Cardinality versus Ordinality: A Suggested Compromise

By Michael Mandler

American Economic Review, September 2006

By taking sets of utility functions as primitive, we define an ordering over assumptions on utility functions that gauges their measurement requirements. Cardinal and ordinal assumptions constitute two levels of measurability, but other assumptions lie ...

Self-Enforcing Voting in International Organizations

By Giovanni Maggi and Massimo Morelli

American Economic Review, September 2006

Some international organizations are governed by unanimity rule, others by (simple or qualified) majority rules. Standard voting models, which assume that the decisions made by voting are perfectly enforceable, have a hard time explaining the observed ...

Speculative Growth: Hints from the U.S. Economy

By Ricardo J. Caballero, Emmanuel Farhi, and Mohamad L. Hammour

American Economic Review, September 2006

We propose a framework for understanding episodes of vigorous economic expansion and extreme asset valuations. We interpret this phenomenon as a highvaluation equilibrium with a low cost of capital based on optimism about future funding. The key ingred...

Shocks and Government Beliefs: The Rise and Fall of American Inflation

By Thomas Sargent, Noah Williams, and Tao Zha

American Economic Review, September 2006

We use a Bayesian Markov Chain Monte Carlo algorithm to estimate the parameters of a “true” data-generating mechanism and those of a sequence of approximating models that a monetary authority uses to guide its decisions. Gaps between a true expectati...

Traditional Institutions Meet the Modern World: Caste, Gender, and Schooling Choice in a Globalizing Economy

By Kaivan Munshi and Mark Rosenzweig

American Economic Review, September 2006

This paper addresses the question of how traditional institutions interact with the forces of globalization to shape the economic mobility and welfare of particular groups of individuals in the new economy. We explore the role of one such traditional i...

$1,000 Cash Back: The Pass-Through of Auto Manufacturer Promotions

By Meghan Busse, Jorge Silva-Risso, and Florian Zettelmeyer

American Economic Review, September 2006

Automobile manufacturers frequently use promotions involving cash incentives. While payments are nominally directed to either customers or dealers, the ultimate beneficiary of the promotion depends on the outcome of price negotiation. We use program ev...

A Theory of Participation in Elections

By Timothy Feddersen and Alvaro Sandroni

American Economic Review, September 2006

We analyze a model of participation in elections in which voting is costly and no vote is pivotal. Ethical agents are motivated to participate when they determine that agents of their type are obligated to do so. Unlike previous duty-based models of parti...

What is Discrimination? Gender in the American Economic Association, 1935-2004

By Stephen G. Donald and Daniel S. Hamermesh

American Economic Review, September 2006

We illustrate problems of measuring discrimination using elections to AEA offices. With a new econometric technique, we find female candidates have a much better than random chance of victory. This advantage is either reverse discrimination or reflects be...

Stock Prices, News, and Economic Fluctuations

By Paul Beaudry and Franck Portier

American Economic Review, September 2006

We show that the joint behavior of stock prices and TFP favors a view of business cycles driven largely by a shock that does not affect productivity in the short run – and therefore does not look like a standard technology shock – but affects productivi...

Life-Cycle Variation in the Association between Current and Lifetime Earnings

By Steven Haider and Gary Solon

American Economic Review, September 2006

Researchers in a variety of important economic literatures have assumed that current income variables as proxies for lifetime income variables follow the textbook errors-in-variables model. In our analysis of Social Security records containing nearly care...

Choice Shifts in Groups: A Decision-Theoretic Basis

By Kfir Eliaz, Debraj Ray, and Ronny Razin

American Economic Review, September 2006

The phenomenon of choice shifts in group decision-making has received attention in the social psychology literature. Faced with a risky group decision, individuals appear to support more extreme choices relative to those they would make on their own. This...

Good Principals or Good Peers? Parental Valuation of School Characteristics, Tiebout Equilibrium, and the Incentive Effects of Competition among Jurisdictions

By Jesse M. Rothstein

American Economic Review, September 2006

In a multicommunity model, high-income families cluster together in any equilibrium, and cluster near effective schools if effectiveness is an important component of community desirability. Governmental fragmentation facilitates this residential sorting. ...

Caps on Political Lobbying: Comment

By Todd R. Kaplan and David Wettstein

American Economic Review, September 2006

Caps on Political Lobbying: Reply

By Yeon-Koo Che and Ian L. Gale

American Economic Review, September 2006

Credibility of Optimal Monetary Delegation: Comment

By John Driffill and Zeno Rotondi

American Economic Review, September 2006

Equilibrium Incentives in Oligopoly: Corrigendum

By Chaim Fershtman and Kenneth L. Judd

American Economic Review, September 2006

Modern Macroeconomics in Practice: How Theory Is Shaping Policy

[Symposium: Macroeconomic Lessons]

By V. V. Chari and Patrick J. Kehoe

Journal of Economic Perspectives, Fall 2006

Over the last three decades, macroeconomic theory and the practice of macroeconomics by economists have changed significantly -- for the better. Macroeconomics is now firmly grounded in the principles of economic theory. We focus on the role of economic t...

The Macroeconomist as Scientist and Engineer

[Symposium: Macroeconomic Lessons]

By N. Gregory Mankiw

Journal of Economic Perspectives, Fall 2006

The subfield of macroeconomics was born, not as a science, but more as a type of engineering. The problem that gave birth to our field was the Great Depression. God put macroeconomists on earth not to propose and test elegant theories but to solve practic...

The Real Effects of European Monetary Union

[Symposium: The Euro]

By Philip R. Lane

Journal of Economic Perspectives, Fall 2006

We explore the impact of European monetary union on the economies of the member countries. Inflation differentials across the euro area have been persistent, such that cumulative real exchange rate movements across the euro area have been quite substantia...

The European Central Bank, the Euro, and Global Financial Markets

[Symposium: The Euro]

By Kathryn M. E. Dominguez

Journal of Economic Perspectives, Fall 2006

The economic case for European monetary union was shaky at best when it was first discussed 35 years ago. Europe's leaders felt that monetary union was the capstone to their efforts to create an integrated Europe, and much to the rest of the world's surpr...