Template-Type: ReDIF-Paper 1.0 Author-Name: Caballero, Ricardo J. Author-Name: Farhi, Emmanuel Author-Name: Gourinchas, Pierre-Olivier Title: An Equilibrium Model of "Global Imbalances" and Low Interest Rates 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 portfolios — 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 stemming from the heterogenity in different regions of the world in their 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. Beyond the specific sequence of events that motivate our analysis, the framework is flexible enough to shed light on a range of scenarios in a global equilibrium environment. Creation-Date: 2008 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/3229094/Farhi_EquilibriumModel.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3229094 Template-Type: ReDIF-Paper 1.0 Author-Name: Katz, Lawrence Author-Name: Goldin, Claudia Title: Education and Income in the Early Twentieth Century: Evidence from the Prairies Abstract: We present the first estimates of the returns to years of schooling before 1940 using a large sample individuals (from the 1915 Iowa State Census). The returns to a year of high school or college were substantial in 1915—about 11 percent for all males and in excess of 12 percent for young males. Education enabled individuals to enter lucrative white-collar jobs, but sizable educational wage differentials also existed within occupational groups. Returns were substantial even for those in farming. We find, using U.S. census data, that returns to education decreased between 1915 and 1940 and again during the 1940s. Creation-Date: 2000 Publication-Status: Published in Journal of Economic History File-URL: http://dash.harvard.edu/bitstream/handle/1/2766688/katz_edu.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2766688 Template-Type: ReDIF-Paper 1.0 Author-Name: Ibragimov, Marat Author-Name: Ibragimov, Rustam Title: Optimal Constants in the Rosenthal Inequality for Random Variables with Zero Odd Moments. Abstract: We obtain estimates for the best constant in the Rosenthal inequality View the MathML source for independent random variables ξ1,…,ξn with l zero first odd moments, lgreater-or-equal, slanted1. The estimates are sharp in the extremal cases l=1 and l=m, that is, in the cases of random variables with zero mean and random variables with m zero first odd moments. Creation-Date: 2008 Publication-Status: Published in Statistics and Probability Letters File-URL: http://dash.harvard.edu/bitstream/handle/1/2624461/ibragimov_ibragimov.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2624461 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Levine, David Title: An Economist's Perspective on Multi-Agent Learning Abstract: We comment on the Shoham, Powers, and Grenager survey of multi-agent learning and game theory, emphasizing that some of their categories are important for economics and others are not. We also try to correct some minor imprecisions in their discussion of the economics literature on learning in games. Creation-Date: 2007 Publication-Status: Published in Artificial Intelligence File-URL: http://dash.harvard.edu/bitstream/handle/1/3200613/fudenberg_econperspective.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3200613 Template-Type: ReDIF-Paper 1.0 Author-Name: Ibragimov, Rustam Title: Efficiency of linear estimators under heavy-tailedness: convolutions of [alpha]-symmetric distributions. Abstract: This paper focuses on the analysis of efficiency, peakedness, and majorization properties of linear estimators under heavy-tailedness assumptions. We demonstrate that peakedness and majorization properties of log-concavely distributed random samples continue to hold for convolutions of [alpha]-symmetric distributions with [alpha] > 1. However, these properties are reversed in the case of convolutions of [alpha]-symmetric distributions with [alpha] < 1. We show that the sample mean is the best linear unbiased estimator of the population mean for not extremely heavy-tailed populations in the sense of its peakedness. In such a case, the sample mean exhibits monotone consistency, and an increase in the sample size always improves its performance. However, efficiency of the sample mean in the sense of peakedness decreases with the sample size if it is used to estimate the location parameter under extreme heavy-tailedness. We also present applications of the results in the study of concentration inequalities for linear estimators. Creation-Date: 2007 Publication-Status: Published in Econometric Theory File-URL: http://dash.harvard.edu/bitstream/handle/1/2623749/ibragimov_efficiency.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2623749 Template-Type: ReDIF-Paper 1.0 Author-Name: Wooldridge, Jeffrey M. Author-Name: Imbens, Guido Title: Recent Developments in the Econometrics of Program Evaluation Abstract: Many empirical questions in economics and other social sciences depend on causal effects of programs or policies. In the last two decades, much research has been done on the econometric and statistical analysis of such causal effects. This recent theoretical literature has built on, and combined features of, earlier work in both the statistics and econometrics literatures. It has by now reached a level of maturity that makes it an important tool in many areas of empirical research in economics, including labor economics, public finance, development economics, industrial organization, and other areas of empirical microeconomics. In this review, we discuss some of the recent developments. We focus primarily on practical issues for empirical researchers, as well as provide a historical overview of the area and give references to more technical research. Creation-Date: 2009 Publication-Status: Published in Journal of Economic Literature File-URL: http://dash.harvard.edu/bitstream/handle/1/3043416/imbens_recent.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3043416 Template-Type: ReDIF-Paper 1.0 Author-Name: Ibragimov, Rustam Author-Name: Sharakhmetov, Shaturgun Title: The exact constant in the Rosenthal inequality for random variables with mean zero Abstract: Let $\xi_1, \ldots, \xi_n$ be independent random variables with ${\bf E}\xi_i=0,$ ${\bf E}|\xi_i|^t<\infty$, $t>2$, $i=1,\ldots, n,$ and let $S_n=\sum_{i=1}^n \xi_i.$ In the present paper we prove that the exact constant ${\overline C}(2m)$ in the Rosenthal inequality $$ {\bf E}|S_n|^t\le C(t) \max \Bigg(\sum_{i=1}^n{\bf E}|\xi_i|^t,\ \Bigg(\sum_{i=1}^n {\bf E}\xi_i^2\Bigg)^{t/2}\Bigg) $$ for $t=2m,$ $m\in {\bf N},$ is given by $$ \overline C(2m)=(2m)! \sum_{j=1}^{2m} \sum_{r=1}^j \sum \prod_{k=1}^r \frac {(m_k!)^{-j_k}} {j_k!}, $$ where the inner sum is taken over all natural $m_1 > m_2 > \cdots > m_r > 1$ and $j_1, \ldots, j_r$ satisfying the conditions $m_1j_1+\cdots+m_rj_r=2m$ and $j_1+\cdots+j_r=j$. Moreover $$ \overline C(2m)={\bf E}(\theta-1)^{2m}, $$ where $\theta $ is a Poisson random variable with parameter 1. Creation-Date: 2002 Publication-Status: Published in Theory of Probability and Its Applications File-URL: http://dash.harvard.edu/bitstream/handle/1/2623703/ibragimov_meanzero.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2623703 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Title: Household Finance Abstract: The study of household finance is challenging because household behavior is difficult to measure, and households face constraints not captured by textbook models. Evidence on participation, diversification, and mortgage refinancing suggests that many households invest effectively, 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 avoid financial strategies for which they feel unqualified. Some financial products involve a cross-subsidy from naive to sophisticated households, and this can inhibit welfare-improving financial innovation. Creation-Date: 2006 Publication-Status: Published in Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/3157877/campbellnber_householdfinance.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3157877 Template-Type: ReDIF-Paper 1.0 Author-Name: Ibragimov, Rustam Author-Name: Walden, Johan Title: The limits of diversification when losses may be large. Abstract: Recent results in value at risk analysis show that, for extremely heavy-tailed risks with unbounded distribution support, diversification may increase value at risk, and that generally it is difficult to construct an appropriate risk measure for such distributions. We further analyze the limitations of diversification for heavy-tailed risks. We provide additional insight in two ways. First, we show that similar non-diversification results are valid for a large class of risks with bounded support, as long as the risks are concentrated on a sufficiently large interval. The required length of the support depends on the number of risks available and on the degree of heavy-tailedness. Second, we relate the value at risk approach to more general risk frameworks. We argue that in markets for risky assets where the number of assets is limited compared with the (bounded) distribution support of the risks, unbounded heavy-tailed risks may provide a reasonable approximation. We suggest that this type of analysis may have a role in explaining various types of market failures in markets for assets with possibly large negative outcomes. Creation-Date: 2007 Publication-Status: Published in Journal of Banking and Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/2624460/ibragimov_walden.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2624460 Template-Type: ReDIF-Paper 1.0 Author-Name: Ibragimov, Rustam Title: Heavy-tailedness and Threshold Sex Determination. Abstract: This paper studies the properties of the sex ratio in two-period models of threshold (e.g., polygenic or temperature-dependent) sex determination under heavy-tailedness in the framework of possibly skewed stable distributions and their convolutions. We show that if the initial distribution of the sex determining trait in such settings is moderately heavy-tailed and has a finite first moment, then an excess of males (females) in the first period leads to the same pattern in the second period. Thus, the excess of one sex over the other one accumulates over two generations and the sex ratio in the total alive population in the second period cannot stabilize at the balanced sex ratio value of 1/2. These properties are reversed for extremely heavy-tailed initial distributions of sex determining traits with infinite first moments. In such settings, the sex ratio of the offspring oscillates around the balanced sex ratio value and an excess of males (females) in the first period leads to an excess of females (males) in the second period. In addition, the sex ratio in the total living population in the second period can stabilize at 1/2 for some extremely heavy-tailed initial distributions of the sex determining trait. The results in the paper are shown to also hold for bounded sex determining phenotypes. Creation-Date: 2008 Publication-Status: Published in Statistics and Probability Letters File-URL: http://dash.harvard.edu/bitstream/handle/1/2623659/ibragimov_sex.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2623659 Template-Type: ReDIF-Paper 1.0 Author-Name: Mobius, Markus Author-Name: Szeidl, Adam Author-Name: Karlan, Dean Author-Name: Allcott, Hunt Author-Name: Rosenblat, Tanya Title: Community Size and Network Closure Abstract: Creation-Date: 2007 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2962638/mobius_communitysize.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2962638 Template-Type: ReDIF-Paper 1.0 Author-Name: Katz, Lawrence Author-Name: Goldin, Claudia Title: Transitions: Career and Family Life Cycles of the Educational Elite Abstract: Creation-Date: 2008 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2799055/Goldin_Transitions.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2799055 Template-Type: ReDIF-Paper 1.0 Author-Name: Ibragimov, Rustam Author-Name: Phillips, Peter C.B. Title: Regression asymptotics using martingale convergence methods. Abstract: Weak convergence of partial sums and multilinear forms in independent random variables and linear processes and their nonlinear analogues to stochastic integrals now plays a major role in nonstationary time series and has been central to the development of unit root econometrics. The present paper develops a new and conceptually simple method for obtaining such forms of convergence. The method relies on the fact that the econometric quantities of interest involve discrete time martingales or semimartingales and shows how in the limit these quantities become continuous martingales and semimartingales. The limit theory itself uses very general convergence results for semimartingales that were obtained in the work of Jacod and Shiryaev (2003, Limit Theorems for Stochastic Processes). The theory that is developed here is applicable in a wide range of econometric models, and many examples are given. %One notable outcome of the new approach is that it provides a unified treatment of the asymptotics for stationary, explosive, unit root, and local to unity autoregression, and also some general nonlinear time series regressions. All of these cases are subsumed within the martingale convergence approach, and different rates of convergence are accommodated in a natural way. Moreover, the results on multivariate extensions developed in the paper deliver a unification of the asymptotics for, among many others, models with cointegration and also for regressions with regressors that are nonlinear transforms of integrated time series driven by shocks correlated with the equation errors. Because this is the first time the methods have been used in econometrics, the exposition is presented in some detail with illustrations of new derivations of some well-known existing results, in addition to the provision of new results and the unification of the limit theory for autoregression. Creation-Date: 2008 Publication-Status: Published in Econometric Theory File-URL: http://dash.harvard.edu/bitstream/handle/1/2624459/ibragimov_martingale.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2624459 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Author-Name: Taksler, Glen Title: Equity Volatility and Corporate Bond Yields Abstract: This paper explores the effect of equity volatility on corporate bond yields. Panel data for the late 1990s show that idiosyncratic firm-level volatility can explain as much cross-sectional variation in yields as can credit ratings. This finding, together with the upward trend in idiosyncratic equity volatility documented by Campbell, Lettau, Malkiel, and Xu (2001), helps to explain recent increases in corporate bond yields. The definitive version is available at www.blackwell-synergy.com. Creation-Date: 2003 Publication-Status: Published in Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/3153307/campbellssrn_equityvolatility.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3153307 Template-Type: ReDIF-Paper 1.0 Author-Name: Ibragimov, Rustam Title: A Tale of Two Tails: Peakedness Properties in Inheritance Models of Evolutionary Theory. Abstract: In this paper, we study transmission of traits through generations in multifactorial inheritance models with sex- and time-dependent heritability. We further analyze the implications of these models under heavy-tailedness of traits’ distributions. Among other results, we show that in the case of a trait (for instance, a medical or behavioral disorder or a phenotype with significant heritability affecting human capital in an economy) with not very thick-tailed initial density, the trait distribution becomes increasingly more peaked, that is, increasingly more concentrated and unequally spread, with time. But these patterns are reversed for traits with sufficiently heavy-tailed initial distributions (e.g., a medical or behavioral disorder for which there is no strongly expressed risk group or a relatively equally distributed ability with significant genetic influence). Such traits’ distributions become less peaked over time and increasingly more spread in the population. The proof of the results in the paper is based on the general results on majorization properties of heavy-tailed distributions obtained recently in Ibragimov (Econom Theory 23: 501–517, 2007) and also presented in the author’s Ph.D. dissertation (Ibragimov, New majorization theory in economics and martingale convergence results in econometrics. Yale University, 2005) and several their extensions derived in this work. Creation-Date: 2008 Publication-Status: Published in Journal of Evolutionary Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/2624003/ibragimov_taletail.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2624003 Template-Type: ReDIF-Paper 1.0 Author-Name: Lewis, Frank D. Author-Name: Goldin, Claudia Title: The Post-Bellum Recovery of the South and the Cost of the Civil War: Comment Abstract: Creation-Date: 1978 Publication-Status: Published in Journal of Economic History File-URL: http://dash.harvard.edu/bitstream/handle/1/2645467/Goldin_PostbellumRecovery.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2645467 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia Author-Name: Sokoloff, Kenneth Title: Women, Children, and Industrialization in the Early Republic: Evidence from the Manufacturing Censuses Abstract: Manufacturing firm data for 1820 to 1850 are employed to investigate the role of women and children in the industrialization of the American Northeast. The principal findings include: (1) Women and children composed a major share of the entire manufacturing labor force; (2) their employment was closely associated with production processes used by large establishments, both mechanized and non-mechanized; (3) the wage of females (and boys) increased relative to that of men with industrial development; and (4) female labor force participation in industrial counties was substantial. These findings bear on the nature of technical change during early industrialization and why American industrial development was initially concentrated in the Northeast. Creation-Date: 1982 Publication-Status: Published in Journal of Economic History File-URL: http://dash.harvard.edu/bitstream/handle/1/2664292/Goldin_WomenChildren.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2664292 Template-Type: ReDIF-Paper 1.0 Author-Name: Glaeser, Edward Author-Name: Saiz, Albert Author-Name: Gyourko, Joseph Title: Housing Supply and Housing Bubbles Abstract: Like many other assets, housing prices are quite volatile relative to observable changes in fundamentals. If we are going to understand boom-bust housing cycles, we must incorporate housing supply. In this paper, we present a simple model of housing bubbles that predicts that places with more elastic housing supply have fewer and shorter bubbles, with smaller price increases. However, the welfare consequences of bubbles may actually be higher in more elastic places because those places will overbuild more in response to a bubble. The data show that the price run-ups of the 1980s were almost exclusively experienced in cities where housing supply is more inelastic. More elastic places had slightly larger increases in building during that period. Over the past five years, a modest number of more elastic places also experienced large price booms, but as the model suggests, these booms seem to have been quite short. Prices are already moving back towards construction costs in those areas. Creation-Date: 2008 Publication-Status: Published in Journal of Urban Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/2962640/housing%20supply.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2962640 Template-Type: ReDIF-Paper 1.0 Author-Name: Katz, Lawrence Author-Name: Duncan, Greg J. Author-Name: Kling, Jeffrey R. Author-Name: Kessler, Ronald C. Author-Name: Ludwig, Jens Author-Name: Sanbonmatsu, Lisa Author-Name: Liebman, Jeffrey B. Title: What Can We Learn about Neighborhood Effects from the Moving to Opportunity Experiment? Abstract: Experimental estimates from Moving to Opportunity (MTO) show no significant impacts of moves to lower‐poverty neighborhoods on adult economic self‐sufficiency four to seven years after random assignment. The authors disagree with Clampet‐Lundquist and Massey's claim that MTO was a weak intervention and therefore uninformative about neighborhood effects. MTO produced large changes in neighborhood environments that improved adult mental health and many outcomes for young females. Clampet‐Lundquist and Massey's claim that MTO experimental estimates are plagued by selection bias is erroneous. Their new nonexperimental estimates are uninformative because they add back the selection problems that MTO's experimental design was intended to overcome. Creation-Date: 2008 Publication-Status: Published in American Journal of Sociology File-URL: http://dash.harvard.edu/bitstream/handle/1/2766959/katz_neighbor1.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2766959 Template-Type: ReDIF-Paper 1.0 Author-Name: Brainerd, Elizabeth Author-Name: Cutler, David Title: Autopsy on an Empire: Understanding Mortality in Russia and the Former Soviet Union Abstract: Male life expectancy at birth fell by over six years in Russia between 1989 and 1994. Many other countries of the former Soviet Union saw similar declines, and female life expectancy fell as well. Using cross-country and Russian household survey data, we assess six possible explanations for this upsurge in mortality. Most find little support in the data: the deterioration of the health care system, changes in diet and obesity, and material deprivation fail to explain the increase in mortality rates. The two factors that do appear to be important are alcohol consumption, especially as it relates to external causes of death (homicide, suicide, and accidents) and stress associated with a poor outlook for the future. However, a large residual remains to be explained. Creation-Date: 2005 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/2640589/cutler_autopsy.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2640589 Template-Type: ReDIF-Paper 1.0 Author-Name: Feldstein, Martin Title: Designing Institutions to Deal with Terrorism in the United States Abstract: The explosion in the 21st century of terrorist activities by Islamic radicals in the United States, Europe and Asia requires reforming the institutions for domestic counterterrorism (CT) and new international relations among individual national CT organizations. This paper discusses the institutional reforms for CT in the United States, focusing particularly on the changes in the FBI. These changes are compared with the way that the British CT activities of the MI5 and MI6 have evolved in response to terrorism in Britain. The paper also discusses the reasons why there is strong cooperation among the CT activities of all the major governments and with the United States in particular, even when those governments do not agree about military cooperation or about the use of economic sanctions. Creation-Date: 2008 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2920114/feldstein_designing.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2920114 Template-Type: ReDIF-Paper 1.0 Author-Name: Roth, Alvin Author-Name: Bereby-Meyer, Yoella Title: The Speed of Learning in Noisy Games: Partial Reinforcement and the Sustainability of Cooperation Abstract: In an experiment, players’ ability to learn to cooperate in the repeated prisoner’s dilemma was substantially diminished when the payoffs were noisy, even though players could monitor one another's past actions perfectly. In contrast, in one-time play against a succession of opponents, noisy payoffs increased cooperation, by slowing the rate at which cooperation decays. These observations are consistent with the robust observation from the psychology literature that partial reinforcement (adding randomness to the link between an action and its consequences while holding expected payoffs constant) slows learning. This effect is magnified in the repeated game: When others are slow to learn to cooperate, the benefits of cooperation are reduced, which further hampers cooperation. These results show that a small change in the payoff environment, which changes the speed of individual learning, can have a large effect on collective behavior. And they show that there may be interesting comparative dynamics that can be derived from careful attention to the fact that at least some economic behavior is learned from experience. Creation-Date: 2006 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2580381/Roth_Noisygames_retry.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2580381 Template-Type: ReDIF-Paper 1.0 Author-Name: Roth, Alvin Title: Repugnance as a Constraint on Markets 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, it can persist for a very long time, although changes in institutions that reflect repugnance can occur relatively quickly when the underlying repugnance changes. Creation-Date: 2007 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/2624677/Roth_Repugnance.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2624677 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Y. Author-Name: Clarida, Richard H. Title: The Term Structure of Euromarket Interest Rates: An Empirical Investigation Abstract: This paper is an empirical investigation of the predictability and co-movement of risk premia in the term structure of Euromarket interest rates. We present regression results which suggest that risk premia in three Euromarket term structures and on uncovered foreign asset positions move together. We test formally the hypothesis that these risk premia move in proportion to a single latent variable. We are unable to reject this hypothesis. The single latent variable model can be interpreted as in Hansen and Hodrick (1983) and Hodrick and Srivastava (1984) as a specialization of the ICAPM in which assets have constant betas on a single, unobservable benchmark portfolio. Creation-Date: 1987 Publication-Status: Published in Journal of Monetary Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3353759/campbell_termstructure.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3353759 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Y. Author-Name: Mankiw, N. Gregory Title: Permanent Income, Current Income, and Consumption Abstract: This article reexamines the consistency of the permanent-income hypothesis with aggregate postwar U.S. data. The permanent-income hypothesis is nested within a more general model in which a fraction of income accrues to individuals who consume their current income rather than their permanent income. This fraction is estimated to be about 50%, indicating a substantial departure from the permanent-income hypothesis. Our results cannot be easily explained by time aggregation or small-sample bias, by changes in the real interest rate, or by nonseparabilities in the utility function of consumers. Creation-Date: 1990 Publication-Status: Published in Journal of Business and Economic Statistics File-URL: http://dash.harvard.edu/bitstream/handle/1/3353762/campbell_permanent.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3353762 Template-Type: ReDIF-Paper 1.0 Author-Name: Posner, Richard A. Author-Name: Avery, Christopher Author-Name: Jolls, Christine Author-Name: Roth, Alvin Title: The Market for Federal Judicial Law Clerks Abstract: In September 1998, the Judicial Conference of the United States abandoned its latest attempt to regulate the timing of interviews and offers in the law clerk selection process. This paper surveys the further unraveling of the market since then, makes comparisons with other entry level professional labor markets, and evaluates some possibilities for reform. Creation-Date: 2001 Publication-Status: Published in University of Chicago Law Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2623748/Roth_lawclerks.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2623748 Template-Type: ReDIF-Paper 1.0 Author-Name: Green, Jerry Title: Compensatory Transfers in Two-Player Decision Problems Abstract: This paper presents an axiomatic characterization of a family of solutions to two-player quasi-linear social choice problems. In these problems the players select a single action from a set available to them. They may also transfer money between themselves. The solutions form a one-parameter family, where the parameter is a non-negative number, t. The solutions can be interpreted as follows: Any efficient action can be selected. Based on this action, compute for each player a “best claim for compensation”. A claim for compensation is the difference between the value of an alternative action and the selected efficient action, minus a penalty proportional to the extent to which the alternative action is inefficient. The coefficient of proportionality of this penalty is t. The best claim for compensation for a player is the maximum of this computed claim over all possible alternative actions. The solution, at the parameter value t, is to implement the chosen efficient action and make a monetary transfer equal to the average of these two best claims. The characterization relies on three main axioms. The paper presents and justifies these axioms and compares them to related conditions used in other bargaining contexts. In Nash Bargaining Theory, the axioms analogous to these three are in conflict with each other. In contrast, in the quasi-linear social choice setting of this paper, all three conditions can be satisfied simultaneously. Creation-Date: 2005 Publication-Status: Published in International Journal of Game Theory File-URL: http://dash.harvard.edu/bitstream/handle/1/3204680/green_compensatory.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3204680 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Levine, David Title: Conditional Universal Consistency Abstract: Players choose an action before learning an outcome chosen according to an unknown and history-dependent stochastic rule. Procedures that categorize outcomes, and use a randomized variation on fictitious play within each category are studied. These procedures are “conditionally consistent:” they yield almost as high a time-average payoff as if the player knew the conditional distributions of actions given categories. Moreover, given any alternative procedure, there is a conditionally consistent procedure whose performance is no more than epsilon worse regardless of the discount factor. We also discuss cycles, and argue that the time-average of play should resemble a correlated equilibrium. Creation-Date: 1999 Publication-Status: Published in Games and Economic Behavior File-URL: http://dash.harvard.edu/bitstream/handle/1/3204826/fudenberg_conditional.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3204826 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia Title: The Work and Wages of Single Women, 1870-1920 Abstract: Single women dominated the U.S. female labor force from 1870 to 1920. Data on the home life and working conditions of single women in 1888 and 1907 enable the estimation of their earnings functions. Work in the manufacturing sector for these women was task-oriented and payment was frequently by the piece. Earnings rose steeply with experience and peaked early; learning was mainly on-the-job. Occupational segregation by sex was a partial product of the method of payment, and the early termination of human capital investment was a function of the life-cycle labor force participation of these women, although the role of the family was also critical. Creation-Date: 1980 Publication-Status: Published in Journal of Economic History File-URL: http://dash.harvard.edu/bitstream/handle/1/2643864/Golding_WorkWages.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2643864 Template-Type: ReDIF-Paper 1.0 Author-Name: Lopez-de-Silanes, Florencio Author-Name: La Porta, Rafael Author-Name: Shleifer, Andrei Title: The Economic Consequences of Legal Origins Abstract: In the last decade, economists have produced a considerable body of research suggesting that the historical origin of a country’s laws is highly correlated with a broad range of its legal rules and regulations, as well as with economic outcomes. We summarize this evidence and attempt a unified interpretation. We also address several objections to the empirical claim that legal origins matter. Finally, we assess the implications of this research for economic reform. Creation-Date: 2008 Publication-Status: Published in Journal of Economic Literature File-URL: http://dash.harvard.edu/bitstream/handle/1/2962610/consequences%20of%20legal%20origins.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2962610 Template-Type: ReDIF-Paper 1.0 Author-Name: Katz, Lawrence Author-Name: Gibbons, Robert Author-Name: Lemieux, Thomas Author-Name: Parent, Daniel Title: Comparative Advantage, Learning, and Sectoral Wage Determination Abstract: We develop a model in which a worker’s skills determine the worker’s current wage and sector. The market and the worker are initially uncertain about some of the worker’s skills. Endogenous wage changes and sector mobility occur as labor market participants learn about these unobserved skills. We show how the model can be estimated using nonlinear instrumental variables techniques. We apply our methodology to study wages and allocation of workers across occupations and industries using individual‐level panel data from the National Longitudinal Survey of Youth. We find that high‐wage sectors employ high‐skill workers and offer high returns to workers’ skills. Creation-Date: 2005 Publication-Status: Published in Journal of Labor Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/2766651/katz_comparative1.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2766651 Template-Type: ReDIF-Paper 1.0 Author-Name: Little, Jane Sneddon Author-Name: Cooper, Richard Title: U.S. Monetary Policy in an Integrating World: 1960 to 2000 Abstract: This article examines the impact of global developments on the practice of U.S. monetary policy, broadly defined to include regulatory and lender-of-last-resort functions as well as open market, discount, and intervention activity, over the past forty years. It is part of a paper presented at the forty-fifth economic conference of the Federal Reserve Bank of Boston. The authors briefly review a few familiar facts establishing the increased openness of the U.S. economy, and go on to explore episodes when external events beyond those included in the domestic outlook—events like significant exchange rate shifts—appear to have influenced monetary policy decisions. They find that the view that U.S. monetary policy is mostly or even entirely domestically oriented is largely incorrect, in at least three different respects. Greater engagement with the rest of the world in both trade and financial transactions has led the U.S. economy to be more directly affected by overseas developments than it was three or four decades ago. Moreover, a perusal of FOMC records reveals extensive references to international developments in discussions of the future direction of monetary policy. And third, external competitive pressures have facilitated substantial changes in the structure of the U.S. financial system. This interplay between financial innovation and regulatory change has in turn affected how monetary policy works. Creation-Date: 2001 Publication-Status: Published in New England Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/13580995/neer301c.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:13580995 Template-Type: ReDIF-Paper 1.0 Author-Name: Rodrik, Dani Author-Name: Alesina, Alberto Title: Distributive Politics and Economic Growth Abstract: We study the relationship between politics and economic growth in a simple model of endogenous growth with distributive conflict among agents endowed with varying capital/labor shares. We establish several results regarding the factor ownership of the median individual and the level of taxation, redistribution, and growth. Policies that maximize growth are optimal only for a government that cares solely about pure "capitalists." The greater the inequality of wealth and income, the higher the rate of taxation, and the lower growth. We present empirical results that show that inequality in land and income ownership is negatively correlated with subsequent economic growth. Creation-Date: 1994 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4551798/alesina_distributive.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4551798 Template-Type: ReDIF-Paper 1.0 Author-Name: Ellison, Glenn Author-Name: Mobius, Markus Author-Name: Fudenberg, Drew Title: Competing Auctions Abstract: This paper shows that larger auctions are more efficient than smaller ones, but that despite this scale effect, two competing and otherwise identical markets or auction sites of different sizes can coexist in equilibrium. We find that the range of equilibrium market sizes depends on the aggregate buyer—seller ratio, and also whether the markets are especially thin. Creation-Date: 2004 Publication-Status: Published in Journal of the European Economic Association File-URL: http://dash.harvard.edu/bitstream/handle/1/3043414/Ellison_CompetingAuctions.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3043414 Template-Type: ReDIF-Paper 1.0 Author-Name: La Ferrara, Eliana Author-Name: Alesina, Alberto Title: Participation in Heterogeneous Communities Abstract: This paper studies what determines group formation and the degree of participation when the population is heterogeneous, both in terms of income and race or ethnicity. We are especially interested in whether and how much the degree of heterogeneity in communities influences the amount of participation in different types of groups. Using survey data on group membership and data on U. S. localities, we find that, after controlling for many individual characteristics, participation in social activities is significantly lower in more unequal and in more racially or ethnically fragmented localities. We also find that those individuals who express views against racial mixing are less prone to participate in groups the more racially heterogeneous their community is. These results are consistent with our model of group formation. Creation-Date: 2000 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4551796/alesina_participation.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4551796 Template-Type: ReDIF-Paper 1.0 Author-Name: Baqir, Reza Author-Name: Easterly, William Author-Name: Alesina, Alberto Title: Public Goods and Ethnic Divisions Abstract: We present a model that links heterogeneity of preferences across ethnic groups in a city to the amount and type of public goods the city supplies. We test the implications of the model with three related data sets: U. S. cities, U. S. metropolitan areas, and U. S. urban counties. Results show that the shares of spending on productive public goods—education, roads, sewers and trash pickup—in U. S. cities (metro areas/urban counties) are inversely related to the city's (metro area's/county's) ethnic fragmentation, even after controlling for other socioeconomic and demographic determinants. We conclude that ethnic conflict is an important determinant of local public finances. Creation-Date: 1999 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4551797/alesina_publicgoods.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4551797 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia Author-Name: Kuziemko, Ilyana Author-Name: Katz, Lawrence Title: The Homecoming of American College Women: The Reversal of the College Gender Gap 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. Creation-Date: 2006 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/2962611/Goldin_Homecoming.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2962611 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Author-Name: Cocco, Joao Title: How Do House Prices Affect Consumption? Evidence from Micro Data Abstract: Housing is a major component of wealth. Since house prices fluctuate considerably over time, it is important to understand how these fluctuations affect households’ consumption decisions. Rising house prices may stimulate consumption by increasing households’ perceived wealth, or by relaxing borrowing constraints. This paper investigates the response of household consumption to house prices using UK micro data. We estimate the largest effect of house prices on consumption for older homeowners, and the smallest effect, insignificantly different from zero, for younger renters. This finding is consistent with heterogeneity in the wealth effect across these groups. In addition, we find that regional house prices affect regional consumption growth. Predictable changes in house prices are correlated with predictable changes in consumption, particularly for households that are more likely to be borrowing constrained, but this effect is driven by national rather than regional house prices and is important for renters as well as homeowners, suggesting that UK house prices are correlated with aggregate financial market conditions. Creation-Date: 2007 Publication-Status: Published in Journal of Monetary Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3122600/campbellssrn_houseprices.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3122600 Template-Type: ReDIF-Paper 1.0 Author-Name: Roth, Alvin Author-Name: Niederle, Muriel Title: Unraveling Reduces the Scope of an Entry Level Labor Market: Gastroenterology with and without a Centralized Match. Abstract: The entry-level market for American gastroenterologists was organized by a centralized clearinghouse from 1986 to 1996. Before, and since, it has been conducted via a decentralized market in which appointment dates have unraveled to well over a year before the start of employment. We find that, both before and after the years in which the centralized clearinghouse was used, gastroenterologists are less mobile and more likely to be employed at the same hospital in which they were internal medicine residents than when the clearinghouse was in use. This suggests that the clearinghouse not only coordinates the timing of appointments but also increases the scope of the market, compared to a decentralized market with early appointments. Creation-Date: 2003 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/2623686/Niederle_Unraveling.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2623686 Template-Type: ReDIF-Paper 1.0 Author-Name: Szeidl, Adam Author-Name: Rosenblat, Tanya Author-Name: Mobius, Markus Author-Name: Karlan, Dean Title: Trust and Social Collateral Abstract: This paper builds a theory of trust based on informal contract enforcement in social networks. In our model, network connections between individuals can be used as social collateral to secure informal borrowing. We define network-based trust as the highest amount one agent can borrow from another agent, and derive a reduced-form expression for this quantity which we then use in three applications. (1) We predict that dense networks generate bonding social capital that allows transacting valuable assets, while loose networks create bridging social capital that improves access to cheap favors like information. (2) For job recommendation networks, we show that strong ties between employers and trusted recommenders reduce asymmetric information about the quality of job candidates. (3) Using data from Peru, we show empirically that network-based trust predicts informal borrowing, and we structurally estimate and test our model. Creation-Date: 2009 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3051620/mobius%20social%20collateral.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3051620 Template-Type: ReDIF-Paper 1.0 Author-Name: Roth, Alvin Title: What Have We Learned from Market Design? Abstract: This essay discusses some things we have learned about markets, in the process of designing marketplaces to fix market failures. To work well, marketplaces have to provide thickness, i.e. they need to attract a large enough proportion of the potential participants in the market; they have to overcome the congestion that thickness can bring, by making it possible to consider enough alternative transactions to arrive at good ones; and they need to make it safe and sufficiently simple to participate in the market, as opposed to transacting outside of the market, or having to engage in costly and risky strategic behavior. I'll draw on recent examples of market design ranging from labor markets for doctors and new economists, to kidney exchange, and school choice in New York City and Boston. Creation-Date: 2008 Publication-Status: Published in The Economic Journal: The Quarterly Journal of The Royal Economic Society File-URL: http://dash.harvard.edu/bitstream/handle/1/2579650/Roth_market%20design.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2579650 Template-Type: ReDIF-Paper 1.0 Author-Name: Roth, Alvin Author-Name: Ockenfels, Axel Author-Name: Ariely, Dan Title: An Experimental Analysis of Ending Rules in Internet Auctions Abstract: A great deal of late bidding has been observed on internet auctions such as eBay, which employ a second price auction with a fixed deadline. Much less late bidding has been observed on internet auctions such as those run by Amazon, which employ similar auction rules, but use an ending rule that automatically extends the auction if necessary after the scheduled close until ten minutes have passed without a bid. This paper reports an experiment that allows us to examine the effect of the different ending rules under controlled conditions, without the other differences between internet auction houses that prevent unambiguous interpretation of the field data. We find that the difference in auction ending rules is sufficient by itself to produce the differences in late bidding observed in the field data. The experimental data also allow us to examine how individuals bid in relation to their private values, and how this behavior is shaped by the different opportunities for learning provided in the auction conditions. Creation-Date: 2005 Publication-Status: Published in Rand Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/2579649/Roth_internet.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2579649 Template-Type: ReDIF-Paper 1.0 Author-Name: Swagel, Phillip Author-Name: Mankiw, N Title: Antidumping: The Third Rail of Trade Policy Abstract: Although few U.S. politicians will admit it, antidumping policy has strayed far from its original purpose of guarding against predatory foreign firms. It is now little more than an excuse for a few powerful industries to shield themselves from competition -- at great cost to both American consumers and American business. Creation-Date: 2005 Publication-Status: Published in Foreign Affairs File-URL: http://dash.harvard.edu/bitstream/handle/1/2961701/Mankiw_Antidumping.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2961701 Template-Type: ReDIF-Paper 1.0 Author-Name: Fréchette, Guillaume Author-Name: Unver, M. Utku Author-Name: Roth, Alvin Title: Unraveling Yields Inefficient Matchings: Evidence from Post-Season College Football Bowls Abstract: Many markets have “unraveled” and experienced inefficient, early, dispersed transactions, and subsequently developed institutions to delay transaction timing. It has previously proved difficult, however, to measure and identify the resulting efficiency gains. Prior to 1992, college football teams were matched for post-season play up to several weeks before the end of the regular season. Since 1992, the market has reorganized to postpone this matching. We show that the matching of teams affects efficiency as measured by the resulting television viewership, and that the reorganization promoted more efficient matching, chiefly as a result of the increased ability of later matching to produce “championship” games. Creation-Date: 2007 Publication-Status: Published in Rand Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/2570385/Roth_unraveling%20yields.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2570385 Template-Type: ReDIF-Paper 1.0 Author-Name: Banerjee, Abhijit V. Author-Name: Mullainathan, Sendhil Title: Limited Attention and Income Distribution Abstract: Economists have long been interested in the idea that there is a direct circular relation between poverty and low productivity, and not just one that is mediated by market failures, usually in asset markets. The nutrition-based efficiency wage model (Partha Dasgupta and Debraj Ray, 1987) is the canonical example of models where this happens: However it has been variously suggested (see for example T. N. Srinivasan, 1994) that the link from nutrition to productivity and especially the link from productivity to nutrition is too weak to be any more than a small part of the story. Partha Dasgupta himself acknowledges this when he writes "nutrition-productivity construct provides a metaphor,..., for ... an economic environment harboring poverty traps" (Partha Dasgupta, 1997, page 5). We propose an alternative approach to this question based on the idea that attention is a scarce resource that is important for productivity. Specifically, people may not be able to fully attend to their jobs if they are also worrying about problems at home and being distracted in this way reduces productivity. But not paying attention at home is also costly: early symptoms of a child's sickness may go unnoticed; water may run out at the end of the day; kerosene for lighting lamps at home might run out and make it hard to do homework; etc. Finally, the extent to which home life distracts depends on the nature of home life. Specifically, certain goods (e.g. a good baby sitter, a 24-hour piped water supply, a connection to a power supply grid) can reduce the extent of home life distraction. These three assumptions generate an interesting relation between income and productivity that is at the core of our model. The non-poor in this model, by virtue of owning distraction-saving goods and services at home, are able to focus more on their work. Hence they will be more productive at work and will be able to afford more distraction-saving goods. This simple two-way relationship between income and productivity produces a discontinuity in the relation between human capital and earnings which is certain cases can lead to a poverty trap, even in the absence of any market failures. Creation-Date: 2008 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2907518/mullainathan%20limited%20attention.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2907518 Template-Type: ReDIF-Paper 1.0 Author-Name: Staiger, Robert W. Author-Name: Antras, Pol Title: Offshoring and the Role of Trade Agreements Abstract: The rise of offshoring of intermediate inputs raises important questions for commercial policy. Do the distinguishing features of offshoring introduce novel reasons for trade policy intervention? Does offshoring create new problems of global policy cooperation whose solutions require international agreements with novel features? Can trade agreements that are designed to address problems that arise when trade predominantly takes the form of the exchange of final goods be expected to perform in a world where offshoring is prevalent? In this paper we provide answers to these questions, and thereby initiate the study of trade agreements in the presence of offshoring. We do so by deriving the Nash and internationally efficient trade policy choices of governments in an environment in which some trade flows involve the exchange of customized inputs, contracts governing these transactions are incomplete, and the matching between final-good producers and input suppliers may involve search frictions. By characterizing the differences between Nash and internationally efficient policies in this environment, and by comparing these differences to those that would arise in the absence of offshoring of customized inputs, we seek to understand the implications of offshoring for the role of trade agreements. Our findings indicate that the rise of offshoring is likely to complicate the task of trade agreements, because in the presence of offshoring, (i) the mechanism by which countries can shift the costs of intervention on to their trading partners is more complicated and extends to a wider set of policies than is the case when offshoring is not present, and (ii) because the underlying problem that a trade agreement must address in the presence of offshoring varies with the political preferences of member governments. As a consequence, the increasing prevalence of offshoring is likely to make it increasingly difficult for governments to rely on simple and general rules -- such as reciprocity and non-discrimination -- to help them solve their trade-related problems. Creation-Date: 2008 Publication-Status: Published in Nber Working Paper Series File-URL: http://dash.harvard.edu/bitstream/handle/1/3374525/antras_offshoringrole.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3374525 Template-Type: ReDIF-Paper 1.0 Author-Name: Foley, C. Fritz Author-Name: Antras, Pol Title: Regional Trade Integration and Multinational Firm Strategies Abstract: This paper analyzes the effects of the formation of a regional trade agreement on the level and nature of multinational firm activity. We examine aggregate data that captures the response of U.S. multinational firms to the formation of the ASEAN free trade agreement. Observed patterns guide the development of a model in which heterogeneous firms from a source country decide how to serve two foreign markets. Following a reduction in tariffs on trade between the two foreign countries, the model predicts growth in the number of source-country firms engaging in foreign direct investment, growth in the size of affiliates that are active in reforming countries both before and after the tariff reduction, and an increase in the extent to which the sales of affiliates in reforming countries are directed towards other reforming countries. Analysis of firm-level responses to the creation of the ASEAN free trade agreement yields results that are consistent with these predictions. Creation-Date: 2009 Publication-Status: Published in Nber Working Paper Series File-URL: http://dash.harvard.edu/bitstream/handle/1/3374522/antras_regional.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3374522 Template-Type: ReDIF-Paper 1.0 Author-Name: Vigdor, Jacob Author-Name: Glaeser, Edward Author-Name: Cutler, David Title: When Are Ghettos Bad? Lessons from Immigrant Segregation In the United States Abstract: Recent studies provide conflicting evidence on the connection between ethnic or racial neighborhood segregation and outcomes. Some studies find that residence in an enclave is beneficial, some reach the opposite conclusion, and still others imply that any relationship is small. One hypothesis is that studies differ because the impact of segregation varies across groups, perhaps because its impact is more benign for better-educated groups. This paper presents new evidence on this hypothesis using data on first-generation immigrants in the United States. We confront the endogenous selection into residential enclaves and find that selection into enclave neighborhoods is on balance negative. Correcting for this selection produces positive mean effects of segregation, and a positive correlation between group average human capital and the impact of segregation. Creation-Date: 2008 Publication-Status: Published in Journal of Urban Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/2666726/cutler_ghettos.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2666726 Template-Type: ReDIF-Paper 1.0 Author-Name: Mullainathan, Sendhil Author-Name: Brown, Jeffrey R. Author-Name: Kling, Jeffrey R. Author-Name: Wrobel, Marian Vaillant Title: Why Don't People Insure Late Life Consumption? A Framing Explanation of the Under-Annuitization Puzzle Abstract: Creation-Date: 2008 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2799056/Brown_InsureLateLife.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2799056 Template-Type: ReDIF-Paper 1.0 Author-Name: Rappaport, Jordan Author-Name: Kahn, Matthew E. Author-Name: Glaeser, Edward Title: Why Do The Poor Live In Cities? The Role of Public Transportation Abstract: More than 19 percent of people in American central cities are poor. In suburbs, just 7.5 percent of people live in poverty. The income elasticity of demand for land is too low for urban poverty to come from wealthy individuals' wanting to live where land is cheap (the traditional explanation of urban poverty). A significant income elasticity for land exists only because the rich eschew apartment living, and that elasticity is still too low to explain the poor's urbanization. The urbanization of poverty comes mainly from better access to public transportation in central cities. Creation-Date: 2008 Publication-Status: Published in Journal of Urban Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/2958224/why%20do%20the%20poor%20live%20in%20cities.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2958224 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Alesina, Alberto Author-Name: Trebbi, Francesco Title: Endogenous Political Institutions Abstract: A fundamental aspect of institutional design is how much society chooses to delegate unchecked power to its leaders. If, once elected, a leader cannot be restrained, society runs the risk of a tyranny of the majority, if not the tyranny of a dictator. If a leader faces too many ex post checks and balances, legislative action is too often blocked. As our critical constitutional choice, we focus upon the size of the minority needed to block legislation, or conversely the size of the (super) majority needed to govern. We analyze both "optimal" constitutional design and "positive" aspects of this process. We derive several empirical implications which we then discuss. Creation-Date: 2004 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4481498/alesina_endogenous.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4481498 Template-Type: ReDIF-Paper 1.0 Author-Name: Alesina, Alberto Title: The Size of Countries: Does it Matter? Abstract: Borders are a man-made institution, and as such their shape cannot be taken as part of the physical landscape. The size of countries is endogenous to politico-economic forces. This paper discusses recent efforts by economists to study three related questions: What determines the evolution of the size of countries? Does size matter for economic success? Given the trend toward decentralization and of creation of supernational unions such as the EU, is the meaning of national borders evolving? (JEL: H10) Creation-Date: 2003 Publication-Status: Published in Journal of the European Economic Association File-URL: http://dash.harvard.edu/bitstream/handle/1/4551794/alesina_size.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4551794 Template-Type: ReDIF-Paper 1.0 Author-Name: Barro, Robert Author-Name: Alesina, Alberto Title: Currency Unions Abstract: Common currencies affect trading costs and, thereby, the amounts of trade, output, and consumption. From the perspective of monetary policy, the adoption of another country's currency trades off the benefits of commitment to price stability (if a committed anchor is selected) against the loss of an independent stabilization policy. We show that the type of country that has more to gain from giving up its own currency is a small open economy heavily trading with one particular large partner, with a history of high inflation and with a business cycle highly correlated with that of the potential "anchor." We also characterize the features of the optimal number of currency unions. Creation-Date: 2002 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4551795/alesina_currencyunions.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4551795 Template-Type: ReDIF-Paper 1.0 Author-Name: Elmendorf, Douglas W. Author-Name: Mankiw, N Title: Government Debt Abstract: This paper surveys the literature on the macroeconomic effects of government debt. It begins by discussing the data on debt and deficits, including the historical time series, measurement issues, and projections of future fiscal policy. The paper then presents the conventional theory of government debt, which emphasizes aggregate demand in the short run and crowding out in the long run. It next examines the theoretical and empirical debate over the theory of debt neutrality called Ricardian equivalence. Finally, the paper considers the various normative perspectives about how the government should use its ability to borrow. Creation-Date: 1999 Publication-Status: Published in Handbook of Macroeconomics File-URL: http://dash.harvard.edu/bitstream/handle/1/2643866/Mankiw_GovernmentDebt.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2643866 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Levine, David Title: An Easier Way to Calibrate Abstract: Forecasts are said to be calibrated if the frequency predictions are approximately correct. This is a refinement of an idea first introduced by David Blackwell in 1955. We show that “K-initialized myopic strategies” are approximately calibrated when K is large. These strategies first “initialize” by making each forecast exactly K times, and thereafter play, in each period t, the minmax strategy in a static game. Creation-Date: 1999 Publication-Status: Published in Games and Economic Behavior File-URL: http://dash.harvard.edu/bitstream/handle/1/3203773/fudenberg_calibrate.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3203773 Template-Type: ReDIF-Paper 1.0 Author-Name: Cukierman, Alex Author-Name: Alesina, Alberto Title: The Politics of Ambiguity Abstract: Politicians face a trade-off between the policies that maximize their chances of reelection and their most preferred policies (or the policies most preferred by the constituency which they represent). This paper analyzes this trade-off in a dynamic electoral model in which the voters are not fully informed about the preferences of the incumbent. First, we show that the incumbent follows a policy which is intermediate between the other party's ideal policy and his own ideal policy. Second, we show that, often, the incumbent has an incentive to choose procedures which make it difficult for voters to pinpoint his preferences with absolute precision. Thus, politicians may prefer to be "ambiguous." Creation-Date: 1990 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4552530/alesina_politicsambiguity.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4552530 Template-Type: ReDIF-Paper 1.0 Author-Name: Mankiw, N Title: Government Purchases and Real Interest Rates Abstract: This paper examines the dynamic impact of government purchases in a simple general equilibrium model with both durable and non-durable consumer goods as well as productive capital. The model generates perhaps surprising results. In particular, increases in government purchases are shown to cause reductions in real interest rates. The model thus provides a possible explanation for the observed behavior of real interest rates around wars. Creation-Date: 1987 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/2624457/Mankiw_GovernmentPurchases.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2624457 Template-Type: ReDIF-Paper 1.0 Author-Name: Trebbi, Francesco Author-Name: Aghion, Philippe Author-Name: Alesina, Alberto Title: Electoral Rules and Minority Representation in U.S. Cities Abstract: This paper studies the choice of electoral rules and in particular the question of minority representation. Majorities tend to disenfranchise minorities through strategic manipulation of electoral rules. With the aim of explaining changes in electoral rules adopted by U.S. cities, particularly in the South, we show why majorities tend to adopt "winner-take-all" city-wide rules (at-large elections) in response to an increase in the size of the minority when the minority they are facing is relatively small. In this case, for the majority it is more effective to leverage on its sheer size instead of risking conceding representation to voters from minority-elected districts. However, as the minority becomes larger (closer to a fifty-fifty split), the possibility of losing the whole city induces the majority to prefer minority votes to be confined in minority-packed districts. Single-member district rules serve this purpose. We show empirical results consistent with these implications of the model in a novel data set covering U.S. cities and towns from 1930 to 2000. Creation-Date: 2008 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4551793/alesina_electoral.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4551793 Template-Type: ReDIF-Paper 1.0 Author-Name: Hong, Harrison Author-Name: Stein, Jeremy Title: Disagreement and the Stock Market Abstract: A large catalog of variables with no apparent connection to risk has been shown to forecast stock returns, both in the time series and the cross-section. For instance, we see medium-term momentum and post-earnings drift in returns—the tendency for stocks that have had unusually high past returns or good earnings news to continue to deliver relatively strong returns over the subsequent six to twelve months (and vice-versa for stocks with low past returns or bad earnings news); we also see longer-run fundamental reversion—the tendency for “glamour” stocks with high ratios of market value to earnings, cashflows, or book value to deliver weak returns over the subsequent several years (and vice-versa for “value” stocks with low ratios of market value to fundamentals). To explain these patterns of predictability in stock returns, we advocate a particular class of heterogeneous-agent models that we call “disagreement models.” Disagreement models may incorporate work on gradual information flow, limited attention, and heterogeneous priors, but all highlight the importance of differences in the beliefs of investors. Disagreement models hold the promise of delivering a comprehensive joint account of stock prices and trading volume—and some of the most interesting empirical patterns in the stock market are linked to volume. Creation-Date: 2007 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/2894690/stein%20disagreement%20and%20the%20stock%20market.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2894690 Template-Type: ReDIF-Paper 1.0 Author-Name: Sheshinski, Eytan Author-Name: Green, Jerry Title: Direct Versus Indirect Remedies for Externalities Abstract: This paper is concerned with tax policies designed to obtain an improved competitive allocation in the presence of consumption externalities. It is known that the full optimum can, in general, be attained only through the imposition of excise taxes at different levels for different individuals. Since these may be ruled out (possibly because of implementation costs), one is confined to consider second-best taxes. The common interpretation of the Pigouvian principle has called for taxes on the externality-creating commodities. With no relationships between the consumption of different commodities the Pigouvian principle is obviously impeccable. But the existence of substitutes or complements for an externality-causing commodity raises the possibility of indirect policies: treating the externality through the markets for related goods. Obviously, if the direct policy is not feasible, the indirect treatment may provide some partial remedy. We show, however, that even when direct policies are available, the overall optimum may involve only indirect policies. An example with such a result is provided in the paper. We also list a number of cases in which the traditional prescription is confirmed, and the overall optimum involves only direct policies. Creation-Date: 1976 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/3204666/green_directversus.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3204666 Template-Type: ReDIF-Paper 1.0 Author-Name: Ranguelova, Elena Author-Name: Feldstein, Martin S. Title: Accumulated Pension Collars: A Market Approach to Reducing The Risk of Investment-Based Social Security Reform Abstract: This paper shows how a new type of derivative product that could be provided by private financial markets could in principle be used to guarantee that an investment-based Social Security reform provides at least the level of real retirement income that is projected in current Social Security rules. In effect, future retirees could purchase a put option' that guarantees that the future retirement benefit will not fall below the level projected in current Social Security law or some other chosen level. To pay for this guarantee, they would agree to give up the part of the annuity payments which exceeds a given level, effectively selling a call option on the stream of payments. This market-based approach could be completely voluntary, leaving each individual to decide what level of guarantee he wants. The higher the minimum guarantee that the individual chooses, the more of the potentially higher returns he must give up. The financial market can thus tailor each individual's product to his own risk preferences. Alternatively, the government might require that any product that is sold as part of the investment-based Social Security reform must include at least some such market-based guarantee. Our analysis calculates some of the tradeoffs that could be provided in today's financial markets. We show that it is feasible to protect future benefits equal to those projected in current law with a combination of the current payroll tax rate and Personal Retirement Account savings equal to 2.5 percent of covered earnings. Raising the savings rate to 3.0 percent increases substantially the amount of the return that the individual can keep, raising it to 145 percent of the currently projected level of benefits. Reducing the guarantee level to 90 percent of the projected future benefits would increase this upside potential to 150 percent of the currently projected level of benefits with a 2.5 percent saving rate and 195 percent of the currently projected benefits with a 3.0 percent saving rate. Creation-Date: 2000 Publication-Status: Published in Nber Working Paper Series File-URL: http://dash.harvard.edu/bitstream/handle/1/10456097/feldsteinRanguelova_pension.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:10456097 Template-Type: ReDIF-Paper 1.0 Author-Name: Summers, Lawrence H. Author-Name: Cutler, David Title: The Costs of Conflict Resolution and Financial Distress: Evidence from the Texaco-Pennzoil Litigation Abstract: This article demonstrates that the dispute between Texaco and Pennzoil over the Getty Oil takeover reduced the combined wealth of the claimants on the two companies by over $3 billion. During the course of the litigation, Pennzoil's shareholders gained only one-sixth as much as Texaco's shareholders lost. When the litigation was settled, about two-thirds of the loss in wealth was regained. These fluctuations in value exceed most estimates of the direct costs of carrying on the litigation, and may reflect the disruption in the operations of Texaco caused by the dispute. Creation-Date: 1988 Publication-Status: Published in Rand Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/2689179/cutler_texaco.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2689179 Template-Type: ReDIF-Paper 1.0 Author-Name: Mobius, Markus Author-Name: Rosenblat, Tanya Title: Why Beauty Matters Abstract: We decompose the beauty premium in an experimental labor market where “employers” determine wages of “workers” who perform a maze-solving task. This task requires a true skill which we show to be unaffected by physical attractiveness. We find a sizable beauty premium and can identify three transmission channels: (a) physically attractive workers are more confident and higher confidence increases wages; (b) for a given level of confidence, physically attractive workers are (wrongly) considered more able by employers; (c) controlling for worker confidence, physically attractive workers have oral skills (such as communication and social skills) that raise their wages when they interact with employers. Our methodology can be adopted to study the sources of discriminatory pay differentials in other settings. Creation-Date: 2006 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/3043406/mobius_beauty.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3043406 Template-Type: ReDIF-Paper 1.0 Author-Name: Antras, Pol Author-Name: Padro i Miquel, Gerard Title: Foreign Influence and Welfare Abstract: How do foreign interests influence the policy determination process? What are the welfare implications of such foreign influence? In this paper we develop a model of foreign influence and apply it to the study of optimal tariffs. We develop a two-country voting model of electoral competition, where we allow the incumbent party in each country to take costly actions that probabilistically affect the electoral outcome in the other country. We show that policies end up maximizing a weighted sum of domestic and foreign welfare, and we study the determinants of this weight. We show that foreign influence may be welfare-enhancing from the point of view of aggregate world welfare because it helps alleviate externalities arising from cross-border effects of policies. Foreign influence can however prove harmful in the presence of large imbalances in influence power across countries. We apply our model of foreign influence to the study of optimal trade policy. We derive a modified formula for the optimal import tariff and show that a country's import tariff is more distorted whenever the influenced country is small relative to the influencing country and whenever natural trade barriers between the two countries are small. Creation-Date: 2009 Publication-Status: Published in Nber Working Paper Series File-URL: http://dash.harvard.edu/bitstream/handle/1/3374523/antras_welfare.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/3374523/antras_nberwelfare.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3374523 Template-Type: ReDIF-Paper 1.0 Author-Name: Samwick, Andrew Author-Name: Feldstein, Martin Title: Potential Paths of Social Security Reform Abstract: This paper presents several alternative Social Security reform options in which the projected level of benefits for every future cohort of retirees is as high or higher than the benefits projected in current law. These future benefits can be achieved without any increase in the payroll tax or in other tax rates. Under each option, the Social Security Trust Fund is solvent and ends with a sustainable positive and growing balance. Each option combines the current pay-as-you-go system of defined benefits with an investment-based personal retirement account (PRA). Assets in the PRA can be bequeathed if the individual dies before normal retirement age. We also consider the option in which an individual can take all or part of his accumulated PRA balanced as a lump sum at normal retirement age. The basic plan that we present in greatest detail combines a transfer to the personal retirement account of a portion of the individual's payroll tax equal to 1.5 percent of earnings if the individual agrees to deposit an equal out-of-pocket amount. The additional national saving that results from this option leads to increased business investment and therefore to increased general tax revenue; a portion of that revenue, equal to 1 percent of the PRA balances , is transferred to the Social Security Trust Fund. The other options that we present include plans with no out-of-pocket contributions by individuals and others with no transfer of general revenue to the Trust Fund. We also discuss the implications of different rates of return on the PRA balances and, more generally, the issue of risk, including a market-based method of guaranteeing the real principal of all PRA deposits. Creation-Date: 2001 Publication-Status: Published in Tax Policy and the Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/2920119/feldstein_potentialpaths.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2920119 Template-Type: ReDIF-Paper 1.0 Author-Name: Fryer, Roland Author-Name: Echenique, Federico Title: A Measure of Segregation Based on Social Interactions Abstract: We develop an index of segregation based on two premises: (1) a measure of segregation should disaggregate to the level of individuals, and (2) an individual is more segregated the more segregated are the agents with whom she interacts. We present an index that satisfies (1) and (2) and that is based on agents' social interactions: the extent to which blacks interact with blacks, whites with whites, etc. We use the index to measure school and residential segregation. Using detailed data on friendship networks, we calculate levels of within-school racial segregation in a sample of U. S. schools. We also calculate residential segregation across major U. S. cities, using block-level data from the 2000 U. S. Census. Creation-Date: 2007 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/2958220/a%20measure%20of%20segregation.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2958220 Template-Type: ReDIF-Paper 1.0 Author-Name: Samwick, Andrew Author-Name: Feldstein, Martin S. Title: Allocating Payroll Tax Revenue to Personal Retirement Accounts to Maintain Social Security Benefits and the Payroll Tax Rate Abstract: In an earlier paper we analyzed a method of combining traditional tax financed pay-as-you-go Social Security benefits with annuities financed by Personal Retirement Accounts. We showed that such a combination could maintain the level of retirement income projected in current Social Security law while avoiding a future increase in the payroll tax rate. The current paper extends the earlier analysis in four ways: (1) We now specify that the funds deposited in the Personal Retirement Accounts come from allocating 2 percent of the 12.4 percent payroll tax instead of being additional funds provided from outside the system. (2) We discuss the effects of the uncertain return on investment based annuities. (3) We provide estimates of the cost of permitting bequests if individuals die either before retirement or during the first twenty years after retirement. (4) We update the statistical basis for our estimates to be consistent with the 2000 Social Security Trustees Report. Our analysis shows that a program of Personal Retirement Accounts funded by allocating 2 percent of the 12.4 percent payroll tax collections can maintain the retirement income projected in current law while avoiding any increase in the 12.4 percent payroll tax. The combination of the higher return on the assets in the Personal Retirement Accounts and the use of the additional corporate profits taxes that result from the increased national saving in Personal Retirement Accounts is sufficient to maintain the solvency of the Social Security Trust Fund even though the tax payments to the fund are reduced from 12.4 percent of taxable payroll to 10.4 percent of taxable payroll. Although there is a period of years when the Trust Fund must borrow, it is able to repay this borrowing with interest out of future tax collections. In the long run, the Trust Fund becomes very large, implying that it would be possible to reduce the payroll tax further or to increase retirement incomes above the levels projected in current law. Creation-Date: 2000 Publication-Status: Published in NBER Working Paper Series File-URL: http://dash.harvard.edu/bitstream/handle/1/10456096/feldstein_allocating.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:10456096 Template-Type: ReDIF-Paper 1.0 Author-Name: Feldstein, Martin Title: Prefunding Medicare Abstract: The Medicare program of health care for the aged now costs more than $5,000 per enrollee, a national cost of more than $200 billion a year. The official projections that these costs will rise rapidly from 2.5% of GDP now to 5.5% of GDP in 2030 and 7% of GDP in 2070 assume that structural changes in health care will prevent the even more rapid growth of spending that would occur if past trends continue. These GDP shares are equivalent to increasing the payroll tax rates that rise from 5% of total wages now to 14% of total wages by 2070. Alternatively, if the increased Medicare spending is financed by an across-the-board increase in income tax rates, all tax rates would rise by 46 percent (e.g., from 28% to 41%). If Medicare costs continue to be tax financed, the sharp increase in Medicare costs would cause a substantial increase in the deadweight loss of the tax system. Even with quite favorable assumptions, the increased deadweight loss is likely to be almost as large as the direct increase in the health care costs themselves. This paper analyzes an alternative life cycle approach to paying for the cost of health care of the aged: a system of investment-based individual Retiree Health Accounts (RHAs) to which the government deposits funds during individuals' working years. At retirement the individual could use the accumulated fund to purchase a fee-for-service plan like the current Medicare package, to pay for membership in an HMO, or to establish a medical savings account with a high deductible insurance policy. Using data from the Social Security administration, I estimate that annual RHA deposits equal to about 1.4% of total payroll would eventually be enough to pay for the full increase in the cost of Medicare, obviating a nine percentage point payroll tax increase. Creation-Date: 1999 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2794831/felds_prefnd.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2794831 Template-Type: ReDIF-Paper 1.0 Author-Name: Ranguelova, Elena Author-Name: Feldstein, Martin Title: Individual Risk in an Investment-Based Social Security System Abstract: This paper examines the risk aspects of an investment-based defined contribution Social Security plan. We focus on the risk after the plan is fully phased in. Individuals deposit a fraction of wages to a Personal Retirement Account (PRA), invest these funds in a 60:40 equity-debt mix, and in a similarly invested annuity at age 67. The value of the assets follows a random walk with mean and variance of a 60:40 equity-debt portfolio over the period 1946-95, a mean log return of 5.5 percent (net of administrative costs of 0.4 percent) and a standard deviation of 12.5 percent. We study he stochastic distributions of this process by doing 10,000 simulations of the 80-year experience of the cohort that reached age 21 in 1998. The resulting annuities are compared to the future defined benefits specified in current law (the benchmark' benefits). With no uncertainty, a 5.5 percent log return would permit the benchmark benefits to be purchased with PRA deposits of 3.1 percent of payroll, only one-sixth of the pay-as-you-go tax needed for the benchmark benefits. Saving a higher share of wages provides a cushion' that protects the individual from the risk of an unacceptably low level of benefits. For example, PRA deposits of 6 percent of wages reduces the probability that the benefits are less than the benchmark to 0.17 and the probability that they are less than 61 percent of the benchmark to 0.05. PRA deposits of 9 percent of wages (half of the tax rate required in a pay-as-you-go system) would substantially reduce these risks. This pure investment-based plan is an extreme case. The investment risk can be reduced further by using a mixed system that combines pay-as-you-go and investment-based components or that makes intergenerational transfers conditional on the performance of stock and bond prices. Creation-Date: 2001 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2797440/feldstein_risk.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2797440 Template-Type: ReDIF-Paper 1.0 Author-Name: Feldstein, Martin Author-Name: Wrobel, Marian Vaillant Title: Can State Taxes Redistribute Income? Abstract: The evidence presented in this paper supports the basic theoretical presumption that state and local governments cannot redistribute income. Since individuals can avoid unfavorable taxes by migrating to jurisdictions that offer more favorable tax conditions, a relatively unfavorable tax will cause gross wages to adjust until the resulting net wage is equal to that available elsewhere. The current empirical findings go beyond confirming this long-run tendency and show that gross wages adjust rapidly to the changing tax environment. Thus, states cannot redistribute income for a period of even a few years. The adjustment of gross wages to tax rates implies that a more progressive tax system raises the cost to firms of hiring more highly skilled employees and reduces the cost of lower skilled labor. A more progressive tax thus induces firms to hire fewer high skilled employees and to hire more low skilled employees. Since state taxes cannot alter net wages, there can be no trade-off at the state level between distribution goals and economic efficiency. Shifts in state tax progressivity, by altering the structure of employment in the state and distorting the mix of labor inputs used by firms in the state, create deadweight efficiency losses without achieving any net redistribution. Creation-Date: 1994 Publication-Status: Published in Journal of Public Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/2799054/feldstein_statetaxes.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2799054 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Levine, David Title: A Dual-Self Model of Impulse Control Abstract: We propose that a simple “dual-self” model gives a unified explanation for several empirical regularities, including the apparent time inconsistency that has motivated models of quasi-hyperbolic discounting and Rabin's paradox of risk aversion in the large and small. The model also implies that self-control costs imply excess delay, as in the O'Donoghue and Rabin models of quasi-hyperbolic utility, and it explains experimental evidence that increased cognitive load makes temptations harder to resist. The base version of our model is consistent with the Gul-Pesendorfer axioms, but we argue that these axioms must be relaxed to account for the effect of cognitive load. Creation-Date: 2006 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/3196335/dual_self.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3196335 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia Title: Egalitarianism and the Returns to Education during the Great Transformation of American Education Abstract: Secondary school education greatly expanded in the United States from 1910 to 1940, setting its schooling attainment apart from that of all other countries. Barely 10 percent of youth were high school graduates in 1910, but by the mid 1930s the median youth had a high school diploma. In some regions, by the 1930s enrollment and graduation rates rose to levels that were as high as they would be two decades later. The issue addressed here concerns the economic impact of the large increase in the supply of educated labor. Evidence is presented concerning the sharp decline in the wage premium to ordinary white‐collar workers. With the expansion of the high school, large numbers of Americans competed for positions in the coveted white‐collar sector. Although the return to a year of high school remained considerable on the eve of World War II, egalitarianism had evened the playing field for a substantial segment of Americans. Creation-Date: 1999 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/2623652/Goldin_Egalitarianism.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2623652 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia Title: Female Labor Force Participation: The Origin of Black and White Differences, 1870 and 1880 Abstract: Although white women have only recently entered the work force, their black counterparts have participated throughout American history. Differences between their rates of participation have been recorded only for the post-1890 period and analyzed only for the post-1940 period due to a lack of available data. To remedy this deficiency my work explores female labor supply at the dawn of emanicipation, 1870 and 1880, in seven southern cities, using data drawn from the manuscripts of the population census. Probit regression techniques demonstrate that economic and demographic variables explain only part of the difference between black and white women and, as in the findings of contemporary research, race is shown to be an important factor. Several explanations are discussed, in particular one relying on socialization differences which are termed a "legacy of slavery." Creation-Date: 1977 Publication-Status: Published in Journal of Economic History File-URL: http://dash.harvard.edu/bitstream/handle/1/2643657/Goldin_FemaleLabor.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2643657 Template-Type: ReDIF-Paper 1.0 Author-Name: Feldstein, Martin Title: Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1986 Tax Reform Act Abstract: This paper uses a Treasury Department panel of more than 4,000 taxpayers to estimate the sensitivity of taxable income to changes in tax rates based on a comparison of the tax returns of the same individual taxpayers before and after the 1986 tax reform. The analysis emphasizes that the response of taxable income involves much more than a change in the traditional measures of labor supply. The evidence shows an elasticity of taxable income with respect to the marginal net-of-tax rate that is at least one and that could be substantially higher. The implications for recent tax rate changes are discussed. Creation-Date: 1995 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/2766676/feldstein_taxable.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2766676 Template-Type: ReDIF-Paper 1.0 Author-Name: Fryer, Roland Title: A Model of Social Interactions and Endogenous Poverty Traps 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 trade-off between human capital and cooperation among the group. Second, there exist equilibria which exhibit bipolar human capital investment behavior by individuals of similar ability. Third, as social mobility increases this bipolarization increases. The model's 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. Creation-Date: 2007 Publication-Status: Published in Rationality and Society File-URL: http://dash.harvard.edu/bitstream/handle/1/2958480/model%20of%20social%20interactions.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2958480 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia Title: The Human-Capital Century and American Leadership: Virtues of the Past Abstract: The modern concept of the wealth of nations emerged by the early twentieth century. Capital embodied in people—human capital—mattered. The United States led all nations in mass postelementary education during the “human-capital century.” The American system of education was shaped by New World endowments and Republican ideology and was characterized by virtues including publicly funded mass education that was open and forgiving, academic yet practical, secular, gender neutral, and funded and controlled by small districts. The American educational template was a remarkable success, but recent educational concerns and policy have redefined some of its “virtues” as “vices.” Creation-Date: 2001 Publication-Status: Published in The Journal of Economic History File-URL: http://dash.harvard.edu/bitstream/handle/1/2624681/Goldin_HumanCapital.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2624681 Template-Type: ReDIF-Paper 1.0 Author-Name: Cooper, Richard Title: Economic Aspects of the Cold War, 1962-1975 Abstract: US objectives during the Cold War were to prevent Soviet attacks on the United States and its allies and to prevent the spread of communism as a political and economic system to other countries, whether by force or by threat, subversion, persuasion, or bribery. The principal instrument to prevent attack was an extensive build-up of defensive and retaliatory military forces, combined with political and military alliances that extended US protection to other countries in exchange for their engagement and support. The principal instruments for preventing the spread of communism by non-military means involved building an international economic system conducive to economic prosperity; engaging in persuasion, providing incentives, and occasionally imposing economic sanctions; and, not least, promoting a robust US economy that could serve as a stimulant to others and as a beacon for the benefits of a free, enterprise-based, market-oriented economy. Creation-Date: 2003 Publication-Status: Published in WCFIA Working Paper File-URL: http://dash.harvard.edu/bitstream/handle/1/3677060/Cooper_EconomicAspects.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/3677060/Cooper_EconomicAspectsChart.xls File-Format: application/msexcel Handle: RePEc:hrv:faseco:3677060 Template-Type: ReDIF-Paper 1.0 Author-Name: Fryer, Roland Title: Implicit Quotas Abstract: Employment or admission “goals” are often preferred to affirmative action as a way of obtaining diversity. By constructing a simple model of employer‐auditor interaction, I show that when an auditor has imperfect information regarding employers’ proclivities to discriminate and the fraction of qualified minorities in each employer’s applicant pool, goals are synonymous with quotas. Technically speaking, any equilibrium of the auditing game involves a nonempty set of employers who hire so that they do not trigger an audit by rejecting qualified nonminorities, hiring unqualified minorities, or both. Further, under some assumptions, explicit quotas (those mandated by an auditor) are more efficient than implicit quotas (goals settled on in equilibrium by employers wishing to avoid an audit). Creation-Date: 2009 Publication-Status: Published in Journal of Legal Studies File-URL: http://dash.harvard.edu/bitstream/handle/1/2940155/implicit%20quotas.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2940155 Template-Type: ReDIF-Paper 1.0 Author-Name: Cutler, David Author-Name: Vigdor, Jacob Author-Name: Glaeser, Edward Title: The Rise and Decline of the American Ghetto Abstract: This paper examines segregation in American cities from 1890 to 1990. From 1890 to 1940, ghettos were born as blacks migrated to urban areas and cities developed vast expanses filled with almost entirely black housing. From 1940 to 1970, black migration continued and the physical areas of the ghettos expanded. Since 1970, there has been a decline in segregation as blacks have moved into previously all‐white areas of cities and suburbs. Across all these time periods there is a strong positive relation between urban population or density and segregation. Data on house prices and attitudes toward integration suggest that in the mid‐twentieth century, segregation was a product of collective actions taken by whites to exclude blacks from their neighborhoods. By 1990, the legal barriers enforcing segregation had been replaced by decentralized racism, where whites pay more than blacks to live in predominantly white areas. Creation-Date: 1999 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/2770033/Cutler_RiseandFall.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2770033 Template-Type: ReDIF-Paper 1.0 Author-Name: Shapiro, Jesse Author-Name: Glaeser, Edward Author-Name: Cutler, David Title: Why Have Americans Become More Obese Abstract: Americans have become considerably more obese over the past 25 years. This increase is primarily the result of consuming more calories. The increase in food consumption is itself the result of technological innovations which made it possible for food to be mass prepared far from the point of consumption, and consumed with lower time costs of preparation and cleaning. Price changes are normally beneficial, but may not be if people have self-control problems. This applies to some, but not most, of the population. Creation-Date: 2003 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/2640583/cutler_obese.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2640583 Template-Type: ReDIF-Paper 1.0 Author-Name: Sönmez, Tayfun Author-Name: Pathak, Parag A. Author-Name: Abdulkadiroglu, Atila Author-Name: Roth, Alvin Title: The Boston Public School Match Abstract: Creation-Date: 2005 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2562764/Roth_bostonpublic.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2562764 Template-Type: ReDIF-Paper 1.0 Author-Name: Metcalf, Gilbert Author-Name: Feldstein, Martin Title: The Effect of Federal Tax Deductibility on State and Local Taxes and Spending Abstract: This paper examines the effect of federal deductibility of state and local taxes on the fiscal behavior of state and local governments. The primary finding is that deductibil ity affects the way that state and local governments finance their sp ending as well as the overall level of spending. More specifically, i n states in which federal deductibility implies a relatively low cost of using deductible personal taxes (including income, sales, and pro perty taxes), there is greater reliance on those taxes and less reliance on business taxes and other revenue sources. The effect of deductibility on the state and local financial mix implies that deductibility has a much lower cost to the federal government than has previously been assumed. Creation-Date: 1987 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/2766699/feldstein_federal.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2766699 Template-Type: ReDIF-Paper 1.0 Author-Name: Madrian, Brigitte Author-Name: Cutler, David Title: Labor Market Responses to Rising Health Insurance Costs Abstract: Increases in the cost of providing health insurance must have some effect on labor markets, either in lower wages, changes in the composition of employment, or both. Despite a presumption that most of this effect will be in the form of lower wages, we document in this paper a significant effect on work hours as well. Using data from the CPS and the SIPP, we show that rising health insurance costs over the 1980s increased the hours worked of those with health insurance by up to 3 percent. We argue that this occurs because health insurance is a fixed cost, and as it becomes more expensive to provide, firms face an incentive to substitute hours per worker for the number of workers employed. Creation-Date: 1998 Publication-Status: Published in Rand Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/2643643/cutler_labormarket.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2643643 Template-Type: ReDIF-Paper 1.0 Author-Name: Cooper, Richard Title: Is "Economic Power" a Useful and Operational Concept? Abstract: With the end of the Cold War, and until 9/11/01, many academic and journalistic pundits averred that military power was no longer of great importance, that the future lay with economic power. The claim was made that the United States was an "economic superpower," and therefore would continue to be the world's dominant power in any case. Does this term mean anything other than "biggest national economy?" If so, what exactly does it mean? This paper will discuss the concept of economic power, and then apply the concept to the proposal of John Mearsheimer, the R. Wendell Harrison Distinguished Service Professor of Political Science at the University of Chicago, that on strategic (balance of power) grounds the United States should take steps to slow down the economic growth of China. Creation-Date: 2004 Publication-Status: Published in Working paper series (Weatherhead Center for International Affairs) File-URL: http://dash.harvard.edu/bitstream/handle/1/3677050/Cooper_EconomicPower.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3677050 Template-Type: ReDIF-Paper 1.0 Author-Name: Hotz, V. Joseph Author-Name: Crump, Richard K. Author-Name: Mitnik, Oscar A. Author-Name: Imbens, Guido Title: Dealing with Limited Overlap in Estimation of Average Treatment Effects Abstract: Estimation of average treatment effects under unconfounded or ignorable treatment assignment is often hampered by lack of overlap in the covariate distributions between treatment groups. This lack of overlap can lead to imprecise estimates, and can make commonly used estimators sensitive to the choice of specification. In such cases researchers have often used ad hoc methods for trimming the sample. We develop a systematic approach to addressing lack of overlap. We characterize optimal subsamples for which the average treatment effect can be estimated most precisely. Under some conditions, the optimal selection rules depend solely on the propensity score. For a wide range of distributions, a good approximation to the optimal rule is provided by the simple rule of thumb to discard all units with estimated propensity scores outside the range [0.1,0.9]. Creation-Date: 2009 Publication-Status: Published in Biometrika File-URL: http://dash.harvard.edu/bitstream/handle/1/3007645/imbens_addressing.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3007645 Template-Type: ReDIF-Paper 1.0 Author-Name: Stein, Jeremy Title: Conversations among Competitors Abstract: I develop a model of bilateral conversations in which players honestly exchange ideas with their competitors. The key to incentive compatibility is a complementarity in the information structure: a player can only generate a new insight if he has access to his counterpart’s previous thoughts on a topic. I then examine a social network in which A has a conversation with B, then B has a conversation with C, and so on. Relatively underdeveloped ideas can travel long distances over the network. More valuable ideas, by contrast, tend to remain localized among small groups of agents. (JEL D82, D83) Creation-Date: 2008 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2799052/Stein_Conversations.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2799052 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia Title: The Quiet Revolution That Transformed Women’s Employment, Education, and Family Abstract: Creation-Date: 2006 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2943933/Goldin_QuietRevolution.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2943933 Template-Type: ReDIF-Paper 1.0 Author-Name: Feldstein, Martin Title: Should Social Security Benefits Be Means Tested? Abstract: Social-security retirement benefits distort the saving decisions of workers who are rational enough to save for their future. Since the implicit rate of return in an unfunded social-security program is less than the marginal product of capital, the resulting decline in saving causes a welfare loss. The present paper examines the conditions under which the welfare loss can be reduced by replacing the current universal social-security program with a means-tested program that pays benefits only to those individuals with little or no other retirement income or assets. Creation-Date: 1987 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/2770498/feldstein_socialsec.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2770498 Template-Type: ReDIF-Paper 1.0 Author-Name: Feldstein, Martin Title: Argentina's Fall: Lessons from the Latest Financial Crisis Abstract: Creation-Date: 2002 Publication-Status: Published in Foreign Affairs File-URL: http://dash.harvard.edu/bitstream/handle/1/2959849/feldstein_argentina.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2959849 Template-Type: ReDIF-Paper 1.0 Author-Name: Dekel, Eddie Author-Name: Fudenberg, Drew Author-Name: Morris, Stephen Title: Topologies on Types Abstract: We define and analyze a "strategic topology'' on types in the Harsanyi-Mertens-Zamir universal type space, where two types are close if their strategic behavior is similar in all strategic situations. For a fixed game and action define the distance between a pair of types as the difference between the smallest epsilon for which the action is epsilon interim correlated rationalizable. We define a strategic topology in which a sequence of types converges if and only if this distance tends to zero for any action and game. Thus a sequence of types converges in the strategic topology if that smallest epsilon does not jump either up or down in the limit. As applied to sequences, the upper-semicontinuity property is equivalent to convergence in the product topology, but the lower-semicontinuity property is a strictly stronger requirement, as shown by the electronic mail game. In the strategic topology, the set of "finite types'' (types describable by finite type spaces) is dense but the set of finite common-prior types is not. Creation-Date: 2006 Publication-Status: Published in Theoretical Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3160489/fudenberg_topologies.PDF File-Format: application/pdf Handle: RePEc:hrv:faseco:3160489 Template-Type: ReDIF-Paper 1.0 Author-Name: Feldstein, Martin Title: The Transformation of Public Economics Research: 1970-2000 Abstract: The nature and content of research and teaching in public economics have changed enormously during the past three decades. The field is more theoretically rigorous, more empirical, more focused on real policy issues, and more concerned with government spending as well as with taxation. For me, it has been an exciting time to be a public finance economist and to contribute to this intellectual transformation. Creation-Date: 2002 Publication-Status: Published in Journal of Public Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/2797442/feldstein_transformation.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2797442 Template-Type: ReDIF-Paper 1.0 Author-Name: Feldstein, Martin Author-Name: Altman, Dan Title: Unemployment Insurance Savings Accounts Abstract: We examine a system of Unemployment Insurance Saving Accounts (UISAs) as an alternative to the traditional unemployment insurance system. Individuals are required to save up to 4 percent of wages in special accounts and to draw unemployment compensation from these accounts instead of taking state unemployment insurance benefits. If the accounts are exhausted, the government lends money to the account. Positive accounts earn the return on commercial paper and negative accounts are charged that rate. Positive UISA balances are converted into retirement income or bequeathed if the individual dies before retirement age. Negative account balances are forgiven at retirement age. Money taken by an unemployed individual from a UISA with a positive balance reduces the individual's personal wealth by an equal amount. In this case, individuals fully internalize the cost of unemployment compensation. UISAs provide the same protection to the unemployed as the current UI system but with less of the adverse incentives. The key empirical question is whether accounts based on a moderate saving rate can finance a significant share of unemployment payments or whether the concentration of unemployment among a relatively small number of individuals implies that the UISA balances would typically be negative, forcing individuals to rely on government benefits with the same adverse effects that characterize the current UI system. To resolve this issue we use the Panel Study on Income Dynamics to simulate the UISA system over a 25 year historic period. Our analysis indicates that almost all individuals have positive UISA balances and therefore remain sensitive to the cost of unemployment compensation. Even among individuals who experience unemployment, most have positive account balances at the end of their unemployment spell. Although about half of the benefit dollars would go to individuals whose accounts are negative at the end of their working life, less than one third of the benefits go to individuals who also have negative account balances when unemployed. These facts suggest a substantial potential improvement in the incentives of the unemployed. The cost to taxpayers of forgiving the negative balances is substantially less than half of the taxpayer cost of the current UI system. Our analysis of the distribution of lifetime UISA payments and taxes of household heads shows the top quintile gaining a small cumulative amount while those in the bottom quintile lose a very small cumulative amount. Other quintiles are small net gainers. Creation-Date: 2007 Publication-Status: Published in Tax Policy and The Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/2960185/feldsteinaltman_unemployment.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2960185 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia Author-Name: Katz, Lawrence Title: Education and Income in the Early 20th Century: Evidence from the Prairies Abstract: We present the first estimates of the returns to years of schooling before 1940 using a large sample individuals (from the 1915 Iowa State Census). The returns to a year of high school or college were substantial in 1915—about 11 percent for all males and in excess of 12 percent for young males. Education enabled individuals to enter lucrative white-collar jobs, but sizable educational wage differentials also existed within occupational groups. Returns were substantial even for those in farming. We find, using U.S. census data, that returns to education decreased between 1915 and 1940 and again during the 1940s. Creation-Date: 2000 Publication-Status: Published in The Journal of Economic History File-URL: http://dash.harvard.edu/bitstream/handle/1/2624456/Goldin_EducationIncome.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2624456 Template-Type: ReDIF-Paper 1.0 Author-Name: Feldstein, Martin Title: Resolving the Global Imbalance: The Dollar and the U.S. Saving Rate Abstract: The massive deficit in the U.S. trade and current accounts is one of the most striking features of the current global economy and, to some observers, one of the most worrying. Although the current account deficit finally began to shrink in 2007, it remained at more than 5 percent of GDP—more than $700 billion. While some observers claim that the U.S. economy can continue to have trade deficits of this magnitude for years—some would say for decades—into the future, I believe that such enormous deficits cannot continue and will decline significantly in the coming years. This paper discusses the reasons for that decline and the changes that are needed in the U.S. saving rate and in the value of the dollar to bring it about. Reducing the U.S. current account deficit does not require action by the U.S. government or by the governments of America's trading partners. Market forces alone will cause the U.S. trade deficit to decline further. In practice, however, changes in government policies at home and abroad may lead to faster reductions in the U.S. trade deficit. More important, the response of the U.S. and foreign governments and central banks will determine the way in which the global economy as a whole adjusts to the decline in the U.S. trade deficit. Reductions in the U.S. current account deficit will of course imply lower aggregate trade surpluses in the rest of the world. Taken by itself, a reduction in any country's trade surplus will reduce aggregate demand and therefore employment in that country. I will therefore look at what other countries—China, Japan, and European countries—can do to avoid the adverse consequences of the inevitable decline of the U.S. trade deficit. Creation-Date: 2008 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/2792081/feldstein_resolving.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2792081 Template-Type: ReDIF-Paper 1.0 Author-Name: Bertrand, Marianne Author-Name: Shafir, Eldar Author-Name: Mullainathan, Sendhil Title: Behavioral Economics and Marketing in Aid of Decision Making Among the Poor Abstract: This article considers several aspects of the economic decision making of the poor from the perspective of behavioral economics, and it focuses on potential contributions from marketing. Among other things, the authors consider some relevant facets of the social and institutional environments in which the poor interact, and they review some behavioral patterns that are likely to arise in these contexts. A behaviorally more informed perspective can help make sense of what might otherwise be considered “puzzles” in the economic comportment of the poor. A behavioral analysis suggests that substantial welfare changes could result from relatively minor policy interventions, and insightful marketing may provide much needed help in the design of such interventions. Creation-Date: 2006 Publication-Status: Published in Journal of Public Policy and Marketing File-URL: http://dash.harvard.edu/bitstream/handle/1/2962609/behavioral%20economics%20and%20marketing.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2962609 Template-Type: ReDIF-Paper 1.0 Author-Name: Cooper, Richard Title: Growth and Inequality: The Role of Foreign Trade and Investment Abstract: This paper addresses the influence of foreign trade and investment on inequality or, more generally, on the distribution of income, with a focus on developing countries. There has been some scholarly debate on the influence on economic growth of economic openness to the rest of the world. Since growth affects the level of poverty and the distribution of income, the trade–growth nexus is also addressed. "Distribution of income" has several quite different meanings, apart from the issue of the specific measurements that are used to describe it. Economic theory has mainly been concerned with the functional distribution of income, that is, with the returns to different identifiable factors of production and their respective shares in total income of a particular country, such as the share of labor income in national income. Popular and political discourse is more concerned with the size distribution of income, such as the fraction of national income accruing to the top ten percent, or the bottom decile, of residents of the country in question — and in particular on whether inequality has risen or declined. In recent years, concern with the size distribution of income has extended to the global distribution, where observations are on countries, grouped by per capita income, rather than on individuals. The two concepts of distribution are related by the ownership of the factors of production, especially land in a predominantly agrarian economy, capital in a modern economy. If ownership of land and capital were evenly distributed across a population, even significant changes in the functional distribution of income would have little impact on the size distribution of income. Creation-Date: 2001 Publication-Status: Published in WCFIA Working Paper File-URL: http://dash.harvard.edu/bitstream/handle/1/3677049/Cooper_GrowthInequality.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3677049 Template-Type: ReDIF-Paper 1.0 Author-Name: Lemieux, Thomas Author-Name: Imbens, Guido Title: The Regression Discontinuity Design — Theory and Applications Abstract: In Regression Discontinuity (RD) designs for evaluating causal effects of interventions, assignment to a treatment is determined at least partly by the value of an observed covariate lying on either side of a fixed threshold. These designs were first introduced in the evaluation literature by Thistlewaite and Campbell (1960). With the exception of a few unpublished theoretical papers, these methods did not attract much attention in the economics literature until recently. Starting in the late 1990s, there has been a large number of studies in economics applying and extending RD methods. In this paper we review some of the practical and theoretical issues involved in the implementation of RD methods. Creation-Date: 2008 Publication-Status: Published in Journal of Econometrics File-URL: http://dash.harvard.edu/bitstream/handle/1/3043411/imbens_regresh.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3043411 Template-Type: ReDIF-Paper 1.0 Author-Name: Lopez-de-Silanes, Florencio Author-Name: Djankov, Simeon Author-Name: La Porta, Rafael Author-Name: Shleifer, Andrei Title: The Law and Economics of Self-dealing Abstract: We present a new measure of legal protection of minority shareholders against expropriation by corporate insiders: the anti-self-dealing index. Assembled with the help of Lex Mundi law firms, the index is calculated for 72 countries based on legal rules prevailing in 2003, and focuses on private enforcement mechanisms, such as disclosure, approval, and litigation, that govern a specific self-dealing transaction. This theoretically grounded index predicts a variety of stock market outcomes, and generally works better than the previously introduced index of anti-director rights. Creation-Date: 2008 Publication-Status: Published in Journal of Financial Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/2907526/selfdeal.may17.jfe.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2907526 Template-Type: ReDIF-Paper 1.0 Author-Name: Alesina, Alberto Author-Name: Londregan, John Title: A Model of the Political Economy of the United States Abstract: We develop and test a model of joint determination of economic growth and national election results in the United States. The formal model, which combines developments in the rational choice analysis of the behavior of economic agents and voters, leads to a system of equations in which the dependent variables are the growth rate and the vote shares in presidential and congressional elections. Our estimates support the theoretical claims that growth responds to unanticipated policy shifts and that voters use both on-year and midterm elections to balance the two parties. On the other hand, we find no support for "rational" retrospective voting. We do reconfirm, in a fully simultaneous framework, the "naive" retrospective voting literate's finding that the economy has a strong effect on presidential voting. We find congressional elections unaffected by the economy, except as transmitted by presidential coattails. Creation-Date: 1993 Publication-Status: Published in American Political Science Review File-URL: http://dash.harvard.edu/bitstream/handle/1/4552529/alesina_politicaleconomy.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4552529 Template-Type: ReDIF-Paper 1.0 Author-Name: Roth, Alvin Author-Name: Niederle, Muriel Title: The Gastroenterology Fellowship Market: Should There Be A Match? Abstract: Creation-Date: 2005 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2562766/Roth_Gastro.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2562766 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia Title: The Economics of Emancipation Abstract: Creation-Date: 1973 Publication-Status: Published in Journal of Economic History File-URL: http://dash.harvard.edu/bitstream/handle/1/2643645/Goldin_EconomicsEmancipation.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2643645 Template-Type: ReDIF-Paper 1.0 Author-Name: Feldstein, Martin Title: Public Policies and Private Saving in Mexico Abstract: Increasing the rate of saving is an important priority for many emerging market countries. This paper focuses on Mexico and discusses a variety of policies through which the government of Mexico could stimulate a higher rate of saving. These ideas are building blocks rather than an overall plan. Some are mutually exclusive but most are options that could be combined to achieve a higher rate of saving. Although the emphasis is on policy options that can be helpful in raising saving, the paper also discusses proposals that would be likely to reduce the rate of saving. The primary focus of the paper is on tax reforms, but there is also a discussion of financial regulation, government debt management, and the new system of retirement saving accounts. Creation-Date: 1999 Publication-Status: Published in Economia mexicana File-URL: http://dash.harvard.edu/bitstream/handle/1/3044933/feldstein_publicprivatemex.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3044933 Template-Type: ReDIF-Paper 1.0 Author-Name: Glaeser, Edward Author-Name: Cutler, David Title: What Explains Differences in Smoking, Drinking, and Other Health Related Behaviors Abstract: We explore economic model of health behaviors. While the standard economic model of health as an investment is generally supported empirically, the ability of this model to explain heterogeneity across individuals is extremely limited. Most prominently, the correlation of different health behaviors across people is virtually zero, suggest that standard factors such as variation in discount rates or the value of life are not the drivers of behavior. We focus instead on two other factors: genetics; and behavioral-specific situational factors. The first factor is empirically important, and we suspect the second is as well. Creation-Date: 2005 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2664274/cutler_smokingdrinking.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2664274 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia Author-Name: Shim, Maria Title: Making a Name: Women's Surnames at Marriage and Beyond Abstract: This paper tracks the fraction of college graduate women who kept their surnames upon marriage and after childbirth and explores some of the correlates of surname retention. Data from the New York Times, Harvard College alumni books, and Massachusetts birth records are used. Surname retention at marriage greatly increased from 1975 to about 1985 although Massachusetts birth records and the Harvard data show a decrease in the fraction keeping their surnames beginning around the early 1990s. The observable characteristics of importance in surname retention are those revealing that the bride has already “made a name” for herself. Creation-Date: 2004 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/2796938/Goldin_MakingName.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2796938 Template-Type: ReDIF-Paper 1.0 Author-Name: Feldstein, Martin Title: A Self-Help Guide for Emerging Markets Abstract: International economic crises will continue to occur in the future as they have for centuries past. The rapid spread of the 1997 crisis in Asia and of the 1982 crisis in Latin America showed how shifts in market perceptions can suddenly bring trouble to countries even when there has been no change in objective conditions. More recently, the sharp jump in emerging market interest rates after Russia's August 1998 default underlined the vulnerability of all emerging market economies to increases in investors' aversion to risk. Emerging market countries that want to avoid the devastating effects of such crises must protect themselves. They cannot depend on the International Monetary Fund or other international organizations nor expect that a new global financial architecture' will make the world economy less dangerous. Taking steps to protect themselves requires more than avoiding those bad policies that make a currency crisis inevitable. The process of contagion makes even the virtuous vulnerable to currency runs. Liquidity is the key to self-protection. A country that has substantial international liquidity -- large foreign exchange reserves and a ready source of foreign currency loans -- is less likely to be the object of a currency attack. Substantial liquidity also permits a country that is attacked from within or without to defend itself better and to make more orderly adjustments. The challenge is to find ways to increase liquidity at reasonable cost. Creation-Date: 1999 Publication-Status: Published in Foreign Affairs File-URL: http://dash.harvard.edu/bitstream/handle/1/2961700/feldstein_selfhelp.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2961700 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia Title: Monitoring Costs and Occupational Segregation by Sex: A Historical Analysis Abstract: Female manufacturing workers around 1900 were far more likely to be paid by the piece and were rarely employed at the same occupation in the same firm as males. These and related aspects of work organization can be understood through a model in which workers shirk, monitoring is costly, and males and females have different turnover rates. Employers adopt either piece rates or deferred payment. Occupational segregation by sex and differences in earnings result even if workers are equally productive. Establishment-level data on supervising male and female workers in time- and piece-rate positions are examined. Creation-Date: 1986 Publication-Status: Published in Journal of Labor Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/2666727/Goldin_MonitoringCosts.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2666727 Template-Type: ReDIF-Paper 1.0 Author-Name: Feldstein, Martin Title: Why is the Dollar So High? Abstract: The level of the dollar is part of a complex general equilibrium system. Nevertheless, it is helpful to recognize that the high level of the dollar is necessary to generate the current account deficit equal to the difference between national saving and investment. Understanding the high level of the dollar therefore requires understanding the reasons for the low level of national saving in the United States. Reducing the large current account deficit will require both a higher rate of national saving and a more competitive dollar. Although the necessary decline in the real value of the dollar can in theory occur without a decline in the dollar's nominal value, the implied magnitude of the fall in the domestic price level is implausible. A decline of the real value of the dollar that is large enough to reduce the current account deficit significantly requires a significant decline in the nominal value of the dollar. Creation-Date: 2007 Publication-Status: Published in Journal of Policy Modeling File-URL: http://dash.harvard.edu/bitstream/handle/1/2794833/felds_dolla.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2794833 Template-Type: ReDIF-Paper 1.0 Author-Name: Mitnik, Oscar K. Author-Name: Imbens, Guido Author-Name: Hotz, V. Joseph Author-Name: Crump, Richard K. Title: Nonparametric Tests for Treatment Effect Heterogeneity Abstract: In this paper we develop two nonparametric tests of treatment effect heterogeneity. The first test is for the null hypothesis that the treatment has a zero average effect for all subpopulations defined by covariates. The second test is for the null hypothesis that the average effect conditional on the covariates is identical for all subpopulations, that is, that there is no heterogeneity in average treatment effects by covariates. We derive tests that are straightforward to implement and illustrate the use of these tests on data from two sets of experimental evaluations of the effects of welfare-to-work programs. Creation-Date: 2008 Publication-Status: Published in The Review of Economics and Statistics File-URL: http://dash.harvard.edu/bitstream/handle/1/3039049/imbens_nonparametric.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3039049 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia Title: Maximum Hours Legislation and Female Employment: A Reassessment Abstract: The causes and results of state maximum hours legislation for female workers, passed from 1848 to the 1920s, are explored and found to differ from the interpretation presented by Landes (1980). Although maximum hours legislation served to decrease scheduled hours in 1920, the effect was minimal. Curiously, the legislation seems to have operated equally for men. Legislation affecting only females was symptomatic of a general desire by labor for lower hours, and these lower hours were achieved in the tight, and otherwise special, World War I labor market. Most significant, the restrictiveness of the legislation had no adverse effect on the employment share of women in manufacturing. Reasons for the relationship between the decline in hours worked by men and legislation protecting women are suggested, but it still is not clear what precise mechanisms operated to decrease hours of work for all. Creation-Date: 1988 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/2645471/Goldin_MaximumHours.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2645471 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Author-Name: Mullainathan, Sendhil Author-Name: Schwartzstein, Joshua Title: Coarse Thinking and Persuasion Abstract: We present a model of uninformative persuasion in which individuals “think coarsely”: they group situations into categories and apply the same model of inference to all situations within a category. Coarse thinking exhibits two features that persuaders take advantage of: (i) transference, whereby individuals transfer the informational content of a given message from situations in a category where it is useful to those where it is not, and (ii) framing, whereby objectively useless information influences individuals' choice of category. The model sheds light on uninformative advertising and product branding, as well as on some otherwise anomalous evidence on mutual fund advertising. Creation-Date: 2008 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/11022284/coarse%20thinking%20and%20persuasion.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11022284 Template-Type: ReDIF-Paper 1.0 Author-Name: Feldstein, Martin Title: Social Security Pension Reform in China Abstract: China has legislated a mixed social security pension system with a defined benefit pay-as-you-go portion and an investment-based defined contribution portion. This paper analyses the economics of these two types of systems in the Chinese context and calculates the advantage to China of using an investment-based portion. Several options for reform of the recently legislated system are considered. Creation-Date: 1999 Publication-Status: Published in China Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2794835/feldstein_china.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2794835 Template-Type: ReDIF-Paper 1.0 Author-Name: Feldstein, Martin Title: Structural Reform of Social Security Abstract: Governments around the world have enacted or are currently considering fundamental structural reforms of their Social Security pension programs. The key feature in these reforms is a shift from a pure pay-as-you-go tax-financed system, in which taxes on current workers are primarily distributed to current retirees, to a mixed system that combines pay-as-you-go benefits with investment-based personal retirement accounts. This paper discusses how such a mixed system could work in practice and how the transition to such a change could be achieved. It then analyzes the economic gains that would result from shifting to a mixed system. I turn next to the three problems that critics raise about any investment-based plan: administrative costs, risk, and income distribution. Finally, I comment on some of the ad hoc proposals for dealing with the financial problem of Social Security without shifting to an investment-based system. Creation-Date: 2005 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/2794830/felds_strux.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2794830 Template-Type: ReDIF-Paper 1.0 Author-Name: Lewis, Frank Author-Name: Goldin, Claudia Title: The Economic Cost of the American Civil War: Estimates and Implications Abstract: Creation-Date: 1975 Publication-Status: Published in Journal of Economic History File-URL: http://dash.harvard.edu/bitstream/handle/1/2662305/Goldin_EconomicCost.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2662305 Template-Type: ReDIF-Paper 1.0 Author-Name: Feldstein, Martin Title: Why is Productivity Growing Faster? Abstract: Productivity in the United States has been growing faster in the past seven years than it did in the previous quarter century. U.S. productivity growth accelerated while that in Europe declined. This paper asks why U.S. productivity growth has been faster than in the past and than in Europe. An important reason for the faster growth has been the strong incentives for managers at all levels to make the kinds of changes that can raise productivity even if that involves personal risk and discomfort. These incentives became much stronger during the 1990s for reasons that I speculate about but do not begin to understand fully. The information technology developments in personal computers and in internet and intranet communications provided a powerful means to achieve the productivity gains that everyone was seeking. But even if the new IT opportunities had not come along, the combination of strong incentives and a receptive corporate climate would have led managers to find other ways to increase productivity, although undoubtedly not by as much. European firms had neither the incentive structure nor the corporate environment supportive of making change that could involve significant job changes and layoffs. Although Europe has higher unemployment rates, it is much more difficult to lay off workers in Europe than in the United States. Reorganizing white collar work to change job assignments and locations is also much easier in the U.S. than in Europe. The future is likely to see continued strong productivity growth and perhaps even increasing productivity growth in the United States if the incentives and corporate environments remain supportive. The prospects for Europe remain uncertain. Creation-Date: 2003 Publication-Status: Published in Journal of Policy Modeling File-URL: http://dash.harvard.edu/bitstream/handle/1/2794834/felds_grow.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2794834 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia Title: America's Graduation from High School: The Evolution and Spread of Secondary Schooling in the Twentieth Century Abstract: Secondary-school enrollment and graduation rates increased spectacularly in much of the United States from 1910 to 1940; the advance was particularly rapid from 1920 to 1935 in the nonsouthern states. This increase was uniquely American; no other nation underwent an equivalent change for several decades. States that rapidly expanded their high school enrollments early in the period had greater wealth, more homogeneity of wealth, and less manufacturing activity than others. Factors prompting the expansion include the substantial returns to education early in the century and a responsive "state." This work is based on a newly constructed state-level data set. Creation-Date: 1998 Publication-Status: Published in Journal of Economic History File-URL: http://dash.harvard.edu/bitstream/handle/1/2664307/Goldin_AmericaGraduation.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2664307 Template-Type: ReDIF-Paper 1.0 Author-Name: Acemoglu, Daron Author-Name: Zilibotti, Fabrizio Author-Name: Aghion, Philippe Title: Vertical Integration and Distance to Frontier Abstract: We construct a model where the equilibrium organization of firms changes as an economy approaches the world technology frontier. In vertically integrated firms, owners (managers) have to spend time both on production and innovation activities, and this creates managerial overload, and discourages innovation. Outsourcing of some production activities mitigates the managerial overload, but creates a holdup problem, causing some of the rents of the owners to be dissipated to the supplier. Far from the technology frontier, imitation activities are more important, and vertical integration is preferred. Closer to the frontier, the value of innovation increases, encouraging outsourcing. Creation-Date: 2003 Publication-Status: Published in Journal of the European Economic Association File-URL: http://dash.harvard.edu/bitstream/handle/1/4481512/aghion_verticalintegration.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4481512 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Title: Advancing Beyond "Advances in Behavioral Economics" Abstract: This essay discusses the field of behavioral economics, with a focus on the papers in Advances in Behavioral Economics. These papers show that there is a body of “behavioral facts” that is both economically significant and regular enough to be modeled. For the field to advance further, it should devote more attention to the foundations of its models, and develop unified explanations for a wider range of phenomena. Creation-Date: 2006 Publication-Status: Published in Journal of Economic Literature File-URL: http://dash.harvard.edu/bitstream/handle/1/3208222/fudenberg_advancingbeyond.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3208222 Template-Type: ReDIF-Paper 1.0 Author-Name: Pathak, Parag A. Author-Name: Abdulkadiroglu, Atila Author-Name: Roth, Alvin Title: The New York City High School Match Abstract: Creation-Date: 2005 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2562765/Roth_NYC.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2562765 Template-Type: ReDIF-Paper 1.0 Author-Name: Roth, Alvin Author-Name: Ünver, M. Utku Author-Name: Sönmez, Tayfun Title: A Kidney Exchange Clearinghouse in New England Abstract: Creation-Date: 2005 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2562810/Roth_KidneyEngland.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2562810 Template-Type: ReDIF-Paper 1.0 Author-Name: Zilibotti, Fabrizio Author-Name: Redding, Stephen Author-Name: Burgess, Robin Author-Name: Aghion, Philippe Title: The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India Abstract: We study whether the effects on registered manufacturing output of dismantling the License Raj—a system of central controls regulating entry and production activity in this sector—vary across Indian states with different labor market regulations. The effects are found to be unequal across Indian states with different labor market regulations. In particular, following delicensing, industries located in states with pro-employer labor market institutions grew more quickly than those in pro-worker environments. Creation-Date: 2008 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/4554127/aghion_unequaleffects.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4554127 Template-Type: ReDIF-Paper 1.0 Author-Name: Stein, Jeremy Author-Name: Aghion, Philippe Title: Growth Versus Margins: Destabilizing Consequences of Giving the Stock Market What it Wants Abstract: We develop a model in which a firm can devote effort either to increasing sales growth, or to improving per-unit profit margins. If the firm's manager cares about the current stock price, she will favor the growth strategy when the market pays more attention to growth numbers. Conversely, it can be rational for the market to weight growth measures more heavily when it is known that the firm is following a growth strategy. This two-way feedback between firms' strategies and the market's pricing rule can lead to excess volatility in real variables, even absent any external shocks. Creation-Date: 2008 Publication-Status: Published in Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/3660730/aghion_growthvsmargins.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3660730 Template-Type: ReDIF-Paper 1.0 Author-Name: Scarpetta, Stefano Author-Name: Fally, Thibault Author-Name: Aghion, Philippe Title: Credit Constraints as a Barrier to the Entry and Post-Entry Growth of Firms Abstract: Advanced market economies are characterized by a continuous process of creative destruction. Market forces and technological developments play a major role in shaping this process, but institutional and policy settings also influence firms' decision to enter, to expand if successful and to exit if competition becomes unbearable. In this paper we focus on the effects of financial development on the entry of new firms and the expansion of successful new businesses. Drawing from harmonized firm-level data for 16 industrialized and emerging economies, we find that access to finance matters most for the entry of small firms and in sectors that are more dependent upon external finance. This finding is robust to controlling for other potential entry barriers (labour market regulations and entry regulations). On the other hand, financial development has either no effect or a negative effect on entry by large firms. Access to finance also helps new firms expand if successful. Both private credit and stock market capitalization are important for promoting entry and post-entry growth of firms. Altogether, these results suggest that, despite significant progress over the past decade, many countries, including those in Continental Europe, should improve their financial markets so as to get the most out of creative destruction, by encouraging the entry of new (especially small) firms and the post-entry growth of successful young businesses. Creation-Date: 2007 Publication-Status: Published in Economic Policy File-URL: http://dash.harvard.edu/bitstream/handle/1/4554208/aghion_creditconstraints.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4554208 Template-Type: ReDIF-Paper 1.0 Author-Name: Roth, Alvin Title: Deferred Acceptance Algorithms: History, Theory, Practice, and Open Questions Abstract: The deferred acceptance algorithm proposed by Gale and Shapley (1962) has had a profound influence on market design, both directly, by being adapted into practical matching mechanisms, and, indirectly, by raising new theoretical questions. Deferred acceptance algorithms are at the basis of a number of labor market clearinghouses around the world, and have recently been implemented in school choice systems in Boston and New York City. In addition, the study of markets that have failed in ways that can be fixed with centralized mechanisms has led to a deeper understanding of some of the tasks a marketplace needs to accomplish to perform well. In particular, marketplaces work well when they provide thickness to the market, help it deal with the congestion that thickness can bring, and make it safe for participants to act effectively on their preferences. Centralized clearinghouses organized around the deferred acceptance algorithm can have these properties, and this has sometimes allowed failed markets to be reorganized. Creation-Date: 2008 Publication-Status: Published in International Journal of Game Theory File-URL: http://dash.harvard.edu/bitstream/handle/1/2579651/Roth_Deferred%20Acceptance.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2579651 Template-Type: ReDIF-Paper 1.0 Author-Name: Alter, George Author-Name: Rotella, Elyce Author-Name: Goldin, Claudia Title: The Savings of Ordinary Americans: The Philadelphia Saving Fund Society in the Mid-Nineteenth Century Abstract: We explore the savings behavior of ordinary Americans through their accounts at the Philadelphia Saving Fund Society, the oldest mutual savings bank in the United States. Our sample contains all 2,374 accounts opened in 1850. Savings accounts were generally brief affairs, but median balances mounted to about three-quarters of annual income in three years. Deposits and withdrawals were infrequent, but substantial. Only female servants, as a group, used their accounts for life-cycle savings, eventually amassing large nest eggs. Men often used them to hold funds before acquiring physical property. We estimate saving rates between 10 and 15 percent on active accounts. Creation-Date: 1994 Publication-Status: Published in Journal of Economic History File-URL: http://dash.harvard.edu/bitstream/handle/1/2643655/Alter_Saving.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2643655 Template-Type: ReDIF-Paper 1.0 Author-Name: Stock, James Author-Name: Feldstein, Martin Title: Measuring Money Growth When Financial Markets are Changing Abstract: This article considers constructing monetary aggregates in the presence of financial market innovations and changes in the relationship between individual assets and output. We propose two procedures for constructing a monetary aggregate with the objective of providing a reliable monetary leading indicator of nominal GDP. In the first, subaggregates discretely switch in and out; in the second, the aggregate's growth is a time-varying weighted average of the growth of the subaggregates, where the weights follow a multivariate random walk. These procedures are used to examine augmenting M2 with stock and/or bond mutual funds. The alternative aggregates are broadly similar to M2, but during 1992–1993 they outperform M2. Creation-Date: 1996 Publication-Status: Published in Journal of Monetary Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/2799053/feldstein_measuringmoney.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2799053 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia Title: The Long Road to the Fast Track: Career and Family Abstract: The career and family outcomes of college graduate women suggest that the twentieth century contained five distinct cohorts. The first cohort, graduating college from 1900 to 1920, had either "family or career." The second, graduating from 1920 to 1945, had "job then family." The third cohort, the college graduate mothers of the baby boom, graduated from 1946 to the mid1960s and had "family then job." Among the fourth cohort, graduating college from the late 1960s to 1980 and whose stated goal was "career then family," 13 to 18 percent achieved both by age forty. The objective of the fifth cohort, graduating from around 1980 to 1990, has been "career and family," and 21 to 28 percent have realized that goal by age forty. The author traces the demographic and labor force experiences of these five cohorts of college graduates and discusses why "career and family" outcomes changed over time. Creation-Date: 2004 Publication-Status: Published in Annals of the American Academy of Political and Social Science File-URL: http://dash.harvard.edu/bitstream/handle/1/2920116/Goldin_LongRoad.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2920116 Template-Type: ReDIF-Paper 1.0 Author-Name: Sen, Amartya Title: Capitalism Beyond the Crisis Abstract: Creation-Date: 2009 Publication-Status: Published in New York Review of Books File-URL: http://dash.harvard.edu/bitstream/handle/1/2961699/Sen_2009.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2961699 Template-Type: ReDIF-Paper 1.0 Author-Name: Roth, Alvin Author-Name: Ünver, M. Utku Author-Name: Sönmez, Tayfun Title: Kidney Exchange Abstract: Most transplanted kidneys are from cadavers, but there are also many transplants from live donors. Recently, there have started to be kidney exchanges involving two donor-patient pairs such that each donor cannot give a kidney to the intended recipient because of immunological incompatibility, but each patient can receive a kidney from the other donor. Exchanges are also made in which a donor-patient pair makes a donation to someone waiting for a cadaver kidney, in return for the patient in the pair receiving high priority for a compatible cadaver kidney when one becomes available. There are stringent legal/ethical constraints on how exchanges can be conducted. We explore how larger scale exchanges of these kinds can be arranged efficiently and incentive compatibly, within existing constraints. The problem resembles some of the “housing” problems studied in the mechanism design literature for indivisible goods, with the novel feature that while live donor kidneys can be assigned simultaneously, cadaver kidneys cannot. In addition to studying the theoretical properties of the proposed kidney exchange, we present simulation results suggesting that the welfare gains from larger scale exchange would be substantial, both in increased number of feasible live donation transplants, and in improved match quality of transplanted kidneys. Creation-Date: 2004 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/2580565/Roth_kidneyexchange04.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2580565 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Author-Name: Shiller, Robert Title: Cointegration and Tests of Present Value Models Abstract: Application of some advances in econometrics (in the theory of co-integrated vector autoregressive models) enables us to deal effectively with two problems in rational expectations present value models: nonstationarity of time series and incomplete data on information of market participants. With U.S. data, we find some relatively encouraging new results for the rational expectations theory of the term structure and some puzzling results for the present value model of stock prices. Creation-Date: 1987 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/3122490/campbell_cointegration.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3122490 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia Title: Life-Cycle Labor-Force Participation of Married Women: Historical Evidence and Implications Abstract: The seven-fold increase, since 1920, in the labor force participation rate of married women was not accompanied by a substantial increase in average work experience among employed married women. Two data sets giving life-cycle labor-force histories for cohorts of women born from the 1880s to 1910s indicate considerable (unconditional) heterogeneity in labor-force participation. Employed married women had substantial attachment to their jobs; increased participation brought in women with little prior work experience. Average work experience among cross sections of employed married women increased from 9.1 to 10.5 years over the 1930-50 period. Implications for "wage discrimination" are discussed. Creation-Date: 1989 Publication-Status: Published in Journal of Labor Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/2656816/Goldin_LifeCycle.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2656816 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Author-Name: Vuolteenaho, Tuomo Title: Bad Beta, Good Beta Abstract: This paper explains the size and value "anomalies" in stock returns using an economically motivated two-beta model. We break the beta of a stock with the market portfolio into two components, one reflecting news about the market's future cash flows and one reflecting news about the market's discount rates. Intertemporal asset pricing theory suggests that the former should have a higher price of risk; thus beta, like cholesterol, comes in "had" and "good" varieties. Empirically, we find that value stocks and small stocks have considerably higher cash-flow betas than growth stocks and large stocks, and this can explain their higher average returns. The poor performance of the capital asset pricing model (CAPM) since 1963 is explained by the fact that growth stocks and high-past-beta stocks have predominantly good betas with low risk prices. Creation-Date: 2004 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/3122489/campbellssrn_badbeta.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3122489 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Author-Name: Viceira, Luis Title: Consumption and Portfolio Decisions When Expected Returns are Time Varying Abstract: This paper presents an approximate analytical solution to the optimal consumption and portfolio choice problem of an infinitely lived investor with Epstein-Zin-Weil utility who faces a constant riskless interest rate and a time-varying equity premium. When the model is calibrated to U. S. stock market data, it implies that intertemporal hedging motives greatly increase, and may even double, the average demand for stocks by investors whose risk-aversion coefficients exceed one. The optimal portfolio policy also involves timing the stock market. Failure to time or to hedge can cause large welfare losses relative to the optimal policy. Creation-Date: 1999 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3163266/campbell_consumption.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3163266 Template-Type: ReDIF-Paper 1.0 Author-Name: Alesina, Alberto Title: Macroeconomic Policy in a Two-party System as a Repeated Game Abstract: This paper considers the interaction of two parties with different objectives concerning inflation and unemployment and rational and forward-looking wage-setters. If discretionary policies are followed, an economic cycle related to the political cycle results in equilibrium. This cycle is significantly different from the traditional "political business cycle." Reputational mechanisms due to the repeated interaction of the two parties and the public or commitments to a common policy rule can improve upon the discretionary outcome by reducing or eliminating the magnitude of the economic fluctuations. Creation-Date: 1987 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4552531/alesina_macroeconomic.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4552531 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Author-Name: Schwartz, Allie Author-Name: Ramadorai, Tarun Title: Caught on Tape: Institutional Trading, Stock Returns, and Earnings Announcements Abstract: Many questions about institutional trading can only be answered if one tracks high-frequency changes in institutional ownership. In the United States, however, institutions are only required to report behavior from the "tape", the Transactions and Quotes database of the New York Stock Exchange, using a sophisticated method that best predicts quarterly 13-F data from trades of different sizes. We find that daily institutional trades are highly persistent and respond positively to recent daily returns but negatively to longer-term past daily returns. Institutional trades, particularly sells, appear to generate short-term losses--possibly reflecting institutional demand for liquidity--but longer-term profits. One source of these profits is that institutions anticipate both earnings surprises and post-earnings-announcement drift. These results are different from those obtained using a standard size cutoff rule for institutional trades. Creation-Date: 2009 Publication-Status: Published in Journal of Financial Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/2609649/Campbell_CaughtOnTape.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2609649 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Author-Name: Calvert, Lauren E. Author-Name: Sodini, Paolo Title: Fight or Flight? Portfolio Rebalancing by Individual Investors Abstract: This paper investigates the dynamics of individual portfolios in a unique dataset containing the disaggregated wealth of all households in Sweden. Between 1999 and 2002, we observe little aggregate rebalancing in the financial portfolio of participants. These patterns conceal strong household-level evidence of active rebalancing, which on average offsets about one half of idiosyncratic passive variations in the risky asset share. Wealthy, educated investors with better diversified portfolios tend to rebalance more actively. We found some evidence that households rebalance towards a higher risky share as they become richer. We also study the decisions to trade individual assets. Households are more likely to fully sell directly held stocks if those stocks have performed well, and more likely to exit direct stockholding if their stock portfolios have performed well; but these relationships are much weaker for mutual funds, a pattern which is consistent with previous research on the disposition effect among direct stockholders and performance sensitivity among mutual fund investors. When households continue to hold individual assets, however, they rebalance both stocks and mutual funds to offset about one sixth of the passive variations in individual asset shares. Households rebalance primarily by adjusting purchases of risky assets if their risky portfolios have performed poorly, and by adjusting both fund purchases and full sales of stocks if their risky portfolios have performed well. Finally, the tendency for households to fully sell winning stocks is weaker for wealthy investors with diversified portfolios of individual stocks. Creation-Date: 2009 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/2617031/Campbell_FightorFlight.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2617031 Template-Type: ReDIF-Paper 1.0 Author-Name: Ardagna, Silvia Title: Fiscal Stabilizations: When Do They Work and Why Abstract: This paper studies the determinants and channels through which fiscal contractions influence the dynamics of the debt-to-GDP ratio and GDP growth. Using data from a panel of OECD countries, the paper shows that the success of fiscal adjustments in decreasing the debt-to-GDP ratio depends on the size of the fiscal contraction and less on its composition. The rate of growth of output matters too, but higher GDP growth does not drive the success of a fiscal stabilization. In contrast, whether a fiscal adjustment is expansionary depends largely on the composition of the fiscal maneuvre. In particular, stabilizations implemented by cutting public spending lead to higher GDP growth rates. The effects of the composition on growth work mostly through the labor market rather than through agents’ expectations of future fiscal policy. Finally, the evidence suggests that successful and expansionary fiscal contractions are not the result of accompanying expansionary monetary policy or exchange rate devaluations. Creation-Date: 2004 Publication-Status: Published in European Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2580047/Ardagna_FiscalStabilizations.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2580047 Template-Type: ReDIF-Paper 1.0 Author-Name: Cutler, David Title: Walking the Tightrope on Medicare Reform Abstract: A central controversy in the debate about Medicare is whether the program spends too much money or whether instead it should be expanded to cover more. I consider the value of increased Medicare spending. I argue that on average Medicare spending is worth it: the health gains brought by medicare have been greater than their cost. At the margin, however, services are overused and have low value. Medicare reforms need to promote the high average value of care while eliminating care of low value. Many of the proposed reforms fall short of this goal. Creation-Date: 2000 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/2640587/cutler_tightrope.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2640587 Template-Type: ReDIF-Paper 1.0 Author-Name: Cahuc, Pierre Author-Name: Algan, Yann Author-Name: Aghion, Philippe Title: Civil Society and the State: The Interplay between Cooperation and Minimum Wage Regulation Abstract: In a cross-section of countries, state regulation of labor markets is strongly negatively correlated with the quality of labor relations. In this paper, we argue that these facts reflect different ways to regulate labor markets, either through the state or through the civil society, depending on the degree of cooperation in the economy. We rationalize these facts with a model of learning of the quality of labor relations. Distrustful labor relations lead to low unionization and high demand for direct state regulation of wages. In turn, state regulation crowds out the possibility for workers to experiment negotiation and learn about the potential cooperative nature of labor relations. This crowding out effect can give rise to multiple equilibria: a “good” equilibrium characterized by cooperative labor relations and high union density, leading to low state regulation; and a “bad” equilibrium, characterized by distrustful labor relations, low union density and strong state regulation of the minimum wage. Creation-Date: 2009 Publication-Status: Published in Mimeo, Harvard File-URL: http://dash.harvard.edu/bitstream/handle/1/3226957/Aghion_CivilSociety.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3226957 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Braun, Matias Author-Name: Fedderke, Johannes Title: Competition and Productivity Growth in South Africa Abstract: This article shows that mark-ups are significantly higher in South African manufacturing industries than they are in corresponding industries worldwide. We test for the consequences of this low-level of product market competition on productivity growth. The results of the paper are that high mark-ups have a large negative impact on productivity growth in South African manufacturing industry. Our results are robust to three different data sources, two alternative measures of productivity growth, and three distinct measures of the mark-up. Controlling for potential endogeneity of regressors does not eliminate the findings. The definitive version is available at www3.interscience.wiley.com. Creation-Date: 2008 Publication-Status: Published in Economics of Transition File-URL: http://dash.harvard.edu/bitstream/handle/1/3350068/aghion_southafrica.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3350068 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Author-Name: Calvet, Lauren E. Author-Name: Sodini, Paolo Title: Measuring the Financial Sophistication of Households Abstract: Creation-Date: 2009 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2618438/Campbell_MeasuringSophist.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2618438 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Author-Name: Thompson, Samuel P. Title: Predicting Excess Stock Returns Out of Sample: Can Anything Beat the Historical Average? Abstract: Goyal and Welch (2007) argue that the historical average excess stock return forecasts future excess stock returns better than regressions of excess returns on predictor variables. In this article, we show that many predictive regressions beat the historical average return, once weak restrictions are imposed on the signs of coefficients and return forecasts. The out-of-sample explanatory power is small, but nonetheless is economically meaningful for mean-variance investors. Even better results can be obtained by imposing the restrictions of steady-state valuation models, thereby removing the need to estimate the average from a short sample of volatile stock returns. Creation-Date: 2008 Publication-Status: Published in The Review of Financial Studies File-URL: http://dash.harvard.edu/bitstream/handle/1/2622619/Campbell_Predicting.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2622619 Template-Type: ReDIF-Paper 1.0 Author-Name: Feldstein, Martin Title: Did Wages Reflect Growth in Productivity? Abstract: The level of productivity doubled in the U.S. nonfarm business sector between 1970 and 2006. Wages, or more accurately total compensation per hour, increased at approximately the same annual rate during that period if nominal compensation is adjusted for inflation in the same way as the nominal output measure that is used to calculate productivity. Total employee compensation as a share of national income was 66% of national income in 1970 and 64% in 2006. This measure of the labor compensation share has been remarkably stable since the 1970s. It rose from an average of 62% in the decade of the 1960s to 66% in the decades of the 1970s and 1980s and then declined to 65% in the decade of the 1990s where it has again been from 2000 until the most recent quarter. Creation-Date: 2008 Publication-Status: Published in Journal of Policy Modeling File-URL: http://dash.harvard.edu/bitstream/handle/1/2794832/feld_wages.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2794832 Template-Type: ReDIF-Paper 1.0 Author-Name: Cutler, David Title: Equality, Efficiency, and Market Fundamentals: The Dynamics of International Medical Care Reform. Abstract: Public opinion surveys uniformly show low support for medical-care systems in developed countries. The longstanding conflict between equal access to care and efficient service provision partly explains this dissatisfaction. But the trade-off is particularly acute in medical care, as new technologies developed over time have increased the cost of care and made the equity commitment even more expensive. Countries first dealt with rising costs by maintaining equal access and restricting total spending. Efficiency suffered, however. As a result, many countries are considering a move away from spending controls and toward incentive-based medical-care reform. Creation-Date: 2002 Publication-Status: Published in Journal of Economic Literature File-URL: http://dash.harvard.edu/bitstream/handle/1/2640584/cutler_equality.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2640584 Template-Type: ReDIF-Paper 1.0 Author-Name: Mendez, Oscar Author-Name: Cutler, David Author-Name: Knaul, Felicia Author-Name: Lozano, Rafael Author-Name: Zurita, Beatriz Title: Financial Crisis, Health Outcomes, and Aging: Mexico in the 1980s and 1990s Abstract: We study the impact of economic crisis on health in Mexico. There have been four wide-scale economic crises in Mexico in the past two decades, the most recent in 1995–96. We find that mortality rates for the very young and the elderly increase or decline less rapidly in crisis years as compared with non-crisis years. In the 1995–96 crisis, mortality rates were about 5 to 7 percent higher in the crisis years compared to the years just prior to the crisis. This translates into a 0.4 percent increase in mortality for the elderly and a 0.06 percent increase in mortality for the very young. We find tentative evidence that economic crises affect mortality by reducing incomes and possibly by placing a greater burden on the medical sector, but not by forcing less healthy members of the population to work or by forcing primary caregivers to go to work. Creation-Date: 2002 Publication-Status: Published in Journal of Public Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/2707939/cutler_financialcrisis.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2707939 Template-Type: ReDIF-Paper 1.0 Author-Name: Viceira, Luis Author-Name: Serfaty-de Medeiros, Karine Author-Name: Campbell, John Title: Global Currency Hedging Abstract: Over the period 1975 to 2005, the US dollar (particularly in relation to the Canadian dollar) and the euro and Swiss franc (particularly in the second half of the period) have moved against world equity markets. Thus these currencies should be attractive to risk-minimizing global equity investors despite their low average returns. The risk-minimizing currency strategy for a global bond investor is close to a full currency hedge, with a modest long position in the US dollar. There is little evidence that risk-minimizing investors should adjust their currency positions in response to movements in interest differentials. Creation-Date: 2009 Publication-Status: Published in Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/3153308/campbell_GlobalCurrencyHedging.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3153308 Template-Type: ReDIF-Paper 1.0 Author-Name: Cutler, David Title: The Lifetime Costs and Benefits of Medical Technology Abstract: Measuring the lifetime costs and benefits of medical technologies is essential in evaluating technological change and determining the productivity of medical care. Using data on Medicare beneficiaries with a heart attack in the late 1980s and 17 years of follow up data, I evaluate the long-term costs and benefits of revascularization after a heart attack. I account for non-random selection into treatment with instrumental variables; following McClellan, McNeil, and Newhouse, the instrument is the differential distance to a hospital capable of providing revascularization. The results show that revascularization is associated with over 1 year of additional life expectancy, at a cost of about $40,000. Revascularization, or other treatments correlated with it, appears to be highly cost-effective. Creation-Date: 2007 Publication-Status: Published in Journal of Health Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/2643640/cutler_lifetimecosts.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2643640 Template-Type: ReDIF-Paper 1.0 Author-Name: Cutler, David Author-Name: McGarry, Kathleen Author-Name: Finkelstein, Amy Title: Preference Heterogeneity and Insurance Markets: Explaining a Puzzle of Insurance Abstract: Standard theories of insurance, dating from Rothschild and Stiglitz (1976), stress the role of adverse selection in explaining the decision to purchase insurance. In these models, higher risk people buy full or near-full insurance, while lower risk people buy less complete coverage, if they buy at all. While this prediction appears to hold in some real world insurance markets, in many others, it is the lower risk individuals who have more insurance coverage. If the standard model is extended to allow individuals to vary in their risk tolerance as well as their risk type, this could explain why the relationship between insurance coverage and risk occurrence can be of any sign, even if the standard asymmetric information effects also exist. We present empirical evidence in five difference insurance markets in the United States that is consistent with this potential role for risk tolerance. Specifically, we show that individuals who engage in risky behavior or who do not engage in risk reducing behavior are systematically less likely to hold life insurance, acute private health insurance, annuities, long-term care insurance, and Medigap. Moreover, we show that the sign of this preference effect differs across markets, tending to induce lower risk individuals to purchase insurance in some of these markets, but higher risk individuals to purchase insurance in others. These findings suggest that preference heterogeneity may be important in explaining the differential patterns of insurance coverage in various insurance markets. Creation-Date: 2008 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2640581/cutler_preference.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2640581 Template-Type: ReDIF-Paper 1.0 Author-Name: Cutler, David Author-Name: McClellan, Mark Title: Productivity Change in Health Care Abstract: Creation-Date: 2001 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2640585/cutler_productivity%20change.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2640585 Template-Type: ReDIF-Paper 1.0 Author-Name: Cutler, David Author-Name: Landrum, Mary Beth Author-Name: Huckman, Robert Title: The Role of Information in Medical Markets: An Analysis of Publicly Reported Outcomes in Cardiac Surgery Abstract: During the past two decades, several public and private organizations have initiated programs to report publicly on the quality of medical care provided by specific hospitals and physicians. These programs have sparked broad debate among economists and policy makers concerning whether, and to what extent, they have improved or harmed medical productivity. We take advantage of a cross-sectional time series of different hospitals to address two fundamental questions about quality reporting. First, we examine whether report cards affect the distribution of patients across hospitals. Second, we determine whether report cards lead to improved medical quality among hospitals identified as particularly bad or good performers. Our data are from the longest-standing effort to measure and report health care quality the Cardiac Surgery Reporting System (CSRS) in New York State. Using data for 1991 through 1999, we find that CSRS affected both the volume of cases and future quality at hospitals identified as poor performers. Poor performing hospitals lost relatively healthy patients to competing facilities and experienced subsequent improvements in their performance as measured by risk-adjusted mortality. Creation-Date: 2004 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2640582/cutler_infomarkets.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2640582 Template-Type: ReDIF-Paper 1.0 Author-Name: Cutler, David Author-Name: Huckman, Robert Title: Technological Development and Medical Productivity: The Diffusion of Angioplasty in New York State Abstract: A puzzling feature of many medical innovations is that they simultaneously appear to reduce unit costs and increase total costs. We consider this phenomenon by examining the diffusion of percutaneous transluminal coronary angioplasty (PTCA)—a treatment for coronary artery disease—over the past two decades. We find that growth in the use of PTCA led to higher total costs despite its lower unit cost. Over the two decades following PTCA’s introduction, however, we find that the magnitude of this increase was reduced by between 10 and 20% due to the substitution of PTCA for CABG. In addition, the increased use of PTCA appears to be a productivity improvement. PTCAs that substitute for CABG cost less and have the same or better outcomes, while PTCAs that replace medical management appear to improve health by enough to justify the cost. Creation-Date: 2003 Publication-Status: Published in Journal of Health Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/2664291/cutler_techdev.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2664291 Template-Type: ReDIF-Paper 1.0 Author-Name: Rosen, Allison B. Author-Name: Cutler, David Author-Name: Vijan, Sandeep Title: Value of Medical Innovation in the United States: 1960-2000 Abstract: Background: The increased use of medical therapies has led to increased medical costs. To provide insight into the value of this increased spending, we compared gains in life expectancy with the increased costs of care from 1960 through 2000. Methods: We estimated life expectancy in 1960, 1970, 1980, 1990, and 2000 for four age groups. To control for the influence of nonmedical factors on survival, we assumed in our base-case analysis that 50 percent of the gains were due to medical care. We compared the adjusted increases in life expectancy with the lifetime cost of medical care in the same years. Results: From 1960 through 2000, the life expectancy for newborns increased by 6.97 years, lifetime medical spending adjusted for inflation increased by approximately $69,000, and the cost per year of life gained was $19,900. The cost increased from $7,400 per year of life gained in the 1970s to $36,300 in the 1990s. The average cost per year of life gained in 1960–2000 was approximately $31,600 at 15 years of age, $53,700 at 45 years of age, and $84,700 at 65 years of age. At 65 years of age, costs rose more rapidly than did life expectancy: the cost per year of life gained was $121,000 between 1980 and 1990 and $145,000 between 1990 and 2000. Conclusions: On average, the increases in medical spending since 1960 have provided reasonable value. However, the spending increases in medical care for the elderly since 1980 are associated with a high cost per year of life gained. The national focus on the rise in medical spending should be balanced by attention to the health benefits of this increased spending. Creation-Date: 2006 Publication-Status: Published in New England Journal of Medicine File-URL: http://dash.harvard.edu/bitstream/handle/1/2674791/cutler_NEJM.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2674791 Template-Type: ReDIF-Paper 1.0 Author-Name: Mobius, Markus Author-Name: Rosenblat, Tanya Title: Getting Closer or Drifting Apart Abstract: Advances in communication and transportation technologies have the potential to bring people closer together and create a "global village." However, they also allow heterogeneous agents to segregate along special interests, which gives rise to communities fragmented by type rather than by geography. We show that lower communication costs should always decrease separation between individual agents even as group-based separation increases. Each measure of separation is pertinent for distinct types of social interaction. A group-based measure captures the diversity of group preferences that can have an impact on the provision of public goods. While an individual measure correlates with the speed of information transmission through the social network that affects, for example, learning about job opportunities and new technologies. We test the model by looking at coauthoring between academic economists before and during the rise of the Internet in the 1990s. Creation-Date: 2004 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3043419/Mobius_CloserDrifting.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3043419 Template-Type: ReDIF-Paper 1.0 Author-Name: McClellan, Mark Author-Name: Cutler, David Author-Name: Newhous, Joseph P. Title: How Does Managed Care Do It? Abstract: Integrating the health services and insurance industries, as health maintenance organizations (HMOs) do, could lower expenditure by reducing either the quantity of services or unit price or both. We compare the treatment of heart disease in HMOs and traditional insurance plans using two datasets from Massachusetts. The nature of these health problems should minimize selection. HMOs have 30% to 40% lower expenditures than traditional plans. Both actual treatments and health outcomes differ little; virtually all the difference in spending comes from lower unit prices. Managed care may yield substantial increases in measured productivity relative to traditional insurance. Creation-Date: 2000 Publication-Status: Published in Rand Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/2643884/cutler_managedcare.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2643884 Template-Type: ReDIF-Paper 1.0 Author-Name: Antras, Pol Title: Is the U.S. Aggregate Production Function Cobb-Douglas? New Estimates of the Elasticity of Substitution Abstract: I present new estimates of the elasticity of substitution between capital and labor using data from the private sector of the U.S. economy for the period 1948-1998. I first adopt Berndt’s (1976) specification, which assumes that technological change is Hicks neutral. Consistently with his results, I estimate elasticities of substitution that are not significantly different from one. I next show, however, that restricting the analysis to Hicks-neutral technological change necessarily biases the estimates of the elasticity towards one. When I modify the econometric specification to allow for biased technical change, I obtain significantly lower estimates of the elasticity of substitution. I conclude that the U.S. economy is not well described by a Cobb-Douglas aggregate production function. I present estimates based on both classical regression analysis and time series analysis. In the process, I deal with issues related to the nonsphericality of the disturbances, the endogeneity of the regressors, and the nonstationarity of the series involved in the estimation. Creation-Date: 2004 Publication-Status: Published in Contributions in Macroeconomics File-URL: http://dash.harvard.edu/bitstream/handle/1/3196325/antras_usaggregate.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3196325 Template-Type: ReDIF-Paper 1.0 Author-Name: Antras, Pol Title: Property Rights and the International Organization of Production Abstract: Creation-Date: 2005 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/3196326/antras_propertyrights.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3196326 Template-Type: ReDIF-Paper 1.0 Author-Name: Chamberlain, Gary Author-Name: Imbens, Guido Title: Hierarchical Bayes Models with Many Instrumental Variables Abstract: In this paper, we explore Bayesian inference in models with many instrumental variables that are potentially weakly correlated with the endogenous regressor. The prior distribution has a hierarchical (nested) structure. We apply the methods to the Angrist-Krueger (AK, 1991) analysis of returns to schooling using instrumental variables formed by interacting quarter of birth with state/year dummy variables. Bound, Jaeger, and Baker (1995) show that randomly generated instrumental variables, designed to match the AK data set, give two-stage least squares results that look similar to the results based on the actual instrumental variables. Using a hierarchical model with the AK data, we find a posterior distribution for the parameter of interest that is tight and plausible. Using data with randomly generated instruments, the posterior distribution is diffuse. Most of the information in the AK data can in fact be extracted with quarter of birth as the single instrumental variable. Using artificial data patterned on the AK data, we find that if all the information had been in the interactions between quarter of birth and state/year dummies, then the hierarchical model would still have led to precise inferences, whereas the single instrument model would have suggested that there was no information in the data. We conclude that hierarchical modeling is a conceptually straightforward way of efficiently combining many weak instrumental variables. Creation-Date: 1996 Publication-Status: Published in NBER Technical Working Paper File-URL: http://dash.harvard.edu/bitstream/handle/1/3221489/Chamberlain_HierarchicalBayes.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3221489 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Title: Understanding Risk and Return Abstract: This paper uses an equilibrium multifactor model to interpret the cross-sectional pattern of postwar U.S. stock and bond returns. Priced factors include the return on a stock index, revisions in forecasts of future stock returns (to capture intertemporal hedging effects), and revisions in forecasts of future labor income growth (proxies for the return on human capital). Aggregate stock market risk is the main factor determining excess returns; but in the presence of human capital or stock market mean reversion, the coefficient of relative risk aversion is much higher than the price of stock market risk. Creation-Date: 1996 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/3153293/campbell_risk.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3153293 Template-Type: ReDIF-Paper 1.0 Author-Name: Wang, Jiang Author-Name: Grossman, Sanford Author-Name: Campbell, John Title: Trading Volume and Serial Correlation in Stock Returns Abstract: This paper investigates the relationship between aggregate stock market trading volume and the serial correlation of daily stock returns. For both stock indexes and individual large stocks, the first-order daily return autocorrelation tends to decline with volume. The paper explains this phenomenon using a model in which risk-averse "market makers" accommodate buying or selling pressure from "liquidity" or "noninformational" traders. Changing expected stock returns reward market makers for playing this role. The model implies that a stock price decline on a high-volume day is more likely than a stock price decline on a low-volume day to be associated with an increase in the expected stock return. Creation-Date: 1993 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3128710/campbell_trading.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3128710 Template-Type: ReDIF-Paper 1.0 Author-Name: Chernew, Michael Author-Name: Cutler, David Author-Name: Keenan, Patricia S. Title: Increasing Health Insurance Costs and the Decline in Health Insurance Coverage Abstract: Objective. To determine the impact of rising health insurance premiums on coverage rates. Data Sources & Study Setting. Our analysis is based on two cohorts of nonelderly Americans residing in 64 large metropolitan statistical areas (MSAs) surveyed in the Current Population Survey in 1989–1991 and 1998–2000. Measures of premiums are based on data from the Health Insurance Association of America and the Kaiser Family Foundation/Health Research and Educational Trust Survey of Employer-Sponsored Health Benefits. Study Design. Probit regression and instrumental variable techniques are used to estimate the association between rising local health insurance costs and the falling propensity for individuals to have any health insurance coverage, controlling for a rich array of economic, demographic, and policy covariates. Principal Findings. More than half of the decline in coverage rates experienced over the 1990s is attributable to the increase in health insurance premiums (2.0 percentage points of the 3.1 percentage point decline). Medicaid expansions led to a 1 percentage point increase in coverage. Changes in economic and demographic factors had little net effect. The number of people uninsured could increase by 1.9–6.3 million in the decade ending 2010 if real, per capita medical costs increase at a rate of 1–3 percentage points, holding all else constant. Conclusions. Initiatives aimed at reducing the number of uninsured must confront the growing pressure on coverage rates generated by rising costs. Creation-Date: 2005 Publication-Status: Published in Health Services Research File-URL: http://dash.harvard.edu/bitstream/handle/1/2660660/cutler_increasinghealth.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2660660 Template-Type: ReDIF-Paper 1.0 Author-Name: Diamond, Peter Author-Name: Fudenberg, Drew Title: Rational Expectations Business Cycles in Search Equilibrium: A Correction Abstract: Presents a correction to an article on rational expectations in business cycles. Creation-Date: 1991 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/3190370/fudenberg_rationalcorrection.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3190370 Template-Type: ReDIF-Paper 1.0 Author-Name: Takahashi, Satoru Author-Name: Levine, David Author-Name: Fudenberg, Drew Title: Perfect Public Equilibrium When Players Are Patient Abstract: We provide a characterization of the limit set of perfect public equilibrium payoffs of repeated games with imperfect public monitoring as the discount factor goes to one. Our result covers general stage games including those that fail a “full-dimensionality” condition that had been imposed in past work. It also provides a characterization of the limit set when the strategies are restricted in a way that endogenously makes the full-dimensionality condition fail, as in the strongly symmetric equilibrium studied by Abreu [Abreu, D., 1986. Extremal equilibria of oligopolistic supergames. J. Econ. Theory 39, 191–228] and Abreu et al. [Abreu, D., Pearce, D., Stacchetti, E., 1986. Optimal cartel equilibria with imperfect monitoring. J. Econ. Theory 39, 251–269]. Finally, we use our characterization to give a sufficient condition for the exact achievability of first-best outcomes. Equilibria of this type, for which all continuation payoffs lie on the Pareto frontier, have a strong renegotiation-proofness property: regardless of the history, players can never unanimously prefer another equilibrium. Creation-Date: 2007 Publication-Status: Published in Games and Economic Behavior File-URL: http://dash.harvard.edu/bitstream/handle/1/3196336/perfect_public.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3196336 Template-Type: ReDIF-Paper 1.0 Author-Name: Levine, David Author-Name: Ely, Jeffrey Author-Name: Fudenberg, Drew Title: When is Reputation Bad? Abstract: In traditional reputation models, the ability to build a reputation is good for the long-run player. In [Ely, J., Valimaki, J., 2003. Bad reputation. NAJ Econ. 4, 2; http://www.najecon.org/v4.htm. Quart. J. Econ. 118 (2003) 785–814], Ely and Valimaki give an example in which reputation is unambiguously bad. This paper characterizes a class of games in which that insight holds. The key to bad reputation is that participation is optional for the short-run players, and that every action of the long-run player that makes the short-run players want to participate has a chance of being interpreted as a signal that the long-run player is “bad.” We allow a broad set of commitment types, allowing many types, including the “Stackelberg type” used to prove positive results on reputation. Although reputation need not be bad if the probability of the Stackelberg type is too high, the relative probability of the Stackelberg type can be high when all commitment types are unlikely. Creation-Date: 2008 Publication-Status: Published in Games and Economic Behavior File-URL: http://dash.harvard.edu/bitstream/handle/1/3196337/reputation_bad.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3196337 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Diamond, Peter Title: Rational Expectations Business Cycles in Search Equilibrium Abstract: We examine the rational expectations equilibrium paths of the model of search and barter in Diamond's "Aggregate Demand Management in Search Equilibrium." For some initial positions, there are two equilibrium paths converging to different steady states, with the high-activity path Pareto-dominating the low-activity path, With some parameters there is also a continuum of equilibrium paths converging to another steady state. Moreover, there can be cycles that are equilibrium' paths, even though the environment is stationary. Creation-Date: 1989 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/3374509/fudenberg_rational.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3374509 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Author-Name: Mankiw, Gregory Title: Are Output Fluctuations Transitory? Abstract: According to the conventional view of the business cycle, fluctuations in output represent temporary deviations from trend. The purpose of this paper is to question this conventional view. If fluctuations in output are dominated by temporary deviations from the natural rate of output, then an unexpected change in output today should not substantially change one's forecast of output in, say, five or ten years. Our examination of quarterly postwar United States data leads us to be skeptical about this implication. The data suggest that an unexpected change in real GNP of 1 percent should change one's forecast by over 1 percent over a long horizon. Creation-Date: 1987 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3122545/campbell_output.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3122545 Template-Type: ReDIF-Paper 1.0 Author-Name: Feldstein, Martin Title: The Council of Economic Advisors: From Stabilization to Resource Allocation Abstract: This paper traces the changing role of the Council of Economic Advisers. In the 50 years since its creation, the CEA's focus has shifted from the design of policies to achieve full employment to one of advising on the much-enlarged spending and tax activities of the federal government. The CEA's original attention to achieving cyclical stability through fiscal policy diminished as economists changed their views about the inherent stability of the economy and the usefulness of fiscal policy. With the shift of macroeconomic policy to the Federal Reserve, the CEA's macroeconomic role has diminished but not disappeared. The rapid growth of government spending during the past five decades has greatly increased the role for the CEA in seeking efficient resource allocation. Creation-Date: 1997 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2961702/feldstein_theCEA.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2961702 Template-Type: ReDIF-Paper 1.0 Author-Name: Levine, David Author-Name: Fudenberg, Drew Title: Measuring Players' Losses in Experimental Games Abstract: In some experiments rational players who understand the structure of the game could improve their payoff. We bound the size of the observed losses in several such experiments. To do this, we suppose that observed play resembles an equilibrium because players learn about their opponents' play. Consequently, in an extensive-form game, some actions that are not optimal given the true distribution of opponents' play could be optimal given available information. We find that average losses are small: $0.03 to $0.64 per player with stakes between $2 and $30. In one of the three experiments we examine, this also implies a narrow range of outcome. Creation-Date: 1997 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3160492/fudenberg_measuring.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3160492 Template-Type: ReDIF-Paper 1.0 Author-Name: Tirole, Jean Author-Name: Levine, David Author-Name: Fudenberg, Drew Title: Incomplete Information Bargaining with Outside Opportunities Abstract: We consider two kinds of ‘outside opportunity’ that a seller of an indivisible good might have: selling to a different buyer and consuming the good herself. In both models the seller is uncertain about the buyer's valuation, and becomes more pessimistic over time. When the seller becomes sufficiently pessimistic, she prefers the outside opportunity, so she will not bargain indefinitely with the current buyer. Despite the resulting finite-horizon nature of negotiations, the link between the buyer's willingness to accept an offer and the seller's eagerness to go "outside" generates multiple equilibria. Creation-Date: 1987 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3196301/fudenberg_incompleteinformation.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3196301 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Ellison, Glenn Title: Word-of-Mouth Communication and Social Learning Abstract: This paper studies the way that word-of-mouth communication aggregates the information of individual agents. We find that the structure of the communication process determines whether all agents end up making identical choices, with less communication making this conformity more likely. Despite the players' naive decision rules and the stochastic decision environment, word-of-mouth communication may lead all players to adopt the action that is on average superior. These socially efficient outcomes tend to occur when each agent samples only a few others. Creation-Date: 1995 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3196300/fudenberg_word-of-mouth.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3196300 Template-Type: ReDIF-Paper 1.0 Author-Name: Tirole, Jean Author-Name: Fudenberg, Drew Title: A Theory of Income and Dividend Smoothing Based on Incumbency Rents Abstract: "Income smoothing" is the process of manipulating the time profile of earnings or earnings reports to make the reported income stream less variable. This paper builds a theory of income smoothing based on the managers' concern about keeping their position or avoiding interference, and on the idea that current performance receives more weight than past performance when one is assessing the future. When investment is added to the model, so that income reports and dividends can be set independently, we find that both dividends and income reports may be smoothed and that dividends may convey information not present in the income report. Creation-Date: 1995 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/3160494/fudenberg_theoryofincome.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3160494 Template-Type: ReDIF-Paper 1.0 Author-Name: Ellison, Glenn Author-Name: Fudenberg, Drew Title: Rules of Thumb for Social Learning Abstract: This paper studies agents who consider the experiences of their neighbors in deciding which of two technologies to use. We analyze two learning environments, one in which the same technology is optimal for all players and another in which each technology is better for some of them. In both environments, players use exogenously specified rules of thumb that ignore historical data but may incorporate a tendency to use the more popular technology. In some cases these naive rules can lead to fairly efficient decisions in the long run, but adjustment can be slow when a superior technology is first introduced. Creation-Date: 1993 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/3196332/fudenberg_rules.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3196332 Template-Type: ReDIF-Paper 1.0 Author-Name: Levine, David Author-Name: Fudenberg, Drew Title: Superstition and Rational Learning Abstract: We argue that some, but not all, superstitions can persist when learning is rational and players are patient, and illustrate our argument with an example inspired by the Code of Hammurabi. The code specified an “appeal by surviving in the river” as a way of deciding whether an accusation was true. According to our theory, a mechanism that uses superstitions two or more steps off the equilibrium path, such as “appeal by surviving in the river,” is more likely to persist than a superstition where the false beliefs are only one step off the equilibrium path. Creation-Date: 2006 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/3196330/Superstition.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3196330 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Title: Inspecting the Mechanism: An Analytical Approach to the Stochastic Growth Model Abstract: This paper argues that a clear understanding of the stochastic growth model can best be achieved by working out an approximate analytical solution. The proposed solution method replaces the true budget constraints and Euler equations of economic agents with loglinear approximations. The model then becomes a system of loglinear expectational difference equations, which can be solved by the method of undetermined coefficients. The paper uses this technique to study shocks to techno- logy and shocks to government spending financed by lump-sum or distortionary taxation. It emphasizes that the persistence of shocks is an important determinant of their macroeconomic effects. Creation-Date: 1994 Publication-Status: Published in Journal of Monetary Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3196342/campbellnber_mechanism.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3196342 Template-Type: ReDIF-Paper 1.0 Author-Name: Viceira, Luis Author-Name: Rodriguez, Jorge Author-Name: Chacko, George Author-Name: Campbell, John Title: Strategic Asset Allocation in a Continuous-Time VAR Model Abstract: This paper derives an approximate solution to a continuous-time intertemporal portfolio and consumption choice problem. The problem is the continuous-time equivalent of the discrete-time problem studied by Campbell and Viceira (Q. J. Econ. 114 (1999) 433) in which the expected excess return on a risky asset follows an AR(1) process, while the riskless interest rate is constant. The paper also shows how to obtain continuous-time parameters that are consistent with discrete-time econometric estimates. The continuous-time solution is the limit of that of Campbell and Viceira and has the property that conservative long-term investors have a large positive intertemporal hedging demand for stocks. Creation-Date: 2004 Publication-Status: Published in Journal of Economic Dynamics and Control File-URL: http://dash.harvard.edu/bitstream/handle/1/3294738/campbellssrn_VAR.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3294738 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Title: Estimating the Equity Premium Abstract: Finance theory restricts the time-series behaviour of valuation ratios and links the cross-section of stock prices to the level of the equity premium. This can be used to strengthen the evidence for predictability in stock returns. Steady-state valuation models are useful predictors of stock returns, given the persistence in valuation ratios. A steady-state approach suggests that the world geometric average equity premium fell considerably in the late twentieth century, rose modestly in the early years of the twenty-first century, and was almost 4% at the end of March 2007. Creation-Date: 2008 Publication-Status: Published in Canadian Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3196339/campbellnber_equitypremium.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3196339 Template-Type: ReDIF-Paper 1.0 Author-Name: Szilagyi, Jan Author-Name: Hilscher, Jens Author-Name: Campbell, John Title: In Search of Distress Risk Abstract: This paper explores the determinants of corporate failure and the pricing of financially distressed stocks whose failure probability, estimated from a dynamic logit model using accounting and market variables, is high. 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 low failure risk. These patterns are more pronounced for stocks with possible informational or arbitrage-related frictions. They are inconsistent with the conjecture that the value and size effects are compensation for the risk of financial distress. Creation-Date: 2008 Publication-Status: Published in Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/3199070/campbellssrn_distressrisk.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3199070 Template-Type: ReDIF-Paper 1.0 Author-Name: Sen, Amartya Title: Why and How Is Health a Human Right? Abstract: Creation-Date: 2008 Publication-Status: Published in The Lancet File-URL: http://dash.harvard.edu/bitstream/handle/1/3124128/Sen_HealthHumanRight.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3124128 Template-Type: ReDIF-Paper 1.0 Author-Name: Cooper, Richard Title: A Half-Century of Development Abstract: Development as a global policy objective dates from the 1940s. Relative to expectations then, the world economy performed outstandingly well during the second half of the 20th century. Worldwide growth in average per capita income exceeded two percent a year (historically unprecedented), many poor countries became rich, infant mortality declined, diets improved, longevity increased, diseases were contained if not vanquished. Poverty on the World Bank definition of $1 a day (in 1985$) declined dramatically, and the number of persons in poverty was halved despite a more than doubling of the world population. Variations occurred over time and space, with rapid growth being concentrated in Europe and Japan early in the period, then moving to east Asia, southeast Asia, and south Asia. Growth in the 1950s and especially the 1960s exceeded that in later decades. Examples of high growth could be found in every continent, but on average sub-Saharan Africa fared much less well than other regions. Declines in national per capita income were rare, and concentrated in Africa. Civil disorder was a common but not the universal cause of low growth. Median world income gained relative to the well-off, but both spurted ahead of the poorest. World exports grew more rapidly than output, often leading the way. Many countries gradually shifted their exports from primary products to labor-intensive manufactured goods, and as development proceeded to more sophisticated manufactures and services. The fraction of the labor force devoted to agriculture declined significantly. One country after another achieved social stability, created the right incentives for effort and risk-taking, and engaged constructively with the world economy, which facilitated economic growth. Those that lagged failed to meet one or more of these conditions. Civil and political liberties also spread during this period, although less certainly and less securely. On the whole, it was a good half century for mankind. The substantial poverty and misery that still exists should not lead to neglect or even denial of these achievements. Creation-Date: 2005 Publication-Status: Published in CID Working Paper Series File-URL: http://dash.harvard.edu/bitstream/handle/1/3677048/Cooper_Half-CenturyDevelopment.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3677048 Template-Type: ReDIF-Paper 1.0 Author-Name: Green, Jerry Title: "Making book against oneself," the Independence Axiom, and Nonlinear Utility Theory Abstract: An individual with known preferences over lotteries can be led to accept random wealth distributions different from his initial endowment by a sequential process in which some uncertainty is resolved and he is offered a new lottery in place of the remaining uncertainty. This paper examines the restrictions that can be placed on an individual's preferences by axioms that stipulate that such a process not be able to generate a new wealth distribution that is prima facie inferior to the original. The relationship of these axioms to the independence axiom of von Neumann and Morgenstern and to the quasi convexity of preferences in the wealth distribution are explored. Creation-Date: 1987 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3203640/green_makingbook.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3203640 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Title: Asset Pricing at the Millennium Abstract: This paper surveys the field of asset pricing. The emphasis is on the interplay between theory and empirical work and on the trade-off between risk and return. Modern research seeks to understand the behavior of the stochastic discount factor (SDF) that prices all assets in the economy. The behavior of the term structure of real interest rates restricts the conditional mean of the SDF, whereas patterns of risk premia restrict its conditional volatility and factor structure. Stylized facts about interest rates, aggregate stock prices, and cross-sectional patterns in stock returns have stimulated new research on optimal portfolio choice, intertemporal equilibrium models, and behavioral finance. The definitive version is available at www.blackwell-synergy.com. Creation-Date: 2000 Publication-Status: Published in Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/3294737/campbellssrn_millennium.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3294737 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Title: Why Long Horizons? A Study of Power Against Persistent Alternatives Abstract: This paper studies tests of predictability in regressions with a given AR(1) regressor and an asset return dependent variable measured over a short or long horizon. The paper shows that when there is a persistent predictable component in the return, an increase in the horizon may increase the R2 statistic of the regression and the approximate slope of a predictability test. Monte Carlo experiments show that long-horizon regression tests have serious size distortions when asymptotic critical values are used, but some versions of such tests have power advantages remaining after size is corrected. Creation-Date: 2001 Publication-Status: Published in Journal of Empirical Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/3196341/campbellnber_longhorizons.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3196341 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Ellison, Glenn Title: Knife-Edge or Plateau: When Do Market Models Tip? Abstract: This paper studies whether agents must agglomerate at a single location in a class of models of two-sided interaction. In these models there is an increasing returns effect that favors agglomeration, but also a crowding or market-impact effect that makes agents prefer to be in a market with fewer agents of their own type. We show that such models do not tip in the way the term is commonly used. Instead, they have a broad plateau of equilibria with two active markets, and tipping occurs only when one market is below a critical size threshold. Our assumptions are fairly weak, and are satisfied in Krugman's model of labor market pooling, a heterogeneous-agent version of Pagano's asset market model, and Ellison, Fudenberg, and Möbius' model of competing auctions. Creation-Date: 2003 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3160493/fudenberg_knife-edge.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3160493 Template-Type: ReDIF-Paper 1.0 Author-Name: Nosbusch, Yves Author-Name: Campbell, John Title: Intergenerational Risksharing and Equilibrium Asset Prices 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. Creation-Date: 2007 Publication-Status: Published in Journal of Monetary Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3196340/campbellnber_intergenerational.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3196340 Template-Type: ReDIF-Paper 1.0 Author-Name: Vuolteenaho, Tuomo Author-Name: Campbell, John Title: Inflation Illusion and Stock Prices Abstract: We empirically decompose the S&P 500's dividend yield into (1) a rational forecast of long-run real dividend growth, (2) the subjectively expected risk premium, and (3) residual mispricing attributed to the market's forecast of dividend growth deviating from the rational forecast. Modigliani and Cohn's (1979) hypothesis and the persistent use of the "Fed model" by Wall Street suggest that the stock market incorrectly extrapolates past nominal growth rates without taking into account the impact of time-varying inflation. Consistent with the Modigliani-Cohn hypothesis, we find that the level of inflation explains almost 80% of the time-series variation in stock-market mispricing. Creation-Date: 2004 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/3196090/campbellnber_inflationillusion.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3196090 Template-Type: ReDIF-Paper 1.0 Author-Name: Ghironi, Fabio Author-Name: Melitz, Marc Title: Trade Flow Dynamics with Heterogeneous Firms Abstract: We use a two-country, stochastic, general equilibrium model of international trade and macroeconomic dynamics with monopolistic competition and heterogeneous firms to explore the role of entry in the domestic economy and the extensive margin of international trade in the dynamics of U.S. trade flows over the business cycle. We show that the model can reproduce the evidence on the cyclicality of U.S. trade and important features of the evidence on the extensive margins of domestic entry and international trade. Entry in the domestic economy and the implied differences in the timing of export and import expansions in response to favorable productivity shocks provide the key mechanism for the model's ability to explain this range of stylized facts. Creation-Date: 2007 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/3229097/melitz_tradeflows.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3229097 Template-Type: ReDIF-Paper 1.0 Author-Name: Spolaore, Enrico Author-Name: Alesina, Alberto Title: War, Peace, and the Size of Countries Abstract: This paper studies the relationship between international conflict and the size distribution of countries in a model in which both peaceful bargaining and nonpeaceful confrontations are possible. We show how the size distribution of countries depends on the likelihood, benefits, and costs of conflict and war. We also study the role of international law and show how better defined international ‘property rights’ may lead to country breakup and more numerous local conflicts. Creation-Date: 2005 Publication-Status: Published in Journal of Public Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4553002/alesinassrn_warpeace.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553002 Template-Type: ReDIF-Paper 1.0 Author-Name: Zilibotti, Fabrizio Author-Name: Aghion, Philippe Author-Name: Acemoglu, Daron Title: Distance to Frontier, Selection, and Economic Growth Abstract: We analyze an economy where firms undertake both innovation and adoption of technologies from the world technology frontier. The selection of high-skill managers and firms is more important for innovation than for adoption. As the economy approaches the frontier, selection becomes more important. Countries at early stages of development pursue an investment-based strategy, which relies on existing firms and managers to maximize investment but sacrifices selection. Closer to the world technology frontier, economies switch to an innovation-based strategy with short-term relationships, younger firms, less investment, and better selection of firms and managers. We show that relatively backward economies may switch out of the investment-based strategy too soon, so certain policies such as limits on product market competition or investment subsidies, which encourage the investment-based strategy, may be beneficial. However, these policies may have significant long-run costs because they make it more likely that a society will be trapped in the investment-based strategy and fail to converge to the world technology frontier. Creation-Date: 2006 Publication-Status: Published in Journal of the European Economic Association File-URL: http://dash.harvard.edu/bitstream/handle/1/4554122/aghion_distancefrontier.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4554122 Template-Type: ReDIF-Paper 1.0 Author-Name: Zilibotti, Fabrizio Author-Name: Redding, Stephen Author-Name: Burgess, Robin Author-Name: Aghion, Philippe Title: Entry Liberalization and Inequality in Industrial Performance Abstract: Industrial delicensing, which began in 1985 in India marked a discrete break from a past of centrally planned industrial development. Similar liberalization episodes are taking place across the globe. We develop a simple Schumpeterian growth model to understand how firms respond to the entry threat imposed by liberalization. The model emphasizes that firm responses, even within the same industrial sector, are likely to be heterogeneous leading to an increase in within industry inequality. Technologically advanced firms and those located in regions with pro-business institutions are more likely to respond to the threat of entry by investing in new technologies and production processes. Empirical analysis using a panel of three-digit state industry data from India for the period 1980–1997 confirms that delicensing led to an increase in within industry inequality in industrial performance. Creation-Date: 2005 Publication-Status: Published in Journal of the European Economic Association File-URL: http://dash.harvard.edu/bitstream/handle/1/4481508/aghion_entry.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4481508 Template-Type: ReDIF-Paper 1.0 Author-Name: Sodini, Paolo Author-Name: Calvet, Laurent E. Author-Name: Campbell, John Title: Down or Out: Assessing the Welfare Costs of Household Investment Mistakes. Abstract: This paper investigates the efficiency of household investment decisions using comprehensive disaggregated Swedish data. We consider two main sources of inefficiency: underdiversification (“down”) and nonparticipation in risky asset markets (“out”). While a few households are very poorly diversified, most Swedish households outperform the Sharpe ratio of their domestic stock index through international diversification. Financially sophisticated households invest more efficiently but also more aggressively, and overall they incur higher return losses from underdiversification. The return cost of nonparticipation is smaller by almost one‐half when we take account of the fact that nonparticipants would likely be inefficient investors. Creation-Date: 2007 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/3122488/campbell_down_out.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3122488 Template-Type: ReDIF-Paper 1.0 Author-Name: Nowak, Martin Author-Name: Sasaki, Akira Author-Name: Fudenberg, Drew Author-Name: Taylor, Christine Title: Emergence of Cooperation and Evolutionary Stability in Finite Populations Abstract: To explain the evolution of cooperation by natural selection has been a major goal of biologists since Darwin. Cooperators help others at a cost to themselves, while defectors receive the benefits of altruism without providing any help in return. The standard game dynamical formulation is the 'Prisoner's Dilemma', in which two players have a choice between cooperation and defection. In the repeated game, cooperators using direct reciprocity cannot be exploited by defectors, but it is unclear how such cooperators can arise in the first place. In general, defectors are stable against invasion by cooperators. This understanding is based on traditional concepts of evolutionary stability and dynamics in infinite populations. Here we study evolutionary game dynamics in finite populations. We show that a single cooperator using a strategy like 'tit-for-tat' can invade a population of defectors with a probability that corresponds to a net selective advantage. We specify the conditions required for natural selection to favour the emergence of cooperation and define evolutionary stability in finite populations. Creation-Date: 2004 Publication-Status: Published in Nature File-URL: http://dash.harvard.edu/bitstream/handle/1/3196331/fudenberg_emergence.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3196331 Template-Type: ReDIF-Paper 1.0 Author-Name: La Ferrara, Eliana Author-Name: Alesina, Alberto Title: Preferences for Redistribution in the Land of Opportunities Abstract: This paper explores how individual preferences for redistribution depend on future income prospects. In addition to estimating the impact of individuals' socioeconomic background and of their subjective perceptions of future mobility, we employ panel data to construct ‘objective’ measures of expected gains and losses from redistribution for different categories of individuals. We find that such measures have considerable explanatory power and perform better than ‘general mobility’ indexes. We also find that preferences for redistribution respond to individual beliefs on what determines one's position in the social ladder. Ceteris paribus, people who believe that the American society offers 'equal opportunities' are more averse to redistribution. Creation-Date: 2005 Publication-Status: Published in Journal of Public Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4552533/alesinassrn_redistribution.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4552533 Template-Type: ReDIF-Paper 1.0 Author-Name: Zilibotti, Fabrizio Author-Name: Griffith, Rachel Author-Name: Aghion, Philippe Author-Name: Acemoglu, Daron Title: Vertical Integration and Technology: Theory and Evidence Abstract: This paper investigates the determinants of vertical integration. We first derive a number of predictions regarding the relationship between technology intensity and vertical integration from a simple incomplete contracts model. Then, we investigate these predictions using plant-level data for the UK manufacturing sector. Most importantly, and consistent with theory, we find that the technology intensities of downstream (producer) and upstream (supplier) industries have opposite effects on the likelihood of vertical integration. Also consistent with theory, both these effects are stronger when the supplying industry accounts for a large fraction of the producer’s costs. These results are generally robust and hold with alternative measures of technology intensity, with alternative estimation strategies, and with or without controlling for a number of firm and industry-level characteristics. Creation-Date: 2010-11-15 Publication-Status: Published in Journal of the European Economic Association File-URL: http://dash.harvard.edu/bitstream/handle/1/4554219/aghion_integrationtechnology.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4554219 Template-Type: ReDIF-Paper 1.0 Author-Name: Green, Jerry Author-Name: Sheshinski, Eytan Title: Optimal Capital-Gains Taxation Under Limited Information Abstract: Taxation of capital gains at realization may distort individuals' decisions regarding holding or selling during an asset's lifetime. This creates the problem of designing a tax structure for capital gains so as to induce efficient patterns of holding and selling. Several tax structures are explored in this paper. Linear taxation, at rates which rise with the holding period, can achieve the first best, even under the conditions of limited information that we postulate. The form of the optimal tax is independent of the stochastic structure of rates of return. We also derive the optimal nonlinear tax under the constraint that it be independent of the holding period. Second-best tax rules are examined. Results in a two-period model are contrasted with those in a continuous time framework. Also treated is the case in which the returns to the asset under consideration depend on the aggregate quantity invested. Creation-Date: 1978 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/3210340/green_optimalcapital.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3210340 Template-Type: ReDIF-Paper 1.0 Author-Name: Feldstein, Martin Title: The European Central Bank and the Euro: The First Year Abstract: The creation of the euro and the European Central Bank is a remarkable and unprecedented event in economic and political history: creating a supranational central bank and leaving eleven countries without national currencies of their own. The experience of the first year confirms that one size fits all' monetary policy is not suitable for Europe because cyclical and inflation conditions vary substantially among countries. Labor market policies during this first year will increase this problem in the future and may lead to more trade protectionism. The paper explores reasons why cyclical unemployment, structural unemployment, and inflation may all be higher in the future as a result of the single currency. Although some advocate the euro despite its economic problems because of its assumed favorable effects on European political cohesiveness, the paper argues that it is more likely to lead to political conflict within Europe and with the Unites States. Creation-Date: 2000 Publication-Status: Published in Journal of Policy Modeling File-URL: http://dash.harvard.edu/bitstream/handle/1/3043424/feldstein_european.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3043424 Template-Type: ReDIF-Paper 1.0 Author-Name: Rey, Patrick Author-Name: Dewatripont, Mathias Author-Name: Aghion, Philippe Title: Transferable Control Abstract: In this paper, we introduce the notion of transferable control, defined as a situation where one party (the principal, say) can transfer control to another party (the agent) but cannot commit herself to do so. One theoretical foundation for this notion builds on the distinction between formal and real authority introduced by Aghion and Tirole, in which the actual exercise of authority may require noncontractible information, absent which formal control rights are vacuous. We use this notion to study the extent to which control transfers may allow an agent to reveal information regarding his ability or willingness to cooperate with the principal in the future. We show that the distinction between contractible and transferable control can drastically influence how learning takes place: with contractible control, information about the agent can often be acquired through revelation mechanisms that involve communication and message-contingent control allocations; in contrast, when control is transferable but not contractible, it can be optimal to transfer control unconditionally and learn instead from the way in which the agent exercises control. Creation-Date: 2004 Publication-Status: Published in Journal of the European Economic Association File-URL: http://dash.harvard.edu/bitstream/handle/1/4481511/aghion_transferablecontrol.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4481511 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Bolton, Patrick Title: Incomplete Social Contracts Abstract: There is a long normative ‘Social Contract’ tradition that attempts to characterize ex-post income inequalities that are agreeable to all ‘behind a veil of ignorance.’ This paper takes a similar normative approach to characterize social decision-making procedures. It is shown that quite generally some form of majority-voting is preferred to unanimity ‘behind a veil of ignorance’ whenever society faces deadweight costs in making compensating transfers. Deviations from unanimity (or ex-post Pareto optimality) are exante efficient to the extent that they economize on costly compensating transfers. Put another way, the optimal decision rule trades off the benefits of minority protection and those from greater flexibility. Creation-Date: 2003 Publication-Status: Published in Journal of the European Economic Association File-URL: http://dash.harvard.edu/bitstream/handle/1/4554123/aghion_incompletesocial.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4554123 Template-Type: ReDIF-Paper 1.0 Author-Name: Howitt, Peter Author-Name: Mayer-Foulkes, David Author-Name: Aghion, Philippe Title: The Effect of Financial Development on Convergence: Theory and Evidence Abstract: We introduce imperfect creditor protection in a multicountry Schumpeterian growth model. The theory predicts that any country with more than some critical level of financial development will converge to the growth rate of the world technology frontier, and that all other countries will have a strictly lower long-run growth rate. We present evidence supporting these and other implications, in the form of a cross-country growth regression with a significant and sizable negative coefficient on initial per-capita GDP (relative to the United States) interacted with financial intermediation. In addition, we find that other variables representing schooling, geography, health, policy, politics, and institutions do not affect the significance of the interaction between financial intermediation and initial per capita GDP, and do not show any independent effect on convergence in the regressions. Our findings are robust to removal of outliers and to alternative conditioning sets, estimation procedures, and measures of financial development. Creation-Date: 2005 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4481509/aghion_convergence.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4481509 Template-Type: ReDIF-Paper 1.0 Author-Name: Ambrus, Attila Author-Name: Field, Erica Title: Early Marriage, Age of Menarche, and Female Schooling Attainment in Bangladesh Abstract: Using data from rural Bangladesh, we explore the hypothesis that women attain less schooling as a result of social and financial pressure to marry young. We isolate the causal effect of marriage timing using age of menarche as an instrumental variable. Our results indicate that each additional year that marriage is delayed is associated with 0.22 additional year of schooling and 5.6 percent higher literacy. Delayed marriage is also associated with an increase in use of preventive health services. In the context of competitive marriage markets, we use the above results to obtain estimates of the change in equilibrium female education that would arise from introducing age of consent laws. Creation-Date: 2008 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/3200264/ambrus_earlymarriage.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3200264 Template-Type: ReDIF-Paper 1.0 Author-Name: Alesina, Alberto Author-Name: Devleeschauwer, Arnaud Author-Name: Wacziarg, Romain Author-Name: Kurlat, Sergio Author-Name: Easterly, William Title: Fractionalization Abstract: We provide new measures of ethnic, linguistic, and religious fractionalization for about 190 countries. These measures are more comprehensive than those previously used in the economics literature and we compare our new variables with those previously used. We also revisit the question of the effects of ethnic, linguistic, and religious heterogeneity on the quality of institutions and growth. We partly confirm and partly modify previous results. The patterns of cross-correlations between potential explanatory variables and their different degree of endogeneity makes it hard to make unqualified statements about competing explanations for economic growth and the quality of government. Our new data, which features the underlying group structure of ethnicities, religions and languages, also allows the computation of alternative measures of heterogeneity, and we turn to measures of polarization as an alternative to the commonly used index of fractionalization. Creation-Date: 2003 Publication-Status: Published in Journal of Economic Growth File-URL: http://dash.harvard.edu/bitstream/handle/1/4553003/alesinassrn_fractionalization.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553003 Template-Type: ReDIF-Paper 1.0 Author-Name: Bacchetta, Philippe Author-Name: Aghion, Philippe Author-Name: Banerjee, Abhijit Title: Financial Development and the Instability of Open Economies Abstract: This paper introduces a framework for analyzing the role of financial factors as a source of instability in small open economies. Our basic model is a dynamic open economy model with a tradeable good produced with capital and a country-specific factor. We also assume that firms face credit constraints, with the constraint being tighter at a lower level of financial development. A basic implication of this model is that economies at an intermediate level of financial development are more unstable than either very developed or very underdeveloped economies. This is true both in the sense that temporary shocks have large and persistent effects and also in the sense that these economies can exhibit cycles. Thus, countries that are going through a phase of financial development may become more unstable in the short run. Similarly, full capital account liberalization may destabilize the economy in economies at an intermediate level of financial development: phases of growth with capital inflows are followed by collapse with capital outflows. On the other hand, foreign direct investment does not destabilize. Creation-Date: 2004 Publication-Status: Published in Journal of Monetary Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4554209/aghion_financialdevelopment.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4554209 Template-Type: ReDIF-Paper 1.0 Author-Name: Alesina, Alberto Author-Name: La Ferrara, Eliana Title: Ethnic Diversity and Economic Performance Abstract: We survey and assess the literature on the positive and negative effects of ethnic diversity on economic policies and outcomes. Our focus is on communities of different size and organizational structure, such as countries, cities in developed countries, and villages and groups in developing countries. We also consider the endogenous formation of political jurisdictions and highlight several open issues in need of further research, in particular the endogenous formation of ethnic identity and the measurement of ethnic diversity. Creation-Date: 2005 Publication-Status: Published in Journal of Economic Literature File-URL: http://dash.harvard.edu/bitstream/handle/1/4553005/alesinassrn_ethnicdiversity.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553005 Template-Type: ReDIF-Paper 1.0 Author-Name: Angeletos, George-Marios Author-Name: Alesina, Alberto Title: Corruption, Inequality, and Fairness Abstract: Bigger governments raise the possibilities for corruption; more corruption may in turn raise the support for redistributive policies that intend to correct the inequality and injustice generated by corruption. We formalize these insights in a simple dynamic model. A positive feedback from past to current levels of taxation and corruption arises either when wealth originating in corruption and rent seeking is considered unfair, or when the ability to engage in corruption is unevenly distributed in the population. This feedback introduces persistence in the size of the government and the levels of corruption and inequality. Multiple steady states exist in some cases. Creation-Date: 2005 Publication-Status: Published in Journal of Monetary Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4553006/alesinassrn_corruption.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553006 Template-Type: ReDIF-Paper 1.0 Author-Name: Fuchs-Schundeln, Nicola Author-Name: Alesina, Alberto Title: Good-Bye Lenin (Or Not?): The Effect of Communism on People's Preferences Abstract: Preferences for redistribution, as well as the generosity of welfare states, differ significantly across countries. This paper tests whether there exists a feedback process of the economic regime on individual preferences. We exploit the experiment of German separation and reunification to establish exogeneity of the economic system. We find that, after German reunification, East Germans are more in favor of state intervention than West Germans. This effect is especially strong for older cohorts. We further find that East Germans' preferences converge toward those of West Germans. It will take one to two generations for preferences to converge completely. Creation-Date: 2007 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/4553032/alesinassrn_goodbyelenin.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553032 Template-Type: ReDIF-Paper 1.0 Author-Name: Perotti, Roberto Author-Name: Alesina, Alberto Title: The European Union: A Politically Incorrect View Abstract: In this paper, we present our view of the recent evolution of European integration. We first briefly describe the main features of the institution and decision making process in the European Union, with particular attention to the debate between federalists and super nationalists. We then identify two key issues in the process of European integration: 1) an emphasis on “institutional balance” based on a complex web of institutions with overlapping jurisdiction; 2) A conflict between a dirigiste versus a more laissez faire approach to government. We argue that the first problem leads to a lack of clarity in the allocation of powers between European institutions, confusion in the allocation of prerogatives between national governments and EU institutions, and lack of transparency and accountability. The dirigiste culture also manifests itself in an abundant production of verbose rhetoric, which in our view is far from innocuous and direct set the European policy debate in the wrong direction. We then study how these problems play out in 4 important areas: employment policies, culture and scientific research, foreign and defense policies, and fiscal policy. Finally, we study the implications of the recently proposed European Constitution a potential solution of these two problems. Creation-Date: 2004 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/4553004/alesinassrn_politicallyincorrect.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553004 Template-Type: ReDIF-Paper 1.0 Author-Name: Ünver, M. Utku Author-Name: Sönmez, Tayfun Author-Name: Roth, Alvin Title: Efficient Kidney Exchange: Coincidence of Wants in a Markets with Compatibility-Based Preferences Abstract: Patients needing kidney transplants may have donors who cannot donate to them because of blood or tissue incompatibility. Incompatible patient-donor pairs can exchange donor kidneys with other pairs only when there is a “double coincidence of wants.” Developing infrastructure to perform three-way as well as two-way exchanges will have a substantial effect on the number of transplants that can be arranged. Larger than three-way exchanges have less impact on efficiency. In a general model of type-compatible exchanges, the size of the largest exchanges required to achieve efficiency equals the number of types. Creation-Date: 2007 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2562809/Roth_Kidney3way.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2562809 Template-Type: ReDIF-Paper 1.0 Author-Name: Banerjee, Abhijit Author-Name: Bacchetta, Philippe Author-Name: Aghion, Philippe Title: Currency Crises and Monetary Policy in an Economy with Credit Constraints Abstract: This paper presents a simple model of currency crises which is driven by the interplay between the credit constraints of private domestic firms and the existence of nominal price rigidities. The possibility of multiple equilibria, including a ‘currency crisis’ equilibrium with low output and a depreciated domestic currency, results from the following mechanism: If nominal prices are ‘sticky’, a currency depreciation leads to an increase in the foreign currency debt repayment obligations of firms, and thus to a fall in their profits; this reduces firms’ borrowing capacity and therefore investment and output in a credit-constrained economy, which in turn reduces the demand for the domestic currency and leads to a depreciation. We examine the impact of various shocks, including productivity, fiscal, or expectational shocks. We then analyze the optimal monetary policy to prevent or solve currency crises. We also argue that currency crises can occur both under fixed and flexible exchange rate regimes as the primary source of crises is the deteriorating balance sheet of private firms. Creation-Date: 2001 Publication-Status: Published in European Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/4554218/aghion_currencycrises.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4554218 Template-Type: ReDIF-Paper 1.0 Author-Name: Prantl, Susanne Author-Name: Howitt, Peter Author-Name: Griffith, Rachel Author-Name: Blundell, Richard Author-Name: Aghion, Philippe Title: Entry and Productivity Growth: Evidence From Microlevel Panel Data Abstract: How does entry affect productivity growth of incumbents? In this paper we exploit policy reforms in the United Kingdom that changed entry conditions by opening up the U.K. economy during the 1980s and panel data on British establishments to shed light on this question. We show that more entry, measured by a higher share of industry employment in foreign firms, has led to faster total factor productivity growth of domestic incumbent firms and thus to faster aggregate productivity growth. Creation-Date: 2004 Publication-Status: Published in Journal of the European Economic Association File-URL: http://dash.harvard.edu/bitstream/handle/1/4481510/aghion_entryproductivity.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4481510 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Author-Name: Yogo, Motohiro Title: Efficient tests of stock return predictability Abstract: Conventional tests of the predictability of stock returns could be invalid, that is reject the null too frequently, when the predictor variable is persistent and its innovations are highly correlated with returns. We develop a pretest to determine whether the conventional t-test leads to invalid inference and an efficient test of predictability that corrects this problem. Although the conventional t-test is invalid for the dividend–price and smoothed earnings–price ratios, our test finds evidence for predictability. We also find evidence for predictability with the short rate and the long-short yield spread, for which the conventional t-test leads to valid inference. Creation-Date: 2006 Publication-Status: Published in Journal of Financial Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3122601/campbellssrn_stockreturn.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3122601 Template-Type: ReDIF-Paper 1.0 Author-Name: Angeletos, George-Marios Author-Name: Alesina, Alberto Title: Fairness and Redistribution Abstract: Different beliefs about the fairness of social competition and what determines income inequality influence the redistributive policy chosen in a society. But the composition of income in equilibrium depends on tax policies. We show how the interaction between social beliefs and welfare policies may lead to multiple equilibria or multiple steady states. If a society believes that individual effort determines income, and that all have a right to enjoy the fruits of their effort, it will choose low redistribution and low taxes. In equilibrium, effort will be high and the role of luck will be limited, in which case market outcomes will be relatively fair and social beliefs will be self-fulfilled. If, instead, a society believes that luck, birth, connections, and/or corruption determine wealth, it will levy high taxes, thus distorting allocations and making these beliefs self-sustained as well. These insights may help explain the cross-country variation in perceptions about income inequality and choices of redistributive policies. Creation-Date: 2005 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/4553009/alesinassrn_fairness.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553009 Template-Type: ReDIF-Paper 1.0 Author-Name: Vigdor, Jacob L. Author-Name: Glaeser, Edward Author-Name: Cutler, David Title: Is the Melting Pot Still Hot? Explaining the Resurgence of Immigrant Segregation. Abstract: This paper uses decennial Census data to examine trends in immigrant segregation in the United States between 1910 and 2000. Immigrant segregation declined in the first half of the century, but has been rising over the past few decades. Analysis of restricted access 1990 Census microdata suggests that this rise would be even more striking if the native-born children of immigrants could be consistently excluded from the analysis. We analyze longitudinal variation in immigrant segregation, as well as housing price patterns across metropolitan areas, to test four hypotheses of immigrant segregation. Immigration itself has surged in recent decades, but the tendency for newly arrived immigrants to be younger and of lower socioeconomic status explains very little of the recent rise in immigrant segregation. We also find little evidence of increased nativism in the housing market. Evidence instead points to changes in urban form, manifested in particular as native-driven suburbanization and the decline of public transit as a transportation mode, as a central explanation for the new immigrant segregation. Creation-Date: 2008 Publication-Status: Published in Review of Economics and Statistics File-URL: http://dash.harvard.edu/bitstream/handle/1/2664275/cutler_meltingpot1.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2664275 Template-Type: ReDIF-Paper 1.0 Author-Name: Dekel, Eddie Author-Name: Fudenberg, Drew Author-Name: Levine, David Title: Learning to Play Bayesian Games Abstract: This paper discusses the implications of learning theory for the analysis of games with a move by Nature. One goal is to illuminate the issues that arise when modeling situations where players are learning about the distribution of Nature's move as well as learning about the opponents' strategies. A second goal is to argue that quite restrictive assumptions are necessary to justify the concept of Nash equilibrium without a common prior as a steady state of a learning process. Creation-Date: 2004 Publication-Status: Published in Games and Economic Behavior File-URL: http://dash.harvard.edu/bitstream/handle/1/3200612/fudenberg_Bayesiangames.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3200612 Template-Type: ReDIF-Paper 1.0 Author-Name: Di Tella, Rafael Author-Name: Alesina, Alberto Author-Name: MacCulloch, Robert Title: Inequality and Happiness: Are Europeans and Americans Different? Abstract: We study the effect of the level of inequality in society on individual well-being using a total of 123,668 answers to a survey question about “happiness”. We find that individuals have a lower tendency to report themselves happy when inequality is high, even after controlling for individual income, a large set of personal characteristics, and year and country (or, in the case of the US, state) dummies. The effect, however, is more precisely defined statistically in Europe than in the US. In addition, we find striking differences across groups. In Europe, the poor and those on the left of the political spectrum are unhappy about inequality; whereas in the US the happiness of the poor and of those on the left is uncorrelated with inequality. Interestingly, in the US, the rich are bothered by inequality. Comparing across continents, we find that left-wingers in Europe are more hurt by inequality than left-wingers in the US. And the poor in Europe are more concerned with inequality than the poor in America, an effect that is large in terms of size but is only significant at the 10% level. We argue that these findings are consistent with the perception (not necessarily the reality) that Americans have been living in a mobile society, where individual effort can move people up and down the income ladder, while Europeans believe that they live in less mobile societies. Creation-Date: 2004 Publication-Status: Published in Journal of Public Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4553007/alesinassrn_inequalityhappiness_PDFA.20150908.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553007 Template-Type: ReDIF-Paper 1.0 Author-Name: Etro, Federico Author-Name: Ageloni, Ignazio Author-Name: Alesina, Alberto Title: International Unions Abstract: We model an international union as a group of countries deciding to centralize the provision of public goods, or policies, that generate externalities across union members. The trade-off between the benefits of coordination and the loss of independent policymaking endogenously determines size, composition, and scope of the union. Policy uniformity reduces the size of the union, may block the entry of new members, and induces excessive centralization. We study flexible rules with nonuniform policies that reduce these inefficiencies, focusing particularly on arrangements that are relevant to the ongoing debate on the institutional structure of the European Union. Creation-Date: 2005 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/4553008/alesinassrn_internationalunions.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553008 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Levine, David Title: The Nash-Threats Folk Theorem with Communication and Approximate Common Knowledge in Two Player Games Abstract: We show that the use of communications to coordinate equilibria generates a Nash-threats folk theorem in two-player games with “almost public” information. The results generalize to the n-person case. However, the two-person case is more difficult because it is not possible to sustain equilibria by comparing the reports of different players, and using these “third parties” to effectively enforce contracts. Creation-Date: 2007 Publication-Status: Published in Journal of Economic Theory File-URL: http://dash.harvard.edu/bitstream/handle/1/3203772/fudenberg_nash.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3203772 Template-Type: ReDIF-Paper 1.0 Author-Name: Piketty, Thomas Author-Name: Banerjee, Abhijit Author-Name: Aghion, Philippe Title: Dualism and Macroeconomic Volatility Abstract: This paper develops a simple macroeconomic model that shows that combining capital market imperfections together with unequal access to investment opportunities across individuals can generate endogenous and permanent fluctuations in aggregate GDP, investment, and interest rates. Reducing inequality of access may be a necessary condition for macroeconomic stabilization. Moreover, countercyclical fiscal policies have a role to play: in our model savings are underutilized in slumps because of the limited debt capacity of potential investors. Therefore, the government should issue public debt during recessions in order to absorb those idle savings and finance investment subsidies or tax cuts for investors. Creation-Date: 1999 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4554124/aghion_dualism.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4554124 Template-Type: ReDIF-Paper 1.0 Author-Name: Acemoglu, Daron Author-Name: Antras, Pol Author-Name: Helpman, Elhanan Title: Contracts and Technology Adoption Abstract: We develop a tractable framework for the analysis of the relationship between contractual incompleteness, technological complementarities, and technology adoption. In our model, a firm chooses its technology and investment levels in contractible activities by suppliers of intermediate inputs. Suppliers then choose investments in noncontractible activities, anticipating payoffs from an ex post bargaining game. We show that greater contractual incompleteness leads to the adoption of less advanced technologies, and that the impact of contractual incompleteness is more pronounced when there is greater complementary among the intermediate inputs. We study a number of applications of the main framework and show that the mechanism proposed in the paper can generate sizable productivity differences across countries with different contracting institutions, and that differences in contracting institutions lead to endogenous comparative advantage differences. Creation-Date: 2007 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/3199063/antras_techadoption.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3199063 Template-Type: ReDIF-Paper 1.0 Author-Name: Antras, Pol Title: Firms, Contracts, and Trade Structure Abstract: Roughly one-third of world trade is intrafirm trade. This paper starts by unveiling two systematic patterns in the volume of intrafirm trade. In a panel of industries, the share of intrafirm imports in total U. S. imports is significantly higher, the higher the capital intensity of the exporting industry. In a cross section of countries the share of intrafirm imports in total U. S. imports is significantly higher, the higher the capital-labor ratio of the exporting country. I then show that these patterns can be rationalized in a theoretical framework that combines a Grossman-Hart-Moore view of the firm with a Helpman-Krugman view of international trade. In particular, I develop an incomplete-contracting, property-rights model of the boundaries of the firm, which I then incorporate into a standard trade model with imperfect competition and product differentiation. The model pins down the boundaries of multinational firms as well as the international location of production, and it is shown to predict the patterns of intrafirm trade identified above. Econometric evidence reveals that the model is consistent with other qualitative and quantitative features of the data. Creation-Date: 2003 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3196328/antras_firmscontracts.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3196328 Template-Type: ReDIF-Paper 1.0 Author-Name: Desai, Mihir Author-Name: Antras, Pol Author-Name: Foley, C. Fritz Title: Multinational Firms, FDI Flows and Imperfect Capital Markets Abstract: This paper examines how costly financial contracting and weak investor protection influence the cross-border operational, financing and investment decisions of firms. We develop a model in which product developers can play a useful role in monitoring the deployment of their technology abroad. The analysis demonstrates that when firms want to exploit technologies abroad, multinational firm (MNC) activity and foreign direct investment (FDI) flows arise endogenously when monitoring is nonverifiable and financial frictions exist. The mechanism generating MNC activity is not the risk of technological expropriation by local partners but the demands of external funders who require MNC participation to ensure value maximization by local entrepreneurs. The model demonstrates that weak investor protections limit the scale of multinational firm activity, increase the reliance on FDI flows and alter the decision to deploy technology through FDI as opposed to arm's length technology transfers. Several distinctive predictions for the impact of weak investor protection on MNC activity and FDI flows are tested and confirmed using firm-level data. Creation-Date: 2009 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3199065/antras_fdiflows.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3199065 Template-Type: ReDIF-Paper 1.0 Author-Name: Zilibotti, Fabrizio Author-Name: Van Reenen, John Author-Name: Lelarge, Claire Author-Name: Aghion, Philippe Author-Name: Acemoglu, Daron Title: Technology, Information, and the Decentralization of the Firm Abstract: This paper analyzes the relationship between the diffusion of new technologies and the decentralization of firms. Centralized control relies on the information of the principal, which we equate with publicly available information. Decentralized control, on the other hand, delegates authority to a manager with superior information. However, the manager can use his 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 tradeoff 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 data sets on French and British firms in the 1990s, we report robust correlations consistent with these predictions. Creation-Date: 2007 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4481506/aghion_technologyinformation.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4481506 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Y. Author-Name: Mei, Jianping Title: Where Do Betas Come From? Asset Price Dynamics and the Sources of Systematic Risk Abstract: In this article we break asset's betas with common factors into components attributable to news about future cash flows, real interest rates, and excess returns. To achieve this decomposition, we use a vector autoregressive time-series model and an approximate log-linear present value relation. The betas of industry and size portfolios with the market are largely attributed to changing expected returns. Betas with inflation and industrial production reflect opposing cash flow and expected return effects. We also show how asset pricing theory restricts the expected excess return components of betas. Creation-Date: 1993 Publication-Status: Published in Review of Financial Studies File-URL: http://dash.harvard.edu/bitstream/handle/1/3353757/campbell_wheredobetas.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3353757 Template-Type: ReDIF-Paper 1.0 Author-Name: Feldstein, Martin Title: Effects of Taxes on Economic Behavior Abstract: This paper discusses how the effects of taxes on economic behavior are important for revenue estimation, for calculating efficiency effects, and for understanding short-term macroeconomic consequences. The primary focus is on taxes on labor income but some attention is given to taxes on income from saving. Specific calculations illustrate the importance of behavioral responses for accurate calculation of the revenue effects and deadweight losses of tax changes. Creation-Date: 2008 Publication-Status: Published in National Tax Journal File-URL: http://dash.harvard.edu/bitstream/handle/1/2943922/feldstein_fx%20of%20taxes.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2943922 Template-Type: ReDIF-Paper 1.0 Author-Name: Schiantarelli, Fabio Author-Name: Perotti, Roberto Author-Name: Ardagna, Silvia Author-Name: Alesina, Alberto Title: Fiscal Policy, Profits, and Investment Abstract: This paper evaluates the effects of fiscal policy on investment using a panel of OECD countries. We find a sizeable negative effect of public spending--and in particular of its wage component--on profits and on business investment. This result is consistent with different theoretical models in which government employment creates wage pressure for the private sector. Various types of taxes also have negative effects on profits, but, interestingly, the effects of government spending on investment are larger than those of taxes. Our results can explain the so-called "non-Keynesian" (i.e., expansionary) effects of fiscal adjustments. Creation-Date: 2002 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/4685103/alesina_fiscalpolicy.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4685103 Template-Type: ReDIF-Paper 1.0 Author-Name: Wacziarg, Romain Author-Name: Alesina, Alberto Title: Is Europe Going Too Far? Abstract: This paper examines the process of European political integration. We start with a political-economy model of monetary policy, illustrating a general principle: economic integration requires setting up European institutions endowed with the authority to enact Europe-wide policies. On the other hand, when countries can take advantage of scale effects thanks to economic integration, the need for large countries is reduced. Thus increased economic integration reduces the need for political integration in Europe. To reconcile these views, we propose a model for the optimal allocation of prerogatives across levels of government. When the provision of public goods is characterized by cross-border spillovers, some centralization of policies is needed to internalize the externality. These gains from centralization must be traded-off against the costs from imposing the same policies upon heterogeneous groups. The optimal allocation of prerogatives results from this trade-off. Using our model as a benchmark, we analyze the institutional incentives at play for the allocation of political prerogatives in Europe and conclude that the EU has gone too far on most issues. Creation-Date: 1999 Publication-Status: Published in Carnegie-Rochester Conference Series on Public Policy File-URL: http://dash.harvard.edu/bitstream/handle/1/4553012/alesina_europetoofar.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553012 Template-Type: ReDIF-Paper 1.0 Author-Name: Feldstein, Martin Author-Name: Green, Jerry Title: Why Do Companies Pay Dividends? Abstract: This paper presents a simple model of market equilibrium to explain why firms that maximize the value of their shares pay dividends even though the funds could instead be retained and subsequently distributed to shareholders in a way that would allow them to be taxed more favorably as capital gains. The two principal ingredients of our explanation are: (1) the conflicting preferences of shareholders in different tax brackets and (2) the shareholders' desire for portfolio diversification, we show that companies will pay a positive fraction of earnings in dividends. We also provide some comparative static analysis of dividend behavior with respect to tax parameters and to the conditions determining the riskiness of the securities. Creation-Date: 1983 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/3204679/green_companiesdividend.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3204679 Template-Type: ReDIF-Paper 1.0 Author-Name: Easterly, William Author-Name: Baqir, Reza Author-Name: Alesina, Alberto Title: Redistributive Public Employment Abstract: Politicians may use “disguised” redistributive policies in order to circumvent opposition to explicit tax-transfer schemes. First, we present a theoretical model that formalizes this hypothesis. Next, we provide evidence consistent with the prediction of the model, namely that in U.S. cities, politicians use public employment as such a redistributive device. We find that city employment is significantly higher in cities where income inequality and ethnic fragmentation are higher. Creation-Date: 2000 Publication-Status: Published in Journal of Urban Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4553013/alesina_publicemployment.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553013 Template-Type: ReDIF-Paper 1.0 Author-Name: Alesina, Alberto Author-Name: Weder, Beatrice Title: Do Corrupt Governments Receive Less Foreign Aid? Abstract: Critics of foreign aid programs argue that these funds often support corrupt governments and inefficient bureaucracies. Supporters argue that foreign aid can be used to reward good governments. This paper documents that there is no evidence that less corrupt governments receive more foreign aid. On the contrary, according to some measures of corruption, more corrupt governments receive more aid. Also, we could not find any evidence that an increase in foreign aid reduces corruption. In summary, the answer to the question posed in the title is "no." Creation-Date: 2002 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/4553011/alesina_corruptgovernments.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553011 Template-Type: ReDIF-Paper 1.0 Author-Name: Wacziarg, Romain Author-Name: Spolaore, Enrico Author-Name: Alesina, Alberto Title: Economic Integration and Political Disintegration Abstract: In a world of trade restrictions, large countries enjoy economic benefits, because political boundaries determine the size of the market. Under free trade and global markets even relatively small cultural, linguistic or ethnic groups can benefit from forming small, homogeneous political jurisdictions. This paper provides a formal model of the relationship between openness and the equilibrium number and size of countries, and successfully tests two implications of the model. Firstly, the economic benefits of country size are mediated by the degree of openness to trade. Secondly, the history of nation-state creations and secessions is influenced by the trade regime. Creation-Date: 2000 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/4553029/alesina_integration.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553029 Template-Type: ReDIF-Paper 1.0 Author-Name: Spolaore, Enrico Author-Name: Alesina, Alberto Title: Conflict, Defense Spending, and the Number of Nations Abstract: This paper provides a formal model of endogenous border formation and choice of defense spending in a world with international conflict. We examine both the case of democratic governments and of dictatorships. The model is consistent with three observations. First, breakup of countries should follow a reduction in the likelihood of international conflicts. Second, the number of regional conflicts between smaller countries may increase as a result of the breakup of larger countries. Third, the size of the peace dividend (the reduction in defense spending in a more peaceful world) is limited by the process of country breakup. Creation-Date: 2006 Publication-Status: Published in European Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/4553016/alesina_conflictdefense.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553016 Template-Type: ReDIF-Paper 1.0 Author-Name: Fryer, Roland Author-Name: List, John A. Author-Name: Levitt, Steven D. Title: Exploring the Impact of Financial Incentives on Stereotype Threat: Evidence from a Pilot Study Abstract: Creation-Date: 2008 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2961941/2008%20levitt%20and%20list.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2961941 Template-Type: ReDIF-Paper 1.0 Author-Name: Green, Jerry Author-Name: Sheshinski, Eytan Title: A Note on the Progressivity of Optimal Public Expenditures Abstract: Creation-Date: 1975 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3203641/green_progressivity.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3203641 Template-Type: ReDIF-Paper 1.0 Author-Name: Kahn, Charles M. Author-Name: Green, Jerry Title: Wage-Employment Contracts Abstract: This paper studies the efficient agreements about the dependence of workers' earnings on employment, when the employment level is controlled by firms. The firms' superior information about profitability conditions is responsible for this form of contract governance. Under plausible assumptions, such agreements will cause employment to diverge from efficiency as a byproduct of their attempt to mitigate risk. It is shown that, if leisure is a normal good and firms are risk-neutral, employment is always above the efficient level. Such a one-period implicit contracting model cannot, therefore, be used to "explain" unemployment as a rational byproduct of risk sharing between workers and a risk-neutral firm under conditions of asymmetric information. Creation-Date: 1983 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3203642/green_wage.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3203642 Template-Type: ReDIF-Paper 1.0 Author-Name: Cohen, Gerald Author-Name: Alesina, Alberto Author-Name: Roubini, Nouriel Title: Macroeconomic Policy and Elections in OECD Democracies Abstract: The purpose of this paper is to test for evidence of opportunistic "political business cycles" in a large sample of 18 OECD economies. Our results can be summarized as follows: 1) We find very little evidence of pre-electoral effects on economic outcomes, in particular, on GDP growth and unemployment; 2) We see some evidence of "political monetary cycles," that is, expansionary monetary policy in election years; 3) We also observe indications of "political budget cycles," or "loose" fiscal policy prior to elections; 4) Inflation exhibits a post-electoral jump, which could be explained by either the pre-electoral "loose" monetary and fiscal policies and/or by an opportunistic timing of increases in publicly controlled prices, or indirect taxes. Creation-Date: 1992 Publication-Status: Published in Economics & Politics File-URL: http://dash.harvard.edu/bitstream/handle/1/4553023/alesina_macroeconomicoecd.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553023 Template-Type: ReDIF-Paper 1.0 Author-Name: Antras, Pol Title: Incomplete Contracts and the Product Cycle Abstract: I present a model in which the incomplete nature of contracts governing international transactions limits the extent to which the production process can be fragmented across borders. Because of contractual frictions, goods are initially manufactured in the same country where product development takes place. Only when the good becomes sufficiently standardized is the manufacturing stage of production shifted to a low-wage foreign location. Solving for the optimal organizational structure, I develop a new version of the product cycle hypothesis in which manufacturing is shifted abroad first within firm boundaries, and only at a later stage to independent foreign firms. Creation-Date: 2005 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/3196324/antras_incompletecontracts.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3196324 Template-Type: ReDIF-Paper 1.0 Author-Name: Shoven, John Author-Name: Green, Jerry Title: The Effects of Interest Rates on Mortgage Prepayments Abstract:
Three main types of mortgages are fixed interest contracts which automatically fall due on the sale of a dwelling, fixed rate loans which are assumable by a buyer, and floating rate instruments. When interest rates rise, the fall in the economic value of these assets in savings and loan associations' portfolios varies from one form of mortgage to another. For either of the fixed interest rate contracts, the cash flow from the mortgage is constant as long as it has not been prepaid. If the interest rate rises, the homeowner has a nominal capital gain, since his loan is then at a below market interest rate. He would therefore be less likely to prepay. The fall in the savings and loans' net worth arises from two factors: (1) the interest rate differential for mortgages of a fixed duration, and (2) the endogenous lengthening of the duration.
This paper is an attempt to measure the dependence of the duration of mortgages on the implicit unrealized capital gain of mortgage holders resulting from interest rate changes. Our estimate is based on a sample of 4,000 mortgages issued in California which were active in 1975. We follow their payment history from 1975 to 1982. Using a Proportional Hazards Model, we estimate the percentage reduction in prepayment probability associated with interest rate changes. Our results indicate that for due—on—sale fixed interest rate mortgages, a sudden increase in the interest rate from 10 to 15 percent would induce a 23 percent loss in the economic value of the mortgage. If the mortgage were assumable, this loss would be 28 percent. Correspondingly, the 6—year average time to repayment of mortgages at a constant interest rate would be lengthened to nine years for due—on—sale mortgages, and 13—1/2 years for assumable ones.
The definitive version is available at www.blackwell-synergy.com.
Creation-Date: 1986 Publication-Status: Published in Journal of Money, Credit and Banking File-URL: http://dash.harvard.edu/bitstream/handle/1/3204664/green_prepayments.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3204664 Template-Type: ReDIF-Paper 1.0 Author-Name: Zingales, Luigi Author-Name: Reenen, John Van Author-Name: Aghion, Philippe Title: Innovation and Institutional Ownership Abstract: We find that institutional ownership in publicly traded companies is associated with more innovation (measured by cite-weighted patents). To explore the mechanism through which this link arises, we build a model that nests the lazy-manager hypothesis with career-concerns, where institutional owners increase managerial incentives to innovate by reducing the career risk of risky projects. The data supports the career concerns model. First, whereas the lazy manager hypothesis predicts a substitution effect between institutional ownership and product market competition (and managerial entrenchment generally), the career-concern model allows for complementarity. Empirically, we reject substitution effects. Second, CEOs are less likely to be fired in the face of profit downturns when institutional ownership is higher. Finally, using instrumental variables, policy changes and disaggregating by type of owner we find that the effect of institutions on innovation does not appear to be due to endogenous selection. Creation-Date: 2009 Publication-Status: Published in NBER Working Paper Series File-URL: http://dash.harvard.edu/bitstream/handle/1/4481491/Aghion_InnovationInstitutional.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4481491 Template-Type: ReDIF-Paper 1.0 Author-Name: Howitt, Peter Author-Name: Griffith, Rachel Author-Name: Aghion, Philippe Author-Name: Blundell, Richard Author-Name: Bloom, Nick Title: Competition and Innovation: An Inverted-U Relationship Abstract: This paper investigates the relationship between product market competition and innovation. We find strong evidence of an inverted-U relationship using panel data. We develop a model where competition discourages laggard firms from innovating but encourages neck-and-neck firms to innovate. Together with the effect of competition on the equilibrium industry structure, these generate an inverted-U. Two additional predictions of the model—that the average technological distance between leaders and followers increases with competition, and that the inverted-U is steeper when industries are more neck-and-neck—are both supported by the data. Creation-Date: 2005 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4481507/aghion_invertedu.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4481507 Template-Type: ReDIF-Paper 1.0 Author-Name: Sachs, Jeffrey Author-Name: Alesina, Alberto Title: Political Parties and the Business Cycle in the United States, 1948-1984 Abstract: This paper tests the existence and the extent of a politically induced business cycle in the U.S. in the post—World War II period. The cycle described in this paper is different from the traditional "political business cycle" of Nordhaus. It is based on a systematic difference between the monetary policies of the two parties in a model with labor contracts. From an explicit optimization problem we derive a system of equations for output and money growth. Then we successfully test the non-linear restriction imposed by the theory on the parameters of the system of equations. We cannot reject the hypothesis that money growth has been systematically different under the two types of administration and that this difference contributes to explain output fluctuations. Creation-Date: 1988 Publication-Status: Published in Journal of Money, Credit and Banking File-URL: http://dash.harvard.edu/bitstream/handle/1/4553026/alesina_politicalparties1948.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553026 Template-Type: ReDIF-Paper 1.0 Author-Name: Stein, Jeremy Author-Name: Kubik, Jeffrey D. Author-Name: Hong, Harrison Title: The Only Game in Town: Stock-Price Consequences of Local Bias Abstract: Theory suggests that, in the presence of local bias, the price of a stock should be decreasing in the ratio of the aggregate book value of firms in its region to the aggregate risk tolerance of investors in its region. Using data on U.S. states and Census regions, we find clear-cut support for this proposition. Most of the variation in the ratio of interest comes from differences across regions in aggregate book value per capita. Regions with low population density—e.g., the Deep South—are home to relatively few firms per capita, which leads to higher stock prices via an "only-game-in-town" effect. Creation-Date: 2008 Publication-Status: Published in Journal of Financial Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3710665/Stein%20OnlyGameInTown.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3710665 Template-Type: ReDIF-Paper 1.0 Author-Name: Sheshinski, Eytan Author-Name: Feldstein, Martin Author-Name: Green, Jerry Author-Name: Auerbach, Alan Title: Inflation and Taxes in a Growing Economy with Debt and Equity Finance Abstract: Our tax system was designed for an economy with little or no inflation. The current paper shows that inflation causes capricious changes in the effective rate of tax on capital income and therefore in the real net rate of return that savers receive. This is not only a temporary disequilibrium effect but one which persists in steady-state equilibrium. Unlike earlier papers by Feldstein and by Green and Sheshinski, the current study recognizes that firms finance investment by both debt and equity in a ratio that depends on the tax rates and on the rate of inflation. Creation-Date: 1978 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/3203645/green_inflationtaxes.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3203645 Template-Type: ReDIF-Paper 1.0 Author-Name: Holden, Richard T. Author-Name: Fudenberg, Drew Author-Name: Aghion, Philippe Title: Subgame Perfect Implementation with Almost Perfect Information and the Hold-Up Problem Abstract: The foundations of incomplete contracts have been questioned using or extending the subgame perfect implementation approach of Moore and Repullo (1988). We consider the robustness of subgame perfect implementation to the introduction of small amounts of asymmetric information. We show that Moore-Repullo mechanisms may not yield (even approximately) truthful revelation in pure or totally mixed strategies as the amount of asymmetric information goes to zero. Moreover, we argue that a wide class of extensive-form mechanisms are subject to this fragility. Creation-Date: 2009 Publication-Status: Published in NBER Working Paper Series File-URL: http://dash.harvard.edu/bitstream/handle/1/3708929/Aghion_SubgamePerfect.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3708929 Template-Type: ReDIF-Paper 1.0 Author-Name: Wacziarg, Romain Author-Name: Alesina, Alberto Title: Openness, Country Size and Government Abstract: This paper shows that smaller countries have a larger share of public consumption in GDP, and are also more open to trade. These empirical observations are consistent with recent theoretical models explaining country formation and break up, and may account for the observed positive empirical relationship between trade openness and government size. Creation-Date: 1998 Publication-Status: Published in Journal of Public Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4553014/alesina_openness.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553014 Template-Type: ReDIF-Paper 1.0 Author-Name: Alesina, Alberto Author-Name: Spear, Stephen Title: An Overlapping Generations Model of Electoral Competition Abstract: Creation-Date: 1988 Publication-Status: Published in Journal of Public Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4553015/alesina_overlapping.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553015 Template-Type: ReDIF-Paper 1.0 Author-Name: Levine, David Author-Name: Dekel, Eddie Author-Name: Fudenberg, Drew Title: Payoff Information and Self-Confirming Equilibrium Abstract: In a self-confirming equilibrium, each player correctly forecasts the actions that opponents will take along the equilibrium path, but may be mistaken about the way that opponents would respond to deviations. This paper develops a refinement of self-confirming equilibrium in which players use information about opponents' payoffs in forming beliefs about the way that opponents play off of the equilibrium path. We show that this concept is robust to payoff uncertainty. We also discuss its relationship to other concepts and show that it is closely related to assuming almost common certainty of payoffs in an epistemic model with independent beliefs. Creation-Date: 1999 Publication-Status: Published in Journal of Economic Theory File-URL: http://dash.harvard.edu/bitstream/handle/1/3200614/fudenberg_payoff.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3200614 Template-Type: ReDIF-Paper 1.0 Author-Name: Levine, David Author-Name: Fudenberg, Drew Title: Continuous Time Limits of Repeated Games with Imperfect Public Monitoring Abstract: In a repeated game with imperfect public information, the set of equilibria depends on the way that the distribution of public signals varies with the players' actions. Recent research has focused on the case of “frequent monitoring,” where the time interval between periods becomes small. Here we study a simple example of a commitment game with a long-run and short-run player in order to examine different specifications of how the signal distribution depends upon period length. We give a simple criterion for the existence of efficient equilibrium, and show that the efficiency of the equilibria that can be supported depends in an important way on the effect of the player's actions on the variance of the signals, and whether extreme values of the signals are “bad news” of “cheating” behavior, or “good news” of “cooperative” behavior. Creation-Date: 2007 Publication-Status: Published in Review of Economic Dynamics File-URL: http://dash.harvard.edu/bitstream/handle/1/3196334/Continuous_Time_Limits.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3196334 Template-Type: ReDIF-Paper 1.0 Author-Name: Feldstein, Martin Author-Name: Sheshinski, Eytan Author-Name: Green, Jerry Title: Corporate Financial Policy and Taxation in a Growing Economy Abstract: Creation-Date: 1979 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3203643/green_growingeconomy.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3203643 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Author-Name: Ludvigson, Sydney Title: Elasticities of Substitution in Real Business Cycle Models with Home Production Abstract: This paper constructs a simple model of home production that demonstrates the connection between the intertemporal elasticity of substitution in market consumption (IES) and the static elasticity of substitution between home and market consumption (SES). Understanding this connection is important because there is a large body of empirical evidence suggesting that the IES is small, but little evidence on the size of the SES. We use our framework to shed light on the properties of a home production model with a low IES. We find that such a model must have three fundamental properties in order to match key aspects of aggregate U.S. data. First, the steady-state growth rate of technology must be the same across sectors. Second, shocks to technology must be sufficiently positively correlated across sectors. Third, capital must be used more intensively in the market sector than in the home sector. A home production model with these three properties can be surprisingly successful at reconciling the RBC paradigm with evidence for a low IES. Creation-Date: 2001 Publication-Status: Published in Journal of Money, Credit and Banking File-URL: http://dash.harvard.edu/bitstream/handle/1/3163262/campbellssrn_elasticities.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3163262 Template-Type: ReDIF-Paper 1.0 Author-Name: Levine, David Author-Name: Fudenberg, Drew Title: Efficiency and Observability with Long-Run and Short-Run Players Abstract: We present a general algorithm for computing the limit, as δ → 1, of the set of payoffs of perfect public equilibria of repeated games with long-run and short-run players, allowing for the possibility that the players′ actions are not observable by their opponents. We illustrate the algorithm with two economic examples. In a simple partnership we show how to compute the equilibrium payoffs when the folk theorem fails. In an investment game, we show that two competing capitalists subject to moral hazard may both become worse off if their firms are merged and they split the profits from the merger. Finally, we show that with short-run players each long-run player′s highest equilibrium payoff is generally greater when their realized actions are observed. Creation-Date: 1994 Publication-Status: Published in Journal of Economic Theory File-URL: http://dash.harvard.edu/bitstream/handle/1/3203774/fudenberg_efficiency.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3203774 Template-Type: ReDIF-Paper 1.0 Author-Name: Pesendorfer, Wolfgang Author-Name: Levine, David Author-Name: Fudenberg, Drew Title: When Are Nonanonymous Players Negligible? Abstract: We examine games played by a single large player and a large number of opponents who are small, but not anonymous. If the play of the small players is observed with noise, and if the number of actions the large player controls is bounded as the number of small players grows, the equilibrium set converges to that of the game where there is a continuum of small players. This paper extends previous work on the negligibility of small players by dropping the assumption that small players' actions are “anonymous.” That is, we allow each small player's actions to be observed separately, instead of supposing that the small players' actions are only observed through their effect on an aggregate statistic. Creation-Date: 1998 Publication-Status: Published in Journal of Economic Theory File-URL: http://dash.harvard.edu/bitstream/handle/1/3203775/fudenberg_nonanonymous.PDF File-Format: application/pdf Handle: RePEc:hrv:faseco:3203775 Template-Type: ReDIF-Paper 1.0 Author-Name: Green, Jerry Author-Name: Stokey, Nancy Title: A Comparison of Tournaments and Contracts Abstract: Tournaments, reward structures based on rank order, are compared with individual contracts in a model with one risk-neutral principal and many risk-averse agents. Each agent's output is a stochastic function of his effort level plus an additive shock term that is common to all the agents. The principal observes only the output levels of the agents. It is shown that, in the absence of a common shock, using optimal independent contracts dominates using the optimal tournament. Conversely, if the distribution of the common shock is sufficiently diffuse, using the optimal tournament dominates using optimal independent contracts. Finally, it is shown that for a sufficiently large number of agents, a principal who cannot observe the common shock but uses the optimal tournament does as well as one who can observe the shock and uses independent contracts. Creation-Date: 1983 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/3203644/green_comparison.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3203644 Template-Type: ReDIF-Paper 1.0 Author-Name: McKinney, C. Nicholas Author-Name: Niederle, Muriel Author-Name: Roth, Alvin Title: The collapse of a medical labor clearinghouse (and why such failures are rare) Abstract: Creation-Date: 2005 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2570404/Roth_medical.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2570404 Template-Type: ReDIF-Paper 1.0 Author-Name: Schuknecht, Ludger Author-Name: Angeloni, Ignazio Author-Name: Alesina, Alberto Title: What Does The European Union Do? Abstract: The goal of this paper is to evaluate the attribution of policy prerogatives to European Union level institutions and compare them to the implications of normative policy models and to the preferences of European citizens. For this purpose we construct a set of indicators to measure the policy-making intensity of the European Union (European Council, Parliament, Commission, Court of Justice, etc.). We confirm that the extent and the intensity of policy-making by the EU have increased sharply over the last 30 years, but at different speeds, and in different degrees, across policy domains. In recent years the areas that have expanded most are quite remote from the EEC’s original mission of establishing a free market zone with common external trade policy. On the contrary some policy domains that would normally be attributed to the highest level of government remain at national level. We argue that the resulting allocation of prerogatives between the EU and member countries is partly inconsistent with normative criteria concerning the assignment of policies at different government levels, as laid out in the theoretical literature. Creation-Date: 2005 Publication-Status: Published in Public Choice File-URL: http://dash.harvard.edu/bitstream/handle/1/4553010/alesina_whatdoeseudo.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553010 Template-Type: ReDIF-Paper 1.0 Author-Name: Stern, Scott Author-Name: Kolev, Julian Author-Name: Dewatripont, Mathias Author-Name: Aghion, Philippe Author-Name: Murray, Fiona Title: Of Mice and Academics: Examining the Effect of Openness on Innovation Abstract: Scientific freedom and openness are hallmarks of academia: relative to their counterparts in industry, academics maintain discretion over their research agenda and allow others to build on their discoveries. This paper examines the relationship between openness and freedom, building on recent models emphasizing that, from an economic perspective, freedom is the granting of control rights to researchers. Within this framework, openness of upstream research does not simply encourage higher levels of downstream exploitation. It also raises the incentives for additional upstream research by encouraging the establishment of entirely new research directions. In other words, within academia, restrictions on scientific openness (such as those created by formal intellectual property (IP)) may limit the diversity and experimentation of basic research itself. We test this hypothesis by examining a "natural experiment" in openness within the academic community: NIH agreements during the late 1990s that circumscribed IP restrictions for academics regarding certain genetically engineered mice. Using a sample of engineered mice that are linked to specific scientific papers (some affected by the NIH agreements and some not), we implement a differences-in-differences estimator to evaluate how the level and type of follow-on research using these mice changes after the NIH-induced increase in openness. We find a significant increase in the level of follow-on research. Moreover, this increase is driven by a substantial increase in the rate of exploration of more diverse research paths. Overall, our findings highlight a neglected cost of IP: reductions in the diversity of experimentation that follows from a single idea. Creation-Date: 2009 Publication-Status: Published in NBER Working Paper Series File-URL: http://dash.harvard.edu/bitstream/handle/1/4554220/Aghion_OfMiceAcademics.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4554220 Template-Type: ReDIF-Paper 1.0 Author-Name: Imhof, Lorens Author-Name: Nowak, Martin Author-Name: Fudenberg, Drew Title: Tit-for-Tat or Win-Stay, Lose-Shift? Abstract: The repeated Prisoner's Dilemma is usually known as a story of tit-for-tat (TFT). This remarkable strategy has won both of Robert Axelrod's tournaments. TFT does whatever the opponent has done in the previous round. It will cooperate if the opponent has cooperated, and it will defect if the opponent has defected. But TFT has two weaknesses: (i) it cannot correct mistakes (erroneous moves) and (ii) a population of TFT players is undermined by random drift when mutant strategies appear which play always-cooperate (ALLC). Another equally simple strategy called ‘win-stay, lose-shift’ (WSLS) has neither of these two disadvantages. WSLS repeats the previous move if the resulting payoff has met its aspiration level and changes otherwise. Here, we use a novel approach of stochastic evolutionary game dynamics in finite populations to study mutation–selection dynamics in the presence of erroneous moves. We compare four strategies: always-defect (ALLD), ALLC, TFT and WSLS. There are two possible outcomes: if the benefit of cooperation is below a critical value then ALLD is selected; if the benefit of cooperation is above this critical value then WSLS is selected. TFT is never selected in this evolutionary process, but lowers the selection threshold for WSLS. Creation-Date: 2007 Publication-Status: Published in Journal of Theoretical Biology File-URL: http://dash.harvard.edu/bitstream/handle/1/3200671/fudenberg_titfortat.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3200671 Template-Type: ReDIF-Paper 1.0 Author-Name: Levine, David Author-Name: Dekel, Eddie Author-Name: Fudenberg, Drew Title: Subjective Uncertainty Over Behavior Strategies: A Correction Abstract: In order to model the subjective uncertainty of a player over the behavior strategies of an opponent, one must consider the player's beliefs about the opponent's play at information sets that the player thinks have probability zero. This corregendum uses “trembles” to provide a definition of the convex hull of a set of behavior strategies. This corrects a definition we gave in [E. Dekel, D. Fudenberg, and D. K. Levine, 1999, J. Econ. Theory 89, 165–185], which led to two of the solution concepts we defined there not having the properties we intended. Creation-Date: 2002 Publication-Status: Published in Journal of Economic Theory File-URL: http://dash.harvard.edu/bitstream/handle/1/3200611/fudenberg_subjectivecorrection.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3200611 Template-Type: ReDIF-Paper 1.0 Author-Name: Kyle, Albert Author-Name: Campbell, John Title: Smart Money, Noise Trading and Stock Price Behaviour Abstract: This paper estimates an equilibrium model of stock price behaviour in which changes in exponentially de-trended dividends and prices are normally distributed and exogenous "noise traders" interact with "smart-money" investors who have constant absolute risk aversion. The model can explain the volatility and predictability of U.S. stock returns in the period 1871-1986 using either a low discount rate (4% or below) and a large constant risk discount on the stock price, or a higher discount rate (5% or above) and noise trading correlated with fundamentals. The data are not well able to distinguish between these explanations. Creation-Date: 1993 Publication-Status: Published in Review of Economic Studies File-URL: http://dash.harvard.edu/bitstream/handle/1/3208217/campbell_smartnoise.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3208217 Template-Type: ReDIF-Paper 1.0 Author-Name: Ghironi, Fabio Author-Name: Melitz, Marc Title: International Trade and Macroeconomic Dynamics with Heterogeneous Firms Abstract: We develop a stochastic, general equilibrium, two-country model of trade and macroeconomic dynamics. Productivity differs across individual, monopolistically competitive firms in each country. Firms face a sunk entry cost in the domestic market and both fixed and per-unit export costs. Only relatively more productive firms export. Exogenous shocks to aggregate productivity and entry or trade costs induce firms to enter and exit both their domestic and export markets, thus altering the composition of consumption baskets across countries over time. In a world of flexible prices, our model generates endogenously persistent deviations from PPP that would not exist absent our microeconomic structure with heterogeneous firms. It provides an endogenous, microfounded explanation for a Harrod-Balassa-Samuelson effect in response to aggregate productivity differentials and deregulation. Finally, the model successfully matches several moments of U. S. and international business cycles. Creation-Date: 2005 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3228377/melitz_internationaltrade.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3228377 Template-Type: ReDIF-Paper 1.0 Author-Name: Hamao, Yasushi Author-Name: Campbell, John Title: Predictable Stock Returns in the United States and Japan: A Study of Long-Term Capital Market Integration Abstract: This paper uses the predictability of monthly excess returns on U.S. and Japanese equity portfolios over the U.S. Treasury bill rate to study the integration of long-term capital markets in these two countries. During the period 1971-1990 similar variables, including the dividend-price ratio and interest rate variables, help to forecast excess returns in each country. In addition, in the 1980's U.S. variables help to forecast excess Japanese stock returns. There is some evidence of common movement in expected excess returns across the two countries, which is suggestive of integration of long-term capital markets. Creation-Date: 1992 Publication-Status: Published in Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/3207694/campbell_predictableUSjapan.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3207694 Template-Type: ReDIF-Paper 1.0 Author-Name: Ammer, John Author-Name: Campbell, John Title: What Moves the Stock and Bond Markets? A Variance Decomposition for Long-Term Asset Returns Abstract: This paper uses a vector autoregressive model to decompose excess stock and 10-year bond returns into changes in expectations of future stock dividends, inflation, short-term real interest rates, and excess stock and bond returns. In monthly postwar U.S. data, stock and bond returns are driven largely by news about future excess stock returns and inflation, respectively. Real interest rates have little impact on returns, although they do affect the short-term nominal interest rate and the slope of the term structure. These findings help to explain the low correlation between excess stock and bond returns. Creation-Date: 1993 Publication-Status: Published in Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/3382857/campbell_whatmoves.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3382857 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Title: Intertemporal Asset Pricing Without Consumption Data Abstract: This paper proposes a new way to generalize the insights of stark asset pricing theory to a multiperiod setting. The paper uses a loglinear approximation to the budget constraint to substitute out consumption from a standard intertemporal asset pricing model. In a homoscedastic lognormal setting, the consumption-wealth ratio is shown to depend on the elasticity of intertemporal substitution in consumption, while asset risk premia are determined by the coefficient of relative risk aversion. Risk premia are related to the covariances of asset returns with the market return and with news about the discounted value of all future market returns. Creation-Date: 1993 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/3221491/campbell_intertemporal.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3221491 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Title: A Defense of Traditional Hypotheses about the Term Structure of Interest Rates Abstract: Expectations theories of asset returns may be interpreted either as stating that risk premia are zero or that they are constant through time. Under the former interpretation, different versions of the expectations theory of the term structure are inconsistent with one another, but I show that this does not necessarily carry over to the constant risk premium interpretation of the theory. I present a general equilibrium example in which different types of risk premium are constant through time and dependent only on maturity. Furthermore, I argue that differences among expectations theories are second-order effects of bond yield variability. I develop an approximate linearized framework for analysis of the term structure in which these differences disappear, and I test its accuracy in practice using data from the CRSP government bond tapes. Creation-Date: 1986 Publication-Status: Published in Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/3207698/campbell_defensetraditional.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3207698 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Imhof, Lorens Title: Imitation Processes with Small Mutations Abstract: This note characterizes the impact of adding rare stochastic mutations to an “imitation dynamic,” meaning a process with the properties that absent strategies remain absent, and non-homogeneous states are transient. The resulting system will spend almost all of its time at the absorbing states of the no-mutation process. The work of Freidlin and Wentzell [Random Perturbations of Dynamical Systems, Springer, New York, 1984] and its extensions provide a general algorithm for calculating the limit distribution, but this algorithm can be complicated to apply. This note provides a simpler and more intuitive algorithm. Loosely speaking, in a process with K strategies, it is sufficient to find the invariant distribution of a K×K Markov matrix on the K homogeneous states, where the probability of a transit from “all play i” to “all play j” is the probability of a transition from the state “all agents but 1 play i, 1 plays j” to the state “all play j”. Creation-Date: 2006 Publication-Status: Published in Journal of Economic Theory File-URL: http://dash.harvard.edu/bitstream/handle/1/3190369/imitation.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3190369 Template-Type: ReDIF-Paper 1.0 Author-Name: Fryer, Roland Title: Belief Flipping in a Dynamic Model of Statistical Discrimination 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. Creation-Date: 2007 Publication-Status: Published in Journal of Public Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/2955768/belief%20flipping.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2955768 Template-Type: ReDIF-Paper 1.0 Author-Name: Yeaple, Stephen Author-Name: Helpman, Elhanan Author-Name: Melitz, Marc Title: Export versus FDI with Heterogeneous Firms Abstract: Creation-Date: 2004 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/3229098/melitz_exportvsfdi.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3229098 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Author-Name: McLiesh, Caralee Author-Name: Hart, Oliver Author-Name: Djankov, Simeon Title: Debt Enforcement Around the World Abstract: Insolvency practitioners from 88 countries describe how debt enforcement will proceed against an identical hotel about to default on its debt. We use the data on time, cost, and the likely disposition of the assets (preservation as a going concern vs. piecemeal sale) to construct a measure of the efficiency of debt enforcement in each country. This measure is strongly correlated with per capita income and legal origin and predicts debt market development. Several characteristics of debt enforcement procedures, such as the structure of appeals and availability of floating charge finance, influence efficiency. Creation-Date: 2008 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/2961825/debt_enforcement_JPE_final.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2961825 Template-Type: ReDIF-Paper 1.0 Author-Name: Feldstein, Martin Title: The 2006 Economic Report of the President 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. Creation-Date: 2006 Publication-Status: Published in Journal of Economic Literature File-URL: http://dash.harvard.edu/bitstream/handle/1/2794836/feldstein_reviews.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2794836 Template-Type: ReDIF-Paper 1.0 Author-Name: Bertrand, Marianne Author-Name: Shafir, Eldar Author-Name: Mullainathan, Sendhil Title: A Behavioral Economics View of Poverty Abstract: Creation-Date: 2004 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2907437/behav%20econ%20poverty.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2907437 Template-Type: ReDIF-Paper 1.0 Author-Name: Tenreyro, Silvana Author-Name: Barro, Robert Author-Name: Alesina, Alberto Title: Optimal Currency Areas Abstract: Creation-Date: 2002 Publication-Status: Published in NBER Macroeconomics Annual File-URL: http://dash.harvard.edu/bitstream/handle/1/4553033/alesina_optimalcurrency.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553033 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Mobius, Markus Author-Name: Szeidl, Adam Title: Existence of Equilibrium in Large Double Auctions Abstract: We show the existence of a pure strategy, symmetric, increasing equilibrium in dou- ble auction markets with correlated, conditionally independent private values and many participants. The equilibrium we find is arbitrarily close to fully revealing as the market size grows. Our results provide strategic foundations for price-taking behavior in large markets. Creation-Date: 2007 Publication-Status: Published in Journal of Economic Theory File-URL: http://dash.harvard.edu/bitstream/handle/1/3043420/mobius_existence.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3043420 Template-Type: ReDIF-Paper 1.0 Author-Name: Tabellini, Guido Author-Name: Alesina, Alberto Title: External Debt, Capital Flight and Political Risk Abstract: This paper explains the simultaneous occurrence of large external debts, private capital outflows and low domestic capital formation. We consider a general equilibrium model in which two government types with conflicting distributional goals randomly alternate in office. Uncertainty over the fiscal policies of future governments generates capital flight and small domestic investment, and induces the government to overaccumulate external debt. The model also predicts that left-wing governments are more inclined to restrict capital outflows than right-wing governments. Finally, we examine how political uncertainty affects the risk premium and how debt repudiation may occur after a regime change. Creation-Date: 1989 Publication-Status: Published in Journal of International Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4553019/alesina_externaldebt.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553019 Template-Type: ReDIF-Paper 1.0 Author-Name: Tabellini, Guido Author-Name: Alesina, Alberto Title: A Positive Theory of Fiscal Deficits and Government Debt Abstract: This paper considers an economy in which policymakers with different preferences alternate in office as a result of elections. Government debt is used strategically by each policymaker to influence the choices of his successors. If different policymakers disagree about the desired composition of government spending between two public goods, the economy exhibits a deficits bias; that is, debt accumulation is higher than it would be with a social planner. The equilibrium level of debt is larger the larger is the degree of polarization between alternating governments and the less likely it is that the current government will be re-elected. Creation-Date: 1990 Publication-Status: Published in Review of Economic Studies File-URL: http://dash.harvard.edu/bitstream/handle/1/3612769/alesina_positivetheory.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3612769 Template-Type: ReDIF-Paper 1.0 Author-Name: Green, Jerry Author-Name: Honkapohja, Seppo Title: Bilateral Contracts Abstract: A mathematical characterization of self-enforcing bilateral contracts is given. Contracts where both parties exercise some control over the quantity traded can sometimes be superior to contracts that rest control entirely with one side. Some qualitative characteristics of these contracts are given. Creation-Date: 1983 Publication-Status: Published in Journal of Mathematical Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3204671/green_bilateral.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3204671 Template-Type: ReDIF-Paper 1.0 Author-Name: Chamberlain, Gary Author-Name: Rothschild, Michael Title: Arbitrage, Factor Structure, and Mean-Variance Analysis on Large Asset Markets Abstract: We examine the implications of arbitrage in a market with many assets. The absence of arbitrage opportunities implies that the linear functionals that give the mean and cost of a portfolio are continuous; hence there exist unique portfolios that represent these functionals. These portfolios span the mean-variance efficient set. We resolve the question of when a market with many assets permits so much diversification that risk-free investment opportunities are available. Ross 112, 141 showed that if there is a factor structure, then the mean returns are approximately linear functions of factor loadings. We define an approximate factor structure and show that this weaker restriction is sufficient for Ross' result. If the covariance matrix of the asset returns has only K unbounded eigenvalues, then there is an approximate factor structure and it is unique. The corresponding K eigenvectors converge and play the role of factor loadings. Hence only a principal component analysis is needed in empirical work. Creation-Date: 1982 Publication-Status: Published in Working paper series (National Bureau of Economic Research) File-URL: http://dash.harvard.edu/bitstream/handle/1/3230355/Chamberlain_ArbitrageFactor.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3230355 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Author-Name: Clarida, Richard Title: The Dollar and Real Interest Rates Abstract: In this paper, we investigate the link between the real foreign exchange value of the dollar and real interest rates since 1979. We argue that it is important to consider the possibility that real exchange rate movements reflect movements of the long-run equilibrium exchange rate as well as real interest differentials. We use a state-space approach to estimate the importance of shifts in the long-run equilibrium exchange rate, the persistence of the ex ante short-term real interest differential, and the effect of this differential on the exchange rate. Using U.S., Canadian, British, German and Japanese data from October 1979 to March 1986, we find that movements in the dollar real exchange rate have been dominated by unanticipated shifts in the expected long-run real exchange rate. Ex ante real interest differentials have not been persistent or variable enough to account for a major part of exchange rate variation. We use Mussa's (1984) rational expectations model of the real exchange rate and the current account to interpret our results. Creation-Date: 1987 Publication-Status: Published in Carnegie-Rochester Conference Series on Public Policy File-URL: http://dash.harvard.edu/bitstream/handle/1/3221495/campbell_dollarrealinterest.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3221495 Template-Type: ReDIF-Paper 1.0 Author-Name: Shiller, Robert Author-Name: Campbell, John Title: Interpreting Cointegrated Models Abstract: Error-correction models for cointegrated economic variables are commonly interpreted as reflecting partial adjustment of one variable to another. We show that error-correction models may also arise because one variable forecasts another. Reduced-form estimates of error-correction models cannot be used to distinguish these interpretations. In an application, we show that the estimated coefficients in the Marsh-Merton (1987) error-correction model of dividend behavior in the stock market are roughly implied by a near-rational expectations model wherein dividends are persistent and prices are disturbed by some persistent random noise. Their results thus do not demonstrate partial adjustment or 'smoothing' by managers, but may reflect little more than the persistence of dividends and the noiseness of prices. Creation-Date: 1988 Publication-Status: Published in Journal of Economic Dynamics and Control File-URL: http://dash.harvard.edu/bitstream/handle/1/3221492/campbell_interpretingcointegrated.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3221492 Template-Type: ReDIF-Paper 1.0 Author-Name: Mobius, Markus Author-Name: Do, Quoc-Anh Author-Name: Leider, Stephen Author-Name: Rosenblat, Tanya Title: Directed Altruism and Enforced Reciprocity in Social Networks Abstract: We conduct online field experiments in large real-world social networks in order to decompose prosocial giving into three components: (1) baseline altruism toward randomly selected strangers, (2) directed altruism that favors friends over random strangers, and (3) giving motivated by the prospect of future interaction. Directed altruism increases giving to friends by 52 percent relative to random strangers, while future interaction effects increase giving by an additional 24 percent when giving is socially efficient. This finding suggests that future interaction affects giving through a repeated game mechanism where agents can be rewarded for granting efficiency enhancing favors. We also find that subjects with higher baseline altruism have friends with higher baseline altruism. Creation-Date: 2009 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3054685/mobius%20altruism%20reciprocity.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3054685 Template-Type: ReDIF-Paper 1.0 Author-Name: Green, Jerry Author-Name: Laffont, Jean-Jacques Title: Disequilibrium Dynamics with Inventories and Anticipatory Price-Setting Abstract: This paper studies the sequence of short-run quantity-constrained equilibria of a model with a single storable output, labor and money. The durability of output gives rise to inventory fluctuations which influence the course of the equilibria attained. One special feature of interest is the assumption that prices are not at the level which would equilibrate all markets if there were no stochastic shocks to the economy. With prices frozen at this level, the nature of the realized shocks determines the type of disequilibrium realized and the unintended component of inventory change. The analysis concentrates on two questions: What is the statistical nature of the process governing the real wage, output, employment and inventories? And is it possible to test this model against the alternative hypothesis that prices are continually flexible even after the shocks have disturbed the system? We find that although these theories are similar in their qualitative structure, tests can be developed. We also show how the frequencies of different types of quantity-constrained equilibria vary with the stochastic specification. This may shed some insight on why it is commonly believed that some types of disequilibrium phenomena have not been observed. Creation-Date: 1981 Publication-Status: Published in European Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/3204668/green_disequilibrium.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3204668 Template-Type: ReDIF-Paper 1.0 Author-Name: Perotti, Roberto Author-Name: Alesina, Alberto Title: The Welfare State and Competitiveness Abstract: In all industrial countries, fiscal policy is increasingly about redistribution. In this paper, we study redistribution across different types of agents in a world characterized by the presence of labor unions and distortionary taxation. We show that an increase in transfers financed by distortionary taxation has nonlinear effects on unit labor costs relative to the other countries, depending on the degree of centralization of the wage-setting process in the labor market. We find considerable empirical support for the model in a sample of 14 OECD countries. Creation-Date: 1997 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/4553027/alesina_welfarestate.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553027 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Title: Bond and Stock Returns in a Simple Exchange Model Abstract: This paper studies asset pricing in a general equilibrium representative agent exchange model. The assumptions of isoelastic period utility and lognormal endowment allow the derivation of closed-form solutions for asset returns without restricting the serial correlation of the log endowment. Risk premiums on stocks and real bonds are found to be simple functions of relative risk aversion, the variance of the log endowment innovation, and the weights in the moving average representation of the log endowment. The paper analyzes the sign of term premiums, the size of the equity premium, and the effect of taste shocks on asset prices. Creation-Date: 1986 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3122544/campbell_bondstock.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3122544 Template-Type: ReDIF-Paper 1.0 Author-Name: Tsyvinski, Aleh Author-Name: Golosov, Mikhail Author-Name: Farhi, Emmanuel Title: A Theory of Liquidity and Regulation of Financial Intermediation Abstract: This paper studies a Diamond–Dybvig model of providing insurance against unobservable liquidity shocks in the presence of unobservable trades. We show that competitive equilibria are inefficient. A social planner finds it beneficial to introduce a wedge between the interest rate implicit in optimal allocations and the economy's marginal rate of transformation. This improves risk sharing by reducing the attractiveness of joint deviations where agents simultaneously misrepresent their type and engage in trades on private markets. We propose a simple implementation of the optimum that imposes a constraint on the portfolio share that financial intermediaries invest in short-term assets. Creation-Date: 2009 Publication-Status: Published in Review of Economic Studies File-URL: http://dash.harvard.edu/bitstream/handle/1/4481504/Farhi_TheoryLiquidity.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4481504 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Author-Name: Cocco, Joao Title: Household Risk Management and Optimal Mortgage Choice Abstract: This paper asks how a household should choose between a fixed-rate (FRM) and an adjustable-rate (ARM) mortgage. In an environment with uncertain inflation a nominal FRM has a risky real capital value, whereas an ARM has a stable real capital value but short-term variability in required real payments. Numerical solution of a life-cycle model with borrowing constraints and income risk shows that an ARM is generally attractive, but less so for a risk-averse household with a large mortgage, risky income, high default cost, or low moving probability. An inflation-indexed FRM can improve substantially on standard nominal mortgages. Creation-Date: 2003 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3157876/campbell_household.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3157876 Template-Type: ReDIF-Paper 1.0 Author-Name: Morris, Stephen Author-Name: Dekel, Eddie Author-Name: Fudenberg, Drew Title: Interim Correlated Rationalizability Abstract: This paper proposes the solution concept of interim correlated rationalizability, and shows that all types that have the same hierarchies of beliefs have the same set of interim-correlated-rationalizable outcomes. This solution concept characterizes common certainty of rationality in the universal type space. Creation-Date: 2007 Publication-Status: Published in Theoretical Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3196333/fudenberg_interim.PDF File-Format: application/pdf Handle: RePEc:hrv:faseco:3196333 Template-Type: ReDIF-Paper 1.0 Author-Name: Feldstein, Martin Title: How Big Should Government Be? Abstract: Suggests that the deadweight burden caused by a tax rate increase depends not only on labor force participation response but also on other dimensions of labor supply (the forms in which compensation is paid; the forms of tax-favored consumption; and intertemporal allocation of consumption.) Recent econometric work implies that the deadweight burden caused by incremental taxation (the marginal excess burden) may exceed one dollar per dollar of revenue raised, making the cost of incremental government spending more than two dollars for each dollar of government spending. Creation-Date: 1997 Publication-Status: Published in National tax journal File-URL: http://dash.harvard.edu/bitstream/handle/1/3043427/feldstein_biggovt.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3043427 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Author-Name: Perron, Pierre Title: Pitfalls and Opportunities: What Macroeconomists Should Know about Unit Roots Abstract: This paper is an introduction to unit root econometrics as applied in macroeconomics. The paper first discusses univariate time series analysis, emphasizing the following topics: alternative representations of unit root processes, unit root testing procedures, the power of unit root tests, and the interpretation of unit root econometrics in finite samples. A second part of the paper tackles similar issues in a multivariate context where cointegration is now the central concept. The paper reviews representation, testing, and estimation of multivariate time series models with some unit roots. Two important themes of this paper are first, the importance of correctly specifying deterministic components of the series, and second, the usefulness of unit root tests not as methods to uncover some "true relation" but as practical devices that can be used to impose reasonable restrictions on the data and to suggest what asymptotic distribution theory gives the best approximation to the finite-sample distribution of coefficient estimates and test statistics. Creation-Date: 1991 Publication-Status: Published in NBER Macroeconomics Annual File-URL: http://dash.harvard.edu/bitstream/handle/1/3374863/campbell_pitfalls.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3374863 Template-Type: ReDIF-Paper 1.0 Author-Name: Roubini, Nouriel Author-Name: Alesina, Alberto Title: Political Cycles in OECD Economies Abstract: This paper studies whether the dynamic behaviour of GNP growth, unemployment and inflation is systematically affected by the timing of elections and of changes of governments. The sample includes the last three decades in 18 OECD economies. We explicitly test the implication of several models of political cycles, both of the "opportunistic" and of the "partisan" type. Also, we confront the implication of recent "rational" models with more traditional approaches. Our results can be summarized as follows: (a) The "political business cycles" hypothesis, as formulated in Nordhaus (1975) on output and unemployment is generally rejected by the data; (b) inflation tends to increase immediately after elections, perhaps as a result of pre-electoral expansionary monetary and fiscal policies; (c) we find evidence of temporary partisan differences in output and unemployment and of long-run partisan differences in the inflation rate as implied by the "rational partisan theory" by Alesina (1987); (d) we find virtually no evidence of permanent partisan differences in output growth and unemployment. Creation-Date: 1992 Publication-Status: Published in Review of Economic Studies File-URL: http://dash.harvard.edu/bitstream/handle/1/4553025/alesina_politicalcycles.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553025 Template-Type: ReDIF-Paper 1.0 Author-Name: Hentschel, Ludger Author-Name: Campbell, John Title: No News is Good News: An Asymmetric Model of Changing Volatility in Stock Returns Abstract: It seems plausible that an increase in stock market volatility raises required stock returns, and thus lowers stock prices. We develop a formal model of this volatility feedback effect using a simple model of changing variance (a quadratic generalized autoregressive conditionally heteroskedastic, or QGARCH, model). Our model is asymmetric and helps to explain the negative skewness and excess kurtosis of U.S. monthly and daily stock returns over the period 1926–1988. We find that volatility feedback normally has little effect on returns, but it can be important during periods of high volatility. Creation-Date: 1992 Publication-Status: Published in Journal of Financial Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3220232/campbell_nonews.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3220232 Template-Type: ReDIF-Paper 1.0 Author-Name: Barro, Robert Title: On the Welfare Costs of Consumption Uncertainty 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. Creation-Date: 2006 Publication-Status: Published in NBER Working Paper Series File-URL: http://dash.harvard.edu/bitstream/handle/1/3224745/Barro_OnWelfareCosts.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3224745 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Author-Name: Shiller, Robert Title: Stock Prices, Earnings, and Expected Dividends Abstract: Long historical averages of real earnings help forecast present values of future real dividends. With aggregate U.S. stock market data (1871-1986), a vector-autoregressive forecast of the present value of future dividends is, for each year, roughly a weighted average of moving-average earnings and current real price, with between two thirds and three fourths of the weight on the earnings measure. We develop the implications of this for the present-value model of stock prices and for recent results that long-horizon stock returns are highly forecastable. Creation-Date: 1988 Publication-Status: Published in Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/3224293/campbell_stockpricesearnings.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3224293 Template-Type: ReDIF-Paper 1.0 Author-Name: Mankiw, N. Gregory Author-Name: Campbell, John Title: Permanent and Transitory Components in Macroeconomic Fluctuations Abstract: Fluctuations in real GNP have traditionally been viewed as transitory deviations from a deterministic time trend. The purpose of this paper is to review some of the recent developments that have led to a new view of output fluctuations and then to provide some additional evidence. Using post-war quarterly data, it is hard to reject the view that real GNP is as persistent as a random walk with drift.We also consider the hypothesis that the recent finding of persistence are due to the failure to distinguish the business cycle from other fluctuations in real GNP. We use the measured unemployment rate to decompose output fluctuations. We find no evidence for the view that business cycle fluctuations are more quickly trend-reverting. Creation-Date: 1987 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/3207697/campbell_permanenttransitory.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3207697 Template-Type: ReDIF-Paper 1.0 Author-Name: Barro, Robert Title: Rare Disasters and Asset Markets in the Twentieth Century Abstract: The potential for rare economic disasters explains a lot of asset-pricing puzzles. I calibrate disaster probabilities from the twentieth century global history, especially the sharp contractions associated with World War I, the Great Depression, and World War II. The puzzles that can be explained include the high equity premium, low risk-free rate, and volatile stock returns. Another mystery that may be resolved is why expected real interest rates were low in the United States during major wars, such as World War II. The model, an extension of work by Rietz, maintains the tractable framework of a representative agent, time-additive and isoelastic preferences, and complete markets. The results hold with i.i.d. shocks to productivity growth in a Lucas-tree type economy and also with the inclusion of capital formation. Creation-Date: 2006 Publication-Status: Published in The Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3208215/Barro_RareDisasters.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3208215 Template-Type: ReDIF-Paper 1.0 Author-Name: Imbens, Guido Author-Name: Chamberlain, Gary Title: Nonparametric Applications of Bayesian Inference Abstract: The paper evaluates the usefulness of a nonparametric approach to Bayesian inference by presenting two applications. The approach is due to Ferguson (1973, 1974) and Rubin (1981). Our first application considers an educational choice problem. We focus on obtaining a predictive distribution for earnings corresponding to various levels of schooling. This predictive distribution incorporates the parameter uncertainty, so that it is relevant for decision making under uncertainty in the expected utility framework of microeconomics. The second application is to quantile regression. Our point here is to examine the potential of the nonparametric framework to provide inferences without making asymptotic approximations. Unlike in the first application, the standard asymptotic normal approximation turns out to not be a good guide. We also consider a comparison with a bootstrap approach. Creation-Date: 1996 Publication-Status: Published in NBER Technical Working Paper File-URL: http://dash.harvard.edu/bitstream/handle/1/3221493/Chamberlain_NonparametricApplications.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3221493 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Author-Name: Deaton, Angus Title: Why Is Consumption So Smooth? Abstract: For thirty years it has been accepted that consumption is smooth because permanent income is smoother than measured income. (This paper considers the evidence for the contrary position, that permanent income is in fact less smooth than measured income, so that the smoothness of consumption cannot be straightforwardly explained by permanent income theory.) The paper argues that in postwar U.S. quarterly data, consumption is smooth because it responds with a lag to changes in income. Creation-Date: 1989 Publication-Status: Published in Review of Economic Studies File-URL: http://dash.harvard.edu/bitstream/handle/1/3221494/campbell_consumptionsmooth.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3221494 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Title: A Variance Decomposition for Stock Returns Abstract: Creation-Date: 1991 Publication-Status: Published in Economic Journal File-URL: http://dash.harvard.edu/bitstream/handle/1/3207695/campbell_variancedecomposition.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3207695 Template-Type: ReDIF-Paper 1.0 Author-Name: Drazen, Allan Author-Name: Alesina, Alberto Title: Why Are Stabilizations Delayed? Abstract: When a stabilization has significant distributional implications (e.g., tax increases to eliminate a large budget deficit), socioeconomic groups may attempt to shift the burden of stabilization onto other groups. The process leading to stabilization becomes a "war of attrition," each group attempting to wait the others out and stabilization occurring only when one group concedes and bears a disproportionate share of the burden. We solve for the expected time of stabilization in a model of "rational" delay and relate it to several political and economic variables. We motivate this approach and its results by comparison to historical and current episodes. Creation-Date: 1988 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/4553028/alesina_whystabilizations.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553028 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Title: Measuring the Persistence of Expected Returns Abstract: Creation-Date: 1990 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/3207696/campbell_measuringpersistence.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3207696 Template-Type: ReDIF-Paper 1.0 Author-Name: Stein, Ernesto Author-Name: Hommes, Rudolf Author-Name: Hausmann, Ricardo Author-Name: Alesina, Alberto Title: Budget Institutions and Fiscal Performance in Latin America Abstract: In this paper, we collect detailed information on the budget institutions of Latin American countries. We classify these institutions on a "hierarchical"/"collegial" scale, as a function of the existence of constraints on the deficit, and voting rules. We show that "hierarchical" and transparent procedures have been associated with more fiscal discipline in Latin America in the 1980s and early 1990s. Creation-Date: 1999 Publication-Status: Published in Journal of Development Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4553021/alesina_budgetinstitutions.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553021 Template-Type: ReDIF-Paper 1.0 Author-Name: Alesina, Alberto Author-Name: Perotti, Roberto Title: Economic Risk and Political Risk in Fiscal Unions Abstract: A fiscal programme that redistributes income from rich to poor individuals indirectly redistributes tax revenues from regions hit by a favourable shock to regions hit by an unfavourable one. Centralised fiscal redistribution has therefore been advocated as a way to insure individuals against region-specific shocks. In this paper, we argue that a centralised fiscal policy, while reducing the uncertainty on the tax base, may create additional uncertainty on the tax rate. Using a simple model we show that the higher uncertainty on the policy instrument might more than offset the lower uncertainty on the tax base. Creation-Date: 1994 Publication-Status: Published in Economic Journal File-URL: http://dash.harvard.edu/bitstream/handle/1/4553022/alesina_risk.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553022 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Author-Name: Cochrane, John Title: Explaining the Poor Performance of Consumption-Based Asset Pricing Models Abstract: We show that the external habit-formation model economy of Campbell and Cochrane (1999) can explain why the Capital Asset Pricing Model (CAPM) and its extensions are betterapproximate asset pricing models than is the standard onsumption-based model. The model economy produces time-varying expected eturns, tracked by the dividend–price ratio. Portfolio-based models capture some of this variation in state variables, which a state-independent function of consumption cannot capture. Therefore, though the consumption-based model and CAPM are both perfect conditional asset pricing models, the portfolio-based models are better approximate unconditional asset pricing models. Creation-Date: 2000 Publication-Status: Published in Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/3163265/campbellnber_poorperformance.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3163265 Template-Type: ReDIF-Paper 1.0 Author-Name: McCleary, Rachel Author-Name: Barro, Robert Title: Which Countries Have State Religions? Abstract: Among 188 countries, 72 had no state religion in 2000, 1970, and 1900; 58 had a state religion throughout; and 58 had 1 or 2 transitions. We use a Hotelling spatial competition model to analyze the likelihood that the religion market would be monopolized. Similar forces influence a government’s decision to establish a state religion. Consistent with the model, the probability of state religion in 1970 and 2000 is increasing with the adherence rate to the main religion, has a nonlinear relation with population, and has little relation with per capita GDP. The probability of state religion decreases sharply under Communism, but lagged Communism has only a weak effect. With costly adjustment for institutions, the probability of state religion in 1970 or 2000 depends substantially on the status in 1900. This persistence is much stronger for countries with no major regime change than for countries with such a change. Creation-Date: 2005 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3710663/Barro_WhichCountries.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3710663 Template-Type: ReDIF-Paper 1.0 Author-Name: Shiller, Robert Author-Name: Campbell, John Title: A Simple Account of the Behavior of Long-Term Interest Rates Abstract: Recent empirical research on the term structure of interest rates has shown that the long-term interest rate is well described by a distributed lag on short-term interest rates, but does not conform to the expectations theory of the term structure. It has been suggested that the long rate "overreacts" to the short rate. This paper presents aunified taxonomy of risk premia, or deviations from the expectations theory. This enables the hypothesis of overreaction to be formally stated. It is shown that, if anything, the long rate has underreacted to the short rate. However, the independent movement of the long rate is primarily responsible for the failure of the expectations theory. Creation-Date: 1984 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/3208216/campbell_simpleaccount.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3208216 Template-Type: ReDIF-Paper 1.0 Author-Name: Rosenthal, Howard Author-Name: Alesina, Alberto Title: Partisan Cycles in Congressional Elections and the Macroeconomy Abstract: In the postwar United States the president's party has always done worse in the midterm congressional elections than in the previous congressional election. Republican administrations exhibit below-average, and Democratic administrations above-average, economic growth in the first half of each term, whereas in the latter halves the two see equal growth. Our rational expectations model is consistent with these two regularities. In presidential elections, voters choose between two polarized candidates. They then use midterm elections to counterbalance the president's policies by strengthening the opposition in Congress. Since presidents of different parties are associated with different policies, our model predicts a (spurious) correlation between the states of the economy and elections. Our predictions contrast with those of retrospective voting models, in which voters reward the incumbent if the economy is doing well before the election. Our model performs empirically at least as well as, and often better than, alternative models. Creation-Date: 1989 Publication-Status: Published in American Political Science Review File-URL: http://dash.harvard.edu/bitstream/handle/1/4553031/alesina_partisancycles.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553031 Template-Type: ReDIF-Paper 1.0 Author-Name: Dollar, David Author-Name: Alesina, Alberto Title: Who Gives Foreign Aid to Whom and Why? Abstract: This paper studies the pattern of allocation of foreign aid from various donors to receiving countries. We find considerable evidence that the direction of foreign aid is dictated as much by political and strategic considerations, as by the economic needs and policy performance of the recipients. Colonial past and political alliances are major determinants of foreign aid. At the margin, however, countries that democratize receive more aid, ceteris paribus. While foreign aid flows respond to political variables, foreign direct investments are more sensitive to economic incentives, particularly "good policies" and protection of property rights in the receiving countries. We also uncover significant differences in the behavior of different donors. Creation-Date: 2000 Publication-Status: Published in Journal of Economic Growth File-URL: http://dash.harvard.edu/bitstream/handle/1/4553020/alesina_whogives.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553020 Template-Type: ReDIF-Paper 1.0 Author-Name: Roubini, Nouriel Author-Name: Swagel, Phillip Author-Name: Ozler, Sule Author-Name: Alesina, Alberto Title: Political Instability and Economic Growth Abstract: This paper investigates the relationship between political instability and per capita GDP growth in a sample of 113 countries for the period 1950 through 1982. We define political instability as the propensity of a government collapse, and we estimate a model in which such a measure of political instability and economic growth are jointly determined. The main result of this paper is that in countries and time periods with a high propensity of government collapse, growth is significantly lower than otherwise. We also discuss the effects of different types of government changes on growth. Creation-Date: 1996 Publication-Status: Published in Journal of Economic Growth File-URL: http://dash.harvard.edu/bitstream/handle/1/4553024/alesina_instabilitygrowth.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553024 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Title: Money Announcements, The Demand for Bank Reserves, and the Behavior of the Federal Funds Rate within the Statement Week Abstract: The effect of money stock announcements on the federal funds rate has been attributed informally to the information conveyed by the announcements about aggregate reserve demand. This "Aggregate Information Hypothesis" explains the effect without reference to Federal Reserve intervention in the funds market. In this paper I provide a formal model of the Aggregate Information Hypothesis under lagged reserve accounting. The model relies on imperfect information in the funds market, and on imperfect bank arbitrage of reserve demand between days of the week. Some stylized facts are presented about funds rate behavior in the period 1980-1983. Creation-Date: 1987 Publication-Status: Published in Journal of Money, Credit and Banking File-URL: http://dash.harvard.edu/bitstream/handle/1/3220231/campbell_moneyannouncements.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3220231 Template-Type: ReDIF-Paper 1.0 Author-Name: Shiller, Robert Author-Name: Campbell, John Title: Yield Spreads and Interest Rate Movements: A Bird's Eye View Abstract: This paper examines postwar U.S. term structure data and finds that for almost any combination of maturities between one month and ten years, a high yield spread between a longer-term and a shorter-term interest rate forecasts rising shorter-term interest rates over the long term, but a declining yield on the longer-term bond over the short term. This pattern is inconsistent with the expectations theory of the term structure, but is consistent with a model in which the spread is proportional to the value implied by the expectations theory. Creation-Date: 1991 Publication-Status: Published in Review of Economic Studies File-URL: http://dash.harvard.edu/bitstream/handle/1/3221490/campbell_birdseye.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3221490 Template-Type: ReDIF-Paper 1.0 Author-Name: Tabellini, Guido Author-Name: Alesina, Alberto Title: Voting on the Budget Deficit Abstract: This paper analyzes a model in which a group of rational individuals votes over the composition and time profile of public spending. All voters agree that a balanced budget is ex ante optimal. However, if there is disagreement between current and future majorities, a balanced budget is not a political equilibrium under majority rule. Under certain conditions a majority of the voters favors a budget deficit, and the equilibrium deficit is larger the greater is the polarization among voters. Creation-Date: 1990 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/4553030/alesina_votingbudget.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553030 Template-Type: ReDIF-Paper 1.0 Author-Name: Maskin, Eric Author-Name: Kreps, David Author-Name: Fudenberg, Drew Title: Repeated Games with Long-run and Short-run Players Abstract: This paper studies the set of equilibrium payoffs in repeated games with long- and short-run players and little discounting. Because the short-run players are unconcerned about the future, each equilibrium outcome is constrained to lie on their static reaction (best-response) curves. The natural extension of the folk theorem to games of this sort would simply include this constraint in the definitions of the feasible payoffs and minmax values. In fact, this extension does obtain under the assumption that each player's choice of a mixed strategy for the stage game is publicly observable but, in contrast to standard repeated games, the set of equilibrium payoffs is different if players can observe only their opponents' realized actions. Creation-Date: 1990 Publication-Status: Published in Review of Economic Studies File-URL: http://dash.harvard.edu/bitstream/handle/1/3226950/fudenberg_repeatedgames.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3226950 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Title: Stock Returns and the Term Structure Abstract: In monthly U.S. data for 1959–1979 and 1979–1983, the state of the term structure of interest rates predicts excess stock returns, as well as excess returns on bills and bonds. This paper documents this fact and uses it to examine some simple asset pricing models. In 1959–1979, the data strongly reject a single-latent-variable specification of predictable excess returns. There is considerable evidence that conditional variances of excess returns change through time, but the relationship between conditional mean and conditional variance is reliably positive only at the short end of the term structure. Creation-Date: 1987 Publication-Status: Published in Journal of Financial Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3207699/campbell_stockreturns.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3207699 Template-Type: ReDIF-Paper 1.0 Author-Name: Blanchard, Olivier Jean Author-Name: Aghion, Philippe Title: On the Speed of Transition in Central Europe Abstract: Creation-Date: 1994 Publication-Status: Published in NBER Macroeconomics Annual File-URL: http://dash.harvard.edu/bitstream/handle/1/4481322/aghion_speedtransitionCE.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4481322 Template-Type: ReDIF-Paper 1.0 Author-Name: McCleary, Rachel Author-Name: Barro, Robert Title: Religion and Economic Growth across Countries Abstract: Empirical research on the determinants of economic growth typically neglects the influence of religion. To fill this gap, this study uses international survey data on religiosity for a broad panel of countries to investigate the effects of church attendance and religious beliefs on economic growth. To isolate the direction of causation from religiosity to economic performance, the estimation relies on instrumental variables suggested by an analysis in which church attendance and religious beliefs are the dependent variables. The instruments are variables for the presence of state religion and for regulation of the religion market, the composition of religious adherence, and an indicator of religious pluralism. Results show that economic growth responds positively to religious beliefs, notably beliefs in hell and heaven, but negatively to church attendance. That is, growth depends on the extent of believing relative to belonging. These results accord with a model in which religious beliefs influence individual traits that enhance economic performance. The beliefs are an output of the religion sector, and church attendance is an input to this sector. Hence, for given beliefs, higher church attendance signifies more resources used up by the religion sector. Creation-Date: 2003 Publication-Status: Published in American Sociological Review File-URL: http://dash.harvard.edu/bitstream/handle/1/3708464/Barro_ReligionEconomicGrowth.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3708464 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Levine, David Title: Limit Games and Limit Equilibria Abstract: We provide a necessary and sufficient condition for equilibria of a game to arise as limits of ε-equilibria of games with smaller strategy spaces. As the smaller games are frequently more tractable, our result facilitates the characterization of the set of equilibria. Creation-Date: 1986 Publication-Status: Published in Journal of Economic Theory File-URL: http://dash.harvard.edu/bitstream/handle/1/3350443/fudenberg_limitgames.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3350443 Template-Type: ReDIF-Paper 1.0 Author-Name: Levine, David Author-Name: Kreps, David Author-Name: Fudenberg, Drew Title: On the Robustness of Equilibrium Refinements Abstract: The philosophy of equilibrium refinements is that the analyst, if he knows things about the structure of the game, can reject some Nash equilibria as unreasonable. The word “know” in the preceding sentence deserves special emphasis. If in a fixed game the analyst can reject a particular equilibrium outcome, but he cannot do so for games arbitrarily “close by,” then he may have second thoughts about rejecting the outcome. We consider several notions of distance between games, and we characterize their implications for the robustness of equilibrium refinements. Creation-Date: 1988 Publication-Status: Published in Journal of Economic Theory File-URL: http://dash.harvard.edu/bitstream/handle/1/3350444/fudenberg_robustness.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3350444 Template-Type: ReDIF-Paper 1.0 Author-Name: Richard, Blundell Author-Name: Rachel, Griffith Author-Name: Peter, Howitt Author-Name: Susanne, Prantl Author-Name: Aghion, Philippe Title: The Effects of Entry on Incumbent Innovation and Productivity Abstract: How does firm entry affect innovation incentives in incumbent firms? Microdata suggest that there is heterogeneity across industries. Specifically, incumbent productivity growth and patenting is positively correlated with lagged greenfield foreign firm entry in technologically advanced industries, but not in laggard industries. In this paper we provide evidence that these correlations arise from a causal effect predicted by Schumpeterian growth theory—the threat of technologically advanced entry spurs innovation incentives in sectors close to the technology frontier, where successful innovation allows incumbents to survive the threat, but discourages innovation in laggard sectors, where the threat reduces incumbents' expected rents from innovating. We find that the empirical patterns hold using rich micro panel data for the United Kingdom. We control for the endogeneity of entry by exploiting major European and U.K. policy reforms, and allow for endogeneity of additional factors. We complement the analysis for foreign entry with evidence for domestic entry and entry through imports. Creation-Date: 2009 Publication-Status: Published in Review of Economics and Statistics File-URL: http://dash.harvard.edu/bitstream/handle/1/4554222/aghion_incumbent.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4554222 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Marinescu, Ioana Title: Cyclical Budgetary Policy and Economic Growth: What Do We Learn From OECD Panel Data? Abstract: This paper uses yearly panel data on OECD countries to analyze the relationship between growth and the cyclicality of government debt. We develop new time-varying estimates of the cyclicality of public debt. Our main findings can be summarized as follows: (i) less procyclical public debt growth can have significantly positive effects on productivity growth, in particular when financial development is lower; (ii) public debt growth has become increasingly countercyclical in most OECD countries over the past twenty years, but this trend has been less pronounced in the EMU; (iii) less financially developed or more open economies display less countercyclical public debt growth. Creation-Date: 2007 Publication-Status: Published in NBER Macroeconomics Annual File-URL: http://dash.harvard.edu/bitstream/handle/1/3350066/aghion_cyclicalbudgetary.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3350066 Template-Type: ReDIF-Paper 1.0 Author-Name: Barr, David Author-Name: Campbell, John Title: Inflation, Real Interest Rates, and the Bond Market: A Study of UK Nominal and Index-Linked Government Bond Prices Abstract: This paper estimates expected future real interest rates and inflation rates from observed prices of UK government nominal and index-linked bonds. The estimation method takes account of imperfections in the indexation of UK index-linked bonds. It assumes that expected log returns on all bonds are equal, and that expected real interest rates and inflation follow simple time-series processes whose parameters can be estimated from the cross-section of bond prices. The extracted inflation expectations forecast actual future inflation more accurately than nominal yields do. The estimated real interest rate is highly variable at short horizons, but comparatively stable at long horizons. Changes in real rates and expected inflation are strongly negatively correlated at short horizons, but not at long horizons. Creation-Date: 1997 Publication-Status: Published in Journal of Monetary Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3163261/campbellnber_uknominal.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3163261 Template-Type: ReDIF-Paper 1.0 Author-Name: Viceira, Luis Author-Name: Campbell, John Author-Name: White, Joshua Title: Foreign Currency for Long-Term Investors Abstract: Conventional wisdom holds that conservative investors should avoid exposure to foreign currency risk. Even if they hold foreign equities, they should hedge the currency exposure of these positions and hold only domestic Treasury bills. This paper argues that the conventional wisdom may be wrong for long-term investors. Domestic bills are risky for long-term investors, because real interest rates vary over time and bills must be rolled over at uncertain future interest rates. This risk can be hedged by holding foreign currency if the domestic currency tends to depreciate when the domestic real interest rate falls. Empirically this effect is important and can lead conservative long-term investors to hold more than half their wealth in foreign currency. Creation-Date: 2003 Publication-Status: Published in The Economic Journal File-URL: http://dash.harvard.edu/bitstream/handle/1/3128708/campbellssrn_foreigncurrency.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3128708 Template-Type: ReDIF-Paper 1.0 Author-Name: Stein, Jeremy C. Author-Name: Dewatripont, Mathias Author-Name: Aghion, Philippe Title: Academic Freedom, Private-Sector Focus, and the Process of Innovation Abstract: We develop a model that clarifies the respective advantages and disadvantages of academic and private-sector research. Rather than relying on lack of appropriability or spillovers to generate a rationale for academic research, we emphasize control-rights considerations, and argue that the fundamental tradeoff between academia and the private sector is one of creative control versus focus. By serving as a precommitment mechanism that allows scientists to freely pursue their own interests, academia can be indispensable for early-stage research. At the same time, the private sector's ability to direct scientists toward higher-payoff activities makes it more attractive for later-stage research. Creation-Date: 2008 Publication-Status: Published in The RAND Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3637074/aghion_academicfreedom.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3637074 Template-Type: ReDIF-Paper 1.0 Author-Name: Ibragimov, Rustam Title: Thou shalt not diversity: Why "Two of Every Sort"? Abstract: This paper presents a study of the intertemporal propagation of distributional properties of phenotypes in general polygenic multisex inheritance models with sex- and time-dependent heritabilities. It further analyzes the implications of these models under heavy-tailedness of traits' initial distributions. Our results suggest the optimality of a flexible asexual/binary mating system. Switching between asexual and binary inheritance mechanisms allows the population effectively to achieve a fast suppression of negative traits and a fast dispersion of positive traits, regardless of the distributional properties of the phenotypes in the initial period. Creation-Date: 2007 Publication-Status: Published in Journal of Applied Probability File-URL: http://dash.harvard.edu/bitstream/handle/1/2623763/ibragimov_thoushaltnot.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2623763 Template-Type: ReDIF-Paper 1.0 Author-Name: Antras, Pol Author-Name: Voth, Hans-Joachim Title: Factor Prices and Productivity Growth During the British Industrial Revolution Abstract: This paper presents new estimates of total factor productivity growth in Britain for the period 1770–1860. We use the dual technique and argue that the estimates we derive from factor prices are of similar quality to quantity-based calculations. Our results provide further evidence, calculated on the basis of an independent set of sources, that productivity growth during the British Industrial Revolution was relatively slow. The Crafts–Harley view of the Industrial Revolution is thus reinforced. Our preferred estimates suggest a modest acceleration after 1800. Creation-Date: 2003 Publication-Status: Published in Explorations in Economic History File-URL: http://dash.harvard.edu/bitstream/handle/1/3199066/antras_britishrev.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3199066 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Levine, David Title: Repeated Games with Frequent Signals Abstract: We study repeated games with frequent actions and frequent imperfect public signals, where the signals are aggregates of many discrete events, such as sales or tasks. The high-frequency limit of the equilibrium set depends both on the probability law governing the discrete events and on how many events are aggregated into a single signal. When the underlying events have a binomial distribution, the limit equilibria correspond to the equilibria of the associated continuous-time game with diffusion signals, but other event processes that aggregate to a diffusion limit can have a different set of limit equilibria. Thus the continuous-time game need not be a good approximation of the high-frequency limit when the underlying events have three or more possible values. Creation-Date: 2009 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3160491/fudenberg_repeatedgames.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3160491 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Levine, David Title: Consistency and Cautious Fictitious Play Abstract: We study a variation of fictitious play, in which the probability of each action is an exponential function of that action's utility against the historical frequency of opponents' play. Regardless of the opponents' strategies, the utility received by an agent using this rule is nearly the best that could be achieved against the historical frequency. Such rules are approximately optimal in i.i.d. environments, and guarantee nearly the minmax regardless of opponents' behavior. Fictitious play shares these properties provided it switches 'infrequently' between actions. We also study the long-run outcomes when all players use consistent and cautious rules. Creation-Date: 1995 Publication-Status: Published in Journal of Economic Dynamics and Control File-URL: http://dash.harvard.edu/bitstream/handle/1/3198694/fudenberg_consistency.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3198694 Template-Type: ReDIF-Paper 1.0 Author-Name: Ottaviano, Gianmarco Author-Name: Melitz, Marc Title: Market Size, Trade, and Productivity Abstract: We develop a monopolistically competitive model of trade with firm heterogeneity—in terms of productivity differences—and endogenous differences in the "toughness" of competition across markets—in terms of the number and average productivity of competing firms. We analyse how these features vary across markets of different size that are not perfectly integrated through trade; we then study the effects of different trade liberalization policies. In our model, market size and trade affect the toughness of competition, which then feeds back into the selection of heterogeneous producers and exporters in that market. Aggregate productivity and average mark-ups thus respond to both the size of a market and the extent of its integration through trade (larger, more integrated markets exhibit higher productivity and lower mark-ups). Our model remains highly tractable, even when extended to a general framework with multiple asymmetric countries integrated to different extents through asymmetric trade costs. We believe this provides a useful modelling framework that is particularly well suited to the analysis of trade and regional integration policy scenarios in an environment with heterogeneous firms and endogenous mark-ups. Creation-Date: 2008 Publication-Status: Published in Review of Economic Studies File-URL: http://dash.harvard.edu/bitstream/handle/1/3229096/melitz_marketsize.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3229096 Template-Type: ReDIF-Paper 1.0 Author-Name: Gourinchas, Pierre-Oliver Author-Name: Farhi, Emmanuel Author-Name: Caballero, Ricardo J. Title: Financial Crash, Commodity Prices, and Global Imbalances Abstract: The current financial crisis has its origins in global asset scarcity, which led to large capital flows toward the United States and to the creation of asset bubbles that eventually burst. In its first phase the crash exacerbated the shortage of assets in the world economy, which triggered a partial re-creation of the bubble in commodities markets, and oil markets in particular. This bubble in turn led to an increase in petrodollars seeking financial assets in the United States, which became a source of stability for the U.S. external balance. The second phase of the crisis is more conventional and began to emerge in the summer of 2008, when it became apparent that the financial crisis would permeate the real economy and sharply slow global growth. This slowdown worked to reverse the tight commodity market conditions required for a bubble to develop, ultimately destroying the commodity bubble. Creation-Date: 2008 Publication-Status: Published in Brookings Papers on Economic Activity File-URL: http://dash.harvard.edu/bitstream/handle/1/3229095/Farhi_FinancialCrash.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3229095 Template-Type: ReDIF-Paper 1.0 Author-Name: Rubinstein, Yona Author-Name: Helpman, Elhanan Author-Name: Melitz, Marc Title: Estimating Trade Flows: Trading Partners and Trading Volumes Abstract: We develop a simple model of international trade with heterogeneous firms that is consistent with a number of stylized features of the data. In particular, the model predicts positive as well as zero trade flows across pairs of countries, and it allows the number of exporting firms to vary across destination countries. As a result, the impact of trade frictions on trade flows can be decomposed into the intensive and extensive margins, where the former refers to the trade volume per exporter and the latter refers to the number of exporters. This model yields a generalized gravity equation that accounts for the self-selection of firms into export markets and their impact on trade volumes. We then develop a two-stage estimation procedure that uses an equation for selection into trade partners in the first stage and a trade flow equation in the second. We implement this procedure parametrically, semiparametrically, and nonparametrically, showing that in all three cases the estimated effects of trade frictions are similar. Importantly, our method provides estimates of the intensive and extensive margins of trade. We show that traditional estimates are biased and that most of the bias is due not to selection but rather due to the omission of the extensive margin. Moreover, the effect of the number of exporting firms varies across country pairs according to their characteristics. This variation is large and particularly so for trade between developed and less developed countries and between pairs of less developed countries. Creation-Date: 2008 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3228230/melitz_estimatingtradeflows.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3228230 Template-Type: ReDIF-Paper 1.0 Author-Name: Malkiel, Burton Author-Name: Campbell, John Author-Name: Lettau, Martin Author-Name: Xu, Yexiao Title: Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk Abstract: This paper uses a disaggregated approach to study the volatility of common stocks at the market, industry, and firm levels. Over the period from 1962 to 1997 there has been a noticeable increase in firm-level volatility relative to market volatility. Accordingly, correlations among individual stocks and the explanatory power of the market model for a typical stock have declined, whereas the number of stocks needed to achieve a given level of diversification has increased. All the volatility measures move together countercyclically and help to predict GDP growth. Market volatility tends to lead the other volatility series. Factors that may be responsible for these findings are suggested. The definitive version is available at www.blackwell-synergy.com. Creation-Date: 2001 Publication-Status: Published in Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/3128707/campbellssrn_volatile.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3128707 Template-Type: ReDIF-Paper 1.0 Author-Name: Walden, Johan Author-Name: Ibragimov, Rustam Title: Portfolio Diversification under Local and Moderate Deviations from Power Laws. Abstract: This paper analyzes portfolio diversification for nonlinear transformations of heavy-tailed risks. It is shown that diversification of a portfolio of convex functions of heavy-tailed risks increases the portfolio’s riskiness if expectations of these risks are infinite. In contrast, for concave functions of heavy-tailed risks with finite expectations, the stylized fact that diversification is preferable continues to hold. The framework of transformations of heavy-tailed risks includes many models with Pareto-type distributions that exhibit local or moderate deviations from power tails in the form of additional slowly varying or exponential factors. The class of distributions under study is therefore extended beyond the stable class. Creation-Date: 2008 Publication-Status: Published in Insurance: Mathematics and Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/2640586/ibragimov_portfolio.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2640586 Template-Type: ReDIF-Paper 1.0 Author-Name: Melitz, Marc Title: When and How Should Infant Industries Be Protected? Abstract: This paper develops and analyzes a welfare maximizing model of infant industry protection. The domestic infant industry is competitive and experiences dynamic learning effects that are external to firms. The competitive foreign industry is mature and produces a good that is an imperfect substitute for the domestic good. A government planner can protect the infant industry using domestic production subsidies, tariffs, or quotas in order to maximize domestic welfare over time. As protection is not always optimal (although the domestic industry experiences a learning externality), the paper shows how the decision to protect the industry should depend on the industry's learning potential, the shape of the learning curve, and the degree of substitutability between domestic and foreign goods. Assuming some reasonable restrictions on the flexibility over time of the policy instruments, the paper subsequently compares the effectiveness of the different instruments. Given such restrictions, the paper shows that quotas induce higher welfare levels than tariffs. In some cases, the dominance of the quota is so pronounced that it compensates for any amount of government revenue loss related to the administration of the quota (including the case of a voluntary export restraint, where no revenue is collected). In similar cases, the quota may even be preferred to a domestic production subsidy. Creation-Date: 2005 Publication-Status: Published in Journal of International Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3228378/melitz_infant.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3228378 Template-Type: ReDIF-Paper 1.0 Author-Name: Ibragimov, Rustam Author-Name: Ibragimov, Marat Title: Market Demand Elasticity and Income Inequality Abstract: This paper deals with the analysis of the relation between aggregate demand for a consumption good and the distribution of income across consumers. We obtain sufficient conditions under which changes in income inequality lead to an increase or decrease in the market demand elasticities. The conditions are satisfied for individual demand functions commonly used in economic models, in particular, for the typical demand functions on luxury goods and necessities. Creation-Date: 2007 Publication-Status: Published in Economic Theory File-URL: http://dash.harvard.edu/bitstream/handle/1/2623728/ibragimov_market%20demand.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2623728 Template-Type: ReDIF-Paper 1.0 Author-Name: Imhof, Lorens Author-Name: Ellison, Glenn Author-Name: Fudenberg, Drew Title: Random Matching in Adaptive Dynamics Abstract: This paper studies the effect of randomness in per-period matching on the long-run outcome of non-equilibrium adaptive processes. If there are many matchings between each strategy revision, the randomness due to matching will be small; our question is when a very small noise due to matching has a negligible effect. We study two different senses of this idea, and provide sufficient conditions for each. The less demanding sense corresponds to sending the matching noise to zero while holding fixed all other aspects of the adaptive process. The second sense in which matching noise can be negligible is that it does not alter the limit distribution obtained as the limit of the invariant distributions as an exogenous “mutation rate” goes to zero. Creation-Date: 2009 Publication-Status: Published in Games and Economic Behavior File-URL: http://dash.harvard.edu/bitstream/handle/1/3190371/random_matching.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3190371 Template-Type: ReDIF-Paper 1.0 Author-Name: de la Peña, Victor H. Author-Name: Sharakhmetov, Shaturgun Author-Name: Ibragimov, Rustam Title: On Extremal Distributions and Sharp L[sub]p-Bounds For Sums of Multilinear Forms. Abstract: In this paper we present a study of the problem of approximating the expectations of functions of statistics in independent and dependent random variables in terms of the expectations of functions of the component random variables. We present results providing sharp analogues of the Burkholder--Rosenthal inequalities and related estimates for the expectations of functions of sums of dependent nonnegative r.v.'s and conditionally symmetric martingale differences with bounded conditional moments as well as for sums of multilinear forms. Among others, we obtain the following sharp inequalities: $E(\sum_{k=1}^n X_k)^t\le 2 \max (\sum_{k=1}^n EX_k^t, (\sum_{k=1}^n a_k)^t)$ for all nonnegative r.v.'s $X_1, \ldots, X_n$ with $E(X_k\mid X_1, \ldots, X_{k-1})\le a_k$, $EX_k^t<\infty$, $k=1, \ldots, n$, $1#x003C;t#x003C;2$; $E(\sum_{k=1}^n X_k)^t\le E\theta^t(1) \max (\sum_{k=1}^n b_k, (\sum_{k=1}^n a_k^s)^{t/s})$ for all nonnegative r.v.'s $X_1, \ldots, X_n$ with $E(X_k^s\mid X_1, \ldots, X_{k-1})\le a_k^s$, $E(X_k^t\mid X_1, \ldots, X_{k-1})\le b_k$, $k=1, \ldots, n$, $1#x003C;t#x003C;2$, $0#x003C;s\le t-1$ or $t\ge 2$, $0#x003C;s\le 1$, where $\theta(1)$ is a Poisson random variable with parameter 1. As applications, new decoupling inequalities for sums of multilinear forms are presented and sharp Khintchine--Marcinkiewicz--Zygmund inequalities for generalized moving averages are obtained. The results can also be used in the study of a wide class of nonlinear statistics connected to problems of long-range dependence and in an econometric setup, in particular, in stabilization policy problems and in the study of properties of moving average and autocorrelation processes. The results are based on the iteration of a series of key lemmas that capture the essential extremal properties of the moments of the statistics involved. Creation-Date: 2003 Publication-Status: Published in Annals of Probability File-URL: http://dash.harvard.edu/bitstream/handle/1/2624455/ibragimov_extremal.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2624455 Template-Type: ReDIF-Paper 1.0 Author-Name: Imhof, Lorens Author-Name: Fudenberg, Drew Title: Monotone Imitation Dynamics in Large Populations Abstract: We analyze a class of imitation dynamics with mutations for games with any finite number of actions, and give conditions for the selection of a unique equilibrium as the mutation rate becomes small and the population becomes large. Our results cover the multiple-action extensions of the aspiration-and-imitation process of Binmore and Samuelson [Muddling through: noisy equilibrium selection, J. Econ. Theory 74 (1997) 235–265] and the related processes proposed by Benaı¨m and Weibull [Deterministic approximation of stochastic evolution in games, Econometrica 71 (2003) 873–903] and Traulsen et al. [Coevolutionary dynamics: from finite to infinite populations, Phys. Rev. Lett. 95 (2005) 238701], as well as the frequency-dependent Moran process studied by Fudenberg et al. [Evolutionary game dynamics in finite populations with strong selection and weak mutation, Theoretical Population Biol. 70 (2006) 352–363]. We illustrate our results by considering the effect of the number of periods of repetition on the selected equilibrium in repeated play of the prisoner's dilemma when players are restricted to a small set of simple strategies. Creation-Date: 2008 Publication-Status: Published in Journal of Economic Theory File-URL: http://dash.harvard.edu/bitstream/handle/1/3196338/monotone_imitation.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3196338 Template-Type: ReDIF-Paper 1.0 Author-Name: Friedman, Benjamin Morton Title: Capitalism, Economic Growth & Democracy Abstract: No abstract Creation-Date: 2007 Publication-Status: Published in Daedalus -Boston Mass- File-URL: http://dash.harvard.edu/bitstream/handle/1/4481500/Fieldman_CapitalismEconomicGrowth.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4481500 Template-Type: ReDIF-Paper 1.0 Author-Name: Siebert, Calvin D. Author-Name: Jorgenson, Dale W. Title: Optimal Capital Accumulation and Corporate Investment Behavior Abstract: No abstract provided. Creation-Date: 1968 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3403057/Jorgenson_OptimalCapital.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3403057 Template-Type: ReDIF-Paper 1.0 Author-Name: Aguiar, Mark Author-Name: Amador, Manuel Author-Name: Gopinath, Gita Title: Investment Cycles and Sovereign Debt Overhang Abstract: We characterize optimal taxation of foreign capital and optimal sovereign debt policy in a small open economy where the government cannot commit to policy, seeks to insure a risk averse domestic constituency, and is more impatient than the market. Optimal policy generates long-run cycles in both sovereign debt and foreign direct investment in an environment in which the first best capital stock is a constant. The expected tax on capital endogenously varies with the state of the economy and in- vestment is distorted by more in recessions than in booms amplifying the effect of shocks. The government’s lack of commitment induces a negative correlation between investment and the stock of government debt, a "debt overhang" effect. Debt relief is never Pareto improving and cannot affect the long-run level of investment. Further, restricting the government to a balanced budget can eliminate the cyclical distortion of investment. Creation-Date: 2008 Publication-Status: Published in Review of Economic Studies File-URL: http://dash.harvard.edu/bitstream/handle/1/11988004/Gopinath_InvestmentCycles.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11988004 Template-Type: ReDIF-Paper 1.0 Author-Name: Aguiar, Mark Author-Name: Gopinath, Gita Title: Emerging Market Business Cycles: The Cycle is the Trend Abstract: Emerging market business cycles exhibit strongly countercyclical current accounts, consumption volatility that exceeds income volatility, and “sudden stops” in capital inflows. These features contrast with developed small open economies. Nevertheless, we show that a standard model characterizes both types of markets. Motivated by the frequent policy regime switches observed in emerging markets, our premise is that these economies are subject to substantial volatility in trend growth. Our methodology exploits the information in consumption and net exports to identify the persistence of productivity. We find that shocks to trend growth—rather than transitory fluctuations around a stable trend—are the primary source of fluctuations in emerging markets. The key features of emerging market business cycles are then shown to be consistent with this underlying income process in an otherwise standard equilibrium model. Creation-Date: 2007 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/11988098/Gopinath_EmergingMarket.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11988098 Template-Type: ReDIF-Paper 1.0 Author-Name: Gopinath, Gita Author-Name: Aguiar, Mark Author-Name: Amador, Manuel Title: Expropriation Dynamics Abstract: Creation-Date: 2009 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/11987997/Gopinath_ExpropriationDynamics.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11987997 Template-Type: ReDIF-Paper 1.0 Author-Name: Mortimer, Julie Holland Title: Price Discrimination, Copyright Law, and Technological Innovation: Evidence From The Introduction of DVDs Abstract: U. S. copyright law effectively prevents direct price discrimination for copyright holders that sell to different markets. In response, these firms can engage in indirect price discrimination. I derive theoretical predictions about the use of indirect price discrimination, and I analyze how optimal pricing strategies differ for different products. Using data on VHS and DVD movie distribution, I find that firms' pricing choices are consistent with the predictions of theory and that firms' use of indirect price discrimination benefits consumers (but harms ancillary retailers). Finally, I examine what optimal pricing strategies might look like in a legal environment that permits direct price discrimination. Creation-Date: 2007 Publication-Status: Published in Quarterly Journal of Economics -Cambridge Massachusetts- File-URL: http://dash.harvard.edu/bitstream/handle/1/3425914/Mortimer_PriceDiscrimination.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3425914 Template-Type: ReDIF-Paper 1.0 Author-Name: Field, Alfred J. Author-Name: Field, Erica Marie Title: Globalization, Crop Choice and Property Rights in Rural Peru, 1994-2004 Abstract: This paper describes the results of initial work analyzing a panel of rural households in Peru between 1994 and 2004 to determine household responses to changes in relative prices of traditional versus export-oriented products. Our principal interest was to better understand how household responses to external economic shocks influenced rural welfare, income distribution and poverty. Since a large percentage of Peruvians living in poverty are located in rural areas, learning more about how these households respond to a changing external environment provides insights into the factors that influence their ability to improve their absolute and relative economic position. The results of our analysis indicate that changes in relative prices had a significant impact on the adoption of new agricultural products, and the magnitude of response was mitigated by households’ degree of tenure security and access to regional and local markets. Analysis of household expenditures over the period indicate that those who adopted export crops experienced a significant growth in consumption proportional to the change in acreage devoted to exportable products, and were less likely to be classified as impoverished at the end of the period. Instrumental variables estimates suggest that this association is causal. Creation-Date: 2002 Publication-Status: Published in WIDER Research Paper File-URL: http://dash.harvard.edu/bitstream/handle/1/3634149/Field_GlobalizationCrop.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3634149 Template-Type: ReDIF-Paper 1.0 Author-Name: Laibson, David I. Title: A Cue-Theory of Consumption Abstract: Psychological experiments demonstrate that repeated pairings of a cue and a consumption good eventually create cue-based complementarities: the presence of the cue raises the marginal utility derived from consumption. In this paper, such dynamic preferences are embedded in a rational choice model. Behavior that arises from this model is characterized by endogenous cue sensitivities, costly cue-management, commitment, and cue-based spikes in impatience. The model is used to understand addictive/habit-forming behaviors and marketing. The model explains why preferences change rapidly from moment to moment, why temptations should sometimes be avoided, and how firms package and position goods. Creation-Date: 2000 Publication-Status: Published in Quarterly Journal of Economics -Cambridge Massachusetts- File-URL: http://dash.harvard.edu/bitstream/handle/1/4481496/Laibson_Cue-Theory.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4481496 Template-Type: ReDIF-Paper 1.0 Author-Name: Glaeser, Edward Ludwig Author-Name: Laibson, David I. Author-Name: Scheinkman, Jose A. Author-Name: Soutter, Christine L. Title: Measuring Trust Abstract: We combine two experiments and a survey to measure trust and trustworthiness—two key components of social capital. Standard attitudinal survey questions about trust predict trustworthy behavior in our experiments much better than they predict trusting behavior. Trusting behavior in the experiments is predicted by past trusting behavior outside of the experiments. When individuals are closer socially, both trust and trustworthiness rise. Trustworthiness declines when partners are of different races or nationalities. High status individuals are able to elicit more trustworthiness in others. Creation-Date: 2000 Publication-Status: Published in Quarterly Journal of Economics -Cambridge Massachusetts- File-URL: http://dash.harvard.edu/bitstream/handle/1/4481497/Laibson_MeasuringTrust.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4481497 Template-Type: ReDIF-Paper 1.0 Author-Name: Jorgenson, Dale W. Title: Technology and Decision Rules in the Theory of Investment Behavior Abstract: No abstract provided. Creation-Date: 1973 Publication-Status: Published in Quarterly Journal of Economics -Cambridge Massachusetts- File-URL: http://dash.harvard.edu/bitstream/handle/1/3403064/Jorgenson_TechnologyDecision.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3403064 Template-Type: ReDIF-Paper 1.0 Author-Name: Mankiw, N. Gregory Author-Name: Reis, Ricardo Title: What Measure of Inflation Should a Central Bank Target? Abstract: This paper assumes that a central bank commits itself to maintaining an inflation target and then asks what measure of the inflation rate the central bank should use if it wants to maximize economic stability. The paper first formalizes this problem and examines its microeconomic foundations. It then shows how the weight of a sector in the stability price index depends on the sector's characteristics, including size, cyclical sensitivity, sluggishness of price adjustment, and magnitude of sectoral shocks. When a numerical illustration of the problem is calibrated to U.S. data, one tentative conclusion is that a central bank that wants to achieve maximum stability of economic activity should use a price index that gives substantial weight to the level of nominal wages. Creation-Date: 2003 Publication-Status: Published in Journal of the European Economic Association File-URL: http://dash.harvard.edu/bitstream/handle/1/3415322/Mankiw_WhatMeasure.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3415322 Template-Type: ReDIF-Paper 1.0 Author-Name: Mankiw, N. Gregory Author-Name: Reis, Ricardo Title: Sticky Information in General Equilibrium 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. Creation-Date: 2007 Publication-Status: Published in Journal of the European Economic Association File-URL: http://dash.harvard.edu/bitstream/handle/1/3415323/Mankiw_StickyInformation.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3415323 Template-Type: ReDIF-Paper 1.0 Author-Name: Kuttner, Kenneth N. Author-Name: Friedman, Benjamin Morton Title: Indicator Properties of the Paper—Bill Spread: Lessons from Recent Experience Abstract: A feature of U.S. postwar business cycle experience that is by now widely documented is the tendency of the spread between the respective interest rates on commercial paper and Treasury bills to widen shortly before the onset of recessions. By contrast, the paper—bill spread did not anticipate the 1990–1991 recession. Empirical work presented in this paper supports two (not mutually exclusive) explanations for this departure from past experience. First, at least part of the paper—bill spread's predictive content with respect to business cycle fluctuations stems from its role as an indicator of monetary policy, but the 1990–1991 recession was unusual in postwar U.S. experience in not being immediately precipitated by tight monetary policy. Second, movements of the spread during the few years just prior to the 1990–1991 recession were strongly influenced by changes in the relative quantities of commercial paper, bank CDs, and Treasury bills that occurred for reasons unrelated to the business cycle. This latter finding in particular sheds light on the important role of imperfect substitutability of different short-term debt instruments in investors' portfolios, and highlights the burdens associated with using relative interest rate relationships as business cycle indicators. Creation-Date: 1998 Publication-Status: Published in The Review of Economics and Statistics File-URL: http://dash.harvard.edu/bitstream/handle/1/4554251/Friedman_IndicatorProperties.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4554251 Template-Type: ReDIF-Paper 1.0 Author-Name: Mankiw, N. Gregory Author-Name: Reis, Ricardo Title: Sticky Information Versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve Abstract: This paper examines a model of dynamic price adjustment based on the assumption that information disseminates slowly throughout the population. Compared with the commonly used sticky-price model, this sticky-information model displays three related properties that are more consistent with accepted views about the effects of monetary policy. First, disinflations are always contractionary (although announced disinflations are less contractionary than surprise ones). Second, monetary policy shocks have their maximum impact on inflation with a substantial delay. Third, the change in inflation is positively correlated with the level of economic activity. Creation-Date: 2002 Publication-Status: Published in Quarterly Journal of Economics -Cambridge Massachusetts- File-URL: http://dash.harvard.edu/bitstream/handle/1/3415324/Mankiw_StickyInformationVersus.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3415324 Template-Type: ReDIF-Paper 1.0 Author-Name: Ball, Laurence Author-Name: Mankiw, N. Gregory Title: Interpreting the Correlation Between Inflation and the Skewness of Relative Prices: A Comment on Bryan and Cecchetti Abstract: No abstract provided. Creation-Date: 1999 Publication-Status: Published in Review of Economics and Statistics File-URL: http://dash.harvard.edu/bitstream/handle/1/3415439/Mankiw_InterpretingCorrelation.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3415439 Template-Type: ReDIF-Paper 1.0 Author-Name: Berns, Gregory S. Author-Name: Loewenstein, George Author-Name: Laibson, David I. Title: Intertemporal Choice - Toward an Integrative Framework Abstract: Intertemporal choices are decisions with consequences that play out over time. These choices range from the prosaic–-how much food to eat at a meal– to life--changing decisions about education, marriage, fertility, health behaviors and savings. Intertemporal preferences also affect policy debates about long-run challenges, such as global warming. Historically, it was assumed that delayed rewards were discounted at a constant rate over time. Recent theoretical and empirical advances from economic, psychological and neuroscience perspectives, however, have revealed a more complex account of how individuals make intertemporal decisions. We review and integrate these advances. We emphasize three different, occasionally competing, mechanisms that are implemented in the brain: representation, anticipation and self-control. Creation-Date: 2007 Publication-Status: Published in Trends in Cognitive Sciences File-URL: http://dash.harvard.edu/bitstream/handle/1/4554332/Laibson_IntertemporalChoice.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4554332 Template-Type: ReDIF-Paper 1.0 Author-Name: Cutler, David Author-Name: Lleras-Muney, Adriana Author-Name: Deaton, Angus Title: The Determinants of Mortality Abstract: The pleasures of life are worth nothing if one is not alive to experience them. Through the twentieth century in the United States and other high-income countries, growth in real incomes was accompanied by a historically unprecedented decline in mortality rates that caused life expectancy at birth to grow by nearly 30 years. In the years just after World War II, life expectancy gaps between countries were falling across the world. Poor countries enjoyed rapid increases in life-expectancy through the 1970s, with the gains in some cases exceeding an additional year of life expectancy per year, though the HIV/AIDS epidemic and the transition in Russia and Eastern Europe have changed that situation. We investigate the determinants of the historical decline in mortality, of differences in mortality across countries, and of differences in mortality across groups within countries. A good theory of mortality should explain all of the facts we will outline. No such theory exists at present, but at the end of the paper we will sketch a tentative synthesis. Creation-Date: 2006 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/2640588/cutler_determinants.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2640588 Template-Type: ReDIF-Paper 1.0 Author-Name: Acemoglu, Daron Author-Name: Finkelstein, Amy Author-Name: Cutler, David Author-Name: Linn, Joshua Title: Did Medicare Induce Pharmaceutical Innovation? 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. Creation-Date: 2006 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2664267/cutler_medicareinduce.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2664267 Template-Type: ReDIF-Paper 1.0 Author-Name: Altman, Daniel Author-Name: Cutler, David Author-Name: Zeckhauser, Richard J. Title: Enrollee Mix, Treatment Intensity, and Cost in Competing Indemnity and HMO Plans Abstract: Why do indemnity insurance plans cost substantially more per capita—77% more in our study—than HMOs? We answer this question using data from a large organization’s insurance pool, covering 215,000 lives. We decompose cost differences for eight major medical conditions into four sources: demographics, incidence within demographic groups, treatment intensity, and prices per service. Greater incidence of disease in the indemnity plan (both from demographics themselves and within demographic groups) and higher prices each explain nearly 50% of the difference. Contrary to conventional wisdom, indemnity plans do not have greater treatment intensity. Creation-Date: 2003 Publication-Status: Published in Journal of Health Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/2664300/cutler_enrolleemix.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2664300 Template-Type: ReDIF-Paper 1.0 Author-Name: Ardagna, Silvia Title: Financial Markets’ Behavior Around Episodes of Large Changes in the Fiscal Stance Abstract: Using a panel of OECD countries from 1960 to 2002, this paper shows that interest rates, particularly those of long-term government bonds, decrease when countries’ fiscal position improves and increase around periods of budget deteriorations. Stock market prices surge around times of substantial fiscal tightening and plunge in periods of very loose fiscal policy. In addition, the paper shows that results depend on countries’ initial fiscal conditions and on the type of fiscal consolidations: Fiscal adjustments that occur in country-years with high levels of government deficit, that are implemented by cutting government spending, and that generate a permanent and substantial decrease in government debt are associated with larger reductions in interest rates and increases in stock market prices. Creation-Date: 2009 Publication-Status: Published in European Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2579824/Ardagna_FinancialMarkets.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2579824 Template-Type: ReDIF-Paper 1.0 Author-Name: Antras, Pol Author-Name: Helpman, Elhanan Title: Global Sourcing Abstract: We present a North‐South model of international trade in which differentiated products are developed in the North. Sectors are populated by final‐good producers who differ in productivity levels. On the basis of productivity and sectoral characteristics, firms decide whether to integrate into the production of intermediate inputs or outsource them. In either case they have to decide from which country to source the inputs. Final‐good producers and their suppliers must make relationship‐specific investments, both in an integrated firm and in an arm’s‐length relationship. We describe an equilibrium in which firms with different productivity levels choose different ownership structures and supplier locations. We then study the effects of within‐sectoral heterogeneity and variations in industry characteristics on the relative prevalence of these organizational forms. Creation-Date: 2004 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/3196327/antras_globalsourcing.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3196327 Template-Type: ReDIF-Paper 1.0 Author-Name: Rossi-Hansberg, Esteban Author-Name: Garicano, Luis Author-Name: Antras, Pol Title: Offshoring in a Knowledge Economy Abstract: How does the formation of cross-country teams affect the organization of work and the structure of wages? To study this question, we propose a theory of the assignment of heterogeneous agents into hierarchical teams, where less skilled agents specialize in production and more skilled agents specialize in problem solving. We first analyze the properties of the competitive equilibrium of the model in a closed economy, and show that the model has a unique and efficient solution. We then study the equilibrium of a two-country model (North and South), where countries differ in their distributions of ability, and in which agents in different countries can join together in teams. We refer to this type of integration as globalization. Globalization leads to better matches for all southern workers but only for the best northern workers. As a result, we show that globalization increases wage inequality among nonmanagers in the South, but not necessarily in the North. We also study how globalization affects the size distribution of firms and the patterns of consumption and trade in the global economy. Creation-Date: 2006 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3196323/antras_offshoring.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3196323 Template-Type: ReDIF-Paper 1.0 Author-Name: Ardagna, Silvia Author-Name: Lane, Timothy Author-Name: Caselli, Francesco Title: Fiscal Discipline and the Cost of Public Debt Service: Some Estimates for OECD Countries Abstract: We use a panel of 16 OECD countries over several decades to investigate the effects of government debts and deficits on long-term interest rates. In simple static specifications, a one-percentage-point increase in the primary deficit relative to GDP increases contemporaneous long-term interest rates by about 10 basis points. In a vector autoregression (VAR), the same shock leads to a cumulative increase of almost 150 basis points after 10 years. The effect of debt on interest rates is non-linear: only for countries with above-average levels of debt does an increase in debt affect the interest rate. World fiscal policy is also important: an increase in total OECD-government borrowing increases each country's interest rates. However, domestic fiscal policy continues to affect domestic interest rates even after controlling for worldwide debts and deficits. Creation-Date: 2007 Publication-Status: Published in The B.E. Journal of Macroeconomics File-URL: http://dash.harvard.edu/bitstream/handle/1/2579739/Ardagna_FiscalDiscipline.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2579739 Template-Type: ReDIF-Paper 1.0 Author-Name: Cocco, Joao Author-Name: Gomes, Francisco Author-Name: Maenhout, Pascal J. Author-Name: Campbell, John Y. Author-Name: Viceira, Luis Manuel Title: Stock Market Mean Reversion and the Optimal Equity Allocation of a Long-Lived Investor Abstract: This paper solves numerically the intertemporal consumption and portfolio choice problem of an infinitely-lived investor who faces a time-varying equity premium. The solutions we obtain are very similar to the approximate analytical solutions of Campbell and Viceira (1999), except at the upper extreme of the state space where both the numerical consumption and portfolio rules flatten out. We also consider a constrained version of the problem in which the investor faces borrowing and short-sales restrictions. These constraints bind when the equity premium moves away from its mean in either direction, and are particularly severe for risk-tolerant investors. The constraints have substantial effects on optimal consumption, but much more modest effects on optimal portfolio choice in the region of the state space where they are not binding. Creation-Date: 2001 Publication-Status: Published in European Finance Review File-URL: http://dash.harvard.edu/bitstream/handle/1/3353758/campbell_meanreversion.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3353758 Template-Type: ReDIF-Paper 1.0 Author-Name: Cutler, David Author-Name: Johnson, Richard Title: The Birth and Growth of the Social Insurance State: Explaining Old-Age and Medical Insurance Across Countries Abstract: We seek to explain why countries have adopted national Old-Age Insurance and Health Insurance programs. Theoretical work has posited several factors that could lead to this adoption: the strain from expanding capitalism; the need for political legitimacy; the desire to transfer to similar people; increased wealth; and the outcome of leviathan government. We relate the probability of a country's creating social insurance to proxies for each of these theories. We find weak evidence that the probability of adopting a system declines with increases in wealth and with greater ethnic heterogeneity. Still, none of the theories is very strongly related to system adoption. We conclude that social insurance can be politically expedient for many different reasons. Creation-Date: 2004 Publication-Status: Published in Public Choice File-URL: http://dash.harvard.edu/bitstream/handle/1/2643658/cutler_birthandgrowth.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2643658 Template-Type: ReDIF-Paper 1.0 Author-Name: Chernew, Michael Author-Name: Keenan, Patricia Author-Name: Cutler, David Title: Charity Care, Risk Pooling, and the Decline in Private Health Insurance Abstract: Creation-Date: 2005 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/2640562/cutler_charity.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2640562 Template-Type: ReDIF-Paper 1.0 Author-Name: Rossi-Hansberg, Esteban Author-Name: Antras, Pol Title: Organizations and Trade Abstract: We survey an emerging literature at the intersection of organizational economics and international trade. We argue that a proper modeling of the organizational aspects of production provides valuable insights on the aggregate workings of the world economy. In reviewing the literature, we describe certain predictions of standard models that are affected or even overturned when organizational decisions are brought into the analysis. We also suggest potentially fruitful areas for future research. Creation-Date: 2009 Publication-Status: Published in Annual Review of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3199064/antras_organizations.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3199064 Template-Type: ReDIF-Paper 1.0 Author-Name: McCleary, Rachel Author-Name: Barro, Robert Title: Religion and Political Economy in an International Panel Abstract: Economic and political developments affect religiosity, and the extent of religious participation and beliefs influence economic performance and political institutions. We study these two directions of causation in a broad cross-country panel that includes survey information over the last 20 years on church attendance and an array of religious beliefs. Although religiosity declines overall with economic development, the nature of the response varies with the dimension of development. Church attendance and religious beliefs are positively related to education (thereby conflicting with theories in which religion reflects non-scientific thinking) and negatively related to urbanization. Attendance also declines with higher life expectancy and lower fertility. We investigate the effects of official state religions, government regulation of the religion market, Communism, religious pluralism, and the denominational composition of religious adherence. On the other side, we find that economic growth responds positively to the extent of some religious beliefs but negatively to church attendance. That is, growth depends on the extent of believing relative to belonging. These results hold up when we use as instrumental variables the measures of official state religion, government regulation, and religious pluralism. Creation-Date: 2002 Publication-Status: Published in NBER Working Paper Series File-URL: http://dash.harvard.edu/bitstream/handle/1/3221170/Barro_ReligionPolitical.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3221170 Template-Type: ReDIF-Paper 1.0 Author-Name: Laibson, David I. Author-Name: Gabaix, Xavier Title: Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets Abstract: Bayesian consumers infer that hidden add-on prices (e.g., the cost of ink for a printer) are likely to be high prices. If consumers are Bayesian, firms will not shroud information in equilibrium. However, shrouding may occur in an economy with some myopic (or unaware) consumers. Such shrouding creates an inefficiency, which firms may have an incentive to eliminate by educating their competitors’ customers. However, if add-ons have close substitutes, a “curse of debiasing” arises, and firms will not be able to profitably debias consumers by unshrouding add-ons. In equilibrium, two kinds of exploitation coexist. Optimizing firms exploit myopic consumers through marketing schemes that shroud high- priced add-ons. In turn, sophisticated consumers exploit these marketing schemes. It is not possible to profitably drive away the business of sophisticates. It is also not possible to profitably lure either myopes or sophisticates to nonexploitative firms. We show that informational shrouding flourishes even in highly competitive markets, even in markets with costless advertising, and even when the shrouding generates allocational inefficiencies. Creation-Date: 2006 Publication-Status: Published in Quarterly Journal of Economics -Cambridge Massachusetts- File-URL: http://dash.harvard.edu/bitstream/handle/1/4554333/Laibson_ShroudedAttributes.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4554333 Template-Type: ReDIF-Paper 1.0 Author-Name: Caballero, Ricardo J. Author-Name: Antras, Pol Title: Trade and Capital Flows: A Financial Frictions Perspective Abstract: The classical Heckscher-Ohlin-Mundell paradigm states that trade and capital mobility are substitutes, in the sense that trade integration reduces the incentives for capital to flow to capital-scarce countries. In this paper we show that in a world with heterogeneous financial development, the classic conclusion does not hold. In particular, in less financially developed economies (South), trade and capital mobility are complements. Within a dynamic framework, the complementarity carries over to (financial) capital flows. This interaction implies that deepening trade integration in South raises net capital inflows (or reduces net capital outflows). It also implies that, at the global level, protectionism may backfire if the goal is to rebalance capital flows, when these are already heading from South to North. Our perspective also has implications for the effects of trade integration on factor prices. In contrast to the Heckscher-Ohlin model, trade liberalization always decreases the wage-rental in South: an anti-Stolper-Samuelson result. Creation-Date: 2007 Publication-Status: Published in NBER Working Paper Series File-URL: http://dash.harvard.edu/bitstream/handle/1/3264875/Antras_TradeCapital.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3264875 Template-Type: ReDIF-Paper 1.0 Author-Name: Laibson, David I. Title: Golden Eggs and Hyperbolic Discounting Abstract: Hyperbolic discount functions induce dynamically inconsistent preferences, implying a motive for consumers to constrain their own future choices. This paper analyzes the decisions of a hyperbolic consumer who has access to an imperfect commitment technology: an illiquid asset whose sale must be initiated one period before the sale proceeds are received. The model predicts that consumption tracks income, and the model explains why consumers have asset-specific marginal propensities to consume. The model suggests that financial innovation may have caused the ongoing decline in U. S. savings rates, since financial innovation in- creases liquidity, eliminating commitment opportunities. Finally, the model implies that financial market innovation may reduce welfare by providing “too much” liquidity. Creation-Date: 1997 Publication-Status: Published in Quarterly Journal of Economics -Cambridge Massachusetts- File-URL: http://dash.harvard.edu/bitstream/handle/1/4481499/Laibson_GoldenEggs.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4481499 Template-Type: ReDIF-Paper 1.0 Author-Name: Athey, Susan Title: Monotone Comparative Statics Under Uncertainty Abstract: This paper analyzes monotone comparative statics predictions in several classes of stochastic optimization problems. The main results characterize necessary and sufficient conditions for comparative statics predictions to hold based on properties of primitive functions, that is, utility functions and probability distributions. The results apply when the primitives satisfy one of the following two properties: (i) a single-crossing property, which arises in applications such as portfolio investment problems and auctions, or (ii) log-supermodularity, which arises in the analysis of demand functions, affiliated random variables, stochastic orders, and orders over risk aversion. Creation-Date: 2002 Publication-Status: Published in Quarterly Journal of Economics -Cambridge Massachusetts- File-URL: http://dash.harvard.edu/bitstream/handle/1/3372263/Athey_MonotoneComparative.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3372263 Template-Type: ReDIF-Paper 1.0 Author-Name: Djankov, Simeon Author-Name: Caralee, McLiesh Author-Name: Nenova, Tatiana Author-Name: Shleifer, Andrei Title: Who Owns the Media? Abstract: We examine the patterns of media ownership in 97 countries around the world. We find that almost universally the largest media firms are owned by the government or by private families. Government ownership is more pervasive in broadcasting than in the printed media. We then examine two theories of government ownership of the media: the public interest (Pigouvian) theory, according to which government ownership cures market failures, and the public choice theory, according to which government ownership undermines political and economic freedom. The data support the second theory. Creation-Date: 2003 Publication-Status: Published in Journal of Law and Economics -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3606236/Shleifer_WhoOwns.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3606236 Template-Type: ReDIF-Paper 1.0 Author-Name: Jaffee, Dwight Author-Name: Shleifer, Andrei Title: Costs of Financial Distress, Delayed Calls of Convertible Bonds, and the Role of Investment Banks Abstract: Creation-Date: 1990 Publication-Status: Published in Journal of Business -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3606238/Shleifer_CostsFinancial.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3606238 Template-Type: ReDIF-Paper 1.0 Author-Name: Glaeser, Edward Ludwig Author-Name: Kallal, Hedi D. Author-Name: Scheinkman, Jose A. Author-Name: Shleifer, Andrei Title: Growth in Cities Abstract: Recent theories of economic growth, including those of Romer, Porter, and Jacobs, have stressed the role of technological spillovers in generating growth. Because such knowledge spillovers are particularly effective in cities, where communication between people is more extensive, data on the growth of industries in different cities allow us to test some of these theories. Using a new data set on the growth of large industries in 170 U.S. cities between 1956 and 1987, we find that local competition and urban variety, but not regional specialization, encourage employment growth in industries. The evidence suggests that important knowledge spillovers might occur between rather than within industries, consistent with the theories of Jacobs. Creation-Date: 1992 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3451309/Shleifer_GrowthCities.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3451309 Template-Type: ReDIF-Paper 1.0 Author-Name: La Porta, Rafael Author-Name: Lopez-de-Silanes, Florencio Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert W. Title: Law and Finance Abstract: This paper examines legal rules covering protection of corporate shareholders and creditors, the origin of these rules, and the quality of their enforcement in 49 countries. The results show that common‐law countries generally have the strongest, and french civil law countries the weakest, legal protections of investors, with German‐-and Scandinavian‐-civil‐law countries located in the middle. We also find that concentration of ownership of shares in the largest public companies is negatively related to investor protections, consistent with the hypothesis that small, diversified share‐holders are unlikely to be important in countries that fail to protect their rights. Creation-Date: 1998 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3451310/Shleifer_LawFinance.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3451310 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert W. Title: Large Shareholders and Corporate Control Abstract: In a corporation with many small owners, it may not pay any one of them to monitor the performance of the management. We explore a model in which the presence of a large minority shareholder provides a partial solution to this free-rider problem. The model sheds light on the following questions: Under what circumstances will we observe a tender offer as opposed to a proxy fight or an internal management shake-up? How strong are the forces pushing toward increasing concentration of ownership of a diffusely held firm? Why do corporate and personal investors commonly hold stock in the same firm, despite their disparate tax preferences? Creation-Date: 1986 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3606237/Shleifer_IndustralizationBigPush.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3606237 Template-Type: ReDIF-Paper 1.0 Author-Name: Weitzman, Martin L. Title: Review of Planning Problems in the USSR: The Contribution of Mathematical Economics to Their Solution, 1960-1971 Abstract: Creation-Date: 1975 Publication-Status: Published in Journal of Business -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/11064406/Weitzman_BookReview.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11064406 Template-Type: ReDIF-Paper 1.0 Author-Name: Stein, Jeremy C. Title: Rational Capital Budgeting in an Irrational World Abstract: This article addresses the following basic capital budgeting problem: suppose that cross-sectional differences in stock returns can be predicted based on variables other than P(e.g., book-to-market) and that this predictability reflects market irrationality rather than compensation for fundamental risk. In this setting, how should companies determine hurdle rates? I show how factors such as managerial time horizons and financial constraints affect the optimal hurdle rate. Under some circumstances, beta can be useful as a capital tool, even budgeting if it is of no use in predicting stock returns. Creation-Date: 1996 Publication-Status: Published in Journal of Business -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3708373/Stein_RationalCapital.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3708373 Template-Type: ReDIF-Paper 1.0 Author-Name: Greenwald, Bruce C. Author-Name: Stein, Jeremy C. Title: Transactional Risk, Market Crashes, and the Role of Circuit Breakers Abstract: The authors develop a pair of models that illustrate how imperfections in transfunctional mechanisms can lead to a market crash. Neither market orders nor limit orders allow traders to condition their demands on the full information set needed to achieve a Walrasian outcome. When volume shocks are sufficiently large, the deviations from Walrasian prices and allocations are large also. Properly designed and implemented, circuit breakers may help to overcome some of these informational problems and thereby improve the market's ability to absorb large volume shocks. Creation-Date: 1991 Publication-Status: Published in Journal of Business -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3710666/Stein_TransactionalRisk.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3710666 Template-Type: ReDIF-Paper 1.0 Author-Name: Nunn, Nathan Title: The Long-Term Effects of Africa's Slave Trades Abstract: Can part of Africa's current underdevelopment be explained by its slave trades? To explore this question, I use data from shipping records and historical documents reporting slave ethnicities to construct estimates of the number of slaves exported from each country during Africa's slave trades. I find a robust negative relationship between the number of slaves exported from a country and current economic performance. To better understand if the relationship is causal, I examine the historical evidence on selection into the slave trades and use instrumental variables. Together the evidence suggests that the slave trades had an adverse effect on economic development. Creation-Date: 2008 Publication-Status: Published in Quarterly Journal of Economics -Cambridge Massachusetts- File-URL: http://dash.harvard.edu/bitstream/handle/1/3710252/Nunn_Long-TermEffects.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3710252 Template-Type: ReDIF-Paper 1.0 Author-Name: Weitzman, Martin L. Title: On Modeling and Interpreting the Economics of Catastrophic Climate Change Abstract: With climate change as prototype example, this paper analyzes the implications of structural uncertainty for the economics of low-probability, high-impact catastrophes. Even when updated by Bayesian learning, uncertain structural parameters induce a critical “tail fattening” of posterior-predictive distributions. Such fattened tails have strong implications for situations, like climate change, where a catastrophe is theoretically possible because prior knowledge cannot place sufficiently narrow bounds on overall damages. This paper shows that the economic consequences of fat-tailed structural uncertainty (along with unsureness about high-temperature damages) can readily outweigh the effects of discounting in climate-change policy analysis. Creation-Date: 2009 Publication-Status: Published in Review of Economics and Statistics File-URL: http://dash.harvard.edu/bitstream/handle/1/3693423/Weitzman_OnModeling.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3693423 Template-Type: ReDIF-Paper 1.0 Author-Name: Stein, Jeremy C. Title: Takeover Threats and Managerial Myopia Abstract: This paper examines the familiar argument that takeover pressure can be damaging because it leads managers to sacrifice long-term interests in order to boost current profits. If stockholders are imperfectly informed, temporarily low earnings may cause the stock to become undervalued, increasing the likelihood of a takeover at an unfavorable price; hence the managerial concern with current bottom line. The magnitude of the problem depends on a variety of factors, including the attitudes and beliefs o f shareholders, the extent to which corporate raiders have inside information, and the degree to which managers are concerned with retaining control of their firms. Creation-Date: 1988 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3708937/Stein_TakeoverThreats.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3708937 Template-Type: ReDIF-Paper 1.0 Author-Name: Jorgenson, Dale W. Author-Name: Yun, Kun-Young Title: Tax Reform and U.S. Economic Growth Abstract: In this paper we evaluate the impact of the Tax Reform Act of 1986 on U.S. economic growth. We first calculate effective tax rates on income from capital employed in corporate, noncorporate, and household sectors. We then project the future growth of the U.S. economy with and without the 1986 tax reform. We find that much of the potential gain in welfare was dissipated through failure to index the income tax base for inflation. The most promising avenue for future reform is to include income from household assets in the tax base, while reducing tax rates on business income. Creation-Date: 1990 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3403059/Jorgenson_TaxReform.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3403059 Template-Type: ReDIF-Paper 1.0 Author-Name: Weitzman, Martin L. Title: Pricing the Limits to Growth from Minerals Depletion Abstract: This paper evaluates the loss of global welfare from exhaustion of nonrenewable resources, such as oil. The underlying methodology represents an empirical application of some recent developments in the theory of green accounting and sustainability. The paper estimates that the world loses the equivalent of about 1 percent of final consumption per year from finiteness of the earth's resources, compared with a counterfactual trajectory where global extraction of minerals is allowed to remain forever constant at today's flow rates and extraction costs. Creation-Date: 1999 Publication-Status: Published in Quarterly Journal of Economics -Cambridge Massachusetts- File-URL: http://dash.harvard.edu/bitstream/handle/1/3708467/Weitzman_PricingLimits.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3708467 Template-Type: ReDIF-Paper 1.0 Author-Name: Weitzman, Martin L. Title: Economic Profitability Versus Ecological Entropy Abstract: There is a long-standing trade-off in bioculture between concentrating on high-yield varieties and maintaining sufficient diversity to lower the risks of catastrophic infection. The paper uses a simple ecology-based model of endogenous disease to indicate how a local decision to plant more of a widely grown crop creates negative externalities by increasing the probability that new pathogens will evolve to attack the crop globally. Society's basic issue concerns where to locate on an efficiency frontier between economic profitability and a standard formula for ecological entropy—proved here to be a rigorous measure of “generalized resistance” to crop-ecosystem failure. Creation-Date: 2000 Publication-Status: Published in Quarterly Journal of Economics -Cambridge Massachusetts- File-URL: http://dash.harvard.edu/bitstream/handle/1/3693703/Weitzman_EconomicsProfitability.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3693703 Template-Type: ReDIF-Paper 1.0 Author-Name: Summers, Lawrence H. Author-Name: Dickens, William T. Author-Name: Katz, Lawrence F. Author-Name: Lang, Kevin Title: Employee Crime and the Monitoring Puzzle Abstract: The simplest economic theories of crime predict that profit-maximizing firms should follow strategies of minimal monitoring with large penalties for employee crime. We investigate possible reasons why firms actually spend considerable resources trying to detect employee malfeasance. We find that the most plausible explanations for firms' large outlays on monitoring of employees-legal restrictions on penalty clauses in contracts and the adverse impact of harsh punishment schemes on worker morale-are also consistent with the payment of premium (rent-generating) wages by cost-minimizing firms. Creation-Date: 1989 Publication-Status: Published in Journal of Labor Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3645199/Summers_EmployeeCrime.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3645199 Template-Type: ReDIF-Paper 1.0 Author-Name: De Long, J. Bradford Author-Name: Shleifer, Andrei Author-Name: Summers, Lawrence H. Author-Name: Waldmann, Robert J. Title: Noise Trader Risk in Financial Markets Abstract: We present a simple overlapping generations model of an asset market in which irrational noise traders with erroneous stochastic beliefs both affect prices and earn higher expected returns. The unpredictability of noise traders' beliefs creates a risk in the price of the asset that deters rational arbitrageurs from aggressively betting against them. As a result, prices can diverge significantly from fundamental values even in the absence of fundamental risk. Moreover, bearing a disproportionate amount of risk that they themselves create enables noise traders to earn a higher expected return than rational investors do. The model sheds light on a number of financial anomalies, including the excess volatility of asset prices, the mean reversion of stock returns, the underpricing of closed-end mutual funds, and the Mehra-Prescott equity premium puzzle. Creation-Date: 1990 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3725552/Summers_NoiseTrader_Risk.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3725552 Template-Type: ReDIF-Paper 1.0 Author-Name: Kremer, Michael R. Author-Name: Miguel, Edward Author-Name: Thornton, Rebecca Title: Incentives to Learn Abstract: We study a randomized evaluation of a merit scholarship program in which Kenyan girls who scored well on academic exams had school fees paid and received a grant. Girls showed substantial exam score gains, and teacher attendance improved in program schools. There were positive externalities for girls with low pretest scores, who were unlikely to win a scholarship. We see no evidence for weakened intrinsic motivation. There were heterogeneous program effects. In one of the two districts, there were large exam gains and positive spillovers to boys. In the other, attrition complicates estimation, but we cannot reject the hypothesis of no program effect. Creation-Date: 2009 Publication-Status: Published in Review of Economics and Statistics File-URL: http://dash.harvard.edu/bitstream/handle/1/3716457/Kremer_IncentivesLearn.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3716457 Template-Type: ReDIF-Paper 1.0 Author-Name: Nunn, Nathan Title: Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade Abstract: Is a country's ability to enforce contracts an important determinant of comparative advantage? To answer this question, I construct a variable that measures, for each good, the proportion of its intermediate inputs that require relationship-specific investments. Combining this measure with data on trade flows and judicial quality, I find that countries with good contract enforcement specialize in the production of goods for which relationship-specific investments are most important. According to my estimates contract enforcement explains more of the pattern of trade than physical capital and skilled labor combined. Creation-Date: 2007 Publication-Status: Published in Quarterly Journal of Economics -Cambridge Massachusetts- File-URL: http://dash.harvard.edu/bitstream/handle/1/4686801/Nunn_Relationship-Specificity.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4686801 Template-Type: ReDIF-Paper 1.0 Author-Name: Obstfeld, Maurice Author-Name: Rogoff, Kenneth S. Title: Global Implications of Self-Oriented National Monetary Rules Abstract: It is well-known that if international linkages are relatively small, the potential gains to international monetary policy coordination are typically quite limited. But when goods and financial markets are tightly linked, is it problematic if countries unilaterally design their monetary policy rules? Are the stabilization gains from having separate currencies largely squandered in the absence of effective international monetary coordination? We argue that under plausible assumptions the answer is no. Unless risk aversion is very high, lack of coordination in rule setting is a second-order problem compared with the overall gains from macroeconomic stabilization. Creation-Date: 2002 Publication-Status: Published in The Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/34721962/Rogoff_GlobalImplications.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34721962 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Author-Name: Summers, Lawrence H. Author-Name: Bernheim, B. Douglas Title: The Strategic Bequest Motive Abstract: Although recent research suggests that intergenerational transfers play an important role in aggregate capital accumulation, our understanding of bequest motives remains incomplete. We develop a simple model of strategic bequests in which a testator influences the decisions of his beneficiaries by holding wealth in bequeathal forms and by conditioning the division of bequests on the beneficiaries' actions. The model generates falsifiable empirical predictions that are inconsistent with other theories of intergenerational transfer. We present econometric and other evidence that strongly suggests that bequests are often used as compensation for services rendered by beneficiaries. Creation-Date: 1986 Publication-Status: Published in Journal of Labor Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3721794/Summers_StrategicBequest.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3721794 Template-Type: ReDIF-Paper 1.0 Author-Name: Gopinath, Gita Author-Name: Rigobon, Roberto Title: Sticky Borders 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 micro data 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 United States, there is producer currency pricing in exports and local currency pricing in imports. Third, import price rigidity has increased by ten 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%. Creation-Date: 2008 Publication-Status: Published in Quarterly Journal of Economics -Cambridge Massachusetts- File-URL: http://dash.harvard.edu/bitstream/handle/1/32116841/Gopinath_StickyBorders.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:32116841 Template-Type: ReDIF-Paper 1.0 Author-Name: Reinhart, Carmen M. Author-Name: Rogoff, Kenneth S. Title: The Modern History of Exchange Rate Arrangements: A Reinterpretation Abstract: We develop a novel system of reclassifying historical exchange rate regimes. One key difference between our study and previous classifications is that we employ monthly data on market-determined parallel exchange rates going back to 1946 for 153 countries. Our approach differs from the IMF official classification (which we show to be only a little better than random); it also differs radically from all previous attempts at historical reclassification. Our classification points to a rethinking of economic performance under alternative exchange rate regimes. Indeed, the breakup of Bretton Woods had less impact on exchange rate regimes than is popularly believed. Creation-Date: 2004 Publication-Status: Published in The Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/34721963/Rogoff_ModernHistory.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34721963 Template-Type: ReDIF-Paper 1.0 Author-Name: Blanchard, Olivier Author-Name: Kremer, Michael R. Title: Disorganization Abstract: Under central planning, many firms relied on a single supplier for critical inputs. Transition has led to decentralized bargaining between suppliers and buyers. Under incomplete contracts or asymmetric information, bargaining may inefficiently break down, and if chains of production link many specialized producers, output will decline sharply. Mechanisms that mitigate these problems in the West, such as reputation, can only play a limited role in transition. The empirical evidence suggests that output has fallen farthest for the goods with the most complex production process, and that disorganization has been more important in the former Soviet Union than in Central Europe. Creation-Date: 1997 Publication-Status: Published in Quarterly Journal of Economics -Cambridge Massachusetts- File-URL: http://dash.harvard.edu/bitstream/handle/1/3659691/Kremer_Disorganization.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3659691 Template-Type: ReDIF-Paper 1.0 Author-Name: Schelling, Thomas Crombie Title: Reciprocal Measures for Arms Stabilization Abstract: Creation-Date: 2005 Publication-Status: Published in Daedalus -Boston Mass- File-URL: http://dash.harvard.edu/bitstream/handle/1/3425941/Schelling_ReciprocalMeasures.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3425941 Template-Type: ReDIF-Paper 1.0 Author-Name: De Long, J. Bradford Author-Name: Shleifer, Andrei Author-Name: Summers, Lawrence H. Author-Name: Waldmann, Robert J. Title: The Survival of Noise Traders in Financial Markets Abstract: The authors present a model of portfolio allocation by noise traders with incorrect expectations about return variances. For such misperceptions, noise traders who do not affect prices can earn higher expected returns than rational investors with similar risk aversion. Moreover, such noise traders can come to dominate the market in that the probability that they eventually have a high share of total wealth is close to one. Noise traders come to dominate despite their taking of excessive risk and their higher consumption. The authors conclude that the case against their long-run viability is not as clear-cut as is commonly supposed. Creation-Date: 1991 Publication-Status: Published in Journal of Business -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3725470/Summers_SurvivalNoise.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3725470 Template-Type: ReDIF-Paper 1.0 Author-Name: Jorgenson, Dale W. Title: Growth and Fluctuations: A Causal Interpretation Abstract: I. Introduction, 416.--II. The dynamic input-output system, 420.--III. Stability of the dynamic input-output system: investment policy, 423.--IV. Stability of the dynamic input-output system: output policy, 430.--V. Summary and conclusion, 434. Creation-Date: 1960 Publication-Status: Published in Quarterly Journal of Economics -Cambridge Massachusetts- File-URL: http://dash.harvard.edu/bitstream/handle/1/3403056/Jorgenson_GrowthFluctuations.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3403056 Template-Type: ReDIF-Paper 1.0 Author-Name: Weitzman, Martin L. Title: Recombinant Growth Abstract: This paper attempts to provide microfoundations for the knowledge production function in an idea-based growth model. Production of new ideas is made a function of newly reconfigured old ideas in the spirit of the way an agricultural research station develops improved plant varieties by cross-pollinating existing plant varieties. The model shows how knowledge can build upon itself in a combinatoric feedback process that may have significant implications for economic growth. The paper's main theme is that the ultimate limits to growth lie not so much in our ability to generate new ideas as in our ability to process an abundance of potentially new ideas into usable form. Creation-Date: 1998 Publication-Status: Published in Quarterly Journal of Economics -Cambridge Massachusetts- File-URL: http://dash.harvard.edu/bitstream/handle/1/3708468/Weitzman_RecombinantGrowth.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3708468 Template-Type: ReDIF-Paper 1.0 Author-Name: Gopinath, Gita Title: Lending Booms, Sharp Reversals and Real Exchange Rate Dynamics Abstract: Emerging markets in the 1990s experienced periods of booms followed by collapses in gross domestic product, consumption, traded and non-traded sector output and real exchange rate movements alongside unprecedented movements in foreign investor participation in these economies. An important feature of these episodes is the asymmetry in the pattern of booms and collapses. We introduce a natural search friction into the foreign investment decision in a small open economy and demonstrate that this can generate the asymmetry observed in the data. The magnitude of the reversals predicted by the model can be quantitatively large and empirically relevant. Creation-Date: 2003 Publication-Status: Published in Journal of International Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/11988005/Gopinath_LendingBooms.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11988005 Template-Type: ReDIF-Paper 1.0 Author-Name: Kremer, Michael R. Title: Patent Buyouts: A Mechanism for Encouraging Innovation Abstract: In 1839 the French government purchased the Daguerreotype patent and placed it in the public domain. Such patent buyouts could potentially eliminate the monopoly price distortions and incentives for rent-stealing duplicative research created by patents, while increasing incentives for original research. Governments could offer to purchase patents at their estimated private value, as determined in an auction, times a markup equal to the typical ratio of inventions' social and private value. Most patents purchased would be placed in the public domain, but to induce bidders to reveal their valuations, a few would be sold to the highest bidder. Creation-Date: 1998 Publication-Status: Published in Quarterly Journal of Economics -Cambridge Massachusetts- File-URL: http://dash.harvard.edu/bitstream/handle/1/3693705/Kremer_PatentBuyouts.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3693705 Template-Type: ReDIF-Paper 1.0 Author-Name: Kornai, Janos Title: What the Change of System from Socialism to Capitalism Does and Does Not Mean Abstract: Creation-Date: 2000 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/3634160/Kornai_WhatChange.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/3634160/Kornai_WhatChangePermission.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3634160 Template-Type: ReDIF-Paper 1.0 Author-Name: Jorgenson, Dale W. Title: The Embodiment Hypothesis Abstract: No abstract provided. Creation-Date: 1966 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3403063/Jorgenson_EmbodimentHypothesis.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3403063 Template-Type: ReDIF-Paper 1.0 Author-Name: Helpman, Elhanan Title: An Exploration in the Theory of Exchange-Rate Regimes Abstract: Three exchange-rate regimes--a float, a one-sided peg, and a cooperative peg--are evaluated and compared in terms of efficiency and welfare levels. The framework of analysis embodies country-specific monies, with the money of each country being used to transact in its commodity markets and its currency-denominated bonds. Welfare levels depend only on consumption levels. In the presence of perfect foresight all equilibrium allocations are Pareto efficient. In a floating exchange-rate regime the perfect foresight equilibrium allocation coincides with an equilibrium of a costless barter economy. The same result holds in a one-sided peg if the pegging country's exchange-rate stabilizing authority breaks even over time. In a cooperative peg regime there is a different equilibrium allocation for each combination of exchange-rate levels and monetary policies. Problems of policy coordination and conflicts in desired monetary policies are discussed. Creation-Date: 1981 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3445091/Helpman_ExplorationTheory.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3445091 Template-Type: ReDIF-Paper 1.0 Author-Name: Helpman, Elhanan Title: A Simple Theory of International Trade with Multinational Corporations Abstract: Using the idea that firm-specific assets associated with marketing, management, and product-specific R & D can be used to service production plants in countries other than the country in which these inputs are employed, I develop a simple general equilibrium model of international trade in which the location of plants in a differentiated product industry is a decision variable. The model is then used to derive predictions of trade patterns, volumes of trade, the share of intra-industry trade, and the share of intrafirm trade as functions of relative country size and differences in relative factor endowments. Creation-Date: 1984 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3445092/Helpman_SimpleTheory.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3445092 Template-Type: ReDIF-Paper 1.0 Author-Name: Razin, Assaf Author-Name: Helpman, Elhanan Title: The Protective Effect of a Tariff Under Uncertainty Abstract: We examine the protective effect of a tariff in a small economy with uncertainty and a stock market in which shares of firms are traded. In a deterministic economy, the allocation of resources is governed by commodity prices; in our economy, it is governed by equity prices and is dependent on commodity prices only to the extent that they influence equity prices. We show that in the absence of international trade in securities a tariff need not protect the import competing sector. In the presence of international trade in securities, a tariff always protects the import competing sector. Creation-Date: 1978 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3445093/Helpman_ProtectiveEffect.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3445093 Template-Type: ReDIF-Paper 1.0 Author-Name: Sen, Amartya Kumar Title: Review of Equalities by Douglas Rae Abstract: No abstract provided. Creation-Date: 1985 Publication-Status: Published in Ethics -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3612778/Sen_EqualitiesBookReview.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3612778 Template-Type: ReDIF-Paper 1.0 Author-Name: Sen, Amartya Kumar Title: The Impossibility of a Paretian Liberal Abstract: The purpose of this paper is to present an impossibility result that seems to have some disturbing consequences for principles of social choice. A common objection to the method of majority decision is that it is illiberal. The argument takes the following form: Given other things in the society, if you prefer to have pink walls rather than white, then society should permit you to have this, even if a majority of the community would like to see your walls white. Similarly, whether you should sleep on your back or on your belly is a matter in which the society should permit you absolute freedom, even if a majority of the community is nosey enough to feel that you must sleep on your back. We formalize this concept of individual liberty in an extremely weak form and examine its consequences. Creation-Date: 1970 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3612779/Sen_ImpossibilityParetian.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3612779 Template-Type: ReDIF-Paper 1.0 Author-Name: Sen, Amartya Kumar Title: The Impossibility of a Paretian Liberal: Reply Abstract: In reply to the critiques of Professor Hillinger and Lapham on Amartya Sen's original article. Creation-Date: 1971 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3612780/Sen_ImpossibilityParetianReply1.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3612780 Template-Type: ReDIF-Paper 1.0 Author-Name: Pakes, Ariel Author-Name: Nitzan, Shmuel Title: Optimum Contracts for Research Personnel, Research Employment, and the Establishment of "Rival" Enterprises Abstract: This paper considers the problem of hiring scientists for research and development projects when one takes explicit account of the fact that the scientist may be able to use the information acquired during the project in a rival enterprise. Management's problem is to determine an optimum labor policy for its project. The policy consists of an employment decision and a labor contract. Given optimum behavior, it is straightforward to analyze the effect of the potential for mobility of scientific personnel on project profitability and on research employment. We also formalize conditions under which one would expect to observe a scientist leaving his employer to set up or join a rival. Creation-Date: 1983 Publication-Status: Published in Journal of Labor Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3428538/Pakes_OptimumContracts.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3428538 Template-Type: ReDIF-Paper 1.0 Author-Name: Coles, Peter Andrew Author-Name: Levine, Phillip B. Author-Name: Roth, Alvin E. Author-Name: Cawley, John Author-Name: Niederle, Muriel Author-Name: Siegfried, John J. Title: The Job Market for New Economists: A Market Design Perspective Abstract: This paper, written by the members of the American Economic Association (AEA) Ad Hoc Committee on the Job Market, provides an overview of the market for new Ph.D. economists. It describes the role of the AEA in the market and focuses in particular on two mechanisms adopted in recent years at the suggestion of our Committee. First, job market applicants now have a signaling service to send an expression of special interest to up to two employers prior to interviews at the January Allied Social Science Associations (ASSA) meetings. Second, the AEA now invites candidates who are still on the market, and employers whose positions are still vacant, to participate in a web-based "scramble" to reduce search costs and thicken the late part of the job market. We present statistics on the activity in these market mechanisms and present survey evidence that both mechanisms have facilitated matches. The paper concludes by discussing the emergence of platforms for transmitting job market information and other design issues that may arise in the market for new economists. Creation-Date: 2010 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/5343168/Roth_JobMarket.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/5343168/Roth_JobMarket.doc File-Format: application/msword Handle: RePEc:hrv:faseco:5343168 Template-Type: ReDIF-Paper 1.0 Author-Name: Stock, James H. Title: Measuring Business Cycle Time Abstract: The business cycle analysis of Burns and Mitchell and the National Bureau of Economic Research presumed that aggregate economic variables evolve on a time scale defined by business cycle turning points rather than by months or quarters. Do macroeconomic variables appear to evolve on an economic rather than a calendar time scale? Evidence presented here suggests that they do. However, the estimated economic time scales are only weakly related to business cycle time scales, providing evidence against the view underlying traditional business cycle analysis. Creation-Date: 1987 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3425950/Stock_MeasuringBusinessCycle.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3425950 Template-Type: ReDIF-Paper 1.0 Author-Name: Levinsohn, James Author-Name: Berry, Steven Author-Name: Pakes, Ariel Title: Differentiated Products Demand Systems from a Combination of Micro and Macro Data: The New Car Market Abstract: In this paper, we consider how rich sources of information on consumer choice can help to identify demand parameters in a widely used class of differentiated products demand models. Most important, we show how to use “second‐choice” data on automotive purchases to obtain good estimates of substitution patterns in the automobile industry. We use our estimates to make out‐of‐sample predictions about important recent changes in industry structure. Creation-Date: 2004 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3436404/Pakes_DifferentiatedProducts.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3436404 Template-Type: ReDIF-Paper 1.0 Author-Name: Obstfeld, Maurice Author-Name: Rogoff, Kenneth S. Title: Speculative Hyperinflations in Maximizing Models: Can We Rule Them Out? Abstract: This paper uses an infinite-horizon model based on individual maximizing behavior to study whether explosive price-level paths unrelated to monetary growth--speculative hyperinflations--can be equilibrium paths under rational expectations. In a pure fiat money regime, speculative hyperinflations can be excluded only through severe restrictions on individual preferences; but when the government fractionally backs the currency by guaranteeing a minimal real redemption value for money, speculative hyperinflations are impossible, even if agents are not completely certain that they can redeem their money in any given period. The analysis also confirms that implosive price-level paths and divergent paths for capital asset prices are not equilibria under either monetary regime. Creation-Date: 1983 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/12491027/Rogoff_SpeculativeHyperinflations.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12491027 Template-Type: ReDIF-Paper 1.0 Author-Name: Ball, Laurence Author-Name: Mankiw, N. Gregory Title: Intergenerational Risk Sharing in the Spirit of Arrow, Debreu, and Rawls, with Applications to Social Security Design Abstract: This paper examines the optimal allocation of risk in an overlapping‐generations economy. It compares the allocation of risk the economy reaches naturally to the allocation that would be reached if generations behind a Rawlsian “veil of ignorance” could share risk with one another through complete Arrow‐Debreu contingent‐claims markets. The paper then examines how the government might implement optimal intergenerational risk sharing with a social security system. One conclusion is that the system must either hold equity claims to capital or negatively index benefits to equity returns. Creation-Date: 2007 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3443106/Mankiw_IntergenerationalRisk.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3443106 Template-Type: ReDIF-Paper 1.0 Author-Name: Kimball, Miles S. Author-Name: Mankiw, N. Gregory Title: Precautionary Saving and the Timing of Taxes Abstract: This paper analyzes the effects of government debt and income taxes on consumption and saving in a world of infinitely lived house- holds having uncertain and heterogeneous incomes. The special structure of the model allows exact aggregation across households despite incomplete markets. The effects of government debt are shown to be substantial, roughly comparable to those resulting from finite horizons, and crucially dependent on the length of time until the debt is repaid. Also, anticipated changes in taxes are shown to cause anticipated changes in consumption. Finally, an index of fiscal stance is derived. Creation-Date: 1989 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3443105/Mankiw_PrecautionarySaving.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3443105 Template-Type: ReDIF-Paper 1.0 Author-Name: Bulow, Jeremy Author-Name: Rogoff, Kenneth S. Title: A Constant Recontracting Model of Sovereign Debt Abstract: We present a dynamic model of international lending in which borrowers cannot commit to future repayments and in which debtors can sometimes successfully negotiate partial defaults or "rescheduling agreements." All parties in a debt rescheduling negotiation realize that today's rescheduling agreement may itself have to be renegotiated in the future. Our bargaining-theoretic approach allows us to handle the effects of uncertainty on sovereign debt contracts in a much more satisfactory way than in earlier analyses. The framework is readily extended to analyze the conflicting interests of different lenders and of banks and creditor country taxpayers. Creation-Date: 1989 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/12491028/Rogoff_ConstantRecontracting.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12491028 Template-Type: ReDIF-Paper 1.0 Author-Name: Pakes, Ariel Title: On Patents, R & D, and the Stock Market Rate of Return Abstract: Empirical work on the causes and effects of inventive activity has had difficulty in finding measures that can indicate when and where changes in either inventive inputs or inventive output have occurred. The recent computerization of the U.S. Patent Office's data base may prove helpful in this context, but there is the problem that a priori we do not know the relationships between patent applications and economically meaningful measures of these inputs and outputs. To help solve this problem, this paper investigates the dynamic relationships among the number of successful patent applications of firms, a measure of the firm's investment in inventive activity (its R & D expenditures), and an indicator of its inventive output (the stock market value of the firm). Creation-Date: 1985 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3436409/Pakes_OnPatents.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3436409 Template-Type: ReDIF-Paper 1.0 Author-Name: Perkins, Dwight Heald Title: Price Stability and Development in Mainland China (1951-63) Abstract: No abstract provided. Creation-Date: 1964 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3429712/Perkins_PriceStability.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3429712 Template-Type: ReDIF-Paper 1.0 Author-Name: Bertrand, Marianne Author-Name: Mullainathan, Sendhil Title: Enjoying the Quiet Life? Corporate Governance and Managerial Preferences Abstract: Much of our understanding of corporations builds on the idea that managers, when they are not closely monitored, will pursue goals that are not in shareholders’ interests. But what goals would managers pursue? This paper uses variation in corporate governance generated by state adoption of antitakeover laws to empirically map out managerial preferences. We use plant‐level data and exploit a unique feature of corporate law that allows us to deal with possible biases associated with the timing of the laws. We find that when managers are insulated from takeovers, worker wages (especially those of white‐collar workers) rise. The destruction of old plants falls, but the creation of new plants also falls. Finally, overall productivity and profitability decline in response to these laws. Our results suggest that active empire building may not be the norm and that managers may instead prefer to enjoy the quiet life. Creation-Date: 2003 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3429713/Mullainathan_EnjoyingQuietLife.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3429713 Template-Type: ReDIF-Paper 1.0 Author-Name: Gibbons, Robert Author-Name: Katz, Lawrence F. Title: Layoffs and Lemons Abstract: We provide theoretical and empirical analyses of an asymmetric-information model of layoffs. When firms have discretion with respect to whom to lay off, the market infers that laid-off workers are of low ability. Assuming that no such negative inference is warranted if workers are displaced in a plant closing, postdisplacement wages should be lower and postdisplacement unemployment spells should be longer for those displaced by layoffs than for those displaced by plant closings, but predisplacement wages should not differ by cause of displacement. Evidence on displaced workers from Current Population Surveys supports all three of our model's predictions. Creation-Date: 1991 Publication-Status: Published in Journal of Labor Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3442782/Katz_LayoffsLemons.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3442782 Template-Type: ReDIF-Paper 1.0 Author-Name: Stein, Jeremy C. Title: Informational Externalities and Welfare-Reducing Speculation Abstract: Introducing more speculators into the market for a given commodity leads to improved risk sharing but can also change the informational content of prices. This inflicts an externality on those traders already in the market, whose ability to make inferences based on current prices will be affected. In some cases, the externality is negative: the entry of new speculators lowers the informativeness of the price to existing traders. The net result can be one of price destabilization and welfare reduction. This is true even when all agents are rational, risk-averse, competitors who make the best possible use of their available information. Creation-Date: 1987 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3660740/Stein_InformationalExternalities.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3660740 Template-Type: ReDIF-Paper 1.0 Author-Name: Abraham, Katharine G. Author-Name: Katz, Lawrence F. Title: Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances? Abstract: Recent work by David Lilien has argued that the positive correlation between the dispersion of employment growth rates across sectors (a) and the unemployment rate implies that sectoral shifts in labor demand are responsible for a substantial fraction of cyclical variation in unemployment. This paper demonstrates that, under empirically satisfied conditions, traditional single-factor business-cycle models will produce a positive correlation between (sigma) and the unemployment rate. Information on the job vacancy rate permits one to distinguish between a pure sectoral shift and a pure aggregate demand interpretation of this positive correlation. The finding that a and the volume of help wanted advertising (a job vacancy proxy) are negatively related supports an aggregate demand interpretation. Creation-Date: 1986 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3442781/Katz_CyclicalUnemployment.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3442781 Template-Type: ReDIF-Paper 1.0 Author-Name: Katz, Lawrence F. Author-Name: Rosen, Kenneth T. Title: The Interjurisdictional Effects of Growth Controls on Housing Prices Abstract: No abstract provided. Creation-Date: 1987 Publication-Status: Published in Journal of Law and Economics -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3442758/Katz_InterjurisdictionalEffects.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3442758 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert W. Title: The Efficiency of Investment in the Presence of Aggregate Demand Spillovers Abstract: In the presence of aggregate demand spillovers, an imperfectly competitive firm's profit is positively related to aggregate income, which in turn rises with profits of all firms in the economy. This pecuniary externality makes a dollar of a firm's profit raise aggregate income by more than a dollar since other firms' profits also rise, and in this way gives rise to a "multiplier." Since such multipliers are ignored by firms making investment decisions, privately optimal investment decisions under uncertainty will not in general be socially optimal. Under reasonable conditions, investment is too low. Creation-Date: 1988 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3725553/Shleifer_EfficiencyInvestment.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3725553 Template-Type: ReDIF-Paper 1.0 Author-Name: Sen, Amartya Kumar Title: Indian Traditions & the Western Imagination Abstract: No abstract provided. Creation-Date: 2005 Publication-Status: Published in Daedalus -Boston Mass- File-URL: http://dash.harvard.edu/bitstream/handle/1/3595956/Sen_IndianTraditions.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3595956 Template-Type: ReDIF-Paper 1.0 Author-Name: De Long, J. Bradford Author-Name: Shleifer, Andrei Title: Princes and Merchants: European City Growth before the Industrial Revolution Abstract: No abstract provided. Creation-Date: 1993 Publication-Status: Published in Journal of Law and Economics -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3451302/Shleifer_PrincesMerchants.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3451302 Template-Type: ReDIF-Paper 1.0 Author-Name: Sen, Amartya Kumar Title: The Discipline of Cost‐Benefit Analysis Abstract: Cost‐benefit analysis is a general discipline, based on the use of some foundational principles, which are not altogether controversial, but have nevertheless considered plausibility. Divisiveness increases as various additional requirements are imposed. There is a trade‐off here between easier usability (through locked‐up formulae) and more general acceptability (through allowing parametric variations). The paper examines and scrutinizes the merits and demerits of these additional requirements. The particular variant of cost‐benefit approach that is most commonly used now is, in fact, extraordinarily limited, because of its insistence on doing the valuation entirely through an analogy with the market mechanism. This admits only a narrow class of values, and demands that individuals be unconcerned about many substantial variations, ignored in the procedure of market valuation. The use, instead, of a general social choice approach can allow greater freedom of valuation and can also accommodate more informational inputs. Creation-Date: 2000 Publication-Status: Published in Journal of Legal Studies -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3444801/Sen_DisciplineCost-Benefit.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3444801 Template-Type: ReDIF-Paper 1.0 Author-Name: Obstfeld, Maurice Author-Name: Rogoff, Kenneth S. Title: Exchange Rate Dynamics Redux Abstract: We develop an analytically tractable two-country model that marries a full account of global macroeconomic dynamics to a supply framework based on monopolistic competition and sticky nominal prices. The model offers simple and intuitive predictions about exchange rates and current accounts that sometimes differ sharply from those of either modern flexible-price intertemporal models or traditional sticky-price Keynesian models. Our analysis leads to a novel perspective on the international welfare spillovers due to monetary and fiscal policies. Creation-Date: 1995 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/12491026/Rogoff_ExchangeRate.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12491026 Template-Type: ReDIF-Paper 1.0 Author-Name: Cooper, Richard Newell Title: Tariff Dispersion and Trade Negotiations Abstract: Creation-Date: 1964 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/13580987/Cooper_TariffDispersion.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:13580987 Template-Type: ReDIF-Paper 1.0 Author-Name: Cooper, Richard Newell Title: The Theory of Balance-of-Payments Adjustment: Comment Abstract: Creation-Date: 1967 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/13580988/Cooper_TheoryBalance-of-Payments.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:13580988 Template-Type: ReDIF-Paper 1.0 Author-Name: Barro, Robert J. Author-Name: Sahasakul, Chaipat Title: Measuring the Average Marginal Tax Rate from the Individual Income Tax Abstract: The economic effects of taxation depend on the configuration of marginal tax rates. We consider here the appropriate measure of a marginal tax rate for the federal individual income tax, which has a graduated-rate structure and allows for numerous legal and illegal deductions from total income. Our conclusion is that the explicit marginal rate from the tax schedule is the right concept for many purposes. Hence, we construct approximately weighted averages of these marginal tax rates for 1916-80. When weighted by adjusted gross income, the arithmetic average of marginal tax rates is 5% in 1920, 2% in 1930, 6% in 1940, 20% in 1950, 23% in 1960, 24% in 1970, and 30% in 1980. Creation-Date: 1983 Publication-Status: Published in Journal of Business -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3451293/Barro_MeasuringAverage.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3451293 Template-Type: ReDIF-Paper 1.0 Author-Name: Barro, Robert J. Author-Name: Sala-i-Martin, Xavier Title: Convergence Abstract: A key economic issue is whether poor countries or regions tend to grow faster than rich ones: are there automatic forces that lead to convergence over time in the levels of per capita income and product? We use the neoclassical growth model as a framework to study convergence across the 48 contiguous U.S. states. We exploit data on personal income since 1840 and on gross state product since 1963. The U.S. states provide clear evidence of convergence, but the findings can be reconciled quantitatively with the neoclassical model only if diminishing returns to capital set in very slowly. The results for per capita gross domestic product from a broad sample of countries are similar if we hold constant a set of variables that proxy for differences in steady-state characteristics. Creation-Date: 1992 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3451299/Barro_Convergence.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3451299 Template-Type: ReDIF-Paper 1.0 Author-Name: Marinescu, Ioana Author-Name: Klemm, Alexander Author-Name: Bond, Stephen Author-Name: Aghion, Philippe Title: Technology and Financial Structure: Are Innovative Firms Different? Abstract: We use data on publicly traded U.K. firms to investigate whether financing choices differ systematically with R&D intensity. As well as looking at a balance sheet measure of the debt/assets ratio, we also consider the probability of raising finance by issuing new equity, and the shares of bank debt and secured debt in total debt. We find a nonlinear relationship with the debt/assets ratio: firms that report positive but low R&D use more debt finance than firms that report no R&D, but the use of debt finance falls with R&D intensity among those firms that report R&D. We find a simpler relationship with the probability of issuing new equity: Firms that report R&D are more likely to raise funds by issuing shares than firms that report no R&D, and this probability increases with R&D intensity. The shares of bank debt and secured debt in total debt are both lower for firms that report R&D compared to those that do not, and tend to fall as R&D intensity rises. We discuss possible explanations for these patterns. Creation-Date: 2004 Publication-Status: Published in Journal of the European Economic Association File-URL: http://dash.harvard.edu/bitstream/handle/1/3200323/aghion_technologyfinancial.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3200323 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Title: Schumpeterian Growth Theory and the Dynamics of Income Inequality Abstract: In this lecture, it is argued that Schumpeterian Growth Theory, in which growth is driven by a sequence of quality-improving innovations, can shed light on two important puzzles raised by the recent evolution of wage inequality in developed economies. The first puzzle concerns wage inequality between educational groups, which has substantially risen in the US and the UK during the past two decades following a sharp increase in the supply of educated labor. The second puzzle concerns wage inequality within educational groups, which accounts for a large fraction of the observed increase in wage inequality, although in contrast to between-group wage inequality it has mainly affected the temporary component of income. The definitive version is available at www3.interscience.wiley.com. Creation-Date: 2002 Publication-Status: Published in Econometrica File-URL: http://dash.harvard.edu/bitstream/handle/1/3350067/aghion_schumpeterian.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3350067 Template-Type: ReDIF-Paper 1.0 Author-Name: Barro, Jason R. Author-Name: Barro, Robert J. Title: Pay, Performance, and Turnover of Bank CEOs Abstract: A new data set covers chief executive officers (CEOs) of large commercial banks over the period 1982-87. For newly hired CEOs, the elasticity of pay with respect to assets is about one-third. For continuing CEOs, the change in compensation depends on performance, as measured by stock and accounting returns. The sensitivity of pay to performance diminishes with experience, but the returns are not filtered for peer-group returns. Logit regressions relate the probability of CEO departure to age and performance, as measured by stock returns filtered for peer-group returns; CEO experience does not influence this relationship. Creation-Date: 1990 Publication-Status: Published in Journal of Labor Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3451300/Barro_PayPerformance.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3451300 Template-Type: ReDIF-Paper 1.0 Author-Name: Hornbeck, Richard A. Title: Barbed Wire: Property Rights and Agricultural Development Abstract: This paper examines the impact on agricultural development from the introduction of barbed wire fencing to the American Plains in the late 19th century. Without a fence, farmers risked uncompensated damage by others’ livestock. From 1880 to 1900, the introduction and near universal adoption of barbed wire greatly reduced the cost of fences, relative to predominant wooden fences, most in counties with the least woodland. Over that period, counties with the least woodland experienced substantial relative increases in settlement, land improvement, land values, and the productivity and production share of crops most in need of protection. This increase in agricultural development appears partly to reflect farmers’ increased ability to protect their land from encroachment. States’ inability to protect this full bundle of property rights on the frontier, beyond providing formal land titles, might have otherwise restricted agricultural development. Creation-Date: 2010 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/11185832/Hornbeck_BarbedWire.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11185832 Template-Type: ReDIF-Paper 1.0 Author-Name: Nicoletti, Giuseppe Author-Name: Ardagna, Silvia Author-Name: Alesina, Alberto Author-Name: Schiantarelli, Fabio Title: Regulation and Investment Abstract: We use newly assembled data on regulation in several sectors of many OECD countries to provide evidence that regulatory reform of product markets is associated with an increase in investment. A component of reform that plays a very important role is entry liberalization, but privatization also has a substantial effect on investment. Sensitivity analysis suggests that our results are robust. Creation-Date: 2005 Publication-Status: Published in Journal of the European Economic Association File-URL: http://dash.harvard.edu/bitstream/handle/1/2579825/Ardagna_RegulationInvestment.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2579825 Template-Type: ReDIF-Paper 1.0 Author-Name: Greenstone, Michael Author-Name: Hornbeck, Richard A. Author-Name: Moretti, Enrico Title: Identifying Agglomeration Spillovers: Evidence from Winners and Losers of Large Plant Openings Abstract: We quantify agglomeration spillovers by estimating the impact of the opening of a large manufacturing plant on the total factor productivity (TFP) of incumbent plants in the same county. We use the location rankings of profit-maximizing firms to compare incumbent plants in the county where the new plant ultimately chose to locate (the “winning county”), with incumbent plants in the runner-up county (the “losing county”). Incumbent plants in winning and losing counties have economically and statistically similar trends in TFP in the 7 years before the new plant opening. Five years after the new plant opening, TFP of incumbent plants in winning counties is 12% higher than TFP of incumbent plants in losing counties. Consistent with some theories of agglomeration economies, this effect is larger for incumbent plants that share similar labor and technology pools with the new plant. We also find evidence of a relative increase in skill-adjusted labor costs in winning counties, indicating that the ultimate effect on profits is smaller than the direct increase in productivity. Creation-Date: 2010 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/11185831/Hornbeck_IdentifyingAgglomeration.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11185831 Template-Type: ReDIF-Paper 1.0 Author-Name: Barro, Robert J. Title: Inflation, the Payments Period, and the Demand for Money Abstract: Creation-Date: 1970 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3451392/Barro_InflationPayments.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3451392 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Dreber, Anna Author-Name: Rand, David G. Author-Name: Nowak, Martin Title: Winners Don't Punish Abstract: Creation-Date: 2008 Publication-Status: Published in Nature File-URL: http://dash.harvard.edu/bitstream/handle/1/2252594/winners%20don't%20punish.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2252594 Template-Type: ReDIF-Paper 1.0 Author-Name: Levin, Jonathan Author-Name: Athey, Susan Title: Information and Competition in U.S. Forest Service Timber Auctions Abstract: This paper analyzes the role of private information in U.S. Forest Service timber auctions. In these auctions, firms bid a per unit price for each timber species. Total bids are computed by multiplying these prices by Forest Service volume estimates, but payments depend on actual volumes harvested. We develop an equilibrium theory for these auctions. We then relate (ex post) data about volume to (ex ante) bids. We show that bidders have private information about volumes of species and use it as predicted by theory. Differences in bidder estimates appear to affect the allocation of tracts, but competition limits information rents. Creation-Date: 2001 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3612768/Athey_InformationCompetition.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3612768 Template-Type: ReDIF-Paper 1.0 Author-Name: Ardagna, Silvia Author-Name: Alesina, Alberto Title: Tales of Fiscal Adjustment Abstract: This paper examines the evidence on fiscal adjustments in OECD countries from the early 1960s to today. The results shed light on the recently observed phenomenon of fiscal tightening that produces (non-Keynesian) expansionary effects. One interpretation is that a serious fiscal tightening increases demand Wealth rises when future tax burdens decline, and when interest rates decline credibility is restored and inflation or default risks abate. Both consumption and investment rise. For this effect to produce an expansion, the tightening must be sizeable and occur after a period of stress when the budget is quickly deteriorating and public debt is building up. Another interpretation emphasizes the supply side. Typically, a fiscal consolidation based on tax increases is short-lived. To be long lasting, it must include cuts in public employment, transfers and government wages. lo be politically possible, such a policy must be supported by trade unions. These measures result in more efficient labour markets and boost the supply side. Based both on statistical evidence and on a detailed analysis often cares of major fiscal adjustment, this article provides cautious support to the supply-side view, without denying a more limited role for the demand-side channel. The definitive version is available at www.blackwell-synergy.com Creation-Date: 1998 Publication-Status: Published in Economic Policy File-URL: http://dash.harvard.edu/bitstream/handle/1/2579822/Ardagna_TalesFiscal.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2579822 Template-Type: ReDIF-Paper 1.0 Author-Name: Ambrus, Attila Author-Name: Argenziano, Rossella Title: Asymmetric Networks in Two-Sided Markets Abstract: This paper investigates pricing decisions and network choices in two-sided markets with network externalities. Consumers are heterogeneous in how much they value the externality. Imposing restrictions on the extent of coordination failure among consumers generates clear qualitative conclusions about equilibrium market configurations. Multiple asymmetric networks can coexist in equilibrium, both in the case of a monopolist network provider and in the case of competing providers. These equilibria have the property that one network is cheaper and larger on one side, while the other network is cheaper and larger on the other side. Product differentiation is endogenized by consumers' network choices. Creation-Date: 2009 Publication-Status: Published in American Economic Journal: Microeconomics File-URL: http://dash.harvard.edu/bitstream/handle/1/3204916/ambrus_asymmetric.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3204916 Template-Type: ReDIF-Paper 1.0 Author-Name: Takahashi, Satoru Author-Name: Ambrus, Attila Title: Multi-Sender Cheap Talk with Restricted State Spaces Abstract: This paper analyzes multi-sender cheap talk when the state space might be restricted, either because the policy space is restricted, or the set of rationalizable policies of the receiver is not the whole space. We provide a necessary and sufficient condition for the existence of a fully revealing perfect Bayesian equilibrium for any state space. We show that if biases are large enough and are not of similar directions, where the notion of similarity depends on the shape of the state space, then there is no fully revealing perfect Bayesian equilibrium. The results suggest that boundedness, as opposed to dimensionality, of the state space plays an important role in determining the qualitative implications of a cheap talk model. We also investigate equilibria that satisfy a robustness property, diagonal continuity. Creation-Date: 2008 Publication-Status: Published in Theoretical Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3200263/ambrus_multi-sender.PDF File-Format: application/pdf Handle: RePEc:hrv:faseco:3200263 Template-Type: ReDIF-Paper 1.0 Author-Name: Ambrus, Attila Title: Coalitional Rationalizability Abstract: This paper investigates how groups or coalitions of players can act in their collective interest in noncooperative normal form games even if equilibrium play is not assumed. The main idea is that each member of a coalition will confine play to a subset of their strategies if it is in their mutual interest to do so. An iterative procedure of restrictions is used to define a noncooperative solution concept, the set of coalitionally rationalizable strategies. The procedure is analogous to iterative deletion of never best response strategies, but operates on implicit agreements by different coalitions. The solution set is a nonempty subset of the rationalizable strategies. Creation-Date: 2006 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3200266/ambrus_coalitional.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3200266 Template-Type: ReDIF-Paper 1.0 Author-Name: Ambrus, Attila Title: Theories of Coalitional Rationality Abstract: This paper generalizes the concept of best response to coalitions of players and offers epistemic definitions of coalitional rationalizability in normal form games. The (best) response of a coalition is defined to be an operator from sets of conjectures to sets of strategies. A strategy is epistemic coalitionally rationalizable if it is consistent with rationality and common certainty that every coalition is rational. A characterization of this solution set is provided for operators satisfying four basic properties. Special attention is devoted to an operator that leads to a solution concept that is generically equivalent to the iteratively defined concept of coalitional rationalizability. Creation-Date: 2009 Publication-Status: Published in Journal of Economic Theory File-URL: http://dash.harvard.edu/bitstream/handle/1/3204917/Ambrus_TheoriesCoalitional.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3204917 Template-Type: ReDIF-Paper 1.0 Author-Name: Barro, Robert J. Title: Determinants of Democracy Abstract: A panel study of over 100 countries from 1960 to 1995 finds that improvements in the standard of living predict increase in democracy, as measured by a subjective indicator of electoral rights. The propensity for democracy rises with per capita GDP, primary schooling, and a smaller gap between male and female primary attainment. For a given standard of living, democaracy tends to fall with urbnization and with a greater reliance on natrual resources. Democracy has little relation to country size but rises with the middle‐class share of income. The apparently strong relation of democracy to colonial heritage mostly disappears when the economic variables are held constant. Similarly, the allowance for these economic variables weakens the interplay between democracy and religious affiliation. However, negative effects from Muslim and non‐religious affiliations remain intact. Creation-Date: 1999 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3451297/Barro_DeterminantsDemocracy.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3451297 Template-Type: ReDIF-Paper 1.0 Author-Name: Barro, Robert J. Author-Name: Sahasakul, Chaipat Title: Average Marginal Tax Rates from Social Security and the Individual Income Tax Abstract: We extend previous estimates of the average marginal tax rate from the federal individual income tax to include social security. Our computations consider the tax rates on employers, employees, and the self-employed; the income that accrues to persons with earnings below the ceiling; and the effective deductibility of employers' social security contributions from workers' taxable income. The next effect of social security on the average marginal tax rate is below .02 until 1966 but then rises to .03 in 1968, .04 in 1973, .05 in 1974, .06 in 1979, and .07 in 1982. Creation-Date: 1986 Publication-Status: Published in Journal of Business -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3451298/Barro_AverageMarginal.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3451298 Template-Type: ReDIF-Paper 1.0 Author-Name: Hart, Oliver D. Author-Name: Moore, John Title: On the Design of Hierarchies: Coordination Versus Specialization Abstract: We consider an economy that has to decide how assets are to be used. Agents have ideas, but these ideas conflict. We suppose that decision‐making authority is determined by hierarchy: each asset has a chain of command, and the most senior person with an idea exercises authority. We analyze the optimal hierarchical structure given that some agents coordinate and other specialize. Among other things, our theory explains why coordinators should typically be senior to specialists and why pyramidal hierarchies may be optimal. Our theory also throws light on the optimal degree of decentralization inside a firm and on firm boundaries. Creation-Date: 2005 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3448676/Hart_OnDesign.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3448676 Template-Type: ReDIF-Paper 1.0 Author-Name: Ichniowski, Casey Author-Name: Freeman, Richard Barry Author-Name: Lauer, Harrison Title: Collective Bargaining Laws, Threat Effects, and the Determination of Police Compensation Abstract: This article demonstrates that state collective bargaining laws are important determinants of union and nonunion public employee compensation. State laws that provide stronger bargaining rights and ensure closure to the bargaining process increase the direct effect of police unions on compensation. Moreover, indirect threat effects on the pay of nonunion police also increase with stronger bargaining laws. In each law category investigated, nonunion police receive most of the compensation premium enjoyed by unionized police. Previous studies that have not adequately controlled for these effects of bargaining laws have therefore underestimated the full effect of public-sector unions on compensation. Creation-Date: 1989 Publication-Status: Published in Journal of Labor Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4631949/Freeman_CollectiveBargaining.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4631949 Template-Type: ReDIF-Paper 1.0 Author-Name: Helpman, Elhanan Author-Name: Antras, Pol Author-Name: Aghion, Philippe Title: Negotiating Free Trade Abstract: We develop a dynamic bargaining model in which a leading country endogenously decides whether to sequentially negotiate free trade agreements with subsets of countries or engage in simultaneous multilateral bargaining with all countries at once. We show how the structure of coalition externalities shapes the choice between sequential and multilateral bargaining, and we identify circumstances in which the grand coalition is the equilibrium outcome, leading to worldwide free trade. A model of international trade is then used to illustrate equilibrium outcomes and how they depend on the structure of trade and protection. Global free trade is not achieved when the political-economy motive for protection is sufficiently large. Furthermore, the model generates both “building bloc” and “stumbling bloc” effects of preferential trade agreements. In particular, we describe an equilibrium in which global free trade is attained only when preferential trade agreements are permitted to form (a building bloc effect), and an equilibrium in which global free trade is attained only when preferential trade agreements are forbidden (a stumbling bloc effect). The analysis identifies conditions under which each of these outcomes emerges. Creation-Date: 2007 Publication-Status: Published in Journal of International Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3351239/aghion_negotiating.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3351239 Template-Type: ReDIF-Paper 1.0 Author-Name: Maskin, Eric S. Author-Name: Grossman, Sanford J. Author-Name: Hart, Oliver D. Title: Unemployment with Observable Aggregate Shocks Abstract: A general equilibrium model of' optimal employment contracts is developed where firms have better information about labor's marginal product than workers. It is optimal for the wage to be tied to the level of employment, to prevent the firm from falsely stating that the marginal product is low and cutting the wage. It is shown that an observed aggregate shock that leads to an interindustry shift in labor demand and that would have no effect on total employment under symmetric information leads to a reduction in employment when firms and workers have asymmetric information. Creation-Date: 1983 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3448840/Hart_UnemploymentObservableAgg.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3448840 Template-Type: ReDIF-Paper 1.0 Author-Name: Helpman, Elhanan Author-Name: Razin, Assaf Title: Dynamics of a Floating Exchange Rate Regime Abstract: We study the full equilibrium dynamics of a two-country world economy with a floating exchange rate, traded and nontraded goods, and explicit modeling of the use of money. The resulting exchange rate equation depends on several details of the economic structure, such as the supply structure and propensities to spend on various goods. Although real exchange rate movements have the usual association with the current account, the ordinary exchange rate may appreciate or depreciate when there are deficits on current account even when the quantities of money do not change. Deviations from purchasing-power parity and the Fisher equation are shown to be the rule rather than the exception. Creation-Date: 1982 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3445095/Helpman_DynamicsFloating.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3445095 Template-Type: ReDIF-Paper 1.0 Author-Name: Helpman, Elhanan Author-Name: Grossman, Gene M. Title: Product Development and International Trade Abstract: We develop a multicountry, dynamic general equilibrium model of product innovation and international trade to study the creation of comparative advantage through research and development and the evolution of world trade over time. In our model, firms must incur resource costs to introduce new products, and forward-looking potential producers conduct R & D and enter the product market whenever profit opportunities exist. Trade has both intraindustry and interindustry components, and the different incentives that face agents in different countries for investment and savings decisions give rise to intertemporal trade. We derive results on the dynamics of trade patterns and trade volume and on the temporal emergence of multinational corporations. Creation-Date: 1989 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3445094/Helpman_ProductDevelopment.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3445094 Template-Type: ReDIF-Paper 1.0 Author-Name: Friedman, Benjamin Morton Title: Optimal Economic Stabilization Policy: An Extended Framework Abstract: This paper outlines an optimization framework which extends the familiar Tinbergen-Theil model in two ways. First, a "piecewise quadratic" replaces the standard quadratic objective function. Second, the time horizon of the optimization becomes, within the context of economic stabilization problems, endogenous to the optimization process itself. The purpose of both extensions is to escape the conceptual restrictiveness of the Tinbergen-Theil structure while preserving the practical convenience of that model for applied policy work. The paper also describes a solution algorithm incorporating these two extensions, and it presents the results of a sample computational application based on the 1957-58 recession. Creation-Date: 1972 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/4554308/Friendman_OptimEconomic.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4554308 Template-Type: ReDIF-Paper 1.0 Author-Name: Freeman, Richard Barry Title: Political Power, Desegregation, and Employment of Black Schoolteachers Abstract: This paper examines the impact of de jure desegregation on education in the South and of increased black voting power on the demand for black schoolteachers in the United States. Because changes in the black share of voters in the post-World War II South are due largely to "exogenous" national laws (the Voting Rights Act of 1965, in particular), the paper provides a unique test of the impact of changes in political power on public decision making. The main finding is that increased black voting power appears to have raised demand for black schoolteachers in the 1960s. There is additional suggestive evidence that black voting power operated in part through election of black officials. The increase in demand due to the changes in voting offset most of the reduction in demand due to desegregation of schooling in the South, averting the potential dire effects of desegregated education on employment of black teachers. Instead of declining, relative employment of blacks in teaching was maintained, and relative incomes rose in the 1950s and 1960s. These results are consistent with the broad "governmental discrimination" hypothesis that much of the economic progress or retrogression of blacks in the United States is explicable in terms of black political power and resultant governmental activity. Creation-Date: 1977 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/4632237/Freeman_PoliticalPower.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4632237 Template-Type: ReDIF-Paper 1.0 Author-Name: Freeman, Richard Barry Title: Longitudinal Analyses of the Effects of Trade Unions Abstract: This paper examines how measurement error biases longitudinal estimates of union effects. It develops numerical examples, statistical models, and econometric estimates which indicate that measurement error is a major problem in longitudinal data sets, so that longitudinal analyses do not provide the research panacea for determining the effects of unionism (or other economic forces) some have suggested. There are three major findings:1) The difference between the cross-section and longitudinal estimates is attributable in large part to random error in the measurement of who changes union status. Given modest errors of measurement, of the magnitudes observed,and a moderate proportion of workers changing union status, also of the magnitudes observed, measurement error biases downward estimated effects of unions by substantial amounts. 2) Longitudinal analysis of the effects of unionism on nonwage and wage outcomes tends to confirm the significant impact of unionism found in cross-section studies, with the longitudinal estimates of both nonwage and wage outcomes lover in the longitudinal analysis than in the cross-section analysis of the same data set. 3) The likely upward bias of cross-section estimates of the effect of unions and the likely downward bias of longitudinal estimates suggests that,under reasonable conditions, the two sets of estimates bound the "true" union impact posited in standard models of what unions do. Creation-Date: 1984 Publication-Status: Published in Journal of Labor Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4631951/Freeman_LongitudinalAnalyses.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4631951 Template-Type: ReDIF-Paper 1.0 Author-Name: Freeman, Richard Barry Title: Working for Nothing: The Supply of Volunteer Labor Abstract: Volunteer activity is work performed without monetary recompense. This article shows that volunteering is a sizeable economic activity in the United States, that volunteers have high skills and opportunity costs of time, that standard labor supply explanations of volunteering account for only a minor part of volunteer behavior, and that many volunteer only when requested to do so. This suggests that volunteering is a "conscience good or activity"-something that people feel morally obligated to do when asked, but which they would just as soon let someone else do. Creation-Date: 1997 Publication-Status: Published in Journal of Labor Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4632239/Freeman_WorkingNothing.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4632239 Template-Type: ReDIF-Paper 1.0 Author-Name: Grossman, Gene M. Author-Name: Helpman, Elhanan Title: Trade Wars and Trade Talks Abstract: Whether governments clash in trade disputes or negotiate over trade agreements, their actions in the international arena reflect political conditions back home. Previous studies of cooperative and non-cooperative trade relations have focused on governments that are immune from political pressures and act as benevolent servants of the public interest. Here we take a first step towards introducing domestic politics into the analysis of international economic relations. We study the interactions between national leaders who are concerned both with providing a high standard of living to the general electorate and collecting campaign contributions from special interest groups. The analysis reveals the determinants of the structure of protection in a non-cooperative trade war and in a cooperative trade agreement. Creation-Date: 1995 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3450062/Helpman_TradeWars.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3450062 Template-Type: ReDIF-Paper 1.0 Author-Name: Freeman, Richard Barry Author-Name: Kleiner, Morris M. Title: The Impact of New Unionization on Wages and Working Conditions Abstract: This study investigates the impact of union organization on the wages and labor practices of establishments newly organized in the 1980s. It uses a research design in which establishments are "paired" with their closest nonunion competitor. It finds that, unionism had only a modest effect on wages in the newly organized plants, which contrasts sharply with the huge union wage impact found in cross-section comparisons of union and nonunion individuals,but unionism substantially alters several personnel practices, creating grievance systems, greater seniority protection, and job bidding and posting. That newly organized establishments adopt union working conditions but grant only modest wage increases suggests that "collective voice" rather than monopoly wage gains is the key to understanding new unionism. Creation-Date: 1990 Publication-Status: Published in Journal of Labor Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4632238/Freeman_ImpactNew.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4632238 Template-Type: ReDIF-Paper 1.0 Author-Name: Friedman, Benjamin Morton Title: Financial Flow Variables and the Short-Run Determination of Long-Term Interest Rates Abstract: Because transactions costs are smaller for allocating new cash flows than for reallocating existing asset holdings, financial flow variables are important determinants of investors' short-run asset demands. The demand-for-bonds equations implied by the resulting "optimal marginal adjustment" model of portfolio behavior constitute the demand side of a structural supply-demand model of the determination of the long-term interest rate. Empirical results, based on demand-for-bonds equations estimated using U.S. data for six major categories of bond market investors, support the optimal marginal adjustment model and show that the associated structural model of interest rate determination, which is restricted by the underlying demand-for-bonds equations, fits the data about as well as do previously developed unrestricted reduced-form term-structure equations. Creation-Date: 1977 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/4554309/Friendman_FinancialFlowV.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4554309 Template-Type: ReDIF-Paper 1.0 Author-Name: Dixit, Avinash Author-Name: Grossman, Gene M. Author-Name: Helpman, Elhanan Title: Common Agency and Coordination: General Theory and Application to Government Policy Making Abstract: We develop a model of common agency with complete information and general preferences with nontransferable utility, and we prove that the principals' Nash equilibrium in truthful strategies implements an efficient action. We apply this theory to the construction of a positive model of public finance, where organized special interests can lobby the government for consumer and producer taxes or subsidies and targeted lump‐sum taxes or transfers. The lobbies use only the nondistorting transfers in their noncooperative equilibrium, but their intergroup competition for transfers turns into a prisoners' dilemma in which the government captures all the gain that is potentially available to the parties. Creation-Date: 1997 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3450061/Helpman_CommonAgency.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3450061 Template-Type: ReDIF-Paper 1.0 Author-Name: Hart, Oliver D. Author-Name: Moore, John Title: Property Rights and the Nature of the Firm Abstract: This paper provides a framework for addressing the question of when transactions should be carried out within a firm and when through the market. Following Grossman and Hart, we identify a firm with the assets that its owners control. We argue that the crucial difference for party 1 between owning a firm (integration) and contracting for a service from another party 2 who owns this firm (nonintegration) is that, under integration, party 1 can selectively fire the workers of the firm (including party 2), whereas under nonintegration he can "fire" (i.e., stop dealing with) only the entire firm: the combination of party 2, the workers, and the firm's assets. We use this idea to study how changes in ownership affect the incentives of employees as well as those of owner-managers. Our frame- work is broad enough to encompass more general control structures than simple ownership: for example, partnerships and worker and consumer cooperatives all emerge as special cases. Creation-Date: 1990 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3448675/Hart_PropertyRights.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3448675 Template-Type: ReDIF-Paper 1.0 Author-Name: Bodie, Zvi Author-Name: Friedman, Benjamin Morton Title: Interest Rate Uncertainty and the Value of Bond Call Protection Abstract: This paper uses a model of the valuation of bonds bearing call options, together with observed market yields on callable bonds, to infer information about the uncertainty associated with interest rate expectations. A dynamic programming solution of the model simultaneously determines both the bond price and the issuer's optimal refunding strategy, given the relevant data describing the bond and the market's expectations of future interest rates. Application of the valuation model in reverse, for quarterly average data for 1969-76, generates a time series representing the uncertainty which the market associated with its expectations of future interest rates during this interval, given the then-prevailing yields on new issues of utility bonds and industrial bonds callable after 5 years and 10 years, respectively. This uncertainty, parameterized as the standard deviation of a truncated normal distribution, fluctuated between 1/2 percent and 3/4 percent between 1969 and early 1974, then rose to sharply higher levels from mid-1974 through mid-1975, and has fluctuated between 3/4 percent and 1 percent since late 1975. Creation-Date: 1978 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/4554310/Friendman_InterestRateUncert.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4554310 Template-Type: ReDIF-Paper 1.0 Author-Name: Hart, Oliver D. Author-Name: Kreps, David M. Title: Price Destabilizing Speculation Abstract: It is sometimes asserted that rational speculative activity must result in more stable prices because speculators buy when prices are low and sell when they are high. This is incorrect. Speculators buy when the chances of price appreciation are high, selling when the chances are low. Speculative activity in an economy in which all agents are rational, have identical priors, and have access to identical information may destabilize prices, under any reasonable definition of destabilization. It takes extremely strong conditions to ensure that speculative activity (of the commodity storage variety) "stabilizes" prices, even in a very weak sense. Creation-Date: 1986 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3448679/Hart_PriceDestabilizing.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3448679 Template-Type: ReDIF-Paper 1.0 Author-Name: Hornbeck, Richard A. Title: Price Discrimination and Smuggling of AIDS Drugs Abstract: Patent-holding pharmaceutical companies are shown to be imperfectly able to charge differential prices for AIDS drugs due to the potential for black market exchange. Thus, greater segmentation in the international market through additional barriers to smuggling would induce firms to charge lower prices for AIDS drugs in poorer countries. Without these additional barriers, widespread drug distribution through mandated lower prices or weakened patent protection in the developing world would result in smuggling, undercutting demand in developed markets and reducing firms’ research incentives. By contrast, further market segmentation would allow policy makers to go beyond the induced price cuts and remove patent protection in many markets where the benefits to increased distribution would likely outweigh the losses to research incentives. Creation-Date: 2005 Publication-Status: Published in Topics in Economic Analysis and Policy File-URL: http://dash.harvard.edu/bitstream/handle/1/11186012/Hornbeck_PriceDiscrimination.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11186012 Template-Type: ReDIF-Paper 1.0 Author-Name: Field, Erica Marie Title: Property Rights and Investment in Urban Slums Abstract: This paper examines the effect of changes in tenure security on residential investment in urban squatter neighborhoods. To address the endogeneity of property rights, I make use of variation in ownership status induced by a nation-wide titling program in Peru. In a difference-in-difference analysis, I compare the change in housing investment before and after the program among participating households to the change in investment among two samples of non-participants. My results indicate that strengthening property rights in urban slums has a significant effect on residential investment: the rate of housing renovation rises by more than two-thirds of the baseline level. The bulk of the increase is financed without the use of credit, indicating that changes over time reflect an increase in investment incentives related to lower threat of eviction. Creation-Date: 2005 Publication-Status: Published in Journal of the European Economic Association File-URL: http://dash.harvard.edu/bitstream/handle/1/3634150/Field_PropertyRights.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3634150 Template-Type: ReDIF-Paper 1.0 Author-Name: Shannon, Chris Author-Name: Strzalecki, Tomasz Author-Name: Rigotti, Luca Title: Subjective Beliefs and Ex Ante Trade Abstract: We study a definition of subjective beliefs applicable to preferences that allow for the perception of ambiguity, and provide a characterization of such beliefs in terms of market behavior. Using this definition, we derive necessary and sufficient conditions for the efficiency of ex ante trade and show that these conditions follow from the fundamental welfare theorems. When aggregate uncertainty is absent, our results show that full insurance is efficient if and only if agents share some common subjective beliefs. Our results hold for a general class of convex preferences, which contains many functional forms used in applications involving ambiguity and ambiguity aversion. We show how our results can be articulated in the language of these functional forms, confirming results existing in the literature, generating new results, and providing a useful tool for applications. Creation-Date: 2008 Publication-Status: Published in Econometrica -Evanston Ill- File-URL: http://dash.harvard.edu/bitstream/handle/1/3637104/Strzalecki_SubjectiveBeliefs.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3637104 Template-Type: ReDIF-Paper 1.0 Author-Name: Barro, Robert J. Title: An Efficiency-Wage Theory of the Weather Abstract: No abstract provided. Creation-Date: 1989 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3451295/Barro_AnEfficiency-WageTheory.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3451295 Template-Type: ReDIF-Paper 1.0 Author-Name: Barro, Robert J. Title: Government Spending in a Simple Model of Endogeneous Growth Abstract: One strand of endogenous-growth models assumes constant returns to a broad concept of capital. I extend these models to include tax- financed government services that affect production or utility. Growth and saving rates fall with an increase in utility-type expenditures; the two rates rise initially with productive government expenditures but subsequently decline. With an income tax, the decentralized choices of growth and saving are "too low," but if the production function is Cobb-Douglas, the optimizing government still satisfies a natural condition for productive efficiency. Empirical evidence across countries supports some of the hypotheses about government and growth. Creation-Date: 1990 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3451296/Barro_GovernmentSpending.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3451296 Template-Type: ReDIF-Paper 1.0 Author-Name: Barro, Robert J. Author-Name: Friedman, James W. Title: On Uncertain Lifetimes Abstract: This paper contrasts consumer choice under uncertain lifetimes with the behavior that would arise if each individual's lifetime were announced at birth. In a model that includes life insurance and excludes investments in human capital, the expected utility under uncertain lifetimes exceeds that under known lifetimes when the latter expectation is based on preannouncement survival probabilities. This conclusion emerges, first, because the model without human capital contains no planning benefits from knowledge of the horizon and, second, because the prior announcement of lifetimes forces risk-averse consumers to undertake an extra gamble that they could otherwise avoid by using life insurance. Creation-Date: 1977 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3451301/Barro_OnUncertain.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3451301 Template-Type: ReDIF-Paper 1.0 Author-Name: Barro, Robert J. Title: Inflationary Finance and the Welfare Cost of Inflation Abstract: This paper applies previous theoretical and empirical results on inflation and demand for money to a study of inflationary finance and the welfare cost of inflation. The amount of revenue generated by a steady inflation is derived as a function of the inflation rate and some underlying parameters. Empirically, the revenue-maximizing rate is on the order of 140 percent per month with the corresponding revenue approximating 15 percent of national income. It is argued that hyper-inflations become unstable when the revenue-maximizing rate is exceeded. Because inflation leads to higher transaction costs (resulting from greater payment frequencies and reduced use of "money" as a payments medium), there is a net social cost attached to inflationary finance. The model implies that marginal collection costs of inflationary finance exceed 50 percent for all positive rates of inflation-hence, alternative means of raising revenue should be socially preferable. The analysis also provides estimates of the social gain from moving to the optimum quantity of money as 1-3 percent of income. Creation-Date: 1972 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3451393/Barro_InflationaryFinance.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3451393 Template-Type: ReDIF-Paper 1.0 Author-Name: La Porta, Rafael Author-Name: Lopez-de-Silanes, Florencio Author-Name: Pop-Eleches, Cristian Author-Name: Shleifer, Andrei Title: Judicial Checks and Balances Abstract: In the Anglo‐American constitutional tradition, judicial checks and balances are often seen as crucial guarantees of freedom. Hayek distinguishes two ways in which the judiciary provides such checks and balances: judicial independence and constitutional review. We create a new database of constitutional rules in 71 countries that reflect these provisions. We find strong support for the proposition that both judicial independence and constitutional review are associated with greater freedom. Consistent with theory, judicial independence accounts for some of the positive effect of common‐law legal origin on measures of economic freedom. The results point to significant benefits of the Anglo‐American system of government for freedom. Creation-Date: 2004 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3451311/Shleifer_JudicialChecks.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3451311 Template-Type: ReDIF-Paper 1.0 Author-Name: Gennaioli, Nicola Author-Name: Shleifer, Andrei Title: The Evolution of Common Law Abstract: We present a model of lawmaking by appellate courts in which judges influenced by policy preferences can distinguish precedents at some cost. We find a cost and a benefit of diversity of judicial views. Policy‐motivated judges distort the law away from efficiency, but diversity of judicial views also fosters legal evolution and increases the law’s precision. We call our central finding the Cardozo theorem: even when judges are motivated by personal agendas, legal evolution is, on average, beneficial because it washes out judicial biases and renders the law more precise. Our paper provides a theoretical foundation for the evolutionary adaptability of common law. Creation-Date: 2007 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3451305/Shleifer_EvolutionCommon.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3451305 Template-Type: ReDIF-Paper 1.0 Author-Name: Ardagna, Silvia Title: Fiscal Policy Composition, Public Debt, and Economic Activity Abstract: This paper uses a dynamic general equilibrium model i) to investigate how changes to different spending and revenue items of the budget affect economic activity and public finance; and ii) to evaluate the welfare costs of alternative fiscal policy maneuvers. The paper shows that,unlike an increase in government purchases of final goods, an increase in public employment and transfers can have a contractionary effect on the economy in the same way as a rise in tax rates. It also suggests that fiscal adjustments implemented by cutting spending items increase households' welfare and are more effective in reducing the primary deficit and public debt than are increases in tax rates. Creation-Date: 2001 Publication-Status: Published in Public Choice File-URL: http://dash.harvard.edu/bitstream/handle/1/2579823/Ardagna_FiscalPolicy00.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2579823 Template-Type: ReDIF-Paper 1.0 Author-Name: Ardagna, Silvia Title: Fiscal Policy in Unionized Labor Markets Abstract: This paper investigates the effects of fiscal policy on economic activity, public finances, welfare, and income distribution in a dynamic general equilibrium model with a unionized labor market. The paper shows that debt-financed increases of public employment, wages of public sector employees, unemployment benefits, and labor taxes put pressure on unions’ wage claims, leading to higher private sector wages, lower employment, capital, and output. In addition, increases of public employment, public wages and unemployment benefits increase workers’ utility relative to the pre-policy change equilibrium during the transition, but not in the long-run. Instead, workers’ utility decreases at any time horizon when labor taxes increase. Capitalists always benefit from increases in taxes on labor but their welfare decreases when public spending goes up. Finally, the paper investigates the extent to which the way the government balances its budget affects these results. Creation-Date: 2007 Publication-Status: Published in Journal of Economic Dynamics and Control File-URL: http://dash.harvard.edu/bitstream/handle/1/2580048/Ardagna_FiscalPolicy.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2580048 Template-Type: ReDIF-Paper 1.0 Author-Name: Barro, Robert J. Title: Monopoly and Contrived Depreciation Abstract: No abstract provided. Creation-Date: 1972 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3451394/Barro_MonopolyContrived.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3451394 Template-Type: ReDIF-Paper 1.0 Author-Name: Barro, Robert J. Title: Are Government Bonds Net Wealth? Abstract: The assumption that government bonds are perceived as net wealth by the private sector is crucial in demonstrating real effects of shifts in the stock of public debt. In particular, the standard effects of "expansionary" fiscal policy on aggregate demand hinge on this assumption. Government bonds will be perceived as net wealth only if their value exceeds the capitalized value of the implied stream of future tax liabilities. This paper considers the effects on bond values and tax capitalization of finite lives, imperfect private capital markets, a government monopoly in the production of bond "liquidity services," and uncertainty about future tax obligations. It is shown within the context of an overlapping-generations model that finite lives will not be relevant to the capitalization of future tax liabilities so long as current generations are connected to future generations by a chain of operative intergenerational transfers (either in the direction from old to young or in the direction from young to old). Applications of this result to social security and to other types of imposed intergenerational transfer schemes are also noted. In the presence of imperfect private capital markets, government debt issue will increase net wealth if the government is more efficient, at the margin, than the private market in carrying out the loan process. Similarly, if the government has monopoly power in the production of bond "liquidity services," then public debt issue will raise net wealth. Finally, the existence of uncertainty with respect to individual future tax liabilities implies that public debt issue may increase the overall risk contained in household balance sheets and thereby effectively reduce household wealth. Creation-Date: 1974 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3451399/Barro_AreGovernment.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3451399 Template-Type: ReDIF-Paper 1.0 Author-Name: Gennaioli, Nicola Author-Name: Shleifer, Andrei Title: Judicial Fact Discretion Abstract: Following legal realists, we model the causes and consequences of trial judges exercising discretion in finding facts in a trial. 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, distorts the number and severity of accidents, and generates welfare losses. It also encourages litigants to take extreme positions in court and raises the incidence of litigation relative to settlement, especially in new and complex disputes for which the law is unsettled. Creation-Date: 2008 Publication-Status: Published in Journal of Legal Studies -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3451304/Shleifer_JudicialFact.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3451304 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Title: Implementation Cycles Abstract: The paper describes an artificial economy in which firms in different sectors make inventions at different times but innovate simultaneously to take advantage of high aggregate demand. In turn, high demand results from simultaneous innovation in many sectors. The economy exhibits multiple cyclical equilibria, with entrepreneurs' expectations determining which equilibrium obtains. These equilibria are Pareto ranked, and the most profitable equilibrium need not be the most efficient. While an informed stabilization policy can sometimes raise welfare, if large booms are necessary to cover fixed costs of innovation, stabilization policy can stop all technological progress. Creation-Date: 1986 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3451303/Shleifer_ImplementationCycles.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3451303 Template-Type: ReDIF-Paper 1.0 Author-Name: Werning, Ivan Author-Name: Farhi, Emmanuel Title: Inequality and Social Discounting Abstract: We explore steady-state inequality in an intergenerational model with altruistically linked individuals who experience privately observed taste shocks. When the welfare function depends only on the initial generation, efficiency requires immiseration: inequality grows without bound and everyone’s consumption converges to zero. We study other efficient allocations in which the welfare function values future generations directly, placing a positive but vanishing weight on their welfare. The social discount factor is then higher than the private one, and for any such difference we find that consumption exhibits mean reversion and that a steady-state, cross-sectional distribution for consumption and welfare exists, with no one trapped at misery. Creation-Date: 2007 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/3451391/Farhi_InequalitySocial.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3451391 Template-Type: ReDIF-Paper 1.0 Author-Name: Barro, Robert J. Title: Perceived Wealth in Bonds and Social Security and the Ricardian Equivalence Theorem: Reply to Feldstein and Buchanan Abstract: Creation-Date: 1976 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3612770/Barro_PerceivedWealthREPLY.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3612770 Template-Type: ReDIF-Paper 1.0 Author-Name: Barro, Robert J. Title: Unanticipated Money, Output, and the Price Level in the United States Abstract: Earlier analysis of unanticipated money growth is extended to output (GNP) and the price level (GNP deflator) for recent U.S. experience. Price level determination is more complicated than output determination, because both anticipated and unanticipated money movements are involved. Empirical results accord well with the model-notably, they support the key hypothesis of a one-to-one, contemporaneous link be- tween anticipated money and the price level. Precise estimates are obtained for the lagged responses of output and prices to unanticipated money movements. Cross-equation comparisons indicate that the price response to unanticipated money movements has a longer lag than the output response. A form of lagged adjustment in money demand can account for this difference. The forecasts for inflation average 5.5 percent per year for 1977-80. Creation-Date: 1978 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3450988/Barro_UnanticipatedMoney.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3450988 Template-Type: ReDIF-Paper 1.0 Author-Name: Barro, Robert J. Title: On the Determination of the Public Debt Abstract: A public debt theory is constructed in which the Ricardian invariance theorem is valid as a first-order proposition but where the dependence of excess burden on the timing of taxation implies an optimal time path of debt issue. A central proposition is that deficits are varied in order to maintain expect ed constancy in tax rates. This behavior implies a positive effect on debt issue of temporary increases in government spending (as in wartime) a countercyclical response of debt to temporary income movements, and a one-to-one effect of expected inflation on nominal debt growth. Debt issue would be invariant with the outstanding debt-income ratio and, except for a minor effect, with the level of government spending. Hypotheses are tested on U.S. data since World WXar1. Results are basically in accord Fith the theory. It also turns out that a small set of explanatory variables can account for the principal movements in interest-bearing federal debt since the 1920s. Creation-Date: 1979 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3451400/Barro_OnDetermination.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3451400 Template-Type: ReDIF-Paper 1.0 Author-Name: Ashenfelter, Orley Author-Name: Rosen, Sherwin Author-Name: Freeman, Richard Barry Author-Name: McElroy, Marjorie B. Title: H. Gregg Lewis Memorial Comments Abstract: Creation-Date: 1994 Publication-Status: Published in Journal of Labor Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4631950/Freeman_HGreggLewis.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4631950 Template-Type: ReDIF-Paper 1.0 Author-Name: Cooper, Richard Newell Title: The Balance of Payments in Review Abstract: No abstract provided. Creation-Date: 1966 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/11857764/Cooper_BalancePayments[1].pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11857764 Template-Type: ReDIF-Paper 1.0 Author-Name: Grossman, Sanford J. Author-Name: Hart, Oliver D. Title: The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration Abstract: Our theory of costly contracts emphasizes that contractual rights can be of two types: specific rights and residual rights. When it is costly to list all specific rights over assets in the contract, it may be optimal to let one party purchase all residual rights. Ownership is the purchase of these residual rights. When residual rights are purchased by one party, they are lost by a second party, and this inevitably creates distortions. Firm 1 purchases firm 2 when firm 1's control increases the productivity of its management more than the loss of control decreases the productivity of firm 2's management. Creation-Date: 1986 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3450060/Hart_CostsBenefits.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3450060 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Tirole, Jean Title: Formal and Real Authority in Organizations Abstract: This paper develops a theory of the allocation of formal authority (the right to decide) and real authority (the effective control over decisions) within organizations, and it illustrates how a formally integrated structure can accommodate various degrees of "real" integration. Real authority is determined by the structure of information, which in turn depends on the allocation of formal authority. An increase in an agent's real authority promotes initiative but results in a loss of control for the principal. After spelling out (some of) the main determinants of the delegation of formal authority within organizations, the paper examines a number of factors that increase the subordinates' real authority in a formally integrated structure: overload, lenient rules, urgency of decision, reputation, performance measurement, and multiplicity of superiors. Finally, the amount of communication in an organization is shown to depend on the allocation of formal authority. Creation-Date: 1997 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/4554125/Aghion_FormalRealA.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4554125 Template-Type: ReDIF-Paper 1.0 Author-Name: Barro, Robert J. Title: Output Effects of Government Purchases Abstract: The theoretical analysis focuses on the distinction between temporary and permanent movements in government purchases. Under plausible conditions, the temporary case involves an output response that is positive, less than one-to-one with the change in government purchases, and larger than that generated by an equal-sized, but permanent, shift in purchases. The equilibrium real rate of return rises in the temporary case, but changes little in the permanent one. Defense purchases are divided empirically into "permanent" and "temporary" components by considering the role of (temporary) wars. No temporary shifts in nondefense purchases were isolated. Empirical results verify an expansionary output effect for temporary purchases that exceeds that of permanent purchases. The results for some other expectational hypotheses are found to be generally sup- portive of the theory. Creation-Date: 1981 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3451294/Barro_OutputEffects.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3451294 Template-Type: ReDIF-Paper 1.0 Author-Name: Ebert, Jane E. J. Author-Name: Gilbert, Daniel Todd Author-Name: Wilson, Timothy D. Title: Forecasting and Backcasting: Predicting the Impact of Events on the Future Abstract: In many choices they make—-for example, choosing between a movie and a play or deciding whether to attend a sports game shortly before a birthday party—-consumers are guided by how they expect an event will make them feel. They may predict their feelings by forecasting (imagining their feelings when the impacting event occurs, then considering how those feelings might change over time) or by backcasting (imagining their feelings in a future period, then considering how those feelings might be different were the impacting event to happen). Four studies show that backcasters expect events to have a greater hedonic impact than do forecasters, largely because they think more about the impacting event. The studies also reveal that backcasters consider other information that forecasters tend to ignore. Creation-Date: 2009 Publication-Status: Published in Journal of Consumer Research File-URL: http://dash.harvard.edu/bitstream/handle/1/3549374/Gilbert_ForecastingBackcasting.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3549374 Template-Type: ReDIF-Paper 1.0 Author-Name: Cooper, Richard Newell Title: William Pitt, Taxation, and the Needs of War Abstract: No abstract provided. Creation-Date: 1982 Publication-Status: Published in Journal of British Studies File-URL: http://dash.harvard.edu/bitstream/handle/1/34881478/Cooper_WilliamPitt.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34881478 Template-Type: ReDIF-Paper 1.0 Author-Name: Imbens, Guido Author-Name: Abadie, Alberto Title: On the Failure of the Bootstrap for Matching Estimators Abstract: Matching estimators are widely used in empirical economics for the evaluation of programs or treatments. Researchers using matching methods often apply the bootstrap to calculate the standard errors. However, no formal justification has been provided for the use of the bootstrap in this setting. In this article, we show that the standard bootstrap is, in general, not valid for matching estimators, even in the simple case with a single continuous covariate where the estimator is root-N consistent and asymptotically normally distributed with zero asymptotic bias. Valid inferential methods in this setting are the analytic asymptotic variance estimator of Abadie and Imbens (2006a) as well as certain modifications of the standard bootstrap, like the subsampling methods in Politis and Romano (1994). Creation-Date: 2008 Publication-Status: Published in Econometrica: journal of the Econometric Society File-URL: http://dash.harvard.edu/bitstream/handle/1/3043415/imbens_bootstrap.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3043415 Template-Type: ReDIF-Paper 1.0 Author-Name: Barro, Robert J. Title: Futures Markets and the Fluctuations in Inflation, Monetary Growth, and Asset Returns Abstract: Inflation and nominal interest rates have been volatile in recent years. Futures contracts in price indices would help in this environment by enhancing information about prices and by providing a convenient means for people to hedge against inflation. There is some evidence that the availability of these instruments would encourage investment and reduce the mean real rate of return on long-term bonds. Indexed bonds--which are now significant in Britain--serve a similar purpose. IN the absence of such bonds, there would be a market for price-index futures, although the volume of trading would probably be modest. Creation-Date: 1986 Publication-Status: Published in Journal of Business -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3475682/Barro_FuturesMarkets.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3475682 Template-Type: ReDIF-Paper 1.0 Author-Name: Barberis, Nicholas Author-Name: Boycko, Maxim Author-Name: Shleifer, Andrei Author-Name: Tsukanova, Natalia Title: How Does Privatization Work? Evidence from the Russian Shops Abstract: We use a survey of 452 Russian shops, most of which were privatized between 1992 and 1993, to measure the importance of alternative channels through which privatization promotes restructuring. Restructuring is measured as major renovation, a change in suppliers, an increase in hours stores stay open, and layoffs. There is strong evidence that the presence of new owners and new managers raises the likelihood of restructuring. In contrast, there is no evidence that equity incentives of old managers promote restructuring. The evidence points to the critical role new human capital plays in economic transformation. Creation-Date: 1996 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3451306/Shleifer_HowDoesPrivatization.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3451306 Template-Type: ReDIF-Paper 1.0 Author-Name: Weitzman, Martin L. Title: Utility Analysis and Group Behavior: An Empirical Study Abstract: Creation-Date: 1965 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3710799/Weitzman_UtilityAnalysis.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3710799 Template-Type: ReDIF-Paper 1.0 Author-Name: Murphy, Kevin M. Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert W. Title: Industrialization and the Big Push Abstract: This paper explores Rosenstein-Rodan's idea that simultaneous industrialization of many sectors of the economy can be profitable for them all even when no sector can break even industrializing alone. We analyze this idea in the context of an imperfectly competitive economy with aggregate demand spillovers and interpret the big push into industrialization as a move from a bad to a good equilibrium. We present three mechanisms for generating a big push and discuss their relevance for less developed countries. Creation-Date: 1989 Publication-Status: Published in Journal of Political Economy -Chicago- File-URL: http://dash.harvard.edu/bitstream/handle/1/3606235/Shleifer_IndustralizationBigPush.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3606235 Template-Type: ReDIF-Paper 1.0 Author-Name: Mark, Aguiar Author-Name: Gopinath, Gita Title: Fire-Sale Foreign Direct Investment and Liquidity Crises Abstract: In placing capital market imperfections at the center of emerg- ing market crises, the theoretical literature has associated a liquidity crisis with low foreign investment and the exit of investors from the crisis economy. However, a liquidity crisis is equally consistent with an inflow of foreign capital in the form of mergers and acquisitions (M&A). To support this hypothesis, we use a firm-level data set to show that foreign acquisitions increased by 91% in East Asia between 1996 and 1998, while intranational merger activity declined. Firm liquidity plays a significant and sizable role in explaining both the increase in foreign acquisitions and the decline in the price of acquisitions during the crisis. This contrasts with the role of liquidity in noncrisis years and in noncrisis economies in the region. This effect is also most prominent in the tradable sector. Quanti- tatively, the observed decline in liquidity can explain 25% of the increase in foreign acquisition activity in the tradable sectors. The nature of M&A activity supports liquidity-based explanations of the East Asian crisis and provides an explanation for the puzzling stability of FDI inflows during the crises. Creation-Date: 2005 Publication-Status: Published in Review of Economics and Statistics File-URL: http://dash.harvard.edu/bitstream/handle/1/3634155/Gopinath_Fire-saleForeign.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3634155 Template-Type: ReDIF-Paper 1.0 Author-Name: Rand, David Gertler Author-Name: Dreber, Anna Author-Name: Fudenberg, Drew Author-Name: Ellingson, Tore Author-Name: Nowak, Martin A. Title: Positive Interactions Promote Public Cooperation Abstract: The public goods game is the classic laboratory paradigm for studying collective action problems. Each participant chooses how much to contribute to a common pool that returns benefits to all participants equally. The ideal outcome occurs if everybody contributes the maximum amount, but the self-interested strategy is not to contribute anything. Most previous studies have found punishment to be more effective than reward for maintaining cooperation in public goods games. The typical design of these studies, however, represses future consequences for today’s actions. In an experimental setting, we compare public goods games followed by punishment, reward, or both in the setting of truly repeated games, in which player identities persist from round to round. We show that reward is as effective as punishment for maintaining public cooperation and leads to higher total earnings. Moreover, when both options are available, reward leads to increased contributions and payoff, whereas punishment has no effect on contributions and leads to lower payoff. We conclude that reward outperforms punishment in repeated public goods games and that human cooperation in such repeated settings is best supported by positive interactions with others. Creation-Date: 2009 Publication-Status: Published in Science File-URL: http://dash.harvard.edu/bitstream/handle/1/3804483/Nowak_PositiveInteractions.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3804483 Template-Type: ReDIF-Paper 1.0 Author-Name: Kremer, Michael R. Title: “Measuring Poverty”: Discussion Abstract: Creation-Date: 2005 Publication-Status: Published in Review of Economics and Statistics File-URL: http://dash.harvard.edu/bitstream/handle/1/3716464/Kremer_MeasuringPoverty.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3716464 Template-Type: ReDIF-Paper 1.0 Author-Name: Carroll, Gabriel D. Author-Name: Choi, James J. Author-Name: Laibson, David I. Author-Name: Madrian, Brigitte Author-Name: Metrick, Andrew Title: Optimal Defaults and Active Decisions Abstract: Defaults often have a large influence on consumer decisions. We identify an overlooked but practical alternative to defaults: requiring individuals to make an explicit choice for themselves. We study such “active decisions” in the context of 401(k) saving. We find that compelling new hires to make active decisions about 401(k) enrollment raises the initial fraction that enroll by 28 percentage points relative to a standard opt-in enrollment procedure, producing a savings distribution three months after hire that would take 30 months to achieve under standard enrollment. We also present a model of 401(k) enrollment and derive conditions under which the optimal enrollment regime is automatic enrollment (i.e., default enrollment), standard enrollment (i.e., default non-enrollment), or active decisions (i.e., no default and compulsory choice). Active decisions are optimal when consumers have a strong propensity to procrastinate and savings preferences are highly heterogeneous. Financial illiteracy, however, favors default enrollment over active decision enrollment. Creation-Date: 2009 Publication-Status: Published in Quarterly Journal of Economics -Cambridge Massachusetts- File-URL: http://dash.harvard.edu/bitstream/handle/1/4686776/Laibson_OptimalDefaults.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4686776 Template-Type: ReDIF-Paper 1.0 Author-Name: Taubinsky, Dmitry Author-Name: Morris, Carrie L. Author-Name: Schuldt, Jonathan P. Author-Name: Chabris, Christopher F Author-Name: Laibson, David I. Title: The Allocation of Time in Decision-Making Abstract: We study the allocation of time across decision problems. If a decision-maker (1) has noisy estimates of value, (2) improves those estimates the longer he or she analyzes a choice problem, and (3) allocates time optimally, then the decision-maker should spend less time choosing when the difference in value between two options is relatively large. To test this prediction we ask subjects to make 27 binary incentive-compatible intertemporal choices, and measure response time for each decision. Our time allocation model explains 54% of the variance in average decision time. These results support the view that decisionmaking is a cognitively costly activity that uses time as an input allocated according to cost-benefit principles. Creation-Date: 2009 Publication-Status: Published in Journal- European Economic Association File-URL: http://dash.harvard.edu/bitstream/handle/1/4481495/Laibson_AllocationTime.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4481495 Template-Type: ReDIF-Paper 1.0 Author-Name: Laibson, David I. Author-Name: Agarwal, Sumit Author-Name: Driscoll, John C. Author-Name: Gabaix, Xavier Title: The Age of Reason: Financial Decisions over the Life-Cycle with Implications for Regulation Abstract: Many consumers make poor financial choices and older adults are particularly vulnerable to such errors. About half of the population between ages 80 and 89 either has dementia or a medical diagnosis of “cognitive impairment without dementia.” We study lifecycle patterns in financial mistakes using a proprietary database that measures ten different types of credit behavior. Financial mistakes include suboptimal use of credit card balance transfer offers, misestimation of the value of one’s house, and excess interest rate and fee payments. In a cross-section of prime borrowers, middle-aged adults make fewer financial mistakes than younger and older adults. We conclude that financial mistakes follow a U-shaped pattern, with the cost-minimizing performance occurring around age 53. We analyze regulatory regimes that may help individuals avoid making financial mistakes. Some of these regimes are designed to address the particular challenges faced by older adults, but much of our discussion is relevant for all vulnerable populations. We discuss disclosure, nudges, financial driving licenses, advanced directives, fiduciaries, asset safe harbors, ex-post and ex-ante regulatory oversight. Finally, we pose seven questions for future research on cognitive limitations and associated policy responses. Creation-Date: 2009 Publication-Status: Published in Brookings Papers on Economic Activity File-URL: http://dash.harvard.edu/bitstream/handle/1/4554335/Laibson_AgeofReason.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4554335 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia D. Author-Name: Katz, Lawrence F. Title: The Future of Inequality: The Other Reason Education Matters So Much Abstract: Creation-Date: 2009 Publication-Status: Published in Aspen Institute Congressional Program File-URL: http://dash.harvard.edu/bitstream/handle/1/4341691/GoldenKatz_EdIneq.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4341691 Template-Type: ReDIF-Paper 1.0 Author-Name: Laibson, David I. Author-Name: Choi, James J. Author-Name: Madrian, Brigitte Title: Reducing the Complexity Costs of 401(k) Participation Through Quick Enrollment 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. Creation-Date: 2009 Publication-Status: Published in Developments in the Economics of Aging File-URL: http://dash.harvard.edu/bitstream/handle/1/4686772/Laibson_ComplexityCost401K.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4686772 Template-Type: ReDIF-Paper 1.0 Author-Name: Abdulkadiroglu, Atila Author-Name: Pathak, Parag Abishek Author-Name: Roth, Alvin E. Title: Strategy-Proofness Versus Efficiency in Matching with Indifferences: Redesigning the NYC High School Match Abstract: The design of the New York City (NYC) high school match involved trade-offs among efficiency, stability, and strategy-proofness that raise new theoretical questions. We analyze a model with indifferences -- ties -- in school preferences. Simulations with field data and the theory favor breaking indifferences the same way at every school -- single tiebreaking -- in a student-proposing deferred acceptance mechanism. Any inefficiency associated with a realized tiebreaking cannot be removed without harming student incentives. Finally, we empirically document the extent of potential efficiency loss associated with strategy-proofness and stability, and direct attention to some open questions. (JEL C78, D82, I21) Creation-Date: 2009 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/11077572/Roth_MatchingIndifferencesNYC.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11077572 Template-Type: ReDIF-Paper 1.0 Author-Name: Friedman, Benjamin Morton Title: Widening Inequality Combined with Modest Growth Abstract: The author argues that inequality, combined with only modest growth, can have grave moral consequences. History suggests that, in the past, a rising standard of living has promoted tolerance for others, commitment to economic opportunity, and democracy. But stagnating incomes due to inequality can lead to the opposite outcomes. The nation’s response to immigration is a good example, says the author. Creation-Date: 2009 Publication-Status: Published in Challenge File-URL: http://dash.harvard.edu/bitstream/handle/1/4554326/1275078466-Widening%20Equality%20Combined%20with%20Modest%20Growth.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4554326 Template-Type: ReDIF-Paper 1.0 Author-Name: Choi, James Author-Name: Madrian, Brigitte Author-Name: Laibson, David I. Title: Why Does the Law of One Price Fail? An Experiment on Index Mutual Funds Abstract: We evaluate why individuals invest in high-fee index funds. In our experiments, subjects each allocate $10,000 across four S&P 500 index funds and are rewarded for their portfolio’s subsequent return. Subjects overwhelmingly fail to minimize fees. We reject the hypothesis that subjects buy high-fee index funds because of bundled non-portfolio services. Search costs for fees matter, but even when we eliminate these costs, fees are not minimized. Instead, subjects place high weight on annualized returns since inception. Fees paid decrease with financial literacy. Interestingly, subjects who choose high-fee funds sense they are making a mistake. Creation-Date: 2010 Publication-Status: Published in Review of Financial Studies File-URL: http://dash.harvard.edu/bitstream/handle/1/4686775/Laibson_OnePriceFail.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4686775 Template-Type: ReDIF-Paper 1.0 Author-Name: Metrick, Andrew Author-Name: Laibson, David I. Author-Name: Choi, James J. Author-Name: Madrian, Brigitte Title: Reinforcement Learning and Savings Behavior Abstract: We show that individual investors over-extrapolate from their personal experience when making savings decisions. Investors who experience particularly rewarding outcomes from saving in their 401(k)—a high average and/or low variance return—increase their 401(k) savings rate more than investors who have less rewarding experiences with saving. This finding is not driven by aggregate time-series shocks, income effects, rational learning about investing skill, investor fixed effects, or time-varying investor-level heterogeneity that is correlated with portfolio allocations to stock, bond, and cash asset classes. We discuss implications for the equity premium puzzle and interventions aimed at improving household financial outcomes. Creation-Date: 2009 Publication-Status: Published in Journal of Finance -New York- File-URL: http://dash.harvard.edu/bitstream/handle/1/4686777/Laibson_ReinforcementLearning.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4686777 Template-Type: ReDIF-Paper 1.0 Author-Name: Niederle, Muriel Author-Name: Roth, Alvin E. Title: Market Culture: How Rules Governing Exploding Offers Affect Market Performance Abstract: Many markets encounter difficulty maintaining a thick marketplace because they experience transactions made at dispersed times. To address such problems, many markets try to establish norms concerning when offers can be made, accepted, and rejected. Examining such markets suggests it is difficult to establish a thick market at an efficient time if firms can make exploding offers, and workers cannot renege on early commitments. Laboratory experiments allow us to isolate the effects of exploding offers and binding acceptances. In a simple experiment, we find inefficient early contracting when firms can make exploding offers and applicants' acceptances are binding. (JEL C91, D40, D81) Creation-Date: 2009 Publication-Status: Published in American Economic Journal Microeconomics File-URL: http://dash.harvard.edu/bitstream/handle/1/11077571/Roth_MarketCultureForthcoming.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11077571 Template-Type: ReDIF-Paper 1.0 Author-Name: Laibson, David I. Author-Name: Mollerstrom, Johanna Britta Title: Capital Flows, Consumption Booms and Asset Bubbles: A Behavioural Alternative to the Savings Glut Hypothesis Abstract: Bernanke (2005) hypothesized that a “global savings glut” was causing large trade imbalances. However, we show that the global savings rates did not show a robust upward trend during the relevant period. Moreover, if there had been a global savings glut there should have been a large investment boom in the countries that imported capital. Instead, those countries experienced consumption booms. National asset bubbles explain the international imbalances. The bubbles raised consumption, resulting in large trade deficits. In a sample of 18 OECD countries plus China, movements in home prices alone explain half of the variation in trade deficits. Creation-Date: 2010 Publication-Status: Published in Economic Journal -London- File-URL: http://dash.harvard.edu/bitstream/handle/1/4686766/Laibson_CapitalFlows.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4686766 Template-Type: ReDIF-Paper 1.0 Author-Name: Grosskopf, Brit Author-Name: Roth, Alvin E. Title: If You are Offered the Right of First Refusal, Should You Accept? An Investigation of Contract Design Abstract: Rights of first refusal are contract clauses intended to provide the holder of a license or lease with some protection when the contract ends. The simplest version gives the right holder the ability to act after potential competitors. However, another common implementation requires the right holder to accept or reject some offers before potential competitors are given the same offer, and, if the right holder rejects the initial offer, allows the right to be exercised affirmatively only if competitors are subsequently offered a better deal (e.g. a lower price). We explore, theoretically and experimentally, the impact this latter form of right of first refusal can have on the outcome of negotiation. Counterintuitively, this “right” of first refusal can be disadvantageous to its holder. This suggests that applied contract design may benefit from the same kind of attention to detail that has begun to be given to practical market design. Creation-Date: 2009 Publication-Status: Published in Games and Economic Behavior File-URL: http://dash.harvard.edu/bitstream/handle/1/4261988/Roth_ROFRbargainingGEB.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4261988 Template-Type: ReDIF-Paper 1.0 Author-Name: Mankiw, N. Gregory Author-Name: Weinzierl, Matthew Charles Author-Name: Yagan, Danny Ferris Title: Optimal Taxation in Theory and Practice Abstract: The optimal design of a tax system is a topic that has long fascinated economic theorists and flummoxed economic policymakers. This paper explores the interplay between tax theory and tax policy. It identifies key lessons policymakers might take from the academic literature on how taxes ought to be designed, and it discusses the extent to which these lessons are reflected in actual policy. Creation-Date: 2009 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/4263739/Mankiw_OptimalTaxationTheory.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4263739 Template-Type: ReDIF-Paper 1.0 Author-Name: Mankiw, N. Gregory Title: Smart Taxes: An Open Invitation to Join the Pigou Club Abstract: Many economists favor higher taxes on energy-related products such as gasoline, while the general public is more skeptical. This essay, based on a talk given at the March 2008 meeting of the Eastern Economic Association, discusses various aspects of this policy debate. It focuses, in particular, on the use of these taxes to correct for various externalities - an idea advocated long ago by British economist Arthur Pigou. Creation-Date: 2009 Publication-Status: Published in Eastern Economic Journal File-URL: http://dash.harvard.edu/bitstream/handle/1/4263740/Mankiw_SmartTaxes.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4263740 Template-Type: ReDIF-Paper 1.0 Author-Name: Miron, Jeffrey A. Title: Bailout or Bankruptcy? A Libertarian Perspective on the Financial Crisis Abstract: Creation-Date: 2009 Publication-Status: Published in Cato Journal File-URL: http://dash.harvard.edu/bitstream/handle/1/4319665/Miron_Bailout.doc File-Format: application/msword File-URL: http://dash.harvard.edu/bitstream/handle/1/4319665/Miron_Bailout.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4319665 Template-Type: ReDIF-Paper 1.0 Author-Name: Miron, Jeffrey A. Author-Name: Tetelbaum, Elina Title: Did the Federal Drinking Age Save Lives? Abstract: Creation-Date: 2009 Publication-Status: Published in Regulation -Washington- File-URL: http://dash.harvard.edu/bitstream/handle/1/4319663/Miron_DrinkingAge.doc File-Format: application/msword File-URL: http://dash.harvard.edu/bitstream/handle/1/4319663/Miron_DrinkingAge.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4319663 Template-Type: ReDIF-Paper 1.0 Author-Name: Miron, Jeffrey A. Author-Name: Tetelbaum, Elina Title: Does the Minimum Legal Drinking Age Save Lives? Abstract: The minimum legal drinking age (MLDA) is widely believed to save lives by reducing traffic fatalities among underage drivers. Further, the Federal Uniform Drinking Age Act, which pressured all states to adopt an MLDA of 21, is regarded as having contributed enormously to this life-saving effect. This article challenges both claims. State-level panel data for the past 30 yr show that any nationwide impact of the MLDA is driven by states that increased their MLDA prior to any inducement from the federal government. Even in early-adopting states, the impact of the MLDA did not persist much past the year of adoption. The MLDA appears to have only a minor impact on teen drinking. (JEL H11, K42). Creation-Date: 2009 Publication-Status: Published in Economic Inquiry File-URL: http://dash.harvard.edu/bitstream/handle/1/4319664/Miron_MinDrinkingAge.doc File-Format: application/msword File-URL: http://dash.harvard.edu/bitstream/handle/1/4319664/Miron_MinDrinkAgeLives.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4319664 Template-Type: ReDIF-Paper 1.0 Author-Name: Pierce, Naomi Ellen Author-Name: Frederickson, Megan E. Author-Name: Yu, Douglas W. Author-Name: Weyl, Eric Glen Title: Are Mutualisms Maintained by Host Sanctions or Partner Fidelity Feedback? Abstract: Although mutualisms are common in all ecological communities and have played key roles in the diversification of life, our current understanding of the evolution of cooperation applies mostly to social behavior within a species. A central question is whether mutualisms persist because hosts have evolved costly punishment of cheaters. Here, we use the economic theory of employment contracts to formulate and distinguish between two mechanisms that have been proposed to prevent cheating in host-symbiont mutualisms, Partner Fidelity Feedback (PFF) and Host Sanctions (HS). Under PFF, positive feedback between host fitness and symbiont fitness is sufficient to prevent cheating; in contrast, HS posits the necessity of costly punishment to maintain mutualism. A coevolutionary model of mutualism finds that HS are unlikely to evolve de novo, and published data on legume-rhizobia and yucca-moth mutualisms are consistent with PFF and not HS. Thus, in systems considered to be textbook cases of HS, we find poor support for the theory that hosts have evolved to punish cheating symbionts; instead, we show that even horizontally transmitted mutualisms can be stabilized via PFF. PFF theory may place previously underappreciated constraints on the evolution of mutualism, and explain why punishment is far from ubiquitous in nature. Creation-Date: 2010 Publication-Status: Published in Proceedings of the National Academy of Sciences of the United States of America File-URL: http://dash.harvard.edu/bitstream/handle/1/4726200/Pierce_MutualismFeedback.doc File-Format: application/msword File-URL: http://dash.harvard.edu/bitstream/handle/1/4726200/Pierce_MutualismFeedback.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4726200 Template-Type: ReDIF-Paper 1.0 Author-Name: Levine, David K. Author-Name: Fudenberg, Drew Title: Learning and Equilibrium Abstract: The theory of learning in games studies how, which and what kind of equilibria might arise as a consequence of a long-run non-equilibrium process of learning, adaptation and/or imitation. If agents’ strategies are completely observed at the end of each round, and agents are randomly matched with a series of anonymous opponents, fairly simple rules perform well in terms of the agent’s worst-case payoffs, and also guarantee that any steady state of the system must correspond to an equilibrium. If (as in extensive-form games) players do not observe the strategies chosen by their opponents, then learning is consistent with steady states that are not Nash equilibria because players can maintain incorrect beliefs about off-path play. Beliefs can also be incorrect due to cognitive limitations and systematic inferential errors. Creation-Date: 2009 Publication-Status: Published in Annual Review of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4382413/Learning%20and%20Equilibrium.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4382413 Template-Type: ReDIF-Paper 1.0 Author-Name: Bleakley, Hoyt Author-Name: Miguel, Edward Author-Name: Kremer, Michael R. Author-Name: Jukes, Matthew Author-Name: Bundy, Donald A. P. Title: Deworming and Development: Asking the Right Questions, Asking the Questions Right Abstract: Two billion people are infected with intestinal worms. In many areas, the majority of schoolchildren are infected, and the World Health Organization (WHO) has called for school-based mass deworming. The key area for debate is not whether deworming medicine works—in fact, the medical literature finds that treatment is highly effective, and thus the standard of care calls for treating any patient known to harbor an infection. As the authors of the Cochrane systematic review point out, a critical issue in evaluating current soil-transmitted helminth policies is whether the benefits of deworming exceed the costs or whether it would be more prudent to use the money for other purposes. While in general we think the Cochrane approach is very valuable, we argue below that many of the underlying studies of deworming suffer from three critical methodological problems: treatment externalities in dynamic infection systems, inadequate measurement of cognitive outcomes and school attendance, and sample attrition. We then argue that the currently available evidence from studies that address these issues is consistent with the consensus view expressed by other reviews and by policymakers that deworming is a very cost-effective way to increase school participation and has a high benefit to cost ratio. Creation-Date: 2009 Publication-Status: Published in PLoS Neglected Tropical Diseases File-URL: http://dash.harvard.edu/bitstream/handle/1/4460861/2627944.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4460861 Template-Type: ReDIF-Paper 1.0 Author-Name: Hoxby, Caroline Author-Name: Baqir, Reza Author-Name: Alesina, Alberto Title: Political Jurisdictions in Heterogeneous Communities Abstract: We investigate whether political jurisdictions form in response to the trade‐off between economies of scale and the costs of a heterogeneous population. We consider heterogeneity in income, race, ethnicity, and religion, and we test the model using American school districts, school attendance areas, municipalities, and special districts. We find strong evidence of a trade‐off between economies of scale and racial heterogeneity; we also find evidence of a trade‐off between economies of scale and income heterogeneity. Conversely, we find little evidence that ethnic or religious heterogeneity shapes jurisdictions. To clarify the direction of causality between heterogeneity and jurisdictions, we exploit shocks to racial heterogeneity generated by the two world wars. Creation-Date: 2004 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/4552532/alesina_jurisdictions.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4552532 Template-Type: ReDIF-Paper 1.0 Author-Name: Howitt, Peter Author-Name: Aghion, Philippe Title: Appropriate Growth Policy: A Unifying Framework Abstract: In this lecture, we use Schumpeterian growth theory, where growth comes from quality-improving innovations, to elaborate a theory of growth policy and to explain the growth gap between Europe and the US. Our theoretical apparatus systematizes the case-by-case approach to growth policy design. The emphasis is on three policy areas that are potentially relevant for growth in Europe, namely: competition and entry, education, and macropolicy. We argue that higher entry and exit (higher firm turnover) and increased emphasis on higher education are more growth-enhancing in countries that are closer to the technological frontier. We also argue that countercyclical budgetary policies are more growth-enhancing in countries with lower financial development. The analysis thus points to important interaction effects between policies and state variables, such as distance to frontier or financial development, in growth regressions. Finally, we argue that the other endogenous growth models, namely the AK and product variety models, fail to account for the evidence on the relationship between competition, education, volatility, and growth, and consequently cannot deliver relevant policy prescriptions in the three areas we consider. Creation-Date: 2006 Publication-Status: Published in Journal of the European Economic Association File-URL: http://dash.harvard.edu/bitstream/handle/1/4554121/aghion_appropriategrowth.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4554121 Template-Type: ReDIF-Paper 1.0 Author-Name: Gennaioli, Nicola Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert Title: Neglected Risks, Financial Innovation, and Financial Fragility Abstract: We present a standard model of financial innovation, in which intermediaries engineer securities with cash flows that investors seek, but modify two assumptions. First, investors (and possibly intermediaries) neglect certain unlikely risks. Second, investors demand securities with safe cash flows. Financial intermediaries cater to these preferences and beliefs by engineering securities perceived to be safe but exposed to neglected risks. Because the risks are neglected, security issuance is excessive. As investors eventually recognize these risks, they fly back to the safety of traditional securities and markets become fragile, even without leverage, precisely because the volume of new claims is excessive. Creation-Date: 2012 Publication-Status: Published in Journal of Financial Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/10886835/86973485.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:10886835 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Title: Psychologists at the Gate: Review of Daniel Kahneman’s Thinking, Fast and Slow Abstract: Creation-Date: 2012 Publication-Status: Published in Journal of Economic Literature File-URL: http://dash.harvard.edu/bitstream/handle/1/10735580/67734428.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:10735580 Template-Type: ReDIF-Paper 1.0 Author-Name: Costinot, Arnaud Author-Name: Antras, Pol Title: Intermediation and Economic Integration Abstract: The theory of international trade has paid scant attention to market institutions. Neither neoclassical theory nor new trade models typically specify the process by which supply and demand meet. Yet in the real world, intermediaries play a central role in materializing the gains from exchange outlined by standard trade theories. In Antràs and Costinot (2010), we have developed a stylized but explicit model of intermediation in trade. In this short paper, we present a variant of this model that illustrates the potential role of intermediaries in facilitating the realization of the gains from trade. Creation-Date: 2010 Publication-Status: Published in The American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/4784026/Antras_Intermediation.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4784026 Template-Type: ReDIF-Paper 1.0 Author-Name: Bordalo, Pedro Author-Name: Gennaioli, Nicola Author-Name: Shleifer, Andrei Title: Salience and Experimental Tests of the Endowment Effect Abstract: We provide a novel account of experimental evidence for the endowment effect using the salience mechanism (Bordalo, Gennaioli, and Shleifer, 2011). The two-stage procedure implemented in experiments implies that the endowed good and other goods are evaluated in different contexts. We describe conditions under which the standard effect occurs, but also account for recent evidence such as a reverse endowment effect for bads and a role for reference prices in modulating the WTA-WTP gap. Creation-Date: 2012 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/10636304/3156322.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:10636304 Template-Type: ReDIF-Paper 1.0 Author-Name: Antras, Pol Author-Name: Costinot, Arnaud Title: Intermediated Trade Abstract: This paper develops a simple model of international trade with intermediation. We consider an economy with two islands and two types of agents, farmers and traders. Farmers can produce two goods, but in order to sell these goods in centralized (Walrasian) markets, they need to be matched with a trader, and this entails costly search. In the absence of search frictions, our model reduces to a standard Ricardian model of trade. We use this simple model to contrast the implications of changes in the integration of Walrasian markets, which allow traders from different islands to exchange their goods, and changes in the access to these Walrasian markets, which allow farmers to trade with traders from different islands. We find that intermediation always magnifies the gains from trade under the former type of integration, but leads to more nuanced welfare results under the latter, including the possibility of aggregate losses. Creation-Date: 2011 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4784024/Antras_Intermediated_Trade.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4784024 Template-Type: ReDIF-Paper 1.0 Author-Name: Caballero, Richard J. Author-Name: Antras, Pol Title: On the Role of Financial Frictions and the Saving Rate during Trade Liberalizations Abstract: We study how financial frictions and the saving rate shape the long-run effects of trade liberalization on income, consumption and the distribution of wealth in financially underdeveloped economies. In our model, regardless of whether the capital account is open or not, trade liberalization reduces the share of wealth in the hands of entrepreneurs and may well reduce steady state consumption and income. Furthermore, trade opening is more likely to reduce steady-state consumption and output, the higher is the level of financial development. For economies with an open capital account, a higher saving rate also increases the likelihood that a trade liberalization leads to a reduction in steady-state consumption and output. Creation-Date: 2010 Publication-Status: Published in Journal of the European Economic Association File-URL: http://dash.harvard.edu/bitstream/handle/1/4784027/Antras_FinancialFrictions.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4784027 Template-Type: ReDIF-Paper 1.0 Author-Name: Kolstad, Jonathan T. Author-Name: Cutler, David M. Author-Name: Huckman, Robert Steven Title: Input Constraints and the Efficiency of Entry: Lessons from Cardiac Surgery Abstract: Prior studies suggest that, with elastically supplied inputs, free entry may lead to an inefficiently high number of firms in equilibrium. Under input scarcity, however, the welfare loss from free entry is reduced. Further, free entry may increase use of high-quality inputs, as oligopolistic firms underuse these inputs when entry is constrained. We assess these predictions by examining how the 1996 repeal of certificate-of-need (CON) legislation in Pennsylvania affected the market for cardiac surgery in the state. We show that entry led to a redistribution of surgeries to higher-quality this entry was approximately welfare neutral. Creation-Date: 2010 Publication-Status: Published in American Economic Journal: Economic Policy File-URL: http://dash.harvard.edu/bitstream/handle/1/5344226/Input%20constraints.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:5344226 Template-Type: ReDIF-Paper 1.0 Author-Name: Roth, Alvin E. Author-Name: Leider, Stephen Title: Kidneys For Sale: Who Disapproves, and Why? Abstract: The shortage of transplant kidneys has spurred debate about legalizing monetary payments to donors to increase the number of available kidneys. However, buying and selling organs faces widespread disapproval. We survey a representative sample of Americans to assess disapproval for several forms of kidney market, and to understand why individuals disapprove by identifying factors that predict disapproval, including disapproval of markets for other body parts, dislike of increased scope for markets, and distrust of markets generally. Our results suggest that while the public is potentially receptive to compensating kidney donors, among those who oppose it, general disapproval towards certain kinds of transactions is at least as important as concern about specific policy details. Between 51% and 63% of respondents approve of the various potential kidney markets we investigate, and between 42% and 58% want such markets to be legal. 38% of respondents disapprove of at least one market. Respondents who distrust markets generally are \(not\) more disapproving of kidney markets; however we find significant correlations between kidney market disapproval and attitudes reflecting disapproval towards certain transactions – including both other body markets and market encroachment into traditionally non-market exchanges, such as food preparation. Creation-Date: 2010 Publication-Status: Published in American Journal of Transplantation File-URL: http://dash.harvard.edu/bitstream/handle/1/5128483/Roth_Kidneys.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:5128483 Template-Type: ReDIF-Paper 1.0 Author-Name: Cutler, David M. Author-Name: Singhal, Monica Author-Name: Vogl, Tom Author-Name: Fung, Winnie Author-Name: Kremer, Michael R. Title: Early-Life Malaria Exposure and Adult Outcomes: Evidence from Malaria Eradication in India Abstract: We examine the effects of exposure to malaria in early childhood on educational attainment and economic status in adulthood by exploiting geographic variation in malaria prevalence in India prior to a nationwide eradication program in the 1950s. We find that the program led to modest increases in household per capita consumption for prime age men, and the effects for men are larger than those for women in most specifications. We find no evidence of increased educational attainment for men, and mixed evidence for women. Creation-Date: 2010 Publication-Status: Published in American Economic Journal: Applied Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/5344529/malaria_nov09_final.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:5344529 Template-Type: ReDIF-Paper 1.0 Author-Name: Roth, Alvin E. Author-Name: Herzog, Stefan Author-Name: Hau, Robin Author-Name: Hertwig, Ralph Author-Name: Erev, Ido Author-Name: Ert, Eyal Author-Name: Haruvy, Ernan Author-Name: Stewart, Terrence Author-Name: West, Robert Author-Name: Lebiere, Christian Title: A Choice Prediction Competition: Choices From Experience and From Description Abstract: Erev, Ert, and Roth organized three choice prediction competitions focused on three related choice tasks: one shot decisions from description (decisions under risk), one shot decisions from experience, and repeated decisions from experience. Each competition was based on two experimental datasets: An estimation dataset, and a competition dataset. The studies that generated the two datasets used the same methods and subject pool, and examined decision problems randomly selected from the same distribution. After collecting the experimental data to be used for estimation, the organizers posted them on the Web, together with their fit with several baseline models, and challenged other researchers to compete to predict the results of the second (competition) set of experimental sessions. Fourteen teams responded to the challenge: the last seven authors of this paper are members of the winning teams. The results highlight the robustness of the difference between decisions from description and decisions from experience. The best predictions of decisions from descriptions were obtained with a stochastic variant of prospect theory assuming that the sensitivity to the weighted values decreases with the distance between the cumulative payoff functions. The best predictions of decisions from experience were obtained with models that assume reliance on small samples. Merits and limitations of the competition method are discussed. Creation-Date: 2009 Publication-Status: Published in Journal of Behavioral Decision Making File-URL: http://dash.harvard.edu/bitstream/handle/1/5343169/Roth_ChoicePrediction.doc File-Format: application/msword File-URL: http://dash.harvard.edu/bitstream/handle/1/5343169/Roth_ChoicePrediction.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:5343169 Template-Type: ReDIF-Paper 1.0 Author-Name: Cutler, David M. Title: The Next Wave of Corporate Medicine -- How We All Might Benefit Abstract: Creation-Date: 2009 Publication-Status: Published in New England Journal of Medicine File-URL: http://dash.harvard.edu/bitstream/handle/1/5346351/cutler%20-%20next%20wave%20of%20corporate.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:5346351 Template-Type: ReDIF-Paper 1.0 Author-Name: Cutler, David M. Author-Name: Rosen, Allison B. Author-Name: Fang, Margaret C. Title: Trends in Thrombolytic Use for Ischemic Stroke in the United States Abstract: BACKGROUND: Although recombinant tissue plasminogen activator (tPA) improves outcomes from ischemic stroke, prior studies have found low rates of administration. Recent guidelines and regulatory agencies have advocated for increased tPA administration in appropriate patients, but it is unclear how many patients actually receive tPA. OBJECTIVE: To determine whether national rates of tPA use for ischemic stroke have increased over time. METHODS: We identified all patients with a primary diagnosis of ischemic stroke from years 2001 to 2006 in the National Hospital Discharge Survey (NHDS), a nationally representative sample of inpatient hospitalizations, and searched for procedure codes for intravenous thrombolytic administration. Clinical and demographic factors were obtained from the survey and multivariable logistic regression used to identify independent predictors associated with thrombolytic use. RESULTS: Among the 22,842 patients hospitalized with ischemic stroke, tPA administration rates increased from 0.87% in 2001 to 2.40% in 2006 (P < 0.001 for trend). Older patients were less likely to receive tPA (adjusted odds ratio [OR] and 95% confidence interval [CI]; 0.4 [0.3-0.6] for patients ≥80 years vs. <60 years), as were African American patients (0.4 [0.3-0.7]). Larger hospitals were more likely to administer tPA (3.3 [2.0-5.6] in hospitals with at least 300 beds compared to those with 6-99 beds). CONCLUSIONS: Although tPA administration for ischemic stroke has increased nationally in recent years, the overall rate of use remains very low. Larger hospitals were more likely to administer tPA. Further efforts to improve appropriate administration of tPA should be encouraged, particularly as the acceptable time-window for using tPA widens. Creation-Date: 2010 Publication-Status: Published in Journal of Hospital Medicine File-URL: http://dash.harvard.edu/bitstream/handle/1/5343031/Trends%20in%20Thrombolytic.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:5343031 Template-Type: ReDIF-Paper 1.0 Author-Name: Cutler, David M. Title: Where Are the Health Care Entrepreneurs? The Failure of Organizational Innovation in Health Care Abstract: Medical care is characterized by enormous inefficiency. Costs are higher and outcomes worse than almost all analyses of the industry suggest should occur. In other industries characterized by inefficiency, efficient firms expand to take over the market, or new firms enter to eliminate inefficiencies. This has not happened in medical care, however. This paper explores the reasons for this failure of innovation. I identify two factors as being particularly important in organizational stagnation: public insurance programs that are oriented to volume of care and not value, and inadequate information about quality of care. Recent reforms have aspects that bear on these problems. Creation-Date: 2010 Publication-Status: Published in Innovation Policy and the Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/5345877/where%20are%20the%20healthcare%20entrepreneurs.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:5345877 Template-Type: ReDIF-Paper 1.0 Author-Name: Cutler, David M. Author-Name: Lleras-Muney, Adriana Title: Understanding Differences in Health Behaviors by Education Abstract: Using a variety of data sets from two countries, we examine possible explanations for the relationship between education and health behaviors, known as the education gradient. We show that income, health insurance, and family background can account for about 30 percent of the gradient. Knowledge and measures of cognitive ability explain an additional 30 percent. Social networks account for another 10 percent. Our proxies for discounting, risk aversion, or the value of future do not account for any of the education gradient, and neither do personality factors such as a sense of control of oneself or over one’s life. Creation-Date: 2010 Publication-Status: Published in Journal of Health Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/5344195/understanding%20differences.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:5344195 Template-Type: ReDIF-Paper 1.0 Author-Name: Chan, David Chimin Author-Name: Avorn, Jerry Lewis Author-Name: Solomon, Daniel Hal Author-Name: Brookhart, Alan Author-Name: Choudhry, Niteesh K Author-Name: Cutler, David M. Author-Name: Jan, Saira Author-Name: Fischer, Michael Adam Author-Name: Liu, Jun Author-Name: Shrank, William H. Title: Patient, Physician, and Payment Predictors of Statin Adherence Abstract: BACKGROUND: Although many patient, physician, and payment predictors of adherence have been described, knowledge of their relative strength and overall ability to explain adherence is limited. OBJECTIVES: To measure the contributions of patient, physician, and payment predictors in explaining adherence to statins RESEARCH DESIGN: Retrospective cohort study using administrative data SUBJECTS: 14,257 patients insured by Horizon Blue Cross Blue Shield of New Jersey (BCBSNJ) who were newly prescribed a statin cholesterol-lowering medication MEASURES: Adherence to statin medication was measured during the year after the initial prescription, based on proportion of days covered (PDC). The impact of patient, physician, and payment predictors of adherence were evaluated using multivariate logistic regression. The explanatory power of these models was evaluated with C statistics, a measure of the goodness of fit. RESULTS: Overall, 36.4% of patients were fully adherent. Older patient age, male gender, lower neighborhood percent black composition, higher median income, and fewer number of emergency department (ED) visits were significant patient predictors of adherence. Having a statin prescribed by a cardiologist, a patient's primary care physician, or a US medical graduate were significant physician predictors of adherence. Lower copayments also predicted adherence. All of our models had low explanatory power. Multivariate models including patient covariates only had greater explanatory power (C = 0.613) than models with physician variables only (C = 0.566) or copayments only (C = 0.543). A fully specified model had only slightly more explanatory power (C = 0.633) than the model with patient characteristics alone. CONCLUSIONS: Despite relatively comprehensive claims data on patients, physicians, and out-of-pocket costs, our overall ability to explain adherence remains poor. Administrative data likely do not capture many complex mechanisms underlying adherence. Creation-Date: 2010 Publication-Status: Published in Medical Care File-URL: http://dash.harvard.edu/bitstream/handle/1/5343023/PATIENT,%20PHYSICIAN,%20AND%20PAYMENT.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:5343023 Template-Type: ReDIF-Paper 1.0 Author-Name: Kremer, Michael R. Author-Name: Karlan, D. S. Author-Name: Hornbeck, Richard A. Author-Name: Gine, X. Author-Name: Duflo, E. Author-Name: Pariente, W. Author-Name: Null, C. Author-Name: Miguel, E. Author-Name: Devoto, F. Author-Name: Crepon, B. Author-Name: Banerjee, A. Author-Name: Zwane, A. P. Author-Name: Zinman, J. Author-Name: Van Dusen, E. Title: Being Surveyed Can Change Later Behavior and Related Parameter Estimates Abstract: Does completing a household survey change the later behavior of those surveyed? In three field studies of health and two of microlending, we randomly assigned subjects to be surveyed about health and/or household finances and then measured subsequent use of a related product with data that does not rely on subjects' self-reports. In the three health experiments, we find that being surveyed increases use of water treatment products and take-up of medical insurance. Frequent surveys on reported diarrhea also led to biased estimates of the impact of improved source water quality. In two microlending studies, we do not find an effect of being surveyed on borrowing behavior. The results suggest that limited attention could play an important but context-dependent role in consumer choice, with the implication that researchers should reconsider whether, how, and how much to survey their subjects Creation-Date: 2011 Publication-Status: Published in Proceedings of the National Academy of Sciences File-URL: http://dash.harvard.edu/bitstream/handle/1/11339433/surveyfx_2011.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11339433 Template-Type: ReDIF-Paper 1.0 Author-Name: Ruhnke, Gregory W. Author-Name: Coca-Perraillon, Marcelo Author-Name: Kitch, Barrett Tyler Author-Name: Cutler, David M. Title: Trends in Mortality and Medical Spending in Patients Hospitalized for Community-Acquired Pneumonia: 1993–2005 Abstract: Background: Community-acquired pneumonia (CAP) is the most common infectious cause of death in the United States. To understand the impact of efforts to improve quality and efficiency of care in CAP, we examined trends in mortality and costs among hospitalized CAP patients. Methods: Using the National Inpatient Sample from 1993–2005, we studied 569,524 CAP admissions. The primary outcome was mortality at discharge. We used logistic regression to evaluate the mortality trend, adjusting for age, gender, and comorbidities. To account for the impact of early discharge practices, we also compared daily mortality rates and performed a Cox proportional-hazards model. We used a generalized linear model to analyze trends in hospitalization costs, which were derived using cost-to-charge ratios. Results: Over time, length of stay (LOS) declined, while more patients were discharged to other facilities. The frequency of many comorbidities increased. Age/gender-adjusted mortality decreased from 8.9% to 4.1% (P < 0.001). In multivariable analysis, the mortality risk declined through 2005 (odds ratio, 0.50; 95% confidence interval [CI], 0.48–0.53), compared to reference year 1993. The daily mortality rates demonstrated that most of the mortality reduction occurred early during hospitalization. After adjusting for early discharge practices, the risk of mortality still declined through 2005 (hazard ratio, 0.74, 95% CI 0.70–0.78). Median hospitalization costs exhibited a modest reduction over time, mostly due to reduced LOS. Conclusions: Mortality among patients hospitalized for CAP has declined. Lower in-hospital mortality at a reduced cost suggests that pneumonia is a case of improved productivity in health care. Creation-Date: 2010 Publication-Status: Published in Medical Care File-URL: http://dash.harvard.edu/bitstream/handle/1/5344530/Trends%20in%20mortality.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:5344530 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Title: Comments on Gorton and Metrick: Regulating the Shadow Banking System Abstract: Creation-Date: 2010 Publication-Status: Published in Brookings Papers on Economic Activity File-URL: http://dash.harvard.edu/bitstream/handle/1/10498513/BPEA_Fall_2010_Shleifer_comment_on_Gorton_Metrick.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:10498513 Template-Type: ReDIF-Paper 1.0 Author-Name: Cutler, David M. Author-Name: Pozen, Alexis Title: Medical Spending Differences in the United States and Canada: The Role of Prices, Procedures, and Administrative Expenses Abstract: The United States far outspends Canada on health care, but the sources of additional spending are unclear. We evaluated the importance of incomes, administration, and medical interventions in this difference. Pooling various sources, we calculated medical personnel incomes, administrative expenses, and procedure volume and intensity for the United States and Canada. We found that Canada spent $1,589 per capita less on physicians and hospitals in 2002. Administration accounted for the largest share of this difference (39%), followed by incomes (31%), and more intensive provision of medical services (14%). Whether this additional spending is wasteful or warranted is unknown. Creation-Date: 2010 Publication-Status: Published in Inquiry File-URL: http://dash.harvard.edu/bitstream/handle/1/5343032/Medical%20Spending%20Differences%20in%20the%20U.S.%20and%20Canada.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:5343032 Template-Type: ReDIF-Paper 1.0 Author-Name: Friedman, Benjamin Morton Title: Economic Growth and the Moral Society Abstract: Creation-Date: 2010 Publication-Status: Published in Conversations: The Journal of the Institute for Jewish Ideas and Ideals File-URL: http://dash.harvard.edu/bitstream/handle/1/10229935/Conversations%20article%20--%20May%202010%20Economic%20Growth%20and%20the%20Moral%20Society.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:10229935 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia D. Author-Name: Katz, Lawrence F. Title: The Cost of Workplace Flexibility for High-Powered Professionals Abstract: The authors study the pecuniary penalties for family-related amenities in the workplace (e.g., job interruptions, short hours, part-time work, and flexibility during the workday), how women have responded to them, and how the penalties have changed over time. The pecuniary penalties to behaviors that are beneficial to family appear to have decreased in many professions. Self-employment has declined in many of the high-end professions (e.g., pharmacy, optometry, dentistry, law, medicine, and veterinary medicine) where it was costly in terms of workplace flexibility. The authors conclude that many professions have experienced an increase in workplace flexibility, driven often by exogenous factors (e.g., increased scale of operations and shifts to corporate ownership of business) but also endogenously because of an increased number of women. Workplace flexibility in some positions, notably in the business and financial sectors, has lagged. Creation-Date: 2011 Publication-Status: Published in Annals of the American Academy of Political and Social Science File-URL: http://dash.harvard.edu/bitstream/handle/1/8737996/90914239.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:8737996 Template-Type: ReDIF-Paper 1.0 Author-Name: Rand, David G Author-Name: Fudenberg, Drew Author-Name: Dreber, Anna Title: Slow to Anger and Fast to Forgive: Cooperation in an Uncertain World Abstract: We study the experimental play of the repeated prisoner’s dilemma when intended actions are implemented with noise. In treatments where cooperation is an equilibrium, subjects cooperate substantially more than in treatments without cooperative equilibria. In all settings there was considerable strategic diversity, indicating that subjects had not fully learned the distribution of play. Furthermore, cooperative strategies yielded higher payoffs than uncooperative strategies in the treatments with cooperative equilibria. In these treatments successful strategies were “lenient” in not retaliating for the first defection, and many were “forgiving” in trying to return to cooperation after inflicting a punishment. Creation-Date: 2012 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/11223697/Slow%20to%20Anger.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11223697 Template-Type: ReDIF-Paper 1.0 Author-Name: Rmalho, Rita Author-Name: Ganser, Tim Christian Author-Name: Shleifer, Andrei Author-Name: McLiesh, Caralee Author-Name: Djankov, Simeon Title: The Effect of Corporate Taxes on Investment and Entrepreneurship Abstract: We present new data on effective corporate income tax rates in 85 countries in 2004. The data come from a survey, conducted jointly with PricewaterhouseCoopers, of all taxes imposed on "the same" standardized mid-size domestic firm. In a cross-section of countries, our estimates of the effective corporate tax rate have a large adverse impact on aggregate investment, FDI, and entrepreneurial activity. Corporate tax rates are correlated with investment in manufacturing but not services, as well as with the size of the informal economy. The results are robust to the inclusion of many controls. (JEL E22, F23, G31, H25, H32, L26) Creation-Date: 2010 Publication-Status: Published in American Economic Journal: Macroeconomics File-URL: http://dash.harvard.edu/bitstream/handle/1/8705900/AEJMacro.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:8705900 Template-Type: ReDIF-Paper 1.0 Author-Name: Vishny, Robert W. Author-Name: Bhagat, Sanjai Author-Name: Shleifer, Andrei Title: Hostile Takeovers in the 1980s: The Return to Corporate Specialization Abstract: Creation-Date: 1990 Publication-Status: Published in Brookings Papers on Economic Activity File-URL: http://dash.harvard.edu/bitstream/handle/1/8705861/Hostile_Takeovers_80s.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:8705861 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Author-Name: Niblett, Anthony Author-Name: Posner, Richard A. Title: The Evolution of a Legal Rule Abstract: Efficient legal rules are central to efficient resource allocation in a market economy. But the question whether the common law actually converges to efficiency in commercial areas has remained empirically untested. We create a dataset of 461 state-court appellate decisions involving the economic loss rule in construction disputes and trace the evolution of this law from 1970 to 2005. We find that the law did not converge to any stable resting point and evolved differently in different states. Legal evolution is influenced by plaintiffs’ choice of which legal claims to make, the relative economic power of the parties, and nonbinding federal precedent. Creation-Date: 2010 Publication-Status: Published in Journal of Legal Studies File-URL: http://dash.harvard.edu/bitstream/handle/1/8687032/Shleif_LegalRule.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:8687032 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Yamamoto, Yuichi Title: The Folk Theorem for Irreducible Stochastic Games with Imperfect Public Monitoring Abstract: This paper introduces stochastic games with imperfect public signals. It provides a sufficient condition for the folk theorem when the game is irreducible, thus generalizing the results of Dutta (1995) and Fudenberg, Levine, and Maskin (1994). To do this, the paper extends the concept of self-generation (Abreu, Pearce, and Stacchetti, 1990) to “return generation,” which explicitly tracks actions and incentives until the next time the state returns to its current value, and asks that players not wish to deviate given the way their continuation payoffs from the time of this return depend on the public signals that have been observed. Creation-Date: 2011 Publication-Status: Published in Journal of Economic Theory File-URL: http://dash.harvard.edu/bitstream/handle/1/8896226/folk_theorem.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:8896226 Template-Type: ReDIF-Paper 1.0 Author-Name: Polk, Christopher Author-Name: Vuolteenaho, Tuomo Author-Name: Campbell, John Y. Title: Growth or Glamour? Fundamentals and Systematic Risk in Stock Returns Abstract: The cash flows of growth stocks are particularly sensitive to temporary movements in aggregate stock prices, driven by shocks to market discount rates, while the cash flows of value stocks are particularly sensitive to permanent movements, driven by shocks to aggregate cash flows. Thus, the high betas of growth (value) stocks with the market's discount-rate (cash-flow) shocks are determined by the cash-flow fundamentals of growth and value companies. Growth stocks are not merely “glamour stocks” whose systematic risks are purely driven by investor sentiment. More generally, the systematic risks of individual stocks with similar accounting characteristics are primarily driven by the systematic risks of their fundamentals.growth and value companies. Growth stocks are not merely "glamour stocks" whose systematic risks are purely driven by investor sentiment. More generally, accounting measures of firm-level risk have predictive power for firm's betas with market-wide cash flows, and this predictive power arises from the behavior of firm's cash flows. The systematic risks of stocks with similar accounting characteristics are primarily driven by the systematic risks of their fundamentals. Creation-Date: 2010 Publication-Status: Published in Review of Financial Studies File-URL: http://dash.harvard.edu/bitstream/handle/1/9887622/Campbell_Growth.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:9887622 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia D. Author-Name: Katz, Lawrence F. Title: Mass Secondary Schooling and the State: The Role of State Compulsion in the High School Movement Abstract: In the three decades after 1910 the fraction of U.S. youths enrolled in public and private secondary schools soared from 18 to 71 percent and the fraction graduating increased from 9 to 51 percent. At the same time, state compulsory education and child labor legislation became more stringent. It might appear from the timing that the laws caused the increase in education rates. We evaluate that possibility using contemporaneous evidence on enrollments and also the micro-data from the 1960 census to examine the effect of the laws on overall educational attainment. Our estimation approach exploits cross-state differences in the timing of changes in state laws. The expansion of state compulsory schooling and child labor laws from 1910 to 1939 can, at best, account for 6 to 7 percent of the increase in high school enrollments and can account for about the same portion of the increase in the eventual educational attainment for the affected cohorts over the period. The “state,” in the form of localities, was already providing educational resources in the United States. Compulsory education laws had larger impacts in other nations where the laws compelled the state to expand educational resources. Creation-Date: 2011 Publication-Status: Published in Understanding Long-Run Economic Growth: Geography, Institutions, and the Knowledge Economy (National Bureau of Economic Research Conference Report) File-URL: http://dash.harvard.edu/bitstream/handle/1/33901525/67454082.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33901525 Template-Type: ReDIF-Paper 1.0 Author-Name: Duncan, Greg J. Author-Name: Katz, Lawrence F. Author-Name: Kessler, Ronald Author-Name: Kling, Jeffrey R. Author-Name: Gennetian, Lisa Author-Name: Adam, Emma Author-Name: Ludwig, Jens Author-Name: Sanbonmatsu, Lisa Author-Name: Tessler, Stacy Author-Name: McDade, Thomas W. Author-Name: Whitaker, Robert C. Title: Neighborhoods, Obesity and Diabetes –-- A Randomized Social Experiment Abstract: Background: The question of whether neighborhood environment contributes directly to the development of obesity and diabetes remains unresolved. The study reported on here uses data from a social experiment to assess the association of randomly assigned variation in neighborhood conditions with obesity and diabetes. Methods: From 1994 through 1998, the Department of Housing and Urban Development (HUD) randomly assigned 4498 women with children living in public housing in high-poverty urban census tracts (in which ≥40% of residents had incomes below the federal poverty threshold) to one of three groups: 1788 were assigned to receive housing vouchers, which were redeemable only if they moved to a low-poverty census tract (where <10% of residents were poor), and counseling on moving; 1312 were assigned to receive unrestricted, traditional vouchers, with no special counseling on moving; and 1398 were assigned to a control group that was offered neither of these opportunities. From 2008 through 2010, as part of a long-term follow-up survey, we measured data indicating health outcomes, including height, weight, and level of glycated hemoglobin (HbA\(_{1c}\)). Creation-Date: 2011 Publication-Status: Published in New England Journal of Medicine File-URL: http://dash.harvard.edu/bitstream/handle/1/8642951/57317788.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:8642951 Template-Type: ReDIF-Paper 1.0 Author-Name: Chi, Wei Author-Name: Freeman, Richard Barry Author-Name: Li, Hongbin Title: Adjusting to Really Big Changes: The Labor Market in China, 1989-2009 Abstract: China’s emerging labor market was buffeted by changes in demand and supply and institutional changes in the last two decades. Using the Chinese Urban Household Survey data from 1989 to 2009, our study shows that the market responded with substantial changes in the structure of wages and in employment and types of jobs that workers obtained that mirrors the adjustments found in labor markets in advanced economies. However, the one place where the Chinese labor market appears to diverge from the labor markets in advanced countries is the rapid convergence in earnings and occupational positions of cohorts who entered the job market under more or less favorable conditions. On this dimension, China’s labor market seems more flexible than those in other countries. Three related factors may explain this pattern: (1) the rapid growth of China’s economy; (2) the high rate of employee turnover; (3) the relative weakness of internal labor markets in China. Bottom line, the Chinese labor market has responded about as well as one could expect to the changes in the demand and supply factors and institutional shocks in this critical period in Chinese economic history. Creation-Date: 2012 Publication-Status: Published in NBER Working Paper Series File-URL: http://dash.harvard.edu/bitstream/handle/1/10060082/47734739.doc File-Format: application/msword Handle: RePEc:hrv:faseco:10060082 Template-Type: ReDIF-Paper 1.0 Author-Name: Deming, David J. Author-Name: Goldin, Claudia D. Author-Name: Katz, Lawrence F. Title: The For-Profit Postsecondary School Sector: Nimble Critters or Agile Predators? Abstract: Private for-profit institutions have been the fastest-growing part of the U.S. higher education sector. For-profit enrollment increased from 0.2 percent to 9.1 percent of total enrollment in degree-granting schools from 1970 to 2009, and for-profit institutions account for the majority of enrollments in non-degree-granting postsecondary schools. We describe the schools, students, and programs in the for-profit higher education sector, its phenomenal recent growth, and its relationship to the federal and state governments. Using the 2004 to 2009 Beginning Postsecondary Students (BPS) longitudinal survey, we assess outcomes of a recent cohort of first-time undergraduates who attended for-profits relative to comparable students who attended community colleges or other public or private non-profit institutions. We find that relative to these other institutions, for-profits educate a larger fraction of minority, disadvantaged, and older students, and they have greater success at retaining students in their first year and getting them to complete short programs at the certificate and AA levels. But we also find that for-profit students end up with higher unemployment and "idleness" rates and lower earnings six years after entering programs than do comparable students from other schools and that, not surprisingly, they have far greater default rates on their loans. Creation-Date: 2012 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/8642952/65616640.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:8642952 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert W. Title: Takeovers in the '60s and the '80s: Evidence and Implications Abstract: This paper reviews the evidence on takeover waves of the 1960s and 1980s, and discusses the implications of this evidence for corporate strategy, agency theory, capital market efficiency, and antitrust policy. We conclude that antitrust policy played an important role in the two takeover waves, and that the wave of the ';60s presents a problem for efficient capital markets. Creation-Date: 1991 Publication-Status: Published in Strategic Management Journal File-URL: http://dash.harvard.edu/bitstream/handle/1/10498058/takeovers_60s_80s.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:10498058 Template-Type: ReDIF-Paper 1.0 Author-Name: Lakonishok, Joseph Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert W. Title: The Structure and Performance of the Money Management Industry Abstract: Creation-Date: 1992 Publication-Status: Published in Brookings Papers on Economic Activity: Microeconomics File-URL: http://dash.harvard.edu/bitstream/handle/1/10498059/structure_performance.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:10498059 Template-Type: ReDIF-Paper 1.0 Author-Name: Friedman, Benjamin Morton Title: Economic Origins and Aims: A Role for Religious Thinking? Abstract: Creation-Date: 2010 Publication-Status: Published in Reflections: A Magazine of Theological and Ethical Inquiry File-URL: http://dash.harvard.edu/bitstream/handle/1/10229934/Yale%20Divinity%20School%20Reflections%20article_March%202010.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:10229934 Template-Type: ReDIF-Paper 1.0 Author-Name: Weitzman, Martin L. Title: Additive Damages, Fat-Tailed Climate Dynamics, and Uncertain Discounting Abstract: This paper in applied theory argues that there is a loose chain of reasoning connecting the following three basic links in the economics of climate change: 1) additive disutility damages may be appropriate for analyzing some impacts of global warming; 2) an uncertain feedback-forcing coefficient, which might be near one with infinitesimal probability, can cause the distribution of the future time trajectory of global temperatures to have fat tails and a high variance; 3) when high-variance additive damages are discounted at an uncertain rate of pure time preference, which might be near zero with infinitesimal probability, it can make expected present discounted disutility very large. Some possible implications for welfare analysis and climate-change policy are briefly noted. Creation-Date: 2009 Publication-Status: Published in Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/9639963/AdditiveDamagesFatTailed.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:9639963 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Title: Peter Bauer and the Failure of Foreign Aid Abstract: Creation-Date: 2009 Publication-Status: Published in Cato Journal File-URL: http://dash.harvard.edu/bitstream/handle/1/8705862/bauer.2009.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:8705862 Template-Type: ReDIF-Paper 1.0 Author-Name: Freeman, Richard Barry Title: What Can We Learn from NLRA to Create Labor Law for the 21st Century? Abstract: Creation-Date: 2011 Publication-Status: Published in ABA Journal of Labor & Employment Law File-URL: http://dash.harvard.edu/bitstream/handle/1/10060081/88348381.doc File-Format: application/msword File-URL: http://dash.harvard.edu/bitstream/handle/1/10060081/88348381.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:10060081 Template-Type: ReDIF-Paper 1.0 Author-Name: Hilscher, Jens Dietrich Author-Name: Campbell, John Y. Author-Name: Szilagyi, Jan Title: Predicting Financial Distress and the Performance of Distressed Stocks Abstract: In this paper, we consider the measurement and pricing of distress risk.We present a model of corporate failure in which accounting and market-based measures forecast the likelihood of future financial distress. Our best model is more accurate than leading alternative measures of corporate failure risk.We use our measure of financial distress to examine the performance of distressed stocks from 1981 to 2008. We find that distressed stocks have high stock return volatility and high market betas and that they tend to underperform safe stocks by more at times of high market volatility and risk aversion. However, investors in distressed stocks have not been rewarded for bearing these risks. Instead, distressed stocks have had very low returns, both relative to the market and after adjusting for their high risk. The underperformance of distressed stocks is present in all size and value quintiles. It is lower for stocks with low analyst coverage and institutional holdings, which suggests that information or arbitrage-related frictions may be partly responsible for the underperformance of distressed stocks. Creation-Date: 2011 Publication-Status: Published in Journal of Investment Management File-URL: http://dash.harvard.edu/bitstream/handle/1/9887619/JOIM_predicting_financial_11.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:9887619 Template-Type: ReDIF-Paper 1.0 Author-Name: Giglio, Stefano Author-Name: Pathak, Parag Author-Name: Campbell, John Y. Title: Forced Sales and House Prices Abstract: This paper uses data on all house transactions in Massachusetts over the last 20 years to show that houses sold after foreclosure, or close in time to the death or bankruptcy of a seller, are sold at lower prices than other houses. Foreclosure discounts are on average at 27 percent of the value of a house. Moreover, foreclosures that take place within small local geographies of a house lower the price at which it is sold. Our preferred estimate is that a foreclosure at a distance of 0.05 miles lowers the price of a house by about 1 percent. Creation-Date: 2011 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/9887623/Campbell_ForcedSales.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:9887623 Template-Type: ReDIF-Paper 1.0 Author-Name: Beeler, Jason Author-Name: Campbell, John Y. Title: The Long-Run Risks Model and Aggregate Asset Prices: An Empirical Assessment Abstract: The long-run risks model of asset prices explains stock price variation as a response to persistent fluctuations in the mean and volatility of aggregate consumption growth, by a representative agent with a high elasticity of intertemporal substitution. This paper documents several empirical difficulties for the model, as calibrated by Bansal and Yaron (BY, 2004) and Bansal et al. (BKY, 2011). U.S. data do not show as much univariate persistence in consumption or dividend growth as implied by the model. BY's calibration counterfactually implies that long-run consumption and dividend growth should be highly predictable from stock prices. BKY's calibration does better in this respect by greatly increasing the persistence of volatility fluctuations and their impact on stock prices. This calibration fits the predictive power of stock prices for future consumption volatility, but implies much greater predictive power of stock prices for future stock return volatility than is found in the data. The long-run risks model, particularly as calibrated by BKY, implies extremely low yields and negative term premia on inflation-indexed bonds. Finally, neither calibration can explain why movements in real interest rates do not generate strong predictable movements in consumption growth. Creation-Date: 2012 Publication-Status: Published in Critical Finance Review File-URL: http://dash.harvard.edu/bitstream/handle/1/9887621/Beeler_LongRunRisks.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:9887621 Template-Type: ReDIF-Paper 1.0 Author-Name: Rosen, Allison B. Author-Name: Stewart, Susan T. Author-Name: Cutler, David M. Title: Forecasting the Effects of Obesity and Smoking on U.S. Life Expectancy Abstract: Background: While increases in obesity over the past 30 years have adversely affected population health, there have been concomitant improvements due to reductions in smoking. Better understanding of the joint effects of these trends on longevity and quality of life will help policymakers target resources more efficiently. Methods: For each year from 2005 to 2020, we forecast life expectancy and qualityadjusted life expectancy for a representative 18 year old, assuming a continuation of past trends in smoking from the National Health Interview Survey (1978-79, 1990-91 and 2004-06), and past trends in body-mass index (BMI) from the National Health and Nutrition Examination Survey (1971-75, 1998-1994, and 2003-06). The 2003 Medical Expenditure Panel Survey was used to examine the effects of smoking and BMI on health-related quality of life. Results: The negative effects of increasing BMI overwhelmed the positive effects of declines in smoking in multiple scenarios. In the base case, increases in the remaining life expectancy of a typical 18 year old are held back by 0.71 years or 0.91 quality-adjusted years between 2005 and 2020. If all U.S. adults became normal weight non-smokers by 2020, LE is forecast to increase by 3.76 life years or 5.16 quality-adjusted years. Conclusions: If past obesity trends continue unchecked, the negative impact on U.S. population health is forecast to overtake the positive effect from declining smoking rates, which could erode the pattern of steady gains in health experienced since early in the 20th century. Creation-Date: 2009 Publication-Status: Published in The New England Journal of Medicine File-URL: http://dash.harvard.edu/bitstream/handle/1/5344184/Forecasting%20the%20Impact%20of%20Obesity%20and%20Smoking.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:5344184 Template-Type: ReDIF-Paper 1.0 Author-Name: Cutler, David M. Author-Name: Gelber, Alexander M. Title: Changes in the Incidence and Duration of Periods Without Insurance Abstract: BACKGROUND: Policymakers have recently proposed ways of providing health care coverage for an increased number of uninsured persons. However, there are few data that show how the incidence and duration of periods in which persons do not have insurance have changed over time. METHODS: We used two data sets from the Survey of Income and Program Participation of the U.S. Census Bureau: one that covered the period from 1983 through 1986 (25,946 persons), and another that covered the period from 2001 through 2004 (40,282 persons). For each set of years, we estimated the probability that a person would be uninsured for some period of time and the probability that a person would subsequently obtain private or public insurance. We also estimated the probabilities that persons in various demographic groups would become uninsured over the course of a year and would remain uninsured for various amounts of time. RESULTS: The percentage of the population that lost insurance in a 12-month period increased from 19.8% in 1983-1986 to 21.8% in 2001-2004 (P=0.04). The percentage that was uninsured for a period of time increased markedly among persons with the lowest educational level and predominantly represented loss of private coverage. The percentage of new uninsured periods that ended within 24 months increased from 73.8% to 79.7% between the two study periods (P<0.001); increases were seen in all age groups and among persons of all educational levels. Transition from no insurance to private insurance decreased from 65.2% to 59.2% (P<0.001). Transition from no insurance to public insurance increased from 8.7% to 20.4% (P<0.001). CONCLUSIONS: As compared with the years from 1983 through 1986, from 2001 through 2004, more people, particularly those with the lowest educational level, had periods in which they were not insured. The periods without insurance were shorter in 2001-2004 than they were in 1983-1986, since an increase in transitions to public coverage offset a reduction in transitions to private coverage. Our results portend difficulties if private coverage continues to decline and is not offset by further expansions of public insurance. Creation-Date: 2009 Publication-Status: Published in New England Journal of Medicine File-URL: http://dash.harvard.edu/bitstream/handle/1/5344531/Changes%20in%20Prevalence.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:5344531 Template-Type: ReDIF-Paper 1.0 Author-Name: Friedman, Benjamin Morton Title: Reconstructing Economics in Light of the 2007-? Financial Crisis Abstract: The lessons learned from the recent financial crisis should significantly reshape the economics profession's thinking, including, importantly, what we teach our students. Five such lessons are that we live in a monetary economy and therefore aggregate demand and policies that affect aggregate demand are determinants of real economic outcomes; that what actually matters for this purpose is not money but the volume, availability, and price of credit; that the fact that most lending is done by financial institutions matters as well; that the prices set in our financial markets do not always exhibit the “rationality” economists normally claim for them; and that both frictions and the uneven impact of economic events prevent us from adapting to disturbances in the way textbook economics suggests. Creation-Date: 2011 Publication-Status: Published in Journal of Economic Education File-URL: http://dash.harvard.edu/bitstream/handle/1/5241348/Friedman_ReconstructingEconomics.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:5241348 Template-Type: ReDIF-Paper 1.0 Author-Name: Saez, Emmanuel Author-Name: Chetty, Nadarajan Title: Optimal Taxation and Social Insurance with Endogenous Private Insurance Abstract: This paper characterizes the welfare gains from redistributive taxation and social insurance in an environment where the private sector provides partial insurance. We analyze stylized models in which adverse selection, pre-existing information, or imperfect optimization in private insurance markets create a role for government intervention. We derive simple formulas that map reduced-form empirical estimates into quantitative predictions for optimal tax and social insurance policy. Applications to unemployment and health insurance show that taking private market insurance into account matters significantly for optimal benefit levels given existing empirical estimates of the key parameters. Creation-Date: 2010 Publication-Status: Published in American Economic Journal: Economic Policy File-URL: http://dash.harvard.edu/bitstream/handle/1/9696326/endog_priv_insurance_aej.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:9696326 Template-Type: ReDIF-Paper 1.0 Author-Name: Chetty, Nadarajan Title: Sufficient Statistics for Welfare Analysis: A Bridge Between Structural and Reduced-Form Methods Abstract: The debate between structural and reduced-form approaches has generated substantial controversy in applied economics. This article reviews a recent literature in public economics that combines the advantages of reduced-form strategies—transparent and credible identification—with an important advantage of structural models—the ability to make predictions about counterfactual outcomes and welfare. This literature has developed formulas for the welfare consequences of various policies that are functions of reduced-form elasticities rather than structural primitives. I present a general framework that shows how many policy questions can be answered by estimating a small set of sufficient statistics using program-evaluation methods. I use this framework to synthesize the modern literature on taxation, social insurance, and behavioral welfare economics. Finally, I discuss problems in macroeconomics, labor, development, and industrial organization that could be tackled using the sufficient statistic approach. Creation-Date: 2009 Publication-Status: Published in Annual Review of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/9748528/suffstat_ar.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:9748528 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Y. Author-Name: Tufano, Peter Author-Name: Madrian, Brigitte C. Author-Name: Jackson, Howell Edmunds Title: Consumer Financial Protection Abstract: The recent financial crisis has led many to question how well businesses deliver services and how well regulatory institutions address problems in consumer financial markets. This paper discusses consumer financial regulation, emphasizing the full range of arguments for regulation that derive from market failure and from limited consumer rationality in financial decision making. We present three case studies—of mortgage markets, payday lending, and financing retirement consumption—to illustrate the need for, and limits of, regulation. We argue that if regulation is to be beneficial, it must be tailored to specific problems and must be accompanied by research to measure the effectiveness of regulatory interventions. Creation-Date: 2011 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/9887620/JEP_consumer_financial_protection_11.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:9887620 Template-Type: ReDIF-Paper 1.0 Author-Name: Saez, Emmanuel Author-Name: Chetty, Raj Title: Dividend and Corporate Taxation in an Agency Model of the Firm Abstract: Recent evidence on the effect of dividend taxes on firm behavior is inconsistent with neoclassical theories of dividend and corporate taxation. We develop a simple agency model in which managers and shareholders have conflicting interests to explain the evidence. In this model, dividend taxation induces managers to undertake unproductive investments by retaining earnings, and creates a first-order deadweight cost. In contrast, corporate taxes do not distort the manager's payout decision and may only create second-order efficiency costs. Corporate income taxation may therefore be a more efficient way to generate revenue than dividend taxation, challenging existing intuitions based on neoclassical models Creation-Date: 2010 Publication-Status: Published in American Economic Journal: Economic Policy File-URL: http://dash.harvard.edu/bitstream/handle/1/9748526/divcorptax_agency_theory.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:9748526 Template-Type: ReDIF-Paper 1.0 Author-Name: Weitzman, Martin L. Title: Revisiting Fat-Tailed Uncertainty in the Economics of Climate Change Abstract: In this article, I revisit some basic issues concerning structural uncertainty and catastrophic climate change. My target audience here are general economists, so this article could also be viewed as a somewhat less technical exposition that supplements my previous work. Using empirical examples, I argue that it is implausible that low-probability, high-negative impact events would not much influence an economic analysis of climate change. I then try to integrate the empirical examples and the theory together into a unified package with a unified message that the possibility of catastrophic climate change needs to be taken seriously. Creation-Date: 2011 Publication-Status: Published in REEP Symposium on Fat Tails File-URL: http://dash.harvard.edu/bitstream/handle/1/11130443/61_REEP%20final%20fat.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11130443 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Y. Title: Mortgage Market Design Abstract: This article explores the causes and consequences of cross-country variation in mortgage market structure. It draws on insights from several fields: urban economics, asset pricing, behavioral finance, financial intermediation, and macroeconomics. It discusses lessons from the credit boom, the challenges of mortgage modification in the aftermath of the boom, consumer financial protection, and alternative mortgage forms and funding models. The article argues that the USA has much to learn from mortgage finance in other countries, and specifically from the Danish implementation of the European covered bonds system. Creation-Date: 2012-11-08 Publication-Status: Published in Review of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/9887618/RF_mortgage_market_design_12.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:9887618 Template-Type: ReDIF-Paper 1.0 Author-Name: Chetty, Nadarajan Author-Name: Weber, Andrea Author-Name: Guren, Adam Michael Author-Name: Day, Manoli Title: Are Micro and Macro Labor Supply Elasticities Consistent? A Review of Evidence on the Intensive and Extensive Margins Abstract: We evaluate whether state-of-the-art macro models featuring indivisible labor are consistent with modern quasi-experimental micro evidence by synthesizing evidence on both the intensive and extensive margins. We find that micro estimates are consistent with macro estimates of the steady-state (Hicksian) elasticities relevant for cross-country comparisons on both the extensive and intensive margins. However, micro estimates of intertemporal substitution (Frisch) elasticities are an order of magnitude smaller than the values needed to explain business cycle fluctuations in aggregate hours by preferences. The key puzzle to be resolved is why micro and macro estimates of the Frisch extensive margin elasticity are so different. Creation-Date: 2011 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/11878970/Chetty_MicroMacro.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11878970 Template-Type: ReDIF-Paper 1.0 Author-Name: Cuñat, Alejandro Author-Name: Melitz, Marc J. Title: A Many-Country, Many-Good Model of Labor Market Rigidities as a Source of Comparative Advantage Abstract: We extend the theoretical framework in Cuñat and Melitz (2007) to a many-country setup where countries exhibit different degrees of labor market fexibility. We rely on the insights from a recent paper by Costinot (2009) to obtain precise predictions about comparative advantage in this setting: countries with more fexible labor markets specialize in more volatile industries. Creation-Date: 2009 Publication-Status: Published in Journal of the European Economic Association File-URL: http://dash.harvard.edu/bitstream/handle/1/9299644/acmm2--091009.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:9299644 Template-Type: ReDIF-Paper 1.0 Author-Name: Friedman, Benjamin Morton Title: Economics: A Moral Inquiry with Religious Origins Abstract: In contrast to the standard interpretation of the origins of economics out of the secular European Enlightenment of the 18th century, the transition in thinking that we rightly identify with Adam Smith and his contemporaries and followers, which gave us economics as we now know it, was powerfully influenced by then-controversial changes in religious belief in the English-speaking Protestant world in which they lived: in particular, key aspects of the movement away from orthodox Calvinism. Further, those at-the-outset influences of religious thinking not only fostered the subsequent spread of Smithian thinking, especially in America, but shaped the course of its reception. The ultimate result was a variety of fundamental resonances between economic thinking and religious thinking that continue to influence our public discussion of economic issues, and our public debate over economic policy, today. Creation-Date: 2011 Publication-Status: Published in The American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/8895184/Friedman_EconomicsMoral.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:8895184 Template-Type: ReDIF-Paper 1.0 Author-Name: Chetty, Nadarajan Title: Bounds on Elasticities With Optimization Frictions: A Synthesis of Micro and Macro Evidence on Labor Supply Abstract: How can price elasticities be identified when agents face optimization frictions such as adjustment costs or inattention? I derive bounds on structural price elasticities that are a function of the observed effect of a price change on demand, the size of the price change, and the degree of frictions. The degree of frictions is measured by the utility losses agents tolerate to deviate from the frictionless optimum. The bounds imply that frictions affect intensive margin elasticities much more than extensive margin elasticities. I apply these bounds to the literature on labor supply. The utility costs of ignoring the tax changes used to identify intensive margin labor supply elasticities are typically less than 1% of earnings. As a result, small frictions can explain the differences between micro and macro elasticities, extensive and intensive margin elasticities, and other disparate findings. Pooling estimates from existing studies, I estimate a Hicksian labor supply elasticity of 0.33 on the intensive margin and 0.25 on the extensive margin after accounting for frictions. Creation-Date: 2012 Publication-Status: Published in Econometrica File-URL: http://dash.harvard.edu/bitstream/handle/1/9748524/chetty_bounds.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:9748524 Template-Type: ReDIF-Paper 1.0 Author-Name: Lee, James Author-Name: Borst, Gregoire Author-Name: Chabris, Christopher F. Author-Name: Benjamin, Daniel J. Author-Name: Beauchamp, Jonathan P. Author-Name: Glaeser, Edward Ludwig Author-Name: Pinker, Steven Author-Name: Laibson, David I. Title: Why It Is Hard to Find Genes Associated With Social Science Traits: Theoretical and Empirical Considerations Abstract: OBJECTIVES: We explain why traits of interest to behavioral scientists may have a genetic architecture featuring hundreds or thousands of loci with tiny individual effects rather than a few with large effects and why such an architecture makes it difficult to find robust associations between traits and genes. METHODS: We conducted a genome-wide association study at 2 sites, Harvard University and Union College, measuring more than 100 physical and behavioral traits with a sample size typical of candidate gene studies. We evaluated predictions that alleles with large effect sizes would be rare and most traits of interest to social science are likely characterized by a lack of strong directional selection. We also carried out a theoretical analysis of the genetic architecture of traits based on R.A. Fisher's geometric model of natural selection and empirical analyses of the effects of selection bias and phenotype measurement stability on the results of genetic association studies. RESULTS: Although we replicated several known genetic associations with physical traits, we found only 2 associations with behavioral traits that met the nominal genome-wide significance threshold, indicating that physical and behavioral traits are mainly affected by numerous genes with small effects. CONCLUSIONS: The challenge for social science genomics is the likelihood that genes are connected to behavioral variation by lengthy, nonlinear, interactive causal chains, and unraveling these chains requires allying with personal genomics to take advantage of the potential for large sample sizes as well as continuing with traditional epidemiological studies. Creation-Date: 2013 Publication-Status: Published in American Journal of Public Health File-URL: http://dash.harvard.edu/bitstream/handle/1/12410512/90059055.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12410512 Template-Type: ReDIF-Paper 1.0 Author-Name: Friedman, Benjamin Morton Title: Learning From The Crisis: What Can Central Banks Do? Abstract: Creation-Date: 2010 Publication-Status: Published in Challenges to Central Banking in the Context of Financial Crisis: The International Research Experience File-URL: http://dash.harvard.edu/bitstream/handle/1/8895183/Friedman_LearningCrisis.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:8895183 Template-Type: ReDIF-Paper 1.0 Author-Name: Agarwal, Sumit Author-Name: Driscoll, John D. Author-Name: Laibson, David I. Title: Optimal Mortgage Refinancing: A Closed Form Solution Abstract: We derive the first closed-form optimal refinancing rule: Refinance when the current mortgage interest rate falls below the original rate by at least \(\frac{1}{ψ}\)[φ + W (− exp (−φ))]. In this formula W(.) is the Lambert W-function, ψ = \(\frac{2 (ρ + λ)}{σ}\), φ = 1 + ψ (ρ + λ)\(\frac{κ/M}{(1 − τ )}\), ρ is the real discount rate, λ is the expected real rate of exogenous mortgage repayment, σ is the standard deviation of the mortgage rate, κ/M is the ratio of the tax-adjusted refinancing cost and the remaining mortgage value, and τ is the marginal tax rate. This expression is derived by solving a tractable class of refinancing problems. Our quantitative results closely match those reported by researchers using numerical methods. Creation-Date: 2012 Publication-Status: Published in Journal of Money, Credit, and Banking File-URL: http://dash.harvard.edu/bitstream/handle/1/9918811/Optimal%20Mortgage%20Refinancing%20092012.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:9918811 Template-Type: ReDIF-Paper 1.0 Author-Name: Chetty, Nadarajan Title: Is the Taxable Income Elasticity Sufficient to Calculate Deadweight Loss? The Implications of Evasion and Avoidance Abstract: Martin Feldstein's (1999) widely used taxable income formula for deadweight loss assumes the marginal social cost of evasion and avoidance equals the tax rate. This condition is likely to be violated in practice for two reasons. First, some of the costs of evasion and avoidance are transfers to other agents. Second, some individuals overestimate the costs of evasion and avoidance. In such situations, excess burden depends on a weighted average of the taxable income and total earned income elasticities, with the weight determined by the resource cost of sheltering income from taxation. This generalized formula implies the efficiency cost of taxing high income individuals is not necessarily large despite evidence that their reported incomes are highly sensitive to marginal tax rates. Creation-Date: 2009 Publication-Status: Published in American Economic Journal: Economic Policy File-URL: http://dash.harvard.edu/bitstream/handle/1/9748527/taxable_income_formula_aej.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:9748527 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia D. Author-Name: Bertrand, Marianne Author-Name: Katz, Lawrence F. Title: Dynamics of the Gender Gap for Young Professionals in the Financial and Corporate Sectors Abstract: The careers of MBAs from a top US business school are studied to understand how career dynamics differ by gender. Although male and female MBAs have nearly identical earnings at the outset of their careers, their earnings soon diverge, with the male earnings advantage reaching almost 60 log points a decade after MBA completion. Three proximate factors account for the large and rising gender gap in earnings: differences in training prior to MBA graduation, differences in career interruptions, and differences in weekly hours. The greater career discontinuity and shorter work hours for female MBAs are largely associated with motherhood. (JEL J16, J22, J31, J44) Creation-Date: 2010 Publication-Status: Published in American Economic Journal: Applied Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/8810041/Goldin_w14681.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:8810041 Template-Type: ReDIF-Paper 1.0 Author-Name: Katz, Lawrence F. Author-Name: Goldin, Claudia D. Title: Putting the "Co" in Education: Timing, Reasons, and Consequences of College Coeduction from 1835 to the Present Abstract: The history of coeducation in U.S. higher education is explored through an analysis of a database containing almost all 4-year undergraduate institutions that operated in 1897, 1924, 1934, or 1980. The opening of coeducational institutions was continuous throughout its history, and the switching from single-sex was also fairly constant from 1835 to the 1950s before accelerating in the 1960s and 1970s. Older and private single-sex institutions were slower to become coeducational, and institutions persisting as single-sex into the 1970s had lower enrollment growth than those that switched earlier. Access to coeducational institutions was associated with increased women’s educational attainment. Creation-Date: 2011 Publication-Status: Published in Journal of Human Capital File-URL: http://dash.harvard.edu/bitstream/handle/1/8642950/39446043.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:8642950 Template-Type: ReDIF-Paper 1.0 Author-Name: Beauchamp, Jonathan P. Author-Name: Christakis, Nicholas Alexander Author-Name: Hauser, Robert M. Author-Name: Laibson, David I. Author-Name: Benjamin, Daniel J. Author-Name: Johannesson, Magnus Author-Name: Atwood, Craig S. Author-Name: Freese, Jeremy Author-Name: Hauser, Taissa S. Author-Name: Chabris, Christopher F. Author-Name: Hebert, Benjamin Michael Author-Name: van der Loos, Matthijs J. H. M. Author-Name: Magnusson, Patrik K. E. Author-Name: Lichtenstein, Paul Author-Name: Cesarini, David Title: Most Reported Genetic Associations with General Intelligence Are Probably False Positives Abstract: General intelligence (g) and virtually all other behavioral traits are heritable. Associations between g and specific single-nucleotide polymorphisms (SNPs) in several candidate genes involved in brain function have been reported. We sought to replicate published associations between g and 12 specific genetic variants (in the genes DTNBP1, CTSD, DRD2, ANKK1, CHRM2, SSADH, COMT, BDNF, CHRNA4, DISC1, APOE, and SNAP25) using data sets from three independent, well-characterized longitudinal studies with samples of 5,571, 1,759, and 2,441 individuals. Of 32 independent tests across all three data sets, only 1 was nominally significant. By contrast, power analyses showed that we should have expected 10 to 15 significant associations, given reasonable assumptions for genotype effect sizes. For positive controls, we confirmed accepted genetic associations for Alzheimer’s disease and body mass index, and we used SNP-based calculations of genetic relatedness to replicate previous estimates that about half of the variance in g is accounted for by common genetic variation among individuals. We conclude that the molecular genetics of psychology and social science requires approaches that go beyond the examination of candidate genes. Creation-Date: 2012 Publication-Status: Published in Psychological Science File-URL: http://dash.harvard.edu/bitstream/handle/1/9938142/Most_Reported_Genetic.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:9938142 Template-Type: ReDIF-Paper 1.0 Author-Name: Mollerstrom, Johanna Britta Author-Name: Laibson, David I. Author-Name: Chauvin, Kyle Title: Asset Bubbles and the Cost of Economic Fluctuations Abstract: Lucas (1987, 2003) estimates that the cost of economic fluctuations is low; a social planner would pay no more than 0.1% of (permanent) consumption to eliminate all future business cycle fluctuations. The current paper extends Lucas’ calculations by studying the costs of fluctuations arising from asset bubbles. We estimate two classes of costs: consumption volatility due to asset bubbles in a representative agent economy and consumption volatility that arises because households have heterogeneous exposure to the bubble assets. We show that the magnitude of welfare costs is primarily driven by the existence of heterogeneity. Our benchmark calibration implies that the asset bubbles of the last decade generated a social welfare cost equal to a permanent 3% reduction in the level of national consumption. If assets are held proportionately across the population, these welfare costs fall by an order of magnitude. Our calculations are sensitive to the details of the calibration, including the degree of balance sheet and trading heterogeneity, the coefficient of relative risk aversion, and the magnitude of the asset bubble. Our preferred specifications generate welfare costs ranging from 1% to 10% of (permanent) national consumption. Creation-Date: 2011 Publication-Status: Published in Journal of Money, Credit and Banking File-URL: http://dash.harvard.edu/bitstream/handle/1/9938146/Asset_Bubbles.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:9938146 Template-Type: ReDIF-Paper 1.0 Author-Name: Looney, Adam Author-Name: Kroft, Kory Author-Name: Chetty, Raj Title: Salience and Taxation: Theory and Evidence Abstract: Using two strategies, we show that consumers underreact to taxes that are not salient. First, using a field experiment in a grocery store, we find that posting tax-inclusive price tags reduces demand by 8 percent. Second, increases in taxes included in posted prices reduce alcohol consumption more than increases in taxes applied at the register. We develop a theoretical framework for applied welfare analysis that accommodates salience effects and other optimization failures. The simple formulas we derive imply that the economic incidence of a tax depends on its statutory incidence, and that even policies that induce no change in behavior can create efficiency losses. Creation-Date: 2009 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/9748525/Chetty_SalienceTaxation.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:9748525 Template-Type: ReDIF-Paper 1.0 Author-Name: Laibson, David I. Author-Name: Fuster, Andreas Author-Name: Mendel, Brock Title: Natural Expectations and Macroeconomic Fluctuations Abstract: Creation-Date: 2010 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/9938147/natural_expectations.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:9938147 Template-Type: ReDIF-Paper 1.0 Author-Name: Boyle, Patricia A. Author-Name: Yu, Lei Author-Name: Buchman, Aron S. Author-Name: Laibson, David I. Author-Name: Bennett, David A. Title: Cognitive Function Is Associated with Risk Aversion in Community-Based Older Persons Abstract: Background: Emerging data from younger and middle-aged persons suggest that cognitive ability is negatively associated with risk aversion, but this association has not been studied among older persons who are at high risk of experiencing loss of cognitive function. Methods: Using data from 369 community-dwelling older persons without dementia from the Rush Memory and Aging Project, an ongoing longitudinal epidemiologic study of aging, we examined the correlates of risk aversion and tested the hypothesis that cognition is negatively associated with risk aversion. Global cognition and five specific cognitive abilities were measured via detailed cognitive testing, and risk aversion was measured using standard behavioral economics questions in which participants were asked to choose between a certain monetary payment ($15) versus a gamble in which they could gain more than $15 or gain nothing; potential gamble gains ranged from $21.79 to $151.19 with the gain amounts varied randomly over questions. We first examined the bivariate associations of age, education, sex, income and cognition with risk aversion. Next, we examined the associations between cognition and risk aversion via mixed models adjusted for age, sex, education, and income. Finally, we conducted sensitivity analyses to ensure that our results were not driven by persons with preclinical cognitive impairment. Results: In bivariate analyses, sex, education, income and global cognition were associated with risk aversion. However, in a mixed effect model, only sex (estimate = -1.49, standard error (SE) = 0.39, p < 0.001) and global cognitive function (estimate = -1.05, standard error (SE) = 0.34, p < 0.003) were significantly inversely associated with risk aversion. Thus, a lower level of global cognitive function and female sex were associated with greater risk aversion. Moreover, performance on four out of the five cognitive domains was negatively related to risk aversion (i.e., semantic memory, episodic memory, working memory, and perceptual speed); performance on visuospatial abilities was not. Conclusion: A lower level of cognitive ability and female sex are associated with greater risk aversion in advanced age. Creation-Date: 2011 Publication-Status: Published in BMC Geriatrics File-URL: http://dash.harvard.edu/bitstream/handle/1/9938145/cognitive_function.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:9938145 Template-Type: ReDIF-Paper 1.0 Author-Name: Laibson, David I. Author-Name: Harris, Christopher Title: Instantaneous Gratification Abstract: Extending Barro (1999) and Luttmer & Mariotti (2003), we introduce a new model of time preferences: the instantaneous-gratification model. This model applies tractably to a much wider range of settings than existing models. It applies to both complete- and incomplete-market settings and it works with generic utility functions. It works in settings with linear policy rules and in settings in which equilibrium cannot be supported by linear rules. The instantaneous-gratification model also generates a unique equilibrium, even in infinite-horizon applications, thereby resolving the multiplicity problem hitherto associated with dynamically inconsistent models. Finally, it simultaneously features a single welfare criterion and a behavioral tendency towards overconsumption Creation-Date: 2012 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/9918802/Instantaneous_Grat_Laibson_Harris_Jun12.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:9918802 Template-Type: ReDIF-Paper 1.0 Author-Name: Chetty, Raj Title: Moral Hazard versus Liquidity and Optimal Unemployment Insurance Abstract: This paper presents new evidence on why unemployment insurance (UI) benefits affect search behavior and develops a simple method of calculating the welfare gains from UI using this evidence. I show that 60 percent of the increase in unemployment durations caused by UI benefits is due to a “liquidity effect” rather than distortions on marginal incentives to search (“moral hazard”) by combining two empirical strategies. First, I find that increases in benefits have much larger effects on durations for liquidity‐constrained households. Second, lump‐sum severance payments increase durations substantially among constrained households. I derive a formula for the optimal benefit level that depends only on the reduced‐form liquidity and moral hazard elasticities. The formula implies that the optimal UI benefit level exceeds 50 percent of the wage. The “exact identification” approach to welfare analysis proposed here yields robust optimal policy results because it does not require structural estimation of primitives. Creation-Date: 2008 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/9751256/Chetty_MoralHazard.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:9751256 Template-Type: ReDIF-Paper 1.0 Author-Name: van der Loos, Matthijs J. H. M. Author-Name: Benjamin, Daniel J. Author-Name: Cesarini, David Author-Name: Dawes, Christopher T. Author-Name: Koellinger, Philipp D. Author-Name: Magnusson, Patrik K. E. Author-Name: Chabris, Christopher F. Author-Name: Conley, Dalton Author-Name: Laibson, David I. Author-Name: Johannesson, Magnus Author-Name: Visscher, Peter M. Title: The Genetic Architecture of Economic and Political Preferences Abstract: Preferences are fundamental building blocks in all models of economic and political behavior. We study a new sample of comprehensively genotyped subjects with data on economic and political preferences and educational attainment. We use dense single nucleotide polymorphism (SNP) data to estimate the proportion of variation in these traits explained by common SNPs and to conduct genome-wide association study (GWAS) and prediction analyses. The pattern of results is consistent with findings for other complex traits. First, the estimated fraction of phenotypic variation that could, in principle, be explained by dense SNP arrays is around one-half of the narrow heritability estimated using twin and family samples. The molecular-genetic–based heritability estimates, therefore, partially corroborate evidence of significant heritability from behavior genetic studies. Second, our analyses suggest that these traits have a polygenic architecture, with the heritable variation explained by many genes with small effects. Our results suggest that most published genetic association studies with economic and political traits are dramatically underpowered, which implies a high false discovery rate. These results convey a cautionary message for whether, how, and how soon molecular genetic data can contribute to, and potentially transform, research in social science. We propose some constructive responses to the inferential challenges posed by the small explanatory power of individual SNPs. Creation-Date: 2012 Publication-Status: Published in Proceedings of the National Academy of Sciences File-URL: http://dash.harvard.edu/bitstream/handle/1/10121961/Benjamin_GeneticArchitecture.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:10121961 Template-Type: ReDIF-Paper 1.0 Author-Name: Freeman, Richard Barry Title: Practitioner of the Dismal Science? Who, Me? Couldn’t Be!! Abstract: Creation-Date: 2014 Publication-Status: Published in Eminent Economists II File-URL: http://dash.harvard.edu/bitstream/handle/1/34330162/Practitioner_of_the_Dismal_Science-Who_Me_in_Eminent_Economists_II_Chap12-in-Cambridge-Univ-Press_VOL_2014.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/34330162/Practitioner%20of%20Dismal%20Science%20Who%20Me_MS-DASH_2013.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34330162 Template-Type: ReDIF-Paper 1.0 Author-Name: Simsek, Alp Title: Belief Disagreements and Collateral Constraints Abstract: Belief disagreements have been suggested as a major contributing factor to the recent financial crisis. This paper theoretically evaluates this hypothesis. I assume that optimists have limited wealth and take on leverage in order to take positions in line with their beliefs. To have a significant effect on asset prices, they need to borrow from traders with pessimistic beliefs using loans collateralized by the asset itself. Since pessimists do not value the collateral as much as optimists do, they are reluctant to lend, which provides an endogenous constraint on optimist's ability to borrow and to influence asset prices. I demonstrate that the tightness of this constraint depends on the nature of belief disagreements. Optimism concerning the probability of downside states has no or little effect on asset prices because these types of optimism are disciplined by this constraint. Instead, optimism concerning the relative probability of upside states could have significant effects on asset prices. This asymmetric disciplining effect is robust to allowing for short selling because pessimists that borrow the asset face a similar endogenous constraint. These results emphasize that what investors disagree about matters for asset prices, to a greater extent than the level of disagreements. When richer contracts are available, insurance contracts (similar to credit default swaps) endogenously emerge to facilitate betting. Richer contracts moderate the effect of belief disagreements on asset prices because the medium of betting shifts from buying (or shorting) the asset to trading alternative contracts. Creation-Date: 2012-09-17 Publication-Status: Published in Econometrica File-URL: http://dash.harvard.edu/bitstream/handle/1/9561259/simsekBeliefDisagreementsCollateralConstraints10.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:9561259 Template-Type: ReDIF-Paper 1.0 Author-Name: Grankvist, Alexander Author-Name: Benjamin, Daniel J. Author-Name: Harris, Tamara B. Author-Name: Launer, Lenore J. Author-Name: Smith, Albert Vernon Author-Name: Johannesson, Magnus Author-Name: Atwood, Craig S. Author-Name: Hebert, Benjamin Michael Author-Name: Hultman, Christina M. Author-Name: Lichtenstein, Paul Author-Name: Purcell, Shaun Author-Name: Magnusson, Patrik K.E. Author-Name: Christakis, Nicholas Alexander Author-Name: Beauchamp, Jonathan P. Author-Name: Cesarini, David Author-Name: Chabris, Christopher F. Author-Name: Glaeser, Edward Ludwig Author-Name: Laibson, David I. Author-Name: Guðnason, Vilmundur Author-Name: Freese, Jeremy Author-Name: Hauser, Robert M. Author-Name: Hauser, Taissa S. Title: The Promises and Pitfalls of Genoeconomics Abstract: This article reviews existing research at the intersection of genetics and economics, presents some new findings that illustrate the state of genoeconomics research, and surveys the prospects of this emerging field. Twin studies suggest that economic outcomes and preferences, once corrected for measurement error, appear to be about as heritable as many medical conditions and personality traits. Consistent with this pattern, we present new evidence on the heritability of permanent income and wealth. Turning to genetic association studies, we survey the main ways that the direct measurement of genetic variation across individuals is likely to contribute to economics, and we outline the challenges that have slowed progress in making these contributions. The most urgent problem facing researchers in this field is that most existing efforts to find associations between genetic variation and economic behavior are based on samples that are too small to ensure adequate statistical power. This has led to many false positives in the literature. We suggest a number of possible strategies to improve and remedy this problem: (a) pooling data sets, (b) using statistical techniques that exploit the greater information content of many genes jointly, and (c) focusing on economically relevant traits that are most proximate to known biological mechanisms. Creation-Date: 2012 Publication-Status: Published in Annual Review of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/10137000/Benjamin_PromisesPitfalls.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:10137000 Template-Type: ReDIF-Paper 1.0 Author-Name: Weinstein, Jonathan Author-Name: Ambrus, Attila Title: Price Dispersion and Loss Leaders Abstract: Dispersion in retail prices of identical goods is inconsistent with the standard model of price competition among identical firms, which predicts that all prices will be driven down to cost. One common explanation for such dispersion is the use of a loss-leader strategy, in which a firm prices one good below cost in order to attract a higher customer volume for profitable goods. By assuming each consumer is forced to buy all desired goods at a single firm, we create the possibility of an effective loss-leader strategy. We find that such a strategy cannot occur in equilibrium if individual demands are inelastic, or if demands are diversely distributed. We further show that equilibrium loss leaders can occur (and can result in positive profits) if there are demand complementarities, but only with delicate relationships among the preferences of all consumers. Creation-Date: 2008 Publication-Status: Published in Theoretical Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/4589708/ambrus_price.PDF File-Format: application/pdf Handle: RePEc:hrv:faseco:4589708 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert W. Title: Asset Fire Sales and Credit Easing Abstract: Creation-Date: 2010 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/10362022/19509/asset_fire_sales_aer_published.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:10362022 Template-Type: ReDIF-Paper 1.0 Author-Name: Feldstein, Martin S. Title: The Euro and European Economic Conditions Abstract: The creation of the euro should now be recognized as an experiment that has led to the sovereign debt crisis in several countries, the fragile condition of major European banks, the high levels of unemployment, and the large trade deficits that now exist in most Eurozone countries. Although the European Central Bank managed the euro in a way that achieved a low rate of inflation, other countries both in Europe and elsewhere have also had a decade of low inflation without incurring the costs of a monetary union. The emergence of these problems just a dozen years after the start of the euro in 1999 was not an accident or the result of bureaucratic mismanagement but the inevitable consequence of imposing a single currency on a very heterogeneous group of countries, a heterogeneity that includes not only economic structures but also fiscal traditions and social attitudes. This paper reviews (1) the reasons for these economic problems, (2) the political origins of the European Monetary Union, (3) the current attempts to solve the sovereign debt problem, (4) the long-term problem of inter-country differences of productivity growth and competitiveness, (5) the special problems of Greece and Italy, (6) and the pros and cons of a Greek departure from the Eurozone. Creation-Date: 2011 Publication-Status: Published in NBER Working Paper Series File-URL: http://dash.harvard.edu/bitstream/handle/1/9949289/Feldstein_EuroEuropean.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:9949289 Template-Type: ReDIF-Paper 1.0 Author-Name: Fuster, Andreas Author-Name: Hebert, Benjamin Michael Author-Name: Laibson, David I. Title: Investment Dynamics with Natural Expectations Abstract: We study an investment model in which agents have the wrong beliefs about the dynamic properties of fundamentals. Specifically, we assume that agents underestimate the rate of mean reversion. The model exhibits the following six properties: (i) Beliefs are excessively optimistic in good times and excessively pessimistic in bad times. (ii) Asset prices are too volatile. (iii) Excess returns are negatively autocorrelated. (iv) High levels of corporate profits predict negative future excess returns. (v) Real economic activity is excessively volatile; the economy experiences amplified investment cycles. (vi) Corporate profits are positively autocorrelated in the short run and negatively autocorrelated in the medium run. The paper provides an illustrative model of animal spirits, amplified business cycles, and excess volatility. Creation-Date: 2012 Publication-Status: Published in International Journal of Central Banking File-URL: http://dash.harvard.edu/bitstream/handle/1/10139283/Fuster_InvestmentDynamics.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:10139283 Template-Type: ReDIF-Paper 1.0 Author-Name: Hurwitz, Michael Author-Name: Goodman, Joshua Samuel Author-Name: Smith, Jonathan Author-Name: Fox, Julia Title: The relationship between siblings’ college choices: Evidence from one million SAT-taking families Abstract: Research consistently shows that college choice in an important predictor of college completion and labor market outcomes. These longer term implications of college choice, combined with suboptimal choices made by many low-income but high-achieving students, has sparked several large-scale initiatives to improve college choice. Strategically targeting those students most susceptible to making questionable decisions in the college-choice process remains challenging, as variation in college choice is largely unexplained by easily measurable socio-demographic characteristics. This paper explores the potential to improve upon existing models and, more generally, to better understand college choice by documenting the similarities in college enrollment patterns between younger and older siblings. To do so, we identify siblings in the millions of SAT test-takers between the 2004 and 2011 high school graduation cohorts. We find that younger siblings enroll in the same college as their older sibling 21.2 percent of the time. Also, conditional on their own SAT scores, we find that younger siblings whose older siblings enrolled in four-year colleges and the most selective colleges are 17.4 and 21.3 percentage points, respectively, more likely to themselves enroll in four-year and the most selective colleges. Overall, adding characteristics and enrollment decisions of older siblings to standard college choice models improves model fit and consequently, are valuable pieces of information for explanatory and predictive power. Creation-Date: 2015 Publication-Status: Published in Economics of Education Review File-URL: http://dash.harvard.edu/bitstream/handle/1/22805380/175231/sib_non_rivalry.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:22805380 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Levine, David K. Title: Self-confirming Equilibrium and the Lucas Critique Abstract: We examine the role of off-path “superstitions” in macro-economics, and show how a false belief about off-path play is the key element underlying both the Lucas Critique and the game-theoretic concept of self-confirming equilibrium. However, the impact of false beliefs in these two cases is different: In the Lucas case, a policy maker's incorrect beliefs about off-path play can lead to the adoption of mistaken policy innovation. However, the consequences of such an innovation provide evidence that the belief that motivated them was wrong. In contrast, play may never escape an undesirable self-confirming equilibrium, as the action implied by the mistaken belief does not generate data that contradicts it; escape from the self-confirming equilibrium requires that players do a sufficient amount of experimentation with off-path actions. Creation-Date: 2009 Publication-Status: Published in Journal of Economic Theory File-URL: http://dash.harvard.edu/bitstream/handle/1/4686412/Fudenberg_LucasCritique.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4686412 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Archetti, Marco Author-Name: Green, Jerry R. Author-Name: Pierce, Naomi Ellen Author-Name: Yu, Douglas W. Author-Name: Úbeda, Francisco Title: Let the Right One In: A Microeconomic Approach to Partner Choice in Mutualisms Abstract: One of the main problems impeding the evolution of cooperation is partner choice. When information is asymmetric (the quality of a potential partner is known only to himself), it may seem that partner choice is not possible without signaling. Many mutualisms, however, exist without signaling, and the mechanisms by which hosts might select the right partners are unclear. Here we propose a general mechanism of partner choice, "screening," that is similar to the economic theory of mechanism design. Imposing the appropriate costs and rewards may induce the informed individuals to screen themselves according to their types and therefore allow a noninformed individual to establish associations with the correct partners in the absence of signaling. Several types of biological symbioses are good candidates for screening, including bobtail squid, ant-plants, gut microbiomes, and many animal and plant species that produce reactive oxygen species. We describe a series of diagnostic tests for screening. Screening games can apply to the cases where by-products, partner fidelity feedback, or host sanctions do not apply, therefore explaining the evolution of mutualism in systems where it is impossible for potential symbionts to signal their cooperativeness beforehand and where the host does not punish symbiont misbehavior. Creation-Date: 2011 Publication-Status: Published in The American Naturalist File-URL: http://dash.harvard.edu/bitstream/handle/1/9962009/Archetti_Let.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:9962009 Template-Type: ReDIF-Paper 1.0 Author-Name: Albrecht, Konstanze Author-Name: Volz, Kirsten G. Author-Name: Sutter, Matthias Author-Name: Laibson, David I. Author-Name: Yves von Cramon, D. Title: What Is for Me Is Not for You: Brain Correlates of Intertemporal Choice for Self and Other Abstract: People have present-biased preferences: they choose more impatiently when choosing between an immediate reward and a delayed reward, than when choosing between a delayed reward and a more delayed reward. Following McClure et al. [McClure, S.M., Laibson, D.I., Loewenstein, G., Cohen, J.D. (2004). Separate neural systems value immediate and delayed monetary rewards. Science, 306, 503.], we find that areas in the dopaminergic reward system show greater activation when a binary choice set includes both an immediate reward and a delayed reward in contrast to activation measured when the binary choice set contains only delayed rewards. The presence of an immediate reward in the choice set elevates activation of the ventral striatum, pregenual anterior cingulate cortex and anterior medial prefrontal cortex. These dopaminergic reward areas are also responsive to the identity of the recipient of the reward. Even an immediate reward does not activate these dopaminergic regions when the decision is being made for another person. Our results support the hypotheses that participants show less affective engagement (i) when they are making choices for themselves that only involve options in the future or (ii) when they are making choices for someone else. As hypothesized, we also find that behavioral choices reflect more patience when choosing for someone else. Creation-Date: 2011 Publication-Status: Published in Social Cognitive and Affective Neuroscience File-URL: http://dash.harvard.edu/bitstream/handle/1/9972760/What_Is_For_Me.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:9972760 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Yamamoto, Yuichi Title: Learning from Private Information in Noisy Repeated Games Abstract: We study the perfect type-contingently public ex-post equilibrium (PTXE) of repeated games where players observe imperfect public signals of the actions played, and both the payoff functions and the map from actions to signal distributions depend on an unknown state. The PTXE payoffs when players are patient are determined by the solutions to a family of linear programming problems. Using this characterization, we develop conditions under which play can be as if the players have learned the state. We provide a sufficient condition for the folk theorem, and a characterization of the PTXE payoffs in games with a known monitoring structure. Creation-Date: 2011 Publication-Status: Published in Journal of Economic Theory File-URL: http://dash.harvard.edu/bitstream/handle/1/9962008/Fudenberg_Learning.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:9962008 Template-Type: ReDIF-Paper 1.0 Author-Name: Fuster, Andreas Author-Name: Herbert, Benjamin Author-Name: Laibson, David I. Title: Natural Expectations, Macroeconomic Dynamics, and Asset Pricing Abstract: Creation-Date: 2011 Publication-Status: Published in NBER Macroeconomics Annual File-URL: http://dash.harvard.edu/bitstream/handle/1/10140029/Natural_Expectations.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:10140029 Template-Type: ReDIF-Paper 1.0 Author-Name: Laibson, David I. Author-Name: Madrian, Brigitte C. Author-Name: Choi, James J. Title: Mental Accounting in Portfolio Choice: Evidence from a Flypaper Effect Abstract: Consistent with mental accounting, we document that investors sometimes choose the asset allocation for one account without considering the asset allocation of their other accounts. The setting is a firm that changed its 401(k) matching rules. Initially, 401(k) enrollees chose the allocation of their own contributions, but the firm chose the match allocation. These enrollees ignored the match allocation when choosing their own-contribution allocation. In the second regime, enrollees simultaneously selected both allocations, leading them to mentally integrate the two. Own-contribution allocations before the rule change equal the combined own and match-contribution allocations afterwards, whereas combined allocations differ sharply across regimes. Creation-Date: 2009 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/4686774/Laibson_MentalAccounting.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4686774 Template-Type: ReDIF-Paper 1.0 Author-Name: Jaeger, Simon C Author-Name: Ganong, Peter Nathan Title: A Permutation Test and Estimation Alternatives for the Regression Kink Design Abstract: The Regression Kink (RK) design is an increasingly popular empirical method, with more than 20 studies circulated using RK in the last 5 years since the initial circulation of Card, Lee, Pei and Weber (2012). We document empirically that these estimates, which typically use local linear regression, are highly sensitive to curvature in the underlying relationship between the outcome and the assignment variable. As an alternative inference procedure, motivated by randomization inference, we propose that researchers construct a distribution of placebo estimates in regions without a policy kink. We apply our procedure to three empirical RK applications – two administrative UI datasets with true policy kinks and the 1980 Census, which has no policy kinks – and we find that statistical significance based on conventional p-values may be spurious. In contrast, our permutation test reinforces the asymptotic inference results of a recent Regression Discontinuity study and a Difference-in-Difference study. Finally, we propose estimating RK models with a modified cubic splines framework and test the performance of different estimators in a simulation exercise. Cubic specifications – in particular recently proposed robust estimators (Calonico, Cattaneo and Titiunik 2014) – yield short interval lengths with good coverage rates. Creation-Date: 2014 Publication-Status: Published in Institute for the Study of Labor (IZA) Discussion Series Papers File-URL: http://dash.harvard.edu/bitstream/handle/1/34222894/174531/ganong_jaeger_2014_wp_0.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34222894 Template-Type: ReDIF-Paper 1.0 Author-Name: Zhang, Wang Author-Name: Pal, Sumanta K. Author-Name: Liu, Xueli Author-Name: Yang, Chunmei Author-Name: Allahabadi, Sachin Author-Name: Bhanji, Shaira Author-Name: Figlin, Robert A. Author-Name: Yu, Hua Author-Name: Reckamp, Karen L. Title: Myeloid Clusters Are Associated with a Pro-Metastatic Environment and Poor Prognosis in Smoking-Related Early Stage Non-Small Cell Lung Cancer Abstract: Background: This study aimed to understand the role of myeloid cell clusters in uninvolved regional lymph nodes from early stage non-small cell lung cancer patients. Methods: Uninvolved regional lymph node sections from 67 patients with stage I–III resected non-small cell lung cancer were immunostained to detect myeloid clusters, STAT3 activity and occult metastasis. Anthracosis intensity, myeloid cluster infiltration associated with anthracosis and pSTAT3 level were scored and correlated with patient survival. Multivariate Cox regression analysis was performed with prognostic variables. Human macrophages were used for in vitro nicotine treatment. Results: \(CD68^+\) myeloid clusters associated with anthracosis and with an immunosuppressive and metastasis-promoting phenotype and elevated overall STAT3 activity were observed in uninvolved lymph nodes. In patients with a smoking history, myeloid cluster score significantly correlated with anthracosis intensity and pSTAT3 level (P<0.01). Nicotine activated STAT3 in macrophages in long-term culture. \(CD68^+\) myeloid clusters correlated and colocalized with occult metastasis. Myeloid cluster score was an independent prognostic factor (P = 0.049) and was associated with survival by Kaplan-Maier estimate in patients with a history of smoking (P = 0.055). The combination of myeloid cluster score with either lymph node stage or pSTAT3 level defined two populations with a significant difference in survival (P = 0.024 and P = 0.004, respectively). Conclusions: Myeloid clusters facilitate a pro-metastatic microenvironment in uninvolved regional lymph nodes and associate with occult metastasis in early stage non-small cell lung cancer. Myeloid cluster score is an independent prognostic factor for survival in patients with a history of smoking, and may present a novel method to inform therapy choices in the adjuvant setting. Further validation studies are warranted. Creation-Date: 2013 Publication-Status: Published in PLoS ONE File-URL: http://dash.harvard.edu/bitstream/handle/1/11859328/3663795.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11859328 Template-Type: ReDIF-Paper 1.0 Author-Name: Weitzman, Martin L. Title: GHG Targets as Insurance Against Catastrophic Climate Damages Abstract: A critical issue in climate change economics is the specification of the so-called “damages function” and its interaction with the unknown uncertainty of catastrophic outcomes. This paper asks how much we might be misled by our economic assessment of climate change when we employ a conventional quadratic damages function and/or a thin-tailed probability distribution for extreme temperatures. The paper gives some numerical examples of the indirect value of various greenhouse gas (GHG) concentration targets as insurance against catastrophic climate change temperatures and damages. These numerical exercises suggest that we might be underestimating considerably the welfare losses from uncertainty by using a quadratic damages function and/or a thin-tailed temperature distribution. In these examples, the primary reason for keeping GHG levels down is to insure against high-temperature catastrophic climate risks. Creation-Date: 2012 Publication-Status: Published in Journal of Public Economic Theory File-URL: http://dash.harvard.edu/bitstream/handle/1/11315435/GHG_Targets_Insurance.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11315435 Template-Type: ReDIF-Paper 1.0 Author-Name: Reinhart, Carmen M. Author-Name: Rogoff, Kenneth S. Title: Serial Default and the “Paradox” of Rich-to-Poor Capital Flows Abstract: Creation-Date: 2004 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/11129182/Reinhart_Rogoff_Serial_Default_AER2004.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11129182 Template-Type: ReDIF-Paper 1.0 Author-Name: Reinhart, Carmen M. Author-Name: Rogoff, Kenneth S. Title: The Aftermath of Financial Crises Abstract: Creation-Date: 2009 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/11129155/Reinhart_Rogoff_Aftermath_of_Financial_Crises_AER2009.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11129155 Template-Type: ReDIF-Paper 1.0 Author-Name: Glaeser, Edward Ludwig Author-Name: Shleifer, Andrei Title: Gary Becker (1930-2014) Abstract: Gary Becker, who died on 3 May 2014 at the age of 83, redefined economics both in its methodology and scope. He radically expanded the sphere of economic analysis. As the range of issues and especially data in economics increased over the last half century, Becker's approach became more and more relevant and modern. He was awarded the 1992 Nobel Prize in Economics for “having extended the domain of microeconomic analysis to a wide range of human behavior and interaction, including nonmarket behavior.” Creation-Date: 2014 Publication-Status: Published in Science File-URL: http://dash.harvard.edu/bitstream/handle/1/33470177/174291/science-2014-glaeser-1233.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33470177 Template-Type: ReDIF-Paper 1.0 Author-Name: Beshears, John Leonard Author-Name: Choi, James J Author-Name: Fuster, Andreas Author-Name: Laibson, David I. Author-Name: Madrian, Brigitte Title: What Goes Up Must Come Down? Experimental Evidence on Intuitive Forecasting Abstract: Do laboratory subjects correctly perceive the dynamics of a mean-reverting time series? In our experiment, subjects receive historical data and make forecasts at different horizons. The time series process that we use features short-run momentum and long-run partial mean reversion. Half of the subjects see a version of this process in which the momentum and partial mean reversion unfold over ten periods ("fast"), while the other subjects see a version with dynamics that unfold over 50 periods ("slow"). Typical subjects recognize most of the mean reversion of the fast process and none of the mean reversion of the slow process. Creation-Date: 2013 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/12378032/Beshears_WhatGoes.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12378032 Template-Type: ReDIF-Paper 1.0 Author-Name: Maniadis, Zacharias Author-Name: Levine, David K. Author-Name: Fudenberg, Drew Title: On the Robustness of Anchoring Effects in WTP and WTA Experiments Abstract: We reexamine the effects of the anchoring manipulation of Ariely, Loewenstein, and Prelec (2003) on the evaluation of common market goods and find very weak anchoring effects. We perform the same manipulation on the evaluation of binary lotteries, and find no anchoring effects at all. This suggests limits on the robustness of anchoring effects. Creation-Date: 2012 Publication-Status: Published in American Economic Journal: Macroeconomics File-URL: http://dash.harvard.edu/bitstream/handle/1/11005333/On%20the%20Robustness%20of%20Anchoring.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11005333 Template-Type: ReDIF-Paper 1.0 Author-Name: Mendel, Brock Author-Name: Shleifer, Andrei Title: Chasing Noise Abstract: We present a simple model in which rational but uninformed traders occasionally chase noise as if it were information, thereby amplifying sentiment shocks and moving prices away from fundamental values. In the model, noise traders can have an impact on market equilibrium disproportionate to their size in the market. The model offers a partial explanation for the surprisingly low market price of financial risk in the spring of 2007. Creation-Date: 2012 Publication-Status: Published in Journal of Financial Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/10859950/44265251.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:10859950 Template-Type: ReDIF-Paper 1.0 Author-Name: Feige, Chris Author-Name: Miron, Jeffrey A. Title: The Opium Wars, Opium Legalization and Opium Consumption in China Abstract: The effect of drug prohibition on drug consumption is a critical issue in debates over drug policy. One episode that provides information on the consumption-reducing effect of drug prohibition is the Chinese legalization of opium in 1858. In this paper we examine the impact of China's opium legalization on the quantity and price of British opium exports from India to China during the 19th century. We find little evidence that legalization increased exports or decreased price. Thus, the evidence suggests China's opium prohibition had a minimal impact on opium consumption. Creation-Date: 2008 Publication-Status: Published in Applied Economics Letters File-URL: http://dash.harvard.edu/bitstream/handle/1/11379703/miron-opium-wars.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11379703 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Author-Name: Bordalo, Pedro Author-Name: Gennaioli, Nicola Title: Salience Theory of Choice Under Risk Abstract: We present a theory of choice among lotteries in which the decision maker's attention is drawn to (precisely defined) salient payoffs. This leads the decision maker to a context-dependent representation of lotteries in which true probabilities are replaced by decision weights distorted in favor of salient payoffs. By specifying decision weights as a function of payoffs, our model provides a novel and unified account of many empirical phenomena, including frequent risk-seeking behavior, invariance failures such as the Allais paradox, and preference reversals. It also yields new predictions, including some that distinguish it from prospect theory, which we test. Creation-Date: 2012 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/10636303/29210/salience_qje_jan18_final.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/10636303/29210/salience_appendix_qje_jan18.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:10636303 Template-Type: ReDIF-Paper 1.0 Author-Name: Tercieux, Olivier Author-Name: Aghion, Philippe Author-Name: Fudenberg, Drew Author-Name: Holden, Richard Author-Name: Kunimoto, Takashi Title: Subgame-Perfect Implementation Under Information Perturbations Abstract: We consider the robustness of extensive form mechanisms to deviations from common knowledge about the state of nature, which we refer to as information perturbations. First, we show that even under arbitrarily small information perturbations the Moore-Repullo mechanism does not yield (even approximately) truthful revelation and that in addition the mechanism has sequential equilibria with undesirable outcomes. More generally, we prove that any extensive form mechanism is fragile in the sense that if a non-Maskin monotonic social objective can be implemented with this mechanism, then there are arbitrarily small information perturbations under which an undesirable sequential equilibrium also exists. Finally, we argue that outside options can help improve efficiency in asymmetric information environments, and that these options can be thought of as reflecting ownership of an asset. JEL Codes: C72, D23, D78, D82 Creation-Date: 2012 Publication-Status: Published in The Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/11224965/Subgame%20Perfect%20Implementation.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11224965 Template-Type: ReDIF-Paper 1.0 Author-Name: Hornbeck, Richard A. Title: The Enduring Impact of the American Dust Bowl: Short- and Long-Run Adjustments to Environmental Catastrophe Abstract: The 1930s American Dust Bowl was an environmental catastrophe that greatly eroded sections of the Plains. The Dust Bowl is estimated to have immediately, substantially, and persistently reduced agricultural land values and revenues in more-eroded counties relative to less-eroded counties. During the Depression and through at least the 1950s, there was limited relative adjustment of farmland away from activities that became relatively less productive in more-eroded areas. Agricultural adjustments recovered less than 25 percent of the initial difference in agricultural costs for more-eroded counties. The economy adjusted predominantly through large relative population declines in more-eroded counties, both during the 1930s and through the 1950s. (JEL N32, N52, Q15, Q18, Q54) Creation-Date: 2012 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/11303325/hornbeck_dustbowl.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11303325 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert W. Title: Unstable banking Abstract: We propose a theory of financial intermediaries operating in markets influenced by investor sentiment. In our model, banks make, securitize, distribute, and trade loans, or they hold cash. They also borrow money, using their security holdings as collateral. Banks maximize profits, and there are no conflicts of interest between bank shareholders and creditors. The theory predicts that bank credit and real investment will be volatile when market prices of loans are volatile, but it also points to the instability of banks, especially leveraged banks, participating in markets. Profit- maximizing behavior by banks creates systemic risk. Creation-Date: 2010 Publication-Status: Published in Journal of Financial Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/33077921/SSRN-id1401788.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33077921 Template-Type: ReDIF-Paper 1.0 Author-Name: Al-Ubaydli, Omar Author-Name: Houser, Daniel Author-Name: Nye, John Author-Name: Paganelli, Maria Pia Author-Name: Pan, Xiaofei Title: The Causal Effect of Market Priming on Trust: An Experimental Investigation Using Randomized Control Abstract: We report data from laboratory experiments where participants were primed using phrases related to markets and trade. Participants then participated in trust games with anonymous strangers. The decisions of primed participants are compared to those of a control group. We find evidence that priming for market participation affects positively the beliefs regarding the trustworthiness of anonymous strangers and increases trusting decisions. Creation-Date: 2013 Publication-Status: Published in PLoS ONE File-URL: http://dash.harvard.edu/bitstream/handle/1/11215414/3589397.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11215414 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Levine, David K. Title: Timing and Self-Control Abstract: The dual self-model of self-control with one-period lived short-run selves is excessively sensitive to the timing of shocks and to the interpolation of additional “noaction” time periods in between the dates when decisions are made. We show that when short-run selves have a random length of time this excess sensitivity goes away. We consider both linear and convex cost of self-control models, illustrating the theory through a series of examples. We examine when opportunities to consume will be avoided or delayed; we consider the way in which the marginal interest declines with delay, and we examine how preference “reversals” depend on the timing of information. To accommodate the combination of short time periods and convex costs of self control we extend the model to treat willpower as a cognitive resource that is limited in the short run. Creation-Date: 2012 Publication-Status: Published in Econometrica File-URL: http://dash.harvard.edu/bitstream/handle/1/11005331/Timing%20and%20Self-Control.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11005331 Template-Type: ReDIF-Paper 1.0 Author-Name: Nikolov, Plamen Title: Justice and Allocation in International Health Aid Abstract: Creation-Date: 2007 Publication-Status: Published in SAIS Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/11009152/intlhealth.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11009152 Template-Type: ReDIF-Paper 1.0 Author-Name: Friedman, Benjamin Morton Title: Rules versus Discretion at the Federal Reserve: On to the Second Century Abstract: Much of the experience of the U.S. Federal Reserve System, during the institution’s first hundred years, has revolved around controversies that fit squarely within the classical debate over rules versus discretion in economic policymaking. This paper looks back at the major episodes in this history since World War II, including the initial freeing of monetary policy from war-related interest-pegging, the Federal Reserve’s delayed but ultimately successful response to the inflation of the 1970s and early 1980s, the brief experiment with monetary aggregate targets, the extraordinary actions prompted by the 2007-9 financial crisis, and the current tentative exploration of inflation targeting. The paper concludes that the tension between the desire for rule-based policymaking and the practicalities that lead central bankers to preserve discretion in actual policy decisions does not admit of any easy, straightforward solution, and therefore that this tension is likely to persist into the Federal Reserve’s next century too. Creation-Date: 2012 Publication-Status: Published in Journal of Macroeconomics File-URL: http://dash.harvard.edu/bitstream/handle/1/10886842/Journal%20of%20Macroeconomics%20paper%20--%20May%202012[1].pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:10886842 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Y. Title: The Changing Role of Nominal Government Bonds in Asset Allocation Abstract: The covariance between nominal bonds and stocks has varied considerably over recent decades and has even switched sign. It has been predominantly positive in periods such as the late 1970s and early 1980s when the economy has experienced supply shocks and the central bank has lacked credibility. It has been predominantly negative in periods such as the 2000s when investors have feared weak aggregate demand and deflation. Nominal bonds are attractive to short-term equity investors when these bonds are negatively correlated with stocks, as has been the case during the 2000s and especially during the downturn of 2007–2008. They are attractive to conservative long-term investors when long-term inflationary expectations are stable, for then these bonds are close substitutes for inflation-indexed bonds that are riskless in the long term. Creation-Date: 2009 Publication-Status: Published in Geneva Risk and Insurance Review File-URL: http://dash.harvard.edu/bitstream/handle/1/10884856/Campbell_Changing.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:10884856 Template-Type: ReDIF-Paper 1.0 Author-Name: Reinhart, Carmen M. Author-Name: Rogoff, Kenneth S. Title: Growth in a Time of Debt Abstract: Creation-Date: 2010 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/11129154/Reinhart_Rogoff_Growth_in_a_Time_of_Debt_2010.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11129154 Template-Type: ReDIF-Paper 1.0 Author-Name: Shiller, Robert J. Author-Name: Campbell, John Y. Author-Name: Viceira, Luis Manuel Title: Understanding Inflation-Indexed Bond Markets Abstract: This paper explores the history of inflation-indexed bond markets in the US and the UK. It documents a massive decline in long-term real interest rates from the 1990's until 2008, followed by a sudden spike in these rates during the financial crisis of 2008. Breakeven inflation rates, calculated from inflation- indexed and nominal government bond yields, stabilized until the fall of 2008, when they showed dramatic declines. The paper asks to what extent short-term real interest rates, bond risks, and liquidity explain the trends before 2008 and the unusual developments in the fall of 2008. Low inflation-indexed yields and high short-term volatility of inflation-indexed bond returns do not invalidate the basic case for these bonds, that they provide a safe asset for long-term investors. Governments should expect inflation-indexed bonds to be a relatively cheap form of debt financing going forward, even though they have offered high returns over the past decade. Creation-Date: 2009 Publication-Status: Published in Brookings Papers on Economic Activity File-URL: http://dash.harvard.edu/bitstream/handle/1/10885503/Campbell_Understanding.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:10885503 Template-Type: ReDIF-Paper 1.0 Author-Name: Reinhart, Carmen M. Author-Name: Rogoff, Kenneth S. Title: Shifting Mandates: The Federal Reserve's First Centennial Abstract: The Federal Reserve's mandate has evolved considerably over the organization's hundred-year history. It was changed from an initial focus in 1913 on financial stability, to fiscal financing in World War II and its aftermath, to a strong anti-inflation focus from the late 1970s, and then back to greater emphasis on financial stability since the Great Contraction. Yet, as the Fed's mandate has expanded in recent years, its range of instruments has narrowed, partly based on a misguided belief in the inherent stability of financial markets. We argue for a return to multiple instruments, including a more active role for reserve requirements. Creation-Date: 2013 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/11129184/Reinhart_Rogoff_Shifting_Mandates_AER2013.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11129184 Template-Type: ReDIF-Paper 1.0 Author-Name: Reinhart, Carmen M. Author-Name: Rogoff, Kenneth S. Title: Is the 2007 US Sub-Prime Financial Crisis So Different? An International Historical Comparison Abstract: Creation-Date: 2008 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/11129156/Reinhart_Rogoff_Is_the_US_Sub-prine_Crisis_So_Different_AER2008.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11129156 Template-Type: ReDIF-Paper 1.0 Author-Name: Nikolov, Plamen Title: The AIDS Epidemic and Its Economic Roots Abstract: Creation-Date: 2009 Publication-Status: Published in Harvard Health Policy Review File-URL: http://dash.harvard.edu/bitstream/handle/1/10988621/AIDS%20and%20Economics.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:10988621 Template-Type: ReDIF-Paper 1.0 Author-Name: Beshears, John Leonard Author-Name: Choi, James J. Author-Name: Laibson, David I. Author-Name: Madrian, Brigitte Title: How Are Preferences Revealed? Abstract: Revealed preferences are tastes that rationalize an economic agent's observed actions. Normative preferences represent the agent's actual interests. It sometimes makes sense to assume that revealed preferences are identical to normative preferences. But there are many cases where this assumption is violated. We identify five factors that increase the likelihood of a disparity between revealed preferences and normative preferences: passive choice, complexity, limited personal experience, third-party marketing, and intertemporal choice. We then discuss six approaches that jointly contribute to the identification of normative preferences: structural estimation, active decisions, asymptotic choice, aggregated revealed preferences, reported preferences, and informed preferences. Each of these approaches uses consumer behavior to infer some property of normative preferences without equating revealed and normative preferences. We illustrate these issues with evidence from savings and investment outcomes. Creation-Date: 2008 Publication-Status: Published in Journal of Public Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/11130523/Laibson_Preferences.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11130523 Template-Type: ReDIF-Paper 1.0 Author-Name: Friedman, Benjamin Morton Title: Monetary Policy, Fiscal Policy, and the Efficiency of Our Financial System: Lessons from the Financial Crisis Abstract: Creation-Date: 2012 Publication-Status: Published in International Journal of Central Banking File-URL: http://dash.harvard.edu/bitstream/handle/1/10886843/FRB%20Boston%20conference%20--%20April%202011%20--%20edited%20comments[1].pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:10886843 Template-Type: ReDIF-Paper 1.0 Author-Name: Friedman, Benjamin Morton Title: Monetary Policy for Emerging Market Economies: Beyond Inflation Targeting Abstract: Monetary policymakers normally seek to achieve multiple objectives: for prices as well as real economic activity, sometimes for the composition of real activity as well as the aggregate, and often for aspects of the economy's international balance. The fact that monetary policy has only one basic instrument to use therefore creates both complexity and tensions among these objectives. Although inflation targeting represents a way of imposing a logical consistency on monetary policy, in the presence of multiple policy objectives inflation targeting undermines policy transparency and therefore makes accountability more difficult too. Because of the limitation of monetary policy's having only one instrument, but multiple objectives, fiscal policy and prudential supervision and regulation of financial institutions are also important for enabling emerging market economies to achieve their macroeconomic aims. Creation-Date: 2008 Publication-Status: Published in Macroeconomics and Finance in Emerging Market Economies File-URL: http://dash.harvard.edu/bitstream/handle/1/10886841/Monetary%20Policy%20for%20Emerging%20Market%20Economies.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:10886841 Template-Type: ReDIF-Paper 1.0 Author-Name: Cuñat, Alejandro Author-Name: Melitz, Marc J. Title: Volatility, Labor Market Flexibility, and the Pattern of Comparative Advantage Abstract: This paper studies the link between volatility, labor market flexibility, and international trade. International differences in labor market regulations affect how firms can adjust to idiosyncratic shocks. These institutional differences interact with sector specific differences in volatility (the variance of the firm-specific shocks in a sector) to generate a new source of comparative advantage. Other things equal, countries with more flexible labor markets specialize in sectors with higher volatility. Empirical evidence for a large sample of countries strongly supports this theory: the exports of countries with more flexible labor markets are biased towards high-volatility sectors. We show how differences in labor market institutions can be parsimoniously integrated into the workhorse model of Ricardian comparative advantage of Dornbusch, Fischer, and Samuelson (1977, American Economic Review, 67, 823–839). We also show how our model can be extended to multiple factors of production. Creation-Date: 2012 Publication-Status: Published in Journal of the European Economic Association File-URL: http://dash.harvard.edu/bitstream/handle/1/10914283/acmm_10_0118b.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:10914283 Template-Type: ReDIF-Paper 1.0 Author-Name: Bilbiie, Florin O. Author-Name: Ghironi, Fabio Author-Name: Melitz, Marc J. Title: Endogenous Entry, Product Variety, and Business Cycles Abstract: This paper builds a framework for the analysis of macroeconomic fluctuations that incorporates the endogenous determination of the number of producers and products over the business cycle. Economic expansions induce higher entry rates by prospective entrants subject to sunk investment costs. The sluggish response of the number of producers generates a new and potentially important endogenous propagation mechanism for business cycle models. The return to investment determines household saving decisions, producer entry, and the allocation of labor across sectors. Our framework replicates several features of business cycles and predicts procyclical profits even for preference specifications that imply countercyclical markups. Creation-Date: 2012 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/10914281/BGMRBCJPERevision2_120312.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:10914281 Template-Type: ReDIF-Paper 1.0 Author-Name: Mankiw, N. Gregory Author-Name: Reis, Ricardo Title: Imperfect Information and Aggregate Supply Abstract: This paper surveys the research in the past decade on imperfect information models of aggregate supply and the Phillips curve. This new work has emphasized that information is dispersed and disseminates slowly across a population of agents who strategically interact in their use of information. We discuss the foundations on which models of aggregate supply rest, as well as the micro-foundations for two classes of imperfect information models: models with partial information, where agents observe economic conditions with noise, and models with delayed information, where they observe economic conditions with a lag. We derive the implications of these two classes of models for: the existence of a non-vertical aggregate supply, the persistence of the real effects of monetary policy, the difference between idiosyncratic and aggregate shocks, the dynamics of disagreement, and the role of transparency in policy. Finally, we present some of the topics on the research frontier in this area. Creation-Date: 2010 Publication-Status: Published in Handbook of Monetary Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/33907956/Imperfect%20Information_0.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33907956 Template-Type: ReDIF-Paper 1.0 Author-Name: Rogoff, Kenneth S. Title: Why Not a Global Currency? Abstract: Creation-Date: 2001 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/11129183/Rogoff_Why_Not_Global_Currency_AER2001.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11129183 Template-Type: ReDIF-Paper 1.0 Author-Name: Bulow, Jeremy Author-Name: Rogoff, Kenneth S. Title: Grants versus Loans for Development Banks Abstract: Creation-Date: 2005 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/11129181/Bulow_Rogoff_Grants_versus_Loans_AER2005.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11129181 Template-Type: ReDIF-Paper 1.0 Author-Name: Chabris, Christopher F. Author-Name: Laibson, David I. Author-Name: Morris, Carrie L. Author-Name: Schuldt, Jonathon P. Author-Name: Taubinsky, Dmitry Title: Individual Laboratory-Measured Discount Rates Predict Field Behavior Abstract: We estimate discount rates of 555 subjects using a laboratory task and find that these individual discount rates predict inter-individual variation in field behaviors (e.g., exercise, BMI, smoking). The correlation between the discount rate and each field behavior is small: none exceeds 0.28 and many are near 0. However, the discount rate has at least as much predictive power as any variable in our dataset (e.g., sex, age, education). The correlation between the discount rate and field behavior rises when field behaviors are aggregated: these correlations range from 0.09–0.38. We present a model that explains why specific intertemporal choice behaviors are only weakly correlated with discount rates, even though discount rates robustly predict aggregates of intertemporal decisions. Creation-Date: 2008 Publication-Status: Published in Journal of Risk and Uncertainty File-URL: http://dash.harvard.edu/bitstream/handle/1/11130522/Laibson_Individual.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11130522 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Imhof, LA Title: Phenotype Switching and Mutations in Random Environments Abstract: Cell populations can benefit from changing phenotype when the environment changes. One mechanism for generating these changes is stochastic phenotype switching, whereby cells switch stochastically from one phenotype to another according to genetically determined rates, irrespective of the current environment, with the matching of phenotype to environment then determined by selective pressure. This mechanism has been observed in numerous contexts, but identifying the precise connection between switching rates and environmental changes remains an open problem. Here, we introduce a simple model to study the evolution of phenotype switching in a finite population subject to random environmental shocks. We compare the successes of competing genotypes with different switching rates, and analyze how the optimal switching rates depend on the frequency of environmental changes. If environmental changes are as rare as mutations, then the optimal switching rates mimic the rates of environmental changes. If the environment changes more frequently, then the optimal genotype either maximally favors fitness in the more common environment or has the maximal switching rate to each phenotype. Our results also explain why the optimum is relatively insensitive to fitness in each environment. Creation-Date: 2012 Publication-Status: Published in Bulletin of Mathematical Biology File-URL: http://dash.harvard.edu/bitstream/handle/1/11005332/Phenotype%20Switching.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11005332 Template-Type: ReDIF-Paper 1.0 Author-Name: Melitz, Marc J. Author-Name: Trefler, Daniel Title: Gains from Trade When Firms Matter Abstract: The rising prominence of intra-industry trade and huge multinationals has transformed the way economists think about the gains from trade. In the past, we focused on gains that stemmed either from endowment differences (wheat for iron ore) or inter-industry comparative advantage (David Ricardo's classic example of cloth for port). Today, we focus on three sources of gains from trade: 1) love-of-variety gains associated with intra-industry trade; 2) allocative efficiency gains associated with shifting labor and capital out of small, less-productive firms and into large, more-productive firms; and 3) productive efficiency gains associated with trade-induced innovation. This paper reviews these three sources of gains from trade both theoretically and empirically. Our empirical evidence will be centered on the experience of Canada following its closer economic integration in 1989 with the United States—the largest example of bilateral intra-industry trade in the world—but we will also describe evidence for other countries. Creation-Date: 2012 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/10914282/GainsFromTrade_V8_Figs.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:10914282 Template-Type: ReDIF-Paper 1.0 Author-Name: Mankiw, N. Gregory Author-Name: Campbell, John Title: International Evidence on the Persistence of Economic Fluctuations Abstract: This paper presents new evidence on the persistence of fluctuations in real GNP. We estimate two measures of persistence nonparametrically using post-war quarterly data from Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. We compare these estimates with Monte Carlo results from various AR(2) processes. For six out of seven countries, the point estimates indicate that a 1% shock to output should change the long-run unvariate forecast of output by well over 1%. Low-order ARMA models yield similar conclusions. Finally, we examine the persistence in relative outputs of different countries. Creation-Date: 1989 Publication-Status: Published in Journal of Monetary Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3224417/campbell_internationalevidence.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3224417 Template-Type: ReDIF-Paper 1.0 Author-Name: Strzalecki, Tomasz Title: Probabilistic Sophistication and Variational Preferences Abstract: This paper shows that in the class of variational preferences the notion of probabilistic sophistication is equivalent to expected utility as long as there exists at least one event such that the independence axiom holds for bets on that event. This extends the result of Marinacci (2002) and provides a novel interpretation of his result. Creation-Date: 2011 Publication-Status: Published in Journal of Economic Theory File-URL: http://dash.harvard.edu/bitstream/handle/1/11352635/psvp25.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11352635 Template-Type: ReDIF-Paper 1.0 Author-Name: Strzalecki, Tomasz Author-Name: Werner, Jan Title: Efficient Allocations under Ambiguity Abstract: Important implications of the expected utility hypothesis and risk aversion are that if agents have the same probability belief, then consumption plans in every efficient allocation of resources under uncertainty are comonotone with the aggregate endowment, and if their beliefs are concordant, then the consumption plans are measurable with respect to the aggregate endowment. We study these two properties of efficient allocations for models of preferences that exhibit ambiguity aversion using the concept of conditional beliefs, which we introduce in this paper. We provide characterizations of such conditional beliefs for the standard models of preferences used in applications. Creation-Date: 2011 Publication-Status: Published in Journal of Economic Theory File-URL: http://dash.harvard.edu/bitstream/handle/1/11352637/comono94.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11352637 Template-Type: ReDIF-Paper 1.0 Author-Name: Weinzierl, Matthew Charles Author-Name: Eggertsson, Gauti B. Author-Name: Blanchard, Olivier Author-Name: Mankiw, N. Gregory Title: An Exploration of Optimal Stabilization Policy Abstract: This paper examines the optimal response of monetary and fiscal policy to a decline in aggregate demand. The theoretical framework is a two-period general equilibrium model in which prices are sticky in the short run and flexible in the long run. Policy is evaluated by how well it raises the welfare of the representative household. Although the model has Keynesian features, its policy prescriptions differ significantly from those of textbook Keynesian analysis. Moreover, the model suggests that the commonly used “bang for the buck” calculations are potentially misleading guides for the welfare effects of alternative fiscal policies. Creation-Date: 2011 Publication-Status: Published in Brookings Papers on Economic Activity File-URL: http://dash.harvard.edu/bitstream/handle/1/11177699/Exploration%20of%20Optimal_0.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11177699 Template-Type: ReDIF-Paper 1.0 Author-Name: Perotti, Roberto Author-Name: Alesina, Alberto Title: Income Distribution, Political Instability, and Investment Abstract: This paper successfully tests on a sample of 71 countries for the period 1960–85 the following hypotheses. Income inequality, by fuelling social discontent, increases sociopolitical instability. The latter, by creating uncertainty in the politico-economic environment, reduces investment. As a consequence, income inequality and investment are inversely related. Since investment is a primary engine of growth, this paper identifies a channel for an inverse relationship between income inequality and growth. We measure socio-political instability with indices which capture the occurrence of more or less violent phenomena of political unrest and we test our hypotheses by estimating a two-equation model in which the endogenous variables are investment and an index of socio-political instability. Our results are robust to sensitivity analysis on the specification of the model and the measure of political instability, and are unchanged when the model is estimated using robust regression techniques. Creation-Date: 1996 Publication-Status: Published in European Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/4553018/alesina_incomedistribution.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:4553018 Template-Type: ReDIF-Paper 1.0 Author-Name: Weitzman, Martin L. Title: The Ramsey Discounting Formula for a Hidden-State Stochastic Growth Process Abstract: The long term discount rate is critically dependent upon projections of future growth rates that are fuzzier in proportion to the remoteness of the time horizon. This paper models such increasing fuzziness as an evolving hidden-state stochastic process. The underlying trend growth rate is an unobservable random walk hidden by noisy transitory shocks and recoverable only as a probability distribution via Bayesian updating. A simple expression is derived for the time-declining Ramsey discount rate. The components of this hidden-state Ramsey discounting formula are then analyzed, followed by a few remarks about possible implications and applications Creation-Date: 2012 Publication-Status: Published in Environmental and Resource Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/11204670/Ramsey_Discounting_Weitzman.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11204670 Template-Type: ReDIF-Paper 1.0 Author-Name: Antras, Pol Title: Grossman-Hart (1986) Goes Global: Incomplete Contracts, Property Rights, and the International Organization of Production Abstract: I survey the influence of Grossman and Hart's (1986) “The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration,” 94 Journal of Political Economy 691–719.) seminal paper in the field of International Trade. I discuss the implementation of the theory in open-economy environments and its implications for the international organization of production and the structure of international trade flows. I also review empirical work suggestive of the empirical relevance of the property-rights theory. Along the way, I develop novel theoretical results and also outline some of the key limitations of existing contributions. Creation-Date: 2014 Publication-Status: Published in Journal of Law, Economics, and Organization File-URL: http://dash.harvard.edu/bitstream/handle/1/12220386/65794266.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12220386 Template-Type: ReDIF-Paper 1.0 Author-Name: Miron, Jeffrey A. Title: Bailout or Bankruptcy? Abstract: Creation-Date: 2009 Publication-Status: Published in The Cato Journal : An Interdisciplinary Journal of Public Policy Analysis File-URL: http://dash.harvard.edu/bitstream/handle/1/11380185/cj29n1-1.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11380185 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Lavine, David K. Title: Fairness, Risk Preferences and Independence: Impossibility Theorems Abstract: The most widely used economic models of social preferences are specified only for certain outcomes. There are two obvious methods of extending them to lotteries. If we do so by expected utility theory, so that the independence axiom is satisfied, our results imply that the resulting preferences do not exhibit ex ante fairness. If we do so by replacing certain outcomes with their expected utilities for each individual, so that individual risk preferences are preserved, then ex ante fairness may be preserved, but neither the independence axiom nor ex post fairness is satisfied. Both ex ante and ex post fairness can be satisfied but then the individual does not have well defined preferences over own lotteries. Creation-Date: 2012 Publication-Status: Published in Journal of Economic Behavior and Organization File-URL: http://dash.harvard.edu/bitstream/handle/1/11022184/fairindependence-corrected2$445486000000007921$-1.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11022184 Template-Type: ReDIF-Paper 1.0 Author-Name: Algan, Yann Author-Name: Shleifer, Andrei Title: Teaching Practices and Social Capital Abstract: We use several data sets to consider the effect of teaching practices on student beliefs, as well as on organization of firms and institutions. In student level data, teaching practices (such as teachers lecturing versus students working in groups) exert a substantial influence on student beliefs about cooperation both with each other and with teachers. In cross‐ country data, teaching practices shape both beliefs and institutional outcomes. The relationship between teaching practices and student test performance is nonlinear. The evidence supports the idea that progressive education promotes social capital. Creation-Date: 2013 Publication-Status: Published in American Economic Journal: Applied Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/11878804/Algan_Teaching.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11878804 Template-Type: ReDIF-Paper 1.0 Author-Name: Baldiga, Katherine A. Author-Name: Green, Jerry R. Title: Assent-maximizing social choice Abstract: We take a decision theoretic approach to the classic social choice problem, using data on the frequency of choice problems to compute social choice functions. We define a family of social choice rules that depend on the population’s preferences and on the probability distribution over the sets of feasible alternatives that the society will face. Our methods generalize the well-known Kemeny Rule. In the Kemeny Rule, it is known a priori that the subset of feasible alternatives will be a pair. We define a distinct social choice function for each distribution over the feasible subsets. Our rules can be interpreted as distance minimization—selecting the order closest to the population’s preferences, using a metric on the orders that reflects the distribution over the possible feasible sets. The distance is the probability that two orders will disagree about the optimal choice from a randomly selected available set. We provide an algorithmic method to compute these metrics in the case where the probability of a given feasible set is a function only of its cardinality. Creation-Date: 2011 Publication-Status: Published in Social Choice and Welfare File-URL: http://dash.harvard.edu/bitstream/handle/1/33927874/PublicationVersion_Choice-based_Measures_of_Conflict_in_Preferences_7.5.11.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33927874 Template-Type: ReDIF-Paper 1.0 Author-Name: Gennaioli, Nicola Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert W. Title: A Model of Shadow Banking Abstract: We present a model of shadow banking in which banks originate and trade loans, assemble them into diversified portfolios, and finance these portfolios externally with riskless debt. In this model: outside investor wealth drives the demand for riskless debt and indirectly for securitization, bank assets and leverage move together, banks become interconnected through markets, and banks increase their exposure to systematic risk as they reduce idiosyncratic risk through diversification. The shadow banking system is stable and welfare improving under rational expectations, but vulnerable to crises and liquidity dry-ups when investors ignore tail risks. Creation-Date: 2013 Publication-Status: Published in The Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/11688792/87077864.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11688792 Template-Type: ReDIF-Paper 1.0 Author-Name: Adam, Emma Author-Name: Kessler, Ronald Author-Name: Gennetian, Lisa A. Author-Name: Duncan, Greg J. Author-Name: Congdon, William J. Author-Name: Katz, Lawrence F. Author-Name: Ludwig, Jens Author-Name: Sanbonmatsu, Lisa Author-Name: Yang, Fanghua Author-Name: Kling, Jeffrey R. Author-Name: Lindau, Stacy Tessler Author-Name: Marvakov, Jordan Author-Name: Potter, Nicholas A. Author-Name: McDade, Thomas W. Title: The Long-Term Effects of Moving to Opportunity on Adult Health and Economic Self-Sufficiency Abstract: Adults living in high-poverty neighborhoods often fare worse than adults in more advantaged neighborhoods on their physical health, mental health, and economic well-being. Although social scientists have observed this association for hundreds of years, they have found it difficult to determine the extent to which the neighborhoods themselves affect well-being versus the extent to which people at greater risk for adverse outcomes live in impoverished neighborhoods. In this article, we examine neighborhood effects using data from the 10- to 15-year evaluation of the Moving to Opportunity (MTO) for Fair Housing demonstration, which offered randomly selected families a housing voucher. The experimental design of MTO allows us to isolate the effects of neighborhoods from selection bias. We find that, 10 to 15 years after enrolling participants, the program had very few detectable effects on economic well-being but had some substantial effects on the physical and mental health of adults. For adults whose families received the offer of a housing voucher that could be used to move only to a low-poverty neighborhood, we find health benefits in terms of lower prevalence of diabetes, extreme obesity, physical limitations, and psychological distress. For adults offered a Section 8 voucher, we find benefits in terms of less extreme obesity and lower prevalence of lifetime depression. Creation-Date: 2012 Publication-Status: Published in Cityscape File-URL: http://dash.harvard.edu/bitstream/handle/1/33950780/88269654.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33950780 Template-Type: ReDIF-Paper 1.0 Author-Name: Boyle, Patricia A Author-Name: Yu, Lei Author-Name: Segawa, Eisuke Author-Name: Wilson, Robert S Author-Name: Buchman, Aron S Author-Name: Laibson, David I. Author-Name: Bennett, David A Title: Association of cognition with temporal discounting in community based older persons Abstract: Background: The objective of this study was to test the hypothesis that cognitive function is negatively associated with temporal discounting in old age. Methods Participants were 388 community-dwelling older persons without dementia from the Rush Memory and Aging Project, an ongoing longitudinal epidemiologic study of aging in the Chicago metropolitan area. Temporal discounting was measured using standard questions in which participants were asked to choose between an immediate, smaller payment and a delayed, larger one. Cognition was measured using a detailed battery including 19 tests. The association between cognition and temporal discounting was examined via mixed models adjusted for age, sex, education, income, and the number of chronic medical conditions. Results: Descriptive data revealed a consistent pattern whereby older persons with lower cognitive function were more likely to discount greater but delayed rewards compared to those with higher cognitive function. Further, in a mixed effect model adjusted for age, sex, education, income, and chronic medical conditions, global cognitive function was negatively associated with temporal discounting (estimate = −0.45, SE = 0.18, p = 0.015), such that a person with lower cognition exhibited greater discounting. Finally, in subsequent models examining domain specific associations, perceptual speed and visuospatial abilities were associated with temporal discounting, but episodic memory, semantic memory and working memory were not. Conclusion: Among older persons without dementia, a lower level of cognitive function is associated with greater temporal discounting. These findings have implications regarding the ability of older persons to make decisions that involve delayed rewards but maximize well-being. Creation-Date: 2012 Publication-Status: Published in BMC Geriatrics File-URL: http://dash.harvard.edu/bitstream/handle/1/11726269/3458966.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11726269 Template-Type: ReDIF-Paper 1.0 Author-Name: Gennetian, Lisa A. Author-Name: Sciandra, Matthew Author-Name: Sanbonmatsu, Lisa Author-Name: Ludwig, Jens Author-Name: Katz, Lawrence F. Author-Name: Duncan, Greg J. Author-Name: Kling, Jeffrey R. Author-Name: Kessler, Ronald Title: The Long-Term Effects of Moving to Opportunity on Youth Outcomes Abstract: Evidence about the effects of neighborhood environments on children and youth is central to the design of a wide range of public policies. Armed with long-term survey data from the Moving to Opportunity (MTO) for Fair Housing demonstration final impacts evaluation (Sanbonmatsu et al., 2011), we have the opportunity to understand whether neighborhood poverty and related characteristics exert an independent causal effect on the life chances of young people. Findings from analyses of youth in the long-term survey for the final impacts evaluation show that MTO had few detectable effects on a range of schooling outcomes, even for those children who were of preschool age at study entry. MTO also had few detectable effects on physical health outcomes. In other youth outcome domains, patterns of effects on youth were similar to, but more muted than, those in the interim impacts evaluation (Orr et al., 2003), with favorable patterns among female youth—particularly on mental health outcomes—and less favorable patterns among male youth. Creation-Date: 2012 Publication-Status: Published in Cityscape File-URL: http://dash.harvard.edu/bitstream/handle/1/33950779/56125297.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33950779 Template-Type: ReDIF-Paper 1.0 Author-Name: Ludwig, Jens Author-Name: Duncan, Greg J. Author-Name: Katz, Lawrence F. Author-Name: Kessler, Ronald Author-Name: Kling, Jeffrey R. Author-Name: Gennetian, Lisa A. Author-Name: Sanbonmatsu, Lisa Title: Neighborhood Effects on the Long-Term Well-Being of Low-Income Adults Abstract: Nearly 9 million Americans live in extreme-poverty neighborhoods, places that also tend to be racially segregated and dangerous. Yet, the effects on the well-being of residents of moving out of such communities into less distressed areas remain uncertain. Using data from Moving to Opportunity, a unique randomized housing mobility experiment, we found that moving from a high-poverty to lower-poverty neighborhood leads to long-term (10- to 15-year) improvements in adult physical and mental health and subjective well-being, despite not affecting economic self-sufficiency. A 1–standard deviation decline in neighborhood poverty (13 percentage points) increases subjective well-being by an amount equal to the gap in subjective well-being between people whose annual incomes differ by $13,000—a large amount given that the average control group income is $20,000. Subjective well-being is more strongly affected by changes in neighborhood economic disadvantage than racial segregation, which is important because racial segregation has been declining since 1970, but income segregation has been increasing. Creation-Date: 2012 Publication-Status: Published in Science File-URL: http://dash.harvard.edu/bitstream/handle/1/11870359/19173177.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11870359 Template-Type: ReDIF-Paper 1.0 Author-Name: Babcock, Linda Author-Name: Congdon, William J Author-Name: Katz, Lawrence F. Author-Name: Mullainathan, Sendhil Title: Notes on Behavioral Economics and Labor Market Policy Abstract: Labor market policies succeed or fail at least in part depending on how well they reflect or account for behavioral responses. Insights from behavioral economics, which allow for realistic deviations from standard economic assumptions about behavior, have consequences for the design and functioning of labor market policies. We review key implications of behavioral economics related to procrastination, difficulties in dealing with complexity, and potentially biased labor market expectations for the design of selected labor market policies including unemployment compensation, employment services and job search assistance, and job training. Creation-Date: 2012 Publication-Status: Published in IZA Journal of Labor Policy File-URL: http://dash.harvard.edu/bitstream/handle/1/11870387/21490600.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11870387 Template-Type: ReDIF-Paper 1.0 Author-Name: Gopinath, Gita Author-Name: Itskhoki, Oleg Author-Name: Neiman, Brent Title: Trade Prices and the Global Trade Collapse of 2008–09 Abstract: We document the behavior of trade prices during the Great Trade Collapse of 2008- 2009 using transaction-level data from the U.S. Bureau of Labor Statistics. First, we find that differentiated manufactures exhibited marked stability in their trade prices during the large decline in their trade volumes. Prices of non-differentiated manufactures, by contrast, declined sharply. Second, while the trade collapse was much steeper among differentiated durable manufacturers than among non-durables, prices in both categories barely changed. Third, the frequency and magnitude of price adjustments at the product level changed with the onset of the crisis, consistent with a state-dependent view of price adjustment. The quantitative magnitudes of the changes, however, were not pronounced enough to affect aggregate prices. Our findings present a challenge for theories of the trade collapse based on cost shocks specific to traded goods that work through prices. Creation-Date: 2012 Publication-Status: Published in IMF Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/11988099/7682789.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11988099 Template-Type: ReDIF-Paper 1.0 Author-Name: Bordalo, Pedro Author-Name: Gennaioli, Nicola Author-Name: Shleifer, Andrei Title: Salience and Asset Prices Abstract: Creation-Date: 2013 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/11688793/24836689.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11688793 Template-Type: ReDIF-Paper 1.0 Author-Name: Gopinath, Gita Title: The International Price System Abstract: I define and provide empirical evidence for an “International Price System” in global trade employing data for thirty-five developed and developing countries. This price system is characterized by two features. First, the overwhelming share of world trade is invoiced in very few currencies, with the dollar the dominant currency. Second, international prices, in their currency of invoicing, are not very sensitive to exchange rates at horizons of up to two years. In this system, a good proxy for a country's inflation sensitivity to exchange rate fluctuations is the fraction of its imports invoiced in a foreign currency. U.S. inflation is consequently more insulated from exchange rate shocks, while other countries are highly sensitive to it. Exchange rate depreciations (appreciations) make U.S. exports cheaper (expensive), while for other countries they mainly raise (lower) mark-ups and hence profits. U.S. monetary policy has spillover effects on inflation in other countries, while spillovers from other countries monetary policies on to U.S. inflation are more muted. Creation-Date: 2015 Publication-Status: Published in National Bureau of Economic Research File-URL: http://dash.harvard.edu/bitstream/handle/1/30780147/paper_083115_01.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30780147 Template-Type: ReDIF-Paper 1.0 Author-Name: Greenwood, Robin Marc Author-Name: Shleifer, Andrei Title: Expectations of Returns and Expected Returns Abstract: We analyze time series of investor expectations of future stock market returns from six data sources between 1963 and 2011. The six measures of expectations are highly positively correlated with each other, as well as with past stock returns and with the level of the stock market. However, investor expectations are strongly negatively correlated with model-based expected returns. The evidence is not consistent with rational expectations representative investor models of returns. Creation-Date: 2014 Publication-Status: Published in Review of Financial Studies File-URL: http://dash.harvard.edu/bitstream/handle/1/11880390/Shleifer-expectations-and-returns.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11880390 Template-Type: ReDIF-Paper 1.0 Author-Name: Alesina, Alberto Francesco Author-Name: Giuliano, Paola Author-Name: Nunn, Nathan Title: Fertility and the Plough Abstract: This paper provides evidence that the form of agriculture traditionally practiced—intensive plough agriculture versus shifting hoe agriculture—affected historic norms and preferences about fertility, and that these norms persist, affecting observed fertility around the world today. Creation-Date: 2011 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/11986333/nunn-fertility.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11986333 Template-Type: ReDIF-Paper 1.0 Author-Name: Botero, Juan Author-Name: Ponce, Alejandro Author-Name: Shleifer, Andrei Title: Education, Complaints, and Accountability Abstract: Better-educated countries have better governments, an empirical regularity that holds in both dictatorships and democracies. Possible reasons for this fact are that educated people are more likely to complain about misconduct by government officials and that more frequent complaints encourage better behavior from officials. Newly assembled individual-level survey data from the World Justice Project show that, within countries, better-educated people are more likely to report official misconduct. The results are confirmed using other survey data on reporting crime and corruption. Citizens’ complaints might thus be an operative mechanism that explains the link between education and the quality of government. Creation-Date: 2013 Publication-Status: Published in Journal of Law and Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/11880346/69711/ponce_sept2013_1_sep18.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11880346 Template-Type: ReDIF-Paper 1.0 Author-Name: Berger, Daniel Author-Name: Easterly, William Author-Name: Nunn, Nathan Author-Name: Satyanath, Shanker Title: Commercial Imperialism? Political Influence and Trade during the Cold War Abstract: We provide evidence that increased political influence, arising from CIA interventions during the Cold War, was used to create a larger foreign market for American products. Following CIA interventions, imports from the US increased dramatically, while total exports to the US were unaffected. The surge in imports was concentrated in industries in which the US had a comparative disadvantage, not a comparative advantage. Our analysis is able to rule out decreased trade costs, changing political ideology, and an increase in US loans and grants as alternative explanations. We provide evidence that the increased imports arose through direct purchases of American products by foreign governments. Creation-Date: 2013 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/11986334/nunn-commerical-imperalism.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11986334 Template-Type: ReDIF-Paper 1.0 Author-Name: Nunn, Nathan Author-Name: Wantchekon, Leonard Title: The Slave Trade and the Origins of Mistrust in Africa Abstract: We show that current differences in trust levels within Africa can be traced back to the transatlantic and Indian Ocean slave trades. Combining contemporary individual-level survey data with historical data on slave shipments by ethnic group, we find that individuals whose ancestors were heavily raided during the slave trade are less trusting today. Evidence from a variety of identification strategies suggests that the relationship is causal. Examining causal mechanisms, we show that most of the impact of the slave trade is through factors that are internal to the individual, such as cultural norms, beliefs, and values. Creation-Date: 2011 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/11986331/nunn-slave-trade.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11986331 Template-Type: ReDIF-Paper 1.0 Author-Name: Loewenstein, George Author-Name: Friedman, Joelle Y. Author-Name: McGill, Barbara Author-Name: Ahmad, Sarah Author-Name: Linck, Suzanne Author-Name: Sinkula, Stacey Author-Name: Beshears, John Leonard Author-Name: Choi, James J. Author-Name: Kolstad, Jonathan Author-Name: Laibson, David I. Author-Name: Madrian, Brigitte Author-Name: List, John A. Author-Name: Volpp, Kevin G. Title: Consumers’ Misunderstanding of Health Insurance Abstract: We report results from two surveys of representative samples of Americans with private health insurance. The first examines how well Americans understand, and believe they understand, traditional health insurance coverage. The second examines whether those insured under a simplified all-copay insurance plan will be more likely to engage in cost-reducing behaviors relative to those insured under a traditional plan with deductibles and coinsurance, and measures consumer preferences between the two plans. The surveys provide strong evidence that consumers do not understand traditional plans and would better understand a simplified plan, but weaker evidence that a simplified plan would have strong appeal to consumers or change their healthcare choices. Creation-Date: 2013 Publication-Status: Published in Journal of Health Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/17190506/simple_insurance.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:17190506 Template-Type: ReDIF-Paper 1.0 Author-Name: Nunn, Nathan Title: Religious Conversion in Colonial Africa Abstract: Creation-Date: 2010 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/11986328/nunn-religious-conversion.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11986328 Template-Type: ReDIF-Paper 1.0 Author-Name: Dreber-Almenberg, Anna Author-Name: Fudenberg, Drew Author-Name: Rand, David G. Title: Who cooperates in repeated games: The role of altruism, inequity aversion, and demographics Abstract: We explore the extent to which altruism, as measured by giving in a dictator game (DG), accounts for play in a noisy version of the repeated prisoner's dilemma. We find that DG giving is correlated with cooperation in the repeated game when no cooperative equilibria exist, but not when cooperation is an equilibrium. Furthermore, none of the commonly observed strategies are better explained by inequity aversion or efficiency concerns than money maximization. Various survey questions provide additional evidence for the relative unimportance of social preferences. We conclude that cooperation in repeated games is primarily motivated by long-term payoff maximization and that even though some subjects may have other goals, this does not seem to be the key determinant of how play varies with the parameters of the repeated game. In particular, altruism does not seem to be a major source of the observed diversity of play. Creation-Date: 2014 Publication-Status: Published in Journal of Economic Behavior & Organization File-URL: http://dash.harvard.edu/bitstream/handle/1/11923167/135496/who_cooperates_in_repeated_games.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11923167 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Ishii, Yuhta Author-Name: Kominers, Scott Duke Title: Delayed-response strategies in repeated games with observation lags Abstract: We extend the folk theorem of repeated games to two settings in which players' information about others' play arrives with stochastic lags. In our first model, signals are almost-perfect if and when they do arrive, that is, each player either observes an almost-perfect signal of period-t play with some lag or else never sees a signal of period-t play. The second model has the same lag structure, but the information structure corresponds to a lagged form of imperfect public monitoring, and players are allowed to communicate via cheap-talk messages at the end of each period. In each case, we construct equilibria in “delayed-response strategies,” which ensure that players wait long enough to respond to signals that with high probability all relevant signals are received before players respond. To do so, we extend past work on private monitoring to obtain folk theorems despite the small residual amount of private information. Creation-Date: 2014 Publication-Status: Published in Journal of Economic Theory File-URL: http://dash.harvard.edu/bitstream/handle/1/11880354/99726/delayed_response_strategies_0.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11880354 Template-Type: ReDIF-Paper 1.0 Author-Name: Nunn, Nathan Author-Name: Qian, Nancy Title: The Columbian Exchange: A History of Disease, Food, and Ideas Abstract: This paper provides an overview of the long-term impacts of the Columbian Exchange -- that is, the exchange of diseases, ideas, food crops, technologies, populations, and cultures between the New World and the Old World after Christopher Columbus' voyage to the Americas in 1492. We focus on the aspects of the exchange that have been most neglected by economic studies; namely the transfer of diseases, food crops, and knowledge between the two Worlds. We pay particular attention to the effects of the exchange on the Old World. Creation-Date: 2010 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/11986330/nunn-columbian-exchange.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11986330 Template-Type: ReDIF-Paper 1.0 Author-Name: Melitz, Marc J. Author-Name: Burstein, Ariel Title: Trade Liberalization and Firm Dynamics Abstract: In this paper, we analyze the transition dynamics associated with an economy's response to trade liberalization. We start by reviewing the recent literature that incorporates firm dynamics into models of international trade. We then build upon that literature to characterize the role of firm dynamics, export-market selection, firm-level innovation, sunk export costs, and firms' expectations regarding the time path of liberalization in generating those transition dynamics following trade liberalization. These modeling ingredients generate substantial aggregate transition dynamics as they shift and shape the endogenous distribution of firms over time. Our results show how the responses of trade volumes, innovation, and aggregate output can vary greatly over time depending on those modeling ingredients. This has important consequences for many issues in international economics that rely on predictions for the effects of globalization over time on those key aggregate outcomes. Creation-Date: 2013 Publication-Status: Published in Advances in Economics and Econometrics File-URL: http://dash.harvard.edu/bitstream/handle/1/34557509/WCOct9.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34557509 Template-Type: ReDIF-Paper 1.0 Author-Name: Laibson, David I. Author-Name: Madrian, Brigitte Author-Name: Reynolds, Gwendolyn Author-Name: Beshears, John Leonard Author-Name: Choi, James J. Title: Testimonials Do Not Convert Patients from Brand to Generic Medication Abstract: Objectives: To assess whether the addition of a peer testimonial to an informational mailing increases conversion rates from brand-name prescription medications to lower-cost therapeutic equivalents, and whether the testimonial’s efficacy increases when information is added about an affiliation the quoted individual shares with the recipient. Research Design and Methods: 5,498 union members were randomly assigned to receive one of three different informational letters: one without a testimonial (No Testimonial Group), one with a testimonial from a person whose shared union affiliation with the recipient was not disclosed (Unaffiliated Testimonial Group), and one with a testimonial from a person whose shared union affiliation with the recipient was disclosed (Affiliated Testimonial Group). Results: The conversion rate for the No Testimonial Group was 12.2%, which is higher than the Unaffiliated Testimonial Group rate of 11.3% and the Affiliated Testimonial Group rate of 11.7%. The differences between the groups are not statistically significant. Conclusions: Short peer testimonials do not increase the impact of a mailed communication on conversion rates to lower-cost, therapeutically equivalent medications, even when the testimonial is presented as coming from a more socially proximate peer. Creation-Date: 2013 Publication-Status: Published in American Journal of Managed Care File-URL: http://dash.harvard.edu/bitstream/handle/1/11920070/144616/testimonials_ajmc_2013.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11920070 Template-Type: ReDIF-Paper 1.0 Author-Name: Nunn, Nathan Author-Name: Trefler, Daniel Title: The Structure of Tariffs and Long-Term Growth Abstract: We show that the "skill bias" of a country's tariff structure is positively correlated with long-term per capita GDP growth. Testing for causal mechanisms, we find evidence consistent with the existence of real benefits from tariffs focused in skill-intensive industries. However, this only accounts for a quarter of the total correlation between skill-biased tariffs and growth. Turning to alternative explanations, we extend the standard Grossman-Helpman "protection-for-sale" model and show how the skill bias of tariffs can reflect the extent of domestic rent-seeking activities in the economy. We provide evidence that the remaining variation is explained by this endogeneity. Creation-Date: 2010 Publication-Status: Published in American Economic Journal: Macroeconomics File-URL: http://dash.harvard.edu/bitstream/handle/1/11986329/nunn-structure-of-tariffs.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11986329 Template-Type: ReDIF-Paper 1.0 Author-Name: Giuliano, Paola Author-Name: Nunn, Nathan Title: The Transmission of Democracy: From the Village to the Nation-State Abstract: We provide evidence that a tradition of village democracy is associated with the presence of national democracy today. We also show that a tradition of local democracy is associated with attitudes which are more supportive of democracy, with better quality institutions and with higher levels of economic development. Our findings indicate persistence in democratic institutions over time, and suggest the importance of traditional local institutions for well-functioning national-level institutions. Creation-Date: 2013 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/11986384/nunn-transmission-of-democracy.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:11986384 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Howitt, Peter Author-Name: Violante†, Giovanni L. Title: General Purpose Technology and Wage Inequality Abstract: The recent changes in the US wage structure are often linked to the new wave of capital-embodied information technologies. The existing literature has emphasized either the accelerated pace or the skill-bias of embodied technical progress as the driving force behind the rise in wage inequality. A key, neglected, aspect is the “general purpose” nature of the new information technologies. This paper formalizes the idea of generality of technology in two ways, one related to human capital (skill transferability) and one to physical capital (vintage compatibility) and studies the impact of an increase in these two dimensions of technological generality on equilibrium wage inequality. Creation-Date: 2002 Publication-Status: Published in Journal of Economic Growth File-URL: http://dash.harvard.edu/bitstream/handle/1/12490369/General%20Purpose%20Technology%20and%20Wage%20Inequality.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12490369 Template-Type: ReDIF-Paper 1.0 Author-Name: Bryson, Alex Author-Name: Freeman, Richard Barry Title: Employee Perceptions of Working Conditions and the Desire for Worker Representation in Britain and the US Abstract: This paper explores the link between employee perceptions of working conditions and the desire for worker representation in Britain and the US. We find that the distribution of employee perceptions of poor working conditions is similar in Britain and the US; similar factors affect the number of perceived poor working conditions; and the perception of poor working conditions is strongly associated with the desire for union representation. The nature of workplaces, as opposed to employees’ characteristics, is the predominant factor determining employee perceptions of poor working conditions. Creation-Date: 2013 Publication-Status: Published in Journal of Labor Research File-URL: http://dash.harvard.edu/bitstream/handle/1/12242814/39230481.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12242814 Template-Type: ReDIF-Paper 1.0 Author-Name: Chade, H. Author-Name: Lewis, Gregory Author-Name: Smith, L. Title: Student Portfolios and the College Admissions Problem Abstract: We develop a decentralized Bayesian model of college admissions with two ranked colleges, heterogeneous students and two realistic match frictions: students find it costly to apply to college, and college evaluations of their applications are uncertain. Students thus face a portfolio choice problem in their application decision, while colleges choose admissions standards that act like market-clearing prices. Enrollment at each college is affected by the standards at the other college through student portfolio reallocation. In equilibrium, student-college sorting may fail: weaker students sometimes apply more aggressively, and the weaker college might impose higher standards. Applying our framework, we analyze affirmative action, showing how it induces minority applicants to construct their application portfolios as if they were majority students of higher caliber. Creation-Date: 2014 Publication-Status: Published in The Review of Economic Studies File-URL: http://dash.harvard.edu/bitstream/handle/1/12363836/65488447.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12363836 Template-Type: ReDIF-Paper 1.0 Author-Name: Chong, Alberto Author-Name: La Porta, Rafael Author-Name: Lopez-de-Silanes, Florencio Author-Name: Shleifer, Andrei Title: Letter Grading Government Efficiency Abstract: We mailed letters to non-existent business addresses in 159 countries (10 per country), and measured whether they come back to the return address in the United States and how long it takes. About 60% of the letters were returned, taking over six months, on average. The results provide new objective indicators of government efficiency across countries, based on a simple and universal service, and allow us to shed light on its determinants. The evidence suggests that both technology and management quality influence government efficiency, just as they do that of the private sector. Creation-Date: 2014 Publication-Status: Published in Journal of the European Economic Association File-URL: http://dash.harvard.edu/bitstream/handle/1/12111439/38978/letters_sep26_2013_jeea.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/12111439/38978/appendices_sep26_2013_jeea.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12111439 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Dewatripont, Mathias Author-Name: Rey, Patrick Title: Competition, Financial Discipline and Growth Abstract: This paper develops a general equilibrium model of technological adoption in an economy populated by 'satisficing' entrepreneurs whose main objective is to minimise innovative effort while keeping the firm alive. In such an economy, product market competition is shown to have a stimulating effect on growth. Indeed, by reducing the amount of slack a manager can afford while keeping his firm alive, competition, combined with the threat of liquidation acts as a disciplinary device which fosters technology adoption and therefore growth. We then investigate how the existence of financial markets affects the importance of this growth-enhancing effect of competition. Creation-Date: 1999 Publication-Status: Published in Rev Econ Studies File-URL: http://dash.harvard.edu/bitstream/handle/1/12490416/Competition,%20Financial%20Discipline,%20and%20Growth.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12490416 Template-Type: ReDIF-Paper 1.0 Author-Name: Botta, Michael Author-Name: Cutler, David M. Title: Meaningful use: Floor or ceiling? Abstract: Background: In 2011, federal incentive payments for meaningful use of electronic health records (EHRs) began. This study evaluates the impact of the program on hospitals and EHR vendors, identifying how it affects EHR planning and development. Specifically, it assesses whether vendors and Chief Information Officers (CIOs) are viewing the meaningful use requirements as a floor – the minimally acceptable level of implementation, upon which development continues – or as a ceiling – the upper-bound on EHR development and implementation. Methods: The study combines interviews with EHR vendors and hospital CIOs with EHR adoption data from American Hospital Association surveys. Results from interviews with 17 hospital and system CIOs (representing 144 individual acute-care hospitals) and 8 EHR development executives (representing twothirds of installations) are detailed. Furthermore, it compares adoption of two key EHR functions, BCMA and CPOE, which are treated differently under stage 1 of the incentive program. Results: Three key findings emerge from the study. First, meaningful use requirements can serve as either a floor or a ceiling, depending on the abilities of institutions implementing EHRs. Second, the increasing focus on achieving meaningful use across both hospitals and vendors risks missing the forest of health care system change through the trees of meeting discrete requirements. Third, while the meaningful use incentive program has accelerated the development and implementation of some key functions, it has also slowed development of others. Conclusions: Policy makers should craft subsequent stages of the incentive program to ensure smaller facilities and additional features necessary for health care system change are not left behind. Creation-Date: 2014 Publication-Status: Published in Healthcare File-URL: http://dash.harvard.edu/bitstream/handle/1/33471114/168346/cutler_2014_healthcare_2_pp48_to_52meaningful_use_with_botta.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33471114 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Howitt, Peter Title: A Model of Growth Through Creative Destruction Abstract: A model of endogenous growth is developed in which vertical innovations, generated by a competitive research sector, constitute the underlying source of growth. Equilibrium is determined by a forward-looking difference equation, according to which the amount of research in any period depends upon the expected amount of research next period. One source of this intertemporal relationship is creative destruction. That is, the prospect of more future research discourages current research by threatening to destroy the rents created by current research. The paper analyzes the positive and normative properties of stationary equilibria, in which research employment is constant and GNP follows a random walk with drift, although under some circumstances cyclical equilibria also exist. Both the average growth rate and the variance of the growth rate are increasing functions of the size of innovations, the size of the skilled labor force, and the productivity of research as measured by a parameter indicating the effect of research on the Poisson arrival rate of innovations; and decreasing functions of the rate of time preference of the representative individual. Under laissez faire the economy's growth rate may be more or less than optimal because, in addition to the appropriability and intertemporal spillover effects of other endogenous growth models, which tend to make growth slower than optimal, the model also has effects that work in the opposite direction. In particular, the fact that private research firms do not internalize the destruction of rents generated by their innovations introduces a business-stealing effect similar to that found in the partial-equilibrium patent race literature. When we endogenize the size of innovations we find that business stealing also makes innovations too small. Creation-Date: 1992 Publication-Status: Published in Econometrica File-URL: http://dash.harvard.edu/bitstream/handle/1/12490578/A%20Model%20of%20Growth%20through%20Creative%20Destruction.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12490578 Template-Type: ReDIF-Paper 1.0 Author-Name: Bates, Robert H. Author-Name: Coatsworth, John H. Author-Name: Williamson, Jeffrey G. Title: Lost Decades: Postindependence Performance in Latin America and Africa Abstract: Africa and Latin America secured independence from European colonial rule a century and half apart: most of Latin America by the 1820s and most of Africa by 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. The parallels suggest that Africa might be exiting from a period of postimperial collapse and entering one of relative political stability and economic growth, as did Latin America almost two centuries ago. Creation-Date: 2007 Publication-Status: Published in Journal of Economic History File-URL: http://dash.harvard.edu/bitstream/handle/1/12211559/S0022050707000447a.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12211559 Template-Type: ReDIF-Paper 1.0 Author-Name: Harris, Christopher Author-Name: Howitt, Peter Author-Name: Vickers, John Author-Name: Aghion, Philippe Title: Competition, Imitation and Growth with Step-by-Step Innovation Abstract: Is more intense product market competition and imitation good or bad for growth? This question is addressed in the context of an endogenous growth model with “step-by-step” innovations, in which technological laggards must first catch up with the leading-edge technology before battling for techno- logical leadership in the future. In contrast to earlier Schumpeterian models in which innovations are always made by outsider firms who earn no rents if they fail to innovate and become monopolies if they do innovate, here we find: first, that the usual Schumpeterian effect of more intense product market competition (PMC) is almost always outweighed by the increased in- centive for firms to innovate in order to escape competition, so that PMC has a positive effect on growth; second, that a little imitation is almost always growth-enhancing, as it promotes more frequent neck-and-neck competition, but too much imitation is unambiguously growth-reducing. The model thus points to complementary roles for competition (anti-trust) policy and patent policy. Creation-Date: 2001 Publication-Status: Published in Review of Economic Studies File-URL: http://dash.harvard.edu/bitstream/handle/1/12375013/Competition,%20Imitation%20and%20Growth%20with%20Step-by-Step%20Innovation.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12375013 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Bolton, Patrick Author-Name: Dewatripont, Mathias Title: Contagious bank failures in a free banking system Abstract: This paper develops a model of an unregulated banking system based around a private clearing house arrangement. Whilst such a system may dominate one with a public safety net in reducing moral hazard in lending and therefore the scope for individual bank insolvency, it also increases the likelihood of contagious bank failures following a systemic shock or an aggregate liquidity shortage. Creation-Date: 2000 Publication-Status: Published in European Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/12490629/Contagious%20Bank%20Failures%20in%20a%20Free%20Banking%20System.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12490629 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Askenazy, Philippe Author-Name: Berman, Nicolas Author-Name: Cette, Gilbert Author-Name: Eymard, Laurent Title: Credit Constraints and the Cyclicality of R&D Investment: Evidence from France Abstract: We use a French firm-level data set containing 13,000 firms over the period 1994–2004 to analyze the relationship between credit constraints and firms’ R&D behavior over the business cycle. Our main results can be summarized as follows: (i) R&D investment is countercyclical without credit constraints, but it becomes procyclical as firms face tighter credit constraints; (ii) this result is only observed for firms in sectors that depend more heavily upon external finance, or that are characterized by a low degree of asset tangibility; (iii) in more credit-constrained firms, R&D investment plummets during recessions but does not increase proportionally during upturns. Creation-Date: 2012 Publication-Status: Published in Journal of the European Economic Association File-URL: http://dash.harvard.edu/bitstream/handle/1/12490632/Credit%20Constraints%20and%20the%20Cyclicality%20of%20R&D%20Investments-%20Evidence%20from%20France.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12490632 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Caroli, Eve Author-Name: García-Peñalosa, Cecilia Title: Inequality and Economic Growth: The Perspective of the New Growth Theories Abstract: We analyze the relationship between inequality and economic growth from two directions. The first part of the survey examines the effect of inequality on growth, showing that when capital markets are imperfect, there is not necessarily a trade-off between equity and efficiency. It therefore provides an explanation for two recent empirical findings, namely, the negative impact of inequality and the positive effect of redistribution upon growth. The second part analyzes several mechanisms whereby growth may increase wage inequality, both across and within education cohorts. Technical change, and in particular the implementation of "General Purpose Technologies," stands as a crucial factor in explaining the recent upsurge in wage inequality. Creation-Date: 1999 Publication-Status: Published in Journal of Economic Literature File-URL: http://dash.harvard.edu/bitstream/handle/1/12502063/Inequality%20and%20Economic%20Growth%20-%20The%20Perspective%20of%20the%20New%20Growth%20Theories.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12502063 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Hemous, David Author-Name: Kharroubi, Enisse Title: Credit Constraints, Cyclical Fiscal Policy and Industry Growth Abstract: What are the effects of cyclical fiscal policy on industry growth? We show that industries with a relatively heavier reliance on external finance or lower asset tangibility tend to grow faster (in terms of both value added and of labor productivity growth) in countries that implement fiscal policies that are more countercyclical. We reach this conclusion using Rajan and Zingales׳s (1998) difference-in-difference methodology on a panel data sample of manufacturing industries across 15 OECD countries over the period 1980–2005. Creation-Date: 2014 Publication-Status: Published in Journal of Monetary Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/12585130/Credit%20Constraints,%20Cyclical%20Fiscal%20Policy%20and%20Industry%20Growth.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12585130 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Dewatripont, Mathias Author-Name: Rey, Patrick Title: Renegotiation Design with Unverifiable Information Abstract: This paper considers a buyer-seller relationship with observable but unverifiable investments and/or random utility parameters. In such situations, it is known that contract renegotiation may prevent the implementation of first-best outcomes. In this paper, we show however that efficient investments and optimal risk-sharing can typically be achieved provided the initial contract is able to monitor the ex post renegotiation process. Specifically, we focus on the following two features of renegotiation design. First, default options in case renegotiation breaks down; second, the allocation of all bargaining power to either contracting party. Moreover, we show that these two features can be obtained in standard Rubinstein bargaining games through contractual provisions, such as specific-performance clauses and penalties for delay (or, equivalently, financial "hostages" refundable without interest). Creation-Date: 1994 Publication-Status: Published in Econometrica File-URL: http://dash.harvard.edu/bitstream/handle/1/12375014/Renegotiation%20Design%20With%20Unverifiable%20Information.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12375014 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Angeletos, George-Marios Author-Name: Banerjee, Abhijit Author-Name: Manova, Kalina Title: Volatility and growth: Credit constraints and the composition of investment Abstract: This paper examines how uncertainty and credit constraints affect the cyclical composition of investment and thereby volatility and growth. We develop a model where firms engage in two types of investment: a short-term one; and a long-term one, which contributes more to productivity growth. Because it takes longer to complete, long-term investment has a relatively less cyclical return; but it also has a higher liquidity risk. The first effect ensures that the share of long-term investment to total investment is countercyclical when financial markets are perfect; the second implies that this share may turn procyclical when firms face tight credit constraints. The contribution of the paper is thus to identify a novel propagation mechanism: through its effect on the cyclical composition of investment, tighter credit can lead to both higher volatility and lower mean growth. Evidence from a panel of countries provides support for the model’s key predictions. Creation-Date: 2010 Publication-Status: Published in Journal of Monetary Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/12490636/Volatility%20and%20Growth%20-%20Credit%20Constraints%20and%20Productivity-Enhancing%20Investment%20.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12490636 Template-Type: ReDIF-Paper 1.0 Author-Name: Vandenbussche, Jérôme Author-Name: Aghion, Philippe Author-Name: Meghir, Costas Title: Growth, distance to frontier and composition of human capital Abstract: We examine the contribution of human capital to economy-wide technological improvements through the two channels of innovation and imitation. We develop a theoretical model showing that skilled labor has a higher growth-enhancing effect closer to the technological frontier under the reasonable assumption that innovation is a relatively more skill-intensive activity than imitation. Also, we provide evidence in favor of this prediction using a panel dataset covering 19 OECD countries between 1960 and 2000 and explain why previous empirical research had found no positive relationship between initial schooling level and subsequent growth in rich countries. Creation-Date: 2006 Publication-Status: Published in Journal of Economic Growth File-URL: http://dash.harvard.edu/bitstream/handle/1/12490648/Distance%20to%20Frontier,%20Growth,%20and%20the%20Composition%20of%20Human%20Capital.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12490648 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Algan, Yann Author-Name: Cahuc, Pierre Author-Name: Shleifer, Andrei Title: Regulation and Distrust Abstract: We document that, in a cross section of countries, government regulation is strongly negatively correlated with measures of trust. In a simple model explaining this correlation, distrust creates public demand for regulation, whereas regulation in turn discourages formation of trust, leading to multiple equilibria. A key implication of the model is that individuals in low-trust countries want more government intervention even though they know the government is corrupt. We test this and other implications of the model using country- and individual-level data on trust and beliefs about the role of government, as well as on changes in beliefs during the transition from socialism. Creation-Date: 2010 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/12490649/Distrust%20and%20Regulation.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12490649 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Y. Author-Name: Giglio, Stefano Author-Name: Polk, Christopher Title: Hard Times Abstract: We show that the stock market downturns of 2000–2002 and 2007–2009 have very different proximate causes. The early 2000s saw a large increase in the discount rates applied to profits by rational investors, while the late 2000s saw a decrease in rational expectations of future profits. We reach these conclusions by using a VAR model of aggregate stock returns and valuations, estimated both without restrictions and imposing the cross-sectional restrictions of the intertemporal capital asset pricing model (ICAPM). Our findings imply that the 2007–2009 downturn was particularly serious for rational long-term investors, whose losses were not offset by improving stock return forecasts as in the previous recession. (JEL G12, N22) Creation-Date: 2013 Publication-Status: Published in Review of Asset Pricing Studies File-URL: http://dash.harvard.edu/bitstream/handle/1/12172786/hardtimes20120827.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12172786 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Bolton, P. Author-Name: Tirole, J. Title: Exit Options in Corporate Finance: Liquidity versus Incentives Abstract: This paper provides a first study of the optimal design of active monitors' exit options in a problem involving a demand for liquidity and costly monitoring of the issuer. Optimal incentives to monitor the issuer may involve restricting the monitor's right to sell her claims on the firm's cash-flow early. But the monitor will then require a liquidity premium for holding such an illiquid claim. In general, therefore, there will be a trade off between incentives and liquidity. The paper highlights a fundamental complementarity between speculative monitoring in financial markets (which increases the informativeness of prices) and active monitoring inside the firm: in financial markets where price discovery is better and securities prices reflect the fundamentals of the issuer better, the incentive cost of greater liquidity may be smaller and active monitoring incentives may be preserved. The paper spells out the conditions under which more or less liquidity is warranted and applies the analysis to shed light on common exit provisions in venture capital financing. Creation-Date: 2004 Publication-Status: Published in Review of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/12500289/Exit%20Options%20in%20Corporate%20Finance%20-%20Liquidity%20versus%20Incentives.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12500289 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Dewatripont, Mathias Author-Name: Hoxby, Caroline Author-Name: Mas-Colell, Andreu Author-Name: Sapir, Andreu Title: The governance and performance of universities: evidence from Europe and the US Abstract: We test the hypothesis that universities are more productive when they are both more autonomous and face more competition. Using survey data, we construct indices of university autonomy and competition for both Europe and the United States. We show that there are strong positive correlations between these indices and multiple measures of university output. To obtain causal evidence, we investigate exogenous shocks to US universities’ expenditures over three decades. These shocks arise through the political appointment process, which we use to generate instrumental variables. We find that an exogenous increase in a university’s expenditure generates more output, measured by either patents or publications, if the university is more autonomous and faces more competition. Exploiting variation over time in the ‘stakes’ of competitions for US federal research grants, we also find that universities generate more output for a given expenditure when research competitions are high stakes. We draw lessons, arguing that European universities could benefit from a combination of greater autonomy and greater accountability. Greater accountability might come through increased reliance on competitive grants, enhanced competition for students and faculty (promoted by reforms that increase mobility), and yardstick competitions (which often take the form of assessment exercises). Creation-Date: 2010 Publication-Status: Published in Economic Policy File-URL: http://dash.harvard.edu/bitstream/handle/1/12502061/Governance%20and%20Peformance%20of%20Universities.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12502061 Template-Type: ReDIF-Paper 1.0 Author-Name: Sterner, Thomas Author-Name: Tol, Richard S. J. Author-Name: Weitzman, Martin L. Author-Name: Pizer, William A. Author-Name: Portney, Paul R. Author-Name: Arrow, Kenneth J. Author-Name: Cropper, Maureen L. Author-Name: Gollier, Christian Author-Name: Groom, Ben Author-Name: Heal, Geoffrey M. Author-Name: Newell, Richard G. Author-Name: Nordhaus, William D. Author-Name: Pindyck, Robert S Title: Should Governments Use a Declining Discount Rate in Project Analysis? Abstract: Should governments use a discount rate that declines over time when evaluating the future benefits and costs of public projects? The argument for using a declining discount rate (DDR) is simple: if the discount rates that will be applied in the future are uncertain but positively correlated, and if the analyst can assign probabilities to these discount rates, then the result will be a declining schedule of certainty-equivalent discount rates. There is a growing empirical literature that estimates models of long-term interest rates and uses them to forecast the DDR schedule. However, this literature has been criticized because it lacks a connection to the theory of project evaluation. In benefit-cost analysis, the net benefits of a project in year t (in consumption units) are discounted to the present at the rate at which society would trade consumption in year t for consumption in the present. With simplifying assumptions, this leads to the Ramsey discounting formula, which results in a declining certainty-equivalent discount rate if the rate of growth in consumption is uncertain and if shocks to consumption are correlated over time. We conclude that the arguments in favor of a DDR are compelling and thus merit serious consideration by regulatory agencies in the United States. Creation-Date: 2014 Publication-Status: Published in Review of Environmental Economics and Policy File-URL: http://dash.harvard.edu/bitstream/handle/1/33373349/203051/rev_environ_econ_policy-2014-arrow-145-63_0.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33373349 Template-Type: ReDIF-Paper 1.0 Author-Name: Wilson, Michael Author-Name: Cutler, David M. Title: Emergency Department Profits Are Likely To Continue As The Affordable Care Act Expands Coverage Abstract: To better understand the financial viability of hospital emergency departments (EDs), we created national estimates of the cost to hospitals of providing ED care and the associated hospital revenue using hospital financial reports and patient claims data from 2009. We then estimated the effect the Affordable Care Act (ACA) will have on the future profitability of providing ED care. We estimated that hospital revenue from ED care exceeded costs for that care by $6.1 billion in 2009, representing a profit margin of 7.8 percent (net revenue expressed as a percentage of total revenue). However, this is primarily because hospitals make enough profit on the privately insured ($17 billion) to cover underpayment from all other payer groups, such as Medicare, Medicaid, and unreimbursed care. Assuming current payer reimbursement rates, ACA reforms could result in an additional 4.4-percentage-point increase in profit margins for hospital-based EDs compared to what could be the case without the reforms. Creation-Date: 2014 Publication-Status: Published in Health Affairs File-URL: http://dash.harvard.edu/bitstream/handle/1/33471113/168341/cutler_2014_health_affairs_33_5_pp702_to_799_with_wilson_1.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33471113 Template-Type: ReDIF-Paper 1.0 Author-Name: Goodman, Joshua Samuel Author-Name: Goodman, Lucas Author-Name: Goodman, Sarena Author-Name: Goodman, Allen C. Title: A Few Goodmen: Surname-Sharing Co-Authors in Economics Abstract: We explore the phenomenon of co-authorship by economists who share a surname. Prior research has included at most two economist co-authors who share a surname. Ours is the first paper to have three economist co-authors who share a surname, as well as the first where such co-authors are unrelated by marriage or blood. Creation-Date: 2014 Publication-Status: Published in Econ Inq File-URL: http://dash.harvard.edu/bitstream/handle/1/22805379/AFewGoodmenSurnameSharingEconomist_preview%202.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:22805379 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Y. Author-Name: Ramadorai, Tarun Author-Name: Ranish, Benjamin Michael Title: How Do Regulators Influence Mortgage Risk: Evidence from an Emerging Market Abstract: To understand the effects of regulation on mortgage risk, it is instructive to track the history of regulatory changes in a country rather than to rely entirely on cross- country evidence that can be contaminated by unobserved heterogeneity. However, in developed countries with fairly stable systems of financial regulation, it is difficult to track these effects. We employ loan-level data on over a million loans disbursed in India over the 1995 to 2010 period to understand how fast-changing regulation impacted mortgage lending and risk. We use cross-sectional differences in the time- series variation of delinquency rates, conditional on initial interest rates, to detect the effects of regulation on mortgage delinquencies. Creation-Date: 2012 Publication-Status: Published in NBER Working Paper Series File-URL: http://dash.harvard.edu/bitstream/handle/1/12168178/RegulatoryAppendix09082012.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/12168178/RegulatorsMortgageRisk08sep12.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/12168178/EmpiricalAppendix090812.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12168178 Template-Type: ReDIF-Paper 1.0 Author-Name: Farhi, Emmanuel Author-Name: Gopinath, Gita Author-Name: Itskhoki, Oleg Title: Fiscal Devaluations Abstract: We show that even when the exchange rate cannot be devalued, a small set of conventional fiscal instruments can robustly replicate the real allocations attained under a nominal exchange rate devaluation in a dynamic New Keynesian open economy environment. We perform the analysis under alternative pricing assumptions—producer or local currency pricing, along with nominal wage stickiness; under arbitrary degrees of asset market completeness and for general stochastic sequences of devaluations. There are two types of fiscal policies equivalent to an exchange rate devaluation—one, a uniform increase in import tariff and export subsidy, and two, a value-added tax increase and a uniform payroll tax reduction. When the devaluations are anticipated, these policies need to be supplemented with a consumption tax reduction and an income tax increase. These policies are revenue neutral. In certain cases equivalence requires, in addition, a partial default on foreign bond holders. We discuss the issues of implementation of these policies, in particular, under the circumstances of a currency union. Creation-Date: 2014 Publication-Status: Published in Review of Economic Studies File-URL: http://dash.harvard.edu/bitstream/handle/1/12336336/2701144.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12336336 Template-Type: ReDIF-Paper 1.0 Author-Name: Hart, Oliver D. Title: Hold-Up, Asset Ownership, and Reference Points Abstract: We study two parties who desire a smooth trading relationship under conditions of value and cost uncertainty. A contract fixing price works well in normal times because there is nothing to argue about. However, when value or cost is unusually high or low, one party will deviate from the contract and hold up the other party, causing deadweight losses as parties withhold cooperation. We show that allocating asset ownership and indexing contracts can reduce the incentives to engage in hold-up. In contrast to much of the literature, the driving force in our model is payoff uncertainty, rather than noncontractible investments. Creation-Date: 2009 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/34728601/paper.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34728601 Template-Type: ReDIF-Paper 1.0 Author-Name: Aguiar, Mark Author-Name: Amador, Manuel Author-Name: Farhi, Emmanuel Author-Name: Gopinath, Gita Title: Sovereign Debt Booms in Monetary Unions Abstract: We propose a continuous time model to investigate the impact of inflation credibility on sovereign debt dynamics. At every point in time, an impatient government decides fiscal surplus and inflation, without commitment. Inflation is costly, but reduces the real value of outstanding nominal debt. In equilibrium, debt dynamics is the result of two opposing forces: (i) impatience and (ii) the desire to conquer low inflation. A large increase in inflation credibility can trigger a process of debt accumulation. This rationalizes the sovereign debt booms that are often experienced by low inflation credibility countries upon joining a currency union. Creation-Date: 2014 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/12559514/55064951.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12559514 Template-Type: ReDIF-Paper 1.0 Author-Name: Mayer, Thierry Author-Name: Melitz, Marc J. Author-Name: Ottaviano, Gianmarco I. P. Title: Market Size, Competition, and the Product Mix of Exporters Abstract: We build a theoretical model of multi-product firms that highlights how competition across market destinations affects both a firm's exported product range and product mix. We show how tougher competition in an export market induces a firm to skew its export sales toward its best performing products. We find very strong confirmation of this competitive effect for French exporters across export market destinations. Theoretically, this within-firm change in product mix driven by the trading environment has important repercussions on firm productivity. A calibrated fit to our theoretical model reveals that these productivity effects are potentially quite large. Creation-Date: 2014 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/12330897/Market%20Size,%20Competition.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12330897 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Y. Title: Investing and Spending: The Twin Challenges of University Endowment Management Abstract: Creation-Date: 2011 Publication-Status: Published in Forum for the Future of Higher Education File-URL: http://dash.harvard.edu/bitstream/handle/1/22423613/JYC_AspenSymposium_20110606_105.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/22423613/ff1205s.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:22423613 Template-Type: ReDIF-Paper 1.0 Author-Name: Fryer, Roland Gerhard Author-Name: Katz, Lawrence F. Title: Achieving Escape Velocity: Neighborhood and School Interventions to Reduce Persistent Inequality Abstract: This paper reviews the evidence on the efficacy of neighborhood and school interventions in improving the long-run outcomes of children growing up in poor families. We focus on studies exploiting exogenous sources of variation in neighborhoods and schools and which examine at least medium-term outcomes. Higher-quality neighborhoods improve family safety, adult subjective well-being and health, and girls' mental health. But they have no detectable impact on youth human capital, labor market outcomes, or risky behaviors. In contrast, higher-quality schools can improve children's academic achievement and can have longer-term positive impacts of increasing educational attainment and earnings and reducing incarceration and teen pregnancy. Creation-Date: 2013 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/12330898/43037263.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12330898 Template-Type: ReDIF-Paper 1.0 Author-Name: Alesina, Alberto Francesco Author-Name: Glaeser, Edward Ludwig Author-Name: Sacerdote, Burce Title: Why Doesn't the United States Have a European-Style Welfare State? Abstract: European countries are much more generous to the poor relative to the US level of generosity. Economic models suggest that redistribution is a function of the variance and skewness of the pre-tax income distribution, the volatility of income (perhaps because of trade shocks), the social costs of taxation and the expected income mobility of the median voter. None of these factors appear to explain the differences between the US and Europe. Instead, the differences appear to be the result of racial heterogeneity in the US and American political institutions. Racial animosity in the US makes redistribution to the poor, who are disproportionately black, unappealing to many voters. American political institutions limited the growth of a socialist party, and more generally limited the political power of the poor. Creation-Date: 2001 Publication-Status: Published in Brookings Papers on Economic Activity File-URL: http://dash.harvard.edu/bitstream/handle/1/12502088/1209137.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12502088 Template-Type: ReDIF-Paper 1.0 Author-Name: Alesina, Alberto Francesco Author-Name: Rosenthal, Howard Title: A Theory of Divided Government Abstract: This paper extends the spatial theory of voting to the case in which policy choices depend upon the interaction between executive and the legislature. Voters are strategic and to analyze equilibrium the authors apply 'coalition proof' type refinements. The model has implications consistent with voting behavior in the United States: (1) split-ticket with some voters choosing one party for the presidency and the other for Congress; (2) for some parameter values, a divided government with different parties controlling the executive and the majority of the legislature; and (3) the mid-term electoral cycle with the party holding the presidency always losing votes in mid-term legislative elections. Creation-Date: 1996 Publication-Status: Published in Econometrica File-URL: http://dash.harvard.edu/bitstream/handle/1/34222831/2171833.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34222831 Template-Type: ReDIF-Paper 1.0 Author-Name: Alesina, Alberto Francesco Title: Comments on ‘Alternative Models of Political Business Cycles’ by W.D. Nordhaus Abstract: Creation-Date: 1989 Publication-Status: Published in Brookings Papers on Economic Activity File-URL: http://dash.harvard.edu/bitstream/handle/1/12553719/1989b_bpea_nordhaus_alesina_schultze.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12553719 Template-Type: ReDIF-Paper 1.0 Author-Name: Sciandra, Matthew Author-Name: Sanbonmatsu, Lisa Author-Name: Duncan, Greg J. Author-Name: Gennetian, Lisa A. Author-Name: Katz, Lawrence F. Author-Name: Kessler, Ronald Author-Name: Kling, Jeffrey R. Author-Name: Ludwig, Jens Title: Long-Term Effects of the Moving to Opportunity Residential Mobility Experiment on Crime and Delinquency Abstract: Objectives: Using data from a randomized experiment, to examine whether moving youth out of areas of concentrated poverty, where a disproportionate amount of crime occurs, prevents involvement in crime. Methods: We draw on new administrative data from the U.S. Department of Housing and Urban Development’s Moving to Opportunity (MTO) experiment. MTO families were randomized into an experimental group offered a housing voucher that could only be used to move to a low-poverty neighborhood, a Section 8 housing group offered a standard housing voucher, and a control group. This paper focuses on MTO youth ages 15–25 in 2001 (n = 4,643) and analyzes intention to treat effects on neighborhood characteristics and criminal behavior (number of violent- and property-crime arrests) through 10 years after randomization. Results: We find the offer of a housing voucher generates large improvements in neighborhood conditions that attenuate over time and initially generates substantial reductions in violent-crime arrests and sizable increases in property-crime arrests for experimental group males. The crime effects attenuate over time along with differences in neighborhood conditions. Conclusions: Our findings suggest that criminal behavior is more strongly related to current neighborhood conditions (situational neighborhood effects) than to past neighborhood conditions (developmental neighborhood effects). The MTO design makes it difficult to determine which specific neighborhood characteristics are most important for criminal behavior. Our administrative data analyses could be affected by differences across areas in the likelihood that a crime results in an arrest. Creation-Date: 2013 Publication-Status: Published in Journal of Experimental Criminology File-URL: http://dash.harvard.edu/bitstream/handle/1/34222823/nihms-522657%202.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34222823 Template-Type: ReDIF-Paper 1.0 Author-Name: Alesina, Alberto Francesco Title: Comments on "When Do Policy Reforms Work?' by Daron Acemoglu et al. Abstract: Questions of the effectiveness of economic policy reform are inseparable from the political economy factors responsible for distortionary policies in the first place. Distortionary policies are more likely to be adopted where politicians face fewer constraints. Hence reform should have modest effects in societies where the political system already imposes strong constraints, and in societies with weak constraints, because it does not alter the underlying political economy. Reform should be most effective in societies with intermediate constraints. Furthermore, effective reform in one dimension may lead to deterioration in others, as politicians address the underlying demands through other means—a phenomenon we call the seesaw effect. We report evidence that central bank reforms reduced inflation in countries with intermediate constraints but had no or little effect where constraints were strong or weak. We also present evidence consistent with the seesaw effect: in countries where central bank reform reduces inflation, government expenditure tends to increase. Creation-Date: 2008 Publication-Status: Published in Brookings Papers on Economic Activity File-URL: http://dash.harvard.edu/bitstream/handle/1/12553722/2008a_bpea_acemoglu.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12553722 Template-Type: ReDIF-Paper 1.0 Author-Name: Gopinath, Gita Author-Name: Neiman, Brent Title: Trade Adjustment and Productivity in Large Crises Abstract: We empirically characterize the mechanics of trade adjustment during the Argentine crisis. Though imports collapsed by 70 percent from 2000-2002, the entry and exit of firms or products at the country level played a small role. The within-firm churning of imported inputs, however, played a sizeable role. We build a model of trade in intermediate inputs with heterogeneous firms, fixed import costs, and roundabout production. Import demand is non-homothetic and the implications of an import price shock depend on the full distribution of firm-level adjustments. An import price shock generates a significant decline in productivity. Creation-Date: 2014 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/12330899/74522782.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12330899 Template-Type: ReDIF-Paper 1.0 Author-Name: Ludwig, Jens Author-Name: Duncan, Greg J Author-Name: Gennetian, Lisa A Author-Name: Katz, Lawrence F. Author-Name: Kessler, Ronald Author-Name: Kling, Jeffrey R Author-Name: Sanbonmatsu, Lisa Title: Long-Term Neighborhood Effects on Low-Income Families: Evidence from Moving to Opportunity Abstract: We examine long-term neighborhood effects on low-income families using data from the Moving to Opportunity (MTO) randomized housing-mobility experiment. This experiment offered to some public-housing families but not to others the chance to move to less-disadvantaged neighborhoods. We show that ten to 15 years after baseline, MTO: (i) improves adult physical and mental health; (ii) has no detectable effect on economic outcomes or youth schooling or physical health; and (iii) has mixed results by gender on other youth outcomes, with girls doing better on some measures and boys doing worse. Despite the somewhat mixed pattern of impacts on traditional behavioral outcomes, MTO moves substantially improve adult subjective well-being. Creation-Date: 2013 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/12553723/66458583.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12553723 Template-Type: ReDIF-Paper 1.0 Author-Name: Alesina, Alberto Francesco Author-Name: Perotti, Roberto Author-Name: Tavares, Jose Title: The Political Economy of Fiscal Adjustments Abstract: Creation-Date: 1998 Publication-Status: Published in Brookings Papers on Economic Activity File-URL: http://dash.harvard.edu/bitstream/handle/1/12553724/1998a_bpea_alesina_perotti_tavares_obstfeld_eichengreen.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12553724 Template-Type: ReDIF-Paper 1.0 Author-Name: Rokicki, Slawa Author-Name: Donato, Katherine Elizabeth Title: Effects of China's Rural Insurance Scheme on Objective Measures of Health Abstract: Background In 2003, the Chinese government established the New Cooperative Medical Scheme (NCMS) with the goal of improving health for the country’s 800 million mostly uninsured rural residents. Using new data on objective health measures, we analyzed the program’s effectiveness in improving health for enrollees. Methods Using longitudinal data from the China Health and Nutritional Survey from 2000 to 2009 (12 080 observations across four waves), we analyzed the impact of the NCMS on objective measures of health such as blood pressure, HbA1c, and cholesterol, as well as use of preventive care. In order to overcome inherent selection bias where less healthy people are more likely to enroll in the voluntary health insurance scheme, we used intent-to-treat and instrumental variable analysis strategies, and offered evidence that these approaches can mitigate this bias. Results For every additional year of NCMS coverage, the probability of seeking preventive health care increased by 0.6 percentage points (95% CI 0.1-1.0). However, we did not find evidence that the NCMS resulted in consistent improvements in objective measures of health. Sub-group analysis suggested that lower-income communities benefited more from the program, implying that the program may have resulted in some lessening of the wealth-based disparity in health. Conclusions The NCMS does not appear to significantly improve objective measures of health. This is consistent with evaluations of health insurance programs in other countries, but in contrast to some previously reported improvements in self-reported health resulting from the NCMS. Creation-Date: 2016 Publication-Status: Published in PLoS ONE File-URL: http://dash.harvard.edu/bitstream/handle/1/27030489/Donato_Rokicki_China_Health_Insurance.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/27030489/Donato_Rokicki_China_Health_Insurance.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27030489 Template-Type: ReDIF-Paper 1.0 Author-Name: Alesina, Alberto Francesco Title: Comments on 'Europe's Gamble' by M. Obstfeld Abstract: Creation-Date: 1997 Publication-Status: Published in Brookings Papers on Economic Activity File-URL: http://dash.harvard.edu/bitstream/handle/1/12553725/1997b_bpea_obstfeld_alesina_cooper.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12553725 Template-Type: ReDIF-Paper 1.0 Author-Name: Azari Soufiani, Hossein Author-Name: Diao, Hansheng Author-Name: Lai, Zhenyu Author-Name: Parkes, David C. Title: Generalized Random Utility Models with Multiple Types Abstract: We propose a model for demand estimation in multi-agent, differentiated product settings and present an estimation algorithm that uses reversible jump MCMC techniques to classify agents' types. Our model extends the popular setup in Berry, Levinsohn and Pakes (1995) to allow for the data-driven classification of agents' types using agent-level data. We focus on applications involving data on agents' ranking over alternatives, and present theoretical conditions that establish the identifiability of the model and uni-modality of the likelihood/posterior. Results on both real and simulated data provide support for the scalability of our approach. Creation-Date: 2013 Publication-Status: Published in Advances in Neural In File-URL: http://dash.harvard.edu/bitstream/handle/1/12363923/25885776.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12363923 Template-Type: ReDIF-Paper 1.0 Author-Name: Alesina, Alberto Francesco Author-Name: Ardagna, Silvia Title: Large Changes in Fiscal Policy: Taxes versus Spending Abstract: We examine the evidence on episodes of large stances in fiscal policy, both in cases of fiscal stimuli and in that of fiscal adjustments in OECD countries from 1970 to 2007. Fiscal stimuli based upon tax cuts are more likely to increase growth than those based upon spending increases. As for fiscal adjustments, those based upon spending cuts and no tax increases are more likely to reduce deficits and debt over GDP ratios than those based upon tax increases. In addition, adjustments on the spending side rather than on the tax side are less likely to create recessions. We confirm these results with simple regression analysis. Creation-Date: 2010 Publication-Status: Published in Tax Policy and the Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/22801844/c11970%202.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:22801844 Template-Type: ReDIF-Paper 1.0 Author-Name: Deming, David James Author-Name: Goldin, Claudia D. Author-Name: Katz, Lawrence F. Title: For-Profit Colleges Abstract: For-profit, or proprietary, colleges are the fastest-growing postsecondary schools in the nation, enrolling a disproportionately high share of disadvantaged and minority students and those ill-prepared for college. Because these schools, many of them big national chains, derive most of their revenue from taxpayer-funded student financial aid, they are of interest to policy makers not only for the role they play in the higher education spectrum but also for the value they provide their students. In this article, David Deming, Claudia Goldin, and Lawrence Katz look at the students who attend for-profits, the reasons they choose these schools, and student outcomes on a number of broad measures and draw several conclusions. First, the authors write, the evidence shows that public community colleges may provide an equal or better education at lower cost than for-profits. But budget pressures mean that community colleges and other nonselective public institutions may not be able to meet the demand for higher education. Some students unable to get into desired courses and programs at public institutions may face only two alternatives: attendance at a for-profit or no postsecondary education at all. Second, for-profits appear to be at their best with well-defined programs of short duration that prepare students for a specific occupation. But for-profit completion rates, default rates, and labor market outcomes for students seeking associate’s or higher degrees compare unfavorably with those of public postsecondary institutions. In principle, taxpayer investment in student aid should be accompanied by scrutiny concerning whether students complete their course of study and subsequently earn enough to justify the investment and pay back their student loans. Designing appropriate regulations to help students navigate the market for higher education has proven to be a challenge because of the great variation in student goals and types of programs. Ensuring that potential students have complete and objective information about the costs and expected benefits of for-profit programs could improve postsecondary education opportunities for disadvantaged students and counter aggressive and potentially misleading recruitment practices at for-profit colleges, the authors write. Creation-Date: 2013 Publication-Status: Published in Future of Children File-URL: http://dash.harvard.edu/bitstream/handle/1/12553738/11434354.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12553738 Template-Type: ReDIF-Paper 1.0 Author-Name: Taksler, Glen B Author-Name: Cutler, David M. Author-Name: Giovannucci, Edward L. Author-Name: Keating, Nancy Lynn Title: Vitamin D deficiency in minority populations Abstract: Objective Black and Hispanic individuals synthesize less vitamin D per unit of sun exposure than white individuals. The relationship between UV radiation and vitamin D insufficiency in minorities has not been well explored. Design Prospective cohort study. Setting Using the National Health and Nutrition Examination Survey, we obtained serum vitamin D levels for non-Hispanic Whites, Hispanics and non-Hispanic Blacks aged ≥18 years from 2000–2006. We linked these data with the average monthly solar UV index by census tract and data on sun exposure, vitamin D supplementation, health and demographics. We used multivariable regression analyses to assess vitamin D deficiency (<15 ng/ml) and insufficiency (<20 ng/ml) in January (when the UV index was lowest) by race/ethnicity and geography. Subjects Adults (n 14 319) aged ≥18 years. Results A 1-point increase in the UV index was associated with a 0·51 ng/ml increase in vitamin D (95 % CI 0·35, 0·67 ng/ml; P<0·001). Non-Hispanic Black race and Hispanic ethnicity were associated with a 7·47 and 3·41 ng/ml decrease in vitamin D, respectively (both P<0·001). In January, an estimated 65·4 % of non-Hispanic Blacks were deficient in vitamin D, compared with 28·9 % of Hispanics and 14·0 % of non-Hispanic Whites. An estimated 84·2 % of non-Hispanic Blacks were insufficient in vitamin D v. 56·3 % of Hispanics and 34·8 % of non-Hispanic Whites. More non-Hispanic Blacks were estimated to be deficient in vitamin D in January in the highest UV index quartile than were non-Hispanic Whites in the lowest UV index quartile (60·2 % v. 25·7 %). Conclusions Wintertime vitamin D insufficiency is pervasive among minority populations, and not uncommon among non-Hispanic Whites. Creation-Date: 2014 Publication-Status: Published in Public Health Nutrition File-URL: http://dash.harvard.edu/bitstream/handle/1/12585271/184906/vitamin_d_deficiency_in_minority_populations.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12585271 Template-Type: ReDIF-Paper 1.0 Author-Name: Chetty, Raj Author-Name: Saez, Emmanuel Author-Name: Sándor, László Title: What Policies Increase Prosocial Behavior? An Experiment with Referees at the Journal of Public Economics Abstract: We evaluate policies to increase prosocial behavior using a field experiment with 1,500 referees at the Journal of Public Economics. We randomly assign referees to four groups: a control group with a six week deadline to submit a referee report, a group with a four week deadline, a cash incentive group rewarded with $100 for meeting the four week deadline, and a social incentive group in which referees were told that their turnaround times would be publicly posted. We obtain four sets of results. First, shorter deadlines reduce the time referees take to submit reports substantially. Second, cash incentives significantly improve speed, especially in the week before the deadline. Cash payments do not crowd out intrinsic motivation: after the cash treatment ends, referees who received cash incentives are no slower than those in the 4 week deadline group. Third, social incentives have smaller but significant effects on review times and are especially effective among tenured professors, who are less sensitive to deadlines and cash incentives. Fourth, all the treatments have little or no effect on agreement rates, quality of reports, or review times at other journals. We conclude that small changes in journals’ policies could substantially expedite peer review at little cost. More generally, price incentives, nudges, and social pressure are effective and complementary methods of increasing prosocial behavior. Creation-Date: 2014 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/22803569/176786/referee_experiment_0.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:22803569 Template-Type: ReDIF-Paper 1.0 Author-Name: Freeman, Richard Barry Author-Name: Bryson, Alex Author-Name: Lucifora, Claudio Author-Name: Pellizari, Michele Author-Name: Perotin, Virginie Title: Paying for Performance: Incentive Pay Schemes and Employees’ Financial Participation Abstract: We present new comparable data on the incidence of performance pay schemes in Europe and the USA. We find that the percentage of employees exposed to incentive pay schemes ranges from around 10-15 percent in some European countries to over 40 percent in Scandinavian countries and the US. Individual pay and profit/gain sharing schemes are widely diffused, whereas share ownership schemes are much less common, particularly in Europe. We document a number of empirical regularities. Incentive pay is less common in countries with a higher share of small firms. Higher product and labour market regulation are associated with lower use of incentive pay. Capital market development is a necessary requirement for a wider diffusion of incentive pay, particularly sharing and ownership schemes. When we control for a large set of individual characteristics and company attributes, we find that the probability that a worker is covered by an incentive scheme is higher in large firms and in high-skilled occupations, while it is much lower for females. Creation-Date: 2012 Publication-Status: Published in Centre for Economic Performance Discussion Paper Series File-URL: http://dash.harvard.edu/bitstream/handle/1/37146963/Paying%20for%20Performance%20-%20Incentive%20Pay%20Schemes_Bryson-Freeman-Lucifora-et-al_CEP%20DP%201112.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:37146963 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Strzalecki, Tomasz Title: Dynamic Logit with Choice Aversion Abstract: We characterize a generalization of discounted logistic choice that incorporates a parameter to capture different views the agent might have about the costs and benefits of larger choice sets. The discounted logit model used in the empirical literature is the special case that displays a “preference for flexibility” in the sense that the agent always prefers to add additional items to a menu. Other cases display varying levels of “choice aversion,” where the agent prefers to remove items from a menu if their ex ante value is below a threshold. We show that higher choice aversion, as measured by dislike of bigger menus, also corresponds to an increased preference for putting off decisions as late as possible. Creation-Date: 2015 Publication-Status: Published in Econometrica File-URL: http://dash.harvard.edu/bitstream/handle/1/14397609/fudenberg-strzalecki.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:14397609 Template-Type: ReDIF-Paper 1.0 Author-Name: Cooper, Richard N. Title: Reform of the International Monetary System: A Modest Proposal Abstract: Reform of the international monetary system is back on the official agenda, for the first time since 1974, 37 years ago. France's president Nicolas Sarkozy called last year for a "new Bretton Woods conference", and has set reform high on the agenda of the G-20, of which he is chairman in 2011. A start was made at the Seoul summit in November 2010, when the G-20 leaders requested the International Monetary Fund (IMF) to identify "indicative guidelines" for large imbalances in payments. In accepted parlance the international monetary system is a narrower concept than the world economy or even the financial components of the world economy. Here's a proposal: let each country set a target level for its foreign exchange reserves five years hence. Then subject these proposed national targets to international discussion and review. Each country would be expected to defend its proposed target before peers, especially if it was unusually high or low. Creation-Date: 2011 Publication-Status: Published in Central Banking File-URL: http://dash.harvard.edu/bitstream/handle/1/13581009/Cooper_ReformInternational.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:13581009 Template-Type: ReDIF-Paper 1.0 Author-Name: Stewart, Susan T. Author-Name: Cutler, David M. Author-Name: Rosen, Allison B. Title: Comparison of Trends in US Health-Related Quality of Life Over the 2000s Using the SF-6D, HALex, EQ-5D, and EQ-5D Visual Analog Scale Versus a Broader Set of Symptoms and Impairments Abstract: BACKGROUND: A number of instruments have been developed to measure health-related quality of life (HRQoL), differing in the health domains covered and their scoring. Although few such measures have been consistently included in US national health surveys over time, the surveys have included data on a broad range of symptoms and impairments, which enables the tracking of population health trends. OBJECTIVES: To compare trends in HRQoL as measured using existing instruments versus using a broader range of symptoms and impairments collected in multiple years of nationally representative data. DATA AND MEASURES: Data were from the 2000-2010 Medical Expenditure Panel Survey, which is nationally representative of the noninstitutionalized US population. Level of and trends in HRQoL derived from a broad range of survey symptoms and impairments (SSI) was compared with HRQoL from the SF-6D, the HALex, and, between 2000 and 2003, the EuroQol-5D (EQ-5D) and EQ-5D Visual Analog Scale. RESULTS:: Trends in HRQoL were similar using different measures. The SSI scores correlated 0.66-0.80 with scores from other measures and mean SSI scores were between those of other measures. Scores from all HRQoL measures declined similarly with increasing age and with the presence of comorbid conditions. CONCLUSIONS: Measuring HRQoL using a broader range of symptoms and impairments than those in a single instrument yields population health trends similar to those from other measures while making maximum use of existing data and providing rich detail on the factors underlying change. Creation-Date: 2014 Publication-Status: Published in Medical Care File-URL: http://dash.harvard.edu/bitstream/handle/1/33471117/184911/comparisons.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33471117 Template-Type: ReDIF-Paper 1.0 Author-Name: Weitzman, Martin L. Title: Can Negotiating a Uniform Carbon Price Help to Internalize the Global Warming Externality? Abstract: It is difficult to resolve the global warming free-rider externality problem by negotiating n different quantity targets. By contrast, negotiating a single internationally binding minimum carbon price (the proceeds from which are domestically retained) counters self-interest by incentivizing agents to internalize the externality. The model of this article indicates an exact sense in which each agent’s extra cost from a higher emissions price is counterbalanced by that agent’s extra benefit from inducing all other agents to simultaneously lower their emissions in response to the higher price. Some implications are discussed. While the study is centered on a formal model, the tone of the policy discussion resembles more an exploratory think piece. Creation-Date: 2014 Publication-Status: Published in Journal of the Association of Environmental and Resource Economists File-URL: http://dash.harvard.edu/bitstream/handle/1/12992321/uniform.carbon.tax_.voting.jaereversion2.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12992321 Template-Type: ReDIF-Paper 1.0 Author-Name: Fang, Margaret C. Author-Name: Coca Perraillon, Marcelo Author-Name: Ghosh, Kaushik Author-Name: Cutler, David M. Author-Name: Rosen, Allison B. Title: Trends in Stroke Rates, Risk, and Outcomes in the United States, 1988 to 2008 Abstract: Background Stroke is a major cause of morbidity and mortality. We describe trends in the incidence, outcomes, and risk factors for stroke in the US Medicare population from 1988 to 2008. Methods We analyzed data from a 20% sample of hospitalized Medicare beneficiaries with a principal discharge diagnosis of ischemic (n = 918,124) or hemorrhagic stroke (n = 133,218). Stroke risk factors were determined from the National Health and Nutrition Examination Survey (years 1988-1994, 2001-2008) and medication uptake from the Medicare Current Beneficiary Survey (years 1992-2008). Primary outcomes were stroke incidence and 30-day mortality after stroke hospitalization. Results Ischemic stroke incidence decreased from 927 per 100,000 in 1988 to 545 per 100,000 in 2008, and hemorrhagic stroke decreased from 112 per 100,000 to 94 per 100,000. Risk-adjusted 30-day mortality decreased from 15.9% in 1988 to 12.7% in 2008 for ischemic stroke and from 44.7% to 39.3% for hemorrhagic stroke. Although observed stroke rates decreased, the Framingham stroke model actually predicted increased stroke risk (mean stroke score 8.3% in 1988-1994, 8.8% in 2005-2008). Statin use in the general population increased (4.0% in 1992, 41.4% in 2008), as did antihypertensive use (53.0% in 1992, 73.5% in 2008). Conclusions Incident strokes in the Medicare population aged ≥65 years decreased by approximately 40% over the last 2 decades, a decline greater than expected on the basis of the population's stroke risk factors. Case fatality from stroke also declined. Although causality cannot be proven, declining stroke rates paralleled increased use of statins and antihypertensive medications. Creation-Date: 2014 Publication-Status: Published in The American Journal of Medicine File-URL: http://dash.harvard.edu/bitstream/handle/1/33471116/184901/trends.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33471116 Template-Type: ReDIF-Paper 1.0 Author-Name: Weitzman, Martin L. Title: A Precautionary Tale of Uncertain Tail Fattening Abstract: Suppose that there is a probability density function for how bad things might get, but that the overall rate at which this probability density function slims down to approach zero in the tail is uncertain. The paper shows how a basic precautionary principle of tail fattening could then apply. The worse is the contemplated damage, the more should a decision maker consider the bad tail to be among the relatively fatter-tailed possibilities. A rough numerical example is applied to the uncertain tail distribution of climate sensitivity. Creation-Date: 2013 Publication-Status: Published in Environment and Resource Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/12840806/a_precautionary_tale_of_uncertain_tail_fattening._environmental_and_resource_economics_volume_55_issue_2_2013_pages_159-173.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12840806 Template-Type: ReDIF-Paper 1.0 Author-Name: Montiel Olea, J. L. Author-Name: Strzalecki, Tomasz Title: Axiomatization and Measurement of Quasi-Hyperbolic Discounting Abstract: This article provides an axiomatic characterization of quasi-hyperbolic discounting and a more general class of semi-hyperbolic preferences. We impose consistency restrictions directly on the intertemporal trade-offs by relying on what we call “annuity compensations.” Our axiomatization leads naturally to an experimental design that disentangles discounting from the elasticity of intertemporal substitution. In a pilot experiment we use the partial identification approach to estimate bounds for the distributions of discount factors in the subject pool. Consistent with previous studies, we find evidence for both present and future bias. Creation-Date: 2014 Publication-Status: Published in The Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/12967840/qje-resubmit18b%20(2).pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12967840 Template-Type: ReDIF-Paper 1.0 Author-Name: Weitzman, Martin L. Title: What Is the "Damages Function" for Global Warming — And What Difference Might It Make? Abstract: The existing literature on climate change offers little guidance on why one specification or another of a "damages function" has been selected. Ideally, one wants a functional form that captures reality adequately, yet is analytically sufficiently tractable to yield useful results. This paper gives two plausible risk aversion axioms that a reduced form utility function of temperature change and the capacity to produce consumption might reasonably be required to satisfy. These axioms indicate that the standard-practice multiplicative specification of disutility damages from global warming, as well as its additive analogue, are special cases of this paper's theoretically derived utility function. Empirically, the paper gives some numerical examples demonstrating the surprisingly strong implications for economic policy of the distinction between additive and multiplicative disutility damages. Creation-Date: 2010 Publication-Status: Published in Climate Change Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/33373343/damagesfunctionglobalwarming.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33373343 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Y. Author-Name: Viceira, Luis Manuel Title: The Term Structure of the Risk–Return Trade-Off Abstract: Expected excess returns on bonds and stocks, real interest rates, and risk shift over time in predictable ways. Furthermore, these shifts tend to persist for long periods. Changes in investment opportunities can alter the risk–return trade-off of bonds, stocks, and cash across investment horizons, thus creating a “term structure” of the risk–return trade-off. This term structure can be extracted from a parsimonious model of return dynamics, as is illustrated with data from the U.S. stock and bond markets. Creation-Date: 2005 Publication-Status: Published in Financial Analysts Journal File-URL: http://dash.harvard.edu/bitstream/handle/1/34299168/196911/cv_termstructure_riskreturn.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34299168 Template-Type: ReDIF-Paper 1.0 Author-Name: Gollier, Christian Author-Name: Weitzman, Martin L. Title: How should the distant future be discounted when discount rates are uncertain? Abstract: The so-called “Weitzman–Gollier puzzle” is the fact that two seemingly symmetric and equally plausible ways of dealing with uncertain future discount rates appear to give diametrically opposed results. The puzzle is resolved when agents optimize their consumption plans. The long run discount rate declines over time toward its lowest possible value. Creation-Date: 2010 Publication-Status: Published in Economics Letters File-URL: http://dash.harvard.edu/bitstream/handle/1/33373345/howshoulddistantfuture.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33373345 Template-Type: ReDIF-Paper 1.0 Author-Name: Melitz, Marc J. Author-Name: Polanec, Sašo Title: Dynamic Olley-Pakes Productivity Decomposition with Entry and Exit Abstract: In this paper, we propose an extension of the productivity decomposition method developed by Olley & Pakes (1996). This extension provides an accounting for the contributions of both firm entry and exit to aggregate productivity changes. It breaks down the contribution of surviving firms into a component accounting for changes in the firm-level distribution of productivity and another accounting for market share reallocations among those firms - following the same methodology as the one proposed by Olley & Pakes (1996). We argue that the other decompositions that break-down aggregate productivity changes into these same four components introduce some biases in the measurement of the contributions of entry and exit. We apply our proposed decomposition to the large measured increases of productivity in Slovenian manufacturing during the 1995-2000 period and contrast our results with those of other decompositions. We find that, over a 5-year period, the measurement bias associated with entry and exit is substantial, accounting for up to 10 percentage points of aggregate productivity growth. We also find that market share reallocations among surviving firms played a much more important role in driving aggregate productivity changes. Creation-Date: 2015 Publication-Status: Published in The RAND Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/17492204/197236/dopdv9_1_1.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:17492204 Template-Type: ReDIF-Paper 1.0 Author-Name: Cooper, Richard N. Title: Japan's New Economic Policy Abstract: Creation-Date: 2013 Publication-Status: Published in Century Weekly File-URL: http://dash.harvard.edu/bitstream/handle/1/23520559/nikkei.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:23520559 Template-Type: ReDIF-Paper 1.0 Author-Name: Andersen, Steffen Author-Name: Campbell, John Y. Author-Name: Meisner-Nielsen, Kasper Author-Name: Ramadorai, Tarun Title: Inattention and Inertia in Household Finance: Evidence from the Danish Mortgage Market Abstract: This paper studies the refinancing behavior of Danish households during a recent period of declining interest rates. Danish data are particularly suitable for this purpose because the Danish mortgage system imposes few barriers to refinancing, and demographic and economic characteristics of mortgage borrowers can be accurately measured. The paper finds that household characteristics affect both inattention (a low responsiveness of mortgage refinancing to financial incentives) and inertia (a low unconditional probability of refinancing). Many characteristics move inattention and inertia in the same direction, implying a high cross-sectional correlation of 0.76 between these two household attributes. Middle-aged and older households show greater inertia and inattention than young households. Education and income reduce both inertia and inattention, but the effect of education is greater among more educated households, while the effect of income is greater among poorer households. Housing and financial wealth have opposite effects on inertia, consistent with the view that households manage their mortgages more actively when housing is relatively more important to them. Creation-Date: 2014 Publication-Status: Published in SSRN Journal File-URL: http://dash.harvard.edu/bitstream/handle/1/17492179/andersencampbellnielsenramadorai_24june2015.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:17492179 Template-Type: ReDIF-Paper 1.0 Author-Name: Tamer, Elie Title: Partial Identification in Econometrics Abstract: Identification in econometric models maps prior assumptions and the data to information about a parameter of interest. The partial identification approach to inference recognizes that this process should not result in a binary answer that consists of whether the parameter is point identified. Rather, given the data, the partial identification approach characterizes the informational content of various assumptions by providing a menu of estimates, each based on different sets of assumptions, some of which are plausible and some of which are not. Of course, more assumptions beget more information, so stronger conclusions can be made at the expense of more assumptions. The partial identification approach advocates a more fluid view of identification and hence provides the empirical researcher with methods to help study the spectrum of information that we can harness about a parameter of interest using a menu of assumptions. This approach links conclusions drawn from various empirical models to sets of assumptions made in a transparent way. It allows researchers to examine the informational content of their assumptions and their impacts on the inferences made. Naturally, with finite sample sizes, this approach leads to statistical complications, as one needs to deal with characterizing sampling uncertainty in models that do not point identify a parameter. Therefore, new methods for inference are developed. These methods construct confidence sets for partially identified parameters, and confidence regions for sets of parameters, or identifiable sets. Creation-Date: 2010 Publication-Status: Published in Annual Review of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/34728615/192401/pie.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34728615 Template-Type: ReDIF-Paper 1.0 Author-Name: Weitzman, Martin L. Title: Climate change: Insurance for a warming planet Abstract: Creation-Date: 2010 Publication-Status: Published in Nature File-URL: http://dash.harvard.edu/bitstream/handle/1/33373348/467784a.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33373348 Template-Type: ReDIF-Paper 1.0 Author-Name: Komarova, Tatiana Author-Name: Severini, Thomas A. Author-Name: Tamer, Elie Title: Quantile Uncorrelation and Instrumental Regressions Abstract: We introduce a notion of median uncorrelation that is a natural extension of mean (linear) uncorrelation. A scalar random variable Y is median uncorrelated with a k-dimensional random vector X if and only if the slope from an LAD regression of Y on X is zero. Using this simple definition, we characterize properties of median uncorrelated random variables, and introduce a notion of multivariate median uncorrelation. We provide measures of median uncorrelation that are similar to the linear correlation coefficient and the coefficient of determination. We also extend this median uncorrelation to other loss functions. As two stage least squares exploits mean uncorrelation between an instrument vector and the error to derive consistent estimators for parameters in linear regressions with endogenous regressors, the main result of this paper shows how a median uncorrelation assumption between an instrument vector and the error can similarly be used to derive consistent estimators in these linear models with endogenous regressors. We also show how median uncorrelation can be used in linear panel models with quantile restrictions and in linear models with measurement errors. Creation-Date: 2012 Publication-Status: Published in Journal of Econometric Methods File-URL: http://dash.harvard.edu/bitstream/handle/1/25267902/192371/kst.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:25267902 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Levine, David Saul Title: Tail probabilities for triangular arrays Abstract: Di erent discrete time triangular arrays representing a noisy signal of players' activities can lead to the same limiting di usion process yet lead to di erent limit equilibria. Whether the limit equilibria are equilibria of the limiting continuous time game depends on the limit properties of test statistics for whether a player has deviated. We provide an estimate of the tail probabilities along these arrays that allows us to determine the asymptotic behavior of the best test and thus of the best equilibrium. Creation-Date: 2013 Publication-Status: Published in Journal of Dynamics and Games File-URL: http://dash.harvard.edu/bitstream/handle/1/13041349/Fudenberg_TailProbabilities.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:13041349 Template-Type: ReDIF-Paper 1.0 Author-Name: Melitz, Marc J. Author-Name: Redding, Stephen J. Title: New Trade Models, New Welfare Implications Abstract: We show that endogenous firm selection provides a new welfare margin for heterogeneous firm models of trade (relative to homogeneous firm models). Under some parameter restrictions, the trade elasticity is constant and is a sufficient statistic for welfare, along with the domestic trade share. However, even small deviations from these restrictions imply that trade elasticities are variable and differ across markets and levels of trade costs. In this more general setting, the domestic trade share and endogenous trade elasticity are no longer sufficient statistics for welfare. Additional empirically observable moments of the micro structure also matter for welfare. Creation-Date: 2015 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/34299161/65406/hhgft_012514_figs.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/34299161/65406/appendix_hhgft_012014.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34299161 Template-Type: ReDIF-Paper 1.0 Author-Name: Weitzman, Martin L. Title: Some Dynamic Economic Consequences of the Climate-Sensitivity Inference Dilemma Abstract: Creation-Date: 2010 Publication-Status: Published in Handbook of Environmental Accounting File-URL: http://dash.harvard.edu/bitstream/handle/1/33373347/somedynamiceconomicconsequences.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33373347 Template-Type: ReDIF-Paper 1.0 Author-Name: Strzalecki, Tomasz Title: Temporal Resolution of Uncertainty and Recursive Models of Ambiguity Aversion Abstract: Dynamic models of ambiguity aversion are increasingly popular in applied work. This paper shows that there is a strong interdependence in such models between the ambiguity attitude and the preference for the timing of the resolution of uncertainty, as defined by the classic work of Kreps and Porteus (1978). The modeling choices made in the domain of ambiguity aversion influence the set of modeling choices available in the domain of timing attitudes. The main result is that the only model of ambiguity aversion that exhibits indifference to timing is the maxmin expected utility of Gilboa and Schmeidler (1989). This paper examines the structure of the timing nonindifference implied by the other commonly used models of ambiguity aversion. This paper also characterizes the indifference to long-run risk, a notion introduced by Duffie and Epstein (1992). The interdependence of ambiguity and timing that this paper identifies is of interest both conceptually and practically—especially for economists using these models in applications. Creation-Date: 2013 Publication-Status: Published in Econometrica File-URL: http://dash.harvard.edu/bitstream/handle/1/12967691/ecta9619.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12967691 Template-Type: ReDIF-Paper 1.0 Author-Name: Friedman, Benjamin Morton Title: The Simple Analytics of Monetary Policy: A Post-Crisis Approach Abstract: The standard workhorse models of monetary policy now commonly in use, both for teaching macro- economics to students and for supporting policymaking within many central banks, are incapable of incorporating the most widely accepted accounts of how the 2007–9 financial crisis occurred and are incapable too of analyzing the actions that monetary policymakers took in response to it. They also offer no point of entry for the frontier research that many economists have subsequently undertaken, especially research revolving around frictions in financial intermediation. The author suggests a simple model that bridges this gap by distinguishing the interest rate that the central bank sets from the interest rate that matters for the spending decisions of households and firms. One version of this model adds to the canonical “new Keynesian” model a fourth equation representing the spread between these two interest rates. An alternate version replaces this reduced-form expression for the spread with explicit supply and demand equations for privately issued credit obligations. The discussion illustrates the use of both versions of the model for analyzing the kind of breakdown in financial intermediation that triggered the 2007–9 crisis as well as “unconventional” central bank actions like large-scale asset purchases and forward guidance on the policy interest rate. Creation-Date: 2013 Publication-Status: Published in The Journal of Economic Education File-URL: http://dash.harvard.edu/bitstream/handle/1/14117757/The%20Simple%20Analytics%20of%20Monetary%20Policy%20--%20NBER%20WP%2018960.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:14117757 Template-Type: ReDIF-Paper 1.0 Author-Name: Rogoff, Kenneth S. Author-Name: Tashiro, Takeshi Title: Japan’s exorbitant privilege Abstract: The concept of "exorbitant privilege" has received great attention from policy makers as well as academics worldwide. The idea originally referred to the willingness of foreigners to hold large quantities of US government debt at extremely low interest rates, due to the dollar's world reserve currency status. In recent years, the term exorbitant privilege has been expanded to explain why the US appears to be enjoying excess return from its external assets over liabilities across all asset classes, including foreign direct investment, equities and other forms of portfolio investment. In this paper, we give a brief review of the recent literature on exorbitant privilege, and then proceed to discuss exorbitant privilege in the context of another country, Japan, which has been the world's largest creditor nation for more than two decades. In contrast to the common perception that Japan has been a particularly poor international investor, we find that Japan enjoys exorbitant privilege in both the broad and narrow sense. Japan also earns higher expected returns from maturity transformation. Thus although the dollar is the reserve currency, the yen also has enjoyed a safe haven effect in the recent period. Creation-Date: 2015 Publication-Status: Published in Journal of the Japanese and International Economies File-URL: http://dash.harvard.edu/bitstream/handle/1/34299169/japans_exorbitant_privilege_reiti_dp_14e047_revised.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34299169 Template-Type: ReDIF-Paper 1.0 Author-Name: Weitzman, Martin L. Title: Risk-adjusted gamma discounting Abstract: It is widely recognized that the economics of distant-future events, like climate change, is critically dependent upon the choice of a discount rate. Unfortunately, it is unclear how to discount distant-future events when the future discount rate itself is unknown. In previous work, an analytically-tractable approach called ‘‘gamma discounting’’ was proposed, which gave a declining discount rate schedule as a simple closed-form function of time. This paper extends the previous gamma approach by using a Ramsey optimal growth model, combined with uncertainty about future productivity, in order to ‘‘risk adjust’’ all probabilities by marginal utility weights. Some basic numerical examples are given, which suggest that the overall effect of risk-adjusted gamma discounting on lowering distant-future discount rates may be significant. The driving force is a ‘‘fear factor’’ from risk aversion to permanent productivity shocks representing catastrophic future states of the world. Creation-Date: 2010 Publication-Status: Published in Journal of Environmental Economics and Management File-URL: http://dash.harvard.edu/bitstream/handle/1/33373344/riskadjustedgammadiscounting.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33373344 Template-Type: ReDIF-Paper 1.0 Author-Name: Weitzman, Martin L. Title: Fat-Tailed Uncertainty in the Economics of Catastrophic Climate Change Abstract: In this article, I revisit some basic issues concerning structural uncertainty and catastrophic climate change. My target audience here are general economists, so this article could also be viewed as a somewhat less technical exposition that supplements my previous work. Using empirical examples, I argue that it is implausible that low-probability, high-negative impact events would not much influence an economic analysis of climate change. I then try to integrate the empirical examples and the theory together into a unified package with a unified message that the possibility of catastrophic climate change needs to be taken seriously. Creation-Date: 2011 Publication-Status: Published in Review of Environmental Economics and Policy File-URL: http://dash.harvard.edu/bitstream/handle/1/34728611/fattaileduncertaintyeconomics.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34728611 Template-Type: ReDIF-Paper 1.0 Author-Name: Erev, Ido Author-Name: Ert, Eyal Author-Name: Roth, Alvin E. Title: A Choice Prediction Competition for Social Preferences in Simple Extensive Form Games: An Introduction Abstract: Two independent, but related, choice prediction competitions are organized that focus on behavior in simple two-person extensive form games http://sites.google.com/site/extformpredcomp/): one focuses on predicting the choices of the first mover and the other on predicting the choices of the second mover. The competitions are based on an estimation experiment and a competition experiment. The two experiments use the same methods and subject pool, and examine games randomly selected from the same distribution. The current introductory paper presents the results of the estimation experiment, and clarifies the descriptive value of some baseline models. The best baseline model assumes that each choice is made based on one of several rules. The rules include: rational choice, level-1 reasoning, an attempt to maximize joint payoff, and an attempt to increase fairness. The probability of using the different rules is assumed to be stable over games. The estimated parameters imply that the most popular rule is rational choice; it is used in about half the cases. To participate in the competitions, researchers are asked to email the organizers models (implemented in computer programs) that read the incentive structure as input, and derive the predicted behavior as an output. The submission deadline is 1 December 2011, the results of the competition experiment will not be revealed until that date. The submitted models will be ranked based on their prediction error. The winners of the competitions will be invited to write a paper that describes their model. Creation-Date: 2011 Publication-Status: Published in Games File-URL: http://dash.harvard.edu/bitstream/handle/1/32067416/games-02-00257.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/32067416/games-02-00257.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:32067416 Template-Type: ReDIF-Paper 1.0 Author-Name: Baicker, Katherine Author-Name: Cutler, David M. Author-Name: Song, Zirui Title: Workplace Wellness Programs Can Generate Savings Abstract: With health care expenditures soaring, there is increasing interest in workplace-based disease prevention and health promotion as a means of improving health while lowering costs. We conduct a critical meta-analysis of the literature on costs and savings associated such programs, focusing on studies with particularly rigorous methods and examining effects on health care costs and absenteeism. We find that medical costs fall about $3.27 for every dollar spent on wellness programs, and absentee day costs fall by about $2.73 for every dollar spent. This average return on investment suggests that the wider adoption of such programs could prove beneficial for budgets and productivity as well as health outcomes. Creation-Date: 2010 Publication-Status: Published in Health Affairs File-URL: http://dash.harvard.edu/bitstream/handle/1/5345879/Workplace%20Wellness%20Programs.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:5345879 Template-Type: ReDIF-Paper 1.0 Author-Name: Arrow, K. Author-Name: Cropper, M. Author-Name: Gollier, C. Author-Name: Groom, B. Author-Name: Heal, G. Author-Name: Newell, R. Author-Name: Nordhaus, W. Author-Name: Pindyck, R. Author-Name: Pizer, W. Author-Name: Portney, P. Author-Name: Sterner, T. Author-Name: Tol, R. S. J. Author-Name: Weitzman, Martin L. Title: Determining Benefits and Costs for Future Generations Abstract: In economic project analysis, the rate at which future benefits and costs are discounted relative to current values often determines whether a project passes the benefit-cost test. This is especially true of projects with long time horizons, such as those to reduce greenhouse gas (GHG) emissions. Whether the benefits of climate policies, which can last for centuries, outweigh the costs, many of which are borne today, is especially sensitive to the rate at which future benefits are discounted. This is also true of other policies, e.g., affecting nuclear waste disposal or the construction of long-lived infrastructure. Creation-Date: 2013 Publication-Status: Published in Science File-URL: http://dash.harvard.edu/bitstream/handle/1/12841963/Determining%20Benefits%20and%20Costs%20for%20Future%20Generations.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12841963 Template-Type: ReDIF-Paper 1.0 Author-Name: Weitzman, Martin L. Title: Tail-Hedge Discounting and the Social Cost of Carbon Abstract: The choice of an overall discount rate for climate change investments depends critically on how different components of investment payoffs are discounted at differing rates reflecting their underlying risk characteristics. Such underlying rates can vary enormously, from ≈1 percent for idiosyncratic diversifiable risk to ≈7 percent for systematic nondiversifiable risk. Which risk-adjusted rate is chosen can have a huge impact on cost-benefit analysis. In this expository paper, I attempt to set forth in accessible language with a simple linear model what I think are some of the basic issues involved in discounting climate risks. The paper introduces a new concept that may be relevant for climate-change discounting: the degree to which an investment hedges against the bad tail of catastrophic damages by insuring positive expected payoffs even under the worst circumstances. The prototype application is calculating the social cost of carbon. Creation-Date: 2013 Publication-Status: Published in Journal of Economic Literature File-URL: http://dash.harvard.edu/bitstream/handle/1/12841971/tail_hedge_discounting_and_the_social_cost_of_carbon_september_2013.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12841971 Template-Type: ReDIF-Paper 1.0 Author-Name: Friedman, Benjamin Morton Title: Toward a New Understanding of Monetary Policy Abstract: Creation-Date: 2013 Publication-Status: Published in Macroeconomic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/12967700/MAS%20article%20--%20July%202013.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12967700 Template-Type: ReDIF-Paper 1.0 Author-Name: Epstein, Larry G. Author-Name: Farhi, Emmanuel Author-Name: Strzalecki, Tomasz Title: How Much Would You Pay to Resolve Long-Run Risk? Abstract: Though risk aversion and the elasticity of intertemporal substitution have been the subjects of careful scrutiny, the long-run risks literature as well as the broader literature using recursive utility to address asset pricing puzzles have ignored the full implications of their parameter specifications. Recursive utility implies that the temporal resolution of risk matters and a quantitative assessment thereof should be part of the calibration process. This paper gives a sense of the magnitudes of implied timing premia. Its objective is to inject temporal resolution of risk into the discussion of the quantitative properties of long-run risks and related models. Creation-Date: 2014 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/12967842/premium57-final_0%20(2).pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12967842 Template-Type: ReDIF-Paper 1.0 Author-Name: Mavroeidis, Sophocles Author-Name: Plagborg-Moller, Mikkel Author-Name: Stock, James H. Title: Empirical Evidence on Inflation Expectations in the New Keynesian Phillips Curve Abstract: We review the main identification strategies and empirical evidence on the role of expectations in the New Keynesian Phillips curve, paying particular attention to the issue of weak identification. Our goal is to provide a clear understanding of the role of expectations that integrates across the different papers and specifications in the literature. We discuss the properties of the various limited-information econometric methods used in the literature and provide explanations of why they produce conflicting results. Using a common dataset and a flexible empirical approach, we find that researchers are faced with substantial specification uncertainty, as different combinations of various a priori reasonable specification choices give rise to a vast set of point estimates. Moreover, given a specification, estimation is subject to considerable sampling uncertainty due to weak identification. We highlight the assumptions that seem to matter most for identification and the configuration of point estimates. We conclude that the literature has reached a limit on how much can be learned about the New Keynesian Phillips curve from aggregate macroeconomic time series. New identification approaches and new datasets are needed to reach an empirical consensus. Creation-Date: 2014 Publication-Status: Published in Journal of Economic Literature File-URL: http://dash.harvard.edu/bitstream/handle/1/22795845/infl_expns_nkpc_mps%202.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:22795845 Template-Type: ReDIF-Paper 1.0 Author-Name: Anderson, Robert M. Author-Name: Ellison, Glenn Author-Name: Fudenberg, Drew Title: Location choice in two-sided markets with indivisible agents Abstract: Consider a model of location choice by two sorts of agents, called “buyers” and “sellers”: In the first period agents simultaneously choose between two identical possible locations; following this, the agents at each location play some sort of game with the other agents there. Buyers prefer locations with fewer other buyers and more sellers, and sellers have the reverse preferences. We study the set of possible equilibrium sizes for the two markets, and show that two markets of very different sizes can co-exist even if larger markets are more efficient. This extends the analysis of Ellison and Fudenberg [2003. Quart. J. Econ. 118, 1249–1278], who ignored the constraint that the number of agents of each type in each market should be an integer, and instead analyzed the “quasi-equilibria” where agents are treated as infinitely divisible. Creation-Date: 2010 Publication-Status: Published in Games and Economic Behavior File-URL: http://dash.harvard.edu/bitstream/handle/1/27755298/31578966.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27755298 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Yamamoto, Yuichi Title: Repeated Games Where the Payoffs and Monitoring Structure Are Unknown Abstract: This paper studies repeated games with imperfect public monitoring where the play- ers are uncertain both about the payoff functions and about the relationship between the distribution of signals and the actions played. We introduce the concept of perfect public ex post equilibrium (PPXE), and show that it can be characterized with an exten- sion of the techniques used to study perfect public equilibria. We develop identifiability conditions that are sufficient for a folk theorem; these conditions imply that there are PPXE in which the payoffs are approximately the same as if the monitoring structure and payoff functions were known. Finally, we define perfect type-contingently public ex post equilibria (PTXE), which allows players to condition their actions on their initial private information, and we provide its linear programming characterization. Creation-Date: 2010 Publication-Status: Published in Econometrica File-URL: http://dash.harvard.edu/bitstream/handle/1/13411374/66495102.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:13411374 Template-Type: ReDIF-Paper 1.0 Author-Name: Cutler, David M. Author-Name: Huang, Wei Author-Name: Lleras-Muney, Adriana Title: When Does Education Matter? The Protective Effect of Education for Cohorts Graduating in Bad Times Abstract: Using Eurobarometer data, we document large variation across European countries in education gradients in income, self-reported health, life satisfaction, obesity, smoking and drinking. While this variation has been documented previously, the reasons why the effect of education on income, health and health behaviors varies is not well understood. We build on previous literature documenting that cohorts graduating in bad times have lower wages and poorer health for many years after graduation, compared to those graduating in good times. We investigate whether more educated individuals suffer smaller income and health losses as a result of poor labor market conditions upon labor market entry. We confirm that a higher unemployment rate at graduation is associated with lower income, lower life satisfaction, greater obesity, more smoking and drinking later in life. Further, education plays a protective role for these outcomes, especially when unemployment rates are high: the losses associated with poor labor market outcomes are substantially lower for more educated individuals. Variation in unemployment rates upon graduation can potentially explain a large fraction of the variance in gradients across different countries. Creation-Date: 2014-12-08 Publication-Status: Published in Social Science and Medicine File-URL: http://dash.harvard.edu/bitstream/handle/1/13479095/207751/w20156.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:13479095 Template-Type: ReDIF-Paper 1.0 Author-Name: Laibson, David I. Author-Name: Rietveld, Cornelius A. Author-Name: Conley, Dalton Author-Name: Eriksson, Nicholas Author-Name: Esko, Tonu Author-Name: Medland, Sarah E. Author-Name: Vinkhuyzen, Anna A. E. Author-Name: Yang, Jian Author-Name: Boardman, Jason D. Author-Name: Chabris, Christopher F. Author-Name: Dawes, Christopher T. Author-Name: Domingue, Benjamin W. Author-Name: Hinds, David A. Author-Name: Johannesson, Magnus Author-Name: Kiefer, Amy K. Author-Name: Magnusson, Patrik K. E. Author-Name: Mountain, Joanna L. Author-Name: Oskarsson, Sven Author-Name: Rostapshova, Olga Author-Name: Teumer, Alexander Author-Name: Tung, Joyce Y. Author-Name: Visscher, Peter M. Author-Name: Benjamin, Daniel J. Author-Name: Cesarini, David Author-Name: Koellinger, Philipp D. Title: Replicability and Robustness of Genome-Wide-Association Studies for Behavioral Traits Abstract: A recent genome-wide-association study of educational attainment identified three single-nucleotide polymorphisms (SNPs) whose associations, despite their small effect sizes (each \(R^2 \approx 0.02\%)\), reached genome-wide significance \((p < 5 × 10^{−8})\) in a large discovery sample and were replicated in an independent sample (p < .05). The study also reported associations between educational attainment and indices of SNPs called “polygenic scores.” In three studies, we evaluated the robustness of these findings. Study 1 showed that the associations with all three SNPs were replicated in another large (N = 34,428) independent sample. We also found that the scores remained predictive \((R^2 \approx 2\%)\) in regressions with stringent controls for stratification (Study 2) and in new within-family analyses (Study 3). Our results show that large and therefore well-powered genome-wide-association studies can identify replicable genetic associations with behavioral traits. The small effect sizes of individual SNPs are likely to be a major contributing factor explaining the striking contrast between our results and the disappointing replication record of most candidate-gene studies. Creation-Date: 2014 Publication-Status: Published in Psychological Science File-URL: http://dash.harvard.edu/bitstream/handle/1/33371478/208901/rietveld_et_al._2014_psych_sci.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/33371478/208901/si_psych_science_2014.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33371478 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Peysakhovich, Alexander Title: Recency, Records and Recaps: Learning and Non-Equilibrium Behavior in a Simple Decision Problem Abstract: Nash equilibrium takes optimization as a primitive, but suboptimal behavior can persist in simple stochastic decision problems. This has motivated the development of other equilibrium concepts such as cursed equilibrium and behavioral equilibrium. We experimentally study a simple adverse selection (or “lemons”) problem and find that learning models that heavily discount past information (i.e. display recency bias) explain patterns of behavior better than Nash, cursed or behavioral equilibrium. Providing counterfactual information or a record of past outcomes does little to aid convergence to optimal strategies, but providing sample averages (“recaps”) gets individuals most of the way to optimality. Thus recency effects are not solely due to limited memory but stem from some other form of cognitive constraints. Our results show the importance of going beyond static optimization and incorporating features of human learning into economic models. Creation-Date: 2014 Publication-Status: Published in Proceedings of the Fifteenth ACM Conference on Economics and Computation - EC '14 File-URL: http://dash.harvard.edu/bitstream/handle/1/27755296/167691/recency_records_and_recaps_0.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27755296 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Levine, David K. Author-Name: Maniadis, Zacharias Title: An approximate dual-self model and paradoxes of choice under risk Abstract: We derive a simplified version of the model of Fudenberg and Levine, 2006 and Fudenberg and Levine, 2011 and show how this approximate model is useful in explaining choice under risk. We show that in the simple case of three outcomes, the model can generate indifference curves that “fan out” in the Marschak–Machina triangle, and thus can explain the well-known Allais and common ratio paradoxes that models such as prospect theory and regret theory are designed to capture. At the same time, our model is consistent with modern macroeconomic theory and evidence and generates predictions across a much wider set of domains than these models. Creation-Date: 2014 Publication-Status: Published in Journal of Economic Psychology File-URL: http://dash.harvard.edu/bitstream/handle/1/13051803/Fudenberg_ApproximateDualSelf.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:13051803 Template-Type: ReDIF-Paper 1.0 Author-Name: Pakes, Ariel Title: Alternative Models for Moment Inequalities Abstract: Behavioral choice models generate inequalities which, when combined with additional assumptions, can be used as a basis for estimation. This paper considers two sets of such assumptions and uses them in two empirical examples. The second example examines the structure of payments resulting from the upstream interactions in a vertical market. I then mimic the empirical setting for this example in a numerical analysis which computes actual equilibria, examines how their characteristics vary with the market setting, and compares them to the empirical results. The final section uses the numerical results in a Monte Carlo analysis of the robustness of the two approaches to estimation to their underlying assumptions. Creation-Date: 2010 Publication-Status: Published in Econometrica File-URL: http://dash.harvard.edu/bitstream/handle/1/34708519/32432314.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34708519 Template-Type: ReDIF-Paper 1.0 Author-Name: Weitzman, Martin L. Title: Fat Tails and the Social Cost of Carbon Abstract: At high enough greenhouse gas concentrations, climate change might conceivably cause catastrophic damages with small but non-negligible probabilities. If the bad tail of climate damages is sufficiently fat, and if the coefficient of relative risk aversion is greater than one, the catastrophe-reducing insurance aspect of mitigation investments could in theory have a strong influence on raising the social cost of carbon. In this paper I exposit the influence of fat tails on climate change economics in a simple stark formulation focused on the social cost of carbon. I then attempt to place the basic underlying issues within a balanced perspective. Creation-Date: 2014 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/12992320/203061/aer.104.5.544fattailsandthesocialcostofcarbon.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12992320 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia D. Author-Name: Olivetti, Claudia Title: Shocking Labor Supply: A Reassessment of the Role of World War II on Women's Labor Supply Abstract: The most prominent feature of the female labor force across the past hundred years is its enormous growth. But many believe that the increase was discontinuous. Our purpose is to identify the short- and long-run impacts of WWII on the labor supply of women who were currently married in 1950 and 1960. Using WWII mobilization rates by state, we find a wartime impact on weeks worked and the labor force participation of married white (non-farm) women in both 1950 and 1960. The impact, moreover, was experienced almost entirely by women in the top half of the education distribution. Creation-Date: 2013 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/13041327/goldin-olivetti_paper.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:13041327 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Author-Name: Treisman, Daniel Title: Normal Countries: The East 25 Years After Communism Abstract: Creation-Date: 2014 Publication-Status: Published in Foreign Affairs File-URL: http://dash.harvard.edu/bitstream/handle/1/33077922/204036/normal_countries_draft_sept_12_annotated.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33077922 Template-Type: ReDIF-Paper 1.0 Author-Name: Freeman, Richard Barry Title: What, If Anything, Can Labor Do to Rejuvenate Itself and Improve Worker Well-being in an Era of Inequality and Crisis-driven Austerity? Abstract: The economic position of workers has weakened in much of the advanced world. Over the past 30–40 years the share of national income going to labor has fallen. Labor earnings have become more unequally distributed. The proportion of workers in trade unions has trended downward, accompanied in some countries with commensurate declines in collective bargaining coverage. Union influence on the direction of the economy has diminished even in countries where firms and unions negotiate wage and working conditions for most employees and where left-oriented parties are in government. Increases in government deficits and debt resulting from the Great Recession have induced many governments to introduce austerity policies that are likely to perpetuate high joblessness and inequality into the foreseeable future. Finance's speculative excesses fed market capitalism but much of the costs of the implosion of finance and ensuing Great Recession will fall on labor into the foreseeable future. There is no easy answer to the title question. As the phrase “if anything” indicates, it is unclear whether labor can rejuvenate itself and pressure societies to restore full employment and raise living standards in the face of inequality and pressures for austerity programs. Differences in the labor relations systems among countries, in levels of inequality, in the importance of money in politics, and in the post Great Recession state of economies will undoubtedly produce different responses across countries and labor movements. In this paper I examine the situation in the US, where the ability of trade unions to represent labor's interest has declined more than in any other major economy. Collective bargaining in the US is co-terminus with union density. For over half a century union density has fallen in the private sector. In 2012 6.6% of private sector workers were union members (US BLS, 2013, table 3) – below the 1900 level when total density, then based almost entirely on private sector workers, was 6.8% (Freeman, 1998, p 291). In the 2000s unions gained so few members in National Labor Relations Board representation elections or in other ways that the anti-unionists’ once quixotic dream of a union-free labor market has become a reality in the private sector. American labor law and custom makes it difficult for workers and firms to substitute other forms of workplace labor activity for collective bargaining. The law forbids employer-initiated works councils. There are no mechanisms for extending collective contracts beyond the firm and local unions who negotiate and sign a contract. Employer associations are more interested in undermining collective bargaining than in discussing labor issues with the AFL-CIO or some other union federation. Unionism and collective bargaining have followed a different path in the public sector. Union density increased from the 1960s to the 2000s when about 37% of employees were union members, including teachers, police, firefighters, university professors, graduate student teaching assistants, as well as bus drivers, clerical workers, and so on.1 When recession-induced budget crises hit cities and states in the late 2000s, however, opponents of unions attacked public sector bargaining as a contributing factor to the deficits. In the US federal system, state law governs state and local government collective bargaining. Some states encourage public sector collective bargaining. Other states, largely in the South, make it illegal for public sector employers to bargain with unions. Following the 2008 elections, Republican-dominated legislatures in several states that had encouraged collective bargaining passed bills to restrict bargaining, outlaw dues checkoffs/agency fees (which provide a funding stream to unions), and limit union political activities. Wisconsin, which had pioneered laws favorable to public sector bargaining, added provisions to its budget bill that effectively eliminated collective bargaining for all state and local workers except police and fire. Ohio enacted legislation of a similar kind that targeted all state and local employees including police and fire. Opponents of the Wisconsin legislation forced the state's governor into a recall election but failed to turn him out of office or reverse the legislative decision. Opponents of the Ohio legislation overturned their law in a referendum (Freeman and Han, 2012), which seemed to stem the anti-union movement. But in 2012 the Republican dominated legislature in historically pro-union Michigan passed a bill to weaken unions there. At this writing anti-union groups have bills pending in the legislatures of many other states. Unions have circled their wagons to defend the one part of the labor market where they still hold considerable sway. The experience of the US is extreme but nonetheless informative for other advanced countries where crisis-driven austerity and increased inequality weaken union ability to represent workers and may embolden groups opposed to collective action, welfare state protections of workers and the like to follow the lead of their US counterparts. The failure of US unions to develop alternatives to collective bargaining to advance worker interests as union density fell is a “canary in the mine” warning to labor elsewhere. The new efforts by US labor activists, social entrepreneurs, some unions, and in 2013 the AFL-CIO itself to mobilize citizens to defend workers’ interests without collective bargaining directs attention to innovative ways for labor to develop countervailing power and press for full employment and rising living standards for all. The paper is divided into three sections. Section one reviews the decline in labor as a force determining outcomes in modern capitalism, with particular attention to the collapse of the firm-based collective bargaining model in the US. Section two highlights the need for a strong labor movement to help reform the finance-dominated model of capitalism that underlies the implosion of Wall Street and ensuing economic crisis. Section three examines the ways that labor activists, social entrepreneurs, and unions are developing ways to rejuvenate labor power and improve labor conditions absent collective bargaining. There is a brief conclusion. Creation-Date: 2013 Publication-Status: Published in Perspektiven der Wirtschaftspolitik File-URL: http://dash.harvard.edu/bitstream/handle/1/13047660/What%20Can%20Labor%20Do%20to%20Rejuvenate.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/13047660/What%20Can%20Labor%20Do%20to%20Rejuvenate_WELT-paper_4-16-13.doc File-Format: application/msword Handle: RePEc:hrv:faseco:13047660 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Levine, David K. Title: Recency, Consistent Learning, and Nash Equilibrium Abstract: We examine the long-term implication of two models of learning with recency bias: recursive weights and limited memory. We show that both models generate similar beliefs and that both have a weighted universal consistency property. Using the limited-memory model we produce learning procedures that both are weighted universally consistent and converge with probability one to strict Nash equilibrium. Creation-Date: 2014 Publication-Status: Published in Proceedings of the National Academy of Sciences File-URL: http://dash.harvard.edu/bitstream/handle/1/13477947/165196/learning_with_recency_bias.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:13477947 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Pathak, Parag A. Title: Unobserved punishment supports cooperation Abstract: Costly punishment can facilitate cooperation in public-goods games, as human subjects will incur costs to punish non-cooperators even in settings where it is unlikely that they will face the same opponents again. Understanding when and why it occurs is important both for the design of economic institutions and for modeling the evolution of cooperation. Our experiment shows that subjects will engage in costly punishment even when it will not be observed until the end of the session, which supports the view that agents enjoy punishment. Moreover, players continue to cooperate when punishment is unobserved, perhaps because they (correctly) anticipate that shirkers will be punished: Fear of punishment can be as effective at promoting contributions as punishment itself. Creation-Date: 2010 Publication-Status: Published in Journal of Public Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/27755297/48697046.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27755297 Template-Type: ReDIF-Paper 1.0 Author-Name: Freeman, Richard Barry Author-Name: Ganguli, Ina Author-Name: Murciano-Goroff, Raviv Title: Why and Wherefore of Increased Scientific Collaboration Abstract: This paper examines international and domestic collaborations using data from an original survey of corresponding authors and Web of Science data of articles that had at least one US coauthor in the fields of Particle and Field Physics, Nanoscience and Nanotechnology, and Biotechnology and Applied Microbiology. The data allow us to investigate the connections among coauthors and the views of corresponding authors about the collaboration. We have four main findings. First, we find that US collaborations have increased across US cities as well as across international borders, with the nature of collaborations across cities resembling that across countries. Second, face-to-face meetings are important in collaborations: most collaborators first met working in the same institution and communicate often through meetings with coauthors from distant locations. Third, the main reason for most collaborations is to combine the specialized knowledge and skills of coauthors, but there are substantial differences in the mode of collaborations between small lab-based science and big science, where international collaborations are more prevalent. Fourth, for biotech, we find that citations to international papers are higher compared to papers with domestic collaborators only, but not for the other two fields. Moreover, in all three fields, papers with the same number of coauthors had lower citations if they were international collaborations. Overall, our findings suggest that all collaborations are best viewed from a framework of collaborations across space broadly, rather than in terms of international as opposed to domestic collaborative activity. Creation-Date: 2015 Publication-Status: Published in National Bureau of Economic Research File-URL: http://dash.harvard.edu/bitstream/handle/1/34305979/Why%20and%20Wherefore%20of%20Increased%20Scientific%20Collaboration_Freeman-Ganguli-Goroff_UPDATED%20MS%20for%20VOL_11-14-141.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34305979 Template-Type: ReDIF-Paper 1.0 Author-Name: Cooper, Richard N. Title: Financing for climate change Abstract: This paper argues that the 2009 pledge of $100 billion in 2020 by rich countries for mitigation and adaptation should not be used for mitigation by commercial firms in developing countries, since that would artificially create competitive advantage for such firms and provoke protectionist reactions in the rich countries where firms must bear the costs of mitigation, thereby undermining the world trading system. The costs of heating the earth's surface should be borne by all emitters, just as the price of copper and other scarce resources is paid by all users, rich or poor. That will still leave scope for rich country help in adaptation to climate change and in bringing to fruition new technologies to reduce emissions. Creation-Date: 2012 Publication-Status: Published in Energy Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/13578515/Cooper_Financing%20for%20Climate%20Change.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:13578515 Template-Type: ReDIF-Paper 1.0 Author-Name: Beshears, John Leonard Author-Name: Choi, James J. Author-Name: Laibson, David I. Author-Name: Madrian, Brigitte Author-Name: Zeldes, Stephen P. Title: What Makes Annuitization More Appealing? Abstract: We conduct and analyze two large surveys of hypothetical annuitization choices. We find that allowing individuals to annuitize a fraction of their wealth increases annuitization relative to a situation where annuitization is an “all or nothing” decision. Very few respondents choose declining real payout streams over flat or increasing real payout streams of equivalent expected present value. Highlighting the effects of inflation increases demand for cost of living adjustments. Frames that highlight flexibility, control, and investment significantly reduce annuitization. A majority of respondents prefer to receive an extra “bonus” payment during one month of the year that is funded by slightly lower payments in the remaining months. Concerns about later-life income, spending flexibility, and counterparty risk are the most important self-reported motives that influence the annuitization decision. Creation-Date: 2014 Publication-Status: Published in Journal of Public Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/13382511/bclmz_jh_what_makes_annuitization_2013_v26b_jpube.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:13382511 Template-Type: ReDIF-Paper 1.0 Author-Name: Grossman, Gene M. Author-Name: Helpman, Elhanan Title: Outsourcing in a Global Economy Abstract: We study the determinants of the location of sub-contracted activity in a general equilibrium model of outsourcing and trade. We model outsourcing as an activity that requires search for a partner and relationship-specific investments that are governed by incomplete contracts. The extent of international outsourcing depends inter alia on the thickness of the domestic and foreign market for input suppliers, the relative cost of searching in each market, the relative cost of customizing inputs, and the nature of the contracting environment in each country. Creation-Date: 2005 Publication-Status: Published in Review of Economic Studies File-URL: http://dash.harvard.edu/bitstream/handle/1/25586654/Outsourcing.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:25586654 Template-Type: ReDIF-Paper 1.0 Author-Name: Muendler, Marc-Andreas Author-Name: Redding, Stephen Author-Name: Akerman, Anders Author-Name: Helpman, Elhanan Author-Name: Itskhoki, Oleg Title: Sources of Wage Inequality Abstract: Recent theories of firm heterogeneity emphasize between-firm wage differences as a new mechanism through which trade can affect wage inequality. Using linked employer-employee data for Sweden, we show that many of the stylized facts about wage inequality found in Helpman et al. (2012) for Brazil also hold for Sweden. Much of overall wage inequality arises within sector-occupations and for workers with similar observable characteristics. One notable difference is a smaller contribution from between-firm differences in wages in Sweden, which could reflect the influence of Swedish labor market institutions in dampening the scope for variation in wages between firms through collective wage agreements. Creation-Date: 2013 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/25586658/aer.103.3.214.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:25586658 Template-Type: ReDIF-Paper 1.0 Author-Name: Helpman, Elhanan Author-Name: Itskhoki, Oleg Author-Name: Redding, Stephen Title: Inequality and Unemployment in a Global Economy Abstract: This paper develops a new framework for examining the determinants of wage distributions that emphasizes within-industry reallocation, labor market frictions, and differences in workforce composition across firms. More productive firms pay higher wages and exporting increases the wage paid by a firm with a given productivity. The opening of trade enhances wage inequality and can either raise or reduce unemployment. While wage inequality is higher in a trade equilibrium than in autarky, gradual trade liberalization first increases and later decreases inequality. Creation-Date: 2010 Publication-Status: Published in Econometrica File-URL: http://dash.harvard.edu/bitstream/handle/1/25586656/technicalappendix_HIRopen_020910_final%20DASH.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/25586656/Inequality_and_Unemployment.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:25586656 Template-Type: ReDIF-Paper 1.0 Author-Name: Helpman, Elhanan Title: Foreign Trade and Investment: Firm-level Perspectives Abstract: This Economica Coase Lecture reviews research that has revolutionized the field of international trade and foreign direct investment. It explains the motivation behind the development of new analytical frameworks, the nature of these frameworks, and the empirical studies that sprouted from them. Creation-Date: 2013 Publication-Status: Published in Economica File-URL: http://dash.harvard.edu/bitstream/handle/1/25586657/Foreign_Trade_and_Investment.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:25586657 Template-Type: ReDIF-Paper 1.0 Author-Name: Helpman, Elhanan Author-Name: Itskhoki, Oleg Title: Labour Market Rigidities, Trade and Unemployment Abstract: We study a two-country two-sector model of international trade in which one sector produces homogeneous products while the other produces differentiated products. The differentiated-product industry has firm heterogeneity, monopolistic competition, search and matching in its labor market, and wage bargaining. Some of the workers searching for jobs end up being unemployed. Countries are similar except for frictions in their labor markets. We study the interaction of labor market rigidities and trade impediments in shaping welfare, trade flows, productivity, price levels and unemployment rates. We show that both countries gain from trade but that the flexible country -- which has lower labor market frictions -- gains proportionately more. A flexible labor market confers comparative advantage; the flexible country exports differentiated products on net. A country benefits by lowering frictions in its labor market, but this harms the country's trade partner. And the simultaneous proportional lowering of labor market frictions in both countries benefits both of them. The model generates rich patterns of unemployment. Specifically, trade integration -- which benefits both countries -- may raise their rates of unemployment. Moreover, differences in rates of unemployment do not necessarily reflect differences in labor market rigidities; the rate of unemployment can be higher or lower in the flexible country. Finally, we show that the flexible country has both higher total factor productivity and a lower price level, which operates against the standard Balassa-Samuelson effect. Creation-Date: 2010 Publication-Status: Published in Review of Economic Studies File-URL: http://dash.harvard.edu/bitstream/handle/1/25586655/LaborMarketRigidities_v2%20DASH.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:25586655 Template-Type: ReDIF-Paper 1.0 Author-Name: Freeman, Richard Barry Author-Name: Huang, Wei Title: Collaboration: Strength in diversity Abstract: Creation-Date: 2014 Publication-Status: Published in Nature File-URL: http://dash.harvard.edu/bitstream/handle/1/33496269/Collaboration_Strength%20in%20diversity_Freeman-and-Huang_Nature2014.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33496269 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Title: Some Lessons from the Yield Curve Abstract: Focuses on the relationship between short- and long-term interest rates in the United States. Review of the academic literature on the term structure; United States Treasury securities; Expectations hypothesis of the term structure; Monetary policy and the United States bond market in spring 1994. Creation-Date: 1995 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/3163264/campbellnber_yieldcurve.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3163264 Template-Type: ReDIF-Paper 1.0 Author-Name: Cooper, Richard N. Title: Does the SDR Have a Future? Abstract: Creation-Date: 2010 Publication-Status: Published in Journal of Globalization and Development File-URL: http://dash.harvard.edu/bitstream/handle/1/13578516/Cooper_Does%20the%20SDR%20Have%20a%20Future.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:13578516 Template-Type: ReDIF-Paper 1.0 Author-Name: Hastie, Nicholas D. Author-Name: van der Loos, Matthijs J. H. M. Author-Name: Vitart, Veronique Author-Name: Völzke, Henry Author-Name: Wellmann, Jürgen Author-Name: Yu, Lei Author-Name: Zhao, Wei Author-Name: Allik, Jüri Author-Name: Attia, John R. Author-Name: Bandinelli, Stefania Author-Name: Bastardot, François Author-Name: Beauchamp, Jonathan Author-Name: Bennett, David A. Author-Name: Berger, Klaus Author-Name: Bierut, Laura J. Author-Name: Boomsma, Dorret I. Author-Name: Bültmann, Ute Author-Name: Campbell, Harry Author-Name: Chabris, Christopher Author-Name: Cherkas, Lynn Author-Name: Chung, Mina K. Author-Name: Cucca, Francesco Author-Name: de Andrade, Mariza Author-Name: De Jager, Philip Lawrence Author-Name: De Neve, Jan-Emmanuel Author-Name: Deary, Ian J. Author-Name: Dedoussis, George V. Author-Name: Deloukas, Panos Author-Name: Dimitriou, Maria Author-Name: Eiríksdóttir, Guðný Author-Name: Elderson, Martin F. Author-Name: Eriksson, Johan G. Author-Name: Evans, David M. Author-Name: Faul, Jessica D. Author-Name: Ferrucci, Luigi Author-Name: Garcia, Melissa E. Author-Name: Grönberg, Henrik Author-Name: Guðnason, Vilmundur Author-Name: Hall, Per Author-Name: Harris, Juliette M. Author-Name: Harris, Tamara B. Author-Name: Heath, Andrew C. Author-Name: Hernandez, Dena G. Author-Name: Hoffmann, Wolfgang Author-Name: Hofman, Adriaan Author-Name: Holle, Rolf Author-Name: Holliday, Elizabeth G. Author-Name: Hottenga, Jouke-Jan Author-Name: Iacono, William G. Author-Name: Illig, Thomas Author-Name: Järvelin, Marjo-Riitta Author-Name: Kähönen, Mika Author-Name: Kaprio, Jaakko Author-Name: Kirkpatrick, Robert M. Author-Name: Kowgier, Matthew Author-Name: Latvala, Antti Author-Name: Launer, Lenore J. Author-Name: Lawlor, Debbie A. Author-Name: Lehtimäki, Terho Author-Name: Li, Jingmei Author-Name: Lichtenstein, Paul Author-Name: Lichtner, Peter Author-Name: Liewald, David C. Author-Name: Madden, Pamela A. Author-Name: Magnusson, Patrik K. E. Author-Name: Makinen, Tomi E. Author-Name: Masala, Marco Author-Name: McGue, Matt Author-Name: Metspalu, Andres Author-Name: Mielck, Andreas Author-Name: Miller, Michael B. Author-Name: Montgomery, Grant W. Author-Name: Mukherjee, Sutapa Author-Name: Nyholt, Dale R. Author-Name: Oostra, Ben A. Author-Name: Palmer, Lyle J. Author-Name: Palotie, Aarno Author-Name: Penninx, Brenda W. J. H. Author-Name: Perola, Markus Author-Name: Peyser, Patricia A. Author-Name: Preisig, Martin Author-Name: Räikkönen, Katri Author-Name: Raitakari, Olli T. Author-Name: Realo, Anu Author-Name: Ring, Susan M. Author-Name: Ripatti, Samuli Author-Name: Rivadeneira, Fernando Author-Name: Rudan, Igor Author-Name: Rustichini, Aldo Author-Name: Salomaa, Veikko Author-Name: Sarin, Antti-Pekka Author-Name: Schlessinger, David Author-Name: Scott, Rodney J. Author-Name: Snieder, Harold Author-Name: St Pourcain, Beate Author-Name: Starr, John M. Author-Name: Sul, Jae Hoon Author-Name: Surakka, Ida Author-Name: Svento, Rauli Author-Name: Teumer, Alexander Author-Name: Tiemeier, Henning Author-Name: van Rooij, Frank J. A. Author-Name: Van Wagoner, David R. Author-Name: Vartiainen, Erkki Author-Name: Viikari, Jorma Author-Name: Vollenweider, Peter Author-Name: Vonk, Judith M. Author-Name: Waeber, Gérard Author-Name: Weir, David R. Author-Name: Wichmann, H.-Erich Author-Name: Widen, Elisabeth Author-Name: Willemsen, Gonneke Author-Name: Wilson, James F. Author-Name: Wright, Alan F. Author-Name: Conley, Dalton Author-Name: Davey-Smith, George Author-Name: Franke, Lude Author-Name: Groenen, Patrick J. F. Author-Name: Hofman, Albert Author-Name: Johannesson, Magnus Author-Name: Kardia, Sharon L. R. Author-Name: Krueger, Robert F. Author-Name: Laibson, David I. Author-Name: Martin, Nicholas G. Author-Name: Meyer, Michelle N. Author-Name: Posthuma, Danielle Author-Name: Thurik, A. Roy Author-Name: Timpson, Nicholas J. Author-Name: Uitterlinden, André G. Author-Name: van Duijn, Cornelia M. Author-Name: Visscher, Peter M. Author-Name: Benjamin, Daniel J. Author-Name: Cesarini, David Author-Name: Koellinger, Philipp D. Author-Name: Rietveld, Cornelius A. Author-Name: Medland, Sarah E. Author-Name: Derringer, Jaime Author-Name: Yang, Jian Author-Name: Esko, Tonu Author-Name: Martin, Nicolas W. Author-Name: Westra, Harm-Jan Author-Name: Shakhbazov, Konstantin Author-Name: Abdellaoui, Abdel Author-Name: Agrawal, Arpana Author-Name: Albrecht, Eva Author-Name: Alizadeh, Behrooz Z. Author-Name: Amin, Najaf Author-Name: Barnard, John Author-Name: Baumeister, Sebastian E. Author-Name: Benke, Kelly S. Author-Name: Bielak, Lawrence F. Author-Name: Boatman, Jeffrey A. Author-Name: Boyle, Patricia A. Author-Name: Davies, Gail Author-Name: de Leeuw, Christiaan Author-Name: Eklund, Niina Author-Name: Evans, Daniel S. Author-Name: Ferhmann, Rudolf Author-Name: Fischer, Krista Author-Name: Gieger, Christian Author-Name: Gjessing, Håkon K. Author-Name: Hagg, Sara Author-Name: Harris, Jennifer R. Author-Name: Hayward, Caroline Author-Name: Holzapfel, Christina Author-Name: Ibrahim-Verbaas, Carla A. Author-Name: Ingelsson, Erik Author-Name: Jacobsson, Bo Author-Name: Joshi, Peter K. Author-Name: Jugessur, Astanand Author-Name: Kaakinen, Marika Author-Name: Kanoni, Stavroula Author-Name: Karjalainen, Juha Author-Name: Kolcic, Ivana Author-Name: Kristiansson, Kati Author-Name: Kutalik, Zoltán Author-Name: Lahti, Jari Author-Name: Lee, Sang H. Author-Name: Lin, Peng Author-Name: Lind, Penelope A. Author-Name: Liu, Yongmei Author-Name: Lohman, Kurt Author-Name: Loitfelder, Marisa Author-Name: McMahon, George Author-Name: Vidal, Pedro Marques Author-Name: Meirelles, Osorio Author-Name: Milani, Lili Author-Name: Myhre, Ronny Author-Name: Nuotio, Marja-Liisa Author-Name: Oldmeadow, Christopher J. Author-Name: Petrovic, Katja E. Author-Name: Peyrot, Wouter J. Author-Name: Polašek, Ozren Author-Name: Quaye, Lydia Author-Name: Reinmaa, Eva Author-Name: Rice, John P. Author-Name: Rizzi, Thais S. Author-Name: Schmidt, Helena Author-Name: Schmidt, Reinhold Author-Name: Smith, Albert V. Author-Name: Smith, Jennifer A. Author-Name: Tanaka, Toshiko Author-Name: Terracciano, Antonio Title: GWAS of 126,559 Individuals Identifies Genetic Variants Associated with Educational Attainment Abstract: A genome-wide association study (GWAS) of educational attainment was conducted in a discovery sample of 101,069 individuals and a replication sample of 25,490. Three independent single-nucleotide polymorphisms (SNPs) are genome-wide significant (rs9320913, rs11584700, rs4851266), and all three replicate. Estimated effects sizes are small (coefficient of determination R2 ≈ 0.02%), approximately 1 month of schooling per allele. A linear polygenic score from all measured SNPs accounts for ≈2% of the variance in both educational attainment and cognitive function. Genes in the region of the loci have previously been associated with health, cognitive, and central nervous system phenotypes, and bioinformatics analyses suggest the involvement of the anterior caudate nucleus. These findings provide promising candidate SNPs for follow-up work, and our effect size estimates can anchor power analyses in social-science genetics. Creation-Date: 2013 Publication-Status: Published in Science File-URL: http://dash.harvard.edu/bitstream/handle/1/13383543/nihms495960.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:13383543 Template-Type: ReDIF-Paper 1.0 Author-Name: Fryer, Roland Gerhard Author-Name: Holden, Richard Title: Measuring the Compactness of Political Districting Plans Abstract: We develop a measure of compactness based on the distance between voters within the same district relative to the minimum distance achievable, which we coin the relative proximity index. Any compactness measure that satisfies three desirable properties (anonymity of voters, efficient clustering, and invariance to scale, population density, and number of districts) ranks districting plans identically to our index. We then calculate the relative proximity index for the 106th Congress, which requires us to solve for each state’s maximal compactness—a problem that is nondeterministic polynomial-time hard (NP hard). The correlations between our index and the commonly used measures of dispersion and perimeter are −.37 and −.29, respectively. We conclude by estimating seat-vote curves under maximally compact districts for several large states. The fraction of additional seats a party obtains when its average vote increases is significantly greater under maximally compact districting plans relative to the existing plans. Creation-Date: 2011 Publication-Status: Published in Journal of Law and Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/13456931/fryer-holden-2011.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:13456931 Template-Type: ReDIF-Paper 1.0 Author-Name: Fajgelbaum, Pablo Author-Name: Grossman, Gene Author-Name: Helpman, Elhanan Title: Income Distribution, Product Quality, and International Trade Abstract: We develop a framework for studying trade in vertically and horizontally differentiated products. In our model, consumers with heterogeneous incomes and tastes purchase a homogeneous good as well as making a discrete choice of quality and variety of a differentiated product. The distribution of preferences in the population generates a nested logit demand structure. These demands are such that the fraction of consumers who buy a higher-quality product rises with income. We use the model to study the pattern of trade between countries that differ in size and income distributions but are otherwise identical. Trade―which is driven primarily by demand factors―derives from "home market effects" in the presence of transport costs. The model helps to explain why richer countries export higher-quality goods. It provides a tractable tool for studying the welfare consequences of trade, transport costs, and trade policy for different income groups in an economy. Creation-Date: 2011 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/25586659/JPE_662628.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:25586659 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Author-Name: Treisman, Daniel Title: The US and Russia: They Don't Need Us Abstract: Creation-Date: 2015-04-28 Publication-Status: Published in Foreign Affairs File-URL: http://dash.harvard.edu/bitstream/handle/1/14844863/Shleifer_USRussia.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:14844863 Template-Type: ReDIF-Paper 1.0 Author-Name: Morck, Randall Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert W. Title: Management ownership and market valuation Abstract: We investigate the relation between management ownership and corporate performance, as measured by Tobin's Q. In a cross-section of Fortune 500 firms, Tobin's Q first increases and then declines as board of directors holdings rise. For older firms there is weak evidence that Q is lower when a firm is run by a member of the founding family than when it is run by an officer unrelated to the founder. Creation-Date: 1988 Publication-Status: Published in Journal of Financial Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/29407535/w2055%202.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:29407535 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Bacchetta, Philippe Author-Name: Ranciere, Romain Author-Name: Rogoff, Kenneth S. Title: Exchange Rate Volatility and Productivity Growth: The Role of Financial Development 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. Creation-Date: 2009 Publication-Status: Published in Journal of Monetary Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/12490419/Exchange%20Rate%20Volatility%20and%20Productivity%20Growth-%20The%20Role%20of%20Financial%20Development.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12490419 Template-Type: ReDIF-Paper 1.0 Author-Name: Weitzman, Martin L. Title: A Voting Architecture for the Governance of Free-Driver Externalities, with Application to Geoengineering Abstract: Abating climate change is an enormous international public goods problem with a classical "free rider" structure. But it is also a global "free driver" problem because geoengineering the stratosphere with reflective particles to block incoming solar radiation is so cheap that it could essentially be undertaken unilaterally by one state perceiving itself to be in peril. This exploratory paper develops the main features of a "free driver" externality in a simple model motivated by the asymmetric consequences of type-I and type-II errors. I propose a social-choice decision architecture embodying the solution concept of a supermajority voting rule and derive its basic properties. Creation-Date: 2015-07-15 Publication-Status: Published in Scandinavian Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/17368469/34975192.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:17368469 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert Title: Fire Sales in Finance and Macroeconomics Abstract: Analysts of the recent financial crisis often refer to the role of asset "fire sales" in depleting the balance sheets of financial institutions and aggravating the fragility of the financial system. The term "fire sale" has been around since the nineteenth century to describe firms selling smoke-damaged merchandise at cut-rate prices in the aftermath of a fire. But what are fire sales in broad financial markets with hundreds of participants? As we suggested in a 1992 paper, a fire sale is essentially a forced sale of an asset at a dislocated price. The asset sale is forced in the sense that the seller cannot pay creditors without selling assets. The price is dislocated because the highest potential bidders are typically involved in a similar activity as the seller, and are therefore themselves indebted and cannot borrow more to buy the asset. Indeed, rather than bidding for the asset, they might be selling similar assets themselves. Assets are then bought by nonspecialists who, knowing that they have less expertise with the assets in question, are only willing to buy at valuations that are much lower. In this paper, we selectively review some of the research on fire sales, emphasizing both concepts and supporting evidence. We begin by describing our 1992 model of fire sales and the related findings in empirical corporate finance. We then show that models of fire sales can account for several related phenomena during the recent financial crisis, including the contraction of the banking system and the failures of arbitrage in financial markets exemplified by historically unprecedented differences in prices of very similar securities. We then link fire sales to macroeconomics by discussing how such dislocations of security prices and the reduction in balance sheets of banks can reduce investment and output. Finally, we consider how the concept of fire sales can help us think about government interventions in financial markets, including the evidently successful Federal Reserve interventions in 2009. Fire sales are surely not the whole story of the financial crisis, but they are a phenomenon that binds together many elements of the crisis. Creation-Date: 2011 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/33077925/Shleifer_FireSales.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33077925 Template-Type: ReDIF-Paper 1.0 Author-Name: Cooper, Richard N. Title: Reflections on the Financial Crisis Abstract: Creation-Date: 2011 Publication-Status: Published in Harvard College Economics Review File-URL: http://dash.harvard.edu/bitstream/handle/1/34305997/HER.txt.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34305997 Template-Type: ReDIF-Paper 1.0 Author-Name: Freeman, Richard Barry Title: The Subcontracted Labor Market: David Weil’s book, The Fissured Workplace, describes a disturbing trend for workers. Abstract: Creation-Date: 2014 Publication-Status: Published in Perspectives on Work File-URL: http://dash.harvard.edu/bitstream/handle/1/22548086/Welcome%20to%20the%20Fissured%20LM_ms_LERA-Perspectives-on-Work_Weil-issue_2014.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:22548086 Template-Type: ReDIF-Paper 1.0 Author-Name: Cooper, Richard N. Title: The Third Plenum and Economic Reform Abstract: Creation-Date: 2014 Publication-Status: Published in Harvard Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/14350455/CooperThirdPlenum2014.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:14350455 Template-Type: ReDIF-Paper 1.0 Author-Name: Cooper, Richard N. Title: Reivew of The Bretton Woods Transcripts Abstract: Creation-Date: 2014 Publication-Status: Published in Journal of Economic Literature File-URL: http://dash.harvard.edu/bitstream/handle/1/14352638/CooperReview2014.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:14352638 Template-Type: ReDIF-Paper 1.0 Author-Name: Katz, Lawrence Author-Name: Goldin, Claudia Title: The Power of the Pill: Oral Contraceptives and Women's Career and Marriage Decisions Abstract: The fraction of U.S. college graduate women entering professional programs increased substantially just after 1970, and the age at first marriage among all U.S. college graduate women began to soar around the same year. We explore the relationship between these two changes and the diffusion of the birth control pill (“the pill”) among young, unmarried college graduate women. Although the pill was approved in 1960 by the Food and Drug Administration and spread rapidly among married women, it did not diffuse among young, single women until the late 1960s after state law changes reduced the age of majority and extended “mature minor” decisions. We present both descriptive time series and formal econometric evidence that exploit cross‐state and cross‐cohort variation in pill availability to young, unmarried women, establishing the “power of the pill” in lowering the costs of long‐duration professional education for women and raising the age at first marriage. Creation-Date: 2002 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/2624453/Goldin_PowerPill.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:2624453 Template-Type: ReDIF-Paper 1.0 Author-Name: Cooper, Richard N. Title: Key Currencies After the Euro Abstract: Creation-Date: 1999 Publication-Status: Published in The World Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/15754030/CooperAfterEuro.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:15754030 Template-Type: ReDIF-Paper 1.0 Author-Name: Strzalecki, Tomasz Title: Depth of Reasoning and Higher Order Beliefs Abstract: As demonstrated by the email game of Rubinstein (1989), the predictions of the standard equilibrium models of game theory are sensitive to assumptions about the fine details of the higher order beliefs. This paper shows that models of bounded depth of reasoning based on level-k thinking or cognitive hierarchy make predictions that are independent of the tail assumptions on the higher order beliefs. The framework developed here provides a language that makes it possible to identify general conditions on depth of reasoning, instead of committing to a particular model such as level-k thinking or cognitive hierarchy. Creation-Date: 2014 Publication-Status: Published in Journal of Economic Behavior & Organization File-URL: http://dash.harvard.edu/bitstream/handle/1/14397608/strzalecki-depth.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:14397608 Template-Type: ReDIF-Paper 1.0 Author-Name: Strzalecki, Tomasz Title: Axiomatic Foundations of Multiplier Preferences Abstract: This paper axiomatizes the robust control criterion of multiplier preferences introduced by Hansen and Sargent (2001). The axiomatization relates multiplier preferences to other classes of preferences studied in decision theory, in particular, the variational preferences recently introduced by Maccheroni, Marinacci, and Rustichini (2006a). This paper also establishes a link between the parameters of the multiplier criterion and the observable behavior of the agent. This link enables measurement of the parameter on the basis of observable choice data and provides a useful tool for applications. Creation-Date: 2011 Publication-Status: Published in Econometrica File-URL: http://dash.harvard.edu/bitstream/handle/1/14397610/strzalecki-multiplier.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:14397610 Template-Type: ReDIF-Paper 1.0 Author-Name: Platteau, Jean-Philippe Author-Name: Strzalecki, Tomasz Title: Collective Action, Heterogeneous Loyalties and Path Dependence: Micro-evidence from Senegal Abstract: In Senegal, we encountered a situation in which a minority group of migrant fishermen had completely different sets of expectations regarding a collective action depending on the location where they operated. In one village expectations were pessimistic, while in the other village they were optimistic. Understanding this contrast and its implications provides the main justification for the paper. To be able to account for the contrast between the two areas, pessimistic expectations in the first area have to be traced back to a preceding conflict that could never be settled satisfactorily. A perverse path-dependent process had thus been set in motion that could not be changed by a simple act of will of a determined leadership. To demonstrate the links between expectations and actions that fit with the story told, we propose a simple model of collective action with asymmetric information. Creation-Date: 2004 Publication-Status: Published in Journal of African Economies File-URL: http://dash.harvard.edu/bitstream/handle/1/14425933/platteau-strzalecki.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:14425933 Template-Type: ReDIF-Paper 1.0 Author-Name: Freeman, Richard Barry Title: Immigration, International Collaboration, and Innovation: Science and Technology Policy in the Global Economy Abstract: Globalization of scientific and technological knowledge has reduced the US share of world scientific activity; increased the foreign-born proportion of scientists and engineers in US universities and in the US labor market; and led to greater US scientific collaborations with other countries. China's massive investments in university education and R&D has in particular made it a special partner for the US in scientific work. These developments have substantial implications for US science and technology policy. This paper discusses several policies that U.S. policy makers might consider in responding to the changing global world of science and technology. These include aligning immigration policies more closely to the influx of international students; granting fellowships to students working on turning scientific and technological advances into commercial innovations; and requiring firms with R&D tax credits or other government R&D funding to develop "impact plans" to use their new knowledge to produce innovative products or processes. Creation-Date: 2015 Publication-Status: Published in Innovation Policy and the Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/14400082/Immigration%20Intl%20Collab%20and%20Innov_S&T%20policy%20in%20global%20Econ_Kerr-FINAL-for-VOL_Innov-Policy-and-Economy-Journal_4-1-15.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:14400082 Template-Type: ReDIF-Paper 1.0 Author-Name: Barth, Erling Author-Name: Bryson, Alex Author-Name: Davis, James Author-Name: Freeman, Richard Barry Title: It's Where You Work: Increases in Earnings Dispersion across Establishments and Individuals in the U.S. Abstract: This paper links data on establishments and individuals to analyze the role of establishments in the increase in inequality that has become a central topic in economic analysis and policy debate. It decomposes changes in the variance of ln earnings among individuals into the part due to changes in earnings among establishments and the part due to changes in earnings within-establishments and finds that much of the 1970s-2010s increase in earnings inequality results from increased dispersion of the earnings among the establishments where individuals work. It also shows that the divergence of establishment earnings occurred within and across industries and was associated with increased variance of revenues per worker. Our results direct attention to the fundamental role of establishment-level pay setting and economic adjustments in earnings inequality. Creation-Date: 2015 Publication-Status: Published in Journal of Labor Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/34307787/It's%20Where%20You%20Work_MS-JOLE_Barth-Bryson-Davis-Freeman_3-31-15.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34307787 Template-Type: ReDIF-Paper 1.0 Author-Name: Melitz, Marc J. Author-Name: Redding, Stephen J. Title: Missing Gains from Trade? Abstract: The theoretical result that there are welfare gains from trade is a central tenet of international economics. In a class of trade models that satisfy a gravity equation, the welfare gains from tradecan be computed using only the open economy domestic trade share and the elasticity of trade with respect to variable trade costs. The measured welfare gains from trade from this quantitativeapproach are typically relatively modest. In this paper, we suggest a channel for welfare gains that this quantitative approach typically abstracts from: trade-induced changes in domestic productivity.Using a model of sequential production, in which trade induces a reorganization of production that raises domestic productivity, we show that the welfare gains from trade can become arbitrarily large. Creation-Date: 2014 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/14596340/144566/mg_010914sr_nber.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:14596340 Template-Type: ReDIF-Paper 1.0 Author-Name: Alesina, Alberto Francesco Author-Name: Ardagna, Silvia Title: The Design of Fiscal Adjustments Abstract: This paper offers three results. First, in line with the previous literature, we confirm that fiscal adjustments based mostly on the spending side are less likely to be reversed. Second, spending based fiscal adjustments have caused smaller recessions than tax based fiscal adjustments. Finally, certain combinations of policies have made it possible for spending based fiscal adjustments to be associated with growth in the economy even on impact rather than with a recession. Thus, expansionary fiscal adjustments are possible. Creation-Date: 2013 Publication-Status: Published in Tax Policy and the Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/22801843/Ardagna_paper.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:22801843 Template-Type: ReDIF-Paper 1.0 Author-Name: Reinhart, Carmen M. Author-Name: Reinhart, Vincent Author-Name: Rogoff, Kenneth S. Title: Dealing with debt Abstract: This paper explores the menu of options for renormalizing public debt levels relative to nominal activity in the long run, should governments eventually decide to do so. Although debt ratios may need to rise further in some cases, a vision of longer-term options is key to weighing alternative medium-term stabilization strategies. Orthodox ones, the standard fare of officialdom, include enhancing growth, running primary budget surpluses, and privatizing government assets. Heterodox polices include restructuring debt contracts, generating unexpected inflation, taxing wealth, and repressing private finance. Advanced countries have relied far more on heterodox approaches than many observers choose to remember. Creation-Date: 2015 Publication-Status: Published in Journal of International Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/23936571/Dealing%20with%20Debt.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:23936571 Template-Type: ReDIF-Paper 1.0 Author-Name: Freeman, Richard Barry Author-Name: Viarengo, Martina Title: School and family effects on educational outcomes across countries Abstract: This study analyzes the link between student test scores and the school students attend, the policies and practices of the schools, students’ family background and their parents’ involvement in their education using data from the 2009 wave of the Program for International Student Assessment. We find that 1) a substantial proportion of the variation of test scores within countries is associated with the school students attend; 2) a sizable proportion of the school fixed effects is associated with school policies and teaching practices beyond national policies or other mechanisms that sort students of differing abilities among schools; 3) school fixed effects are a major pathway for the link between family background and test scores. The implication is that what schools do is important in the level and dispersion of test scores, suggesting the value of further analysis of what goes in schools to pin down causal links between policies and practices and test score outcomes. Creation-Date: 2014 Publication-Status: Published in Economic Policy File-URL: http://dash.harvard.edu/bitstream/handle/1/25811018/FreemanSchoolandFamily2014.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:25811018 Template-Type: ReDIF-Paper 1.0 Author-Name: Kessler, Ronald Author-Name: Duncan, Greg J. Author-Name: Gennetian, Lisa A. Author-Name: Katz, Lawrence F. Author-Name: Kling, Jeffrey R. Author-Name: Sampson, Nancy A. Author-Name: Sanbonmatsu, Lisa Author-Name: Zaslavsky, Alan M. Author-Name: Ludwig, Jens Title: Associations of Housing Mobility Interventions for Children in High-Poverty Neighborhoods With Subsequent Mental Disorders During Adolescence Abstract: Importance Youth in high-poverty neighborhoods have high rates of emotional problems. Understanding neighborhood influences on mental health is crucial for designing neighborhood-level interventions. Objective To perform an exploratory analysis of associations between housing mobility interventions for children in high-poverty neighborhoods and subsequent mental disorders during adolescence. Design, Setting, and Participants The Moving to Opportunity Demonstration from 1994 to 1998 randomized 4604 volunteer public housing families with 3689 children in high-poverty neighborhoods into 1 of 2 housing mobility intervention groups (a low-poverty voucher group vs a traditional voucher group) or a control group. The low-poverty voucher group (n=1430) received vouchers to move to low-poverty neighborhoods with enhanced mobility counseling. The traditional voucher group (n=1081) received geographically unrestricted vouchers. Controls (n=1178) received no intervention. Follow-up evaluation was performed 10 to 15 years later (June 2008-April 2010) with participants aged 13 to 19 years (0-8 years at randomization). Response rates were 86.9% to 92.9%. Main Outcomes and Measures Presence of mental disorders from the Diagnostic and Statistical Manual of Mental Disorders (Fourth Edition) within the past 12 months, including major depressive disorder, panic disorder, posttraumatic stress disorder (PTSD), oppositional-defiant disorder, intermittent explosive disorder, and conduct disorder, as assessed post hoc with a validated diagnostic interview. Results Of the 3689 adolescents randomized, 2872 were interviewed (1407 boys and 1465 girls). Compared with the control group, boys in the low-poverty voucher group had significantly increased rates of major depression (7.1% vs 3.5%; odds ratio (OR), 2.2 [95% CI, 1.2-3.9]), PTSD (6.2% vs 1.9%; OR, 3.4 [95% CI, 1.6-7.4]), and conduct disorder (6.4% vs 2.1%; OR, 3.1 [95% CI, 1.7-5.8]). Boys in the traditional voucher group had increased rates of PTSD compared with the control group (4.9% vs 1.9%, OR, 2.7 [95% CI, 1.2-5.8]). However, compared with the control group, girls in the traditional voucher group had decreased rates of major depression (6.5% vs 10.9%; OR, 0.6 [95% CI, 0.3-0.9]) and conduct disorder (0.3% vs 2.9%; OR, 0.1 [95% CI, 0.0-0.4]). Conclusions and Relevance Interventions to encourage moving out of high-poverty neighborhoods were associated with increased rates of depression, PTSD, and conduct disorder among boys and reduced rates of depression and conduct disorder among girls. Better understanding of interactions among individual, family, and neighborhood risk factors is needed to guide future public housing policy changes. Observational studies have consistently found that youth in high-poverty neighborhoods have high rates of emotional problems even after controlling for individual-level risk factors.1 These findings raise the possibilities that neighborhood characteristics affect emotional functioning2 and neighborhood-level interventions may reduce emotional problems. Available data from observational studies are unclear and subject to selection bias and the possibility of reverse causality (ie, families with emotional problems end up in poorer neighborhoods). Despite this uncertainty, presumptive neighborhood effects have been characterized,3 causal pathways have been hypothesized,4 and interventions have been implemented.5 It is important to evaluate these causal claims regarding neighborhood effects experimentally. The US Department of Housing and Urban Development (HUD) enacted a housing mobility experiment known as the Moving to Opportunity for Fair Housing Demonstration by randomizing volunteer low-income public housing families with children to receive vouchers to move to lower-poverty neighborhoods.6,7 An interim evaluation 4 to 7 years after randomization showed that the intervention caused families to move to better neighborhoods with lower poverty and crime rates and increased social ties with more affluent people.8 Significant reductions in psychological distress and depression were also found among adolescent girls in the intervention group vs the control group but increased behavior problems were found among adolescent boys in the intervention group vs the control group.9- 11 Given the importance of these sex differences, clinically significant mental disorders were included in a long-term (10-15 years after randomization) follow-up assessment. Prior long-term follow-up reports documented effects on improved neighborhood characteristics,12,13 reduced adult extreme obesity and diabetes,14 and improved adult subjective well-being.13 No detectable effects on economic self-sufficiency were found.13 Although long-term evaluation found significantly reduced psychological distress among adolescent girls,15 measures of mental disorders were not examined in previous reports. The primary objectives of the Moving to Opportunity study were to move families to lower-poverty neighborhoods and increase educational achievement and economic self-sufficiency. Mental disorders were measured as post hoc outcomes. The current report presents the first exploratory analyses evaluating long-term associations of housing mobility randomization with mental disorders among participants who were in early childhood at randomization and adolescence at follow-up. Creation-Date: 2014 Publication-Status: Published in JAMA File-URL: http://dash.harvard.edu/bitstream/handle/1/34309063/17122227.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34309063 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia D. Author-Name: Katz, Lawrence F. Title: The Most Egalitarian of All Professions: Pharmacy and the Evolution of a Family-Friendly Occupation Abstract: Pharmacy has become a female-majority profession that is highly remunerated with a small gender earnings gap and low earnings dispersion relative to other occupations. We sketch a labor market framework based on the theory of equalizing differences to integrate and interpret our empirical findings on earnings, hours of work, and the part-time work wage penalty for pharmacists. Using extensive surveys of pharmacists for 2000, 2004, and 2009 as well as samples from the American Community Surveys and the Current Population Surveys, we explore the gender earnings gap, the penalty to part-time work, labor force persistence, and the demographics of pharmacists relative to other college graduates. We address why the substantial entrance of women into the profession was associated with an increase in their earnings relative to male pharmacists. We conclude that the changing nature of pharmacy employment with the growth of large national pharmacy chains and hospitals and the related decline of independent pharmacies played key roles in the creation of a more family-friendly, female-friendly pharmacy profession. The position of pharmacist is probably the most egalitarian of all U.S. professions today. Creation-Date: 2015 Publication-Status: Published in Journal of Labor Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/17368603/41480479.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:17368603 Template-Type: ReDIF-Paper 1.0 Author-Name: Laibson, David I. Title: Why Don't Present-Biased Agents Make Commitments? Abstract: Present-biased preferences engender a demand for commitment. Commitment is a problematic prediction, since we see so little of it. I quantitatively explore the reasons for the "missing" commitment. Extending the procrastination model in Carroll et al. (2009), I show how equilibrium commitment is related to (i) the standard deviation of the opportunity cost of time, (ii) the cost of delay, (iii) the degree of partial naivete, and (iv) the direct cost of commitment. The calibrated model demonstrates that the perceived benefits of commitment are often overwhelmed by the costs of commitment. Demand for commitment is a special case rather than the general case. Creation-Date: 2015 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/22583328/50641591.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:22583328 Template-Type: ReDIF-Paper 1.0 Author-Name: Marglin, Stephen Alan Author-Name: Banuri, Tariq Title: What Should a Sustainable Economy Sustain? The case for a just economy Abstract: Stephen Marglin and Tariq Banuri argue that the debate between neoclassical and ecological economists over the limits to growth cannot be resolved by appealing to their empirical analyses, but by using the framework of environmental justice. Creation-Date: 2013 Publication-Status: Published in Development File-URL: http://dash.harvard.edu/bitstream/handle/1/25658991/Post-Print%20Banuri-Marglin.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:25658991 Template-Type: ReDIF-Paper 1.0 Author-Name: Watson, Mark W. Author-Name: Stock, James H. Title: Estimating turning points using large data sets Abstract: Dating business cycles entails ascertaining economy-wide turning points. Broadly speaking, there are two approaches in the literature. The first approach, which dates to Burns and Mitchell (1946), is to identify turning points individually in a large number of series, then to look for a common date that could be called an aggregate turning point. The second approach, which has been the focus of more recent academic and applied work, is to look for turning points in a few, or just one, aggregate. This paper examines these two approaches to the identification of turning points. We provide a nonparametric definition of a turning point (an estimand) based on a population of time series. This leads to estimators of turning points, sampling distributions, and standard errors for turning points based on a sample of series. We consider both simple random sampling and stratified sampling. The empirical part of the analysis is based on a data set of 270 disaggregated monthly real economic time series for the US, 1959–2010. Creation-Date: 2014 Publication-Status: Published in Journal of Econometrics File-URL: http://dash.harvard.edu/bitstream/handle/1/33192198/Estimating%20Turning%20Points.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33192198 Template-Type: ReDIF-Paper 1.0 Author-Name: Freeman, Richard Barry Author-Name: Huang, Wei Title: Collaborating with People Like Me: Ethnic Coauthorship within the United States Abstract: By examining the ethnic identity of authors in over 2.5 million scientific papers written by US-based authors from 1985 to 2008, we find that persons of similar ethnicity coauthor together more frequently than predicted by their proportion among authors. The greater homophily is associated with publication in lower-impact journals and with fewer citations. Meanwhile, papers with authors in more locations and with longer reference lists get published in higher-impact journals and receive more citations. These findings suggest that diversity in inputs by author ethnicity, location, and references leads to greater contributions to science as measured by impact factors and citations. Creation-Date: 2015 Publication-Status: Published in Journal of Labor Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/20453995/Collaborating%20w-People%20Like%20Me_Huang-and-Freeman_final-MS_Sept2014.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:20453995 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Y. Author-Name: Cocco, Joao F. Title: A Model of Mortgage Default Abstract: In this paper, we solve a dynamic model of households' mortgage decisions incorporating labor income, house price, inflation, and interest rate risk. Using a zero-profit condition for mortgage lenders, we solve for equilibrium mortgage rates given borrower characteristics and optimal decisions. The model quantifies the effects of adjustable versus fixed mortgage rates, loan-to-value ratios, and mortgage affordability measures on mortgage premia and default. Mortgage selection by heterogeneous borrowers helps explain the higher default rates on adjustable-rate mortgages during the recent U.S. housing downturn, and the variation in mortgage premia with the level of interest rates. Creation-Date: 2015 Publication-Status: Published in The Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/30758219/mortdefault13022014.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/30758219/mortdefault13022014.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30758219 Template-Type: ReDIF-Paper 1.0 Author-Name: Costa, Dora Author-Name: Goldin, Claudia D. Author-Name: Margo, Robert A. Title: In Memorium: Robert W. Fogel Abstract: Creation-Date: 2013 Publication-Status: Published in J. Econ. Hist. File-URL: http://dash.harvard.edu/bitstream/handle/1/22856737/Fogel_JEH.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:22856737 Template-Type: ReDIF-Paper 1.0 Author-Name: Obermeyer, Ziad Author-Name: Makar, Maggie Author-Name: Abujaber, Samer Author-Name: Dominici, Francesca Author-Name: Block, Susan Dale Author-Name: Cutler, David M. Title: Association Between the Medicare Hospice Benefit and Health Care Utilization and Costs for Patients With Poor-Prognosis Cancer Abstract: Importance More patients with cancer use hospice currently than ever before, but there are indications that care intensity outside of hospice is increasing, and length of hospice stay decreasing. Uncertainties regarding how hospice affects health care utilization and costs have hampered efforts to promote it. Objective To compare utilization and costs of health care for patients with poor-prognosis cancers enrolled in hospice vs similar patients without hospice care. Design, Setting, and Participants Matched cohort study of patients in hospice and nonhospice care using a nationally representative 20% sample of Medicare fee-for-service beneficiaries who died in 2011. Patients with poor-prognosis cancers (eg, brain, pancreatic, metastatic malignancies) enrolled in hospice before death were matched to similar patients who died without hospice care. Exposures Period between hospice enrollment and death for hospice beneficiaries, and the equivalent period of nonhospice care before death for matched nonhospice patients. Main Outcomes and Measures Health care utilization including hospitalizations and procedures, place of death, cost trajectories before and after hospice start, and cumulative costs, all during the last year of life. Results Among 86 851 patients with poor-prognosis cancers, median time from first poor-prognosis diagnosis to death was 13 months (interquartile range [IQR], 3-34), and 51 924 patients (60%) entered hospice before death. Matching yielded a cohort balanced on age, sex, region, time from poor-prognosis diagnosis to death, and baseline care utilization, with 18 165 patients in the hospice group and 18 165 in the nonhospice group. After matching, 11% of nonhospice and 1% of hospice beneficiaries who had cancer-directed therapy after exposure were excluded. Median hospice duration was 11 days. After exposure, nonhospice beneficiaries had significantly more hospitalizations (65% [95% CI, 64%-66%], vs hospice with 42% [95% CI, 42%-43%]; risk ratio, 1.5 [95% CI, 1.5-1.6]), intensive care (36% [95% CI, 35%-37%], vs hospice with 15% [95% CI, 14%-15%]; risk ratio, 2.4 [95% CI, 2.3-2.5]), and invasive procedures (51% [95% CI, 50%-52%], vs hospice with 27% [95% CI, 26%-27%]; risk ratio, 1.9 [95% CI, 1.9-2.0]), largely for acute conditions not directly related to cancer; and 74% (95% CI, 74%-75%) of nonhospice beneficiaries died in hospitals and nursing facilities compared with 14% (95% CI, 14%-15%) of hospice beneficiaries. Costs for hospice and nonhospice beneficiaries were not significantly different at baseline, but diverged after hospice start. Total costs over the last year of life were $71 517 (95% CI, $70 543-72 490) for nonhospice and $62 819 (95% CI, $62 082-63 557) for hospice, a statistically significant difference of $8697 (95% CI, $7560-$9835). Conclusions and Relevance In this sample of Medicare fee-for-service beneficiaries with poor-prognosis cancer, those receiving hospice care vs not (control), had significantly lower rates of hospitalization, intensive care unit admission, and invasive procedures at the end of life, along with significantly lower total costs during the last year of life. Creation-Date: 2014 Publication-Status: Published in JAMA File-URL: http://dash.harvard.edu/bitstream/handle/1/22856726/JAMA%20Final%20Association%20Medicare%20hospice%20benefit%20utilization%20and%20costs.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:22856726 Template-Type: ReDIF-Paper 1.0 Author-Name: Barndorff-Nielsen, Ole E. Author-Name: Lunde, Asger Author-Name: Shephard, Neil Author-Name: Veraart, Almut E.D. Title: Integer-valued trawl processes: A class of stationary infinitely divisible processes Abstract: This paper introduces a new continuous-time framework for modelling serially correlated count and integer-valued data. The key component in our new model is the class of integer-valued trawl processes, which are serially correlated, stationary, infinitely divisible processes. We analyse the probabilistic properties of such processes in detail and, in addition, study volatility modulation and multivariate extensions within the new modelling framework. Moreover, we describe how the parameters of a trawl process can be estimated and obtain promising estimation results in our simulation study. Finally, we apply our new modelling framework to high-frequency financial data. Creation-Date: 2014 Publication-Status: Published in Scandinavian Journal of Statistics File-URL: http://dash.harvard.edu/bitstream/handle/1/34650304/GeneralTrawlPaper.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34650304 Template-Type: ReDIF-Paper 1.0 Author-Name: Freeman, Richard Barry Title: Knowledge, Knowledge … Knowledge for My Economy Abstract: The creation of S&T knowledge and development of S&T- based innovation has spread worldwide from traditionally advanced countries to traditionally developing countries, often under the direction of governments. Korea is an exemplar in this new locus. Korea's burst in Science and Technology during the last three decades has made Korea a substantive player in the global production of S&T knowledge and its application to business. Although Korea still trails the US and other top countries in the quality of research, it has leaped from its 1980s standing as bit player in the knowledge economy to being among the leaders in the early 21st Century. This paper shows that Korea’s advance benefited from its active participation in the global market in higher education, in international research collaborations, and its close ties to the U.S. Korea’s experience offers lessons for other countries who seek to advance by becoming knowledge economies. Korea proves that a developing country can gain comparative advantage in knowledge production and use; that government policy can stimulate such a development; and that openness to the world of higher education and research is the best way to move forward and overcome the middle income trap. Creation-Date: 2015 Publication-Status: Published in KDI Journal of Economic Policy File-URL: http://dash.harvard.edu/bitstream/handle/1/33496270/Knowledge%20-%20Knowledge%20for%20My%20Economy_KDI-Journal_vol-37_2015.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33496270 Template-Type: ReDIF-Paper 1.0 Author-Name: Freeman, Richard Barry Title: Why Do We Work More Than Keynes Expected? Abstract: Creation-Date: 2008 Publication-Status: Published in Revisiting Keynes File-URL: http://dash.harvard.edu/bitstream/handle/1/34310002/Why-Do-We-Work-More-Keynes-Expected_MS-for-Pecchi-Piga-VOL-4-07_0.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34310002 Template-Type: ReDIF-Paper 1.0 Author-Name: Noureldin, Diaa Author-Name: Shephard, Neil Author-Name: Sheppard, Kevin Title: Multivariate rotated ARCH models Abstract: This paper introduces a new class of multivariate volatility models which is easy to estimate using covariance targeting, even with rich dynamics. We call them rotated ARCH (RARCH) models. The basic structure is to rotate the returns and then to Öt them using a BEKK-type parameterization of the time-varying covariance whose long-run covariance is the identity matrix. The extension to DCC-type parameterizations is given, introducing the rotated conditional correlation (RCC) model. Inference for these models is computationally attractive, and the asymptotics are standard. The techniques are illustrated using data on some DJIA stocks. Creation-Date: 2014 Publication-Status: Published in Journal of Econometrics File-URL: http://dash.harvard.edu/bitstream/handle/1/34650305/MultivariateRotate_Diaa.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34650305 Template-Type: ReDIF-Paper 1.0 Author-Name: Tabellini, Guido Author-Name: Alesina, Alberto Francesco Author-Name: Campante, Filipe Robin Title: Why Is Fiscal Policy Often Procyclical? Abstract: Fiscal policy is procyclical in many developing countries. We explain this policy failure with a political agency problem. Procyclicality is driven by voters who seek to “starve the Leviathan” to reduce political rents. Voters observe the state of the economy but not the rents appropriated by corrupt governments. When they observe a boom, voters optimally demand more public goods or lower taxes, and this induces a procyclical bias in fiscal policy. The empirical evidence is consistent with this explanation: Procyclicality of fiscal policy is more pronounced in more corrupt democracies. Creation-Date: 2008 Publication-Status: Published in Journal of the European Economic Association File-URL: http://dash.harvard.edu/bitstream/handle/1/34729976/248206/alesinacampantetabellini.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34729976 Template-Type: ReDIF-Paper 1.0 Author-Name: Marglin, Stephen Alan Title: Why Is So Little Left of the Left? Abstract: Creation-Date: 1992 Publication-Status: Published in Z Papers File-URL: http://dash.harvard.edu/bitstream/handle/1/25055385/Why_Is_So_Little_Left_of_the_Left_0.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:25055385 Template-Type: ReDIF-Paper 1.0 Author-Name: Jasso, Guillermina Author-Name: Wadhwa, Vivek Author-Name: Gereffi, Gary Author-Name: Rissing, Ben Author-Name: Freeman, Richard Barry Title: How Many Highly Skilled Foreign-Born are Waiting in Line for U.S. Legal Permanent Residence? Abstract: While the United States welcomes foreign-born students and trainees and, less warmly, temporary workers such as H-1B visa holders, it places an array of requirements, obstacles, and delays upon persons who would like to make the U.S. their permanent home. The number of people in the queue for legal permanent residence (LPR) is, however, difficult to ascertain. This paper estimates the number of highly skilled foreign-born persons waiting for LPR via the three main employment-based categories, separately by whether they are living in the United States or abroad, as well as the number of family members. We find that as of the end of FY 2006 there were about half a million employment-based principals awaiting LPR in the United States, together with over half a million family members, plus over 125 thousand principals and family members waiting abroad. These numbers dwarf the visas available annually – 120,120 plus any not used in the family preferences – suggesting that the long delays in gaining legal permanent residence are a visa number problem, not an administrative processing problem, as many believe. The backlog thus cannot be eliminated without a large change in public policy. The delay in gaining legal permanent residence could contribute to the decision of many highly skilled foreign-born to leave the United States. Creation-Date: 2010 Publication-Status: Published in International Migration Review File-URL: http://dash.harvard.edu/bitstream/handle/1/32095399/How%20Many%20Highly%20Skilled%20Foreign%20Born%20Waiting%20in%20Line_w-Jasso-Wadhwa-Rissing_IMR_summer2010.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:32095399 Template-Type: ReDIF-Paper 1.0 Author-Name: Freeman, Richard Barry Author-Name: Gelber, Alexander M. Title: Prize Structure and Information in Tournaments: Experimental Evidence Abstract: This paper examines behavior in a tournament in which we vary the tournament prize structure and the available information about participants’ skill at the task of solving mazes. The number of solved mazes is lowest when payments are independent of performance; higher when a single, large prize is given; and highest when multiple, differentiated prizes are given. This result is strongest when we inform participants about the number of mazes they and others solved in a pre-tournament round. Some participants reported that they solved more mazes than they actually solved, and this misreporting also peaked with multiple differentiated prizes. Creation-Date: 2010 Publication-Status: Published in American Economic Journal: Applied Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/34310817/Prize%20Structure%20and%20Information%20in%20Tournaments_w-Gelber_AmerEconJournal_-Jan2010.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34310817 Template-Type: ReDIF-Paper 1.0 Author-Name: Freeman, Richard Barry Title: What Can Latin America Learn from China's Labour Market Reforms? Abstract: Analysts typically see labour institutions in advanced countries as defining the ways in which developing economies can organize their labour markets. International agencies often pose the choice as one between a US-style decentralized market-driven system, or a European Union (EU)-style system in which industrial or regional unions bargain collectively with employer federations to produce agreements that governments may extend to all firms and workers in the sector. This chapter argues that developing country labour markets differ so much from those in advanced countries that developing countries can benefit more from the experience the labour markets in other developing countries rather than from the labour markets of advanced economies. The range and performance of labour institutions among advanced and developing countries is examined. Then China’s labour institutions and labour market reforms are compared to Latin American institutions and reforms. Creation-Date: 2014 Publication-Status: Published in Falling Inequality in Latin America File-URL: http://dash.harvard.edu/bitstream/handle/1/34548955/What_Can_Latin_Amer_Learn_from_Chinas_Labor_Mkt_Reforms_in_Fall_Inequality_in_Latin_Amer_Chap13_Oxford_VOL__2014.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/34548955/What%20Can%20Latin-Amer%20Learn%20from%20China%20LM%20Reforms_MS--DASH_8-14-13.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34548955 Template-Type: ReDIF-Paper 1.0 Author-Name: Mankiw, N. Gregory Title: Spreading the Wealth Around: Reflections Inspired by Joe the Plumber Abstract: This essay discusses the policy debate concerning optimal taxation and the distribution of income. It begins with a brief overview of trends in income inequality, the leading hypothesis to explain these trends, and the distribution of the tax burden. It then considers the normative question of how the tax system should be designed. The conventional utilitarian framework is found to be wanting, as it leads to prescriptions that conflict with many individuals’ moral intuitions. The essay then explores an alternative normative framework, dubbed the Just Deserts Theory, according to which an individual’s compensation should reflect his or her social contribution. Creation-Date: 2010 Publication-Status: Published in Eastern Economic Journal File-URL: http://dash.harvard.edu/bitstream/handle/1/34310083/w15846.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34310083 Template-Type: ReDIF-Paper 1.0 Author-Name: Freeman, Richard Barry Title: It's financialization! Abstract: Wall Street's 2007–09 implosion and the ensuing global recession highlight the crucial relationship between finance and the economy. Governments, international agencies and experts had failed to detect rising risk levels in the deregulated financial sector. The author outlines the resulting huge cost in lost jobs and likely reductions in public goods and growth, as economies restabilize budgets after paying for massive bailouts and stimulus packages. Specifically, he assesses the role of monetary incentives for rent-seeking in the decisions that led to the crisis. Finally, he makes the case for radical reform of the institutions linking finance and the real economy. Creation-Date: 2010 Publication-Status: Published in International Labour Review File-URL: http://dash.harvard.edu/bitstream/handle/1/34548957/Its%20Financialization_IntlLabourReview-Vol149_2010.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34548957 Template-Type: ReDIF-Paper 1.0 Author-Name: Anderson, Ross Author-Name: Ashlagi, Itai Author-Name: Gamarnik, David Author-Name: Roth, Alvin E. Title: Finding long chains in kidney exchange using the traveling salesman problem Abstract: There are currently more than 100,000 patients on the waiting list in the United States for a kidney transplant from a deceased donor. To address this shortage, kidney exchange programs allow patients with living incompatible donors to exchange donors through cycles and chains initiated by altruistic nondirected donors. To determine which exchanges will take place, kidney exchange programs use algorithms for maximizing the number of transplants under constraints about the size of feasible exchanges. This problem is NP-hard, and algorithms previously used were unable to optimize when chains could be long. We developed two algorithms that use integer programming to solve this problem, one of which is inspired by the traveling salesman, that together can find optimal solutions in practice. Creation-Date: 2015 Publication-Status: Published in Proceedings of the National Academy of Sciences File-URL: http://dash.harvard.edu/bitstream/handle/1/30830063/pnas.201421853.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/30830063/pnas.201421853.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30830063 Template-Type: ReDIF-Paper 1.0 Author-Name: Summers, Lawrence H. Author-Name: Waldmann, Robert J. Author-Name: De Long, J. Bradford Author-Name: Shleifer, Andrei Title: The Size and Incidence of the Losses from Noise Trading Abstract: Recent empirical research has identified a significant amount of volatility in stock prices that cannot be easily explained by changes in fundamentals; one interpretation is that asset prices respond not only to news but also to irrational "noise trading." We assess the welfare effects and incidence of such noise trading using an overlapping-generations model that gives investors short horizons. We find that the additional risk generated by noise trading can reduce the capital stock and consumption of the economy, and we show that part of that cost may be borne by rational investors. We conclude that the welfare costs of noise trading may be large if the magnitude of noise in aggregate stock prices is as large as suggested by some of the recent empirical literature on the excess volatility of the market. Creation-Date: 1989 Publication-Status: Published in The Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/27693804/w2875.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27693804 Template-Type: ReDIF-Paper 1.0 Author-Name: Balas, Aron Author-Name: La Porta, Rafael Author-Name: Lopez-de-Silanes, Florencio Author-Name: Shleifer, Andrei Title: The Divergence of Legal Procedures Abstract: Djankov et al. (2003a) propose and measure for 109 countries in the year 2000 an index of formalism of legal procedure for two simple disputes: eviction of a non-paying tenant and collection of a bounced check. For a sub-sample of 40 countries, we compute this index every year starting in 1950, which allows us to study the evolution of legal rules. We find that between 1950 and 2000, the formalism of legal procedure did not converge, and possibly diverged, between common law and French civil law countries. At least in this specific area of law, the results are inconsistent with the hypothesis that national legal systems are converging, and support the view that legal origins exert long lasting influence on legal rules. Creation-Date: 2009 Publication-Status: Published in American Economic Journal: Economic Policy File-URL: http://dash.harvard.edu/bitstream/handle/1/27867131/w13809.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27867131 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Olszewski, Wojciech Title: Repeated games with asynchronous monitoring of an imperfect signal Abstract: We consider a long-run player facing a sequence of short-run opponents who receive noisy signals of the long-run player’s past actions. We modify the standard, synchronous-action, model by supposing that players observe an underlying public signal of the opponent’s actions at random and privately known times. In one modification, the public signals are Poisson events and either the observations occur within a small epsilon time interval or the observations have exponential waiting times. In the second modification, the underlying signal is the position of a diffusion process. We show that in the Poisson cases the high-frequency limit is the same as in the Fudenberg and Levine (2007, 2009) study of limits of high-frequency public signals, but that the limits can differ when the signals correspond to adiffusion. Creation-Date: 2011 Publication-Status: Published in Games and Economic Behavior File-URL: http://dash.harvard.edu/bitstream/handle/1/27755311/Repeated_Games_with_Asynchronous.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/27755311/Repeated_Games_with_Asynchronous.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27755311 Template-Type: ReDIF-Paper 1.0 Author-Name: Takahashi, Satoru Author-Name: Fudenberg, Drew Title: Heterogeneous beliefs and local information in stochastic fictitious play Abstract: Stochastic fictitious play (SFP) assumes that agents do not try to influence the future play of their current opponents, an assumption that is justified by appeal to a setting with a large population of players who are randomly matched to play the game. However, the dynamics of SFP have only been analyzed in models where all agents in a player role have the same beliefs. We analyze the dynamics of SFP in settings where there is a population of agents who observe only outcomes in their own matches and thus have heterogeneous beliefs. We provide conditions that ensure that the system converges to a state with homogeneous beliefs, and that its asymptotic behavior is the same as with a single representative agent in each player role. Creation-Date: 2011 Publication-Status: Published in Games and Economic Behavior File-URL: http://dash.harvard.edu/bitstream/handle/1/27755310/Heterogeneous_Beliefs.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/27755310/Heterogeneous_Beliefs.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27755310 Template-Type: ReDIF-Paper 1.0 Author-Name: Kaufmann, Robert K. Author-Name: Kauppi, Heikki Author-Name: Stock, James H. Title: Does temperature contain a stochastic trend? Evaluating conflicting statistical results Abstract: We evaluate the claim by Gay et al. (Clim Change 94:333–349, 2009) that “surface temperature can be better described as a trend stationary process with a one-time permanent shock” than efforts by Kaufmann et al. (Clim Change 77:249–278, 2006) to model surface temperature as a time series that contains a stochastic trend that is imparted by the time series for radiative forcing. We test this claim by comparing the in-sample forecast generated by the trend stationary model with a one-time permanent shock to the in-sample forecast generated by a cointegration/error correction model that is assumed to be stable over the 1870– 2000 sample period. Results indicate that the in-sample forecast generated by the cointegration/error correction model is more accurate than the in-sample forecast generated by the trend stationary model with a one-time permanent shock. Furthermore, Monte Carlo simulations of the cointegration/error correction model generate time series for temperature that are consistent with the trend-stationary-with-a-break result generated by Gay et al. (Clim Change 94:333–349, 2009), while the time series for radiative forcing cannot be modeled as trend stationary with a one-time shock. Based on these results, we argue that modeling surface temperature as a time series that shares a stochastic trend with radiative forcing offers the possibility of greater insights regarding the potential causes of climate change and efforts to slow its progression. Creation-Date: 2009 Publication-Status: Published in Climatic Change File-URL: http://dash.harvard.edu/bitstream/handle/1/33201420/TemperatureStochasticTrend.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/33201420/TemperatureStochasticTrend.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33201420 Template-Type: ReDIF-Paper 1.0 Author-Name: Antras, Pol Title: International Organizations and Trade Abstract: The three central primitives of international trade theory are consumer preferences, factor endowments, and the production technologies that allow firms to transform factors of production into consumer goods. A limitation of traditional trade theory, however, is that the specification of technology treats the mapping between factors of production and final goods as a black box. In practice, the decisions of agents in organizations determine this mapping. Recently, international trade economists have incorporated insights from the field of Organizational Economics into their theories, thereby shedding new light on the mapping between factors of production and consumer goods. This research agenda is important for at least three reasons. First, it provides an explanation for phenomena that standard trade theory is unable to explain (such as the boundaries and hierarchical structure of multinational firms, or the determinants of intrafirm trade). Second, this literature illustrates how considering the endogenous response of organizations to changes in the economic environment (such as falling trade costs, declining communication costs, or improvements in contract enforcement) can dramatically affect or even overturn some predictions of standard models. Third, this line of models leads to a revision of key aspects of the design of efficient international trade agreements. What follows is a brief account of some of my own contributions to the literature on international trade and organizations. In my joint survey article with Esteban Rossi-Hansberg,1 we have attempted to provide a more balanced overview of this literature. Creation-Date: 2010 Publication-Status: Published in NBER Reporter File-URL: http://dash.harvard.edu/bitstream/handle/1/27231633/NBERReporter.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/27231633/NBERReporter.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27231633 Template-Type: ReDIF-Paper 1.0 Author-Name: Alesina, Alberto Francesco Author-Name: Giuliano, Paola Title: Family Ties Abstract: Creation-Date: 2014 Publication-Status: Published in Handbook of Economic Growth File-URL: http://dash.harvard.edu/bitstream/handle/1/34330186/familyties_march2013.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34330186 Template-Type: ReDIF-Paper 1.0 Author-Name: Alesina, Alberto Francesco Author-Name: Ichino, Andrea Author-Name: Karabarbounis, Loukas Title: Gender-Based Taxation and the Division of Family Chores Abstract: Gender-Based Taxation (GBT) satisfies Ramsey’s rule of optimality because it taxes at a lower rate the more elastic labor supply of women. This holds when different elasticities between men and women are taken as exogenous. We study GBT in a model in which labor supply elasticities emerge endogenously from the bargained allocation of goods and time in the family. We explore the cases of superior bargaining power for men, higher men wages and higher women productivity in home duties. In all cases, men commit to a career in the market and take less home duties than women. As a result, their market work becomes less substitutable to home duty and their labor supply responds less to changes in the market wage. When society can resolve its distributional concerns efficiently with gender-specific lump sum transfers, GBT with higher marginal tax rates on (single and married) men is optimal. In addition, GBT affects the intrafamily bargaining, leading to a more balanced allocation of labor market outcomes across spouses and a smaller gender gap in labor supply elasticities. Creation-Date: 2011 Publication-Status: Published in American Economic Journal: Economic Policy File-URL: http://dash.harvard.edu/bitstream/handle/1/30752834/gender-basedtaxationsept2010.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30752834 Template-Type: ReDIF-Paper 1.0 Author-Name: Alesina, Alberto Francesco Author-Name: La Ferrara, Eliana Title: A Test of Racial Bias in Capital Sentencing Abstract: We collect a new dataset on capital punishment in the United States and we propose a test of racial bias based upon patterns of sentence reversals. We model the courts as minimizing type I and II errors. If trial courts were unbiased, conditional on defendant’s race the error rate should be independent of the victim’s race. Instead we uncover 3 and 9 percentage points higher reversal rates in direct appeal and habeas corpus cases, respectively, against minority defendants who killed whites. The pattern for white defendants is opposite but not statistically significant. This bias is confined to Southern states. Creation-Date: 2014 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/30752840/racial_bias_in_capital_sentencing_2014_aer.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30752840 Template-Type: ReDIF-Paper 1.0 Author-Name: Alesina, Alberto Francesco Author-Name: Giuliano, Paola Title: Family Ties and Political Participation Abstract: We establish an inverse relationship between family ties and political participation, such that the more individuals rely on the family as a provider of services, insurance, transfer of resources, the lower is one's civic engagement and political participation. We also show that strong family ties appear to be a substitute for generalized trust, rather than a complement to it. These three constructs-civic engagement, political participation, and trust- are part of what is known as social capital; therefore, in this paper, we contribute to the investigation of the origin and evolution of social capital. We establish these results using within-country evidence and looking at the behavior of immigrants from various countries in 32 different destination places. Creation-Date: 2011 Publication-Status: Published in Journal of the European Economic Association File-URL: http://dash.harvard.edu/bitstream/handle/1/30752839/familytiesandpoliticalparticipation.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30752839 Template-Type: ReDIF-Paper 1.0 Author-Name: Kolesar, Michal Author-Name: Chetty, Raj Author-Name: Friedman, John Author-Name: Glaeser, Edward Ludwig Author-Name: Imbens, Guido Title: Identification and Inference With Many Invalid Instruments Abstract: We study estimation and inference in settings where the interest is in the effect of a potentially endogenous regressor on some outcome. To address the endogeneity we exploit the presence of additional variables. Like conventional instrumental variables, these variables are correlated with the endogenous regressor. However, unlike conventional instrumental variables, they also have direct effects on the outcome, and thus are “invalid” instruments. Our novel identifying assumption is that the direct effects of these invalid instruments are uncorrelated with the effects of the instruments on the endogenous regressor. We show that in this case the limited-information-maximum-likelihood (liml) estimator is no longer consistent, but that a modification of the bias-corrected two-stage-least-squares (tsls) estimator is consistent. We also show that conventional tests for over-identifying restrictions, adapted to the many instruments setting, can be used to test for the presence of these direct effects. We recommend that empirical researchers carry out such tests and compare estimates based on liml and the modified version of bias-corrected tsls. We illustrate in the context of two applications that such practice can be illuminating, and that our novel identifying assumption has substantive empirical content. Creation-Date: 2015 Publication-Status: Published in Journal of Business & Economic Statistics File-URL: http://dash.harvard.edu/bitstream/handle/1/27769098/invalid_instruments.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27769098 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Bechtold, Stefan Author-Name: Cassar, Lea Author-Name: Herz, Holger Title: The Causal Effects of Competition on Innovation: Experimental Evidence Abstract: In this paper, we design two laboratory experiments to analyze the causal effects of competition on step-by-step innovation. Innovations result from costly R&D investments and move technology up one step. Competition is inversely measured by the ex post rents for firms that operate at the same technological level, i.e. for neck-and-neck firms. First, we find that increased competition leads to a significant increase in R&D investments by neck-and-neck firms. Second, increased competition decreases R&D investments by firms that are lagging behind, in particular if the time horizon is short. Third, we find that increased competition affects industry composition by reducing the fraction of sectors where firms are neck-and-neck. All these results are consistent with the predictions of step-by-step innovation models. Creation-Date: 2014 Publication-Status: Published in Nber Working Paper Series File-URL: http://dash.harvard.edu/bitstream/handle/1/27738688/causal_effects_of_competition.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27738688 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Akcigit, Ufuk Author-Name: Howitt, Peter Title: What Do We Learn From Schumpeterian Growth Theory? Abstract: Schumpeterian growth theory has "operationalized" Schumpeter''s notion of creative destruction by developing models based on this concept. These models shed light on several aspects of the growth process which could not be properly addressed by alternative theories. In this survey, we focus on four important aspects, namely: (i) the role of competition and market structure; (ii) firm dynamics; (iii) the relationship between growth and development with the notion of appropriate growth institutions; (iv) the emergence and impact of long-term technological waves. In each case Schumpeterian growth theory delivers predictions that distinguish it from other growth models and which can be tested using micro data. Creation-Date: 2013 Publication-Status: Published in Nber Working Paper Series File-URL: http://dash.harvard.edu/bitstream/handle/1/27755233/what_do_we_learn_0.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27755233 Template-Type: ReDIF-Paper 1.0 Author-Name: Alesina, Alberto Francesco Author-Name: Zhuravskaya, Ekaterina Title: Segregation and the Quality of Government in a Cross Section of Countries Abstract: We provide a new compilation of data on ethnic, linguistic, and religious composition at the subnational level for a large number of countries. Using these data, we measure segregation of groups within the country. To overcome the endogeneity problem that arises because of mobility and endogenous internal borders, we construct an instrument for segregation. We find that more ethnically and linguistically segregated countries, i.e., those where groups live more spatially separately, have a lower quality of government; there is no relationship between religious segregation and governance. Trust is an important channel of influence; it is lower in more segregated countries. Creation-Date: 2011 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/30752835/segregationandthequalityofgovernmentinacross-sectionofcountries.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30752835 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Howitt, Peter Author-Name: Prantl, Susanne Title: Patent rights, product market reforms, and innovation Abstract: In this paper, we provide empirical evidence to the effect that strong patent rights may complement competition-increasing product market reforms in fostering innovation. First, we find that the product market reform induced by the large-scale internal market reform of the European Union in 1992 enhanced, on average, innovative investments in manufacturing industries of countries with strong patent rights since the pre-sample period, but not so in industries of countries with weaker patent rights. Second, the positive response to the product market reform is more pronounced in industries where, in general, innovators tend to value patent protection higher than in other industries, except for the manufacture of electrical and optical equipment. The observed complementarity between competition and patent protection can be rationalized using a Schumpeterian growth model with step-by-step innovation. In such a model, better patent protection prolongs the period over which a firm that successfully escapes competition by innovating, actually enjoys higher monopoly rents from its technological upgrade. Creation-Date: 2015 Publication-Status: Published in Journal of Economic Growth File-URL: http://dash.harvard.edu/bitstream/handle/1/27755230/patent_rights.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27755230 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Griffith, Rachel Author-Name: Howitt, Peter Title: Vertical Integration and Competition Abstract: Creation-Date: 2006 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/34330170/000282806777211595.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34330170 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Akcigit, Ufuk Author-Name: Fernández-Villaverde, Jesús Title: Optimal Capital Versus Labor Taxation with Innovation-Led Growth Abstract: Chamley (1986) and Judd (1985) showed that, in a standard neoclassical growth model with capital accumulation and infinitely lived agents, either taxing or subsidizing capital cannot be optimal in the steady state. In this paper, we introduce innovation-led growth into the Chamley-Judd framework, using a Schumpeterian growth model where productivity-enhancing innovations result from profit-motivated R&D investment. Our main result is that, for a given required trend of public expenditure, a zero tax/subsidy on capital becomes suboptimal. In particular, the higher the level of public expenditure and the income elasticity of labor supply, the less should capital income be subsidized and the more it should be taxed. Not taxing capital implies that labor must be taxed at a higher rate. This in turn has a detrimental effect on labor supply and therefore on the market size for innovation. At the same time, for a given labor supply, taxing capital also reduces innovation incentives, so that for low levels of public expenditure and/or labor supply elasticity it becomes optimal to subsidize capital income. Creation-Date: 2012 Publication-Status: Published in Nber Working Paper Series File-URL: http://dash.harvard.edu/bitstream/handle/1/27755236/optimal_capital.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27755236 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Dechezleprêtre, Antoine Author-Name: Hemous, David Author-Name: Martin, Ralf Author-Name: Van Reenen, John Title: Carbon Taxes, Path Dependency, and Directed Technical Change: Evidence from the Auto Industry Abstract: Can directed technical change be used to combat climate change? We construct new firm-level panel data on auto industry innovation distinguishing between "dirty" (internal combustion engine) and "clean" (e.g. electric and hybrid) patents across 80 countries over several decades. We show that firms tend to innovate relatively more in clean technologies when they face higher tax-inclusive fuel prices. Furthermore, there is path dependence in the type of innovation both from aggregate spillovers and from the firm's own innovation history. Using our model we simulate the increases in carbon taxes needed to allow clean to overtake dirty technologies. Creation-Date: 2016 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/27759048/SSRN-id2186325.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27759048 Template-Type: ReDIF-Paper 1.0 Author-Name: Alesina, Alberto Francesco Author-Name: Giuliano, Paola Title: Culture and Institutions Abstract: A growing body of empirical work measuring different types of cultural traits has shown that culture matters for a variety of economic outcomes. This paper focuses on one specific aspect of the relevance of culture: its relationship to institutions. We review work with a theoretical, empirical, and historical bent to assess the presence of a two-way causal effect between culture and institutions. Creation-Date: 2015 Publication-Status: Published in Journal of Economic Literature File-URL: http://dash.harvard.edu/bitstream/handle/1/27759053/cultureandinstitutions_jel_2014.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27759053 Template-Type: ReDIF-Paper 1.0 Author-Name: Alesina, Alberto Francesco Author-Name: Michalopoulos, Stelios Author-Name: Papaioannou, Ellias Title: Ethnic Inequality Abstract: This study explores the consequences and origins of between-ethnicity economic inequality across countries. First, combining satellite images of nighttime luminosity with the historical homelands of ethnolinguistic groups we construct measures of ethnic inequality for a large sample of countries. We also compile proxies of overall spatial inequality and regional inequality across administrative units. Second, we uncover a strong negative association between ethnic inequality and contemporary comparative development; the correlation is also present when we condition on regional inequality, which is itself related to under-development. Third, we investigate the roots of ethnic inequality and establish that differences in geographic endowments across ethnic homelands explain a sizable fraction of the observed variation in economic disparities across groups. Fourth, we show that ethnic-specific inequality in geographic endowments is also linked to under-development. Creation-Date: 2016 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/27759620/ethnic_inequality_dec_2014.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27759620 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Askenazy, Philippe Author-Name: Berman, Nicolas Author-Name: Cette, Gilbert Author-Name: Eymard, Laurent Title: Credit Constraints and the Cyclicality of R&D Investment: Evidence from France Abstract: We use a French firm-level panel data set over the period 1993-2004 to analyze the relationship between credit constraints and firms' R&D behavior over the business cycle. Our main results can be summarized as follows: (i) the share of R&D investment over total investment is countercyclical without credit constraints, but it becomes more procyclical as firms face tighter credit constraints; (ii) the result is magnified for firms in sectors that depend more heavily upon external finance; (iii) in more credit constrained firms, R&D investment share plummets during recessions but does not increase proportionally during upturns; (iv) average R&D investment and productivity growth are more negatively correlated with sales volatility in more credit constrained firms. Creation-Date: 2012 Publication-Status: Published in Journal of the European Economic Association File-URL: http://dash.harvard.edu/bitstream/handle/1/27759621/credit_constraints_and_cyclicality.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27759621 Template-Type: ReDIF-Paper 1.0 Author-Name: Ramadorai, Tarun Author-Name: Ranish, Benjamin Author-Name: Campbell, John Y. Title: The Impact of Regulation on Mortgage Risk: Evidence from India Abstract: We employ loan-level data on over a million loans disbursed in India between 1995 and 2010 to understand how fast-changing regulation impacted mortgage lending and risk. Our paper uses changes in regulatory treatment discontinuities associated with loan size and leverage to detect regulation-induced loan delinquencies. We also find that an acceleration in the classification of assets as nonperforming resulted in substantially lower delinquency probabilities and losses given delinquency. Creation-Date: 2015 Publication-Status: Published in American Economic Journal: Economic Policy File-URL: http://dash.harvard.edu/bitstream/handle/1/34331451/RegulatorsMortgageRisk10Sep2014.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/34331451/RegulatorsMortgageRisk10Sep2014.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34331451 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Title: State versus Private Ownership Abstract: Creation-Date: 1998 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/33077889/state_vs_private.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33077889 Template-Type: ReDIF-Paper 1.0 Author-Name: Barberis, Nicholas Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert Title: A Model of Investor Sentiment Abstract: Recent empirical research in finance has uncovered two families of pervasive regularities: underreaction of stock prices to news such as earning announcements; and overreaction of stock prices to a series of good or bad news. In this paper, we present a parsimonious model of investor sentiment--that is, of how investors form beliefs--that is consistent with the empirical findings. The model is based on psychological evidence and produces both underreaction and overreaction for a wide range of parameter values. Creation-Date: 1998 Publication-Status: Published in Journal of Financial Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/30747159/w5926.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30747159 Template-Type: ReDIF-Paper 1.0 Author-Name: Johnson, Simon Author-Name: Kaufmann, Daniel Author-Name: Shleifer, Andrei Title: The unofficial Economy in Transition Abstract: Creation-Date: 1997 Publication-Status: Published in Brookings Papers on Economic Activity File-URL: http://dash.harvard.edu/bitstream/handle/1/30728045/1997b_bpea_johnson_kaufmann_shleifer_goldman_weitzman.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30728045 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert W Title: Reversing the Soviet Economic Collapse Abstract: Creation-Date: 1991 Publication-Status: Published in Brookings Papers on Economic Activity File-URL: http://dash.harvard.edu/bitstream/handle/1/30723290/1991b_bpea_shleifer_vishny.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30723290 Template-Type: ReDIF-Paper 1.0 Author-Name: Marzilli Ericson, K. M. Author-Name: White, J. M. Author-Name: Laibson, David I. Author-Name: Cohen, J. D. Title: Money Earlier or Later? Simple Heuristics Explain Intertemporal Choices Better Than Delay Discounting Does Abstract: Heuristic models have been proposed for many domains involving choice. We conducted an out-of-sample, cross-validated comparison of heuristic models of intertemporal choice (which can account for many of the known intertemporal choice anomalies) and discounting models. Heuristic models outperformed traditional utility-discounting models, including models of exponential and hyperbolic discounting. The best-performing models predicted choices by using a weighted average of absolute differences and relative percentage differences of the attributes of the goods in a choice set. We concluded that heuristic models explain time-money trade-off choices in experiments better than do utility-discounting models. Creation-Date: 2015 Publication-Status: Published in Psychological Science File-URL: http://dash.harvard.edu/bitstream/handle/1/30367415/34371965.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30367415 Template-Type: ReDIF-Paper 1.0 Author-Name: Morck, Randall Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert W Title: The Stock Market Investments: Is the Market a Sideshow? Abstract: Creation-Date: 1990 Publication-Status: Published in Brookings Papers on Economic Activity File-URL: http://dash.harvard.edu/bitstream/handle/1/30747157/stock_market_and_investment.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30747157 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia D. Author-Name: Katz, Lawrence F. Title: The Origins of Technology-Skill Complementarity Abstract: Current concern with relationships among particular technologies, capital, and the wage structure motivates this study of the origins of technology-skill complementarity in manufacturing. We offer evidence of the existence of technology-skill and capital-skill (relative) complementarities from 1909 to 1929, and suggest that they were associated with continuous-process and batch methods and the adoption of electric motors. Industries that used more capital per worker and a greater proportion of their horsepower in the form of purchased electricity employed relatively more educated blue-collar workers in 1940 and paid their blue-collar workers substantially more from 1909 to 1929. We also infer capital-skill complementarity using the wage-bill for non-production workers and find that the relationship was as large from 1909-19 as it has been recently. Finally, we link our findings to those on the high-school movement (1910 to 1940). The rapid increase in the supply of skills from 1910 to 1940 may have prevented rising inequality with technological change. Creation-Date: 1998 Publication-Status: Published in The Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/27867130/SSRN-id1729074.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27867130 Template-Type: ReDIF-Paper 1.0 Author-Name: Roth, Alvin E. Title: The Evolution of the Labor Market for Medical Interns and Residents: A Case Study in Game Theory Abstract: The organization of the labor market for medical interns and residents underwent a number of changes before taking its present form in 1951. The record of these changes and the problems that prompted them provides an unusual opportunity to study the forces at work in markets of this kind. The present paper begins with a brief history and then presents a game-theoretic analysis to explain the orderly operation and longevity of the current market, in contrast to the turmoil that characterized various earlier short-lived attempts to organize the market. An analysis is also given of some contemporary problems facing the market. A subsidiary theme of the paper concerns the history of ideas: the problems encountered in the organization of this market, and some of the solutions arrived at, anticipated the discussion of such issues in the literature of economics and game theory. Creation-Date: 1984 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/29410143/evolut.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:29410143 Template-Type: ReDIF-Paper 1.0 Author-Name: Glaeser, Edward Ludwig Author-Name: Shleifer, Andrei Title: The Rise of the Regulatory State Abstract: During the Progressive Era at the beginning of the 20 th century, the United States replaced litigation by regulation as the principal mechanism of social control of business. To explain why this happened, we present a model of choice of law enforcement strategy between litigation and regulation based on the idea that justice can be subverted with sufficient expenditure of resources. The model suggests that courts are more vulnerable to subversion than regulators, especially in an environment of significant inequality of wealth and political power. The switch to regulation can then be seen as an efficient response to the subversion of justice by robber barons during the Gilded Age. The model makes sense of the progressive reform agenda, and of the successes and failures of alternative law enforcement strategies in different countries. Creation-Date: 2003 Publication-Status: Published in Journal of Economic Literature File-URL: http://dash.harvard.edu/bitstream/handle/1/30747197/w8650.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30747197 Template-Type: ReDIF-Paper 1.0 Author-Name: Mullainathan, Sendhil Author-Name: Shleifer, Andrei Title: The Market for News Abstract: We investigate the market for news under two assumptions: that readers hold beliefs which they like to see confirmed, and that newspapers can slant stories toward these beliefs. We show that, on the topics where readers share common beliefs, one should not expect accuracy even from competitive media: competition results in lower prices, but common slanting toward reader biases. On topics where reader beliefs diverge (such as politically divisive issues), however, newspapers segment the market and slant toward extreme positions. Yet in the aggregate, a reader with access to all news sources could get an unbiased perspective. Generally speaking, reader heterogeneity is more important for accuracy in media than competition per se. Creation-Date: 2005 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/33078973/0002828054825619.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33078973 Template-Type: ReDIF-Paper 1.0 Author-Name: La Porta, Rafael Author-Name: Lopez-De-Silanes, Florencio Author-Name: Shleifer, Andrei Title: Government Ownership of Banks Abstract: In this paper, we investigate a neglected aspect of financial systems of many countries around the world: government ownership of banks. We assemble data which establish four findings. First, government ownership of banks is large and pervasive around the world. Second, such ownership is particularly significant in countries with low levels of per capita income, underdeveloped financial systems, interventionist and inefficient governments, and poor protection of property rights. Third, government ownership of banks is associated with slower subsequent financial development. Finally, government ownership of banks is associated with lower subsequent growth of per capita income, and in particular with lower growth of productivity rather than slower factor accumulation. This evidence is inconsistent with the optimistic “development” theories of government ownership of banks common in the 1960s, but supports the more recent “political” theories of the effects of government ownership of firms. Creation-Date: 2002 Publication-Status: Published in The Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/30747188/w7620.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30747188 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia D. Author-Name: Katz, Lawrence F. Title: Human Capital and Social Capital: The Rise of Secondary Schooling in America, 1910–1940 Abstract: Creation-Date: 1999 Publication-Status: Published in Journal of Interdisciplinary History File-URL: http://dash.harvard.edu/bitstream/handle/1/29429088/002219599551868.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:29429088 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert W. Title: Liquidation Values and Debt Capacity: A Market Equilibrium Approach Abstract: We explore the determinants of liquidation values of assets, particularly focusing on the potential buyers of assets. When a firm in financial distress needs to sell assets, its industry peers are likely to be experiencing problems themselves, leading to asset sales at prices below value in best use. Such illiquidity makes assets cheap in bad times, and so ex ante is a significant private cost of leverage. We use this focus on asset buyers to explain variation in debt capacity across industries and over the business cycle, as well as the rise in U.S. corporate leverage in the 1980s. Creation-Date: 1992 Publication-Status: Published in The Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/27692663/w3618.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27692663 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia D. Title: The Role of World War II in the Rise of Women's Employment Abstract: The 1940's were a turning point in married women's labor force participation, leading many to credit World War II with spurring economic and social change. This paper uses information from two retrospective surveys, one in 1944 and another in 1951, to resolve the role of World War II in the rise of women's paid work. More than 50% of all married women working in 1950 had been employed in 1940, and more than half of the decade's new entrants joined the labor force after the war. Of those women who entered the labor force during the war, almost half exited before 1950. Employment during World War II did not enhance a woman's earnings in 1950 in a manner consistent with most hypotheses about the war. Considerable persistence in the labor force and in occupations during the turbulent 1940's is displayed for women working in 1950, similar to findings for the periods both before and after. World War Il had several significant indirect impacts on women's employment, but its direct influence appears considerably more modest. Creation-Date: 1991 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/30703972/out.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30703972 Template-Type: ReDIF-Paper 1.0 Author-Name: Murphy, Kevin M Author-Name: Shleifer, Andrei Title: Quality and Trade Abstract: Creation-Date: 1997 Publication-Status: Published in Journal of Development Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/30722111/66.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30722111 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert W Title: The Politics of Market Socialism Abstract: Creation-Date: 1994 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/33077903/politics_market_socialism.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33077903 Template-Type: ReDIF-Paper 1.0 Author-Name: Lakonishok, Josef Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert W Title: Contrarian Investment, Extrapolation, and Risk Abstract: Creation-Date: 1994 Publication-Status: Published in Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/30721347/84.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30721347 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Author-Name: Summers, Lawrence H. Title: The Noise Trader Approach to Finance Abstract: Creation-Date: 1990 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/33077905/noise_trader_approach_finance.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33077905 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Title: Tirole's Industrial Regulation and Organization Legacy in Economics Abstract: Jean Tirole was awarded the 2014 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for his analysis of market power and regulation. This paper provides an overview of some of that work, and of his related contributions to game theory. Creation-Date: 2015 Publication-Status: Published in Scand. J. of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/27303657/tiroles_industrial_regulation.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27303657 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Title: Will the Sovereign Debt Market Survive? Abstract: Economic theory and evidence from a variety of debt markets shed light on current reform proposals concerning emerging market debt. Debt markets, including the U.S. municipal bond market, generally function best when the rights of creditors are protected most effectively. Since current IMF reform proposals significantly emasculate creditor rights, they are likely to have an adverse effect on the flow of new funds to sovereign borrowers. Creation-Date: 2003 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/33078969/w9493.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33078969 Template-Type: ReDIF-Paper 1.0 Author-Name: Blanchard, Olivier Author-Name: Shleifer, Andrei Title: Federalism With and Without Political Centralization:China Versus Russia Abstract: In China, local governments have actively contributed to the growth of new firms. In Russia, local governments have typically stood in the way, be it through taxation, regulation, or corruption. There appears to be two main reasons behind the behavior of local governments in Russia. First, capture by old firms, leading local governments to protect them from competition by new entrants. Second, competition for rents by local officials, eliminating incentives for new firms to enter. The question then is why this has not happened in China. We argue that the answer lies in the degree of political centralization present in China, but not in Russia. Transition in China has taken place under the tight control of the communist party. As a result, the central government has been in a strong position both to reward and to punish local administrations, reducing both the risk of local capture and the scope of competition for rents. By contrast, transition in Russia has come with the emergence of a partly dysfunctional democracy. The central government has been neither strong enough to impose its views, nor strong enough to set clear rules about the sharing of the proceeds of growth. As a result, local governments have had few incentives either to resist capture or to rein in competition for rents. Based on the experience of China, a number of researchers have argued that federalism could play a central role in development. We agree, but with an important caveat. We believe the experience of Russia indicates that another ingredient is crucial, namely political centralization. Creation-Date: 2001 Publication-Status: Published in IMF Staff Papers File-URL: http://dash.harvard.edu/bitstream/handle/1/30747169/w7616.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30747169 Template-Type: ReDIF-Paper 1.0 Author-Name: Freeman, Richard Barry Author-Name: Han, Eunice Author-Name: Madland, David Author-Name: Duke, Brendan Title: How Does Declining Unionism Affect the American Middle Class and Intergenerational Mobility? Abstract: This paper examines unionism’s relationship to the size of the middle class and its relationship to intergenerational mobility. Panel Study of Income Dynamics (PSID) 1985 and 2011 files are used to examine the change in the share of workers in a middle-income group (defined by persons having incomes within 50 percent of the median) and use a shift-share decomposition to explore how the decline of unionism contributes to the shrinking middle class. The files are also used to investigate the correlation between parents’ union status and the incomes of their children. Additionally, federal income tax data is used to examine the geographical correlation between union density and intergenerational mobility. Findings include that union workers are disproportionately in the middle-income group or above, and some reach middle-income status due to the union wage premium; the offspring of union parents have higher incomes than the offspring of otherwise comparable non-union parents, especially when the parents are low-skilled; and offspring from communities with higher union density have higher average incomes relative to their parents compared to offspring from communities with lower union density. These findings show a strong, though not necessarily causal, link between unions, the middle class, and intergenerational mobility. Creation-Date: 2016 Publication-Status: Published in Proceedings of the Ninth Biennial Federal Reserve System Community Development Research Conference File-URL: http://dash.harvard.edu/bitstream/handle/1/27304672/how_does_declining_unionism_affect_mobilty_final-ms_fed-reserve_freeman-han-madland-duke_1-25-16.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27304672 Template-Type: ReDIF-Paper 1.0 Author-Name: Deming, David James Author-Name: Yuchtman, Noam Author-Name: Abulafi, Amira Author-Name: Goldin, Claudia D. Author-Name: Katz, Lawrence F. Title: The Value of Postsecondary Credentials in the Labor Market: An Experimental Study Abstract: We study employers’ perceptions of the value of postsecondary degrees using a field experiment. We randomly assign the sector and selectivity of institutions to fictitious resumes and apply to real vacancy postings for business and health jobs on a large online job board. We find that a business bachelor’s degree from a for-profit “online” institution is 22 percent less likely to receive a callback than one from a non-selective public institution. In applications to health jobs, we find that for-profit credentials receive fewer callbacks unless the job requires an external quality indicator such as an occupational license. Creation-Date: 2016 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/30367409/30665162.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30367409 Template-Type: ReDIF-Paper 1.0 Author-Name: Gennaioli, Nicola Author-Name: Ma, Yueran Author-Name: Shleifer, Andrei Title: Expectations and Investment Abstract: Using micro data from Duke University quarterly survey of Chief Financial Officers, we show that corporate investment plans as well as actual investment are well explained by CFOs’ expectations of earnings growth. The information in expectations data is not subsumed by traditional variables, such as Tobin’s Q or discount rates. We also show that errors in CFO expectations of earnings growth are predictable from past earnings and other data, pointing to extrapolative structure of expectations and suggesting that expectations may not be rational. This evidence, like earlier findings in finance, points to the usefulness of data on actual expectations for understanding economic behavior. Creation-Date: 2015 Publication-Status: Published in NBER Macroeconomics Annual File-URL: http://dash.harvard.edu/bitstream/handle/1/32193497/ExpectationsandInvestment.Shleifer.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:32193497 Template-Type: ReDIF-Paper 1.0 Author-Name: Bordalo, Pedro Author-Name: Gennaioli, Nicola Author-Name: Shleifer, Andrei Title: Salience Theory of Judicial Decisions Abstract: We present a model of judicial decision making in which the judge overweights the salient facts of the case. The context of the judicial decision, which is comparative by nature, shapes which aspects of the case stand out and draw the judge’s attention. By focusing judicial attention on such salient aspects of the case, legally irrelevant information can affect judicial decisions. Our model accounts for a range of recent experimental evidence that bears on the psychology of judicial decisions, including anchoring effects in the setting of damages, decoy effects in choice of legal remedies, and framing effects in the decision to litigate. The model also offers a new approach to positive analysis of damage awards in torts. Creation-Date: 2015 Publication-Status: Published in The Journal of Legal Studies File-URL: http://dash.harvard.edu/bitstream/handle/1/27814561/salience-and-law_feb15_2_0.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27814561 Template-Type: ReDIF-Paper 1.0 Author-Name: Chabris, C. F. Author-Name: Lee, J. J. Author-Name: Cesarini, D. Author-Name: Benjamin, D. J. Author-Name: Laibson, David I. Title: The Fourth Law of Behavior Genetics Abstract: Behavior genetics is the study of the relationship between genetic variation and psychological traits. Turkheimer (2000) proposed “Three Laws of Behavior Genetics” based on empirical regularities observed in studies of twins and other kinships. On the basis of molecular studies that have measured DNA variation directly, we propose a Fourth Law of Behavior Genetics: “A typical human behavioral trait is associated with very many genetic variants, each of which accounts for a very small percentage of the behavioral variability.” This law explains several consistent patterns in the results of gene-discovery studies, including the failure of candidate-gene studies to robustly replicate, the need for genome-wide association studies (and why such studies have a much stronger replication record), and the crucial importance of extremely large samples in these endeavors. We review the evidence in favor of the Fourth Law and discuss its implications for the design and interpretation of gene-behavior research. Creation-Date: 2015 Publication-Status: Published in Current Directions in Psychological Science File-URL: http://dash.harvard.edu/bitstream/handle/1/30780203/42626803.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30780203 Template-Type: ReDIF-Paper 1.0 Author-Name: Chetty, Nadarajan Title: Behavioral Economics and Public Policy: A Pragmatic Perspective Abstract: The debate about behavioral economics – the incorporation of insights from psychology into economics – is often framed as a question about the foundational assumptions of economic models. This paper presents a more pragmatic perspective on behavioral economics that focuses on its value for improving empirical predictions and policy decisions. I discuss three ways in which behavioral economics can contribute to public policy: by offering new policy tools, improving predictions about the effects of existing policies, and generating new welfare implications. I illustrate these contributions using applications to retirement savings, labor supply, and neighborhood choice. Behavioral models provide new tools to change behaviors such as savings rates and new counterfactuals to estimate the effects of policies such as income taxation. Behavioral models also provide new prescriptions for optimal policy that can be characterized in a non-paternalistic manner using methods analogous to those in neoclassical models. Model uncertainty does not justify using the neoclassical model; instead, it can provide a new rationale for using behavioral nudges. I conclude that incorporating behavioral features to the extent they help answer core economic questions may be more productive than viewing behavioral economics as a separate subfield that challenges the assumptions of neoclassical models. Creation-Date: 2015 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/34330194/behavioral_ely.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34330194 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Title: Does Competition Destroy Ethical Behavior? Abstract: Explanations of unethical behavior often neglect the role of competition, as opposed to greed, in assuring its spread. Using the examples of child labor, corruption, "excessive" executive pay, corporate earnings manipulation, and commercial activities by universities, this paper clarifies the role of competition in promoting censured conduct. When unethical behavior cuts costs, competition drives down prices and entrepreneurs' incomes, and thereby reduces their willingness to pay for ethical conduct. Nonetheless, I suggest that competition might be good for ethical behavior in the long run, because it promotes growth and raises incomes. Higher incomes raise the willingness to pay for ethical behavior, but may also change what people believe to be ethical for the better. Creation-Date: 2004 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/27867243/w10269.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27867243 Template-Type: ReDIF-Paper 1.0 Author-Name: Barberis, Nicholas Author-Name: Shleifer, Andrei Author-Name: Wurgler, Jeffrey Title: Comovement Abstract: A number of studies have identifed patterns of positive correlation of returns, or comovement, among different traded securities. We distinguish three views of such comovement. The traditional "fundamentals" view explains the comovement of securities through positive correlations in the rational determinants of their values, such as cash flows or discount rates. "Category-based" comovement occurs when investors classify different securities into the same asset class and shift resources in and out of this class in correlated ways. A related phenomenon of "habitat-based" comovement arises when a group of investors restricts its trading to a given set of securities, and moves in and out of that set in tandem. We present models of each of the three types of comovement, and then assess them empirically using data on stock inclusions into and deletions from the S&P 500 index. Index changes are noteworthy because they change a stock's category and investor clientele (habitat), but do not change its fundamentals. We find that when a stock is added to the index, its beta and R-squared with respect to the index increase, while its beta with respect to stocks outside the index falls. The converse happens when a stock is deleted. These results are broadly supportive of the category and habitat views of comovement, but not of the fundamentals view. More generally, we argue that these non-traditional views may help explain other instances of comovement in the data Creation-Date: 2005 Publication-Status: Published in Journal of Financial Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/27867240/barberis-etal.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27867240 Template-Type: ReDIF-Paper 1.0 Author-Name: Murphy, Kevin M Author-Name: Shleifer, Andrei Title: Persuasion in Politics Abstract: We present a model of the creation of social networks, such as political parties, trade unions, religious coalitions, or political action committees, through discussion and mutual persuasion among their members. The key idea is that people are influenced by those inside their network, but not by those outside. Once created, networks can be “rented out” to politicians who seek votes and support for their initiatives and ideas, which may have little to do with network members' core beliefs. In this framework, political competition does not lead to convergence of party platforms to the views of the median voter. Rather, parties separate their messages and try to isolate their members to prevent personal influence from those in the opposition. Creation-Date: 2004 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/27867244/w10248.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27867244 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia D. Author-Name: Margo, Robert Title: The Great Compression: The Wage Structure in the United States at Mid- Century Abstract: The structure of wages narrowed considerably during the 1940's, increased slightly during the 1950's and 1960's, and then expanded greatly after 1970. The era of wage stretching of the past two decades has been a current focus, but we return attention here to the decade that was witness to an extraordinary compression in the wage structure. Wages narrowed by education, job experience, region, and occupation, and compression occurred within these cells as well. For white men, the 90-10 differential in the log of wages was 1.414 in 1940 but 1.060 in 1950. By 1985 it has risen back to its 1940 level. Thus the recent widening of the wage structure has returned to it a dispersion characteristic of fifty years ago. We explore various explanations for the rapid compression in the wage structure during the 1940's and for its maintenance during the subsequent decade or more. We first assess the hypothesis that the Great Depression left the wage structure in 1939 more unequal than in the late 1920's, but we find evidence to the contrary. World War II and the National War Labor Board share some of the credit for the Great Compression. But much belongs to a rapid increase in the demand for unskilled labor at a time when educated labor was greatly increasing in number. These same factors caused the wage structure to remain compressed until its expansion during the past two decades. Creation-Date: 1992 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/30703979/w3817.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30703979 Template-Type: ReDIF-Paper 1.0 Author-Name: Kroft, Kory Author-Name: Lange, Fabian Author-Name: Notowidigdo, Matthew J. Author-Name: Katz, Lawrence F. Title: Long-Term Unemployment and the Great Recession: The Role of Composition, Duration Dependence, and Nonparticipation Abstract: We explore the role of composition, duration dependence, and labor force nonparticipation in accounting for the sharp increase in the incidence of long-term unemployment (LTU) during the Great Recession. We show that compositional shifts account for very little of the observed increase in LTU. Using panel data from the Current Population Survey for 2002–7, we calibrate a matching model that allows for duration dependence in unemployment and transitions between employment, unemployment, and nonparticipation. The calibrated model accounts for almost all of the increase in LTU and much of the observed outward shift in the Beveridge curve between 2008 and 2013. Creation-Date: 2016 Publication-Status: Published in Journal of Labor Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/27731427/40988369.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27731427 Template-Type: ReDIF-Paper 1.0 Author-Name: Glaeser, Edward Ludwig Author-Name: Shleifer, Andrei Title: A Reason for Quantity Regulation Abstract: Contrary to the standard economic advice, many regulations of financial intermediaries, as well as other regulations such as blue laws, fishing rules, zoning restrictions, or pollution controls, take the form of quantity controls rather than taxes. We argue that costs of enforcement are crucial to understanding these choices. When violations of quantity regulations are cheaper to discover than failures to pay taxes, the former can emerge as the optimal instrument for the government, even when it is less attractive in the absence of enforcement costs. This analysis is especially relevant to situations where private enforcement of regulations is crucial. Creation-Date: 2001 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/33078975/aer%2E91%2E2%2E431.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33078975 Template-Type: ReDIF-Paper 1.0 Author-Name: Beshears, John Leonard Author-Name: Choi, James J. Author-Name: Hurwitz, Joshua Bayard Author-Name: Laibson, David I. Author-Name: Madrian, Brigitte Title: Liquidity in Retirement Savings Systems: An International Comparison Abstract: We compare the liquidity that six developed countries have built into their employer-based defined contribution (DC) retirement schemes. In Germany, Singapore, and the UK, withdrawals are essentially banned no matter what kind of transitory income shock the household realizes. By contrast, in Canada and Australia, liquidity is state-contingent. For a middle-income household, DC accounts are completely illiquid unless annual income falls substantially, in which case DC assets become highly liquid. The US stands alone in the universally high liquidity of its DC system: whether or not income falls, the penalties for early withdrawal are low or non-existent. Creation-Date: 2015 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/30403718/53915264.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30403718 Template-Type: ReDIF-Paper 1.0 Author-Name: Lee, Charles Author-Name: Shleifer, Andrei Author-Name: Thaler, Richard H. Title: Investor Sentiment and the Closed-End Fund Puzzle Abstract: This paper examines the proposition that fluctuations in discounts on closed end funds are driven by changes in individual investor sentiment toward closed end funds and other securities. The theory implies that discounts on various funds must move together, that new funds get started when seasoned funds sell at a premium or a small discount, and that discounts on the funds fluctuate together with prices of securities affected by the same investor sentiment. The evidence supports these predictions. In particular, we find that discounts on closed end funds narrow when small stocks do well, as would be expected if closed end funds were subject to the same sentiment as small stocks, whim tern. also to be held by individual investors. The evidence thus suggests that investor sentiment affects security returns. Creation-Date: 1991 Publication-Status: Published in The Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/27693394/w3465.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27693394 Template-Type: ReDIF-Paper 1.0 Author-Name: Lakonishok, Josef Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert W. Title: The impact of institutional trading on stock prices Abstract: This paper uses a new data set of quarterly portfolio holdings of 769 all-equity pension funds between 1985 and 1989 to evaluate the potential effect of their trading on stock prices. We address two aspects of trading by money managers: herding, which refers to buying (selling) the same stocks as other managers buy (sell) at the same time; and positive-feedback trading, which refers to buying winners and selling losers. These two aspects of trading are commonly a part of the argument that institutions destabilize stock prices. At the level of individual stocks at quarterly frequencies, we find no evidence of substantial herding or positive-feedback trading by pension fund managers, except in small stocks. Also, there is no strong cross-sectional correlation between changes in pension funds' holdings of a stock and its abnormal return. Creation-Date: 1992 Publication-Status: Published in Journal of Financial Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/27692662/w3846.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27692662 Template-Type: ReDIF-Paper 1.0 Author-Name: Gopinath, Gita Author-Name: Gourinchas, Pierre-Olivier Author-Name: Hsieh, Chang-Tai Author-Name: Li, Nicholas Title: International Prices, Costs, and Markup Differences Abstract: Relative cross-border retail prices, in a common currency, comoves closely with the nominal exchange rate. Using a data set with product level retail prices and wholesale costs for a large grocery chain operating in the U.S. and Canada, we decompose this variation into relative wholesale costs and relative markup components. We find that the correlation of the nominal exchange rate with the real exchange rate is mainly driven by changes in relative wholesale costs, arguably the most tradable component of a retailer’s costs. We then measure the extent to which national borders impose additional costs that segment markets across countries. We show that retail prices respond to changes in wholesale costs in neighboring stores within the same country but not to changes in wholesale costs in a neighboring store located across the border. In addition, we find a median discontinuous change in retail and wholesale prices of 24 percent at the international border. By contrast, the median discontinuity is 0 percent for state and provincial boundaries. Creation-Date: 2011 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/30703875/paper_pricescostsmkups.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30703875 Template-Type: ReDIF-Paper 1.0 Author-Name: Gopinath, Gita Title: Comment on Individual Price Adjustment along the Extensive Margin Abstract: Creation-Date: 2013 Publication-Status: Published in NBER Macroeconomics Annual File-URL: http://dash.harvard.edu/bitstream/handle/1/32857274/c12754.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:32857274 Template-Type: ReDIF-Paper 1.0 Author-Name: Gopinath, Gita Author-Name: Itskhoki, Oleg Title: Frequency of Price Adjustment and Pass-through Abstract: We empirically document using U.S. import prices that on average goods with a high frequency of price adjustment have a long-run pass-through that is at least twice as high as that of low-frequency adjusters. We show theoretically that this relationship should follow because variable mark-ups that reduce long-run pass-through also reduces the curvature of the profit function when expressed as a function of the cost shocks, making the firm less willing to adjust its price. Lastly, we quantitatively evaluate a dynamic menu-cost model and show that the variable mark-up channel can generate significant variation in frequency, equivalent to 37% of the observed variation in the data. On the other hand the standard workhorse model with constant elasticity of demand and Calvo or state dependent pricing has difficulty matching the facts. Creation-Date: 2010 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/30703806/frequencyandpassthrough.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30703806 Template-Type: ReDIF-Paper 1.0 Author-Name: Glaeser, Edward Ludwig Author-Name: Ponzetto, Giacomo A. M. Author-Name: Shleifer, Andrei Title: Why does democracy need education? 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. Creation-Date: 2007 Publication-Status: Published in Journal of Economic Growth File-URL: http://dash.harvard.edu/bitstream/handle/1/27867132/w12128.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27867132 Template-Type: ReDIF-Paper 1.0 Author-Name: Murphy, Kevin M. Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert W. Title: The Allocation of Talent: Implications for Growth Abstract: A country's most talented people typically organize production by others, so they can spread their ability advantage over a larger scale. When they start firms, they innovate and foster growth, but when they become rent seekers, they only redistribute wealth and reduce growth. Occupational choice depends on returns to ability and to scale in each sector, on market size, and on compensation contracts. In most countries, rent seeking rewards talent more than entrepreneurship does, leading to stagnation. Our evidence shows that countries with a higher proportion of engineering college majors grow faster; whereas countries with a higher proportion of law concentrators grow slower. Creation-Date: 1991 Publication-Status: Published in The Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/27692664/w3530.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27692664 Template-Type: ReDIF-Paper 1.0 Author-Name: Laibson, David I. Author-Name: List, John A. Title: Principles of (Behavioral) Economics Abstract: Behavioral economics has become an important and integrated component of modern economics. Behavioral economists embrace the core principles of economics—optimization and equilibrium—and seek to develop and extend those ideas to make them more empirically accurate. Behavioral models assume that economic actors try to pick the best feasible option and those actors sometimes make mistakes. Behavioral ideas should be incorporated throughout the first-year undergraduate course. Instructors should also considering allocating a lecture (or more) to a focused discussion of behavioral concepts. We describe our approach to such a lecture, highlighting six modular principles and empirical examples that support them. Creation-Date: 2015 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/30805504/95919624.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30805504 Template-Type: ReDIF-Paper 1.0 Author-Name: Gopinath, Gita Author-Name: Itskhoki, Oleg Author-Name: Rigobon, Roberto Title: Currency Choice and Exchange Rate Pass-through Abstract: In the open economy macro literature with nominal rigidities, the currency in which goods are priced has important implications for optimal monetary and exchange rate policy and for exchange rate pass-through. We show, using novel data on currency and prices for U.S. imports, that even conditional on a price change, there is a large difference in the pass-through of the average good priced in dollars (25%) versus non-dollars (95%). We document this to be the case across countries and within disaggregated sectors. This finding contradicts the assumption in an important class of models that the currency of pricing is exogenous. We present a model of endogenous currency choice in a dynamic price setting environment and show that the predictions of the model are strongly supported by the data. Creation-Date: 2010 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/30703874/cp15f.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30703874 Template-Type: ReDIF-Paper 1.0 Author-Name: Miron, Jeffrey A. Title: The Case Against the Fiscal Stimulus Abstract: Creation-Date: 2010 Publication-Status: Published in Harvard Journal of Law and Public Policy File-URL: http://dash.harvard.edu/bitstream/handle/1/29412036/519.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:29412036 Template-Type: ReDIF-Paper 1.0 Author-Name: La Porta, Rafael Author-Name: Lopez-de-Silanes, Florencio Author-Name: Shleifer, Andrei Title: What Works in Securities Laws? Abstract: We examine the effect of securities laws on stock market development in 49 countries. We find almost no evidence that public enforcement benefits stock markets, and strong evidence that laws facilitating private enforcement through disclosure and liability rules benefit stock markets. Creation-Date: 2006 Publication-Status: Published in The Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/27867135/w9882.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27867135 Template-Type: ReDIF-Paper 1.0 Author-Name: La Porta, Rafael Author-Name: Lopez-De-Silanes, Florencio Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert Title: Investor Protection and Corporate Valuation Abstract: Recent research has documented large differences among countries in ownership concentration in publicly traded firms, in the breadth and depth of capital markets, in dividend policies, and in the access of firms to external finance. A common element to the explanations of these differences is how well investors, both shareholders and creditors, are protected by law from expropriation by the managers and controlling shareholders of firms. We describe the differences in laws and the effectiveness of their enforcement across countries, discuss the possible origins of these differences, summarize their consequences, and assess potential strategies of corporate governance reform. We argue that the legal approach is a more fruitful way to understand corporate governance and its reform than the conventional distinction between bank-centered and market-centered financial systems. Creation-Date: 2002 Publication-Status: Published in The Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/30747191/Investor_Protection-CorpGov.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30747191 Template-Type: ReDIF-Paper 1.0 Author-Name: Borek, T. Christopher Author-Name: Frattarelli, Angelo Author-Name: Hart, Oliver D. Title: Tax Shelters or Efficient Tax Planning? A Theory of the Firm Perspective on the Economic Substance Doctrine Abstract: Courts have articulated a number of legal tests to distinguish corporate transactions that have a legitimate business or economic purpose from those carried out largely, if not solely, for favorable tax treatment. We outline an approach to analyzing the economic substance of corporate transactions based on the property rights theory of the firm and describe its application in two recent tax cases. Creation-Date: 2014 Publication-Status: Published in The Journal of Law and Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/30703804/borek_frattarelli_hart_-_final.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30703804 Template-Type: ReDIF-Paper 1.0 Author-Name: Porta, Rafael La Author-Name: Lopez-de-Silane, Florencio Author-Name: Pop-Eleches, Cristian Author-Name: Shleifer, Andrei Title: The Guarantees of Freedom Abstract: Hayek (1960) distinguishes the institutions of English freedom, which guarantee the independence of judges from political interference in the administration of justice, from those of American freedom, which allow judges to restrain law-making powers of the sovereign through constitutional review. We create a data base of constitutional rules in 71 countries that reflect these institutions of English and American freedom, and ask whether these rules predict economic and political freedom in a cross-section of countries. We find that the English institutions of judicial independence are strong predictors of economic freedom and weaker predictors of political freedom. The American institutions of checks and balances are strong predictors of political but not of economic freedom. Judicial independence explains half of the positive effect of common law legal origin on measures of economic freedom. Creation-Date: 2002 Publication-Status: Published in Nber Working Paper Series File-URL: http://dash.harvard.edu/bitstream/handle/1/29408125/SSRN-id298057.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:29408125 Template-Type: ReDIF-Paper 1.0 Author-Name: Fudenberg, Drew Author-Name: Kamada, Yuichiro Title: Rationalizable partition-confirmed equilibrium Abstract: Rationalizable partition-confirmed equilibrium (RPCE) describes the steady-state outcomes of rational learning in extensive-form games when rationality is common knowledge and players observe a partition of the terminal nodes. RPCE allows players to make inferences about unobserved play by others. We discuss the implications of this using numerous examples, and discuss the relationship of RPCE to other solution concepts in the literature. Creation-Date: 2015 Publication-Status: Published in Theoretical Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/27303656/rationalizable_2015.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27303656 Template-Type: ReDIF-Paper 1.0 Author-Name: Chetty, Nadarajan Author-Name: Friedman, John Author-Name: Rockoff, Jonah E. Title: Measuring the Impacts of Teachers II: Teacher Value-Added and Student Outcomes in Adulthood Abstract: Are teachers' impacts on students' test scores ("value-added") a good measure of their quality? This question has sparked debate partly because of a lack of evidence on whether high value-added (VA) teachers improve students' long-term outcomes. Using school district and tax records for more than one million children, we find that students assigned to high-VA teachers are more likely to attend college, earn higher salaries, and are less likely to have children as teenagers. Replacing a teacher whose VA is in the bottom 5% with an average teacher would increase the present value of students' lifetime income by approximately $250,000 per classroom. Creation-Date: 2014 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/30749606/w19424.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30749606 Template-Type: ReDIF-Paper 1.0 Author-Name: Glaeser, Edward Ludwig Author-Name: Shleifer, Andrei Title: Legal Origins Abstract: A central requirement in the design of a legal system is the protection of law enforcers from coercion by litigants through either violence or bribes. The higher the risk of coercion, the greater the need for protection and control of law enforcers by the state. Such control, however, also makes law enforcers beholden to the state, and politicizes justice. This perspective explains why, starting in the twelfth and thirteenth centuries, the relatively more peaceful England developed trials by independent juries, while the less peaceful France relied on state-employed judges to resolve disputes. It may also explain many differences between common and civil law traditions with respect to both the structure of legal systems and the observed social and economic outcomes. Creation-Date: 2002 Publication-Status: Published in The Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/29408124/w8272.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:29408124 Template-Type: ReDIF-Paper 1.0 Author-Name: La Porta, Rafael Author-Name: Lopez-de-Silanes, Florencio Author-Name: Vishny, Robert Author-Name: Shleifer, Andrei Title: The quality of government Abstract: We investigate empirically the determinants of the quality of governments in a large cross-section of countries. We assess government performance using measures of government intervention, public sector efficiency, public good provision, size of government, and political freedom. We find that countries that are poor, close to the equator, ethnolinguistically heterogeneous, use French of socialist laws, or have high proportions of Catholics of Muslims exhibit inferior government performance. We also find that the larger governments tend to be the better performing ones. The importance of historical factors in explaining the variation in government performance across countries sheds light on the economic, political, and cultural theories of institutions. Creation-Date: 1999 Publication-Status: Published in Journal of Law, Economics, and Organization File-URL: http://dash.harvard.edu/bitstream/handle/1/30747160/w6727.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30747160 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia D. Author-Name: Katz, Lawrence F. Title: The Shaping of Higher Education: The Formative Years in the United States, 1890 to 1940 Abstract: The American university was shaped in a formative period from 1890 to 1940 long before the rise of federal funding, the G.I. Bill, and mass higher education. Both the scale and scope of institutions of higher education were greatly increased, the research university blossomed, states vastly increased their funding of higher education, and the public sector greatly expanded relative to the private sector. Independent professional institutions declined, as did theological institutes and denominational colleges in general. Increases in the scale and scope of institutions of higher education were generated by exogenous changes in the that affected the professions generally and that of the clergy in particular. The increase in the share of students in the public sector may also have been prompted by these exogenous changes for they gave advantages to institutions, such as those in the public sector, that had research facilities, reputation, and a long purse. The high school movement, which swept parts of the country from 1910 to 1940, brought students from less privileged backgrounds to college and thus also buoyed enrollments in the public sector. States differed widely in their funding of higher education per capita and we find that greater generosity in 1929 was positively associated with later statehood, lower private college enrollments in 1900, greater shares of employment in mining and manufacturing, higher income, and a proxy for greater and more equally distributed wealth. Creation-Date: 1999 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/30747152/jep%2E13%2E1%2E37.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30747152 Template-Type: ReDIF-Paper 1.0 Author-Name: Johnson, Simon Author-Name: La Porta, Rafael Author-Name: Lopez-de-Silanes, Florencio Author-Name: Shleifer, Andrei Title: Tunneling Abstract: Tunnelling is defined as the transfer of assets and profits out of firms for the benefit of their controlling shareholders. We describe the various forms that tunnelling can take, and examine under what circumstances it is legal. We discuss two important legal principles -- the duty of care and the duty of loyalty-- which courts use to analyze cases involving tunnelling. Several important legal cases from France, Belgium, and Italy illustrate how and why the law accommodates tunnelling in civil law countries, and why certain kinds of tunnelling are less likely to pass legal scrutiny in common law countries. Creation-Date: 2000 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/30747165/w7523.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30747165 Template-Type: ReDIF-Paper 1.0 Author-Name: LaPorta, Rafael Author-Name: Lakonishok, Josef Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert Title: Good News for Value Stocks: Further Evidence on Market Efficiency Abstract: This paper examines the hypothesis that the superior return to so-called value stocks is the result of expectational errors made by investors. We study stock price reactions around earnings announcements for value and glamour stock over a 5 year period after portfolio formation. The announcement returns suggest that a significant portion of the return difference between value and glamour stocks is attributable to earnings surprises that are systematically more positive for value stocks. The evidence is inconsistent with a risk-based explanation for the return differential. Creation-Date: 1997 Publication-Status: Published in Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/30725119/w5311.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30725119 Template-Type: ReDIF-Paper 1.0 Author-Name: Boycko, Maxim Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert W Title: Privatizing Russia Abstract: Creation-Date: 1993 Publication-Status: Published in Brookings Papers on Economic Activity File-URL: http://dash.harvard.edu/bitstream/handle/1/30724330/privatizing_russia.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30724330 Template-Type: ReDIF-Paper 1.0 Author-Name: Boycko, Maxim Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert W Title: Voucher Privatization Abstract: Creation-Date: 1994 Publication-Status: Published in Journal of Financial Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/30704159/85.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30704159 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Title: Interaction Effects in the Relationship Between Growth and Finance Abstract: This paper analyzes how interacting financial development with initial income, macroeconomic volatility and policy variables, can improve our understanding of convergence and divergence across countries, and also restore the significance of correlations between growth and volatility and therefore between growth and macropolicy, even when controlling for country fixed effects or when eliminating countries with extreme policies or bad institutions. Creation-Date: 2006 Publication-Status: Published in Capitalism and Society File-URL: http://dash.harvard.edu/bitstream/handle/1/30751368/[]%20Interaction%20Effects%20in%20the%20Relationship%20Between%20Growth%20and%20Finance.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30751368 Template-Type: ReDIF-Paper 1.0 Author-Name: De Long, J. Bradford Author-Name: Shleifer, Andrei Author-Name: Summers, Lawrence H. Author-Name: Waldmann, Robert J. Title: Positive Feedback Investment Strategies and Destabilizing Rational Speculation Abstract: Analyses of the role of rational speculators in financial markets usually presume that such investors dampen price fluctuations by trading against liquidity or noise traders. This conclusion does not necessarily hold when noise traders follow positive-feedback investment strategies buy when prices rise and sell when prices fall. In such cases, it may pay rational speculators to try to jump on the bandwagon early and to purchase ahead of noise trader demand. If rational speculators' attempts to jump on the bandwagon early trigger positive-feedback investment strategies, then an increase in the number of forward-looking rational speculators can lead to increased volatility of prices about fundamentals. Creation-Date: 1990 Publication-Status: Published in The Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/27693805/w2880.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27693805 Template-Type: ReDIF-Paper 1.0 Author-Name: Botero, J. C. Author-Name: Djankov, S. Author-Name: Porta, R. L. Author-Name: Lopez-de-Silanes, F. Author-Name: Shleifer, Andrei Title: The Regulation of Labor Abstract: We investigate the regulation of labor markets through employment, collective relations, and social security laws in 85 countries. We find that the political power of the left is associated with more stringent labor regulations and more generous social security systems, and that socialist, French, and Scandinavian legal origin countries have sharply higher levels of labor regulation than do common law countries. However, the effects of legal origins are larger, and explain more of the variation in regulations, than those of politics. Heavier regulation of labor is associated with lower labor force participation and higher unemployment, especially of the young. These results are most naturally consistent with legal theories, according to which countries have pervasive regulatory styles inherited from the transplantation of legal systems. Creation-Date: 2004 Publication-Status: Published in The Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/27867241/labor06172004completereres.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27867241 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia D. Author-Name: Sokoloff, Kenneth Title: The Relative Productivity Hypothesis of Industrialization: The American Case, 1820 to 1850 Abstract: The American Northeast industrialized rapidly from about 1820 to 1850, while the South remained agricultural. Industrialization in the Northeast was substantially powered during these decades by female and child labor, who comprised about 45% of the manufacturing work force in 1832. Wherever manufacturing spread in the Northeast, the wages of females and children relative to those of adult men increased greatly from levels in the agricultural sector which were previously quite low. Our hypothesis of early industrialization is that such development proceeds first in areas whose agriculture, for various reasons, puts a low value on females and children relative to adult men. The lower the "relative productivity" of females and children in the pre-industrial agricultural or traditional economy the earlier will manufacturing evolve, the proportionately greater will the relative wages for females and children increase, and the relatively more manufactured goods will the economy produce. A two-sector model which incorporates a difference in "relative productivity" between two economies is used to develop seven propositions relating to the process of early industrialization. Data from two early censuses of manufactures, 1832 and 1850, and other sources provide evidence for our hypothesis, demonstrating, for example, the low relative productivity of females and children in the Northeast agricultural sector, and the increase in relative wages for these laborers with industrialization. We conclude that factors with low relative productivity in agriculture were instrumental in the initial adoption of the factory system and of industrialization in general in the U.S., and we believe these results are applicable to contemporary phenomena in developing countries. Creation-Date: 1984 Publication-Status: Published in The Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/30703977/w0722.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30703977 Template-Type: ReDIF-Paper 1.0 Author-Name: Milkman, Katherine L. Author-Name: Beshears, John Leonard Author-Name: Choi, James J. Author-Name: Laibson, David I. Author-Name: Madrian, Brigitte Title: The Effect of Providing Peer Information on Retirement Savings Decisions Abstract: Using a field experiment in a 401(k) plan, we measure the effect of disseminating information about peer behavior on savings. Low-saving employees received simplified plan enrollment or contribution increase forms. A randomized subset of forms stated the fraction of age-matched coworkers participating in the plan or age-matched participants contributing at least 6% of pay to the plan. We document an oppositional reaction: the presence of peer information decreased the savings of nonparticipants who were ineligible for 401(k) automatic enrollment, and higher observed peer savings rates also decreased savings. Discouragement from upward social comparisons seems to drive this reaction. Creation-Date: 2015 Publication-Status: Published in The Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/32785047/42626803.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:32785047 Template-Type: ReDIF-Paper 1.0 Author-Name: Rogoff, Kenneth S. Author-Name: Chen, Yu-Chin Author-Name: Rossi, Barbara Title: Can Exchange Rates Forecast Commodity Prices? Abstract: We show that "commodity currency" exchange rates have remarkably robust power in predicting global commodity prices, both in-sample and out-of-sample, and against a variety of alternative benchmarks. This result is of particular interest to policymakers, given the lack of deep forward markets in many individual commodities, and broad aggregate commodity indices in particular. We also explore the reverse relationship (commodity prices forecasting exchange rates) but find it to be notably less robust. We o§er a theoretical resolution, based on the fact that exchange rates are strongly forward looking, whereas commodity price fluctuations are typically more sensitive to short-term demand imbalances. Creation-Date: 2010 Publication-Status: Published in Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/29412033/can_exchange_rates_forecast_commodity_prices.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:29412033 Template-Type: ReDIF-Paper 1.0 Author-Name: Morck, Randall Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert W. Title: Do Managerial Objectives Drive Bad Acquisitions? Abstract: This paper documents for a sample of 327 US acquisitions between 1975 and 1987 three forces that systematically reduce the announcement day return of bidding firms. The returns to bidding shareholders are lower when their firm diversifies, when it buys a rapidly growing target , and when the performance of its managers has been poor before the acquisition. These results are consistent with the proposition that managerial rather than shareholders' objectives drive bad acquisitions. Creation-Date: 1990 Publication-Status: Published in The Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/27693803/w3000.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27693803 Template-Type: ReDIF-Paper 1.0 Author-Name: Chetty, Nadarajan Author-Name: Finkelstein, Amy Nadya Title: Social Insurance: Connecting Theory to Data Abstract: We survey the literature on social insurance, focusing on recent work that has connected theory to evidence to make quantitative statements about welfare and optimal policy. Our review contains two parts. We first discuss motives for government intervention in private insurance markets, focusing primarily on selection. We review the original theoretical arguments for government intervention in the presence of adverse selection, and describe how recent work has refined and challenged the conclusions drawn from early theoretical models. We then describe empirical work that tests for selection in insurance markets, documents the welfare costs of this selection, and analyzes the welfare consequences of potential public policy interventions. In the second part of the paper, we review work on optimal social insurance policies. We discuss formulas for the optimal level of insurance benefits in terms of empirically estimable parameters. We then consider the consequences of relaxing the key assumptions underlying these formulas, e.g., by allowing for fiscal externalities or behavioral biases. We also summarize recent work on other dimensions of optimal policy, including mandated savings accounts and the optimal path of benefits. Finally, we discuss the key challenges that remain in understanding the optimal design of social insurance policies. Creation-Date: 2013 Publication-Status: Published in Handbook of Public Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/34330197/handbook_soc_ins.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34330197 Template-Type: ReDIF-Paper 1.0 Author-Name: Djankov, Simeon Author-Name: La Porta, Rafael Author-Name: Lopez-de-Silanes, Florencio Author-Name: Shleifer, Andrei Title: Disclosure by Politicians Abstract: We collect data on the rules and practices of financial and conflict disclosure by politicians in 175 countries. Although two thirds of the countries have some disclosure laws, less than a third make disclosures available to the public. Disclosure is more extensive in richer and more democratic countries. Disclosure is correlated with lower perceived corruption when it is public, when it identifies sources of income and conflicts of interest, and when a country is a democracy. Creation-Date: 2010 Publication-Status: Published in American Economic Journal: Applied Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/33077931/w14703.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33077931 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Author-Name: Djankov, Simeon Author-Name: McLiesh, Caralee Title: Private credit in 129 countries? Abstract: We investigate cross-country determinants of private credit, using new data on legal creditor rights and private and public credit registries in 129 countries. We find that both creditor protection through the legal system and information sharing institutions are associated with higher ratios of private credit to GDP, but that the former is relatively more important in the richer countries. An analysis of legal reforms also shows that improvements in creditor rights and in information sharing precede faster credit growth. We also find that creditor rights are extremely stable overtime, contrary to the convergence hypothesis. Finally, we find that legal origins are an important determinant of both creditor rights and information sharing institutions. Creation-Date: 2007 Publication-Status: Published in Journal of Financial Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/27867134/w11078.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27867134 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia D. Author-Name: Rouse, Cecilia Title: Orchestrating Impartiality: The Impact of “Blind” Auditions on Female Musicians Abstract: A change in the audition procedures of symphony orchestras--adoption of "blind" auditions with a "screen" to conceal the candidate's identity from the jury--provides a test for sex-biased hiring. Using data from actual auditions, in an individual fixed-effects framework, we find that the screen increases the probability a woman will be advanced and hired. Although some of our estimates have large standard errors and there is one persistent effect in the opposite direction, the weight of the evidence suggests that the blind audition procedure fostered impartiality in hiring and increased the proportion women in symphony orchestras. Creation-Date: 2000 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/30703974/aer%2E90%2E4%2E715.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30703974 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert W. Title: Stock market driven acquisitions Abstract: We present a model of mergers and acquisitions based on stock market misvaluations of the combining firms. The key ingredients of the model are the relative valuations of the merging firms and the market’s perception of the synergies from the combination. The model explains who acquires whom, the choice of the medium of payment, the valuation consequences of mergers, and merger waves. The model is consistent with available empirical findings about characteristics and returns of merging firms, and yields new predictions as well. Creation-Date: 2003 Publication-Status: Published in Journal of Financial Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/30748164/stockmarketdrivenacquisitionsf.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30748164 Template-Type: ReDIF-Paper 1.0 Author-Name: Djankov, S. Author-Name: La Porta, R. Author-Name: Lopez-de-Silanes, F. Author-Name: Shleifer, Andrei Title: The Regulation of Entry Abstract: We present new data on the regulation of entry of start-up firms in 75 countries. The data set contains information on the number of procedures, official time, and official cost that a start-up must bear before it can operate legally. The official costs of entry are extremely high in most countries. Countries with heavier regulation of entry have higher corruption and larger unofficial economies, but not better quality of public or private goods. Countries with more democratic and limited governments have fewer entry regulations. The evidence is inconsistent with Pigouvian (helping hand) theories of benevolent regulation, but support the (grabbing hand) view that entry regulation benefits politicians and bureaucrats. Creation-Date: 2002 Publication-Status: Published in The Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/30747190/w7892.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30747190 Template-Type: ReDIF-Paper 1.0 Author-Name: Barberis, Nicholas Author-Name: Shleifer, Andrei Title: Style investing Abstract: We study asset prices in an economy where some investors classify risky assets into di fferent styles and move funds back and forth between these styles depending on their relative performance. Our assumptions imply that news about one style can a ffect the prices of other apparently unrelated styles, that assets in the same style will comove too much while assets in di fferent styles comove too little, and that high average returns on a style will be associated with common factors for reasons unrelated to risk. They also lead to a rich pattern of own- and cross- autocorrelations, sample premia that can be very di fferent from true premia, and imply that style momentum strategies will be pro table. We use our model to shed light on many puzzling features of the data. Creation-Date: 2003 Publication-Status: Published in Journal of Financial Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/30747193/SSRN-id255557.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30747193 Template-Type: ReDIF-Paper 1.0 Author-Name: Lee, Charles Author-Name: Shleifer, Andrei Author-Name: Thaler, Richard H Title: Anomalies: Closed-End Mutual Funds Abstract: Creation-Date: 1990 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/33077904/closed_end_mut_funds.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33077904 Template-Type: ReDIF-Paper 1.0 Author-Name: Burkart, Mike Author-Name: Panunzi, Fausto Author-Name: Shleifer, Andrei Title: Family Firms Abstract: We present a model of succession in a firm owned and managed by its founder. The founder decides between hiring a professional manager or leaving management to his heir, as well as on how much, if any, of the shares to float on the stock exchange. We assume that a professional is a better manager than the heir, and describe how the founder’s decision is shaped by the legal environment. Specifically, we show that, in legal regimes that successfully limit the expropriation of minority shareholders, the widely held professionally managed corporation emerges as the equilibrium outcome. In legal regimes with intermediate protection, management is delegated to a professional, but the family stays on as large shareholders to monitor the manager. In legal regimes with the weakest protection, the founder designates his heir to manage and ownership remains inside the family. This theory of separation of ownership from management includes the Anglo-Saxon and the Continental European patterns of corporate governance as special cases, and generates additional empirical predictions consistent with cross-country evidence. Creation-Date: 2003 Publication-Status: Published in The Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/30747196/NDL2002-074.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30747196 Template-Type: ReDIF-Paper 1.0 Author-Name: Glaeser, Edward Author-Name: Scheinkman, Jose Author-Name: Shleifer, Andrei Title: The injustice of inequality Abstract: In many countries, the operation of legal, political and regulatory institutions is subverted by the wealthy and the politically powerful for their own benefit. This subversion takes the form of corruption, intimidation, and other forms of influence. We present a model of such institutional subversion – focusing specifically on courts – and of the effects of inequality in economic and political resources on the magnitude of subversion. We then use the model to analyze the consequences of institutional subversion for the law and order environment in the country, as well as for capital accumulation and growth. We illustrate the model with historical evidence from Gilded Age United States and the transition economies of the 1990s. We also present some cross-country evidence consistent with the basic prediction of the model. Creation-Date: 2003 Publication-Status: Published in Journal of Monetary Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/30747194/InequalityJME.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30747194 Template-Type: ReDIF-Paper 1.0 Author-Name: La Porta, Rafael Author-Name: Lopez-de-Silanes, Florencio Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert Title: Investor protection and corporate governance Abstract: Recent research has documented large differences between countries in ownership concentration in publicly traded firms, in the breadth and depth of capital markets, in dividend policies, and in the access of firms to external finance. We suggest that there is a common element to the explanations of these differences, namely how well investors, both shareholders and creditors, are protected by law from expropriation by the managers and controlling shareholders of firms. We describe the differences in laws and the effectiveness of their enforcement across countries, discuss the possible origins of these differences, summarize their consequences, and assess potential strategies of corporate governance reform. We argue that the legal approach is a more fruitful way to understand corporate governance and its reform than the conventional distinction between bank-centered and market-centered financial systems. Creation-Date: 2000 Publication-Status: Published in Journal of Financial Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/29408126/w7428.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:29408126 Template-Type: ReDIF-Paper 1.0 Author-Name: Djankov, S. Author-Name: La Porta, R. Author-Name: Lopez-de-Silanes, F. Author-Name: Shleifer, Andrei Title: Courts: the Lex Mundi Project Abstract: In cooperation with Lex Mundi member law firms in 109 countries, we measure and describe the exact procedures used by litigants and courts to evict a tenant for nonpayment of rent and to collect a bounced check. We use these data to construct an index of procedural formalism of dispute resolution for each country. We find that such formalism is systematically greater in civil than in common law countries, and is associated with higher expected duration of judicial proceedings, less consistency, less honesty, less fairness in judicial decisions, and more corruption. These results suggest that legal transplantation may have led to an inefficiently high level of procedural formalism, particularly in developing countries. Creation-Date: 2003 Publication-Status: Published in The Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/29408123/w8890.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:29408123 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia D. Title: Cliometrics and the Nobel Abstract: In October 1993, the Royal Swedish Academy of Sciences awarded the Nobel Prize in Economics to Robert William Fogel and Douglass Cecil North `for having renewed research in economic history.' The Academy noted that `they were pioneers in the branch of economic history that has been called the þnew economic history,þ or þcliometricsþ.' In this paper I address what this cliometrics is and how these two Nobel Prize winners furthered the discipline of economics. Creation-Date: 1995 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/30703876/jep%2E9%2E2%2E191.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30703876 Template-Type: ReDIF-Paper 1.0 Author-Name: Roth, Alvin E. Title: The origins, history, and design of the resident match Abstract: Creation-Date: 2003 Publication-Status: Published in Journal of the American Medical Association File-URL: http://dash.harvard.edu/bitstream/handle/1/35059715/JAMA.OriginsAndHistoryNRMP.Roth.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:35059715 Template-Type: ReDIF-Paper 1.0 Author-Name: Roth, Alvin E. Author-Name: Niederle, Muriel Title: Relationship Between Wages and Presence of a Match in Medical Fellowships Abstract: Creation-Date: 2003 Publication-Status: Published in Journal of the American Medical Association File-URL: http://dash.harvard.edu/bitstream/handle/1/35059714/JAMA.Niederle.Roth.2003.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:35059714 Template-Type: ReDIF-Paper 1.0 Author-Name: Roth, Alvin E. Author-Name: Niederle, Muriel Title: Unraveling reduces mobility in a labor market: Gastroenterology with and without a centralized match Abstract: The entry-level market for American gastroenterologists was organized by a centralized clearinghouse from 1986 to 1996. Before, and since, it has been conducted via a decentralized market in which appointment dates have unraveled to well over a year before the start of employment. We find that, both before and after the years in which the centralized clearinghouse was used, gastroenterologists are less mobile and more likely to be employed at the same hospital in which they were internal medicine residents than when the clearinghouse was in use. This suggests that the clearinghouse not only coordinates the timing of appointments but also increases the scope of the market, compared to a decentralized market with early appointments. Creation-Date: 2003 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/29408444/gastro.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:29408444 Template-Type: ReDIF-Paper 1.0 Author-Name: Rees, Michael Kenneth Author-Name: Kopke, Jonathan E. Author-Name: Pelletier, Ronald P. Author-Name: Segev, Dorry L. Author-Name: Rutter, Matthew E. Author-Name: Fabrega, Alfredo J. Author-Name: Rogers, Jeffrey David Author-Name: Pankewycz, Oleh G. Author-Name: Hiller, Janet Author-Name: Roth, Alvin E. Author-Name: Sandholm, Tuomas Author-Name: Ünver, M. Utku Author-Name: Montgomery, Robert Armstrong Title: A Nonsimultaneous, Extended, Altruistic-Donor Chain Abstract: We report a chain of 10 kidney transplantations, initiated in July 2007 by a single altruistic donor (i.e., a donor without a designated recipient) and coordinated over a period of 8 months by two large paired-donation registries. These transplantations involved six transplantation centers in five states. In the case of five of the transplantations, the donors and their coregistered recipients underwent surgery simultaneously. In the other five cases, “bridge donors” continued the chain as many as 5 months after the coregistered recipients in their own pairs had received transplants. This report of a chain of paired kidney donations, in which the transplantations were not necessarily performed simultaneously, illustrates the potential of this strategy. Creation-Date: 2009 Publication-Status: Published in New England Journal of Medicine File-URL: http://dash.harvard.edu/bitstream/handle/1/29408291/Rees%20etal%20NEJM%202009.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:29408291 Template-Type: ReDIF-Paper 1.0 Author-Name: Chetty, Raj Author-Name: Hendren, Nathaniel Author-Name: Katz, Lawrence F. Title: The Effects of Exposure to Better Neighborhoods on Children: New Evidence from the Moving to Opportunity Experiment Abstract: The Moving to Opportunity (MTO) experiment offered randomly selected families housing vouchers to move from high-poverty housing projects to lower-poverty neighborhoods. We analyze MTO's impacts on children's long-term outcomes using tax data. We find that moving to a lower-poverty neighborhood when young (before age 13) increases college attendance and earnings and reduces single parenthood rates. Moving as an adolescent has slightly negative impacts, perhaps because of disruption effects. The decline in the gains from moving with the age when children move suggests that the duration of exposure to better environments during childhood is an important determinant of children's long-term outcomes. Creation-Date: 2016 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/30367426/46646672.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30367426 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia D. Title: The historical evolution of female earnings functions and occupations Abstract: Of all the changes in the history of women's market work, few have been more impressive than the rapid emergence and feminization of the clerical sector and the related decline in manufacturing employment for women. Although a century ago few women were clerical workers, as early as 1920 22% of all employed non-farm women were, and about 50% of all clerical workers were women. Employment for women in the clerical sector expanded at five times the annual rate in manufacturing from 1890 to 1930, and during the same period of time wages for female clerical workers fell relative to those in manufacturing. This paper explores the underlying causes of these dramatic sectoral shifts by estimating the relationship between earnings and experience for manufacturing and clerical workers from 1888 to 1940. It is seen that earnings profiles for employment in manufacturing rose steeply with experience and peaked early, while those in the clerical sector were much flatter and did not peak within the relevant range. Returns to off-job training and depreciation with age and with time away from the labor force also differed between these occupations. A model of sectoral shift is developed in which workers choose occupations and therefore the time path of training on the basis of their life-cycle labor force participation and their consumption value of education. The coefficients from the earnings function estimations are used to demonstrate that the decline in the relative wage of clerical to manufacturing work from 1890 to 1930 can be explained by such a model, Finally, it is shown that a sizable percentage of the difference in the growth of female employment in the manufacturing and clerical sectors can be explained by various labor supply factors. Creation-Date: 1984 Publication-Status: Published in Explorations in Economic History File-URL: http://dash.harvard.edu/bitstream/handle/1/30703975/w0529.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30703975 Template-Type: ReDIF-Paper 1.0 Author-Name: Gennaioli, Nicola Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert Title: Neglected Risks: The Psychology of Financial Crises Abstract: Creation-Date: 2015 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/33077926/neglectedrisks.aer2015.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33077926 Template-Type: ReDIF-Paper 1.0 Author-Name: Schwartzstein, Joshua Author-Name: Shleifer, Andrei Title: An Activity-Generating Theory of Regulation Abstract: We propose an activity-generating theory of regulation. When courts make errors, tort litigation becomes unpredictable and as such imposes risk on firms, thereby discouraging entry, innovation, and other socially desirable activity. When social returns to activity are higher than private returns, it may pay the society to generate some information ex ante about how risky firms are and to impose safety standards based on that information. In some situations, compliance with such standards should entirely preempt tort liability; in others, it should merely reduce penalties. By reducing litigation risk, this type of regulation can raise welfare. Creation-Date: 2013 Publication-Status: Published in The Journal of Law and Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/27814564/ActivityGenerating.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27814564 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, P Author-Name: Bloom, N. Author-Name: Van Reenen, J. Title: Incomplete Contracts and the Internal Organization of Firms Abstract: We survey the theoretical and empirical literature on decentralization within firms. We first discuss how the concept of incomplete contracts shapes our views about the organization of decision-making. We then overview the empirical evidence on the determinants of decentralization and on the effects of decentralization on firm performance. A number of factors highlighted in the theory are shown to be important in accounting for delegation, such as heterogeneity and congruence of preferences as proxied by trust. Empirically, competition, human capital, and IT also appear to foster decentralization. There are substantial gaps between theoretical and empirical work and we suggest avenues for future research in bridging this gap Creation-Date: 2013 Publication-Status: Published in Journal of Law, Economics, and Organization File-URL: http://dash.harvard.edu/bitstream/handle/1/30752801/Incomplete%20Contracts.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30752801 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Askenazy, Philippe Author-Name: Bourlès, Renaud Author-Name: Cette, Gilbert Author-Name: Dromel, Nicolas Title: Education, market rigidities and growth Abstract: This paper investigates the effects of the education level, product market rigidities and employment protection legislation on growth. It exploits macro-panel data for OECD countries. For countries close to the technological frontier, education and rigidities are significantly related to TFP growth. The contribution of the interaction between product market regulation and labour market rigidity seems particularly substantial. Creation-Date: 2009 Publication-Status: Published in Economics Letters File-URL: http://dash.harvard.edu/bitstream/handle/1/30752414/EDUCATION,%20MARKET%20RIGIDITIES%20AND%20GROWTH.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30752414 Template-Type: ReDIF-Paper 1.0 Author-Name: Djankov, Simeon Author-Name: Glaeser, Edward Author-Name: La Porta, Rafael Author-Name: Lopez-de-Silanes, Florencio Author-Name: Shleifer, Andrei Title: The new comparative economics Abstract: In recent years, comparative economics experienced a revival, with a new focus on comparing capitalist economies. The transition from socialism, the Asian financial crisis, and the European economic and political integration, have challenged our understanding of how capitalist economies and societies work. Capitalist economies differ in important ways in how they regulate market activities, including the extent of public ownership, regulation of social harms and externalities, contract enforcement, modes of dispute resolution, etc. Capitalist countries also differ in how they regulate political competition, including the structure of electoral systems, the nature of checks and balances, legal procedures, and so on. These institutional differences among countries are both highly systematic, and have important consequences of economic and social outcomes. As an important example, the historical origin of a country’s legal system has proved to be a crucial factor shaping institutions. A growing body of theoretical and empirical research documents and analyzes how history as well as current conditions shape institutions. This research -- which we call the new comparative economics -- helps explain many differences in performance, and informs the design of economic and political reforms. Creation-Date: 2003 Publication-Status: Published in Journal of Comparative Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/28652214/Schleifer.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:28652214 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert W. Title: A Survey of Corporate Governance Abstract: This paper surveys research on corporate governance, with special attention to the importance of legal protection of investors and of ownership concentration in corporate governance systems around the world. Creation-Date: 1997 Publication-Status: Published in The Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/30728046/w5554.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30728046 Template-Type: ReDIF-Paper 1.0 Author-Name: Gennaioli, N. Author-Name: Shleifer, Andrei Author-Name: Vishny, R. Title: Finance and the Preservation of Wealth Abstract: We introduce the model of asset management developed in Gennaioli, Shleifer, and Vishny (2012) into a Solow-style neoclassical growth model with diminishing returns to capital. Savers rely on trusted intermediaries to manage their wealth (claims on capital stock), who can charge fees above costs to trusting investors. In this model, the size of the financial sector rises with aggregate wealth, and wealth grows relative to GDP. As a consequence, the ratio of financial income to GDP rises over time, even though fees for given financial services decline. Because the size of the financial sector fluctuates with changes in investor trust, the model can account for the sharp decline of finance in the Great Depression, as well as its slow recovery afterwards. Entry by financial intermediaries as wealth increased in recent years may have further deepened investor trust and encouraged growth of financial income. Creation-Date: 2014 Publication-Status: Published in The Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/27814562/w19117.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27814562 Template-Type: ReDIF-Paper 1.0 Author-Name: De Long, J. Bradford Author-Name: Shleifer, Andrei Title: The stock market bubble of 1929: evidence from closed-end mutual funds Abstract: The sharp rise and subsequent crash of stock prices in 1929 is perhaps the most striking episode in the history of American financial markets. The nominal S & P composite index rose sixty-four percent from January 1928 to September 1929, fell thirty-three percent from September 1929 to December 1929, recovered about halfway to its 1929 peak, and then fell again to a low point in the summer of 1932 sixty-six percent below its December 1929 level and seventy-seven percent below its September 1929 average (see figure 1). Creation-Date: 1991 Publication-Status: Published in J. Eco. History File-URL: http://dash.harvard.edu/bitstream/handle/1/30703980/bubble_1929.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30703980 Template-Type: ReDIF-Paper 1.0 Author-Name: Lopez-de-Salanes, Florencio Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert Title: Privatization in the United States Abstract: In the United States, the two principal modes of producing local government services are inhouse provision by government employees and contracting out to private suppliers, also known as privatization. We examine empirically how United States counties choose their mode of providing services. The evidence indicates that state clean-governance laws and state restricting county spending encourage privatization, whereas strong public unions discourage it. The evidence is inconsistent with the view that efficiency considerations along govern the provision mode, and points to the important roles played by political patronage and taxpayer resistance to government spending in the privatization decision. Creation-Date: 1997 Publication-Status: Published in RAND Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/30727606/w5113.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30727606 Template-Type: ReDIF-Paper 1.0 Author-Name: Gennaioli, Nicola Author-Name: Shleifer, Andrei Title: Overruling and the instability of law Abstract: We investigate the evolution of common law under overruling, a system of precedent change in which appellate courts replace existing legal rules with new ones. We use a legal realist model, in which judges change the law to reflect their own preferences or attitudes, but changing the law is costly to them. The model's predictions are consistent with the empirical evidence on the overruling behavior of the U.S. Supreme Court and appellate courts. We find that overruling leads to unstable legal rules that rarely converge to efficiency. The selection of disputes for litigation does not change this conclusion. Our findings provide a rationale for the value of precedent, as well as for the general preference of appellate courts for distinguishing rather than overruling as a law-making strategy. Creation-Date: 2007 Publication-Status: Published in Journal of Comparative Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/27867133/w12913.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27867133 Template-Type: ReDIF-Paper 1.0 Author-Name: Bordalo, Pedro Author-Name: Gennaioli, Nicola Author-Name: Shleifer, Andrei Title: Salience and Consumer Choice Abstract: We present a theory of context-dependent choice in which a consumer’s attention is drawn to salient attributes of goods, such as quality or price. An attribute is salient for a good when it stands out among the good’s attributes relative to that attribute’s average level in the choice set (or, more broadly, the choice context). Consumers attach disproportionately high weight to salient attributes, and their choices are tilted toward goods with higher quality/price ratios. The model accounts for a variety of disparate evidence, including decoy effects and contextdependent willingness to pay. It also suggests a novel theory of misleading sales. Creation-Date: 2013 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/27814563/pdf_1.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27814563 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Author-Name: Treisman, Daniel Title: Why Moscow Says No: A Question of Russian Interests, Not Psychology Abstract: Creation-Date: 2011 Publication-Status: Published in Foreign Affairs File-URL: http://dash.harvard.edu/bitstream/handle/1/27867127/shleifertreismansept282010fa.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27867127 Template-Type: ReDIF-Paper 1.0 Author-Name: Glaeser, Edward Ludwig Author-Name: Shleifer, Andrei Title: Not-for-profit entrepreneurs Abstract: Entrepreneurs who start new firms may choose not-for-profit status as a means of committing to soft incentives. Such incentives protect donors, volunteers, consumers and employees from ex post expropriation of profits by the entrepreneur. We derive conditions under which completely self-interested entrepreneurs opt for not-for-profit status, despite the fact that this status limits their ability to enjoy the profits of their enterprises. When entrepreneurs have a taste for producing high quality products, the incentives are even stronger, and moreover, non-profit status can serve as a signal of that taste. We also show that even in the absence of tax advantages, unrestricted donations would flow to non-profits rather than for-profit firms because donations have more significant influence of the decisions of the non-profits. Creation-Date: 2001 Publication-Status: Published in Journal of Public Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/33078971/w6810.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33078971 Template-Type: ReDIF-Paper 1.0 Author-Name: Hart, Oliver D. Author-Name: Shleifer, Andrei Author-Name: Vishny, R. W. Title: The Proper Scope of Government: Theory and an Application to Prisons Abstract: When should a government provide a service inhouse and when should it contract out provision? We develop a model in which the provider can invest in improving the quality of service or reducing cost, If contracts are incomplete, the private provider has a stronger incentive to engage in both quality improvement and cost reduction than a government employee. However, the private contractor’s incentive to engage in cost reduction is typically too strong because he ignores the adverse effect on non-contractible quality. The model is applied to understanding the costs and benefits of prison privatization. Creation-Date: 1997 Publication-Status: Published in The Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/30727607/w5744.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30727607 Template-Type: ReDIF-Paper 1.0 Author-Name: Chetty, Nadarajan Author-Name: Friedman, John Author-Name: Rockoff, Jonah E. Title: Measuring the Impacts of Teachers I: Evaluating Bias in Teacher Value-Added Estimates Abstract: Are teachers' impacts on students' test scores ("value-added") a good measure of their quality? One reason this question has sparked debate is disagreement about whether value-added (VA) measures provide unbiased estimates of teachers' causal impacts on student achievement. We test for bias in VA using previously unobserved parent characteristics and a quasi-experimental design based on changes in teaching staff. Using school district and tax records for more than one million children, we find that VA models which control for a student's prior test scores exhibit little bias in forecasting teachers' impacts on student achievement. Creation-Date: 2014 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/30749073/w19423.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30749073 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Y. Title: Restoring Rational Choice: The Challenge of Consumer Financial Regulation Abstract: This lecture considers the case for consumer financial regulation in an environment where many households lack the knowledge to manage their financial affairs effectively. The lecture argues that financial ignorance is pervasive and unsurprising given the complexity of modern financial products, and that it contributes meaningfully to the evolution of wealth inequality. The lecture uses a stylized model to discuss the welfare economics of paternalistic intervention in financial markets, and discusses several specific examples including asset allocation in retirement savings, fees for unsecured short-term borrowing, and reverse mortgages. Creation-Date: 2016 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/27413770/ElyLecture_March2016.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/27413770/ElyLecture_March2016.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27413770 Template-Type: ReDIF-Paper 1.0 Author-Name: Chetty, Nadarajan Author-Name: Guren, Adam Author-Name: Manoli, Day Author-Name: Weber, Andrea Title: Does Indivisible Labor Explain the Difference between Micro and Macro Elasticities? A Meta-Analysis of Extensive Margin Elasticities Abstract: Macroeconomic calibrations imply much larger labor supply elasticities than microeconometric studies. One prominent explanation for this divergence is that indivisible labor generates extensive margin responses that are not captured in micro studies of hours choices. We evaluate whether existing calibrations of macro models are consistent with micro evidence on extensive margin responses using two approaches. First, we use a standard calibrated macro model to simulate the impacts of tax policy changes on labor supply. Second, we present a metaanalysis of quasi-experimental estimates of extensive margin elasticities. We find that micro estimates are consistent with macro evidence on the steady-state (Hicksian) elasticities relevant for cross-country comparisons. However, micro estimates of extensive-margin elasticities are an order of magnitude smaller than the values needed to explain business cycle fluctuations in aggregate hours. Hence, indivisible labor supply does not explain the large gap between micro and macro estimates of intertemporal substitution (Frisch) elasticities. Our synthesis of the micro evidence points to Hicksian elasticities of 0.3 on the intensive and 0.25 on the extensive margin and Frisch elasticities of 0.5 on the intensive and 0.25 on the extensive margin. Creation-Date: 2013 Publication-Status: Published in NBER Macroeconomics Annual File-URL: http://dash.harvard.edu/bitstream/handle/1/27304826/ext_margin.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27304826 Template-Type: ReDIF-Paper 1.0 Author-Name: La Porta, Rafael Author-Name: Lopez-de-Silanes, Florencio Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert W Title: Trust in Large Organizations Abstract: Several authors suggest that trust is an important determinant of cooperation between strangers in a society, and therefore of performance of social institutions. We argue that trust should be particularly important for the performance of large organizations. In a cross-section of countries, evidence on government performance, participation in civic and professional societies, importance of large firms, and the performance of social institution more generally supports this hypothesis. Moreover, trust is lower in countries with dominant hierarchical religions, which may have deterred "horizontal networks of cooperation" between people. In sum, theories of trust hold up remarkable well on a cross-section of countries. Creation-Date: 1997 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/30726298/w5864.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30726298 Template-Type: ReDIF-Paper 1.0 Author-Name: Frye, Timothy Author-Name: Shleifer, Andrei Title: The Invisible Hand and the Grabbing Hand. Abstract: Evidence from a survey of 105 shop-owners in Moscow and Warsaw shows that the reliance on private protection, as well as the burden of regulation and corruption, are much greater in Moscow. The evidence suggests that the "invisible hand" model of government better fits the Warsaw local government, and the "grabbing hand" model is more appropriate for Moscow. The evidence implies that the singular focus on the speed of economic reforms to understand the success of transition is misplaced, and that the quality of government may be as essential. Creation-Date: 1997 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/30725664/w5856.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30725664 Template-Type: ReDIF-Paper 1.0 Author-Name: Tamer, Elie Author-Name: Kline, Brendan Title: Bayesian inference in a class of partially identified models Abstract: This paper develops a Bayesian approach to inference in a class of partially identified econometric models. Models in this class are characterized by a known mapping between a point identified reduced-form parameter µ, and the identified set for a partially identified parameter θ. The approach maps posterior inference about µ to various posterior inference statements concerning the identified set for θ, without the specification of a prior for θ. Many posterior inference statements are considered, including the posterior probability that a particular parameter value (or a set of parameter values) is in the identified set. The approach applies also to functions of θ. The paper develops general results on large sample approximations, which illustrate how the posterior probabilities over the identified set are revised by the data, and establishes conditions under which the Bayesian credible sets also are valid frequentist confidence sets. The approach is computationally attractive even in high-dimensional models, in that the approach avoids an exhaustive search over the parameter space. The performance of the approach is illustrated via Monte Carlo experiments and an empirical application to a binary entry game involving airlines. Creation-Date: 2016 Publication-Status: Published in Quantitative Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/30780157/24111006.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30780157 Template-Type: ReDIF-Paper 1.0 Author-Name: Deming, David James Author-Name: Goldin, Claudia D. Author-Name: Katz, Lawrence F. Author-Name: Yuchtman, Noam Title: Can Online Learning Bend the Higher Education Cost Curve? Abstract: We examine whether online learning technologies have led to lower prices in higher education. Using data from the Integrated Postsecondary Education Data System, we show that online education is concentrated in large for-profit chains and less-selective public institutions. Colleges with a higher share of online students charge lower tuition prices. We present evidence that real and relative prices for full-time undergraduate online education declined from 2006 to 2013. Although the pattern of results suggests some hope that online technology can “bend the cost curve” in higher education, the impact of online learning on education quality remains uncertain. Creation-Date: 2015 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/27725247/32142728.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27725247 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Saint-Paul, Gilles Title: Uncovering Some Causal Relationships Between Productivity Growth and the Structure of Economic Fluctuations: A Tentative Survey Abstract: This paper discusses recent theoretical and empirical work on the interactions between growth and business cycles. One may distinguish two very different types of approaches to the problem of the influence of macroeconomic fluctuations on long-run growth. In the first type of approach, which relies on learning by doing mechanisms or aggregate demand externalities, productivity growth and direct production activities are complements. An expansion therefore has a positive long-run effect on total factor productivity. In the second type of approach, hereafter labeled 'opportunity cost or 'learning-by-doing', productivity growth and production activities are substitutes. The opportunity cost of some productivity improving activities falls in a recession, which has a long-run positive impact on output. This does not mean, however, that recessions should on average last longer or be more frequent, since the expectation of future recessions reduces today's incentives for productivity growth. We also briefly discuss some empirical work which is mildly supportive of the opportunity cost approach, while showing that it can be reconciled with the observed pro-cyclical behavior of measured total factor productivity. We also describe some theoretical work on the effects of growth on business cycles. Creation-Date: 1998 Publication-Status: Published in Labour File-URL: http://dash.harvard.edu/bitstream/handle/1/30752799/SSRN-id253135.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30752799 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Author-Name: Treisman, Daniel Title: A Normal Country: Russia After Communism Abstract: Creation-Date: 2005 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/33078568/normjepoct06.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33078568 Template-Type: ReDIF-Paper 1.0 Author-Name: La Porta, Rafael Author-Name: Lopez-de-Silanes, Florencio Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert W. Title: Agency Problems and Dividend Policies around the World Abstract: This paper outlines and tests two agency models of dividends. According to the “outcome” model, dividends are the result of effective pressure by minority shareholders to force corporate insiders to disgorge cash. According to the “substitute” model, insiders interested in issuing equity in the future choose to pay dividends to establish a reputation for decent treatment of minority shareholders. The first model predicts that stronger minority shareholder rights should be associated with higher dividend payouts; the second model predicts the opposite. Tests on a cross-section of 4,000 companies from 33 countries with different levels of minority shareholder rights support the outcome agency model of dividends. Creation-Date: 2000 Publication-Status: Published in The Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/30747163/Agency_Problems.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30747163 Template-Type: ReDIF-Paper 1.0 Author-Name: La Porta, Rafael Author-Name: Lopez-De-Silanes, Florencio Author-Name: Shleifer, Andrei Title: Corporate Ownership Around the World Abstract: We present data on ownership structures of large corporations in 27 wealthy economies, making an effort to identify ultimate controlling shareholders of these firms. We find that, except in economies with very good shareholder protection, relatively few of these firms are widely-held, in contrast to the Berle and Means image of ownership of the modern corporation. Rather, these firms are typically controlled by families of the State. Equity control by financial institutions of other widely-held corporations is less common. The controlling shareholders typically have the power over firms significantly in excess of their cash flow rights, primarily through the use of pyramids and participation in management. The results suggest that the principal agency problem in large corporations around the world is that of restricting expropriation of minority shareholders by the controlling shareholders, rather than that of restricting empire building by professional managers unaccountable to shareholders. Creation-Date: 1999 Publication-Status: Published in The Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/30747162/w6625.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30747162 Template-Type: ReDIF-Paper 1.0 Author-Name: La Porta, Rafael Author-Name: Shleifer, Andrei Title: The Unofficial Economy and Economic Development Abstract: In developing countries, informal firms account for up to about half of all economic activity. Using data from World Bank firm-level surveys, we find that informal firms are small and extremely unproductive compared with even the small formal firms in the sample, and especially relative to the larger formal firms. Formal firms are run by much better educated managers than informal ones and use more capital, have different customers, market their products, and use more external finance. Few formal firms have ever operated informally. This evidence supports the dual economy (“Wal-Mart”) theory of development, in which growth comes about from the creation of highly productive formal firms. Informal firms keep millions of people alive but disappear as the economy develops. Creation-Date: 2008 Publication-Status: Published in Brookings Papers on Economic Activity File-URL: http://dash.harvard.edu/bitstream/handle/1/33078210/unofficial_economy_brookings_2008.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33078210 Template-Type: ReDIF-Paper 1.0 Author-Name: Aghion, Philippe Author-Name: Askenazy, Philippe Author-Name: Berman, Nicolas Author-Name: Cette, Gilbert Author-Name: Eymard, Laurent Title: Credit Constraints and the Cyclicality of R&D Investment: Evidence from France Abstract: We use a French firm-level panel data set over the period 1993-2004 to analyze the relationship between credit constraints and firms' R&D behavior over the business cycle. Our main results can be summarized as follows: (i) the share of R&D investment over total investment is countercyclical without credit constraints, but it becomes more procyclical as firms face tighter credit constraints; (ii) the result is magnified for firms in sectors that depend more heavily upon external finance; (iii) in more credit constrained firms, R&D investment share plummets during recessions but does not increase proportionally during upturns; (iv) average R&D investment and productivity growth are more negatively correlated with sales volatility in more credit constrained firms. Creation-Date: 2012 Publication-Status: Published in Journal of the European Economic Association File-URL: http://dash.harvard.edu/bitstream/handle/1/30752812/credit_constraints_and_cyclicality.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30752812 Template-Type: ReDIF-Paper 1.0 Author-Name: Mulligan, C. B. Author-Name: Shleifer, Andrei Title: Conscription as Regulation Abstract: We examine the practice of military conscription around the world from the perspective of two standard theories, and a new one, which emphasizes the fixed cost of introducing and administering the draft as a deterrent to its use. We find that, holding the relative size of the military constant, higher population countries are more likely to use the draft. We also find that French legal origin countries, which we see as facing lower fixed and variable administrative costs, are more likely to draft than are common law countries. Conscription does not seem to be influenced by democracy, and is influenced by the deadweight costs of taxation only in countries with very large militaries. The results suggest that fixed costs of introducing and administering new regulations may be an important determinant of their use. Creation-Date: 2005 Publication-Status: Published in American Law and Economics Review File-URL: http://dash.harvard.edu/bitstream/handle/1/27867136/w10558.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27867136 Template-Type: ReDIF-Paper 1.0 Author-Name: Chetty, Nadarajan Author-Name: Hendren, Nathaniel Author-Name: Kline, Patrick Author-Name: Saez, Emmanuel Title: Where is the land of Opportunity? The Geography of Intergenerational Mobility in the United States Abstract: We use administrative records on the incomes of more than 40 million children and their parents to describe three features of intergenerational mobility in the United States. First, we characterize the joint distribution of parent and child income at the national level. The conditional expectation of child income given parent income is linear in percentile ranks. On average, a 10 percentile increase in parent income is associated with a 3.4 percentile increase in a child’s income. Second, intergenerational mobility varies substantially across areas within the United States. For example, the probability that a child reaches the top quintile of the national income distribution starting from a family in the bottom quintile is 4.4% in Charlotte but 12.9% in San Jose. Third, we explore the factors correlated with upward mobility. High mobility areas have (i) less residential segregation, (ii) less income inequality, (iii) better primary schools, (iv) greater social capital, and (v) greater family stability. Although our descriptive analysis does not identify the causal mechanisms that determine upward mobility, the publicly available statistics on intergenerational mobility developed here can facilitate research on such mechanisms. Creation-Date: 2014 Publication-Status: Published in The Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/30750027/mobility_geo.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30750027 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Author-Name: La Porta, Rafael Author-Name: Lopez-De-Silanes, Florencio Author-Name: Vishny, Robert W. Title: Legal Determinants of External Finance Abstract: Using a sample of 49 countries, we show that countries with poorer investor protections, measured by both the character of legal rules and the quality of law enforcement, have smaller and narrower capital markets. These findings apply to both equity and debt markets. In particular, French civil law countries have both the weakest investor protections and the least developed capital markets, especially as compared to common law countries. Creation-Date: 1997 Publication-Status: Published in The Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/30728041/w5879.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30728041 Template-Type: ReDIF-Paper 1.0 Author-Name: Gennaioli, N. Author-Name: Shleifer, Andrei Title: What Comes to Mind Abstract: We present a model of judgment under uncertainty, in which an agent combines data received from the external world with information retrieved from memory to evaluate a hypothesis. We focus on what comes to mind immediately, as the agent makes quick, intuitive evaluations. Because the automatic retrieval of data from memory is both limited and selected, the agent's evaluations may be severely biased. This framework can account for some of the evidence on heuristics and biases presented by Kahneman and Tversky, including conjunction and disjunction fallacies. Creation-Date: 2010 Publication-Status: Published in The Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/27867129/w15084.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27867129 Template-Type: ReDIF-Paper 1.0 Author-Name: Rand, David Gertler Author-Name: Fudenberg, Drew Author-Name: Dreber, Anna Title: It's the thought that counts: The role of intentions in noisy repeated games Abstract: We examine cooperation in repeated interactions where intended actions are implemented with noise but intentions are perfectly observable. Observable intentions lead to more cooperation compared to control games where intentions are unobserved, allowing subjects to reach similar cooperation levels as in games without noise. Most subjects condition exclusively on intentions, and use simpler, lower-memory strategies compared to games where intentions are unobservable. When the returns to cooperation are high, some subjects are tolerant, using good outcomes to forgive attempted defections; when the returns to cooperation are low, some subjects are punitive, using bad outcomes to punish accidental defections. Creation-Date: 2015 Publication-Status: Published in Journal of Economic Behavior & Organization File-URL: http://dash.harvard.edu/bitstream/handle/1/27304431/its_the_thought_that_counts_0.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27304431 Template-Type: ReDIF-Paper 1.0 Author-Name: Glaeser, Edward Ludwig Author-Name: Shleifer, Andrei Title: The Curley Effect: The Economics of Shaping the Electorate Abstract: James Michael Curley, a four-time mayor of Boston, used wasteful redistribution to his poor Irish constituents and incendiary rhetoric to encourage richer citizens to emigrate from Boston, thereby shaping the electorate in his favor. Boston as a consequence stagnated, but Curley kept winning elections. We present a model of the Curley effect, in which inefficient redistributive policies are sought not by interest groups protecting their rents, but by incumbent politicians trying to shape the electorate through emigration of their opponents or reinforcement of class identities. The model sheds light on ethnic politics in the United States and abroad, as well as on class politics in many countries including Britain. Creation-Date: 2005 Publication-Status: Published in Journal of Law, Economics, and Organization File-URL: http://dash.harvard.edu/bitstream/handle/1/27867137/w8942.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27867137 Template-Type: ReDIF-Paper 1.0 Author-Name: Glaeser, Edward L. Author-Name: La Porta, Rafael Author-Name: Lopez-de-Silanes, Florencio Author-Name: Shleifer, Andrei Title: Do Institutions Cause Growth? Abstract: We revisit the debate over whether political institutions cause economic growth, or whether, alternatively, growth and human capital accumulation lead to institutional improvement. We find that most indicators of institutional quality used to establish the proposition that institutions cause growth are constructed to be conceptually unsuitable for that purpose. We also find that some of the instrumental variable techniques used in the literature are flawed. Basic OLS results, as well as a variety of additional evidence, suggest that a) human capital is a more basic source of growth than are the institutions, b) poor countries get out of poverty through good policies, often pursued by dictators, and c) subsequently improve their political institutions. Creation-Date: 2004 Publication-Status: Published in Journal of Economic Growth File-URL: http://dash.harvard.edu/bitstream/handle/1/27867242/w10568.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27867242 Template-Type: ReDIF-Paper 1.0 Author-Name: Cellini, Stephanie Riegg Author-Name: Goldin, Claudia D. Title: Does Federal Student Aid Raise Tuition? New Evidence on For-Profit Colleges Abstract: We use administrative data from five states to provide the first comprehensive estimates of the size of the for-profit higher education sector in the U.S. Our estimates include schools that are not currently eligible to participate in federal student aid programs under Title IV of the Higher Education Act and are therefore missed in official counts. We find that the number of for-profit institutions is double the official count and the number of students enrolled during the year is between one-quarter and one-third greater. Many for-profit institutions that are not Title IV eligible offer certificate (non-degree) programs that are similar, if not identical, to those given by institutions that are Title IV eligible. We find that the Title IV institutions charge tuition that is about 78 percent higher than that charged by comparable institutions whose students cannot apply for federal financial aid. The dollar value of the premium is about equal to the amount of grant aid and loan subsidy received by students in eligible institutions, lending some credence to a variant of the "Bennett hypothesis" that aid-eligible for-profit institutions capture a large part of the federal student aid subsidy. Creation-Date: 2014 Publication-Status: Published in American Economic Journal: Economic Policy File-URL: http://dash.harvard.edu/bitstream/handle/1/27769883/SSRN-id2002579.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27769883 Template-Type: ReDIF-Paper 1.0 Author-Name: Chen, Yujiao Author-Name: Malkawi, Ali Author-Name: Liu, Zhu Author-Name: Freeman, Richard Barry Author-Name: Tong, Zheming Title: Energy Saving Potential of Natural Ventilation in China: The Impact of Ambient Air Pollution Abstract: Natural ventilation (NV) is a key sustainable solution for reducing the energy use in buildings, improving thermal comfort, and maintaining a healthy indoor environment. However, the energy savings and environmental benefits are affected greatly by ambient air pollution in China. Here we estimate the NV potential of all major Chinese cities based on weather, ambient air quality, building configuration, and newly constructed square footage of office buildings in the year of 2015. In general, little NV potential is observed in northern China during the winter and southern China during the summer. Kunming located in the Southwest China is the most weather-favorable city for natural ventilation, and reveals almost zero loss due to air pollution. Building Energy Simulation (BES) is conducted to estimate the energy savings of natural ventilation in which ambient air pollution and total square footage must be taken into account. Beijing, the capital city, displays limited per-square-meter saving potential due to the unfavorable weather and air quality for natural ventilation, but its largest total square footage of office buildings makes it become the city with the greatest energy saving opportunity in China. Our analysis shows that the aggregated energy savings potential of office buildings at 35 major Chinese cities is 112 GWh in 2015, even after allowing for a 43 GWh loss due to China’s serious air pollution issue especially in North China. 8–78% of the cooling energy consumption can be potentially reduced by natural ventilation depending on local weather and air quality. The findings here provide guidelines for improving current energy and environmental policies in China, and a direction for reforming building codes. Creation-Date: 2016 Publication-Status: Published in Applied Energy File-URL: http://dash.harvard.edu/bitstream/handle/1/27733689/Energy_saving_potential_of_natural_ventilation_in_China_MS-almost-final_Tong-Chen-Malkawi-Liu-Freeman_Applied_Energy_2016.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27733689 Template-Type: ReDIF-Paper 1.0 Author-Name: Bates, Brandon J. Author-Name: Plagborg-Møller, Mikkel Author-Name: Stock, James H. Author-Name: Watson, Mark W. Title: Consistent Factor Estimation in Dynamic Factor Models with Structural Instability Abstract: This paper considers the estimation of approximate dynamic factor models when there is temporal instability in the factor loadings. We characterize the type and magnitude of instabilities under which the principal components estimator of the factors is consistent, and find that these instabilities can be larger than earlier theoretical calculations suggest. We further characterize the rate of convergence of the estimated factors as a function of the magnitude of the time variation in the factor loadings for general types of parameter instability, and provide numerical evidence that this consistency rate is tight in the special case of random walk parameter variation. We also discuss implications of these results for the robustness of regressions based on the estimated factors and of estimates of the number of factors in the presence of parameter instability. Creation-Date: 2013 Publication-Status: Published in Journal of Econometrics File-URL: http://dash.harvard.edu/bitstream/handle/1/28469786/consistentfactorestimation.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:28469786 Template-Type: ReDIF-Paper 1.0 Author-Name: Stock, James H. Author-Name: Watson, Mark Title: Dynamic Factor Models Abstract: This article surveys work on a class of models, dynamic factor models (DFMs), that has received considerable attention in the past decade because of their ability to model simultaneously and consistently data sets in which the number of series exceeds the number of time series observations. The aim of this survey is to describe the key theoretical results, applications, and empirical findings in the recent literature on DFMs. The article is organized as follows. The first issue at hand for the econometrician is to estimate the factors and to ascertain how many factors there are; these two topics are covered in Sections 2 and 3. Once one has reliable estimates of the factors, there are a number of things one can do with them beyond using them for forecasting, including using them as instrumental variables, estimating factor-augmented vector autoregressions, and estimating dynamic stochastic general equilibrium models; these applications are covered in Section 4. Section 5 discusses some extensions. Creation-Date: 2011 Publication-Status: Published in Oxford Handbooks Online File-URL: http://dash.harvard.edu/bitstream/handle/1/28469541/dynamicfactormodels_0_0.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:28469541 Template-Type: ReDIF-Paper 1.0 Author-Name: Stock, James H. Author-Name: Watson, Mark Title: The Evolution of National and Regional Factors in U.S. Housing Construction Abstract: This paper presents and describes a newly available data set on monthly building permits for U.S. states from 1969-2007. These data are used to estimate regions of common housing construction activity. Building permits exhibit substantial comovement across states, and these comovements are modeled as being associated with a national factor, a regional factor, and a state-specific disturbance. When stochastic volatility is added to this state building permit dynamic factor model, the decline in the volatility in state permits is found to be associated with a sharp decline in the mid-1980s in the volatility of the national factor and with a slow, steady decline in the volatility of the state-specific component, with these two sources contributing approximately equally for a typical state. The timing of the sharp reduction in volatility of the national component coincides with break dates previously identified for the Great Moderation in U.S. economic activity. Creation-Date: 2008 Publication-Status: Published in Volatility and Time Series Econometrics File-URL: http://dash.harvard.edu/bitstream/handle/1/28468706/evolutionnationalregionalfactors_0.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:28468706 Template-Type: ReDIF-Paper 1.0 Author-Name: Stock, James H. Author-Name: Watson, Mark Title: Heteroskedasticity-Robust Standard Errors for Fixed Effects Panel Data Regression Abstract: The conventional heteroskedasticity-robust (HR) variance matrix estimator for cross-sectional regression (with or without a degrees-of-freedom adjustment), applied to the fixed-effects estimator for panel data with serially uncorrelated errors, is inconsistent if the number of time periods T is fixed (and greater than 2) as the number of entities n increases. We provide a bias-adjusted HR estimator that is √nT-consistent under any sequences (n T ) in which n and/or T increase to ∞. This estimator can be extended to handle serial correlation of fixed order. Creation-Date: 2008 Publication-Status: Published in Econometrica File-URL: http://dash.harvard.edu/bitstream/handle/1/28461843/heteroskedasticity-robust_standard_errors_for_fixed_effects_regression.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:28461843 Template-Type: ReDIF-Paper 1.0 Author-Name: Kaufmann, R. K. Author-Name: Kauppi, H. Author-Name: Mann, M. L. Author-Name: Stock, James H. Title: Reconciling anthropogenic climate change with observed temperature 1998–2008 Abstract: Given the widely noted increase in the warming effects of rising greenhouse gas concentrations, it has been unclear why global surface temperatures did not rise between 1998 and 2008. We find that this hiatus in warming coincides with a period of little increase in the sum of anthropogenic and natural forcings. Declining solar insolation as part of a normal eleven-year cycle, and a cyclical change from an El Nino to a La Nina dominate our measure of anthropogenic effects because rapid growth in short-lived sulfur emissions partially offsets rising greenhouse gas concentrations. As such, we find that recent global temperature records are consistent with the existing understanding of the relationship among global surface temperature, internal variability, and radiative forcing, which includes anthropogenic factors with well known warming and cooling effects. Creation-Date: 2011 Publication-Status: Published in Proceedings of the National Academy of Sciences File-URL: http://dash.harvard.edu/bitstream/handle/1/29071926/reconciling_anthropogenic_climate_change_with_observed_temperature_1998-2008.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:29071926 Template-Type: ReDIF-Paper 1.0 Author-Name: Rogoff, Kenneth S. Title: Costs and Benefits to Phasing Out Paper Currency Abstract: Despite advances in transactions technologies, paper currency still constitutes a notable percentage of the money supply in most countries. For example, it constitutes roughly 10% of the US Federal Reserve’s main monetary aggregate, M2. Yet, it has important drawbacks. First, it can help facilitate activity in the underground (tax-evading) and illegal economy. Second, its existence creates the artifact of the zero bound on the nominal interest rate. On the other hand, the enduring popularity of paper currency generates many benefits, including substantial seigniorage revenue. This paper explores some of the issues associated with phasing out paper currency, especially large-denomination notes. Creation-Date: 2014 Publication-Status: Published in NBER Macroeconomics Annual File-URL: http://dash.harvard.edu/bitstream/handle/1/12491029/168026/nber_macro_annual_dinner_talk_may_5.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12491029 Template-Type: ReDIF-Paper 1.0 Author-Name: LaPorta, Rafael Author-Name: Shleifer, Andrei Title: Informality and Development Abstract: We establish five facts about the informal economy in developing countries. First, it is huge, reaching about half of the total in the poorest countries. Second, it has extremely low productivity compared to the formal economy: informal firms are typically small, inefficient, and run by poorly educated entrepreneurs. Third, although avoidance of taxes and regulations is an important reason for informality, the productivity of informal firms is too low for them to thrive in the formal sector. Lowering registration costs neither brings many informal firms into the formal sector, nor unleashes economic growth. Fourth, the informal economy is largely disconnected from the formal economy. Informal firms rarely transition to formality, and continue their existence, often for years or even decades, without much growth or improvement. Fifth, as countries grow and develop, the informal economy eventually shrinks, and the formal economy comes to dominate economic life. These five facts are most consistent with dual models of informality and economic development. Creation-Date: 2014 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/12343780/171301/informality_may27_abstract.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12343780 Template-Type: ReDIF-Paper 1.0 Author-Name: Shleifer, Andrei Title: Matthew Gentzkow, Winner of the 2014 Clark Medal Abstract: Creation-Date: 2014-12-04 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/13460254/205036/gentzkow_sept_new.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:13460254 Template-Type: ReDIF-Paper 1.0 Author-Name: Gennaioli, Nicola Author-Name: Shleifer, Andrei Author-Name: Vishny, Robert W. Title: Money Doctors Abstract: We present a new model of money management, in which investors delegate portfolio management to professionals based not only on performance, but also on trust. Trust in the manager reduces an investor’s perception of the riskiness of a given investment, and allows managers to charge higher fees to investors who trust them more. Money managers compete for investor funds by setting their fees, but because of trust the fees do not fall to costs. In the model, 1) managers consistently underperform the market net of fees but investors still prefer to delegate money management to taking risk on their own, 2) fees involve sharing of expected returns between managers and investors, with higher fees in riskier products, 3) managers pander to investors when investors exhibit biases in their beliefs, and do not correct misperceptions, and 4) despite long run benefits from better performance, the profits from pandering to trusting investors discourage managers from pursuing contrarian strategies relative to the case with no trust. We show how trust-mediated money management renders arbitrage less effective, and may help destabilize financial markets. Creation-Date: 2014 Publication-Status: Published in The Journal of Finance File-URL: http://dash.harvard.edu/bitstream/handle/1/12965657/Gennaioli_Shleifer_Vishny.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12965657 Template-Type: ReDIF-Paper 1.0 Author-Name: Katz, Lawrence F. Title: America's Jobs Challenges and the Continuing Role of the U.S. Department of Labor Abstract: Creation-Date: 2014 Publication-Status: Published in Industrial and Labor Relations Review File-URL: http://dash.harvard.edu/bitstream/handle/1/12374798/54860570.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:12374798 Template-Type: ReDIF-Paper 1.0 Author-Name: Hart, Oliver D. Title: Noncontractible Investments and Reference Points Abstract: We analyze noncontractible investments in a model with shading. A seller can make an investment that affects a buyer’s value. The parties have outside options that depend on asset ownership. When shading is not possible and there is no contract renegotiation, an optimum can be achieved by giving the seller the right to make a take-it-or-leave-it offer. However, with shading, such a contract creates deadweight losses. We show that an optimal contract will limit the seller’s offers, and possibly create ex post inefficiency. Asset ownership can improve matters even if revelation mechanisms are allowed. Creation-Date: 2013 Publication-Status: Published in Games File-URL: http://dash.harvard.edu/bitstream/handle/1/29058539/games_04-00437.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:29058539 Template-Type: ReDIF-Paper 1.0 Author-Name: Qian, Nancy Author-Name: Nunn, Nathan Title: US Food Aid and Civil Conflict Abstract: We study the effect of U.S. food aid on conflict in recipient countries. Our analysis exploits time variation in food aid shipments due to changes in U.S. wheat production and cross-sectional variation in a country's tendency to receive any U.S. food aid. According to our estimates, an increase in U.S. food aid increases the incidence and duration of civil conflicts, but has no robust effect on inter-state conflicts or the onset of civil conflicts. We also provide suggestive evidence that the effects are most pronounced in countries with a recent history of civil conflict. Creation-Date: 2014 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/30410811/faidconf_20130806_final_0.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/30410811/faidconf_20130806_final_0.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30410811 Template-Type: ReDIF-Paper 1.0 Author-Name: Campbell, John Author-Name: Cochrane, John H. Title: By Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior Abstract: We present a consumption‐based model that explains a wide variety of dynamic asset pricing phenomena, including the procyclical variation of stock prices, the long‐horizon predictability of excess stock returns, and the countercyclical variation of stock market volatility. The model captures much of the history of stock prices from consumption data. It explains the short‐and long‐run equity premium puzzles despite a low and constant risk‐free rate. The results are essentially the same whether we model stocks as a claim to the consumption stream or as a claim to volatile dividends poorly corelated with consumption. The model is driven by an independently and identically distributed consumption growth process and adds a slow ‐moving external habit to the standard power utility function. These features generate slow countercyclical variation in risk premia. The model posits a fundamentally novel description of risk premia. Investors fear stocks primarily because they do poorly in recessions unrelated to the risks of long‐run average consumption growth. Creation-Date: 1999 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/3119444/campbell_aggregate_stock.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3119444 Template-Type: ReDIF-Paper 1.0 Author-Name: Trefler, Daniel Author-Name: Nunn, Nathan Title: Incomplete contracts and the boundaries of the multinational firm Abstract: Using data on U.S. intra-firm and arm’s-length imports for 5,705 products imported from 220 countries, we examine the determinants of the share of U.S. imports that are intra-firm. We examine two predictions that arise from Antràs (2003), Antràs & Helpman (2008) and Antràs & Helpman (2004). First, we find that, consistent with the implicit logic of Antràs (2003) and the explicit predictions of Antràs & Helpman (2008), vertical integration is increasing in the importance of non-contractible headquarter inputs relative to non-contractible supplier inputs. In other words, we show that only non-contractible headquarter inputs affect the firm’s make-or-buy decision. Second, we also provide empirical support for the Antràs & Helpman (2004) prediction that intra-firm trade is largest where non-contractible headquarter inputs are important and productivity is high. Creation-Date: 2013 Publication-Status: Published in Journal of Economic Behavior & Organization File-URL: http://dash.harvard.edu/bitstream/handle/1/33077829/nunn_trefler_jebo_2013.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/33077829/nunn_trefler_jebo_2013.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33077829 Template-Type: ReDIF-Paper 1.0 Author-Name: Nunn, Nathan Author-Name: Puga, Diego Title: Ruggedness: The Blessing of Bad Geography in Africa Abstract: We show that geography, through its impact on history, can have important effects on economic development today. The analysis focuses on the historic interaction between ruggedness and Africa’s slave trades. Although rugged terrain hinders trade and most productive activities, negatively affecting income globally, rugged terrain within Africa afforded protection to those being raided during the slave trades. Since the slave trades retarded subsequent economic development, ruggedness within Africa has also had a historic indirect positive effect on income. Studying all countries worldwide, we estimate the differential effect of ruggedness on income for Africa. We show that the differential effect of ruggedness is statistically significant and economically meaningful, it is found in Africa only, it cannot be explained by other factors like Africa’s unique geographic environment, and it is fully accounted for by the history of the slave trades. Creation-Date: 2012 Publication-Status: Published in Review of Economics and Statistics File-URL: http://dash.harvard.edu/bitstream/handle/1/29412035/ruggedness.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:29412035 Template-Type: ReDIF-Paper 1.0 Author-Name: Lowes, Sara Rachel Author-Name: Nunn, Nathan Author-Name: Robinson, James A. Author-Name: Weigel, Jonathan Lynn Title: Understanding Ethnic Identity in Africa: Evidence from the Implicit Association Test (IAT) Abstract: We use a variant of the Implicit Association Test (IAT) to examine individuals’ implicit attitudes towards various ethnic groups. Using a population from the Democratic Republic of Congo, we find that the IAT measures show evidence of an implicit bias in favor of one’s own ethnicity. Individuals have implicit views of their own ethnic group that are more positive than their implicit views of other ethnic groups. We find this implicit bias to be quantitatively smaller than the (explicit) bias one finds when using self-reported attitudes about different ethnic groups. Creation-Date: 2015 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/33077827/lowes_nunn_robinson_weigel_aerpp_2015.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/33077827/lowes_nunn_robinson_weigel_aerpp_2015.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33077827 Template-Type: ReDIF-Paper 1.0 Author-Name: Chan, Yeung Lewis Author-Name: Viceira, Luis Author-Name: Campbell, John Title: A Multivariate Model of Strategic Asset Allocation Abstract: We develop an approximate solution method for the optimal consumption and portfolio choice problem of an infinitely long-lived investor with Epstein–Zin utility who faces a set of asset returns described by a vector autoregression in returns and state variables. Empirical estimates in long-run annual and post-war quarterly U.S. data suggest that the predictability of stock returns greatly increases the optimal demand for stocks. The role of nominal bonds in long-term portfolios depends on the importance of real interest rate risk relative to other sources of risk. Long-term inflation-indexed bonds greatly increase the utility of conservative investors. Creation-Date: 2003 Publication-Status: Published in Journal of Financial Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/3163263/campbellnber_assetallocation.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3163263 Template-Type: ReDIF-Paper 1.0 Author-Name: Nunn, Nathan Title: The Importance of History for Economic Development Abstract: This article provides a survey of a growing body of empirical evidence that points toward the important long-term effects that historic events can have on economic development. The most recent studies, using microlevel data and more sophisticated identification techniques, have moved beyond testing whether history matters and attempt to identify exactly why history matters. The most commonly examined channels include institutions, culture, knowledge and technology, and movements between multiple equilibria. The article concludes with a discussion of the questions that remain and the direction of current research in the literature. Creation-Date: 2009 Publication-Status: Published in Annual Review of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/33077824/nunn_are_2009.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/33077824/nunn_are_2009.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33077824 Template-Type: ReDIF-Paper 1.0 Author-Name: Nunn, Nathan Author-Name: Qian, N. Title: The Potato's Contribution to Population and Urbanization: Evidence From A Historical Experiment Abstract: We exploit regional variation in suitability for cultivating potatoes, together with time variation arising from their introduction to the Old World from the Americas, to estimate the impact of potatoes on Old World population and urbanization. Our results show that the introduction of the potato was responsible for a signicant portion of the increase in population and urbanization observed during the 18th and 19th centuries. According to our most conservative estimates, the introduction of the potato accounts for approximately one-quarter of the growth in Old World population and urbanization between 1700 and 1900. Additional evidence from within-country comparisons of city populations and adult heights also conrm the cross-country findings. Creation-Date: 2011 Publication-Status: Published in The Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/33077825/nunn_qian_qje_2011.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/33077825/nunn_qian_qje_2011.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33077825 Template-Type: ReDIF-Paper 1.0 Author-Name: Alesina, Alberto Francesco Author-Name: Giuliano, Paola Author-Name: Nunn, Nathan Title: On the Origins of Gender Roles: Women and the Plough Abstract: The study examines the historical origins of existing cross-cultural differences in beliefs and values regarding the appropriate role of women in society. We test the hypothesis that traditional agricultural practices influenced the historical gender division of labor and the evolution of gender norms. We find that, consistent with existing hypotheses, the descendants of societies that traditionally practiced plough agriculture today have less equal gender norms, measured using reported gender-role attitudes and female participation in the workplace, politics and entrepreneurial activities. Our results hold looking across countries, across districts within countries, and across ethnicities within districts. To test for the importance of cultural persistence, we examine the children of immigrants living in Europe and the United States. We find that even among these individuals, all born and raised in the same country, those with a heritage of traditional plough use exhibit less equal beliefs about gender roles today. Creation-Date: 2013 Publication-Status: Published in The Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/33077826/alesina_giuliano_nunn_qje_2013.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/33077826/alesina_giuliano_nunn_qje_2013.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33077826 Template-Type: ReDIF-Paper 1.0 Author-Name: Nunn, Nathan Title: Historical legacies: A model linking Africa's past to its current underdevelopment Abstract: Recent studies have found evidence linking Africa’s current under-development to colonial rule and the slave trade. Given that these events ended long ago, why do they continue to matter today? I develop a model, exhibiting path dependence, which provides one explanation for why these past events may have lasting impacts. The model has multiple equilibria: one equilibrium with secure property rights and a high level of production and others with insecure property rights and low levels of production. I show that external extraction, when severe enough, causes a society initially in the high production equilibrium to move to a low production equilibrium. Because of the stability of low production equilibria, the society remains trapped in this suboptimal equilibrium even after the period of external extraction ends. The model provides one explanation why Africa’s past events continue to matter today. Creation-Date: 2007 Publication-Status: Published in Journal of Development Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/33077823/legacy_jde.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/33077823/legacy_jde.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33077823 Template-Type: ReDIF-Paper 1.0 Author-Name: Dragusanu, Raluca Author-Name: Giovannucci, Daniele Author-Name: Nunn, Nathan Title: The Economics of Fair Trade Abstract: Fair Trade is a labeling initiative aimed at improving the lives of the poor in developing countries by offering better terms to producers and helping them to organize. Whether Fair Trade can achieve its intended goals has been hotly debated in academic and policy circles. In particular, debates have been waged about whether Fair Trade makes "economic sense" and is sustainable in the long run. The aim of this article is to provide a critical overview of the economic theory behind Fair Trade, describing the potential benefits and potential pitfalls. We also provide an assessment of the empirical evidence of the impacts of Fair Trade to date. Creation-Date: 2014 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/33077828/dragusanu_giovannucci_nunn_jep_2014.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/33077828/dragusanu_giovannucci_nunn_jep_2014.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33077828 Template-Type: ReDIF-Paper 1.0 Author-Name: Roth, Alvin E. Author-Name: Xing, X. Title: Turnaround Time and Bottlenecks in Market Clearing: Decentralized Matching in the Market for Clinical Psychologists Abstract: In the context of entry-level labor markets, we consider the potential transactions that have to be evaluated before equilibrium transactions can be identified. These potential transactions involve offers that are rejected. After an initial phase in which many offers can be proffered in parallel, subsequent potential transactions must be processed serially, since a new offer cannot be made until an outstanding offer is rejected. In this phase even a small time required to process offers and rejections may cause bottlenecks. In many, perhaps most, decentralized labor markets, this means that transactions have to be finalized before there is time for the market to clear, that is, before all the potential transactions that would need to be evaluated in order to reach a stable outcome can in fact be evaluated. This has implications for the strategic behavior of firms and workers. In particular, in deciding to whom to offer a position, a firm may have strong incentives to consider not only its preferences over workers but also the likelihood that its offer will be accepted, since if its offer is rejected it may find that many other potential employees have become unavailable in the interim. The analysis is carried out in connection with the decentralized. Creation-Date: 1997 Publication-Status: Published in Journal of Political Economy File-URL: http://dash.harvard.edu/bitstream/handle/1/33445962/RothXingJPE97.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/33445962/RothXingJPE97.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33445962 Template-Type: ReDIF-Paper 1.0 Author-Name: Viceira, Luis Author-Name: Campbell, John Title: Who Should Buy Long-Term Bonds? Abstract: According to conventional wisdom, long-term bonds are appropriate for conservative long-term investors. This paper develops a model of optimal consumption and portfolio choice for infinite-lived investors with recursive utility who face stochastic interest rates, solves the model using an approximate analytical method, and evaluates conventional wisdom. As risk aversion increases, the myopic component of risky asset demand disappears but the intertemporal hedging component does not. Conservative investors hold assets to hedge the risk that real interest rates will decline. Long-term inflation-indexed bonds are most suitable for this purpose, but nominal bonds may also be used if inflation risk is low. Creation-Date: 2001 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/3128709/campbellssrn_long-termbonds.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3128709 Template-Type: ReDIF-Paper 1.0 Author-Name: Ambuehl, Sandro Author-Name: Niederle, Muriel Author-Name: Roth, Alvin E. Title: More Money, More Problems? Can High Pay be Coercive and Repugnant? Abstract: IRBs can disallow high incentives they deem coercive. A vignette study on MTurk concerning participation in medical trials shows that a substantial minority of subjects concurs. They think high incentives cause more regret, and that more people would be better off without the opportunity to participate. We model observers as judging the ethicality of incentives by partially using their own utility. The model predicts that payments are repugnant only to the extent that they affect the participation decision, and more so for larger transactions. Incentivizing poorer participants is more repugnant, and in-kind incentives are less repugnant than monetary incentives. Creation-Date: 2015 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/30829771/Ambuehl_Niederle_Roth.AERPP_2015.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/30829771/Ambuehl_Niederle_Roth.AERPP_2015.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30829771 Template-Type: ReDIF-Paper 1.0 Author-Name: Ashlagi, Itai Author-Name: Roth, Alvin E. Title: Free riding and participation in large scale, multi-hospital kidney exchange Abstract: As multi-hospital kidney exchange has grown, the set of players has grown from patients and surgeons to include hospitals. Hospitals can choose to enroll only their hard-to-match patient–donor pairs, while conducting easily arranged exchanges internally. This behavior has already been observed. We show that as the population of hospitals and patients grows, the cost of making it individually rational for hospitals to participate fully becomes low in almost every large exchange pool (although the worst-case cost is very high), while the cost of failing to guarantee individual rationality is high—in lost transplants. We identify a mechanism that gives hospitals incentives to reveal all patient–donor pairs. We observe that if such a mechanism were to be implemented and hospitals enrolled all their pairs, the resulting patient pools would allow efficient matchings that could be implemented with two- and three-way exchanges. Creation-Date: 2014 Publication-Status: Published in Theoretical Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/30830954/1357-11619-1-PB.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/30830954/1357-11619-1-PB.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30830954 Template-Type: ReDIF-Paper 1.0 Author-Name: Kojima, Fuhito Author-Name: Pathak, Parag Author-Name: Roth, Alvin E. Title: Matching with Couples: Stability and Incentives in Large Markets* Abstract: Accommodating couples has been a longstanding issue in the design of centralized labor market clearinghouses for doctors and psychologists, because couples view pairs of jobs as complements. A stable matching may not exist when couples are present. We find conditions under which a stable matching exists with high probability in large markets. We present a mechanism that finds a stable matching with high probability, and which makes truth-telling by all participants an approximate equilibrium. We relate these theoretical results to the job market for psychologists, in which stable matchings exist for all years of the data, despite the presence of couples. Creation-Date: 2013 Publication-Status: Published in The Quarterly Journal of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/30831454/w16028.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/30831454/w16028.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30831454 Template-Type: ReDIF-Paper 1.0 Author-Name: Kessler, Judd B. Author-Name: Roth, Alvin E. Title: Getting More Organs for Transplantation Abstract: Organs for transplantation are a scarce resource. Paying to increase the supply of organs is illegal in much of the world. We review efforts to increase transplantation by increasing the supply of available organs from living and deceased donors. Progress has been made in increasing the availability of living donor kidneys through kidney exchange. Recent legislation in Israel aims at encouraging deceased donation by awarding priority for receiving organs to registered donors. We also explore the manner in which organ donation is solicited and present evidence to suggest that some recent movement towards "mandated choice" may be counterproductive. Creation-Date: 2014 Publication-Status: Published in American Economic Review File-URL: http://dash.harvard.edu/bitstream/handle/1/30208846/KesslerRoth_OrganLessons_PP_v10.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/30208846/KesslerRoth_OrganLessons_PP_v10.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30208846 Template-Type: ReDIF-Paper 1.0 Author-Name: Badarinza, Cristian Author-Name: Campbell, John Y. Author-Name: Ramadorai, Tarun Title: International Comparative Household Finance Abstract: This paper reviews the literature on international comparative household finance. The paper presents summary statistics on household balance sheets for 13 developed countries, and uses these statistics to discuss common features and contrasts across countries. The paper then discusses retirement savings, investments in risky assets, unsecured debt, and mortgages. Creation-Date: 2016 Publication-Status: Published in Annual Review of Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/27535132/AnnualReviewICHF_-_WP.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/27535132/AnnualReviewICHF_-_WP.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:27535132 Template-Type: ReDIF-Paper 1.0 Author-Name: Erev, I. Author-Name: Roth, Alvin E. Title: Maximization, learning, and economic behavior Abstract: The rationality assumption that underlies mainstream economic theory has proved to be a useful approximation, despite the fact that systematic violations to its predictions can be found. That is, the assumption of rational behavior is useful in understanding the ways in which many successful economic institutions function, although it is also true that actual human behavior falls systematically short of perfect rationality. We consider a possible explanation of this apparent inconsistency, suggesting that mechanisms that rest on the rationality assumption are likely to be successful when they create an environment in which the behavior they try to facilitate leads to the best payoff for all agents on average, and most of the time. Review of basic learning research suggests that, under these conditions, people quickly learn to maximize expected return. This review also shows that there are many situations in which experience does not increase maximization. In many cases, experience leads people to underweight rare events. In addition, the current paper suggests that it is convenient to distinguish between two behavioral approaches to improve economic analyses. The first, and more conventional approach among behavioral economists and psychologists interested in judgment and decision making, highlights violations of the rational model and proposes descriptive models that capture these violations. The second approach studies human learning to clarify the conditions under which people quickly learn to maximize expected return. The current review highlights one set of conditions of this type and shows how the understanding of these conditions can facilitate market design. Creation-Date: 2014 Publication-Status: Published in Proceedings of the National Academy of Sciences File-URL: http://dash.harvard.edu/bitstream/handle/1/30831199/PNAS-2014-Erev-10818-25.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/30831199/PNAS-2014-Erev-10818-25.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:30831199 Template-Type: ReDIF-Paper 1.0 Author-Name: Dütting, Paul Author-Name: Fischer, Felix Author-Name: Parkes, David C. Title: Truthful Outcomes from Non-Truthful Position Auctions Abstract: We exhibit a property of the VCG mechanism that can help explain the surprising rarity with which it is used even in settings with unit demand: a relative lack of robustness to inaccuracies in the choice of its parameters. For a standard position auction environment in which the auctioneer may not know the precise relative values of the positions, we show that under both complete and incomplete information a non-truthful mechanism supports the truthful outcome of the VCG mechanism for a wider range of these values than the VCG mechanism itself. The result for complete information concerns the generalized second-price mechanism and lends additional theoretical support to the use of this mechanism in practice. Particularly interesting from a technical perspective is the case of incomplete information, where a surprising combinatorial equivalence helps us to avoid confrontation with an unwieldy differential equation. Creation-Date: 2016 Publication-Status: Published in Proceedings of the 2016 ACM Conference on Economics and Computation - EC '16 File-URL: http://dash.harvard.edu/bitstream/handle/1/32227268/dfp_tnt.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/32227268/dfp_tnt.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:32227268 Template-Type: ReDIF-Paper 1.0 Author-Name: Sönmez, Tayfun Author-Name: Utku Ünver, M. Author-Name: Roth, Alvin E. Title: Pairwise kidney exchange Abstract: In connection with an earlier paper on the exchange of live donor kidneys (Roth, Sönmez, and ‹Ünver 2004) the authors entered into discussions with New England transplant surgeons and their colleagues in the transplant community, aimed at implementing a Kidney Exchange program. In the course of those discussions it became clear that a likely first step will be to implement pairwise exchanges, between just two patient-donor pairs, as these are logistically simpler than exchanges involving more than two pairs. Furthermore, the experience of these surgeons suggests to them that patient and surgeon preferences over kidneys should be 0-1, i.e. that patients and surgeons should be indifferent among kidneys from healthy donors whose kidneys are compatible with the patient. This is because, in the United States, transplants of compatible live kidneys have about equal graft survival probabilities, regardless of the closeness of tissue types between patient and donor (unless there is a rare perfect match). In the present paper we show that, although the pairwise constraint eliminates some potential exchanges, there is a wide class of constrained-efficient mechanisms that are strategy-proof when patientdonor pairs and surgeons have 0-1 preferences. This class of mechanisms includes deterministic mechanisms that would accomodate the kinds of priority setting that organ banks currently use for the allocation of cadaver organs, as well as stochastic mechanisms that allow considerations of distributive justice to be addressed. Creation-Date: 2005 Publication-Status: Published in Journal of Economic Theory File-URL: http://dash.harvard.edu/bitstream/handle/1/32072400/wp620.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/32072400/wp620.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:32072400 Template-Type: ReDIF-Paper 1.0 Author-Name: Roth, Alvin E. Title: The Economist as Engineer: Game Theory, Experimentation, and Computation as Tools for Design Economics Abstract: Economists have lately been called upon not only to analyze markets, but to design them. Market design involves a responsibility for detail, a need to deal with all of a market’s complications, not just its principle features. Designers therefore cannot work only with the simple conceptual models used for theoretical insights into the general working of markets. Instead, market design calls for an engineering approach. Drawing primarily on the design of the entry level labor market for American doctors (the National Resident Matching Program), and of the auctions of radio spectrum conducted by the Federal Communications Commission, this paper makes the case that experimental and computational economics are natural complements to game theory in the work of design. The paper also argues that some of the challenges facing both markets involve dealing with related kinds of complementarities, and that this suggests an agenda for future theoretical research. Creation-Date: 2002 Publication-Status: Published in Econometrica File-URL: http://dash.harvard.edu/bitstream/handle/1/33445961/EconomistAsEngineer.Econometrica.Roth.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/33445961/EconomistAsEngineer.Econometrica.Roth.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33445961 Template-Type: ReDIF-Paper 1.0 Author-Name: Beshears, John Leonard Author-Name: Choi, James J. Author-Name: Laibson, David I. Author-Name: Madrian, Brigitte C. Title: Simplification and Saving 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 10–20 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. Creation-Date: 2012-11-20 Publication-Status: Published in Journal of Economic Behavior and Organization File-URL: http://dash.harvard.edu/bitstream/handle/1/9925399/simplification_saving.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:9925399 Template-Type: ReDIF-Paper 1.0 Author-Name: Clingingsmith, David Author-Name: Khwaja, Asim Ijaz Author-Name: Kremer, Michael R. Title: Estimating the Impact of the Hajj: Religion and Tolerance in Islam's Global Gathering Abstract: We estimate the impact on pilgrims of performing the Hajj pilgrimage to Mecca. Our method compares successful and unsuccessful applicants in a lottery used by Pakistan to allocate Hajj visas. Pilgrim accounts stress that the Hajj leads to a feeling of unity with fellow Muslims, but outsiders have sometimes feared that this could be accompanied by antipathy toward non-Muslims. We find that participation in the Hajj increases observance of global Islamic practices, such as prayer and fasting, while decreasing participation in localized practices and beliefs, such as the use of amulets and dowry. It increases belief in equality and harmony among ethnic groups and Islamic sects and leads to more favorable attitudes toward women, including greater acceptance of female education and employment. Increased unity within the Islamic world is not accompanied by antipathy toward non-Muslims. Instead, Hajjis show increased belief in peace, and in equality and harmony among adherents of different religions. The evidence suggests that these changes are likely due to exposure to and interaction with Hajjis from around the world, rather than to a changed social role of pilgrims upon return. Creation-Date: 2009 Publication-Status: Published in Quarterly Journal of Economics -Cambridge Massachusetts- File-URL: http://dash.harvard.edu/bitstream/handle/1/3659699/HajjPaper_25JULY08_final.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:3659699 Template-Type: ReDIF-Paper 1.0 Author-Name: Erev, Ido Author-Name: Ert, Eyal Author-Name: Roth, Alvin E. Title: A Choice Prediction Competition for Market Entry Games: An Introduction Abstract: A choice prediction competition is organized that focuses on decisions from experience in market entry games (http://sites.google.com/site/gpredcomp/ and http://www.mdpi.com/si/games/predict-behavior/). The competition is based on two experiments: An estimation experiment, and a competition experiment. The two experiments use the same methods and subject pool, and examine games randomly selected from the same distribution. The current introductory paper presents the results of the estimation experiment, and clarifies the descriptive value of several baseline models. The experimental results reveal the robustness of eight behavioral tendencies that were documented in previous studies of market entry games and individual decisions from experience. The best baseline model (I-SAW) assumes reliance on small samples of experiences, and strong inertia when the recent results are not surprising. The competition experiment will be run in May 2010 (after the completion of this introduction), but they will not be revealed until September. To participate in the competition, researchers are asked to E-mail the organizers models (implemented in computer programs) that read the incentive structure as input, and derive the predicted behavior as an output. The submitted models will be ranked based on their prediction error. The winners of the competition will be invited to publish a paper that describes their model. Creation-Date: 2010 Publication-Status: Published in Games File-URL: http://dash.harvard.edu/bitstream/handle/1/33444603/games-01-00117.pdf File-Format: application/pdf File-URL: http://dash.harvard.edu/bitstream/handle/1/33444603/games-01-00117.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33444603 Template-Type: ReDIF-Paper 1.0 Author-Name: Gabaix, Xavier Author-Name: Lasry, Jean-Michel Author-Name: Lions, Pierre-Louis Author-Name: Moll, Benjamin Title: The Dynamics of Inequality Abstract: The past forty years have seen a rapid rise in top income inequality in the United States. While there is a large number of existing theories of the Pareto tail of the long-run income distributions, almost none of these address the fast rise in top inequality observed in the data. We show that standard theories, which build on a random growth mechanism, generate transition dynamics that are too slow relative to those observed in the data. We then suggest two parsimonious deviations from the canonical model that can explain such changes: “scale dependence” that may arise from changes in skill prices, and “type dependence,” that is, the presence of some “high-growth types.” These deviations are consistent with theories in which the increase in top income inequality is driven by the rise of “superstar” entrepreneurs or managers. Creation-Date: 2016 Publication-Status: Published in Econometrica File-URL: http://dash.harvard.edu/bitstream/handle/1/34651703/48452449.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34651703 Template-Type: ReDIF-Paper 1.0 Author-Name: Edmans, Alex Author-Name: Gabaix, Xavier Title: Executive Compensation: A Modern Primer Abstract: This article studies traditional and modern theories of executive compensation, bringing them together under a simple unifying framework accessible to the general-interest reader. We analyze assignment models of the level of pay, and static and dynamic moral-hazard models of incentives, and compare their predictions to empirical findings. We make two broad points. First, traditional theories find it difficult to explain the data, suggesting that compensation results from "rent extraction" by CEOs. However, more modern "shareholder value" theories, that arguably better capture the CEO setting, do deliver predictions consistent with observed practices, suggesting that these practices need not be inefficient. Second, seemingly innocuous features of the modeling setup, often made for tractability or convenience, can lead to significant differences in the model's implications and conclusions on the efficiency of observed practices. We close by highlighting apparent inefficiencies in executive compensation and additional directions for future research. Creation-Date: 2016 Publication-Status: Published in Journal of Economic Literature File-URL: http://dash.harvard.edu/bitstream/handle/1/34651704/45770950.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34651704 Template-Type: ReDIF-Paper 1.0 Author-Name: Goldin, Claudia D. Author-Name: Katz, Lawrence F. Title: A Most Egalitarian Profession: Pharmacy and the Evolution of a Family-Friendly Occupation Abstract: Pharmacy today is a highly remunerated female-majority profession with a small gender earnings gap and low earnings dispersion. Using extensive surveys of pharmacists, as well as the US Census, American Community Surveys, and Current Population Surveys, we explore the gender earnings gap, penalty to part-time work, demographics of pharmacists relative to other college graduates, and evolution of the profession during the last half-century. Technological changes increasing substitutability among pharmacists, growth of pharmacy employment in retail chains and hospitals, and related decline of independent pharmacies reduced the penalty to part-time work and contribute to the narrow gender earnings gap in pharmacy. Creation-Date: 2016 Publication-Status: Published in Journal of Labor Economics File-URL: http://dash.harvard.edu/bitstream/handle/1/33973831/13623673.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:33973831 Template-Type: ReDIF-Paper 1.0 Author-Name: Katz, Lawrence F. Title: Roland Fryer: 2015 John Bates Clark Medalist Abstract: Roland Fryer is an extraordinary applied microeconomist whose research output related to racial inequality, the US racial achievement gap, and the design and evaluation of educational policies make him a worthy recipient of the 2015 John Bates Clark Medal. I will divide this survey of Roland's research into five categories: the racial achievement gap, education policies and reforms, economics of social interactions, the economics of discrimination and anti-discrimination policies, and further topics involving the black-white racial divide. Creation-Date: 2016 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/34391682/38024886.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34391682 Template-Type: ReDIF-Paper 1.0 Author-Name: Gabaix, Xavier Title: Power Laws in Economics: An Introduction Abstract: Many of the insights of economics seem to be qualitative, with many fewer reliable quantitative laws. However a series of power laws in economics do count as true and nontrivial quantitative laws—and they are not only established empirically, but also understood theoretically. I will start by providing several illustrations of empirical power laws having to do with patterns involving cities, firms, and the stock market. I summarize some of the theoretical explanations that have been proposed. I suggest that power laws help us explain many economic phenomena, including aggregate economic fluctuations. I hope to clarify why power laws are so special, and to demonstrate their utility. In conclusion, I list some power-law-related economic enigmas that demand further exploration. Creation-Date: 2016 Publication-Status: Published in Journal of Economic Perspectives File-URL: http://dash.harvard.edu/bitstream/handle/1/34651705/68262294.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34651705 Template-Type: ReDIF-Paper 1.0 Author-Name: Pakes, Ariel Title: Empirical tools and competition analysis: Past progress and current problems Abstract: I review a subset of the empirical tools available for competition analysis. The tools discussed are those needed for the empirical analysis of; demand, production efficiency, product repositioning, and the evolution of market structure. Where relevant I start with a brief review of tools developed in the 1990s that have recently been incorporated into the analysis of actual policy. The focus is on providing an overview of new developments; both those that are easy to implement, and those that are not quite at that stage yet show promise. Creation-Date: 2017 Publication-Status: Published in International Journal of Industrial Organization File-URL: http://dash.harvard.edu/bitstream/handle/1/34710163/50459412.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34710163 Template-Type: ReDIF-Paper 1.0 Author-Name: Beshears, John Leonard Author-Name: Choi, James J. Author-Name: Laibson, David I. Author-Name: Madrian, Brigitte Author-Name: Reynolds, Gwendolyn I. Title: Vaccination Rates are Associated With Functional Proximity But Not Base Proximity of Vaccination Clinics Abstract: Background: Routine annual influenza vaccinations are recommended for persons 6 months of age and older, but less than half of US adults get vaccinated. Many employers offer employees free influenza vaccinations at workplace clinics, but even then take-up is low. Objective: To determine whether employees are significantly more likely to get vaccinated if they have a higher probability of walking by the clinic for reasons other than vaccination. Method: We obtained data from an employer with a free workplace influenza vaccination clinic. Using each employee’s building entry/exit swipe card data, we test whether functional proximity—the likelihood that the employee walks by the clinic for reasons other than vaccination—predicts whether the employee gets vaccinated at the clinic. We also test whether base proximity—the inverse of walking distance from the employee’s desk to the clinic—predicts vaccination probability. Participants: A total of 1801 employees of a health benefits administrator that held a free workplace influenza vaccination clinic. Results: A 2 SD increase in functional proximity is associated with a 6.4 percentage point increase in the probability of vaccination (total vaccination rate at company=40%), even though the average employee’s desk is only 166 meters from the clinic. Base proximity does not predict vaccination probability. Conclusions and Relevance: Minor changes in the environment can have substantial effects on the probability of vaccination. If these results generalize, health systems should emphasize functional proximity over base proximity when locating preventive health services. Creation-Date: 2016 Publication-Status: Published in Medical Care File-URL: http://dash.harvard.edu/bitstream/handle/1/34737827/vaccination%20rates%20manuscript.pdf File-Format: application/pdf Handle: RePEc:hrv:faseco:34737827