American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Journal Article Front Matter i viii Including: David A. Wise: Distinguished Fellow 2011 http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.i 10.1257/aer.102.7.i American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Articles The Spending and Debt Response to Minimum Wage Hikes DanielAaronsonFederal Reserve Bank of Chicago SumitAgarwalNational U Singapore EricFrenchFederal Reserve Bank of Chicago 3111 39 Immediately following a minimum wage hike, household income rises on average by about $250 per quarter and spending by roughly $700 per quarter for households with minimum wage workers. Most of the spending response is caused by a small number of households who purchase vehicles. Furthermore, we find that the high spending levels are financed through increases in collateralized debt. Our results are consistent with a model where households can borrow against durables and face costs of adjusting their durables stock. (JEL D12, D14, D91, J38) http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3111 10.1257/aer.102.7.3111 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Articles Offshoring and the Role of Trade Agreements PolAntràsHarvard U Robert W.StaigerU WI 3140 83 The rise of offshoring of intermediate inputs raises important questions for commercial policy. Do the distinguishing features of offshoring introduce novel reasons for trade policy intervention? Does offshoring create new problems of global policy cooperation whose solutions require international agreements with novel features? In this paper we provide answers to these questions, and thereby initiate the study of trade agreements in the presence of offshoring. We argue that the rise of offshoring will make it increasingly difficult for governments to rely on traditional GATT/WTO concepts and rules -- such as market access, reciprocity and non-discrimination -- to solve their trade-related problems. (JEL F12, F13, L24) http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3140 10.1257/aer.102.7.3140 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Articles Information and Employee Evaluation: Evidence from a Randomized Intervention in Public Schools Jonah E.RockoffColumbia U Douglas O.StaigerDartmouth College Thomas J.KaneHarvard U Eric S.TaylorStanford U 3184 3213 We examine how employers learn about worker productivity in a randomized pilot experiment which provided objective estimates of teacher performance to school principals. We test several hypotheses that support a simple Bayesian learning model with imperfect information. First, the correlation between performance estimates and prior beliefs rises with more precise objective estimates and more precise subjective priors. Second, new information exerts greater influence on posterior beliefs when it is more precise and when priors are less precise. Employer learning affects job separation and productivity in schools, increasing turnover for teachers with low performance estimates and producing small test score improvements. (JEL D83, I21, J24, J45) http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3184 10.1257/aer.102.7.3184 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Articles Pricing and Welfare in Health Plan Choice M. KateBundorfStanford U JonathanLevinStanford U NealeMahoneyHarvard U 3214 48 Premiums in health insurance markets frequently do not reflect individual differences in costs, either because consumers have private information or because prices are not risk rated. This creates inefficiencies when consumers self-select into plans. We develop a simple econometric model to study this problem and estimate it using data on small employers. We find a welfare loss of 2-11 percent of coverage costs compared to what is feasible with risk rating. Only about one-quarter of this is due to inefficiently chosen uniform contribution levels. We also investigate the reclassification risk created by risk rating individual incremental premiums, finding only a modest welfare cost. (JEL G22, I13, I18) http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3214 10.1257/aer.102.7.3214 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Articles Diagnosing Consumer Confusion and Sub-optimal Shopping Effort: Theory and Mortgage-Market Evidence Susan E.WoodwardSand Hill Econometrics, Menlo Park, CA Robert E.HallHoover Institution, Stanford U 3249 76 Mortgage loans are leading examples of transactions where experts on one side of the market take advantage of consumers' lack of knowledge and experience. We study the compensation that borrowers pay to mortgage brokers for assistance from application to closing. Two findings support the conclusion that confused borrowers overpay for brokers' services: (i ) A model of effective shopping shows that borrowers sacrifice at least $1,000 by shopping from too few brokers. (ii ) Borrowers who compensate their brokers with both cash and a commission from the lender pay twice as much as similar borrowers who pay no cash. (JEL D12, D14, G21) http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3249 10.1257/aer.102.7.3249 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Articles Lost in Transit: Product Replacement Bias and Pricing to Market EmiNakamuraColumbia U JónSteinssonColumbia U 3277 3316 In the microdata underlying US trade price indexes, 40 percent of products are replaced before a single price change is observed and 70 percent are replaced after two price changes or fewer. A price index that focuses on price changes for identical items may, therefore, miss an important component of price adjustment occurring at the time of product replacements. We provide a model of this "product replacement bias" and quantify its importance using US data. Accounting for product replacement bias, long-run exchange rate "pass-through" is substantially higher than conventional estimates suggest, and the terms of trade are substantially more volatile. (JEL F14, F31) http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3277 10.1257/aer.102.7.3277 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Articles Imperfect Public Monitoring with Costly Punishment: An Experimental Study AttilaAmbrusDuke U BenGreinerU New South Wales 3317 32 This paper experimentally investigates the effects of a costly punishment option on cooperation and social welfare in long, finitely repeated public good contribution games. In a perfect monitoring environment, increasing the severity of the potential punishment monotonically increases average net payoffs. In a more realistic imperfect monitoring environment, we find a U-shaped relationship. Access to a standard punishment technology in this setting significantly decreases net payoffs, even in the long run. Access to a severe punishment technology leads to roughly the same payoffs as with no punishment option, as the benefits of increased cooperation offset the social costs of punishing. (JEL C92, H41, K42) http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3317 10.1257/aer.102.7.3317 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Articles Estimating Time Preferences from Convex Budgets JamesAndreoniU CA, San Diego CharlesSprengerStanford U 3333 56 Experimentally elicited discount rates are frequently higher than what seems reasonable for economic decision-making. Such high rates are often attributed to present-biased discounting. A well-known bias of standard measurements is the assumption of linear consumption utility. Attempting to correct this bias using measures of risk aversion to identify concavity, researchers find reasonable discounting but at the cost of exceptionally high utility function curvature. We present a new methodology for identifying time preferences, both discounting and curvature, from simple allocation decisions. We find reasonable levels of both discounting and curvature and, surprisingly, dynamically consistent time preferences. (JEL C91, D12, D81) http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3333 10.1257/aer.102.7.3333 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Articles Risk Preferences Are Not Time Preferences JamesAndreoniU CA, San Diego CharlesSprengerStanford U 3357 76 Risk and time are intertwined. The present is known while the future is inherently risky. This is problematic when studying time preferences since uncontrolled risk can generate apparently present-biased behavior. We systematically manipulate risk in an intertemporal choice experiment. Discounted expected utility performs well with risk, but when certainty is added common ratio predictions fail sharply. The data cannot be explained by prospect theory, hyperbolic discounting, or preferences for resolution of uncertainty, but seem consistent with a direct preference for certainty. The data suggest strongly a difference between risk and time preferences. (JEL C91 D81 D91) http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3357 10.1257/aer.102.7.3357 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Articles Married with Children: A Collective Labor Supply Model with Detailed Time Use and Intrahousehold Expenditure Information LaurensCherchyeCES, Catholic U Leuven BramDe RockFree U Brussels FredericVermeulenTilburg U 3377 3405 We propose a collective labor supply model with household production that generalizes a model of Blundell, Chiappori, and Meghir (2005). Adults' preferences depend not only on own leisure and individual private consumption of market goods. They also depend on the consumption of domestic goods, which are produced by combining market goods with individuals' time. A new identification result, which uses production shifters, is developed. We apply our model to unique data on Dutch couples with children. Our application uses a novel estimation strategy that builds upon the familiar two-stage allocation representation of the collective model. (JEL D12, J12, J22) http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3377 10.1257/aer.102.7.3377 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Articles Exports, Export Destinations, and Skills IreneBrambillaNational U La Plata DanielLedermanWorld Bank GuidoPortoNational U La Plata 3406 38 This paper explores the links between exports, export destinations, and skill utilization. We identify two mechanisms behind these links: differences across destinations in quality valuation and in exporting required services, activities that are intensive in skilled labor. Depending on the characteristics of the source country (income, language), the theories suggest a skill-bias in export destinations. We test the theory using a panel of Argentine manufacturing firms. We find that Argentine firms exporting to high-income countries hired more skilled workers than other exporters and domestic firms. Instead, we cannot identify any causal effect of exporting per se on skill utilization. (JEL F14, F16, J24, L60, O14, O19) http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3406 10.1257/aer.102.7.3406 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Articles Who Matters in Coordination Problems? JózsefSákovicsU Edinburgh JakubSteinerCERGE-EI, Prague and Northwestern U 3439 61 Agents face a coordination problem akin to the adoption of a network technology. A principal announces investment subsidies that, at minimal cost, attain a given likelihood of successful coordination. Optimal subsidies target agents who impose high externalities on others and on whom others impose low externalities. Based on the analysis of the role of strategic uncertainty in coordination processes, we provide a methodology that can be used to find the optimal targets for a variety of interventions in a large class of coordination problems with heterogeneous agents. (JEL D81, D82, D83, O33) http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3439 10.1257/aer.102.7.3439 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Articles Loss Leading as an Exploitative Practice ZhijunChenU Auckland and Ecole Polytechnique, Palaiseau PatrickReyToulouse School of Economics 3462 82 We show that large retailers, competing with smaller stores that carry a narrower range, can exercise market power by pricing below cost some of the products also offered by the smaller rivals, in order to discriminate multistop shoppers from one-stop shoppers. Loss leading thus appears as an exploitative device rather than as an exclusionary instrument, although it hurts the smaller rivals as well; banning below-cost pricing increases consumer surplus, rivals' profits, and social welfare. Our insights extend to industries where established firms compete with entrants offering fewer products. They also apply to complementary products such as platforms and applications. (JEL L11, L13, L81) http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3462 10.1257/aer.102.7.3462 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Articles Human Capital Prices, Productivity, and Growth Audra J.BowlusSocial Science Centre, U Western Ontario ChrisRobinsonSocial Science Centre, U Western Ontario 3483 3515 Separate identification of the price and quantity of human capital has important implications for understanding key issues in economics. Price and quantity series are derived for four education levels. The price series are highly correlated and they exhibit a strong secular trend. Three resulting implications are explored: the rising college premium is found to be driven more by relative quantity than relative price changes, life-cycle wage profiles are readily interpretable as reflecting optimal human capital investment paths using the estimated price series, and adjusting the labor input for quality increases dramatically reduces the contribution of MFP to growth. (JEL D91, I20, J24, J31, O47) http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3483 10.1257/aer.102.7.3483 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Shorter Papers Political Aid Cycles MichaelFayeNew York NY PaulNiehausU CA, San Diego 3516 30 Researchers have scrutinized foreign aid's effects on poverty and growth, but anecdotal evidence suggests that donors often use aid for other ends. We test whether donors use bilateral aid to influence elections in developing countries. We find that recipient country administrations closely aligned with a donor receive more aid during election years, while those less aligned receive less. Consistent with our interpretation, this effect holds only in competitive elections, is absent in US aid flows to non-government entities, and is driven by bilateral alignment rather than incumbent characteristics. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3516 10.1257/aer.102.7.3516 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Shorter Papers Human Capital Investment and the Gender Division of Labor in a Brawn-Based Economy Mark M.PittBrown U Mark R.RosenzweigYale U Mohammad NazmulHassanInstitute of Nutrition and Food Science, Dhaka U 3531 60 A model of human capital investment and activity choice is used to explain facts describing gender differentials in the levels and returns to human capital investments and occupational choice. These include the higher return to and level of schooling, the small effect of healthiness on wages, and the large effect of healthiness on schooling for females relative to males. The model incorporates gender differences in the level and responsiveness of brawn to nutrition in a Roy-economy setting in which activities reward skill and brawn differentially. Evidence from rural Bangladesh provides support for the model and the importance of the distribution of brawn. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3531 10.1257/aer.102.7.3531 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Shorter Papers The 11-20 Money Request Game: A Level-k Reasoning Study AyalaAradTel Aviv U ArielRubinsteinTel Aviv U and NYU 3561 73 We study experimentally a new two-player game: each player requests an amount between 11 and 20 shekels. He receives the requested amount and if he requests exactly one shekel less than the other player, he receives an additional 20 shekels. Level-k reasoning is appealing due to the natural starting point (requesting 20) and the straightforward best-response operation. Nevertheless, almost all subjects exhibit at most three levels of reasoning. Two variants of the game demonstrate that the depth of reasoning is not increased by enhancing the attractiveness of the level-0 strategy or by reducing the cost of undercutting the other player. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3561 10.1257/aer.102.7.3561 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Shorter Papers Who Gets the Job Referral? Evidence from a Social Networks Experiment LoriBeamanNorthwestern U JeremyMagruderU CA, Berkeley 3574 93 We use recruitment into a laboratory experiment in Kolkata, India to analyze how social networks select individuals for jobs. The experiment allows subjects to refer actual network members for casual jobs as experimental subjects under exogenously varied incentive contracts. We provide evidence that some workers, those who are high ability, have useful information about the abilities of members of their social network. However, the experiment also shows that social networks provide incentives to refer less qualified workers, and firms must counterbalance these incentives in order to effectively use existing employees to help overcome their screening problem. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3574 10.1257/aer.102.7.3574 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Shorter Papers Innovation and Foreign Ownership MariaGuadalupeINSEAD, Fontainebleau OlgaKuzminaNew Economic School, Moscow CatherineThomasLondon School of Economics and Political Science 3594 3627 This paper uses a rich panel dataset of Spanish manufacturing firms (1990-2006) and a propensity score reweighting estimator to show that multinational firms acquire the most productive domestic firms, which, on acquisition, conduct more product and process innovation (simultaneously adopting new machines and organizational practices) and adopt foreign technologies, leading to higher productivity. We propose a model of endogenous selection and innovation in heterogeneous firms that explains both the observed selection patterns and the innovation decisions. Further, we show in the data that innovation upon acquisition is associated with the increased market scale provided by the parent firm. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3594 10.1257/aer.102.7.3594 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Shorter Papers The Effect of Evaluation on Teacher Performance Eric S.TaylorStanford U John H.TylerBrown U 3628 51 Teacher performance evaluation has become a dominant theme in school reform efforts. Yet, whether evaluation changes the performance of teachers, the focus of this paper, is unknown. Instead, evaluation has largely been studied as an input to selective dismissal decisions. We study mid-career teachers for whom we observe an objective measure of productivity -- value-added to student achievement -- before, during, and after evaluation. We find teachers are more productive in post-evaluation years, with the largest improvements among teachers performing relatively poorly ex-ante. The results suggest teachers can gain information from evaluation and subsequently develop new skills, increase long-run effort, or both. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3628 10.1257/aer.102.7.3628 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Shorter Papers The Impact of Pollution on Worker Productivity JoshuaGraff ZivinU CA, San Diego MatthewNeidellColumbia U 3652 73 This paper assesses the impact of pollution on worker productivity by relating exogenous daily variations in ozone with productivity of agricultural workers as recorded under piece rate contracts. We find robust evidence that ozone levels well below federal air quality standards have a significant impact on productivity. These results suggest that, in contrast to common characterizations of environmental protection as a tax on producers, environmental protection can also be viewed as an investment in human capital, and thus a tool for promoting economic growth. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3652 10.1257/aer.102.7.3652 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Shorter Papers Self-Fulfilling Risk Panics PhilippeBacchettaU Lausanne CédricTilleGraduate Institute of International and Development Studies, Geneva Ericvan WincoopU VA 3674 3700 Recent crises have seen large spikes in asset price risk. We propose an explanation for such panics based on self-fulfilling shifts in beliefs about risk. A negative link between the current level and the future risk of an asset price leads to a circular relationship between the stochastic process of asset price risk and the price itself. Self-fulfilling shifts in perceived risk can be coordinated around a pure sunspot or around a macro fundamental. In a risk panic, a macro fundamental can be a focal point that affects both the magnitude of the panic and subsequent shifts in perceived risk. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3674 10.1257/aer.102.7.3674 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Shorter Papers Life Insurance and Household Consumption Jay H.HongU Rochester José-VíctorRíos-RullU MN and Federal Reserve Bank of Minneapolis 3701 30 Using life insurance holdings by age, sex, and marital status, we infer how individuals value consumption in different demographic stages. We estimate equivalence scales and bequest motives simultaneously within a fully specified model where agents face US demographics and save and purchase life insurance. Our findings indicate that individuals are very caring for dependents, that economies of scale are large, that children are very costly (or yield very high marginal utility), that wives with children produce lots of home goods, and that females display habits from marriage, while men do not. These findings contrast sharply with standard equivalence scales. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3701 10.1257/aer.102.7.3701 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Shorter Papers Revolving Door Lobbyists JordiBlanes i VidalCEP, London School of Economics and Political Science MirkoDracaU Warwick ChristianFons-RosenU Pompeu Fabra and Barcelona GSE 3731 48 Washington's "revolving door"––the movement from government service into the lobbying industry––is regarded as a major concern for policy-making. We study how ex-government staffers benefit from the personal connections acquired during their public service. Lobbyists with experience in the office of a US Senator suffer a 24 percent drop in generated revenue when that Senator leaves office. The effect is immediate, discontinuous around the exit period, and long-lasting. Consistent with the notion that lobbyists sell access to powerful politicians, the drop in revenue is increasing in the seniority of and committee assignments power held by the exiting politician. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3731 10.1257/aer.102.7.3731 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Shorter Papers The Economic Impacts of Climate Change: Evidence from Agricultural Output and Random Fluctuations in Weather: Comment Anthony C.FisherU CA, Berkeley W. MichaelHanemannU CA, Berkeley Michael J.RobertsNC State U WolframSchlenkerColumbia U 3749 60 In a series of studies employing a variety of approaches, we have found that the potential impact of climate change on US agriculture is likely negative. Deschênes and Greenstone (2007) report dramatically different results based on regressions of agricultural profits and yields on weather variables. The divergence is explained by (1) missing and incorrect weather and climate data in their study; (2) their use of older climate change projections rather than the more recent and less optimistic projections from the Fourth Assessment Report; and (3) difficulties in their profit measure due to the confounding effects of storage. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3749 10.1257/aer.102.7.3749 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Shorter Papers The Economic Impacts of Climate Change: Evidence from Agricultural Output and Random Fluctuations in Weather: Reply OlivierDeschênesU CA, Santa Barbara and IZA Bonn MichaelGreenstoneMIT 3761 73 Fisher et al. (2012)––henceforth, FHRS––have uncovered coding and data errors in our paper, Deschênes and Greenstone (2007), henceforth, DG. We acknowledge and are embarrassed by these mistakes. We are grateful to FHRS for uncovering them. We hope that this Reply will also contribute to advancing the literature on the vital question of the impact of climate change on the US agricultural sector. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3761 10.1257/aer.102.7.3761 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 102 7 December 2012 http://www.aeaweb.org/issue.php?journal=AER&volume=102&issue=7 Shorter Papers Growth Dynamics: The Myth of Economic Recovery: Comment HannesMuellerCSIC, Madrid and Barcelona GSE 3774 77 This comment highlights different ways of coding crisis episodes in Cerra and Saxena (2008) (CS). The comment shows that the coding used for civil war implies a misrepresentation of its impact. A correct coding of civil war reveals that the average civil war leads to a loss in output of 18 percent. This makes civil wars more devastating than all other crisis studied by CS. http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.7.3774 10.1257/aer.102.7.3774