Journal of Economic Literature
Vol. 33, No. 1, March 1995

Contents

The Economics of Exchange Rates
Mark P. Taylor      13

Recent Evolutionary Theorizing about Economic Change
Richard R. Nelson      48

Lessons from the U.S. Unemployment Insurance Experiments
Bruce D. Meyer      91

Environmental Regulation and the Competitiveness of U.S. Manufacturing: What Does the Evidence Tell Us?
Adam B. Jaffe, Steven R. Peterson, Paul R. Portney, and Robert Stavins       132

The Transition According to Cambridge, Mass
Peter Murrell      164

Regulating Risks
Robert A. Pollak      179

Book Reviews in pdf format (AEA members only)


The Economics of Exchange Rates
Mark P. Taylor

Reviews the literature on exchange rate economics over the last two decades, with particular reference to recent developments. Topics surveyed include the evidence on foreign exchange market efficiency and forward discount bias, chewed interest parity and purchasing power parity, the theory and evidence relating to the determination of exchange rates (the flexible-price monetary model, the stickyprice monetary model, the equilibrium models and the portfolio balance model), recent work on the effectiveness of foreign exchange intervention, and the recent literature on exchange rate behavior within target zones. The emerging literature on foreign exchange market microstructure is also briefly discussed.

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Recent Evolutionary Theorizing about Economic Change
Richard R. Nelson

Economists long have employed evolutionary language and metaphors to characterize economic change, but until recently have largely eschewed the expression of explicit evolutionary theories. Over the last decade, however, a number of explicit evolutionary theories have been developed by economists, and other social scientists. This essay discusses the general analytic art form, and summarizes and discusses a number of the particular models. In the light of those examples, it evaluates the strengths and weaknesses of explicit evolutionary theorizing as an approach to understanding economic change.

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Lessons from the U.S. Unemployment Insurance Experiments
Bruce D. Meyer

Recent social experiments have evaluated two reforms of the unemployment insurance (UI) system: reemployment bonuses and job search programs. The bonus experiments show that economic incentives affect the length of UI receipt and provide weak evidence that an earlier return to work does not decrease earnings. The experiments do not show the favorability of a permanent bonus program as they ignore its effect on the number of the claimants. The job search experiments test several more promising reforms. Nearly all of the combinations of services and increased enforcement reduce UI receipt and have favorable cost/benefit analyses. Earnings often increase, though the estimates are imprecise.

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Environmental Regulation and the Competitiveness of U.S. Manufacturing: What Does the Evidence Tell Us?
Adam B. Jaffe, Steven R. Peterson, Paul R. Portney, and Robert Stavins

This survey assesses evidence on the linkage between environmental regulation and competitiveness, and finds little support for the conventional wisdom that environmental regulations have large adverse effects on competitiveness. Studies examining the effects of environmental regulations on net exports, overall trade flows, and plant-location decisions have produced estimates that are small, statistically insignificant, or not robust. We also find no systematic evidence supporting the revisionist hypothesis that environmental regulations stimulate innovation and improved competitiveness. Overall, the evidence suggests that the truth regarding the relationship between environmental protection and international competitiveness lies in between the extremes of the current debate.

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The Transition According to Cambridge, Mass
Peter Murrell

This paper reviews the NBER's "The Transition in Eastern Europe." This book's 18 essays examine privatization, stabilization, fiscal policies, the nascent private sector, bankruptcy, foreign trade, and investment, etc. Individual country performance occupies six studies. These essays, which are of high quality, provide a cross-section of the literature on transition. However, the book's stronger conclusions are not supported by strong evidence. Two conclusions, unemphasized by contributors, emerge. Expectations, which reflect the theories used to design standard reforms, are often unfulfilled during reforms. A plausible explanation for the misplaced expectations is the ahistorical approach of those theories.

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Regulating Risks
Robert A. Pollak

Stephen Breyer's new book, "Breaking the Vicious Circle: Toward Effective Risk Regulation" addresses the widely recognized problems of health, safety, and environmental regulation. Breyer argues that public perceptions, congressional politics, and the technical uncertainties of risk regulation define a "vicious circle" - a situation of "regulatory gridlock." Breyer argues that reforming and depoliticizing the regulatory process - a solution that draws on "the virtues of bureaucracy" - is the best chance for practical reform. The review questions whether quantitative risk assessment, the "scientific" component of risk regulation (as opposed to risk management, the policy component), can be made "scientific" enough to engender the trust required to succeed.

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