Regulation, Competition and Liberalization

By Mark Armstrong and David E.M. Sappington

Journal of Economic Literature, June 2006

In many countries throughout the world, regulators are struggling to determine whether and how to introduce competition into regulated industries. This essay examines the complexities involved in the liberalization process. While stressing the importanc...

Decentralization, Hierarchies, and Incentives: A Mechanism Design Perspective

By Dilip Mookherjee

Journal of Economic Literature, June 2006

Separation of ownership from management, multidivisional firm organizations, delegation of production decisions to worker teams, delegation of pricing and advertising decisions to retail franchisers, reliance on intermediaries in trade or finance, and d...

Schumpeter Redux: A Review of Raghuram G. Rajan and Luigi Zingales's Saving Capitalism from the Capitalists

By Richard Sylla

Journal of Economic Literature, June 2006

Saving Capitalism from the Capitalists is an ambitious probe into capitalism's past, present, and future. Whereas Joseph A. Schumpeter viewed capitalism as doomed because it was losing its political and social supports, Rajan and Zingales see i...

A Review of Steven Shavell's Foundations of Economic Analysis of Law

By Richard A. Posner

Journal of Economic Literature, June 2006

Steven Shavell's Foundations of Economic Analysis of Law (Harvard University Press, 2004) is a major theoretical contribution to "law and economics," the applied field of economics that studies the economic properties and consequences of legal ...

A Review of Peter Isard's Globalization and the International Financial System: What's Wrong and What Can be Done?

By Barry Eichengreen

Journal of Economic Literature, June 2006

Peter Isard's recent book (Globalization and the International Financial System: What's Wrong and What Can be Done?, Cambridge University Press, 2005) provides a thoughtful and balanced review of the scholarly literature on the past operation a...

Book Reviews

Journal of Economic Literature, June 2006

Annotated Listing of New Books

Journal of Economic Literature, June 2006

JEL Classification System

Journal of Economic Literature, June 2006

Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill?

By Thomas Lemieux

American Economic Review, June 2006

This paper shows that a large fraction of the 1973-2003 growth in residual wage inequality is due to composition effects linked to the secular increase in experience and education, two factors associated with higher within-group wage dispersion. The le...

The World Technology Frontier

By Francesco Caselli and Wilbur John Coleman II

American Economic Review, June 2006

We study cross-country differences in the aggregate production function when skilled and unskilled labor are imperfect substitutes. We find that there is a skill bias in cross-country technology differences. Higher-income countries use skilled labor mo...

Medium-Term Business Cycles

By Diego Comin and Mark Gertler

American Economic Review, June 2006

Over the postwar period, many industrialized countries have experienced significant medium-frequency oscillations between periods of robust growth versus relative stagnation. Conventional business cycle filters, however, tend to sweep these oscillations...

Can Information Heterogeneity Explain the Exchange Rate Determination Puzzle?

By Philippe Bacchetta and Eric Van Wincoop

American Economic Review, June 2006

Empirical evidence shows that most exchange rate volatility at short to medium horizons is related to order flow and not to macroeconomic variables. We introduce symmetric information dispersion about future macroeconomic fundamentals in a dynamic rati...

Media Frenzies in Markets for Financial Information

By Laura L. Veldkamp

American Economic Review, June 2006

Emerging equity markets witness occasional surges in prices (frenzies) and crossmarket price dispersion (herds), accompanied by abundant media coverage. An information market complementarity can explain these anomalies. Because information has high fix...

An Efficient Dynamic Auction for Heterogeneous Commodities

By Lawrence M. Ausubel

American Economic Review, June 2006

This article proposes a new dynamic design for auctioning multiple heterogeneous commodities. An auctioneer wishes to allocate K types of commodities among n bidders. The auctioneer announces a vector of current prices, bidders report quantities demand...

Superstition and Rational Learning

By Drew Fudenberg and David K. Levine

American Economic Review, June 2006

We argue that some, but not all, superstitions can persist when learning is rational and players are patient, and illustrate our argument with an example inspired by the Code of Hammurabi. The code specified an "appeal by surviving in the river" as a w...

Matching and Price Competition

By Jeremy Bulow and Jonathan Levin

American Economic Review, June 2006

We develop a model in which firms set impersonal salary levels before matching with workers. Wages fall relative to any competitive equilibrium while profits rise almost as much, implying little inefficiency. Furthermore, the best firms gain the most f...

A Change Would Do You Good .... An Experimental Study on How to Overcome Coordination Failure in Organizations

By Jordi Brandts and David J. Cooper

American Economic Review, June 2006

We study how financial incentives can be used to overcome a history of coordination failure using controlled laboratory experiments. Subjects' payoffs depend on coordinating at high effort levels. In an initial phase, the benefits of coordination are l...

Paying Not to Go to the Gym

By Stefano DellaVigna and Ulrike Malmendier

American Economic Review, June 2006

How do consumers choose from a menu of contracts? We analyze a novel dataset from three U.S. health clubs with information on both the contractual choice and the day-to-day attendance decisions of 7,752 members over three years. The observed consumer b...

Handcuffs for the Grabbing Hand? Media Capture and Government Accountability

By Timothy Besley and Andrea Prat

American Economic Review, June 2006

It has long been recognized that the media play an essential role in government accountability. Even in the absence of censorship, however, the government may influence news content by maintaining a "cozy" relationship with the media. This paper develo...

Pareto-Improving Social Security Reform when Financial Markets are Incomplete!?

By Dirk Krueger and Felix Kubler

American Economic Review, June 2006

This paper studies an overlapping generations model with stochastic production and incomplete markets to assess whether the introduction of an unfunded social security system leads to a Pareto improvement. When returns to capital and wages are imperfec...