Front Matter

American Economic Review, September 2010

Includes "Douglass C. North: Distinguished Fellow 2009"

Morally Motivated Self-Regulation

By David P. Baron

American Economic Review, September 2010

Self-regulation is the private provision of public goods and private redistribution. This paper examines the scope of self-regulation motivated by altruistic moral preferences that are reciprocal and stronger the closer are citizens in a socioeconomic dis...

Identifying the Elasticity of Substitution with Biased Technical Change

By Miguel A. León-Ledesma, Peter McAdam, and Alpo Willman

American Economic Review, September 2010

The capital-labor substitution elasticity and technical biases in production are critical parameters. The received wisdom claims their joint identification is infeasible. We challenge that interpretation. Putting the new approach of "normalized" producti...

Social Comparisons and Contributions to Online Communities: A Field Experiment on MovieLens

By Yan Chen, F. Maxwell Harper, Joseph Konstan, and Sherry Xin Li

American Economic Review, September 2010

We design a field experiment to explore the use of social comparison to increase contributions to an online community. We find that, after receiving behavioral information about the median user's total number of movie ratings, users below the median demon...

Are Health Insurance Markets Competitive?

By Leemore S. Dafny

American Economic Review, September 2010

To gauge the competitiveness of the group health insurance industry, I investigate whether health insurers charge higher premiums, ceteris paribus, to more profitable firms. Such "direct price discrimination" is feasible only in imperfectly competitive se...

Wage Risk and Employment Risk over the Life Cycle

By Hamish Low, Costas Meghir, and Luigi Pistaferri

American Economic Review, September 2010

We specify a life-cycle model of consumption, labor supply and job mobility in an economy with search frictions. We distinguish different sources of risk, including shocks to productivity, job arrival, and job destruction. Allowing for job mobility has a ...

The Law of the Few

By Andrea Galeotti and Sanjeev Goyal

American Economic Review, September 2010

Empirical work shows that a large majority of individuals get most of their information from a very small subset of the group, viz., the influencers; moreover, there exist only minor differences between the observable characteristics of the influencers an...

Technology Capital and the US Current Account

By Ellen R. McGrattan and Edward C. Prescott

American Economic Review, September 2010

The US Bureau of Economic Analysis (BEA) estimates that the return on investments of foreign subsidiaries of US multinational companies over the period 1982-2006 averaged 9.4 percent annually after taxes; US subsidiaries of foreign multinationals averaged...

Sovereign Risk and Secondary Markets

By Fernando Broner, Alberto Martin, and Jaume Ventura

American Economic Review, September 2010

Conventional wisdom says that, in the absence of default penalties, sovereign risk destroys all foreign asset trade. We show that this conventional wisdom rests on one implicit assumption: that assets cannot be retraded in secondary markets. Without this ...

Pavlovian Processes in Consumer Choice: The Physical Presence of a Good Increases Willingness-to-Pay

By Benjamin Bushong, Lindsay M. King, Colin F. Camerer, and Antonio Rangel

American Economic Review, September 2010

This paper describes a series of laboratory experiments studying whether the form in which items are displayed at the time of decision affects the dollar value that subjects place on them. Using a Becker-DeGroot auction under three different conditions &#...

Determinants of Redistributive Politics: An Empirical Analysis of Land Reforms in West Bengal, India

By Pranab Bardhan and Dilip Mookherjee

American Economic Review, September 2010

We investigate political determinants of land reform implementation in the Indian state of West Bengal. Using a village panel spanning 1974-1998, we do not find evidence supporting the hypothesis that land reforms were positively and monotonically relat...

Monopoly Price Discrimination and Demand Curvature

By Iñaki Aguirre, Simon Cowan, and John Vickers

American Economic Review, September 2010

This paper presents a general analysis of the effects of monopolistic third-degree price discrimination on welfare and output when all markets are served. Sufficient conditions — involving straightforward comparisons of the curvatures of the direct...

Strategic Redistricting

By Faruk Gul and Wolfgang Pesendorfer

American Economic Review, September 2010

Two parties choose redistricting plans to maximize their probability of winning a majority in the House of Representatives. In the unique equilibrium, parties maximally segregate their opponents' supporters but pool their own supporters into uniform dist...

A Price Theory of Multi-sided Platforms

By E. Glen Weyl

American Economic Review, September 2010

I develop a general theory of monopoly pricing of networks. Platforms use insulating tariffs to avoid coordination failure, implementing any desired allocation. Profit maximization distorts in the spirit of A. Michael Spence (1975) by internalizing only n...

Consumption Taxes and Redistribution

By Isabel Correia

American Economic Review, September 2010

This study considers replacing the current US tax system with only a flat tax consumption tax, showing, in contrast to the literature, that such a reform leads to a decline in inequality and increase in welfare for the welfare-poor. The results are obtain...

When Does Communication Improve Coordination?

By Tore Ellingsen and Robert Östling

American Economic Review, September 2010

We study costless pre-play communication of intentions among inexperienced players. Using the level-k model of strategic thinking to describe players' beliefs, we fully characterize the effects of preplay communication in symmetric 2x2 games. One-way comm...

Kinship, Incentives, and Evolution

By Ingela Alger and Jörgen W. Weibull

American Economic Review, September 2010

We analyze how family ties affect incentives, with focus on the strategic interaction between two mutually altruistic siblings. The siblings exert effort to produce output under uncertainty, and they may transfer output to each other. With equally altruis...

Elections, Capital Flows, and Politico-economic Equilibria

By Roberto Chang

American Economic Review, September 2010

We study an open economy where a pro-labor and a pro-business candidate compete in an election. The winner chooses taxes, which affect investment returns. Electoral outcomes depend on the size of the foreign debt, but the debt itself reflects expectations...

Preemption Games: Theory and Experiment

By Steven T. Anderson, Daniel Friedman, and Ryan Oprea

American Economic Review, September 2010

Several impatient investors with private costs Ci face an indivisible irreversible investment opportunity whose value V is governed by geometric Brownian motion. The first investor i to seize the opportunity receives ...

Watta Satta: Bride Exchange and Women's Welfare in Rural Pakistan

By Hanan G. Jacoby and Ghazala Mansuri

American Economic Review, September 2010

Can marriage institutions limit marital inefficiency? We study the pervasive custom of watta satta in rural Pakistan, a bride exchange between families coupled with a mutual threat of retaliation. Watta satta can be seen as a mechanism for coordinating th...