American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 5 December 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=5&issue_date=December 2003 Journal Article Maps of Bounded Rationality: Psychology for Behavioral Economics DanielKahneman 1449 1475 http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=5&article=1&issue_date=December 2003 10.1257/000282803322655392 http://www.e-aer.org/data/attanasio_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 5 December 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=5&issue_date=December 2003 Journal Article Recurrent Hyperinflations and Learning AlbertMarcet Juan P.Nicolini 1476 1498 We use a model of boundedly rational learning to account for the observations of recurrent hyperinflations in the 1980's. In a standard monetary model we replace the assumption of full rational expectations by a formal definition of quasi-rational learning. The model under learning matches some crucial stylized facts observed during the recurrent hyperinflations experienced by several countries in the 1980's remarkably well. We argue that, despite being a small departure from rational expectations, quasi-rational learning does not preclude falsifiability of the model, it does not violate reasonable rationality requirements, and it can be used for policy evaluation. http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=5&article=2&issue_date=December 2003 10.1257/000282803322655400 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 5 December 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=5&issue_date=December 2003 Journal Article Pension Wealth and Household Saving: Evidence from Pension Reforms in the United Kingdom Orazio P.Attanasio SusannRohwedder 1499 1521 Using three major U.K. pension reforms as natural experiments we investigate the relationship between pension saving and discretionary private savings. Unlike most differences-in-differences approaches which rely on average differences between control and treatment group, we use economic theory to model the response of each individual household. The empirical analysis, based on the Family Expenditure Survey, uses both time-series and cross-sectional variation to identify the behavioral response. The earnings-related tier of the pension scheme is found to have a negative impact on private savings with relatively high substitution elasticities; the impact of the flat-rate tier is not significantly different from zero. http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=5&article=3&issue_date=December 2003 10.1257/000282803322655419 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 5 December 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=5&issue_date=December 2003 Journal Article Interactions of Commitment and Discretion in Monetary and Fiscal Policies AvinashDixit LuisaLambertini 1522 1542 We consider monetary-fiscal interactions when the monetary authority is more conservative than the fiscal. With both policies discretionary, (1) Nash equilibrium yields lower output and higher price than the ideal points of both authorities, (2) of the two leadership possibilities, fiscal leadership is generally better. With fiscal discretion, monetary commitment yields the same outcome as discretionary monetary leadership for all realizations of shocks. But fiscal commitment is not similarly negated by monetary discretion. Second-best outcomes require either joint commitment, or identical targets for the two authorities - output socially optimal and price level appropriately conservative - or complete separation of tasks. http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=5&article=4&issue_date=December 2003 10.1257/000282803322655428 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 5 December 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=5&issue_date=December 2003 Journal Article Stochastic Technical Progress, Smooth Trends, and Nearly Distinct Business Cycles Julio J.Rotemberg 1543 1559 This paper studies a model of random technical progress where technology diffuses at realistically slow rates. It fits smooth trends to the sum of GDP series generated by this model and series representing transitory, or cyclical, fluctuations. Detrended GDP is then largely unrelated to technical progress. The detrending method proposed by Rotemberg (1999) reconstructs cyclical variations somewhat more accurately than the HP filter. With sufficiently slow diffusion it is also more accurate than a method based on VARs fitted to hours and GDP growth. Consistent with the model's predictions, permanent shocks initially depress both hours and output in these VARs. http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=5&article=5&issue_date=December 2003 10.1257/000282803322655437 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 5 December 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=5&issue_date=December 2003 Journal Article Are Idle Hands the Devil's Workshop? Incapacitation, Concentration, and Juvenile Crime Brian A.Jacob LarsLefgren 1560 1577 This paper examines the short-term effect of school on juvenile crime. To do so, we bring together daily measures of criminal activity and detailed school calendar information from 29 jurisdictions across the country, and utilize the plausibly exogenous variation generated by teacher in-service days. We find that the level of property crime committed by juveniles decreases by 14 percent on days when school is in session, but the level of violent crime increases by 28 percent on such days. Our findings suggest that both incapacitation and concentration influence juvenile crime. http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=5&article=6&issue_date=December 2003 10.1257/000282803322655446 http://www.e-aer.org/data/jacob_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 5 December 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=5&issue_date=December 2003 Journal Article A Reconsideration of Hedonic Price Indexes with an Application to PC's ArielPakes 1578 1596 This paper compares hedonic to matched model indexes. Matched model indexes are averages of the price changes of goods that remain on sampled stores' shelves. Since goods that disappear tend to have falling market values, matched model indexes select from the right tail of price changes. The BLS can construct hedonic indexes that correct for this selection and are justified by standard arguments. In an empirical study of PC's hedonics produce sharp price declines while matched model indexes are near zero. Also, though there are modifications to hedonics that seem desirable, they are not those in current use. http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=5&article=7&issue_date=December 2003 10.1257/000282803322655455 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 5 December 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=5&issue_date=December 2003 Journal Article Valuing Biodiversity from an Economic Perspective: A Unified Economic, Ecological, and Genetic Approach William A.Brock AnastasiosXepapadeas 1597 1614 We develop a conceptual framework for valuing biodiversity from an economic perspective. We argue for a dynamic economic welfare measure of biodiversity that complements the literature on benefit-cost approaches and genetic distance/phylogenic tree approaches. Using a unified model of optimal economic management of an ecosystem under ecological and genetic constraints, we identify gains from management policies leading to a more diverse system, using the Bellman state valuation function of the problem. We show that a more diverse system could attain a higher value although the genetic distance of the species in the more diverse system could be almost zero. http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=5&article=8&issue_date=December 2003 10.1257/000282803322655464 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 5 December 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=5&issue_date=December 2003 Journal Article Fundamentals, Panics, and Bank Distress During the Depression Charles W.Calomiris Joseph R.Mason 1615 1647 We assemble bank-level and other data for Fed member banks to model determinants of bank failure. Fundamentals explain bank failure risk well. The first two Friedman-Schwartz crises are not associated with positive unexplained residual failure risk, or increased importance of bank illiquidity for forecasting failure. The third Friedman-Schwartz crisis is more ambiguous, but increased residual failure risk is small in the aggregate. The final crisis (early 1933) saw a large unexplained increase in bank failure risk. Local contagion and illiquidity may have played a role in pre-1933 bank failures, even though those effects were not large in their aggregate impact. http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=5&article=9&issue_date=December 2003 10.1257/000282803322655473 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 5 December 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=5&issue_date=December 2003 Journal Article Assessing the Importance of Tiebout Sorting: Local Heterogeneity from 1850 to 1990 Paul W.Rhode Koleman S.Strumpf 1648 1677 This paper argues that long-run trends in geographic segregation are inconsistent with models where residential choice depends solely on local public goods (the Tiebout hypothesis). We develop an extension of the Tiebout model that predicts as mobility costs fall, the heterogeneity across communities of individual public good preferences and of public good provision must (weakly) increase. Given the secular decline in mobility costs, these predictions can be evaluated using historical data. We find decreasing heterogeneity in policies and proxies for preferences across (i) a sample of U.S. municipalities (1870-1990); (ii) all Boston-area municipalities (1870-1990); and (iii) all U.S. counties (1850-1990). http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=5&article=10&issue_date=December 2003 10.1257/000282803322655482 http://www.e-aer.org/data/rhode_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 5 December 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=5&issue_date=December 2003 Journal Article Inefficient Foreign Borrowing: A Dual- and Common-Agency Perspective JeanTirole 1678 1702 Studying the implications of uncoordinated borrowing, the paper first looks at whether and when countries borrow too much in the aggregate. It then revisits the "original sin" debate, analyzing whether and when equity portfolio investment, international portfolio diversification, domestic currency denomination and longer maturities enhance borrowing countries' access to international lending. The paper thereby relates a country's level and quality of access to international capital markets to a variety of institutional features such as the level of domestic savings, their location, the extent of control rights held by political authorities, and the interests of dominant domestic political forces. http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=5&article=11&issue_date=December 2003 10.1257/000282803322655491 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 5 December 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=5&issue_date=December 2003 Journal Article Price Ceilings as Focal Points for Tacit Collusion: Evidence from Credit Cards Christopher R.Knittel VictorStango 1703 1729 We test whether a nonbinding price ceiling may serve as a focal point for tacit collusion, using data from the credit card market during the 1980's. Our empirical model can distinguish instances when firms match a binding ceiling from instances when firms tacitly collude at a nonbinding ceiling. The results suggest that tacit collusion at nonbinding state-level ceilings was prevalent during the early 1980's, but that national integration of the market reduced the sustainability of tacit collusion by the end of the decade. The results highlight a perverse effect of price regulation. http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=5&article=12&issue_date=December 2003 10.1257/000282803322655509 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 5 December 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=5&issue_date=December 2003 Journal Article Kin Groups and Reciprocity: A Model of Credit Transactions in Ghana Eliana LaFerrara 1730 1751 This paper studies kinship band networks as capital market institutions. Membership in a community where individuals are dynastically linked has two effects on informal credit. First, the nonanonymity of the dynastic link allows to sanction the defaulters' offspring and induce compliance even in short-term interactions (social enforcement). Second, preferential agreements can arise in which kin members condition their behavior on the characteristics of a player's predecessor, expecting others to do the same with their offspring (reciprocity). These effects are incorporated in an OLG game with endogenous matching between lenders and borrowers and tested using household-level data from Ghana. http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=5&article=13&issue_date=December 2003 10.1257/000282803322655518 http://www.e-aer.org/data/laferrara_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 5 December 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=5&issue_date=December 2003 Journal Article Pregnancy and the Demand for Cigarettes W. DavidBradford 1752 1763 http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=5&article=14&issue_date=December 2003 10.1257/000282803322655527 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 5 December 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=5&issue_date=December 2003 Journal Article Crime, Inequality, and Unemployment KennethBurdett RicardoLagos RandallWright 1764 1777 http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=5&article=15&issue_date=December 2003 10.1257/000282803322655536 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 5 December 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=5&issue_date=December 2003 Journal Article Creating the U.S. Dollar Currency Union, 1748–1811: A Quest for Monetary Stability or a Usurpation of State Sovereignty for Personal Gain? FarleyGrubb 1778 1798 http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=5&article=16&issue_date=December 2003 10.1257/000282803322655545 http://www.e-aer.org/data/grubb_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 5 December 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=5&issue_date=December 2003 Journal Article Returns to Education: Evidence from U.K. Twins DorotheBonjour Lynn F.Cherkas Jonathan E.Haskel Denise D.Hawkes Tim DSpector 1799 1812 http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=5&article=17&issue_date=December 2003 10.1257/000282803322655554 http://www.e-aer.org/data/dec03_data_hawkes.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 5 December 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=5&issue_date=December 2003 Journal Article Socioeconomic Status and Child Health: Why Is the Relationship Stronger for Older Children? JanetCurrie MarkStabile 1813 1823 http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=5&article=18&issue_date=December 2003 10.1257/000282803322655563 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 5 December 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=5&issue_date=December 2003 Journal Article Clubs with Entrapment AvinashDixit 1824 1829 http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=5&article=19&issue_date=December 2003 10.1257/000282803322655572 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 5 December 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=5&issue_date=December 2003 Journal Article Uncoupled Dynamics Do Not Lead to Nash Equilibrium SergiuHart AndreuMas-Colell 1830 1836 http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=5&article=20&issue_date=December 2003 10.1257/000282803322655581 cty>Journal Article Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet Alvin E.Roth AxelOckenfels 1093 1103 http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=92&issue=4&article=20&issue_date=September 2002 10.1257/00028280260344632 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 92 4 September 2002 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=92&issue=4&issue_date=September 2002 Journal Article The Risk Premium for Equity: Implications for the Proposed Diversification of the Social Security Fund SimonGrant JohnQuiggin 1104 1115 http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=92&issue=4&article=21&issue_date=September 2002 10.1257/00028280260344641 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 92 4 September 2002 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=92&issue=4&issue_date=September 2002 Journal Article A New Measure of Horizontal Equity Alan J.Auerbach Kevin A.Hassett 1116 1125 http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=92&issue=4&article=22&issue_date=September 2002 10.1257/00028280260344650 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/