American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 2 1 January 2010 http://www.aeaweb.org/issue.php?journal=MAC&volume=2&issue=1 Journal Article A Theory of Military Dictatorships DaronAcemogluMIT and CIFAR DavideTicchiU Urbino AndreaVindigniPrinceton U and IZA, Bonn 1 42 We investigate how nondemocratic regimes use the military and how this can lead to the emergence of military dictatorships. The elite may build a strong military and make the concessions necessary for the military to behave as their perfect agent, or they may risk the military turning against them. Once the transition to democracy takes place, a strong military poses a threat against the nascent democratic regime until it is reformed. We study the role of income inequality and natural resources in the emergence of military dictatorships and show how the national defense role of the military may facilitate democratic consolidation. (JEL D72, H56) http://www.aeaweb.org/articles.php?doi=10.1257/mac.2.1.1 10.1257/mac.2.1.1 http://www.aeaweb.org/aej/mac/app/2008-0137_app.pdf American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 2 1 January 2010 http://www.aeaweb.org/issue.php?journal=MAC&volume=2&issue=1 Journal Article Inflation-Gap Persistence in the US TimothyCogleyNYU Giorgio E.PrimiceriNorthwestern U Thomas J.SargentNYU and Hoover Institution, Stanford U 43 69 We estimate vector autoregressions with drifting coefficients and stochastic volatility to investigate whether US inflation persistence has changed. We focus on the inflation gap, defined as the difference between inflation and trend inflation, and we measure persistence in terms of short- to medium-term predictability. We present evidence that inflation-gap persistence increased during the Great Inflation and that it fell after the Volcker disinflation. We interpret these changes using a dynamic new Keynesian model that highlights the importance of changes in the central bank's inflation target. (JEL E12, E31, E52, E58) http://www.aeaweb.org/articles.php?doi=10.1257/mac.2.1.43 10.1257/mac.2.1.43 http://www.aeaweb.org/aej/mac/data/2008-0061_data.zip http://www.aeaweb.org/aej/mac/app/2008-0061_app.pdf American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 2 1 January 2010 http://www.aeaweb.org/issue.php?journal=MAC&volume=2&issue=1 Journal Article The TIPS Yield Curve and Inflation Compensation Refet S.GürkaynakBilkent U BrianSackFederal Reserve Bank of New York Jonathan H.WrightJohns Hopkins U 70 92 For over ten years, the Treasury has issued index-linked debt. This paper describes the methodology for fitting a smoothed yield curve to these securities that is used at the Federal Reserve Board every day, and makes the estimates public. Comparison with the corresponding nominal yield curve allows measures of inflation compensation to be computed. We discuss the interpretation of inflation compensation, and provide evidence that it is not a pure measure of inflation expectations being distorted by inflation risk premium and liquidity premium components. We attempt to estimate the TIPS liquidity premium and to extract underlying inflation expectations. (JEL E31, E43, H63) http://www.aeaweb.org/articles.php?doi=10.1257/mac.2.1.70 10.1257/mac.2.1.70 http://www.aeaweb.org/aej/mac/data/2008-0110_data.zip American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 2 1 January 2010 http://www.aeaweb.org/issue.php?journal=MAC&volume=2&issue=1 Journal Article Why Are Saving Rates of Urban Households in China Rising? Marcos D.ChamonIMF Eswar S.PrasadCornell U 93 130 From 1995 to 2005, the average urban household savings rate in China rose by 7 percentage points, to about one-quarter of disposable income. Savings rates increased across all demographic groups, and the age profile of savings has an unusual pattern in recent years, with younger and older households having relatively high savings rates. We argue that these patterns are best explained by the rising private burden of expenditures on housing, education, and health care. These effects and precautionary motives may have been amplified by financial underdevelopment, including constraints on borrowing against future income and low returns on financial assets. (JEL D14, E21, O12, O18, P25, P36) http://www.aeaweb.org/articles.php?doi=10.1257/mac.2.1.93 10.1257/mac.2.1.93 American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 2 1 January 2010 http://www.aeaweb.org/issue.php?journal=MAC&volume=2&issue=1 Journal Article Firm Heterogeneity and the Long-Run Effects of Dividend Tax Reform FrançoisGourioBoston U JianjunMiaoBoston U and Zhongnan U Economics and Law 131 68 To study the long-run effect of dividend taxation on aggregate capital accumulation, we build a dynamic general equilibrium model in which there is a continuum of firms subject to idiosyncratic productivity shocks. We find that a dividend tax cut raises aggregate productivity by reducing the frictions in the reallocation of capital across firms. Our baseline model simulations show that when both dividend and capital gains tax rates are cut from 25 and 20 percent, respectively, to the same 15 percent level permanently, the aggregate long-run capital stock increases by about 4 percent. (JEL D21, E22, E62, G32, G35, H25, H32) http://www.aeaweb.org/articles.php?doi=10.1257/mac.2.1.131 10.1257/mac.2.1.131 http://www.aeaweb.org/aej/mac/data/2008-0079_data.zip American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 2 1 January 2010 http://www.aeaweb.org/issue.php?journal=MAC&volume=2&issue=1 Journal Article Productivity Differences between and within Countries DaronAcemogluMIT MelissaDellMIT 169 88 We document substantial within-country (cross-municipality) differences in incomes for a large number of countries in the Americas. A significant fraction of the within-country differences cannot be explained by observed human capital. We conjecture that the sources of within-country and between-country differences are related. As a first step toward a unified framework, we propose a simple model incorporating differences in technological know-how across countries and differences in productive efficiency within countries. (JEL E23, I31, J31, O15, O18, O47, R23) http://www.aeaweb.org/articles.php?doi=10.1257/mac.2.1.169 10.1257/mac.2.1.169 http://www.aeaweb.org/aej/mac/data/2009-0012_data.zip http://www.aeaweb.org/aej/mac/app/2009-0012_app.pdf American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 2 1 January 2010 http://www.aeaweb.org/issue.php?journal=MAC&volume=2&issue=1 Journal Article Why Does Misallocation Persist? Abhijit V.BanerjeeMIT BenjaminMollU Chicago 189 206 Recent papers argue that the misallocation of resources can explain large cross-country TFP differences. This argument is underpinned by empirical evidence documenting substantial dispersion in the marginal products of resources, particularly capital, in developing countries. But why does misallocation persists? That is, why don't distortions disappear on their own? This is particularly true for capital misallocation, a point we illustrate in a simple model of capital accumulation with credit constraints. We distinguish between misallocation on the intensive and the extensive margin, and show that the former should disappear asymptotically under general conditions, while the latter may persist. We conclude by discussing possible theories of persistent misallocation. (JEL D24, E22, G31, G32, L26) http://www.aeaweb.org/articles.php?doi=10.1257/mac.2.1.189 10.1257/mac.2.1.189 American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 2 1 January 2010 http://www.aeaweb.org/issue.php?journal=MAC&volume=2&issue=1 Journal Article Development Accounting Chang-TaiHsiehU Chicago Peter J.KlenowStanford U 207 23 Researchers have made much progress in the past 25 years in accounting for the proximate determinants of income levels: physical capital, human capital, and Total Factor Productivity (TFP). But we still know little about why these factors vary. We argue that TFP exerts a powerful influence on output not only directly, but also indirectly, through its effect on physical and human capital accumulation. We discuss why TFP varies across countries, highlighting misallocation of inputs across firms and industries as a key determinant. (JEL E22, E23, F21, F35, O10, O40) http://www.aeaweb.org/articles.php?doi=10.1257/mac.2.1.207 10.1257/mac.2.1.207 http://www.aeaweb.org/aej/mac/data/2009-0054_data.zip American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 2 1 January 2010 http://www.aeaweb.org/issue.php?journal=MAC&volume=2&issue=1 Journal Article The New Kaldor Facts: Ideas, Institutions, Population, and Human Capital Charles I.JonesStanford U Paul M.RomerSIEPR, Stanford U 224 45 In 1961, Nicholas Kaldor highlighted six "stylized" facts to summarize the patterns that economists had discovered in national income accounts and to shape the growth models being developed to explain them. Redoing this exercise today shows just how much progress we have made. In contrast to Kaldor's facts, which revolved around a single state variable, physical capital, our updated facts force consideration of four far more interesting variables: ideas, institutions, population, and human capital. Dynamic models have uncovered subtle interactions among these variables, generating important insights about such big questions as: Why has growth accelerated? Why are there gains from trade? (JEL D01, E01, E22, E23, E24, J11) http://www.aeaweb.org/articles.php?doi=10.1257/mac.2.1.224 10.1257/mac.2.1.224 http://www.aeaweb.org/aej/mac/data/2009-0057_data.zip American Economic Association Nashville, TN 1945-7707 1945-7715 American Economic Journal: Macroeconomics http://www.aeaweb.org/aej-macro/ 2 1 January 2010 http://www.aeaweb.org/issue.php?journal=MAC&volume=2&issue=1 Journal Article Front Matter i iv http://www.aeaweb.org/articles.php?doi=10.1257/mac.2.1.i 10.1257/mac.2.1.i