American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 103 1 February 2013 http://www.aeaweb.org/issue.php?journal=AER&volume=103&issue=1 Articles The 'Out of Africa' Hypothesis, Human Genetic Diversity, and Comparative Economic Development QuamrulAshrafWilliams College OdedGalorBrown U 1 46 This research advances and empirically establishes the hypothesis that, in the course of the prehistoric exodus of Homo sapiens out of Africa, variation in migratory distance to various settlements across the globe affected genetic diversity and has had a persistent hump-shaped effect on comparative economic development, reflecting the trade-off between the beneficial and the detrimental effects of diversity on productivity. While the low diversity of Native American populations and the high diversity of African populations have been detrimental for the development of these regions, the intermediate levels of diversity associated with European and Asian populations have been conducive for development. (JEL N10, N30, N50, O10, O50, Z10) http://www.aeaweb.org/articles.php?doi=10.1257/aer.103.1.1 10.1257/aer.103.1.1 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 103 1 February 2013 http://www.aeaweb.org/issue.php?journal=AER&volume=103&issue=1 Articles Pandering to Persuade Yeon-KooCheColumbia U and YERI, Yonsei U WouterDesseinColumbia U NavinKartikColumbia U 47 79 An agent advises a principal on selecting one of multiple projects or an outside option. The agent is privately informed about the projects' benefits and shares the principal's preferences except for not internalizing her value from the outside option. We show that for moderate outside option values, strategic communication is characterized by pandering: the agent biases his recommendation toward "conditionally better-looking" projects, even when both parties would be better off with some other project. A project that has lower expected value can be conditionally better-looking. We develop comparative statics and implications of pandering. Pandering is also induced by an optimal mechanism without transfers. (JEL D23, D82) http://www.aeaweb.org/articles.php?doi=10.1257/aer.103.1.47 10.1257/aer.103.1.47 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 103 1 February 2013 http://www.aeaweb.org/issue.php?journal=AER&volume=103&issue=1 Articles School Admissions Reform in Chicago and England: Comparing Mechanisms by Their Vulnerability to Manipulation Parag A.PathakMIT TayfunSönmezBoston College 80 106 In Fall 2009, Chicago authorities abandoned a school assignment mechanism midstream, citing concerns about its vulnerability to manipulation. Nonetheless, they asked thousands of applicants to re-rank schools in a new mechanism that is also manipulable. This paper introduces a method to compare mechanisms by their vulnerability to manipulation. Our methodology formalizes how the old mechanism is at least as manipulable as any other plausible mechanism, including the new one. A number of similar transitions took place in England after the widely popular Boston mechanism was ruled illegal in 2007. Our approach provides support for these and other recent policy changes. (JEL C78, D82, H75, I21, I28) http://www.aeaweb.org/articles.php?doi=10.1257/aer.103.1.80 10.1257/aer.103.1.80 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 103 1 February 2013 http://www.aeaweb.org/issue.php?journal=AER&volume=103&issue=1 Articles Coercive Contract Enforcement: Law and the Labor Market in Nineteenth Century Industrial Britain SureshNaiduColumbia U NoamYuchtmanU CA, Berkeley 107 44 British Master and Servant law made employee contract breach a criminal offense until 1875. We develop a contracting model generating equilibrium contract breach and prosecutions, then exploit exogenous changes in output prices to examine the effects of labor demand shocks on prosecutions. Positive shocks in the textile, iron, and coal industries increased prosecutions. Following the abolition of criminal sanctions, wages differentially rose in counties that had experienced more prosecutions, and wages responded more to labor demand shocks. Coercive contract enforcement was applied in industrial Britain; restricted mobility allowed workers to commit to risk-sharing contracts with lower, but less volatile, wages. (JEL J31, J41, K12, K31, N33, N43) http://www.aeaweb.org/articles.php?doi=10.1257/aer.103.1.107 10.1257/aer.103.1.107 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 103 1 February 2013 http://www.aeaweb.org/issue.php?journal=AER&volume=103&issue=1 Articles Price Discrimination and Bargaining: Empirical Evidence from Medical Devices MatthewGrennanU Toronto 145 77 Many important issues in business-to-business markets involve price discrimination and negotiated prices, situations where theoretical predictions are ambiguous. This paper uses new panel data on buyer-supplier transfers and a structural model to empirically analyze bargaining and price discrimination in a medical device market. While many phenomena that restrict different prices to different buyers are suggested as ways to decrease hospital costs (e.g., mergers, group purchasing organizations, and transparency), I find that: (i) more uniform pricing works against hospitals by softening competition; and (ii) results depend ultimately on a previously unexplored bargaining effect. (JEL C78, L13, L14, L64) http://www.aeaweb.org/articles.php?doi=10.1257/aer.103.1.145 10.1257/aer.103.1.145 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 103 1 February 2013 http://www.aeaweb.org/issue.php?journal=AER&volume=103&issue=1 Articles Selection on Moral Hazard in Health Insurance LiranEinavStanford U AmyFinkelsteinMIT Stephen P.RyanU TX PaulSchrimpfU British Columbia Mark R.CullenStanford U 178 219 We use employee-level panel data from a single firm to explore the possibility that individuals may select insurance coverage in part based on their anticipated behavioral ("moral hazard") response to insurance, a phenomenon we label "selection on moral hazard." Using a model of plan choice and medical utilization, we present evidence of heterogenous moral hazard as well as selection on it, and explore some of its implications. For example, we show that, at least in our context, abstracting from selection on moral hazard could lead to overestimates of the spending reduction associated with introducing a high-deductible health insurance option. (JEL D82, G22, I13, J32) http://www.aeaweb.org/articles.php?doi=10.1257/aer.103.1.178 10.1257/aer.103.1.178 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 103 1 February 2013 http://www.aeaweb.org/issue.php?journal=AER&volume=103&issue=1 Articles Are Consumers Myopic? Evidence from New and Used Car Purchases Meghan R.BusseNorthwestern U Christopher R.KnittelMIT FlorianZettelmeyerNorthwestern U 220 56 We investigate whether car buyers are myopic about future fuel costs. We estimate the effect of gasoline prices on short-run equilibrium prices of cars of different fuel economies. We then compare the implied changes in willingness-to-pay to the associated changes in expected future gasoline costs for cars of different fuel economies in order to calculate implicit discount rates. Using different assumptions about annual mileage, survival rates, and demand elasticities, we calculate a range of implicit discount rates similar to the range of interest rates paid by car buyers who borrow. We interpret this as showing little evidence of consumer myopia. (JEL D12, H25, L11, L62, L71, L81) http://www.aeaweb.org/articles.php?doi=10.1257/aer.103.1.220 10.1257/aer.103.1.220 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 103 1 February 2013 http://www.aeaweb.org/issue.php?journal=AER&volume=103&issue=1 Articles The Impact of Medical Liability Standards on Regional Variations in Physician Behavior: Evidence from the Adoption of National-Standard Rules MichaelFrakesCornell U 257 76 I explore the association between regional variations in physician behavior and the geographical scope of malpractice standards of care. I estimate a 30-50 percent reduction in the gap between state and national utilization rates of various treatments and diagnostic procedures following the adoption of a rule requiring physicians to follow national, as opposed to local, standards. These findings suggest that standardization in malpractice law may lead to greater standardization in practices and, more generally, that physicians may indeed adhere to specific liability standards. In connection with the estimated convergence in practices, I observe no associated changes in patient health. (JEL I11, I18, J44, K13) http://www.aeaweb.org/articles.php?doi=10.1257/aer.103.1.257 10.1257/aer.103.1.257 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 103 1 February 2013 http://www.aeaweb.org/issue.php?journal=AER&volume=103&issue=1 Articles Innovation and Institutional Ownership PhilippeAghionHarvard U JohnVan ReenenCEP, London School of Economics and Political Science LuigiZingalesU Chicago 277 304 We find that greater institutional ownership is associated with more innovation. To explore the mechanism, we contrast the "lazy manager" hypothesis with a model where institutional owners increase innovation incentives through reducing career risks. The evidence favors career concerns. First, we find complementarity between institutional ownership and product market competition, whereas the lazy manager hypothesis predicts substitution. Second, CEOs are less likely to be fired in the face of profit downturns when institutional ownership is higher. Finally, using instrumental variables, policy changes, and disaggregating by type of institutional owner, we argue that the effect of institutions on innovation is causal. (JEL G23, G32, L25, M10, O31, O34) http://www.aeaweb.org/articles.php?doi=10.1257/aer.103.1.277 10.1257/aer.103.1.277 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 103 1 February 2013 http://www.aeaweb.org/issue.php?journal=AER&volume=103&issue=1 Articles Cross-Country Differences in Productivity: The Role of Allocation and Selection EricBartelsmanFree U Amsterdam and Tinbergen Institute JohnHaltiwangerU MD and IZA, Bonn StefanoScarpettaOECD and IZA, Bonn 305 34 This paper investigates the effect of idiosyncratic (firm-level) policy distortions on aggregate outcomes. Exploiting harmonized firm‑level data for a number of countries, we show that there is substantial and systematic cross‑country variation in the within-industry covariance between size and productivity. We develop a model in which heterogeneous firms face adjustment frictions (overhead labor and quasi-fixed capital) and distortions. The model can be readily calibrated so that variations in the distribution of distortions allow matching the observed cross-country moments. We show that the differences in the distortions that account for the size-productivity covariance imply substantial differences in aggregate performance. (JEL D24, L25, O47) http://www.aeaweb.org/articles.php?doi=10.1257/aer.103.1.305 10.1257/aer.103.1.305 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 103 1 February 2013 http://www.aeaweb.org/issue.php?journal=AER&volume=103&issue=1 Articles Making Sense of Nonbinding Retail-Price Recommendations StefanBuehlerInstitute of Economics, U St Gallen Dennis L.GäertnerU Bonn 335 59 We model retail-price recommendations (RPRs) as a communication device in vertical supply relations with private manufacturer information on production costs and consumer demand. With static trade, RPRs are irrelevant, and the equilibrium outcome is inefficient. With repeated trade, RPRs can become part of a relational contract, communicating private information from manufacturer to retailer that is indispensable for maximizing joint surplus. We show that this contract is self-enforcing if the retailer's profit is independent of production costs and punishment strategies are chosen appropriately. The predictions of our analysis are consistent with the available empirical evidence. (JEL D21, D24, L11, L14, L22, L60, L81) http://www.aeaweb.org/articles.php?doi=10.1257/aer.103.1.335 10.1257/aer.103.1.335 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 103 1 February 2013 http://www.aeaweb.org/issue.php?journal=AER&volume=103&issue=1 Articles Entropy and the Value of Information for Investors AntonioCabralesU Carlos III de Madrid OlivierGossnerParis School of Economics and London School of Economics and Political Science RobertoSerranoBrown U 360 77 Consider an investor who fears ruin when facing investments that satisfy no-arbitrage. Before investing he can purchase information about the state of nature as an information structure. Given his prior, information structure α investment dominates information structure β if, whenever he is willing to buy β at some price, he is also willing to buy α at that price. We show that this informativeness ordering is complete and is represented by the decrease in entropy of his beliefs, regardless of his preferences, initial wealth, or investment problem. We also show that no prior-independent informativeness ordering based on similar premises exists. (JEL D14, D81, D83, G11) http://www.aeaweb.org/articles.php?doi=10.1257/aer.103.1.360 10.1257/aer.103.1.360 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 103 1 February 2013 http://www.aeaweb.org/issue.php?journal=AER&volume=103&issue=1 Articles Technological Diversification MiklósKorenCentral European U, Budapest SilvanaTenreyroCEP, London School or Economics and Political Science 378 414 Economies at early stages of development are frequently shaken by large changes in growth rates, whereas advanced economies tend to experience relatively stable growth rates. To explain this pattern, we propose a model of technological diversification. Production makes use of input-varieties that are subject to imperfectly correlated shocks. Endogenous variety adoption by firms raises average productivity and provides diversification benefits against variety-specific shocks. Firm-level and aggregate volatility thus decline as a by-product of the development process. We quantitatively assess the model's predictions and find that it can generate patterns of volatility and development consistent with the data. (JEL D21, D24, E23, O33, O47) http://www.aeaweb.org/articles.php?doi=10.1257/aer.103.1.378 10.1257/aer.103.1.378 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 103 1 February 2013 http://www.aeaweb.org/issue.php?journal=AER&volume=103&issue=1 Articles Dictating the Risk: Experimental Evidence on Giving in Risky Environments J. MichelleBrockEuropean Bank of Reconstruction and Development AndreasLangeU Hamburg Erkut Y.OzbayU MD 415 37 We study if and how social preferences extend to risky environments. We provide experimental evidence from different versions of dictator games with risky outcomes and establish that preferences that are exclusively based on ex post or on ex ante comparisons cannot generate the observed behavioral patterns. The more money decision-makers transfer in the standard dictator game, the more likely they are to equalize payoff chances under risk. Risk to the recipient does, however, generally decrease the transferred amount. Ultimately, a utility function with a combination of ex post and ex ante fairness concerns may best describe behavior. (JEL C72, D63, D64, D81) http://www.aeaweb.org/articles.php?doi=10.1257/aer.103.1.415 10.1257/aer.103.1.415 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 103 1 February 2013 http://www.aeaweb.org/issue.php?journal=AER&volume=103&issue=1 Articles Children's Resources in Collective Households: Identification, Estimation, and an Application to Child Poverty in Malawi Geoffrey R.DunbarSimon Fraser U ArthurLewbelBoston College KrishnaPendakurSimon Fraser U 438 71 The share of household resources devoted to children is hard to identify because consumption is measured at the household level and goods can be shared. Using semiparametric restrictions on individual preferences within a collective model, we identify how total household resources are divided up among household members by observing how each family member's expenditures on a single private good like clothing vary with income and family size. Using data from Malawi we show how resources devoted to wives and children vary by family size and structure, and we find that standard poverty indices understate the incidence of child poverty. (JEL I31, I32, J12, J13, O12, O15) http://www.aeaweb.org/articles.php?doi=10.1257/aer.103.1.438 10.1257/aer.103.1.438 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 103 1 February 2013 http://www.aeaweb.org/issue.php?journal=AER&volume=103&issue=1 Shorter Papers Cultural Change as Learning: The Evolution of Female Labor Force Participation over a Century RaquelFernándezNYU and IZA, Bonn 472 500 This paper develops a learning model of cultural change to investigate why women's labor force participation (LFP) and attitudes toward women’s work both changed dramatically. In the model, women's beliefs about the long-run payoff from working evolve endogenously via an intergenerational learning process. This process generically generates the data's S-shaped LFP curve and introduces a novel role for wage changes via their effect on the speed of intergenerational learning. The calibrated model does a good job of replicating the evolution of female LFP in the United States over the last 120 years and finds that the new role for wages was quantitatively significant. http://www.aeaweb.org/articles.php?doi=10.1257/aer.103.1.472 10.1257/aer.103.1.472 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 103 1 February 2013 http://www.aeaweb.org/issue.php?journal=AER&volume=103&issue=1 Shorter Papers Submission Fees and Response Times in Academic Publishing ChristopherCottonU Miami 501 09 Both submission fees and response times enable editors to maintain an acceptable refereeing burden by discouraging the submission of articles with low probability of acceptance. When authors differ in their ability or willingness to pay submission fees and deal with delays, journal quality is maximized under a combination of moderate fees and moderate delays. http://www.aeaweb.org/articles.php?doi=10.1257/aer.103.1.501 10.1257/aer.103.1.501 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 103 1 February 2013 http://www.aeaweb.org/issue.php?journal=AER&volume=103&issue=1 Shorter Papers Impatience and Uncertainty: Experimental Decisions Predict Adolescents' Field Behavior MatthiasSutterU Innsbruck and U Gothenburg Martin G.KocherU Munich and U Gothenburg DanielaGlätzle-RüetzlerU Innsbruck Stefan T.TrautmannU Tilburg 510 31 We study risk attitudes, ambiguity attitudes, and time preferences of 661 children and adolescents, aged ten to eighteen years, in an incentivized experiment and relate experimental choices to field behavior. Experimental measures of impatience are found to be significant predictors of health-related field behavior, saving decisions, and conduct at school. In particular, more impatient children and adolescents are more likely to spend money on alcohol and cigarettes, have a higher body mass index, are less likely to save money, and show worse conduct at school. Experimental measures for risk and ambiguity attitudes are only weak predictors of field behavior. http://www.aeaweb.org/articles.php?doi=10.1257/aer.103.1.510 10.1257/aer.103.1.510 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 103 1 February 2013 http://www.aeaweb.org/issue.php?journal=AER&volume=103&issue=1 Shorter Papers Preferences for Truthfulness: Heterogeneity among and within Individuals RajnaGibsonSwiss Finance Institute and U Geneva CarmenTannerU Zurich Alexander F.WagnerU Zurich and Harvard U 532 48 We conduct an experiment assessing the extent to which people trade off the economic costs of truthfulness against the intrinsic costs of lying. The results allow us to reject a type-based model. People's preferences for truthfulness do not identify them as only either "economic types" (who care only about consequences) or "ethical types" (who care only about process). Instead, we find that preferences for truthfulness are heterogeneous among individuals. Moreover, when examining possible sources of intrinsic costs of lying and their interplay with economic costs of truthfulness, we find that preferences for truthfulness are also heterogeneous within individuals. http://www.aeaweb.org/articles.php?doi=10.1257/aer.103.1.532 10.1257/aer.103.1.532 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 103 1 February 2013 http://www.aeaweb.org/issue.php?journal=AER&volume=103&issue=1 Shorter Papers Fairness and Redistribution: Comment RafaelDi TellaHarvard U JuanDubraU Montevideo 549 53 We provide an example that shows that in the Alesina and Angeletos (2005) model one can obtain multiplicity even if luck plays no role in the economy. Thus, it is not critical that the noise to signal ratio be increasing in taxes, or that desired taxes are increasing in the noise to signal ratio. http://www.aeaweb.org/articles.php?doi=10.1257/aer.103.1.549 10.1257/aer.103.1.549 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 103 1 February 2013 http://www.aeaweb.org/issue.php?journal=AER&volume=103&issue=1 Shorter Papers Fairness and Redistribution: Reply AlbertoAlesinaHarvard U and IGIER George-MariosAngeletosMIT GuidoCozziU St Gallen 554 61 This paper responds to the comment of Di Tella and Dubra (2013). We first clarify that the model of Alesina and Angeletos (2005) admits two distinct types of multiplicity: one that is at the core of their contribution, and a separate one that is at work in Di Tella and Dubra's example. We then proceed to show how Alesina and Angeletos's results are robust to alternative specifications of the voting mechanism. http://www.aeaweb.org/articles.php?doi=10.1257/aer.103.1.554 10.1257/aer.103.1.554 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 103 1 February 2013 http://www.aeaweb.org/issue.php?journal=AER&volume=103&issue=1 Journal Article Front Matter i vi http://www.aeaweb.org/articles.php?doi=10.1257/aer.103.1.i 10.1257/aer.103.1.i