American Economic Association Nashville, Tennessee 0002-8282 American Economic Review 90 1 March 2000 114 Population, Food, and Knowledge D. GaleJohnson http://www.aeaweb.org/aer/contents/mar2000.html American Economic Association Nashville, Tennessee 0002-8282 American Economic Review 90 1 March 2000 1529 Optimal Adoption of Complementary Technologies BoyanJovanovicDmitriyStolyarov When a production process requires two extremely complementary inputs, conventional wisdom holds that a firm would always upgrade them simultaneously. We show, however, that if upgrading each input involves a fixed cost, the firm may upgrade them at different dates, "asynchronously." This insight helps us understand why productivity rises with the age of a plant, why investment in structures is more spiked than equipment investment, and why plants have spare capacity. The bigger point of the paper is that complementarity does not necessarily imply comovement--not even for a single decision maker. http://www.aeaweb.org/aer/contents/mar2000.html American Economic Association Nashville, Tennessee 0002-8282 American Economic Review 90 1 March 2000 3045 Collateral Damage: Effects of the Japanese Bank Crisis on Real Activity in the United States JoePeekEric S.Rosengren The Japanese banking crisis provides a natural experiment to test whether a loan supply shock can affect real economic activity. Because the shock was external to U.S. credit markets, yet connected through the Japanese bank penetration of U.S. markets, this event allows us to identify an exogenous loan supply shock and ultimately link that shock to construction activity in U.S. commercial real estate markets. We exploit the variation across geographically distinct commercial real estate markets to establish conclusively that loan supply shocks emanating from Japan had real effects on economic activity in the United States. http://www.aeaweb.org/aer/contents/mar2000.html American Economic Association Nashville, Tennessee 0002-8282 American Economic Review 90 1 March 2000 4672 Endogenous Inequality in Integrated Labor Markets with Two-Sided Search George J.MailathLarrySamuelsonAvnerShaked We consider a market with "red" and "green" workers, where labels are payoff irrelevant. Workers may acquire skills. Skilled workers search for vacancies, while firms search for workers. A unique symmetric equilibrium exists in which color is irrelevant. There are also asymmetric equilibria in which firms search only for green workers, more green than red workers acquire skills, skilled green workers receive higher wages, and the unemployment rate is higher among skilled red workers. Discrimination between ex ante identical individuals arises in equilibrium, and yet firms have perfect information about their workers, and strictly prefer to hire minority workers. http://www.aeaweb.org/aer/contents/mar2000.html American Economic Association Nashville, Tennessee 0002-8282 American Economic Review 90 1 March 2000 7395 Labor-Market Integration, Investment in Risky Human Capital, and Fiscal Competition David E.Wildasin This paper presents a general-equilibrium model where human capital investment increases specialization and exposes skilled workers to region-specific earnings risk Interjurisdictional mobility of skilled labor mitigates these risks; state-contingent migration of skilled labor also improves efficiency. With perfect capital markets, labor-market integration raises welfare and reduces ex post earnings inequality. If instead human capital investment can only be financed through local taxes, labor-market integration leads to interjurisdictional fiscal competition, shifting the burden of taxation to low-skilled immobile workers. Decentralized public provision of human capital investment creates earnings inequalities and is inefficient. http://www.aeaweb.org/aer/contents/mar2000.html American Economic Association Nashville, Tennessee 0002-8282 American Economic Review 90 1 March 2000 96129 Unequal Societies: Income Distribution and the Social Contract RolandBenabou This paper develops a theory of inequality and the social contract aiming to explain how countries with similar economic and political "fundamentals" can sustain such different systems of social insurance, fiscal redistribution, and education finance as those, of the United States and Western Europe. With imperfect credit and insurance markets some redistributive policies can improve ex ante welfare, and this implies that their political support tends to decrease with inequality. Conversely, with credit constraints, lower redistribution translates into more persistent inequality; hence the potential for multiple steady states, with mutually reinforcing high inequality and low redistribution, or vice versa. http://www.aeaweb.org/aer/contents/mar2000.html American Economic Association Nashville, Tennessee 0002-8282 American Economic Review 90 1 March 2000 130146 Mobility, Targeting, and Private-School Vouchers Thomas J.Nechyba This paper uses general-equilibrium simulations to explore the role of residential mobility in shaping the impact of different private-school voucher policies. The simulations are derived from a three-district model of low-, middle-, and high-income school districts (calibrated to New York data) with housing stocks that vary within and across districts. In this model, it is demonstrated that school-district targeted vouchers are similar in their impact to non targeted vouchers but vastly different from vouchers targeted to low-income households. Furthermore, strong migration effects are shown to significantly improve the likely equity consequences of voucher programs. http://www.aeaweb.org/aer/contents/mar2000.html American Economic Association Nashville, Tennessee 0002-8282 American Economic Review 90 1 March 2000 147165 Liberalization, Moral Hazard in Banking, and Prudential Regulation: Are Capital Requirements Enough? Thomas F.HellmanKevin C.MurdockJoseph E.Stiglitz In a dynamic model of moral hazard, competition can undermine prudent bank behavior. While capital-requirement regulation can induce prudent behavior, the policy yields Pareto-inefficient outcomes. Capital requirements reduce gambling incentives by putting bank equity at risk. However, they also have a perverse effect of harming banks' franchise values, thus encouraging gambling. Pareto-efficient outcomes can be achieved by adding deposit-rate controls as a regulatory instrument, since they facilitate prudent investment by increasing franchise values. Even if deposit-rate ceilings are not binding on the equilibrium path, they may be useful in deterring gambling off the equilibrium path. http://www.aeaweb.org/aer/contents/mar2000.html American Economic Association Nashville, Tennessee 0002-8282 American Economic Review 90 1 March 2000 166193 ERC: A Theory of Equity, Reciprocity, and Competition Gary E.BoltonAxelOckenfels We demonstrate that a simple model, constructed on the premise that people are motivated by both their pecuniary payoff and their relative payoff standing, organizes a large and seemingly disparate set of laboratory observations as one consistent pattern. The model is incomplete information but nevertheless posed entirely in terms of directly observable variables. The model explains observations from games where equity is thought to be a factor, such as ultimatum and dictator, games where reciprocity is thought to play a role, such as the prisoner's dilemma and gift exchange, and games where competitive behavior is observed, such as Bertrand markets. http://www.aeaweb.org/aer/contents/mar2000.html American Economic Association Nashville, Tennessee 0002-8282 American Economic Review 90 1 March 2000 194211 The Choice between Market Failures and Corruption DaronAcemogluThierryVerdier Because government intervention transfers resources from one party to another, it creates room for corruption. As corruption often undermines the purpose of the intervention, governments will try to prevent it. They may create rents for bureaucrats, induce a misallocation of resources, and increase the size of the bureaucracy. Since preventing all corruption is excessively costly, second-best intervention may involve a certain fraction of bureaucrats accepting bribes. When corruption is harder to prevent, there may be both more bureaucrats and higher public-sector wages. Also, the optimal degree of government intervention may be nonmonotonic in the level of income. http://www.aeaweb.org/aer/contents/mar2000.html American Economic Association Nashville, Tennessee 0002-8282 American Economic Review 90 1 March 2000 212234 Elephants MichaelKremerCharlesMorcom Many open-access resources, such as elephants, are used to produce storable goods. Anticipated future scarcity of these resources will increase current prices and poaching. This implies that, for given initial conditions, there may be rational expectations equilibria leading to both extinction and survival. The cheapest way for governments to eliminate extinction equilibria may be to commit to tough antipoaching measures if the population falls below a threshold. For governments without credibility, the cheapest way to eliminate extinction equilibria may be to accumulate a sufficient stockpile of the storable good and threaten to sell it should the population fall. http://www.aeaweb.org/aer/contents/mar2000.html American Economic Association Nashville, Tennessee 0002-8282 American Economic Review 90 1 March 2000 235239 Credit Rationing? DanBernhardt http://www.aeaweb.org/aer/contents/mar2000.html American Economic Association Nashville, Tennessee 0002-8282 American Economic Review 90 1 March 2000 240246 Third-Degree Price Discrimination in Input Markets: Output and Welfare YoshihiroYoshida http://www.aeaweb.org/aer/contents/mar2000.html American Economic Association Nashville, Tennessee 0002-8282 American Economic Review 90 1 March 2000 247264 A Simple Mechanism for the Efficient Provision of Public Goods: Experimental Evidence JosefFalkinger http://www.aeaweb.org/aer/contents/mar2000.html American Economic Association Nashville, Tennessee 0002-8282 American Economic Review 90 1 March 2000 265281 Limiting Buyer Discretion: Effects on Performance and Price in Long-Term Contracts Lisa J.Cameron http://www.aeaweb.org/aer/contents/mar2000.html American Economic Association Nashville, Tennessee 0002-8282 American Economic Review 90 1 March 2000 282291 Economic Growth and the Elasticity of Substitution: Two Theorems and Some Suggestions RainerKlumpOlivierde La Grandville http://www.aeaweb.org/aer/contents/mar2000.html American Economic Association Nashville, Tennessee 0002-8282 American Economic Review 90 1 March 2000 292295 Economies of Scale and Constant Returns to Capital: A Neglected Early Contribution to the Theory of Economic Growth Edmund S.Cannon http://www.aeaweb.org/aer/contents/mar2000.html American Economic Association Nashville, Tennessee 0002-8282 American Economic Review 90 1 March 2000 296309 Naked Exclusion: Comment Ilya R.SegalMichael D.Whinston http://www.aeaweb.org/aer/contents/mar2000.html American Economic Association Nashville, Tennessee 0002-8282 American Economic Review 90 1 March 2000 310311 Naked Exclusion: Reply Eric B.RasmusenJ. MarkRamseyerJohn ShepardWileyJr. http://www.aeaweb.org/aer/contents/mar2000.html American Economic Association Nashville, Tennessee 0002-8282 American Economic Review 90 1 March 2000 312315 The Phillips Curve, the Persistence of Inflation, and the Lucas Critique: Evidence from Exchange-Rate Regimes: Comment Clemens J. M.KoolAlexLammertsma http://www.aeaweb.org/aer/contents/mar2000.html American Economic Association Nashville, Tennessee 0002-8282 American Economic Review 90 1 March 2000 316318 Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks: Comment FrankHeinemann http://www.aeaweb.org/aer/contents/mar2000.html American Economic Association Nashville, Tennessee 0002-8282 American Economic Review 90 1 March 2000 319324 The Deadweight Loss of Christmas: Comment Bradley J.RuffleOritTykocinski http://www.aeaweb.org/aer/contents/mar2000.html American Economic Association Nashville, Tennessee 0002-8282 American Economic Review 90 1 March 2000 325325 The Deadweight Loss of Christmas: Reply Sara J.SolnickDavidHemenway http://www.aeaweb.org/aer/contents/mar2000.html