Benefit-Cost in a Benevolent Society

By Theodore C. Bergstrom

American Economic Review, March 2006

How should benefit-cost analysis account for the value that benevolent individuals place on others' enjoyment of public goods? When adding up the benefits to be compared with costs, should we sum the private valuations, the altruistic valuations, or somet...

Do Technological Improvements in the Manufacturing Sector Raise or Lower Employment?

By Yongsung Chang and Jay H. Hong

American Economic Review, March 2006

We find that technology's effect on employment varies greatly across manufacturing industries. Some industries exhibit a temporary reduction in employment in response to a permanent increase in TFP, whereas many more industries exhibit an employment incre...

Politically Connected Firms

By Mara Faccio

American Economic Review, March 2006

Examination of firms in 47 countries shows a widespread overlap of controlling shareholders and top officers who are connected with national parliaments or governments, particularly in countries with higher levels of corruption, with barriers to foreign i...

Persistent Distortionary Policies with Asymmetric Information

By Matthew F. Mitchell and Andrea Moro

American Economic Review, March 2006

Why are distortionary policies used when seemingly Pareto improvements exist? According to a standard textbook argument, a Pareto improvement can be obtained by eliminating the distortions, compensating the losers with a lump sum transfer, and redistribut...

National Treatment in the GATT

By Henrik Horn

American Economic Review, March 2006

The National Treatment (NT) clause is the first-line defense in the GATT (and in most other trade agreements) against opportunistic exploitation of the inevitable incompleteness of the agreement. This paper examines the role of NT as it applies to interna...

Do Labor Issues Matter in the Determination of U.S. Trade Policy? An Empirical Reevaluation

By Xenia Matschke and Shane M. Sherlund

American Economic Review, March 2006

Some recent empirical studies, motivated by Grossman and Helpman's (1994) "protection-for-sale" model, suggest that very few factors (none of them labor related) determine trade protection. This paper reexamines the roles that labor issues play in the det...

Information Gathering, Transaction Costs, and the Property Rights Approach

By Patrick W. Schmitz

American Economic Review, March 2006

The property rights approach to the theory of the firm suggests that ownership structures are chosen in order to provide ex ante investment incentives, while bargaining is ex post efficient. In contrast, transaction cost economics emphasizes ex post ineff...

The New York Times and the Market for Local Newspapers

By Lisa M. George and Joel Waldfogel

American Economic Review, March 2006

Recent technological advances have dramatically lowered the cost of transmitting information over large distances. In the late 1990s, the New York Times implemented a national distribution strategy, expanding delivery in over 100 cities. Using cr...

Social Value of Public Information: Comment: Morris and Shin (2002) Is Actually Pro-Transparency, Not Con

By Lars E. O. Svensson

American Economic Review, March 2006

Social Value of Public Information: Morris and Shin (2002) Is Actually Pro-Transparency, Not Con: Reply

By Stephen Morris, Hyun Song Shin, and Hui Tong

American Economic Review, March 2006

International Protection of Intellectual Property: Corrigendum

By Gene M. Grossman and Edwin L.-C. Lai

American Economic Review, March 2006

On the Irrelevance of Input Prices for Make-or-Buy Decisions

By David E. M Sappington

American Economic Review, December 2005

This paper demonstrates that input prices need not reflect the costs of an efficient incumbent supplier in order to induce entrants to implement efficient make-or-buy decisions. Because of strategic downstream considerations, entrants may always undertake...

Estimating the Value of Proposal Power

By Brian Knight

American Economic Review, December 2005

This paper investigates the role of proposal power in the allocation of transportation projects across U.S. congressional districts in 1991 and 1998. The evidence supports the key qualitative prediction of legislative bargaining models: members with propo...

Human Capital Formation, Life Expectancy, and the Process of Development

By Matteo Cervellati and Uwe Sunde

American Economic Review, December 2005

We provide a unified theory of the transition in income, life expectancy, education, and population size from a nondeveloped environment to sustained growth. Individuals optimally trade off the time cost of education with its lifetime returns. Initially, ...

The Impact of Outsourcing to China on Hong Kong's Labor Market

By Chang-Tai Hsieh and Keong T. Woo

American Economic Review, December 2005

We measure the impact of China's decision to open its economy in 1980 on outsourcing from Hong Kong and the relative demand for less-skilled workers. We show that the relative demand for skilled workers in Hong Kong increased at the same time outsourcing ...

Using Experimental Economics to Measure Social Capital and Predict Financial Decisions

By Dean S. Karlan

American Economic Review, December 2005

Questions remain as to whether results from experimental economics are generalizable to real decisions in nonlaboratory settings. Furthermore, questions persist about whether social capital helps mitigate information asymmetries in credit markets. I exami...

Manufacturer Liability for Harms Caused by Consumers to Others

By Bruce Hay and Kathryn E. Spier

American Economic Review, December 2005

Should the manufacturer of a product be held legally responsible when a consumer, while using the product, harms someone else? We show that if consumers have deep pockets, then manufacturer liability is not desirable. If homogeneous consumers have limited...

Are Banks Really Special? New Evidence from the FDIC-Induced Failure of Healthy Banks

By Adam B. Ashcraft

American Economic Review, December 2005

Recent bank failures are followed by significant and permanent negative declines in real county income. These declines are larger for small failures than for large failures per dollar of assets, are larger for bank failures than thrift failures, and are l...

Bubbles and Experience: An Experiment

By Martin Dufwenberg, Tobias Lindqvist, and Evan Moore

American Economic Review, December 2005

We investigate the occurrence of bubble-crash pricing patterns in laboratory financial markets with a mixture of experienced and inexperienced traders. We find that even with a minority of experienced traders, bubbles are substantially abated.

Does Increasing Women's Schooling Raise the Schooling of the Next Generation? Comment

By Kate L. Antonovics and Arthur S. Goldberger

American Economic Review, December 2005

"Does increasing women's schooling raise the schooling of the next generation?" is the question posed by Jere R. Behrman and Mark R. Rosenzweig (2002). Their answer to the question is no. In fact, they conclude that raising women's schooling may lower the...