American Economic Association Nashville, TN 1945-7782 1945-7790 American Economic Journal: Applied Economics http://www.aeaweb.org/aej-applied/ 2 4 October 2010 http://www.aeaweb.org/issue.php?journal=APP&volume=2&issue=4 Journal Article Front Matter i i http://www.aeaweb.org/articles.php?doi=10.1257/app.2.4.i 10.1257/app.2.4.i American Economic Association Nashville, TN 1945-7782 1945-7790 American Economic Journal: Applied Economics http://www.aeaweb.org/aej-applied/ 2 4 October 2010 http://www.aeaweb.org/issue.php?journal=APP&volume=2&issue=4 Journal Article Factor Immobility and Regional Impacts of Trade Liberalization: Evidence on Poverty from India PetiaTopalovaIMF 1 41 This paper uses the 1991 Indian trade liberalization to measure the impact of trade liberalization on poverty, and to examine the mechanisms underpinning this impact. Variation in sectoral composition across districts and liberalization intensity across production sectors allows a difference-in-difference approach. Rural districts, in which production sectors more exposed to liberalization were concentrated, experienced slower decline in poverty and lower consumption growth. The impact of liberalization was most pronounced among the least geographically mobile at the bottom of the income distribution, and in Indian states where inflexible labor laws impeded factor reallocation across sectors. (JEL F13, I32, O15, O18, O19, O24) http://www.aeaweb.org/articles.php?doi=10.1257/app.2.4.1 10.1257/app.2.4.1 http://www.aeaweb.org/aej/app/data/2008-0030_data.zip http://www.aeaweb.org/aej/app/app/2008-0030_app.pdf American Economic Association Nashville, TN 1945-7782 1945-7790 American Economic Journal: Applied Economics http://www.aeaweb.org/aej-applied/ 2 4 October 2010 http://www.aeaweb.org/issue.php?journal=APP&volume=2&issue=4 Journal Article Trade Adjustment and Human Capital Investments: Evidence from Indian Tariff Reform Eric V.EdmondsDartmouth College and IZA NinaPavcnikDartmouth College and BREAD PetiaTopalovaIMF 42 75 Does trade policy influence schooling and child labor in low-income countries? We examine this question in the context of India's 1991 tariff reforms. While schooling increased and child labor declined in rural India in the 1990s, these trends are attenuated in districts with employment concentrated in industries losing tariff protection. As the loss of protection causes a relative rise in poverty in affected districts, families reduce schooling to save schooling costs. Girls disproportionately bear the burden of helping their families cope with poverty. (JEL F13, F16, I21, J13, J82, O15, O19) http://www.aeaweb.org/articles.php?doi=10.1257/app.2.4.42 10.1257/app.2.4.42 http://www.aeaweb.org/aej/app/data/2008-0100_data.zip http://www.aeaweb.org/aej/app/app/2008-0100_app.pdf American Economic Association Nashville, TN 1945-7782 1945-7790 American Economic Journal: Applied Economics http://www.aeaweb.org/aej-applied/ 2 4 October 2010 http://www.aeaweb.org/issue.php?journal=APP&volume=2&issue=4 Journal Article Beyond Signaling and Human Capital: Education and the Revelation of Ability PeterArcidiaconoDuke U PatrickBayerDuke U AurelHizmoDuke U 76 104 We provide evidence that college graduation plays a direct role in revealing ability to the labor market. Using the NLSY79, our results suggest that ability is observed nearly perfectly for college graduates, but is revealed to the labor market more gradually for high school graduates. Consequently, from the beginning of their careers, college graduates are paid in accordance with their own ability, while the wages of high school graduates are initially unrelated to their own ability. This view of ability revelation in the labor market has considerable power in explaining racial differences in wages, education, and returns to ability. (JEL D82, I21, I23, J24, J31) http://www.aeaweb.org/articles.php?doi=10.1257/app.2.4.76 10.1257/app.2.4.76 http://www.aeaweb.org/aej/app/data/2009-0106_data.zip http://www.aeaweb.org/aej/app/app/2009-0106_app.pdf American Economic Association Nashville, TN 1945-7782 1945-7790 American Economic Journal: Applied Economics http://www.aeaweb.org/aej-applied/ 2 4 October 2010 http://www.aeaweb.org/issue.php?journal=APP&volume=2&issue=4 Journal Article The Flattening Firm and Product Market Competition: The Effect of Trade Liberalization on Corporate Hierarchies MariaGuadalupeColumbia U and IZA JulieWulfHarvard U 105 27 This paper establishes a causal effect of product market competition on various characteristics of organizational design. Using a unique panel dataset on firm hierarchies of large US firms (1986-1999) and a quasi-natural experiment (trade liberalization), we find that competition leads firms to flatten their hierarchies: firms reduce the number of positions between the CEO and division managers, and firms increase the number of positions reporting directly to the CEO. The results illustrate how firms redesign their organizational structure through a set of complementary choices in response to changes in their environment. We discuss several possible interpretations of these changes. (JEL D23, F13, G34, M12, M51) http://www.aeaweb.org/articles.php?doi=10.1257/app.2.4.105 10.1257/app.2.4.105 http://www.aeaweb.org/aej/app/data/2009-0287_data.zip http://www.aeaweb.org/aej/app/app/2009-0287_app.pdf American Economic Association Nashville, TN 1945-7782 1945-7790 American Economic Journal: Applied Economics http://www.aeaweb.org/aej-applied/ 2 4 October 2010 http://www.aeaweb.org/issue.php?journal=APP&volume=2&issue=4 Journal Article Minimum Wages and Earnings Inequality in Urban Mexico MarianoBoschU Alicante MarcoManacordaQueen Mary, U London and Centre for Economic Performance, London School of Economics 128 49 This paper analyzes the contribution of the minimum wage to the well documented rise in earnings inequality in Mexico between the late 1980s and the early 2000s. We find that a substantial part of the growth in inequality, and essentially all of the growth in inequality in the bottom end of the distribution, is due to the steep decline in the real value of the minimum wage. (JEL J31, J38, O15, O17, O18, R23) http://www.aeaweb.org/articles.php?doi=10.1257/app.2.4.128 10.1257/app.2.4.128 http://www.aeaweb.org/aej/app/data/2008-0032_data.zip http://www.aeaweb.org/aej/app/app/2008-0032_app.pdf American Economic Association Nashville, TN 1945-7782 1945-7790 American Economic Journal: Applied Economics http://www.aeaweb.org/aej-applied/ 2 4 October 2010 http://www.aeaweb.org/issue.php?journal=APP&volume=2&issue=4 Journal Article School Competition and Efficiency with Publicly Funded Catholic Schools DavidCardU CA, Berkeley Martin D.DooleyMcMaster U A. AbigailPayneMcMaster U 150 76 We study competition between two publicly funded school systems in Ontario, Canada: one that is open to all students, and one that is restricted to children of Catholic backgrounds. A simple model of competition between the competing systems predicts greater effort by school managers in areas with more Catholic families who are willing to switch systems. Consistent with this insight, we find significant effects of competitive pressure on test score gains between third and sixth grade. Our estimates imply that extending competition to all students would raise average test scores in sixth grade by 6 percent to 8 percent of a standard deviation. (JEL I21, I22, H75, Z12) http://www.aeaweb.org/articles.php?doi=10.1257/app.2.4.150 10.1257/app.2.4.150 http://www.aeaweb.org/aej/app/data/2009-0223_data.zip http://www.aeaweb.org/aej/app/app/2009-0223_app.pdf American Economic Association Nashville, TN 1945-7782 1945-7790 American Economic Journal: Applied Economics http://www.aeaweb.org/aej-applied/ 2 4 October 2010 http://www.aeaweb.org/issue.php?journal=APP&volume=2&issue=4 Journal Article (Over)insuring Modest Risks JustinSydnorU WI 177 99 Despite the large literature on anomalies in risky choice, very little research has explored the relevance of these insights in real insurance markets. This paper uses new data on consumers' choices of deductibles for home insurance to provide evidence that a surprising level of risk aversion over modest stakes is a reality in the market. Most customers purchase low deductibles despite costs significantly above the expected value. Fitting these choices to a standard model of risk aversion yields implausibly large measures of risk parameters. Potential explanations and the implications of these results for understanding the market for insurance are discussed. (JEL D14, D81, G21, G22) http://www.aeaweb.org/articles.php?doi=10.1257/app.2.4.177 10.1257/app.2.4.177 http://www.aeaweb.org/aej/app/data/2009-0248_data.zip American Economic Association Nashville, TN 1945-7782 1945-7790 American Economic Journal: Applied Economics http://www.aeaweb.org/aej-applied/ 2 4 October 2010 http://www.aeaweb.org/issue.php?journal=APP&volume=2&issue=4 Journal Article Government Spending and Legislative Organization: Quasi-experimental Evidence from Germany PeterEggerETH Zurich and CESifo MarkoKoethenbuergerU Copenhagen and CESifo 200 212 This paper presents empirical evidence of a positive effect of council size on government spending using a dataset of 2,056 municipalities in the German state of Bavaria over a period of 21 years. We apply a regression discontinuity design to avoid an endogeneity bias. In particular, we exploit discontinuities in the legal rule that relate population size of a municipality in order to council size to identify a causal relationship between council size and public spending, and find a robust positive impact of council size on spending. Moreover, we show that municipalities primarily adjust current expenditure in response to a rise in council size. (JEL D72, H72, R51) http://www.aeaweb.org/articles.php?doi=10.1257/app.2.4.200 10.1257/app.2.4.200 http://www.aeaweb.org/aej/app/data/2009-0101_data.zip http://www.aeaweb.org/aej/app/app/2009-0101_app.pdf American Economic Association Nashville, TN 1945-7782 1945-7790 American Economic Journal: Applied Economics http://www.aeaweb.org/aej-applied/ 2 4 October 2010 http://www.aeaweb.org/issue.php?journal=APP&volume=2&issue=4 Journal Article Put Your Money Where Your Butt Is: A Commitment Contract for Smoking Cessation XavierGinéWorld Bank DeanKarlanYale U and Abdul Latif Jameel Poverty Action Lab JonathanZinmanDartmouth College 213 35 We designed and tested a voluntary commitment product to help smokers quit smoking. The product (CARES) offered smokers a savings account in which they deposit funds for six months, after which they take a urine test for nicotine and cotinine. If they pass, their money is returned; otherwise, their money is forfeited to charity. Of smokers offered CARES, 11 percent took up, and smokers randomly offered CARES were 3 percentage points more likely to pass the 6-month test than the control group. More importantly, this effect persisted in surprise tests at 12 months, indicating that CARES produced lasting smoking cessation. (JEL D12, I12, O15) http://www.aeaweb.org/articles.php?doi=10.1257/app.2.4.213 10.1257/app.2.4.213 http://www.aeaweb.org/aej/app/data/2009-0213_data.zip American Economic Association Nashville, TN 1945-7782 1945-7790 American Economic Journal: Applied Economics http://www.aeaweb.org/aej-applied/ 2 4 October 2010 http://www.aeaweb.org/issue.php?journal=APP&volume=2&issue=4 Journal Article The Importance of Being Wanted Quy-ToanDoWorld Bank Tung D.PhungIndochina Research and Consulting, Hanoi 236 53 We identify birth wantedness as a source of better child outcomes. In Vietnam, the year of birth is widely believed to determine success. As a result, cohorts born in auspicious years are 12 percent larger. Comparing siblings with one another, those of auspicious cohorts are found to have two extra months of schooling. The Vietnamese horoscope being gender-specific, this difference will be shown to be driven by birth planning. Children born in auspicious years are more likely to have been planned, thus benefiting from a more favorable growth environment. (JEL J12, J13, O15, P23, Z13) http://www.aeaweb.org/articles.php?doi=10.1257/app.2.4.236 10.1257/app.2.4.236 http://www.aeaweb.org/aej/app/data/2009-0196_data.zip