Political Aid Cycles

By Michael Faye and Paul Niehaus

American Economic Review, December 2012

Researchers have scrutinized foreign aid's effects on poverty and growth, but anecdotal evidence suggests that donors often use aid for other ends. We test whether donors use bilateral aid to influence elections in developing countries. We find that recip...

Human Capital Investment and the Gender Division of Labor in a Brawn-Based Economy

By Mark M. Pitt, Mark R. Rosenzweig, and Mohammad Nazmul Hassan

American Economic Review, December 2012

A model of human capital investment and activity choice is used to explain facts describing gender differentials in the levels and returns to human capital investments and occupational choice. These include the higher return to and level of schooling, the...

The 11-20 Money Request Game: A Level-k Reasoning Study

By Ayala Arad and Ariel Rubinstein

American Economic Review, December 2012

We study experimentally a new two-player game: each player requests an amount between 11 and 20 shekels. He receives the requested amount and if he requests exactly one shekel less than the other player, he receives an additional 20 shekels. Level-k reas...

Who Gets the Job Referral? Evidence from a Social Networks Experiment

By Lori Beaman and Jeremy Magruder

American Economic Review, December 2012

We use recruitment into a laboratory experiment in Kolkata, India to analyze how social networks select individuals for jobs. The experiment allows subjects to refer actual network members for casual jobs as experimental subjects under exogenously varied...

Innovation and Foreign Ownership

By Maria Guadalupe, Olga Kuzmina, and Catherine Thomas

American Economic Review, December 2012

This paper uses a rich panel dataset of Spanish manufacturing firms (1990-2006) and a propensity score reweighting estimator to show that multinational firms acquire the most productive domestic firms, which, on acquisition, conduct more product and proce...

The Effect of Evaluation on Teacher Performance

By Eric S. Taylor and John H. Tyler

American Economic Review, December 2012

Teacher performance evaluation has become a dominant theme in school reform efforts. Yet, whether evaluation changes the performance of teachers, the focus of this paper, is unknown. Instead, evaluation has largely been studied as an input to selective d...

The Impact of Pollution on Worker Productivity

By Joshua Graff Zivin and Matthew Neidell

American Economic Review, December 2012

This paper assesses the impact of pollution on worker productivity by relating exogenous daily variations in ozone with productivity of agricultural workers as recorded under piece rate contracts. We find robust evidence that ozone levels well below feder...

Self-Fulfilling Risk Panics

By Philippe Bacchetta, Cédric Tille, and Eric van Wincoop

American Economic Review, December 2012

Recent crises have seen large spikes in asset price risk. We propose an explanation for such panics based on self-fulfilling shifts in beliefs about risk. A negative link between the current level and the future risk of an asset price leads to a circular ...

Life Insurance and Household Consumption

By Jay H. Hong and José-Víctor Ríos-Rull

American Economic Review, December 2012

Using life insurance holdings by age, sex, and marital status, we infer how individuals value consumption in different demographic stages. We estimate equivalence scales and bequest motives simultaneously within a fully specified model where agents face U...

Revolving Door Lobbyists

By Jordi Blanes i Vidal, Mirko Draca, and Christian Fons-Rosen

American Economic Review, December 2012

Washington's "revolving door"—the movement from government service into the lobbying industry—is regarded as a major concern for policy-making. We study how ex-government staffers benefit from the personal connections acquired during their pub...

The Economic Impacts of Climate Change: Evidence from Agricultural Output and Random Fluctuations in Weather: Comment

By Anthony C. Fisher, W. Michael Hanemann, Michael J. Roberts, and Wolfram Schlenker

American Economic Review, December 2012

In a series of studies employing a variety of approaches, we have found that the potential impact of climate change on US agriculture is likely negative. Deschênes and Greenstone (2007) report dramatically different results based on regressions of agr...

The Economic Impacts of Climate Change: Evidence from Agricultural Output and Random Fluctuations in Weather: Reply

By Olivier Deschênes and Michael Greenstone

American Economic Review, December 2012

Fisher et al. (2012) (henceforth, FHRS) have uncovered coding and data errors in our paper, Deschênes and Greenstone (2007), henceforth, DG. We acknowledge and are embarrassed by these mistakes. We are grateful to FHRS for uncovering them. We hope t...

Growth Dynamics: The Myth of Economic Recovery: Comment

By Hannes Mueller

American Economic Review, December 2012

This comment highlights different ways of coding crisis episodes in Cerra and Saxena (2008) (CS). The comment shows that the coding used for civil war implies a misrepresentation of its impact. A correct coding of civil war reveals that the average civil ...

Racial Discrimination in the Labor Market: Theory and Empirics

By Kevin Lang and Jee-Yeon K. Lehmann

Journal of Economic Literature, December 2012

We review theories of race discrimination in the labor market. Taste-based models can generate wage and unemployment duration differentials when combined with either random or directed search even when strong prejudice is not widespread, but no existing ...

Analyzing the Spectrum of Asset Returns: Jump and Volatility Components in High Frequency Data

By Yacine Aït-Sahalia and Jean Jacod

Journal of Economic Literature, December 2012

This paper reports some of the recent developments in the econometric analysis of semimartingales estimated using high frequency financial returns. It describes a simple yet powerful methodology to decompose asset returns sampled at high frequency into t...

Women Empowerment and Economic Development

By Esther Duflo

Journal of Economic Literature, December 2012

Women empowerment and economic development are closely related: in one direction, development alone can play a major role in driving down inequality between men and women; in the other direction, empowering women may benefit development. Does this imply t...

Psychologists at the Gate: A Review of Daniel Kahneman's Thinking, Fast and Slow

By Andrei Shleifer

Journal of Economic Literature, December 2012

The publication of Daniel Kahneman's book, Thinking, Fast and Slow, is a major intellectual event. The book summarizes, but also integrates, the research that Kahneman has done over the past forty years, beginning with his path-breaking work with...

Global Financial Stability and the Lessons of History: A Review of Carmen M. Reinhart and Kenneth S. Rogoff's This Time Is Different: Eight Centuries of Financial Folly

By Alan M. Taylor

Journal of Economic Literature, December 2012

In Reinhart and Rogoff's economic history This Time is Different, the authors provide a panoramic view of crises from the Middle Ages to the modern era. Published just as the current global financial storm arrived, the book quickly showed how his...

Book Reviews

Journal of Economic Literature, December 2012

Annotated Listing of New Books

Journal of Economic Literature, December 2012