Journal of Economic Perspectives
Vol. 15, No. 3, Summer 2001
Contents
The Life-Cycle Model of Consumption and Saving
Martin Browning and Thomas F. Crossley 3-22
A Theory of the Consumption Function, With and Without
Liquidity Constraints
Christopher D. Carroll 23-46
The Hyperbolic Consumption Model: Calibration, Simulation,
and Empirical Evaluation
George-Marios Angeletos, David Laibson, Andrea Repetto, Jeremy Tobacman
and Stephen Weinberg, 47-68
The WTO as a Mechanism for Securing Market Access
Property Rights: Implications for Global Labor and Environmental Issues
Kyle Bagwell and Robert W. Staiger 69-88
Labor Standards: Where Do They Belong on the International
Trade Agenda?
Drusilla K. Brown 89-112
Bridging the Trade-Environment Divide
Daniel C. Esty 113-130
Wheat From Chaff: Meta-Analysis As Quantitative Literature
Review
T.D. Stanley 131-150
International Productivity Comparisons Built from the
Firm Level
Martin Neil Baily and Robert M. Solow 151-172
Institutional Economics: Then and Now
Malcolm Rutherford 173-194
Economic Education in U.S. High Schools
William B. Walstad 195-210
An Interview with William J. Baumol
Alan B. Krueger 211-232
History Lessons: The Early Development of Intellectual
Property Institutions in the United States
B. Zorina Khan and Kenneth L. Sokoloff 233-246
Features:
Recommendations for Further Reading 247-256
Notes 261-264
The Life-Cycle Model of Consumption and Saving
Martin Browning and Thomas F. Crossley
A central implication of life-cycle models is that agents smooth consumption.
We review the empirical evidence on smoothing at frequencies from within
the year up to across a lifetime. We find that life-cycle models - particular
those which incorporate realistic features of markets and goods - have
more empirical successes than failures. We also show that some apparent
deviations from theoretical predictions imply very small welfare losses
for agents. Finally, we emphasize that the coherence of life-cycle models
imposes an important discipline when incorporating new features into models.
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A Theory of the Consumption Function, With and Without Liquidity Constraints
Christopher D. Carroll
This paper argues that the modern stochastic consumption model, in which
impatient consumers face uninsurable labor income risk, matches Milton
Friedman's (1957) original description of the Permanent Income Hypothesis
much better than the perfect foresight or certainty equivalent models
did. The model can explain the high marginal propensity to consume, the
high discount rate on future income, and the important role for precautionary
behavior that were all part of Friedman's original framework. The paper
also explains the relationship of these questions to the Euler equation
literature, and argues that the effects of precautionary saving and liquidity
constraints are often virtually indistinguishable.
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The Hyperbolic Consumption Model: Calibration, Simulation, and Empirical
Evaluation
George-Marios Angeletos, David Laibson, Andrea Repetto, Jeremy Tobacman
and Stephen Weinberg,
Laboratory and field studies of time preference find that discount rates
are much greater in the short run than in the long run. Hyperbolic discount
functions capture this property. This paper presents simulations of the
savings and asset allocation choices of households with hyperbolic preferences.
The behavior of the hyperbolic households is compared to the behavior
of exponential households. The hyperbolic households borrow much more
frequently in the revolving credit market. The hyperbolic households exhibit
greater consumption income comovement and experience a greater drop in
consumption around retirement. The hyperbolic simulations match observed
consumption and balance sheet data much better than the exponential simulations.
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The WTO as a Mechanism for Securing Market Access Property Rights: Implications
for Global Labor and Environmental Issues
Kyle Bagwell and Robert W. Staiger
Can the World Trade Organization (WTO) contribute to the attainment
of sound labor and environmental policies? An answer requires an understanding
of WTO rules. We argue that the purpose of WTO rules is to create a negotiating
forum where governments can exchange secure market access commitments.
From this perspective, we argue that supporters of sound trade, labor
and environmental policies can benefit from a well-functioning WTO, because
facilitating trade liberalization and preventing race-to-the-bottom/regulatory-chill
problems go hand in hand, and each is accomplished by maintaining secure
property rights over negotiated market access commitments.
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Labor Standards: Where Do They Belong on the International Trade Agenda?
Drusilla K. Brown
During the past decade, universal labor standards have become the focus
of intense debate. Advocates argue from humanitarian concerns and the
interests of industrialized-country labor, seeking enforcement with WTO
sanctions. Opponents regard labor regulation as a matter of national sovereignty,
challenge the effectiveness of trade sanctions, and prefer the ILO emphasis
on dialogue, monitoring and technical advice. This paper analyzes the
labor standards debate, with specific attention to the analytical underpinnings
of universal rules; evidence linking weak labor protections in developing
countries to industrialized country wages; and the role of labor standards
in WTO negotiations.
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Bridging the Trade-Environment Divide
Daniel C. Esty
Perceived conflict between trade liberalization and environmental protection
can be traced to a number of issues. Some tensions relate to the environmental
Kuznets curve and whether economic growth yields environmental benefits.
Other concerns arise from efforts to address transboundary externalities
and disputes over the role of trade measures as an environmental enforcement
tool. Another set of issues centers on the risk of a race-toward-the-bottom
regulatory dynamic and the limits of legitimate comparative advantage.
This paper argues that, in an ecologically and economically interdependent
world, trade and environmental policies are inescapably linked as a matter
of descriptive reality and normative necessity.
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Wheat From Chaff: Meta-Analysis As Quantitative Literature Review
T.D. Stanley
This paper presents and develops a quantitative method of literature
reviewing and evaluating empirical research, meta-regression analysis
or MRA. Economics is theory-driven. Yet, we must learn empirically if
economics is to advance. MRA offers a more objective statistical method
to summarize our empirical knowledge and to explain the wide study-to-study
variation in economic research. MRA is used to assess the evidence for
Ricardian equivalence, and its findings are contrasted to those of conventional
narrative review. Furthermore, MRA establishes a platform from which to
distinguish genuine empirical effect from the exploitable specification
error that infests applied econometrics.
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International Productivity Comparisons Built from the Firm Level
Martin Neil Baily and Robert M. Solow
International productivity comparisons can be built up with micro and
macro data. Studies of firms or groups of firms producing similar outputs
reveal the deeper causes of differences in productivity across countries.
The studies find that such differences often depend on patterns of organization
within firms, the motivations of managers and the like. The intensity
of domestic and international competition can have a large impact on productivity.
The case of retailing illustrates the importance of industry evolution.
High productivity retailing formats drive out traditional retailers, unless
restrained by land-use restrictions or regulations.
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Institutional Economics: Then and Now
Malcolm Rutherford
This article gives a history of American institutionalism, and a brief
comparison with the more recent Anew@ institutional economics. Institutionalism
was a significant element in American economics between the Wars, but
declined rapidly thereafter. The article outlines the movement's initial
appeal, its contributions, and the reasons for its decline. Although the
Anew@ institutionalism has few direct ties to the older tradition, some
interesting commonalities are found and discussed. Links to the Anew institutionalism@
in sociology and political science, and to historical work on other Ainstitutional@
traditions are also mentioned.
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Economic Education in U.S. High Schools
William B. Walstad
The teaching of economics at the high school level is vital for increasing
basic economic literacy. This assessment of high school economics in the
United States covers seven topics: enrollments in courses; course content;
the testing of students; achievement in economics courses; economics instruction
in related courses; teacher preparation for economics instruction; and
the contributions from organizations and economists. Significant improvements
are found in the teaching, content, and testing of high school economics
over the past two decades, but more work is needed because a formal course
in economics is taken by less than half of high school graduates.
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An Interview with William J. Baumol
Alan B. Krueger
No abstract available.
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History Lessons: The Early Development of Intellectual Property Institutions
in the United States
B. Zorina Khan and Kenneth L. Sokoloff
The U.S. was a pioneer in establishing the world's first modern intellectual
property system. That system was distinguished by the provision of broad
access to, and strict enforcement of, property rights in new inventions,
coupled with the requirement of public disclosure, and it was effective
at stimulating the growth of a market for technology and technical change
more generally. Far from being static, fundamental modifications were
introduced over time in response to changing circumstances. That such
adjustments so often proved to be constructive owes partly to a private
market being a central feature of the system, and partly to the democratic
structure of U.S. institutions.
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Features (view in pdf format):
Recommendations
for Further Reading (AEA members only)
Notes
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