Freedom Fries

By Guy Michaels and Xiaojia Zhi

American Economic Journal: Applied Economics, July 2010

Do firms always choose the cheapest suitable inputs, or can group attitudes affect their choices? To investigate this question, we examine the deterioration of relations between the United States and France from 2002-2003, when France's favorability ratin...

Front Matter

American Economic Journal: Microeconomics, August 2010

Tracing the Woes: An Empirical Analysis of the Airline Industry

By Steven Berry and Panle Jia

American Economic Journal: Microeconomics, August 2010

The US airline industry went through tremendous turmoil in the early 2000s, with four major bankruptcies, two major mergers, and various changes in network structure. This paper presents a structural model of the industry, and estimates the impact of dema...

The Political Economy of Debt Bondage

By Ulf von Lilienfeld-Toal and Dilip Mookherjee

American Economic Journal: Microeconomics, August 2010

What are the effects of restricting bonded labor clauses in tenancy or debt contracts? While such restrictions reduce agents' ability to credibly commit ex ante to repay principals in states where they default on their financial obligations, they also gen...

Why Tie a Product Consumers Do Not Use?

By Dennis W. Carlton, Joshua S. Gans, and Michael Waldman

American Economic Journal: Microeconomics, August 2010

We provide an explanation for tying not based on any of the standard arguments: efficiency, price discrimination, or exclusion. In our analysis a monopolist ties a complementary good to its monopolized good, but consumers do not use the tied good. The tie...

Which Inequality? The Inequality of Endowments versus the Inequality of Rewards

By Ed Hopkins and Tatiana Kornienko

American Economic Journal: Microeconomics, August 2010

We introduce a new distinction between inequality in initial endowments (e.g., ability, inherited wealth) and inequality of what one can obtain as rewards (e.g., prestigious positions, money). We show that, when society allocates resources via tournaments...

Preventing Crime Waves

By Philip Bond and Kathleen Hagerty

American Economic Journal: Microeconomics, August 2010

We study the design of enforcement mechanisms when enforcement resources are chosen ex ante and are inelastic ex post. Multiple equilibria arise naturally. We identify a new answer to the old question of why non-maximal penalties are used to punish modera...

Ascending Prices and Package Bidding: A Theoretical and Experimental Analysis

By John H. Kagel, Yuanchuan Lien, and Paul Milgrom

American Economic Journal: Microeconomics, August 2010

We use theory and experiment to explore the performance of multi-round, price-guided, combinatorial auctions. We define efficiency-relevant and core-relevant packages and show that if bidders bid aggressively on these and losing bidders bid to their limit...

Money, Political Ambition, and the Career Decisions of Politicians

By Michael P. Keane and Antonio Merlo

American Economic Journal: Microeconomics, August 2010

We assess the impact of a variety of policies that may influence the career decisions of members of the US Congress. These policies alter incentives to run for re-election, run for higher office or leave Congress, by altering wages, non-pecuniary rewards ...

Front Matter

American Economic Journal: Economic Policy, August 2010

Dividend and Corporate Taxation in an Agency Model of the Firm

By Raj Chetty and Emmanuel Saez

American Economic Journal: Economic Policy, August 2010

Recent evidence on the effect of dividend taxes on firm behavior is inconsistent with neoclassical theories of dividend and corporate taxation. We develop a simple agency model in which managers and shareholders have conflicting interests to explain the e...

The Effect of Fast Food Restaurants on Obesity and Weight Gain

By Janet Currie, Stefano DellaVigna, Enrico Moretti, and Vikram Pathania

American Economic Journal: Economic Policy, August 2010

We investigate how changes in the supply of fast food restaurants affect weight outcomes of 3 million children and 3 million pregnant women. Among ninth graders, a fast food restaurant within 0.1 miles of a school results in a 5.2 percent increase in obes...

The General Equilibrium Incidence of Environmental Mandates

By Don Fullerton and Garth Heutel

American Economic Journal: Economic Policy, August 2010

Pollution regulations affect factor demands, relative returns, production, and output prices. In our model, one sector includes pollution as an input that can be a complement or substitute for labor or capital. For each type of mandate, we find condition...

Is Lottery Gambling Addictive?

By Jonathan Guryan and Melissa S. Kearney

American Economic Journal: Economic Policy, August 2010

We present an empirical test for the addictiveness of lottery gambling that exploits an exogenous shock to local market consumption of lottery gambling. It uses the sale of a winning jackpot ticket in a zip code as an instrument for present consumption an...

Trade Restrictiveness and Deadweight Losses from US Tariffs

By Douglas A. Irwin

American Economic Journal: Economic Policy, August 2010

This paper calculates a trade restrictiveness index, i.e., the uniform tariff that yields the same welfare loss as an existing tariff structure, for nearly a century of US data. The results show that the average tariff understates the TRI by about 75 per...

The Price of Gasoline and New Vehicle Fuel Economy: Evidence from Monthly Sales Data

By Thomas Klier and Joshua Linn

American Economic Journal: Economic Policy, August 2010

This paper uses a unique dataset of monthly new vehicle sales by detailed model from 1978 to 2007, and implements a new identification strategy to estimate the effect of the price of gasoline on individual vehicle model sales. We control for unobserved ve...

Dynamic Commitment and the Soft Budget Constraint: An Empirical Test

By Per Pettersson-Lidbom

American Economic Journal: Economic Policy, August 2010

This paper develops an empirical framework for the problem of soft budgets which is explicitly based on a dynamic commitment problem, i.e., the inability of a supporting organization to commit itself not to extend more resources ex post to a budget-constr...

Do Taxpayers Bunch at Kink Points?

By Emmanuel Saez

American Economic Journal: Economic Policy, August 2010

This paper uses tax return data to analyze bunching at the kink points of the US income tax schedule. We estimate the compensated elasticity of reported income with respect to (one minus) the marginal tax rate using bunching evidence. We find clear eviden...

Testing for the Lucas Critique: A Quantitative Investigation

By Jesper Linde

American Economic Review, September 2001

In this paper, I try to shed some new light on the "puzzle" of why the Lucas critique, believed to be important by most economists, seems to have received very little empirical support. I use a real-business-cycle model to verify that the Lucas critique i...

Monetary Policy Rules Based on Real-Time Data

By Athanasios Orphanides

American Economic Review, September 2001

This paper examines the magnitude of informational problems associated with the implementation and interpretation of simple monetary policy rules. Using Taylor's rule as an example, I demonstrate that real-time policy recommendations differ considerably f...