard, but not of adverse selection.
Handle: RePEc:nbr:nberwo:12445
Template-Type: ReDIF-Paper 1.0
Title: Goals and Plans in Protective Decision Making
Classification-JEL: G22; H23; H44
Author-Name: David H. Krantz
Author-Name: Howard Kunreuther
Note: PE
Number: 12446
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12446
File-URL: http://www.nber.org/papers/w12446.pdf
File-Format: application/pdf
Abstract: Protective decisions are often puzzling. Among other anomalies, people insure against non-catastrophic events, underinsure against catastrophic risks, and allow extraneous factors to influence insurance purchases and other protective decisions. Neither expected utility theory nor prospect theory can explain these anomalies satisfactorily. We propose a constructed-choice model for general decision making. The model departs from utility theory and prospect theory in its treatment of multiple goals and it suggests several different ways in which context can affect choice. To apply this model to the above anomalies, we consider many different insurance-related goals, organized in a taxonomy, and we consider the effects of context on goals, resources, plans and decision rules. The paper concludes by suggesting some prescriptions for improving individual decision making with respect to protective measures.
Handle: RePEc:nbr:nberwo:12446
Template-Type: ReDIF-Paper 1.0
Title: Employer Matching and 401(k) Saving: Evidence from the Health and Retirement Study
Classification-JEL: E21; H24; J32
Author-Name: Gary V. Engelhardt
Author-Name: Anil Kumar
Author-Person: pku235
Note: PE
Number: 12447
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12447
File-URL: http://www.nber.org/papers/w12447.pdf
File-Format: application/pdf
Publication-Status: published as Engelhardt, Gary V. & Kumar, Anil, 2007. "Employer matching and 401(k) saving: Evidence from the health and retirement study," Journal of Public Economics, Elsevier, vol. 91(10), pages 1920-1943, November.
Publication-Status: published as Employer Matching and 401(k) Saving: Evidence from the Health and Retirement Study, Gary V. Engelhardt, Anil Kumar. in Public Policy and Retirement, Trans-Atlantic Public Economics Seminar (TAPES), Blomquist and Gordon. 2007
Abstract: Employer matching of employee 401(k) contributions can provide a powerful incentive to save for retirement and is a key component in pension-plan design in the United States. Using detailed administrative contribution, earnings, and pension-plan data from the Health and Retirement Study, this analysis formulates a life-cycle-consistent econometric specification of 401(k) saving and estimates the determinants of saving accounting for non-linearities in the household budget set induced by matching. The participation estimates indicate that an increase in the match rate by 25 cents per dollar of employee contribution raises 401(k) participation by 3.75 to 6 percentage points, and the estimated elasticity of participation with respect to matching ranges from 0.02-0.07. The parametric and semi-parametric estimates for saving indicate that an increase in the match rate by 25 cents per dollar of employee contribution raises 401(k) saving by $400-$700 (in 1991 dollars). The estimated elasticity of 401(k) saving to matching is also small and ranges from 0.09-0.12 overall, with just under half of this effect on the intensive margin. Overall, the analysis reveals that matching is a rather poor policy instrument with which to raise retirement saving.
Handle: RePEc:nbr:nberwo:12447
Template-Type: ReDIF-Paper 1.0
Title: Electoral Uncertainty and the Volatility of International Capital Flows
Classification-JEL: F34; F41
Author-Name: Roberto Chang
Author-Person: pch80
Note: IFM POL
Number: 12448
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12448
File-URL: http://www.nber.org/papers/w12448.pdf
File-Format: application/pdf
Abstract: I study a small open economy in which elections affect and are affected by capital inflows. Two candidates, one favoring workers and another favoring entrepreneurs, run for office; the winner chooses taxes, which affect investment returns. A pro labor victory results in a "sudden stop" in investment and capital flows, reflecting a time inconsistency problem. The pro business candidate is free from time inconsistency but becomes less attractive to voters if the foreign debt is larger. Hence electoral outcomes depends on the size of the debt, which itself depends on expectations about the election. The model's politico economic equilibria has several implications. Politico economic links exacerbate the responses of financial variables to exogenous shocks. Self fulfilling equilibria may exist. Policies that alleviate the pro labor candidate's commitment problem contribute to financial stability but also, and perhaps more surprisingly, to the chances of a pro labor victory in the elections. A redistribution of wealth has ambiguous although predictable effects on politico economic outcomes.
Handle: RePEc:nbr:nberwo:12448
Template-Type: ReDIF-Paper 1.0
Title: Reflections on U.S. Disaster Insurance Policy for the 21st Century
Classification-JEL: G22; H23; H44
Author-Name: Howard Kunreuther
Note: PE
Number: 12449
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12449
File-URL: http://www.nber.org/papers/w12449.pdf
File-Format: application/pdf
Abstract: The devastation caused by hurricanes during the 2004 and 2005 seasons has been unprecedented and is forcing the insurance industry to reevaluate the role that it can play in dealing with future natural disasters in the United States. As shown in Table 1 the four hurricanes that hit Florida in the fall of 2004 -- Charley, Frances, Ivan and Jeanne---and Hurricanes Katrina and Rita in 2005 comprised half of the top 12 disasters with respect to insured losses between 1970 and 2005. On a related note, 18 of the 20 most costly disasters occurred between 1990 and 2005 and 10 occurred in the 21st Century. This context is totally different than the scale of economic loss the country has suffered from natural disasters and other extreme events in the 20th century. The first section of the paper addresses the first question by outlining two principles on which a disaster insurance program should be based. Section 3 then focuses on the second question by analyzing the insurability of a risk and examining the challenges facing the private sector in providing coverage against natural disasters. Section 4 turns to the third question and delineates the opportunities and challenges of a comprehensive disaster insurance program. Section 5 poses a set of open issues that are currently being addressed by a research project on disaster insurance undertaken by the Wharton Risk Center in conjunction with the Insurance Information Institute and Georgia State University. The concluding section summarizes the key issues associated with providing disaster insurance in the 21st century.
Handle: RePEc:nbr:nberwo:12449
Template-Type: ReDIF-Paper 1.0
Title: Democracy and Globalization
Classification-JEL: F0; F00
Author-Name: Barry Eichengreen
Author-Person: pei2
Note: DAE IFM
Number: 12450
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12450
File-URL: http://www.nber.org/papers/w12450.pdf
File-Format: application/pdf
Publication-Status: published as Barry Eichengreen & David Leblang, 2008. "Democracy And Globalization," Economics and Politics, Blackwell Publishing, vol. 20(3), pages 289-334, November.
Abstract: The connections between globalization and democracy are a classic question in international political economy and a topic much debated in foreign policy circles. While the analytical literature is extensive, few previous studies have acknowledged the possibility of bidirectional causality or developed an instrumental variables strategy suitable for addressing it. We do so in this paper and apply our approach to an extensive historical data set. The results suggest the existence of positive relationships running both ways between globalization and democracy, though exceptions obtain at particular times (during the Bretton Woods era) and places (in labor scarce economies).
Handle: RePEc:nbr:nberwo:12450
Template-Type: ReDIF-Paper 1.0
Title: Insurance Underwriter or Financial Development Fund: What Role for Reserve Pooling in Latin America?
Classification-JEL: F0; F02; F39
Author-Name: Barry Eichengreen
Author-Person: pei2
Note: IFM
Number: 12451
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12451
File-URL: http://www.nber.org/papers/w12451.pdf
File-Format: application/pdf
Publication-Status: published as Barry Eichengreen, 2007. "Insurance Underwriter or Financial Development Fund: What Role for Reserve Pooling in Latin America?," Open Economies Review, Springer, vol. 18(1), pages 27-52, February.
Abstract: The accumulation of international reserves by emerging markets raises the question of how to best utilize these funds. This paper explores two routes through which the pooling of reserves could enhance stability and welfare. First, the reserve pool could be used for emergency lending in response to sudden stops. Second, a portion of the reserve pool along with borrowed funds could be used to purchase contingent debt securities issued by governments and corporations, helping to solve the first-mover problem that limits the liquidity of markets in these instruments and hinders their acceptance by private investors. This paper argues that the second option is more likely to be feasible and productive.
Handle: RePEc:nbr:nberwo:12451
Template-Type: ReDIF-Paper 1.0
Title: Myopia and the Effects of Social Security and Capital Taxation on Labor Supply
Classification-JEL: D11; D91; H21; H24; H55; J22
Author-Name: Louis Kaplow
Author-Person: pka44
Note: LS PE
Number: 12452
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12452
File-URL: http://www.nber.org/papers/w12452.pdf
File-Format: application/pdf
Publication-Status: published as Louis Kaplow, 2015. "Myopia and the Effects of Social Security and Capital Taxation on Labor Supply," National Tax Journal, vol 68(1), pages 7-32.
Abstract: Myopia is increasingly believed to be a significant determinant of behavior and also plays a central role in justifications for social security and policies toward the taxation of capital. It is important, however, to account for labor supply effects, particularly in light of the preexisting distortion due to labor income taxation. For example, might even actuarially fair social security have the highly distortionary effect of a tax on top of an existing tax (the income tax) because myopic individuals give excessive weight to present levies on earnings that finance distant future benefits? Similarly, might greater reliance on capital rather than labor income taxation be attractive because collections are in the future rather than when earnings are received? To answer these and other questions, this article analyzes the effect of such policies on labor supply in a model that explicitly incorporates myopic decision-making. Many of the results may seem counterintuitive. In most respects, even with myopia, social security has qualitatively different effects than those of a tax levied on top of an existing tax. Both social security and capital taxation may cause labor supply to rise or fall when individuals are myopic, depending on the curvature of individuals' utility as a function of consumption. Moreover, whatever is the sign of these effects under one assumption about how myopia relates to labor supply decisions, the sign is reversed under the other assumption that is considered. Additionally, some interventions have a first-order effect on labor supply from the outset but others do not, and some labor supply effects rise with the magnitude of the intervention whereas others fall.
Handle: RePEc:nbr:nberwo:12452
Template-Type: ReDIF-Paper 1.0
Title: On the Consequences of Demographic Change for Rates of Returns to Capital, and the Distribution of Wealth and Welfare
Classification-JEL: C68; D33; E17; E25
Author-Name: Dirk Krueger
Author-Person: pkr7
Author-Name: Alexander Ludwig
Author-Person: plu177
Note: EFG PE
Number: 12453
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12453
File-URL: http://www.nber.org/papers/w12453.pdf
File-Format: application/pdf
Publication-Status: published as Krueger, Dirk & Ludwig, Alexander, 2007. "On the consequences of demographic change for rates of returns to capital, and the distribution of wealth and welfare," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 49-87, January.
Abstract: This paper employs a multi-country large scale Overlapping Generations model with uninsurable labor productivity and mortality risk to quantify the impact of the demographic transition towards an older population in industrialized countries on world-wide rates of return, international capital flows and the distribution of wealth and welfare in the OECD. We find that for the U.S. as an open economy, rates of return are predicted to decline by 86 basis points between 2005 and 2080 and wages increase by about 4.1%. If the U.S. were a closed economy, rates of return would decline and wages increase by less. This is due to the fact that other regions in the OECD will age even more rapidly; therefore the U.S. is "importing" the more severe demographic transition from the rest of the OECD in the form of larger factor price changes. In terms of welfare, our model suggests that young agents with little assets and currently low labor productivity gain, up to 1% in consumption, from higher wages associated with population aging. Older, asset-rich households tend to lose, because of the predicted decline in real returns to capital.
Handle: RePEc:nbr:nberwo:12453
Template-Type: ReDIF-Paper 1.0
Title: Can Central Banks Target Bond Prices?
Classification-JEL: E43; E58; E63
Author-Name: Kenneth Kuttner
Author-Person: pku75
Note: ME
Number: 12454
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12454
File-URL: http://www.nber.org/papers/w12454.pdf
File-Format: application/pdf
Publication-Status: published as Chung (ed.) “Monetary Policy in an Environment of Low Inflation.” Seoul: The Bank of Korea, 2006.
Abstract: This paper addresses the possible role of bond prices as operating or intermediate targets for monetary policy. The paper begins with a brief review of the mechanisms through which a central bank could, in theory, influence long-term interest rates, and continues with a brief narrative overview of debt management policies in the U.S., tracing their effects on the maturity distribution of outstanding publicly-held Treasury debt and the composition of the assets held by the Federal Reserve System. The empirical section presents new econometric evidence on the effects of these policies on expected excess holding returns ("term premia"), demonstrating that changes in the Fed's holdings of long-term securities have had statistically significant and economically meaningful effects on the term premia associated with Treasury securities with maturities in the two- to five-year range.
Handle: RePEc:nbr:nberwo:12454
Template-Type: ReDIF-Paper 1.0
Title: Contractual Tradeoffs and SMEs Choice of Organizational Form, A View from U.S. and French History, 1830-2000
Classification-JEL: D21; D86; K2; K22; L22; N8
Author-Name: Naomi R. Lamoreaux
Author-Name: Jean-Laurent Rosenthal
Note: DAE CF
Number: 12455
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12455
File-URL: http://www.nber.org/papers/w12455.pdf
File-Format: application/pdf
Abstract: Today the vast majority of multi-owner firms in the United States are corporations, but that was not the case in the past. Before the advent of the income tax, tort litigation, and significant federal regulation, entrepreneurs more often than not chose to organize as partnerships, a form that economists consider seriously flawed. Why would they make such a terrible mistake? We begin by noting that corporations created new types of contracting problems for businesses at the same time as they solved problems afflicting partnerships. We then model the tradeoffs involved in the choice of corporations versus partnerships and confirm that the model's assumptions are consistent with U.S. legal rules up through the 1940s. The model implies that partnerships and corporations are complementary organizational forms, and we show that data from the U.S. Census of Manufactures strongly supports that implication. We also verify that the model's assumptions hold for the broader set of organizational choices available under the French Code de Commerce and use data on multi-owner firms registered in Paris in the 1830s and 1840s to demonstrate the complementary character of the basic forms. Despite much literature emphasizing the fundamentally different environments for business associated with the French and U.S. legal regimes, the basic calculus underpinning the choice of organizational form was the same in both countries.
Handle: RePEc:nbr:nberwo:12455
Template-Type: ReDIF-Paper 1.0
Title: Stochastic Components of Individual Consumption: A Time Series Analysis of Grouped Data
Classification-JEL: C3; D1; E2
Author-Name: Orazio Attanasio
Author-Person: pat7
Author-Name: Margherita Borella
Author-Person: pbo220
Note: EFG
Number: 12456
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12456
File-URL: http://www.nber.org/papers/w12456.pdf
File-Format: application/pdf
Abstract: In this paper we propose a method to characterize the time series properties of individual consumption, income and interest rates using micro data, as studies in labour economics have characterized the time series properties of hours and earnings. Our approach, however, does not remove aggregate shocks. Having estimated the parameters of a flexible multivariate MA representation we relate the coefficients of our statistical model to structural parameters of theoretical models of consumption behaviour. Our approach offers a unifying framework that encompasses the Euler equation approach to the study of consumption and the studies that relate innovations to income to innovations to consumption, such as those that have found the so-called excess smoothness of consumption. Using a long time series of cross sections to construct synthetic panel data for the UK, we estimate our model and find that the restriction of Euler equations are typically not rejected, while the data show 'excess smoothness'.
Handle: RePEc:nbr:nberwo:12456
Template-Type: ReDIF-Paper 1.0
Title: Openness and Industrial Responses in a Wal-Mart World: A Case Study of Mexican Soaps, Detergents and Surfactant Producers
Classification-JEL: F1; F23; L65; L81
Author-Name: Beata Smarzynska Javorcik
Author-Person: pja78
Author-Name: Wolfgang Keller
Author-Person: pke8
Author-Name: James R. Tybout
Note: ITI PR IO
Number: 12457
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12457
File-URL: http://www.nber.org/papers/w12457.pdf
File-Format: application/pdf
Publication-Status: published as Beata Javorcik & Wolfgang Keller & James Tybout, 2008. "Openness and Industrial Response in a Wal-Mart World: A Case Study of Mexican Soaps, Detergents and Surfactant Producers," The World Economy, Blackwell Publishing, vol. 31(12), pages 1558-1580, December.
Abstract: This paper uses a case study approach to explore the effects of NAFTA and GATT membership on innovation and trade in the Mexican soaps, detergents and surfactants (SDS) industry. Several basic findings emerge. First, the most fundamental effect of NAFTA and the GATT on the SDS industry was to help induce Wal-Mart to enter Mexico. Once there, Walmex fundamentally changed the retail sector, forcing SDS firms to cut their profit margins and/or innovate. Those unable to respond to this new environment tended to lose market share and, in some cases, disappear altogether. Second, partly in response to Walmex, many Mexican producers logged impressive efficiency gains during the previous decade. These gains came both from labor-shedding and from innovation, which in turn was fueled by innovative input suppliers and by multinationals bringing new products and processes from their headquarters to Mexico. Finally, although Mexican detergent exports captured an increasing share of the U.S. detergent market over the past decade, Mexican sales in the U.S. were inhibited by a combination of excessive shipping delays at the border and artificially high input prices (due to Mexican protection of domestic caustic soda suppliers). They were also held back by the major re-tooling costs that Mexican producers would have had to incur in order to establish brand recognition among non-Latin consumers, and in order to comply with zero phosphate laws in many regions of the United States.
Handle: RePEc:nbr:nberwo:12457
Template-Type: ReDIF-Paper 1.0
Title: Youth Smoking, Cigarette Prices, and Anti-Smoking Sentiment
Classification-JEL: I10
Author-Name: Philip DeCicca
Author-Person: pde303
Author-Name: Donald S. Kenkel
Author-Person: pke44
Author-Name: Alan D. Mathios
Author-Person: pma2278
Author-Name: Yoon-Jeong Shin
Author-Name: Jae-Young Lim
Note: EH CH
Number: 12458
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12458
File-URL: http://www.nber.org/papers/w12458.pdf
File-Format: application/pdf
Publication-Status: published as Philip DeCicca & Donald Kenkel & Alan Mathios & Yoon-Jeong Shin & Jae-Young Lim, 2008. "Youth smoking, cigarette prices, and anti-smoking sentiment," Health Economics, John Wiley & Sons, Ltd., vol. 17(6), pages 733-749.
Abstract: In this paper, we develop a new direct measure of state anti-smoking sentiment and merge it with micro data on youth smoking in 1992 and 2000. The empirical results from the cross-sectional models show two consistent patterns: after controlling for differences in state anti-smoking sentiment, the price of cigarettes has a weak and statistically insignificant influence on smoking participation; and state anti-smoking sentiment appears to be a potentially important influence on youth smoking participation. The cross-sectional results are corroborated by results from discrete time hazard models of smoking initiation that include state fixed effects. However, there is evidence of price-responsiveness in the conditional cigarette demand by youth and young adult smokers.
Handle: RePEc:nbr:nberwo:12458
Template-Type: ReDIF-Paper 1.0
Title: Science and Industry: Tracing the Flow of Basic Research through Manufacturing and Trade
Classification-JEL: D2; O3
Author-Name: James D. Adams
Author-Person: pad11
Author-Name: Roger Clemmons
Note: PR
Number: 12459
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12459
File-URL: http://www.nber.org/papers/w12459.pdf
File-Format: application/pdf
Publication-Status: published as James Adams & J. Roger Clemmons, 2008. "Science And Industry: Tracing The Flow Of Basic Research Through Manufacturing And Trade," Economics of Innovation and New Technology, Taylor and Francis Journals, vol. 17(5), pages 473-495.
Abstract: This paper describes flows of basic research through the U.S. economy and explores their implications for scientific output at the industry and field level. The time period is the late 20th century. This paper differs from others in its use of measures of science rather than technology. Together its results provide a more complete picture of the structure of basic research flows than was previously available. Basic research flows are high within petrochemicals and drugs and within a second cluster composed of software and communications. Flows of chemistry, physics, and engineering are common throughout industry; biology and medicine are almost confined to petrochemicals and drugs, and computer science is nearly as limited to software and communications. In general, basic research flows are more concentrated within scientific fields than within industries. The paper also compares effects of different types of basic research on scientific output. The main finding is that the academic spillover effect significantly exceeds that of industrial spillovers or industry basic research. Finally, within field effects exceed between field effects, while the within- and between industry effects are equal. Therefore, scientific fields limit basic research flows more than industries.
Handle: RePEc:nbr:nberwo:12459
Template-Type: ReDIF-Paper 1.0
Title: Euro-Productivity and Euro-Jobs since the 1960s: Which Institutions Really Mattered?
Classification-JEL: N13; N3
Author-Name: Gayle Allard
Author-Name: Peter H. Lindert
Author-Person: pli466
Note: DAE PR
Number: 12460
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12460
File-URL: http://www.nber.org/papers/w12460.pdf
File-Format: application/pdf
Publication-Status: published as Hatton, Timothy J., Kevin H. O’Rourke, and Alan M. Taylor (eds.) The New Comparative Economic History: Essays in Honor of Jeffrey G. Williamson. Cambridge MA: MIT Press, 2007.
Abstract: How have labor market institutions and welfare-state transfers affected jobs and productivity in Western Europe, relative to industrialized Pacific Rim countries? Orthodox criticisms of European government institutions are right in some cases and wrong in others. Protectionist labor-market policies such as employee protection laws seem to have become more costly since about 1980, not through overall employment effects, but through the net human-capital cost of protecting senior male workers at the expense of women and youth. Product-market regulations in core sectors may also have reduced GDP, though here the evidence is less robust. By contrast, high general tax levels have shed the negative influence they might have had in the 1960s and 1970s. Similarly, other institutions closer to the core of the welfare state have caused no net harm to European jobs and growth. The welfare state's tax-based social transfers and coordinated wage bargaining have not harmed either employment or GDP. Even unemployment benefits do not have robustly negative effects.
Handle: RePEc:nbr:nberwo:12460
Template-Type: ReDIF-Paper 1.0
Title: Benchmarking Money Manager Performance: Issues and Evidence
Classification-JEL: G11; G12; G14; G23
Author-Name: Josef Lakonishok
Author-Name: Louis Chan
Author-Name: Stephen G. Dimmock
Author-Person: pdi378
Note: AP
Number: 12461
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12461
File-URL: http://www.nber.org/papers/w12461.pdf
File-Format: application/pdf
Publication-Status: published as Louis K. C. Chan & Stephen G. Dimmock & Josef Lakonishok, 2009. "Benchmarking Money Manager Performance: Issues and Evidence," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 22(11), pages 4553-4599, November.
Abstract: Academic and practitioner research yields a proliferation of methods using size and value/growth attributes or factors to evaluate portfolio performance. We assess the relative merits of several of the most widely-used procedures, including variants of matched-characteristic benchmark portfolios and time-series return regressions, by applying them to a sample of active money managers and passive indexes. Estimated abnormal returns display large variation across approaches. The benchmarks most widely used in academic research --- attribute-matched portfolios from independent sorts, the conventional three-factor time series model, and cross-sectional regressions of returns on stock characteristics --- have poor ability to track returns. Simple alterations are provided that improve the performance of the methods.
Handle: RePEc:nbr:nberwo:12461
Template-Type: ReDIF-Paper 1.0
Title: The Bond Market's q
Classification-JEL: E0; E44; G31
Author-Name: Thomas Philippon
Author-Person: pph81
Note: EFG
Number: 12462
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12462
File-URL: http://www.nber.org/papers/w12462.pdf
File-Format: application/pdf
Publication-Status: published as Philippon, Thomas. "The bond market’s Q," Quarterly Journal of Economics, August 2009.
Abstract: I propose an implementation of the q-theory of investment using bond prices instead of equity prices. Credit risk makes corporate bond prices sensitive to future asset values, and q can be inferred from bond prices. The bond market's q performs much better than the usual measure in standard investment equations. With aggregate data, the fit is three times better, cash flows are driven out and the implied adjustment costs are reduced by more than an order of magnitude. The new measure also improves firm level investment equations.
Handle: RePEc:nbr:nberwo:12462
Template-Type: ReDIF-Paper 1.0
Title: Why Have Corporate Tax Revenues Declined? Another Look
Classification-JEL: G32; H25
Author-Name: Alan J. Auerbach
Author-Person: pau33
Note: PE
Number: 12463
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12463
File-URL: http://www.nber.org/papers/w12463.pdf
File-Format: application/pdf
Publication-Status: published as Auerbach, Alan. "Why Have Corporate Tax Revenues Declined? Another Look," CESifo Economic Studies (June 2007): 153-171.
Abstract: As a share of GDP, U.S. federal tax revenues from nonfinancial corporations have held relatively constant since the early 1980s, after falling precipitously during the late 1960s and the 1970s. But this relative constancy masks offsetting trends in the ratio of nonfinancial C corporation profits to GDP (declining) and the average tax rate on these profits (increasing). The average tax rate rose steadily between 1996 and 2003, an increase largely attributable to an unprecedented rise in the importance of tax losses. This rise casts some doubt on the importance of tax planning activities as a vehicle for reducing corporate taxes. So, too, does the relative stability of the rate of profit (relative to net assets), which might be expected to have declined had the understatement of profits for tax purposes been increasing.
Handle: RePEc:nbr:nberwo:12463
Template-Type: ReDIF-Paper 1.0
Title: The Return to English in a Non-English Speaking Country: Russian Immigrants and Native Israelis in Israel
Classification-JEL: J15; J24; Z13
Author-Name: Kevin Lang
Author-Person: pla83
Author-Name: Erez Siniver
Note: LS
Number: 12464
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12464
File-URL: http://www.nber.org/papers/w12464.pdf
File-Format: application/pdf
Publication-Status: published as Kevin Lang & Erez Siniver, 2009. "The Return to English in a Non-English Speaking Country: Russian Immigrants and Native Israelis in Israel," The B.E. Journal of Economic Analysis & Policy, Berkeley Electronic Press, vol. 9(1).
Abstract: We use a unique sample of Russian immigrants and natives in Israel to examine the return to English knowledge. In cross-section estimates there is a significant return to English knowledge for both immigrants and natives with high levels of education. Language acquisition is an important element in immigrant/native earnings convergence, but most of this convergence is explained by factors other than language acquisition. These results are confirmed using panel data on wages and knowledge of Hebrew and English over time. The benefits of English knowledge vary across occupations in ways that are largely consistent with past evidence on language-skill complementarity. Natives and immigrants with high levels of education benefit similarly from knowing English. While immigrants with low levels of education do not benefit from knowledge of English, there is some evidence that native Israelis do. Conditional on occupation, the rate at which immigrants learn English and Hebrew are largely orthogonal. Therefore earlier work on the importance of knowledge of the host-country language (Hebrew) does not appear to be significantly biased by the absence of measures of English knowledge.
Handle: RePEc:nbr:nberwo:12464
Template-Type: ReDIF-Paper 1.0
Title: How has CEO Turnover Changed? Increasingly Performance Sensitive Boards and Increasingly Uneasy CEOs
Classification-JEL: G3; L2
Author-Name: Steven N. Kaplan
Author-Name: Bernadette Minton
Note: CF
Number: 12465
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12465
File-URL: http://www.nber.org/papers/w12465.pdf
File-Format: application/pdf
Abstract: We study CEO turnover - both internal (board driven) and external (through takeover and bankruptcy) - from 1992 to 2005 for a sample of large U.S. companies. Annual CEO turnover is higher than that estimated in previous studies over earlier periods. Turnover is 14.9% from 1992 to 2005, implying an average tenure as CEO of less than seven years. In the more recent period since 1998, total CEO turnover increases to 16.5%, implying an average tenure of just over six years. Internal turnover is significantly related to three components of firm performance - performance relative to industry, industry performance relative to the overall market, and the performance of the overall stock market. Also in the more recent period since 1998, the relation of internal turnover to performance is more strongly related to all three measures of performance in the contemporaneous year. External turnover is not significantly related to any of the measures of stock performance over the entire sample period, nor over the two sub-periods. We discuss the implications of these findings for various issues in corporate governance.
Handle: RePEc:nbr:nberwo:12465
Template-Type: ReDIF-Paper 1.0
Title: Stature and Status: Height, Ability, and Labor Market Outcomes
Classification-JEL: I1; J3
Author-Name: Anne Case
Author-Person: pca108
Author-Name: Christina Paxson
Author-Person: ppa335
Note: AG CH EH LS
Number: 12466
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12466
File-URL: http://www.nber.org/papers/w12466.pdf
File-Format: application/pdf
Publication-Status: published as Anne Case & Christina Paxson, 2008. "Stature and Status: Height, Ability, and Labor Market Outcomes," Journal of Political Economy, University of Chicago Press, vol. 116(3), pages 499-532, 06.
Abstract: It has long been recognized that taller adults hold jobs of higher status and, on average, earn more than other workers. A large number of hypotheses have been put forward to explain the association between height and earnings. In developed countries, researchers have emphasized factors such as self esteem, social dominance, and discrimination. In this paper, we offer a simpler explanation: On average, taller people earn more because they are smarter. As early as age 3 — before schooling has had a chance to play a role — and throughout childhood, taller children perform significantly better on cognitive tests. The correlation between height in childhood and adulthood is approximately 0.7 for both men and women, so that tall children are much more likely to become tall adults. As adults, taller individuals are more likely to select into higher paying occupations that require more advanced verbal and numerical skills and greater intelligence, for which they earn handsome returns. Using four data sets from the US and the UK, we find that the height premium in adult earnings can be explained by childhood scores on cognitive tests. Furthermore, we show that taller adults select into occupations that have higher cognitive skill requirements and lower physical skill demands.
Handle: RePEc:nbr:nberwo:12466
Template-Type: ReDIF-Paper 1.0
Title: Consumption Commitments and Risk Preferences
Classification-JEL: E2; H2; H5; J21; J64
Author-Name: Raj Chetty
Author-Person: pch161
Author-Name: Adam Szeidl
Author-Person: psz25
Note: AP EFG LS PE
Number: 12467
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12467
File-URL: http://www.nber.org/papers/w12467.pdf
File-Format: application/pdf
Publication-Status: published as Raj Chetty & Adam Szeidl, 2007. "Consumption Commitments and Risk Preferences," The Quarterly Journal of Economics, MIT Press, vol. 122(2), pages 831-877, 05.
Abstract: Many households devote a large fraction of their budgets to "consumption commitments" -- goods that involve transaction costs and are infrequently adjusted. This paper characterizes risk preferences in an expected utility model with commitments. We show that commitments affect risk preferences in two ways: (1) they amplify risk aversion with respect to moderate-stake shocks and (2) they create a motive to take large-payoff gambles. The model thus helps resolve two basic puzzles in expected utility theory: the discrepancy between moderate-stake and large-stake risk aversion and lottery playing by insurance buyers. We discuss applications of the model such as the optimal design of social insurance and tax policies, added worker effects in labor supply, and portfolio choice. Using event studies of unemployment shocks, we document evidence consistent with the consumption adjustment patterns implied by the model.
Handle: RePEc:nbr:nberwo:12467
Template-Type: ReDIF-Paper 1.0
Title: Fraternity Membership and Binge Drinking
Classification-JEL: I12
Author-Name: Jeffrey S. DeSimone
Author-Person: pde214
Note: EH
Number: 12468
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12468
File-URL: http://www.nber.org/papers/w12468.pdf
File-Format: application/pdf
Publication-Status: published as DeSimone, Jeff, 2007. "Fraternity membership and binge drinking," Journal of Health Economics, Elsevier, vol. 26(5), pages 950-967, September.
Abstract: This paper examines the relationship between membership in social fraternities and sororities and binge drinking among 18-24 year old full-time four-year college students who participated in the 1995 National College Health Risk Behavior Survey. To deal with unobserved heterogeneity in binge drinking incidence and frequency regressions, I enter as explanatory variables various measures of situational and overall alcohol use. When these are added, the fraternity membership coefficient is substantially reduced in size, but remains large and highly significant. This suggests that fraternity membership increases binge drinking. If not, it identifies a very specific mechanism underlying the decision to join a fraternity: members drink more intensely than non-members even while doing so in similar frequencies and situations and for similar lengths of time. Particularly notable is that behavior by underage students appears to drive the relationship.
Handle: RePEc:nbr:nberwo:12468
Template-Type: ReDIF-Paper 1.0
Title: Learning-by-Producing and the Geographic Links Between Invention and Production: Experience From the Second Industrial Revolution
Classification-JEL: N0; O3
Author-Name: Dhanoos Sutthiphisal
Author-Person: psu129
Note: DAE PR
Number: 12469
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12469
File-URL: http://www.nber.org/papers/w12469.pdf
File-Format: application/pdf
Publication-Status: published as Sutthiphisal, Dhanoos. "The Geography Of Invention In High- And Low-Technology Industries: Evidence From The Second Industrial Revolution," Journal of Economic History, 2006, v66(2,Jun), 492-496.
Abstract: This paper investigates the impact of ¡§learning-by-producing¡¨ on inventive activity and shows that, in both emerging (electrical equipment and supplies) and maturing (shoes and textiles) industries, the geographic association between invention and production was rather weak during the Second Industrial Revolution. Regional shifts in production were neither accompanied nor followed by corresponding increases in invention. Instead, this paper finds that the geographic location of inventive activity tended to mirror the geographic distribution of individuals with advanced technical skills appropriate to the particular industry in question. Even in the craft-based shoe industry, much of the invention came from those with the advanced technical skills. The findings suggest that scholars have over-emphasized the importance of learning-by-producing in accounting for the geographic differences in inventive activity, and underestimated the significance of technical skills or human capital amongst the population.
Handle: RePEc:nbr:nberwo:12469
Template-Type: ReDIF-Paper 1.0
Title: Optimal Monetary Policy with Collateralized Household Debt and Borrowing Constraints
Classification-JEL: E24; E44; E5
Author-Name: Tommaso Monacelli
Author-Person: pmo32
Note: AP ME
Number: 12470
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12470
File-URL: http://www.nber.org/papers/w12470.pdf
File-Format: application/pdf
Publication-Status: published as Campbell, John (ed.) Asset Prices and Monetary Policy. Chicago: University of Chicago Press, 2008.
Publication-Status: published as Optimal Monetary Policy with Collateralized Household Debt and Borrowing Constraints, Tommaso Monacelli. in Asset Prices and Monetary Policy, Campbell. 2008
Abstract: We study optimal monetary policy in an economy with nominal private debt, borrowing constraints and price rigidity. Private debt reflects equilibrium trade between an impatient borrower, who faces an endogenous collateral constraint, and a patient saver, who engages in consumption smoothing. Since inflation can positively affect borrower's net worth, monetary policy optimally balances the incentive to offset the price stickiness distortion with the one of marginally relaxing the borrower's collateral constraint. We find that the optimal volatility of inflation is increasing in three key parameters: (i) the borrower's weight in the planner's objective function; (ii) the borrower's impatience rate; (iii) the degree of price flexibility. In general, however, deviations from price stability are small for a small degree of price stickiness. In a two-sector version of our model, in which durable price movements can directly affect the ability of borrowing, the optimal volatility of (non-durable) inflation is more sizeable. In our context, and relative to simple Taylor rules, the Ramsey-optimal allocation entails a partial smoothing of real durable goods prices.
Handle: RePEc:nbr:nberwo:12470
Template-Type: ReDIF-Paper 1.0
Title: Should Sixth Grade be in Elementary or Middle School? An Analysis of Grade Configuration and Student Behavior
Classification-JEL: H52
Author-Name: Philip J. Cook
Author-Person: pco30
Author-Name: Robert MacCoun
Author-Name: Clara Muschkin
Author-Name: Jacob Vigdor
Author-Person: pvi23
Note: CH ED PE
Number: 12471
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12471
File-URL: http://www.nber.org/papers/w12471.pdf
File-Format: application/pdf
Abstract: Using administrative data on public school students in North Carolina, we find that sixth grade students attending middle schools are much more likely to be cited for discipline problems than those attending elementary school. That difference remains after adjusting for the socioeconomic and demographic characteristics of the students and their schools. Furthermore, the higher infraction rates recorded by sixth graders who are placed in middle school persist at least through ninth grade. A plausible explanation is that sixth graders are at an especially impressionable age; in middle school, the exposure to older peers and the relative freedom from supervision have deleterious consequences.
Handle: RePEc:nbr:nberwo:12471
Template-Type: ReDIF-Paper 1.0
Title: Smoke Signals: Adolescent Smoking and School Continuation
Classification-JEL: I12; I2
Author-Name: Philip J. Cook
Author-Person: pco30
Author-Name: Rebecca Hutchinson
Note: CH ED EH
Number: 12472
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12472
File-URL: http://www.nber.org/papers/w12472.pdf
File-Format: application/pdf
Publication-Status: published as Bianchi, Marina (ed.) Advances in Austrian Economics Vol. 10, The Evolution of Consumption: Theories and Practices. 2007.
Abstract: This paper presents an exploratory analysis using NLSY97 data of the relationship between the likelihood of school continuation and the choices of whether to smoke or drink. We demonstrate that in the United States as of the late 1990s, smoking in 11th grade was a uniquely powerful predictor of whether the student finished high school, and if so whether the student matriculated in a four-year college. For economists the likely explanation for this empirical link would be based on interpersonal differences in time preference, but that account is called in question by our second finding -- that drinking does not predict school continuation. We speculate that the demand for tobacco by high school students is influenced by the signal conveyed by smoking (of being off track in school), one that is especially powerful for high-aptitude students. To further develop this view, we present estimates of the likelihood of smoking as a function of school commitment and other, more traditional variables. There are no direct implications from this analysis for whether smoking is in some sense a cause of school dropout. We offer some speculations on this matter in the conclusion.
Handle: RePEc:nbr:nberwo:12472
Template-Type: ReDIF-Paper 1.0
Title: Understanding International Portfolio Diversification and Turnover Rates
Classification-JEL: F36
Author-Name: Amir Amadi
Author-Name: Paul Bergin
Author-Person: pbe249
Note: IFM
Number: 12473
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12473
File-URL: http://www.nber.org/papers/w12473.pdf
File-Format: application/pdf
Publication-Status: published as Amadi, Amir A. & Bergin, Paul R., 2008. "Understanding international portfolio diversification and turnover rates," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(2), pages 191-206, April.
Abstract: This paper argues that fixed trading costs in international asset markets help explain equity home bias. This contrasts with explanations prevalent in international macroeconomics, which tend to be based on trading frictions instead in international goods markets, such as nontraded goods or transportation costs. While the stylized fact of high trading turnover in foreign holdings has been interpreted as evidence against international asset trading costs, we show that this argument only applies to costs that are proportional to trade, and not to fixed costs of entering the foreign market. After documenting that the home bias and turnover stylized facts remain valid in recent data, the paper constructs a very simple portfolio allocation model with various configurations of trading costs and with heterogeneous types of traders. A configuration with per unit costs heterogeneous among agents and a homogeneous fixed cost is found to replicate the pair of stylized facts. Intuitively, the lower trading costs that characterize larger and more efficient traders have two implications: firstly, these traders find it more profitable to enter foreign markets; secondly, their lower trading costs encourage a higher rate of trading turnover. Since holdings of international equities are disproportionately dominated by this class of larger and more efficient traders, average trading turnover is higher among international holdings.
Handle: RePEc:nbr:nberwo:12473
Template-Type: ReDIF-Paper 1.0
Title: Competition, Innovation and Growth with Limited Commitment
Classification-JEL: L14; L16; O4
Author-Name: Ramon Marimon
Author-Person: pma763
Author-Name: Vincenzo Quadrini
Author-Person: pqu2
Note: EFG
Number: 12474
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12474
File-URL: http://www.nber.org/papers/w12474.pdf
File-Format: application/pdf
Abstract: We study how barriers to competition---such as restrictions to business start-up and strict enforcement of covenants or IPR---affect the investment in knowledge capital when contracts are not enforceable. These barriers lower the competition for human capital and reduce the incentive to accumulate knowledge. We show in a dynamic general equilibrium model that this mechanism has the potential to account for significant cross-country income inequality.
Handle: RePEc:nbr:nberwo:12474
Template-Type: ReDIF-Paper 1.0
Title: Capital Deepening and Non-Balanced Economic Growth
Classification-JEL: O30; O40; O41
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Veronica Guerrieri
Author-Person: pgu220
Note: EFG
Number: 12475
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12475
File-URL: http://www.nber.org/papers/w12475.pdf
File-Format: application/pdf
Publication-Status: published as Daron Acemoglu & Veronica Guerrieri, 2008. "Capital Deepening and Nonbalanced Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 116(3), pages 467-498, 06.
Abstract: This paper constructs a model of non-balanced economic growth. The main economic force is the combination of differences in factor proportions and capital deepening. Capital deepening tends to increase the relative output of the sector with a greater capital share, but simultaneously induces a reallocation of capital and labor away from that sector. We first illustrate this force using a general two-sector model. We then investigate it further using a class of models with constant elasticity of substitution between two sectors and Cobb-Douglas production functions in each sector. In this class of models, non-balanced growth is shown to be consistent with an asymptotic equilibrium with constant interest rate and capital share in national income. We also show that for realistic parameter values, the model generates dynamics that are broadly consistent with US data. In particular, the model generates more rapid growth of employment in less capital-intensive sectors, more rapid growth of real output in more capital-intensive sectors and aggregate behavior in line with the Kaldor facts. Finally, we construct and analyze a model of "non-balanced endogenous growth," which extends the main results of the paper to an economy with endogenous anddirected technical change. This model shows that equilibrium will typically involve endogenous non-balanced technological progress.
Handle: RePEc:nbr:nberwo:12475
Template-Type: ReDIF-Paper 1.0
Title: Modern Macroeconomics in Practice: How Theory is Shaping Policy
Classification-JEL: E21; E4; E43; E5; E52; E58; E6; E62; E65; H2; H25; H3
Author-Name: Patrick Kehoe
Author-Person: pke4
Author-Name: Varadarajan V. Chari
Author-Person: pch40
Note: EFG ME
Number: 12476
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12476
File-URL: http://www.nber.org/papers/w12476.pdf
File-Format: application/pdf
Publication-Status: published as V. V. Chari & Patrick J. Kehoe, 2006. "Modern Macroeconomics in Practice: How Theory Is Shaping Policy," Journal of Economic Perspectives, American Economic Association, vol. 20(4), pages 3-28, Fall.
Abstract: Theoretical advances in macroeconomics made in the last three decades have had a major influence on macroeconomic policy analysis. Moreover, over the last several decades, the United States and other countries have undertaken a variety of policy changes that are precisely what macroeconomic theory of the last 30 years suggests. The three key developments that have shaped macroeconomic policy analysis are the Lucas critique of policy evaluation due to Robert Lucas, the time inconsistency critique of discre-tionary policy due to Finn Kydland and Edward Prescott, and the development of quantitative dynamic stochastic general equilibrium models following Finn Kydland and Edward Prescott.
Handle: RePEc:nbr:nberwo:12476
Template-Type: ReDIF-Paper 1.0
Title: A Theory of Demand Shocks
Classification-JEL: D58; D84; E32; E40
Author-Name: Guido Lorenzoni
Author-Person: plo185
Note: EFG
Number: 12477
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12477
File-URL: http://www.nber.org/papers/w12477.pdf
File-Format: application/pdf
Publication-Status: published as Lorenzoni, Guido. "A Theory of Demand Shocks." American Economic Review 99, 5 (2009): 2050-2084.
Abstract: This paper presents a model of business cycles driven by shocks to consumer expectations regarding aggregate productivity. Agents are hit by heterogeneous productivity shocks, they observe their own productivity and a noisy public signal regarding aggregate productivity. The shock to this public signal, or "news shock," has the features of an aggregate demand shock: it increases output, employment and inflation in the short run and has no effects in the long run. The dynamics of the economy following an aggregate productivity shock are also affected by the presence of imperfect information: after a productivity shock output adjusts gradually to its higher long-run level, and there is a temporary negative effect on inflation and employment. A calibrated version of the model is able to generate realistic amounts of short-run volatility due to demand shocks, in line with existing time-series evidence. The paper also develops a simple method to solve forward-looking models with dispersed information.
Handle: RePEc:nbr:nberwo:12477
Template-Type: ReDIF-Paper 1.0
Title: First Do No Harm?: Tort Reform and Birth Outcomes
Classification-JEL: I12; I18; K13
Author-Name: Janet Currie
Author-Person: pcu13
Author-Name: W. Bentley MacLeod
Author-Person: pma156
Note: CH EH LE
Number: 12478
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12478
File-URL: http://www.nber.org/papers/w12478.pdf
File-Format: application/pdf
Publication-Status: published as Janet Currie & W. Bentley MacLeod, 2008. "First Do No Harm? Tort Reform and Birth Outcomes," The Quarterly Journal of Economics, MIT Press, vol. 123(2), pages 795-830, 05.
Abstract: We examine the impact of tort reforms using U.S. birth records for 1989-2001. We make four contributions: First, we develop a model that analyzes the incentives created by specific tort reforms. Second, we assemble new data on tort reform. Third, we examine a range of outcomes. Finally, we allow for differential effects by demographic/risk group. We find that reforms of the "deep pockets rule" reduce complications of labor and C-sections, while caps on noneconomic damages increase them. Our results demonstrate there are important interactions between incentives created by tort law and other incentives facing physicians.
Handle: RePEc:nbr:nberwo:12478
Template-Type: ReDIF-Paper 1.0
Title: The "Names Game": Harnessing Inventors' Patent Data for Economic Research
Classification-JEL: C81; C88; O30; O31
Author-Name: Manuel Trajtenberg
Author-Person: ptr35
Author-Name: Gil Shiff
Author-Name: Ran Melamed
Note: PR
Number: 12479
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12479
File-URL: http://www.nber.org/papers/w12479.pdf
File-Format: application/pdf
Publication-Status: published as Manuel Trajtenberg & Gil Shiff & Ran Melamed, 2009. "The "Names Game": Harnessing Inventors, Patent Data for Economic Research," Annals of Economics and Statistics, .
Abstract: The goal of this paper is to lay out a methodology and corresponding computer algorithms, that allow us to extract the detailed data on inventors contained in patents, and harness it for economic research. Patent data has long been used in empirical research in economics, and yet the information on the identity (i.e. the names and location) of the patents' inventors has seldom been deployed in a large scale, primarily because of the "who is who" problem: the name of a given inventor may be spelled differently across her/his patents, and the exact same name may correspond to different inventors (i.e. the "John Smith" problem). Given that there are over 2 million patents with 2 inventors per patent on average, the "who is who" problem applies to over 4 million "records", which is obviously too large to tackle manually. We have thus developed an elaborate methodology and computerized procedure to address this problem in a comprehensive way. The end result is a list of 1.6 million unique inventors from all over the world, with detailed data on their patenting histories, their employers, co-inventors, etc. Forty percent of them have more than one patent, and 70,000 have more than 10 patents. We can trace those multiple inventors across time and space, and thus study the causes and consequences of their mobility across countries, regions, and employers. Given the increasing availability of large computerized data sets on individuals, there may be plenty of opportunities to deploy this methodology to other areas of economic research as well.
Handle: RePEc:nbr:nberwo:12479
Template-Type: ReDIF-Paper 1.0
Title: Welfare Reform, Work Requirements, and Employment Barriers
Classification-JEL: I3; J08
Author-Name: Ellen Meara
Author-Name: Richard Frank
Note: EH LS
Number: 12480
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12480
File-URL: http://www.nber.org/papers/w12480.pdf
File-Format: application/pdf
Abstract: The Personal Responsibility and Work Opportunity Reconciliation Act imposed work requirements on welfare recipients. Using 1999-2001 data from Boston, Chicago, and San Antonio, we compared the labor market and welfare experience of women with four employment barriers: poor mental health, moderate to heavy drug and alcohol use, a child with a behavior problem, and a child under the age of 3. Women with poor mental health and drug and alcohol users were much less likely to move into work than other groups, and more likely to be sanctioned for noncompliance with welfare requirements in 2000-2001 as federal work participation requirements increased
Handle: RePEc:nbr:nberwo:12480
Template-Type: ReDIF-Paper 1.0
Title: Conventional and Unconventional Approaches to Exchange Rate Modeling and Assessment
Classification-JEL: F31; F47
Author-Name: Menzie D. Chinn
Author-Person: pch129
Author-Name: Ron Alquist
Author-Person: pal453
Note: IFM
Number: 12481
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12481
File-URL: http://www.nber.org/papers/w12481.pdf
File-Format: application/pdf
Publication-Status: published as Ron Alquist & Menzie D. Chinn, 2008. "Conventional and unconventional approaches to exchange rate modelling and assessment," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 13(1), pages 2-13.
Abstract: We examine the relative predictive power of the sticky price monetary model, uncovered interest parity, and a transformation of net exports and net foreign assets. In addition to bringing Gourinchas and Rey's new approach and more recent data to bear, we implement the Clark and West (forthcoming) procedure for testing the significance of out-of-sample forecasts. The interest rate parity relation holds better at long horizons and the net exports variable does well in predicting exchange rates at short horizons in-sample. In out-of-sample forecasts, we find evidence that our proxy for Gourinchas and Rey's measure of external imbalances outperforms a random walk at short horizons as do some of other models, although no single model uniformly outperforms the random walk forecast.
Handle: RePEc:nbr:nberwo:12481
Template-Type: ReDIF-Paper 1.0
Title: Globalization and Risk Sharing
Classification-JEL: E24; F34; F36; G15
Author-Name: Jaume Ventura
Author-Person: pve110
Author-Name: Fernando A. Broner
Author-Person: pbr162
Note: IFM
Number: 12482
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12482
File-URL: http://www.nber.org/papers/w12482.pdf
File-Format: application/pdf
Publication-Status: published as Fernando Broner & Jaume Ventura, 2011. "Globalization and Risk Sharing," Review of Economic Studies, Oxford University Press, vol. 78(1), pages 49-82.
Abstract: This paper presents a theoretical study of the e¤ects of globalization on risk sharing and welfare. We model globalization as a gradual and exogenous increase in the fraction of goods that are tradable. In the absence of frictions, globalization opens new goods markets and raises welfare. We assume, however, that countries cannot commit to pay their debts. Unlike the previous literature, and motivated by changes in the institutional setup of emerging-market borrowing, we also assume that countries cannot discriminate between domestic and foreign creditors when paying their debts. Although globalization still opens new goods markets, we find that it can also open or close some asset markets. The net e¤ect on risk sharing and welfare of this process of creation and destruction of markets might be either positive or negative depending on a variety of factors that the theory highlights.
Handle: RePEc:nbr:nberwo:12482
Template-Type: ReDIF-Paper 1.0
Title: Productivity, External Balance and Exchange Rates: Evidence on the Transmission Mechanism Among G7 Countries
Classification-JEL: F32; F41; F42
Author-Name: Giancarlo Corsetti
Author-Name: Luca Dedola
Author-Person: pde41
Author-Name: Sylvain Leduc
Author-Person: ple111
Note: IFM
Number: 12483
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12483
File-URL: http://www.nber.org/papers/w12483.pdf
File-Format: application/pdf
Publication-Status: published as Productivity, External Balance, and Exchange Rates: Evidence on the Transmission Mechanism among G7 Countries, Giancarlo Corsetti, Luca Dedola, Sylvain Leduc. in NBER International Seminar on Macroeconomics 2006, Reichlin and West. 2008
Abstract: This paper investigates the international transmission of productivity shocks in a sample of five G7 countries. For each country, using long-run restrictions, we identify shocks that increase permanently domestic labor productivity in manufacturing (our measure of tradables) relative to an aggregate of other industrial countries including the rest of the G7. We find that, consistent with standard theory, these shocks raise relative consumption, deteriorate net exports, and raise the relative price of nontradables --- in full accord with the Harrod-Balassa-Samuelson hypothesis. Moreover, the deterioration of the external account is fairly persistent, especially for the US. The response of the real exchange rate and (our proxy for) the terms of trade differs across countries: while both relative prices depreciate in Italy and the UK (smaller and more open economies), they appreciate in the US and Japan (the largest and least open economies in our sample); results are however inconclusive for Germany. These findings question a common view in the literature, that a country's terms of trade fall when its output grows, thus providing a mechanism to contain differences in national wealth when productivity levels do not converge. They enhance our understanding of important episodes such as the strong real appreciation of the dollar as the US productivity growth accelerated in the second half of the 1990s. They also provide an empirical contribution to the current debate on the adjustment of the US current account position. Contrary to widespread presumptions, productivity growth in the US tradable sector does not necessarily improve the US trade deficit, nor deteriorate the US terms of trade, at least in the short and medium run.
Handle: RePEc:nbr:nberwo:12483
Template-Type: ReDIF-Paper 1.0
Title: Financial Globalization: A Reappraisal
Classification-JEL: F2; F3; F4; G1
Author-Name: M. Ayhan Kose
Author-Person: pko65
Author-Name: Eswar Prasad
Author-Person: ppr1
Author-Name: Kenneth S. Rogoff
Author-Person: pro164
Author-Name: Shang-Jin Wei
Author-Person: pwe20
Note: IFM
Number: 12484
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12484
File-URL: http://www.nber.org/papers/w12484.pdf
File-Format: application/pdf
Publication-Status: published as M Ayhan Kose & Eswar Prasad & Kenneth Rogoff & Shang-Jin Wei, 2009. "Financial Globalization: A Reappraisal," IMF Staff Papers, Palgrave Macmillan Journals, vol. 56(1), pages 8-62, April.
Publication-Status: published as M. Ayhan Kose & Eswar Prasad & Kenneth Rogoff & Shang-Jin Wei, 2009. "Financial Globalization: A Reappraisal," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 56(2), pages 143-197, June.
Abstract: The literature on the benefits and costs of financial globalization for developing countries has exploded in recent years, but along many disparate channels with a variety of apparently conflicting results. We attempt to provide a unified conceptual framework for organizing this vast and growing literature. This framework allows us to provide a fresh synthetic perspective on the macroeconomic effects of financial globalization, both in terms of growth and volatility. Overall, our critical reading of the recent empirical literature is that it lends some qualified support to the view that developing countries can benefit from financial globalization, but with many nuances. On the other hand, there is little systematic evidence to support widely-cited claims that financial globalization by itself leads to deeper and more costly developing country growth crises.
Handle: RePEc:nbr:nberwo:12484
Template-Type: ReDIF-Paper 1.0
Title: The Consequences of Teenage Childbearing
Classification-JEL: I3; J13
Author-Name: Adam Ashcraft
Author-Person: pas35
Author-Name: Kevin Lang
Author-Person: pla83
Note: LS EH
Number: 12485
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12485
File-URL: http://www.nber.org/papers/w12485.pdf
File-Format: application/pdf
Abstract: We examine the effect of teenage childbearing on the adult outcomes of a sample of women who gave birth, miscarried or had an abortion as teenagers. If miscarriages are (conditionally) random, then if all miscarriages occur before teenagers can obtain abortions, using the absence of a miscarriage as an instrument for a live birth provides a consistent estimate of the effect of teenage motherhood on women who give birth. If all abortions occur before any miscarriage can occur, OLS on the sample of women who either have a live birth or miscarry provides an unbiased estimate of this effect. Under reasonable assumptions, IV underestimates and OLS overestimates the effect of teenage motherhood on adult outcomes. For a variety of outcomes, the two estimates provide a narrow bound on the effect of teenage motherhood on adult outcomes and which is relatively modest. The bounds can also be combined to provide consistent estimates of the effects of teen motherhood. These effects are generally adverse but modest.
Handle: RePEc:nbr:nberwo:12485
Template-Type: ReDIF-Paper 1.0
Title: Irreversible Investment, Real Options, and Competition: Evidence from Real Estate Development
Classification-JEL: D4; D52; E23; R3
Author-Name: Laarni Bulan
Author-Name: Christopher J. Mayer
Author-Person: pma212
Author-Name: C. Tsuriel Somerville
Author-Person: pso132
Note: CF EFG
Number: 12486
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12486
File-URL: http://www.nber.org/papers/w12486.pdf
File-Format: application/pdf
Publication-Status: published as Bulan, Laarni & Mayer, Christopher & Somerville, C. Tsuriel, 2009. "Irreversible investment, real options, and competition: Evidence from real estate development," Journal of Urban Economics, Elsevier, vol. 65(3), pages 237-251, May.
Abstract: We examine the extent to which uncertainty delays investment and the effect of competition on this relationship using a sample of 1,214 condominium developments in Vancouver, Canada built from 1979-1998. We find that increases in both idiosyncratic and systematic risk lead developers to delay new real estate investments. Empirically, a one-standard deviation increase in the return volatility reduces the probability of investment by 13 percent, equivalent to a 9 percent decline in real prices. Increases in the number of potential competitors located near a project negate the negative relationship between idiosyncratic risk and development. These results support models in which competition erodes option values and provide clear evidence for the real options framework over alternatives such as simple risk aversion.
Handle: RePEc:nbr:nberwo:12486
Template-Type: ReDIF-Paper 1.0
Title: The Equity Premium Implied by Production
Classification-JEL: E23; G12
Author-Name: Urban Jermann
Author-Person: pje4
Note: AP
Number: 12487
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12487
File-URL: http://www.nber.org/papers/w12487.pdf
File-Format: application/pdf
Publication-Status: published as Jermann, Urban. "The Equity Premium Implied by Production." Journal of Financial Economics. Volume 98, Issue 2, November 2010, Pages 279-296
Abstract: This paper studies the determinants of the equity premium as implied by producers' first-order conditions. A closed form expression is presented for the Sharpe ratio at steady-state as a function of investment volatility and adjustment cost curvature. Calibrated to the U.S. postwar economy, the model can generate a sizeable equity premium, with reasonable volatility for market returns and risk free rates. The market's Sharpe ratio and the market price of risk are very volatile. Contrary to most models, the model generates a negative correlation between conditional means and standard deviations of aggregate excess returns.
Handle: RePEc:nbr:nberwo:12487
Template-Type: ReDIF-Paper 1.0
Title: Quantifying Equilibrium Network Externalities in the ACH Banking Industry
Classification-JEL: L0; L13; L86; L88
Author-Name: Daniel A. Ackerberg
Author-Person: pac11
Author-Name: Gautam Gowrisankaran
Note: PR
Number: 12488
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12488
File-URL: http://www.nber.org/papers/w12488.pdf
File-Format: application/pdf
Publication-Status: published as Daniel Ackerberg & Gautam Gowrisankaran, 2006. "Quantifying Equilibrium Network Externalities in the ACH Banking Industry," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 738-761, Autumn.
Abstract: We seek to determine the causes and magnitudes of network externalities for the automated clearinghouse (ACH) electronic payments system. We construct an equilibrium model of customer and bank adoption of ACH. We structurally estimate the parameters of the model using an indirect inference procedure and panel data. The parameters are identified from exogenous variation in the adoption decisions of banks based outside the network and other factors. We find that most of the impediment to ACH adoption is from large customer fixed costs of adoption. Policies to provide moderate subsidies to customers and larger subsidies to banks for ACH adoption could increase welfare significantly.
Handle: RePEc:nbr:nberwo:12488
Template-Type: ReDIF-Paper 1.0
Title: The Returns to Currency Speculation
Classification-JEL: E24; F31; G15
Author-Name: Craig Burnside
Author-Person: pbu20
Author-Name: Martin Eichenbaum
Author-Person: pei4
Author-Name: Isaac Kleshchelski
Author-Name: Sergio Rebelo
Note: EFG IFM AP
Number: 12489
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12489
File-URL: http://www.nber.org/papers/w12489.pdf
File-Format: application/pdf
Publication-Status: published as Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 2007. "The Returns to Currency Speculation in Emerging Markets," American Economic Review, American Economic Association, vol. 97(2), pages 333-338, May.
Abstract: Currencies that are at a forward premium tend to depreciate. This 'forward-premium puzzle' represents an egregious deviation from uncovered interest parity. We document the properties of returns to currency speculation strategies that exploit this anomaly. We show that these strategies yield high Sharpe ratios which are not a compensation for risk. In practice bid-ask spreads are an increasing function of order size. In addition, there is price pressure, i.e. exchange rates are an increasing function of net order flow. Together these frictions greatly reduce the profitability of currency speculation strategies. In fact, the marginal Sharpe ratio associated with currency speculation can be zero even though the average Sharpe ratio is positive.
Handle: RePEc:nbr:nberwo:12489
Template-Type: ReDIF-Paper 1.0
Title: How Corruption Hits People When They Are Down
Classification-JEL: H21; K42; O12; O16
Author-Name: Jennifer Hunt
Author-Person: phu9
Note: LE LS PE
Number: 12490
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12490
File-URL: http://www.nber.org/papers/w12490.pdf
File-Format: application/pdf
Publication-Status: published as Hunt, Jennifer, 2007. "How corruption hits people when they are down," Journal of Development Economics, Elsevier, vol. 84(2), pages 574-589, November.
Abstract: Using cross-country and Peruvian data, I show that victims of misfortune, particularly crime victims, are much more likely than non-victims to bribe public officials. Misfortune increases victims' demand for public services, raising bribery indirectly, and also increases victims' propensity to bribe certain officials conditional on using them, possibly because victims are desperate, vulnerable, or demanding services particularly prone to corruption. The effect is strongest for bribery of the police, where the increase in bribery comes principally through increased use of the police. For the judiciary the effect is also strong, and for some misfortunes is composed equally of an increase in use and an increase in bribery conditional on use. The expense and disutility of bribing thus compound the misery brought by misfortune.
Handle: RePEc:nbr:nberwo:12490
Template-Type: ReDIF-Paper 1.0
Title: Swiss Exchange Rate Policy in the 1930s. Was the Delay in Devaluation Too High a Price to Pay for Conservatism?
Classification-JEL: N1; N13
Author-Name: Michael Bordo
Author-Person: pbo243
Author-Name: Thomas Helbling
Author-Name: Harold James
Author-Person: pja546
Note: ME DAE IFM
Number: 12491
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12491
File-URL: http://www.nber.org/papers/w12491.pdf
File-Format: application/pdf
Publication-Status: published as Michael Bordo & Thomas Helbling & Harold James, 2007. "Swiss Exchange Rate Policy in the 1930s. Was the Delay in Devaluation Too High a Price to Pay for Conservatism?," Open Economies Review, Springer, vol. 18(1), pages 1-25, February.
Abstract: In this paper we examine the experience of Switzerland's devaluation in 1936. The Swiss case is of interest because Switzerland was a key member of the gold bloc, and much of the modern academic literature on the Great Depression tries to explain why Switzerland and the other gold bloc countries, France, and the Netherlands, remained on the gold standard until the bitter end. We ask the following questions: what were the issues at stake in the political debate? What was the cost to Switzerland of the delay in the franc devaluation? What would have been the costs and benefits of an earlier exchange rate policy? More specifically, what would have happened if Switzerland had either joined the British and devalued in September 1931, or followed the United States in April 1933? To answer these questions we construct a simple open economy macro model of the interwar Swiss economy. On the basis of this model we then posit counterfactual scenarios of alternative exchange rate pegs in 1931 and 1933. Our simulations clearly show a significant and large increase in real economic activity. If Switzerland had devalued with Britain in 1931, the output level in 1935 would have been some 18 per cent higher than it actually was in that year. If Switzerland had waited until 1933 to devalue, the improvement would have been about 15 per cent higher. The reasons Switzerland did not devalue earlier reflected in part a conservatism in policy making as a result of the difficulty of making exchange rate policy in a democratic setting and in part the consequence of a political economy which favored the fractionalization of different interest groups.
Handle: RePEc:nbr:nberwo:12491
Template-Type: ReDIF-Paper 1.0
Title: Changes in the Federal Reserve's Inflation Target: Causes and Consequences
Classification-JEL: E31; E32; E52
Author-Name: Peter N. Ireland
Author-Person: pir1
Note: ME
Number: 12492
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12492
File-URL: http://www.nber.org/papers/w12492.pdf
File-Format: application/pdf
Publication-Status: published as Peter N. Ireland, 2007. "Changes in the Federal Reserve's Inflation Target: Causes and Consequences," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(8), pages 1851-1882, December.
Abstract: This paper estimates a New Keynesian model to draw inferences about the behavior of the Federal Reserve's unobserved inflation target. The results indicate that the target rose from 1 1/4 percent in 1959 to over 8 percent in the mid-to-late 1970s before falling back below 2 1/2 percent in 2004. The results also provide some support for the hypothesis that over the entire postwar period, Federal Reserve policy has systematically translated short-run price pressures set off by supply-side shocks into more persistent movements in inflation itself, although considerable uncertainty remains about the true source of shifts in the inflation target.
Handle: RePEc:nbr:nberwo:12492
Template-Type: ReDIF-Paper 1.0
Title: Transfer Pricing by U.S.-Based Multinational Firms
Classification-JEL: F14; F23; H25; H26; H32
Author-Name: Andrew B. Bernard
Author-Name: J. Bradford Jensen
Author-Person: pje75
Author-Name: Peter K. Schott
Author-Person: psc98
Note: IO ITI PE
Number: 12493
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12493
File-URL: http://www.nber.org/papers/w12493.pdf
File-Format: application/pdf
Abstract: This paper examines how prices set by multinational firms vary across arm's-length and related-party customers. Comparing prices within firms, products, destination countries, modes of transport and month, we find that the prices U.S. exporters set for their arm's-length customers are substantially larger than the prices recorded for related-parties. This price wedge is smaller for commodities than for differentiated goods, is increasing in firm size and firm export share, and is greater for goods sent to countries with lower corporate tax rates and higher tariffs. We also find that changes in exchange rates have differential effects on arm's-length and related-party prices; an appreciation of the dollar reduces the difference between the prices.
Handle: RePEc:nbr:nberwo:12493
Template-Type: ReDIF-Paper 1.0
Title: Exploring Gender Differences in Employment and Wage Trends Among Less-Skilled Workers
Classification-JEL: J16; J31
Author-Name: Rebecca M. Blank
Author-Person: pbl56
Author-Name: Heidi Shierholz
Note: LS
Number: 12494
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12494
File-URL: http://www.nber.org/papers/w12494.pdf
File-Format: application/pdf
Publication-Status: published as Blank, Rebecca M., Sheldon H. Danziger, and Robert F. Schoeni (eds.) Working and Poor: How Economic and Policy Changes Are Affecting Low-Wage Workers, National Poverty Center Series on Poverty and Public Policy. New York: Russell Sage Foundation, 2006.
Abstract: In contrast to less-skilled men, less-skilled women have experienced growing labor force involvement and moderate wage increases. Compared to more-skilled women, less-skilled women have fallen behind. We investigated the reasons behind these trends in labor force participation and wages for male and female workers of different skill levels over the past 25 years, from 1979-2004. We find that less-skilled women have found themselves in an 'intermediate' place in the labor market. Like less-skilled men, they experienced deteriorating returns to education but, unlike the men, they benefited from a growing positive impact of accumulated experience on labor market outcomes. More-skilled women experienced both growing returns to education and greater accumulation of experience, leading to faster wage growth. In addition, at the same time that experience levels have grown, the returns to experience on wages and labor force participation have also risen among less-skilled women, while the returns to experience have declined among less-skilled men. The negative effect of children and marital status on wages and labor force participation has also declined markedly among women of all skill levels.
Handle: RePEc:nbr:nberwo:12494
Template-Type: ReDIF-Paper 1.0
Title: The International Role of the Dollar and Trade Balance Adjustment
Classification-JEL: F1; F3; F4
Author-Name: Linda S. Goldberg
Author-Person: pgo256
Author-Name: Cédric Tille
Author-Person: pti5
Note: IFM ITI
Number: 12495
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12495
File-URL: http://www.nber.org/papers/w12495.pdf
File-Format: application/pdf
Abstract: The pattern of international trade adjustment is affected by the continuing international role of the dollar and related evidence on exchange rate pass-through into prices. This paper argues that a depreciation of the dollar would have asymmetric effects on flows between the United States and its trading partners. With low exchange rate pass-through to U.S. import prices and high exchange rate pass-through to the local prices of countries consuming U.S. exports, the effect of dollar depreciation on real trade flows is dominated by an adjustment in U.S. export quantities, which increase as U.S. goods become cheaper in the rest of the world. Real U.S. imports are affected less because U.S. prices are more insulated from exchange rate movements -- pass-through is low and dollar invoicing is high. In relation to prices, the effects on the U.S. terms of trade are limited: U.S. exporters earn the same amount of dollars for each unit shipped abroad, and U.S. consumers do not encounter more expensive imports. Movements in dollar exchange rates also affect the international trade transactions of countries invoicing some of their trade in dollars, even when these countries are not transacting directly with the United States.
Handle: RePEc:nbr:nberwo:12495
Template-Type: ReDIF-Paper 1.0
Title: The Forward Market in Emerging Currencies: Less Biased Than in Major Currencies
Classification-JEL: F0; F15; F31
Author-Name: Jeffrey Frankel
Author-Person: pfr12
Author-Name: Jumana Poonawala
Note: IFM
Number: 12496
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12496
File-URL: http://www.nber.org/papers/w12496.pdf
File-Format: application/pdf
Publication-Status: published as Frankel, Jeffrey & Poonawala, Jumana, 2010. "The forward market in emerging currencies: Less biased than in major currencies," Journal of International Money and Finance, Elsevier, vol. 29(3), pages 585-598, April.
Abstract: any studies have replicated the finding that the forward rate is a biased predictor of the future change in the spot exchange rate. Usually the forward discount actually points in the wrong direction. But virtually all those studies apply to advanced economies and major currencies. We apply the same tests to a sample of 14 emerging market currencies. We find a smaller bias than for advanced country currencies. The coefficient is on average positive, i.e., the forward discount at least points in the right direction. It is never significantly less than zero. To us this suggests that a time-varying exchange risk premium may not be the explanation for traditional findings of bias. The reasoning is that emerging markets are probably riskier; yet we find that the bias in their forward rates is smaller. Emerging market currencies probably have more easily-identified trends of depreciation than currencies of advanced countries.
Handle: RePEc:nbr:nberwo:12496
Template-Type: ReDIF-Paper 1.0
Title: Rethinking the Effects of Immigration on Wages
Classification-JEL: F22; J31; J61
Author-Name: Gianmarco I.P. Ottaviano
Author-Person: pot15
Author-Name: Giovanni Peri
Author-Person: ppe210
Note: ITI LS
Number: 12497
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12497
File-URL: http://www.nber.org/papers/w12497.pdf
File-Format: application/pdf
Publication-Status: published as Ottaviano, Gianmarco and Giovanni Peri. “Rethinking the Effects of Immigration on Wages: New Data and Analysis from 1990- 2004” IPC IN FOCUS, the American Immigration Law Foundation's Immigration Policy Center 5, 8 (October 2006).
Publication-Status: published as Gianmarco I. P. Ottaviano & Giovanni Peri, 2012. "Rethinking The Effect Of Immigration On Wages," Journal of the European Economic Association, European Economic Association, vol. 10(1), pages 152-197, 02.
Abstract: This paper asks the following question: what was the effect of surging immigration on average and individual wages of U.S.-born workers during the period 1990-2004? We emphasize the need for a general equilibrium approach to analyze this problem. The impact of immigrants on wages of U.S.-born workers can be evaluated only by accounting carefully for labor market and capital market interactions in production. Using such a general equilibrium approach we estimate that immigrants are imperfect substitutes for U.S.- born workers within the same education-experience-gender group (because they choose different occupations and have different skills). Moreover, accounting for a reasonable speed of adjustment of physical capital we show that most of the wage effects of immigration accrue to native workers within a decade. These two facts imply a positive and significant effect of the 1990-2004 immigration on the average wage of U.S.-born workers overall, both in the short run and in the long run. This positive effect results from averaging a positive effect on wages of U.S.-born workers with at least a high school degree and a small negative effect on wages of U.S.-born workers with no high school degree.
Handle: RePEc:nbr:nberwo:12497
Template-Type: ReDIF-Paper 1.0
Title: Unemployment Fluctuations With Staggered Nash Wage Bargaining
Classification-JEL: E24; E32; J23; J3
Author-Name: Mark Gertler
Author-Person: pge11
Author-Name: Antonella Trigari
Author-Person: ptr17
Note: EFG LS ME
Number: 12498
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12498
File-URL: http://www.nber.org/papers/w12498.pdf
File-Format: application/pdf
Publication-Status: published as Mark Gertler & Antonella Trigari, 2009. "Unemployment Fluctuations with Staggered Nash Wage Bargaining," Journal of Political Economy, University of Chicago Press, vol. 117(1), pages 38-86, 02.
Publication-Status: published as Mark Gertler & Antonella Trigari, 2006. "Unemployment fluctuations with staggered Nash wage bargaining," Proceedings, Federal Reserve Bank of San Francisco.
Abstract: A number of authors have recently emphasized that the conventional model of unemployment dynamics due to Mortensen and Pissarides has difficulty accounting for the relatively volatile behavior of labor market activity over the business cycle. We address this issue by modifying the MP framework to allow for staggered multiperiod wage contracting. What emerges is a tractable relation for wage dynamics that is a natural generalization of the period-by-period Nash bargaining outcome in the conventional formulation. An interesting side-product is the emergence of spillover effects of average wages on the bargaining process. We then show that a reasonable calibration of the model can account well for the cyclical behavior of wages and labor market activity observed in the data. The spillover effects turn out to be important in this respect.
Handle: RePEc:nbr:nberwo:12498
Template-Type: ReDIF-Paper 1.0
Title: A Conceptual World: Why the Art of the Twentieth Century is So Different From the Art of All Earlier Centuries
Classification-JEL: J0
Author-Name: David W. Galenson
Note: LS
Number: 12499
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12499
File-URL: http://www.nber.org/papers/w12499.pdf
File-Format: application/pdf
Abstract: This paper surveys 31 new genres of art that were invented during the twentieth century, chronologically from collage, papier colle, and readymades through installation, performance, and earthworks. This unprecedented proliferation in art forms was a direct consequence of the dominant role of conceptual innovation in the century's art, as a series of young iconoclasts deliberately broke the conventions and rules of existing artistic practice in the process of devising new ways to express their ideas and emotions. This overview affords a more precise understanding of one conspicuous and important way in which twentieth-century art differed from that of all earlier eras. The proliferation of genres has fragmented the advanced art world. A century ago, a great painter could influence nearly all advanced artists, but today it is virtually impossible for any one artist to influence practitioners of genres as diverse as painting, video, and installation. This survey also underscores the central role of Picasso in the advanced art of the past century, as he not only created the first, and one of the most important, of the new genres, but in doing so he also provided a new model of artistic behavior that became an inspiration for many other young conceptual artists.
Handle: RePEc:nbr:nberwo:12499
Template-Type: ReDIF-Paper 1.0
Title: Look at Me Now: What Attracts U.S. Shareholders?
Classification-JEL: G11; G15; G3; M4
Author-Name: John Ammer
Author-Name: Sara B. Holland
Author-Name: David C. Smith
Author-Name: Francis E. Warnock
Note: AP CF IFM
Number: 12500
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12500
File-URL: http://www.nber.org/papers/w12500.pdf
File-Format: application/pdf
Abstract: This paper investigates the underlying determinants of home bias using a comprehensive data set on U.S. investors' aggregate holdings of every foreign stock. Among those foreign stocks that are not listed on U.S. exchanges, which account for more than 96 percent of our usable data sample, we find that U.S. investors prefer firms with characteristics associated with greater information transparency, such as stronger home-country accounting standards. We document that a U.S. cross-listing is economically important, as U.S. ownership of a foreign firm roughly doubles upon cross-listing in the United States. We explore the cross-sectional variation in this "cross-listing effect" and find that the increase in U.S. investment is greatest for firms that are from weak accounting backgrounds and are otherwise informationally opaque, suggesting that the key effect of cross-listing is improvements in disclosure that are valued by U.S. investors. By contrast, cross-listing does not increase the appeal of stocks from countries with weak shareholder rights, suggesting that U.S. cross-listing cannot substitute for legal protections in the home country. Nor does the cross-listing effect appear to be driven simply by increased "familiarity"� with the stock or lowered cross-border transactions costs.
Handle: RePEc:nbr:nberwo:12500
Template-Type: ReDIF-Paper 1.0
Title: The Cost of Banking Regulation
Classification-JEL: E0; G0
Author-Name: Luigi Guiso
Author-Person: pgu58
Author-Name: Paola Sapienza
Author-Person: psa155
Author-Name: Luigi Zingales
Note: ME IO
Number: 12501
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12501
File-URL: http://www.nber.org/papers/w12501.pdf
File-Format: application/pdf
Publication-Status: published as Luigi Guiso & Paola Sapienza & Luigi Zingales, 2004. "The cost of banking regulation," Proceedings, Federal Reserve Bank of Chicago, issue May, pages 125-164.
Abstract: We use exogenous variation in the degree of restrictions to bank competition across Italian provinces to study both the effects of bank regulation and the impact of deregulation. We find that where entry was more restricted the cost of credit was higher and - contrary to expectations- access to credit lower. The only benefit of these restrictions was a lower proportion of bad loans. Liberalization brings a reduction in rates spreads and an increased access to credit at a cost of an increase in bad loans. In provinces where restrictions to bank competition were most severe, the proportion of bad loans after deregulation raises above the level present in more competitive markets, suggesting that the pre-existing conditions severely impact the effect of liberalizations.
Handle: RePEc:nbr:nberwo:12501
Template-Type: ReDIF-Paper 1.0
Title: The Tradeoff Between Mortgage Prepayments and Tax-Deferred Retirement Savings
Classification-JEL: G11; G18; H24; H31
Author-Name: Gene Amromin
Author-Person: pam179
Author-Name: Jennifer Huang
Author-Person: phu418
Author-Name: Clemens Sialm
Author-Person: psi59
Note: AG AP PE
Number: 12502
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12502
File-URL: http://www.nber.org/papers/w12502.pdf
File-Format: application/pdf
Publication-Status: published as Amromin, Gene & Huang, Jennifer & Sialm, Clemens, 2007. "The tradeoff between mortgage prepayments and tax-deferred retirement savings," Journal of Public Economics, Elsevier, vol. 91(10), pages 2014-2040, November.
Publication-Status: published as The Tradeoff between Mortgage Prepayments and Tax-deferred Retirement Savings, Gene Amromin, Jennifer Huang, Clemens Sialm. in Public Policy and Retirement, Trans-Atlantic Public Economics Seminar (TAPES), Blomquist and Gordon. 2007
Abstract: We show that a significant number of households can perform a tax arbitrage by cutting back on their additional mortgage payments and increasing their contributions to tax-deferred accounts (TDA). Using data from the Survey of Consumer Finances, we show that about 38% of U.S. households that are accelerating their mortgage payments instead of saving in tax-deferred accounts are making the wrong choice. For these households, reallocating their savings can yield a mean benefit of 11 to 17 cents per dollar, depending on the choice of investment assets in the TDA. In the aggregate, these mis-allocated savings are costing U.S. households as much as 1.5 billion dollars per year. Finally, we show empirically that this inefficient behavior is unlikely to be driven by liquidity considerations and that self-reported debt aversion and risk aversion variables explain to some extent the preference for paying off debt obligations early and hence the propensity to forgo our proposed tax arbitrage.
Handle: RePEc:nbr:nberwo:12502
Template-Type: ReDIF-Paper 1.0
Title: Rules Rather Than Discretion: Lessons from Hurricane Katrina
Classification-JEL: G22; H23; H44
Author-Name: Howard Kunreuther
Author-Name: Mark Pauly
Note: PE
Number: 12503
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12503
File-URL: http://www.nber.org/papers/w12503.pdf
File-Format: application/pdf
Publication-Status: published as Howard Kunreuther & Mark Pauly, 2006. "Rules rather than discretion: Lessons from Hurricane Katrina," Journal of Risk and Uncertainty, Springer, vol. 33(1), pages 101-116, September.
Abstract: This paper explores options for programs to be put in place prior to a disaster to avoid large and often poorly-managed expenditures following a catastrophe and to provide appropriate protection against the risk of those large losses which do occur. The lack of interest in insurance protection and mitigation by property owners and by public sector agencies prior to a disaster often creates major problems following a catastrophic event for victims and the government. Property owners who suffer severe damage may not have the financial resources easily at hand to rebuild their property and hence will demand relief. The government is then likely to respond with costly but poorly targeted disaster assistance. To avoid these large and often uneven ex post expenditures, we consider the option of mandatory comprehensive private disaster insurance with risk based rates. It may be more efficient to have an ex ante public program to ensure coverage of catastrophic losses and to subsidize low income residents who cannot afford coverage rather than the current largely ex post public disaster relief program.
Handle: RePEc:nbr:nberwo:12503
Template-Type: ReDIF-Paper 1.0
Title: The Effect of State Community Rating Regulations on Premiums and Coverage in the Individual Health Insurance Market
Classification-JEL: I11; I18; I19
Author-Name: Bradley Herring
Author-Person: phe204
Author-Name: Mark V. Pauly
Note: EH
Number: 12504
Creation-Date: 2006-08
Order-URL: http://www.nber.org/papers/w12504
File-URL: http://www.nber.org/papers/w12504.pdf
File-Format: application/pdf
Abstract: Some states have implemented community rating regulations to limit the extent to which premiums in the individual health insurance market can vary with a person?s health status. Community rating and guaranteed issues laws were passed with hopes of increasing access to affordable insurance for people with high-risk health conditions, but there are concerns that these laws led to adverse selection. In some sense, the extent to which these regulations ultimately affected the individual market depends in large part on the degree of risk segmentation in unregulated states. In this paper, we examine the relationship between expected medical expenses, individual insurance premiums, and the likelihood of obtaining individual insurance using data from both the National Health Interview Survey and the Community Tracking Study Household Survey. We test for differences in these relationships between states with both community rating and guaranteed issue and states with no such regulations. While we find that people living in unregulated states with higher expected expense due to chronic health conditions pay modestly higher premiums and are somewhat less likely to obtain coverage, the variation between premiums and risk in unregulated individual insurance markets is far from proportional; there is considerable pooling. In regulated states, we find that there is no effect of having higher expected expense due to chronic health conditions on neither premiums nor coverage. Overall, our results suggest that the effect of regulation is to produce a slight increase in the proportion uninsured, as increases in low risk uninsureds more than offset decreases in high risk uninsureds. Community rating and guaranteed issue regulations produce only small changes in risk pooling because the extent of pooling in the absence of regulation is substantial.
Handle: RePEc:nbr:nberwo:12504
Template-Type: ReDIF-Paper 1.0
Title: A New Framework for the Analysis of Inequality
Classification-JEL: D80; I30
Author-Name: Flavio Cunha
Author-Person: pcu47
Author-Name: James J. Heckman
Note: DAE IFM LS CH
Number: 12505
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12505
File-URL: http://www.nber.org/papers/w12505.pdf
File-Format: application/pdf
Publication-Status: published as Cunha, Flavio & Heckman, James, 2008. "A New Framework For The Analysis Of Inequality," Macroeconomic Dynamics, Cambridge University Press, vol. 12(S2), pages 315-354, September.
Abstract: This paper presents a new framework for analyzing inequality that moves beyond the anonymity postulate. We estimate the determinants of sectoral choice and the joint distributions of outcomes across sectors. We determine which components of realized earnings variability are due to uncertainty and which components are due to components of human diversity that are forcastable by agents. Using our tools, we can determine how policies shift persons across sectors and outcome distributions across sectors.
Handle: RePEc:nbr:nberwo:12505
Template-Type: ReDIF-Paper 1.0
Title: Willingness to Pay for Drug Rehabilitation: Implications for Cost Recovery
Classification-JEL: I1; I10
Author-Name: David Bishai
Author-Person: pbi62
Author-Name: Jody Sindelar
Note: EH
Number: 12506
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12506
File-URL: http://www.nber.org/papers/w12506.pdf
File-Format: application/pdf
Publication-Status: published as Bishai, D. & Sindelar, J. & Ricketts, E.P. & Huettner, S. & Cornelius, L. & Lloyd, J.J. & Havens, J.R. & Latkin, C.A. & Strathdee, S.A., 2008. "Willingness to pay for drug rehabilitation: Implications for cost recovery," Journal of Health Economics, Elsevier, vol. 27(4), pages 959-972, July.
Abstract: Objectives: This study estimates the value that clients place on drug rehabilitation services at the time of intake and how this value varies with the probability of success and availability of social services. Methods: We interviewed 241 heroin users who had been referred to, but had not yet entered, methadone maintenance treatment in Baltimore, Maryland. We asked each subject to state a preference among three hypothetical treatment programs that varied across 3 domains: weekly fee paid by the client out of pocket ($5 to $100), presence/absence of case management, and time spent heroin-free (3 to 24 months). Each subject was asked to complete 18 orthogonal comparisons. Subsequently each subject was asked if they likely would enroll in their preferred choice among the set of three. We computed the expected willingness to pay (WTP) as the probability of enrollment times the fee considered in each choice considered from a multivariate logistic model that controlled for product attributes. We also estimated the price elasticity of demand. Results: We found that 21% of clients preferred programs that were logically dominated by other options. The median expected fee subjects were willing to pay for a program that offered 3 months of heroin-free time was $7.30 per week, rising to $17.11 per week for programs that offered 24 months of heroin-free time. The availability of case management increased median WTP by $5.64 per week. The fee was the most important predictor of the self-reported probability of enrollment with a price elasticity of -0.39 (SE 0.042). Conclusions: Clients' median willingness to pay for drug rehabilitation fell short of the average program costs of $82 per week, which reinforces the need for continued subsidization as drug treatment has high positive externalities. Clients will pay more for higher rates of treatment success and for the presence of case management.
Handle: RePEc:nbr:nberwo:12506
Template-Type: ReDIF-Paper 1.0
Title: An Experimental Test of Criminal Behavior Among Juveniles and Young Adults
Classification-JEL: D64; K42; L11
Author-Name: Michael S. Visser
Author-Name: William T. Harbaugh
Author-Name: Naci H. Mocan
Author-Person: pmo270
Note: CH PE
Number: 12507
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12507
File-URL: http://www.nber.org/papers/w12507.pdf
File-Format: application/pdf
Abstract: We report results from economic experiments that provide a direct test of the hypothesis that criminal behavior responds rationally to changes in the possible rewards and in the probability and severity of punishment. The experiments involve decisions that are best described as petty larceny, and are done using high school and college students who can anonymously take real money from each other. We find that decisions about whether and how much to steal are, in general, rational and responsive to the variations in tradeoffs, and sometimes, though not always, to the overall availability of criminal opportunities.
Handle: RePEc:nbr:nberwo:12507
Template-Type: ReDIF-Paper 1.0
Title: Peers at Work
Classification-JEL: D01; J0
Author-Name: Alexandre Mas
Author-Person: pma2363
Author-Name: Enrico Moretti
Author-Person: pmo392
Note: LS
Number: 12508
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12508
File-URL: http://www.nber.org/papers/w12508.pdf
File-Format: application/pdf
Publication-Status: published as Alexandre Mas & Enrico Moretti, 2009. "Peers at Work," American Economic Review, American Economic Association, vol. 99(1), pages 112-45, March.
Abstract: We investigate how and why the productivity of a worker varies as a function of the productivity of her co-workers in a group production process. In theory, the introduction of a high productivity worker could lower the effort of incumbent workers because of free riding; or it could increase the effort of incumbent workers because of peer effects induced by social norms, social pressure, or learning. Using scanner level data, we measure high frequency, worker-level productivity of checkers for a large grocery chain. Because of the firm's scheduling policy, the timing of within-day changes in personnel is unsystematic, a feature for which we find consistent support in the data. We find strong evidence of positive productivity spillovers from the introduction of highly productive personnel into a shift. A 10% increase in average co-worker permanent productivity is associated with 1.7% increase in a worker's effort. Most of this peer effect arises from low productivity workers benefiting from the presence of high productivity workers. Therefore, the optimal mix of workers in a given shift is the one that maximizes skill diversity. In order to explain the mechanism that generates the peer effect, we examine whether effort depends on workers' ability to monitor one another due to their spatial arrangement, and whether effort is affected by the time workers have previously spent working together. We find that a given worker's effort is positively related to the presence and speed of workers who face him, but not the presence and speed of workers whom he faces (and do not face him). In addition, workers respond more to the presence of co-workers with whom they frequently overlap. These patterns indicate that these individuals are motivated by social pressure and mutual monitoring, and suggest that social preferences can play an important role in inducing effort, even when economic incentives are limited.
Handle: RePEc:nbr:nberwo:12508
Template-Type: ReDIF-Paper 1.0
Title: Public & Private Spillovers, Location and the Productivity of Pharmaceutical Research
Classification-JEL: L23; L65; O3; R3
Author-Name: Jeffrey L. Furman
Author-Name: Margaret K. Kyle
Author-Person: pky20
Author-Name: Iain M. Cockburn
Author-Person: pco166
Author-Name: Rebecca Henderson
Note: PR IO
Number: 12509
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12509
File-URL: http://www.nber.org/papers/w12509.pdf
File-Format: application/pdf
Publication-Status: published as Jeffrey Furman & Margaret K. Kyle & Alain Cockburn & Rebecca M. Henderson, 2005. "Public & Private Spillovers: Location and the Productivity of Pharmaceutical Research," Annals of Economics and Statistics, GENES, issue 79-80, pages 165-188.
Publication-Status: published as FURMAN & KYLE & COCKBURN & HENDERSON, 2005. "Public & Private Spillovers, Location and the Productivity of Pharmaceutical Research," Annales d'Économie et de Statistique, .
Abstract: While there is widespread agreement among economists and management scholars that knowledge spillovers exist and have important economic consequences, researchers know substantially less about the "micro mechanisms" of spillovers -- about the degree to which they are geographically localized, for example, or about the degree to which spillovers from public institutions are qualitatively different from those from privately owned firms (Jaffe, 1986; Krugman, 1991; Jaffe et al., 1993; Porter, 1990). In this paper we make use of the geographic distribution of the research activities of major global pharmaceutical firms to explore the extent to which knowledge spills over from proximate private and public institutions. Our data and empirical approach allow us to make advances on two dimensions. First, by focusing on spillovers in research productivity (as opposed to manufacturing productivity), we build closely on the theoretical literature on spillovers that suggests that knowledge externalities are likely to have the most immediate impact on the production of ideas (Romer, 1986; Aghion & Howitt, 1997). Second, our data allow us to distinguish spillovers from public research from spillovers from private, or competitively funded research, and to more deeply explore the role that institutions and geographic proximity play in driving knowledge spillovers.
Handle: RePEc:nbr:nberwo:12509
Template-Type: ReDIF-Paper 1.0
Title: Contingent Valuation Analysis of Willingness to Pay To Reduce Childhood Obesity
Classification-JEL: I1; I18
Author-Name: John Cawley
Author-Person: pca6
Note: EH
Number: 12510
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12510
File-URL: http://www.nber.org/papers/w12510.pdf
File-Format: application/pdf
Publication-Status: published as Cawley, John. “Contingent Valuation Analysis of Willingness to Pay to Reduce Childhood Obesity.” Economics and Human Biology, July 2008, 6(2): 281-292.
Abstract: Several recent surveys have asked Americans whether they support policies to reduce childhood obesity. There is reason for skepticism of such surveys because people are not confronted with the tax costs of such policies when they are asked whether they support them. This paper uses contingent valuation (CV), a method frequently used to estimate people's willingness to pay (WTP) for goods or services not transacted in markets, applied to unique survey data from New York State to estimate the willingness to pay to reduce childhood obesity.
The willingness to pay data correlate in predictable ways with respondent characteristics. The mean WTP for a 50% reduction in childhood obesity is $46.41 (95% CI: $33.45, $59.15), which implies a total WTP by New York State residents of $690.6 million (95% CI: $497.7, $880.15), which is less than that implied by previous surveys that did not use CV methods but greater than current spending on policies to reduce childhood obesity and greater than the estimated savings in external costs. The findings provide policymakers with useful information about taxpayers' support for, and preferred budget for, anti-obesity policies.
Handle: RePEc:nbr:nberwo:12510
Template-Type: ReDIF-Paper 1.0
Title: The Health Effects of Medicare for the Near-Elderly Uninsured
Classification-JEL: I1; J14
Author-Name: Daniel Polsky
Author-Name: Jalpa A. Doshi
Author-Name: Jose Escarce
Author-Name: Willard Manning
Author-Person: pma757
Author-Name: Susan M. Paddock
Author-Name: Liyi Cen
Author-Name: Jeannette Rogowski
Note: AG EH PE
Number: 12511
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12511
File-URL: http://www.nber.org/papers/w12511.pdf
File-Format: application/pdf
Publication-Status: published as Daniel Polsky & Jalpa A. Doshi & José Escarce & Willard Manning & Susan M. Paddock & Liyi Cen & Jeannette Rogowski, 2009. "The Health Effects of Medicare for the Near-Elderly Uninsured," Health Services Research, vol 44(3), pages 926-945.
Abstract: We study how the trajectory of health for the near-elderly uninsured changes upon enrolling into Medicare at the age of 65. We find that Medicare increases the probability of the previously uninsured having excellent or very good health, decreases their probability of being in good health, and has no discernable effects at lower health levels. Surprisingly, we found Medicare had a similar effect on health for the previously insured. This suggests that Medicare helps the relatively healthy 65 year olds, but does little for those who are already in declining health once they reach the age of 65. The improvement in health between the uninsured and insured were not statistically different from each other. The stability of insurance coverage afforded by Medicare may be the source of the health benefit suggesting that universal coverage at other ages may have similar health effects.
Handle: RePEc:nbr:nberwo:12511
Template-Type: ReDIF-Paper 1.0
Title: From Groundnuts to Globalization: A Structural Estimate of Trade and Growth
Classification-JEL: E00; F43; O4
Author-Name: Christian Broda
Author-Name: Joshua Greenfield
Author-Name: David Weinstein
Author-Person: pwe34
Note: ITI
Number: 12512
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12512
File-URL: http://www.nber.org/papers/w12512.pdf
File-Format: application/pdf
Publication-Status: published as Christian Broda & Joshua Greenfield & David E. Weinstein, 2017. "From Groundnuts to Globalization: A Structural Estimate of Trade and Growth," Research in Economics, .
Abstract: Starting with Romer [1987] and Rivera-Batiz-Romer [1991] economists have been able to model how trade enhances growth through the creation and import of new varieties. In this framework, international trade increases economic output through two channels. First, trade raises productivity levels because producers gain access to new imported varieties. Second, increases in the number of varieties drives down the cost of innovation and results in ever more variety creation. Using highly disaggregate trade data, e.g. Gabon's imports of Gambian groundnuts, we structurally estimate the impact that new imports have had in approximately 4000 markets per country. We then move from groundnuts to globalization by building an exact TFP index that aggregates these micro gains to obtain an estimate of trade on productivity growth for each country. We find that in the typical country in the world, new imported varieties account for 15 percent of its productivity growth. These effects are larger in developing countries where the median impact of new imported varieties equals a quarter of national productivity growth.
Handle: RePEc:nbr:nberwo:12512
Template-Type: ReDIF-Paper 1.0
Title: Linear Approximations and Tests of Conditional Pricing Models
Classification-JEL: G0; G10; G12; G14
Author-Name: Michael W. Brandt
Author-Name: David A. Chapman
Author-Person: pch85
Note: AP
Number: 12513
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12513
File-URL: http://www.nber.org/papers/w12513.pdf
File-Format: application/pdf
Abstract: We construct a simple reduced-form example of a conditional pricing model with modest intrinsic nonlinearity. The theoretical magnitude of the pricing errors (alphas) induced by the application of standard linear conditioning are derived as a direct consequence of an omitted variables bias. When the model is calibrated to either characteristics sorted or industry portfolios, we find that the alphas generated by approximation-induced specification error are economically large. A Monte Carlo analysis shows that finite-sample alphas are even larger. It also shows that the power to detect omitted nonlinear factors through tests based on estimated risk premiums can sometimes be quite low, even when the effect of misspecification on alphas is large.
Handle: RePEc:nbr:nberwo:12513
Template-Type: ReDIF-Paper 1.0
Title: Temporary Investment Tax Incentives: Theory with Evidence from Bonus Depreciation
Classification-JEL: E22; E62; E66
Author-Name: Christopher House
Author-Person: pho56
Author-Name: Matthew D. Shapiro
Author-Person: psh144
Note: EFG ME PE PR
Number: 12514
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12514
File-URL: http://www.nber.org/papers/w12514.pdf
File-Format: application/pdf
Publication-Status: published as Christopher L. House & Matthew D. Shapiro, 2008. "Temporary Investment Tax Incentives: Theory with Evidence from Bonus Depreciation," American Economic Review, American Economic Association, vol. 98(3), pages 737-68, June.
Abstract: Investment decisions are inherently forward-looking. The payoff of acquiring capital goods, particularly long-lived capital goods, is governed almost exclusively by events in the far future. Because the timing of the investment itself does not affect future payoffs, there are strong incentives to delay or accelerate investment to take advantage of predictable intertemporal variations in cost. For sufficiently long-lived capital goods, these incentives are so strong that the intertemporal elasticity of investment demand is nearly infinite. As a consequence, for a temporary tax change, the shadow price of long-lived capital goods must reflect the full tax subsidy regardless of the elasticity of investment supply. While price data provide no information on the elasticity of supply, they can reveal the extent to which adjustment costs are internal or external to the firm. In contrast, the elasticity of investment supply can be inferred from quantity data alone. The bonus depreciation allowance passed in 2002 and increased in 2003 presents an opportunity to test the sharp predictions of neoclassical investment theory. In the law, certain types of long-lived capital goods qualify for substantial tax subsides while others do not. The data show that investment in qualified properties was substantially higher than for unqualified property. The estimated elasticity of investment supply is high--between 10 and 20. Market prices do not react to the subsidy as the theory dictates. This suggests either that internal (unmeasured) adjustment costs play a significant role or that measurement problems in the price data effectively conceal the price changes. While the policy noticeably increased investment in types of capital that benefited substantially from bonus depreciation, the aggregate effects of the policy were modest. The analysis suggests that the policy may have increased output by roughly 0.1 percent to 0.2 percent and increased employment by roughly 100,000 to 200,000 jobs.
Handle: RePEc:nbr:nberwo:12514
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy Strategy: How Did We Get Here?
Classification-JEL: E52; E58
Author-Name: Frederic S. Mishkin
Author-Person: pmi37
Note: EFG ME
Number: 12515
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12515
File-URL: http://www.nber.org/papers/w12515.pdf
File-Format: application/pdf
Publication-Status: published as Frederic S. Mishkin, 2006. "Monetary Policy Strategy: How Did We Get Here?," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 53(4), pages 359-388, December.
Abstract: This paper, which is the introductory chapter in my book, "Monetary Policy Strategy", forthcoming from MIT Press, outlines how thinking in academia and central banks about monetary policy strategy has evolved over time. It shows that six ideas that are now accepted by monetary authorities and governments in almost all countries of the world have led to improved monetary performance: 1) there is no long-run tradeoff between output (employment) and inflation; 2) expectations are critical to monetary policy outcomes; 3) inflation has high costs; 4) monetary policy is subject to the time-inconsistency problem; 5) central bank independence helps improve the efficacy of monetary policy; and 6) a strong nominal anchor is the key to producing good monetary policy outcomes.
Handle: RePEc:nbr:nberwo:12515
Template-Type: ReDIF-Paper 1.0
Title: Gravity for Dummies and Dummies for Gravity Equations
Classification-JEL: F1; F3; F4
Author-Name: Richard Baldwin
Author-Person: pba124
Author-Name: Daria Taglioni
Author-Person: pta176
Note: IFM ITI
Number: 12516
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12516
File-URL: http://www.nber.org/papers/w12516.pdf
File-Format: application/pdf
Publication-Status: published as "Trade effects of the euro: A comparison of estimators”, with Daria Taglioni, Journal of Economic Integration, 22(4), December, pp 780–818. 2007. Circulated as “Gravity for dummies and dummies for gravity equations” CEPR DP5850, and NBER WP 12516. 2007.
Abstract: This paper provides a minimalist derivation of the gravity equation and uses it to identify three common errors in the literature, what we call the gold, silver and bronze medal errors. The paper provides estimates of the size of the biases taking the currency union trade effect as an example. We generalize Anderson-Van Wincoop's multilateral trade resistance factor (which only works with cross section data) to allow for panel data and then show that it can be dealt with using time-varying country dummies with omitted determinants of bilateral trade being dealt with by time-invariant pair dummies.
Handle: RePEc:nbr:nberwo:12516
Template-Type: ReDIF-Paper 1.0
Title: Land and Power: Theory and Evidence from Chile
Classification-JEL: D72; O54; Q15
Author-Name: Jean-Marie Baland
Author-Person: pba128
Author-Name: James A. Robinson
Author-Person: pro179
Note: DAE POL
Number: 12517
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12517
File-URL: http://www.nber.org/papers/w12517.pdf
File-Format: application/pdf
Publication-Status: published as Jean-Marie Baland & James A. Robinson, 2008. "Land and Power: Theory and Evidence from Chile," American Economic Review, American Economic Association, vol. 98(5), pages 1737-65, December.
Abstract: We study the connection between employment and political control. Many employment relationships concede rents to workers. For example, when worker effort is crucial for production, but only imperfectly observed. We show that, depending on the political institutions, the presence of such rents allows employers to use the threat of withdrawing them to control their workers' political behavior. We thus demonstrate that employment does not simply generate income, it also gives power to control the behavior of others. The analysis focuses on the salient example of political control, where landlords coerce the votes of their workers in the absence of a secret ballot. The model we develop generates predictions about electoral outcomes which can be tested by investigating the impact of the introduction of an effective secret ballot. Such an institutional reform reduces landlords' control, and in consequence, we should observe changes in voting behavior, since workers whose votes were previously controlled and sold can now vote freely. We test the predictions of the model by examining in detail the effects of the introduction of the secret ballot in Chile in 1958. We show that, consistent with our theory, the political reforms led to large changes in voting behavior. Before the reforms, localities with more pervasive patron-client relationships tend to exhibit a much stronger support for the right-wing parties, traditionally associated with the landed oligarchy. After the reform however, this difference across localities completely disappeared.
Handle: RePEc:nbr:nberwo:12517
Template-Type: ReDIF-Paper 1.0
Title: Immigration and African-American Employment Opportunities: The Response of Wages, Employment, and Incarceration to Labor Supply Shocks
Classification-JEL: J2; J3; J6; K42
Author-Name: George J. Borjas
Author-Person: pbo44
Author-Name: Jeffrey Grogger
Author-Person: pgr125
Author-Name: Gordon H. Hanson
Author-Person: pha80
Note: ITI LS
Number: 12518
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12518
File-URL: http://www.nber.org/papers/w12518.pdf
File-Format: application/pdf
Abstract: The employment rate of black men, and particularly of low-skill black men, fell precipitously from 1960 to 2000. At the same time, the incarceration rate of black men rose markedly. This paper examines the relation between immigration and these trends in black employment and incarceration. Using data drawn from the 1960-2000 U.S. Censuses, we find a strong correlation between immigration, black wages, black employment rates, and black incarceration rates. As immigrants disproportionately increased the supply of workers in a particular skill group, the wage of black workers in that group fell, the employment rate declined, and the incarceration rate rose. Our analysis suggests that a 10-percent immigrant-induced increase in the supply of a particular skill group reduced the black wage by 4.0 percent, lowered the employment rate of black men by 3.5 percentage points, and increased the incarceration rate of blacks by almost a full percentage point.
Handle: RePEc:nbr:nberwo:12518
Template-Type: ReDIF-Paper 1.0
Title: Evaluating the Effectiveness of Child Safety Seats and Seat Belts in Protecting Children from Injury
Classification-JEL: K2; R4
Author-Name: Steven D. Levitt
Author-Person: ple59
Author-Name: Joseph J. Doyle
Note: CH LE PE EH
Number: 12519
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12519
File-URL: http://www.nber.org/papers/w12519.pdf
File-Format: application/pdf
Publication-Status: published as Doyle, Joseph J., Jr. and Steven D. Levitt. "Evaluating the Effectiveness of Child Safety Seats and Seat Belts in Protecting Children from Injury." Economic Inquiry 48, 3 (July 2010): 521-36.
Abstract: Young children are required to use child safety seats, and the age threshold at which children can legally graduate to seat belts has steadily increased. This paper tests the relative effectiveness of child safety seats, lap-and-shoulder seat belts, and lap belts in preventing injuries among motor vehicle passengers aged 2-6. We analyze three large, representative samples of crashes reported to police, as well as linked hospital data. We find no apparent difference in the two most serious injury categories for children in child safety seats versus lap-and-shoulder belts. Child safety seats provide a statistically significant 25% reduction in the least serious injury category. Lap belts are somewhat less effective than the two other types of restraints, but far superior to riding unrestrained.
Handle: RePEc:nbr:nberwo:12519
Template-Type: ReDIF-Paper 1.0
Title: Creative Destruction in Industries
Classification-JEL: L11
Author-Name: Boyan Jovanovic
Author-Name: Chung-Yi Tse
Author-Person: pts45
Note: PR EFG
Number: 12520
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12520
File-URL: http://www.nber.org/papers/w12520.pdf
File-Format: application/pdf
Abstract: Most industries go through a "shakeout" phase during which the number of producers in the industry declines. Industry output generally continues to rise, however, which implies a reallocation of capacity from exiting firms to incumbents and new entrants. Thus shakeouts seem to be classic creative destruction episodes. Shakeouts of firms tend to occur sooner in industries where technological progress is rapid. Existing models do not explain this. Yet the relation emerges naturally in a vintage-capital model in which shakeouts of firms accompany the replacement of capital, and in which a shakeout is the first replacement echo of the capital created when the industry is born. We fit the model to the Gort-Klepper data and to Agarwal's update of those data.
Handle: RePEc:nbr:nberwo:12520
Template-Type: ReDIF-Paper 1.0
Title: Endogenous Skill Bias in Technology Adoption: City-Level Evidence from the IT Revolution
Classification-JEL: E13; J31; O33
Author-Name: Paul Beaudry
Author-Person: pbe35
Author-Name: Mark Doms
Author-Person: pdo89
Author-Name: Ethan Lewis
Author-Person: ple579
Note: EFG LS PR
Number: 12521
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12521
File-URL: http://www.nber.org/papers/w12521.pdf
File-Format: application/pdf
Abstract: This paper focuses on the bi-directional interaction between technology adoption and labor market conditions. We examine cross-city differences in PC-adoption, relative wages, and changes in relative wages over the period 1980-2000 to evaluate whether the patterns conform to the predictions of a neoclassical model of endogenous technology adoption. Our approach melds the literature on the effect of the relative supply of skilled labor on technology adoption to the often distinct literature on how technological change influences the relative demand for skilled labor. Our results support the idea that differences in technology use across cities and its effects on wages reflect an equilibrium response to local factor supply conditions. The model and data suggest that cities initially endowed with relatively abundant and cheap skilled labor adopted PCs more aggressively than cities with relatively expensive skilled labor, causing returns to skill to increase most in cities that adopted PCs most intensively. Our findings indicate that neo-classical models of endogenous technology adoption can be very useful for understanding where technological change arises and how it affects markets.
Handle: RePEc:nbr:nberwo:12521
Template-Type: ReDIF-Paper 1.0
Title: How Does Foreign Direct Investment Promote Economic Growth? Exploring the Effects of Financial Markets on Linkages
Classification-JEL: F23; F36; F43; O40
Author-Name: Laura Alfaro
Author-Person: pal64
Author-Name: Areendam Chanda
Author-Person: pch59
Author-Name: Sebnem Kalemli-Ozcan
Author-Person: pka37
Author-Name: Selin Sayek
Author-Person: psa409
Note: IFM ITI PR
Number: 12522
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12522
File-URL: http://www.nber.org/papers/w12522.pdf
File-Format: application/pdf
Publication-Status: published as Alfaro, Laura, Areendam Chanda, Sebnem Kalemli-Ozcan, and Selin Sayek. "Does Foreign Direct Investment Promote Economic Growth? Exploring the Role of Financial Markets on Linkages?" Journal of Development Economics 91, 2 (March 2010):242-256.
Abstract: The empirical literature finds mixed evidence on the existence of positive productivity externalities in the host country generated by foreign multinational companies. We propose a mechanism that emphasizes the role of local financial markets in enabling foreign direct investment (FDI) to promote growth through backward linkages, shedding light on this empirical ambiguity. In a small open economy, final goods production is carried out by foreign and domestic firms, which compete for skilled labor, unskilled labor, and intermediate products. To operate a firm in the intermediate goods sector, entrepreneurs must develop a new variety of intermediate good, a task that requires upfront capital investments. The more developed the local financial markets, the easier it is for credit constrained entrepreneurs to start their own firms. The increase in the number of varieties of intermediate goods leads to positive spillovers to the final goods sector. As a result financial markets allow the backward linkages between foreign and domestic firms to turn into FDI spillovers. Our calibration exercises indicate that a) holding the extent of foreign presence constant, financially well-developed economies experience growth rates that are almost twice those of economies with poor financial markets, b) increases in the share of FDI or the relative productivity of the foreign firm leads to higher additional growth in financially developed economies compared to those observed in financially under-developed ones, and c) other local conditions such as market structure and human capital are also important to generate a positive effect of FDI on economic growth.
Handle: RePEc:nbr:nberwo:12522
Template-Type: ReDIF-Paper 1.0
Title: Climbing Atop the Shoulders of Giants: The Impact of Institutions on Cumulative Research
Classification-JEL: H4; L3; O3; O33
Author-Name: Jeffrey L. Furman
Author-Name: Scott Stern
Note: PR
Number: 12523
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12523
File-URL: http://www.nber.org/papers/w12523.pdf
File-Format: application/pdf
Publication-Status: published as Jeffrey L Furman & Scott Stern, 2011. "Climbing atop the Shoulders of Giants: The Impact of Institutions on Cumulative Research," American Economic Review, vol 101(5), pages 1933-1963.
Abstract: While the cumulative nature of knowledge is recognized as central to economic growth, the microeconomic foundations of cumulativeness are less understood. This paper investigates the impact of a research-enhancing institution on cumulativeness, highlighting two effects. First, a selection effect may result in a high correlation between "high-quality" institutions and knowledge of high intrinsic quality. Second, an institution may have a marginal impact -- an incremental influence on cumulativeness, conditional on the type and quality of knowledge considered. This paper distinguishes these effects in the context of a specific institution, biological resource centers (BRCs). BRCs are "living libraries" that authenticate, preserve, and offer independent access to biological materials, such as cells, cultures, and specimens. BRCs may enhance the cumulativeness of knowledge by reducing the marginal cost to researchers of drawing on prior research efforts. We exploit three key aspects of the environment in which BRCs operate to evaluate how they affect the cumulativeness of knowledge: (a) the impact of scientific knowledge is reflected in future scientific citations, (b) deposit into BRCs often occurs with a substantial lag after initial research is completed and published, and (c) "lagged" deposits often result from shocks unrelated to the characteristics of the materials themselves. Employing a difference-in-differences estimator linking specific materials deposits to journal articles, we find evidence for both selection effects and the marginal impact of BRCs on the cumulativeness of knowledge associated with deposited materials. Moreover, the marginal impact increases with time and varies with the economic and institutional conditions in which deposit occurs.
Handle: RePEc:nbr:nberwo:12523
Template-Type: ReDIF-Paper 1.0
Title: Customer Risk from Real-Time Retail Electricity Pricing: Bill Volatility and Hedgability
Classification-JEL: L51; L94
Author-Name: Severin Borenstein
Author-Person: pbo78
Note: IO AP EEE
Number: 12524
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12524
File-URL: http://www.nber.org/papers/w12524.pdf
File-Format: application/pdf
Publication-Status: published as Severin Borenstein, 2007. "Customer Risk from Real-Time Retail Electricity Pricing: Bill Volatility and Hedgability," The Energy Journal, International Association for Energy Economics, vol. 28(2), pages 111-130.
Abstract: One of the most critical concerns that customers have voiced in the debate over real-time retail electricity pricing is that they would be exposed to risk from fluctuations in their electricity cost. The concern seems to be that a customer could find itself consuming a large quantity of power on the day that prices skyrocket and thus receive a monthly bill far larger than it had budgeted for. I analyze the magnitude of this risk, using demand data from 1142 large industrial customers, and then ask how much of this risk can be eliminated through various straightforward financial instruments. I find that very simple hedging strategies can eliminate more than 80% of the bill volatility that would otherwise occur. Far from being complex, mystifying financial instruments that only a Wall Street analyst could love, these are simple forward power purchase contracts, and are already offered to retail customers by a number of fully-regulated utilities that operate real-time pricing programs. I then show that a slightly more sophisticated application of these forward power purchases can significantly enhance their effect on reducing bill volatility.
Handle: RePEc:nbr:nberwo:12524
Template-Type: ReDIF-Paper 1.0
Title: The Corporate Governance Role of the Media: Evidence from Russia
Classification-JEL: G3; O16
Author-Name: Alexander Dyck
Author-Person: pdy5
Author-Name: Natalya Volchkova
Author-Person: pvo60
Author-Name: Luigi Zingales
Note: CF
Number: 12525
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12525
File-URL: http://www.nber.org/papers/w12525.pdf
File-Format: application/pdf
Publication-Status: published as Alexander Dyck & Natalya Volchkova & Luigi Zingales, 2008. "The Corporate Governance Role of the Media: Evidence from Russia," Journal of Finance, American Finance Association, vol. 63(3), pages 1093-1135, 06.
Abstract: We study the effect of media coverage on corporate governance by focusing on Russia in the period 1999-2002. This setting offers us three ideal conditions for such a study: plenty of corporate governance violations, no alternative mechanisms to address them, and the presence of an investment fund (the Hermitage) that actively lobbies the international press to shame companies perpetrating those violations. We find that Hermitage’s lobbying is effective in increasing the coverage of corporate governance violations in the Anglo-American press. We also find that coverage in the Anglo-American press increases the probability that a corporate governance violation is reversed. This effect is present even when we instrument coverage with an exogenous determinant, i.e. the Hermitage’s portfolio composition at the beginning of the period. The Hermitage’s strategy seems to work in part by impacting Russian companies’ reputation abroad and in part by forcing regulators into action.
Handle: RePEc:nbr:nberwo:12525
Template-Type: ReDIF-Paper 1.0
Title: What Has Mattered to Economics Since 1970
Classification-JEL: A11; B20; O33
Author-Name: E. Han Kim
Author-Name: Adair Morse
Author-Name: Luigi Zingales
Note: EFG IO ITI PE POL PR
Number: 12526
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12526
File-URL: http://www.nber.org/papers/w12526.pdf
File-Format: application/pdf
Publication-Status: published as Kim, Han, Adair Morse, and Luigi Zingales. “What Has Mattered to Economics Since 1970." Journal of Economic Perspectives 20, 4 (2006): 189-202.
Abstract: We compile the list of articles published in major refereed economics journals during the last 35 years that have received more than 500 citations. We document major shifts in the mode of contribution and in the importance of different sub-fields: Theory loses out to empirical work, and micro and macro give way to growth and development in the 1990s. While we do not witness any decline in the primacy of production in the United States over the period, the concentration of institutions within the U.S. hosting and training authors of the highly-cited articles has declined substantially.
Handle: RePEc:nbr:nberwo:12526
Template-Type: ReDIF-Paper 1.0
Title: The Effectiveness of Cigarette Regulations in Reducing Cases of Sudden Infant Death Syndrome
Classification-JEL: I0
Author-Name: Sara Markowitz
Author-Person: pma138
Note: CH EH
Number: 12527
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12527
File-URL: http://www.nber.org/papers/w12527.pdf
File-Format: application/pdf
Publication-Status: published as Markowitz, Sara, 2008. "The effectiveness of cigarette regulations in reducing cases of Sudden Infant Death Syndrome," Journal of Health Economics, Elsevier, vol. 27(1), pages 106-133, January.
Abstract: Sudden Infant Death Syndrome is a leading cause of mortality among infants and is responsible for thousands of infant deaths every year. Prenatal smoking and postnatal environmental smoke have been identified as strong risk factors for SIDS. Given the link between smoking and SIDS, this paper examines the direct effects of cigarette prices, taxes and clean indoor air laws in explaining changes in the incidence of SIDS over time in the United States. State-level counts of SIDS cases are generated from death certificates for 1973 to 2003. After controlling for some observed and unobserved confounding factors, the results show that higher cigarette prices and taxes are associated with reductions in SIDS cases. Stronger restrictions on smoking in restaurants and child care centers are also effective in reducing SIDS deaths.
Handle: RePEc:nbr:nberwo:12527
Template-Type: ReDIF-Paper 1.0
Title: Do Female Physicians Capture Their Scarcity Value? The Case of OB/GYNs
Classification-JEL: I1; J16; J44
Author-Name: Jessica Wolpaw Reyes
Note: EH LS
Number: 12528
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12528
File-URL: http://www.nber.org/papers/w12528.pdf
File-Format: application/pdf
Abstract: This paper analyzes how the imperfectly competitive market for Obstetricians and Gynecologists clears in the face of an excess demand for female OB/GYNs. This excess demand results from the convergence of three factors: i) all OB/GYN patients are women, ii) many women prefer to be treated by a female OB/GYN, iii) only a small portion of OB/GYNs are female. The paper finds that both money and non-money prices adjust: female OB/GYNs charge higher fees and also have longer waiting times. Furthermore, these effects are mediated by institutional structure: in contract settings in which money prices are rigid (i.e. managed care), waiting times are more likely to adjust, and in settings in which money prices are more flexible, the reverse occurs. In the end, female OB/GYNs are able to capture some of the value of the preferred service they provide but do not entirely close the gender income gap.
Handle: RePEc:nbr:nberwo:12528
Template-Type: ReDIF-Paper 1.0
Title: High School Alcohol Use and Young Adult Labor Market Outcomes
Classification-JEL: I1; J2; J3
Author-Name: Pinka Chatterji
Author-Person: pch732
Author-Name: Jeffrey DeSimone
Author-Person: pde214
Note: EH
Number: 12529
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12529
File-URL: http://www.nber.org/papers/w12529.pdf
File-Format: application/pdf
Abstract: We estimate the relationship between 10th grade binge drinking in 1990 and labor market outcomes in 2000 among National Educational Longitudinal Survey respondents. For females, adolescent drinking and adult wages are unrelated, and negative employment effects disappear once academic achievement is held constant. For males, negative employment effects and, more strikingly, positive wage effects persist after controlling for achievement as well as background characteristics, educational attainment, and adult binge drinking and family and job characteristics. Accounting for illegal drug use and other problem behaviors in 10th grade eliminates the unemployment effect, but strengthens the wage effect. As the latter is not explicable by the health, income or social capital justifications that are often used for frequently observed positive correlations between adult alcohol use and earnings, we conjecture that binge drinking conveys unobserved social skills that are rewarded by employers.
Handle: RePEc:nbr:nberwo:12529
Template-Type: ReDIF-Paper 1.0
Title: Evidence of a Shift in the Short-Run Price Elasticity of Gasoline Demand
Classification-JEL: D12; L91; Q31; Q41; R40; R41
Author-Name: Jonathan E. Hughes
Author-Person: phu390
Author-Name: Christopher R. Knittel
Author-Person: pkn5
Author-Name: Daniel Sperling
Note: IO EEE
Number: 12530
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12530
File-URL: http://www.nber.org/papers/w12530.pdf
File-Format: application/pdf
Publication-Status: published as Jonathan E. Hughes & Christopher R. Knittel & Daniel Sperling, 2008. "Evidence of a Shift in the Short-Run Price Elasticity of Gasoline Demand," The Energy Journal, International Association for Energy Economics, vol. 29(1), pages 113-134.
Abstract: Understanding the sensitivity of gasoline demand to changes in prices and income has important implications for policies related to climate change, optimal taxation and national security, to name only a few. While the short-run price and income elasticities of gasoline demand in the United States have been studied extensively, the vast majority of these studies focus on consumer behavior in the 1970s and 1980s. There are a number of reasons to believe that current demand elasticities differ from these previous periods, as transportation analysts have hypothesized that behavioral and structural factors over the past several decades have changed the responsiveness of U.S. consumers to changes in gasoline prices. In this paper, we compare the price and income elasticities of gasoline demand in two periods of similarly high prices from 1975 to 1980 and 2001 to 2006. The short-run price elasticities differ considerably: and range from -0.034 to -0.077 during 2001 to 2006, versus -0.21 to -0.34 for 1975 to 1980. The estimated short-run income elasticities range from 0.21 to 0.75 and when estimated with the same models are not significantly different between the two periods.
Handle: RePEc:nbr:nberwo:12530
Template-Type: ReDIF-Paper 1.0
Title: Explaining Import Variety and Quality: The Role of the Income Distribution
Classification-JEL: D3; F1
Author-Name: Yo Chul Choi
Author-Name: David Hummels
Author-Person: phu100
Author-Name: Chong Xiang
Author-Person: pxi42
Note: ITI
Number: 12531
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12531
File-URL: http://www.nber.org/papers/w12531.pdf
File-Format: application/pdf
Publication-Status: published as Choi, Yo Chul, David Hummels, and Chong Xiang. “Explaining Import Quality: the Role of the Income Distribution." Journal of International Economics 77 (2009): 265-276.
Abstract: We examine a generalized version of Flam and Helpman’s (1987) model of vertical differentiation that maps cross-country differences in income distributions to variations in import variety and price distributions. The theoretical predictions are examined and confirmed using micro data on income from the Luxemburg Income Study for 30 countries over 20 years. The pairs of importers whose income distributions look more similar have more export partners in common and more similar import price distributions. Similarly, the importers whose income distributions look more like the world buy from more exporters and have import price distributions that look more like the world.
Handle: RePEc:nbr:nberwo:12531
Template-Type: ReDIF-Paper 1.0
Title: Do State Expenditures on Tobacco Control Programs Decrease Use of Tobacco Products Among College Students?
Classification-JEL: I1
Author-Name: Christina Czart Ciecierski
Author-Name: Pinka Chatterji
Author-Person: pch732
Author-Name: Frank J. Chaloupka
Author-Person: pch236
Author-Name: Henry Wechsler
Note: EH
Number: 12532
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12532
File-URL: http://www.nber.org/papers/w12532.pdf
File-Format: application/pdf
Publication-Status: published as Ciecierski, C. C., P. Chatterji, F. J. Chaloupka, and H. Wechsler. "Do state expenditures on tobacco control programs decrease use of tobacco products among college students?" Health Economics 20, 3 (2011): 253-272.
Abstract: The objective of this paper is to investigate the effects of state tobacco control program expenditures on individual-level tobacco use behaviors among young adults. Data come from the 1993, 1997, 1999 and 2001 waves of the Harvard School of Public Health College Alcohol Study (CAS). Our findings indicate that a higher level of state spending on tobacco control programs is associated with a statistically significant increase in the probability that smokers report at least one attempt to quit smoking in the past year, as well as increases in the number of attempts to quit in the past year among smokers. We also find that higher state expenditures on tobacco control programs are associated with reductions in the prevalence of smokeless tobacco and cigar use among college students. We do not find, however, any statistically significant association between state tobacco control program expenditures and the overall prevalence and intensity of cigarette use among college students, a finding that is at odds with previous research on high school students.
Handle: RePEc:nbr:nberwo:12532
Template-Type: ReDIF-Paper 1.0
Title: Does It Pay, at the Margin, to Work and Save? -- Measuring Effective Marginal Taxes on Americans' Labor Supply and Saving
Classification-JEL: H1; H2; H3
Author-Name: Laurence J. Kotlikoff
Author-Person: pko44
Author-Name: David Rapson
Author-Person: pra605
Note: AG PE
Number: 12533
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12533
File-URL: http://www.nber.org/papers/w12533.pdf
File-Format: application/pdf
Publication-Status: published as Laurence J. Kotlikoff & David Rapson, 2007. "Does It Pay, at the Margin, to Work and Save? Measuring Effective Marginal Taxes on Americans' Labor Supply and Saving," NBER Chapters, in: Tax Policy and the Economy, Volume 21, pages 83-144 National Bureau of Economic Research, Inc.
Publication-Status: published as Laurence J. Kotlikoff & David Rapson, 2007. "Does It Pay, at the Margin, to Work and Save? Measuring Effective Marginal Taxes on Americans' Labor Supply and Saving," Tax Policy and the Economy, vol 21, pages 83-143.
Abstract: Building on Gokhale, Kotlikoff, and Sluchynsky's (2002) study of Americans' incentives to work full or part time, this paper uses ESPlanner, a life-cycle financial planning program, in conjunction with detailed modeling of transfer programs to determine a) total marginal net tax rates on current labor supply, b) total net marginal tax rates on life-cycle labor supply, c) total net marginal tax rates on saving, and d) the tax-arbitrage opportunities available from contributing to retirement accounts. In seeking to provide the most comprehensive analysis to date of fiscal incentives, the paper incorporates federal and state personal income taxes, the FICA payroll tax, federal and state corporate income taxes, federal and state sales and excise taxes, Social Security benefits, Medicare benefits, Medicaid benefits, Foods Stamps, welfare (TAFCD) benefits, and other transfer program benefits. The paper offers four main takeaways. First, thanks to the incredible complexity of the U.S. fiscal system, it's impossible for anyone to understand her incentive to work, save, or contribute to retirement accounts absent highly advanced computer technology and software. Second, the U.S. fiscal system provides most households with very strong reasons to limit their labor supply and saving. Third, the system offers very high-income young and middle aged households as well as most older households tremendous opportunities to arbitrage the tax system by contributing to retirement accounts. Fourth, the patterns by age and income of marginal net tax rates on earnings, marginal net tax rates on saving, and tax-arbitrage opportunities can be summarized with one word -- bizarre.
Handle: RePEc:nbr:nberwo:12533
Template-Type: ReDIF-Paper 1.0
Title: Why Do U.S. Firms Hold So Much More Cash Than They Used To?
Classification-JEL: G30; G32; G35
Author-Name: Thomas W. Bates
Author-Name: Kathleen M. Kahle
Author-Name: Rene M. Stulz
Note: CF
Number: 12534
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12534
File-URL: http://www.nber.org/papers/w12534.pdf
File-Format: application/pdf
Publication-Status: published as Thomas W. Bates & Kathleen M. Kahle & René M. Stulz, 2009. "Why Do U.S. Firms Hold So Much More Cash than They Used To?," Journal of Finance, American Finance Association, vol. 64(5), pages 1985-2021, October.
Abstract: The average cash to assets ratio for U.S. industrial firms increases by 129% from 1980 to 2004. Because of this increase in the average cash ratio, American firms at the end of the sample period can pay back their debt obligations with their cash holdings, so that the average firm has no leverage when leverage is measured by net debt. This change in cash ratios and net debt is the result of a secular trend rather than the outcome of the recent buildup in cash holdings of some large firms. It is concentrated among firms that do not pay dividends. The average cash ratio increases over the sample period because the cash flow of American firms has become riskier, these firms hold fewer inventories and accounts receivable, and the typical firm spends more on R&D. The precautionary motive for cash holdings appears to explain the increase in the average cash ratio.
Handle: RePEc:nbr:nberwo:12534
Template-Type: ReDIF-Paper 1.0
Title: A Comment on The Role of Prices for Excludable Public Goods
Classification-JEL: H21; H41
Author-Name: Gilbert E. Metcalf
Author-Name: Jongsang Park
Note: PE EEE
Number: 12535
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12535
File-URL: http://www.nber.org/papers/w12535.pdf
File-Format: application/pdf
Publication-Status: published as Gilbert Metcalf & Jongsang Park, 2007. "A comment on the role of prices for excludable public goods," International Tax and Public Finance, Springer, vol. 14(6), pages 685-698, December.
Abstract: Blomquist and Christensen (2005) argue that welfare is initially decreasing in the price of an excludable public good and that the case for a positive price for an excludable public good price is weak. We argue that this result follows from their particular characterization of the public good and that an alternative and equally reasonable characterization overturns their result. Hence the policy case for a positive price on the public good is stronger than Blomquist and Christiansen suggest. We also provide a flexible characterization of public goods that nests a wide variety of public goods models.
Handle: RePEc:nbr:nberwo:12535
Template-Type: ReDIF-Paper 1.0
Title: Medicaid Crowd-Out of Private Long-Term Care Insurance Demand: Evidence from the Health and Retirement Survey
Classification-JEL: G22; H51; H53; I18
Author-Name: Jeffrey R. Brown
Author-Person: pbr264
Author-Name: Norma B. Coe
Author-Person: pco329
Author-Name: Amy Finkelstein
Author-Person: pfi264
Note: AG EH PE
Number: 12536
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12536
File-URL: http://www.nber.org/papers/w12536.pdf
File-Format: application/pdf
Publication-Status: published as Medicaid Crowd-Out of Private Long-Term Care Insurance Demand: Evidence from the Health and Retirement Survey, Jeffrey R. Brown, Norma B. Coe, Amy Finkelstein. in Tax Policy and the Economy, Volume 21, Poterba. 2007
Abstract: This paper provides empirical evidence of Medicaid crowd out of demand for private long-term care insurance. Using data on the near- and young-elderly in the Health and Retirement Survey, our central estimate suggests that a $10,000 decrease in the level of assets an individual can keep while qualifying for Medicaid would increase private long-term care insurance coverage by 1.1 percentage points. These estimates imply that if every state in the country moved from their current Medicaid asset eligibility requirements to the most stringent Medicaid eligibility requirements allowed by federal law â€" a change that would decrease average household assets protected by Medicaid by about $25,000 â€" demand for private long-term care insurance would rise by 2.7 percentage points. While this represents a 30 percent increase in insurance coverage relative to the baseline ownership rate of 9.1 percent, it also indicates that the vast majority of households would still find it unattractive to purchase private insurance. We discuss reasons why, even with extremely stringent eligibility requirements, Medicaid may still exert a large crowd-out effect on demand for private insurance.
Handle: RePEc:nbr:nberwo:12536
Template-Type: ReDIF-Paper 1.0
Title: Can News About the Future Drive the Business Cycle?
Classification-JEL: E24; E32
Author-Name: Nir Jaimovich
Author-Person: pja325
Author-Name: Sergio Rebelo
Note: EFG
Number: 12537
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12537
File-URL: http://www.nber.org/papers/w12537.pdf
File-Format: application/pdf
Publication-Status: published as Nir Jaimovich & Sergio Rebelo, 2009. "Can News about the Future Drive the Business Cycle?," American Economic Review, American Economic Association, vol. 99(4), pages 1097-1118, September.
Abstract: Aggregate and sectoral comovement are central features of business cycle data. Therefore, the ability to generate comovement is a natural litmus test for macroeconomic models. But it is a test that most existing models fail. In this paper we propose a unified model that generates both aggregate and sectoral comovement in response to contemporaneous shocks and news shocks about fundamentals. The fundamentals that we consider are aggregate and sectoral TFP shocks as well as investment-specific technical change. The model has three key elements: variable capital utilization, adjustment costs to investment, and a new form of preferences that allow us to parameterize the strength of short-run wealth effects on the labor supply.
Handle: RePEc:nbr:nberwo:12537
Template-Type: ReDIF-Paper 1.0
Title: Why Has House Price Dispersion Gone Up?
Classification-JEL: E24; R12; R13
Author-Name: Stijn Van Nieuwerburgh
Author-Person: pva368
Author-Name: Pierre-Olivier Weill
Author-Person: pwe79
Note: AP EFG PE
Number: 12538
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12538
File-URL: http://www.nber.org/papers/w12538.pdf
File-Format: application/pdf
Publication-Status: published as Stijn Van Nieuwerburgh & Pierre-Olivier Weill, 2010. "Why Has House Price Dispersion Gone Up?," Review of Economic Studies, Blackwell Publishing, vol. 77(4), pages 1567-1606, October.
Abstract: We investigate the 30 year increase in the level and dispersion of house prices across U.S. metropolitan areas in a calibrated dynamic general equilibrium island model. The model is based on two main assumptions: households flow in and out metropolitan areas in response to local wage shocks, and the housing supply cannot adjust instantly because of regulatory constraints. Feeding in our model the 30 year increase in cross-sectional wage dispersion that we document based on metropolitan-level data, we generate the observed increase in house price level and dispersion. In equilibrium, workers flow towards exceptionally productive metropolitan areas and drive house prices up. The calibration also reveals that, while a baseline level of regulation is important, a tightening of regulation by itself cannot account for the increase in house price level and dispersion: in equilibrium, workers flow out of tightly regulated towards less regulated metropolitan areas, undoing most of the price impact of additional local supply regulations. Finally, the calibration with increasing wage dispersion suggests that the welfare effects of housing supply regulation are large.
Handle: RePEc:nbr:nberwo:12538
Template-Type: ReDIF-Paper 1.0
Title: Importation and Innovation
Classification-JEL: D21; D4; F1; I12; I18; O31
Author-Name: Frank R. Lichtenberg
Author-Person: pli76
Note: EFG EH ITI PR
Number: 12539
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12539
File-URL: http://www.nber.org/papers/w12539.pdf
File-Format: application/pdf
Publication-Status: published as Frank R. Lichtenberg, 2007. "Importation And Innovation," Economics of Innovation and New Technology, Taylor and Francis Journals, vol. 16(6), pages 403-417.
Abstract: Importation of drugs into the U.S. would result in a decline in U.S. drug prices. The purpose of this paper is to assess the consequences of importation for new drug development. A simple theoretical model of drug development suggests that the elasticity of innovation with respect to the expected price of drugs should be at least as great as the elasticity of innovation with respect to expected market size (disease incidence). I examine the cross-sectional relationship between pharmaceutical innovation and market size among a set of diseases (different types of cancer) exhibiting substantial exogenous variation in expected market size. I analyze two different measures of pharmaceutical innovation: the number of distinct chemotherapy regimens for treating a cancer site, and the number of articles published in scientific journals pertaining to drug therapy for that cancer site. Both analyses indicate that the amount of pharmaceutical innovation increases with disease incidence. The elasticity of the number of chemotherapy regimens with respect to the number of cases is 0.53. The elasticity of MEDLINE drug cites with respect to cancer incidence throughout the world is 0.60. In the long run, a 10% decline in drug prices would therefore be likely to cause at least a 5-6% decline in pharmaceutical innovation.
Handle: RePEc:nbr:nberwo:12539
Template-Type: ReDIF-Paper 1.0
Title: Indeterminacy in a Forward Looking Regime Switching Model
Classification-JEL: E31; E4; E52
Author-Name: Roger E. A. Farmer
Author-Person: pfa3
Author-Name: Daniel F. Waggoner
Author-Person: pwa463
Author-Name: Tao Zha
Author-Person: pzh80
Note: EFG
Number: 12540
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12540
File-URL: http://www.nber.org/papers/w12540.pdf
File-Format: application/pdf
Publication-Status: published as Roger E. A. Farmer & Daniel F. Waggoner & Tao Zha, 2009. "Indeterminacy in a forward-looking regime switching model," International Journal of Economic Theory, The International Society for Economic Theory, vol. 5(1), pages 69-84.
Abstract: This paper is about the properties of Markov switching rational expectations (MSRE) models. We present a simple monetary policy model that switches between two regimes with known transition probabilities. The first regime, treated in isolation, has a unique determinate rational expectations equilibrium and the second contains a set of indeterminate sunspot equilibria. We show that the Markov switching model, which randomizes between these two regimes, may contain a continuum of indeterminate equilibria. We provide examples of stationary sunspot equilibria and bounded sunspot equilibria which exist even when the MSRE model satisfies a 'generalized Taylor principle'. Our result suggests that it may be more difficult to rule out non-fundamental equilibria in MRSE models than in the single regime case where the Taylor principle is known to guarantee local uniqueness.
Handle: RePEc:nbr:nberwo:12540
Template-Type: ReDIF-Paper 1.0
Title: Is A Great Labor Shortage Coming? Replacement Demand in the Global Economy
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: LS
Number: 12541
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12541
File-URL: http://www.nber.org/papers/w12541.pdf
File-Format: application/pdf
Publication-Status: published as “Is A Great Labor Shortage Coming? Replacement Demand in a Global Economy,” in Harry J. Holzer and Demetra Nightingale (eds) Reshaping the American Workforce in a Changing Economy (DC: Urban Institute Press, 2007).
Abstract: This paper assesses the claim the the US faces an impending labor shortage due to the impending retirement of baby boomers and slow growth of the US work force, and that the country should orient labor market and educational policies to alleviate this prospective shortage. I find that this analysis is flawed, by making growth of GDP the target of economic policy and by paying inadequate attention to the huge supply of qualified low wage workers in the global economy. My analysis shows that the projections of future demands for skills lack the reliability to guide policies on skill development, and that contrary to the assumption implicit in the shortage analyses, demographic changes have not historically been consistently associated with changes in labor market conditions. I argue that if there is to be a shortage, the country should allow the competitive market to raise labor compensation rather than to adopt policies to keep labor costs low.
Handle: RePEc:nbr:nberwo:12541
Template-Type: ReDIF-Paper 1.0
Title: Measuring the Macroeconomic Risks Posed by Asset Price Booms
Classification-JEL: E5; G0
Author-Name: Stephen G. Cecchetti
Author-Person: pce4
Note: ME
Number: 12542
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12542
File-URL: http://www.nber.org/papers/w12542.pdf
File-Format: application/pdf
Publication-Status: published as Cecchetti, Stephen G. "The Brave New World Of Central Banking: Policy Challenges Posed By Asset Price Booms And Busts," National Institute Economic Review, 2006, v2006(196,Apr), 107-119.
Publication-Status: published as Measuring the Macroeconomic Risks Posed by Asset Price Booms, Stephen G. Cecchetti. in Asset Prices and Monetary Policy, Campbell. 2008
Abstract: Modern central bankers are the risk managers of the financial system. They take actions based not only on point forecasts for growth and inflation, but based on the entire distribution of possible macroeconomic outcomes. In numerous instances monetary policymakers have acted in ways designed to avert disasters. What are the implications of this approach for managin the risks posed by asset price booms? To address this question, I study data from a cross-section of countries to examine the impact of equity and property booms on the entire distribution of deviation in output and price-level from their trends. The results suggest that housing booms worsen growth prospects, creating outsized risks of very bad outcomes. By contrast, equity booms have very little impact on the expected mean and variance of macroeconomic performance, but worsen the worst outcomes.
Handle: RePEc:nbr:nberwo:12542
Template-Type: ReDIF-Paper 1.0
Title: International Trade and Finance under the Two Hegemons: Complementaries in the United Kingdom 1870-1913 and the United States 1920-30
Classification-JEL: F10; F30; F40; N10; N20; N70
Author-Name: Alan M. Taylor
Author-Person: pta46
Author-Name: Janine L. F. Wilson
Note: ITI IFM
Number: 12543
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12543
File-URL: http://www.nber.org/papers/w12543.pdf
File-Format: application/pdf
Abstract: Do international trade and finance flow together? In theory, trade and finance can be substitutes or complements, so the matter must be resolved empirically. We study trade and financial flows from the United Kingdom from 1870 to 1913 and the United States in the interwar years. Trade and finance are robustly correlated, even after allowing for simultaneity. Evidence from the British Empire casts doubt on the idea that trade is a punishment device in the event of a default.
Handle: RePEc:nbr:nberwo:12543
Template-Type: ReDIF-Paper 1.0
Title: Growth, Reform Indicators and Policy Complementaries
Classification-JEL: P2; O40; C33
Author-Name: Jorge Braga de Macedo
Author-Person: pbr373
Author-Name: Joaquim Oliveira Martins
Author-Person: pol2
Note: PR
Number: 12544
Creation-Date: 2006-09
Order-URL: http://www.nber.org/papers/w12544
File-URL: http://www.nber.org/papers/w12544.pdf
File-Format: application/pdf
Publication-Status: published as Jorge Braga De Macedo & Joaquim Oliveira Martins, 2008. "Growth, reform indicators and policy complementarities," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 16(2), pages 141-164, 04.
Abstract: This paper discusses the design of structural policies by relating second-best results and the complementarity of reforms. It computes a complementarity index based on structural reform indicators compiled by the EBRD for transition countries, assuming that the run-up to EU integration corresponds to a nearly complete policy cycle. Using econometric panel estimates, the level of reforms and changes in their complementarity are found to be positively related to output growth, corrected for endogeneity, and given initial conditions and the extent of macroeconomic stabilisation.
Handle: RePEc:nbr:nberwo:12544
Template-Type: ReDIF-Paper 1.0
Title: Multilateralising Regionalism: Spaghetti Bowls as Building Blocs on the Path to Global Free Trade
Classification-JEL: F1; F15
Author-Name: Richard Baldwin
Author-Person: pba124
Note: IFM ITI
Number: 12545
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12545
File-URL: http://www.nber.org/papers/w12545.pdf
File-Format: application/pdf
Publication-Status: published as Richard E. Baldwin, 2006. "Multilateralising Regionalism: Spaghetti Bowls as Building Blocs on the Path to Global Free Trade," The World Economy, Blackwell Publishing, vol. 29(11), pages 1451-1518, November.
Abstract: This paper addresses the final steps to global free trade -- the political economy forces that might drive them, and the role the WTO might play in guiding them. Two facts form the departure point: 1) Regionalism is here to stay; 2) the motley assortment of regional trade agreements is not the best way to organise world trade. Moving to global duty-free trade will require a multilateralisation of regionalism. The paper presents the political economy logic of trade liberalisation and uses it to structure a narrative of world trade liberalisation since 1947. The logic is then used to project the world tariff map in 2010, arguing that the pattern will be marked by fractals – fuzzy, leaky trade blocs made up of fuzzy, leaky sub-blocs (fuzzy since the proliferation of FTAs makes it impossible to draw sharp lines around the 3 big blocs, and leaky since some FTAs create free trade 'canals' linking the blocs). The paper then presents a novel political economy mechanism – spaghetti bowls as building blocs – whereby offshoring creates a force that encourages the multilateralisation of regionalism. Finally, the paper suggests three things the WTO could do to help multilateralise regionalism.
Handle: RePEc:nbr:nberwo:12545
Template-Type: ReDIF-Paper 1.0
Title: Colonialism and Modern Income -- Islands as Natural Experiments
Classification-JEL: E21; O11; O4; O40
Author-Name: James Feyrer
Author-Person: pfe139
Author-Name: Bruce Sacerdote
Note: EFG DAE
Number: 12546
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12546
File-URL: http://www.nber.org/papers/w12546.pdf
File-Format: application/pdf
Publication-Status: published as James Feyrer & Bruce Sacerdote, 2009. "Colonialism and Modern Income: Islands as Natural Experiments," The Review of Economics and Statistics, MIT Press, vol. 91(2), pages 245-262, November.
Abstract: Using a new database of islands throughout the Atlantic, Pacific and Indian Oceans we examine whether colonial origins affect modern economic outcomes. We argue that the nature of discovery and colonization of islands provides random variation in the length and type of colonial experience. We instrument for length of colonization using wind direction and wind speed. Wind patterns which mattered a great deal during the age of sail do not have a direct effect on GDP today, but do affect GDP via their historical impact on colonization. The number of years spent as a European colony is strongly positively related to the island's GDP per capita and negatively related to infant mortality. This basic relationship is also found to hold for a standard dataset of developing countries. We test whether this link is directly related to democratic institutions, trade, and the identity of the colonizing nation. While there is substantial variation in the history of democratic institutions across the islands, such variation does not predict income. Islands with significant export products during the colonial period are wealthier today, but this does not diminish the importance of colonial tenure. The timing of the colonial experience seems to matter. Time spent as a colony after 1700 is more beneficial to modern income than years before 1700, consistent with a change in the nature of colonial relationships over time.
Handle: RePEc:nbr:nberwo:12546
Template-Type: ReDIF-Paper 1.0
Title: Pass Through of Exchange Rates to Consumption Prices: What has Changed and Why?
Classification-JEL: F3; F4
Author-Name: Jose Manuel Campa
Author-Person: pca393
Author-Name: Linda S. Goldberg
Author-Person: pgo256
Note: IFM ITI
Number: 12547
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12547
File-URL: http://www.nber.org/papers/w12547.pdf
File-Format: application/pdf
Publication-Status: published as Jose Manuel Campa & Linda S. Goldberg, 2008. "Pass-Through of Exchange Rates to Consumption Prices: What Has Changed and Why?," NBER Chapters, in: International Financial Issues in the Pacific Rim: Global Imbalances, Financial Liberalization, and Exchange Rate Policy (NBER-EASE Volume 17), pages 139-176 National Bureau of Economic Research, Inc.
Abstract: In this paper, we use cross-county and time series evidence to argue that retail price sensitivity to exchange rates may have increased over the past decade. This finding applies to traded goods, as well as to non-traded goods. We highlight three reasons for changing pass through at the level of retail prices of goods. First, pass through may have declined at the level of import prices, but the evidence is mixed over types of goods and countries. Second, there has been a large expansion of imported input use across sectors. This means that the costs of imported goods as well as home tradable goods have heightened sensitivity to import prices and exchange rates. The final channel we consider is whether there have been changing sectoral expenditures on distribution services, with the direction of change negatively correlated with pass through into final consumption prices. We find that this channel, which has been a means of insulating consumption prices from import content and exchange rates, has not systematically changed in recent years. The balance of effects weighs in favor of increased sensitivity of consumption prices to exchange rates, even if exchange-rate pass-through into import prices has declined for some types of goods.
Handle: RePEc:nbr:nberwo:12547
Template-Type: ReDIF-Paper 1.0
Title: Foreign Participation in Local Currency Bond Markets
Classification-JEL: F3; G11; G15; O16
Author-Name: John D. Burger
Author-Person: pbu222
Author-Name: Francis E. Warnock
Note: IFM
Number: 12548
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12548
File-URL: http://www.nber.org/papers/w12548.pdf
File-Format: application/pdf
Publication-Status: published as Review of Financial Economics 16: pp. 291-304 (2007)
Abstract: Countries that cannot attract foreigners to invest in their local currency bonds run the risk of currency mismatches that can result in painful crises. We analyze foreign participation in the bond markets of over 40 countries. Bond markets in less developed countries have returns characterized by high variance and negative skewness, factors that we show are eschewed by U.S. investors. While results based on a three-moment CAPM indicate that it is diversifiable idiosyncratic risk that U.S. investors shun, our analysis suggests that countries can improve foreign participation by reducing macroeconomic instability.
Handle: RePEc:nbr:nberwo:12548
Template-Type: ReDIF-Paper 1.0
Title: Poverty Traps, Distance, and Diversity: The Migration Connection
Classification-JEL: J6; N3
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: DAE EFG LS
Number: 12549
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12549
File-URL: http://www.nber.org/papers/w12549.pdf
File-Format: application/pdf
Abstract: Within-country ethnic diversity in high-wage immigrant nations is driven by long distance migration. This paper documents the migration-diversity connection for the first global century before 1914 and the second global century after 1950. It distinguishes between ethnic diversity among the foreign-born, between the foreign-born and native-born and for total populations using country-of-birth data. It exploits the polarization index made popular in the recent diversity-growth debate and exploits an emigration life cycle model to predict the connection. It also shows how policy matters.
Handle: RePEc:nbr:nberwo:12549
Template-Type: ReDIF-Paper 1.0
Title: Wealth Inequality: Data and Models
Classification-JEL: D3; D58; D64; E2; E20; E23; H0; H31
Author-Name: Marco Cagetti
Author-Name: Mariacristina De Nardi
Author-Person: pde51
Note: PE
Number: 12550
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12550
File-URL: http://www.nber.org/papers/w12550.pdf
File-Format: application/pdf
Publication-Status: published as Cagetti, Marco & De Nardi, Mariacristina, 2008. "Wealth Inequality: Data And Models," Macroeconomic Dynamics, Cambridge University Press, vol. 12(S2), pages 285-313, September.
Abstract: In the United States wealth is highly concentrated and very unequally distributed: the richest 1% hold one third of the total wealth in the economy. Understanding the determinants of wealth inequality is a challenge for many economic models. We summarize some key facts about the wealth distribution and what economic models have been able to explain so far.
Handle: RePEc:nbr:nberwo:12550
Template-Type: ReDIF-Paper 1.0
Title: Are Currency Appreciations Contractionary in China?
Classification-JEL: F31; F41; O53
Author-Name: Jianhuai Shi
Note: IFM
Number: 12551
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12551
File-URL: http://www.nber.org/papers/w12551.pdf
File-Format: application/pdf
Publication-Status: published as Jianhuai, Shi. "Are Currency Appreciations Contractionary in China?" Jingji Yanjiu/Economic Research Journal 42, 1 (January 2007): 41-55.
Publication-Status: published as Are Currency Appreciations Contractionary in China?, Jianhuai Shi. in International Financial Issues in the Pacific Rim: Global Imbalances, Financial Liberalization, and Exchange Rate Policy, Ito and Rose. 2008
Abstract: The Chinese economy has been in a state of external and internal imbalances for some years, which has something to do with the undervaluation of renminbi (RMB). But the Chinese Government hesitates to allow RMB to appreciate because of the worry that RMB appreciations are contractionary thus have negative impact on China's economic growth and employment. The purpose of this paper is to empirically assess the effects of RMB real exchange rate on China's output. The econometric results of the paper show that (1) even after source of spurious correlation is controlled for, RMB appreciation has led to a decline in China's output, suggesting that RMB appreciations are contractionary, and that (2) once the international finance linkage of Chinese economy is accounted for, the effect of RMB real exchange rate shocks on China's output and the power of the shocks in explaining the change of China's output are diminished. The paper gives some possible explanations to those findings, and points out that the findings do not necessarily imply that China should continue maintaining the undervaluation of RMB.
Handle: RePEc:nbr:nberwo:12551
Template-Type: ReDIF-Paper 1.0
Title: Local Currency Bond Markets
Classification-JEL: F30; G15; O16
Author-Name: John D. Burger
Author-Person: pbu222
Author-Name: Francis E. Warnock
Note: IFM
Number: 12552
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12552
File-URL: http://www.nber.org/papers/w12552.pdf
File-Format: application/pdf
Publication-Status: published as Burger, John D., and Francis E. Warnock, 2006. "Local Currency Bond Markets," IMF Staff Papers 53 (Special Issue): 115-132.
Abstract: We analyze the development of 49 local bond markets. Our main finding is that policies and laws matter: Countries with stable inflation rates and strong creditor rights have more developed local bond markets and rely less on foreign-currency-denominated bonds. The results suggest that "original sin" is a misnomer. Emerging economies are not inherently dependent upon foreign-currency debt. Rather, by improving policy performance and strengthening institutions they may develop local currency bond markets, reduce their currency mismatch, and lessen the likelihood of future crises.
Handle: RePEc:nbr:nberwo:12552
Template-Type: ReDIF-Paper 1.0
Title: Inequality and Schooling Responses to Globalization Forces: Lessons from History
Classification-JEL: D3; F1; I2; J6; N3
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: DAE ED LS POL ITI
Number: 12553
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12553
File-URL: http://www.nber.org/papers/w12553.pdf
File-Format: application/pdf
Publication-Status: published as Jeffrey G. Williamson, 2006. "Inequality and schooling responses to globalization forces: lessons from history," Proceedings, Federal Reserve Bank of Dallas, pages 225-248.
Abstract: In the first global century before 1914, trade and especially migration had profound effects on both low-wage, labor abundant Europe and the high-wage, labor scarce New World. Those global forces contributed to a reduction in unskilled labor scarcity in the New World and to a rise in unskilled labor scarcity in Europe. Thus, it contributed to rising inequality in overseas countries, like the United States, and falling inequality in most of Europe. Falling unskilled labor scarcity and rising skill scarcity contributed to the high school revolution in the US. Rising unskilled scarcity also contributed to the primary schooling and literacy revolution in Europe. Under what conditions would we expect the same responses to globalization in today’s world? This paper argues that modern debates about inequality and schooling responses to globalization should pay more attention to history.
Handle: RePEc:nbr:nberwo:12553
Template-Type: ReDIF-Paper 1.0
Title: Differential Mortality, Uncertain Medical Expenses, and the Saving of Elderly Singles
Classification-JEL: D1; D31; E2; H31; H51; I1
Author-Name: Mariacristina De Nardi
Author-Person: pde51
Author-Name: Eric French
Author-Person: pfr203
Author-Name: John Bailey Jones
Author-Person: pjo135
Note: AG EH PE
Number: 12554
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12554
File-URL: http://www.nber.org/papers/w12554.pdf
File-Format: application/pdf
Abstract: People have heterogenous life expectancies: women live longer than men, rich people live longer than poor people, and healthy people live longer than sick people. People are also subject to heterogenous out-of-pocket medical expense risk. We construct a rich structural model of saving behavior for retired single households that accounts for this heterogeneity, and we estimate the model using AHEAD data and the method of simulated moments. We find that the risk of living long and facing high medical expenses goes a long way toward explaining the elderly's savings decisions. Specifically, medical expenses that rise quickly with both age and permanent income can explain why the elderly singles, and especially the richest ones, run down their assets so slowly. We also find that social insurance has a big impact on the elderly's savings.
Handle: RePEc:nbr:nberwo:12554
Template-Type: ReDIF-Paper 1.0
Title: Financially Constrained Stock Returns
Classification-JEL: G12; G31; G32
Author-Name: Dmitry Livdan
Author-Person: pli1379
Author-Name: Horacio Sapriza
Author-Name: Lu Zhang
Author-Person: pzh29
Note: AP CF EFG
Number: 12555
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12555
File-URL: http://www.nber.org/papers/w12555.pdf
File-Format: application/pdf
Publication-Status: published as Dmitry Livdan & Horacio Sapriza & Lu Zhang, 2009. "Financially Constrained Stock Returns," Journal of Finance, American Finance Association, vol. 64(4), pages 1827-1862, 08.
Abstract: More financially constrained firms are riskier and earn higher expected returns than less financially constrained firms, although this effect can be subsumed by size and book-to-market. Further, because the stochastic discount factor makes capital investment more procyclical, financial constraints are more binding in economic booms. These insights arise from two dynamic models. In Model 1, firms face dividend nonnegativity constraints without any access to external funds. In Model 2, firms can retain earnings, raise debt and equity, but face collateral constraints on debt capacity. Despite their diverse structures, the two models share largely similar predictions.
Handle: RePEc:nbr:nberwo:12555
Template-Type: ReDIF-Paper 1.0
Title: Does How Much and How You Pay Matter? Evidence from the Inpatient Rehabilitation Facility Prospective Payment System
Classification-JEL: I1; I18
Author-Name: Neeraj Sood
Author-Person: pso62
Author-Name: Melinda Beeuwkes Buntin
Author-Name: Jose J. Escarce
Note: EH
Number: 12556
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12556
File-URL: http://www.nber.org/papers/w12556.pdf
File-Format: application/pdf
Publication-Status: published as Sood, Neeraj, Melinda Beeuwkes Buntin, and Jose J. Escarce. "Does How Much and How You Pay Matter? Evidence from the Inpatient Rehabilitation Facility Prospective Payment System." Journal of Health Economics 27, 4 (July 2008): 1046-1059.
Abstract: We use the implementation of a new prospective payment system (PPS) for inpatient rehabilitation facilities (IRFs) to investigate the effect of changes in marginal and average reimbursement on costs. The results show that the IRF PPS led to a significant decline in costs and length of stay. Changes in marginal reimbursement associated with the move from a cost based system to a PPS led to a 7 to 11% reduction in costs. The elasticity of costs with respect average reimbursement ranged from 0.26 to 0.34. Finally, the IRF PPS had little or no impact on costs in other sites of care, mortality, or the rate of return to community residence.
Handle: RePEc:nbr:nberwo:12556
Template-Type: ReDIF-Paper 1.0
Title: Aggregate Shocks or Aggregate Information? Costly Information and Business Cycle Comovement
Classification-JEL: D82; E32
Author-Name: Laura Veldkamp
Author-Person: pve40
Author-Name: Justin Wolfers
Author-Person: pwo9
Note: AP EFG ME
Number: 12557
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12557
File-URL: http://www.nber.org/papers/w12557.pdf
File-Format: application/pdf
Publication-Status: published as Veldkamp, Laura & Wolfers, Justin, 2007. "Aggregate shocks or aggregate information? Costly information and business cycle comovement," Journal of Monetary Economics, Elsevier, vol. 54(Supplemen), pages 37-55, September.
Abstract: Synchronized expansions and contractions across sectors define business cycles. Yet synchronization is puzzling because productivity across sectors exhibits weak correlation. While previous work examined production complementarity, our analysis explores complementarity in information acquisition. Because information about future productivity has a high fixed cost of production and a low marginal cost of replication, sectors can share the cost to forecast their sector-specific productivity. Sectors with common, aggregate information make highly correlated productions choices. By filtering out sector-specific shocks and transmitting aggregate ones, information markets amplify business-cycle comovement.
Handle: RePEc:nbr:nberwo:12557
Template-Type: ReDIF-Paper 1.0
Title: The Evolution of Income Concentration in Japan, 1886-2002: Evidence from Income Tax Statistics
Classification-JEL: H24; N15
Author-Name: Chiaki Moriguchi
Author-Person: pmo419
Author-Name: Emmanuel Saez
Author-Person: psa117
Note: LS PE
Number: 12558
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12558
File-URL: http://www.nber.org/papers/w12558.pdf
File-Format: application/pdf
Publication-Status: published as Chiaki Moriguchi & Emmanuel Saez, 2008. "The Evolution of Income Concentration in Japan, 1886-2005: Evidence from Income Tax Statistics," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 713-734, 07.
Abstract: This paper studies the evolution of income concentration in Japan from 1886 to 2002 by constructing long-run series of top income shares and top wage income shares, using income tax statistics. We find that (1) income concentration was extremely high throughout the pre-WWII period during which the nation underwent rapid industrialization; (2) a drastic de-concentration of income at the top took place in 1938-1945; (3) income concentration has remained low throughout the post-WWII period despite the high economic growth; and (4) top income composition in Japan has shifted dramatically from capital income to employment income over the course of the 20th century. We attribute the precipitous fall in income concentration during WWII primarily to the collapse of capital income due to wartime regulations and inflation. We argue that the change in the institutional structure under the occupational reforms made the one-time income de-concentration difficult to reverse. In contrast to the sharp increase in wage income inequality observed in the United States since 1970, the top wage income shares in Japan have remained remarkably stable over the recent decades. We show that the change in technology or tax policies alone cannot account for the comparative experience of Japan and the United States. Instead we suggest that institutional factors such as corporate governance and union structure are important determinants of wage income inequality.
Handle: RePEc:nbr:nberwo:12558
Template-Type: ReDIF-Paper 1.0
Title: Labor Market Shocks and Retirement: Do Government Programs Matter?
Classification-JEL: H55; J26; J64; J65
Author-Name: Courtney C. Coile
Author-Person: pco557
Author-Name: Phillip B. Levine
Author-Person: ple553
Note: AG LS
Number: 12559
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12559
File-URL: http://www.nber.org/papers/w12559.pdf
File-Format: application/pdf
Publication-Status: published as Coile, Courtney C. and Phillip B. Levine. “Labor Market Shocks and Retirement: Do Government Programs Matter?” Journal of Public Economics 91(10):1902-1919, November 2007.
Abstract: This paper examines how unemployment affects retirement and whether the Unemployment Insurance (UI) system and Social Security (SS) system affect how older workers respond to labor market shocks. To do so, we use pooled cross-sectional data from the March Current Population Survey (CPS) as well as March CPS files matched between one year and the next and longitudinal data from the Health and Retirement Survey (HRS). We find that downturns in the labor market increase retirement transitions. The magnitude of this effect is comparable to that associated with moderate changes in financial incentives to retire and to the threat of a health shock to which older workers are exposed. Interestingly, retirements only increase in response to an economic downturn once workers become SS-eligible, suggesting that retirement benefits may help alleviate the income loss associated with a weak labor market. We also estimate the impact of UI generosity on retirement and find little consistent evidence of an effect. This suggests that in some ways SS may serve as a more effective form of unemployment insurance for older workers than UI.
Handle: RePEc:nbr:nberwo:12559
Template-Type: ReDIF-Paper 1.0
Title: International Capital Flows and U.S. Interest Rates
Classification-JEL: E43; E44; F21
Author-Name: Francis E. Warnock
Author-Name: Veronica Cacdac Warnock
Note: IFM ME
Number: 12560
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12560
File-URL: http://www.nber.org/papers/w12560.pdf
File-Format: application/pdf
Publication-Status: published as Warnock, Francis E., and Veronica Cacdac Warnock, 2009, International Capital Flows and U.S. Interest Rates, Journal of International Money and Finance 28: 903-919.
Abstract: Foreign official purchases of U.S. government bonds have an economically large and statistically significant impact on long-term interest rates. Federal Reserve credibility, as evidenced by dramatic reductions in both long-term inflation expectations and the volatility of long rates, contributed much to the decline of long rates in the 1990s. More recently, however, foreign flows have become important. Controlling for various factors given by a standard macroeconomic model, we estimate that had there been no foreign official flows into U.S. government bonds over the past year, the 10-year Treasury yield would currently be 90 basis points higher. Our results are robust to a number of alternative specifications.
Handle: RePEc:nbr:nberwo:12560
Template-Type: ReDIF-Paper 1.0
Title: Do Television and Radio Destroy Social Capital? Evidence from Indonesian Villages
Classification-JEL: Z13
Author-Name: Benjamin A. Olken
Author-Person: pol170
Note: LS POL
Number: 12561
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12561
File-URL: http://www.nber.org/papers/w12561.pdf
File-Format: application/pdf
Publication-Status: published as Benjamin A. Olken, 2009. "Do Television and Radio Destroy Social Capital? Evidence from Indonesian Villages," American Economic Journal: Applied Economics, American Economic Association, vol. 1(4), pages 1-33, October.
Abstract: In "Bowling Alone," Putnam (1995) famously argued that the rise of television may be responsible for social capital's decline. I investigate this hypothesis in the context of Indonesian villages. To identify the impact of exposure to television (and radio), I exploit plausibly exogenous differences in over-the-air signal strength associated with the topography of East and Central Java. Using this approach, I find that better signal reception, which is associated with more time spent watching television and listening to radio, is associated with substantially lower levels of participation in social activities and with lower self-reported measures of trust. I find particularly strong effects on participation in local government activities, as well as on participation in informal savings groups. However, despite the impact on social capital, improved reception does not appear to affect village governance, at least as measured by discussions in village-level meetings and by corruption in a village-level road project.
Handle: RePEc:nbr:nberwo:12561
Template-Type: ReDIF-Paper 1.0
Title: Valuing New Goods in a Model with Complementarities: Online Newspapers
Classification-JEL: C25; L82
Author-Name: Matthew Gentzkow
Author-Person: pge43
Note: IO
Number: 12562
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12562
File-URL: http://www.nber.org/papers/w12562.pdf
File-Format: application/pdf
Publication-Status: published as Matthew Gentzkow, 2007. "Valuing New Goods in a Model with Complementarity: Online Newspapers," American Economic Review, American Economic Association, vol. 97(3), pages 713-744, June.
Abstract: Many important economic questions hinge on the extent to which new goods either crowd out or complement consumption of existing products. Recent methods for studying new goods are based on demand models that rule out complementarity by assumption, so their applicability to these questions has been limited. I develop a new model that relaxes this restriction, and use it to study the specific case of competition between print and online newspapers. Using new micro data from the Washington DC market, I show that the major print and online papers appear to be strong complements in the raw data, but that this is an artifact of unobserved consumer heterogeneity. I estimate that the online paper reduced print readership by 27,000 per day, at a cost of $5.5 million per year in lost print profits. I find that online news has provided substantial welfare benefits to consumers and that charging positive online prices is unlikely to substantially increase firm profits.
Handle: RePEc:nbr:nberwo:12562
Template-Type: ReDIF-Paper 1.0
Title: Entry and Patenting in the Software Industry
Classification-JEL: L1; L6; O34
Author-Name: Iain M. Cockburn
Author-Person: pco166
Author-Name: Megan J. MacGarvie
Author-Person: pma1307
Note: PR IO
Number: 12563
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12563
File-URL: http://www.nber.org/papers/w12563.pdf
File-Format: application/pdf
Publication-Status: published as Cockburn, I., and MacGarvie, M. “Entry and Patenting in the Software Industry.” Management Science, May 2011. vol. 57 no. 5.
Abstract: To what extent are firms kept out of a market by patents covering related technologies? Do patents held by potential entrants make it easier to enter markets? We estimate the empirical relationship between market entry and patents for 27 narrowly defined categories of software products during the period 1990-2004. Controlling for demand, market structure, average patent quality, and other factors, we find that a 10% increase in the number of patents relevant to market reduces the rate of entry by 3-8%, and this relationship intensified following expansions in the patentability of software in the mid-1990s. However, potential entrants with patent applications relevant to a market are more likely to enter it. Finally, patents appear to substitute for complementary assets in the entry process, as patents have both greater entry-deterring and entry-promoting effects for firms without prior experience in other markets.
Handle: RePEc:nbr:nberwo:12563
Template-Type: ReDIF-Paper 1.0
Title: Endogenous Sudden Stops in a Business Cycle Model with Collateral Constraints:A Fisherian Deflation of Tobin's Q
Classification-JEL: D52; E44; F32; F41
Author-Name: Enrique G. Mendoza
Author-Person: pme30
Note: IFM EFG
Number: 12564
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12564
File-URL: http://www.nber.org/papers/w12564.pdf
File-Format: application/pdf
Abstract: The current account reversals, large recessions, and price collapses that define Sudden Stops contradict the predictions of a large class of models in which the current account is a vehicle for consumption smoothing and investment financing. This paper shows that the quantitative predictions of a business cycle model with collateral constraints are consistent with the key features of Sudden Stops. Standard shocks to imported input prices, the world interest rate, and productivity trigger collateral constraints on debt and working capital when borrowing levels are high relative to asset values, and these high-leverage states are endogenous outcomes. In these situations, Irving Fisher's debt-deflation mechanism causes Sudden Stops as the deflation of Tobin's Q leads to a spiraling decline in the prices and holdings of collateral assets. This has immediate effects on output and factor demands because collapsing collateral values cut access to working capital. In contrast with previous findings, collateral constraints induce significant amplification in the responses of macroaggregates to shocks. Because of precautionary saving, Sudden Stops are infrequent events nested within normal cycles in the long run, but they remain a positive probability event.
Handle: RePEc:nbr:nberwo:12564
Template-Type: ReDIF-Paper 1.0
Title: Understanding South Africa's Economic Puzzles
Classification-JEL: O11; O14
Author-Name: Dani Rodrik
Author-Person: pro60
Note: EFG ITI
Number: 12565
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12565
File-URL: http://www.nber.org/papers/w12565.pdf
File-Format: application/pdf
Publication-Status: published as Dani Rodrik, 2008. "Understanding South Africa's economic puzzles ," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 16(4), pages 769-797, October.
Abstract: South Africa has undergone a remarkable transformation since its democratic transition in 1994, but economic growth and employment generation have been disappointing. Most worryingly, unemployment is currently among the highest in the world. While the proximate cause of high unemployment is that prevailing wages levels are too high, the deeper cause lies elsewhere, and is intimately connected to the inability of the South African to generate much growth momentum in the past decade. High unemployment and low growth are both ultimately the result of the shrinkage of the non-mineral tradable sector since the early 1990s. The weakness in particular of export-oriented manufacturing has deprived South Africa from growth opportunities as well as from job creation at the relatively low end of the skill distribution. Econometric analysis identifies the decline in the relative profitability of manufacturing in the 1990s as the most important contributor to the lack of vitality in that sector.
Handle: RePEc:nbr:nberwo:12565
Template-Type: ReDIF-Paper 1.0
Title: Demographics in Dynamic Heckscher-Ohlin Models: Overlapping Generations Versus Infinitely Lived Consumers
Classification-JEL: F11; F43; O15; O41
Author-Name: Claustre Bajona
Author-Person: pba491
Author-Name: Timothy J. Kehoe
Author-Person: pke16
Note: EFG ITI
Number: 12566
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12566
File-URL: http://www.nber.org/papers/w12566.pdf
File-Format: application/pdf
Abstract: This paper contrasts the properties of dynamic Heckscher-Ohlin models with overlapping generations with those of models with infinitely lived consumers. In both environments, if capital is mobile across countries, factor price equalization occurs after the initial period. In general, however, the properties of equilibria differ drastically across environments: With infinitely lived consumers, we find that factor prices equalize in any steady state or cycle and that, in general, there is positive trade in any steady state or cycle. With overlapping generations, in contrast, we construct examples with steady states and cycles in which factor prices are not equalized, and we find that any equilibrium that converges to a steady state or cycle with factor price equalization has no trade after a finite number of periods.
Handle: RePEc:nbr:nberwo:12566
Template-Type: ReDIF-Paper 1.0
Title: Trade, Growth, and Convergence in a Dynamic Heckscher-Ohlin Model
Classification-JEL: F11; F43; O15; O41
Author-Name: Claustre Bajona
Author-Person: pba491
Author-Name: Timothy J. Kehoe
Author-Person: pke16
Note: EFG
Number: 12567
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12567
File-URL: http://www.nber.org/papers/w12567.pdf
File-Format: application/pdf
Publication-Status: published as Claustre Bajona & Timothy Kehoe, 2010. "Trade, Growth, and Convergence in a Dynamic Heckscher-Ohlin Model," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(3), pages 487-513, July.
Abstract: This paper studies the properties of a dynamic Heckscher-Ohlin model - a combination of a static two-good, two-factor Heckscher-Ohlin trade model and a two-sector growth model - with infinitely lived consumers where international borrowing and lending are not permitted. We obtain two main results: First, even if factor prices are equalized, countries that differ only in their initial endowments of capital per worker may converge or diverge in income levels over time, depending on the elasticity of substitution between traded goods. Divergence can occur for parameter values that would imply convergence in a world of closed economies and vice versa. Second, factor price equalization in a given period does not imply factor price equalization in future periods.
Handle: RePEc:nbr:nberwo:12567
Template-Type: ReDIF-Paper 1.0
Title: Federal Tax Policy Towards Energy
Classification-JEL: H20; Q48
Author-Name: Gilbert E. Metcalf
Note: PE EEE
Number: 12568
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12568
File-URL: http://www.nber.org/papers/w12568.pdf
File-Format: application/pdf
Publication-Status: published as Federal Tax Policy Towards Energy, Gilbert E. Metcalf. in Tax Policy and the Economy, Volume 21, Poterba. 2007
Abstract: On Aug. 8, 2005, President Bush signed the Energy Policy Act of 2005 (PL 109-58). This was the first major piece of energy legislation enacted since 1992 following five years of Congressional efforts to pass energy legislation. Among other things, the law contains tax incentives worth over $14 billion between 2005 and 2015. These incentives represent both pre-existing initiatives that the law extends as well as new initiatives. In this paper I survey federal tax energy policy focusing both on programs that affect energy supply and demand. I briefly discuss the distributional and incentive impacts of many of these incentives. In particular, I make a rough calculation of the impact of tax incentives for domestic oil production on world oil supply and prices and find that the incentives for domestic production have negligible impact on world supply or prices despite the United States being the third largest oil producing country in the world. Finally, I present results from a model of electricity pricing to assess the impact of the federal tax incentives directed at electricity generation. I find that nuclear power and renewable electricity sources benefit substantially from accelerated depreciation and that the production and investment tax credits make clean coal technologies cost competitive with pulverized coal and wind and biomass cost competitive with natural gas.
Handle: RePEc:nbr:nberwo:12568
Template-Type: ReDIF-Paper 1.0
Title: Inheritance and Saving
Classification-JEL: E21; H31; J26
Author-Name: David Joulfaian
Author-Person: pjo3
Note: PE EFG
Number: 12569
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12569
File-URL: http://www.nber.org/papers/w12569.pdf
File-Format: application/pdf
Abstract: This paper explores the effects of inheritances on the saving of recipients. Information on inheritances and heirs is obtained from estate tax records of decedents which are linked to the income tax records of beneficiaries. The observed pattern of wealth mobility within two years of the receipt of inheritances and multivariate analyses show that wealth increases by less than the full amount of the inheritance received. Similarly, and consistent with previous findings, large inheritances are found to depress labor force participation.
Handle: RePEc:nbr:nberwo:12569
Template-Type: ReDIF-Paper 1.0
Title: Behavioral Theories of the Business Cycle
Classification-JEL: E32
Author-Name: Nir Jaimovich
Author-Person: pja325
Author-Name: Sergio Rebelo
Note: EFG
Number: 12570
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12570
File-URL: http://www.nber.org/papers/w12570.pdf
File-Format: application/pdf
Publication-Status: published as Nir Jaimovich & Sergio Rebelo, 2007. "Behavioral Theories of the Business Cycle," Journal of the European Economic Association, MIT Press, vol. 5(2-3), pages 361-368, 04-05.
Abstract: We explore the business cycle implications of expectation shocks and of two well-known psychological biases, optimism and overconfidence. The expectations of optimistic agents are biased toward good outcomes, while overconfident agents overestimate the precision of the signals that they receive. Both expectation shocks and overconfidence can increase business-cycle volatility, while preserving the model's properties in terms of comovement, and relative volatilities. In contrast, optimism is not a useful source of volatility in our model.
Handle: RePEc:nbr:nberwo:12570
Template-Type: ReDIF-Paper 1.0
Title: The Puzzle of the Antebellum Fertility Decline in the United States: New Evidence and Reconsideration
Classification-JEL: J1; J13; N21; N3
Author-Name: Michael R. Haines
Author-Person: pha740
Author-Name: J. David Hacker
Note: DAE
Number: 12571
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12571
File-URL: http://www.nber.org/papers/w12571.pdf
File-Format: application/pdf
Abstract: All nations that can be characterized as developed have undergone the demographic transition from high to low levels of fertility and mortality. Most presently developed nations began their fertility transitions in the late nineteenth or early twentieth centuries. The United States was an exception. Evidence using census-based child-woman ratios suggests that the fertility of the white population of the United States was declining from at least the year 1800. By the end of the antebellum period in 1860, child-woman ratios had declined 33 percent. There is also indication that the free black population was experiencing a fertility transition. This transition was well in advance of significant urbanization, industrialization, and mortality decline and well in advance of every other presently developed nation with the exception of France. This paper uses census data on county-level child-woman ratios to test a variety of explanations on the antebellum American fertility transition. It also uses micro data from the IPUMS files for 1850 and 1860. A number of the explanations, including the land availability hypothesis, the local labor market-child default hypothesis, and the life cycle saving hypothesis, are consistent with the data, but nuptiality, not one of the usual explanations, emerges as likely very important.
Handle: RePEc:nbr:nberwo:12571
Template-Type: ReDIF-Paper 1.0
Title: American Indian Mortality in the Late Nineteenth Century: The Impact of Federal Assimilation Policies on a Vulnerable Population
Classification-JEL: J1; J15; N11; N3
Author-Name: J. David Hacker
Author-Name: Michael R. Haines
Author-Person: pha740
Note: DAE
Number: 12572
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12572
File-URL: http://www.nber.org/papers/w12572.pdf
File-Format: application/pdf
Publication-Status: published as J. David Hacker & Michael R. Haines, 2005. "American Indian Mortality in the Late Nineteenth Century: the Impact of Federal Assimilation Policies on a Vulnerable Population," Annales de démographie historique, vol 110(2).
Abstract: Under the urging of late nineteenth-century humanitarian reformers, U.S. policy toward American Indians shifted from removal and relocation efforts to state-sponsored attempts to "civilize" Indians through allotment of tribal lands, citizenship, and forced education. There is little consensus, however, whether and to what extent federal assimilation efforts played a role in the stabilization and recovery of the American Indian population in the twentieth century. In this paper, we rely on a new IPUMS sample of the 1900 census of American Indians and census-based estimation methods to investigate the impact of federal assimilation policies on childhood mortality. We use children ever born and children surviving data included in the censuses to estimate childhood mortality and [responses to] several questions unique to the Indian enumeration [including tribal affiliation, degree of "white blood", type of dwelling, ability to speak English, and whether a citizen by allotment] to construct multivariate models of child mortality. The results suggest that mortality among American Indians in the late nineteenth century was very high - approximately 62% [standardize as % or percent throughout] higher than that for the white population. The impact of assimilation policies was mixed. Increased ability to speak English was associated with lower child mortality, while allotment of land in severalty was associated with higher mortality. The combined effect was a very modest four percent [as above] decline in mortality. As of 1900, the government campaign to assimilate Indians had yet to result in a significant decline in Indian mortality while incurring substantial economic and cultural costs.
Handle: RePEc:nbr:nberwo:12572
Template-Type: ReDIF-Paper 1.0
Title: The Control of Politicians in Divided Societies: The Politics of Fear
Classification-JEL: D72; H2; O17; O55
Author-Name: Gerard Padro i Miquel
Note: POL
Number: 12573
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12573
File-URL: http://www.nber.org/papers/w12573.pdf
File-Format: application/pdf
Publication-Status: published as Padro i Miquel, Gerard. "The Control of Politicians in Divided Societies: The Politics of Fear." Review of Economic Studies 74, 4 (October 2007): 1259-74.
Abstract: Autocrats in many developing countries have extracted enormous personal rents from power. In addition, they have imposed inefficient policies including pervasive patronage spending. I present a model in which the presence of ethnic identities and the absence of institutionalized succession processes allow the ruler to elicit support from a sizeable share of the population despite large reductions in welfare. The fear of falling under an equally inefficient and venal ruler that favors another group is enough to discipline supporters. The model predicts extensive use of patronage, ethnic bias in taxation and spending patterns and unveils a new mechanism through which economic frictions translate into increased rent extraction by the leader. These predictions are consistent with the experiences of bad governance, ethnic bias, wasteful policies and kleptocracy in post-colonial Africa.
Handle: RePEc:nbr:nberwo:12573
Template-Type: ReDIF-Paper 1.0
Title: Understanding Instrumental Variables in Models with Essential Heterogeneity
Classification-JEL: C31
Author-Name: James J. Heckman
Author-Name: Sergio Urzua
Author-Name: Edward J. Vytlacil
Author-Person: pvy2
Note: DAE LS PE POL
Number: 12574
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12574
File-URL: http://www.nber.org/papers/w12574.pdf
File-Format: application/pdf
Publication-Status: published as Heckman, James J., Sergio Urzua and Edward Vytlacil. "Understanding Instrumental Variables In Models With Essential Heterogeneity," Review of Economics and Statistics, 2006, v88(3,Aug), 389-432.
Abstract: This paper examines the properties of instrumental variables (IV) applied to models with essential heterogeneity, that is, models where responses to interventions are heterogeneous and agents adopt treatments (participate in programs) with at least partial knowledge of their idiosyncratic response. We analyze two-outcome and multiple-outcome models including ordered and unordered choice models. We allow for transition-specific and general instruments. We generalize previous analyses by developing weights for treatment effects for general instruments. We develop a simple test for the presence of essential heterogeneity. We note the asymmetry of the model of essential heterogeneity: outcomes of choices are heterogeneous in a general way; choices are not. When both choices and outcomes are permitted to be symmetrically heterogeneous, the method of IV breaks down for estimating treatment parameters.
Handle: RePEc:nbr:nberwo:12574
Template-Type: ReDIF-Paper 1.0
Title: How to Advance Theory with Structural VARs: Use the Sims-Cogley-Nason Approach
Classification-JEL: C32; C51; C52; E13; E17; E21; E27; E32; E37
Author-Name: Patrick J. Kehoe
Author-Person: pke4
Note: IFM ME EFG
Number: 12575
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12575
File-URL: http://www.nber.org/papers/w12575.pdf
File-Format: application/pdf
Publication-Status: published as Assessing Structural VARs, Lawrence J. Christiano, Martin Eichenbaum, Robert Vigfusson. in NBER Macroeconomics Annual 2006, Volume 21, Acemoglu, Rogoff, and Woodford. 2007
Abstract: The common approach to evaluating a model in the structural VAR literature is to compare the impulse responses from structural VARs run on the data to the theoretical impulse responses from the model. The Sims-Cogley-Nason approach instead compares the structural VARs run on the data to identical structural VARs run on data from the model of the same length as the actual data. Chari, Kehoe, and McGrattan (2006) argue that the inappropriate comparison made by the common approach is the root of the problems in the SVAR literature. In practice, the problems can be solved simply. Switching from the common approach to the Sims-Cogley-Nason approach basically involves changing a few lines of computer code and a few lines of text. This switch will vastly increase the value of the structural VAR literature for economic theory.
Handle: RePEc:nbr:nberwo:12575
Template-Type: ReDIF-Paper 1.0
Title: Commercial Policy in a Predatory World
Classification-JEL: F13; K42; O17
Author-Name: James E. Anderson
Author-Person: pan2
Note: ITI DAE
Number: 12576
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12576
File-URL: http://www.nber.org/papers/w12576.pdf
File-Format: application/pdf
Abstract: Mutual causation of predation and trade induces novel effects of commercial policy in this paper. The model can explain trade volume responses to market widening initiatives that are otherwise puzzlingly 'too big' or 'too small'. Efficient commercial policy (broadly defined) depends crucially on the strength of enforcement. Externalities arising between traders are normally internalized by subsidizing (taxing) trade when enforcement is weak (strong). Efficient regional policy squeezes weak enforcement markets while subsidizing strong enforcement markets. Tolerance (intolerance) of smuggling is rational when enforcement is weak (strong).
Handle: RePEc:nbr:nberwo:12576
Template-Type: ReDIF-Paper 1.0
Title: Intellectual Property and Marketing
Classification-JEL: I11; L12; O34
Author-Name: Darius Lakdawalla
Author-Person: pla295
Author-Name: Tomas Philipson
Author-Person: pph37
Author-Name: Y. Richard Wang
Note: AG EH
Number: 12577
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12577
File-URL: http://www.nber.org/papers/w12577.pdf
File-Format: application/pdf
Abstract: Patent protection spurs innovation by raising the rewards for research, but it usually results in less desirable allocations after the innovation has been discovered. In effect, patents reward inventors with inefficient monopoly power. However, previous analysis of intellectual property has focused only on the costs patents impose by restricting price-competition. We analyze the potentially important but overlooked role played by competition on dimensions other than price. Compared to a patent monopoly, competitive firms may engage in inefficient levels of non-price competition -- such as marketing -- when these activities confer benefits on competitors. Patent monopolies may thus price less efficiently, but market more efficiently than competitive firms. We measure the empirical importance of this issue, using patent-expiration data for the US pharmaceutical industry from 1990 to 2003. Contrary to what is predicted by price competition alone, we find that patent expirations actually have a negative effect on output for the first year after expiration. This results from the reduction in marketing effort, which offsets the reduction in price. The short-run decline in output costs consumers at least $400,000 per month, for each drug. In the long-run, however, expirations do raise output, but the value of expiration to consumers is about 15% lower than would be predicted by a model that considers price-competition alone, without marketing effort. The non-standard effects introduced by non-price competition alter the analysis of patents' welfare effects.
Handle: RePEc:nbr:nberwo:12577
Template-Type: ReDIF-Paper 1.0
Title: Optimal Liability for Terrorism
Classification-JEL: K13
Author-Name: Darius Lakdawalla
Author-Person: pla295
Author-Name: Eric Talley
Note: LE
Number: 12578
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12578
File-URL: http://www.nber.org/papers/w12578.pdf
File-Format: application/pdf
Abstract: This paper analyzes the normative role for civil liability in aligning terrorism precaution incentives, when the perpetrators of terrorism are unreachable by courts or regulators. We consider the strategic interaction among targets, subsidiary victims, and terrorists within a sequential, game-theoretic model. The model reveals that, while an "optimal" liability regime indeed exists, its features appear at odds with conventional legal templates. For example, it frequently prescribes damages payments from seemingly unlikely defendants, directing them to seemingly unlikely plaintiffs. The challenge of introducing such a regime using existing tort law doctrines, therefore, is likely to be prohibitive. Instead, we argue, efficient precaution incentives may be best provided by alternative policy mechanisms, such as a mutual public insurance pool for potential targets of terrorism, coupled with direct compensation to victims of terrorist attacks.
Handle: RePEc:nbr:nberwo:12578
Template-Type: ReDIF-Paper 1.0
Title: Testing the Theory of Trade Policy: Evidence from the Abrupt End of the Multifibre Arrangement
Classification-JEL: F1; F13; F14
Author-Name: James Harrigan
Author-Person: pha151
Author-Name: Geoffrey Barrows
Author-Person: pba1536
Note: ITI
Number: 12579
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12579
File-URL: http://www.nber.org/papers/w12579.pdf
File-Format: application/pdf
Publication-Status: published as James Harrigan & Geoffrey Barrows, 2009. "Testing the Theory of Trade Policy: Evidence from the Abrupt End of the Multifiber Arrangement," The Review of Economics and Statistics, MIT Press, vol. 91(2), pages 282-294, November.
Abstract: Quota restrictions on United States imports of apparel and textiles under the multifibre arrangement (MFA) ended abruptly in January 2005. This change in policy was large, predetermined, and fully anticipated, making it an ideal natural experiment for testing the theory of trade policy. We focus on simple and robust theory predictions about the effects of binding quotas, and also compute nonparametric estimates of the cost of the MFA. We find that prices of quota constrained categories from China fell by 38% in 2005, while prices in unconstrained categories from China and from other countries changed little. We also find substantial quality downgrading in imports from China in previously constrained categories, as predicted by theory. The annual cost of the MFA to U.S. consumers was about $90 per household.
Handle: RePEc:nbr:nberwo:12579
Template-Type: ReDIF-Paper 1.0
Title: Losing our Marbles in the New Century? The Great Rebalancing in Historical Perspective
Classification-JEL: F20; F30; F32; F40; F50; N10; N20
Author-Name: Christopher M. Meissner
Author-Person: pme45
Author-Name: Alan M. Taylor
Author-Person: pta46
Note: DAE IFM ITI
Number: 12580
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12580
File-URL: http://www.nber.org/papers/w12580.pdf
File-Format: application/pdf
Publication-Status: published as Christopher M. Meissner & Alan M. Taylor, 2006. "Losing our marbles in the new century?: the great rebalancing in historical perspective," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 51.
Abstract: Great attention is now being paid to global imbalances, the growing U.S. current account deficit financed by growing surpluses in the rest of the world. How can the issue be understood in a more historical perspective? We seek a meaningful comparison between the two eras of globalization: "then" (the period 1870 to 1913) and "now" (the period since the 1970s). We look at the two hegemons in each era: Britain then, and the United States now. And adducing historical data to match what we know from the contemporary record, we proceed in the tradition of New Comparative Economic History to see what lessons the past might have for the present. We consider two of the most controversial and pressing questions in the current debate. First, are current imbalances being sustained, at least in part, by return differentials? And if so, is this reassuring? Second, how will adjustment take place? Will it be a hard or soft landing? Pessimistically, we find no historical evidence that return differentials last forever, even for hegemons. Optimistically, we find that adjustments to imbalances in the past have generally been smooth, even under a regime as hard as the gold standard.
Handle: RePEc:nbr:nberwo:12580
Template-Type: ReDIF-Paper 1.0
Title: Technology and Labor Regulations
Classification-JEL: O3; O4
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Joseph Zeira
Author-Person: pze3
Note: EFG ME LS
Number: 12581
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12581
File-URL: http://www.nber.org/papers/w12581.pdf
File-Format: application/pdf
Abstract: Many low skilled jobs have been substituted away for machines in Europe, or eliminated, much more so than in the US, while technological progress at the "top", i.e. at the high-tech sector, is faster in the US than in Europe. This paper suggests that the main difference between Europe and the US in this respect is their different labor market policies. European countries reduce wage flexibility and inequality through a host of labor market regulations, like binding minimum wage laws, permanent unemployment subsidies, firing costs, etc. Such policies create incentives to develop and adopt labor saving capital intensive technologies at the low end of the skill distribution. At the same time technical change in the US is more skill biased than in Europe, since American skilled wages are higher. In the last few years some partial labor market reforms in Europe may have started to slow down or even reverse this trend.
Handle: RePEc:nbr:nberwo:12581
Template-Type: ReDIF-Paper 1.0
Title: National Survey Evidence on Disasters and Relief: Risk Beliefs, Self-Interest, and Compassion
Classification-JEL: D80; D81; H53; Q54
Author-Name: W. Kip Viscusi
Author-Person: pvi69
Author-Name: Richard J. Zeckhauser
Author-Person: pze7
Note: LE EEE
Number: 12582
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12582
File-URL: http://www.nber.org/papers/w12582.pdf
File-Format: application/pdf
Publication-Status: published as W. Viscusi & Richard Zeckhauser, 2006. "National survey evidence on disasters and relief: Risk beliefs, self-interest, and compassion," Journal of Risk and Uncertainty, Springer, vol. 33(1), pages 13-36, September.
Abstract: A nationally representative sample of respondents estimated their fatality risks from four types of natural disasters, and indicated whether they favored governmental disaster relief. For all hazards, including auto accident risks, most respondents assessed their risks as being below average, with one-third assessing them as average. Individuals from high-risk states, or with experience with disasters, estimate risks higher, though by less than reasonable calculations require. Four-fifths of our respondents favor government relief for disaster victims, but only one-third do for victims in high-risk areas. Individuals who perceive themselves at higher risk are more supportive of government assistance.
Handle: RePEc:nbr:nberwo:12582
Template-Type: ReDIF-Paper 1.0
Title: When Knowledge is an Asset: Explaining the Organizational Structure of Large Law Firms
Classification-JEL: J4; L2; M5
Author-Name: James B. Rebitzer
Author-Person: pre77
Author-Name: Lowell J. Taylor
Author-Person: pta912
Note: LS IO
Number: 12583
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12583
File-URL: http://www.nber.org/papers/w12583.pdf
File-Format: application/pdf
Publication-Status: published as James B. Rebitzer & Lowell J. Taylor, 2007. "When Knowledge Is an Asset: Explaining the Organizational Structure of Large Law Firms," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 201-229.
Abstract: We study the economics of employment relationships through theoretical and empirical analysis of an unusual set of firms, large law firms. Our point of departure is the "property rights" approach that emphasizes the centrality of ownership's legal rights to control important, non-human assets of the enterprise. From this perspective, large law firms are an interesting and potentially important object of study because the most valuable assets of these firms take the form of knowledge - particularly knowledge of the needs and interests of clients. We argue that the two most distinctive organizational features of large law firms, the use of "up or out" promotion contests and the practice of having winners become residual claimants in the firm, emerge naturally in this setting. In addition to explaining otherwise anomalous features of the up-or-out partnership system, this paper suggests a general framework for analyzing organizations where assets reside in the brains of employees.
Handle: RePEc:nbr:nberwo:12583
Template-Type: ReDIF-Paper 1.0
Title: Shooting the Auctioneer
Classification-JEL: E32; J6
Author-Name: Roger E. A. Farmer
Author-Person: pfa3
Author-Name: Andrew Hollenhorst
Note: EFG
Number: 12584
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12584
File-URL: http://www.nber.org/papers/w12584.pdf
File-Format: application/pdf
Abstract: Most dynamic stochastic general equilibrium models of the macroeconomy assume that labor is traded in a spot market. Two exceptions by David Andolfatto and Monika Merz combine a two-sided search model with a one-sector real business cycle model. These hybrid models are successful, in some dimensions, but they cannot account for observed volatility in unemployment and vacancies. Following suggestions by Robert Hall and Robert Shimer, this paper shows that a relatively standard DSGE model with sticky wages can account for these facts. Using a second-order approximation to the policy function we simulate moments of an artificial economy with and without sticky wages and we document the dependence of unemployment and vacancy volatility on two key parameters; the disutility of effort and the degree of wage stickiness. We compute the welfare costs of the sticky wage equilibrium and find them to be small.
Handle: RePEc:nbr:nberwo:12584
Template-Type: ReDIF-Paper 1.0
Title: Baby Boomer Retirement Security: the Roles of Planning, Financial Literacy, and Housing Wealth
Classification-JEL: D91; E21
Author-Name: Annamaria Lusardi
Author-Person: plu347
Author-Name: Olivia S. Mitchell
Author-Person: pmi73
Note: AG
Number: 12585
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12585
File-URL: http://www.nber.org/papers/w12585.pdf
File-Format: application/pdf
Publication-Status: published as Lusardi, Annamaria & Mitchell, Olivia S., 2007. "Baby Boomer retirement security: The roles of planning, financial literacy, and housing wealth," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 205-224, January.
Abstract: We compare wealth holdings across two cohorts of the Health and Retirement Study: the early Baby Boomers in 2004, and individuals in the same age group in 1992. Levels and patterns of total net worth have changed relatively little over time, though Boomers rely more on housing equity than their predecessors. Most important, planners in both cohorts arrive close to retirement with much higher wealth levels and display higher financial literacy than non-planners. Instrumental variables estimates show that planning behavior can explain the differences in savings and why some people arrive close to retirement with very little or no wealth.
Handle: RePEc:nbr:nberwo:12585
Template-Type: ReDIF-Paper 1.0
Title: Fiscal Policy and Macroeconomic Uncertainty in Developing Countries: The Tale of the Tormented Insurer
Classification-JEL: E62; F34; H63
Author-Name: Enrique G. Mendoza
Author-Person: pme30
Author-Name: P. Marcelo Oviedo
Note: IFM
Number: 12586
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12586
File-URL: http://www.nber.org/papers/w12586.pdf
File-Format: application/pdf
Abstract: Governments in emerging markets often behave like a "tormented insurer," trying to use non-state-contingent debt instruments to avoid cuts in payments to private agents despite large fluctuations in public revenues. In the data, average public debt-GDP ratios decline as the variability of revenues increases, primary balances and current expenditures follow cyclical patterns sharply at odds with the countercyclical patterns of industrial countries, and the cyclical variability of public expenditures exceeds that of private expenditures by a wide margin. This paper proposes a model of a small open economy with incomplete markets that can rationalize this behavior. In the model a fiscal authority makes optimal expenditure and debt plans given shocks to output and revenues, and private agents make optimal consumption and asset accumulation plans. Quantitative analysis of the model calibrated to Mexico yields a negative relationship between average public debt and revenue variability similar to the one observed in the data. The model mimics Mexico's GDP correlations of government purchases and the primary balance. The ratio of public-to-private expenditures fluctuates widely and the implied welfare costs dwarf conventional estimates of negligible benefits of risk sharing and consumption smoothing.
Handle: RePEc:nbr:nberwo:12586
Template-Type: ReDIF-Paper 1.0
Title: Volatility in International Financial Market Issuance: The Role of the Financial Center
Classification-JEL: F3
Author-Name: Marco Cipriani
Author-Person: pci23
Author-Name: Graciela L. Kaminsky
Author-Person: pka84
Note: IFM
Number: 12587
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12587
File-URL: http://www.nber.org/papers/w12587.pdf
File-Format: application/pdf
Publication-Status: published as Marco Cipriani & Graciela Kaminsky, 2007. "Volatility in International Financial Market Issuance: The Role of the Financial Center," Open Economies Review, Springer, vol. 18(2), pages 157-176, April.
Abstract: We study the pattern of volatility of gross issuance in international capital markets since 1980. We find several short-lived episodes of high volatility. Over the long run, however, volatility has declined, suggesting that international financial integration has not made financial markets more erratic. We use VAR analysis to examine the determinants of the time-varying pattern of volatility, focusing in particular on the role of financial centers. Our results suggest that a significant portion of the decline in volatility of issuance in international capital markets can be explained by the reduction in the volatility of U.S. interest rates.
Handle: RePEc:nbr:nberwo:12587
Template-Type: ReDIF-Paper 1.0
Title: Optimal Inequality/Optimal Incentives: Evidence from a Tournament
Classification-JEL: A1; H0; J0
Author-Name: Richard B. Freeman
Author-Person: pfr23
Author-Name: Alexander M. Gelber
Note: LS POL
Number: 12588
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12588
File-URL: http://www.nber.org/papers/w12588.pdf
File-Format: application/pdf
Abstract: This paper examines performance in a tournament setting with different levels of inequality in rewards and different provision of information about individual's skill at the task prior to the tournament. We find that that total tournament output depends on inequality according to an inverse U shaped function: We reward subjects based on the number of mazes they can solve, and the number of solved mazes is lowest when payments are independent of the participants' performance; rises to a maximum at a medium level of inequality; then falls at the highest level of inequality. These results are strongest when participants know the number of mazes they solved relative to others in a pre-tournament round and thus can judge their likely success in the tournament. Finally, we find that cheating/fudging on the experiment responds to the level of inequality and information about relative positions. Our results support a model of optimal allocation of prizes in tournaments that postulate convex cost of effort functions.
Handle: RePEc:nbr:nberwo:12588
Template-Type: ReDIF-Paper 1.0
Title: Cross-border Listings, Capital Controls, and Equity Flows To Emerging Markets
Classification-JEL: F21; F3; G15
Author-Name: Hali J. Edison
Author-Person: ped1
Author-Name: Francis E. Warnock
Note: IFM
Number: 12589
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12589
File-URL: http://www.nber.org/papers/w12589.pdf
File-Format: application/pdf
Publication-Status: published as Edison, H., and F. Warnock, 2008. "Cross-Border Listings, Capital Controls, and Equity Flows to Emerging Markets." Journal of International Money and Finance 27: 1013-1027
Abstract: We investigate the impact of two types of financial liberalizations on short- and long-horizon capital flows to emerging markets in a framework that controls for push and pull factors. The first type of liberalization, a reduction in capital controls, is countrywide but uncertain, because its extent and permanence is not known with certainty. The second type, a cross-border listing, is a firm-level liberalization that has no uncertainty. Consistent with theoretical predictions, we find that the deterministic cross-listing results in an immediate but short-lived increase in capital inflows. In contrast, the uncertain reduction in capital controls results in increased inflows only over a longer horizon, if at all.
Handle: RePEc:nbr:nberwo:12589
Template-Type: ReDIF-Paper 1.0
Title: Bank Distress During the Great Contraction, 1929 to 1933, New Data from the Archives of the Board of Governors
Classification-JEL: E42; E5; E65; N1; N12
Author-Name: Gary Richardson
Author-Person: pri185
Note: DAE ME
Number: 12590
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12590
File-URL: http://www.nber.org/papers/w12590.pdf
File-Format: application/pdf
Abstract: During the contraction from 1929 through 1933, the Federal Reserve System tracked changes in the status of all banks operating in the United States and determined the cause of each bank suspension. This essay introduces that hitherto dormant data and analyzes chronological patterns in aggregate series constructed from it. The analysis demonstrates both illiquidity and insolvency were substantial sources of bank distress. Contagion (via correspondent networks and bank runs) propagated the initial banking panics. As the depression deepened and asset values declined, insolvency loomed as the principal threat to depository institutions. These patterns corroborate some and question other conjectures concerning the causes and consequences of the financial crisis during the Great Contraction.
Handle: RePEc:nbr:nberwo:12590
Template-Type: ReDIF-Paper 1.0
Title: Monetary Intervention Mitigated Banking Panics During the Great Depression: Quasi-Experimental Evidence from the Federal Reserve District Border in Mississippi, 1929 to 1933
Classification-JEL: E5; E6; E65; N1; N2
Author-Name: Gary Richardson
Author-Person: pri185
Author-Name: William Troost
Note: DAE ME
Number: 12591
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12591
File-URL: http://www.nber.org/papers/w12591.pdf
File-Format: application/pdf
Publication-Status: published as Richardson, Gary and William Troost. "Monetary Intervention Mitigated Banking Panics During the Great Depression: Quasi-Experimental Evidence from the Federal Reserve District Border in Mississippi, 1929 to 1933." Journal of Political Economy 117, 6 (2009): 1031-1073.
Abstract: The Federal Reserve Act of 1913 divided Mississippi between the 6th (Atlanta) and 8th (St. Louis) Federal Reserve Districts. Before and during the Great Depression, these districts' policies differed. The Atlanta Fed championed monetary activism and the extension of credit to troubled banks. The St. Louis Fed adhered to the doctrine of real bills and eschewed expansionary initiatives. Outcomes differed across districts. In the 6th District, banks failed at lower rates than in the 8th District, particularly during the banking panic in the fall of 1930. The pattern suggests that discount lending reduced failure rates during periods of panic. Historical evidence and statistical analysis corroborates this conclusion.
Handle: RePEc:nbr:nberwo:12591
Template-Type: ReDIF-Paper 1.0
Title: Skill vs. Luck in Entrepreneurship and Venture Capital: Evidence from Serial Entrepreneurs
Classification-JEL: G24; L26
Author-Name: Paul Gompers
Author-Person: pgo301
Author-Name: Anna Kovner
Author-Person: pko289
Author-Name: Josh Lerner
Author-Person: ple60
Author-Name: David Scharfstein
Author-Person: psc177
Note: CF
Number: 12592
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12592
File-URL: http://www.nber.org/papers/w12592.pdf
File-Format: application/pdf
Publication-Status: published as Gompers, Paul, Anna Kovner, Josh Lerner, and David Scharfstein. “Performance Persistence in Entrepreneurship." Journal of Financial Economics 96 (2010): 18-32. Earlier version distributed as National Bureau of Economic Research Working Paper No. 12592 and Harvard Business School Working Paper No. 09-028. (Earlier Name: “Skill vs. Luck in Entrepreneurship and Venture Capital: Evidence from Serial Entrepreneurs.”)
Abstract: This paper argues that a large component of success in entrepreneurship and venture capital can be attributed to skill. We show that entrepreneurs with a track record of success are more likely to succeed than first time entrepreneurs and those who have previously failed. Funding by more experienced venture capital firms enhances the chance of success, but only for entrepreneurs without a successful track record. Similarly, more experienced venture capitalists are able to identify and invest in first time entrepreneurs who are more likely to become serial entrepreneurs. Investments by venture capitalists in successful serial entrepreneurs generate higher returns for their venture capital investors. This finding provides further support for the role of skill in both entrepreneurship and venture capital.
Handle: RePEc:nbr:nberwo:12592
Template-Type: ReDIF-Paper 1.0
Title: David Laidler on Monetarism
Classification-JEL: E00; E50
Author-Name: Michael Bordo
Author-Person: pbo243
Author-Name: Anna J. Schwartz
Note: ME
Number: 12593
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12593
File-URL: http://www.nber.org/papers/w12593.pdf
File-Format: application/pdf
Publication-Status: published as Leeson, Robert (ed.) David Laidler’s Contribution to Macroeconomics. Palgrave McMillan, 2010.
Abstract: David Laidler has been a major player in the development of the monetarist tradition. As the monetarist approach lost influence on policy makers he kept defending the importance of many of its principles. In this paper we survey and assess the impact on monetary economics of Laidler's work on the demand for money and the quantity theory of money; the transmission mechanism on the link between money and nominal income; the Phillips Curve; the monetary approach to the balance of payments; and monetary policy.
Handle: RePEc:nbr:nberwo:12593
Template-Type: ReDIF-Paper 1.0
Title: Deposit Insurance and the Composition of Bank Suspensions in Developing Economies: Lessons from the State Deposit Insurance Experiments of the 1920S
Classification-JEL: E42; E65; L1; N1; N14; O16
Author-Name: Ching-Yi Chung
Author-Name: Gary Richardson
Author-Person: pri185
Note: DAE ME
Number: 12594
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12594
File-URL: http://www.nber.org/papers/w12594.pdf
File-Format: application/pdf
Publication-Status: published as Ching-Yi Chung & Gary Richardson, 2006. "Deposit Insurance Altered the Composition of Bank Suspensions during the 1920s: Evidence from the Archives of the Board of Governors," The B.E. Journal of Economic Analysis & Policy, Berkeley Electronic Press, vol. 0(1).
Abstract: Eight states established deposit insurance systems between 1908 and 1917. All abandoned the systems between 1921 and 1930. Scholars debate the costs and benefits of these policy experiments. New data drawn from the archives of the Federal Reserve Board of Governors demonstrate that deposit insurance influenced the composition of bank suspensions in these states. In typical years, suspensions due to runs fell. Suspensions due to mismanagement rose. During the penultimate year of each system, the bank failure rate rose to an unsustainable height and the system ceased operations.
Handle: RePEc:nbr:nberwo:12594
Template-Type: ReDIF-Paper 1.0
Title: What Drove First Year Premiums in Stand-Alone Medicare Drug Plans?
Classification-JEL: I11; I18
Author-Name: Kosali I. Simon
Author-Person: psi314
Author-Name: Claudio Lucarelli
Note: AG EH
Number: 12595
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12595
File-URL: http://www.nber.org/papers/w12595.pdf
File-Format: application/pdf
Abstract: Medicare's Part D offers heavily subsidized new drug coverage to 22.5 million seniors to date, of whom 16.5 million are in stand-alone drug plans (Department of Health and Human Services, 2006). The government delegated the delivery of the benefit to private insurance companies arguing that market incentives would lead them to provide coverage at the lowest price possible. The massive entry of plans and the large variety of actuarial designs and formularies offered make it complicated to assess how insurers set premiums during this first year of the program. This paper presents the first econometric evidence on whether premiums in the stand-alone drug plan markets are driven by the relevant factors predicted by insurance theory. Using data gathered from the Centers for Medicare and Medicaid Services, we measure a plan's generosity as the simulated out of pocket payments for different sets of drugs. We also identify the listed full drug prices by each insurer and merge these with other plan and geographical characteristics to test predictions about how insurers set premiums. We find evidence that a) the number of insurers in a market is big enough such that it does not appear to influence premiums, b) the full drug prices listed appear to be reflected to some degree in the premiums charged c) plan characteristics such as the provision of extra coverage are reflected in higher premiums, but overall there is a weak relationship between premiums and simulated out of pocket payments for different sets of drugs d) the institutional setting and regional market characteristics affect the firms' bidding behavior and their resulting premiums. Insurers appear to have responded strongly to program incentives such as the automatic enrollment of dual Medicaid-Medicare beneficiaries into low cost plans. As data for 2007 are made available, it will be important to see if plans follow similar pricing strategies in subsequent years of this program.
Handle: RePEc:nbr:nberwo:12595
Template-Type: ReDIF-Paper 1.0
Title: Professor Qualities and Student Achievement
Classification-JEL: H52; I2
Author-Name: Florian Hoffmann
Author-Name: Philip Oreopoulos
Author-Person: por38
Note: CH ED
Number: 12596
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12596
File-URL: http://www.nber.org/papers/w12596.pdf
File-Format: application/pdf
Publication-Status: published as Florian Hoffmann & Philip Oreopoulos, 2009. "Professor Qualities and Student Achievement," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 83-92, 08.
Abstract: This paper uses a new administrative dataset of students at a large university matched to courses and instructors to analyze the importance of teacher quality at the postsecondary level. Instructors are matched to both objective and subjective characteristics of teacher quality to estimate the impact of rank, salary, and perceived effectiveness on grade, dropout and subject interest outcomes. Student fixed effects, time of day and week controls, and the fact that first year students have little information about instructors when choosing courses helps minimize selection biases. We also estimate each instructor's value added and the variance of these effects to determine the extent to which any teacher difference matters to short-term academic outcomes. The findings suggest that subjective teacher evaluations perform well in reflecting an instructor's influence on students while objective characteristics such as rank and salary do not. Whether an instructor teaches full-time or part-time, does research, has tenure, or is highly paid has no influence on a college student's grade, likelihood of dropping a course or taking more subsequent courses in the same subject. However, replacing one instructor with another ranked one standard deviation higher in perceived effectiveness increases average grades by 0.5 percentage points, decreases the likelihood of dropping a class by 1.3 percentage points and increases in the number of same-subject courses taken in second and third year by about 4 percent. The overall importance of instructor differences at the university level is smaller than that implied in earlier research at the elementary and secondary school level, but important outliers exist.
Handle: RePEc:nbr:nberwo:12596
Template-Type: ReDIF-Paper 1.0
Title: Defined Contribution Plans, Defined Benefit Plans, and the Accumulation of Retirement Wealth
Classification-JEL: J14; J26; J32
Author-Name: James Poterba
Author-Person: ppo19
Author-Name: Joshua Rauh
Author-Name: Steven Venti
Author-Name: David Wise
Author-Person: pwi45
Note: AG CF LS PE
Number: 12597
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12597
File-URL: http://www.nber.org/papers/w12597.pdf
File-Format: application/pdf
Publication-Status: published as Poterba, James & Rauh, Joshua & Venti, Steven & Wise, David, 2007. "Defined contribution plans, defined benefit plans, and the accumulation of retirement wealth," Journal of Public Economics, Elsevier, vol. 91(10), pages 2062-2086, November.
Publication-Status: published as Defined Contribution Plans, Defined Benefit Plans, and the Accumulation of Retirement Wealth, James Poterba, Joshua Rauh, Steven Venti, David Wise. in Public Policy and Retirement, Trans-Atlantic Public Economics Seminar (TAPES), Blomquist and Gordon. 2007
Abstract: The private pension structure in the United States, once dominated by defined benefit (DB) plans, is currently divided between defined contribution (DC) and DB plans. Wealth accumulation in DC plans depends on the participant's contribution behavior and on financial market returns, while accumulation in DB plans is sensitive to a participant's labor market experience and to plan parameters. This paper simulates the distribution of retirement wealth, as well as the average level of such wealth, under representative DB and DC plans. The analysis considers the role of asset returns, earnings histories, and retirement plan characteristics using data from the Health and Retirement Study (HRS). To simulate wealth in DC plans, individuals are randomly assigned a share of wages that they and their employer contribute to the plan. The analysis considers several possible asset allocation strategies, with asset returns drawn from the historical return distribution. The DB plan simulations draw earnings histories from the HRS, and randomly assign each individual a pension plan drawn from a sample of large private and public defined benefit plans. The simulations yield distributions of both DC and DB wealth at retirement as well as estimates of the certainty-equivalent wealth associated with representative DB and DC pension structures. The results suggest that average retirement wealth accruals under current DC plans exceed average accruals under private sector DB plans, although the heterogeneity in both types of plans implies many deviations from this rule. The comparison of current DC plans with more generous public sector DB plans is less definitive, because public sector DB plans are more generous on average than their private sector counterparts. The ranking of the expected value of retirement wealth accruals, and the certainty equivalent of those accruals, for these two classes of plans is sensitive to assumptions about the asset allocation rules of the DC plan participant.
Handle: RePEc:nbr:nberwo:12597
Template-Type: ReDIF-Paper 1.0
Title: The Assignment of Property Rights on the Western Frontier: Lessons for Contemporary Environmental and Resource Policy
Classification-JEL: K11; N21; N22; N5; Q15; Q2; Q27; Q28; Q3; Q32
Author-Name: Gary D. Libecap
Author-Person: pli409
Note: DAE EEE
Number: 12598
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12598
File-URL: http://www.nber.org/papers/w12598.pdf
File-Format: application/pdf
Publication-Status: published as Libecap, Gary D., 2007. "The Assignment of Property Rights on the Western Frontier: Lessons for Contemporary Environmental and Resource Policy," The Journal of Economic History, Cambridge University Press, vol. 67(02), pages 257-291, June.
Abstract: In addressing environmental and natural resource problems, there is a move away from primary reliance upon centralized regulation toward assignment of property rights to mitigate the losses of open-access. I examine the assignment of private property rights during the 19th and early 20th centuries to five natural resources, mineral land, timberland, grazing and farm land, and water on federal government lands in the Far West. The region was richly endowed with natural resources, but assigning property rights to them required adaptation from established, eastern practices as defined by the federal land laws. The property rights that emerged and their long-term welfare effects provide a laboratory for examining current questions of institutional design to address over-fishing, excessive air pollution, and other natural resource and environmental problems. A major lesson is that property rights allocations based on local conditions, prior use, and unconstrained by outside government mandates were most effective in addressing not only the immediate threat of open-access, but in providing a longer-term basis for production, investment, and trade. Another lesson is how hard it is to repair initial faulty property allocations. Accordingly, path dependencies in property rules are real, and they have dominated the economic history of resource use in the West.
Handle: RePEc:nbr:nberwo:12598
Template-Type: ReDIF-Paper 1.0
Title: You Cannot be Serious: The Conceptual Innovator as Trickster
Classification-JEL: J01
Author-Name: David Galenson
Note: LS
Number: 12599
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12599
File-URL: http://www.nber.org/papers/w12599.pdf
File-Format: application/pdf
Publication-Status: published as You Cannot be Serious: The Conceptual Innovator as Trickster, David W. Galenson. in Conceptual Revolutions in Twentieth-Century Art, Galenson. 2009
Abstract: In 1917, when the American Society of Independent Artists refused to exhibit a porcelain urinal that Marcel Duchamp had submitted to them as a sculpture, a friend of Duchamp's wrote : "There are those who anxiously ask: 'Is he serious or is he joking?' Perhaps he is both!" Duchamp's behavior - making a provocative and radically innovative artistic gesture, then declining to explain his motives in the face of accusations that this was a hoax - became a model that subsequently inspired a series of iconoclastic young conceptual innovators. These include many of the most important artists of the twentieth century, and their line of descent runs from Joseph Beuys, Andy Warhol, Yves Klein, and Piero Manzoni to Gilbert & George, Jeff Koons, Tracey Emin and Damien Hirst. The ambiguity of these artists' actions has triggered heated and persistent debates over the sincerity of their work, which have increased the effectiveness of the work's attacks on existing artistic conventions at the same time that they have advanced the artists' reputations and careers. The model of the conceptual artist as trickster is a novel feature of the innovative conceptual art of the past century, and it has produced a type of conceptual art that is more personal than nearly all other forms of art: we can never look at their work without thinking not only of their ideas - what is the artistic significance of a manufactured object purchased at a hardware store, or a silkscreen of a photograph taken from a magazine - but also of their attitudes - was Fountain or Fat Chair really intended to be taken seriously?
Handle: RePEc:nbr:nberwo:12599
Template-Type: ReDIF-Paper 1.0
Title: Progressive Estate Taxation
Classification-JEL: E6
Author-Name: Emmanuel Farhi
Author-Person: pfa207
Author-Name: Ivan Werning
Author-Person: pwe141
Note: EFG PE
Number: 12600
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12600
File-URL: http://www.nber.org/papers/w12600.pdf
File-Format: application/pdf
Publication-Status: published as Farhi, Emmanuel and Ivan Werning. “Progressive Estate Taxation." Quarterly Journal of Economics 125, 2 (May 2010): 635-673..
Abstract: For an economy with altruistic parents facing productivity shocks, the optimal estate taxation is progressive: fortunate parents should face lower net returns on their inheritances. This progressivity reflects optimal mean reversion in consumption, which ensures that a long-run steady state exists with bounded inequality - avoiding immiseration.
Handle: RePEc:nbr:nberwo:12600
Template-Type: ReDIF-Paper 1.0
Title: The Causes and Consequences of Land Use Regulation: Evidence from Greater Boston
Classification-JEL: R14; R21; R31
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Author-Name: Bryce A. Ward
Note: EFG PE
Number: 12601
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12601
File-URL: http://www.nber.org/papers/w12601.pdf
File-Format: application/pdf
Publication-Status: published as Glaeser, Edward L. & Ward, Bryce A., 2009. "The causes and consequences of land use regulation: Evidence from Greater Boston," Journal of Urban Economics, Elsevier, vol. 65(3), pages 265-278, May.
Abstract: Over the past 30 years, eastern Massachusetts has seen a remarkable combination of rising home prices and declining supply of new homes. The reductions in new supply don't appear to reflect a real lack of land, but instead reflect a response to man-made restrictions on development. In this paper, we examine the land-use regulations in greater Boston. There has been a large increase in the number of new regulations, which differ widely over space. Few variables, other than historical density and abundant recreational water, reliably predict these regulations. High lot sizes and other regulations are associated with less construction. The regulations boost prices by decreasing density, but density levels seem far too low to maximize total land value.
Handle: RePEc:nbr:nberwo:12601
Template-Type: ReDIF-Paper 1.0
Title: Trade Costs in the First Wave of Globalization
Classification-JEL: F15; N70
Author-Name: David S. Jacks
Author-Person: pja138
Author-Name: Christopher M. Meissner
Author-Person: pme45
Author-Name: Dennis Novy
Author-Person: pno75
Note: DAE
Number: 12602
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12602
File-URL: http://www.nber.org/papers/w12602.pdf
File-Format: application/pdf
Publication-Status: published as David Jacks, Christopher M. Meissner and Dennis Novy, “Trade Costs in the First Wave of Globalization” (2010) Explorations in Economic History vol. 47 (2) pp. 127-141.
Abstract: What drives globalization today and in the past? We employ a new micro-founded measure of bilateral trade costs based on a standard model of trade in differentiated goods to address this question. These trade costs gauge the difference between observed bilateral trade and frictionless trade. They comprise tariffs, transportation costs and all other factors that impede international trade but which are inherently difficult to observe. Trade costs fell on average by ten to fifteen percent between 1870 and 1913. We also use this measure to decompose the growth of global trade over that period and find that roughly 44 percent of the global trade boom can be explained by reductions in trade costs; the remaining 56 percent is attributable to economic expansion.
Handle: RePEc:nbr:nberwo:12602
Template-Type: ReDIF-Paper 1.0
Title: Lead Pipes and Child Mortality
Classification-JEL: I1; N30
Author-Name: Karen Clay
Author-Person: pcl25
Author-Name: Werner Troesken
Author-Person: ptr352
Author-Name: Michael Haines
Author-Person: pha740
Note: CH DAE EH
Number: 12603
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12603
File-URL: http://www.nber.org/papers/w12603.pdf
File-Format: application/pdf
Abstract: Beginning around 1880, public health issues and engineering advances spurred the installation of city water and sewer systems. As part of this growth, many cities chose to use lead service pipes to connect residences to city water systems. This choice had negative consequences for child mortality, although the consequences were often hard to observe amid the overall falling death rates. This paper uses national data from the public use sample of the 1900 Census of Population and data on city use of lead pipes in 1897 to estimate the effect of lead pipes on child mortality. In 1900, 29 percent of the married women in the United States who had given birth to at least one child and were age forty-five or younger lived in locations where lead service pipes were used to deliver water. Because the effect of lead pipes depended on the acidity and hardness of the water, much of the negative effect was concentrated on the densely populated eastern seaboard. In the full sample, women who lived on the eastern seaboard in cities with lead pipes experienced increased child mortality of 9.3 percent relative to the sample average. These estimates suggest that the number of child deaths attributable to the use of lead pipes numbered in the tens of thousands. Many surviving children may have experienced substantial IQ impairment as a result of lead exposure. The tragedy is that lead problems were avoidable, particularly once data became available on the toxicity of lead. These findings have implications for current policy and events.
Handle: RePEc:nbr:nberwo:12603
Template-Type: ReDIF-Paper 1.0
Title: Strategic Incompatibility in ATM Markets
Classification-JEL: K21; L1; L12; L4; L41; L44; L84
Author-Name: Christopher R. Knittel
Author-Person: pkn5
Author-Name: Victor Stango
Author-Person: pst264
Note: IO LE
Number: 12604
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12604
File-URL: http://www.nber.org/papers/w12604.pdf
File-Format: application/pdf
Publication-Status: published as Knittel, Christopher and Victor Stango. "Strategic Incompatibility in ATM Markets." Journal of Banking and Finance. Volume 35, Issue 10, October 2011, Pages 2627-2636.
Abstract: We test whether firms use incompatibility strategically, using data from ATM markets. High ATM fees degrade the value of competitors' deposit accounts, and can in principle serve as a mechanism for siphoning depositors away from competitors or for creating deposit account differentiation. Our empirical framework can empirically distinguish surcharging motivated by this strategic concern from surcharging that simply maximizes ATM profit considered as a stand-alone operation. The results are consistent with such behavior by large banks, but not by small banks. For large banks, the effect of incompatibility seems to operate through higher deposit account fees rather than increased deposit account base.
Handle: RePEc:nbr:nberwo:12604
Template-Type: ReDIF-Paper 1.0
Title: Sticky Information in General Equilibrium
Classification-JEL: E10; E30
Author-Name: N. Gregory Mankiw
Author-Name: Ricardo Reis
Author-Person: pre73
Note: EFG ME
Number: 12605
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12605
File-URL: http://www.nber.org/papers/w12605.pdf
File-Format: application/pdf
Publication-Status: published as N. Gregory Mankiw & Ricardo Reis, 2007. "Sticky Information in General Equilibrium," Journal of the European Economic Association, MIT Press, vol. 5(2-3), pages 603-613, 04-05.
Abstract: This paper develops and analyzes a general-equilibrium model with sticky information. The only rigidity in goods, labor, and financial markets is that agents are inattentive, sporadically updating their information sets, when setting prices, wages, and consumption. After presenting the ingredients of such a model, the paper develops an algorithm to solve this class of models and uses it to study the model's dynamic properties. It then estimates the parameters of the model using U.S. data on five key macroeconomic time series. It finds that information stickiness is present in all markets, and is especially pronounced for consumers and workers. Variance decompositions show that monetary policy and aggregate demand shocks account for most of the variance of inflation, output, and hours.
Handle: RePEc:nbr:nberwo:12605
Template-Type: ReDIF-Paper 1.0
Title: The Conquest of South American Inflation
Classification-JEL: D83; E31; E52
Author-Name: Thomas Sargent
Author-Person: psa83
Author-Name: Noah Williams
Author-Person: pwi107
Author-Name: Tao Zha
Author-Person: pzh80
Note: EFG ME
Number: 12606
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12606
File-URL: http://www.nber.org/papers/w12606.pdf
File-Format: application/pdf
Publication-Status: published as Thomas Sargent & Noah Williams & Tao Zha, 2009. "The Conquest of South American Inflation," Journal of Political Economy, University of Chicago Press, vol. 117(2), pages 211-256, 04.
Abstract: We infer determinants of Latin American hyperinflations and stabilizations by using the method of maximum likelihood to estimate a hidden Markov model that potentially assigns roles both to fundamentals in the form of government deficits that are financed by money creation and to destabilizing expectations dynamics that can occasionally divorce inflation from fundamentals. Our maximum likelihood estimates allow us to interpret observed inflation rates in terms of variations in the deficits, sequences of shocks that trigger temporary episodes of expectations driven hyperinflations, and occasional superficial reforms that cut inflation without reforming deficits. Our estimates also allow us to infer the deficit adjustments that seem to have permanently stabilized inflation processes.
Handle: RePEc:nbr:nberwo:12606
Template-Type: ReDIF-Paper 1.0
Title: Further Tests of Abortion and Crime: A Response to Donohue and Levitt (2001,2004, 2006)
Classification-JEL: K14; K4
Author-Name: Theodore J. Joyce
Author-Person: pjo112
Note: EH LE
Number: 12607
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12607
File-URL: http://www.nber.org/papers/w12607.pdf
File-Format: application/pdf
Abstract: The association between legalized abortion and crime remains a contentious finding with major implications for social policy. In this paper, I replicate analyses of Donohue and Levitt (2001, 2004, 2006) in which they regress age-specific arrests and homicides on cohort-specific abortion rates. I find that the coefficient on the abortion rate in a regression of age-specific homicide or arrest rates has either the wrong sign or is small in magnitude and statistically insignificant when adjusted for serial correlation. Efforts to instrument for measurement error are flawed and attempts to identify cohort from selection effects are mis-specified. Nor are their findings robust to alternative identification strategies. A convincing test of abortion and crime should be based on an exogenous change in abortion that had a demonstrable effect on fertility. Thus, I analyze changes in abortion rates before and after Roe to identify changes in unwanted fertility. I use within-state comparison groups to net out hard to measure period effects. I also follow Donohue and Levitt (2004) and average the effects of abortion on crime over 15 to 20 years of the life of a cohort to lessen the impact of the crack epidemic. I find little support for a credible association between legalized abortion and crime.
Handle: RePEc:nbr:nberwo:12607
Template-Type: ReDIF-Paper 1.0
Title: Methodological Issues in the Evaluation of Parental Involvement Laws: Evidence from Texas
Classification-JEL: J13; J18
Author-Name: Silvie Colman
Author-Name: Theodore J. Joyce
Author-Person: pjo112
Author-Name: Robert Kaestner
Author-Person: pka42
Note: EH
Number: 12608
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12608
File-URL: http://www.nber.org/papers/w12608.pdf
File-Format: application/pdf
Abstract: The number of states that require parental involvement in a minor's decision to terminate a pregnancy has more than doubled since 1988. Congress is currently considering legislation that would further limit access to abortion for minors who reside in states that enforce parental involvement laws. So far, the academic literature has not reached a consensus as to the impact of such abortion restrictions, mainly due to methodological limitations caused by the inability to measure cross-state travel and misclassification of exposure. Using detailed data on abortions and births from Texas, we demonstrate that these limitations led researchers to overestimate the decline in minors' abortion rate, underestimate the increase in their birth rate, and to miss an important behavioral response to the law, which is the tendency to delay the abortion among a group of older minors. Correction of these methodological problems is important given the controversy surrounding abortion and the need of voters and policymakers to accurately assess the likely impact of these laws.
Handle: RePEc:nbr:nberwo:12608
Template-Type: ReDIF-Paper 1.0
Title: Equilibrium Yield Curves
Classification-JEL: E0; E3; E4; G0; G12
Author-Name: Monika Piazzesi
Author-Person: ppi37
Author-Name: Martin Schneider
Author-Person: psc69
Note: AP EFG ME
Number: 12609
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12609
File-URL: http://www.nber.org/papers/w12609.pdf
File-Format: application/pdf
Publication-Status: published as Acemoglu, Daron, Kenneth Rogoff, and Michael Woodford (eds.) NBER Macroeconomics Annual 2006. Cambridge MA: MIT Press, 2007.
Publication-Status: published as Equilibrium Yield Curves, Monika Piazzesi, Martin Schneider. in NBER Macroeconomics Annual 2006, Volume 21, Acemoglu, Rogoff, and Woodford. 2007
Abstract: This paper considers how the role of inflation as a leading business-cycle indicator affects the pricing of nominal bonds. We examine a representative agent asset pricing model with recursive utility preferences and exogenous consumption growth and inflation. We solve for yields under various assumptions on the evolution of investor beliefs. If inflation is bad news for consumption growth, the nominal yield curve slopes up. Moreover, the level of nominal interest rates and term spreads are high in times when inflation news are harder to interpret. This is relevant for periods such as the early 1980s, when the joint dynamics of inflation and growth was not well understood.
Handle: RePEc:nbr:nberwo:12609
Template-Type: ReDIF-Paper 1.0
Title: Lost Decades: Lessons from Post-Independence Latin America for Today's Africa
Classification-JEL: N0; O10; O54; O55
Author-Name: Robert H. Bates
Author-Name: John H. Coatsworth
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: DAE EFG POL
Number: 12610
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12610
File-URL: http://www.nber.org/papers/w12610.pdf
File-Format: application/pdf
Publication-Status: published as Bates, Robert H. & Coatsworth, John H. & Williamson, Jeffrey G., 2007. "Lost Decades: Postindependence Performance in Latin America and Africa," The Journal of Economic History, Cambridge University Press, vol. 67(04), pages 917-943, December.
Abstract: Africa and Latin America secured their independence from European colonial rule a century and half apart: most of Latin America after 1820 and most of Africa after 1960. Despite the distance in time and space, they share important similarities. In each case independence was followed by political instability, violent conflict and economic stagnation lasting for about a half-century (lost decades). The parallels suggest that Africa might be exiting from a period of post-imperial collapse and entering a period of relative political stability and economic growth, as did Latin America a century and a half earlier.
Handle: RePEc:nbr:nberwo:12610
Template-Type: ReDIF-Paper 1.0
Title: Evaluating the Economic Significance of Downward Nominal Wage Rigidity
Classification-JEL: E24; E31; J30; J41
Author-Name: Michael W. Elsby
Author-Person: pel126
Note: LS ME EFG
Number: 12611
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12611
File-URL: http://www.nber.org/papers/w12611.pdf
File-Format: application/pdf
Publication-Status: published as Elsby, Michael W.L., 2009. "Evaluating the economic significance of downward nominal wage rigidity," Journal of Monetary Economics, Elsevier, vol. 56(2), pages 154-169, March.
Abstract: The existence of downward nominal wage rigidity has been abundantly documented, but what are its economic implications? This paper demonstrates that, even when wages are allocative, downward wage rigidity can be consistent with weak macroeconomic effects. Firms have an incentive to compress wage increases as well as wage cuts when downward wage rigidity binds. By neglecting compression of wage increases, previous literature may have overstated the costs of downward wage rigidity to firms. Using microdata from the US and Great Britain, I find that evidence for compression of wage increases when downward wage rigidity binds. Accounting for this reduces the estimated increase in aggregate wage growth due to wage rigidity to be much closer to zero. These results suggest that downward wage rigidity may not provide a strong argument against the targeting of low inflation rates.
Handle: RePEc:nbr:nberwo:12611
Template-Type: ReDIF-Paper 1.0
Title: Tracing the Impact of Bank Liquidity Shocks: Evidence from an Emerging Market
Classification-JEL: E44; E5; E51; G21; G3
Author-Name: Atif Mian
Author-Person: pmi415
Author-Name: Asim Ijaz Khwaja
Author-Person: pkh256
Note: CF ME IFM
Number: 12612
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12612
File-URL: http://www.nber.org/papers/w12612.pdf
File-Format: application/pdf
Publication-Status: published as Asim Ijaz Khwaja & Atif Mian, 2008. "Tracing the Impact of Bank Liquidity Shocks: Evidence from an Emerging Market," American Economic Review, American Economic Association, vol. 98(4), pages 1413-42, September.
Abstract: Do liquidity shocks matter? While even a simple `yes' or `no' presents identification challenges, going beyond this entails tracing how such shocks to lenders are passed on to borrowers, and whether borrowers can in turn cushion these shocks through the credit market. This paper does so by using data that follows all loans made by lenders to borrowing firms in Pakistan, and exploiting cross-bank variation in liquidity shocks induced by the unanticipated nuclear tests in 1998. We isolate the causal impact of the bank lending channel by showing that for the same firm borrowing from two different banks, its loan from the bank experiencing a 1% larger decline in liquidity drops by an additional 0.6%. The liquidity shock also lowers the probability of continued lending to old clients and extending credit to new ones. Although this lending channel affects all firms significantly, large firms and those with strong business and political ties completely compensate the effect by borrowing more from more liquid banks - both through existing and new banking relationships. In contrast, small unconnected firms are entirely unable to hedge and face large drops in overall borrowing and increased financial distress. The liquidity shocks thus have large distributional consequences.
Handle: RePEc:nbr:nberwo:12612
Template-Type: ReDIF-Paper 1.0
Title: British Colonial Institutions and Economic Development in India
Classification-JEL: N45; O10; P14
Author-Name: Shilpi Kapur
Author-Name: Sukkoo Kim
Note: DAE CF
Number: 12613
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12613
File-URL: http://www.nber.org/papers/w12613.pdf
File-Format: application/pdf
Abstract: We explore the impact of British colonial institutions on the economic development of India. In some regions, the British colonial government assigned property rights in land and taxes to landlords whereas in others it assigned them directly to cultivators or non-landlords. Although Banerjee and Iyer (2005) find that agricultural productivity of non-landlord areas diverged and out-performed relative to landlord areas after 1965 with the advent of the Green Revolution, we find evidence of superior economic performance of non-landlord regions in both the pre- and the post-independence periods. We believe that landlord and non-landlord regions diverged because their differing property rights institutions led to differences in incentives for development.
Handle: RePEc:nbr:nberwo:12613
Template-Type: ReDIF-Paper 1.0
Title: Bubbles and Self-Enforcing Debt
Classification-JEL: D50; D52; D53; E40; F34; G10
Author-Name: Christian Hellwig
Author-Person: phe110
Author-Name: Guido Lorenzoni
Author-Person: plo185
Note: AP EFG IFM
Number: 12614
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12614
File-URL: http://www.nber.org/papers/w12614.pdf
File-Format: application/pdf
Publication-Status: published as Christian Hellwig & Guido Lorenzoni, 2009. "Bubbles and Self-Enforcing Debt," Econometrica, Econometric Society, vol. 77(4), pages 1137-1164, 07.
Abstract: We characterize equilibria with endogenous debt constraints for a general equilibrium economy with limited commitment in which the only consequence of default is losing the ability to borrow in future periods. First, we show that equilibrium debt limits must satisfy a simple condition that allows agents to exactly roll over existing debt period by period. Second, we provide an equivalence result, whereby the resulting set of equilibrium allocations with self-enforcing private debt is equivalent to the allocations that are sustained with unbacked public debt or rational bubbles; for the latter, there exist well known existence and characterization results. In contrast to the classic result by Bulow and Rogoff (AER 1989), positive levels of debt are sustainable in our environment because the interest rate is sufficiently low to provide repayment incentives.
Handle: RePEc:nbr:nberwo:12614
Template-Type: ReDIF-Paper 1.0
Title: Time Preference, Time Discounting, and Smoking Decisions
Classification-JEL: D84; D91; I12
Author-Name: Ahmed Khwaja
Author-Name: Dan Silverman
Author-Person: psi181
Author-Name: Frank Sloan
Author-Person: psl34
Note: EH
Number: 12615
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12615
File-URL: http://www.nber.org/papers/w12615.pdf
File-Format: application/pdf
Publication-Status: published as Khwaja, Ahmed & Silverman, Dan & Sloan, Frank, 2007. "Time preference, time discounting, and smoking decisions," Journal of Health Economics, Elsevier, vol. 26(5), pages 927-949, September.
Abstract: This study examines the relationship between time discounting, other sources of time preference, and intertemporal choices about smoking. Using a survey fielded for our analysis, we elicit rates of time discount from choices in financial and health domains. We also examine the relationship between other determinants of time preference and smoking status. We find very high rates of time discount in the financial realm for a horizon of one year, irrespective of smoking status. In the health domain, the implied rates of time discount decline with the length of the time delay (hyperbolic discounting) and the sign of the payoff (the "sign effect"). We use a series of questions about the willingness to undergo a colonoscopy to elicit short- and long-run rates of discount in a quasi-hyperbolic discounting framework, finding no evidence that short-run and long-run rates of discount differ by smoking status. Using more general measures of time preference, i.e., impulsivity and length of financial planning horizon, smokers are more impatient. However, neither of these measures is significantly correlated with the measures of time discounting. Our results indicate that subjective rates of time discount revealed through committed choice scenarios are not related to differences in smoking behavior. Rather, a combination of more general measures of time preference and self-control, i.e., impulsivity and financial planning, are more closely related to the smoking decision.
Handle: RePEc:nbr:nberwo:12615
Template-Type: ReDIF-Paper 1.0
Title: A Simple Test of the Effect of Interest Rate Defense
Classification-JEL: F31; F33
Author-Name: Allan Drazen
Author-Person: pdr25
Author-Name: Stefan Hubrich
Note: DAE IFM
Number: 12616
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12616
File-URL: http://www.nber.org/papers/w12616.pdf
File-Format: application/pdf
Publication-Status: published as Drazen, Allan & Hubrich, Stefan, 2006. "A simple test of the effect of interest rate defense," Journal of the Japanese and International Economies, Elsevier, vol. 20(4), pages 612-636, December.
Abstract: High interest rates to defend the exchange rate signal that a government is committed to fixed exchange rates, but may also signal weak fundamentals. We test the effectiveness of the interest rate defense by disaggregating into the effects on future interest rates differentials, expectations of future exchange rates, and risk premia. While much previous empirical work has been inconclusive due to offsetting effects, tests that "disaggregate" the effects provide significant information. Raising overnight interest rates strengthens the exchange rate over the short-term, but also leads to an expected depreciation at a horizon of a year and longer and an increase in the risk premium, consistent with the argument that it also signals weak fundamentals.
Handle: RePEc:nbr:nberwo:12616
Template-Type: ReDIF-Paper 1.0
Title: Regulation - the Corridor to Liberalization: The Experience of the Israeli Phone Market 1984-2005
Classification-JEL: K2; L43; L5; L51; L96
Author-Name: Reuben Gronau
Author-Person: pgr333
Note: IO
Number: 12617
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12617
File-URL: http://www.nber.org/papers/w12617.pdf
File-Format: application/pdf
Publication-Status: published as Reuben Gronau, 2007. "Regulation—the corridor to liberalization: the experience of the Israeli phone market 1984–2005," Journal of Regulatory Economics, Springer, vol. 32(3), pages 287-311, December.
Abstract: An important part of the literature on regulatory economics is based on the US experience, where a well-established regulator faces a privately owned monopoly. It is sometimes forgotten that this model does not apply in many places where a newly established regulator faces a government owned, or a newly privatized, company. It definitely does not apply to the case of the Israeli communication industry where the government serves as regulator and at the same time is the owner of the wireline monopolist. The paper follows the regulatory experience of the Israeli communication industry over the last 20 years, analyzing its impact on consumers' welfare, the monopoly's profitability and its productivity. Though the Israeli institutions may look to a Western observer today as unique they were quite common in most of the developed economies prior to the wave of privatizations and deregulation in the 90s. The lessons learned from the Israeli experience have, however, more than a historic interest, and may be relevant for the regulatory process in general.
Handle: RePEc:nbr:nberwo:12617
Template-Type: ReDIF-Paper 1.0
Title: Reservation Wages and Unemployment Insurance
Classification-JEL: J6
Author-Name: Robert Shimer
Author-Person: psh9
Author-Name: Ivan Werning
Author-Person: pwe141
Note: EFG PE LS
Number: 12618
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12618
File-URL: http://www.nber.org/papers/w12618.pdf
File-Format: application/pdf
Publication-Status: published as Robert Shimer & Iván Werning, 2007. "Reservation Wages and Unemployment Insurance," The Quarterly Journal of Economics, MIT Press, vol. 122(3), pages 1145-1185, 08.
Abstract: This paper argues that a risk-averse worker's after-tax reservation wage encodes all the relevant information about her welfare. This insight leads to a novel test for the optimality of unemployment insurance based on the responsiveness of reservation wages to unemployment benefits. Some existing estimates imply significant gains to raising the current level of unemployment benefits in the United States, but highlight the need for more research on the determinants of reservation wages. Our approach complements those based on Baily's (1978) test.
Handle: RePEc:nbr:nberwo:12618
Template-Type: ReDIF-Paper 1.0
Title: An Instrumental Variable Evaluation of Antidepressant Use on Employment Among HIV-Infected Women Using Highly-Active Antiretroviral Therapy in the United States: 1996-2004
Classification-JEL: I12; I18; J22
Author-Name: Omar Galarraga
Author-Person: pga677
Author-Name: David S. Salkever
Author-Person: psa1313
Author-Name: Judith A. Cook
Author-Name: Stephen J. Gange
Note: LS EH
Number: 12619
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12619
File-URL: http://www.nber.org/papers/w12619.pdf
File-Format: application/pdf
Publication-Status: published as Galarraga, Omar, David Salkever, Judith Cook, and Stephen Gange. "An Instrumental Variable Evaluation of Antidepressant Use on Employment Among HIV-Infected Women Using Highly-Active Antiretroviral Therapy in the United States: 1996-2004." Health Economics 19, 2 (February 2010): 173-188.
Abstract: This paper examines the effect of antidepressant use on the likelihood of being employed among HIV-positive women receiving highly active antiretroviral therapy (HAART) in the United States from 1994 to 2004. We use instrumental variables to predict antidepressant use independently of outcomes; thus, addressing potential sources of bias -- more depressed women are more likely to receive antidepressant treatment, but they are also more likely to be unemployed. The results show that antidepressant use has a positive effect on the employment probability of women living with HIV. The proposed instrumental variables can be used to identify antidepressant use in the WIHS population. Among women receiving HAART, and controlling for individual and local area labor market characteristics, the use of antidepressants is associated with a higher probability of being employed.
Handle: RePEc:nbr:nberwo:12619
Template-Type: ReDIF-Paper 1.0
Title: External Imbalances in an Advanced, Commodity-Exporting Country: The Case of New Zealand
Classification-JEL: F1; F14; F31; F32
Author-Name: Sebastian Edwards
Author-Person: ped3
Note: IFM
Number: 12620
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12620
File-URL: http://www.nber.org/papers/w12620.pdf
File-Format: application/pdf
Abstract: During the last three years New Zealand has faced increasingly large external imbalances. The current account deficit has increased from 4.3% of GDP in 2003 to almost 9.0% of GDP in 2005. During the same period the country's net international investment position (NIIP) went from a negative level equivalent to 78.5% of GDP to negative 89% of GDP. In this paper I analyze the potential consequences of New Zealand's external imbalances. More specifically, I investigate what is the probability that New Zealand will undergo a costly adjustment characterized by an abrupt and large current account reversal. I find that to an important extent the (very) negative NIIP and (very) large current account deficit may be explained by New Zealand's very close economic relationship with Australia. The econometric results suggest that the rapid growth in the deficit during the last few years has (greatly) increased New Zealand's vulnerability to "contagion." It has also increased the advantage of the country's current floating exchange rate regime.
Handle: RePEc:nbr:nberwo:12620
Template-Type: ReDIF-Paper 1.0
Title: Demographic Change, Social Security Systems, and Savings
Classification-JEL: E1; J2
Author-Name: David E. Bloom
Author-Person: pbl79
Author-Name: David Canning
Author-Person: pca340
Author-Name: Rick Mansfield
Author-Name: Michael Moore
Author-Person: pmo284
Note: AG EFG LS PE
Number: 12621
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12621
File-URL: http://www.nber.org/papers/w12621.pdf
File-Format: application/pdf
Publication-Status: published as Bloom, David E. & Canning, David & Mansfield, Richard K. & Moore, Michael, 2007. "Demographic change, social security systems, and savings," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 92-114, January.
Abstract: In theory, improvements in healthy life expectancy should generate increases in the average age of retirement, with little effect on savings rates. In many countries, however, retirement incentives in social security programs prevent retirement ages from keeping pace with changes in life expectancy, leading to an increased need for life-cycle savings. Analyzing a cross-country panel of macroeconomic data, we find that increased longevity raises aggregate savings rates in countries with universal pension coverage and retirement incentives, though the effect disappears in countries with pay-as-you-go systems and high replacement rates.
Handle: RePEc:nbr:nberwo:12621
Template-Type: ReDIF-Paper 1.0
Title: Relationship Banking and the Pricing of Financial Services
Classification-JEL: G18; G21; G24
Author-Name: Charles Calomiris
Author-Person: pca421
Author-Name: Thanavut Pornrojnangkool
Note: CF IO LE
Number: 12622
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12622
File-URL: http://www.nber.org/papers/w12622.pdf
File-Format: application/pdf
Publication-Status: published as Charles Calomiris & Thanavut Pornrojnangkool, 2009. "Relationship Banking and the Pricing of Financial Services," Journal of Financial Services Research, Springer, vol. 35(3), pages 189-224, June.
Abstract: We investigate how banking relationships that combine lending and underwriting services affect the terms of lending, through both loan supply- and loan demand-side effects, and the underwriting costs of debt and equity issues. We capture and control for firm characteristics, including differences in the sequences of firm financing decisions (which we argue are likely to capture important cross-sectional heterogeneity, and which previously have been ignored in the literature). We construct a structural model of lending, which separately identifies loan supply and loan demand. Our approach results in significant improvement in the explanatory power of our regressions when compared to prior studies. We find no evidence that universal banks under-price loans to win underwriting business. Instead, we find that universal banks charge premiums for loans and underwriting services to extract value from combined lending and underwriting relationships. We also find that universal banks (as opposed to stand alone investment banks) enjoy cost advantages in both lending and underwriting, irrespective of relationship benefits. Part of the advantage borrowers may enjoy from bundling products may be a form of liquidity risk insurance, which is manifested in a reduced demand for lines of credit. We also find evidence of a “road show� effect; firms that engage in debt underwritings enjoy loan pricing discounts on the loans that are negotiated at times close to the debt underwritings.
Handle: RePEc:nbr:nberwo:12622
Template-Type: ReDIF-Paper 1.0
Title: Tradeoffs from Integrating Diagnosis and Treatment in Markets for Health Care
Classification-JEL: I1
Author-Name: Christopher C. Afendulis
Author-Name: Daniel P. Kessler
Note: EH
Number: 12623
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12623
File-URL: http://www.nber.org/papers/w12623.pdf
File-Format: application/pdf
Publication-Status: published as Christopher C. Afendulis & Daniel P. Kessler, 2007. "Tradeoffs from Integrating Diagnosis and Treatment in Markets for Health Care," American Economic Review, American Economic Association, vol. 97(3), pages 1013-1020, June.
Abstract: What are the important tradeoffs in consulting a single expert for both diagnosis and treatment? On one hand, an integrated diagnostician may have the incentive to recommend treatments that are not in the buyer's best interests. On the other hand, joint production of diagnosis and treatment by an integrated diagnostician may be more efficient. We examine an important special case of this problem: the costs and health outcomes of elderly Medicare beneficiaries with coronary artery disease. We compare the empirical consequences of diagnosis by an "integrated" cardiologist -- one who can provide surgical treatment -- to the consequences of diagnosis by a non-integrated cardiologist. Diagnosis by an integrated cardiologist leads, on net, to higher health spending but similar health outcomes. The net effect contains three components: reduced spending and improved outcomes from better allocation of patients to surgical treatment options; increased spending conditional on treatment option; and worse outcomes from poorer provision of non-surgical care. We conclude that accounting more completely for doctors' incentives to refer patients in setting reimbursements, or in the alternative, allowing doctors more freedom to make and receive payments for referrals, could reduce spending and improve quality.
Handle: RePEc:nbr:nberwo:12623
Template-Type: ReDIF-Paper 1.0
Title: Welfare Reform and Family Expenditures: How are Single Mothers Adapting to the New Welfare and Work Regime?
Classification-JEL: I3; I31; I38
Author-Name: Neeraj Kaushal
Author-Person: pka320
Author-Name: Qin Gao
Author-Name: Jane Waldfogel
Note: CH PE
Number: 12624
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12624
File-URL: http://www.nber.org/papers/w12624.pdf
File-Format: application/pdf
Publication-Status: published as Kaushal, N., Q. Gao & J. Waldfogel. "Welfare reform and family expenditures: How are single mothers adapting to the new welfare and work regime?" Social Service Review Vol. 81, No. 3, September 2007. pp 369-396.
Abstract: We study the effect of welfare reform, broadly defined to include social policy changes in the 1990s, on the material well-being and expenditure patterns of poor single-mother families. Our research suggests that welfare reform did not affect total expenditures in households headed by low-educated single mothers. However, patterns of expenditure did change. We find strong evidence that the policy was associated with an increase in spending on transportation and food away from home, and some evidence of an increase in spending on adult clothing and footwear. In contrast, we find no statistically significant changes in expenditures on childcare or learning and enrichment activities. This pattern of results suggests that welfare reform has shifted family expenditures towards items that facilitate work outside the home, but, at least so far, has not allowed families to catch up with more advantaged families in terms of their expenditures on learning and enrichment items.
Handle: RePEc:nbr:nberwo:12624
Template-Type: ReDIF-Paper 1.0
Title: On the Existence and Efficiency of Equilibria Under Liability Rules
Classification-JEL: C62; D62; K13
Author-Name: Ram Singh
Note: LE
Number: 12625
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12625
File-URL: http://www.nber.org/papers/w12625.pdf
File-Format: application/pdf
Abstract: While the focus of mainstream economic analysis of liability rules remains on negligence liability, recently some legal scholars have argued for the sharing of liability. In this paper, our first objective is contribute to the debate regarding the desirability of the sharing of liability for the accident loss. To this end, we study the implications of various approaches toward liability assignment for the existence and efficiency of equilibria. In particular, we analyze the proposal of Calabresi and Cooper (1996). Contrary to what is suggested in the literature, we show that the sharing of liability when parties are either both negligent or both non-negligent does not threaten the existence of equilibria. Moreover, it does not dilute the incentives for the parties to take the due care. Our second objective is to extend the efficiency analysis beyond Shavell (1980, 1987) and Miceli (1997), to search for the second-best liability rules. We show that each of the standard liability rules fails to be efficient even from a second-best perspective. Furthermore, we show that second-best efficiency requires loss sharing between non-negligent parties. As corollaries to our main results, we reexamine some of the existing claims regarding the existence and efficiency of equilibria under liability rules.
Handle: RePEc:nbr:nberwo:12625
Template-Type: ReDIF-Paper 1.0
Title: The Performance of Reverse Leveraged Buyouts
Classification-JEL: G23; G24; G34
Author-Name: Jerry Cao
Author-Name: Josh Lerner
Author-Person: ple60
Note: CF
Number: 12626
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12626
File-URL: http://www.nber.org/papers/w12626.pdf
File-Format: application/pdf
Publication-Status: published as Cao, Jerry & Lerner, Josh, 2009. "The performance of reverse leveraged buyouts," Journal of Financial Economics, Elsevier, vol. 91(2), pages 139-157, February.
Abstract: Reverse leveraged buyouts (RLBOs) have received increased public scrutiny but attracted little systematic study. We collect a comprehensive sample of 496 RLBOs between 1980 and 2002 and examine three- and five-year stock performance of these offerings. RLBOs appear to consistently outperform other IPOs and the stock market as a whole, with economically and statistically meaningful positive returns. There is no evidence of a deterioration of returns over time, despite the growth of the buyout market: RLBOs performed strongly in the late 1980s, the mid-1990s, and the 2000s. Large RLBOs that are backed by private equity firms with more capital under management perform better. We also find the so-called quick flips--when private equity firms sell off an investment within a year after acquisition--underperform.
Handle: RePEc:nbr:nberwo:12626
Template-Type: ReDIF-Paper 1.0
Title: Individual Teacher Incentives And Student Performance
Classification-JEL: I2
Author-Name: David N. Figlio
Author-Person: pfi57
Author-Name: Lawrence Kenny
Author-Person: pke84
Note: CH ED
Number: 12627
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12627
File-URL: http://www.nber.org/papers/w12627.pdf
File-Format: application/pdf
Publication-Status: published as Figlio, David N. & Kenny, Lawrence W., 2007. "Individual teacher incentives and student performance," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 901-914, June.
Abstract: This paper is the first to systematically document the relationship between individual teacher performance incentives and student achievement using United States data. We combine data from the National Education Longitudinal Survey on schools, students, and their families with our own survey conducted in 2000 regarding the use of teacher incentives. This survey on teacher incentives has unique data on frequency and magnitude of merit raises and bonuses, teacher evaluation, and teacher termination. We find that test scores are higher in schools that offer individual financial incentives for good performance. Moreover, the estimated relationship between the presence of merit pay in teacher compensation and student test scores is strongest in schools that may have the least parental oversight. The association between teacher incentives and student performance could be due to better schools adopting teacher incentives or to teacher incentives eliciting more effort from teachers; it is impossible to rule out the former explanation with our cross sectional data.
Handle: RePEc:nbr:nberwo:12627
Template-Type: ReDIF-Paper 1.0
Title: Cramming: The Effects of School Accountability on College-Bound Students
Classification-JEL: I2
Author-Name: Colleen Donovan
Author-Name: David N. Figlio
Author-Person: pfi57
Author-Name: Mark Rush
Author-Person: pru130
Note: CH ED
Number: 12628
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12628
File-URL: http://www.nber.org/papers/w12628.pdf
File-Format: application/pdf
Abstract: This paper is the first to explore the effects of school accountability systems on high-achieving students' long-term performance. Using exceptional data from a large highly-selective state university, we relate school accountability pressure in high school to a student's university-level grades and study habits. We exploit a change in the state's accountability system in 1999 that led to some schools becoming newlythreatened by accountability pressure and others becoming newly-unthreatened to identify the effects of accountability pressure. We find that an accountability system based on a low-level test of basic skills apparently led to generally reduced performance by high-achieving students, while an accountability system based on a more challenging criterion-referenced exam apparently led to improved performance in college on mathematics and other technical subjects. Both types of systems are associated with increased "cramming" by students in college. The results indicate that the nature of an accountability system can influence its effectiveness.
Handle: RePEc:nbr:nberwo:12628
Template-Type: ReDIF-Paper 1.0
Title: Real Business Cycles in Emerging Countries?
Classification-JEL: F41
Author-Name: Javier García-Cicco
Author-Name: Roberto Pancrazi
Author-Person: ppa621
Author-Name: Martín Uribe
Note: EFG IFM
Number: 12629
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12629
File-URL: http://www.nber.org/papers/w12629.pdf
File-Format: application/pdf
Publication-Status: published as Garciaa-Cicco, Javier, Roberto Pancrazi, and Martín Uribe. “Real Business Cycles in Emerging Countries?" American Economic Review 100, 5 (December 2010): 2510-2531.
Abstract: We use more than one century of Argentine and Mexican data to estimate the structural parameters of a small-open-economy real-business-cycle model driven by nonstationary productivity shocks. We find that the RBC model does a poor job at explaining business cycles in emerging countries. We then estimate an augmented model that incorporates shocks to the country premium and financial frictions. We find that the estimated financial-friction model provides a remarkably good account of business cycles in emerging markets and, importantly, assigns a negligible role to nonstationary productivity shocks.
Handle: RePEc:nbr:nberwo:12629
Template-Type: ReDIF-Paper 1.0
Title: On the Heterogeneity of Dowry Motives
Classification-JEL: C5; D1; J12
Author-Name: Raj Arunachalam
Author-Person: par130
Author-Name: Trevon D. Logan
Author-Person: plo110
Note: CH LS
Number: 12630
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12630
File-URL: http://www.nber.org/papers/w12630.pdf
File-Format: application/pdf
Publication-Status: published as Raj Arunachalam & Trevon D. Logan, 2016. "On the heterogeneity of dowry motives," Journal of Population Economics, vol 29(1), pages 135-166.
Abstract: Dowries have been modeled as pre-mortem bequests to daughters or as groom-prices paid to in-laws. These two classes of models yield mutually exclusive predictions, but empirical tests of these predictions have been mixed. We argue that the heterogeneity of findings can be explained by a heterogeneous world--some households use dowries as a bequest and others use dowries as a price. We estimate a model with heterogeneous dowry motives and use the predictions from the competing theories in an exogenous switching regression to place households in the price or bequest regime. Our empirical strategy generates multiple, independent checks on the validity of regime assignment. Using retrospective marriage data from rural Bangladesh, we find robust evidence of heterogeneity in dowry motives in the population; that bequest dowries have declined in prevalence and amount over time; and that bequest households are better off compared to price households on a variety of welfare measures.
Handle: RePEc:nbr:nberwo:12630
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Incentives on Human Behavior: Can We Make It Disappear? The Case of the Death Penalty
Classification-JEL: K0; K14; K4; K42
Author-Name: Naci H. Mocan
Author-Person: pmo270
Author-Name: R. Kaj Gittings
Author-Person: pgi167
Note: EH
Number: 12631
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12631
File-URL: http://www.nber.org/papers/w12631.pdf
File-Format: application/pdf
Publication-Status: published as Naci Mocan & Kaj Gittings, 2010. "The Impact of Incentives on Human Behavior: Can We Make it Disappear? The Case of the Death Penalty," NBER Chapters, in: The Economics of Crime: Lessons for and from Latin America, pages 379-418 National Bureau of Economic Research, Inc.
Abstract: Although decades of empirical research has demonstrated that criminal behavior responds to incentives, non-economists frequently express the belief that human beings are not rational enough to make calculated decisions about the costs and benefits of engaging in crime and therefore, a priori drawing the conclusion that criminal activity cannot be altered by incentives. However, scientific research should not be driven by personal beliefs. Whether or not economic conditions matter or deterrence measures such police, arrests, prison deaths, executions, and commutations provide signals to people is an empirical question, which should be guided by a solid theoretical framework. In this paper we extend the analysis of Mocan and Gittings (2003). We alter the original model in a number of directions to make the relationship between homicide rates and death penalty related outcomes (executions, commutations and removals) disappear. We deliberately deviate from the theoretically consistent measurement of the risk variables originally employed by Mocan and Gittings (2003) in a variety of ways. We also investigate the sensitivity of the results to changes in the estimation sample (removing high executing states for example) and weighting. The basic results are insensitive to these and a variety of other specification tests performed in the paper. The results are often strong enough to even hold up under theoretically meaningless measurements of the risk variables. In summary, the original findings of Mocan and Gittings (2003) are robust, providing evidence that people indeed react to incentives induced by capital punishment. Research findings about the deterrent effect of the death penalty evoke strong feelings, which could be due to political, ideological, religious, or other personal beliefs. Yet, such findings do not mean that capital punishment is good or bad, nor does it provide any judgment about whether capital punishment should be implemented or abolished. It is simply a scientific finding which demonstrates that people react to incentives. Therefore, there is no need to be afraid of this result.
Handle: RePEc:nbr:nberwo:12631
Template-Type: ReDIF-Paper 1.0
Title: Does Television Cause Autism?
Classification-JEL: I1
Author-Name: Michael Waldman
Author-Person: pwa40
Author-Name: Sean Nicholson
Author-Person: pni108
Author-Name: Nodir Adilov
Note: CH EH
Number: 12632
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12632
File-URL: http://www.nber.org/papers/w12632.pdf
File-Format: application/pdf
Abstract: Autism is currently estimated to affect approximately one in every 166 children, yet the cause or causes of the condition are not well understood. One of the current theories concerning the condition is that among a set of children vulnerable to developing the condition because of their underlying genetics, the condition manifests itself when such a child is exposed to a (currently unknown) environmental trigger. In this paper we empirically investigate the hypothesis that early childhood television viewing serves as such a trigger. Using the Bureau of Labor Statistics' American Time Use Survey, we first establish that the amount of television a young child watches is positively related to the amount of precipitation in the child's community. This suggests that, if television is a trigger for autism, then autism should be more prevalent in communities that receive substantial precipitation. We then look at county-level autism data for three states -- California, Oregon, and Washington -- characterized by high precipitation variability. Employing a variety of tests, we show that in each of the three states (and across all three states when pooled) there is substantial evidence that county autism rates are indeed positively related to county-wide levels of precipitation. In our final set of tests we use California and Pennsylvania data on children born between 1972 and 1989 to show, again consistent with the television as trigger hypothesis, that county autism rates are also positively related to the percentage of households that subscribe to cable television. Our precipitation tests indicate that just under forty percent of autism diagnoses in the three states studied is the result of television watching due to precipitation, while our cable tests indicate that approximately seventeen percent of the growth in autism in California and Pennsylvania during the 1970s and 1980s is due to the growth of cable television. These findings are consistent with early childhood television viewing being an important trigger for autism. We also discuss further tests that can be conducted to explore the hypothesis more directly.
Handle: RePEc:nbr:nberwo:12632
Template-Type: ReDIF-Paper 1.0
Title: Illiquid Assets and Optimal Portfolio Choice
Classification-JEL: G11
Author-Name: Eduardo S. Schwartz
Author-Name: Claudio Tebaldi
Author-Person: pte303
Note: AP
Number: 12633
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12633
File-URL: http://www.nber.org/papers/w12633.pdf
File-Format: application/pdf
Abstract: The presence of illiquid assets, such as human wealth or a family owned business, complicates the problem of portfolio choice. This paper is concerned with the problem of optimal asset allocation and consumption in a continuous time model when one asset cannot be traded. This illiquid asset, which depends on an uninsurable source of risk, provides a liquid dividend. In the case of human capital we can think about this dividend as labor income. The agent is endowed with a given amount of the illiquid asset and with some liquid wealth which can be allocated in a market where there is a risky and a riskless asset. The main point of the paper is that the optimal allocations to the two liquid assets and consumption will critically depend on the endowment and characteristics of the illiquid asset, in addition to the preferences and to the liquid holdings held by the agent. We provide what we believe to be the first analytical solution to this problem when the agent has power utility of consumption and terminal wealth. We also derive the value that the agent assigns to the illiquid asset. The risk adjusted valuation procedure we develop can be used to value both liquid and illiquid assets, as well as contingent claims on those assets.
Handle: RePEc:nbr:nberwo:12633
Template-Type: ReDIF-Paper 1.0
Title: When is Market Incompleteness Irrelevant for the Price of Aggregate Risk (and when is it not)?
Classification-JEL: E21; E44; G0
Author-Name: Dirk Krueger
Author-Person: pkr7
Author-Name: Hanno Lustig
Author-Person: plu17
Note: AP EFG
Number: 12634
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12634
File-URL: http://www.nber.org/papers/w12634.pdf
File-Format: application/pdf
Publication-Status: published as Krueger, Dirk & Lustig, Hanno, 2010. "When is market incompleteness irrelevant for the price of aggregate risk (and when is it not)?," Journal of Economic Theory, Elsevier, vol. 145(1), pages 1-41, January.
Abstract: In a standard incomplete markets model with a continuum of households that have constant relative risk aversion (CRRA) preferences, the absence of insurance markets for idiosyncratic labor income risk has no effect on the premium for aggregate risk if the distribution of idiosyncratic risk is independent of aggregate shocks and aggregate consumption growth is independent over time. In the equilibrium, which features trade and binding solvency constraints, as opposed to Constantinides and Duffie (1996), households only use the stock market to smooth consumption; the bond market is inoperative. Furthermore we show that the cross-sectional wealth and consumption distributions are not affected by aggregate shocks. These results hold regardless of the persistence of idiosyncratic shocks, and arise even when households face tight solvency constraints, but only a weaker irrelevance result survives when we allow for predictability in aggregate consumption growth.
Handle: RePEc:nbr:nberwo:12634
Template-Type: ReDIF-Paper 1.0
Title: Tacit Collusion in the Presence of Cyclical Demand and Endogenous Capacity Levels
Classification-JEL: L0; L1; L13; L49
Author-Name: Christopher R. Knittel
Author-Person: pkn5
Author-Name: Jason J. Lepore
Note: IO
Number: 12635
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12635
File-URL: http://www.nber.org/papers/w12635.pdf
File-Format: application/pdf
Publication-Status: published as Knittel, Christopher R. & Lepore, Jason J., 2010. "Tacit collusion in the presence of cyclical demand and endogenous capacity levels," International Journal of Industrial Organization, Elsevier, vol. 28(2), pages 131-144, March.
Abstract: We analyze tacit collusion in an industry characterized by cyclical demand and long-run scale decisions; firms face deterministic demand cycles and choose capacity levels prior to competing in prices. Our focus is on the nature of prices. We find that two types of price wars may exist. In one, collusion can involve periods of mixed strategy price wars. In the other, consistent with the Rotemberg and Saloner (1986) definition of price wars, we show that collusive prices can also become countercyclical. We also establish pricing patterns with respect to the relative prices in booms and recessions. If the marginal cost of capacity is high enough, holding current demand constant, prices in the boom will be generally lower than the prices in the recession; this reverses the results of Haltiwanger and Harrington (1991). In contrast, if the marginal cost of capacity is low enough, then prices in the boom will be generally higher than the prices in the recession. For costs in an intermediate range, numerical examples are calculated to show specific pricing patterns.
Handle: RePEc:nbr:nberwo:12635
Template-Type: ReDIF-Paper 1.0
Title: When Bioterrorism Was No Big Deal
Classification-JEL: J10; N11
Author-Name: Patricia E. Beeson
Author-Name: Werner Troesken
Author-Person: ptr352
Note: DAE EH
Number: 12636
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12636
File-URL: http://www.nber.org/papers/w12636.pdf
File-Format: application/pdf
Abstract: To better understand the potential economic repercussions of a bioterrorist attack, this paper explores the effects of several catastrophic epidemics that struck American cities between 1690 and 1880. The epidemics considered here killed between 10 and 25 percent of the urban population studied. A particular emphasis is placed on smallpox and yellow fever, both of which have been identified as potential bioterrorist agents. The central findings of the paper are threefold. First, severe localized epidemics did not disrupt, in any permanent way, the population level or long-term growth trajectory of those cities. Non-localized epidemics (i.e., those that struck more than one major city) do appear to have had some negative effect on population levels and long-term growth. There is also modest evidence that ill-advised responses to epidemics on the part of government officials might have had lasting and negative effects in a few cities. Second, severe localized epidemics did not disrupt trade flows; non-localized epidemics had adverse, though fleeting, effects on trade. Third, while severe epidemics probably imposed some modest costs on local and regional economies, these costs were very small relative to the national economy.
Handle: RePEc:nbr:nberwo:12636
Template-Type: ReDIF-Paper 1.0
Title: A New Framework for Analyzing and Managing Macrofinancial Risks of an Economy
Classification-JEL: E5; E6; G2; H0
Author-Name: Dale F. Gray
Author-Name: Robert C. Merton
Author-Person: pme203
Author-Name: Zvi Bodie
Author-Person: pbo569
Note: ME EFG IFM
Number: 12637
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12637
File-URL: http://www.nber.org/papers/w12637.pdf
File-Format: application/pdf
Abstract: The high cost of international economic and financial crises highlights the need for a comprehensive framework to assess the robustness of national economic and financial systems. This paper proposes a new comprehensive approach to measure, analyze, and manage macroeconomic risk based on the theory and practice of modern contingent claims analysis (CCA). We illustrate how to use the CCA approach to model and measure sectoral and national risk exposures, and analyze policies to offset their potentially harmful effects. This new framework provides economic balance sheets for inter-linked sectors and a risk accounting framework for an economy. CCA provides a natural framework for analysis of mismatches between an entity's assets and liabilities, such as currency and maturity mismatches on balance sheets. Policies or actions that reduce these mismatches will help reduce risk and vulnerability. It also provides a new framework for sovereign capital structure analysis. It is useful for assessing vulnerability, policy analysis, risk management, investment analysis, and design of risk control strategies. Both public and private sector participants can benefit from pursuing ways to facilitate more efficient macro risk accounting, improve price and volatility discovery, and expand international risk intermediation activities.
Handle: RePEc:nbr:nberwo:12637
Template-Type: ReDIF-Paper 1.0
Title: Revealing the Secrets of the Temple: The Value of Publishing Central Bank Interest Rate Projections
Classification-JEL: E43; E52
Author-Name: Glenn D. Rudebusch
Author-Person: pru10
Author-Name: John C. Williams
Author-Person: pwi23
Note: AP
Number: 12638
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12638
File-URL: http://www.nber.org/papers/w12638.pdf
File-Format: application/pdf
Publication-Status: published as Revealing the Secrets of the Temple: The Value of Publishing Central Bank Interest Rate Projections, Glenn D. Rudebusch, John C. Williams. in Asset Prices and Monetary Policy, Campbell. 2008
Abstract: The modern view of monetary policy stresses its role in shaping the entire yield curve of interest rates in order to achieve various macroeconomic objectives. A crucial element of this process involves guiding financial market expectations of future central bank actions. Recently, a few central banks have started to explicitly signal their future policy intentions to the public, and two of these banks have even begun publishing their internal interest rate projections. We examine the macroeconomic effects of direct revelation of a central bank's expectations about the future path of the policy rate. We show that, in an economy where private agents have imperfect information about the determination of monetary policy, central bank communication of interest rate projections can help shape financial market expectations and may improve macroeconomic performance.
Handle: RePEc:nbr:nberwo:12638
Template-Type: ReDIF-Paper 1.0
Title: Cash-on-Hand and Competing Models of Intertemporal Behavior: New Evidence from the Labor Market
Classification-JEL: D91; E6; H5; J6
Author-Name: David Card
Author-Person: pca271
Author-Name: Raj Chetty
Author-Person: pch161
Author-Name: Andrea Weber
Author-Person: pwe32
Note: AG EFG LS PE
Number: 12639
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12639
File-URL: http://www.nber.org/papers/w12639.pdf
File-Format: application/pdf
Publication-Status: published as David Card & Raj Chetty & Andrea Weber, 2007. "Cash-On-Hand and Competing Models of Intertemporal Behavior: New Evidence from the Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 122(4), pages 1511-1560, November.
Abstract: This paper presents new tests of the permanent income hypothesis and other widely used models of household behavior using data from the labor market. We estimate the "excess sensitivity" of job search behavior to cash-on-hand using sharp discontinuities in eligibility for severance pay and extended unemployment insurance (UI) benefits in Austria. Analyzing data for over one-half million job losers, we obtain three empirical results: (1) a lump-sum severance payment equal to two months of earnings reduces the job-finding rate by 8-12% on average; (2) an extension of the potential duration of UI benefits from 20 weeks to 30 weeks similarly lowers job-finding rates in the first 20 weeks of search by 5-9%; and (3) increases in the duration of search induced by the two programs have little or no effect on subsequent job match quality. Using a search theoretic model, we show that estimates of the relative effect of severance pay and extended benefits can be used to calibrate and test a wide set of intertemporal models. Our estimates of this ratio are inconsistent with the predictions of a standard permanent income model, as well as naive "rule of thumb" behavior. The representative job searcher in our data is 70% of the way between the permanent income benchmark and credit-constrained behavior in terms of sensitivity to cash-on-hand.
Handle: RePEc:nbr:nberwo:12639
Template-Type: ReDIF-Paper 1.0
Title: University Patenting: Estimating the Diminishing Breadth of Knowledge Diffusion and Consumption
Classification-JEL: I23; O33; O34
Author-Name: Carlos Rosell
Author-Name: Ajay Agrawal
Author-Person: pag38
Note: PR
Number: 12640
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12640
File-URL: http://www.nber.org/papers/w12640.pdf
File-Format: application/pdf
Abstract: The rate of university patenting increased dramatically during the 1980s. To what extent did the knowledge flow patterns associated with public sector inventions change as university administrators and faculty seemingly became more commercially oriented? Using a Herfindahl-type measure of patent assignee concentration and employing a difference-in-differences estimation to compare university to firm patents across two time periods, we find that the university diffusion premium (the degree to which knowledge flows from patented university inventions are more widely distributed across assignees than those of firms) declined by over half during the 1980s. In addition, we find that the university diversity premium (the degree to which knowledge inflows used to develop patented university inventions are drawn from a less concentrated set of prior art holders than those used by firms) also declined by over half. Moreover, in both cases the estimated increase in knowledge flow concentration is largely driven by universities experienced in patenting, suggesting these phenomena are not likely to dissipate with experience.
Handle: RePEc:nbr:nberwo:12640
Template-Type: ReDIF-Paper 1.0
Title: Crime and Punishment in the "American Dream"
Classification-JEL: E62; K14; K42; P16
Author-Name: Rafael Di Tella
Author-Person: pdi128
Author-Name: Juan Dubra
Author-Person: pdu45
Note: PE LS
Number: 12641
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12641
File-URL: http://www.nber.org/papers/w12641.pdf
File-Format: application/pdf
Publication-Status: published as Di Tella, Rafael & Dubra, Juan, 2008. "Crime and punishment in the "American Dream"," Journal of Public Economics, Elsevier, vol. 92(7), pages 1564-1584, July.
Abstract: We observe that countries where belief in the "American dream" (i.e., effort pays) prevails also set harsher punishment for criminals. We know from previous work that beliefs are also correlated with several features of the economic system (taxation, social insurance, etc). Our objective is to study the joint determination of these three features (beliefs, punitiveness and economic system) in a way that replicates the observed empirical patterns. We present a model where beliefs determine the types of contracts that firms offer and whether workers exert effort. Some workers become criminals, depending on their luck in the labor market, the expected punishment, and an individual shock that we call "meanness". It is this meanness level that a penal system based on "retribution" tries to detect when deciding the severity of the punishment. We find that when initial beliefs differ, two equilibria can emerge out of identical fundamentals. In the "American" (as opposed to the "French") equilibrium, belief in the "American dream" is commonplace, workers exert effort, there are high powered contracts (and income is unequally distributed) and punishments are harsh. Economists who believe that deterrence (rather than retribution) shapes punishment can interpret the meanness parameter as pessimism about future economic opportunities and verify that two similar equilibria emerge.
Handle: RePEc:nbr:nberwo:12641
Template-Type: ReDIF-Paper 1.0
Title: Welfare Reform and Indirect Impacts on Health
Classification-JEL: I1; I3
Author-Name: Marianne Bitler
Author-Person: pbi12
Author-Name: Hilary W. Hoynes
Author-Person: pho278
Note: EH PE
Number: 12642
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12642
File-URL: http://www.nber.org/papers/w12642.pdf
File-Format: application/pdf
Publication-Status: published as Schoeni, R., J. House, G. Kaplan, and H. Pollack (eds.) Making Americans Healthier: Social and Economic Policy as Health Policy. New York: Russell Sage, 2008.
Abstract: The stated goals of welfare reform are to increase work, reduce dependency on welfare, reduce births outside marriage, and to increase the formation of two parent families. However, welfare reform may also have indirect impacts on health. We provide a comprehensive review of the literature on the impacts of welfare reform on health. We illustrate the main findings from the literature by presenting estimates of the impact of reform on health insurance, health utilization, and health status using data from five state waiver experiments. The most consistent finding is that welfare reform led to a reduction in health insurance coverage. The impacts on health care utilization and health status tend to be more mixed and fewer are statistically significant. While the results are not conclusive, they suggest that welfare-to-work programs need not have large negative health effects.
Handle: RePEc:nbr:nberwo:12642
Template-Type: ReDIF-Paper 1.0
Title: Cost-Offsets of New Medications for Treatment of Schizophrenia
Classification-JEL: I12
Author-Name: Richard G. Frank
Author-Name: Thomas G. McGuire
Author-Name: Sharon-Lise Normand
Note: EH
Number: 12643
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12643
File-URL: http://www.nber.org/papers/w12643.pdf
File-Format: application/pdf
Abstract: Broad claims are frequently made that new medications will offset all or part of their costs by reducing other areas of Medicaid spending. In this paper we examine the net impact on spending for new drugs used to treat schizophrenia. We extend research in this area by taking a new approach to identification of spending impacts of new drugs. We specify and estimate models of spending on treatment of schizophrenia using 7 years of Florida Medicaid data. The estimates indicate that use of the new drugs result in net spending increases. This may be due to increased adherence to treatment.
Handle: RePEc:nbr:nberwo:12643
Template-Type: ReDIF-Paper 1.0
Title: Devaluation with Contract Redenomination in Argentina
Classification-JEL: G18; G3; G32
Author-Name: Charles Calomiris
Author-Person: pca421
Note: CF ME IFM
Number: 12644
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12644
File-URL: http://www.nber.org/papers/w12644.pdf
File-Format: application/pdf
Publication-Status: published as Charles Calomiris, 2007. "Devaluation with contract redenomination in Argentina," Annals of Finance, Springer, vol. 3(1), pages 155-192, January.
Abstract: This study offers the first empirical microeconomic analysis of the effectiveness of dollar debt and contract redenomination policies to mitigate adverse financial and relative price consequences from a large devaluation. An analysis of Argentina's policy of devaluation with redenomination in 2002, in contrast to Mexico's policy of devaluation without debt redenomination in 1994-1995, shows that devaluation benefited tradables firms, and that dollar debt redenomination in Argentina benefited high-dollar debtors, as shown in these firms' investment behavior, especially non-tradables firms whose revenues in dollar terms were adversely affected by devaluation. That investment behavior contrasts with the experience of Mexican firms in the aftermath of Mexico's large devaluation, in which non-tradables producers with high dollar debt displayed significant relative reductions in investment. Stock return reactions to Argentine debt redenomination indicate large, positive, unanticipated effects on high-dollar debtors from debt redenomination. Energy concession contract redenomination likewise increased investment by high energy users in Argentina, and that benefit was apparent also in positive stock returns of those firms.
Handle: RePEc:nbr:nberwo:12644
Template-Type: ReDIF-Paper 1.0
Title: The Economics of Earnings Manipulation and Managerial Compensation
Classification-JEL: A12
Author-Name: Keith J. Crocker
Author-Name: Joel Slemrod
Author-Person: psl10
Note: LS CF
Number: 12645
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12645
File-URL: http://www.nber.org/papers/w12645.pdf
File-Format: application/pdf
Publication-Status: published as Keith J. Crocker & Joel Slemrod, 2007. "The economics of earnings manipulation and managerial compensation," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 698-713, 09.
Abstract: This paper examines managerial compensation in an environment where managers may take a hidden action that affects the actual earnings of the firm. When realized, these earnings constitute hidden information that is privately observed by the manager, who may expend resources to generate an inflated earnings report. We characterize the optimal managerial compensation contract in this setting, and demonstrate that contracts contingent on reported earnings cannot provide managers with the incentive both to maximize profits, and to report those profits honestly. As a result, some degree of earnings management must be tolerated as a necessary part of an efficient agreement.
Handle: RePEc:nbr:nberwo:12645
Template-Type: ReDIF-Paper 1.0
Title: Product Differentiation and Film Programming Choice: Do First-Run Movie Theatres Show the Same Films?
Classification-JEL: C33; L11; L82
Author-Name: Darlene C. Chisholm
Author-Name: Margaret S. McMillan
Author-Person: pmc26
Author-Name: George Norman
Author-Person: pno24
Note: IO
Number: 12646
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12646
File-URL: http://www.nber.org/papers/w12646.pdf
File-Format: application/pdf
Publication-Status: published as Darlene Chisholm & Margaret McMillan & George Norman, 2010. "Product differentiation and film-programming choice: do first-run movie theatres show the same films?," Journal of Cultural Economics, Springer, vol. 34(2), pages 131-145, May.
Abstract: We present an empirical analysis of product differentiation using a new dynamic panel data set on film programming choice in a major U.S. metropolitan motion-pictures exhibition market. Using these data, we compute two measures of film programming choice which allow us to investigate the determinants of strategic product differentiation in a multi-characteristics space. Our evidence is consistent with the idea that the degree of product differentiation between theatre pairs reflects a balance between strategic concerns and contractual constraints. Similarity in one dimension is offset by differentiation in others. Finally, we find that ownership matters: theatres under common ownership make more similar programming choices than theatres with different owners.
Handle: RePEc:nbr:nberwo:12646
Template-Type: ReDIF-Paper 1.0
Title: Two Flaws In Business Cycle Accounting
Classification-JEL: C01; C32; C52
Author-Name: Lawrence J. Christiano
Author-Person: pch45
Author-Name: Joshua M. Davis
Note: EFG
Number: 12647
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12647
File-URL: http://www.nber.org/papers/w12647.pdf
File-Format: application/pdf
Abstract: Using 'business cycle accounting' (BCA), Chari, Kehoe and McGrattan (2006) (CKM) conclude that models of financial frictions which create a wedge in the intertemporal Euler equation are not promising avenues for modeling business cycle dynamics. There are two reasons that this conclusion is not warranted. First, small changes in the implementation of BCA overturn CKM's conclusions. Second, one way that shocks to the intertemporal wedge impact on the economy is by their spillover effects onto other wedges. This potentially important mechanism for the transmission of intertemporal wedge shocks is not identified under BCA. CKM potentially understate the importance of these shocks by adopting the extreme position that spillover effects are zero.
Handle: RePEc:nbr:nberwo:12647
Template-Type: ReDIF-Paper 1.0
Title: Learning and Disagreement in an Uncertain World
Classification-JEL: C11; C72; D83
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Victor Chernozhukov
Author-Person: pch864
Author-Name: Muhamet Yildiz
Author-Person: pyi16
Note: EFG AP
Number: 12648
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12648
File-URL: http://www.nber.org/papers/w12648.pdf
File-Format: application/pdf
Abstract: Most economic analyses presume that there are limited differences in the prior beliefs of individuals, as assumption most often justified by the argument that sufficient common experiences and observations will eliminate disagreements. We investigate this claim using a simple model of Bayesian learning. Two individuals with different priors observe the same infinite sequence of signals about some underlying parameter. Existing results in the literature establish that when individuals are certain about the interpretation of signals, under very mild conditions there will be asymptotic agreement---their assessments will eventually agree. In contrast, we look at an environment in which individuals are uncertain about the interpretation of signals, meaning that they have non-degenerate probability distributions over the conditional distribution of signals given the underlying parameter. When priors on the parameter and the conditional distribution of signals have full support, we prove the following results: (1) Individuals will never agree, even after observing the same infinite sequence of signals. (2) Before observing the signals, they believe with probability 1 that their posteriors about the underlying parameter will fail to converge. (3) Observing the same sequence of signals may lead to a divergence of opinion rather than the typically presumed convergence. We then characterize the conditions for asymptotic agreement under "approximate certainty"---i.e., as we look at the limit where uncertainty about the interpretation of the signals disappears. When the family of probability distributions of signals given the parameter has "rapidly-varying tails" (such as the normal or exponential distributions), approximate certainty restores asymptotic agreement. However, when the family of probability distributions has "regularly-varying tails" (such as the Pareto, the log-normal, and the t-distributions), asymptotic agreement does not obtain even in the limit as the amount of uncertainty disappears. Lack of common priors has important implications for economic behavior in a range of circumstances. We illustrate how the type of learning outlined in this paper interacts with economic behavior in various different situations, including games of common interest, coordination, asset trading and bargaining.
Handle: RePEc:nbr:nberwo:12648
Template-Type: ReDIF-Paper 1.0
Title: Why do firms hold so much cash? A tax-based explanation
Classification-JEL: F23; F3; G32; G35; H25
Author-Name: C. Fritz Foley
Author-Name: Jay C. Hartzell
Author-Name: Sheridan Titman
Author-Person: pti51
Author-Name: Garry Twite
Note: CF ITI PE
Number: 12649
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12649
File-URL: http://www.nber.org/papers/w12649.pdf
File-Format: application/pdf
Publication-Status: published as Fritz Foley, C. & Hartzell, Jay C. & Titman, Sheridan & Twite, Garry, 2007. "Why do firms hold so much cash? A tax-based explanation," Journal of Financial Economics, Elsevier, vol. 86(3), pages 579-607, December.
Abstract: U.S. corporations hold significant amounts of cash on their balance sheets, and these cash holdings have been justified in the existing empirical literature by transaction costs and precautionary motives. An additional explanation, considered in this study, is that U.S. multinational firms hold cash in their foreign subsidiaries because of the tax costs associated with repatriating foreign income. Consistent with this hypothesis, firms that face higher repatriation tax burdens hold higher levels of cash, hold this cash abroad, and hold this cash in affiliates that trigger high tax costs when repatriating earnings. Estimates indicate that a one standard deviation increase in the tax burden from repatriating foreign income is associated with a 7.9% increase in the ratio of cash to net assets. In addition, certain firms, specifically those that are less financially constrained domestically and those that are more technology intensive, exhibit a higher sensitivity of affiliate cash holdings to repatriation tax burdens.
Handle: RePEc:nbr:nberwo:12649
Template-Type: ReDIF-Paper 1.0
Title: Long Term Risk: An Operator Approach
Classification-JEL: G12
Author-Name: Lars Peter Hansen
Author-Person: pha303
Author-Name: Jose Scheinkman
Author-Person: psc26
Note: AP
Number: 12650
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12650
File-URL: http://www.nber.org/papers/w12650.pdf
File-Format: application/pdf
Publication-Status: published as Lars Peter Hansen & José A. Scheinkman, 2009. "Long-Term Risk: An Operator Approach," Econometrica, Econometric Society, vol. 77(1), pages 177-234, 01.
Abstract: We create an analytical structure that reveals the long run risk-return relationship for nonlinear continuous time Markov environments. We do so by studying an eigenvalue problem associated with a positive eigenfunction for a conveniently chosen family of valuation operators. This family forms a semigroup whose members are indexed by the elapsed time between payoff and valuation dates. We represent the semigroup using a positive process with three components: an exponential term constructed from the eigenvalue, a martingale and a transient eigenfunction term. The eigenvalue encodes the risk adjustment, the martingale alters the probability measure to capture long run approximation, and the eigenfunction gives the long run dependence on the Markov state. We establish existence and uniqueness of the relevant eigenvalue and eigenfunction. By showing how changes in the stochastic growth components of cash flows induce changes in the corresponding eigenvalues and eigenfunctions, we reveal a long-run risk return tradeoff.
Handle: RePEc:nbr:nberwo:12650
Template-Type: ReDIF-Paper 1.0
Title: School Quality and the Black-White Achievement Gap
Classification-JEL: H4; H7; I2; J15; J7; I1
Author-Name: Eric A. Hanushek
Author-Person: pha97
Author-Name: Steven G. Rivkin
Author-Person: pri265
Note: CH ED LS PE EH
Number: 12651
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12651
File-URL: http://www.nber.org/papers/w12651.pdf
File-Format: application/pdf
Abstract: Substantial uncertainty exists about the impact of school quality on the black-white achievement gap. Our results, based on both Texas Schools Project (TSP) administrative data and the Early Childhood Longitudinal Survey (ECLS), differ noticeably from other recent analyses of the black-white achievement gap by providing strong evidence that schools have a substantial effect on the differential. The majority of the expansion of the achievement gap with age occurs between rather than within schools, and specific school and peer factors exert a significant effect on the growth in the achievement gap. Unequal distributions of inexperienced teachers and of racial concentrations in schools can explain all of the increased achievement gap between grades 3 and 8. Moreover, non-random sample attrition for school changers and much higher rates of special education classification and grade retention for blacks appears to lead to a significant understatement of the increase in the achievement gap with age within the ECLS and other data sets.
Handle: RePEc:nbr:nberwo:12651
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Education Quality on Income Growth and Mortality Decline
Classification-JEL: F4; I2; J0; J21; O4; I1
Author-Name: Eliot A. Jamison
Author-Name: Dean T. Jamison
Author-Name: Eric A. Hanushek
Author-Person: pha97
Note: ED EFG ITI LS CH EH
Number: 12652
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12652
File-URL: http://www.nber.org/papers/w12652.pdf
File-Format: application/pdf
Publication-Status: published as Jamison, Eliot A. & Jamison, Dean T. & Hanushek, Eric A., 2007. "The effects of education quality on income growth and mortality decline," Economics of Education Review, Elsevier, vol. 26(6), pages 771-788, December.
Abstract: Previous work shows that higher levels of education quality (as measured by international student achievement tests) increases growth rates of national income. This paper begins by confirming those findings in an analysis involving more countries over more time with additional controls. We then use the panel structure of our data to assess whether the mechanism by which education quality appears to improve per capita income levels is through shifting the level of the production function (probably not), through increasing the impact of an additional year of education (probably not), or through increasing a country's rate of technological progress (very likely). Mortality rates complement income levels as indicators of national well-being and we extend our panel models to show that improved education quality increases the rate of decline in infant mortality. Throughout the analysis, we find a stronger impact of education quality and of years of schooling in open than in closed economies.
Handle: RePEc:nbr:nberwo:12652
Template-Type: ReDIF-Paper 1.0
Title: Political Competitiveness
Classification-JEL: H11; L12; P16
Author-Name: Casey B. Mulligan
Author-Person: pmu64
Author-Name: Kevin K. Tsui
Author-Person: pts36
Note: IO PE POL
Number: 12653
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12653
File-URL: http://www.nber.org/papers/w12653.pdf
File-Format: application/pdf
Abstract: Political competitiveness - which many interpret as the degree of democracy - can be modeled as a monopolistic competition. All regimes are constrained by the threat of "entry," and thereby seek some combination of popular support and political entry barriers. This simple model predicts that many public policies are unrelated to political competitiveness, and that even unchallenged nondemocratic regimes should tax far short of their Laffer curve maximum. Economic sanctions, odious debt repudiation, and other policies designed to punish dictators can have the unintended consequences of increasing oppression and discouraging competition. Since entry barriers are a form of increasing returns, democratic countries (defined according to low entry barriers) are more likely to subdivide and nondemocratic countries are more likely to merge. These and other predictions are consistent with previous empirical findings on comparative public finance, election contests, international conflict, the size of nations, and the Lipset hypothesis. As in the private sector, the number of competitors is not necessarily a good indicator of public sector competitiveness.
Handle: RePEc:nbr:nberwo:12653
Template-Type: ReDIF-Paper 1.0
Title: Inflation Implications of Rising Government Debt
Classification-JEL: E31; E62
Author-Name: Chryssi Giannitsarou
Author-Person: pgi11
Author-Name: Andrew Scott
Author-Person: psc65
Note: IFM ME PE
Number: 12654
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12654
File-URL: http://www.nber.org/papers/w12654.pdf
File-Format: application/pdf
Publication-Status: published as Reichlin, Lucrezia and Kenneth West. NBER International Seminar on Macroeconomics 2006. Chicago and London: University of Chicago Press , 2008.
Publication-Status: published as Inflation Implications of Rising Government Debt, Chryssi Giannitsarou, Andrew Scott. in NBER International Seminar on Macroeconomics 2006, Reichlin and West. 2008
Abstract: The intertemporal budget constraint of the government implies a relationship between a ratio of current liabilities to the primary deficit with future values of inflation, interest rates, GDP and narrow money growth and changes in the primary deficit. This relationship defines a natural measure of fiscal balance and can be used as an accounting identity to examine the channels through which governments achieve fiscal sustainability. We evaluate the ability of this framework to account for the fiscal behaviour of six industrialised nations since 1960. We show how fiscal imbalances are mainly removed through adjustments in the primary deficit (80-100%), with less substantial roles being played by inflation (0-10%) and GDP growth (0-20%). Focusing on the relation between fiscal imbalances and inflation suggests extremely modest interactions. This post WWII evidence suggests that the widely anticipated future increases in fiscal deficits, need not necessarily have a substantial impact on inflation.
Handle: RePEc:nbr:nberwo:12654
Template-Type: ReDIF-Paper 1.0
Title: Is the Eldest Son Different? The Residential Choice of Siblings in Japan
Classification-JEL: D12; D91; J14; Z13
Author-Name: Midori Wakabayashi
Author-Name: Charles Y. Horioka
Author-Person: pho41
Note: AG CH
Number: 12655
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12655
File-URL: http://www.nber.org/papers/w12655.pdf
File-Format: application/pdf
Publication-Status: published as Wakabayashi, Midori & Horioka, Charles Yuji, 2009. "Is the eldest son different? The residential choice of siblings in Japan," Japan and the World Economy, Elsevier, vol. 21(4), pages 337-348, December.
Abstract: In this paper, we analyze the determinants of the living arrangements (coresidence behavior) of elderly parents and their children (whether elderly parents live with their children, and if so, with which child) in Japan using micro data from a household survey. Our results provide support for all four explanations of coresidence behavior but especially for the life cycle and dynasty models (both of which assume selfishly motivated parents) and social norms and traditions: The fact that parents who were self-employed before retirement are more likely to live with their children, the fact that parents are less likely to live with sons who adopt their wife's surname, and the fact that parents are more likely to live with daughters whose husbands adopt their surname constitute evidence in favor of the dynasty model. The fact that parents who were (relatively wealthy) executives before retirement and parents who are homeowners are more likely to live with their children and the fact that parents are more likely to live with less educated children constitute evidence in favor of the selfish life cycle model (or the altruism model). And the fact that parental attitudes toward their children affect their coresidence behavior, the fact that parents are more likely to live with their eldest child if their eldest child is a son, and the fact that parents are most likely to live with their eldest son even if he is not the eldest child constitute evidence in favor of social norms and traditions.
Handle: RePEc:nbr:nberwo:12655
Template-Type: ReDIF-Paper 1.0
Title: Bankruptcy and Collateral in Debt Constrained Markets
Classification-JEL: D50; D52; D61; G13
Author-Name: Timothy J. Kehoe
Author-Person: pke16
Author-Name: David K. Levine
Author-Person: ple26
Note: EFG CF
Number: 12656
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12656
File-URL: http://www.nber.org/papers/w12656.pdf
File-Format: application/pdf
Publication-Status: published as Farmer, Roger E. A. (ed.) Macroeconomics in the Small and the Large: Essays on Microfoundations, Macroeconomic Applications, and Economic History in Honor of Axel Leijonhufvud. Northampton, MA: Edward Elgar Publishing, 2008.
Abstract: Typical models of bankruptcy and collateral rely on incomplete asset markets. In fact, bankruptcy and collateral add contingencies to asset markets. In some models, these contingencies can be used by consumers to achieve the same equilibrium allocations as in models with complete markets. In particular, the equilibrium allocation in the debt constrained model of Kehoe and Levine (2001) can be implemented in a model with bankruptcy and collateral. The equilibrium allocation is constrained efficient. Bankruptcy occurs when consumers receive low income shocks. The implementation of the debt constrained allocation in a model with bankruptcy and collateral is fragile in the sense of Leijonhufvud's "corridor of stability," however: If the environment changes, the equilibrium allocation is no longer constrained efficient.
Handle: RePEc:nbr:nberwo:12656
Template-Type: ReDIF-Paper 1.0
Title: Was the Wealth of Nations Determined in 1000 B.C.?
Classification-JEL: N7; O3
Author-Name: Diego Comin
Author-Person: pco55
Author-Name: William Easterly
Author-Person: pea1
Author-Name: Erick Gong
Note: EFG PR DAE
Number: 12657
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12657
File-URL: http://www.nber.org/papers/w12657.pdf
File-Format: application/pdf
Publication-Status: published as Diego Comin & William Easterly & Erick Gong, 2010. "Was the Wealth of Nations Determined in 1000 BC?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(3), pages 65-97, July.
Abstract: We assemble a dataset on technology adoption in 1000 B.C., 0 A.D., and 1500 A.D. for the predecessors to today's nation states. We find that this very old history of technology adoption is surprisingly significant for today's national development outcomes. Although our strongest results are for 1500 A.D., we find that even technology as old as 1000 BC matters in some plausible specifications.
Handle: RePEc:nbr:nberwo:12657
Template-Type: ReDIF-Paper 1.0
Title: Asset Pricing Models with Conditional Betas and Alphas: The Effects of Data Snooping and Spurious Regression
Classification-JEL: C5; G1
Author-Name: Wayne E. Ferson
Author-Person: pfe32
Author-Name: Sergei Sarkissian
Author-Person: psa127
Author-Name: Timothy Simin
Author-Person: psi273
Note: AP
Number: 12658
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12658
File-URL: http://www.nber.org/papers/w12658.pdf
File-Format: application/pdf
Publication-Status: published as Ferson, Wayne E. & Sarkissian, Sergei & Simin, Timothy, 2008. "Asset Pricing Models with Conditional Betas and Alphas: The Effects of Data Snooping and Spurious Regression," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 43(02), pages 331-353, June.
Abstract: This paper studies the estimation of asset pricing model regressions with conditional alphas and betas, focusing on the joint effects of data snooping and spurious regression. We find that the regressions are reasonably well specified for conditional betas, even in settings where simple predictive regressions are severely biased. However, there are biases in estimates of the conditional alphas. When time-varying alphas are suppressed and only time-varying betas are considered, the betas become baised. Previous studies overstate the significance of time-varying alphas.
Handle: RePEc:nbr:nberwo:12658
Template-Type: ReDIF-Paper 1.0
Title: Simplification and Saving
Classification-JEL: D12; D14; D83; G11
Author-Name: John Beshears
Author-Name: James J. Choi
Author-Name: David Laibson
Author-Person: pla164
Author-Name: Brigitte C. Madrian
Author-Person: pma384
Note: AG LS PE
Number: 12659
Creation-Date: 2006-10
Order-URL: http://www.nber.org/papers/w12659
File-URL: http://www.nber.org/papers/w12659.pdf
File-Format: application/pdf
Publication-Status: published as Beshears, John & Choi, James J. & Laibson, David & Madrian, Brigitte C., 2013. "Simplification and saving," Journal of Economic Behavior & Organization, Elsevier, vol. 95(C), pages 130-145.
Abstract: The daunting complexity of important financial decisions can lead to procrastination. We evaluate a low-cost intervention that substantially simplifies the retirement savings plan participation decision. Individuals received an opportunity to enroll in a retirement savings plan at a pre-selected contribution rate and asset allocation, allowing them to collapse a multidimensional problem into a binary choice between the status quo and the pre-selected alternative. The intervention increases plan enrollment rates by 10 to 20 percentage points. We find that a similar intervention can be used to increase contribution rates among employees who are already participating in a savings plan.
Handle: RePEc:nbr:nberwo:12659
Template-Type: ReDIF-Paper 1.0
Title: Thin-Slice Forecasts of Gubernatorial Elections
Classification-JEL: D72; J45
Author-Name: Daniel J. Benjamin
Author-Person: pbe959
Author-Name: Jesse M. Shapiro
Author-Person: psh70
Note: POL
Number: 12660
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12660
File-URL: http://www.nber.org/papers/w12660.pdf
File-Format: application/pdf
Publication-Status: published as Daniel J Benjamin & Jesse M Shapiro, 2009. "Thin-Slice Forecasts of Gubernatorial Elections," The Review of Economics and Statistics, MIT Press, vol. 91(3), pages 523-536, 02.
Abstract: We showed 10-second, silent video clips of unfamiliar gubernatorial debates to a group of experimental participants and asked them to predict the election outcomes. The participants' predictions explain more than 20 percent of the variation in the actual two-party vote share across the 58 elections in our study, and their importance survives a range of controls, including state fixed effects. In a horse race of alternative forecasting models, participants' visual forecasts significantly outperform economic variables in predicting vote shares, and are comparable in predictive power to a measure of incumbency status. Adding policy information to the video clips by turning on the sound tends, if anything, to worsen participants' accuracy, suggesting that naïveté may be an asset in some forecasting tasks.
Handle: RePEc:nbr:nberwo:12660
Template-Type: ReDIF-Paper 1.0
Title: Anticipating the Stock Market Crash of 1929: The View from the Floor of the Stock Exchange
Classification-JEL: G10; N22
Author-Name: Eugene N. White
Author-Person: pwh5
Note: DAE AP
Number: 12661
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12661
File-URL: http://www.nber.org/papers/w12661.pdf
File-Format: application/pdf
Publication-Status: published as Atack, Jeremy and Larry Neal (eds.) The Origins and Development of Financial Markets and Institutions. New York: Cambridge University Press, 2009.
Abstract: In the months prior to the stock market crash of 1929, the price of a seat on the New York Stock Exchange was abnormally low. Rising stock prices and volume should have driven up seat prices during the boom of 1929; instead there were negative cumulative abnormal returns to seats of approximately 20 percent in the months just before the crash. At the same time, trading nearly ceased in the thin markets for seats on the regional exchanges. Brokers appear thus to have anticipated the October 1929 crash, although investors in the market apparently did not recognize this information.
Handle: RePEc:nbr:nberwo:12661
Template-Type: ReDIF-Paper 1.0
Title: The Historical Origins of U.S. Exchange Market Intervention Policy
Classification-JEL: E42; N10
Author-Name: Michael D. Bordo
Author-Person: pbo243
Author-Name: Owen Humpage
Author-Person: phu403
Author-Name: Anna J. Schwartz
Note: DAE ME IFM
Number: 12662
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12662
File-URL: http://www.nber.org/papers/w12662.pdf
File-Format: application/pdf
Publication-Status: published as Michael D. Bordo & Owen Humpage & Anna J. Schwartz, 2007. "The historical origins of US exchange market intervention policy," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 12(2), pages 109-132.
Abstract: The present set of arrangements for U.S. exchange market intervention policy was largely developed after 1961 during the Bretton Woods era. However, that set had important historical precedents. In this paper we examine precedents to current arrangements, focusing on three historical eras: pre-1934 operations; the Exchange Stabilization Fund operations beginning in 1934; and the Bretton Woods era. We describe operations by the Second Bank of the United States in the pre-Civil War period and then operations by the U.S. Treasury in the post-Civil War period. After establishment of the Federal Reserve in 1914, the New York Fed engaged in isolated exchange market policies in the 1920s and 1930s, first under the direction of the Governor Benjamin Strong until his death in 1928, thereafter, under the direction of his successor, George Harrison. We then examine operations of the Exchange Stabilization Fund that the Gold Reserve Act of 1934 created as a Treasury Department agency. We exploit unique unpublished sources to analyze its dealings with the Banque de France and the Bank of England before and after the Tripartite Agreement. Finally, based on a unique data set of all U.S. Treasury and Federal Reserve foreign-exchange transactions, we discuss U.S. efforts from 1961 through 1972 to defend the dollar's parity under the Bretton Woods system.
Handle: RePEc:nbr:nberwo:12662
Template-Type: ReDIF-Paper 1.0
Title: Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research
Classification-JEL: J23; J38
Author-Name: David Neumark
Author-Person: pne16
Author-Name: William Wascher
Note: LS
Number: 12663
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12663
File-URL: http://www.nber.org/papers/w12663.pdf
File-Format: application/pdf
Publication-Status: published as D. Neumark and W.L. Wascher, Minimum Wages and Employment, Foundations and Trends in Microeconomics, vol. 3, no. 1+2, pp 1-182, 2007.
Abstract: We review the burgeoning literature on the employment effects of minimum wages - in the United States and other countries - that was spurred by the new minimum wage research beginning in the early 1990s. Our review indicates that there is a wide range of existing estimates and, accordingly, a lack of consensus about the overall effects on low-wage employment of an increase in the minimum wage. However, the oft-stated assertion that recent research fails to support the traditional view that the minimum wage reduces the employment of low-wage workers is clearly incorrect. A sizable majority of the studies surveyed in this monograph give a relatively consistent (although not always statistically significant) indication of negative employment effects of minimum wages. In addition, among the papers we view as providing the most credible evidence, almost all point to negative employment effects, both for the United States as well as for many other countries. Two other important conclusions emerge from our review. First, we see very few - if any - studies that provide convincing evidence of positive employment effects of minimum wages, especially from those studies that focus on the broader groups (rather than a narrow industry) for which the competitive model predicts disemployment effects. Second, the studies that focus on the least-skilled groups provide relatively overwhelming evidence of stronger disemployment effects for these groups.
Handle: RePEc:nbr:nberwo:12663
Template-Type: ReDIF-Paper 1.0
Title: Quality-Consistent Estimates of International Returns to Skill
Classification-JEL: I2; J2
Author-Name: Eric A. Hanushek
Author-Person: pha97
Author-Name: Lei Zhang
Author-Person: pzh150
Note: ED LS
Number: 12664
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12664
File-URL: http://www.nber.org/papers/w12664.pdf
File-Format: application/pdf
Publication-Status: published as Hanushek, Eric and Lei Zhang. “Quality-consistent estimates of international schooling and skill gradients." Journal of Human Capital 3, 2 (2009): 107-143.
Abstract: Returns to education are traditionally estimated in a Mincer wage equation from the variation in schooling for a cross-section of individuals of different ages. Because individuals receive education at different time periods, when the quality of their education may not be identical, this method leads to an over- or under-estimation of the return to education of a given quality depending on how education quality evolves over time. This quality issue interacts with ability bias from self-selection into schooling and is particularly problematic when comparing returns across different countries. Using microdata from the International Adult Literacy Survey, we construct quality adjusted measures of schooling attained at different time periods and use these along with international literacy test information to estimate returns to skills for 13 countries. Estimated returns to quality-adjusted education are considerably higher than the traditional estimate for most countries, but these are offset to varying degrees by selection biases on ability. The combined corrections alter significantly the pattern of returns to schooling and skill seen from naive Mincer wage equations.
Handle: RePEc:nbr:nberwo:12664
Template-Type: ReDIF-Paper 1.0
Title: Origins and Consequences of Child Labor Restrictions: A Macroeconomic Perspective
Classification-JEL: E6; H80; I28; I38; J40
Author-Name: Matthias Doepke
Author-Person: pdo8
Author-Name: Dirk Krueger
Author-Person: pkr7
Note: CH ED EFG PE LS
Number: 12665
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12665
File-URL: http://www.nber.org/papers/w12665.pdf
File-Format: application/pdf
Publication-Status: published as Rupert, Peter (ed.) Frontiers in Family Economics. Bingley, UK: Emerald Group Publishing Limited, 2008.
Abstract: In this paper we investigate the positive and normative consequences of child-labor restrictions for economic aggregates and welfare. We argue that even though the laissez-faire equilibrium may be inefficient, there are usually better policies to cure these inefficiencies than the imposition of a child-labor ban. Given this finding, we investigate the potential political-economic reasons behind the emergence and persistence of child-labor legislation. Our investigation is based on a structural dynamic general equilibrium model that provides a coherent and uniform framework for our analysis.
Handle: RePEc:nbr:nberwo:12665
Template-Type: ReDIF-Paper 1.0
Title: On the Origins of "A Monetary History"
Classification-JEL: B22
Author-Name: Hugh Rockoff
Author-Person: pro65
Note: DAE ME EFG
Number: 12666
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12666
File-URL: http://www.nber.org/papers/w12666.pdf
File-Format: application/pdf
Publication-Status: published as Ross B. Emmett, ed., The Elgar companion to the Chicago school of economics. Northampton, MA: Edward Elgar, 2010, 81-113
Abstract: This paper explores some of the scholarship that influenced Milton Friedman and Anna J. Schwartz's "A Monetary History". It shows that the ideas of several Chicago economists -- Henry Schultz, Henry Simons, Lloyd Mints, and Jacob Viner -- left clear marks. It argues, however, that the most important influence may have been Wesley Clair Mitchell and his classic book "Business Cycles" (1913). Mitchell, and the NBER, provided the methodology for "A Monetary History", in particular the emphasis on compiling long time series of monthly data and analyzing the effects of specific variables on the business cycle. A common methodology and the stability of monetary relationships produced similar conclusions about money. Friedman and Schwartz deemphasized Mitchell's "bank-centric" view of the monetary transmission process, but they reinforced Mitchell's conclusion that money had an independent, predictable, and important influence on the business cycle.
Handle: RePEc:nbr:nberwo:12666
Template-Type: ReDIF-Paper 1.0
Title: Do External Interventions Work? The Case of Trade Reform Conditions in IMF Supported Programs
Classification-JEL: F10; F13; F33
Author-Name: Shang-Jin Wei
Author-Person: pwe20
Author-Name: Zhiwei Zhang
Note: IFM ITI
Number: 12667
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12667
File-URL: http://www.nber.org/papers/w12667.pdf
File-Format: application/pdf
Publication-Status: published as Wei, Shang-Jin and Zhiwei Zhang. "Do external interventions work? The case of trade reform conditions in IMF supported programs." Journal of Development Economics 92, 1 (2010): 71-81.
Abstract: Trade reform conditions are common in IMF supported programs. Of the 99 countries that had IMF programs during 1993-2003, 77 had conditions on trade reforms in their programs. Since the WTO has not been found especially effective in promoting trade openness for most developing countries, it is of great interest to see if the IMF has been more effective as it combines carrots and sticks not available to the WTO. Yet, the effectiveness of trade conditions in IMF programs has not been systematically studied. Using a unique dataset, this paper provides such an assessment. It finds that trade conditions are associated with an increase in trade openness on average, but the effect comes mostly from countries that, by some measure, have a high degree of "willingness to reform."
Handle: RePEc:nbr:nberwo:12667
Template-Type: ReDIF-Paper 1.0
Title: A Solution to Two Paradoxes of International Capital Flows
Classification-JEL: F0; F2; F3; F36
Author-Name: Jiandong Ju
Author-Person: pju209
Author-Name: Shang-Jin Wei
Author-Person: pwe20
Note: IFM ITI
Number: 12668
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12668
File-URL: http://www.nber.org/papers/w12668.pdf
File-Format: application/pdf
Publication-Status: published as Jiandong Ju & Shang-Jin Wei, 2014. "A Solution to Two Paradoxes of International Capital Flows," Economic and Political Studies, vol 2(1), pages 3-43.
Abstract: International capital flows from rich to poor countries can be regarded as either too small (the Lucas paradox in a one-sector model) or too large (when compared with the logic of factor price equalization in a two-sector model). To resolve the paradoxes, we introduce a non-neo-classical model which features financial contracts and firm heterogeneity. In our model, free trade in goods does not imply equal returns to capital across countries. In addition, rich patterns of gross capital flows emerge as a function of financial and property rights institutions. A poor country with an inefficient financial system may simultaneously experience an outflow of financial capital but an inflow of FDI, resulting in a small net flow. In comparison, a country with a low capital-to-labor ratio but a high risk of expropriation may experience outflow of financial capital without compensating inflow of FDI.
Handle: RePEc:nbr:nberwo:12668
Template-Type: ReDIF-Paper 1.0
Title: Minerva Unbound: Knowledge Stocks, Knowledge Flows and New Knowledge Production
Classification-JEL: O31; O33; R11; Z13
Author-Name: Lynne G. Zucker
Author-Person: pzu2
Author-Name: Michael R. Darby
Author-Name: Jonathan Furner
Author-Name: Robert C. Liu
Author-Name: Hongyan Ma
Note: ED PR
Number: 12669
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12669
File-URL: http://www.nber.org/papers/w12669.pdf
File-Format: application/pdf
Publication-Status: published as Zucker, Lynne G. & Darby, Michael R. & Furner, Jonathan & Liu, Robert C. & Ma, Hongyan, 2007. "Minerva unbound: Knowledge stocks, knowledge flows and new knowledge production," Research Policy, Elsevier, vol. 36(6), pages 850-863, July.
Abstract: The rate of regional growth of new knowledge in the field of nanotechnology, as measured by counts of articles and patents in the open-access digital library NanoBank, is shown to be positively affected both by the size of existing regional stocks of recorded knowledge in all scientific fields, and the extent to which tacit knowledge in all fields flows between institutions of different organizational types. The level of federal funding has a large, robust impact on both publication and patenting. The data provide further support for the cumulative advantage model of knowledge production, and for ongoing efforts to institutionalize channels through which cross-organizational collaboration may be achieved.
Handle: RePEc:nbr:nberwo:12669
Template-Type: ReDIF-Paper 1.0
Title: A Search-Based Theory of the On-the-Run Phenomenon
Classification-JEL: D8; G1
Author-Name: Dimitri Vayanos
Author-Person: pva498
Author-Name: Pierre-Olivier Weill
Author-Person: pwe79
Note: AP
Number: 12670
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12670
File-URL: http://www.nber.org/papers/w12670.pdf
File-Format: application/pdf
Publication-Status: published as Dimitri Vayanos & Pierre-Olivier Weill, 2008. "A Search-Based Theory of the On-the-Run Phenomenon," Journal of Finance, American Finance Association, vol. 63(3), pages 1361-1398, 06.
Abstract: We propose a model in which assets with identical cash flows can trade at different prices. Infinitely-lived agents can establish long positions in a search spot market, or short positions by first borrowing an asset in a search repo market. We show that short-sellers can endogenously concentrate in one asset because of search externalities and the constraint that they must deliver the asset they borrowed. That asset enjoys greater liquidity, measured by search times, and a higher lending fee ("specialness"). Liquidity and specialness translate into price premia that are consistent with no-arbitrage. We derive closed-form solutions for small frictions, and can generate price differentials in line with observed on-the-run premia.
Handle: RePEc:nbr:nberwo:12670
Template-Type: ReDIF-Paper 1.0
Title: Testing Models of Low-Frequency Variability
Classification-JEL: C22; E32
Author-Name: Ulrich Mueller
Author-Name: Mark W. Watson
Author-Person: pwa582
Note: EFG ME
Number: 12671
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12671
File-URL: http://www.nber.org/papers/w12671.pdf
File-Format: application/pdf
Publication-Status: published as Müller, Ulrich K. and Mark W. Watson. "Testing Models of Low-Frequency Variability." Econometrica 76, 5 (2008): 979-1016.
Abstract: We develop a framework to assess how successfully standard times eries models explain low-frequency variability of a data series. The low-frequency information is extracted by computing a finite number of weighted averages of the original data, where the weights are low-frequency trigonometric series. The properties of these weighted averages are then compared to the asymptotic implications of a number of common time series models. We apply the framework to twenty U.S. macroeconomic and financial time series using frequencies lower than the business cycle.
Handle: RePEc:nbr:nberwo:12671
Template-Type: ReDIF-Paper 1.0
Title: Linear-Quadratic Approximation of Optimal Policy Problems
Classification-JEL: C61; C63
Author-Name: Pierpaolo Benigno
Author-Person: pbe203
Author-Name: Michael Woodford
Author-Person: pwo3
Note: EFG ME
Number: 12672
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12672
File-URL: http://www.nber.org/papers/w12672.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic Theory, Volume 147, Issue 1, January 2012, Pages 1-42
Abstract: We consider a general class of nonlinear optimal policy problems involving forward-looking constraints (such as the Euler equations that are typically present as structural equations in DSGE models), and show that it is possible, under regularity conditions that are straightforward to check, to derive a problem with linear constraints and a quadratic objective that approximates the exact problem. The LQ approximate problem is computationally simple to solve, even in the case of moderately large state spaces and flexibly parameterized disturbance processes, and its solution represents a local linear approximation to the optimal policy for the exact model in the case that stochastic disturbances are small enough. We derive the second-order conditions that must be satisfied in order for the LQ problem to have a solution, and show that these are stronger, in general, than those required for LQ problems without forward-looking constraints. We also show how the same linear approximations to the model structural equations and quadratic approximation to the exact welfare measure can be used to correctly rank alternative simple policy rules, again in the case of small enough shocks.
Handle: RePEc:nbr:nberwo:12672
Template-Type: ReDIF-Paper 1.0
Title: Euros and Zeros: The Common Currency Effect on Trade in New Goods
Classification-JEL: F12; F31; F4; F41
Author-Name: Richard E. Baldwin
Author-Person: pba124
Author-Name: Virginia Di Nino
Note: IFM ITI
Number: 12673
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12673
File-URL: http://www.nber.org/papers/w12673.pdf
File-Format: application/pdf
Abstract: This paper tests whether trade in new goods is partially responsible for the pro-trade effects of the euro and provides a measure of the size of the effect. It works with a very large data set (about 16 million observations) covering twenty countries at the most disaggregated level of trade data that is publicly available. Using predictions from a heterogeneous-firms trade model in a multi-country environment to structure our empirical model, we find that the euro had a positive impact on trade overall. Our findings provide supportive but not conclusive evidence for the new-goods hypothesis. We also determined the pro-trade effect of euro-usage on non-Euroland nations trading with euro-users. We confirmed the absence of trade diversion for non-Eurozone EU members with sizeable overall increase comparable to that of members.
Handle: RePEc:nbr:nberwo:12673
Template-Type: ReDIF-Paper 1.0
Title: The SES Health Gradient on Both Sides of the Atlantic
Classification-JEL: I0
Author-Name: James Banks
Author-Person: pba509
Author-Name: Michael Marmot
Author-Name: Zoe Oldfield
Author-Person: pol30
Author-Name: James P. Smith
Author-Person: psm28
Note: AG EH
Number: 12674
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12674
File-URL: http://www.nber.org/papers/w12674.pdf
File-Format: application/pdf
Publication-Status: published as Wise, David A. (ed.) Developments in the Economics of Aging, A National Bureau of Economic Research Conference Report. Chicago and London: University of Chicago Press, 2009.
Publication-Status: published as The SES Health Gradient on Both Sides of the Atlantic, James Banks, Michael Marmot, Zoe Oldfield, James P. Smith. in Developments in the Economics of Aging, Wise. 2009
Abstract: Looking across many diseases, average health among mature men is much worse in America compared to England. Second, there exists a steep negative health gradient for men in both countries where men at the bottom of the economic hierarchy are in much worse health than those at the top. This health gradient exists whether education, income, or financial wealth is used as the marker of one's SES status. These conclusions are maintained even after controlling for a standard set of behavioral risk factors such as smoking, drinking, and obesity and are equally true using either biological measures of disease or individual self-reports. In contrast to these disease based measures, health of American men appears to be superior to the health of English men when self-reported general health status is used. The contradiction most likely stems instead from different thresholds used by Americans and English when evaluating health status on subjective scales. For the same "objective" health status, Americans are much more likely to say that their health is good than are the English. Finally, feedbacks from new health events to household income are one of the reasons that underlie the strength of the income gradient with health in England.
Handle: RePEc:nbr:nberwo:12674
Template-Type: ReDIF-Paper 1.0
Title: Complex Ownership Structures and Corporate Valuations
Classification-JEL: G3; G32; G34
Author-Name: Luc Laeven
Author-Person: pla174
Author-Name: Ross Levine
Author-Person: ple61
Note: CF IFM
Number: 12675
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12675
File-URL: http://www.nber.org/papers/w12675.pdf
File-Format: application/pdf
Publication-Status: published as Luc Laeven & Ross Levine, 2008. "Complex Ownership Structures and Corporate Valuations," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 21(2), pages 579-604, April.
Abstract: The bulk of corporate governance theory examines the agency problems that arise from two extreme ownership structures: 100 percent small shareholders or one large, controlling owner combined with small shareholders. In this paper, we question the empirical validity of this dichotomy. In fact, one-third of publicly listed firms in Europe have multiple large owners, and the market value of firms with multiple blockholders differs from firms with a single large owner and from widely-held firms. Moreover, the relationship between corporate valuations and the distribution of cash-flow rights across multiple large owners is consistent with the predictions of recent theoretical models.
Handle: RePEc:nbr:nberwo:12675
Template-Type: ReDIF-Paper 1.0
Title: European Pharmaceutical Price Regulation, Firm Profitability, and R&D Spending
Classification-JEL: I11; I18; K2; O34
Author-Name: Joseph H. Golec
Author-Name: John A. Vernon
Note: EH LE
Number: 12676
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12676
File-URL: http://www.nber.org/papers/w12676.pdf
File-Format: application/pdf
Abstract: EU countries closely regulate pharmaceutical prices whereas the U.S. does not. This paper shows how price constraints affect the profitability, stock returns, and R&D spending of EU and U.S. firms. Compared to EU firms, U.S. firms are more profitable, earn higher stock returns, and spend more on research and development (R&D). Some differences have increased over time. In 1986, EU pharmaceutical R&D exceeded U.S. R&D by about 24 percent, but by 2004, EU R&D trailed U.S. R&D by about 15 percent. During these 19 years, U.S. R&D spending grew at a real annual compound rate of 8.8 percent, while EU R&D spending grew at a real 5.4 percent rate. Results show that EU consumers enjoyed much lower pharmaceutical price inflation, however, at a cost of 46 fewer new medicines introduced by EU firms and 1680 fewer EU research jobs.
Handle: RePEc:nbr:nberwo:12676
Template-Type: ReDIF-Paper 1.0
Title: World Technology Usage Lags
Classification-JEL: O33; O47; O57
Author-Name: Diego A. Comin
Author-Person: pco55
Author-Name: Bart Hobijn
Author-Person: pho54
Author-Name: Emilie Rovito
Note: EFG PR
Number: 12677
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12677
File-URL: http://www.nber.org/papers/w12677.pdf
File-Format: application/pdf
Abstract: We present evidence on the differences in the intensity with which ten major technologies are used in 185 countries across the world. We do so by calculating how many years ago these technologies were used in the U.S. at the same intensity as they are used in the countries in our sample. We denote these time lags as technology usage lags and compare them with lags in real GDP per capita. We find that (i) technology usage lags are large, often comparable to lags in real GDP per capita, (ii) usage lags are highly correlated with lags in per-capita income, and (iii) usage lags are highly correlated across technologies. The productivity differentials between the state of the art technologies that we consider and the ones they replace combined with the usage lags that we document, lead us to infer that technology usage disparities might account for a large part of cross-country TFP differentials.
Handle: RePEc:nbr:nberwo:12677
Template-Type: ReDIF-Paper 1.0
Title: Is Terrorism Eroding Agglomeration Economies in Central Business Districts? Lessons from the Office Real Estate Market in Downtown Chicago
Classification-JEL: H56; K42; R33
Author-Name: Alberto Abadie
Author-Person: pab7
Author-Name: Sofia Dermisi
Author-Person: pde240
Note: LS AP
Number: 12678
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12678
File-URL: http://www.nber.org/papers/w12678.pdf
File-Format: application/pdf
Publication-Status: published as Abadie, Alberto & Dermisi, Sofia, 2008. "Is terrorism eroding agglomeration economies in Central Business Districts? Lessons from the office real estate market in downtown Chicago," Journal of Urban Economics, Elsevier, vol. 64(2), pages 451-463, September.
Abstract: The attacks of September 11, 2001, and more recently the Madrid and London downtown train bombings, have raised concerns over both the safety of downtowns and the continuous efforts by terrorists to attack areas of such high density and significance. This article employs building-level data on vacancy rates to investigate the impact of an increased perception of terrorist risk after 9/11 on the office real estate market in downtown Chicago. Chicago provides the perfect laboratory to investigate the effects of an increase in the perceived level of terrorist risk in a major financial district. Unlike in New York, the 9/11 attacks did not restrict directly the available office space in downtown Chicago. Moreover, the 9/11 attacks induced a large increase in the perception of terrorist risk in the Chicago Central Business District, which includes the tallest building in the U.S. (the Sears Tower) and other landmark buildings which are potential targets of large-scale terrorist attacks. Our results show that, following the 9/11 attacks, vacancy rates experienced a much more pronounced increase in the three most distinctive Chicago landmark buildings (the Sears Tower, the Aon Center and the Hancock Center) and their vicinities than in other areas of the city of Chicago. Our results suggest that economic activity in Central Business Districts can be greatly affected by changes in the perceived level of terrorism.
Handle: RePEc:nbr:nberwo:12678
Template-Type: ReDIF-Paper 1.0
Title: Judicial Fact Discretion
Classification-JEL: K13; K4; K41
Author-Name: Nicola Gennaioli
Author-Person: pge95
Author-Name: Andrei Shleifer
Author-Person: psh93
Note: CF LE
Number: 12679
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12679
File-URL: http://www.nber.org/papers/w12679.pdf
File-Format: application/pdf
Publication-Status: published as Nicola Gennaioli & Andrei Shleifer, 2008. "Judicial Fact Discretion," Journal of Legal Studies, University of Chicago Press, vol. 37(1), pages 1-35, 01.
Abstract: Does it matter for the outcome of a trial who the judge is? Legal practitioners typically believe that the answer is yes, yet legal scholarship sees trial judges as predictably enforcing established law. Following Frank (1951), we suggest here that trial judges exercise considerable discretion in finding facts, which explains the practitioners' perspective and other aspects of trials. We identify two motivations for the exercise of such discretion: judicial policy preferences and judges' aversion to reversal on appeal when the law is unsettled. In the latter case, judges exercising fact discretion find the facts that fit the settled precedents, even when they have no policy preferences. In a standard model of a tort, judicial fact discretion leads to setting of damages unpredictable from true facts of the case but predictable from knowledge of judicial preferences, it distorts the number and severity of accidents, and generates welfare losses. It also raises the incidence of litigation relative to settlement, and encourages litigants to take extreme positions in court, especially in new and complex disputes where the law is unsettled.
Handle: RePEc:nbr:nberwo:12679
Template-Type: ReDIF-Paper 1.0
Title: Economic Well-Being at Older Ages: Income- and Consumption-Based Poverty Measures in the HRS
Classification-JEL: I32; J14
Author-Name: Michael D. Hurd
Author-Person: phu137
Author-Name: Susann Rohwedder
Author-Person: pro270
Note: AG
Number: 12680
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12680
File-URL: http://www.nber.org/papers/w12680.pdf
File-Format: application/pdf
Abstract: According to economic theory, well-being or utility depends on consumption. However, at the household level, total consumption is rarely measured because its collection requires a great deal of survey time. As a result income has been widely used to assess economic well-being and poverty rates. Yet, because households can use wealth to consume more than income, an income-based measure of well-being could yield misleading results for many households, especially at older ages. We use data from the Health and Retirement Study to find income-based poverty rates which we compare with poverty rates as measured in the Current Population Survey. We use HRS consumption data to calculate a consumption-based poverty rate and study the relationship between income-based and consumption-based poverty measures. We find that the poverty rate based on consumption is lower than the income-based poverty rate. Particularly noteworthy is the much lower rate among the oldest single persons such as widows. The explanation for the difference is the ability to consume out of wealth.
Handle: RePEc:nbr:nberwo:12680
Template-Type: ReDIF-Paper 1.0
Title: Health Insurance as a Two-Part Pricing Contract
Classification-JEL: D42; I11
Author-Name: Darius Lakdawalla
Author-Person: pla295
Author-Name: Neeraj Sood
Author-Person: pso62
Note: EH IO
Number: 12681
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12681
File-URL: http://www.nber.org/papers/w12681.pdf
File-Format: application/pdf
Publication-Status: published as Lakdawalla, Darius & Sood, Neeraj, 2013. "Health insurance as a two-part pricing contract," Journal of Public Economics, Elsevier, vol. 102(C), pages 1-12.
Abstract: Monopolies appear throughout health care markets, as a result of patents, limits to the extent of the market, or the presence of unique inputs and skills. In the health care industry, however, the deadweight costs of monopoly may be small or even absent. Health insurance, frequently implemented as an ex ante premium coupled with an ex post co-payment per unit consumed, effectively operates as a two-part pricing contract. This allows monopolists to extract consumer surplus without inefficiently constraining quantity. This view of health insurance contracts has several implications: (1) Low ex post copayments to insured consumers substantially reduce deadweight losses from medical care monopolies -- we calculate, for instance, that the presence of health insurance lowers monopoly loss in the US pharmaceutical market by 82 percent; (2) Price regulation or break-up of health care monopolies may be inferior to laissez-faire or simple redistribution of monopoly profits; and (3) Promoting efficiency in the health insurance market can reduce static losses in the goods market while improving the dynamic efficiency of innovation.
Handle: RePEc:nbr:nberwo:12681
Template-Type: ReDIF-Paper 1.0
Title: Price Impacts of Deals and Predictability of the Exchange Rate Movements
Classification-JEL: F31; F33; G15
Author-Name: Takatoshi Ito
Author-Name: Yuko Hashimoto
Note: IFM AP
Number: 12682
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12682
File-URL: http://www.nber.org/papers/w12682.pdf
File-Format: application/pdf
Publication-Status: published as Ito, T. and A. Rose (eds.) International Financial Issues in the Pacific Rim, NBER East Asia Seminar on Economics, Volume 17. Chicago: University of Chicago Press, 2008.
Publication-Status: published as Price Impacts of Deals and Predictability of the Exchange Rate Movements, Takatoshi Ito, Yuko Hashimoto. in International Financial Issues in the Pacific Rim: Global Imbalances, Financial Liberalization, and Exchange Rate Policy, Ito and Rose. 2008
Abstract: This paper examines the price impact and the predictability of the exchange rate movement using the transaction data recorded in the electronic broking system of the spot foreign exchange market. The number of actual deals at the ask (or bid side) for a specified time interval may be regarded as "order flows" to buy (or sell) in Richard Lyons' work. First, the contemporaneous impact of order flows on the quote and deal prices are analyzed. Second, the price predictability is examined. Our forecasting equations of the exchange rate for the next X minutes (X=1, 5, 15, 30) show that coefficients are significantly different from zero in both 5-min and 1-min forecast horizons, but the significance disappears in the 30-minute interval. The t-statistics become larger as the prediction window becomes shorter. Price impacts of deals at one side of the market are significant but short-lived. Market participants, if they can observe and analyze all the transactions information in real time, may be able to extract information to predict the price movements in the following next few minutes.
Handle: RePEc:nbr:nberwo:12682
Template-Type: ReDIF-Paper 1.0
Title: The Growing Allocative Inefficiency of the U.S. Higher Education Sector
Classification-JEL: J3; L3; O3
Author-Name: James D. Adams
Author-Person: pad11
Author-Name: J. Roger Clemmons
Note: PR
Number: 12683
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12683
File-URL: http://www.nber.org/papers/w12683.pdf
File-Format: application/pdf
Publication-Status: published as Freeman, Richard B. and Daniel Goroff (eds.) Science and Engineering Careers in the U.S. Chicago: University of Chicago Press for NBER, 2009.
Publication-Status: published as The Growing Allocative Inefficiency of the US Higher Education Sector, James D. Adams, J. Roger Clemmons. in Science and Engineering Careers in the United States: An Analysis of Markets and Employment, Freeman and Goroff. 2009
Abstract: This paper presents new evidence on research and teaching productivity in universities using a panel of 102 top U.S. schools during 1981-1999. Faculty employment grows at 0.6 percent per year, compared with growth of 4.9 percent in industrial researchers. Productivity growth per researcher is 1.4-6.7 percent and is higher in private universities. Productivity growth per teacher is 0.8-1.1 percent and is higher in public universities. Growth in research productivity within universities exceeds overall growth, because the research share grows in universities where productivity growth is less. This finding suggests that allocative efficiency of U.S. higher education declined during the late 20th century. R&D stock, endowment, and post-docs increase research productivity in universities, the effect of nonfederal R&D is less, and the returns to research are diminishing. Since the nonfederal R&D share grows and is higher in public schools, this may explain the rising inefficiency. Decreasing returns in research but not teaching suggest that most differences in university size are due to teaching.
Handle: RePEc:nbr:nberwo:12683
Template-Type: ReDIF-Paper 1.0
Title: Optimal exchange rate regimes: Turning Mundell-Fleming's dictum on its head
Classification-JEL: F41
Author-Name: Amartya Lahiri
Author-Person: pla150
Author-Name: Rajesh Singh
Author-Person: psi171
Author-Name: Carlos A. Vegh
Author-Person: pve34
Note: IFM
Number: 12684
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12684
File-URL: http://www.nber.org/papers/w12684.pdf
File-Format: application/pdf
Publication-Status: published as Amartya Lahiri & Rajesh Singh & Carlos A. Vegh, 2007. "Optimal Exchange Rate Regimes: Turning Mundell-Fleming's Dictum on its Head," Panoeconomicus, Faculty of economics, Department of Economics, vol. 54(3), pages 249-270, September.
Abstract: A famous dictum in open economy macroeconomics -- which obtains in the Mundell-Fleming world of sticky prices and perfect capital mobility -- holds that the choice of the optimal exchange rate regime should depend on the type of shock hitting the economy. If shocks are predominantly real, a flexible exchange rate is optimal, whereas if shocks are mainly monetary, a fixed exchange rate is optimal. There is no obvious reason, however, why this paradigm should be the most appropriate one to think about this important issue. Arguably, asset market frictions may be as pervasive as goods market frictions (particularly in developing countries). In this light, we show that in a model with flexible prices and asset market frictions, the Mundell-Fleming dictum is turned on its head: flexible rates are optimal in the presence of monetary shocks, whereas fixed rates are optimal in response to real shocks. We thus conclude that the choice of an optimal exchange rate regime should depend not only on the type of shock (real versus monetary) but also on the type of friction (goods versus asset market).
Handle: RePEc:nbr:nberwo:12684
Template-Type: ReDIF-Paper 1.0
Title: The Optimal Income Taxation of Couples
Classification-JEL: H21
Author-Name: Henrik Jacobsen Kleven
Author-Name: Claus Thustrup Kreiner
Author-Person: pkr231
Author-Name: Emmanuel Saez
Author-Person: psa117
Note: PE
Number: 12685
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12685
File-URL: http://www.nber.org/papers/w12685.pdf
File-Format: application/pdf
Publication-Status: published as Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Emmanuel Saez, 2009. "The Optimal Income Taxation of Couples," Econometrica, Econometric Society, vol. 77(2), pages 537-560, 03.
Abstract: This paper analyzes the optimal income tax treatment of couples. Each couple is modelled as a single rational economic agent supplying labor along two dimensions: primary and secondary earnings. We consider fully general joint income tax systems. Separate taxation is never optimal if social welfare depends on total couple incomes. In a model where secondary earners make only a binary work decision (work or not work), we demonstrate that the marginal tax rate of the primary earner is lower when the spouse works. As a result, the tax distortion on the secondary earner decreases with the earnings of the primary earner and actually vanishes to zero asymptotically. Such negative jointness is optimal because redistribution from two-earner toward one-earner couples is more valuable when primary earner income is lower. We also consider a model where both spouses display intensive labor supply responses. In that context, we show that, starting from the optimal separable tax schedules, introducing some negative jointness is always desirable. Numerical simulations suggest that, in that model, it is also optimal for the marginal tax rate on one earner to decrease with the earnings of his/her spouse. We argue that many actual redistribution systems, featuring family-based transfers combined with individually-based taxes, generate schedules with negative jointness.
Handle: RePEc:nbr:nberwo:12685
Template-Type: ReDIF-Paper 1.0
Title: Health Shocks, Village Elections, and Long-Term Income: Evidence from Rural China
Classification-JEL: I12; O15; Z13
Author-Name: Li Gan
Author-Person: pga94
Author-Name: Lixin Colin Xu
Author-Name: Yang Yao
Note: EH LS PE
Number: 12686
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12686
File-URL: http://www.nber.org/papers/w12686.pdf
File-Format: application/pdf
Abstract: Using a sample of households in 48 Chinese villages for the period 1986-2002, this paper studies the dynamic effects of major health shocks on household income and the role played by village elections in mitigating these effects. Our results show that in the first 15 years after a shock, a shock-hit household on average falls short of its normal income trajectory by 11.8% and its recovery would take 19 years. Based on the premise that shock-hit families impose negative externalities on richer families by borrowing from them, our political economy model predicts that the outcome of village elections would differ from that of a standard median voter model in that the elected village leaders tend to adopt pro-poor policies. Our empirical study finds that villages are more likely to establish a healthcare plan after the election is introduced. In addition, village elections reduce the probability of a household to borrow by 16.7% when one of its working adults is seriously sick. As a result, they reduce more than half of the negative effect of a health shock on household income.
Handle: RePEc:nbr:nberwo:12686
Template-Type: ReDIF-Paper 1.0
Title: Has Globalization Changed Inflation?
Classification-JEL: E31
Author-Name: Laurence M. Ball
Author-Person: pba605
Note: EFG ME
Number: 12687
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12687
File-URL: http://www.nber.org/papers/w12687.pdf
File-Format: application/pdf
Abstract: Many observers suggest that the "globalization" of the U.S. economy has changed the behavior of inflation. This essay examines this idea, focusing on several questions: (1) Has globalization reduced the long-run level of inflation? (2) Has it affected the structure of inflation dynamics, as captured by the Phillips curve? (3) Has it contributed substantial negative shocks to the inflation process? The answers to these questions are no, no, and no.
Handle: RePEc:nbr:nberwo:12687
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Subjective Survival Probabilities on Retirement and Wealth in the United States
Classification-JEL: D1; I1; J1; J22
Author-Name: David E. Bloom
Author-Person: pbl79
Author-Name: David Canning
Author-Person: pca340
Author-Name: Michael Moore
Author-Person: pmo284
Author-Name: Younghwan Song
Note: AG EH LS PE
Number: 12688
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12688
File-URL: http://www.nber.org/papers/w12688.pdf
File-Format: application/pdf
Publication-Status: published as Clark, Robert, Naohiro Ogawa, and Andrew Mason (eds.) "Population Aging, Intergenerational Transfers and the Macroeconomy." Cheltenham, U.K. and Northampton, MA: Elgar, 2007.
Abstract: We explore the proposition that expected longevity affects retirement decisions and accumulated wealth using micro data drawn from the Health and Retirement Study for the United States. We use data on a person's subjective probability of survival to age 75 as a proxy for their prospective lifespan. In order to control for the presence of measurement error and focal points in responses, as well as reverse causality, we instrument subjective survival probabilities using information on current age, or age at death, of the respondent's parents. Our estimates indicate that increased subjective probabilities of survival result in increased household wealth among couples, with no effect on the length of the working life. These findings are consistent with the view that retirement decisions are driven by institutional constraints and incentives and that a longer expected lifespan leads to increased wealth accumulation.
Handle: RePEc:nbr:nberwo:12688
Template-Type: ReDIF-Paper 1.0
Title: AIDS Treatment and Intrahousehold Resource Allocations: Children's Nutrition and Schooling in Kenya
Classification-JEL: I1; I2; O12; O15
Author-Name: Joshua S. Graff Zivin
Author-Person: pgr314
Author-Name: Harsha Thirumurthy
Author-Person: pth85
Author-Name: Markus Goldstein
Author-Person: pgo285
Note: CH EH
Number: 12689
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12689
File-URL: http://www.nber.org/papers/w12689.pdf
File-Format: application/pdf
Publication-Status: published as Zivin, Joshua Graff & Thirumurthy, Harsha & Goldstein, Markus, 2009. "AIDS treatment and intrahousehold resource allocation: Children's nutrition and schooling in Kenya," Journal of Public Economics, Elsevier, vol. 93(7-8), pages 1008-1015, August.
Abstract: The provision of life-saving antiretroviral (ARV) treatment has emerged as a key component of the global response to HIV/AIDS, but very little is known about the impact of this intervention on the welfare of children in the households of treated persons. We estimate the impact of ARV treatment on children's schooling and nutrition outcomes using longitudinal household survey data collected in collaboration with a treatment program in western Kenya. We find that children's weekly hours of school attendance increase by over 20 percent within six months after treatment is initiated for the adult household member. For boys in treatment households, these increases closely follow their reduced market labor supply. Similarly, young children's short-term nutritional status--as measured by their weight-for-height Z-score--also improves dramatically. We argue that these treatment effects will be considerably larger when compared to the counterfactual scenario of no ARV treatment. The results provide evidence on how intrahousehold resource allocation is altered in response to significant health improvements. Since the improvements in children's schooling and nutrition at these critical early ages will affect their socio-economic outcomes in adulthood, the widespread provision of ARV treatment is likely to generate significant long-run macroeconomic benefits.
Handle: RePEc:nbr:nberwo:12689
Template-Type: ReDIF-Paper 1.0
Title: Vector Multiplicative Error Models: Representation and Inference
Classification-JEL: C01
Author-Name: Fabrizio Cipollini
Author-Name: Robert F. Engle
Author-Name: Giampiero M. Gallo
Author-Person: pga48
Note: AP
Number: 12690
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12690
File-URL: http://www.nber.org/papers/w12690.pdf
File-Format: application/pdf
Abstract: The Multiplicative Error Model introduced by Engle (2002) for positive valued processes is specified as the product of a (conditionally autoregressive) scale factor and an innovation process with positive support. In this paper we propose a multi-variate extension of such a model, by taking into consideration the possibility that the vector innovation process be contemporaneously correlated. The estimation procedure is hindered by the lack of probability density functions for multivariate positive valued random variables. We suggest the use of copulafunctions and of estimating equations to jointly estimate the parameters of the scale factors and of the correlations of the innovation processes. Empirical applications on volatility indicators are used to illustrate the gains over the equation by equation procedure.
Handle: RePEc:nbr:nberwo:12690
Template-Type: ReDIF-Paper 1.0
Title: Does Science Promote Women? Evidence from Academia 1973-2001
Classification-JEL: J4; J71
Author-Name: Donna K. Ginther
Author-Person: pgi410
Author-Name: Shulamit Kahn
Author-Person: pka260
Note: ED LS
Number: 12691
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12691
File-URL: http://www.nber.org/papers/w12691.pdf
File-Format: application/pdf
Publication-Status: published as Does Science Promote Women? Evidence from Academia 1973-2001, Donna K. Ginther, Shulamit Kahn. in Science and Engineering Careers in the United States: An Analysis of Markets and Employment, Freeman and Goroff. 2009
Abstract: Many studies have shown that women are under-represented in tenured ranks in the sciences. We evaluate whether gender differences in the likelihood of obtaining a tenure track job, promotion to tenure, and promotion to full professor explain these facts using the 1973-2001 Survey of Doctorate Recipients. We find that women are less likely to take tenure track positions in science, but the gender gap is entirely explained by fertility decisions. We find that in science overall, there is no gender difference in promotion to tenure or full professor after controlling for demographic, family, employer and productivity covariates and that in many cases, there is no gender difference in promotion to tenure or full professor even without controlling for covariates. However, family characteristics have different impacts on women's and men's promotion probabilities. Single women do better at each stage than single men, although this might be due to selection. Children make it less likely that women in science will advance up the academic job ladder beyond their early post-doctorate years, while both marriage and children increase men's likelihood of advancing.
Handle: RePEc:nbr:nberwo:12691
Template-Type: ReDIF-Paper 1.0
Title: International Knowledge Flows: Evidence from an Inventor-Firm Matched Data Set
Classification-JEL: J62; O31; O33
Author-Name: Jinyoung Kim
Author-Person: pki140
Author-Name: Sangjoon John Lee
Author-Name: Gerald Marschke
Author-Person: pma293
Note: PR ITI
Number: 12692
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12692
File-URL: http://www.nber.org/papers/w12692.pdf
File-Format: application/pdf
Publication-Status: published as Freeman, Richard and Daniel Goroff (eds.) Science and Engineering Careers in the United States: An Analysis of Markets and Employment. Chicago and London: NBER and The University of Chicago Press, 2009.
Publication-Status: published as International Knowledge Flows: Evidence from an Inventor-Firm Matched Data Set, Jinyoung Kim, Sangjoon John Lee, Gerald Marschke. in Science and Engineering Careers in the United States: An Analysis of Markets and Employment, Freeman and Goroff. 2009
Abstract: We describe the construction of a panel data set from the U.S. patent data that contains measures of inventors' life-cycle R&D productivity--patents and patent citations. We match the data set to information on the U.S. pharmaceutical and semiconductor firms for whom they work. In this paper we use these data to examine the role of research personnel as a pathway for the diffusion of ideas from foreign countries to U.S. innovators. In particular, we find in recent years an increase in the extent that U.S. innovating firms collaborate with or employ researchers with foreign experience. This increase appears to work primarily through an increase in U.S. firms' employment of foreign-residing researchers; the fraction of research-active U.S. residents with foreign research experience appears to be falling, suggesting that U.S. pharmaceutical and semiconductor firms are increasingly locating operations in foreign countries to employ such researchers, as opposed to such researchers immigrating to the U.S. to work. In addition, we investigate which U.S. firms conducting R&D build upon innovations originating abroad. We find that employing or collaborating with researchers who have research experience abroad seems to facilitate the use of output of non-U.S. R&D. We also find that in the semiconductor industry smaller and older firms, and in the pharmaceutical industry, younger firms are more likely to access foreign R&D output.
Handle: RePEc:nbr:nberwo:12692
Template-Type: ReDIF-Paper 1.0
Title: Educational Mismatch Among Ph.D.s: Determinants and Consequences
Classification-JEL: J24; J28; J44
Author-Name: Keith A. Bender
Author-Person: pbe317
Author-Name: John S. Heywood
Author-Person: phe163
Note: ED
Number: 12693
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12693
File-URL: http://www.nber.org/papers/w12693.pdf
File-Format: application/pdf
Publication-Status: published as Keith A. Bender & John S. Heywood, 2009. "Educational Mismatch among Ph.D.s: Determinants and Consequences," NBER Chapters, in: Science and Engineering Careers in the United States: An Analysis of Markets and Employment, pages 229-255 National Bureau of Economic Research, Inc.
Abstract: Using the Survey of Doctoral Recipients, the magnitude and consequences of job mismatch are estimated for Ph.D.s in science. Approximately one-sixth of academics and nearly one-half of nonacademics report some degree of mismatch. The influence of job mismatch is estimated for three job outcomes: earnings, job satisfaction and turnover. Surprisingly large and robust influences emerge. Mismatch is associated with substantially lower earnings, lower job satisfaction and a higher rate of turnover. These results persist across a variety of specifications and hold for both academics and nonacademics. Estimates of the determinants of mismatch indicate that older workers and those in rapidly changing disciplines are more likely to be mismatched and there is a suggestion that women are more likely to be mismatched.
Handle: RePEc:nbr:nberwo:12693
Template-Type: ReDIF-Paper 1.0
Title: The Evolution of Work
Classification-JEL: J24; L23; O31; O33
Author-Name: Markus Mobius
Author-Person: pmo367
Author-Name: Raphael Schoenle
Author-Person: psc432
Note: IO LS PR
Number: 12694
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12694
File-URL: http://www.nber.org/papers/w12694.pdf
File-Format: application/pdf
Abstract: The division of labor first increased during industrialization and then decreased again after 1970 as job roles have expanded. We explain these trends in the organization of work through a simple model where (a) machines require standardization to exploit economies of scale and (b) more customized products are subject to trends and fashions which make production tasks less predictable and a strict division of labor impractical. At the onset of industrialization, the market supports only a small number of generic varieties which can be mass-produced under a strict division of labor. Thanks to productivity growth, niche markets gradually expand, producers eventually move into customized production and the division of labor decreases again. The model predicts capital-skill substitutability during industrialization and capital skill complementarity in the maturing industrial economy. Moreover, conventional calculations of the factor content of trade underestimate the impact of globalization because they do not take into account changes in product market competition induced by trade. We test our model by exploiting the time-lags in the introduction of bar-coding in three-digit SIC manufacturing industries in the US. We find that both increases in investments in computers and bar-coding have led to skill-upgrading. However, consistent with our model bar-coding has affected mainly the center of the skill distribution by shifting demand away from the high-school educated to the less-than-college educated.
Handle: RePEc:nbr:nberwo:12694
Template-Type: ReDIF-Paper 1.0
Title: The Economics of Conflicts of Interest in Financial Institutions
Classification-JEL: G14; G21; G24; G28
Author-Name: Hamid Mehran
Author-Person: pme276
Author-Name: Rene M. Stulz
Note: CF
Number: 12695
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12695
File-URL: http://www.nber.org/papers/w12695.pdf
File-Format: application/pdf
Publication-Status: published as Mehran, Hamid & Stulz, Rene M., 2007. "The economics of conflicts of interest in financial institutions," Journal of Financial Economics, Elsevier, vol. 85(2), pages 267-296, August.
Abstract: A conflict of interest exists when a party to a transaction could potentially make a gain from taking actions that are detrimental to the other party in the transaction. This paper examines the economics of conflicts of interest in financial institutions and reviews the growing empirical literature (mostly focused on analysts) on the economic implications of these conflicts. Economic analysis shows that, although conflicts of interest are omnipresent when contracting is costly and parties are imperfectly informed, there are important factors that mitigate their impact and, strikingly, it is possible for customers of financial institutions to benefit from the existence of such conflicts. The empirical literature reaches conclusions that differ across types of conflicts of interest, but overall these conclusions are more ambivalent and certainly more benign than the conclusions drawn by journalists and politicians from mostly anecdotal evidence. Though much has been made of conflicts of interest arising from investment banking activities, there is no consensus in the empirical literature supporting the view that conflicts resulting from these activities had a systematic adverse impact on customers of financial institutions.
Handle: RePEc:nbr:nberwo:12695
Template-Type: ReDIF-Paper 1.0
Title: Americans' Dependency on Social Security
Classification-JEL: H22; H55
Author-Name: Laurence J. Kotlikoff
Author-Person: pko44
Author-Name: Ben Marx
Author-Name: Pietro Rizza
Note: AG
Number: 12696
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12696
File-URL: http://www.nber.org/papers/w12696.pdf
File-Format: application/pdf
Abstract: This paper determines the standard of living reductions that young, middle aged, and older households would experience were the U.S. government to cut Social Security benefits (but not taxes) to deal with its well documented (see Gokhale and Smetters, 2005) long-term fiscal crisis. To determine pre- and post-retirement living standards in the absence and presence of Social Security benefit cuts the paper relies on ESPlanner, a financial planning software program. ESPlanner calculates a household's highest sustainable living standard taking into account the household's economic resources including its claims to future Social Security benefits. The program also incorporates borrowing/liquidity constraints that limit households' abilities to smooth their living standards over their life cycles. The analysis considers both stylized single and married households of different ages and resource levels as well as actual households sampled from the 2004 Federal Reserve Survey of Consumer Finances (SCF). The extent of current and future living standard reductions in response to announcements of future Social Security benefit cuts depends critically on the age of the household, when the cuts are announced, the size of the cuts, the income of the household, and the degree to which the household is liquidity constrained. For our stylized households on the brink of retirement the complete elimination of Social Security benefits would entail retirement living standards reductions ranging from roughly one third to one hundred percent depending on the household's income. Our SCF findings also point to a strong dependency on Social Security. Indeed, 41 percent of older SCF couples and 33 percent of SCF singles would experience a living standard reduction of 90 percent or more were Social Security benefits eliminated. A surprising finding is the major dependency of very high-income households on Social Security. Take the highest earning couple in our stylized sample. This couple earns $500,000 per year from age 30 through age 64 when it retires. It enters retirement with over $2.3 million in assets. But given the length of its potential retirement, the modest real return it can safely earn on its assets, its off-the-top housing expenses, and its tax payments, this household is highly dependent on Social Security benefits, notwithstanding their taxable status. Indeed, were this household denied all its Social Security benefits on the eve of its retirement, it would suffer a 35.6 percent reduction in its living standard throughout retirement.
Handle: RePEc:nbr:nberwo:12696
Template-Type: ReDIF-Paper 1.0
Title: Is the International Diversification Potential Diminishing? Foreign Equity Inside and Outside the US
Classification-JEL: F3; F4; G11; G15
Author-Name: Karen K. Lewis
Author-Person: ple1119
Note: AP IFM
Number: 12697
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12697
File-URL: http://www.nber.org/papers/w12697.pdf
File-Format: application/pdf
Abstract: Over the past two decades international markets have become more open, leading to a common perception that global capital markets have become more integrated. In this paper, I ask what this integration and its resulting higher correlation would imply about the diversification potential across countries. For this purpose, I examine two basic groups of international returns: (1) foreign market indices and (2) foreign stocks that are listed and traded in the US. I examine the first group since this is the standard approach in the international diversification literature, while I study the second group since some have argued that US-listed foreign stocks are the more natural diversification vehicle (Errunza et al (1999)). In order to consider the possibility of shifts in the covariance of returns over time, I extend the break-date estimation approach of Bai and Perron (1998) to test for and estimate possible break dates across returns along with their confidence intervals. I find that the covariances among country stock markets have indeed shifted over time for a majority of the countries. But in contrast to the common perception that markets have become significantly more integrated over time, the covariance between foreign markets and the US market have increased only slightly from the beginning to the end of the last twenty years. At the same time, the foreign stocks in the US markets have become significantly more correlated with the US market. To consider the economic significance of these parameter changes, I use the estimates to examine the implications for a simple portfolio decision model in which a US investor could choose between US and foreign portfolios. When restricted to holding foreign assets in the form of market indices, I find that the optimal allocation in foreign market indices actually increases over time. However, the optimal allocation into foreign stocks decreases when the investor is allowed to hold foreign stocks that are traded in the US. Also, the minimum variance attainable by the foreign portfolios has increased over time. These results suggest that the benefits to diversification have declined both for stocks inside and outside the US.
Handle: RePEc:nbr:nberwo:12697
Template-Type: ReDIF-Paper 1.0
Title: Capital Account Liberalization: Theory, Evidence, and Speculation
Classification-JEL: E6; F3; F4; G15; O16
Author-Name: Peter Blair Henry
Author-Person: phe166
Note: AP CF EFG IFM ITI ME POL
Number: 12698
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12698
File-URL: http://www.nber.org/papers/w12698.pdf
File-Format: application/pdf
Publication-Status: published as Peter Blair Henry, 2007. "Capital Account Liberalization: Theory, Evidence, and Speculation," Journal of Economic Literature, American Economic Association, vol. 45(4), pages 887-935, December.
Abstract: Writings on the macroeconomic impact of capital account liberalization find few, if any, robust effects of liberalization on real variables. In contrast to the prevailing wisdom, I argue that the textbook theory of liberalization holds up quite well to a critical reading of this literature. The lion's share of papers that find no effect of liberalization on real variables tell us nothing about the empirical validity of the theory, because they do not really test it. This paper explains why it is that most studies do not really address the theory they set out to test. It also discusses what is necessary to test the theory and examines papers that have done so. Studies that actually test the theory show that liberalization has significant effects on the cost of capital, investment, and economic growth.
Handle: RePEc:nbr:nberwo:12698
Template-Type: ReDIF-Paper 1.0
Title: Pricing-to-Market, the Interest-Rate Rule, and the Exchange Rate
Classification-JEL: F41; F42
Author-Name: Maurice Obstfeld
Author-Person: pob13
Note: IFM ITI
Number: 12699
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12699
File-URL: http://www.nber.org/papers/w12699.pdf
File-Format: application/pdf
Publication-Status: published as Reinhart, Carmen, Carlos Vegh, and Andres Velasco (eds.) Money, Crises, and Transition: Essays in Honor of Guillermo A. Calvo. Cambridge, MA: MIT Press, 2008.
Abstract: Even when the exchange-rate plays no expenditure-switching role, countries may wish to have flexible exchange rates in order to free the domestic interest rate as a stabilization tool. In a setting with nontraded goods, exchange-rate movements may also enhance international risk sharing.
Handle: RePEc:nbr:nberwo:12699
Template-Type: ReDIF-Paper 1.0
Title: Instruments of Commerce and Knowledge: Probe Microscopy, 1980-2000
Classification-JEL: N8; O17; O3; O31; O33; Z1; Z13
Author-Name: Cyrus C. M. Mody
Note: ED LS PR
Number: 12700
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12700
File-URL: http://www.nber.org/papers/w12700.pdf
File-Format: application/pdf
Publication-Status: published as Freeman, Richard B. and Daniel L. Goroff (ed.) Science and Engineering Careers in the United States: An Analysis of Markets and Employment. Chicago and London: University of Chicago Press, 2009.
Publication-Status: published as Instruments of Commerce and Knowledge: Probe Microscopy, 1980-2000, Cyrus C. M. Mody. in Science and Engineering Careers in the United States: An Analysis of Markets and Employment, Freeman and Goroff. 2009
Abstract: Longstanding debates about the role of the university in national culture and the global economy have entered a new phase in the past decade in most industrialized, and several industrializing, countries. One important focus of this debate is corporate involvement in academic scientific research. Proponents of the academic capitalism say that corporate involvement makes the university leaner, more agile, better able to respond to the needs of the day. Critics say that corporate involvement leaves society without the independent, critical voices traditionally lodged in universities. I argue that a science and technology studies perspective, using case studies of research communities, can push this debate in directions envisioned by neither proponents nor critics. I use the development and commercialization of the scanning tunneling microscope and the atomic force microscope as an example of how research communities continually redraw the line between corporate and academic institutions.
Handle: RePEc:nbr:nberwo:12700
Template-Type: ReDIF-Paper 1.0
Title: Bequest and Tax Planning: Evidence From Estate Tax Returns
Classification-JEL: D12; D31; D91; H2
Author-Name: Wojciech Kopczuk
Author-Person: pko20
Note: AG PE
Number: 12701
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12701
File-URL: http://www.nber.org/papers/w12701.pdf
File-Format: application/pdf
Publication-Status: Published in Quarterly Journal of Economics, 2007, 122(4), 1801-1854
Abstract: I study bequest and wealth accumulation behavior of the wealthy (subject to the estate tax) shortly before death. The onset of a terminal illness leads to a very significant reduction in the value of estates reported on tax returns - 15 to 20% with illness lasting "months to years" and about 5 to 10% in case of illness reported as lasting "days to weeks". I provide evidence suggesting that these findings cannot be explained by real shocks to net worth such as due to medical expenses or lost income, but instead reflect "deathbed" estate planning. The results suggest that wealthy individuals actively care about disposition of their estates, but that this preference is dominated by the desire to hold on to their wealth while alive.
Handle: RePEc:nbr:nberwo:12701
Template-Type: ReDIF-Paper 1.0
Title: Repugnance as a Constraint on Markets
Classification-JEL: A10; C78; D62; D63; I11
Author-Name: Alvin E. Roth
Author-Person: pro40
Note: EH LE
Number: 12702
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12702
File-URL: http://www.nber.org/papers/w12702.pdf
File-Format: application/pdf
Publication-Status: published as Alvin E. Roth, 2007. "Repugnance as a Constraint on Markets," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 37-58, Summer.
Abstract: This essay examines how repugnance sometimes constrains what transactions and markets we see. When my colleagues and I have helped design markets and allocation procedures, we have often found that distaste for certain kinds of transactions is a real constraint, every bit as real as the constraints imposed by technology or by the requirements of incentives and efficiency. I'll first consider a range of examples, from slavery and indentured servitude (which once were not as repugnant as they now are) to lending money for interest (which used to be widely repugnant and is now not), and from bans on eating horse meat in California to bans on dwarf tossing in France. An example of special interest will be the widespread laws against the buying and selling of organs for transplantation. The historical record suggests that while repugnance can change over time, change can be quite slow.
Handle: RePEc:nbr:nberwo:12702
Template-Type: ReDIF-Paper 1.0
Title: Deflationary Shocks and Monetary Rules: an Open-Economy Scenario Analysis
Classification-JEL: E17; E52; F41
Author-Name: Douglas Laxton
Author-Person: pla306
Author-Name: Papa N'Diaye
Author-Name: Paolo Pesenti
Author-Person: ppe152
Note: IFM ME
Number: 12703
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12703
File-URL: http://www.nber.org/papers/w12703.pdf
File-Format: application/pdf
Publication-Status: published as Laxton, Douglas & N'Diaye, Papa & Pesenti, Paolo, 2006. "Deflationary shocks and monetary rules: An open-economy scenario analysis," Journal of the Japanese and International Economies, Elsevier, vol. 20(4), pages 665-698, December.
Abstract: The paper considers the macroeconomic transmission of demand and supply shocks in an open economy under alternative assumptions on whether the zero interest floor (ZIF) is binding. It uses a two-country general-equilibrium simulation model calibrated to the Japanese economy vis-a-vis the rest of the world. Negative demand shocks have more prolonged and startling effects on the economy when the ZIF is binding than when it is not binding. Positive supply shocks can actually extend the period of time over which the ZIF may be expected to bind. More open economies hit the ZIF for a shorter period of time, and with less harmful effects. Deflationary supply shocks have different implications according to whether they are concentrated in the tradables rather than the nontradables sector. Price-level-path targeting rules are likely to provide better guidelines for monetary policy in a deflationary environment, and have desirable properties in normal times when the ZIF is not binding.
Handle: RePEc:nbr:nberwo:12703
Template-Type: ReDIF-Paper 1.0
Title: Would Protectionism Defuse Global Imbalances and Spur Economic Activity? A Scenario Analysis
Classification-JEL: E66; F32; F47
Author-Name: Hamid Faruqee
Author-Person: pfa43
Author-Name: Douglas Laxton
Author-Person: pla306
Author-Name: Dirk Muir
Author-Name: Paolo Pesenti
Author-Person: ppe152
Note: IFM ITI
Number: 12704
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12704
File-URL: http://www.nber.org/papers/w12704.pdf
File-Format: application/pdf
Publication-Status: published as Faruqee, Hamid & Laxton, Douglas & Muir, Dirk & Pesenti, Paolo, 2008. "Would protectionism defuse global imbalances and spur economic activity? A scenario analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 32(8), pages 2651-2689, August.
Abstract: In the evolving debate and analysis of global imbalances, a commonly overlooked issue pertains to rising protectionism. This paper attempts to fill that gap, examining the macroeconomic implications of trade policy changes through the lens of a dynamic general equilibrium model of the world economy encompassing four regional blocs. Simulation exercises are carried out to consider the imposition of uniform and discriminatory tariffs on trading partners as well as the case of tariff retaliation. We also discuss a scenario in which a 'globalization backlash' lowers the degree of competition in import-competing sectors, and compare the implications of higher markups in the product and labor markets.
Handle: RePEc:nbr:nberwo:12704
Template-Type: ReDIF-Paper 1.0
Title: Basel II: A Contracting Perspective
Classification-JEL: G21; G28; G33
Author-Name: Edward J. Kane
Author-Person: pka853
Note: CF
Number: 12705
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12705
File-URL: http://www.nber.org/papers/w12705.pdf
File-Format: application/pdf
Publication-Status: published as Edward Kane, 2007. "Basel II: A Contracting Perspective," Journal of Financial Services Research, Springer, vol. 32(1), pages 39-53, October.
Publication-Status: published as Edward J. Kane, 2007. "Basel II: a contracting perspective," Proceedings, Federal Reserve Bank of Chicago, issue May, pages 396-414.
Abstract: Financial safety nets are incomplete social contracts that assign responsibility to various economic sectors for preventing, detecting, and paying for potentially crippling losses at financial institutions. This paper uses the theories of incomplete contracts and sequential bargaining to interpret the Basel Accords as a framework for endlessly renegotiating minimal duties and standards of safety-net management across the community of nations. Modelling the stakes and stakeholders represented by different regulators helps us to understand that inconsistencies exist in prior understandings about the range of sectoral effects that the 2004 Basel II agreement might produce. The analysis seeks to explain why, in the U.S., attempting to resolve these inconsistencies has spawned an embarrassingly fractious debate and repeatedly pushed back Basel II's scheduled implementation.
Handle: RePEc:nbr:nberwo:12705
Template-Type: ReDIF-Paper 1.0
Title: Contracts as Reference Points
Classification-JEL: D23; D86; K12
Author-Name: Oliver Hart
Author-Person: pha222
Author-Name: John Moore
Author-Person: pmo265
Note: CF LE LS
Number: 12706
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12706
File-URL: http://www.nber.org/papers/w12706.pdf
File-Format: application/pdf
Publication-Status: published as Oliver Hart & John Moore, 2008. "Contracts as Reference Points," The Quarterly Journal of Economics, MIT Press, vol. 123(1), pages 1-48, 02.
Abstract: We argue that a contract provides a reference point for a trading relationship: more precisely, for parties' feelings of entitlement. A party's ex post performance depends on whether he gets what he is entitled to relative to outcomes permitted by the contract. A party who is shortchanged shades on performance. A flexible contract allows parties to adjust their outcome to uncertainty, but causes inefficient shading. Our analysis provides a basis for long-term contracts in the absence of noncontractible investments, and elucidates why "employment" contracts, which fix wage in advance and allow the employer to choose the task, can be optimal.
Handle: RePEc:nbr:nberwo:12706
Template-Type: ReDIF-Paper 1.0
Title: What Drives Media Slant? Evidence from U.S. Daily Newspapers
Classification-JEL: D78; K23; L82
Author-Name: Matthew Gentzkow
Author-Person: pge43
Author-Name: Jesse M. Shapiro
Author-Person: psh70
Note: IO POL
Number: 12707
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12707
File-URL: http://www.nber.org/papers/w12707.pdf
File-Format: application/pdf
Publication-Status: published as Matthew Gentzkow & Jesse M. Shapiro, 2010. "What Drives Media Slant? Evidence From U.S. Daily Newspapers," Econometrica, Econometric Society, vol. 78(1), pages 35-71, 01.
Abstract: We construct a new index of media slant that measures whether a news outlet.s language is more similar to that of a congressional Republican or Democrat. We apply the measure to study the market forces that determine political con- tent in the news. We estimate a model of newspaper demand that incorporates slant explicitly, estimate the slant that would be chosen if newspapers independently maximized their own profits, and compare these ideal points with .rms. actual choices. Our analysis confirms an economically significant demand for news slanted toward one's own political ideology. Firms respond strongly to consumer preferences, which account for roughly 20 percent of the variation in measured slant in our sample. By contrast, the identity of a newspaper's owner explains far less of the variation in slant. We also present evidence on the role of pressure from incumbent politicians, tastes of reporters, and newspaper competition in determining slant.
Handle: RePEc:nbr:nberwo:12707
Template-Type: ReDIF-Paper 1.0
Title: The "Great Moderation" and the US External Imbalance
Classification-JEL: F32; F34; F41
Author-Name: Alessandra Fogli
Author-Person: pfo48
Author-Name: Fabrizio Perri
Author-Person: ppe52
Note: EFG IFM
Number: 12708
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12708
File-URL: http://www.nber.org/papers/w12708.pdf
File-Format: application/pdf
Publication-Status: published as Alessandra Fogli & Fabrizio Perri, 2006. "The Great Moderation and the U.S. External Imbalance," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 24(S1), pages 209-225, December.
Abstract: The early 1980s marked the onset of two striking features of the current world macro-economy: the fall in US business cycle volatility (the "great moderation") and the large and persistent US external imbalance. In this paper we argue that an external imbalance is a natural consequence of the great moderation. If a country experiences a fall in volatility greater than that of its partners, its relative incentives to accumulate precautionary savings fall and this results in an equilibrium permanent deterioration of its external balance. To assess how much of the current US imbalance can be explained by this channel, we consider a standard two country business cycle model in which households are subject to country specific shocks they cannot perfectly insure against. The model suggests that a fall in business cycle volatility like the one observed for the US relatively to other major economies can account for about 20% of the current total US external imbalance.
Handle: RePEc:nbr:nberwo:12708
Template-Type: ReDIF-Paper 1.0
Title: Who Misvotes? The Effect of Differential Cognition Costs on Election Outcomes
Classification-JEL: D01; D72; D83; J10
Author-Name: Kelly Shue
Author-Name: Erzo F. P. Luttmer
Author-Person: plu27
Note: PE POL
Number: 12709
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12709
File-URL: http://www.nber.org/papers/w12709.pdf
File-Format: application/pdf
Publication-Status: published as Kelly Shue & Erzo F. P. Luttmer, 2009. "Who Misvotes? The Effect of Differential Cognition Costs on Election Outcomes," American Economic Journal: Economic Policy, American Economic Association, vol. 1(1), pages 229-57, February.
Abstract: If voters are fully rational and have negligible cognition costs, ballot layout should not affect election outcomes. In this paper, we explore deviations from rational voting using quasi-random variation in candidate name placement on ballots from the 2003 California Recall Election. We find that the voteshares of minor candidates almost double when their names are adjacent to the names of major candidates on a ballot. Voteshare gains are largest in precincts with high percentages of Democratic, Hispanic, low-income, non-English speaking, poorly educated, or young voters. A major candidate that attracts a disproportionate share of voters from these types of precincts faces a systematic electoral disadvantage. If the Republican frontrunner Arnold Schwarzenegger and Democratic frontrunner Cruz Bustamante had been in a tie, adjacency misvoting would have given Schwarzenegger an edge of 0.06% of the voteshare. This gain in voteshare exceeds the margins of victory in the 2000 U.S. Presidential Election and the 2004 Washington Gubernatorial Election. We explore which voting technology platforms and brands mitigate misvoting.
Handle: RePEc:nbr:nberwo:12709
Template-Type: ReDIF-Paper 1.0
Title: Gold Rush Fever in Business Cycles
Classification-JEL: E32
Author-Name: Paul Beaudry
Author-Person: pbe35
Author-Name: Fabrice Collard
Author-Person: pco44
Author-Name: Franck Portier
Author-Person: ppo12
Note: EFG
Number: 12710
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12710
File-URL: http://www.nber.org/papers/w12710.pdf
File-Format: application/pdf
Publication-Status: published as Beaudry, Paul & Collard, Fabrice & Portier, Franck, 2011. "Gold rush fever in business cycles," Journal of Monetary Economics, Elsevier, vol. 58(2), pages 84-97, March.
Abstract: Gold rushes are periods of economic boom, generally associated with large increases in expenditures aimed at securing claims near new found veins of gold. An interesting aspect of gold rushes is that, from a social point of view, much of the increased activity is wasteful since it contributes simply to the expansion of the stock of money. In this paper, we explore whether business cycle fluctuations may sometimes be driven by a phenomenon akin to a gold rush. In particular, we present a model where the opening of new market opportunities causes an economic expansion by favoring competition for market share, which is essentially a dissolution of rents. We call such an episode a market rush. We construct a simple model of a market rush that can be embedded into an otherwise standard Dynamic General Equilibrium model, and show how market rushes can help explain important features of the data. We use a simulated-moment estimator to quantify the role of market rushes in fluctuations. We find that market rushes may account for over half the short run volatility in hours worked and a third of the short run volatility of output.
Handle: RePEc:nbr:nberwo:12710
Template-Type: ReDIF-Paper 1.0
Title: A Stable International Monetary System Emerges: Inflation Targeting is Bretton Woods, Reversed
Classification-JEL: F02; F33
Author-Name: Andrew K. Rose
Author-Person: pro71
Note: IFM ME
Number: 12711
Creation-Date: 2006-11
Order-URL: http://www.nber.org/papers/w12711
File-URL: http://www.nber.org/papers/w12711.pdf
File-Format: application/pdf
Publication-Status: published as Rose, Andrew K., 2007. "A stable international monetary system emerges: Inflation targeting is Bretton Woods, reversed," Journal of International Money and Finance, Elsevier, vol. 26(5), pages 663-681, September.
Abstract: A stable international monetary system has emerged since the early 1990s. A large number of industrial and a growing number of developing countries now have domestic inflation targets administered by independent and transparent central banks. These countries place few restrictions on capital mobility and allow their exchange rates to float. The domestic focus of monetary policy in these countries does not have any obvious international cost. Inflation targeters have lower exchange rate volatility and less frequent "sudden stops" of capital flows than similar countries that do not target inflation. Inflation targeting countries also do not have current accounts or international reserves that look different from other countries. This system was not planned and does not rely on international coordination. There is no role for a center country, the IMF, or gold. It is durable; in contrast to other monetary regimes, no country has been forced to abandon an inflation-targeting regime. Succinctly, it is the diametric opposite of the post-war system; Bretton Woods, reversed.
Handle: RePEc:nbr:nberwo:12711
Template-Type: ReDIF-Paper 1.0
Title: A Product-Quality View of the Linder Hypothesis
Classification-JEL: D12; F1; F12
Author-Name: Juan Carlos Hallak
Author-Person: pha474
Note: ITI
Number: 12712
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12712
File-URL: http://www.nber.org/papers/w12712.pdf
File-Format: application/pdf
Publication-Status: published as Juan Carlos Hallak, 2010. "A Product-Quality View of the Linder Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 92(3), pages 453-466, 09.
Abstract: The Linder hypothesis states that countries of similar income per capita should trade more intensely with one another. This hypothesis has attracted substantial research over decades, but the empirical evidence has failed to provide consistent support for it. This paper shows that the reason for the failure is the use of an inappropriate empirical benchmark, the gravity equation estimated using trade data aggregated across sectors. The paper builds a theoretical framework in which, as in Linder's theory, product quality plays the central role. A formal derivation of the Linder hypothesis is obtained, but this hypothesis is shown to hold only if it is formulated as a sector-level prediction. The "sectoral Linder hypothesis" is then estimated on a sample of 64 countries in 1995. The results support the prediction: after controlling for inter-sectoral determinants of trade, countries of similar per-capita income trade more intensely with one another. The paper also shows that a systematic aggregation bias explains the failure of the previous empirical literature to find support for Linder's theory.
Handle: RePEc:nbr:nberwo:12712
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Monetary Policy on Real Commodity Prices
Classification-JEL: E4; E5; F3; Q0
Author-Name: Jeffrey A. Frankel
Author-Person: pfr12
Note: ME
Number: 12713
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12713
File-URL: http://www.nber.org/papers/w12713.pdf
File-Format: application/pdf
Publication-Status: published as The Effect of Monetary Policy on Real Commodity Prices, Jeffrey A. Frankel. in Asset Prices and Monetary Policy, Campbell. 2008
Abstract: Commodity prices are back. This paper looks at connections between monetary policy, and agricultural and mineral commodities. We begin with the monetary influences on commodity prices, first for a large country such as the United States, then smaller countries. The claim is that low real interest rates lead to high real commodity prices. The theory is an analogy with Dornbusch overshooting. The relationship between real interest rates and real commodity prices is also supported empirically. One channel through which this effect is accomplished is a negative effect of interest rates on the desire to carry commodity inventories. The paper concludes with a consideration of implications for monetary policy.
Handle: RePEc:nbr:nberwo:12713
Template-Type: ReDIF-Paper 1.0
Title: Painting by Proxy: The Conceptual Artist as Manufacturer
Classification-JEL: J0
Author-Name: David W. Galenson
Note: LS PR
Number: 12714
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12714
File-URL: http://www.nber.org/papers/w12714.pdf
File-Format: application/pdf
Publication-Status: published as Galenson, David W. Conceptual Revolutions in Twentieth-Century Art. Cambridge and New York: Cambridge University Press, 2009.
Publication-Status: published as Painting by Proxy: The Conceptual Artist as Manufacturer, David W. Galenson. in Conceptual Revolutions in Twentieth-Century Art, Galenson. 2009
Abstract: In 1958, the French philosopher Etienne Gilson observed that "painters are related to manual laborers by a deep-rooted affinity that nothing can eliminate," because painting was the one art in which the person who conceives the work is also necessarily the person who executes it. Conceptual innovators promptly proved Gilson wrong, however, by eliminating the touch of the artist from their paintings: in 1960 the French artist Yves Klein began using "living brushes" - nude models covered with paint - to execute his paintings, and in 1963 Andy Warhol began having his assistant Gerard Malanga silkscreen his canvases. Today many leading artists do not touch their own paintings, and some never see them. This paper traces the innovations that allowed a complete separation between the conception and execution of paintings. The foundation of this separation was laid long before the 20th century, by conceptual Old Masters including Raphael and Rubens, who employed teams of assistants to produce their paintings, but artists began exploring its logical limits during the conceptual revolution of the 1960s and beyond. Thus by the end of the twentieth century Jeff Koons explained that he did not participate in the work of painting his canvases because he believed it would interfere with his growth as an artist, and Damien Hirst defended his practice of having his paintings made by assistants on the grounds that their paintings were better than his. Eliminating the touch of the artist from painting is yet another way in which conceptual innovators transformed art in the twentieth century.
Handle: RePEc:nbr:nberwo:12714
Template-Type: ReDIF-Paper 1.0
Title: Quarterly Data on the Categories and Causes of Bank Distress During the Great Depression
Classification-JEL: E0; E4; E44; N1; N12; N2
Author-Name: Gary Richardson
Author-Person: pri185
Note: DAE ME
Number: 12715
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12715
File-URL: http://www.nber.org/papers/w12715.pdf
File-Format: application/pdf
Publication-Status: published as Richardson, Gary. “Quarterly Data on the Categories and Causes of Bank Distress during the Great Depression." Research in Economic History 25 (January 2008): 37-115.
Abstract: During the contraction from 1929 through 1933, the Federal Reserve System tracked changes in the status of all banks operating in the United States and determined the cause of each bank suspension. This essay introduces quarterly series derived from that hitherto dormant data and presents aggregate series constructed from it. The new data series will supplement, and in some cases, supplant the data currently used to study banking panics of the Great Depression, which was published by the Federal Reserve Board of Governors in 1937.
Handle: RePEc:nbr:nberwo:12715
Template-Type: ReDIF-Paper 1.0
Title: Correspondent Clearing and the Banking Panics of the Great Depression
Classification-JEL: E42; E44; E65; N1; N12; N2
Author-Name: Gary Richardson
Author-Person: pri185
Note: DAE ME
Number: 12716
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12716
File-URL: http://www.nber.org/papers/w12716.pdf
File-Format: application/pdf
Publication-Status: published as Richardson, Gary, 2007. "The Check is in the Mail: Correspondent Clearing and the Collapse of the Banking System, 1930 to 1933," The Journal of Economic History, Cambridge University Press, vol. 67(03), pages 643-671, September.
Abstract: Between the founding of the Federal Reserve System in 1913 and the depression of the 1930s, three check-clearing systems operated in the United States. The Federal Reserve cleared checks for members of the system. Clearing houses cleared checks for members of their organizations. Correspondents cleared checks for all other institutions. The correspondent-clearing system was vulnerable to counter-party cascades, particularly because accounting conventions overstated reserves available to individual institutions and the system as a whole. In November 1930, a correspondent system in the center of the United States collapsed, causing the closure of more than one hundred institutions. Bank runs radiated from the locus of events, and additional correspondent networks succumbed to the situation. For the remainder of the contraction, banks that relied upon correspondents to clear checks failed at higher rates than other banks. In sum, weaknesses within a check-clearing system played a hitherto unrecognized role in the banking crises of the Great Depression.
Handle: RePEc:nbr:nberwo:12716
Template-Type: ReDIF-Paper 1.0
Title: Bank Distress during the Great Depression: The Illiquidity-Insolvency Debate Revisited
Classification-JEL: E0; E42; E44; E65; N01; N12; N2
Author-Name: Gary Richardson
Author-Person: pri185
Note: DAE ME
Number: 12717
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12717
File-URL: http://www.nber.org/papers/w12717.pdf
File-Format: application/pdf
Publication-Status: published as Richardson, Gary. “Bank Distress during the Great Depression: The Illiquidity-Insolvency Debate Revisited." Explorations in Economic History 44, 4 (October 2007):586-607.
Abstract: During the contraction from 1929 through 1933, the Federal Reserve System tracked changes in the status of all banks operating in the United States and determined the cause of each bank suspension. This essay analyzes chronological patterns in aggregate series constructed from that data. The analysis demonstrates both illiquidity and insolvency were substantial sources of bank distress. Periods of heightened distress were correlated with periods of increased illiquidity. Contagion via correspondent networks and bank runs propagated the initial banking panics. As the depression deepened and asset values declined, insolvency loomed as the principal threat to depository institutions.
Handle: RePEc:nbr:nberwo:12717
Template-Type: ReDIF-Paper 1.0
Title: Financial Versus Monetary Mercantilism-Long-run View of Large International Reserves Hoarding
Classification-JEL: F15; F31; F43; F51
Author-Name: Joshua Aizenman
Author-Person: pai8
Author-Name: Jaewoo Lee
Author-Person: ple103
Note: IFM ITI
Number: 12718
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12718
File-URL: http://www.nber.org/papers/w12718.pdf
File-Format: application/pdf
Publication-Status: published as Joshua Aizenman & Jaewoo Lee, 2008. "Financial versus Monetary Mercantilism: Long-run View of Large International Reserves Hoarding," The World Economy, Blackwell Publishing, vol. 31(5), pages 593-611, 05.
Abstract: The sizable hoarding of international reserves by several East Asian countries has been frequently attributed to a modern version of monetary mercantilism -- hoarding international reserves in order to improve competitiveness. From a long-run perspective, manufacturing exporters in East Asia adopted financial mercantilism -- subsidizing the cost of capital -- during decades of high growth. They switched to hoarding large international reserves when growth faltered, making it harder to disentangle the monetary mercantilism from precautionary response to the heritage of past financial mercantilism. Monetary mercantilism also lowers the cost of hoarding, but may be associated with negative externalities leading to competitive hoarding.
Handle: RePEc:nbr:nberwo:12718
Template-Type: ReDIF-Paper 1.0
Title: A Comment Concerning Deposit Insurance and Moral Hazard
Classification-JEL: E42; E44; E65; N1; N13; N2
Author-Name: Gary Richardson
Author-Person: pri185
Note: DAE CF ME
Number: 12719
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12719
File-URL: http://www.nber.org/papers/w12719.pdf
File-Format: application/pdf
Abstract: Hooks and Robinson argue that moral hazard induced by deposit insurance induced banks to invest in riskier assets in Texas during the 1920s. Their regressions suggest this manifestation of moral hazard may explain a portion of the events that occurred during the 1920s, but some other phenomena, hitherto overlooked, must also be at work. Economic logic and evidence form the archives of the Board of Governors suggest that phenomenon is mismanagement and defalcation by corporate officers, which increases when insurance reduces depositors' incentives to monitor and react to the safety and soundness of banks.
Handle: RePEc:nbr:nberwo:12719
Template-Type: ReDIF-Paper 1.0
Title: Coarse Thinking and Persuasion
Classification-JEL: G23; L15; M31; M37
Author-Name: Sendhil Mullainathan
Author-Person: pmu103
Author-Name: Joshua Schwartzstein
Author-Person: psc473
Author-Name: Andrei Shleifer
Author-Person: psh93
Note: AP CF IO
Number: 12720
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12720
File-URL: http://www.nber.org/papers/w12720.pdf
File-Format: application/pdf
Publication-Status: published as Sendhil Mullainathan & Joshua Schwartzstein & Andrei Shleifer, 2008. "Coarse Thinking and Persuasion," The Quarterly Journal of Economics, MIT Press, vol. 123(2), pages 577-619, 05.
Abstract: We present a model of coarse thinking, in which individuals group situations into categories, and transfer the informational content of a given message from situations in a category where it is useful to those where it is not. The model explains how uninformative messages can be persuasive, particularly in low involvement situations, and how objectively informative messages can be dropped by the persuader without the audience assuming the worst. The model sheds light on product branding, the structure of product attributes, and several puzzling aspects of mutual fund advertising.
Handle: RePEc:nbr:nberwo:12720
Template-Type: ReDIF-Paper 1.0
Title: Trading Tasks: A Simple Theory of Offshoring
Classification-JEL: F11; F16
Author-Name: Gene M. Grossman
Author-Person: pgr21
Author-Name: Esteban Rossi-Hansberg
Author-Person: pro72
Note: EFG ITI
Number: 12721
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12721
File-URL: http://www.nber.org/papers/w12721.pdf
File-Format: application/pdf
Publication-Status: published as Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-97, December.
Abstract: For centuries, most international trade involved an exchange of complete goods. But, with recent improvements in transportation and communications technology, it increasingly entails different countries adding value to global supply chains, or what might be called "trade in tasks." We propose a new conceptualization of the global production process that focuses on tradable tasks and use it to study how falling costs of offshoring affect factor prices in the source country. We identify a productivity effect of task trade that benefits the factor whose tasks are more easily moved offshore. In the light of this effect, reductions in the cost of trading tasks can generate shared gains for all domestic factors, in contrast to the distributional conflict that typically results from reductions in the cost of trading goods.
Handle: RePEc:nbr:nberwo:12721
Template-Type: ReDIF-Paper 1.0
Title: Innovation and Productivity across Four European Countries
Classification-JEL: L1; L60; O31; O33; O47
Author-Name: Rachel Griffith
Author-Person: pgr70
Author-Name: Elena Huergo
Author-Person: phu56
Author-Name: Jacques Mairesse
Author-Person: pma712
Author-Name: Bettina Peters
Author-Person: ppe99
Note: PR
Number: 12722
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12722
File-URL: http://www.nber.org/papers/w12722.pdf
File-Format: application/pdf
Publication-Status: published as Rachel Griffith & Elena Huergo & Jacques Mairesse & Bettina Peters, 2006. "Innovation and Productivity Across Four European Countries," Oxford Review of Economic Policy, Oxford University Press, vol. 22(4), pages 483-498, Winter.
Abstract: This paper compares the role innovation plays in productivity across the four European countries France, Germany, Spain and the UK using firm-level data from the internationally harmonized Community Innovation Surveys (CIS3). Despite a considerable number of national firm-level studies analysing this relationship, cross-country comparisons using micro data are still rare. We apply a structural model that describes the link between R&D expenditure, innovation output and productivity (CDM model). Our econometric results suggest that overall the systems driving innovation and productivity are remarkably similar across these four countries, although we also find interesting differences, particularly in the variation in productivity that is associated with more or less innovative activities.
Handle: RePEc:nbr:nberwo:12722
Template-Type: ReDIF-Paper 1.0
Title: The Determinants of Household Saving in China: A Dynamic Panel Analysis of Provincial Data
Classification-JEL: D12; D91; E21; J10
Author-Name: Charles Yuji Horioka
Author-Person: pho41
Author-Name: Junmin Wan
Note: AG EFG
Number: 12723
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12723
File-URL: http://www.nber.org/papers/w12723.pdf
File-Format: application/pdf
Publication-Status: published as Charles Yuji Horioka & Junmin Wan, 2007. "The Determinants of Household Saving in China: A Dynamic Panel Analysis of Provincial Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(8), pages 2077-2096, December.
Abstract: In this paper, we conduct a dynamic panel analysis of the determinants of the household saving rate in China using a life cycle model and panel data on Chinese provinces for the 1995-2004 period from China?s household survey. We find that China?s household saving rate has been high and rising and that the main determinants of variations over time and over space therein are the lagged saving rate, the income growth rate, (in many cases) the real interest rate, and (in some cases) the inflation rate. However, we find that the variables relating to the age structure of the population have the expected impact on the household saving rate in only one of the four samples. These results provide mixed support for the life cycle hypothesis as well as the permanent income hypothesis, are consistent with the existence of inertia or persistence, and imply that China?s household saving rate will remain high for some time to come.
Handle: RePEc:nbr:nberwo:12723
Template-Type: ReDIF-Paper 1.0
Title: Security Issue Timing: What Do Managers Know, and When Do They Know It?
Classification-JEL: G1; G14; G3; G32; G35
Author-Name: Dirk Jenter
Author-Person: pje55
Author-Name: Katharina Lewellen
Author-Name: Jerold B. Warner
Note: CF AP
Number: 12724
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12724
File-URL: http://www.nber.org/papers/w12724.pdf
File-Format: application/pdf
Publication-Status: published as Jenter, Dirk, Katharina Lewellen, and Jerold B. Warner. "Security Issue Timing: What Do Managers Know, and When Do They Know It?" Journal of Finance 66, 2(April 2011): 413-43.
Abstract: We study put option sales undertaken by corporations during their repurchase programs. Put sales' main theoretical motivation is market timing, providing an excellent framework for studying whether security issues reflect managers' ability to identify mispricing. Our evidence is that these bets reflect timing ability, and are not simply a result of overconfidence. In the 100 days following put option issues, there is roughly a 5% abnormal stock price return, and the abnormal return is concentrated around the first earnings release date following put option sales. Longer term effects are generally not detected. Put sales also appear to reflect successful bets on the direction of stock price volatility.
Handle: RePEc:nbr:nberwo:12724
Template-Type: ReDIF-Paper 1.0
Title: Do Trade Policy Differences Induce Sorting? Theory and Evidence from Bangladeshi Apparel Exporters
Classification-JEL: F12; F13
Author-Name: Svetlana Demidova
Author-Person: pde534
Author-Name: Hiau Looi Kee
Author-Person: pke71
Author-Name: Kala Krishna
Author-Person: pkr26
Note: ITI
Number: 12725
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12725
File-URL: http://www.nber.org/papers/w12725.pdf
File-Format: application/pdf
Publication-Status: published as Demidova, Svetlana & Kee, Hiau Looi & Krishna, Kala, 2012. "Do trade policy differences induce sorting? Theory and evidence from Bangladeshi apparel exporters," Journal of International Economics, Elsevier, vol. 87(2), pages 247-261.
Abstract: This paper provides a new heterogeneous firm model for trade where firms differ in their productivity and experience different market demand shocks. The model incorporates variations in trade policy, trade preferences, and the rules of origin needed to obtain them, to reflect real world differences faced by Bangladeshi garment exporters in the US and EU. We estimate firms' productivity using an extension of the Olley Pakes procedure that accounts for the biases arising from both demand shocks and productivity being unobserved. Predictions of the model are then tested non-parametrically and are shown to be supported empirically.
Handle: RePEc:nbr:nberwo:12725
Template-Type: ReDIF-Paper 1.0
Title: Sudden Flight and True Sudden Stops
Classification-JEL: F32; G15
Author-Name: Alexander D. Rothenberg
Author-Person: pro1171
Author-Name: Francis E. Warnock
Note: IFM
Number: 12726
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12726
File-URL: http://www.nber.org/papers/w12726.pdf
File-Format: application/pdf
Publication-Status: published as Review of International Economics, Volume 19, Issue 3, pages 509–524, August 2011
Abstract: We extend the sudden stops literature by allowing crisis episodes to be caused by either the retreat of global investors, as is assumed but not shown in the extant literature, or the sudden flight of local investors. We find that almost half of the previously defined sudden stops are actually episodes of sudden flight. Compared to sudden flight, true sudden stops are bunched and are associated with greater slowdowns in economic activity and sharper currency depreciations. We show that the empirical regularities of sudden flight and true sudden stops are consistent with theoretical models that incorporate gross capital flows and information asymmetries.
Handle: RePEc:nbr:nberwo:12726
Template-Type: ReDIF-Paper 1.0
Title: What Do Trade Negotiators Negotiate About? Empirical Evidence from the World Trade Organization
Classification-JEL: F02; F1; F11; F13; F15; F5; F51; F53; F59
Author-Name: Kyle Bagwell
Author-Person: pba409
Author-Name: Robert W. Staiger
Author-Person: pst85
Note: ITI
Number: 12727
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12727
File-URL: http://www.nber.org/papers/w12727.pdf
File-Format: application/pdf
Publication-Status: published as Kyle Bagwell & Robert W. Staiger, 2011. "What Do Trade Negotiators Negotiate About? Empirical Evidence from the World Trade Organization," American Economic Review, American Economic Association, vol. 101(4), pages 1238-73, June.
Abstract: What do trade negotiators negotiate about? There are two distinct theoretical approaches in the economics literature that offer an answer to this question: the terms-of-trade theory and the commitment theory. The terms-of-trade theory holds that trade agreements are useful to governments as a means of helping them escape from a terms-of-trade-driven Prisoners' Dilemma. The commitment theory holds that trade agreements are useful to governments as a means of helping them make commitments to the private sector. These theories are not mutually exclusive, but there is little direct evidence on the empirical relevance of either. We attempt to investigate empirically the purpose served by market access commitments negotiated in the World Trade Organization. We find broad support for the terms-of-trade theory in the data. We claim more tentatively to find support in the data for the commitment theory as well.
Handle: RePEc:nbr:nberwo:12727
Template-Type: ReDIF-Paper 1.0
Title: Is Home Bias in Assets Related to Home Bias in Goods?
Classification-JEL: F21; F41; G11
Author-Name: Eric van Wincoop
Author-Person: pva387
Author-Name: Francis E. Warnock
Note: IFM
Number: 12728
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12728
File-URL: http://www.nber.org/papers/w12728.pdf
File-Format: application/pdf
Publication-Status: published as van Wincoop, E., and F. Warnock, "Can trade costs in goods explain home bias in assets?" Journal of International Money and Finance. Volume 29, Issue 6, October 2010, Pages 1108-1123
Abstract: Obstfeld and Rogoff (2000) have reinvigorated an old literature on the link between home bias in the goods market and home bias in the asset market by arguing that trade costs in the goods market can account for the observed portfolio home bias. The key link between home bias in the two markets is the real exchange rate. Home bias in consumption implies a different expenditure allocation across countries, which leads to different inflation rates when measured in the same currency. This leads investors from different countries to choose different portfolios to hedge against inflation uncertainty. An older partial equilibrium literature argued that such hedge portfolios are not large enough to produce substantial home bias. We link the general equilibrium and partial equilibrium literatures and show that in both the resulting home bias in the equity market depends on a covariance-variance ratio: the covariance between the real exchange rate and the excess return on home relative to foreign equity, divided by the variance of the excess return. Empirical evidence shows that this ratio and the implied home bias are close to zero, casting significant doubt on a meaningful link between home bias in the goods and asset markets. General equilibrium models that conclude otherwise imply a covariance-variance ratio that is at odds with the data.
Handle: RePEc:nbr:nberwo:12728
Template-Type: ReDIF-Paper 1.0
Title: The Nature of Exchange Rate Regimes
Classification-JEL: F33; F41
Author-Name: Michael W. Klein
Author-Person: pkl9
Author-Name: Jay C. Shambaugh
Note: IFM
Number: 12729
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12729
File-URL: http://www.nber.org/papers/w12729.pdf
File-Format: application/pdf
Abstract: The impermanence of fixed exchange rates has become a stylized fact in international finance. The combination of a view that pegs do not really peg with the "fear of floating" view that floats do not really float generates the conclusion that exchange rate regimes are, in practice, unimportant for the behavior of the exchange rate. This is consistent with evidence on the irrelevance of a country's choice of exchange rate regime for general macroeconomic performance. Recently, though, more studies have shown the exchange rate regime does matter in some contexts. In this paper, we attempt to reconcile the perception that fixed exchange rates are only a "mirage" with the recent research showing the effects of fixed exchange rates on trade, monetary autonomy, and growth. First we demonstrate that, while pegs frequently break, many do last and those that break tend to reform, so a fixed exchange rate today is a good predictor that one will exist in the future. Second, we study the exchange rate effect of fixed exchange rates. Fixed exchange rates exhibit greater bilateral exchange rate stability today and in the future. Pegs also display somewhat lower multilateral volatility.
Handle: RePEc:nbr:nberwo:12729
Template-Type: ReDIF-Paper 1.0
Title: Taxing Consumption and Other Sins
Classification-JEL: H20; H23; H71
Author-Name: James R. Hines Jr.
Author-Person: phi111
Note: PE
Number: 12730
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12730
File-URL: http://www.nber.org/papers/w12730.pdf
File-Format: application/pdf
Publication-Status: published as James R. Hines, 2007. "Taxing Consumption and Other Sins," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 49-68, Winter.
Abstract: Throughout American history, the U.S. federal and state governments have imposed excise taxes on commodities such as alcohol and tobacco (and more recently, gasoline and firearms). Rates of such "sin" taxation, and consumption taxation broadly (including sales taxes and value-added taxes), are currently much lower in the United States than they are in Europe, Japan, and other affluent parts of the world. In part, this reflects relative government sizes, but that is not the whole story, since even controlling for total tax collections, levels of national income, government decentralization, and openness to international trade, the United States imposes unusually low excise and consumption taxes. As a result, the United States relies to a much greater degree than other countries on personal and corporate income taxes, thereby affording fewer opportunities to use the tax system to protect individuals and the environment by discouraging the consumption of "sinful" commodities, and instead simply discouraging saving and investment.
Handle: RePEc:nbr:nberwo:12730
Template-Type: ReDIF-Paper 1.0
Title: Pricing to Habits and the Law of One Price
Classification-JEL: E3; F4
Author-Name: Morten Ravn
Author-Person: pra16
Author-Name: Stephanie Schmitt-Grohe
Author-Person: psc44
Author-Name: Martin Uribe
Note: EFG IFM
Number: 12731
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12731
File-URL: http://www.nber.org/papers/w12731.pdf
File-Format: application/pdf
Publication-Status: published as Morten O. Ravn & Stephanie Schmitt-Grohé & Martín Uribe, 2007. "Pricing to Habits and the Law of One Price," American Economic Review, American Economic Association, vol. 97(2), pages 232-238, May.
Abstract: This paper proposes a novel international transmission mechanism based on the assumption of deep habits. The term deep habits stands for a preference specification according to which consumers form habits on a good-by-good basis. Under deep habits, firms face more elastic demand functions in markets where nonhabitual demand is high relative to habitual demand, creating an incentive to price discriminate. We refer to this type of price discrimination as pricing to habits. In the presence of pricing to habits, innovations to domestic aggregate demand induce a decline in markups in the domestic country but not abroad, leading to a departure from the law of one price. In this way, the proposed pricing-to-habit mechanism can explain the observation that prices of the same good across countries, expressed in the same currency, vary over the business cycle. Furthermore, it can account for the empirical fact that in response to a positive domestic demand shock, such as an increase in government spending, the real exchange rate depreciates, domestic consumption expands, and the trade balance deteriorates.
Handle: RePEc:nbr:nberwo:12731
Template-Type: ReDIF-Paper 1.0
Title: Taxing Sales Under the FairTax: What Rate Works?
Classification-JEL: H1; H2
Author-Name: Paul Bachman
Author-Name: Jonathan Haughton
Author-Person: pha95
Author-Name: Laurence J. Kotlikoff
Author-Person: pko44
Author-Name: Alfonso Sanchez-Penalver
Author-Name: David G. Tuerck
Note: PE
Number: 12732
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12732
File-URL: http://www.nber.org/papers/w12732.pdf
File-Format: application/pdf
Publication-Status: published as Bachman, Paul, Jonathan Haughton, Laurence Kotlikoff, Alfonso Sanchez-Penalver, David G. Tuerck. “Taxing Sales Under the FairTax – What Rate Works?” Tax Notes (November 2006).
Abstract: As specified in Congressional bill H.R. 25/S. 25, the FairTax is a proposal to replace the federal personal income tax, corporate income tax, payroll (FICA) tax, capital gains, alternative minimum, self-employment, and estate and gifts taxes with a single-rate federal retail sales tax. The FairTax also provides a prebate to each household based on its demographic composition. The prebate is set to ensure that households pay no taxes net on spending up to the poverty level. Bill Gale (2005) and the President's Advisory Panel on Federal Tax Reform (2005) suggest that the effective (tax inclusive) tax rate needed to implement H.R. 25 is far higher than the proposed 23% rate. This study, which builds on Gale's (2005) analysis, shows that a 23% rate is eminently feasible and suggests why Gale and the Tax Panel reached the opposite conclusion. This paper begins by projecting the FairTax's 2007 tax base net of its rebate. Next it calculates the tax rate needed to maintain the real levels of federal and state spending under the FairTax. It then determines if an effective rate of 23% would be sufficient to fund 2007 estimated spending or if not, the amount by which non-Social Security federal expenditures would need to be reduced. Finally, it shows that the FairTax imposes no additional real fiscal burdens on state and local government, notwithstanding the requirement that such governments pay the FairTax when they purchase goods and services. Implementing the FairTax rate of 23% would produce $2,586 billion in federal tax revenues which is $358 billion more than the $2,228 billion in tax revenues generated by the taxes it repeals. Adjusting the base for the prebate and the administrative credit paid to businesses and states for collecting the tax results in a net tax base of $9,355 billion. In 2007, spending at current levels is projected to be $3,285 billion. Revenues from the FairTax at a 23% tax rate, plus other federal revenues, are estimated to yield $3,209 billion which is $76 billion less than current CBO spending projections for 2007. The $76 billion amounts to only 2.73% of non-Social Security spending ($2,177 -- $2,101). This is a remarkably small adjustment when set against the more than 30% rise in the real value of these expenditures since 2000. Ensuring real revenue neutrality at the federal level, given the net base of $9,355 billion, implies a rate of 23.82% on a tax-inclusive basis and 31.27% on a tax-exclusive basis. These and other calculations presented here ignore a) general equilibrium feedback (supply-side and demand-side) effects that could significantly raise the FairTax base (see, for example, Kotlikoff and Jokisch, 2005), b) the possibility that tax evasion would exceed the considerable amount automatically incorporated here via the use of NIPA data, which undercount consumption expenditures due to evasion under the current tax system, and c) the roughly $1 trillion real capital gain the federal government would secure on its outstanding nominal debt, were consumer prices to rise by the full amount of the FairTax. The FairTax redistributes real purchasing power from state and local governments to their state and local income-tax taxpayers. It does so by reducing factor prices relative to consumer prices and, thereby, reducing the real value (measured at consumer prices) of state and local income tax payments, which are assessed on factor incomes (namely, factor supplies times factor prices). Gale (2005) and the Tax Panel (2005) recognized this loss in real state and local government revenues in claiming that these governments need to be compensated for having to pay the FairTax. But what they apparently missed is that this loss to these governments is exactly offset by a gain to their taxpayers. Were state and local governments to maintain their real income tax collections -- the assumption made here -- by increasing their tax rates appropriately, their taxpayers' real tax burdens would remain unchanged and there would be no need for the federal government to compensate state and local governments for having to pay the FairTax on their purchases. The second is that H.R. 25 does not preclude state and local governments from levying their sales taxes on the FairTax-inclusive price of consumer goods and services. This produces significantly more revenue compared to levying their sales taxes on producer prices. Moreover, Gale (2005) and the Tax Panel (2005) arrived at a higher tax rate because they did not estimate the Fairtax rate, but instead estimated a sales tax of their own design which had a substantially narrower base.
Handle: RePEc:nbr:nberwo:12732
Template-Type: ReDIF-Paper 1.0
Title: Evaluating Effects of Tax Preferences on Health Care Spending and Federal Revenues
Classification-JEL: H2; H5; I1
Author-Name: John F. Cogan
Author-Name: R. Glenn Hubbard
Author-Person: phu97
Author-Name: Daniel P. Kessler
Note: EH PE
Number: 12733
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12733
File-URL: http://www.nber.org/papers/w12733.pdf
File-Format: application/pdf
Publication-Status: published as Poterba, J.M. (ed.) Tax Policy and the Economy, volume 21. Cambridge: MIT Press, 2007.
Publication-Status: published as Evaluating Effects of Tax Preferences on Health Care Spending and Federal Revenues, John F. Cogan, R. Glenn Hubbard, Daniel P. Kessler. in Tax Policy and the Economy, Volume 21, Poterba. 2007
Abstract: In this paper, we calculate the consequences for health spending and federal revenues of an above-the-line deduction for out-of-pocket health spending. We show how the response of spending to this expansion in the tax preference can be specified as a function of a small number of behavioral parameters that have been estimated in the existing literature. We compare our estimates to those from other researchers. And, we use our analysis to derive some implications for tax policy toward HSAs.
Handle: RePEc:nbr:nberwo:12733
Template-Type: ReDIF-Paper 1.0
Title: International Reserves Management and the Current Account
Classification-JEL: F15; F32; F36; F4
Author-Name: Joshua Aizenman
Author-Person: pai8
Note: ITI IFM
Number: 12734
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12734
File-URL: http://www.nber.org/papers/w12734.pdf
File-Format: application/pdf
Publication-Status: published as Aizenman, Joshua & Lee, Yeonho & Rhee, Youngseop, 2007. "International reserves management and capital mobility in a volatile world: Policy considerations and a case study of Korea," Journal of the Japanese and International Economies, Elsevier, vol. 21(1), pages 1-15, March.
Publication-Status: published as Joshua Aizenman, 2008. "International Reserve Management and the Current Account," Central Banking, Analysis, and Economic Policies Book Series, in: Kevin Cowan & Sebastián Edwards & Rodrigo O. Valdés & Norman Loayza (Series Editor) & Klaus Schmid (ed.), Current Account and External Financing, edition 1, volume 12, chapter 11, pages 435-474 Central Bank of Chile.
Abstract: The paper assesses the costs and benefits of active international reserve management (IRM), shedding light on the question of how intense should IRM be for an emerging market. In principle, an active IRM strategy could lower real exchange rate volatility induced by terms of trade shocks; provide self insurance against sudden stops; reduce the speed of adjustment of the current account; and even allow for higher growth if it fosters exports ("mercantilist" motive). The message of the report is mixed -- management of reserves is not a panacea. The mercantilist case for hoarding international reserves, as an ingredient of an export led growth strategy, is dubious. Done properly, IRM augments macro economic management in turbulent times, mitigating the impact of external adverse shocks and allowing for a smoother current account adjustment. These benefits are especially important for commodity exporting countries, and countries with limited financial development.
Handle: RePEc:nbr:nberwo:12734
Template-Type: ReDIF-Paper 1.0
Title: Global Patterns of Income and Health: Facts, Interpretations, and Policies
Classification-JEL: I1; O1; O15
Author-Name: Angus Deaton
Author-Person: pde30
Note: AG EFG EH
Number: 12735
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12735
File-URL: http://www.nber.org/papers/w12735.pdf
File-Format: application/pdf
Abstract: People in poor countries live shorter lives than people in rich countries so that, if we scale income by some index of health, there is more inequality in the world than if we consider income alone. Such international inequalities in life expectancy decreased for many years after 1945, and the strong correlation between income and life-expectancy might lead us to hope that economic growth will improve people's health as well as their material living conditions. I argue that the apparent convergence in life expectancies is not as beneficial as might appear, and that, while economic growth is the key to poverty reduction, there is no evidence that it will deliver automatic health improvements in the absence of appropriate conditions. The strong negative correlation between economic growth on the one hand and the proportionate rate of decline of infant and child mortality on the other vanishes altogether if we look at the relationship between growth and the absolute rate of decline in infant and child mortality. In effect, the correlation is between the level of infant mortality and the growth of real incomes, most likely reflecting the importance of factors such as education and the quality of institutions that affect both health and growth.
Handle: RePEc:nbr:nberwo:12735
Template-Type: ReDIF-Paper 1.0
Title: The Effects of the Ageing European Population on Economic Growth and Budgets: Implications for Immigration and Other Policies
Classification-JEL: H2; H55; J61
Author-Name: Martin S. Feldstein
Author-Person: pfe112
Note: LS PE
Number: 12736
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12736
File-URL: http://www.nber.org/papers/w12736.pdf
File-Format: application/pdf
Abstract: The ageing of the population presents a major fiscal challenge for the countries of Europe. The combination of increased longevity and a reduced birth rate will directly reduce the growth rates of the European economies by slowing the growth of the capital stock and by weakening the productivity of the labor force. This slower growth of GDP means a smaller tax base and less tax revenue. In addition, the current tax-financed systems of social pensions and health care will require substantial increases in the already high tax rates. The analysis in this paper shows that the common prescription of increased immigration would do little to reduce the future fiscal burden. The increased revenue from a large rise in immigration would finance only a small part of the coming rise in the cost of pension and health benefits. The only alternative to significantly higher tax rates or substantially lower retirement income is to shift from a pure tax-financed system to a mixed system that supplements the tax financed benefits with benefits based on increased saving financial investment.
Handle: RePEc:nbr:nberwo:12736
Template-Type: ReDIF-Paper 1.0
Title: Do Students Care about School Quality? Determinants of Dropout Behavior in Developing Countries
Classification-JEL: H4; I2; J2; O15
Author-Name: Eric A. Hanushek
Author-Person: pha97
Author-Name: Victor Lavy
Author-Person: pla111
Author-Name: Kohtaro Hitomi
Note: CH ED LS PE
Number: 12737
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12737
File-URL: http://www.nber.org/papers/w12737.pdf
File-Format: application/pdf
Publication-Status: published as Eric A. Hanushek & Victor Lavy & Kohtaro Hitomi, 2008. "Do Students Care about School Quality? Determinants of Dropout Behavior in Developing Countries," Journal of Human Capital, University of Chicago Press, vol. 2(1), pages 69-105.
Abstract: School quality and grade completion by students are shown to be directly linked, leading to very different perspectives on educational policy in developing countries. Unique panel data on primary school age children in Egypt permit estimation of behavioral models of school leaving. Students perceive differences in school quality, measured as expected achievement improvements in a given school, and act on it. Specifically, holding constant the student's own ability and achievement, a student is much less likely to remain in school if attending a low quality school rather than a high quality school. This individually rationale behavior suggests that common arguments about a trade-off between quality and access to schools may misstate the real issue and lead to public investment in too little quality. Further, because of this behavioral linkage, there is an achievement bias such that common estimates of rates of return to years of school will be overstated. The paper demonstrates the analytical importance of employing output-based measures of school quality.
Handle: RePEc:nbr:nberwo:12737
Template-Type: ReDIF-Paper 1.0
Title: The Political Economy of Warfare
Classification-JEL: A1
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Note: POL PE
Number: 12738
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12738
File-URL: http://www.nber.org/papers/w12738.pdf
File-Format: application/pdf
Publication-Status: published as Hess, Gregory D. (ed.) Guns and Butter: The Economic Causes and Consequences of Conflict. Cambridge: MIT Press, 2009.
Abstract: Warfare is enormously destructive, and yet countries regularly initiate armed conflict against one another. Even more surprisingly, wars are often quite popular with citizens who stand to gain little materially and may lose much more. This paper presents a model of warfare as the result of domestic political calculations. When incumbents have an edge in fighting wars, they may start wars even if those wars run counter to their country's interests. Challengers are particularly likely to urge aggression when they are unlikely to come into power and when the gains from coming to power are large. Leaders who start wars will naturally try to create hatred by emphasizing the threat and despicable character of the rival country. Wars will be more common in dictatorships than in democracies both because dictators have stronger incentives to stay in power and because they have greater control over the media.
Handle: RePEc:nbr:nberwo:12738
Template-Type: ReDIF-Paper 1.0
Title: Family Firms, Paternalism, and Labor Relations
Classification-JEL: D21; D23; G30; J5
Author-Name: Holger M. Mueller
Author-Name: Thomas Philippon
Author-Person: pph81
Note: CF LS
Number: 12739
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12739
File-URL: http://www.nber.org/papers/w12739.pdf
File-Format: application/pdf
Publication-Status: published as Mueller, Holger and Thomas Philippn. "Family Firms and Labor Relations." American Economic Journal: Macroeconomics 3 (2001): 218-245.
Abstract: Using firm-, industry-, and country-level data, we document a link between family ownership and labor relations. Across countries, we find that family ownership is relatively more prevalent in countries in which labor relations are difficult, consistent with firm-level evidence suggesting that family firms are particularly effective at coping with difficult labor relations. Our cross-country results are robust to controlling for minority shareholder protection and various other potential determinants of family ownership. Our results also hold if we use strike data from the 1960s to predict cross-country variation in family ownership thirty years later. We address causality in two ways. First, we instrument our measure of the quality of labor relations using 'Labor Origin', a variable describing the extent to which the emerging European liberal states in the 18th and 19th centuries confronted guilds and labor organizations. Second, making use of within-country variation at the industry level, we show that - controlling for industry and country fixed effects - industries that are more labor dependent have relatively more family ownership in countries with worse labor relations.
Handle: RePEc:nbr:nberwo:12739
Template-Type: ReDIF-Paper 1.0
Title: Comparing Two Variants of Calvo-Type Wage Stickiness
Classification-JEL: E31; E52
Author-Name: Stephanie Schmitt-Grohe
Author-Person: psc44
Author-Name: Martin Uribe
Note: EFG ME
Number: 12740
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12740
File-URL: http://www.nber.org/papers/w12740.pdf
File-Format: application/pdf
Abstract: We compare two ways of modeling Calvo-type wage stickiness. One in which each household is the monopolistic supplier of a differentiated type of labor input (as in Erceg, et al., 2000) and one in which households supply a homogenous labor input that is transformed by monopolistically competitive labor unions into a differentiated labor input (as in Schmitt-Grohe and Uribe, 2006a,b). We show that up to a log-linear approximation the two variants yield identical equilibrium dynamics, provided the wage stickiness parameter is in each case calibrated to be consistent with empirical estimates of the wage Phillips curve. It follows that econometric estimates of New Keynesian models that rely on log-linearizations of the equilibrium dynamics are mute about which type of wage stickiness fits the data better. In the context of a medium-scale macroeconomic model, we show that the two variants of the sticky-wage formulation give rise to the same Ramsey-optimal dynamics, which call for low volatility of price inflation. Furthermore, under both specifications the optimized operational interest-rate feedback rule features a large coefficient on price inflation and a mute response to wage inflation and output.
Handle: RePEc:nbr:nberwo:12740
Template-Type: ReDIF-Paper 1.0
Title: The "Stern Review" on the Economics of Climate Change
Classification-JEL: Q4; Q5
Author-Name: William D. Nordhaus
Author-Person: pno115
Note: EFG PE EEE
Number: 12741
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12741
File-URL: http://www.nber.org/papers/w12741.pdf
File-Format: application/pdf
Publication-Status: published as William D. Nordhaus, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 686-702, September.
Abstract: How much and how fast should the globe reduce greenhouse-gas emissions? How should nations balance the costs of the reductions against the damages and dangers of climate change? This question has been addressed by the recent "Stern Review on the Economics of Climate Change," which answers these questions clearly and unambiguously. We need urgent, sharp, and immediate reductions in greenhouse-gas emissions. An analysis of the "Stern Review" finds that these recommendations depend decisively on the assumption of a near-zero social discount rate. The Review's unambiguous conclusions about the need for extreme immediate action will not survive the substitution of discounting assumptions that are consistent with today's market place.
Handle: RePEc:nbr:nberwo:12741
Template-Type: ReDIF-Paper 1.0
Title: Catastrophe Bonds, Reinsurance, and the Optimal Collateralization of Risk-Transfer
Classification-JEL: G11; G22
Author-Name: Darius Lakdawalla
Author-Person: pla295
Author-Name: George Zanjani
Note: CF PE AP
Number: 12742
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12742
File-URL: http://www.nber.org/papers/w12742.pdf
File-Format: application/pdf
Publication-Status: published as Darius Lakdawalla & George Zanjani, 2012. "Catastrophe Bonds, Reinsurance, and the Optimal Collateralization of Risk Transfer," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 79(2), pages 449-476, 06.
Abstract: Catastrophe bonds feature full collateralization of the underlying risk transfer, and thus abandon the insurance principle of economizing on collateral through diversification. We examine the theoretical foundations beneath this paradox, finding that fully collateralized instruments have important uses in a risk transfer market when insurers cannot contract completely over the division of assets in the event of insolvency, and, more generally, cannot write contracts with a full menu of state-contingent payments. In this environment, insureds have different levels of exposure to an insurer's default. When contracting constraints limit the insurer's ability to smooth out such differences, catastrophe bonds can be used to deliver coverage to those most exposed to default. We demonstrate how catastrophe bonds can improve welfare in this way by mitigating differences in default exposure, which arise with: (1) contractual incompleteness, and (2) heterogeneity among insureds, which undermines the efficiency of the mechanical pro rata division of assets that takes place in the event of insurer insolvency.
Handle: RePEc:nbr:nberwo:12742
Template-Type: ReDIF-Paper 1.0
Title: Does Increased Access Increase Equality? Gender and Child Health Investments in India
Classification-JEL: I18; J13; J16; O12
Author-Name: Emily Oster
Author-Person: pos39
Note: LS EH
Number: 12743
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12743
File-URL: http://www.nber.org/papers/w12743.pdf
File-Format: application/pdf
Publication-Status: published as Oster, Emily. "Does Increased Access Increase Equality? Gender and Child Health Investments in India." Journal of Development Economics 89, 1 (May 2009): 62-76.
Abstract: Policymakers often argue that increasing access to health care is one crucial avenue for decreasing gender inequality in the developing world. Although this is generally true in the cross section, time series evidence does not always point to the same conclusion. This paper analyzes the relationship between access to child health investments and gender inequality in those health investments in India. A simple theory of gender-biased parental investment suggests that gender inequality may actually be non-monotonically related to access to health investments. At low levels of availability, investment in girls and boys is low but equal; as availability increases, boys get investments first, creating inequality. As availability increases further, girls also receive investments and equality is restored. I test this theory using data on the relationship between gender balance in vaccinations and the availability of "Health Camps" in India. I find support for a non-monotonic relationship. This result may shed light on the contrast between the cross-sectional and time-series evidence on gender and development, and may provide guidance for health policy in developing countries.
Handle: RePEc:nbr:nberwo:12743
Template-Type: ReDIF-Paper 1.0
Title: Unspanned Stochastic Volatility and the Pricing of Commodity Derivatives
Classification-JEL: G13
Author-Name: Anders B. Trolle
Author-Name: Eduardo S. Schwartz
Note: AP
Number: 12744
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12744
File-URL: http://www.nber.org/papers/w12744.pdf
File-Format: application/pdf
Publication-Status: published as Anders B. Trolle & Eduardo S. Schwartz, 2009. "Unspanned Stochastic Volatility and the Pricing of Commodity Derivatives," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 22(11), pages 4423-4461, November.
Abstract: We conduct a comprehensive analysis of unspanned stochastic volatility in commodity markets in general and the crude-oil market in particular. We present model-free results that strongly suggest the presence of unspanned stochastic volatility in the crude-oil market. We then develop a tractable model for pricing commodity derivatives in the presence of unspanned stochastic volatility. The model features correlations between innovations to futures prices and volatility, quasi-analytical prices of options on futures and futures curve dynamics in terms of a low-dimensional affine state vector. The model performs well when estimated on an extensive panel data set of crude-oil futures and options.
Handle: RePEc:nbr:nberwo:12744
Template-Type: ReDIF-Paper 1.0
Title: Trade Agreements as Endogenously Incomplete Contracts
Classification-JEL: D02; F1; F13; F15; F51; F53; F59
Author-Name: Henrik Horn
Author-Name: Giovanni Maggi
Author-Person: pma1315
Author-Name: Robert W. Staiger
Author-Person: pst85
Note: ITI
Number: 12745
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12745
File-URL: http://www.nber.org/papers/w12745.pdf
File-Format: application/pdf
Publication-Status: published as Henrik Horn & Giovanni Maggi & Robert W. Staiger, 2010. "Trade Agreements as Endogenously Incomplete Contracts," American Economic Review, American Economic Association, vol. 100(1), pages 394-419, March.
Abstract: We propose a model of trade agreements in which contracting is costly, and as a consequence the optimal agreement may be incomplete. In spite of its simplicity, the model yields rich predictions on the structure of the optimal trade agreement and how this depends on the fundamentals of the contracting environment. We argue that taking contracting costs explicitly into account can help explain a number of key features of real trade agreements.
Handle: RePEc:nbr:nberwo:12745
Template-Type: ReDIF-Paper 1.0
Title: How Large Is the Housing Wealth Effect? A New Approach
Classification-JEL: C22; E21; E32
Author-Name: Christopher D. Carroll
Author-Person: pca45
Author-Name: Misuzu Otsuka
Author-Name: Jirka Slacalek
Note: AP EFG ME
Number: 12746
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12746
File-URL: http://www.nber.org/papers/w12746.pdf
File-Format: application/pdf
Abstract: This paper presents a simple new method for estimating the size of 'wealth effects' on aggregate consumption. The method exploits the well-documented sluggishness of consumption growth (often interpreted as 'habits' in the asset pricing literature) to distinguish between short-run and long-run wealth effects. In U.S. data, we estimate that the immediate (next-quarter) marginal propensity to consume from a $1 change in housing wealth is about 2 cents, with a final long-run effect around 9 cents. Consistent with several recent studies, we find a housing wealth effect that is substantially larger than the stock wealth effect. We believe that our approach is preferable to the currently popular cointegration- based estimation methods, because neither theory nor evidence justifies faith in the existence of a stable cointegrating vector.
Handle: RePEc:nbr:nberwo:12746
Template-Type: ReDIF-Paper 1.0
Title: Contractual Frictions and Global Sourcing
Classification-JEL: D23; F10; L23
Author-Name: Pol Antràs
Author-Person: pan181
Author-Name: Elhanan Helpman
Author-Person: phe205
Note: ITI
Number: 12747
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12747
File-URL: http://www.nber.org/papers/w12747.pdf
File-Format: application/pdf
Publication-Status: published as Helpman, E., D. Marin, and T. Verdier (eds.) The Organization of Firms in a Global Economy. Cambridge, MA: Harvard University Press, 2008.
Abstract: We generalize the Antras and Helpman (2004) model of the international organization of production in order to accommodate varying degrees of contractual frictions. In particular, we allow the degree of contractibility to vary across inputs and countries. A continuum of firms with heterogeneous productivities decide whether to integrate or outsource the production of intermediate inputs, and from which country to source them. Final-good producers and their suppliers make relationship-specific investments which are only partially contractible, both in an integrated firm and in an arm's-length relationship. We describe equilibria in which firms with different productivity levels choose different ownership structures and supplier locations, and then study the effects of changes in the quality of contractual institutions on the relative prevalence of these organizational forms. Better contracting institutions in the South raise the prevalence of offshoring, but may reduce the relative prevalence of FDI or foreign outsourcing. The impact on the composition of offshoring depends on whether the institutional improvement affects disproportionately the contractibility of a particular input. A key message of the paper is that improvements in the contractibility of inputs controlled by final-good producers have different effects than improvements in the contractibility of inputs controlled by suppliers.
Handle: RePEc:nbr:nberwo:12747
Template-Type: ReDIF-Paper 1.0
Title: Emergence and Persistence of Inefficient States
Classification-JEL: H11; H26; H41; P16
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Davide Ticchi
Author-Person: pti48
Author-Name: Andrea Vindigni
Author-Person: pvi120
Note: EFG POL
Number: 12748
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12748
File-URL: http://www.nber.org/papers/w12748.pdf
File-Format: application/pdf
Publication-Status: published as Acemoglu, Daron, Davide Ticchi, and Andrea Vindigni. "Emergence and Persistence of Inefficient States." Journal of the European Economic Association 9, 2 (April 2011): 177-208.
Abstract: Inefficiencies in the bureaucratic organization of the state are often viewed as important factors in retarding economic development. Why certain societies choose or end up with such inefficient organizations has received very little attention, however. In this paper, we present a simple theory of the emergence and persistence of inefficient states. The society consists of rich and poor individuals. The rich are initially in power, but expect to transition to democracy, which will choose redistributive policies. Taxation requires the employment of bureaucrats. We show that, under certain circumstances, by choosing an inefficient state structure, the rich may be able to use patronage and capture democratic politics. This enables them to reduce the amount of redistribution and public good provision in democracy. Moreover, the inefficient state creates its own constituency and tends to persist over time. Intuitively, an inefficient state structure creates more rents for bureaucrats than would an efficient state structure. When the poor come to power in democracy, they will reform the structure of the state to make it more efficient so that higher taxes can be collected at lower cost and with lower rents for bureaucrats. Anticipating this, when the society starts out with an inefficient organization of the state, bureaucrats support the rich, who set lower taxes but also provide rents to bureaucrats. We show that in order to generate enough political support, the coalition of the rich and bureaucrats may not only choose an inefficient organization of the state, but they may further expand the size of bureaucracy so as to gain additional votes. The model shows that an equilibrium with an inefficient state is more likely to arise when there is greater inequality between the rich and the poor, when bureaucratic rents take intermediate values and when individuals are sufficiently forward-looking.
Handle: RePEc:nbr:nberwo:12748
Template-Type: ReDIF-Paper 1.0
Title: Coalition Formation in Political Games
Classification-JEL: C71; D71; D74
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Georgy Egorov
Author-Person: peg15
Author-Name: Konstantin Sonin
Author-Person: pso47
Note: POL
Number: 12749
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12749
File-URL: http://www.nber.org/papers/w12749.pdf
File-Format: application/pdf
Publication-Status: published as Daron Acemoglu & Georgy Egorov & Konstantin Sonin, 2008. "Coalition Formation in Non-Democracies," Review of Economic Studies, Wiley Blackwell, vol. 75(4), pages 987-1009, October.
Abstract: We study the formation of a ruling coalition in political environments. Each individual is endowed with a level of political power. The ruling coalition consists of a subset of the individuals in the society and decides the distribution of resources. A ruling coalition needs to contain enough powerful members to win against any alternative coalition that may challenge it, and it needs to be self-enforcing, in the sense that none of its sub-coalitions should be able to secede and become the new ruling coalition. We first present an axiomatic approach that captures these notions and determines a (generically) unique ruling coalition. We then construct a simple dynamic game that encompasses these ideas and prove that the sequentially weakly dominant equilibria (and the Markovian trembling hand perfect equilibria) of this game coincide with the set of ruling coalitions of the axiomatic approach. We also show the equivalence of these notions to the core of a related non-transferable utility cooperative game. In all cases, the nature of the ruling coalition is determined by the power constraint, which requires that the ruling coalition be powerful enough, and by the enforcement constraint, which imposes that no sub-coalition of the ruling coalition that commands a majority is self-enforcing. The key insight that emerges from this characterization is that the coalition is made self-enforcing precisely by the failure of its winning sub-coalitions to be self-enforcing. This is most simply illustrated by the following simple finding: with a simple majority rule, while three-person (or larger) coalitions can be self-enforcing, two-person coalitions are generically not self-enforcing. Therefore, the reasoning in this paper suggests that three-person juntas or councils should be more common than two-person ones. In addition, we provide conditions under which the grand coalition will be the ruling coalition and conditions under which the most powerful individuals will not be included in the ruling coalition. We also use this framework to discuss endogenous party formation.
Handle: RePEc:nbr:nberwo:12749
Template-Type: ReDIF-Paper 1.0
Title: Party Influence in Congress and the Economy
Classification-JEL: D72; G13; G14; H0
Author-Name: Erik Snowberg
Author-Person: psn15
Author-Name: Justin Wolfers
Author-Person: pwo9
Author-Name: Eric Zitzewitz
Author-Person: pzi23
Note: AP EFG LS PE POL
Number: 12751
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12751
File-URL: http://www.nber.org/papers/w12751.pdf
File-Format: application/pdf
Publication-Status: published as Snowberg, Erik & Wolfers, Justin & Zitzewitz, Eric, 2007. "Party Influence in Congress and the Economy," International Quarterly Journal of Political Science, now publishers, vol. 2(3), pages 277-286, August.
Abstract: To understand the extent to which partisan majorities in Congress influence economic policy, we compare financial market responses in recent midterm elections to Presidential elections. We use prediction markets tracking election outcomes as a means of precisely timing and calibrating the arrival of news, allowing substantially more precise estimates than a traditional event study methodology. We find that equity values, oil prices, and Treasury yields are slightly higher with Republican majorities in Congress, and that a switch in the majority party in a chamber of Congress has an impact that is only 10-30 percent of that of the Presidency. We also find evidence inconsistent with the popular view that divided government is better for equities, finding instead that equity valuations increase monotonically, albeit slightly, with the degree of Republican control.
Handle: RePEc:nbr:nberwo:12751
Template-Type: ReDIF-Paper 1.0
Title: Uncertainty In Environmental Economics
Classification-JEL: D81; L51; Q28
Author-Name: Robert S. Pindyck
Author-Person: ppi130
Note: IO EEE
Number: 12752
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12752
File-URL: http://www.nber.org/papers/w12752.pdf
File-Format: application/pdf
Publication-Status: published as Pindyck, Robert S. "“Uncertainty in Environmental Economics." Review of Environmental Economics and Policy (Winter 2007).
Abstract: In a world of certainty, the design of environmental policy is relatively straightforward, and boils down to maximizing the present value of the flow of social benefits minus costs. But the real world is one of considerable uncertainty -- over the physical and ecological impact of pollution, over the economic costs and benefits of reducing it, and over the discount rates that should be used to compute present values. The implications of uncertainty are complicated by the fact that most environmental policy problems involve highly nonlinear damage functions, important irreversibilities, and long time horizons. Correctly incorporating uncertainty in policy design is therefore one of the more interesting and important research areas in environmental economics. This paper offers no easy formulas or solutions for treating uncertainty -- to my knowledge, none exist. Instead, I try to clarify the ways in which various kinds of uncertainties will affect optimal policy design, and summarize what we know and don't know about the problem.
Handle: RePEc:nbr:nberwo:12752
Template-Type: ReDIF-Paper 1.0
Title: On the Macroeconomics of Asset Shortages
Classification-JEL: E3; E4; E5; F3; F41
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Note: EFG IFM AP
Number: 12753
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12753
File-URL: http://www.nber.org/papers/w12753.pdf
File-Format: application/pdf
Abstract: The world has a shortage of financial assets. Asset supply is having a hard time keeping up with the global demand for store of value and collateral by households, corporations, governments, insurance companies, and financial intermediaries more broadly. The equilibrium response of asset prices and valuations to these shortages has played a central role in global economic developments over the last twenty years. The so-called "global imbalances," the recurrent emergence of speculative bubbles (which recently have transited from emerging markets, to the dot-coms, to real estate, to gold...), the historically low real interest rates and associated "interest-rate conundrum," and even the widespread low inflation environment and deflationary episodes in parts of the world, all fall into place once one adopts this asset shortage perspective.
Handle: RePEc:nbr:nberwo:12753
Template-Type: ReDIF-Paper 1.0
Title: Crime and Circumstance: The Effects of Infant Health Shocks on Fathers' Criminal Activity
Classification-JEL: I1; K42
Author-Name: Hope Corman
Author-Name: Kelly Noonan
Author-Name: Nancy E. Reichman
Author-Name: Ofira Schwartz-Soicher
Note: CH EH LS
Number: 12754
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12754
File-URL: http://www.nber.org/papers/w12754.pdf
File-Format: application/pdf
Publication-Status: published as Corman, H., Noonan, K., Reichman, N., Schwartz-Soicher. 2011. Life Shocks and Crime: A Test of the “Turning Point” Hypothesis. Demography 48(3): 1177–1202.
Abstract: Few studies in the economics literature have linked individuals' criminal behavior to changes in their personal circumstances. Life shocks, such as natural or personal disasters, could reduce or sever a person's connections to his/her family, job, or community. With fewer connections, crime may become a more attractive option. This study addresses the question of whether an exogenous shock in life circumstances affects criminal activity. Specifically, we estimate the effects of the birth of a child with a random and serious health problem (versus the birth of a healthy infant) on the likelihood that the child's father becomes or remains involved in illegal activities. Controlling for the father's pre-birth criminal activity, we find that the shock of having a child with a serious health problem increases both the father's post-birth conviction and incarceration by 1 to 8 percentage points, depending on the measure of infant health used.
Handle: RePEc:nbr:nberwo:12754
Template-Type: ReDIF-Paper 1.0
Title: The Return to Capital in China
Classification-JEL: E01; E22; E23; O11; O16; O53
Author-Name: Chong-En Bai
Author-Person: pba338
Author-Name: Chang-Tai Hsieh
Author-Name: Yingyi Qian
Note: EFG IFM
Number: 12755
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12755
File-URL: http://www.nber.org/papers/w12755.pdf
File-Format: application/pdf
Publication-Status: published as Chong-En Bai & Chang-Tai Hsieh & Yingyi Qian, 2006. "The Return to Capital in China," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 37(2006-2), pages 61-102.
Abstract: China's investment rate is one of the highest in the world, which naturally leads one to suspect that the return to capital in China must be quite low. Using the data from China's national accounts, we estimate the rate of return to capital in China. We find that the aggregate rate of return to capital averaged 25% during 1978-1993, fell during 1993-1998, and has become flat at roughly 20% since 1998. This evidence suggests that the aggregate return to capital in China does not appear to be significantly lower than the return to capital in the rest of the world. We also find that the standard deviation of the rate of return to capital across Chinese provinces has fallen since 1978.
Handle: RePEc:nbr:nberwo:12755
Template-Type: ReDIF-Paper 1.0
Title: Anomalies in Estimates of Cross-Price Elasticities for Marketing Mix Models: Theory and Empirical Test
Classification-JEL: D12; M30
Author-Name: Andre Bonfrer
Author-Name: Ernst R. Berndt
Author-Name: Alvin Silk
Note: PR
Number: 12756
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12756
File-URL: http://www.nber.org/papers/w12756.pdf
File-Format: application/pdf
Abstract: We investigate the theoretical possibility and empirical regularity of two troublesome anomalies that frequently arise when cross-price elasticities are estimated for a set of brands expected to be substitutes. These anomalies are the occurrence of: (a) negatively signed cross-elasticities; and (b) sign asymmetries in pairs of cross price elasticities. Drawing upon the Slutsky equation from neoclassical demand theory, we show how and why these anomalies may occur when cross elasticities are estimated for pairs of brands that are substitutes. We empirically examine these issues in the context of the widely used Multiplicative Competitive Interaction (MCI) and Multinomial Logit (MNL) specifications of the fully extended attraction models (Cooper and Nakanishi 1988). Utilizing a database of store-level scanner data for 25 categories and 127 brands of frequently purchased branded consumer goods, we find that about 18% of a total of 732 cross elasticity estimates are negative and approximately 40% of the 366 pairs of cross elasticities are sign asymmetric. Finally, we find that the occurrence of negatively signed cross elasticities can be partially explained by a set of hypothesized relationships between cross-price elasticities and brand share and elasticities of income and category demand.
Handle: RePEc:nbr:nberwo:12756
Template-Type: ReDIF-Paper 1.0
Title: Job Security Does Affect Economic Efficiency: Theory, A New Statistic, and Evidence from Chile
Classification-JEL: D21; J23; J63; J65
Author-Name: Amil Petrin
Author-Name: Jagadeesh Sivadasan
Author-Person: psi292
Note: IO PR LS
Number: 12757
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12757
File-URL: http://www.nber.org/papers/w12757.pdf
File-Format: application/pdf
Abstract: The extensive empirical macro- and micro-level evidence on the impact of job security provisions is largely inconclusive. We argue that the weak evidence is a consequence of the weak power of statistics used, which is suggested by a dynamic theory of plant-level labor demand that we develop. This model speaks clearly on one issue: firing costs drive a wedge between the marginal revenue product of labor and its marginal cost. We examine changes in this gap as our test statistic. It is easy to compute and has a welfare interpretation. We use census data of Chilean manufacturing firms for the years 1979-1996 to look for real effects induced by two significant increases in the costs of dismissing employees. Similar to previous findings in other data, the traditional labor demand statistics provide little evidence of a negative impact from increases in firing costs. While we find no evidence that gaps increase for inputs that are not directly affected by firing costs, we find large and statistically significant increases in the mean and variance of the within-firm gap between the marginal revenue product of labor and the wage for both blue and white collar workers.
Handle: RePEc:nbr:nberwo:12757
Template-Type: ReDIF-Paper 1.0
Title: Is Drug Coverage a Free Lunch? Cross-Price Elasticities and the Design of Prescription Drug Benefits
Classification-JEL: D12; I10; M50
Author-Name: Martin Gaynor
Author-Person: pga1
Author-Name: Jian Li
Author-Person: pli1337
Author-Name: William B. Vogt
Author-Person: pvo14
Note: EH
Number: 12758
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12758
File-URL: http://www.nber.org/papers/w12758.pdf
File-Format: application/pdf
Abstract: Recently, many U.S. employers have adopted less generous prescription drug benefits. In addition, the U.S. began to offer prescription drug insurance to approximately 42 million Medicare beneficiaries in 2006. We use data on individual health insurance claims and benefit data from 1997-2003 to study the effects of changing consumers' co-payments for prescription drugs on the quantity demanded and expenditure on prescription drugs, inpatient care and outpatient care. We allow for effects both in the year of the co-payment change and in the year following the change. Our results show that increases in prescription drug prices reduce both the use of and spending on prescription drugs. However, consumers substitute the use of outpatient care and inpatient care for prescription drug use, and about 35% of the expenditure reductions on prescription drugs are offset by the increases in other spending.
Handle: RePEc:nbr:nberwo:12758
Template-Type: ReDIF-Paper 1.0
Title: China and the Multilateral Trading System
Classification-JEL: F13
Author-Name: Robert Z. Lawrence
Author-Person: pla608
Note: ITI
Number: 12759
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12759
File-URL: http://www.nber.org/papers/w12759.pdf
File-Format: application/pdf
Publication-Status: published as in Eichengreen, Barry, Yung Chul Park and Charles Wyplosz (eds) "China, Asia, and the New World Economy"
Abstract: This paper reviews China's multilateral and preferential trade policies. It reviews the demanding terms of China's WTO accession, its current tariff and trade regime and its participation in the Doha Round negotiations and the institution's regular activities. The analysis concludes that China's trade policies are broadly supportive of a rules based multilateral trading order and its behavior at the WTO is that of a status quo power rather than one seeking major systemic changes. The discussion then turns to China's regional trade initiatives. China has been extremely active in negotiating these and their implications remain uncertain. Concerns about an East Asian fortress, though, appear misplaced. Directly, and through their impact in inducing others to respond, these FTAs could provide a powerful impetus to the process of competitive global liberalization. Countries that do implement agreements with China will find it relatively easy to open their markets to other developing countries. There is also a risk however that the proliferation of FTAs will lead to web of overlapping agreements that could make the trading system unnecessarily complex
Handle: RePEc:nbr:nberwo:12759
Template-Type: ReDIF-Paper 1.0
Title: South African Trade Policy Matters: Trade Performance and Trade Policy
Classification-JEL: F1; F13
Author-Name: Lawrence Edwards
Author-Person: ped24
Author-Name: Robert Z. Lawrence
Author-Person: pla608
Note: ITI
Number: 12760
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12760
File-URL: http://www.nber.org/papers/w12760.pdf
File-Format: application/pdf
Publication-Status: published as Lawrence Edwards & Robert Lawrence, 2008. "South African trade policy matters," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 16(4), pages 585-608, October.
Abstract: South African trade policy has exerted a major influence on the composition and aggregate growth of trade. In the Apartheid period, trade protection seriously impeded both exports and imports, and the economy depended on favorable global commodity price trends to avoid running into an external constraint. South Africa developed a comparative advantage in capital-intensive primary and manufactured commodities partly because of its natural resource endowments but also because the pattern of protection was particularly detrimental to exports of non-commodity manufactured goods. High and opaque tariffs seriously impeded export growth. When global commodity markets were weak, in combination with declining gold exports, this seriously constrained aggregate growth and dulled the response of exports to the weaker rand in the late 1980s. On the other hand, surcharges were effective in reducing imports. By contrast, trade liberalization in the 1990s not only increased imports but, by reducing both input costs and the relative profitability of domestic sales, also boosted exports. The growth in non-commodity manufactured sectoral exports as a result of liberalization was actually faster than sectoral imports. This evidence suggests that additional trade liberalization could well be part of the strategy to enhance export diversification. It points to the importance of policies that afford South African firms with access to inputs at world prices as well as a competitive real exchange rate.
Handle: RePEc:nbr:nberwo:12760
Template-Type: ReDIF-Paper 1.0
Title: The International Migration of Knowledge Workers: When is Brain Drain Beneficial?
Classification-JEL: F22; J61
Author-Name: Peter J. Kuhn
Author-Person: pku26
Author-Name: Carol McAusland
Author-Person: pmc106
Note: IO ITI LS
Number: 12761
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12761
File-URL: http://www.nber.org/papers/w12761.pdf
File-Format: application/pdf
Abstract: We consider the welfare effects of the emigration of workers who produce a public good (knowledge). We distinguish between the knowledge diversion and knowledge creation effects of such emigration, and show that the remaining residents of a country can gain from emigration, even when tastes for knowledge goods exhibit a kind of 'home bias'. In contrast to existing models of beneficial brain drain (BBD), our results do not require agglomeration economies, education-related externalities, remittances, return migration, or an emigration 'lottery'. Instead, they are driven purely by the public nature of knowledge goods, combined with differences in market size that induce greater knowledge creation by emigrants abroad than at home. BBD is even more likely in the presence of weak sending-country intellectual property rights (IPRs), or when source country IPR policy is endogenized.
Handle: RePEc:nbr:nberwo:12761
Template-Type: ReDIF-Paper 1.0
Title: Cross-Cohort Differences in Health on the Verge of Retirement
Classification-JEL: I1; J1; J26
Author-Name: Beth J. Soldo
Author-Name: Olivia S. Mitchell
Author-Person: pmi73
Author-Name: Rania Tfaily
Author-Name: John F. McCabe
Note: AG EH LS
Number: 12762
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12762
File-URL: http://www.nber.org/papers/w12762.pdf
File-Format: application/pdf
Publication-Status: published as Madrian, Brigitte, Olivia S. Mitchell, & Beth Soldo (eds.) Redefining Retirement: How Will Boomer Fair? Oxford, UK: Oxford University Press, 2007.
Abstract: Baby Boomers have left a unique imprint on US culture and society in the last 60 years, and it might be anticipated that they will also put their own stamp on retirement, the last phase of the life cycle. Yet because Boomers have not all fully retired, we cannot yet judge how they will fare as retirees. Instead, we focus on how this group compares with prior groups on the verge of retirement, that is, at ages 51-56. Accordingly, this chapter evaluates the stock of health which Early Boomers bring to retirement and compare these to the circumstances of two prior cohorts at the same point in their life cycles. Using three sets of responses from the Health and Retirement Study, we find some interesting patterns. Overall, the raw evidence indicates that Boomers on the verge of retirement are in poorer health their counterparts 12 years ago. Using a summary health index designed for this study, we find that those born 1948 to 1953 share health risks with the War Baby cohort. This suggests that most of the health decline instead began before the late 1940's. A more complex set of health conclusions emerges from the specific self-reported health measures. Boomers indicate they have relatively more difficulty with a range of everyday physical tasks, but they also report having more pain, more chronic conditions, more drinking and psychiatric problems, than their HRS earlier counterparts. This trend portends poorly for the future health of Boomers as they age and incur increasing costs associated with health care and medications. Using our health index, only those at the 75th percentile or higher are likely to be characterized as having good or better health.
Handle: RePEc:nbr:nberwo:12762
Template-Type: ReDIF-Paper 1.0
Title: On the Welfare Costs of Consumption Uncertainty
Classification-JEL: E21; E44; G12
Author-Name: Robert J. Barro
Author-Person: pba251
Note: EFG ME PE
Number: 12763
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12763
File-URL: http://www.nber.org/papers/w12763.pdf
File-Format: application/pdf
Abstract: Satisfactory calculations of the welfare cost of aggregate consumption uncertainty require a framework that replicates major features of asset prices and returns, such as the high equity premium and low risk-free rate. A Lucas-tree model with rare but large disasters is such a framework. In a baseline simulation, the welfare cost of disaster risk is large -- society would be willing to lower real GDP by about 20% each year to eliminate all disaster risk, including wars. In contrast, the welfare cost from usual economic fluctuations is much smaller, though still important -- corresponding to lowering GDP by around 1.5% each year.
Handle: RePEc:nbr:nberwo:12763
Template-Type: ReDIF-Paper 1.0
Title: Health Insurance and Ex Ante Moral Hazard: Evidence from Medicare
Classification-JEL: I12; I18
Author-Name: Dhaval Dave
Author-Person: pda245
Author-Name: Robert Kaestner
Author-Person: pka42
Note: EH AG
Number: 12764
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12764
File-URL: http://www.nber.org/papers/w12764.pdf
File-Format: application/pdf
Publication-Status: published as Dhaval Dave & Robert Kaestner, 2009. "Health insurance and ex ante moral hazard: evidence from Medicare," International Journal of Health Care Finance and Economics, vol 9(4), pages 367-390.
Abstract: Basic economic theory suggests that health insurance coverage may cause a reduction in prevention activities, but empirical studies have yet to provide much evidence to support this prediction. However, in other insurance contexts that involve adverse health events, evidence of ex ante moral hazard is more consistent. In this paper, we extend the analysis of the effect of health insurance on health behaviors by allowing for the possibility that health insurance has a direct (ex ante moral hazard) and indirect effect on health behaviors. The indirect effect works through changes in health promotion information and the probability of illness that may be a byproduct of insurance-induced greater contact with medical professionals. We identify these two effects and in doing so identify the pure ex ante moral hazard effect. This study exploits the plausibly exogenous variation in health insurance as a result of obtaining Medicare coverage at age 65. We find evidence that obtaining health insurance reduces prevention and increases unhealthy behaviors among elderly men. We also find evidence that physician counseling is successful in changing health behaviors.
Handle: RePEc:nbr:nberwo:12764
Template-Type: ReDIF-Paper 1.0
Title: What Do Independent Directors Know? Evidence from Their Trading
Classification-JEL: G34; G38
Author-Name: Enrichetta Ravina
Author-Person: pra1119
Author-Name: Paola Sapienza
Author-Person: psa155
Note: CF
Number: 12765
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12765
File-URL: http://www.nber.org/papers/w12765.pdf
File-Format: application/pdf
Publication-Status: published as “What Do Independent Directors Know? Evidence from Their Trading,” with Enrichetta Ravina, forthcoming, The Review of Financial Studies, Volume 23, Number 3. March 2010. p. 962-1003
Publication-Status: published as What Do Independent Directors Know? Evidence from Their Trading, Enrichetta Ravina, Paola Sapienza. in Corporate Governance, Weisbach. 2010
Abstract: We compare the trading performance of independent directors and other officers of the firm. We find that independent directors earn positive and substantial abnormal returns when they purchase their company stock, and that the difference with the same firm's officers is relatively small at most horizons. The results are robust to controlling for firm fixed effects and to using a variety of alternative specifications. Executive officers and independent directors make higher returns in firms with weaker governance and the gap between these two groups widens in such firms. Independent directors who sit in audit committees earn higher return than other independent directors at the same firm. Finally, independent directors earn significantly higher returns than the market when they sell the company stock in a window before bad news and around a restatement announcement.
Handle: RePEc:nbr:nberwo:12765
Template-Type: ReDIF-Paper 1.0
Title: Can Housing Collateral Explain Long-Run Swings in Asset Returns?
Classification-JEL: G12
Author-Name: Hanno Lustig
Author-Person: plu17
Author-Name: Stijn Van Nieuwerburgh
Author-Person: pva368
Note: AP
Number: 12766
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12766
File-URL: http://www.nber.org/papers/w12766.pdf
File-Format: application/pdf
Abstract: To explain the low-frequency variation in US equity and debt returns in the 20th century, we solve an equilibrium model in which households face housing collateral constraints. An increase in the ratio of housing to human wealth loosens these borrowing constraintsthus allowing for more risk sharing. The rate of return that households require for holding equity decreases as a result. Feeding the historical time series of US housing collateral into the model replicates four features of long-run asset returns. (1) It produces a fifteen percent equity premium during the 1930s and a slow decline of the equity premium from eleven percent in the 1960s to four percent in 2003. (2) It generates large unexpected capital gains for equity holders, especially in the 1990s. (3) The risk-free rate and the housing collateral ratio are strongly positively correlated at low frequencies. (4) The model mimics the slow decline in the volatility of stock returns and the riskless interest rate.
Handle: RePEc:nbr:nberwo:12766
Template-Type: ReDIF-Paper 1.0
Title: Information Cascades: Evidence from An Experiment with Financial Market Professionals
Classification-JEL: G11; G14; G28
Author-Name: Jonathan E. Alevy
Author-Person: pal198
Author-Name: Michael S. Haigh
Author-Name: John List
Author-Person: pli176
Note: AP
Number: 12767
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12767
File-URL: http://www.nber.org/papers/w12767.pdf
File-Format: application/pdf
Publication-Status: published as Jonathan E. Alevy & Michael S. Haigh & John A. List, 2007. "Information Cascades: Evidence from a Field Experiment with Financial Market Professionals," Journal of Finance, American Finance Association, vol. 62(1), pages 151-180, 02.
Abstract: Previous empirical studies of information cascades use either naturally occurring data or laboratory experiments with student subjects. We combine attractive elements from each of these lines of research by observing market professionals from the Chicago Board of Trade (CBOT) in a controlled environment. As a baseline, we compare their behavior to student choices in similar treatments. We further examine whether, and to what extent, cascade formation is influenced by both private signal strength and the quality of previous public signals, as well as decision heuristics that differ from Bayesian rationality. Analysis of over 1,500 individual decisions suggests that CBOT professionals are better able to discern the quality of public signals than their student counterparts. This leads to much different cascade formation. Further, while the behavior of students is consistent with the notion that losses loom larger than gains, market professionals are unaffected by the domain of earnings. These results are important in both a positive and normative sense.
Handle: RePEc:nbr:nberwo:12767
Template-Type: ReDIF-Paper 1.0
Title: Economic Performance and Work Activity in Sweden after the Crisis of the Early 1990s
Classification-JEL: D13; H30; J20; L52; O52
Author-Name: Steven J. Davis
Author-Person: pda15
Author-Name: Magnus Henrekson
Author-Person: phe60
Note: EFG LS PE
Number: 12768
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12768
File-URL: http://www.nber.org/papers/w12768.pdf
File-Format: application/pdf
Publication-Status: published as Economic Performance and Market Work Activity in Sweden After the Crisis of the Early 1990s, Steven J. Davis, Magnus Henrekson. in Reforming the Welfare State: Recovery and Beyond in Sweden, Freeman, Swedenborg, and Topel. 2010
Abstract: Following a severe contraction in the early 1990s, the Swedish economy accumulated a strong record of output growth coupled with a disappointing performance in the labor market. As of 2005, hours worked per person 20-64 years of age are 10.5 percent below the 1990 peak and a mere one percent above the 1993 trough. Employment rates tell a similar story. Our explanation for Sweden's weak performance with respect to market work activity highlights the role of high tax rates on labor income and consumption expenditures, wage-setting arrangements that compress relative wages, business tax policies that disfavor labor-intensive industries and technologies, and a variety of policies and institutional arrangements that disadvantage younger and smaller businesses. This last category includes tax policies that penalize wealth accumulation in the form of owner-operated businesses, a pension system that steers equity capital and loanable funds to large incumbent corporations, and legally mandated job-security provisions that weigh more heavily on smaller and younger businesses. We describe these features of the Swedish institutional setup and provide evidence of their consequences based largely on international comparisons.
Handle: RePEc:nbr:nberwo:12768
Template-Type: ReDIF-Paper 1.0
Title: Growth and Intellectual Property
Classification-JEL: A10; D0; D00; D02
Author-Name: Michele Boldrin
Author-Name: David K. Levine
Author-Person: ple26
Note: EFG
Number: 12769
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12769
File-URL: http://www.nber.org/papers/w12769.pdf
File-Format: application/pdf
Abstract: Intellectual property (IP) protection involves a trade-off between the undesirability of monopoly and the desirable encouragement of creation and innovation. Optimal policy depends on the quantitative strength of these two forces. We give a quantitative assessment of current IP policies. We focus particularly on the scale of the market, showing that as it increases, due either to growth or to the expansion of trade, IP protection should be reduced.
Handle: RePEc:nbr:nberwo:12769
Template-Type: ReDIF-Paper 1.0
Title: Population Aging and Intergenerational Transfers: Introducing Age into National Accounts
Classification-JEL: J10
Author-Name: Andrew Mason
Author-Person: pma1188
Author-Name: Ronald Lee
Author-Person: ple147
Author-Name: An-Chi Tung
Author-Name: Mun-Sim Lai
Author-Name: Tim Miller
Note: AG PE
Number: 12770
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12770
File-URL: http://www.nber.org/papers/w12770.pdf
File-Format: application/pdf
Publication-Status: published as Ganser, Tim, 2009. "Population Aging, Intergenerational Transfers and the Macroeconomy. Edited by Robert Clark, Naohiro Ogawa and Andrew Mason. Edward Elgar, 2007, ISBN 978-1-84720-099-0, 320 pages," Journal of Pension Economics and Finance, Cambridge University Press, vol. 8(04), pages 529-530, October.
Publication-Status: published as Population Aging and Intergenerational Transfers: Introducing Age into National Accounts, Andrew Mason, Ronald Lee, An-Chi Tung, Mun-Sim Lai, Tim Miller. in Developments in the Economics of Aging, Wise. 2009
Abstract: In all societies intergenerational transfers are large and have an important influence on inequality and growth. The development of each generation of youth depends on the resources that it receives from productive members of society for health, education, and sustenance. The well-being of the elderly depends on familial support and a variety of social programs. The National Transfer Accounts (NTA) system provides a comprehensive approach to measuring all reallocations of income across age and time at the aggregate level. It encompasses reallocations achieved through capital accumulation and transfers, distinguishing those mediated by public institutions from those relying on private institutions. This paper introduces the methodology and presents preliminary results emphasizing economic support systems in Taiwan and the United States. As the two economies differ in their demographic configuration, their level of development, and their old-age support systems, comparing them will shed light on the economic implications of population aging under alternative institutional arrangements.
Handle: RePEc:nbr:nberwo:12770
Template-Type: ReDIF-Paper 1.0
Title: Lucky CEOs
Classification-JEL: D23; G32; G38; J33; J44; K22; M14
Author-Name: Lucian A. Bebchuk
Author-Person: pbe72
Author-Name: Yaniv Grinstein
Author-Person: pgr187
Author-Name: Urs Peyer
Author-Person: ppe236
Note: CF LE LS
Number: 12771
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12771
File-URL: http://www.nber.org/papers/w12771.pdf
File-Format: application/pdf
Publication-Status: published as Bebchuk, Lucian, Yaniv Grinstein, and Urs Peyer. “Lucky CEOs and Lucky Directors." Journal of Finance 65, 6 (2010): 2363-2401.
Abstract: We study the relation between corporate governance and opportunistic timing of CEO option grants via backdating or otherwise. Our methodology focuses on how grant date prices rank within the price distribution of the grant month. During 1996-2005, about 12% of firms provided one or more lucky grant -- defined as grants given at the lowest price of the month -- due to opportunistic timing. Lucky grants were more likely when the board did not have a majority of independent directors and/or the CEO had longer tenure -- factors associated with increased influence of the CEO on pay-setting. We find no evidence that gains from manipulated grants served as a substitute for compensation paid through other sources; total reported compensation from such sources was higher in firms providing lucky grants. Finally, opportunistic timing has been widespread throughout the economy, with a significant presence in each of the economy's twelve (Fama-French) industries.
Handle: RePEc:nbr:nberwo:12771
Template-Type: ReDIF-Paper 1.0
Title: DSGE Models in a Data-Rich Environment
Classification-JEL: C10; C32; C53; E1; E32; E37
Author-Name: Jean Boivin
Author-Person: pbo43
Author-Name: Marc Giannoni
Author-Person: pgi36
Note: EFG ME
Number: 12772
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12772
File-URL: http://www.nber.org/papers/w12772.pdf
File-Format: application/pdf
Abstract: Standard practice for the estimation of dynamic stochastic general equilibrium (DSGE) models maintains the assumption that economic variables are properly measured by a single indicator, and that all relevant information for the estimation is summarized by a small number of data series. However, recent empirical research on factor models has shown that information contained in large data sets is relevant for the evolution of important macroeconomic series. This suggests that conventional model estimates and inference based on estimated DSGE models might be distorted. In this paper, we propose an empirical framework for the estimation of DSGE models that exploits the relevant information from a data-rich environment. This framework provides an interpretation of all information contained in a large data set, and in particular of the latent factors, through the lenses of a DSGE model. The estimation involves Markov-Chain Monte-Carlo (MCMC) methods. We apply this estimation approach to a state-of-the-art DSGE monetary model. We find evidence of imperfect measurement of the model's theoretical concepts, in particular for inflation. We show that exploiting more information is important for accurate estimation of the model's concepts and shocks, and that it implies different conclusions about key structural parameters and the sources of economic fluctuations.
Handle: RePEc:nbr:nberwo:12772
Template-Type: ReDIF-Paper 1.0
Title: Corporate Financial and Investment Policies when Future Financing is not Frictionless
Classification-JEL: G31; G32
Author-Name: Heitor Almeida
Author-Name: Murillo Campello
Author-Person: pca164
Author-Name: Michael S. Weisbach
Note: CF
Number: 12773
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12773
File-URL: http://www.nber.org/papers/w12773.pdf
File-Format: application/pdf
Publication-Status: published as Almeida, Heitor, Murillo Campello, and Michael S. Weisbach. "Corporate Financial and Investment Policies when Future Financing is not Frictionless." Journal of Corporate Finance 17, 3 (June 2011): 675-693.
Abstract: Much of corporate finance is concerned with the impact of financing constraints on firms. However, the literature on financing constraints largely ignores the intertemporal implications of those constraints; in particular, how future financing constraints affect current investment decisions. We present a model in which future financing constraints lead firms to have a current preference for investments with shorter payback periods, investments with less risk, and investments that utilize more liquid/pledgeable assets. The model has a host of implications in different areas of corporate finance, including firms' capital budgeting rules, risk-taking behavior, capital structure choices, hedging strategies, and cash management policies. We show how a number of patterns reported in the empirical literature can be reconciled and interpreted in light of the intertemporal optimization problem firms solve when they face costly external financing. For example, contrary to Jensen and Meckling (1976), we show that firms may reduce rather than increase risk when leverage increases exogenously. Furthermore, firms in economies with less developed financial markets will not only take different quantities of investment, but will also take different kinds of investment (safer, short-term projects that are potentially less profitable). We also point out to several predictions that have not been empirically examined. For example, our model predicts that investment safety and liquidity are complementary: constrained firms are specially likely to distort the risk profile of their most liquid investments.
Handle: RePEc:nbr:nberwo:12773
Template-Type: ReDIF-Paper 1.0
Title: The Dynamic Effects of an Earnings Subsidy for Long-Term Welfare Recipients: Evidence from the SSP Applicant Experiment
Classification-JEL: I38
Author-Name: David Card
Author-Person: pca271
Author-Name: Dean R. Hyslop
Author-Person: phy11
Note: LS PE
Number: 12774
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12774
File-URL: http://www.nber.org/papers/w12774.pdf
File-Format: application/pdf
Publication-Status: published as Card, David & Hyslop, Dean R., 2009. "The dynamic effects of an earnings subsidy for long-term welfare recipients: Evidence from the self sufficiency project applicant experiment," Journal of Econometrics, Elsevier, vol. 153(1), pages 1-20, November.
Abstract: In the SSP Applicant Experiment, a random sample of new welfare entrants was informed that if they remained on welfare for a year they would become eligible for a generous earnings subsidy. Those who satisfied the waiting period and then left welfare and began working full time within the following year were entitled to receive payments for up to 36 months whenever they were off welfare and working full time. A simple optimizing model suggests that the program rules created an unusual sequence of incentives to: (1) prolong the initial spell on welfare for at least 12 months to become eligible for the subsidy offer; (2) establish subsidy entitlement by finding full time work and leaving welfare in the 12 to 24 month period after initial entry; and (3) choose work over welfare during the three years that subsidies were available. Consistent with these implications, comparisons between the experimental treatment group and a randomly assigned control group show that the program increased welfare participation in the first year after initial entry and lowered it over the following 5 years. We develop an econometric model of welfare participation and program eligibility status that allows us to identify the behavioral effects associated with the program rules. We find important responses to all three incentives. We also find that the impact of the program persisted after subsidy payments ended, although the effect decayed over time.
Handle: RePEc:nbr:nberwo:12774
Template-Type: ReDIF-Paper 1.0
Title: State-Dependent Intellectual Property Rights Policy
Classification-JEL: L16; O31; O34; O41
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Ufuk Akcigit
Author-Person: pak203
Note: EFG IO PR
Number: 12775
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12775
File-URL: http://www.nber.org/papers/w12775.pdf
File-Format: application/pdf
Abstract: What form of intellectual property rights (IPR) policy contributes to economic growth? Should technological followers be able to license the products of technological leaders? Should a company with a large technological lead receive the same IPR protection as a company with a more limited lead? We develop a general equilibrium framework to investigate these questions. The economy consists of many industries and firms engaged in cumulative (step-by-step) innovation. IPR policy regulates whether followers in an industry can copy the technology of the leader and also how much they have to pay to license past innovations. With full patent protection, followers can catch up to the leader in their industry either by making the same innovation(s) themselves or by making some pre-specified payments to the technological leaders. We prove the existence of a steady-state equilibrium and characterize some of its properties. We then quantitatively investigate the implications of different types of IPR policy on the equilibrium growth rate. The two major results of this exercise are as follows. First, the growth rate in the standard models used in the (growth) literature can be improved significantly by introducing a simple form of licensing. Second, we show that full patent protection is not optimal from the viewpoint of maximizing the growth rate of the economy and that the growth-maximizing policy involves state-dependent IPR protection, providing greater protection to technological leaders that are further ahead than those that are close to their followers. This form of the growth-maximizing policy is a result of the "trickle-down" effect, which implies that providing greater protection to firms that are further ahead of their followers than a certain threshold increases the R&D incentives also for all technological leaders that are less advanced than this threshold.
Handle: RePEc:nbr:nberwo:12775
Template-Type: ReDIF-Paper 1.0
Title: Mandatory Versus Voluntary Disclosure of Product Risks
Classification-JEL: D18; D62; D82; H23; K13; L15
Author-Name: A. Mitchell Polinsky
Author-Person: ppo94
Author-Name: Steven Shavell
Author-Person: psh42
Note: LE CF
Number: 12776
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12776
File-URL: http://www.nber.org/papers/w12776.pdf
File-Format: application/pdf
Publication-Status: published as A. Mitchell Polinsky & Steven Shavell, 2012. "Mandatory Versus Voluntary Disclosure of Product Risks," Journal of Law, Economics and Organization, Oxford University Press, vol. 28(2), pages 360-379.
Abstract: We analyze a model in which firms are able to acquire information about product risks and may or may not be required to disclose this information. We initially study the effect of disclosure rules assuming that firms are not liable for the harm caused by their products. Although mandatory disclosure obviously is superior to voluntary disclosure given the information about product risks that firms possess -- since such information has value to consumers -- voluntary disclosure induces firms to acquire more information about product risks because they can keep silent if the information is unfavorable. The latter effect could lead to higher social welfare under voluntary disclosure. The same results hold if firms are liable for harm under the negligence standard of liability. Under strict liability, however, firms are indifferent about revealing information concerning product risk, and mandatory and voluntary disclosure rules are equivalent.
Handle: RePEc:nbr:nberwo:12776
Template-Type: ReDIF-Paper 1.0
Title: Is the Endangered Species Act Endangering Species?
Classification-JEL: H23; H41; Q27
Author-Name: John A. List
Author-Person: pli176
Author-Name: Michael Margolis
Author-Name: Daniel E. Osgood
Note: PE EEE
Number: 12777
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12777
File-URL: http://www.nber.org/papers/w12777.pdf
File-Format: application/pdf
Abstract: We develop theory and present a suite of theoretically consistent empirical measures to explore the extent to which market intervention inadvertently alters resource allocation in a sequentialmove principal/agent game. We showcase our approach empirically by exploring the extent to which the U.S. Endangered Species Act has altered land development patterns. We report evidence indicating significant acceleration of development directly after each of several events deemed likely to raise fears among owners of habitat land. Our preferred estimate suggests an overall acceleration of land development by roughly one year. We also find from complementary hedonic regression models that habitat parcels declined in value when the habitat map was published, which is consistent with our estimates of the degree of preemption. These results have clear implications for policymakers, who continue to discuss alternative regulatory frameworks for species preservation. More generally, our modeling strategies can be widely applied -- from any particular economic environment that has a sequential-move nature to the narrower case of the political economy of regulation.
Handle: RePEc:nbr:nberwo:12777
Template-Type: ReDIF-Paper 1.0
Title: Socially Optimal Coordination: Characterization and Policy Implications
Classification-JEL: C72; D62; D82; E3; E5
Author-Name: George-Marios Angeletos
Author-Person: pan143
Author-Name: Alessandro Pavan
Author-Person: ppa367
Note: EFG ME
Number: 12778
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12778
File-URL: http://www.nber.org/papers/w12778.pdf
File-Format: application/pdf
Publication-Status: published as George-Marios Angeletos & Alessandro Pavan, 2007. "Socially Optimal Coordination: Characterization and Policy Implications," Journal of the European Economic Association, MIT Press, vol. 5(2-3), pages 585-593, 04-05.
Abstract: In recent years there has been a growing interest in macro models with heterogeneity in information and complementarity in actions. These models deliver promising positive properties, such as heightened inertia and volatility. But they also raise important normative questions, such as whether the heightened inertia and volatility are socially undesirable, whether there is room for policies that correct the way agents use information in equilibrium, and what are the welfare effects of the information disseminated by the media or policy makers. We argue that a key to answering all these questions is the relation between the equilibrium and the socially optimal degrees of coordination. The former summarizes the private value from aligning individual decisions, whereas the latter summarizes the value that society assigns to such an alignment once all externalities are internalized.
Handle: RePEc:nbr:nberwo:12778
Template-Type: ReDIF-Paper 1.0
Title: Rural Income Volatility and Inequality in China
Classification-JEL: O15; O20; O53
Author-Name: John Whalley
Author-Person: pwh8
Author-Name: Ximing Yue
Note: LS
Number: 12779
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12779
File-URL: http://www.nber.org/papers/w12779.pdf
File-Format: application/pdf
Publication-Status: published as John Whalley & Ximing Yue, 2009. "Rural Income Volatility and Inequality in China," CESifo Economic Studies, Oxford University Press, vol. 55(3-4), pages 648-668.
Abstract: Available data indicates a growing urban-rural income gap (the ratio of mean urban to rural incomes) with a significant increase from around 1.8 in the late 1980's to over 3 today. These estimates do not take into account the higher volatility of rural incomes in China. Current literature based on analyses of rural income volatility in China decomposes poverty into chronic and transient components using longitudinal survey data and assesses the fraction of the Foster, Greer and Thorbecke poverty gap attributable to mean income over time being below the poverty line. Resulting estimates of 40-50 % transient poverty point to the policy conclusion that poverty may be a less serious social problem than it appears in annual data due to rural income volatility. Here we use a direct method instead to adjust rural income for volatility using a certainty equivalent income measure and recompute summary statistics for the distribution of volatility corrected incomes, including the urban-rural income gap on which much of current poverty debate in China focuses. Since an uncertain income stream is worth less in utility terms than a certain income stream we argue that heightened rural volatility increases the effective urban-rural income gap and intensifies not weakens poverty concerns. Using Chinese longitudinal rural survey data for which current decompositions can be replicated, we make adjustments for certainty equivalence of rural household income streams which not only widen the urban-rural income gap in China but also increases other distributional summary statistics. Depending upon values used for the coefficient of relative risk aversion, the measured urban-rural income gap increases by 20-30% using a certainty equivalent measure to adjust rural incomes for volatility. We also conduct similar analyses using consumption data, for which slightly larger increases occur.
Handle: RePEc:nbr:nberwo:12779
Template-Type: ReDIF-Paper 1.0
Title: State-Owned Enterprise Behaviour Responses to Trade Reforms: Some Analytics and Numerical Simulation Results Using Chinese Data
Classification-JEL: F00; F13; P2
Author-Name: John Whalley
Author-Person: pwh8
Author-Name: Shunming Zhang
Note: ITI
Number: 12780
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12780
File-URL: http://www.nber.org/papers/w12780.pdf
File-Format: application/pdf
Abstract: We note the absence of prior literature on analytical structures to be used for China and other economies with extensive SOEs when evaluating behavioural responses of SOEs to trade policy and other changes. This is despite both the large empirical literature discussing the productivity effects of Chinese SOE enterprise reform, and wider policy discussion of the potential impacts of various reform initiatives. We present two simple analytical formulations of SOE behaviour in response to trade policy change with the aim of investigating how traditional competitive models of enterprise behaviour can mislead when used in policy debate. One formulation centres on SOE managerial control. In this enterprise managers are politically appointed, expect any non performing loans to be recapitalized by state banks andhence capital is centrally allocated by credit rationing. The managers are assured to maximize the size of the enterprise rather than profits since this yields maximal networking benefits to managers. This implies labour is priced at its average rather than its marginal product, and with a competitive non-manufacturing (agricultural) industry free trade is not optimal policy. The other assumes worker control of SOEs and that workers satisfice in their supply of effort to the enterprise given both fixed wage rates and enterprise employment and otherwise shirk or pursue second jobs. In this formulation the enterprise meets their budget constraint and covers costs. With leisure in the preferences of enterprise members, their leisure consumption will be implied by the satisfying behaviour of the enterprise and will be non optimal. In both model variants, implications for trade policy are different from those of a standard competitive model, and computations using models calibrated to 2003 Chinese data suggest the differences can be large.
Handle: RePEc:nbr:nberwo:12780
Template-Type: ReDIF-Paper 1.0
Title: Heterogeneous Expectations and Bond Markets
Classification-JEL: E43; G12
Author-Name: Wei Xiong
Author-Person: pxi88
Author-Name: Hongjun Yan
Author-Person: pya276
Note: AP ME
Number: 12781
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12781
File-URL: http://www.nber.org/papers/w12781.pdf
File-Format: application/pdf
Publication-Status: published as Xiong, Wei and Hongjun Yan. “Heterogeneous Expectations and Bond Markets." Review of Financial Studies 23, 4 (2010): 1433-1466.
Abstract: This paper presents a dynamic equilibrium model of bond markets, in which two groups of agents hold heterogeneous expectations about future economic conditions. Our model shows that heterogeneous expectations can not only lead to speculative trading, but can also help resolve several challenges to standard representative-agent models of the yield curve. First, the relative wealth fluctuation between the two groups of agents caused by their speculative positions amplifies bond yield volatility, thus providing an explanation for the "excessive volatility puzzle" of bond yields. In addition, the fluctuation in the two groups' expectations and relative wealth also generates time-varying risk premia, which in turn can help explain the failure of the expectation hypothesis. These implications, essentially induced by trading between agents, highlight the importance of incorporating heterogeneous expectations into economic analysis of bond markets.
Handle: RePEc:nbr:nberwo:12781
Template-Type: ReDIF-Paper 1.0
Title: Multi-Product Firms and Trade Liberalization
Classification-JEL: F12; F13; L1
Author-Name: Andrew B. Bernard
Author-Name: Stephen J. Redding
Author-Person: pre64
Author-Name: Peter K. Schott
Author-Person: psc98
Note: IO ITI
Number: 12782
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12782
File-URL: http://www.nber.org/papers/w12782.pdf
File-Format: application/pdf
Publication-Status: published as Bernard, Andrew, Stephen Redding and Peter K. Schott. "Multi-Product Firms and Trade Liberalization." The Quarterly Journal of Economics (2011) 126 (3): 1271-1318.
Abstract: This paper develops a general equilibrium model of multi-product firms and analyzes their behavior during trade liberalization. Firm productivity in a given product is modeled as a combination of firm-level "ability" and firm-product-level "expertise", both of which are stochastic and unknown prior to the firm's payment of a sunk cost of entry. Higher firm-level ability raises a firm's productivity across all products, which induces a positive correlation between a firm's intensive (output per product) and extensive (number of products) margins. Trade liberalization fosters productivity growth within and across firms and in aggregate by inducing firms to shed marginally productive products and forcing the lowest-productivity firms to exit. Though exporters produce a smaller range of products after liberalization, they increase the share of products sold abroad as well as exports per product. All of these adjustments are shown to be relatively more pronounced in countries' comparative advantage industries.
Handle: RePEc:nbr:nberwo:12782
Template-Type: ReDIF-Paper 1.0
Title: Sovereign Risk and Secondary Markets
Classification-JEL: F34; F36; G15
Author-Name: Fernando Broner
Author-Person: pbr162
Author-Name: Alberto Martin
Author-Person: pma513
Author-Name: Jaume Ventura
Author-Person: pve110
Note: IFM
Number: 12783
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12783
File-URL: http://www.nber.org/papers/w12783.pdf
File-Format: application/pdf
Publication-Status: published as Fernando Broner & Alberto Martin & Jaume Ventura, 2010. "Sovereign Risk and Secondary Markets," American Economic Review, American Economic Association, vol. 100(4), pages 1523-55, September.
Abstract: Conventional wisdom says that, in the absence of sufficient default penalties, sovereign risk constrains credit and lowers welfare. We show that this conventional wisdom rests on one implicit assumption: that assets cannot be retraded in secondary markets. Once this assumption is relaxed, there is always an equilibrium in which sovereign risk is stripped of its conventional effects. In such an equilibrium, foreigners hold domestic debts and resell them to domestic residents before enforcement. In the presence of (even arbitrarily small) default penalties, this equilibrium is shown to be unique. As a result, sovereign risk neither constrains welfare nor lowers credit. At most, it creates some additional trade in secondary markets. The results presented here suggest a change in perspective regarding the origins of sovereign risk and its remedies. To argue that sovereign risk constrains credit, one must show both the insufficiency of default penalties and the imperfect workings of secondary markets. To relax credit constraints created by sovereign risk, one can either increase default penalties or improve the workings of secondary markets.
Handle: RePEc:nbr:nberwo:12783
Template-Type: ReDIF-Paper 1.0
Title: Regulating Misinformation
Classification-JEL: A1
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Author-Name: Gergely Ujhelyi
Author-Person: puj2
Note: PE IO
Number: 12784
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12784
File-URL: http://www.nber.org/papers/w12784.pdf
File-Format: application/pdf
Publication-Status: published as Glaeser, Edward L. and Gergely Ujhelyi. "Regulating Misinformation." Journal of Public Economics 94, 3-4 (April 2010): 247-257.
Abstract: The government has responded to misleading advertising by banning it, engaging in counter-advertising and taxing the product. In this paper, we consider the social welfare effects of those different responses to misinformation. While misinformation lowers consumer surplus, its effect on social welfare is ambiguous. Misleading advertising leads to overconsumption but that may be offsetting the under-consumption associated with monopoly prices. If all advertising is misinformation then a tax or quantity restriction on advertising maximizes social welfare. Other policy interventions are inferior and cannot improve on a pure advertising tax. If it is impossible to tax misleading information without also taxing utility increasing advertising, then combining taxes or bans on advertising with other policies can increase welfare.
Handle: RePEc:nbr:nberwo:12784
Template-Type: ReDIF-Paper 1.0
Title: Online Auctions
Classification-JEL: D44
Author-Name: Axel Ockenfels
Author-Person: poc7
Author-Name: David Reiley
Author-Person: pre371
Author-Name: Abdolkarim Sadrieh
Author-Person: psa386
Note: IO
Number: 12785
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12785
File-URL: http://www.nber.org/papers/w12785.pdf
File-Format: application/pdf
Abstract: The economic literature on online auctions is rapidly growing because of the enormous amount of freely available field data. Moreover, numerous innovations in auction-design features on platforms such as eBay have created excellent research opportunities. In this article, we survey the theoretical, empirical, and experimental research on bidder strategies (including the timing of bids and winner's-curse effects) and seller strategies (including reserve-price policies and the use of buy-now options) in online auctions, as well as some of the literature dealing with online-auction design (including stopping rules and multi-object pricing rules).
Handle: RePEc:nbr:nberwo:12785
Template-Type: ReDIF-Paper 1.0
Title: Long-Term Changes in Labor Supply and Taxes: Evidence from OECD Countries, 1956-2004
Classification-JEL: E2; J22
Author-Name: Lee Ohanian
Author-Person: poh1
Author-Name: Andrea Raffo
Author-Person: pra187
Author-Name: Richard Rogerson
Author-Person: pro53
Note: EFG PE LS
Number: 12786
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12786
File-URL: http://www.nber.org/papers/w12786.pdf
File-Format: application/pdf
Publication-Status: published as Ohanian, Lee & Raffo, Andrea & Rogerson, Richard, 2008. "Long-term changes in labor supply and taxes: Evidence from OECD countries, 1956-2004," Journal of Monetary Economics, Elsevier, vol. 55(8), pages 1353-1362, November.
Abstract: We document large differences in trend changes in hours worked across OECD countries over the period 1956-2004. We then assess the extent to which these changes are consistent with the intratemporal first order condition from the neoclassical growth model. We find large and trending deviations from this condition, and that the model can account for virtually none of the changes in hours worked. We then extend the model to incorporate observed changes in taxes. Our findings suggest that taxes can account for much of the variation in hours worked both over time and across countries.
Handle: RePEc:nbr:nberwo:12786
Template-Type: ReDIF-Paper 1.0
Title: Housing Dynamics
Classification-JEL: A1
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Author-Name: Joseph Gyourko
Author-Person: pgy3
Note: PE AP
Number: 12787
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12787
File-URL: http://www.nber.org/papers/w12787.pdf
File-Format: application/pdf
Abstract: The key stylized facts of the housing market are positive serial correlation of price changes at one year frequencies and mean reversion over longer periods, strong persistence in construction, and highly volatile prices and construction levels within markets. We calibrate a dynamic model of housing in the spatial equilibrium tradition of Rosen and Roback to see whether such a model can generate these facts. With reasonable parameter values, this model readily explains the mean reversion of prices over five year periods, but cannot explain the observed positive serial correlation at higher frequencies. The model predicts the positive serial correlation of new construction that we see in the data and the volatility of both prices and quantities in the typical market, but not the volatility of the nation's more extreme markets. The strong serial correlation in annual house price changes and the high volatility of prices in coastal markets are the two biggest housing market puzzles. More research is needed to determine whether measurement error-related data smoothing or market inefficiency can best account for the persistence of high frequency price changes. The best rational explanations of the volatility in high cost markets are shocks to interest rates and unobserved income shocks.
Handle: RePEc:nbr:nberwo:12787
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy Challenges in Emerging Markets: Sudden Stop, Liability Dollarization, and Lender of Last Resort
Classification-JEL: E52; E58; F32
Author-Name: Guillermo A. Calvo
Author-Person: pca694
Note: ME IFM
Number: 12788
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12788
File-URL: http://www.nber.org/papers/w12788.pdf
File-Format: application/pdf
Abstract: The paper argues that Emerging Market economies (EMs) face financial vulnerabilities that weaken the effectiveness of a domestic Lender of Last Resort (LOLR). As a result, monetary policy is inextricably linked to the state of the credit market. In particular, the central bank should be ready to operate as LOLR during Sudden Stop (of capital inflows) by releasing international reserves in an effective manner. These conditions also impact on optimal monetary policy in normal but high-volatility periods. The paper further argues that during those periods interest rate rules may engender excessive volatility of exchange rates and, thus, that it may be advisable to temporarily supplement those rules by foreign exchange market intervention or outright exchange rate pegging. At a fundamental level, the analysis suggests that the state-of-the-art literature summarized by Woodford (2003) or even more heterodox approaches exemplified by Stiglitz and Greenwald (2003) likely fall short of providing a satisfactory guide for monetary policy in EMs.
Handle: RePEc:nbr:nberwo:12788
Template-Type: ReDIF-Paper 1.0
Title: When is Democracy an Equilibrium?: Theory and Evidence from Colombia's "La Violencia"
Classification-JEL: D72
Author-Name: Mario Chacon
Author-Name: James A. Robinson
Author-Person: pro179
Author-Name: Ragnar Torvik
Author-Person: pto24
Note: DAE POL
Number: 12789
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12789
File-URL: http://www.nber.org/papers/w12789.pdf
File-Format: application/pdf
Publication-Status: published as Mario Chacón & James A. Robinson & Ragnar Torvik, 2011. "When is Democracy an Equilibrium? Theory and Evidence from Colombia's La Violencia," Journal of Conflict Resolution, Peace Science Society (International), vol. 55(3), pages 366-396, June.
Abstract: The conventional wisdom in political science is that for a democracy to be consolidated, all groups must have a chance to attain power. If they do not then they will subvert democracy and choose to fight for power. In this paper we show that this wisdom is seriously incomplete because it considers absolute, not relative payoffs. Although the probability of winning an election increases with the size of a group, so does the probability of winning a fight. Thus in a situation where all groups have a high chance of winning an election, they may also have a high chance of winning a fight. Indeed, in a natural model, we show that democracy may never be consolidated in such a situation. Rather, democracy may only be stable when one group is dominant. We provide a test of a key aspect of our model using data from "La Violencia", a political conflict in Colombia during the years 1946-1950 between the Liberal and Conservative parties. Consistent with our results, and contrary to the conventional wisdom, we show that fighting between the parties was more intense in municipalities where the support of the parties was more evenly balanced.
Handle: RePEc:nbr:nberwo:12789
Template-Type: ReDIF-Paper 1.0
Title: Lead Them to Water and Pay Them to Drink: An Experiment with Services and Incentives for College Achievement
Classification-JEL: I22; I28; J24
Author-Name: Joshua Angrist
Author-Person: pan29
Author-Name: Daniel Lang
Author-Name: Philip Oreopoulos
Author-Person: por38
Note: CH ED LS PE
Number: 12790
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12790
File-URL: http://www.nber.org/papers/w12790.pdf
File-Format: application/pdf
Publication-Status: published as Angrist, Joshua, Daniel Lang, and Philip Oreopoulos. “Incentives and Services for College Achievement: Evidence from a Randomized Trial." American Economic Journal: Applied Economics 1, 1 (January 2009): 136-163.
Abstract: High rates of attrition, delayed completion, and poor achievement are growing concerns at colleges and universities in North America. This paper reports on a randomized field experiment involving two strategies designed to improve these outcomes among first-year undergraduates at a large Canadian university. One treatment group was offered peer advising and organized study group services. Another was offered substantial merit-scholarships for solid, but not necessarily top, first year grades. A third treatment group combined both interventions. Service take-up rates were much higher for students offered both services and scholarships than for those offered services alone. Females also used services more than males. No program had an effect on grades for males. However, first-term grades were significantly higher for females in the two scholarship treatment groups. These effects faded somewhat by year's end, but remain significant for females who planned to take enough courses to qualify for a scholarship. There also appears to have been an effect on retention for females offered both scholarships and services. This effect is large enough to generate an overall increase in retention. On balance, the results suggest that a combination of services and incentives is more promising than either alone.
Handle: RePEc:nbr:nberwo:12790
Template-Type: ReDIF-Paper 1.0
Title: Fixed-Term Employment Contracts in an Equilibrium Search Model
Classification-JEL: E24; J08; J3; J31; J63; J64; J65
Author-Name: Fernando Alvarez
Author-Name: Marcelo Veracierto
Author-Person: pve139
Note: EFG LS
Number: 12791
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12791
File-URL: http://www.nber.org/papers/w12791.pdf
File-Format: application/pdf
Publication-Status: published as Alvarez, Fernando & Veracierto, Marcelo, 2012. "Fixed-term employment contracts in an equilibrium search model," Journal of Economic Theory, Elsevier, vol. 147(5), pages 1725-1753.
Abstract: This paper analyzes the effects of fixed-term contracts using a version of the Lucas and Prescott island model with undirected search. A fixed-term contract of length J is modeled as a tax on separations of workers with tenure higher than J . While in principle these policies require a very large state space to analyze the firms and households' problems, we show that equilibrium allocations solve a simple dynamic programming problem. Analyzing this problem we show that equilibrium employment dynamics are characterized by two dimensional inaction sets. Finally, to understand the effect of these contracts, we compare them with two extreme cases: for J = 1 the fixed-term contracts are equivalent to the case of firing taxes, and for large J they are equivalent to the laissez-faire case. In a calibrated version of the model, we find that temporary contracts with J equivalent to three years length close about half of the gap between those two extremes.
Handle: RePEc:nbr:nberwo:12791
Template-Type: ReDIF-Paper 1.0
Title: Entrepreneurial Learning, the IPO Decision, and the Post-IPO Drop in Firm Profitability
Classification-JEL: G1; G3
Author-Name: Lubos Pastor
Author-Person: ppa276
Author-Name: Lucian Taylor
Author-Name: Pietro Veronesi
Note: AP CF
Number: 12792
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12792
File-URL: http://www.nber.org/papers/w12792.pdf
File-Format: application/pdf
Publication-Status: published as &Lubos Pástor & Lucian A. Taylor & Pietro Veronesi, 2009. "Entrepreneurial Learning, the IPO Decision, and the Post-IPO Drop in Firm Profitability," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 22(8), pages 3005-3046, August.
Abstract: We develop a model in which an entrepreneur learns about the average profitability of a private firm before deciding whether to take the firm public. In this decision, the entrepreneur trades off diversification benefits of going public against benefits of private control. The model predicts that firm profitability should decline after the IPO, on average, and that this decline should be larger for firms with more volatile profitability and firms with less uncertain average profitability. These predictions are supported empirically in a sample of 7,183 IPOs in the U.S. between 1975 and 2004.
Handle: RePEc:nbr:nberwo:12792
Template-Type: ReDIF-Paper 1.0
Title: When Is It Optimal to Abandon a Fixed Exchange Rate?
Classification-JEL: F31
Author-Name: Sergio Rebelo
Author-Name: Carlos A. Vegh
Author-Person: pve34
Note: IFM
Number: 12793
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12793
File-URL: http://www.nber.org/papers/w12793.pdf
File-Format: application/pdf
Publication-Status: published as Rebelo, Sergio and Carlos Vegh. "When is it Optimal to Abandon a Fixed Exchange Rate." Review of Economic Studies 75, 3 (2008): 929-955.
Abstract: The influential Krugman-Flood-Garber (KFG) model of balance of payment crises assumes that a fixed exchange rate is abandoned if and only if international reserves reach a critical threshold value. From a positive standpoint, the KFG rule is at odds with many episodes in which the central bank has plenty of international reserves at the time of abandonment. We study the optimal exit policy and show that, from a normative standpoint, the KFG rule is generally suboptimal. We consider a model in which the fixed exchange rate regime has become unsustainable due to an unexpected increase in government spending. We show that, when there are no exit costs, it is optimal to abandon immediately. When there are exit costs, the optimal abandonment time is a decreasing function of the size of the fiscal shock. For large fiscal shocks, immediate abandonment is optimal. Our model is consistent with evidence suggesting that many countries exit fixed exchange rate regimes with still plenty of international reserves in the central bank's vault.
Handle: RePEc:nbr:nberwo:12793
Template-Type: ReDIF-Paper 1.0
Title: Coping with Disaster: The Impact of Hurricanes on International Financial Flows, 1970-2002
Classification-JEL: F21; F22; F34; F35; O19; Q54
Author-Name: Dean Yang
Author-Person: pya75
Note: IFM ITI
Number: 12794
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12794
File-URL: http://www.nber.org/papers/w12794.pdf
File-Format: application/pdf
Publication-Status: published as Yang Dean, 2008. "Coping with Disaster: The Impact of Hurricanes on International Financial Flows, 1970-2002," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-45, June.
Abstract: How well do countries cope with the aftermath of natural disasters? In particular, do international financial flows help buffer countries in the wake of disasters? This paper focuses on hurricanes (one of the most common and destructive types of disasters), and examines the impact of hurricane exposure on resource flows to developing countries. Using meteorological data on storm paths, I construct a time-varying storm index that takes into account the fraction of a country's population exposed to storms of varying intensities. Across developing countries, greater hurricane exposure leads to large increases in foreign aid. For other types of international financial flows, the impact of hurricanes varies according to income level. In the poorer half of the sample, hurricane exposure leads to substantial increases in migrants' remittances, so that total inflows from all sources in the three years following hurricane exposure amount to roughly three-fourths of estimated damages. In the richer half of the sample, by contrast, hurricane exposure stimulates inflows of new lending from multilateral institutions, but offsetting declines in private financial flows are so large that the null hypothesis of zero damage replacement cannot be rejected.
Handle: RePEc:nbr:nberwo:12794
Template-Type: ReDIF-Paper 1.0
Title: A Conceptual Framework for Interpreting Recorded Human History
Classification-JEL: A1; K0; K22; N0; N4; N40; O1; O4; P0; P1; P16; P2
Author-Name: Douglass C. North
Author-Name: John Joseph Wallis
Author-Name: Barry R. Weingast
Author-Person: pwe334
Note: DAE
Number: 12795
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12795
File-URL: http://www.nber.org/papers/w12795.pdf
File-Format: application/pdf
Publication-Status: published as North, Douglas, John Joseph Wallis, and Barry Weingast. Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History. Cambridge and New York: Cambridge University Press, 2009.
Abstract: Neither economics nor political science can explain the process of modern social development. The fact that developed societies always have developed economies and developed polities suggests that the connection between economics and politics must be a fundamental part of the development process. This paper develops an integrated theory of economics and politics. We show how, beginning 10,000 years ago, limited access social orders developed that were able to control violence, provide order, and allow greater production through specialization and exchange. Limited access orders provide order by using the political system to limit economic entry to create rents, and then using the rents to stabilize the political system and limit violence. We call this type of political economy arrangement a natural state. It appears to be the natural way that human societies are organized, even in most of the contemporary world. In contrast, a handful of developed societies have developed open access social orders. In these societies, open access and entry into economic and political organizations sustains economic and political competition. Social order is sustained by competition rather than rent-creation. The key to understanding modern social development is understanding the transition from limited to open access social orders, which only a handful of countries have managed since WWII.
Handle: RePEc:nbr:nberwo:12795
Template-Type: ReDIF-Paper 1.0
Title: An Economic History of Fertility in the U.S.: 1826-1960
Classification-JEL: J1; J11; N30
Author-Name: Larry E. Jones
Author-Person: pjo88
Author-Name: Michele Tertilt
Author-Person: pte114
Note: CH DAE
Number: 12796
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12796
File-URL: http://www.nber.org/papers/w12796.pdf
File-Format: application/pdf
Publication-Status: published as Larry E. Jones, Michèle Tertilt “Chapter 5 An Economic History of Fertility in the United States: 1826–1960.” Volume 1 - Frontiers of Family Economics, ed Peter Rupert. (pp. 165 - 230)
Abstract: In this paper, we use data from the US census to document the history of the relationship between fertility choice and key economic indicators at the individual level for women born between 1826 and 1960. We find that this data suggests several new facts that should be useful for researchers trying to model fertility. (1) The reduction in fertility known as the Demographic Transition (or the Fertility Transition) seems to be much sharper based on cohort fertility measures compared to usual measures like Total Fertility Rate; (2) The baby boom was not quite as large as is suggested by some previous work; (3) We find a strong negative relationship between income and fertility for all cohorts and estimate an overall income elasticity of about -0.38 for the period; (4) We also find systematic deviations from a time invariant, isoelastic, relationship between income and fertility. The most interesting of these is an increase in the income elasticity of demand for children for the 1876-1880 to 1906-1910 birth cohorts. This implies an increased spread in fertility by income which was followed by a dramatic compression.
Handle: RePEc:nbr:nberwo:12796
Template-Type: ReDIF-Paper 1.0
Title: Multifrequency Jump-Diffusions: An Equilibrium Approach
Classification-JEL: C5; D53; G0; G12
Author-Name: Laurent E. Calvet
Author-Person: pca582
Author-Name: Adlai J. Fisher
Author-Person: pfi214
Note: EFG
Number: 12797
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12797
File-URL: http://www.nber.org/papers/w12797.pdf
File-Format: application/pdf
Publication-Status: published as Calvet, Laurent E. & Fisher, Adlai J., 2008. "Multifrequency jump-diffusions: An equilibrium approach," Journal of Mathematical Economics, Elsevier, vol. 44(2), pages 207-226, January.
Abstract: This paper proposes that equilibrium valuation is a powerful method to generate endogenous jumps in asset prices, which provides a structural alternative to traditional reduced-form specifications with exogenous discontinuities. We specify an economy with continuous consumption and dividend paths, in which endogenous price jumps originate from the market impact of regime-switches in the drifts and volatilities of fundamentals. We parsimoniously incorporate shocks of heterogeneous durations in consumption and dividends while keeping constant the number of parameters. Equilibrium valuation creates an endogenous relation between a shock's persistence and the magnitude of the induced price jump. As the number of frequencies driving fundamentals goes to infinity, the price process converges to a novel stochastic process, which we call a multifractal jump-diffusion.
Handle: RePEc:nbr:nberwo:12797
Template-Type: ReDIF-Paper 1.0
Title: Optimal Executive Compensation vs. Managerial Power: A Review of Lucian Bebchuk and Jesse Fried's "Pay without Performance: The Unfulfilled Promise of Executive Compensation"
Classification-JEL: G3; J4; K22
Author-Name: Michael S. Weisbach
Note: CF LE LS
Number: 12798
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12798
File-URL: http://www.nber.org/papers/w12798.pdf
File-Format: application/pdf
Publication-Status: published as Michael S. Weisbach, 2007. "Optimal Executive Compensation versus Managerial Power: A Review of Lucian Bebchuk and Jesse Fried’s Pay without Performance: The Unfulfilled Promise of Executive Compensation," Journal of Economic Literature, American Economic Association, vol. 45(2), pages 419-428, June.
Abstract: This essay reviews Bebchuk and Fried's "Pay without Performance: The Unfulfilled Promise of Executive Compensation". Bebchuk and Fried criticize the standard view of executive compensation, in which executives negotiate contracts with shareholders that provide incentives that motivate them to maximize the shareholders' welfare. In contrast, Bebchuk and Fried argue that executive compensation is more consistent with executives who control their own boards, and who maximize their own compensation subject to an "outrage constraint". They provide a host of evidence consistent with this alternative viewpoint. The book can be evaluated from both a positive and a normative perspective. From a positive perspective, much of the evidence they present, especially about the camouflage and risk-taking aspects of executive compensation systems, is fairly persuasive. However, from a normative perspective, the book conveys the idea that policy changes can dramatically improve executive compensation systems and consequently overall corporate performance. It is unclear to me how effective in practice are potential reforms designed to achieve such changes likely to be.
Handle: RePEc:nbr:nberwo:12798
Template-Type: ReDIF-Paper 1.0
Title: We Can Work It Out - The Globalisation of ICT-enabled Services
Classification-JEL: F1; F16; F2; J24; J62
Author-Name: Desiree van Welsum
Author-Person: pva145
Author-Name: Xavier Reif
Note: ITI LS
Number: 12799
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12799
File-URL: http://www.nber.org/papers/w12799.pdf
File-Format: application/pdf
Publication-Status: published as Desireé van Welsum & Xavier Reif, 2009. "We Can Work It Out: The Globalization of ICT-Enabled Services," NBER Chapters, in: International Trade in Services and Intangibles in the Era of Globalization National Bureau of Economic Research, Inc.
Abstract: This paper examines the relationship between the share of employment potentially affected by offshoring and economic and structural factors, including trade in business services and foreign direct investment (FDI), using simple descriptive regressions for a panel of OECD economies between 1996 and 2003. It tests whether there are differences in the factors driving the shares of potentially offshorable "non-clerical" and clerical occupations in total employment. The results show a positive statistical association between the share of both "non-clerical" and clerical occupations potentially affected by offshoring and exports of business services, and a negative association with imports of business services. However, the results also show important differences between different types of occupations as they behave differently over time, and are affected differently by variables included in the model. In particular, net outward manufacturing FDI, ICT investment, and the relative size of the services sector all have a positive association with the share of potentially offshorable "non-clerical" occupations, but are negative with clerical occupations. Union density has a positive statistical association with clerical occupations but negative with "non-clerical" occupations. These results have important implications for policy, as they clearly suggest that different factors are driving the performance of different occupational groups.
Handle: RePEc:nbr:nberwo:12799
Template-Type: ReDIF-Paper 1.0
Title: Immigration and the Survival of Social Security: A Political Economy Model
Classification-JEL: F22; H55
Author-Name: Edith Sand
Author-Person: psa1976
Author-Name: Assaf Razin
Author-Person: pra388
Note: IFM
Number: 12800
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12800
File-URL: http://www.nber.org/papers/w12800.pdf
File-Format: application/pdf
Abstract: In the political debate people express the idea that immigrants are good because they can help pay for the old. The paper explores this idea in a dynamic political-economy setup. For this purpose we develop an OLG political economy model of social security and migration. We characterize sub-game perfect Markov equilibria where immigration policy and pay-as-you-go (PAYG) social security system are jointly determined through a majority voting process. The main feature of the model is that immigrants are desirable for the sustainability of the social security system because the political system is able to manipulate the ratio of old to young and thereby the coalition which supports future high social security benefits. We demonstrate that the older is the native born population the more likely is that the immigration policy is liberalized and the social security system survives.
Handle: RePEc:nbr:nberwo:12800
Template-Type: ReDIF-Paper 1.0
Title: Did Big Government's Largesse Help the Locals? The Implications of WWII Spending for Local Economic Activity, 1939-1958
Classification-JEL: H50; N32; N42; N92; R11
Author-Name: Joseph Cullen
Author-Name: Price V. Fishback
Author-Person: pfi13
Note: DAE PE EFG
Number: 12801
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12801
File-URL: http://www.nber.org/papers/w12801.pdf
File-Format: application/pdf
Abstract: Studies of the development of local economies often point to large-scale World War II military spending as a source of long-term economic growth, even though the spending declined sharply after the demobilization. We examine the longer term impact of the temporary war spending on county economies using a variety of measures of socioeconomic activity: including per capita retail sales, the extent of manufacturing, population growth, the share of women in the work force, housing values and ownership, and per capita savings over the period 1940-1950. We find that in the longer term counties receiving more war spending per capita during the war experienced extensive growth due to increases in population but not intensive growth, as the war spending had very small impacts on per capita measures of economic activity.
Handle: RePEc:nbr:nberwo:12801
Template-Type: ReDIF-Paper 1.0
Title: Which Countries Become Tax Havens?
Classification-JEL: H25; H87; K10
Author-Name: Dhammika Dharmapala
Author-Person: pdh6
Author-Name: James R. Hines Jr.
Author-Person: phi111
Note: IFM ITI PE
Number: 12802
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12802
File-URL: http://www.nber.org/papers/w12802.pdf
File-Format: application/pdf
Publication-Status: published as Dharmapala, Dhammika & Hines Jr., James R., 2009. "Which countries become tax havens?," Journal of Public Economics, Elsevier, vol. 93(9-10), pages 1058-1068, October.
Abstract: This paper analyzes the factors influencing whether countries become tax havens. Roughly 15 percent of countries are tax havens; as has been widely observed, these countries tend to be small and affluent. This paper documents another robust empirical regularity: better-governed countries are much more likely than others to become tax havens. Using a variety of empirical approaches, and controlling for other relevant factors, governance quality has a statistically significant and quantitatively large impact on the probability of being a tax haven. For a typical country with a population under one million, the likelihood of a becoming a tax haven rises from 24 percent to 63 percent as governance quality improves from the level of Brazil to that of Portugal. The effect of governance on tax haven status persists when the origin of a country's legal system is used as an instrument for its quality of its governance. Low tax rates offer much more powerful inducements to foreign investment in well-governed countries than elsewhere, which may explain why poorly governed countries do not generally attempt to become tax havens -- and suggests that the range of sensible tax policy options is constrained by the quality of governance.
Handle: RePEc:nbr:nberwo:12802
Template-Type: ReDIF-Paper 1.0
Title: Black Box Warnings and Drug Safety: Examining the Determinants and Timing of FDA Warning Labels
Classification-JEL: I1; I11; I18; I28; K2; K23; K32
Author-Name: Allan Begosh
Author-Name: John Goldsmith
Author-Name: Ed Hass
Author-Name: Randall W. Lutter
Author-Person: plu323
Author-Name: Clark Nardinelli
Author-Name: John A. Vernon
Note: EH LE
Number: 12803
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12803
File-URL: http://www.nber.org/papers/w12803.pdf
File-Format: application/pdf
Abstract: Comparing the safety of prescription drugs over time is difficult due to the paucity of reliable quantitative measures of drug safety. Both the academic literature and popular press have focused on drug withdrawals as a proxy for breakdowns in the drug safety system. This metric, however, is problematic because withdrawals are rare events, and they may be influenced by factors beyond a drug's safety profile. In the current paper, we propose a new measure: the incidence and timing of Black Box Warnings (BBWs). BBWs are warnings placed on prescription drug labels when a drug is determined to carry a significant risk of a serious or life-threatening adverse event. Using a unique data set, one that includes all new molecular entities (NMEs) submitted to the FDA between May 1981 and February 2006, and subsequently approved and marketed, we analyze the timing and incidence of BBWs. Our analyses also use data on several drug characteristics likely to affect the probability a new drug will receive a BBW. We draw several conclusions from our analyses. For example, drugs receiving priority FDA review are more likely to have BBWs at the time of approval than NMEs receiving standard review. We also find that early prescription volume and orphan drug status are associated with an increased likelihood of receiving a BBW. We do not, however, find a significant difference in the rate of BBWs across time cohorts. A comparison of NMEs approved before and after the 1992 Prescription Drug User Fee Act (PDUFA), which authorized the payment of user fees from drug manufacturers to the FDA in an effort to expedite new drug application (NDAs) review times, did not reveal a statistically significant difference in the rate of BBWs. Critics of PDUFA maintain that reduced FDA-approval times under PDUFA have compromised drug safety. We do not find empirical support for this contention.
Handle: RePEc:nbr:nberwo:12803
Template-Type: ReDIF-Paper 1.0
Title: Price and Capacity Competition
Classification-JEL: C72; L13
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Kostas Bimpikis
Author-Name: Asuman Ozdaglar
Note: CF EFG IO
Number: 12804
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12804
File-URL: http://www.nber.org/papers/w12804.pdf
File-Format: application/pdf
Publication-Status: published as Acemoglu, Daron & Bimpikis, Kostas & Ozdaglar, Asuman, 2009. "Price and capacity competition," Games and Economic Behavior, Elsevier, vol. 66(1), pages 1-26, May.
Abstract: We study the efficiency of oligopoly equilibria in a model where firms compete over capacities and prices. The motivating example is a communication network where service providers invest in capacities and then compete in prices. Our model economy corresponds to a two-stage game. First, firms (service providers) independently choose their capacity levels. Second, after the capacity levels are observed, they set prices. Given the capacities and prices, users (consumers) allocate their demands across the firms. We first establish the existence of pure strategy subgame perfect equilibria (oligopoly equilibria) and characterize the set of equilibria. These equilibria feature pure strategies along the equilibrium path, but off-the-equilibrium path they are supported by mixed strategies. We then investigate the efficiency properties of these equilibria, where "efficiency" is defined as the ratio of surplus in equilibrium relative to the first best. We show that efficiency in the worst oligopoly equilibria of this game can be arbitrarily low. However, if the best oligopoly equilibrium is selected (among multiple equilibria), the worst-case efficiency loss has a tight bound, approximately equal to 5/6 with 2 firms. This bound monotonically decreases towards zero when the number of firms increases. We also suggest a simple way of implementing the best oligopoly equilibrium. With two firms, this involves the lower-cost firm acting as a Stackelberg leader and choosing its capacity first. We show that in this Stackelberg game form, there exists a unique equilibrium corresponding to the best oligopoly equilibrium. We also show that an alternative game form where capacities and prices are chosen simultaneously always fails to have a pure strategy equilibrium. These results suggest that the timing of capacity and price choices in oligopolistic environments is important both for the existence of equilibrium and for the extent of efficiency losses in equilibrium.
Handle: RePEc:nbr:nberwo:12804
Template-Type: ReDIF-Paper 1.0
Title: Notional Defined Contribution Pension Systems in a Stochastic Context: Design and Stability
Classification-JEL: H55; J11
Author-Name: Alan J. Auerbach
Author-Person: pau33
Author-Name: Ronald Lee
Author-Person: ple147
Note: AG PE
Number: 12805
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12805
File-URL: http://www.nber.org/papers/w12805.pdf
File-Format: application/pdf
Publication-Status: published as Brown, J., J. Liebman, and D. Wise (eds.) Social Security Policy in a Changing Environment. Chicago: University of Chicago Press, 2009.
Publication-Status: published as Notional Defined Contribution Pension Systems in a Stochastic Context: Design and Stability, Alan J. Auerbach, Ronald Lee. in Social Security Policy in a Changing Environment, Brown, Liebman, and Wise. 2009
Abstract: Around the world, Pay-As-You-Go (PAYGO) public pension programs face serious long-term fiscal problems due primarily to actual and projected population aging, and most appear unsustainable as currently structured. Some have proposed the replacement of such plans with systems of fully funded private or personal Defined Contribution (DC) accounts, but the difficulties of transition to funded systems have limited their implementation. Recently, a new variety of public pension program known as "Notional Defined Contribution" or "Non-financial Defined Contribution" (NDC) has been created, with the objectives of addressing the fiscal instability of traditional plans and mimicking the characteristics of funded DC plans while retaining PAYGO finance. Using different versions of the system recently adopted in Sweden, calibrated to US demographic and economic parameters, we evaluate the success of the NDC approach in achieving fiscal stability in a stochastic context. (In a companion paper, we will consider other aspects of the performance of NDC plans in comparison to traditional PAYGO pensions.) We find that the basic NDC scheme is effective at preventing excessive debt accumulation, but does little to prevent significant asset accumulation along many trajectories and on average. With adjustment, however, the NDC approach can be made more stable.
Handle: RePEc:nbr:nberwo:12805
Template-Type: ReDIF-Paper 1.0
Title: Decomposing the Effects of Financial Liberalization: Crises vs. Growth
Classification-JEL: F3; F32; F33; F36; F43; O4
Author-Name: Romain Ranciere
Author-Person: pra52
Author-Name: Aaron Tornell
Author-Person: pto157
Author-Name: Frank Westermann
Author-Person: pwe84
Note: IFM EFG
Number: 12806
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12806
File-URL: http://www.nber.org/papers/w12806.pdf
File-Format: application/pdf
Publication-Status: published as Ranciere, Romain & Tornell, Aaron & Westermann, Frank, 2006. "Decomposing the effects of financial liberalization: Crises vs. growth," Journal of Banking & Finance, Elsevier, vol. 30(12), pages 3331-3348, December.
Abstract: We present a new empirical decomposition of the effects of financial liberalization on economic growth and on the incidence of crises. Our empirical estimates show that the direct effect of financial liberalization on growth by far outweighs the indirect effect via a higher propensity to crisis. We also discuss several models of financial liberalization and growth whose predictions are consistent with our empirical findings.
Handle: RePEc:nbr:nberwo:12806
Template-Type: ReDIF-Paper 1.0
Title: Debt Enforcement Around the World
Classification-JEL: G33; K2
Author-Name: Simeon Djankov
Author-Person: pdj4
Author-Name: Oliver Hart
Author-Person: pha222
Author-Name: Caralee McLiesh
Author-Name: Andrei Shleifer
Author-Person: psh93
Note: CF LE
Number: 12807
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12807
File-URL: http://www.nber.org/papers/w12807.pdf
File-Format: application/pdf
Publication-Status: published as Simeon Djankov & Oliver Hart & Caralee McLiesh & Andrei Shleifer, 2008. "Debt Enforcement around the World," Journal of Political Economy, University of Chicago Press, vol. 116(6), pages 1105-1149, December.
Abstract: We present insolvency practitioners from 88 countries with an identical case of a hotel about to default on its debt, and ask them to describe in detail how debt enforcement against this hotel will proceed in their countries. We use the data on time, cost, and the likely disposition of the assets (preservation as a going concern versus piecemeal sale) to construct a measure of the efficiency of debt enforcement in each country. We identify several characteristics of debt enforcement procedures, such as the structure of appeals and availability of floating charge finance, that influence efficiency. Our measure of efficiency of debt enforcement is strongly correlated with per capita income and legal origin and predicts debt market development across countries. Interestingly, it is also highly correlated with measures of the quality of contract enforcement and public regulation obtained in other studies.
Handle: RePEc:nbr:nberwo:12807
Template-Type: ReDIF-Paper 1.0
Title: Measuring the Impacts of FDI in Central and Eastern Europe
Classification-JEL: F21; F23
Author-Name: Robert E. Lipsey
Author-Person: pli259
Note: ITI
Number: 12808
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12808
File-URL: http://www.nber.org/papers/w12808.pdf
File-Format: application/pdf
Publication-Status: published as Liebscher, Klaus, Josef Christl, Peter Mooslechner, and Doris Ritzberger-Grünwald (eds.) Foreign Direct Investment in Europe: A Changing Landscape. Cheltenham, UK and Northampton, MA: Edward Elgar, 2007.
Abstract: The impacts of inward FDI on host countries are frequently studied using balance-of-payments based measures of flows and stocks. These are unreliable for the purpose because, while theories of the effects of investment are based on FDI production and employment in the host country, these measures are often distorted approximations of the location of real activity. The mismeasurement is particularly important if trade openness, often associated with FDI, is treated as a control variable. The countries of Central and Eastern Europe, a very minor object of US direct investment, have, since 1990, become a major location for FDI from Europe, especially from Germany. The investments from both the US and Germany are, on average, very labor-intensive, and are heavily concentrated in Motor Vehicles. One result has been a shift in the export comparative advantage of these countries toward the machinery and transport equipment sector. Microdata studies in the CEE countries have found that foreign participation is associated with higher productivity in the affiliates themselves. Spillovers to indigenous firms are more spotty, clearer to upstream suppliers than to firms in the same industries as the affiliates.
Handle: RePEc:nbr:nberwo:12808
Template-Type: ReDIF-Paper 1.0
Title: Do Wealth Fluctuations Generate Time-varying Risk Aversion? Micro-Evidence on Individuals' Asset Allocation
Classification-JEL: G11
Author-Name: Markus K. Brunnermeier
Author-Person: pbr31
Author-Name: Stefan Nagel
Author-Person: pna176
Note: AP EFG
Number: 12809
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12809
File-URL: http://www.nber.org/papers/w12809.pdf
File-Format: application/pdf
Publication-Status: published as Brunnermeier, Markus K. and Stefan Nagel. "Do Wealth Fluctuations Generate Time-Varying Risk Aversion? Micro-evidence on Individuals." American Economic Review 98, 3 (2008): 713-736.
Abstract: We use data from the PSID to investigate how households' portfolio allocations change in response to wealth fluctuations. Persistent habits, consumption commitments, and subsistence levels can generate time-varying risk aversion with the consequence that when the level of liquid wealth changes, the proportion a household invests in risky assets should also change in the same direction. In contrast, our analysis shows that the share of liquid assets that households invest in risky assets is not affected by wealth changes. Instead, one of the major drivers of households' portfolio allocation seems to be inertia: households rebalance only very slowly following inflows and outflows or capital gains and losses.
Handle: RePEc:nbr:nberwo:12809
Template-Type: ReDIF-Paper 1.0
Title: Money Illusion and Housing Frenzies
Classification-JEL: G12; R2
Author-Name: Markus K. Brunnermeier
Author-Person: pbr31
Author-Name: Christian Julliard
Author-Person: pju2
Note: AP EFG ME
Number: 12810
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12810
File-URL: http://www.nber.org/papers/w12810.pdf
File-Format: application/pdf
Publication-Status: published as Markus K. Brunnermeier & Christian Julliard, 2008. "Money Illusion and Housing Frenzies," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 21(1), pages 135-180, January.
Abstract: A reduction in inflation can fuel run-ups in housing prices if people suffer from money illusion. For example, investors who decide whether to rent or buy a house by simply comparing monthly rent and mortgage payments do not take into account that inflation lowers future real mortgage costs. We decompose the price-rent ratio in a rational component -- meant to capture the proxy effect and risk premia -- and an implied mispricing. We find that inflation and nominal interest rates explain a large share of the time-series variation of the mispricing, and that the tilt effect is unlikely to rationalize this finding.
Handle: RePEc:nbr:nberwo:12810
Template-Type: ReDIF-Paper 1.0
Title: Lucky Directors
Classification-JEL: D23; G32; G38; J33; J44; K22; M14
Author-Name: Lucian A. Bebchuk
Author-Person: pbe72
Author-Name: Yaniv Grinstein
Author-Person: pgr187
Author-Name: Urs Peyer
Author-Person: ppe236
Note: CF LE
Number: 12811
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12811
File-URL: http://www.nber.org/papers/w12811.pdf
File-Format: application/pdf
Publication-Status: published as Bebchuk, Lucian, Yaniv Grinstein, and Urs Peyer. “Lucky CEOs and Lucky Directors." Journal of Finance 65, 6 (2010): 2363-2401.
Abstract: While prior empirical work and much public attention have focused on the opportunistic timing of executives' grants, we provide in this paper evidence that outside directors' option grants have also been favorably timed to an extent that cannot be fully explained by sheer luck. Examining events in which public firms granted options to outside directors during 1996-2005, we find that 9% were "lucky grant events" falling on days with a stock price equal to a monthly low. We estimate that about 800 lucky grant events owed their status to opportunistic timing, and that about 460 firms and 1400 outside directors were associated with grant events produced by such timing. There is evidence that the opportunistic timing of director grant events has been to a substantial extent the product of backdating and not merely spring-loading based on private information. We find that directors' luck has been correlated with executives' luck. Furthermore, grant events were more likely to be lucky when the firm had more entrenching provisions protecting insiders from the risk of removal, as well as when the board did not have a majority of independent directors.
Handle: RePEc:nbr:nberwo:12811
Template-Type: ReDIF-Paper 1.0
Title: Restructuring Research: Communication Costs and the Democratization of University Innovation
Classification-JEL: O33; R11; Z13
Author-Name: Ajay K. Agrawal
Author-Person: pag38
Author-Name: Avi Goldfarb
Author-Person: pgo53
Note: PR
Number: 12812
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12812
File-URL: http://www.nber.org/papers/w12812.pdf
File-Format: application/pdf
Publication-Status: published as Ajay Agrawal & Avi Goldfarb, 2008. "Restructuring Research: Communication Costs and the Democratization of University Innovation," American Economic Review, American Economic Association, vol. 98(4), pages 1578-90, September.
Abstract: We report evidence indicating that Bitnet adoption facilitated increased research collaboration between US universities. However, not all institutions benefited equally. Using panel data from seven top engineering journals, Bitnet connection records, and a variety of institution ranking data, we find that medium-ranked universities were the primary beneficiaries; they benefited largely by increasing their collaboration with top-ranked schools. Furthermore, we find that the magnitude of this effect was greatest for co-located pairs. These results suggest that the most salient effect of lowering communication costs may have been to facilitate gains from trade through the specialization of research tasks. Thus, the advent of Bitnet -- and likely subsequent versions, including the Internet -- seems to have increased the role of second-tier universities in the national innovation system as producers of new, high-quality knowledge.
Handle: RePEc:nbr:nberwo:12812
Template-Type: ReDIF-Paper 1.0
Title: The Economics of Hurricanes in the United States
Classification-JEL: Q0; Q5; Q54
Author-Name: William D. Nordhaus
Author-Person: pno115
Note: PE EEE
Number: 12813
Creation-Date: 2006-12
Order-URL: http://www.nber.org/papers/w12813
File-URL: http://www.nber.org/papers/w12813.pdf
File-Format: application/pdf
Abstract: The year 2005 brought record numbers of hurricanes and storm damages to the United States. Was this a foretaste of increasingly destructive hurricanes in an era of global warming? This study examines the economic impacts of U.S. hurricanes. The major conclusions are the following: First, there appears to be an increase in the frequency and intensity of tropical cyclones in the North Atlantic. Second, there are substantial vulnerabilities to intense hurricanes in the Atlantic coastal United States. Damages appear to rise with the eighth power of maximum wind speed. Third, greenhouse warming is likely to lead to stronger hurricanes, but the evidence on hurricane frequency is unclear. We estimate that the average annual U.S. hurricane damages will increase by $8 billion at 2005 incomes (0.06 percent of GDP) due to global warming. However, this number may be underestimated by current storm models. Fourth, 2005 appears to have been a quadruple outlier, involving a record number of North Atlantic tropical cyclones, a large fraction of intense storms, a large fraction of the intense storms making landfall in the United States, and an intense storm hitting the most vulnerable high-value region in the country.
Handle: RePEc:nbr:nberwo:12813