Ambiguity Aversion: Implications for the Uncovered Interest Rate Parity Puzzle

By Cosmin Ilut

American Economic Journal: Macroeconomics, July 2012

High interest rate currencies tend to appreciate in the future relative to low interest rate currencies instead of depreciating as uncovered interest parity (UIP) predicts. I construct a model of exchange rate determination in which ambiguity-averse agent...

Temperature Shocks and Economic Growth: Evidence from the Last Half Century

By Melissa Dell, Benjamin F. Jones, and Benjamin A. Olken

American Economic Journal: Macroeconomics, July 2012

This paper uses historical fluctuations in temperature within countries to identify its effects on aggregate economic outcomes. We find three primary results. First, higher temperatures substantially reduce economic growth in poor countries. Second, high...

Social Security Reforms: Benefit Claiming, Labor Force Participation, and Long-Run Sustainability

By Selahattin Imrohoroğlu and Sagiri Kitao

American Economic Journal: Macroeconomics, July 2012

This paper develops a general equilibrium life-cycle model with endogenous labor supply in both intensive and extensive margins, consumption, saving, and benefit claiming to measure the long-run effects of a proposed Social Security reform. Agents in the...

The Cyclicality of Skill Acquisition: Evidence from Panel Data

By Fabio Méndez and Facundo Sepúlveda

American Economic Journal: Macroeconomics, July 2012

This paper presents new empirical evidence regarding the cyclicality of skill acquisition activities. The paper studies both training and schooling episodes at the individual level using quarterly data from the NLSY79 for a period of 19 years. We find tha...

A Quantitative Theory of Information and Unsecured Credit

By Kartik Athreya, Xuan S. Tam, and Eric R. Young

American Economic Journal: Macroeconomics, July 2012

Important changes have occurred in unsecured credit markets over the past three decades. Most prominently, there have been large increases in aggregate consumer debt, the personal bankruptcy rate, the size of bankruptcies, the dispersion of interest rates...

Speculative Bubbles and Financial Crises

By Pengfei Wang and Yi Wen

American Economic Journal: Macroeconomics, July 2012

Are asset prices unduly volatile and often detached from their fundamentals? Does the bursting of financial bubbles depress the real economy? This paper addresses these issues by constructing a DSGE model with speculative bubbles. We characterize conditi...

Front Matter

American Economic Journal: Applied Economics, July 2012

Raising the Barcode Scanner: Technology and Productivity in the Retail Sector

By Emek Basker

American Economic Journal: Applied Economics, July 2012

Barcodes and barcode scanners transformed the grocery industry in the 1970s. I use store-level data from the 1972, 1977, and 1982 Census of Retail Trade, matched to data on store scanner installations, to estimate scanners' effect on labor productivity. I...

How Large Are the Effects from Temporary Changes in Family Environment: Evidence from a Child-Evacuation Program during World War II

By Torsten Santavirta

American Economic Journal: Applied Economics, July 2012

During World War II, some 50,000 Finnish children were evacuated to Sweden and placed in foster families. The evacuation scheme limited sharply the scope for selection into foster care based on background characteristics. A first-come first-served policy ...

Sweetening the Deal? Political Connections and Sugar Mills in India

By Sandip Sukhtankar

American Economic Journal: Applied Economics, July 2012

Political control of firms is prevalent across the world. Evidence suggests that firms profit from political connections, and politicians derive benefit from control over firms. This paper investigates an alternative mechanism through which politicians ma...

Enforcement of Labor Regulation and Informality

By Rita Almeida and Pedro Carneiro

American Economic Journal: Applied Economics, July 2012

Enforcement of labor regulations in the formal sector may drive workers to informality because they increase the costs of formal labor. But better compliance with mandated benefits makes it attractive to be a formal employee. We show that, in locations wi...

When They're Sixty-Four: Peer Effects and the Timing of Retirement

By Kristine M. Brown and Ron A. Laschever

American Economic Journal: Applied Economics, July 2012

This paper examines the effect of peers on an individual's likelihood of retirement using an administrative dataset of all retirement-eligible Los Angeles teachers for the years 1998-2001. We use two large unexpected pension reforms that differentially im...

The Economic Benefits of Pharmaceutical Innovations: The Case of Cox-2 Inhibitors

By Craig L. Garthwaite

American Economic Journal: Applied Economics, July 2012

Despite dramatic improvements in medical technology, little attention has been paid to the role of these innovations in improving economic outcomes. This study estimates the labor supply effects of Cox-2 inhibitors, a widely prescribed class of pharmaceu...

High Unemployment Yet Few Small Firms: The Role of Centralized Bargaining in South Africa

By Jeremy R. Magruder

American Economic Journal: Applied Economics, July 2012

South Africa has very high unemployment, yet few adults work informally in small firms. This paper tests whether centralized bargaining, by which unionized large firms extend arbitration agreements to nonunionized smaller firms, contributes to this probl...

Drug Innovations and Welfare Measures Computed from Market Demand: The Case of Anti-cholesterol Drugs

By Abe Dunn

American Economic Journal: Applied Economics, July 2012

The pharmaceutical industry is characterized as having substantial investment in R&D and a large number of new product introductions, which poses special problems for price measurement caused by the quality of drug products changing over time. This paper...

Expansions in Maternity Leave Coverage and Children's Long-Term Outcomes

By Christian Dustmann and Uta Schönberg

American Economic Journal: Applied Economics, July 2012

This paper evaluates the impact of three major expansions in maternity leave coverage in Germany on children's long-run outcomes. To identify the causal impact of the reforms, we use a difference-indifference design that compares outcomes of children bor...

The Opt-In Revolution? Contraception and the Gender Gap in Wages

By Martha J. Bailey, Brad Hershbein, and Amalia R. Miller

American Economic Journal: Applied Economics, July 2012

Decades of research on the US gender gap in wages describes its correlates, but little is known about why women changed their career paths in the 1960s and 1970s. This paper explores the role of "the Pill" in altering women's human capital investments an...

Front Matter

American Economic Journal: Microeconomics, August 2012

Monopoly and the Incentive to Innovate When Adoption Involves Switchover Disruptions

By Thomas J. Holmes, David K. Levine, and James A. Schmitz

American Economic Journal: Microeconomics, August 2012

Arrow (1962) argued that since a monopoly restricts output relative to a competitive industry, it would be less willing to pay a fixed cost to adopt a new technology. We develop a new theory of why a monopolistic industry innovates less. Firms often face ...

Bonus Payments versus Efficiency Wages in the Repeated Principal-Agent Model with Subjective Evaluations

By Lucas Maestri

American Economic Journal: Microeconomics, August 2012

We study an infinitely repeated principal-agent model with subjective evaluations. We compare the surplus in efficiency-wage equilibria and in bonus-payments equilibria. The agent receives a constant wage and is motivated by the threat of dismissal in ef...