American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Journal Article Front Matter i iv Front Matter includes photograph of Angus S. Deaton as part of a series of photographs of past presidents of the Association. http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.i 10.1257/aer.100.1.i American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Articles Price Indexes, Inequality, and the Measurement of World Poverty AngusDeatonPrinceton U 5 34 I discuss the measurement of world poverty and inequality, with particular attention to the role of purchasing power parity (PPP) price indexes from the International Comparison Project. Global inequality increased with the latest revision of the ICP, and this reduced the global poverty line relative to the US dollar. The recent large increase of nearly half a billion poor people came from an inappropriate updating of the global poverty line, not from the ICP revisions. Even so, PPP comparisons between widely different countries rest on weak theoretical and empirical foundations. I argue for wider use of self-reports from international monitoring surveys, and for a global poverty line that is truly denominated in US dollars. (JEL C43, D31, I31, I32, F31) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.5 10.1257/aer.100.1.5 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Articles Learning about a New Technology: Pineapple in Ghana Timothy G.ConleyU Chicago Christopher R.UdryYale U 35 69 This paper investigates the role of social learning in the diffusion of a new agricultural technology in Ghana. We use unique data on farmers' communication patterns to define each individual's information neighborhood. Conditional on many potentially confounding variables, we find evidence that farmers adjust their inputs to align with those of their information neighbors who were surprisingly successful in previous periods. The relationship of these input adjustments to experience further indicates the presence of social learning. In addition, applying the same method to input choices for another crop, of known technology, correctly indicates an absence of social learning effects. (JEL D83, O13, O33, Q16) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.35 10.1257/aer.100.1.35 http://www.aeaweb.org/aer/data/mar2010/20050697_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Articles Multiple-Product Firms and Product Switching Andrew B.BernardDartmouth College Stephen J.ReddingLondon School of Economics Peter K.SchottYale U 70 97 This paper examines the frequency, pervasiveness, and determinants of product switching by US manufacturing firms. We find that one-half of firms alter their mix of five-digit SIC products every five years, that product switching is correlated with both firm- and firm-product attributes, and that product adding and dropping induce large changes in firm scope. The behavior we observe is consistent with a natural generalization of existing theories of industry dynamics that incorporates endogenous product selection within firms. Our findings suggest that product switching contributes to a reallocation of resources within firms toward their most efficient use. (JEL L11, L21, L25, L60) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.70 10.1257/aer.100.1.70 http://www.aeaweb.org/aer/data/mar2010/20060523_data.zip http://www.aeaweb.org/aer/data/mar2010/20060523_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Articles "Momma's Got the Pill": How Anthony Comstock and Griswold v. Connecticut Shaped US Childbearing Martha J.BaileyU MI 98 129 The 1960s ushered in a new era in US demographic history characterized by significantly lower fertility rates and smaller family sizes. What catalyzed these changes remains a matter of considerable debate. This paper exploits idiosyncratic variation in the language of "Comstock" statutes, enacted in the late 1800s, to quantify the role of the birth control pill in this transition. Almost 50 years after the contraceptive pill appeared on the US market, this analysis provides new evidence that it accelerated the post-1960 decline in marital fertility. (JEL J12, J13, K10, N31, N32) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.98 10.1257/aer.100.1.98 http://www.aeaweb.org/aer/data/mar2010/20071025_data.zip http://www.aeaweb.org/aer/data/mar2010/20071025_app.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Articles Matching and Sorting in Online Dating Gunter J.HitschU Chicago AliHortaçsuU Chicago DanArielyDuke U 130 63 Using data on user attributes and interactions from an online dating site, we estimate mate preferences, and use the Gale-Shapley algorithm to predict stable matches. The predicted matches are similar to the actual matches achieved by the dating site, and the actual matches are approximately efficient. Out-of- sample predictions of offline matches, i.e., marriages, exhibit assortative mating patterns similar to those observed in actual marriages. Thus, mate preferences, without resort to search frictions, can generate sorting in marriages. However, we underpredict some of the correlation patterns; search frictions may play a role in explaining the discrepancy. (JEL C78, J12) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.130 10.1257/aer.100.1.130 http://www.aeaweb.org/aer/data/mar2010/20080317_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Articles Entry, Exit, and Investment-Specific Technical Change Roberto M.SamaniegoGeorge Washington U 164 92 Using European data, this paper finds that (i) industry entry and exit rates are positively related to industry rates of investment-specific technical change (ISTC); and (ii) the sensitivity of industry entry and exit rates to cross-country differences in entry costs depends on industry rates of ISTC. The paper constructs a general equilibrium model in which the rate of ISTC varies across industries and new investment-specific technologies can be introduced by entrants or by incumbents. In the calibrated model, equilibrium behavior is consistent with stylized facts (i) and (ii), provided the cost of technology adoption is increasing in the rate of ISTC. (JEL G31, L11, O31, O33) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.164 10.1257/aer.100.1.164 http://www.aeaweb.org/aer/data/mar2010/20071415_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Articles Patient Cost-Sharing and Hospitalization Offsets in the Elderly AmitabhChandraHarvard U JonathanGruberMIT RobinMcKnightWellesley College 193 213 In the Medicare program, increases in cost sharing by a supplemental insurer can exert financial externalities. We study a policy change that raised patient cost sharing for the supplemental insurer for retired public employees in California. We find that physician visits and prescription drug usage have elasticities that are similar to those of the RAND Health Insurance Experiment (HIE). Unlike the HIE, however, we find substantial "offset" effects in terms of increased hospital utilization. The savings from increased cost sharing accrue mostly to the supplemental insurer, while the costs of increased hospitalization accrue mostly to Medicare. (JEL G22, I12, I18, J14) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.193 10.1257/aer.100.1.193 http://www.aeaweb.org/aer/data/mar2010/20070254_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Articles Contractibility and the Design of Research Agreements JoshLernerHarvard U UlrikeMalmendierU CA, Berkeley 214 46 We analyze how contractibility affects contract design. A major concern when designing research agreements is that researchers use their funding to subsidize other projects. We show that, when research activities are not contractible, an option contract is optimal. The financing firm obtains the option to terminate the agreement and, in case of termination, broad property rights. The threat of termination deters researchers from cross-subsidization, and the cost of exercising the termination option deters the financing firm from opportunistic termination. We test this prediction using 580 biotechnology research agreements. Contracts with termination options are more common when research is non-contractible. (JEL D86, L65, O31, O34) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.214 10.1257/aer.100.1.214 http://www.aeaweb.org/aer/data/mar2010/20050382_data.zip http://www.aeaweb.org/aer/data/mar2010/20050382_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Articles Multinationals and Anti-sweatshop Activism AnnHarrisonWorld Bank and U CA, Berkeley JasonScorseMonterey Institute of International Studies 247 73 During the 1990s, anti-sweatshop activists campaigned to improve conditions for workers in developing countries. This paper analyzes the impact of anti-sweatshop campaigns in Indonesia on wages and employment. Identification is based on comparing the wage growth of workers in foreign-owned and exporting firms in targeted regions or sectors before and after the initiation of anti-sweatshop campaigns. We find the campaigns led to large real wage increases for targeted enterprises. There were some costs in terms of reduced investment, falling profits, and increased probability of closure for smaller plants, but we fail to find significant effects on employment. (JEL F23, J31, J81, L67, O14, O15) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.247 10.1257/aer.100.1.247 http://www.aeaweb.org/aer/data/mar2010/20051333_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Articles Robustly Optimal Monetary Policy with Near-Rational Expectations MichaelWoodfordColumbia U 274 303 The paper considers optimal monetary stabilization policy in a forward-looking model, when the central bank recognizes that private sector expectations need not be precisely model-consistent, and wishes to choose a policy that will be as good as possible in the case of any beliefs that are close enough to model-consistency. It is found that commitment continues to be important for optimal policy, that the optimal long-run inflation target is unaffected by the degree of potential distortion of beliefs, and that optimal policy is even more history-dependent than if rational expectations are assumed. (JEL C62, D84, E13, E31, E32, E52) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.274 10.1257/aer.100.1.274 http://www.aeaweb.org/aer/data/mar2010/20060096_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Articles Currency Choice and Exchange Rate Pass-Through GitaGopinathHarvard U OlegItskhokiPrinceton U RobertoRigobonMIT 304 36 We show, using novel data on currency and prices for US imports, that even conditional on a price change, there is a large difference in the exchange rate pass-through of the average good priced in dollars (25 percent) versus nondollars (95 percent). We document this to be the case across countries and within disaggregated sectors. This finding contradicts the assumption in an important class of models that the currency of pricing is exogenous. We present a model of endogenous currency choice in a dynamic price setting environment and show that the predictions of the model are strongly supported by the data. (JEL E31, F14, F31) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.304 10.1257/aer.100.1.304 http://www.aeaweb.org/aer/data/mar2010/20071160_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Articles Demographics and the Politics of Capital Taxation in a Life-Cycle Economy XavierMateos-PlanasU Southampton 337 63 This article studies the effects of demographics on the mix of tax rates on labor and capital. It uses a quantitative general-equilibrium, overlapping-generations model where tax rates are voted without past commitments in every period and characterized as a Markov equilibrium. In the United States, the younger voting-age population in 1990 compared to 1965 accounts for the observed decline in the relative capital tax rate between those two years. A younger population raises the net return to capital, leads voters to increase their savings, and results in a preference for lower taxes on capital. Conversely, aging might increase capital taxation. (JEL E13, H24, H25, J11) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.337 10.1257/aer.100.1.337 http://www.aeaweb.org/aer/data/mar2010/20031131_data.zip http://www.aeaweb.org/aer/data/mar2010/20031131_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Articles Can Multistage Production Explain the Home Bias in Trade? Kei-MuYiFederal Reserve Bank of Philadelphia 364 93 A large empirical literature finds that there is too little international trade and too much intranational trade to be rationalized by observed international trade costs, such as tariffs and transport costs. This paper investigates whether a model in which the nature of production can change in response to trade costs -- a framework with multistage production -- can better explain the home bias in trade. The calibrated model can explain about two-fifths of the Canada border effect, about two-and-one-half times that of a model with one production stage. The model also explains a significant fraction of Canada-US "back-and- forth," or vertical specialization, trade. (JEL F11, F13, F14) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.364 10.1257/aer.100.1.364 http://www.aeaweb.org/aer/data/mar2010/20051057_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Articles Trade Agreements as Endogenously Incomplete Contracts HenrikHornResearch Institute of Industrial Economics, Stockholm GiovanniMaggiYale U Robert W.StaigerStanford U 394 419 We propose a model of trade agreements in which contracting is costly, and as a consequence the optimal agreement may be incomplete. In spite of its simplicity, the model yields rich predictions on the structure of the optimal trade agreement and how this depends on the fundamentals of the contracting environment. We argue that taking contracting costs explicitly into account can help explain a number of key features of real trade agreements. (JEL D86, F13) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.394 10.1257/aer.100.1.394 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Articles Intergroup Conflict and Intra-group Punishment in an Experimental Contest Game KlausAbbinkCBESS, U East Anglia JordiBrandtsU Autonoma de Barcelona and CSIC BenediktHerrmannU Nottingham HenrikOrzenU Mannheim 420 47 We study how conflict in contest games is influenced by rival parties being groups and by group members being able to punish each other. Our motivation stems from the analysis of sociopolitical conflict. The theoretical prediction is that conflict expenditures are independent of group size and of whether punishment is available. We find, first, that conflict expenditures of groups are substantially larger than those of individuals, and both are above equilibrium. Second, allowing group members to punish each other leads to even larger conflict expenditures. These results contrast with those from public goods experiments where punishment enhances efficiency. (JEL C72, D74, H41) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.420 10.1257/aer.100.1.420 http://www.aeaweb.org/aer/data/mar2010/20071485_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Articles Building Routines: Learning, Cooperation, and the Dynamics of Incomplete Relational Contracts SylvainChassangPrinceton U 448 65 This paper studies how agents with conflicting interests learn to cooperate when the details of cooperation are not common knowledge. It considers a repeated game in which one player has incomplete information about when and how her partner can provide benefits. Initially, monitoring is imperfect and cooperation requires inefficient punishment. As the players' common history grows, the uninformed player can learn to monitor her partner's actions, which allows players to establish more efficient cooperative routines. Because revealing information is costly, it may be optimal not to reveal all the existing information, and efficient equilibria can be path-dependent. (JEL C73, D82, D83, D86) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.448 10.1257/aer.100.1.448 http://www.aeaweb.org/aer/data/mar2010/20080226_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Articles Interpersonal Authority in a Theory of the Firm EricVan den SteenHarvard U 466 90 This paper develops a theory of the firm in which a firm's centralized asset ownership and low-powered incentives give the manager, as an equilibrium outcome, interpersonal authority over employees (in a world with open disagreement). The paper thus provides micro-foundations for the idea that bringing a project inside the firm gives the manager control over that project, while explaining concentrated asset ownership, low-powered incentives, and centralized authority as typical characteristics of firms. The paper also leads to new perspectives on the firm as a legal entity and on the relationship between the Knightian and Coasian views of the firm. (JEL D23, L20) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.466 10.1257/aer.100.1.466 http://www.aeaweb.org/aer/data/mar2010/20070558_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Shorter Papers Monetary Policy Rules and Macroeconomic Stability: Some New Evidence SophoclesMavroeidisBrown U 491 503 I revisit the question of indeterminacy in US monetary policy using limited-information identification-robust methods. I find that the conclusions of Clarida, Galí, and Gernter (2000) that policy was inactive before 1979 are robust, but the evidence over the Volcker-Greenspan periods is inconclusive. I show that this is in fact consistent with policy being active over that period. Problems of identification also arise because policy reaction has been more gradual recently. At a methodological level, the paper demonstrates that identification issues should be taken seriously, and that identification-robust methods can be informative even when they produce wide confidence sets. (E31, E32, E52, E65,) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.491 10.1257/aer.100.1.491 http://www.aeaweb.org/aer/data/mar2010/20071447_data.zip http://www.aeaweb.org/aer/data/mar2010/20071447_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Shorter Papers Tournaments and Office Politics: Evidence from a Real Effort Experiment JeffreyCarpenterMiddlebury College and IZA Peter HansMatthewsMiddlebury College and IZA JohnSchirmGoogle, San Francisco, CA 504 17 Tournaments can elicit more effort but sabotage may attenuate the effect of competition. Because it is hard to separate effort and ability, the evidence on tournaments is thin. There is even less evidence on sabotage because these acts often consist of subjective peer evaluation or "office politics." We discuss real effort experiments in which quality adjusted output and office politics are compared under piece rates and tournaments and find that tournaments increase effort only in the absence of office politics. Competitors subvert each other more in tournaments, and as a result, workers produce less because they expect to be sabotaged. (D82, M54) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.504 10.1257/aer.100.1.504 http://www.aeaweb.org/aer/data/mar2010/20071123_data.zip http://www.aeaweb.org/aer/data/mar2010/20071123_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Shorter Papers Financial Exchange Rates and International Currency Exposures Philip R.LaneTrinity College Dublin Jay C.ShambaughDartmouth College 518 40 In order to gain a better empirical understanding of the international financial implications of currency movements, we construct a database of international currency exposures for a large panel of countries over 1990-2004. We show that trade-weighted exchange rate indices are insufficient to understand the financial impact of currency movements and that our currency measures have high explanatory power for the valuation term in net foreign asset dynamics. Exchange rate valuation shocks are sizable, not quickly reversed, and may entail substantial wealth redistributions. Further, we show that many developing countries have substantially reduced their negative foreign currency positions over the last decade. (F31, F32, G15) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.518 10.1257/aer.100.1.518 http://www.aeaweb.org/aer/data/mar2010/20071105_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Shorter Papers Social Preferences, Beliefs, and the Dynamics of Free Riding in Public Goods Experiments UrsFischbacherU Konstanz and Thurgau Institute of Economics SimonGachterCESifo and IZA 541 56 One lingering puzzle is why voluntary contributions to public goods decline over time in experimental and real-world settings. We show that the decline of cooperation is driven by individual preferences for imperfect conditional cooperation. Many people's desire to contribute less than others, rather than changing beliefs of what others will contribute over time or people's heterogeneity in preferences makes voluntary cooperation fragile. Universal free riding thus eventually emerges, despite the fact that most people are not selfish. (D12, D 83, H41, Z13) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.541 10.1257/aer.100.1.541 http://www.aeaweb.org/aer/data/mar2010/20060029_data.zip http://www.aeaweb.org/aer/data/mar2010/20060029_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Shorter Papers Risk and Time Preferences: Linking Experimental and Household Survey Data from Vietnam TomomiTanakaAZ State U Colin F.CamererCA Institute of Technology QuangNguyenU Lumiere Lyon II 557 71 We conducted experiments in Vietnamese villages to determine the predictors of risk and time preferences. In villages with higher mean income, people are less loss-averse and more patient. Household income is correlated with patience but not with risk. We expand measurements of risk and time preferences beyond expected utility and exponential discounting, replacing those models with prospect theory and a three-parameter hyperbolic discounting model. Comparable risk parameter estimates have been found for Chinese farmers, using our method. (C83, D12, O12, P38) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.557 10.1257/aer.100.1.557 http://www.aeaweb.org/aer/data/mar2010/20060431_data.zip http://www.aeaweb.org/aer/data/mar2010/20060431_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Shorter Papers Earnings Losses of Displaced Workers Revisited Kenneth A.CouchU CT Dana W.PlaczekState of CT Department of Labor 572 89 Earnings losses of Connecticut workers affected by mass layoff are calculated using administrative data. Estimated reductions are initially more than 30 percent and six years later, as much as 15 percent. The Connecticut estimates are smaller than comparable ones from Pennsylvania administrative data but similar to those from the Panel Study of Income Dynamics (PSID) and Department of Workforce Services (DWS). Earnings reductions in Connecticut and Pennsylvania are concentrated among Unemployment Insurance recipients. An unusually high proportion of Unemployment Insurance beneficiaries in Pennsylvania explains the larger estimated losses relative to other studies. Fixed-effects, random growth, and matching estimators produced similar earnings loss estimates suggesting each is relatively unbiased in this context. (J31, J 63, J65, R23) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.572 10.1257/aer.100.1.572 http://www.aeaweb.org/aer/data/mar2010/20060515_data.zip http://www.aeaweb.org/aer/data/mar2010/20060515_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Shorter Papers The Effect of Medicare Part D on Pharmaceutical Prices and Utilization MarkDugganU MD FionaScott MortonYale U 590 607 Medicare Part D began coverage of prescription drugs in 2006. Rather than setting pharmaceutical prices, the government contracted with private insurers to provide drug coverage. Theory suggests that additional insured consumers will raise the optimal price of a branded drug, while the insurer's ability to move demand to substitute treatments may lower prices. We estimate the program's effect on the price and utilization of pharmaceutical treatments. We find that Part D enrollees paid substantially lower prices than while uninsured, and increased their utilization of prescription drugs. We find relative price declines only for drugs with significant therapeutic competition. (L18, L11, L65) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.590 10.1257/aer.100.1.590 http://www.aeaweb.org/aer/data/mar2010/20080264_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Shorter Papers Generalizing the Taylor Principle: Comment Roger E. A.FarmerUCLA Daniel F.WaggonerFederal Reserve Bank of Atlanta TaoZhaFederal Reserve Bank of Atlanta and Emory U 608 17 Troy Davig and Eric Leeper (2007) have proposed a condition they call the generalized Taylor principle to rule out indeterminate equilibria in a version of the new-Keynesian model where the parameters of the policy rule follow a Markov-switching process. We show that although their condition rules out a subset of indeterminate equilibria, it does not establish uniqueness of the fundamental equilibrium. We discuss the differences between indeterminate fundamental equilibria included by Davig and Leeper's condition and fundamental equilibria that their condition misses. (E12, E31, E43, E52) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.608 10.1257/aer.100.1.608 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Shorter Papers Generalizing the Taylor Principle: Reply TroyDavigFederal Reserve Bank of Kansas City Eric M.LeeperIN U 618 24 Farmer, Waggoner, and Zha (2009) (FWZ) show that a new Keynesian model with regime-switching monetary policy can support multiple solutions, appearing to contradict findings in Davig and Leeper (2007) (DL). The explanation is straightforward: FWZ derive solutions using a model that differs from the one to which the DL conditions apply. The FWZ solutions also require that the exogenous driving process is a function of private and policy parameters. This undermines the sharp distinctions among "deep parameters" typical of optimizing models and makes it difficult to ascribe economic interpretations to FWZ's additional solutions. (E12, E31, E43, E52) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.618 10.1257/aer.100.1.618 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Shorter Papers All-or-Nothing Monitoring: Comment BoChenSouthern Methodist U 625 27 Zhao (2008) presents an interesting "all-or-nothing monitoring" result for a multitask moral hazard agency problem with partial effort observation. We argue that the optimal contract based on the non-verifiable observation of the agent's effort in Zhao (2008) can be regarded as a limitation on the incentive schemes available to the principal. I then propose some arguably more appropriate approaches for analyzing such agency problems. (D82, D86, M54) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.625 10.1257/aer.100.1.625 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Shorter Papers Betrayal Aversion: Evidence from Brazil, China, Oman, Switzerland, Turkey, and the United States: Comment Gary E.BoltonPA State U AxelOckenfelsU Cologne 628 33 In a series of binary choice problems, we investigate how a chooser's risk taking changes when others share in their personal risk, either equally or unequally. We find that when the safe option yields inequality, the risky option is taken significantly more often. On the other hand, the inequality resulting from the risky choice does not affect risk taking. We also find that choosers tend to be less risk-averse in a one-person context compared to when the risk also affects the payoff of another. (C72, D81, Z13) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.628 10.1257/aer.100.1.628 http://www.aeaweb.org/aer/data/mar2010/20081034_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 1 March 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=1 Shorter Papers Excellence in Refereeing Award 634 635 http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.634 10.1257/aer.100.1.634