American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 4 September 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=4&issue_date=September 2003 Journal Article The Misallocation of Housing Under Rent Control Edward L.Glaeser Erzo F. P.Luttmer 1027 1046 The standard analysis of price controls assumes that goods are efficiently allocated, even when there are shortages. But if shortages mean that goods are randomly allocated across the consumers that want them, the welfare costs from misallocation may be greater than the undersupply costs. We develop a framework to empirically test for misallocation. The methodology compares consumption patterns for demographic subgroups in rent-controlled and free-market places. We find that in New York City, which is rent-controlled, an economically and statistically significant fraction of apartments appears to be misallocated across demographic subgroups. (JEL C25, D12, D61, R20) http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=4&article=1&issue_date=September 2003 10.1257/000282803769206188 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 4 September 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=4&issue_date=September 2003 Journal Article Social Security Investment in Equities PeterDiamond JohnGeanakoplos 1047 1074 This paper explores the general-equilibrium impact of social security portfolio diversification into private securities, either through the trust fund or private accounts. The analysis depends critically on heterogeneities in saving, production, assets, and taxes. Limited diversification weakly increases interest rates, reduces the expected return on short-term investment (and the equity premium), decreases safe investment, increases risky investment, and increases a suitably weighted social welfare function. However, the effects on aggregate investment, long-term capital values, and the utility of young savers hinges on assumptions about technology. Aggregate investment and long-term asset values can move in opposite directions. (JEL H55) http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=4&article=2&issue_date=September 2003 10.1257/000282803769206197 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 4 September 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=4&issue_date=September 2003 Journal Article On the Evolution of the Firm Size Distribution: Facts and Theory Luís M BCabral JoséMata 1075 1090 Using a comprehensive data set of Portuguese manufacturing firms, we show that the firm size distribution is significantly right-skewed, evolving over time toward a lognormal distribution. We also show that selection accounts for very little of this evolution. Instead, we propose a simple theory based on financing constraints. A calibrated version of our model does a good job at explaining the evolution of the firm size distribution. (JEL L11) http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=4&article=3&issue_date=September 2003 10.1257/000282803769206205 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 4 September 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=4&issue_date=September 2003 Journal Article Inequality and Growth: Why Differential Fertility Matters Davidde la Croix MatthiasDoepke 1091 1113 We develop a new theoretical link between inequality and growth. In our model, fertility and education decisions are interdependent. Poor parents decide to have many children and invest little in education. A mean-preserving spread in the income distribution increases the fertility differential between the rich and the poor, which implies that more weight gets placed on families who provide little education. Consequently, an increase in inequality lowers average education and, therefore, growth. We find that this fertility-differential effect accounts for most of the empirical relationship between inequality and growth. (JEL J13, O40) http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=4&article=4&issue_date=September 2003 10.1257/000282803769206214 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 4 September 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=4&issue_date=September 2003 Journal Article Interpreting Aggregate Wage Growth: The Role of Labor Market Participation RichardBlundell HowardReed Thomas M.Stoker 1114 1131 A new and easily implementable framework for the empirical analysis of the relationship between aggregate and individual wages is developed. Aggregate real wages are shown to contain three important bias terms: one associated with the dispersion of individual wages, a second deriving from compositional changes in the (selected) sample of workers, and a third reflecting the distribution of working hours. Their importance for interpreting the path of aggregate wages and of the returns to education for recent experience in Britain is highlighted. A close correspondence between the estimated biases and the patterns of differences shown by aggregate wages is established. (JEL C34, E24, J31) http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=4&article=5&issue_date=September 2003 10.1257/000282803769206223 http://www.e-aer.org/data/blundell_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 4 September 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=4&issue_date=September 2003 Journal Article Can Mandated Political Representation Increase Policy Influence for Disadvantaged Minorities? Theory and Evidence from India RohiniPande 1132 1151 A basic premise of representative democracy is that all those subject to policy should have a voice in its making. However, policies enacted by electorally accountable governments often fail to reflect the interests of disadvantaged minorities. This paper exploits the institutional features of political reservation, as practiced in Indian states, to examine the role of mandated political representation in providing disadvantaged groups influence over policy-making. I find that political reservation has increased transfers to groups which benefit from the mandate. This finding also suggests that complete policy commitment may be absent in democracies, as is found in this case. (JEL D72, D78, H11, H50) http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=4&article=6&issue_date=September 2003 10.1257/000282803769206232 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 4 September 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=4&issue_date=September 2003 Journal Article Are Mergers Beneficial to Consumers? Evidence from the Market for Bank Deposits DarioFocarelli FabioPanetta 1152 1172 The general conclusion of the empirical literature is that in-market consolidation generates adverse price changes, harming consumers. Previous studies, however, look only at the short-run pricing impact of consolidation, ignoring effects that take longer to materialize. Using a database that includes detailed information on the deposit rates of individual banks in local markets for different categories of depositors, we investigate the long-run price effects of mergers. We find strong evidence that, although consolidation does generate adverse price changes, these are temporary. In the long run, efficiency gains dominate over the market power effect, leading to more favorable prices for consumers. (JEL G21, G34, L1) http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=4&article=7&issue_date=September 2003 10.1257/000282803769206241 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 4 September 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=4&issue_date=September 2003 Journal Article To Float or to Fix: Evidence on the Impact of Exchange Rate Regimes on Growth EduardoLevy-Yeyati FedericoSturzenegger 1173 1193 We study the relationship between exchange rate regimes and economic growth for a sample of 183 countries over the post-Bretton Woods period, using a new de facto classification of regimes based on the actual behavior of the relevant macroeconomic variables. In contrast with previous studies, we find that, for developing countries, less flexible exchange rate regimes are associated with slower growth, as well as with greater output volatility. For industrial countries, regimes do not appear to have any significant impact on growth. The results are robust to endogeneity corrections and a number of alternative specifications borrowed from the growth literature. (JEL F31, F41) http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=4&article=8&issue_date=September 2003 10.1257/000282803769206250 http://www.e-aer.org/data/levy_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 4 September 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=4&issue_date=September 2003 Journal Article Network Effects, Congestion Externalities, and Air Traffic Delays: Or Why Not All Delays Are Evil ChristopherMayer ToddSinai 1194 1215 We examine two factors that explain air traffic congestion: network benefits due to hubbing and congestion externalities. While both factors impact congestion, we find that the hubbing effect dominates empirically. Hub carriers incur most of the additional travel time from hubbing, primarily because they cluster their flights in short time spans to provide passengers as many potential connections as possible with a minimum of waiting time. Non-hub flights at the same hub airports operate with minimal additional travel time. These results suggest that an optimal congestion tax might have a relatively small impact on flight patterns at hub airports. (JEL L2, L5, L9, D6) http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=4&article=9&issue_date=September 2003 10.1257/000282803769206269 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 4 September 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=4&issue_date=September 2003 Journal Article International Business Cycles: World, Region, and Country-Specific Factors M. AyhanKose ChristopherOtrok Charles H.Whiteman 1216 1239 The paper investigates the common dynamic properties of business-cycle fluctuations across countries, regions, and the world. We employ a Bayesian dynamic latent factor model to estimate common components in macroeconomic aggregates (output, consumption, and investment) in a 60-country sample covering seven regions of the world. The results indicate that a common world factor is an important source of volatility for aggregates in most countries, providing evidence for a world business cycle. We find that region-specific factors play only a minor role in explaining fluctuations in economic activity. We also document similarities and differences across regions, countries, and aggregates. (JEL F41, E32, C11, C32) http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=4&article=10&issue_date=September 2003 10.1257/000282803769206278 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 4 September 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=4&issue_date=September 2003 Journal Article Technological Change and the Stock Market JohnLaitner DmitriyStolyarov 1240 1267 Tobin's average q has usually been well above 1, but fell below 1 during 1974-1984. Our model explains this pattern and reconciles it with unchanging aggregate investment. The stock market value in the numerator of q reflects ownership of physical capital and knowledge, but the denominator measures just physical capital. Therefore, q is usually above 1. Periodic arrivals of important new technologies, such as the microprocessor in the 1970's, suddenly render old knowledge and capital obsolete, causing the stock market to drop. National accounts measures of physical capital miss this rapid obsolescence. Then q appears to drop below 1. (JEL E44, O3, O41) http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=4&article=11&issue_date=September 2003 10.1257/000282803769206287 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 4 September 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=4&issue_date=September 2003 Journal Article Plants and Productivity in International Trade Andrew B.Bernard JonathanEaton J. BradfordJensen SamuelKortum 1268 1290 We reconcile trade theory with plant-level export behavior, extending the Ricardian model to accommodate many countries, geographic barriers, and imperfect competition. Our model captures qualitatively basic facts about U.S. plants: (i) productivity dispersion, (ii) higher productivity among exporters, (iii) the small fraction who export, (iv) the small fraction earned from exports among exporting plants, and (v) the size advantage of exporters. Fitting the model to bilateral trade among the United States and 46 major trade partners, we examine the impact of globalization and dollar appreciation on productivity, plant entry and exit, and labor turnover in U.S. manufacturing. (JEL F11, F17, O33) http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=4&article=12&issue_date=September 2003 10.1257/000282803769206296 http://www.aeaweb.org/aer/contents/appendices/bernard_data.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 4 September 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=4&issue_date=September 2003 Journal Article The Economic Significance of National Border Effects Carolyn L.Evans 1291 1312 To address the economic significance of national border effects, this paper provides evidence on two fundamental questions: (1) Do large border effects arise because of high perceived-price wedges between foreign and domestic products, or because imports and domestic goods are very close substitutes?; and (2) If price wedges are important, do they reflect distortionary barriers to trade or do they arise from nondistortionary factors, such as differences in transactions costs or product characteristics? I conclude that, while border effects may imply barriers, welfare costs, and a role for policy, distortions are probably not as substantial as initial border results suggested. (JEL F1) http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=4&article=13&issue_date=September 2003 10.1257/000282803769206304 http://www.e-aer.org/data/evans_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 4 September 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=4&issue_date=September 2003 Journal Article Is the Threat of Reemployment Services More Effective Than the Services Themselves? Evidence from Random Assignment in the UI System Dan A.Black Jeffrey A.Smith Mark C.Berger Brett J.Noel 1313 1327 We examine the effect of the Worker Profiling and Reemployment Services system. This program "profiles" Unemployment Insurance (UI) claimants to determine their probability of benefit exhaustion and then provides mandatory employment and training services to claimants with high predicted probabilities. Using a unique experimental design, we estimate that the program reduces mean weeks of UI benefit receipt by about 2.2 weeks, reduces mean UI benefits received by about $143, and increases subsequent earnings by over $1,050. Most of the effect results from a sharp increase in early UI exits in the treatment group relative to the control group. (JEL J650) http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=4&article=14&issue_date=September 2003 10.1257/000282803769206313 http://www.e-aer.org/data/black_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 4 September 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=4&issue_date=September 2003 Journal Article Information, Decisions, and Productivity: On-Board Computers and Capacity Utilization in Trucking Thomas N.Hubbard 1328 1353 Productivity reflects not only how efficiently inputs are transformed into outputs, but also how well information is applied to resource allocation decisions. This paper examines how information technology has affected capacity utilization in the trucking industry. Estimates for 1997 indicate that advanced on-board computers (OBCs) have increased capacity utilization among adopting trucks by 13 percent. These increases are higher than for 1992, suggesting lags in the returns to adoption, and are highly skewed across hauls. The 1997 estimates imply that OBCs have enabled 3-percent higher capacity utilization in the industry, which translates to billions of dollars of annual benefits. (JEL D24, L92, O33, O47) http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=4&article=15&issue_date=September 2003 10.1257/000282803769206322 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 4 September 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=4&issue_date=September 2003 Journal Article Upward Bias in the Estimated Returns to Education: Evidence from South Africa ThomasHertz 1354 1368 http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=4&article=16&issue_date=September 2003 10.1257/000282803769206331 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 4 September 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=4&issue_date=September 2003 Journal Article Inflation Persistence and Relative Contracting SteinarHolden John C.Driscoll 1369 1372 http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=4&article=17&issue_date=September 2003 10.1257/000282803769206340 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 4 September 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=4&issue_date=September 2003 Journal Article The Importance of Group Coverage: How Tax Policy Shaped U.S. Health Insurance Melissa A.Thomasson 1373 1384 http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=4&article=18&issue_date=September 2003 10.1257/000282803769206359 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 4 September 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=4&issue_date=September 2003 Journal Article Why Dowries? MaristellaBotticini AloysiusSiow 1385 1398 http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=4&article=19&issue_date=September 2003 10.1257/000282803769206368 http://www.e-aer.org/data/botticini_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 4 September 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=4&issue_date=September 2003 Journal Article The Most Technologically Progressive Decade of the Century Alexander J.Field 1399 1413 http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=4&article=20&issue_date=September 2003 10.1257/000282803769206377 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 4 September 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=4&issue_date=September 2003 Journal Article Wage Adjustment Under Low Inflation: Evidence from U.S. History ChristopherHanes John A.James 1414 1424 http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=4&article=21&issue_date=September 2003 10.1257/000282803769206386 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 4 September 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=4&issue_date=September 2003 Journal Article Competition, Risk, and Managerial Incentives MichaelRaith 1425 1436 http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=4&article=22&issue_date=September 2003 10.1257/000282803769206395 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 4 September 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=4&issue_date=September 2003 Journal Article Elephants: Comment Erwin H.Bulte Richard D.Horan Jason F.Shogren 1437 1445 http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=4&article=23&issue_date=September 2003 10.1257/000282803769206403 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 93 4 September 2003 http://www.aeaweb.org/articles/issue_detail.php?journal=AER&volume=93&issue=4&issue_date=September 2003 Journal Article Elephants: Reply MichaelKremer CharlesMorcom 1446 1448 http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=93&issue=4&article=24&issue_date=September 2003 10.1257/000282803769206412