ALBERT

Description: This study uses Monte Carlo analysis to characterize the uncertainty associated with per-ton damage estimates for 565 electric generating units (EGUs) in the contiguous United States (U.S.) This analysis focuses on damage estimates produced by an Integrated Assessment Model (IAM) for emissions of five local air pollutants: sulfur dioxide (SO 2 ), nitrogen oxides (NO x ), volatile organic compounds (VOCs), ammonia (NH 3 ), and fine particulate matter (PM 2.5 ). For each power plant and pollutant, the Monte Carlo procedure yields an empirical distribution for the damage per ton, or marginal damage. The paper links uncertainty in marginal damages to air pollution policy in two ways. First, the paper characterizes uncertainty in the magnitude of the marginal damages which is relevant to policymakers in determining the stringency of pollution controls. Second, the paper explores uncertainty in the relative damages across power plants. Relative damages are important if policymakers elect to design efficient regulations that vary in stringency according to where emissions are released. The empirical section of the paper finds that the marginal damage distributions are positively skewed and they are more variable for sources in urban areas than rural locations. The paper finds that uncertainty in three input parameters has the greatest impact on uncertainty in the magnitude of damages: the adult mortality dose-response parameter, the mortality valuation parameter, and air quality modeling. The analysis also finds that for each pollutant except for NO x only uncertainty in air quality modeling impacts efficient trading ratios calibrated to each firm's marginal damages.

Description: This paper estimates the pattern of consumer expenditures in Iran in an attempt to measure the welfare cost of price subsidies in that country and shed light on possible fiscal reforms. We use the Quadratic Almost Ideal Demand System (Banks et al. (1997)) as our framework for estimation. We show that the general equilibrium fiscal interaction effects play a crucial role in determining the amount the government saves by eliminating the price subsidy of a particular good. Interestingly, eliminating price subsidies on utilities saves the government little by way of revenues and is welfare reducing. Comparing the gains for non-marginal with marginal reforms a la Ahmad and Stern (1984), we also show that the two approaches may not necessarily recommend the same reform.

Description: This paper presents an experiment measuring how lab-induced group identity affects trust and trustworthiness in a repeated trust game with random matching. Identity had positive in-group and negative out-group effects on trust. However, the in-group effect was small and statistically insignificant, while the out-group effect was large. Trustworthiness was determined mainly by reciprocity effects.

Description: We construct daily market-based measures of distance to default for large U.S. financial institutions since 1973. These measures have significant predictive power for institution bankruptcy more than one year in advance. We aggregate the distances to default across institutions to provide an index of the overall health of the financial-services industry. We show that deteriorations in this Financial Institution Health Index are associated with tighter lending standards and higher interest rates on bank loans and precede declines in employment and industrial production. We argue that this points to the condition of financial institutions as an independent source of macroeconomic variability, distinct from traditional accelerator mechanisms.

Description: We investigate the effect of immigration on the labor supply of skilled women, using data on Spain’s large recent immigration wave. We adopt a spatial correlations approach and instrument for current immigration using ethnic networks. We find that female immigration increases the local availability of household services and reduces their price. It also increases the labor supply of skilled native women, by allowing them to return to work earlier after childbirth, and to continue working while caring for elderly dependents. Immigration can account for one third of the recent increase in the employment rate of college-educated women providing child or elderly care.

Description: This paper investigates the standard finding that instituting a minimum quality standard within a vertically differentiated market unambiguously benefits consumers of high quality products. A competitive model is specified in which random cost shocks lead some firms to cheat in equilibrium on their reputation for high quality. When cheating occurs, instituting or raising the level of a minimum standard can lead to the price of high quality products either increasing or decreasing. The effect of a minimum quality standard on the price of high quality products becomes an empirical rather than a theoretical issue.

Description: We provide a unified assessment of a striking disparity in the United States: the differential rate at which white and black infants die. We separate the overall mortality gap into three temporal components—fitness at birth, conditional neonatal mortality, and conditional post-neonatal mortality—and quantify the extent to which each of the components can be predicted using a flexible reweighting method. Almost 90 percent of the overall mortality gap is due to differential fitness at birth, little of which can be predicted by racial differences in background characteristics. The remaining mortality gap stems from conditional post-neonatal mortality differences, nearly all of which can be predicted by background characteristics. The predictability of the mortality gap has declined substantially over the past two decades, largely because the mortality gap among extremely low-fitness infants is increasingly unrelated to background characteristics.

Description: We develop a duopoly model with advertising supported platforms and analyze incentives of a superior firm to license its advanced technologies to an inferior rival. We highlight the role of two technologies characteristic for media platforms: the technology to produce content and to place advertisements. Licensing incentives are driven solely by indirect network effects arising from the aversion of users to advertising. We establish a relationship between licensing incentives and the nature of technology, the decision variable on the advertiser side, and the structure of platforms’ revenues. Only the technology to place advertisements is licensed. If users are charged for access, licensing incentives vanish. Licensing increases the advertising intensity, benefits advertisers and harms users. Our model provides a rationale for technology-based cooperations between competing platforms, such as the planned Yahoo-Google advertising agreement in 2008.

Description: Optimal recycling of minerals can be thought of as an integral part of the theory of the mine. In this paper, we consider the role that wastewater recycling plays in the optimal extraction of groundwater, a renewable resource. We develop a two-sector dynamic optimization model to solve for the optimal trajectories of groundwater extraction and water recycling. For the case of spatially increasing recycling costs, recycled water serves as a supplemental resource in transition to the steady state. For constant unit recycling cost, recycled wastewater is eventually used as a sector-specific backstop for agricultural users, while desalination supplements household groundwater in the steady state. In both cases, recycling water increases welfare by shifting demand away from the aquifer, thus delaying implementation of costly desalination. The model provides guidance on when and how much to develop resource alternatives.

Description: This paper investigates whether rent control affects community socioeconomic composition. In particular, do rent controls increase the presence of poor and minority residents in a locale? Theoretically, the effect of rent control on community composition is ambiguous, as it depends upon several factors including willingness to occupy controlled apartments, landlord imposed rationing mechanisms, and spillover effects of rent controlled housing on uncontrolled units. Using census data on how Cambridge, Massachusetts and nearby communities responded to the state imposed end of rent control, I find evidence that rent control increased the presence of minority residents but also decreased the proportion of poor residents. This evidence is robust to alternate control areas and several specification checks. I also find that despite its positive impact on minority membership, rent control is associated with an increase in traditional measures of residential segregation.

Description: We analyze dynamic models with negative externalities occurring from production capital and input use. We uncover a puzzle related to such models: evaluated with a social welfare function, the steady-state outcome of a socially optimal policy, and thus the tail of the corresponding payoff sequence, may yield a smaller social payoff than a market outcome. The main questions we address are under what conditions this phenomenon arises and how general it is. We show that there are always Pareto-optimal policies which lead to the puzzle when the discount rate is fixed. In addition to discounting, the driving force of our results is that the periodic pollution and profits are linked to production capital. We demonstrate the puzzle with a model for controlling phosphorus losses from crop production. We argue that the puzzle should be taken into account in the policy analysis of dynamic problems, including negative externalities.

Description: We present a model of sequential innovation in which innovators use several research inputs to invent new goods. We extend work by Shapiro (2001) and Lerner and Tirole (2004) by studying the effects of increases in the number of patented research inputs on innovation incentives and optimal patent policy. We consider not only the effects on the incentives to invent final goods, but also on the incentives to invent research inputs (ex-ante effect). We find increasing complexity has a negative effect on innovation activity in the final goods sector when research inputs are complements. Either limiting market power through weaker patents or reducing the lack of coordination through patent pools may solve this problem. We also find the optimal patent breadth and show it is increasing in the elasticity of substitution between the inputs used in research and decreasing (increasing) in the complexity of the R&D process when research inputs are complements (substitutes).

Description: Approximately 100,000 visitors came to Denver, Colorado and Minneapolis, Minnesota to attend the 2008 Democratic and Republican National Conventions. Economic theory suggests that men in transit can shift demand for commercial sex work. We estimate the responsiveness of labor supply to these two conventions, focusing on a previously neglected but increasingly important segment of the prostitution market: indoor sex workers who advertise on the Internet. Using a differences-in-differences estimator of prostitution advertisements posted on a major classified ads website, we find that the conventions caused a 29-44 percent increase in advertisements in Minneapolis and a 47-77 percent increase in Denver. Given the key role prostitution plays in the transmission of STIs, these results imply that focusing public health resources on men in transit may be beneficial.

Description: Using data on the B.E. Journals that rank articles into four quality tiers, this paper examines the accuracy of the research evaluation process in economics. We find that submissions by authors with strong publication records and authors affiliated with highly-ranked institutions are significantly more likely to be published in higher tiers. Citation success as measured by RePEc statistics also depends heavily on the overall research records of the authors. Finally and most importantly, we measure how successful the B.E. Journals’ editors and their reviewers have been at assigning articles to quality tiers. While, on average, they are able to distinguish more influential from less influential manuscripts, we also observe many assignments that are not compatible with the belief that research quality is reflected by the number of citations.

Description: Many recent studies estimate cost function parameters to measure the influence of capital-skill complementarity on changes in skill demand. This paper argues that standard cost function estimates assuming quasi-fixed capital systematically overestimate the effect of complementarity when subject to skill-biased technological change. While previous work has considered bias due to measurement error or general endogeneity concerns, this paper shows that upward bias results directly from cost minimizing behavior. I also develop a novel instrumental variables strategy based on the tax treatment of capital to more accurately measure the effect of complementarity. Although somewhat imprecise, the IV results support the model's prediction that the standard approach overestimates the effect of complementarity.

Description: A growing empirical literature has found that neighborhood heterogeneity lowers people’s likelihood of contributing to public goods. However, this literature has been mostly cross-sectional, and so struggled to address the effects of unobserved influences on contributions that may be correlated with heterogeneity. It has also paid little attention to how heterogeneity’s estimated effects are influenced by neighborhood size or the concavity of heterogeneity measures. With access to a panel of three waves of census data on volunteering rates in New Zealand, released at two fine levels of aggregation, we can control for stable unobserved neighborhood characteristics that may affect volunteering rates. We use pooled cross-section, between and fixed effects regressions to test whether volunteering rates are lowered by heterogeneity in race/ethnicity, language, birthplace, or income. We find that estimates are affected by neighborhood definition, and that ethnic and language heterogeneity are robustly associated with lower volunteering rates in New Zealand.

Description: This paper introduces price-dependent individual demand into the circular city model of product differentiation. We show that for any finite number of firms, an unique symmetric price equilibrium exists provided that demand functions are not “too” convex. As in the case of unit demand, the number of firms under free entry decreases in the fixed cost of entry while increases in the transportation cost of consumers. However, this number is no longer always in excess of the socially optimal level. Insufficient entry occurs when the fixed and transportation costs are high.

Description: We propose and empirically implement a test for the presence of racial prejudice among emergency department (ED) physicians based on the bounceback rates of patients discharged after receiving diagnostic tests during their initial ED visit. A bounceback is defined as a return to the ED within 72 hours of being initially discharged. Applying the test to administrative data of ED visits from California and New Jersey, we do not find evidence of prejudice against black and Hispanic patients, but we find evidence of prejudice against Asians in California. We also find evidence of prejudice against male patients.

Description: Protecting the environment during economic growth is a challenge facing every country. This paper focuses on two regulatory measures that China has adopted to incentivize air quality improvement: publishing a daily air pollution index (API) for major cities since 2000 and linking the API to performance evaluations of local governments. In particular, China defines a day with an API at or below 100 as a blue sky day. Starting in 2003, a city with at least 80% blue sky days in a calendar year (among other criteria) qualified for the “national environmental protection model city” award. This cutoff was increased to 85% in 2007. Using officially reported API data from 37 large cities during 2000-2009, we find a significant discontinuity at the threshold of 100 and this discontinuity is of a greater magnitude after 2003. Moreover, we find that the model cities were less likely to report API right above 100 when they were close to the targeted blue sky days in the fourth quarter of the year when or before they won the model city award. That being said, we also find significant correlation of API with two alternative measures of air pollution – namely visibility as reported by the China Meteorological Administration (CMA) and Aerosol Optical Depth (AOD), corrected for meteorological conditions, from NASA satellites. The discontinuity around 100 suggests that count of blue sky days could have been subject to data manipulation; nevertheless, API does contain useful information about air pollution.

Description: Following the passage of the Waxman-Hatch Act (1984), FDA approval for a generic drug requires the establishment of bio-equivalence between the generic drug and an FDA approved branded drug. However, a large body of evidence in the medical community suggests that bio-equivalence does not guarantee therapeutic equivalence; in some instances the lack of therapeutic equivalence can lead to fatal consequences for patients switching to generic products. In this paper, we construct a simple model to analyze the implications of therapeutic non-equivalence between branded and generic drugs. We show, theoretically and empirically, that this distinction can provide a plausible explanation of the generic competition paradox.

Description: We examine mixed bundling in a competitive environment that incorporates vertical product differentiation. We show that, compared to the equilibrium without bundling, (i) prices, profits and social welfare are lower, whereas (ii) consumer surplus is higher in the equilibrium with mixed bundling. In addition, the population of consumers who purchase both products from the same firm is larger in the equilibrium with mixed bundling. These results are largely in line with those obtained in the previous literature on competitive mixed bundling with horizontal differentiation. Further, we conduct a comparative static analysis with respect to changes in quality differentiation parameters. When the quality gap between brands narrows under no bundling and symmetric mixed bundling, prices and profits decrease. When quality differentiation is asymmetric across products, however, complicated effects occur on prices and profits due to strategic interdependence that mixed bundling creates.

Description: This paper uses US state panel data to explore the relationship between the share of income received by affluent households and the level of income and earnings received by low and middle-income families. A rising top share of income can potentially lead to increases in the incomes of low and middle-income families if economic growth is sufficiently responsive to increases in inequality. A substantial literature on the impacts of inequality on economic growth exists, but has failed to achieve consensus, with various studies finding positive impacts, negative impacts, and no impacts on growth from increased levels of income inequality. This paper departs from that literature by exploring the effect of inequality on the standard of living of middle-income and low-income families. In the context of rising inequality, increased overall growth is not necessarily a suitable proxy for overall standard of living, since growth patterns are not uniform for the entire income distribution. The results of this study indicate that increases in the top share of income (particularly the top one percent) are associated with declines in the actual incomes (and earnings) of middle income families, but have no clear impact on families at the bottom of the income distribution.

Description: The public provision of long-term care (LTC) can replace family-provided LTC when adults are not sufficiently altruistic towards their parents. But State intervention can modify the transmission of values, and reduce the long-run prevalence of family altruism. To characterize the optimal LTC policy, we develop a three-period OLG model where the adult population is divided into altruistic and non-altruistic agents, and where the transmission of altruism follows a socialization process à la Bisin and Verdier (2001). It is shown that public LTC benefits, by reducing parental investment in children, make the long-run survival of family altruism less likely. However, whether crowding out arises or not depends on individual preferences and on the socialization mechanism at work. We also study the incompatibility of the optimal short-run LTC benefits with long-run social welfare maximization. Finally, we discuss the robustness of our results to introducing savings and universal LTC benefits.

Description: It is widely known that standardized tests are noisy measures of student learning, but value added models (VAMs) rarely account for test measurement error (TME). We incorporate information about TME directly into VAMs, focusing on TME that derives from the testing instrument itself. Our analysis is divided into two parts – one based on simulated data and the other based on administrative micro data from Missouri. In the simulations we control the data generating process, which ensures that we obtain accurate TME metrics. In the real-data portion of our analysis we use estimates of TME provided by a major test publisher. In both the simulations and real-data analyses, we find that inference from VAMs is improved by making simple TME adjustments to the models. The improvement is larger in the simulations, but even in the real-data analysis the improvement is on the order of what one could expect if teacher-level sample sizes were increased by 11 to 17 percent.

Description: We investigate whether vertical separation reduces quality discrimination and increases welfare. Consider an industry consisting of a vertically integrated firm, the incumbent, and an independent retailer, the entrant, which requires access to the services of the incumbent's wholesaler. The wholesaler can discriminate against either of the retailers by supplying it an input of lower quality than its rival. We show that, in our setting, vertical separation of the incumbent reduces discrimination against the entrant's retailer, although it does not guarantee non-discrimination. Furthermore, with vertical separation, the wholesaler may discriminate against the incumbent's retailer. Vertical separation impacts social welfare through two effects. First, through the double-marginalization effect, which is negative. Second, through the quality degradation effect, which can be positive or negative. Hence, the net welfare impact of vertical separation is negative or potentially ambiguous.

Description: This paper employs an endogenous merger formation approach in a two-country oligopoly model of trade to examine the international linkages between the nature of mergers and tariff levels. Firms sell differentiated products and compete in a Bertrand fashion in product markets. Two effects play key roles in determining equilibrium market structure: the tariff saving effect and the protection gain effect. The balance between these two effects implies that, when foreign country practices free trade, low home tariffs yield international mergers irrespective of the substitutability levels. By contrast, when foreign tariffs are sufficiently high and products are close substitutes, national mergers obtain in the equilibrium. Unlike this asymmetric result of unilateral trade liberalization, we find that when bilateral tariffs are sufficiently low, international mergers arise. These results fit well with the fact that global trade liberalization has been accompanied by an increase in international merger activities. From a welfare perspective, we show that international mergers are preferable to national mergers and thus social and private merger incentives become aligned together as trade gets bilaterally liberalized. Finally, if countries can commit to a trade policy, they would optimally commit to a low tariff to induce international mergers when products are close substitutes while any tariff commitment is optimal when products are sufficiently differentiated.

Description: The ownership and governance of for-profit (FP), nonprofit (NP), and local government (LG) organizations are different. Therefore, the objectives of these different types of organizations and their performance may differ. We conjecture that in markets where there is substantial asymmetric information between providers and customers, FP firms, LG organizations and NP organizations provide similar levels of quality attributes that are observable to their customers and are well understood by them. However, FP firms are likely to provide lower levels of less-well observed and less-well understood desirable but costly quality attributes than their NP and LG counterparts. Using a rich dataset, we study the quality of outcomes for Minnesota nursing homes, which do not compete on prices. We find support for our theoretical conjectures: FP homes provide lower quality on a number of dimensions, especially those that are less observable by nursing home residents and their families.

Description: A principal needs a worker for the production of a good. The worker can be hired as an internal agent, or an external agent under a contract. These two organizational modes correspond to in-house production and outsourcing, respectively. In each case, the agent earns experience benefits: future monetary returns from managing production, reputation, and enjoyment. The principal would like to extract experience benefits, and can do so when production is outsourced. However, the external agent earns information rent from private information about production costs. The principal cannot fully extract experience benefits when production is in-house because the internal agent must be provided with a minimum income, although the principal has full information on production costs. Our theory proposes a new trade-off, one between information rent under outsourcing and experience rent under in-house production. The principal chooses outsourcing when experience benefits are high, but her organizational choice may be socially inefficient.

Description: This paper analyzes the parking behavior of United Nations diplomats in New York City and highlights the key limitation of an earlier work which claims cultural norms to be the significant determinant of corruption. We show that after controlling for Government Effectiveness index, which measures the quality of civil services and quality and quantity of public infrastructure in a country, the effect of culture on corruption becomes insignificant. However, the Country Corruption index and the Government Effectiveness index are strongly correlated which makes it difficult to identify the causal determinant of corruption. It is important to keep this correlation in mind before arriving at conclusions from empirical studies, because Country Corruption index could be proxying for other influences such as Government Effectiveness index, and ignoring this might lead us to falsely attribute the observed behavior to cultural or social norms alone. Understanding the relative importance of these potential causes of corruption is fundamental to policy recommendations.

Description: Using borrower-level data from FINCA, one of Peru's leading microfinance institutions (MFIs), this paper evaluates the effect on borrowers' access to credit of FINCA's decision to share information on individual outstanding debt records (positive information) as well as group default records (negative information). Since all borrowers were simultaneously exposed to the same policy, the paper develops a creative identification strategy that relies on the exogenous variation of the opening and closing dates of loan cycles across lending groups. A credit expansion effect is identified for some borrowers in FINCA who looked more creditworthy after their positive records were exposed, suggesting that other lenders targeted FINCA clients with good credit records. This credit expansion effect seems to have hurt FINCA through higher default rates as its better clients were skimmed off.

Description: While it is well known that financing and infrastructure constraints negatively affect economic development, the correlations between these constraints have been underexplored in the economics literature. This paper focuses on the implications of financing and infrastructure constraints by studying firms’ investments in electric generators as a response to public power interruptions. A theoretical model demonstrates that financial constraints lower economic returns on owning electric generators, making firms less likely to install private generators if the public power supply becomes unreliable. The empirical results show that, controlling for other factors, firms with a lower cost of external financing are more likely to own private generators in areas where the public power supply is less reliable. Observed correlations among reliability of power supply, financial constraints, and investment in electric generators thus appear consistent with the hypothesis that underdeveloped financial markets and inadequate infrastructure can be a greater barrier for economic development than either of these constraints separately.

Description: We consider an economy where production may use labor of two different skill levels. Workers are heterogeneous and, by investing in education, self-select into one of the two skills. Ex-ante, when firms choose their investments in physical capital, they do not know the level of human capital prevailing in the labor market they will be active in. We prove existence and constrained inefficiency of competitive equilibria, which are always characterized by overeducation. An increase in total expected surplus can be obtained by shrinking, at the margin, the set of workers investing in high skills. This can be implemented by imposing taxes on the cost of investing in high skills or by imposing a progressive labor earning tax.

Description: We estimate and explore mechanisms of the impact of the Earned Income Tax Credit (EITC) expansions on the smoking behavior of women. Differential increases in federal EITC benefits by family size in the mid-1990s allow for a comparison of smoking status changes between mothers with one and more than one child. We exploit these changes in a difference-in-differences framework using data from the 1993-2001 waves of the Behavioral Risk Factor Surveillance System (BRFSS) and show that the increase in EITC benefits yielded a significant decline in the likelihood of being a current smoker among unmarried mothers with less than a college degree. Although women with a high school degree or less and women with some college education received similar benefit increases on average and exhibited similar labor supply responses, the reduction in the likelihood of smoking was concentrated among those with some college.

Description: This paper presents a three-tier law enforcement model in which an inspector monitors a firm’s discharge of waste and reports it to a regulator. The inspector may engage in three forms of corruption – bribery, extortion and framing – with two types of costs: the cost of distorting information against the firm and the cost of side-transfer. In contrast with the earlier literature on corruption, we show that not only bribery but also extortion and framing may occur in equilibrium, even when all the forms of corruption could be deterred. We also find that higher costs of engaging in corruption may result in lower social welfare. Although these costs make engaging in corruption more difficult and hence more easily deter corruption, when corruption occurs in equilibrium, the costs cause wastage of scarce resources from society’s point of view. This analysis also provides an explanation of why corruption is more pervasive in less developed countries.

Description: This paper explores the implications of fairness and reciprocity for self-enforcing international environmental agreements on pollution abatement. Reciprocal countries reward fair behavior (positive reciprocity), but retaliate against countries behaving unfairly (negative reciprocity). We demonstrate that reciprocal countries that have moderate expectations from each other with respect to their national abatement strategies can support a greater degree of environmental cooperation than self-interested ones. However, when only very high abatement standards are deemed fair, then reciprocity could have a detrimental effect on international environmental cooperation. Our model therefore provides a novel perspective on the role of expectations in environmental negotiations.

Description: We investigate decision-making and the potential for social learning among school administrators in the market for school reform consulting services. Specifically, we estimate whether public schools are more likely to choose given Comprehensive School Reform service providers if their “peer” schools—defined by common governance or geography—have performed unusually well with those providers in the past. We find strong evidence that schools tend to contract with providers used by other schools in their own districts in the past, regardless of past performance. In addition, our point estimates are consistent with school administrators using information from peers to choose the plans they perceive to have performed best in the past. Despite choosing a market with an unusually comprehensive data source on contracts between public schools and private firms, our statistical power is sufficiently weak that we cannot reject the absence of social learning.

Description: This paper draws on McFadden’s location choice theory and incorporates households’ residential choice decisions as a hierarchical process in a structural travel demand model. The paper argues that such an approach can effectively tackle the problems of self-selection and multicollinearity. Contrary to previous findings, empirical results based on OLS and 3SLS reveal that travel demand is highly elastic to certain smart-growth features, if they are measured at different spatial scales. The results are robust against alternative sequencing of the hierarchical choice process. An analysis of the quantitative impact of a change in the smart-growth and fuel-tax policies reveals significant returns under both policies. Finally, a simulation based on California suggests that smart growth policies substantially reduce household travel demand.

Description: This paper investigates an intriguing relationship between the demand for telecommunication and remittance services by migrants in Qatar. The hypothesis is that there are important synergies between telecommunications and remittances. Migrants with greater telecom access may have higher demand for remittances, because more frequent communication with relatives raises altruistic motivations for remitting. Migrants who remit more may also demand greater telecommunication service if they seek to monitor remittance recipients’ expenditure patterns. Suggestive evidence of complementarities in telecommunication and remittance demand is found using a cross-sectional dataset of temporary migrants in Qatar from developing countries. This finding highlights an overlooked, yet potentially important role of telecommunication in stimulating greater remittances.

Description: Firms commonly form syndicates to bid jointly for financial assets. Recently, this practice has come under legal scrutiny motivated by models which suggest syndicates are anti-competitive. These models do not account for two important features of financial markets: bidders' value estimates are likely to be correlated, and complicated mechanisms known to be optimal in such settings are usually eschewed in favor of simpler auction formats. We show that these features make it possible for syndicate bidding to generate higher revenues for the auctioneer than bidding among independent firms, even when syndicates are asymmetric or lead to a highly concentrated market. This occurs because syndication can make the industry more suitable to the simple auction format in use. We identify conditions under which syndicates are pro-competitive and discuss the implications for antitrust.

Description: This paper develops an overlapping generations model of criminal behavior, which extends prior research on crime by taking into account parental decisions about their children's education and about sending them to school when they become adolescents. Additionally, it is also assumed that acquired ability in childhood and school resources interplay to determine the student's probability of leaving school before graduation. Therefore, considering that dropping out of school and criminality are endogenously determined by the quality of early childhood education, school inputs and law enforcement parameters, this paper offers a framework to study the effects of interventions in early education on criminality and human capital accumulation vis-à-vis enhancing school resources and public spending on enforcement. Numerical simulations show that stimuli to increase investments in the education of children from disadvantaged families are much more cost-effective as a crime-prevention policy than expenditures on school resources and police protection.

Description: Recent papers find that earnings volatility is again on the rise (Dynan et al. 2008, and Shin and Solon 2011). Using household survey data—the matched Current Population Surveys and Survey of Income and Program Participation—and the newly available Longitudinal Employment and Household Dynamics administrative dataset, we find that earnings volatility was remarkably stable in the 1990s and through the mid 2000s. This evidence is in contrast to that from the Panel Study of Income Dynamics (PSID) which registers a sharp increase in the early 2000s. We investigate whether adjusting measures based on our sources to more closely match the characteristics of the PSID can reconcile this divergence in trends, but do not find a clear explanation for the divergence. We also find little evidence of a rise over this period in the components of volatility: volatility among job leavers, volatility among job stayers, and the fraction of workers who are job leavers.

Description: A dual income tax system, combining progressive taxation of labor income with proportional taxation of income from capital, may or may not be unambiguously inequality reducing. Examples show that the degree of correlation between the distributions of wage and capital income, the degree of tax rate differentiation in the DIT, and reranking of tax-payers can be expected to complicate a clear-cut analysis. We trace out what can be said definitively, obtaining sufficient conditions for unambiguous inequality reduction in certain cases, and more generally identifying the nature of the implicit redistribution between labor and capital income components which is sufficient to ensure overall inequality reduction.

Description: Much attention has been given to the plight of minorities and persons of mixed race in need of a bone marrow transplant. This has led to increased efforts to recruit minority and mixed-race donors. There is strong evidence that members of racial minorities are less likely to find a match than those of European descent. Because the relevant sample sizes are small, direct estimation of the distribution of immunity types for mixed-race populations have not been available. We show how to estimate the distribution of HLA types for persons of mixed race indirectly, using simple principles of probability and the combinatorics of diploid reproduction. We show that recruitment of mixed race donors is cost-effective, but not for the expected reasons. While recruitment of mixed-race donors increases the welfare of patients with the same racial background, the benefits to the targeted recipients do not exceed the costs. However, when account is taken of the likelihood that a mixed-race registrant will be the only available match for a patient classified as being of a single race, the recruitment of mixed race donors turns out to be highly cost-effective.

Description: Absences in Chicago Public High Schools are 4-7 days per year higher in first period than at other times of the day. This study exploits this empirical regularity and the essentially random variation between students in the ordering of classes over the day to measure how the returns to classroom learning vary by course subject, and how much attendance in one class spills over into learning in other subjects. We find that having a class in first period significantly reduces grades in that course but does not affect grades in related subjects. We also find that having math in first period reduces test scores in all subjects and reduces grades in future math classes. These effects are particularly large for black students. For classes other than math, we find little effect of having the class in first period on test scores or long-term grades.

Description: Utilizing a previously unexplored plant-product matched dataset in the Korean manufacturing sector, this paper examines the impact of exporting on firms’ productivity and the mechanism by which it operates. We find strong evidence for the learning-by-exporting hypothesis. We also find that exporting induces plants to introduce new products and rationalize their products beginning from one year prior to, and until two years after, export market entry. The synchronous responses of product churning and TFP suggest that new-product introduction and product rationalization are indeed one mechanism of the learning-by-exporting effect. Finally, we find that plants increase, rather than decrease, their product scope after exporting, in contrast with the prediction from the recent theories of multi-product firms.

Description: We show that collusive-seeming outcomes may occur in equilibrium in a one-period competitive insurance market characterized by adverse selection. We build on the Inderst and Wambach (2001) model and assume that insurance is compulsory and involves a minimum premium and minimum coverage; these are common features in many health systems. In this setup we show that there is a range of equilibria, from the zero profit one where low-risks implicitly subsidize high risks, to one where firms obtain profits with both types of consumers. Moreover, we show that rents only partially dissipate if we assume free entry. Along these equilibria, high risks always obtain full insurance, while the low risks' coverage decreases as the firms' profits increase.

Description: Policy makers justify renewable energy promotion policies partly on the grounds that such policies have positive employment impacts. We apply a computable general equilibrium model to assess the labour market impacts of the feed-in tariff policy used by the Government of Ontario. We find that although the policy is successful at increasing the employment in the `green' sectors of the economy, the policy is also likely to increase the rate of unemployment in the province, and to reduce overall labour force participation. We conclude that policies designed to promote renewable energy should be promoted for the sake of their environmental impacts, not for their labour market effects.

Description: How should changes in environmental quality occurring in the future be discounted? To answer this question we consider a model of “ecological discounting”, where the representative consumer has a utility function defined over two attributes, consumption and environmental quality, which evolve stochastically over time. We characterize the determinants of the social discount rate and its behavior over time using a preference structure that disentangles attitudes towards intertemporal inequality, attitudes towards risk, and tastes over consumption and environmental quality. We show that the degree of substitutability between consumption and environmental quality, the degree of risk aversion, the degree of inequality aversion, and the rate at which these attitudes change as natural and man-made resources evolve over time are all important aspects of the ecological discount rate and its term structure. Our analysis suggests that over medium and long term horizons the ecological discount rate should be below the rate of time preference, supporting recent proposals for immediate action towards climate change mitigation.

Description: A widespread meal-serving system commonly blamed for contributing to the obesity epidemic is the all-you-can-eat buffet, where customers can help themselves to as much food as they wish to eat in a single meal for a fixed entry price. The paper offers a rational-choice model for addressing the individual's eating dilemma in an-all-you-can-eat buffet, incorporating the motivation of getting-one's-money's-worth as a behavioral constraint on eating. Contrary to previous findings, the model reveals that the individual will not necessarily overeat beyond the point of fullness and will not necessarily increase eating in response to a higher entry price. An experiment conducted in collaboration with a sushi restaurant supports this conclusion. The paper further shows that a fat tax imposed on both buffet and a-la-carte meals will not affect buffet eating, hence subjecting all-you-can-eat buffets to the fat tax program need not be counter-effective as the literature results imply.

Description: A cable operator chooses to bundle or provide programs a la carte by striking a balance between maximizing total surplus and minimizing transfer payments to program providers. Using general demand and cost functions, we show that a cable operator's decision to bundle maximizes total producer surplus if the cable operator's bargaining power is sufficiently high, and that a cable operator in a weak bargaining position might strategically choose to unbundle viewer channels in order to enhance its bargaining position with individual program suppliers, even when this decision reduces total surplus. It is, therefore, plausible that regulations to cap market share or impose a la carte on cable operators may reduce total surplus, and absent offsetting increases in consumer welfare, such policy measures may reduce total welfare. Under more restrictive conditions, we extend the analysis and show that consumer and social welfare under bundling or a la carte depends on both bargaining power and advertising rates. Our results imply a monopolist does not necessarily increase deadweight loss, and under certain circumstances a monopolist's bargaining outcomes yield higher social welfare.

Description: During the Great Recession, reported unemployment duration has increased to much higher levels than during earlier severe recessions. Previous studies using data from non-recessionary periods have found that part of this increase was caused by a 1994 redesign in the way the Current Population Survey measures unemployment duration. This paper uses data from recessionary and non-recessionary periods to determine how the size of the redesign’s effect on the distribution of unemployment duration changes over the business cycle. I find that, for most measures of unemployment duration, the redesign effect is relatively constant across business cycle conditions, but the redesign effect on median unemployment duration tends to shrink during recessionary periods. This suggests a constant adjustment factor will adequately correct for the CPS redesign for most variables I consider, but for median duration the use of a constant adjustment factor will lead to underestimating the true median duration during high unemployment periods such as the Great Recession.

Description: Theories on the welfare and competitive effects of exclusive territories are numerous, yet they provide ambiguous results. This paper exploits a natural experiment in the U.S. brewing industry to identify the direction of change in welfare caused by the use of exclusive territories. On January 31, 1991, the state of Arkansas enacted legislation which mandated all beer manufacturers to have exclusive territory clauses in their agreements with distributors. To identify the effect, I employ brand-level sales data before and after the legal change both in Arkansas as well as in nearby Oklahoma and Texas. Results are broadly consistent with a positive relationship between the use of exclusive territories and welfare: the most credible results suggest that the legal mandate increased brand-level volume sales by 45%. I conduct several falsification exercises and robustness tests to rule out other possible explanations for this large effect.

Description: Using multiple births as an Instrumental Variable (IV) for family size and data for 43 developing countries, I find evidence that a shock in fertility has a cost for a family as a whole. Mothers are more likely to live in less stable family arrangements and they are more likely to use contraceptives. Children are less likely to receive some vaccines, attend school, and live with their mothers. The analysis by level of development reveals the cost of fertility is driven by countries with lower levels of development.

Description: After World War II, about 8 million ethnic Germans — so called expellees — were forced to leave their homelands and settle within the new borders of West Germany. Subsequently, a law (Federal Expellee Law) was introduced to foster their labor market integration. We evaluate this law by comparing the employment situation between expellees and groups of West Germans and GDR refugees over time. We define our comparison groups to uncover even small effects of the law. Still, we find no evidence that the law met its goal to foster the expellees’ labor market integration.

Description: Under the framework of a two-stage innovation process in which the first-stage innovation is commercialized by multiple firms at the second stage, this study proposes an optimal patent system for efficient commercialization by a lower cost firm when the R&D costs are private information. Under the existing patent system of granting patents sequentially to successful innovators, the commercialization can be achieved by an inefficient firm (called control loss) and duplicative R&D efforts may occur through competitive innovation race. This study shows that the problems of control loss and duplicative R&D efforts can be prevented if the patent office grants a patent with a mandatory contingent delegation fee only to the first innovator. A carefully designed contingent fee function can induce the first innovator to internalize the patent office’s objective function, leading to efficient commercialization by a lower cost firm.

Description: This study examines the economic returns to beauty and unprotected sex in the commercial sex market in Bangladesh. The results show that there is a beauty premium for commercial sex work, but it is within the bounds of the economic returns to beauty for women in occupations that do not involve sex work. We find that there is an earnings premium for sex workers who sell unprotected sex and that more attractive sex workers charge a higher premium for unprotected sex. This result is consistent with more attractive people being better placed to bargain with others and with male clients being more likely to overvalue the returns to immediate sexual gratification and to engage in risk taking activities in the presence of attractive sex workers. The results are robust to alternative empirical specifications.

Description: We study income responses to income tax changes by using a large panel of Swedish tax payers over the period 1991–2002. Changes in statutory tax rates as well as changes in tax bracket thresholds provide exogenous variations in tax rates that can be used to identify income responses. We estimate dynamic income models which allow us to distinguish between short-run and long-run effects in a straightforward fashion. For men, the estimates of the long-run elasticity of income with respect to the net-of-tax rate hover in a range between 0.10 and 0.30. The estimates for women are statistically insignificant. We simulate the fiscal consequences of a tax reform that reduces the top marginal tax rate by five percentage points. Such a reform may have negligible effects on tax revenues when the interactions between income taxes and other taxes are taken into account.

Description: Do public insurance programs crowd out private savings? I examine the relationship between Medicaid and wealth and make a contribution to the literature on this issue in two primary ways. First, I apply the instrumental-variables approach developed by Gruber and Yelowitz (1999) to a different dataset, the National Longitudinal Survey of Youth, 1979 (NLSY79), while at the same time examining an alternative instrument. The results turn out to differ depending on the instrument and, for one of the instruments, to be sensitive to assumptions needed to identify Medicaid’s effects. Second, I make use of the SIPP data employed by Gruber and Yelowitz themselves, and examine the sensitivity of their conclusions to omitted factors that may be related to both Medicaid eligibility and to wealth accumulation. While more robust than the results using the NLSY79, the SIPP estimates are found to depend both on the sample used and on certain specification restrictions. Taken together, the results suggest caution in making inferences about the impact of Medicaid on wealth.

Description: How much does the current social security system redistribute from rich to poor? We propose alternative concepts of well-being that can be used to classify individuals from rich to poor, and we show how social security redistributes differently under each concept. We use the PSID to estimate lifetime wage profiles and actual earnings each year for a sample of 1778 individuals, and we use mortality probabilities to calculate expected payroll taxes and social security benefits. For a given set of “facts” about the net flows experienced each year by each individual, measured progressivity depends on many assumptions. This paper attempts to capture and to quantify all of the data and characteristics relevant to determine each individual’s “income” under several definitions. We then use each definition of income to classify individuals from rich to poor and to calculate the progressivity of social security. We proceed in seven steps. First, we classify individuals by annual income and use Gini coefficients to find that social security is highly progressive. Second, we reclassify individuals on the basis of lifetime income and find that social security is less progressive. Third, we remove the cap on measured earnings and find that social security is even less progressive. Fourth, we switch from actual to potential lifetime earnings (the present value of the wage rate times 4000 hours each year). This measure captures the value of leisure and home production, so those out of the labor force are less poor, and net payments to them are less progressive. Fifth, we assign to each married individual half of the couple’s income. The low-wage spouse is then not so poor, and social security becomes even less progressive. Sixth, we incorporate mortality probabilities that differ by potential lifetime income. Since the rich live longer and collect benefits longer, social security is no longer progressive. Finally, we increase the discount rate from 2% to 4%, which puts relatively more weight on the earlier-but-regressive payroll tax and less weight on the later-but-progressive benefit schedule. Depending on the definition of income used to classify people, the overall social security system could be deemed progressive, only mildly progressive, or neutral. With an even-higher discount rate, it could even be deemed regressive.

Description: We examine changes in environmental monitoring and enforcement activity in the presence of state legislation prohibiting Strategic Lawsuits Against Public Participation (anti-SLAPP laws). Using data on the Clean Air Act from the Environmental Protection Agency’s ECHO database, we find evidence that state inspections increase by almost 50% after a state passes anti-SLAPP legislation. In addition, we find strong evidence that the ratio of findings of noncompliance to inspections more than doubles in the presence of anti-SLAPP legislation.

Description: While the effect of risk aversion on farmers' decision-making has long been documented, far less is known about the effect of ambiguity aversion. We argue that ambiguity aversion is just as relevant to their decision-making process because they are uncertain about the yield distributions generated by new technologies. By experimentally measuring risk and ambiguity aversion in rural Peru, we provide new evidence on the role of ambiguity aversion on farm decisions in developing countries: ambiguity aversion, not risk aversion, reduces the likelihood that farmers plant more than one variety of their main crop.

Description: Building on the framework developed by Qiu (1997) we investigate the influence of product market competition on incentives to invest in cooperative R&D. For that we disentangle the three components that make up the combined-profits externality. The strategic component is always negative and the size component is always positive. The spillover component is negative (positive) with Bertrand (Cournot) competition. Cournot competition thus yields more cooperative R&D, which could drive the Cournot-Nash price below the Bertrand-Nash price. Our decomposition also explains why, under Cournot competition, cooperative R&D exceeds non-cooperative R&D only if spillovers are “high enough.”

Description: The literature on collusive cartels has mainly focused on the impact of antitrust fines on the sustainability of cartels, in infinitely repeated games. This approach, however, does not allow us to study the effect of antitrust fines on the incentives to form cartels in the first place. In this paper, we adopt a coalitional game approach to modeling collusive agreements, showing that antitrust fines may drive firms from partial cartels to a monopolistic cartel. Moreover, by introducing uncertainty on market demand, we show that the socially optimal competition policy can call for a finite or even zero antitrust penalty, even if there are no enforcement costs. We provide a sufficient condition for these results to apply to any coalitional game of cartel formation with symmetric firms. Then, we discuss the extension to asymmetric firms and dynamic collusion.

Description: Consumerism arises when patients acquire and use medical information from sources other than their physicians. This practice has been hailed as a means of improving quality. This need not be the result. Our theoretical model identifies a channel through which consumerism may reduce quality: consumerist patients place additional demands on their doctors’ time, thus imposing a negative externality on other patients. Relative to a world in which consumerism does not exist, consumerism may harm other consumerists, non-consumerists, or both. Data from a large national survey of physicians confirm the negative effects of consumerism: high levels of consumerist patients are associated with lower perceived quality among physicians.

Description: This paper contributes to the ongoing debate regarding the appropriate approach to use in identifying the impact of immigration on native workers’ labor market outcomes. The initial regression analysis makes use of German administrative data and is based on the variation of foreign workers’ shares within education-experience cells over time. It confirms previous findings suggesting that immigration in Germany had no adverse impact on native wages. However, the paper highlights that in Germany immigrants and natives with similar education and experience are likely to work in different occupations. The subsequent analysis based on occupational clustering uses the same data and finds significant adverse wage effects for natives, particularly for those in basic service occupations. The paper argues, therefore, that an identification strategy based on formal education characteristics might lead to biased estimates if a country’s labor market is characterized by occupational segmentation of immigrants.

Description: We estimate a dynamic model of health that is rooted in "stress models" from Epidemiology. Health is determined by time-invariant endowments, permanent shocks, and transitory shocks. We estimate that the variance in health at age 60 ranges between 2.5 and five times its variance at age 25 depending on which demographic group we consider. We show that the stress model performs better than a simple alternative, the random effects Probit, particularly for less educated people.

Description: Government policies that promote on-the-job training have different effects when, due to unemployment, workers value job security. In this case, an increase in specific training leads to greater job security and lower wages. The wage result, although perhaps counterintuitive, is supported by, and helps explain, published empirical work. Even with lower wages, training policies may be Pareto-improving or may lower welfare, depending on the elasticity of demand for labor. Training mandates and subsidies to training, because of their differing impacts on job security, have different unemployment and welfare effects; mandates are preferred. If government policy can influence specific training and job security independently, training is never optimally encouraged. Policies that promote general training and policies that promote specific training can both raise employment, but in different ways. Specific training lowers the employment outflow; general training raises the employment inflow.

Description: This paper uses a simple model of duopoly competition to study the market provision of program quality offered by television broadcasters under three different regimes. In regime 1, two broadcasters are financed only with subscription fees (i.e., fee-based or pay TV). In regime 2, the two broadcasters generate their revenues only from advertising (i.e., free TV). In regime 3, one pay TV broadcaster competes with one free TV broadcaster. We show that the broadcasters in regime 3 (but not in regimes 1 and 2) vertically differentiate their channel programs if, for a given level of advertising market profitability, viewers strongly or weakly dislike the presence of advertising. In such cases, although the two pay TV broadcasters in regime 1 will unambiguously offer higher or lower quality programming than the two free TV broadcasters under regime 2, it is not clear which broadcaster will provide higher or lower program quality in regime 3 because this depends on the degree of horizontal differentiation between the channel programs. However, the levels of quality offered under regimes 1 and 2 fall between the quality levels offered by the two broadcasters in regime 3.

Description: This study investigates the explanatory variables affecting the agricultural cooperatives decision of downstream vertical integration into the transformation of the products supplied by their members. The study also analyses the effect of the vertical integration decision on the efficiency obtained. This analysis has been carried out by means of a two-step methodology suggested by Heckman (1979) over a sample of Spanish agricultural cooperatives belonging to the Qualified Denomination of Origin La Rioja. The results obtained show that those cooperatives, which have adopted Actualisation Mechanisms of social capital, high dedication to agricultural activity, and high rate of capacity utilization are more likely to integrate within the cooperative another stage of the production cycle. Furthermore, the results show that the most efficient cooperatives are those with a higher level of downstream vertical integration.

Description: This paper models information transmission in an electoral campaign. The voters have conflicting policy interests, but they are congruent in their desire to elect a competent politician. They hold private information about the candidates for office, and they use endorsements and campaign contributions to signal their information, so as to advertise their most preferred candidates. Endorsements are cheap talk, but campaign contributions are costly, hence, contributions are stronger signals than endorsements. Therefore, contributions help to transmit information when voter interests are relatively divergent (however, not so much that campaigning is useless).

Description: This paper explores the relationship between income distribution, prices, production efficiency and aggregate output in a decentralized search economy. We show that income distribution determines how competitive prices are and thereby affects production efficiency and aggregate output. It is shown that, under reasonable assumptions, it is possible to engineer a judicious transfer of income from high to low income individuals, which increases income equality, leads to more competitive prices, and increases aggregate output.

Description: We determine the impact of free trade on the sustainability of an international environmental agreement (IEA) and incorporate it into the assessment of the net benefits of opening up to free trade. We show that such an analysis can reverse the conclusions reached within a standard one-shot game framework. We first examine a one shot game and show that the benefits from an increase in economic activity due to free trade outweigh the extra cost of free trade associated with larger environmental damage. We then consider the infinite repetition of the one-shot game where countries can use trigger strategies and show that there exist circumstances where an IEA is sustainable under autarky but not under free trade. This aggravates the environmental damages caused by free trade and leads to the possibility that welfare may be smaller under free trade than under autarky. This conclusion remains valid even when (i) countries adopt the most cooperative environmental policy when the âfully cooperativeâ environmental policy is not sustainable or (ii) we consider âintermediate tariff reductions.â

Description: Drawing on Grossman & Helpman (2004) and Antràs & Helpman (2004), we identify general conditions that result in an unambiguous mapping of a firmâs productivity level into the organizational form and location of its input sourcing. Using a detailed 2006-2008 data set for Spanish manufacturing firms, we then establish a number of stylized facts about firm-level heterogeneity in sourcing strategies that have largely gone unnoticed in existing literature on input sourcing. Finally, we explore this heterogeneity through econometric estimation of productivity premia associated with different sourcing strategies. We find a robustly significant premium on a strategy that features offshore production of intermediate inputs through a related party (vertical integration). Lower productivity premia are found for strategies that rely on outsourcing to unrelated parties abroad or on vertical integration within the home economy. Across all specifications employed, estimated mean productivity is lowest for domestic-outsourcing firms.

Description: Noting that developing countries may not have the administrative capacity to levy a âpureâ carbon tax, we compare the impact of alternative energy taxes with that of a carbon tax in an economy with multiple distortions. We use a disaggregated computable general equilibrium (CGE) model of the South African economy and simulate a range of tax policies that reduce CO2 emissions by 15 percent. Consistent with a âfirst-bestâ economy, a carbon tax will have the lowest marginal cost of abatement. But the relationship between a tax on energy commodities and one on pollution-intensive commodities depends critically on other distortions in the system and on structural rigidities in the economy. We demonstrate that if South Africa were able to remove distortions in the labor market, the cost of carbon taxation would be negligible. We conclude that the welfare costs of taxing carbon emissions in developing countries depend more on other distortions than on the countryâs own carbon emissions.

Description: In small and open economies, absorption of foreign knowledge through international trade often plays a more important role for domestic innovation and growth than investment in domestic R&D. This suggests that trade policies can increase knowledge spillovers from abroad. Public support to R&D can be motivated both by positive internal knowledge externalities and by its ability to expand absorptive capacity. This dynamic, empirical, general equilibrium analysis models these interplays between R&D, trade and productivity. It compares public R&D support and export promotion of R&D based products with respect to long term growth and welfare impacts. We find that export promotion is inferior to R&D support in spurring R&D. However, it is not outperformed in terms of welfare generation. The reason is that existing and politically persistent policy interventions create inefficiencies that can be counteracted by R&D-based export promotion as a second-best policy.

Description: In this paper, we consider three U.S. public policies that potentially influence the work decisions of mothers of infants—parental leave laws, exemptions from welfare work requirements, and child care subsidies for low-income families. We estimate the effects of these policies on the timing of work participation after birth, and on a range of outcomes in the subsequent four years, using a group difference-in-difference technique suitable for analysis of cross-sectional data. We find that the three policies affect early maternal work participation, but obtain no evidence of significant consequences for child well-being.

Description: We compare four datasets that researchers might use to study competition in the health insurance industry. We show that the two datasets most commonly used to estimate market concentration differ considerably from each other (both in levels and in changes over time), and reflect implausibly high volatility in market shares. By comparison, market share volatility is much lower in a private dataset gathered by a leading investment bank, and in state-level hospital discharge data. We also demonstrate that the outcome of regressions using these data vary considerably by the source used. We conclude that researchers should be cautious about using available data and recommend a new source be developed for public use.

Description: With asymmetric information between investors and firms, credit availability is affected by the resale value of collateralized productive assets. If liquidation occurs, investors recover a greater value the higher the probability to find a buyer and the higher his willingness to pay to use the assets for production. We extend the idea of complementarities among firms in the same industry (as in Shleifer and Vishny, 1992) to study under which conditions credit availability is enhanced by competition in the product market when assets are industry specific.

Description: This paper defines, discusses, and measures “expenditure substitution” in charitable giving. Motivated by a model of conditional demand, I consider the extent to which a “temporary shock” that increases an individual's donation to one cause by a particular amount displaces her gifts to other charitable causes. I use the 2001-2007 waves of the PSID/COPPS, the first data set of its kind, to identify this. Households that give more to one type of charity tend to give more to others. However, many of the correlations between the residuals after fixed-effects regressions are negative and significant, particularly for larger donors and for certain categories of charitable giving. Given plausible econometric assumptions, the negative correlations are strong evidence of expenditure substitution. Overall, these results suggest heterogeneous motivations for giving: small givers may be mainly driven by temporary shocks and personal appeals while larger givers may have concave multi-charity warm-glow preferences.

Description: We explore the economic impact of boycotts of French automobiles in China during the time of the 2008 Beijing Olympics. Conditions were favorable for a boycott, enabling Chinese consumers to overcome the collective action problems that can prevent boycott success and other voluntary contributions to public goods. We use brand and model level data in a difference-in-difference specification to investigate the boycotts’ effects on sales. A robust pattern of large impacts emerges: sales of French automobile brands fell 25-33 percent or more. Consumers substituted mostly toward Chinese and other Asian cars. The sales of the French models did not experience similar relative sales declines in countries other than China—triple-difference estimates point toward even larger relative loss of market share in China. Our results provide evidence that commerce can be used as an effective political weapon.

Description: I estimate the welfare provided to beneficiaries by the Medicare managed care program, and its net costs, for the years 1999-2002. I measure beneficiary welfare with a nested logit model of demand for Medicare HMO plans using detailed data on plan benefits. From this, I find that total beneficiary welfare provided by the program over the four-year period is about $61 billion (2000 $). I also use data on and estimates of the favorable selection enjoyed by Medicare HMOs from the research literature to estimate net costs of the program, which range from $21 billion to $31 billion (2000 $). Estimated net beneficiary welfare of the program therefore ranges from $30 billion to $40 billion and the estimated return on government spending ranges from 96 percent to 186 percent. Even though managed care plans are overpaid by Medicare, the program still enjoys a substantial return due to the popularity of its offerings.

Description: In many credence goods markets, a seller simultaneously diagnoses a problem and offers a recommendation to fix it. One might wonder what prevents these sellers from always exaggerating their customer’s needs. In this paper, we offer a simple explanation, namely, consumers may spurn sellers who have a reputation for such “demand inducement.” We test this explanation by examining patient choice of obstetrician in Florida. In most of the counties that we study, we find that maternity patients are significantly less likely to choose obstetricians who perform more than the expected number of cesarean sections. We address simultaneity by instrumenting for “inducement propensity” using information about the obstetrician's training. Although the instrument is weak, a series of robustness tests suggests that our findings are plausible while ruling out alternative explanations.

Description: We investigate the dynamics of a firm whose advertisements and sales contribute to its customers’ stock of goodwill. An advertising campaign precedes the firm’s sales when the marginal product of advertisement is sufficiently large (e.g., Amazon Kindle and Apple Macintosh), whereas sales of a new brand of a familiar product may start without advertising (e.g. Crocs shoes). When the firm chooses both advertising and sales policies, the optimal solutions can be divided into two groups typified by low and high demand elasticities. When demand elasticity is low, a massive increase in the quantity sold causes a considerable drop in the product's price. Therefore, the firm prefers to use advertising, rather than excess sales. With high demand elasticity, a massive increase in the quantity sold reduces the price only marginally, thus sales becomes a relatively cheap way to build up the stock of goodwill, compared with advertising.

Description: The purpose of this paper is to present a new methodology for evaluating the distributional impacts of climate policy. This methodology builds directly on the framework introduced by Jorgenson, Slesnick, and Wilcoxen (1992), but generalizes it by including leisure time, as well as goods and services, in the measure of household welfare. We provide detailed results for 244 different types of households distinguished by demographic characteristics. In addition, we evaluate the overall impact of a cap-and-trade system, as represented in Energy Modeling Forum 22. While there is a wide range of outcomes for different demographic groups, the impact on economic welfare is regressive and generally negative but relatively small.

Description: Using an analytical general equilibrium model, we find solutions for the effect of energy policy on factor prices as well as output prices. We calibrate the model to the U.S. economy, and we consider a tax on carbon dioxide. By looking at expenditure and income patterns across household groups, we quantify the uses-side and sources-side incidence of the tax. When households are categorized either by annual income or by total annual consumption as a proxy for permanent income, the uses-side incidence is regressive. This result is robust to sensitivity analysis over various parameter values. The sources-side incidence can be progressive, U-shaped, or regressive. Results on the sources side are sensitive to parameter values.

Description: While interest group explanations have considerably advanced our understanding of governmental outcomes, much remains to be understood about the specific country-level, industry-level and firm-level characteristics that underlie the influence firms have on the establishment of governmental rules, laws and regulations. In this study, we draw upon a unique database of roughly 6000 international firms to investigate the abilities of firms to affect governmental policies. We find that country-level institutional characteristics, such as the legal origin and political diversity of the firmâs home country, significantly affect the ability to influence government. We also find that industry-level characteristics, such as the number of industry competitors, and firm-level characteristics, such as size and age, are determinants of firm influence on governments.

Description: Individual countries are in the process of legislating responses to the challenges posed by climate change. The prospect of rising carbon prices raises concerns in these nations about the effects on the competitiveness of their own energy-intensive industries and the potential for carbon leakage, particularly leakage to emerging economies that lack comparable regulation. In response, certain developed countries are proposing controversial trade-related measures and allowance allocation designs to complement their climate policies. Missing from much of the debate on trade-related measures is a broader understanding of how climate policies implemented unilaterally (or subglobally) affect all countries in the global trading system. Arguably, the largest impacts are from the targeted carbon pricing itself, which generates macroeconomic effects, terms-of-trade changes, and shifts in global energy demand and prices; it also changes the relative prices of certain energy-intensive goods. This paper studies how climate policies implemented in certain major economies (the European Union and the United States) affect the global distribution of economic and environmental outcomes and how these outcomes may be altered by complementary policies aimed at addressing carbon leakage.

Description: We investigate the hypothesis that rising wage inequality caused declines in the U.S. aggregate marriage hazard since 1970. Despite confirming previous findings that inequality accounts for much of the decline among young adults before 1990, we find that the aggregate marriage hazard became much less sensitive to inequality thereafter. Our explanation for the weakened relationship relies on the theoretical prediction, which we verify empirically, that inequality influences marital decisions of young singles much more than those of older singles. The aggregate marriage hazard thus became less responsive to inequality over this period because the unmarried population became older.

Description: We study an oligopolistic market in which consumers located around the perimeter of a Salop circle buy either from firms around this perimeter (providing horizontally differentiated goods) or from a firm located at the centre of the circle (providing a homogeneous good). An entry-pricing game is studied. The market equilibria and social optima indicate various possible market failures, including cases in which the market is served only by perimeter firms whilst central provision would be socially optimal (in this sense, more extreme than the standard Salop excessive product differentiation). Moreover, for some parameters, the standard Salop result might be reversed.

Description: Pooling data for 1905 to 2000, we find no systematic relationship between top income shares and economic growth in a panel of 12 developed nations observed between 22 and 85 years. After 1960, however, a one percentage point rise in the top decileâs income share is associated with a statistically significant 0.12 point rise in GDP growth during the following year. This relationship is not driven by changes in either educational attainment or top tax rates. If the increase in inequality is permanent, the increase in growth appears to be permanent. However, our estimates imply that it would take 13 years for the cumulative positive effect of faster growth on the mean income of the bottom nine deciles to offset the negative effect of reducing their share of total income.

Description: High prices for patented pharmaceuticals have prompted many governments to consider allowing competition from âparallel imports,â or products first sold at lower prices in other countries. This paper examines how pharmaceutical firms have responded to changes in intellectual property rights and trade barriers that legalized parallel imports within the European Union (EU). The threat of arbitrage by parallel traders reduces the ability of firms to price discriminate across countries. Due to regulations on price and antitrust law on rationing supply, pharmaceutical firms may rely on non-price responses. Such responses include differentiation of products across countries and selective âcullingâ of product lines to reduce arbitrage opportunities, as well as raising arbitrageursâ costs through choice of packaging. Using a dataset of drug prices and sales from 1993-2004 covering 30 countries, I find evidence that the behavior of pharmaceutical firms in the EU with respect to their product portfolios is consistent with attempts to reduce parallel trade. This may at least partially explain why parallel trade has not yet resulted in significant price convergence across EU countries. Accounting for non-price strategic responses may therefore be important in assessing the welfare effects of competition from parallel imports.

Description: We evaluate the impact of the Medicare HMO program and prescription drug coverage on elderly mortality using data from 1993 to 2000. We specify a model of plan entry and benefit choice and Medicare enrollee plan choice and health outcomes. We derive an estimator that is consistent with endogenous plan selection by using the quasi-experimental variation caused by peculiarities of the Medicare reimbursement system for HMOs. We find that, relative to traditional Medicare, enrollment in an HMO without drug coverage increases mortality while enrollment in an HMO with drug coverage has no significant impact. The economic value of the reduction in mortality from drug coverage far outweighs the costs. HMOs, those without drug coverage in particular, attract healthier enrollees than average.

Description: Health insurance companies seek to influence the type of care patients receive in order to increase value in relation to cost. Traditional health insurance relies primarily on price mechanisms to affect patients' and doctors' choices, whereas managed care plans such as HMOs, as the name implies, affect choices directly thorough various forms of âmanaged care.â I investigate the effect of pecuniary and non-pecuniary incentives used by health insurance companies to influence prescription decisions in an important class of pharmaceuticals, cholesterol-lowering drugs called Statins, using a discrete-choice demand model on patient-level data. My results suggest that HMOs are significantly more successful at influencing drug choice than traditional indemnity insurers. In conjunction with volume-contingent discounts given by drug producers, this could explain part of the cost-effectiveness differential between HMOs and traditional indemnity insurers.

Description: The potential for greenhouse gas (GHG) restrictions in some nations to increased emissions in other nations, or leakage, is a contentious issue in climate change negotiations. We evaluate the impact of border carbon adjustments (BCAs) outlined in the American Clean Energy and Security Act of 2009 (H.R. 2454), using an economy-wide model. For 2025, we find that BCAs reduce leakage by up to two-thirds, but result in only modest reductions in global emissions and significantly reduce welfare. In contrast, BCA-equivalent leakage reductions can be achieved by very small emission charges or efficiency improvements in nations targeted by BCAs, which have negligible welfare effects. We conclude that BCAs are a costly method to reduce leakage, but may be an effective coercion strategy.

Description: The objective of this paper is to re-evaluate the effect of the 1985 âEmployment Services for Ex-Offendersâ (ESEO) program on recidivism in San Diego, Chicago and Boston. The initial group of program participants was split randomly in a control group and a treatment group. The actual treatment (mainly being job related counseling) only takes place conditional on finding a job and not having been arrested for those selected in the treatment group. We use interval-censored proportional hazard models for job search and recidivism time, where the latter model incorporates the conditional treatment effect, depending on covariates. We find that the effect of the program depends on location and age. The ESEO program reduces the risk of recidivism only for ex-inmates over the age of 27 in San Diego and Chicago and over the age of 36 in Boston, but increases the risk of recidivism for the other ex-inmates in the treatment group.