American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Journal Article Front Matter i ix http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.i 10.1257/aer.102.3.i American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Journal Article Foreword ChrisSimsPrinceton U x x http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.x 10.1257/aer.102.3.x American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Journal Article Editors' Introduction William R.JohnsonU VA SamanthaBennettAEA Publications Office xi xii http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.xi 10.1257/aer.102.3.xi American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Does the Current Account Still Matter? MauriceObstfeldU CA, Berkeley 1 23 http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.1 10.1257/aer.102.3.1 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Simple Market Equilibria with Rationally Inattentive Consumers FilipMatejkaCERGE-EI, Prague AlisdairMcKayBoston U 24 29 We study a market with rationally inattentive consumers who are unsure of the terms of the offers made by firms, but can acquire information about the terms at a cost. In a symmetric equilibrium, the price set by firms is continuously increasing in the cost of information for consumers and decreasing in the number of firms operating. In addition, favorable a priori information about a firm leads it to set a higher price, and a new entrant can increase demand for incumbents. When consumers have heterogeneous costs of information, firms selling low-quality products may choose to set the highest prices. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.24 10.1257/aer.102.3.24 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Information Processing and Limited Liability BartoszMackowiakEuropean Central Bank MirkoWiederholtNorthwestern U 30 34 Decision-makers often face limited liability and thus know that their loss will be bounded. We study how limited liability affects the behavior of an agent who chooses how much information to acquire and process in order to take a good decision. We find that an agent facing limited liability processes less information than an agent with unlimited liability. The informational gap between the two agents is larger in bad times than in good times and when information is more costly to process. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.30 10.1257/aer.102.3.30 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Information Choice Technologies ChristianHellwigU Toulouse SebastianKohlsNorthwestern U LauraVeldkampNYU 35 40 Theories based on information costs or frictions have become increasing popular in macroeconomics and macro-finance. The literature has used various types of information choices, such as rational inattention, inattentiveness, information markets and costly precision. Using a unified framework, we compare these different information choice technologies and explain why some generate increasing returns and others, particularly those where agents choose how much public information to observe, generate multiple equilibria. The results can help applied theorists to choose the appropriate information choice technology for their application and to understand the consequences of that modeling choice. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.35 10.1257/aer.102.3.35 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Prospect Theory as Efficient Perceptual Distortion MichaelWoodfordColumbia U 41 46 The paper proposes a theory of efficient perceptual distortions, in which the statistical relation between subjective perceptions and the objective state minimizes the error of the state estimate, subject to a constraint on information processing capacity. The theory is shown to account for observed limits to the accuracy of visual perception, and then postulated to apply to perception of options in economic choice situations as well. When applied to choice between lotteries, it implies reference-dependent valuations, and predicts both risk-aversion with respect to gains and risk-seeking with respect to losses, as in the prospect theory of Kahneman and Tversky (1979). http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.41 10.1257/aer.102.3.41 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Salience in Experimental Tests of the Endowment Effect PedroBordaloRoyal Holloway, U London NicolaGennaioliCREI, U Pompeu Fabra and Barcelona Graduate School of Economics AndreiShleiferHarvard U 47 52 We provide a novel account of experimental evidence for the endowment effect using the salience mechanism (Bordalo, Gennaioli, and Shleifer, 2011). The two-stage procedure implemented in experiments implies that the endowed good and other goods are evaluated in different contexts. We describe conditions under which the standard effect occurs, but also account for recent evidence such as a reverse endowment effect for bads and a role for reference prices in modulating the WTA-WTP gap. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.47 10.1257/aer.102.3.47 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Getting at Systemic Risk via an Agent-Based Model of the Housing Market JohnGeanakoplosYale University and Santa Fe Institute RobertAxtellGeorge Mason University J. DoyneFarmerSanta Fe Institute PeterHowittBrown University BenjaminConlee JonathanGoldstein MatthewHendrey Nathan M.Palmer Chun-YiYang 53 58 Systemic risk must include the housing market, though economists have not generally focused on it. We begin construction of an agent-based model of the housing market with individual data from Washington, DC. Twenty years of success with agent-based models of mortgage prepayments give us hope that such a model could be useful. Preliminary analysis suggests that the housing boom and bust of 1997-2007 was due in large part to changes in leverage rather than interest rates. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.53 10.1257/aer.102.3.53 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Capital Shortfall: A New Approach to Ranking and Regulating Systemic Risks ViralAcharyaNYU RobertEngleNYU MatthewRichardsonNYU 59 64 The financial crisis of 2007-2009 has given way to the sovereign debt crisis of 2010-2012, yet many of the banking issues remain the same. We discuss a method to estimate the capital that a financial firm would need to raise if we have another financial crisis. This measure of capital shortfall is based on publicly available information but is conceptually similar to the stress tests conducted by US and European regulators. We argue that this measure summarizes the major characteristics of systemic risk and provides a reliable interpretation of the past and current financial crises. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.59 10.1257/aer.102.3.59 http://www.aeaweb.org/aer/data/may2012/2012_6044_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Privacy-Preserving Methods for Sharing Financial Risk Exposures Emmanuel A.AbbeEcole Polytechnique Federale de Lausanne Amir E.KhandaniMIT Andrew W.LoMIT and AlphaSimplex Group, Cambridge, MA 65 70 The financial industry relies on trade secrecy to protect its business processes and methods, which can obscure critical financial risk exposures from regulators and the public. Using results from cryptography, we develop computationally tractable protocols for sharing and aggregating such risk exposures that protect the privacy of all parties involved, without the need for trusted third parties. Financial institutions can share aggregate statistics such as Herfindahl indexes, variances, and correlations without revealing proprietary data. Potential applications include: privacy-preserving real-time indexes of bank capital and leverage ratios; monitoring delegated portfolio investments; financial audits; and public indexes of proprietary trading strategies. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.65 10.1257/aer.102.3.65 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Fiscal Policy and the Great Recession in the Euro Area GunterCoenenEuropean Central Bank RolandStraubEuropean Central Bank MathiasTrabandtFederal Reserve Board 71 76 How much did fiscal policy contribute to euro area real GDP growth during the Great Recession? We estimate that discretionary fiscal measures have increased annualized quarterly real GDP growth during the crisis by up to 1.6 percentage points. We obtain our result by using an extended version of the European Central Bank's New Area-Wide Model with a rich specification of the fiscal sector. A detailed modeling of the fiscal sector and the incorporation of as many as eight fiscal time series appear pivotal for our result. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.71 10.1257/aer.102.3.71 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Fiscal Policy in a Financial Crisis: Standard Policy versus Bank Rescue Measures RobertKollmannECARES, Free U Brussels and U Paris, Est Creteil Val-de-Marne WernerRoegerDG-ECFIN Janin't VeldDG-ECFIN 77 81 A key dimension of fiscal policy during the financial crisis was massive government support for the banking system. The macroeconomic effects of that support have, so far, received little attention in the literature. This paper fills this gap, using a quantitative dynamic model with a banking sector. Our results suggest that state aid for banks may have a strong positive effect on real activity. Bank state aid multipliers are in the same range as conventional fiscal spending multipliers. Support for banks has a positive effect on investment, while a rise in government purchases crowds out investment. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.77 10.1257/aer.102.3.77 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Bubbles and Total Factor Productivity JianjunMiaoBoston U PengfeiWangCentral U Finance and Economics, Beijing and Zhejiang U 82 87 This paper presents an infinite-horizon model of production economies in which firms face idiosyncratic productivity shocks and are subject to endogenous credit constraints. Credit-driven stock price bubbles can arise which can relax credit constraints and reallocate capital more efficiently among firms. The collapse of bubbles causes a fall of total factor productivity. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.82 10.1257/aer.102.3.82 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Debt Financing in Asset Markets ZhiguoHeU Chicago WeiXiongPrinceton U 88 94 We study rollover risk and collateral value in a dynamic asset pricing model with endogenous debt financing by extending the framework of Geanakoplos (2009) with a generic binomial tree and time-varying heterogeneous beliefs. Optimistic borrowers face rollover risk if the belief dispersion between the borrowers and the pessimistic lenders widens after interim bad news. We demonstrate the optimality of the maximum riskless short-term debt financing for optimistic borrowers even in the presence of the rollover risk. We also highlight the role of interim trading which, by allowing creditors to sell seized collateral to other optimists with saved cashes, boosts the asset's collateral value and equilibrium price. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.88 10.1257/aer.102.3.88 http://www.aeaweb.org/aer/data/may2012/2012_0114_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Understanding Bubbly Episodes Vasco M.CarvalhoCREI, Barcelona AlbertoMartinCREI, Barcelona JaumeVenturaCREI, Barcelona 95 100 Over the last two decades US aggregate wealth has fluctuated substantially. Against the backdrop of the Great Recession, the effects of these boom-and-bust cycles have come to dominate academic and policy discussions. How can we explain these fluctuations in wealth? Why are these fluctuations associated with changes in consumption, investment and output? In this note, we argue that answers to these questions entail the addition of two ingredients to existent macroeconomic models: rational bubbles and financial frictions. We explain why each of these building blocks is crucial to understand recent events and how they can be seamlessly integrated in standard models. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.95 10.1257/aer.102.3.95 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers The Safe-Asset Share GaryGortonYale U StefanLewellenYale U AndrewMetrickYale U 101 06 We document that the percentage of all U.S. assets that are "safe" has remained stable at about 33 percent since 1952. This stable ratio is a rare example of calm in a rapidly changing financial world. Over the same time period, the ratio of U.S. assets to GDP has increased by a factor of 2.5, and the main supplier of safe financial debt has shifted from commercial banks to the "shadow banking system." We analyze this pattern of stylized facts and offer some tentative conclusions about the composition of the safe-asset share and its role within the overall economy. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.101 10.1257/aer.102.3.101 http://www.aeaweb.org/aer/data/may2012/2012_6051_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Three Principles for Market-Based Credit Regulation PerryMehrlingBarnard College 107 12 A key lesson of the financial crisis 2007-09 is that the Bagehot Rule, "lend freely but at a high rate," needs to be updated for the emerging market-based credit system. A modern rule is suggested: Markets, not Banks; Outside spread, not Inside spread; Core, not Periphery. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.107 10.1257/aer.102.3.107 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Limited-Purpose Banking--Moving from "Trust Me" to "Show Me" Banking ChristopheChamleyBoston U Laurence J.KotlikoffBoston U HeraklesPolemarchakisU Warwick 113 19 There are many alleged culprits for the bank runs of 2008 and their devastating economic fallout. But proprietary information and leverage top our list. Claims of proprietary information forced financial markets to operate on trust, while providing the perfect breeding ground for fraud. And leverage permitted creditors to run at the first whiff of fraud, leveling one financial giant after another. Limited Purpose Banking (LPB), presented here, is a financial reform that sharply curtails proprietary information and eliminates leverage and, thus, the possibility of financial collapse. LPB's adoption is supported by our simple model showing how fraud can destroy finance. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.113 10.1257/aer.102.3.113 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Within-City Variation in Urban Decline: The Case of Detroit VeronicaGuerrieriU Chicago DanielHartleyFederal Reserve Bank of Cleveland ErikHurstU Chicago 120 26 When a city experiences a decline in income or population, do all neighborhoods within the city decline equally? Or, do some neighborhoods decline more than others? What are the characteristics of the neighborhoods that decline the most? We answer these questions by looking at what happened to neighborhoods within Detroit as Detroit experienced a sharp decline in income and population from the 1980s to the late 2000s. We find patterns of changes in income and population that are consistent with the model and empirical patterns of gentrification presented in Guerrieri, Hartley, and Hurst (2011), only playing out in reverse. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.120 10.1257/aer.102.3.120 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Housing Booms and City Centers Edward L.GlaeserLittauer Center, Harvard U Joshua D.GottliebLittauer Center, Harvard U KristinaTobioTaubman Center, Harvard U 127 33 Popular discussions often treat the great housing boom of the 1996-2006 period as if it were a national phenomenon with similar impacts across locales, but across metropolitan areas, price growth was dramatically higher in warmer, less educated cities with less initial density and higher initial housing values. Within metropolitan areas, price growth was faster in neighborhoods closer to the city center. The centralization of price growth during the boom was particularly dramatic in those metropolitan areas where income is higher away from the city center. We consider a number of different explanations for this connection, and find that the connection between centralized price growth and decentralized income seems to be most explained by the faster price growth in central cities that use relatively more public transit. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.127 10.1257/aer.102.3.127 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Heterogeneity in Neighborhood-Level Price Growth in the United States, 1993-2009 FernandoFerreiraU PA JosephGyourkoU PA 134 40 Examination of detailed geographical information on U.S. housing transactions from 1993 to 2009 find much heterogeneity at the neighborhood level in when the recent boom began, how big the initial jumps in price growth were, how long the booms lasted, and what types of neighborhoods boomed first. There is less neighborhood-level heterogeneity in when the bust began and in aggregate price appreciation during the boom. This heterogeneity suggests that there was no one dominant cause of the boom. We also comment on how very local data may help understand the role of contagion, among other housing market phenomena. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.134 10.1257/aer.102.3.134 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Market Prices of Risk with Diverse Beliefs, Learning, and Catastrophes TimothyCogleyNYU Thomas J.SargentNYU and Hoover Institution, Stanford U ViktorTsyrennikovCornell U 141 46 We compare market prices of risk in economies with identical patterns of endowments, priors, and information flows, but two different market structures, one with complete markets, another in which consumers can trade only a single risk-free bond. We study how opportunities to speculate, uncommon priors, and learning affect market prices of risk. Two types of consumers have diverse beliefs about the law of motion for a random exogenous endowment. One type knows the true law of motion while the other type learns about it via Bayes' theorem. Less-well-informed consumers are pessimistic, initially overestimating the probability of a catastrophic state. Learning dynamics and the wealth dynamics that they drive contribute to differences in evolutions of market prices of risk across market structures. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.141 10.1257/aer.102.3.141 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Financial Innovation and Asset Price Volatility FelixKublerU Zurich and Swiss Finance Institute KarlSchmeddersU Zurich and Swiss Finance Institute 147 51 We compare asset prices in an overlapping generations model for incomplete and complete markets. Individuals within a generational cohort have heterogeneous beliefs about future states of the economy and thus would like to make bets against each other. In the incomplete-markets economy, agents cannot make such bets. Asset price volatility is very small. The situation changes dramatically when markets are completed through financial innovations as the set of available securities now allows agents with different beliefs to place bets against each other. Wealth shifts across agents and generations. Such changes in the wealth distribution lead to substantial asset price volatility. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.147 10.1257/aer.102.3.147 http://www.aeaweb.org/aer/data/may2012/2012_2190_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers International Robust Disagreement RiccardoColacitoU NC Mariano M.CroceU NC 152 55 We characterize the equilibrium of a two-country, two-good economy in which agents have opposite preference bias toward one of the two consumption goods and fear model misspecification. We document that disagreement about endowments' growth prospects is a persistent endogenous outcome of this class of economies. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.152 10.1257/aer.102.3.152 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Heterogeneous Beliefs, Wealth Distribution, and Asset Markets with Risk of Default ViktorTsyrennikovCornell U 156 60 We study asset markets and wealth dynamics in the economy with heterogeneous beliefs and risk of default. Agents can trade a full set of Arrow securities but are allowed to default on their delivery promises. Financial markets rationally subject agents to the endogenous "no-default" borrowing limits. Because of the rich menu of financial assets traded in the market speculation opportunities are plentiful. Financial wealth is volatile and the endogenous borrowing limits are always active. Variance of the asset returns is amplified. The asset trading volume is substantial and volatile. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.156 10.1257/aer.102.3.156 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Estimating Sovereign Default Risk HuixinBiBank of Canada NoraTraumNC State U 161 66 This paper uses Bayesian methods to estimate the sovereign default probability for Greece and Italy in the post-EMU period. We build a real business cycle model that allows for interactions among fiscal policy instruments, sovereign default risk, and a "fiscal limit," which measures the maximum level of debt the government is willing to finance. We estimate the full nonlinear model using likelihood inference methods. Although we find that Greece historically had a lower default probability than Italy for a given debt level, our estimates suggest that the Italian government is more willing to service debt than the Greek government. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.161 10.1257/aer.102.3.161 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Evolving Monetary/Fiscal Policy Mix in the United States FrancescoBianchiDuke U 167 72 A micro-founded model that allows for changes in the monetary/fiscal policy mix and in the volatility of structural shocks is fit to US post-WWII data. Agents are aware of the possibility of regime changes and their beliefs have an impact on the law of motion of the macroeconomy. The results show that the '60s and the '70s were characterized by a prolonged period of active fiscal policy and passive monetary policy. The appointment of Volcker marked a change in the conduct of monetary policy, but it took almost ten years for the fiscal authority to start accommodating this regime change. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.167 10.1257/aer.102.3.167 http://www.aeaweb.org/aer/data/may2012/2012_6056_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Monetary-Fiscal Policy Interactions and Indeterminacy in Postwar US Data SarojBhattaraiPA State U Jae WonLeeRutgers U Woong YongParkU Hong Kong 173 78 Using a micro-founded model and a likelihood-based inference method, we show that while a passive monetary and passive fiscal policy regime prevailed in the U.S. before Paul Volcker's chairmanship at the Federal Reserve, an active monetary and passive fiscal policy regime prevailed after his appointment. Since both monetary and fiscal policies were passive pre-Volcker, equilibrium indeterminacy was a feature of the economy. Finally, pre-Volcker, the effects of unanticipated policy shifts were substantially different from those predicted by conventional monetary models: unanticipated increases in interest rates increased inflation and output, while unanticipated increases in lump-sum taxes decreased inflation and output. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.173 10.1257/aer.102.3.173 http://www.aeaweb.org/aer/data/may2012/2012_6055_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Real Exchange Rate Adjustment in and out of the Eurozone MartinBerkaVictoria U Wellington Michael B.DevereuxU British Columbia CharlesEngelU WI 179 85 It is often suggested that currency unions unduly inhibit the efficient adjustment of real exchange rates. Recently, this has been seen as a key failure of the Eurozone. This paper presents evidence that throws doubt on this conclusion. Our evidence suggests that real exchange rate movement within the Eurozone was at least as compatible with efficient adjustment as the behavior of real exchange rates for the floating rate countries outside the Eurozone. This interpretation is consistent with a model in which nominal exchange rate movements give rise to persistent deviations from the law of one price in traded goods. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.179 10.1257/aer.102.3.179 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Fiscal Consolidation in an Open Economy Christopher J.ErcegFederal Reserve Board JesperLindeFederal Reserve Board 186 91 his paper uses a New Keynesian DSGE model of a small open economy to compare how the effects of fiscal consolidation differ depending on whether monetary policy is constrained by currency union membership or by the zero lower bound on policy rates. We show that there are important differences in the impact of fiscal shocks across these monetary regimes that depend both on the duration of the zero lower bound and on features that determine the responsiveness of inflation. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.186 10.1257/aer.102.3.186 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Managing Currency Pegs StephanieSchmitt-GroheColumbia U MartinUribeColumbia U 192 97 The combination of a fixed exchange rate and downward nominal wage rigidity creates a real rigidity. In turn, this real rigidity makes the economy prone to involuntary unemployment during external crises. This paper presents a graphical analysis of alternative policy strategies aimed at mitigating this source of inefficiency. First- and second-best monetary and fiscal solutions are analyzed. Second-best solutions are prudential, whereas first-best solutions are not. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.192 10.1257/aer.102.3.192 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Can Asia Overcome the IMF Stigma? TakatoshiItoU Tokyo 198 202 Asian countries still have the IMF stigma, which originates from the experiences of the Asian crisis of 1997-98. The feeling of being unfairly treated grew even stronger afterward. The Asian countries built large foreign reserves, carried out structural reforms, and became even stronger than pre- crisis period. Asians are confident in not repeating the same mistake of falling into a crisis with too much external borrowing. Whether IMF can entice Asia to new precautionary liquidities facilities remains uncertain. Asia may choose either to focus on completing a regional safety net or to engage in IMF, demanding for a greater voice and votes. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.198 10.1257/aer.102.3.198 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Capital Flow Management OlivierJeanneJohns Hopkins U 203 06 There is a wide variety in the capital account policies of emerging markets and developing economies. Some countries, such as Brazil, have recently experimented with prudential controls on capital inflows, whereas others, such as China, have continued to maintain tight controls. This paper reviews the recent theoretical literature explaining the motivations behind capital account policies, and whether there is a case for international coordination in this area. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.203 10.1257/aer.102.3.203 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers International Liquidity in a Multipolar World BarryEichengreenU CA, Berkeley 207 12 Today's global monetary and financial system, to a remarkable extent, continues to rely on the U.S. dollar for international liquidity. This reflects the currency's historic role, the liquidity of American financial markets, and the absence of alternatives. But with the emergence of emerging markets, the capacity of the United States to provide safe assets will be outstripped by the growth of international transactions. It is thus likely that other large economies, presumably Europe and China, will eventually join the United States as sources of international liquidity and that other currencies will come to share the dollar's reserve-currency status. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.207 10.1257/aer.102.3.207 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Follow the Money: Quantifying Domestic Effects of Foreign Bank Shocks in the Great Recession NicolaCetorelliFederal Reserve Bank of New York Linda S.GoldbergFederal Reserve Bank of New York 213 18 Foreign banks pulled significant funding from their US branches during the Great Recession. We estimate that the average-sized branch experienced a twelve percent net internal fund "withdrawal," with the fund transfer disproportionately bigger for larger branches. This internal shock to the balance sheet of US branches of foreign banks had sizable effects on their lending. On average, for each dollar of funds transferred internally to the parent, branches decreased lending supply by about forty to fifty cents. However, the extent of the lending effects was very different across branches depending on their pre-crisis modes of operation in the United States. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.213 10.1257/aer.102.3.213 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Flight Home, Flight Abroad, and International Credit Cycles MariassuntaGiannettiStockholm School of Economics LucLaevenIMF 219 24 This paper shows that banks exhibit a weaker (stronger) home bias in the extension of new loans when funding conditions in their home country improve (deteriorate). We refer to these changes in home bias as flight abroad and flight home effects, respectively, and show that they are unrelated to the better known flight to quality effect that arises during periods of market turmoil. Our results also indicate that global banks amplify the effect of homegrown shocks on foreign countries while they are a stabilizing factor for the supply of credit in their home countries. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.219 10.1257/aer.102.3.219 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers From Financial Crisis to Great Recession: The Role of Globalized Banks ShekharAiyarIMF 225 30 This paper provides evidence of the role of globalized banks in transmitting financial stresses to the real economy during the global financial crisis. A novel dataset is constructed from quarterly balance sheet reports provided by all UK-resident banks to the Bank of England. I find that the shock to bank funding from non-resident creditors was transmitted domestically through a significant reduction in bank credit supply. Resident subsidiaries and branches of foreign-owned banks reduced lending by a larger amount than domestically-owned banks, while the latter calibrated the reduction in domestic lending more closely to the size of the funding shock. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.225 10.1257/aer.102.3.225 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers International Shock Transmission after the Lehman Brothers Collapse: Evidence from Syndicated Lending RalphDe HaasEuropean Bank for Reconstruction and Development NeeltjeVan HorenDe Nederlandsche Bank 231 37 After Lehman Brothers filed for bankruptcy in September 2008, cross-border bank lending contracted sharply. To explain the severity and variation in this contraction, we analyze detailed data on cross-border syndicated lending by 75 banks to 59 countries. We find that banks which had to write down sub-prime assets, refinance large amounts of long-term debt, and which experienced sharp declines in their market-to-book ratio, transmitted these shocks across borders by curtailing their lending abroad. While shocked banks differentiated between countries in much the same way as less constrained banks, they restricted their lending more to small borrowers. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.231 10.1257/aer.102.3.231 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Moving to Higher Ground: Migration Response to Natural Disasters in the Early Twentieth Century Leah PlattBoustanUCLA Matthew E.KahnInstitute of the Environment, UCLA Paul W.RhodeU MI 238 44 Areas differ in their propensity to experience natural disasters. Exposure to disaster risks can be reduced either through migration (i.e., self-protection) or through public infrastructure investment (e.g., building seawalls). Using migration data from the 1920s and 1930s, this paper studies how the population responded to disaster shocks in an era of minimal public investment. We find that, on net, young men move away from areas hit by tornados but are attracted to areas experiencing floods. Early efforts to protect against future flooding, especially during the New Deal era of the late 1930s, may have counteracted an individual migration response. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.238 10.1257/aer.102.3.238 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Nature versus Nurture: The Environment's Persistent Influence through the Modernization of American Agriculture RichardHornbeckHarvard U 245 49 Technological innovation in agriculture was substantial during the 20th century. Is "modern" technological control of the environment replacing a "primitive" dependency on natural advantages and disadvantages, or has agricultural production remained persistently dependent on the environment? This paper estimates how the 20th century modernization of United States Plains' agriculture changed the impact of environmental characteristics on agricultural land values. Despite substantial technological innovation and rising land values from 1945 to 2002, counties' environmental characteristics largely maintained influence on land values. Environmental change has become no less costly, as technological innovation has not reduced the importance of natural advantages or disadvantages. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.245 10.1257/aer.102.3.245 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Adaptation to Climate Change in Preindustrial Iceland Matthew A.TurnerU Toronto Jeffrey S.RosenthalU Toronto JianChenU Toronto ChunyanHaoU Toronto 250 55 We investigate the effect of climate change on population growth in 18th and 19th century Iceland. We find that annual temperature changes help determine the population growth rate in pre-industrial Iceland: a year 1 degree Celsius cooler than average drives down population growth rates by 1.14%. We also find that 18th and 19th century Icelanders adapt to prolonged changes in climate after 20 years. These adaptations reduce the short run effect of annual change in temperature by about 60%. Finally, a 1 degree Celsius sustained decrease in temperature decreases the steady state population by 10% to 26%. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.250 10.1257/aer.102.3.250 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Race and Gender Differences under Federal Sentencing Guidelines ToddSorensenU CA, Riverside SupriyaSarnikarWestfield State U Ronald L.OaxacaU AZ 256 60 Using data from the United States Sentencing Commission, we examine how judicial biases may have influenced sentences during the era of the Federal criminal sentencing guidelines. Our utility maximization model of judicial sentencing preferences leads to a partially censored ordered probit model that accounts for mass points in the sentencing distribution that occur at the upper and lower guideline limits and at sentences involving no prison time. Our results indicate that racial- and gender-based discrepancies exist, even after controlling for circumstances such as the severity of the offense and past criminal history. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.256 10.1257/aer.102.3.256 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Terrorism and Patriotism: On the Earnings of US Veterans following September 11, 2001 AlbertoDavilaU TX Pan American Marie T.MoraU TX Pan American 261 66 Using data from the 2000 census and the 2001-08 American Community Surveys, this paper examines the impact of 9/11 on the earnings of US veteran men. Our hypothesis is that the surge in patriotism after 9/11 improved their relative earnings, but this earnings effect was short-lived. In addition, we further consider whether this effect was equally felt across race/ethnicity and along regional dimensions. Consistent with our hypothesis, we find a significant short-term improvement in the relative earnings of US veteran men following 9/11. However, additional analyses suggest that this earnings effect did not evenly occur across demographic and geographic dimensions. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.261 10.1257/aer.102.3.261 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers The Nonlinear Relationship between Terrorism and Poverty WalterEndersU AL Gary A.HooverU AL 267 72 In spite of the common wisdom that poverty breeds terrorism, econometric tests usually find that terrorism is influenced by population and various measures of democratic freedom, but not per capita GDP. Unlike previous studies, we use a data set containing separate measures of domestic and transnational terrorism and estimate models allowing for a nonlinear relationship between terrorism and poverty. When we account for the nonlinearities in the data and distinguish between the two types of terrorist events, we find that poverty has as a very strong influence on domestic terrorism and a small, but significant, effect on transnational terrorism. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.267 10.1257/aer.102.3.267 http://www.aeaweb.org/aer/data/may2012/2012_2783_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers War and Stature: Growing Up during the Nigerian Civil War RichardAkreshU IL SoniaBhalotraU Bristol MarinellaLeoneU Sussex Una OkonkwoOsiliIN U-Purdue U Indianapolis 273 77 The Nigerian civil war of 1967-70 was precipitated by secession of the Igbo-dominated south-eastern region to create the state of Biafra. It was the first civil war in Africa, the predecessor of many. We investigate the legacies of this war four decades later. Using variation across ethnicity and cohort, we identify significant long-run impacts on human health capital. Individuals exposed to the war at all ages between birth and adolescence exhibit reduced adult stature and these impacts are largest in adolescence. Adult stature is portentous of reduced life expectancy and lower earnings. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.273 10.1257/aer.102.3.273 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Nation Building and Economic Growth EllynCreaseyUS Navy Ahmed S.RahmanUS Naval Academy, Annapolis Katherine A.SmithUS Naval Academy, Annapolis 278 82 Over the past half-century there have been over three hundred instances of nation building initiatives, episodes where countries jointly give military and economic aid to a country embroiled in conflict. Despite the prevalence and expense of this foreign policy, little research has explored the potential growth effects from these operations. This project uses a standard growth regression framework to quantify the effects of nation building on GDP per capita growth of the recipient nation. The research considers how the characteristics of conflict zones and the interaction of diverse types of both military and economic aid impact the development process. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.278 10.1257/aer.102.3.278 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers The Determinants and Consequences of School Choice Errors in Kenya Adrienne M.LucasU DE Isaac M.MbitiSouthern Methodist U 283 88 School choice systems designed to help disadvantaged groups might be hindered by information asymmetries. Kenyan elite secondary schools admit students from the entire country based on a national test score, district quotas, and stated school choices. We find even the highest ability students make school choice errors. Girls, students with lower test scores, and students from public and low quality schools are more likely to make such errors. Net of observable demographic characteristics, these errors are associated with a decrease in the probability that a student is admitted to an elite secondary school, relegating them to schools of lower quality. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.283 10.1257/aer.102.3.283 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Kinship and Financial Networks, Formal Financial Access, and Risk Reduction CynthiaKinnanNorthwestern U RobertTownsendMIT 289 93 Kinship networks are beneficial for smoothing consumption and investment, but the channels are not well understood. We study the financing devices used for consumption and investment by Thai households. Households that are connected to banks achieve significantly better consumption smoothing than unconnected households; indirect connections via inter-household borrowing are as effective as direct borrowing. Investment appears to be facilitated by kinship: households with kin in the village display reduced sensitivity of investment to income, while connections to banks do not significantly reduce sensitivity. Kin may act as "implicit collateral," permitting borrowing that would violate repayment constraints in its absence. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.289 10.1257/aer.102.3.289 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Child Health and Conflict in Cote d'Ivoire CameliaMinoiuIMF OlgaShemyakinaGA Institute of Technology 294 99 We examine the impact of the 2002-07 civil conflict in Cote d'Ivoire on children's health status measured by height-for-age. We use pre- and post-war survey data coupled with information on the location of violent incidents to capture exposure to the conflict of children born during 1997-2007. Our results indicate that children from regions more affected by the conflict suffered significant health setbacks compared with children from less affected regions. Further, household-level victimization -- such as war-related economic stress, health stress, and displacement -- has a large and negative effect on child health in conflict-affected regions. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.294 10.1257/aer.102.3.294 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers How Financial Literacy Affects Household Wealth Accumulation Jere R.BehrmanU PA Olivia S.MitchellU PA Cindy K.SooU PA DavidBravoCentro de Microdatos, U Chile 300 304 This study isolates the causal effects of financial literacy and schooling on wealth accumulation using a new household dataset and an instrumental variables (IV) approach. Financial literacy and schooling attainment are both strongly positively associated with wealth outcomes in linear regression models, whereas the IV estimates reveal even more potent effects of financial literacy. They also indicate that the schooling effect only becomes positive when interacted with financial literacy. Estimated impacts are substantial enough to imply that investments in financial literacy could have large wealth payoffs. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.300 10.1257/aer.102.3.300 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Financial Education and Timely Decision Support: Lessons from Junior Achievement Bruce IanCarlinUCLA David T.RobinsonDuke U 305 08 Using data from a finance theme park at Junior Achievement of Southern California, we explore how timely decision support is impacted by previous exposure to financial education. Some students received a 19-hour curriculum before participating, and some did not. Trained students were more frugal, paid off debt faster, and relied less on credit financing. However, trained students purchased less comprehensive health insurance, exposing themselves to greater financial risk and wealth volatility. This disparity can be explained by differences in decision support within the park. As such, it appears that education and decision support should be considered complements, not substitutes. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.305 10.1257/aer.102.3.305 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Financial Knowledge and Financial Literacy at the Household Level Alan L.GustmanDartmouth College Thomas L.SteinmeierTX Tech U NahidTabatabaiDartmouth College 309 13 There is evidence of a relation between numeracy and wealth held outside of pensions and Social Security. With pensions and Social Security accounting for half of wealth at retirement, and evidence that those with pensions save more in other forms, one would expect to find knowledge of pensions and Social Security influencing retirement saving. Yet we find no evidence that knowledge of pensions and Social Security is related to nonpension, non-Social Security wealth, to numeracy, or that it plays an intermediate role in the numeracy-wealth relation. Our findings raise questions about policies that would enhance numeracy to increase retirement saving. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.309 10.1257/aer.102.3.309 http://www.aeaweb.org/aer/data/may2012/2012_5950_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Effectiveness of Employer-Provided Financial Information: Hiring to Retiring Robert L.ClarkNC State U Melinda SandlerMorrillNC State U Steven G.AllenNC State U 314 18 Workers plan and save for retirement throughout their careers. Individuals must navigate complex financial instruments and understand public and employer-provided retirement plan characteristics. Beginning when a worker is first hired, most employers provide the option to contribute to retirement saving plans. As workers near retirement, they face many choices that have considerable consequences for their retirement income security. At these two important periods, employers can provide timely information assisting workers in making choices that optimize lifetime wellbeing. Our research, conducted in cooperation with several large employers, illustrates the importance of employer-provided education in increasing worker understanding of several retirement-related issues. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.314 10.1257/aer.102.3.314 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Efficient Auctions and Interdependent Types DirkBergemannYale U StephenMorrisPrinceton U SatoruTakahashiPrinceton U 319 24 We consider the efficient allocation of a single good with interdependent values in a quasi-linear environment. We present an approach to modeling interdependent preferences distinguishing between "payoff types" and "belief types" and report a characterization of when the efficient allocation can be partially Bayesian implemented on a finite type space. The characterization can be used to unify a number of sufficient conditions for efficient partial implementation in this classical auction setting. We report how a canonical language for discussing interdependent types - developed in a more general setting by Bergemann, Morris and Takahashi (2011) - applies in this setting and note by example that this canonical language will not allow us to distinguish some types in the payoff type - belief type language. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.319 10.1257/aer.102.3.319 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Robustly Ranking Mechanisms TilmanBorgersU MI DougSmithUS Federal Trade Commission 325 29 For a mechanism designer with an objective such as welfare we propose a method for robustly ranking mechanisms. The method is based on eliminating weakly dominated strategies only, and thus does not require any assumptions about agents' beliefs about each other except full support. We illustrate the usefulness of this method in two examples: bilateral trading and voting. In both examples we show that there are mechanisms that are ranked by our method above dominant strategy mechanisms. These examples question the literature's focus on dominant strategy mechanisms in cases when such mechanisms yield undesirable outcomes. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.325 10.1257/aer.102.3.325 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Approximation in Mechanism Design Jason D.HartlineNorthwestern U 330 36 This paper considers three challenge areas for mechanism design and describes the role approximation plays in resolving them. Challenge 1: optimal mechanisms are finely tuned to precise details of the distribution on agent preferences. Challenge 2: in environments with multi-dimensional agent preferences economic analysis has failed to provide general characterizations optimal mechanisms. Challenge 3: optimal mechanisms are parameterized by unrealistic knowledge of the distribution of agents' private preferences. This paper surveys positive resolutions to these challenges with emphasis on basic techniques and their relevance to theory and practice. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.330 10.1257/aer.102.3.330 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Copyright Research in the Digital Age: Moving from Piracy to the Supply of New Products JoelWaldfogelU MN 337 42 Twelve years into the Napster era, economists have devoted substantial attention to revenue consequences of unpaid file sharing. Yet, this is only one of a host of questions whose answers are needed to inform evidence-based copyright policy in the digital era. Digitization's effect on travel agents suggests fruitful research questions, which include the impact of digitization on the supply of new works, methods for consumer discovery of new products, and new business models available with digital distribution. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.337 10.1257/aer.102.3.337 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Is Wikipedia Biased? ShaneGreensteinNorthwestern U FengZhuU Southern CA 343 48 This study empirically examines whether Wikipedia has a neutral point of view. It develops a method for measuring the slant of 28 thousand articles about US politics. In its earliest years, Wikipedia's political entries lean Democrat on average. The slant diminishes during Wikipedia's decade of experience. This change does not arise primarily from revision of existing articles. Most articles arrive with a slant, and most articles change only mildly from their initial slant. The overall slant changes due to the entry of articles with opposite slants, leading toward neutrality for many topics, not necessarily within specific articles. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.343 10.1257/aer.102.3.343 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Shifts in Privacy Concerns AviGoldfarbU Toronto CatherineTuckerMIT 349 53 This paper explores how digitization and the associated use of customer data have affected the evolution of consumer privacy concerns. We measure privacy concerns by reluctance to disclose income in an online marketing research survey. Using over three million responses over eight years, our data show: (1) Refusals to reveal information have risen over time, (2) Older people are less likely to reveal information, and (3) The difference between older and younger people has increased over time. Our results suggest that the trends over time are partly due to broadening perceptions of the contexts in which privacy is relevant. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.349 10.1257/aer.102.3.349 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers New Challenges in Multihospital Kidney Exchange ItaiAshlagiMIT Alvin E.RothHarvard U 354 59 The growth of kidney exchange presents new challenges for the design of kidney exchange clearinghouses. The players now include directors of transplant centers, who see sets of patient-donor pairs, and can choose to reveal only difficult-to-match pairs to the clearinghouse, while withholding easy-to-match pairs to transplant locally. This reduces the number of transplants. We discuss how the incentives for hospitals to enroll all pairs in kidney exchange can be achieved, and how the concentration of hard to match pairs increases the importance of long, non-simultaneous nondirected donor chains. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.354 10.1257/aer.102.3.354 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Holdout in the Assembly of Complements: A Problem for Market Design Scott DukeKominersBecker Freidman Institute, U Chicago E. GlenWeylU Chicago 360 65 Holdout problems prevent private (voluntary and self-financing) assembly of complementary goods--such as land or dispersed spectrum--from many self-interested sellers. While mechanisms that fully respect sellers' property rights cannot alleviate these holdout problems, traditional solutions, such as the use of coercive government powers of "eminent domain" to expropriate property, can encourage wasteful and unfair assemblies. We discuss the problems holdout creates for the efficient operation of markets and how previous approaches have used regulated coercion to address these challenges. We then investigate when encouraging competition can partially or fully substitute for coercion, focusing particularly on questions of spectrum allocation. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.360 10.1257/aer.102.3.360 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Stability and Strategy-Proofness for Matching with Constraints: A Problem in the Japanese Medical Match and Its Solution YuichiroKamadaHarvard U FuhitoKojimaStanford U 366 70 Real matching markets are subject to constraints. For example, the Japanese government introduced a new medical matching system in 2009 that imposes a "regional cap" in each of its 47 prefectures, which regulates the total number of medical residents who can be employed in each region. Based on Kamada and Kojima (2011), this paper studies matching markets with such constraints by examining in great detail the Japanese medical matching market. Specifically, we show that the new system introduced in 2009 has problems in terms of stability and strategy-proofness, and provide an alternative mechanism that does better. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.366 10.1257/aer.102.3.366 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Understanding Price Controls and Nonprice Competition with Matching Theory John WilliamHatfieldStanford U Charles R.PlottCA Institute of Technology TomomiTanakaAZ State U 371 75 We develop a quality competition model to understand how price controls affect market outcomes in buyer-seller markets with discrete goods of varying quality. While competitive equilibria do not necessarily exist in such markets when price controls are imposed, we show that stable outcomes do exist and characterize the set of stable outcomes in the presence of price restrictions. In particular, we show that price controls induce non-price competition: price floors induce the trade of inefficiently high quality goods, while price ceilings induce the trade of inefficiently low quality goods. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.371 10.1257/aer.102.3.371 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers After Airline Deregulation and Alfred E. Kahn Nancy L.RoseMIT 376 80 Among Alfred E. "Fred" Kahn's many accomplishments, none is better remembered than his pivotal role in deregulation of the US airline industry. Kahn's commitment to marry core microeconomic principles with institutional analysis, willingness as Chairman of the Civil Aeronautics Board to step outside the "regulation as usual box," and appealing wit made him the face of the Airline Deregulation Act of 1978, one of the great microeconomic policy triumphs. Lessons drawn from Kahn's work and the airline deregulation experience remain instructive for current academic research and regulatory policy design across broad sectors of the economy. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.376 10.1257/aer.102.3.376 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Dynamic Pricing of Electricity Paul L.JoskowAlfred P. Sloan Foundation, New York, NY Catherine D.WolframU CA, Berkeley 381 85 As both a regulator and an academic, Fred Kahn argued that end-use electricity consumers should face prices that reflect the time-varying marginal costs of generating electricity. This has been very slow to happen in the US, even in light of recent technological advances that have lowered costs and improved functionality for meters and automated demand response technologies. We describe these recent developments and discuss the remaining barriers to the proliferation of time-varying electricity pricing. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.381 10.1257/aer.102.3.381 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Telecommunications Deregulation Jerry A.HausmanMIT William E.TaylorNERA, Boston, MA 386 90 From Fred Kahn's writings and experiences as a telecommunications regulator and commenter, we draw the following conclusions: prices must be informed by costs; costs are actual incremental costs; costs and prices are an outcome of a Schumpeterian competitive process, not the starting point; excluding incumbents from markets is fundamentally anticompetitive; and a regulatory transition to deregulation entails propensities to micromanage the process to generate preferred outcomes, visible competitors and expedient price reductions. And most important, where effective competition takes place among platforms characterized by sunk investment--land-line telephony, cable and wireless--traditional regulation is unnecessary and likely to be anticompetitive. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.386 10.1257/aer.102.3.386 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Government Policy for a Partially Deregulated Industry: Deregulate It Fully CliffordWinstonBrookings Institution 391 95 Alfred Kahn was a major force behind regulatory reform that initially benefited air travelers and subsequently consumers in other industries by placing greater reliance on markets than on regulators to allocate resources. Kahn also believed that effective governance was important for deregulation's success. In this paper, I argue that such governance has not occurred in practice and that problems that persist in partially deregulated industries are more likely to be solved by full deregulation and, if necessary, privatization than by government intervention. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.391 10.1257/aer.102.3.391 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Global Supply Chains and Wage Inequality ArnaudCostinotMIT JonathanVogelColumbia U SuWangMIT 396 401 A salient feature of globalization in recent decades is the emergence of "global supply chains" in which different countries specialize in different stages of a sequential production process. In Costinot, Vogel and Wang (2011) (CVW hereafter), we have developed a simple theory of trade with sequential production to shed light on how global supply chains affect the interdependence of nations. In this paper we develop a multi-factor extension of CVW to explore how the emergence of global supply chains may affect wage inequality within countries. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.396 10.1257/aer.102.3.396 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Sustaining Production Chains through Financial Linkages Se-JikKimSeoul National U Hyun SongShinPrinceton U 402 06 The technological constraints on sustaining production chains have been discussed extensively by development economists, but the role of financial linkages has received less attention. In a model of recursive moral hazard for a manufacturing supply chain, we show that the structure of interlocking receivables and payables serve as the glue for the production chain that sustains complex manufacturing output. The inefficiency associated with recursive moral hazard can be mitigated through optimal delays in payments along the chain. However, efficiency requires large stocks of working capital, and invoice prices are high due to implicit amortization costs of inter-firm credit. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.402 10.1257/aer.102.3.402 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Proximity and Production Fragmentation Robert C.JohnsonDartmouth College GuillermoNogueraColumbia U 407 11 Cross-border production chains tend to include geographically proximate countries. This suggests that increases in fragmentation should be largest among nearby trading partners, and thus may serve to localize gross trade. Using data on gross and value added trade from 1970-2009, we present three results supporting this conjecture. First, value added to export ratios are lower and falling more rapidly within geographic regions than between them. Second, gross trade travels shorter distances from source to destination than value added trade, and this gap is growing over time. Third, bilateral value added to export ratios have fallen most among nearby trading partners. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.407 10.1257/aer.102.3.407 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Measuring the Upstreamness of Production and Trade Flows PolAntrasHarvard U DavinChorSingapore Management U ThibaultFallyU CO RussellHillberryU Melbourne 412 16 We propose two distinct approaches to the measurement of industry upstreamness (or average distance from final use) and show that they yield an equivalent measure. Furthermore, we provide two additional interpretations of this measure, one of them related to the concept of forward linkages. We construct this measure for 426 industries using the 2002 US input-output Tables. We also construct our measure using data from selected countries in the OECD STAN database. Finally, we present an application of our measure that explores the determinants of the average upstreamness of exports at the country level using trade flows for 2002. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.412 10.1257/aer.102.3.412 http://www.aeaweb.org/aer/data/may2012/2012_1467_app.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Trade, Labor Market Frictions, and Residual Wage Inequality across Worker Groups PravinKrishnaJohns Hopkins U Jennifer P.PooleU CA, Santa Cruz Mine ZeynepSensesJohns Hopkins U 417 23 Using a matched employer-employee data set, we study the effects of trade liberalization on wage dispersion in Brazil across heterogeneous worker groups, keeping in mind that the assignment of workers to firms may be non-random and determined by the time-invariant productivity of workers specific to the firms with which they are matched. We find differential effects of trade reform on residual wage inequality across worker groups. High education workers experience greater increases in wage dispersion relative to low education workers following trade liberalization. This finding is broadly consistent with the theoretical predictions that emerge from models with heterogeneous firms, heterogeneous workers, and labor market frictions. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.417 10.1257/aer.102.3.417 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Offshoring, Transition, and Training: Evidence from Danish Matched Worker-Firm Data DavidHummelsPurdue U Jakob R.MunchU Copenhagen LarsSkipperAarhus U ChongXiangPurdue U 424 28 We combine matched Danish worker-firm-trade data with detailed individual-worker training data. We find: 1) workers displaced from offshoring firms take up more vocational-training and have a harder time getting re-attached to the labor-force than other displaced workers, and they also exhibit higher vocational-training take-up rates 2 years before layoffs; 2) the staying workers with offshoring firms take up more vocational-training than those with non-offshoring firms; and 3) the post-secondary-training take-up rates for displaced workers are no different than for the general population. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.424 10.1257/aer.102.3.424 http://www.aeaweb.org/aer/data/may2012/2012_1702_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Liberalized Trade and Worker-Firm Matching CarlDavidsonMI State U FredrikHeymanIFN, Stockholm StevenMatuszMI State U FredrikSjoholmLund U and IFN, Stockholm Susan ChunZhuMI State U 429 34 Recent theoretical analysis suggests that a reduction in the cost of exporting increases the degree of assortative matching between workers and firms in export-oriented industries. Changes that reduce the cost of imports have an ambiguous impact on matching. We combine detailed Swedish matched worker-firm data from 1995-2005 with tariff data to test these hypotheses. The data cover 94 sectors subject to international competition and include all firms with at least 20 employees. Our findings strongly support the theoretical predictions. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.429 10.1257/aer.102.3.429 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Exports and Within-Plant Wage Distributions: Evidence from Mexico Judith A.FriasIMSS, Mexico City David S.KaplanInter-American Development Bank EricVerhoogenColumbia U 435 40 This short paper examines the effect of exporting on within-plant wage distributions in employer-employee data on Mexican manufacturing plants. Using the late-1994 peso devaluation interacted with initial plant size as a source of exogenous variation in exporting and focusing on wages at the 10th, 25th, 50th, 75th and 90th percentiles within each plant, we document three patterns: (1) there is no evidence of an effect of exporting on wages at the 10th percentile; (2) the wage effects of exporting are larger at higher percentiles, up to the 75th; and (3) there is no evidence of an increase in dispersion within the top quartile. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.435 10.1257/aer.102.3.435 http://www.aeaweb.org/aer/data/may2012/2012_1704_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Village Economic Accounts: Real and Financial Intertwined ArchawaPaweenawatU Thai Chamber of Commerce Robert M.TownsendMIT 441 46 We propose a framework to create village economic and balance of payments accounts from a micro-level household survey. Using the Townsend Thai data, we create the accounts for villages in rural and semi-urban areas of Thailand. We then study these village economies as small open countries, exploring in particular the relationship between the real and financial variables. We examine cross-village risk-sharing and the Feldstein-Horioka puzzle. Our results suggest that within-village risk-sharing is better than across-village and, while there is smoothing in both, the mechanisms are different. We also find that, unlike countries, the cross-village capital markets are highly integrated. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.441 10.1257/aer.102.3.441 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Innovation in Space KlausDesmetU Carlos III de Madrid EstebanRossi-HansbergPrinceton U 447 52 This paper shows how competition for land may lead firms to optimally innovate in spite of the market being perfectly competitive. When bidding for a location, firms can enhance their bid by investing in innovations that make the land more valuable. Firms are willing to innovate because the non-replicability of land implies that they will not be undercut by some other producer leading to losses as in the standard theory. In the absence of spillovers over space and over time, firms will optimally innovate. Empirical evidence from U.S. metropolitan areas supports the predictions of the theory. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.447 10.1257/aer.102.3.447 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Ricardo's Theory of Comparative Advantage: Old Idea, New Evidence ArnaudCostinotMIT DaveDonaldsonMIT 453 58 When asked to name one proposition in the social sciences that is both true and non-trivial, Paul Samuelson famously replied: 'Ricardo's theory of comparative advantage'. Truth, however, in Samuelson's reply refers to the fact that Ricardo's theory of comparative advantage is mathematically correct, not that it is empirically valid. In this paper we develop and implement an empirical test of Ricardo's ideas. We use novel agricultural data that describe the productivity in 17 crops of 1.6 million parcels of land in 55 countries around the world. We find that a regression of log observed output on log predicted output has a (precisely estimated) slope of 0.84 and an R-squared of 0.93. In our view, these findings offer considerable support for Ricardo's ideas. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.453 10.1257/aer.102.3.453 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Tariff Revenue and Tariff Caps ManuelAmadorStanford U KyleBagwellStanford U 459 65 We characterize the design of an optimal trade agreement when governments are privately informed about the value of tariff revenue. We show that the problem of designing an optimal trade agreement in this setting can be represented as an optimal delegation problem when a money burning instrument is available. In a specification with quadratic payoffs and a uniform distribution, we find that the tariff cap and the probability of binding overhang are higher when the upper bound of the support distribution is higher and when the support distribution has greater width. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.459 10.1257/aer.102.3.459 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Profits in the "New Trade" Approach to Trade Negotiations RalphOssaU Chicago 466 69 I highlight two advantages of adopting a "new trade" approach to trade negotiations. First, it allows for a view of trade negotiations in which producer interests play a prominent role. And second, it lends itself naturally to quantitative analyses of non-cooperative and cooperative trade policy. My specific focus is on profit shifting effects through which countries can gain at the expense of one another. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.466 10.1257/aer.102.3.466 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Trade Agreements and the Nature of Price Determination PolAntrasHarvard U Robert W.StaigerU WI 470 76 According to the terms-of-trade theory, negotiations over tariffs alone, coupled with an effective market access preservation rule, can bring governments to the efficiency frontier. In this paper, we show that the nature of international price determination is important for this central result of the terms-of-trade theory. While the received theory assumes that international prices are fully disciplined by aggregate market clearing conditions, we show here that support for "shallow" integration is overturned, and instead a need for "deep" integration is suggested ? wherein direct negotiations occur over both border and behind-the-border policies ? if international prices are determined through bargaining. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.470 10.1257/aer.102.3.470 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers On the Use of Holdout Samples for Model Selection FrankSchorfheideU PA Kenneth I.WolpinU PA 477 81 Researchers often hold out data from the estimation of econometric models to use for external validation. However, the use of holdout samples is suboptimal from a Bayesian perspective, which prescribes using the entire sample to form posterior model weights. This paper examines a possible rationale for the use of holdout samples: data-inspired modifications of structural models are likely to lead to an exaggeration of model fit. The use of holdout samples can, in principle, set an incentive for the modeler not to exaggerate model fit. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.477 10.1257/aer.102.3.477 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Prediction with Misspecified Models JohnGewekeCentre for the Study of Choice, U Technology Sydney GianniAmisanoEuropean Central Bank 482 86 The assumption that one of a set of prediction models is a literal description of reality formally underlies many formal econometric methods, including Bayesian model averaging and most approaches to model selection. Prediction pooling does not invoke this assumption and leads to predictions that improve on those based on Bayesian model averaging, as assessed by the log predictive score. The paper shows that the improvement is substantial using a pool consisting of a dynamic stochastic general equilibrium model, a vector autoregression, and a dynamic factor model, in conjunction with standard US postwar quarterly macroeconomic time series. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.482 10.1257/aer.102.3.482 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Assumptions Matter: Model Uncertainty and the Deterrent Effect of Capital Punishment Steven N.DurlaufU WI ChaoFuU WI SalvadorNavarroSocial Science Centre, U Western Ontario 487 92 This paper examines how estimates of the deterrent effect of capital punishment depend on alternate choices of assumptions concerning the homicide process. Specific models of the homicide process represent bundles of these assumptions, which involve the unobserved heterogeneity, the relevant penalty probabilities for homicide choices, possible cross-polity parameter variation, and exchangeability between polity-time pairs that do and do not experience positive numbers of murders. We demonstrate how various assumptions have driven the conflicting findings from studies on capital punishment, and isolate a particular set of assumptions that are required to find a positive deterrent effect. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.487 10.1257/aer.102.3.487 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Heuristics and Heterogeneity in Health Insurance Exchanges: Evidence from the Massachusetts Connector Keith MarzilliEricsonBoston U AmandaStarcU PA 493 97 We examine heuristic decision rules in consumer choice on health insurance exchanges using data from the Massachusetts Connector. Consumers may have difficulty making optimal choices in a complex environment. The heuristic "choose the cheapest plan" is suggested by the decision context, previous research, and the data: about 20% of enrollees choose the cheapest plan possible. We find evidence of this heuristic in many models, but while heuristics may play a role, preference heterogeneity is also important. Our most flexible models find an insignificant heuristic effect. In part because holding context fixed, this heuristic is observationally equivalent to extreme price sensitivity. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.493 10.1257/aer.102.3.493 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Health Reform, Health Insurance, and Selection: Estimating Selection into Health Insurance Using the Massachusetts Health Reform Martin B.HackmannYale U Jonathan T.KolstadU PA Amanda E.KowalskiYale U 498 501 We implement an empirical test for selection into health insurance using changes in coverage induced by the introduction of mandated health insurance in Massachusetts. Our test examines changes in the cost of the newly insured relative to those who were insured prior to the reform. We find that counties with larger increases in insurance coverage over the reform period face the smallest increase in average hospital costs for the insured population, consistent with adverse selection into insurance before the reform. Additional results, incorporating cross-state variation and data on health measures, provide further evidence for adverse selection. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.498 10.1257/aer.102.3.498 http://www.aeaweb.org/aer/data/may2012/2012_6060_data.zip http://www.aeaweb.org/aer/data/may2012/2012_6060_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers The Impact of the Massachusetts Health Care Reform on Health Care Use among Children SarahMillerU IL 502 07 In 2006 Massachusetts enacted a major health care reform aimed at achieving near-universal coverage in the state. While other studies have found that this reform substantially affected the use of health services in general, the impact of the reform on children is largely unexplored. Children are of special interest to policymakers because it is widely believed that better health in early childhood results in large payoffs to adult health and achievement. I analyze how the reform affected the insurance coverage, health care utilization patterns, and health outcomes of children under 18 years old. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.502 10.1257/aer.102.3.502 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers How Did Health Care Reform in Massachusetts Impact Insurance Premiums? John A.GravesVanderbilt U JonathanGruberMIT 508 13 It is widely recognized that the 2006 Massachusetts health reforms served as a blueprint for national reform under the 2010 Affordable Care Act (ACA). As such, there is interest in using the Massachusetts experience to understand how insurance premiums might change under the ACA. In this paper, we analyze changes in private insurance premiums in Massachusetts between 2002 and 2010. In contrast to earlier estimates from Massachusetts (Cogan, Hubbard and Kessler 2010), we find no statistical evidence of changes in group premiums. By contrast, we find large reductions in non-group premiums in Massachusetts relative to the rest of the U.S. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.508 10.1257/aer.102.3.508 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers The Long-Term Effects of UI Extensions on Employment Johannes F.SchmiederBoston U Tillvon WachterColumbia U StefanBenderIAB, Nuremberg 514 19 The majority of papers analyzing the employment effects of unemployment insurance (UI) benefit durations focus on the duration of the first unemployment spell. In this paper, we make two contributions. First, we use a regression discontinuity design to analyze the long-term effects of extensions in UI durations. These estimates differ from standard estimates in that they incorporate differences in UI benefit receipt and employment due to recurrent unemployment spells. Second, we derive a welfare formula of UI extensions that incorporates recurrent nonemployment spells. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.514 10.1257/aer.102.3.514 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Unemployment in the Great Recession: Did the Housing Market Crisis Prevent the Unemployed from Moving to Take Jobs? Henry S.FarberPrinceton U 520 25 The labor market in the Great Recession and its aftermath is characterized by great difficulty in escaping unemployment. I present two empirical analyses of a particular explanation for that difficulty, that the housing market crisis has prevented the unemployed from selling their homes and moving to take new jobs. First, I examine post-job-loss mobility rates by home ownership status using data from the Displaced Workers Survey. Second, I examine mobility rates for unemployed homeowners and renters from the month-to-month CPS match. Neither analysis provides any support for the idea that the housing market crisis has reduced mobility of the unemployed. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.520 10.1257/aer.102.3.520 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Contract Form, Wage Flexibility, and Employment ThomasLemieuxU British Columbia W. BentleyMacLeodColumbia U and Institute for Advanced Study, Princeton, NJ DanielParentHEC Montreal 526 31 We begin with two uncontroversial hypotheses - firm productivity is expensive to measure and employment entails relationship-specific investments. These assumptions imply that firms would optimally choose fixed-wage contracts, and complement these with bonus pay when measuring employee performance is not too costly. These assumptions imply that under an optimal employment contract hours of work is less responsive, while total compensation is more responsive to shocks under bonus-pay contracts compared to fixed wage contracts. Using data from the Panel Study of Income Dynamics (PSID) where shocks are proxied using the local unemployment rate, we find strong support for these two implications. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.526 10.1257/aer.102.3.526 http://www.aeaweb.org/aer/data/may2012/2012_6052_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Access to Credit by Small Businesses: How Relevant Are Race, Ethnicity, and Gender? ElizabethAsieduU KS James A.FreemanWheaton College AkwasiNti-AddaeU KS 532 37 This paper employs data from the 1998 and 2003 Survey of Small Business Finances to analyze whether, after controlling for observable factors that influence loan decisions, there is a significant difference in the loan approval rate and the interest rate charged on approved loans for businesses owned by minority or white females and firms owned by white males. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.532 10.1257/aer.102.3.532 http://www.aeaweb.org/aer/data/may2012/2012_3022_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Coming to America: Does Having a Developed Home Country Matter for Self-Employment in the United States? RuthUwaifo OyelereGA Institute of Technology WillieBeltonGA Institute of Technology 538 42 This research examines the relationship between the economic status of an immigrant's home country and the probability of self-employment in the US. We find that immigrants from developing countries on average have lower self-employment probabilities relative to immigrants from developed countries. Similarly, we find a positive correlation between the current HDI of an immigrant's home country and the probability of self-employment in the US. These result are unexpected given that past research suggests immigrants from countries with high levels of self-employment (developing countries) are more likely to be self-employed in the US. We provide a possible explanation for these results. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.538 10.1257/aer.102.3.538 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers The Labor Market Impact of Mandated Employment Verification Systems CatalinaAmuedo-DorantesSan Diego State U CynthiaBansakSt Lawrence U 543 48 Employment verification systems covered about one out of four people hired in the United States in 2010. In this paper, we evaluate the impact of state-level employment verification mandates on the employment and wages of likely unauthorized workers across the entire United States between 2004 and 2010. We find that E-Verify mandates, particularly those covering all employers, significantly curtail the employment likelihood of likely unauthorized male and female workers. However, they appear to have mixed effects on wages and may redistribute likely unauthorized labor towards industries often benefiting from specific exclusions, such as agriculture or food services. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.543 10.1257/aer.102.3.543 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers The Employment of Low-Skilled Immigrant Men in the United States BrianDuncanU CO, Denver Stephen J.TrejoU TX 549 54 Using microdata from the 2000 Census, we analyze how the employment rates of foreign-born and US-born men vary with education. After a period of adjustment during the first few years upon arrival, the overall employment rate of immigrant men quickly approaches that of US natives. Among those with the lowest education levels, immigrants exhibit substantially higher rates of employment than comparable natives. This pattern is consistent with a simple theoretical model of migrant selectivity that jointly considers a potential migrant's decisions regarding where to locate and whether to work. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.549 10.1257/aer.102.3.549 http://www.aeaweb.org/aer/data/may2012/2012_3373_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Love and Money by Parental Matchmaking: Evidence from Urban Couples in China FaliHuangSingapore Management U Ginger ZheJinU MD Lixin ColinXuWorld Bank 555 60 Parental involvement in marriage matchmaking may distort the optimal spouse choice because parents are willing to substitute love for money. The rationale is that the joint income of married children can be shared among extended family members more easily than mutual attraction felt by the couple themselves, and as a result, the best spouse candidate in the parents' eyes can differ from what is optimal to the individual, even though parents are altruistic and care dearly about their children's welfare. We find supporting evidence for this prediction using a unique sample of urban couples in China in the early 1990s. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.555 10.1257/aer.102.3.555 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Business Cycles and Gender Diversification: An Analysis of Establishment-Level Gender Dissimilarity CynthiaBansakSt Lawrence U Mary E.GrahamClarkson U Allan A.ZebedeeClarkson U 561 65 During recessions, the focus on male job losses may overshadow other important outcome variables. We examine the effects of economic downturns on occupational segregation by gender, using staffing data from over 6 million private-sector US establishments from 1966-2010. Consistent with the literature, we find a downward trend in occupational segregation that is diminishing over time. Drawing upon Rubery's (1988) work on women and recessions, we find support for both the buffer and the segmentation hypotheses. On net, however, the buffer hypothesis appears to dominate providing evidence that in periods of economic decline the trend of decreasing economic dissimilarity is interrupted. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.561 10.1257/aer.102.3.561 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Birth Rates and the Vietnam Draft Marianne P.BitlerU CA, Irvine LucieSchmidtWilliams College 566 69 The Vietnam conflict was the defining event for a generation, with nearly 8 million Americans serving in the armed forces. A large literature in economics has focused on effects of Vietnam-Era service post-war, while little research looks at contemporaneous effects of the mobilization, despite the potential for this mobilization to change marriage markets for particular cohorts. We use exogenous variation across states and over time in men drafted per 100 men 19-25 to look at the effects of the wartime mobilization on birth rates. We find robust evidence that higher rates of inducted men led to significantly lower birth rates. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.566 10.1257/aer.102.3.566 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Identification of the Effect of Depression on Risky Sexual Behavior: Exploiting a Natural Experiment Susan L.AverettLafayette College YangWangLafayette College 570 74 Depression is pervasive in the US particularly among women. The costs in terms of direct medical costs and forgone earnings are substantial. This paper investigates an additional cost of depression. Using data from the National Longitudinal Survey of Adolescent Health, we use a unique instrument, the attacks of September 11, which have been linked to depression, to identify the effect of depression on risky sexual behaviors. We find that depressed women are more likely to be sexually active, to engage in oral sex and to have sex without a condom, even after controlling for a rich set of covariates. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.570 10.1257/aer.102.3.570 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Hiring, Churn, and the Business Cycle Edward P.LazearStanford U James R.SpletzerUS Bureau of the Census 575 79 Hires occur for two reasons - to grow a business and to replace those who have left (churn). Churn is an important part of employment dynamics, allowing workers to move to their most productive use. We present evidence on churn from the Job Openings and Labor Turnover Survey (JOLTS). Churn is procyclical. During the 2007-09 recession, four-fifths of hiring reductions are associated with reduced churn, not with reductions in job creation. We estimate that the cost of reduced churn is about two-fifths of a percentage point of GDP annually throughout the three-and-one-half year period since the beginning of the recession. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.575 10.1257/aer.102.3.575 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Job-to-Job Flows in the Great Recession HenryHyattCenter for Economic Studies, US Bureau of the Census ErikaMcEntarferCenter for Economic Studies, US Bureau of the Census 580 83 We develop prototype job-to-job flow measures to provide new evidence on labor turnover and earnings dynamics in the Great Recession. We find a sharp drop in job mobility in the Great Recession, much sharper than the previous recession, and higher earnings penalties for job transitions with an intervening nonemployment spell. Focusing on residential construction separators in particular, we find increasing rates of industry change and higher earnings penalties from job change in the Great Recession. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.580 10.1257/aer.102.3.580 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Recruiting Intensity during and after the Great Recession: National and Industry Evidence Steven J.DavisU Chicago R. JasonFabermanFederal Reserve Bank of Chicago John C.HaltiwangerU MD 584 88 We measure job-filling rates and recruiting intensity per vacancy at the national and industry levels from January 2001 to September 2011 using data from the Job Openings and Labor Turnover Survey. Industry-level movements in these variables are at odds with implications of the standard matching function in labor search theory but consistent with a generalized function that incorporates an important role for recruiting intensity. Construction makes up less than five percent of employment but accounts for more than 40 percent of the large swings in the job-filling rate during and after the Great Recession. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.584 10.1257/aer.102.3.584 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Did the Housing Price Bubble Clobber Local Labor Market Job and Worker Flows When It Burst? John M.AbowdLabor Dynamics Institute, Cornell U LarsVilhuberLabor Dynamics Institute, Cornell U 589 93 We use the Census Bureau's Quarterly Workforce Indicators and the Federal Housing Finance Agency's House Price Indices to study the effects of the housing price bubble on local labor markets. We show that the 35 MSAs in the top decile of the house price boom were most severely impacted. Their stable job employment fell much more than the national average. Their real wage rates did not fall as fast as the national average. Accessions fell much faster than average while separations were constant. Job creations fell substantially while destructions rose slightly. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.589 10.1257/aer.102.3.589 http://www.aeaweb.org/aer/data/may2012/2012_2790_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Time Use, Emotional Well-Being, and Unemployment: Evidence from Longitudinal Data Alan B.KruegerPrinceton U Andreas I.MuellerColumbia U 594 99 This paper provides new evidence on the time use and emotional well-being of unemployed individuals in the weeks before and after starting a new job. The major findings are: (1) time spent on home production drops sharply at the time of re-employment, even when controlling for individual fixed effects; (2) time spent on leisure-related activities, which the unemployed find less enjoyable, drops on re-employment, but less so when controlling for individual fixed effects; (3) the unemployed report higher levels of sadness during specific episodes of the day than the employed; and (4) sadness decreases abruptly at the time of re-employment. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.594 10.1257/aer.102.3.594 http://www.aeaweb.org/aer/data/may2012/2012_1653_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Retirement and Home Production: A Regression Discontinuity Approach ElenaStancanelliU Cergy Pontoise and OFCE, Sciences Po, Paris ArthurVan SoestTilburg U 600 605 Existing studies show that individuals who retire replace some private consumption with home production, but do not consider joint behavior of couples. Here we analyze the causal effect of retirement of each partner on hours of home production for both partners in a couple. Our identification strategy exploits the earliest age retirement laws in France, enabling a fuzzy regression discontinuity approach. We find that own retirement significantly increases own hours of home production and the effect is larger for men than for women. Moreover, retirement of the female partner significantly reduces male hours of home production but not vice versa. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.600 10.1257/aer.102.3.600 http://www.aeaweb.org/aer/data/may2012/2012_1654_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers The Role of Preferences and Opportunity Costs in Determining the Time Allocated to Housework Leslie S.StrattonVA Commonwealth U 606 11 Research on intrahousehold time allocations has assumed that housework is a necessary evil and focused exclusively on the causal role of opportunity costs. In fact, agents likely act to maximize happiness, and preferences regarding even mundane household chores differ considerably. I use information from the 2000-01 UK Time Use Survey to examine time spent on laundry, ironing, cleaning, and food shopping. Joint multivariate analysis of his and her time on weekend and weekday days as well as maid service reveals that her opportunity cost of time matters more than his, but that his preferences play a greater role than hers. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.606 10.1257/aer.102.3.606 http://www.aeaweb.org/aer/data/may2012/2012_1655_data.zip http://www.aeaweb.org/aer/data/may2012/2012_1655_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Papers Aggregate Impacts of a Gift of Time JungminLeeSogang U and IZA, Bonn DaijiKawaguchiHitotsubashi U and IZA, Bonn Daniel S.HamermeshU TX and Maastricht U 612 16 How would people spend additional time if confronted by permanent declines in market work? We examine the impacts of cuts in legislated standard hours which raised employers' overtime costs in Japan around 1990 and in Korea in the early 2000s. Using time-diaries from before and after, we show the shocks were effective -- per-capita hours of market work declined discretely. The economy-wide drops in market work were reallocated solely to leisure and personal maintenance. In the absence of changing household technology a permanent time gift leads to no increase in time spent in household production by the average individual. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.612 10.1257/aer.102.3.612 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Proceedings Minutes of the Annual Business Meeting: Chicago, IL: January 7, 2012 John J.SiegfriedVanderbilt U 620 21 http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.620 10.1257/aer.102.3.620 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Reports Report of the Secretary for 2011 John J.SiegfriedVanderbilt U 622 25 http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.622 10.1257/aer.102.3.622 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Reports Report of the Treasurer John J.SiegfriedVanderbilt U 626 30 http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.626 10.1257/aer.102.3.626 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Reports American Economic Association Universal Academic Questionnaire Summary Statistics Charles E.ScottLoyola U MD John J.SiegfriedVanderbilt U 631 34 http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.631 10.1257/aer.102.3.631 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Reports Minutes of the Meeting of the Executive Committee: Chicago, IL, April 15, 2011 John J.SiegfriedVanderbilt U 637 44 http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.637 10.1257/aer.102.3.637 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Reports Minutes of the Meeting of the Executive Committee: Chicago, IL, January 5, 2012 John J.SiegfriedVanderbilt U 645 52 http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.645 10.1257/aer.102.3.645 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Reports Report of the Editor: American Economic Review Pinelopi KoujianouGoldbergYale U 653 65 http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.653 10.1257/aer.102.3.653 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Reports Report of the Editor: Journal of Economic Literature JanetCurriePrinceton U 666 68 http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.666 10.1257/aer.102.3.666 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Reports Report of the Editor: Journal of Economic Perspectives David H.AutorMIT 669 71 http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.669 10.1257/aer.102.3.669 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Reports Report of the Editor: American Economic Journal: Applied Economics EstherDufloMIT 672 75 http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.672 10.1257/aer.102.3.672 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Reports Report of the Editor: American Economic Journal: Economic Policy AlanAuerbachU CA, Berkeley 676 79 http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.676 10.1257/aer.102.3.676 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Reports Report of the Editor: American Economic Journal: Macroeconomics Steven J.DavisU Chicago 680 84 http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.680 10.1257/aer.102.3.680 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Reports Report of the Editor: American Economic Journal: Microeconomics AndrewPostlewaiteU PA 685 87 http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.685 10.1257/aer.102.3.685 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Reports Report of the Director: Job Openings for Economists John J.SiegfriedVanderbilt U 688 90 http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.688 10.1257/aer.102.3.688 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Reports Report of the Committee on Economic Education for 2011 MichaelWattsPurdue U 691 96 http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.691 10.1257/aer.102.3.691 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Reports Report of the Committee on the Status of Women in the Economics Profession 2011 Barbara M.FraumeniU Southern ME 697 704 http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.697 10.1257/aer.102.3.697 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Reports Committee on the Status of Minority Groups in the Economics Profession: Report of Committee Activities for the 2011 Calendar Year Marie T.MoraU TX Pan American 705 09 http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.705 10.1257/aer.102.3.705 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Reports American Economic Association Committee on Statistics (AEAStat): Annual Report--2011 RobertFeenstraU CA, Davis 710 710 http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.710 10.1257/aer.102.3.710 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Reports Committee on Government Relations CharlesSchultzeBrookings Institution 711 13 http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.711 10.1257/aer.102.3.711 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Reports The American Economic Association and Allied Social Science Associations John J.SiegfriedVanderbilt U 714 15 http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.714 10.1257/aer.102.3.714 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 3 May 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=3 Reports Report of the Selection Committee for the American Economic Journal: Macroeconomics Editor MichaelWoodfordColumbia U 716 716 http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.716 10.1257/aer.102.3.716