American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 49 4 December 2011 http://www.aeaweb.org/issue.php?journal=JEL&volume=49&issue=4 Journal Article Front Matter 897 900 http://www.aeaweb.org/articles.php?doi=10.1257/jel.49.4.1 10.1257/jel.49.4.1 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 49 4 December 2011 http://www.aeaweb.org/issue.php?journal=JEL&volume=49&issue=4 Journal Article Nonlinear Models of Measurement Errors XiaohongChenYale U HanHongStanford U DenisNekipelovU CA, Berkeley 901 37 Measurement errors in economic data are pervasive and nontrivial in size. The presence of measurement errors causes biased and inconsistent parameter estimates and leads to erroneous conclusions to various degrees in economic analysis. While linear errors-in-variables models are usually handled with well-known instrumental variable methods, this article provides an overview of recent research papers that derive estimation methods that provide consistent estimates for nonlinear models with measurement errors. We review models with both classical and nonclassical measurement errors, and with misclassification of discrete variables. For each of the methods surveyed, we describe the key ideas for identification and estimation, and discuss its application whenever it is currently available. (JEL C20, C26, C50) http://www.aeaweb.org/articles.php?doi=10.1257/jel.49.4.901 10.1257/jel.49.4.901 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 49 4 December 2011 http://www.aeaweb.org/issue.php?journal=JEL&volume=49&issue=4 Journal Article Sign Restrictions in Structural Vector Autoregressions: A Critical Review ReneeFryAustralian National U AdrianPaganU Sydney 938 60 The paper provides a review of the estimation of structural vector autoregressions with sign restrictions. It is shown how sign restrictions solve the parametric identification problem present in structural systems but leaves the model identification problem unresolved. A market and a macro model are used to illustrate these points. Suggestions have been made on how to find a unique model. These are reviewed. An analysis is provided of whether one can recover the true impulse responses and what difficulties might arise when one wishes to use the impulse responses found with sign restrictions. (JEL C32, C51, E12) http://www.aeaweb.org/articles.php?doi=10.1257/jel.49.4.938 10.1257/jel.49.4.938 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 49 4 December 2011 http://www.aeaweb.org/issue.php?journal=JEL&volume=49&issue=4 Journal Article Labor Supply and Taxes: A Survey Michael P.KeaneU New South Wales and AZ State U 961 1075 I survey the male and female labor supply literatures, focusing on implications for effects of wages and taxes. For males, I describe and contrast results from three basic types of model: static models (especially those that account for nonlinear taxes), life-cycle models with savings, and life-cycle models with both savings and human capital. For women, more important distinctions are whether models include fixed costs of work, and whether they treat demographics like fertility and marriage (and human capital) as exogenous or endogenous. The literature is characterized by considerable controversy over the responsiveness of labor supply to changes in wages and taxes. At least for males, it is fair to say that most economists believe labor supply elasticities are small. But a sizable minority of studies that I examine obtain large values. Hence, there is no clear consensus on this point. In fact, a simple average of Hicks elasticities across all the studies I examine is 0.31. Several simulation studies have shown that such a value is large enough to generate large efficiency costs of income taxation. For males, I conclude that two factors drive many of the differences in results across studies. One factor is use of direct versus ratio wage measures, with studies that use the former tending to find larger elasticities. Another factor is the failure of most studies to account for human capital returns to work experience. I argue that this may lead to downward bias in elasticity estimates. In a model that includes human capital, I show how even modest elasticitiesx--as conventionally measured--can be consistent with large efficiency costs of taxation. For women, in contrast, it is fair to say that most studies find large labor supply elasticities, especially on the participation margin. In particular, I find that estimates of "long-run" labor supply elasticities--by which I mean estimates that allow for dynamic effects of wages on fertility, marriage, education and work experience--are generally quite large. ( JEL D91, J13, J16, J22, J31, H24) http://www.aeaweb.org/articles.php?doi=10.1257/jel.49.4.961 10.1257/jel.49.4.961 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 49 4 December 2011 http://www.aeaweb.org/issue.php?journal=JEL&volume=49&issue=4 Journal Article The Fundamental Institutions of China's Reforms and Development ChenggangXuU Hong Kong and WCU-SNU 1076 1151 China's economic reforms have resulted in spectacular growth and poverty reduction. However, China's institutions look ill-suited to achieve such a result, and they indeed suffer from serious shortcomings. To solve the "China puzzle," this paper analyzes China's institution--a regionally decentralized authoritarian system. The central government has control over personnel, whereas subnational governments run the bulk of the economy; and they initiate, negotiate, implement, divert, and resist reforms, policies, rules, and laws. China's reform trajectories have been shaped by regional decentralization. Spectacular performance on the one hand and grave problems on the other hand are all determined by this governance structure. (JEL O17, O18, O43, P21, P25, P26) http://www.aeaweb.org/articles.php?doi=10.1257/jel.49.4.1076 10.1257/jel.49.4.1076 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 49 4 December 2011 http://www.aeaweb.org/issue.php?journal=JEL&volume=49&issue=4 Journal Article Economic Liberalization and Indian Economic Growth: What's the Evidence? AshokKotwalU British Columbia BharatRamaswamiIndian Statistical Institute WilimaWadhwaIndian Statistical Institute and ASER Centre 1152 99 India's growth and poverty performance over the last three decades has been a subject of great curiosity. Unlike the East Asian countries, India's growth spurt is not associated with exceptionally high domestic savings or foreign capital inflows or manufacturing exports. So what triggered the change in the growth trajectory? Did the market liberalization policies of the 1990s help? How have the initial conditions shaped the process? And how has the "Indian model" impinged on India's central problem of mass poverty? This paper surveys the literature and offers its own assessment of the drivers of change. (JEL I32, O13, O14, O15, O21, O47) http://www.aeaweb.org/articles.php?doi=10.1257/jel.49.4.1152 10.1257/jel.49.4.1152 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 49 4 December 2011 http://www.aeaweb.org/issue.php?journal=JEL&volume=49&issue=4 Journal Article European Integration at the Crossroads: A Review Essay on the 50th Anniversary of Bela Balassa's Theory of Economic Integration AndreSapirFree U Brussels 1200 1229 Bela Balassa's Theory of Economic Integration, published fifty years ago, is a remarkable, yet little known book. This essay reviews developments in the economic literature and in the process of European integration since the book's publication, showing that it was incredibly prescient. It anticipated by more than twenty years the modern literature on economic integration that emphasizes scale economies, imperfect competition, and economic geography. It also predicted that monetary union cannot function properly without political unification, a condition well illustrated by the recent euro-debt crisis that is likely to be a watershed in the history of European integration. (JEL B31, F15, F36, G01) http://www.aeaweb.org/articles.php?doi=10.1257/jel.49.4.1200 10.1257/jel.49.4.1200 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 49 4 December 2011 http://www.aeaweb.org/issue.php?journal=JEL&volume=49&issue=4 Journal Article Book Reviews 1230 1317 http://www.aeaweb.org/articles.php?doi=10.1257/jel.49.4.1230 10.1257/jel.49.4.1230 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 49 4 December 2011 http://www.aeaweb.org/issue.php?journal=JEL&volume=49&issue=4 Journal Article Annotated Listing of New Books 1318 1410 http://www.aeaweb.org/articles.php?doi=10.1257/jel.49.4.1318 10.1257/jel.49.4.1318 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 49 4 December 2011 http://www.aeaweb.org/issue.php?journal=JEL&volume=49&issue=4 Journal Article JEL Classification System 1411 1425 http://www.aeaweb.org/articles.php?doi=10.1257/jel.49.4.1411 10.1257/jel.49.4.1411 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 49 4 December 2011 http://www.aeaweb.org/issue.php?journal=JEL&volume=49&issue=4 Journal Article Doctoral Dissertations in Economics 1426 1454 http://www.aeaweb.org/articles.php?doi=10.1257/jel.49.4.1426 10.1257/jel.49.4.1426