Explaining Changes in Female Labor Supply in a Life-Cycle Model

By Orazio Attanasio, Hamish Low, and Virginia Sánchez-Marcos

American Economic Review, September 2008

This paper studies the life-cycle labor supply of three cohorts of American women, born in the 1930s, 1940s, and 1950s. We focus on the increase in labor supply of mothers between the 1940s and 1950s cohorts. We construct a lifecycle model of female pa...

Giffen Behavior and Subsistence Consumption

By Robert T. Jensen and Nolan H. Miller

American Economic Review, September 2008

This paper provides the first real-world evidence of Giffen behavior, i.e., upward sloping demand. Subsidizing the prices of dietary staples for extremely poor households in two provinces of China, we find strong evidence of Giffen behavior for rice in...

Restructuring Research: Communication Costs and the Democratization of University Innovation

By Ajay Agrawal and Avi Goldfarb

American Economic Review, September 2008

We report evidence that Bitnet adoption facilitated increased research collaboration between US universities. However, not all institutions benefited equally. Using panel data from seven top engineering journals, Bitnet connection records, and institution...

The Cycle of Violence? An Empirical Analysis of Fatalities in the Palestinian-Israeli Conflict

By David A. Jaeger and M. Daniele Paserman

American Economic Review, September 2008

This paper examines the dynamics of violence in the Palestinian-Israeli conflict during the Second Intifada. Using data on the daily number of fatalities between September 2000 and January 2005, we estimate reaction functions for both Israelis and Palesti...

The Relationship between Economic Status and Child Health: Evidence from the United States

By Simon Condliffe and Charles R. Link

American Economic Review, September 2008

Anne Case et al. (2002), using cross-sectional data, found a positive relationship between children's health and income, with income's protective effect increasing with age. Janet Currie and Mark Stabile (2003), using a panel of Canadian children, foun...

The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India

By Philippe Aghion, Robin Burgess, Stephen J. Redding, and Fabrizio Zilibotti

American Economic Review, September 2008

We study whether the effects on registered manufacturing output of dismantling the License Raj—a system of central controls regulating entry and production activity in this sector—vary across Indian states with different labor market regula...

Tracing the Impact of Bank Liquidity Shocks: Evidence from an Emerging Market

By Asim Ijaz Khwaja and Atif Mian

American Economic Review, September 2008

We examine the impact of liquidity shocks by exploiting cross-bank liquidity variation induced by unanticipated nuclear tests in Pakistan. We show that for the same firm borrowing from two different banks, its loan from the bank experiencing a 1 percen...

The Power of Focal Points Is Limited: Even Minute Payoff Asymmetry May Yield Large Coordination Failures

By Vincent P. Crawford, Uri Gneezy, and Yuval Rottenstreich

American Economic Review, September 2008

Since Schelling, it has often been assumed that players make use of salient decision labels to achieve coordination. Consistent with previous work, we find that given equal payoffs, salient labels yield frequent coordination. However, given even minute...

Optimal Contracting with Endogenous Social Norms

By Paul Fischer and Steven Huddart

American Economic Review, September 2008

Research in sociology and ethics suggests that individuals adhere to social norms of behavior established by their peers. Within an agency framework, we model endogenous social norms by assuming that each agent’s cost of implementing an action depend...

Great Expectations and the End of the Depression

By Gauti B. Eggertsson

American Economic Review, September 2008

This paper suggests that the US recovery from the Great Depression was driven by a shift in expectations. This shift was caused by President Franklin Delano Roosevelt's policy actions. On the monetary policy side, Roosevelt abolished the gold standard ...

Language, Meaning, and Games: A Model of Communication, Coordination, and Evolution

By Stefano Demichelis and Jorgen W. Weibull

American Economic Review, September 2008

Language is a powerful coordination device. We generalize the cheap-talk approach to pre-play communication by way of introducing a meaning correspondence between messages and actions, and by postulating two axioms met by natural languages. Players hav...

The Brain as a Hierarchical Organization

By Isabelle Brocas and Juan D. Carrillo

American Economic Review, September 2008

Based on recent neuroscience evidence, we model the brain as a dual-system organization subject to three conflicts: asymmetric information, temporal horizon, and incentive salience. Under the first and second conflicts, we show that the uninformed syst...

How Strong Are Weak Patents?

By Joseph Farrell and Carl Shapiro

American Economic Review, September 2008

We study the welfare economics of probabilistic patents that are licensed without a full determination of validity. We examine the social value of instead determining patent validity before licensing to downstream technology users, in terms of deadweig...

Does Innovation Cause Stock Market Runups? Evidence from the Great Crash

By Tom Nicholas

American Economic Review, September 2008

This article examines the stock market's changing valuation of corporate patentable assets between 1910 and 1939. It shows that the value of knowledge capital increased significantly during the 1920s compared to the 1910s as investors responded to the ...

Behavioral Equilibrium in Economies with Adverse Selection

By Ignacio Esponda

American Economic Review, September 2008

I propose a new solution concept—behavioral equilibrium—to study environments with players who are naive, in the sense that they fail to account for the informational content of other players' actions. I apply the framework to certain adver...

Competition and Price Variation When Consumers Are Loss Averse

By Paul Heidhues and Botond Kőszegi

American Economic Review, September 2008

We modify the Salop (1979) model of price competition with differentiated products by assuming that consumers are loss averse relative to a reference point given by their recent expectations about the purchase. Consumers' sensitivity to losses in money...

Leverage Cycles and the Anxious Economy

By Ana Fostel and John Geanakoplos

American Economic Review, September 2008

We provide a pricing theory for emerging asset classes, like emerging markets, that are not yet mature enough to be attractive to the general public. We show how leverage cycles can cause contagion, flight to collateral, and issuance rationing in a fre...

Covering the Uninsured in the United States

By Jonathan Gruber

Journal of Economic Literature, September 2008

One of the major social policy issues facing the United States in the first decade of the twenty-first century is the large number of Americans lacking health insurance. This article surveys the major economic issues around covering the uninsured. I rev...

The Role of Cognitive Skills in Economic Development

By Eric A. Hanushek and Ludger Woessmann

Journal of Economic Literature, September 2008

The role of improved schooling, a central part of most development strategies, has become controversial because expansion of school attainment has not guaranteed improved economic conditions. This paper reviews the role of cognitive skills in promoting ...

Real Business Cycle Views of the Great Depression and Recent Events: A Review of Timothy J. Kehoe and Edward C. Prescott's Great Depressions of the Twentieth Century

By Peter Temin

Journal of Economic Literature, September 2008

This book collects essays, most of which were published earlier, into an advertisement for real business cycle (RBC) analysis. Half of the essays discuss the Great Depression; half discuss events of the 1980s and 1990s. They all use the general equilibr...