Minimum Wages and Earnings Inequality in Urban Mexico

By Mariano Bosch and Marco Manacorda

American Economic Journal: Applied Economics, October 2010

This paper analyzes the contribution of the minimum wage to the well documented rise in earnings inequality in Mexico between the late 1980s and the early 2000s. We find that a substantial part of the growth in inequality, and essentially all of the growt...

School Competition and Efficiency with Publicly Funded Catholic Schools

By David Card, Martin D. Dooley, and A. Abigail Payne

American Economic Journal: Applied Economics, October 2010

We study competition between two publicly funded school systems in Ontario, Canada: one that is open to all students, and one that is restricted to children of Catholic backgrounds. A simple model of competition between the competing systems predicts grea...

(Over)insuring Modest Risks

By Justin Sydnor

American Economic Journal: Applied Economics, October 2010

Despite the large literature on anomalies in risky choice, very little research has explored the relevance of these insights in real insurance markets. This paper uses new data on consumers' choices of deductibles for home insurance to provide evidence t...

Government Spending and Legislative Organization: Quasi-experimental Evidence from Germany

By Peter Egger and Marko Koethenbuerger

American Economic Journal: Applied Economics, October 2010

This paper presents empirical evidence of a positive effect of council size on government spending using a dataset of 2,056 municipalities in the German state of Bavaria over a period of 21 years. We apply a regression discontinuity design to avoid an end...

Put Your Money Where Your Butt Is: A Commitment Contract for Smoking Cessation

By Xavier Giné, Dean Karlan, and Jonathan Zinman

American Economic Journal: Applied Economics, October 2010

We designed and tested a voluntary commitment product to help smokers quit smoking. The product (CARES) offered smokers a savings account in which they deposit funds for six months, after which they take a urine test for nicotine and cotinine. If they pas...

The Importance of Being Wanted

By Quy-Toan Do and Tung D. Phung

American Economic Journal: Applied Economics, October 2010

We identify birth wantedness as a source of better child outcomes. In Vietnam, the year of birth is widely believed to determine success. As a result, cohorts born in auspicious years are 12 percent larger. Comparing siblings with one another, those of au...

Front Matter

American Economic Journal: Macroeconomics, October 2010

Understanding PPPs and PPP-Based National Accounts

By Angus Deaton and Alan Heston

American Economic Journal: Macroeconomics, October 2010

We provide an overview of the theory and practice of constructing PPPs. We focus on four practical areas: how to handle international differences in quality; the treatment of urban and rural areas of large countries; how to estimate prices for government ...

Understanding PPPs and PPP-Based National Accounts: Comment

By Erwin Diewert

American Economic Journal: Macroeconomics, October 2010

Understanding PPPs and PPP-Based National Accounts: Comment

By Martin Ravallion

American Economic Journal: Macroeconomics, October 2010

How Much Consumption Insurance beyond Self-Insurance?

By Greg Kaplan and Giovanni L. Violante

American Economic Journal: Macroeconomics, October 2010

We assess the degree of consumption smoothing implicit in a calibrated life-cycle version of the standard incomplete-markets model, and we compare it to the empirical estimates of Richard Blundell, Luigi Pistaferri, and Ian Preston (2008) (BPP hereafter)...

Unmeasured Investment and the Puzzling US Boom in the 1990s

By Ellen R. McGrattan and Edward C. Prescott

American Economic Journal: Macroeconomics, October 2010

For the 1990s, the basic neoclassical growth model predicts a depressed economy, when in fact the US economy boomed. We extend the base model by introducing intangible investment and non-neutral technology change with respect to producing intangible inves...

Do Output Contractions Trigger Democratic Change?

By Paul J. Burke and Andrew Leigh

American Economic Journal: Macroeconomics, October 2010

Does faster economic growth increase pressure for democratic change, or reduce it? Using data for 154 countries for the period 1963-2007, we examine the short-run relationship between economic growth and moves toward and away from greater democracy. To ad...

The Structure of Tariffs and Long-Term Growth

By Nathan Nunn and Daniel Trefler

American Economic Journal: Macroeconomics, October 2010

We show that the "skill bias" of a country's tariff structure is positively correlated with long-term per capita GDP growth. Testing for causal mechanisms, we find evidence consistent with the existence of real benefits from tariffs focused in skill-inte...

Value-Added Taxes, Chain Effects, and Informality

By Áureo de Paula and Jose A. Scheinkman

American Economic Journal: Macroeconomics, October 2010

We present an equilibrium model of tax avoidance and test its implications using a survey of firms in Brazil. In the model, the credit method used to collect value-added tax (VAT) creates informality chains-clients or suppliers of informal firms are more ...

Determinants of Economic Growth: Will Data Tell?

By Antonio Ciccone and Marek Jarociński

American Economic Journal: Macroeconomics, October 2010

Many factors inhibiting and facilitating economic growth have been suggested. Can agnostics rely on international income data to tell them which matter? We find that agnostic priors lead to conclusions that are sensitive to differences across available i...

International Competition and Inflation: A New Keynesian Perspective

By Luca Guerrieri, Christopher Gust, and J. David López-Salido

American Economic Journal: Macroeconomics, October 2010

We develop and estimate an open economy New Keynesian Phillips Curve (NKPC) in which variable demand elasticities give rise to movements in desired markups in response to changes in competitive pressure from abroad. A parametric restriction yields the sta...

Risk-Sensitive Consumption and Savings under Rational Inattention

By Yulei Luo and Eric R. Young

American Economic Journal: Macroeconomics, October 2010

This paper studies the consumption-savings behavior of households who have risk-sensitive preferences and suffer from limited information-processing capacity (rational inattention or RI). We first solve the model explicitly and show that RI increases prec...

Front Matter

American Economic Journal: Economic Policy, November 2010

The Effects of Pharmaceutical Marketing and Promotion on Adverse Drug Events and Regulation

By Guy David, Sara Markowitz, and Seth Richards-Shubik

American Economic Journal: Economic Policy, November 2010

This paper analyzes the relationship between postmarketing promotional activity and reporting of adverse drug reactions (ADRs) by modeling the interaction between a regulator (the FDA) and a pharmaceutical firm. Promotion-driven market expansions enhance...