American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 45 2 June 2007 http://www.aeaweb.org/articles/issue_detail.php?journal=JEL&volume=45&issue=2&issue_date=June 2007 Regular Article Business Groups in Emerging Markets: Paragons or Parasites? TarunKhanna YishayYafeh 331 372 Diversified business groups, consisting of legally independent firms operating across diverse industries, are ubiquitous in emerging markets. Groups around the world share certain attributes but also vary substantially in structure, ownership, and other dimensions. This paper proposes a business group taxonomy, which is used to formulate hypotheses and present evidence about the reasons for the formation, prevalence, and evolution of groups in different environments. In interpreting the evidence, the authors pay particular attention to two aspects neglected in much of the literature: the circumstances under which groups emerge and the historical evidence on some of the questions addressed by recent studies. They argue that business groups are responses to different economic conditions and that, from a welfare standpoint, they can sometimes be "paragons" and, at other times, "parasites." The authors conclude with an agenda for future research. http://www.aeaweb.org/articles/article_detail.php?journal=JEL&volume=45&issue=2&article=1&issue_date=June 2007 10.1257/jel.45.2.331 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 45 2 June 2007 http://www.aeaweb.org/articles/issue_detail.php?journal=JEL&volume=45&issue=2&issue_date=June 2007 Regular Article Automobile Externalities and Policies Ian W. H. Parry MargaretWalls WinstonHarrington 373 399 This paper discusses the nature, and magnitude, of externalities associated with automobile use, including local and global pollution, oil dependence, traffic congestion and traffic accidents. It then discusses current federal policies affecting these externalities, including fuel taxes, fuel economy and emissions standards, and alternative fuel policies, summarizing, insofar as possible, the welfare effects of those policies. Finally, we discuss emerging pricing policies, including congestion tolls, and insurance reform, and summarize the appropriate combination of policies to address automobile externalities. http://www.aeaweb.org/articles/article_detail.php?journal=JEL&volume=45&issue=2&article=2&issue_date=June 2007 10.1257/jel.45.2.373 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 45 2 June 2007 http://www.aeaweb.org/articles/issue_detail.php?journal=JEL&volume=45&issue=2&issue_date=June 2007 Regular Article Global Capital Markets in the Long Run: A Review of Maurice Obstfeld and Alan Taylor’s Global Capital Markets Jeffrey G.Williamson 400 409 Written by Maurice Obstfeld and Alan Taylor, Global Capital Markets: Integration, Crisis, and Growth was a much-needed book that will be cited extensively by those with interests in the long run evolution of the world financial capital market. The book does not simply assess changes in the efficiency of global capital markets over the past 150 years, but rather adds significantly to debates about instability and crisis, asymmetry between rich and poor countries in the costs of going open, the Lucas Paradox, the connections between foreign exchange and financial capital market regimes, and much more. The book makes far better use of the comparative evidence generated by the three epochs since 1850—the first global century before 1914, the second global century after 1950, and the autarchy in between—than do competitors that focus solely on one regime, whether the gold standard, post–World War II Breton Woods, or the float since. In addition, while the financial literature rarely assesses in any useful empirical way the connection between financial markets and the real economy, this book makes that connection absolutely clear. Global Capital Markets is a stimulating book with a very wide and deep reach. http://www.aeaweb.org/articles/article_detail.php?journal=JEL&volume=45&issue=2&article=3&issue_date=June 2007 10.1257/jel.45.2.400 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 45 2 June 2007 http://www.aeaweb.org/articles/issue_detail.php?journal=JEL&volume=45&issue=2&issue_date=June 2007 Regular Article A Review of Richard Layard, Stephen Nickell, and Richard Jackman’s Unemployment: Macroeconomic Performance and the Labour Market OlivierBlanchard 410 418 Unemployment: Macroeconomic Performance and the Labour Market by Richard Layard, Stephen Nickell, and Richard Jackman (Oxford University Press 2005) is the second edition of a book first published in 1991. The second edition is identical to the first except for a long introduction, which reviews the conclusions of the first edition in the light of the following fifteen years. I basically agree with the authors that the book’s framework and conclusions have withstood the test of time very well. I then assess progress since 1991 and point to a number of directions in which progress needs to be achieved. http://www.aeaweb.org/articles/article_detail.php?journal=JEL&volume=45&issue=2&article=4&issue_date=June 2007 10.1257/jel.45.2.410 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 45 2 June 2007 http://www.aeaweb.org/articles/issue_detail.php?journal=JEL&volume=45&issue=2&issue_date=June 2007 Regular Article Optimal Executive Compensation versus Managerial Power: A Review of Lucian Bebchuk and Jesse Fried’s Pay without Performance: The Unfulfilled Promise of Executive Compensation Michael S.Weisbach 419 428 This essay reviews Lucian A. Bebchuk and Jesse M. Fried’s Pay without Performance: The Unfulfilled Promise of Executive Compensation. Bebchuk and Fried criticize the standard view of executive compensation, in which executives negotiate contracts with shareholders that provide incentives that motivate them to maximize the shareholders' welfare. In contrast, Bebchuk and Fried argue that executive compensation is more consistent with executives who control their own boards and who maximize their own compensation subject to an "outrage constraint." They provide a host of evidence consistent with this alternative viewpoint. The book can be evaluated from both positive and normative perspectives. From a positive perspective, much of the evidence they present, especially about the camouflage and risk-taking aspects of executive compensation systems, is fairly persuasive. However, from a normative perspective, the book conveys the idea that policy changes can dramatically improve executive compensation systems and consequently overall corporate performance. It is unclear to me how effective potential reforms designed to achieve such changes are likely to be in practice. http://www.aeaweb.org/articles/article_detail.php?journal=JEL&volume=45&issue=2&article=5&issue_date=June 2007 10.1257/jel.45.2.419 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 45 2 June 2007 http://www.aeaweb.org/articles/issue_detail.php?journal=JEL&volume=45&issue=2&issue_date=June 2007 Book Review Book Reviews 429 482 http://www.aeaweb.org/articles/article_detail.php?journal=JEL&volume=45&issue=2&article=6&issue_date=June 2007 10.1257/jel.45.2.429 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 45 2 June 2007 http://www.aeaweb.org/articles/issue_detail.php?journal=JEL&volume=45&issue=2&issue_date=June 2007 Regular Article Annotated Listing of New Books 483 578 http://www.aeaweb.org/articles/article_detail.php?journal=JEL&volume=45&issue=2&article=7&issue_date=June 2007 10.1257/jel.45.2.483 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 45 2 June 2007 http://www.aeaweb.org/articles/issue_detail.php?journal=JEL&volume=45&issue=2&issue_date=June 2007 Regular Article JEL Classification System 579 591 http://www.aeaweb.org/articles/article_detail.php?journal=JEL&volume=45&issue=2&article=8&issue_date=June 2007 10.1257/jel.45.2.579