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Template-Type: ReDIF-Paper 1.0
Title: Falling Behind the Curve:
A Positive Analysis of Stop-Start Monetary Policies and the Great Inflation
Classification-JEL: E31; E52
Author-Name: Andrew Levin
Author-Person: ple143
Author-Name: John B. Taylor
Author-Person: pta174
Note: EFG ME
Number: 15630
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15630
File-URL: http://www.nber.org/papers/w15630.pdf
File-Format: application/pdf
Publication-Status: published as , Andrew Levin, John B. Taylor. in , Bordo and Orphanides. 2013
Abstract: This paper documents the evolution of long-run inflation expectations and models the stance of monetary policy from 1965 to 1980. A host of survey-based measures and financial market data indicate that long-run inflation expectations rose markedly from 1965 to 1969, leveled off in the mid-1970s, and then rose at an alarming pace from 1977 to 1980. While previous studies have shown that the trajectory of the federal funds rate over that period is not well-represented by a Taylor rule with a constant inflation goal, our analysis indicates that the path of policy can be characterized by a reaction function with two breaks in the intercept--in 1970 and 1976--that correspond to discrete shifts in an implicit inflation goal. This reaction function implies that a series of stop-start episodes occurred in 74-76, and 1979-80. In each episode, policy fell behind the curve by allowing a pickup in inflation before tightening belatedly, and then the subsequent contraction in economic activity led to policy easing before inflation had been brought back down to its previous level. The evidence presented in this paper raises serious doubts about several prominent theories of the Great Inflation and suggests that a simple rule with an explicit inflation goal could serve as a useful benchmark for avoiding its recurrence.
Handle: RePEc:nbr:nberwo:15630
Template-Type: ReDIF-Paper 1.0
Title: The Degree of Judicial Enforcement and Credit Markets: Evidence from Japanese Household Panel Data
Classification-JEL: D12; G21; G33; K12; K41; K42
Author-Name: Charles Yuji Horioka
Author-Person: pho41
Author-Name: Shizuka Sekita
Number: 15631
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15631
File-URL: http://www.nber.org/papers/w15631.pdf
File-Format: application/pdf
Publication-Status: published as Charles Yuji Horioka & Shizuka Sekita, 2011. "The Degree of Judicial Enforcement and Credit Markets: Evidence from Japanese Household Panel Data," International Review of Finance, International Review of Finance Ltd., vol. 11(2), pages 245-268, 06.
Abstract: In this paper, we conduct an empirical analysis of the impact of better judicial enforcement on the probability of being credit rationed, loan size, and the probability of bankruptcy using household-level data from the Japanese Panel Survey of Consumers, conducted by the Institute for Research on Household Economics, in conjunction with judicial data by court district on trial length and the ratio of the number of pending civil trials to the number of incoming civil trials.
Contrary to the predictions of the existing theory, we find that better judicial enforcement increases the probability of being credit rationed and decreases loan size.
Furthermore, we find that better judicial enforcement increases the probability of bankruptcy, a result that is consistent with lax screening effects.
Handle: RePEc:nbr:nberwo:15631
Template-Type: ReDIF-Paper 1.0
Title: Private Equity and Industry Performance
Classification-JEL: G24; G32
Author-Name: Shai Bernstein
Author-Name: Josh Lerner
Author-Person: ple60
Author-Name: Morten S?rensen
Author-Name: Per Str?mberg
Author-Person: pst18
Note: CF PR
Number: 15632
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15632
File-URL: http://www.nber.org/papers/w15632.pdf
File-Format: application/pdf
Publication-Status: published as Shai Bernstein & Josh Lerner & Morten Sorensen & Per Str?mberg, 2017. "Private Equity and Industry Performance," Management Science, vol 63(4), pages .
Abstract: The growth of the private equity industry has spurred concerns about its potential impact on the economy more generally. This analysis looks across nations and industries to assess the impact of private equity on industry performance. Industries where PE funds have invested in the past five years have grown more quickly in terms of productivity and employment. There are few significant differences between industries with limited and high private equity activity. It is hard to find support for claims that economic activity in industries with private equity backing is more exposed to aggregate shocks. The results using lagged private equity investments suggest that the results are not driven by reverse causality. These patterns are not driven solely by common law nations such as the United Kingdom and United States, but also hold in Continental Europe.
Handle: RePEc:nbr:nberwo:15632
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Comparative Effectiveness Research on Health and Health Care Spending
Classification-JEL: I0; I1; I11; I18
Author-Name: Anirban Basu
Author-Person: pba977
Author-Name: Tomas J. Philipson
Author-Person: pph37
Note: HC HE
Number: 15633
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15633
File-URL: http://www.nber.org/papers/w15633.pdf
File-Format: application/pdf
Publication-Status: published as Basu, Anirban & Jena, Anupam B. & Philipson, Tomas J., 2011. "The impact of comparative effectiveness research on health and health care spending," Journal of Health Economics, Elsevier, vol. 30(4), pages 695-706, July.
Abstract: Public technology assessments in general and Comparative Effectiveness Research (CER) in particular have been justified by offsetting benefits of improving patient health and reducing health care spending.
However, little conceptual and empirical understanding exists concerning the quantitative impact of public technology assessments such as CER.
This is needed to assess whether CER has benefits that outweighs its investment costs. This paper provides a systematic framework to analyze the impact of CER on health outcomes and medical care spending. We interpret CER to infuse evidence on product quality into the market place declaring product winners and losers. This shifts demand by patients and doctors as well as coverage by third party payers towards the winners of CER studies and away from losers.
We trace out the spending and health implications of such responses to evidence on product quality in privately and publicly financed health care markets. We simulate these effects for antipsychotics that are among the largest drug classes of the US Medicaid program and for which CER has been conducted by means of the CATIE trial in 1999.
Our main conclusion, from both the conceptual and empirical analysis, is that investments into CER may not always have the intended benefits of lowering spending and improving health outcomes.
Because CER may result in higher spending and worse health, it is important to have methods to evaluate quantitatively the impacts of CER investments.
Handle: RePEc:nbr:nberwo:15633
Template-Type: ReDIF-Paper 1.0
Title: Danger on the Exchange: How Counterparty Risk Was Managed on the Paris Bourse in the Nineteenth Century
Classification-JEL: G0; G01; G18; N23
Author-Name: Angelo Riva
Author-Person: pri328
Author-Name: Eugene N. White
Author-Person: pwh5
Number: 15634
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15634
File-URL: http://www.nber.org/papers/w15634.pdf
File-Format: application/pdf
Abstract: Over the course of the nineteenth century, the struggles of Paris Bourse to manage counterparty risk revealed the awkward choices that face derivatives exchanges.
Shortly after it was founded, the stock exchange, primarily a forward market, instituted a mutual guarantee fund to prevent broker failures from snowballing into a general liquidity crisis.
The creation of the fund then forced the Bourse to search for mechanisms to control moral hazard.
To study the determinants of broker failures, we collected new individual data on defaulting brokers and describe the evolving regulatory regime. To identify the factors behind the annual number of broker failures we use negative binominal regressions.
To explain individual brokers' duration in office, we employ a proportional hazard model, while logit regressions examine the causes of individual broker failures.
In addition to declines in asset prices and trading volume, the moral hazard from the mutual guarantee fund contributed to brokers' defaulting on their obligations.
The Bour when it finally imposed a tight regulatory regime that limited risk, trading began to migrate off the exchange to less regulated markets.
Handle: RePEc:nbr:nberwo:15634
Template-Type: ReDIF-Paper 1.0
Title: Quality Provision, Expected Firm Altruism and Brand Extensions
Classification-JEL: D64; L15; L21
Author-Name: Julio J. Rotemberg
Author-Person: pro30
Number: 15635
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15635
File-URL: http://www.nber.org/papers/w15635.pdf
File-Format: application/pdf
Publication-Status: published as Rotemberg, Julio J. "Expected Firm Altruism, Quality Provision, and Brand Extensions." Marketing Science 32, no. 2 (March–April 2013): 325–341.
Abstract: This paper studies quality choice in a model where consumers expect firms (or brands) to act altruistically. Under plausible assumptions regarding this altruism and the reaction of consumers to firms that demonstrate insufficient altruism, existing brands can face a larger demand for new products than new entrants. Moreover, the failure of new products can reduce the demand for a brand's existing products even if the quality of these existing products is well understood by consumers. The model provides an interpretation for the dependence of the success of brand extensions on the ``fit" between the original product and the extension. The model can also explain why a ``high-end" brand that is expected to care only for its most quality sensitive customers can have an advantage in introducing a product relative to a brand that is expected to be more widely altruistic.
Handle: RePEc:nbr:nberwo:15635
Template-Type: ReDIF-Paper 1.0
Title: The "Other" Imbalance and the Financial Crisis
Classification-JEL: E32; E44; E58; F30; G01; G30
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Note: EFG IFM ME
Number: 15636
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15636
File-URL: http://www.nber.org/papers/w15636.pdf
File-Format: application/pdf
Abstract: One of the main economic villains before the crisis was the presence of large "global imbalances."
The concern was that the U.S. would experience a sudden stop of capital flows, which would unavoidably drag the world economy into a deep recession. However, when the crisis finally did come, the mechanism did not at all resemble the feared sudden stop.
Quite the opposite, during the crisis net capital inflows to the U.S. were a stabilizing rather than a destabilizing source. I argue instead that the root imbalance was of a different kind: The entire world had an insatiable demand for safe debt instruments that put an enormous pressure on the U.S. financial system and its incentives (and this was facilitated by regulatory mistakes).
The crisis itself was the result of the negative feedback loop between the initial tremors in the financial industry created to bridge the safe-assets gap and the panic associated with the chaotic unraveling of this complex industry. Essentially, the financial sector was able to create "safe" assets from the securitization of lower quality ones, but at the cost of exposing the economy to a systemic panic.
This structural problem can be alleviated if governments around the world explicitly absorb a larger share of the systemic risk. The options for doing this range from surplus countries rebalancing their portfolios toward riskier assets, to private-public solutions where asset-producer countries preserve the good parts of the securitization industry while removing the systemic risk from the banks' balance sheets.
Such public-private solutions could be designed with fee structures that could incorporate all kind of too-big- or too-interconnected-to-fail considerations.
Handle: RePEc:nbr:nberwo:15636
Template-Type: ReDIF-Paper 1.0
Title: Causes and Consequences of Early Life Health
Classification-JEL: D1; I12; J13
Author-Name: Anne Case
Author-Person: pca108
Author-Name: Christina Paxson
Author-Person: ppa335
Note: AG CH PE
Number: 15637
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15637
File-URL: http://www.nber.org/papers/w15637.pdf
File-Format: application/pdf
Publication-Status: published as Anne Case & Christina Paxson, 2010. "Causes and consequences of early-life health," Demography, Springer, vol. 47(1), pages S65-S85, March.
Abstract: We examine the consequences of childhood health for economic and health outcomes in adulthood, using height as a marker of health in childhood. After reviewing previous evidence, we present a conceptual framework that highlights data limitations and methodological problems associated with the study of this topic. We present estimates of the associations between height and a range of outcomes, including schooling, employment, earnings, health and cognitive ability, using data collected from early to late adulthood on cohort members in five longitudinal data sets. We find height is uniformly associated with better economic, health and cognitive outcomes - a result only partially explained by the higher average educational attainment of taller individuals. We then turn to the NLSY79 Children and Young Adult Survey to better understand what specific aspects of early childhood are captured by height. We find, even among maternal siblings, taller siblings score better on cognitive tests and progress through school more quickly. Part of the differences found between siblings arises from differences in their birth weights and lengths attributable to mother's behaviors while pregnant. Taken together, these results support the hypothesis that childhood health influences health and economic status throughout the life course.
Handle: RePEc:nbr:nberwo:15637
Template-Type: ReDIF-Paper 1.0
Title: Employee Spinoffs and Other Entrants: Stylized Facts from Brazil
Classification-JEL: J21; L25; L26
Author-Name: Oana Hirakawa
Author-Name: Marc-Andreas Muendler
Author-Person: pmu63
Author-Name: James E. Rauch
Author-Person: pra166
Number: 15638
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15638
File-URL: http://www.nber.org/papers/w15638.pdf
File-Format: application/pdf
Publication-Status: published as Marc Muendler, James E. Rauch, and Oana Tocoian,"Employee Spinoffs and Other Entrants:
Stylized Facts from Brazil," International Journal of Industrial Organization 30 (September 2012): 447-458.
Abstract: Using a comprehensive linked employer-employee database from Brazil for the period , we are able for the first time to compare firms founded as employee spinoffs to new firms without parents and to diversification ventures of existing firms entering a new industry. Employee spinoffs are defined either as the director/manager having moved from a parent in the same industry or as one-quarter of the employees having shifted from a common parent. Depending on definition, employee spinoffs account for between one-sixth and one-third of the new firms in Brazil's private sector during this period. Regardless of definition, size at entry is larger for employee spinoffs than for new firms without parents but smaller than for diversification ventures of existing firms. Similarly, exit rates for employee spinoffs are less than for new firms without parents and comparable to those for diversification ventures of existing firms. These results suggest that we can think of some part of a firm's productivity draw in the Jovanovic (1982) model as embodied in the firm's employees and portable by them to a new firm.
Handle: RePEc:nbr:nberwo:15638
Template-Type: ReDIF-Paper 1.0
Title: Growth in a Time of Debt
Classification-JEL: E2; E3; E6; F3; F4; N10
Author-Name: Carmen M. Reinhart
Author-Person: pre33
Author-Name: Kenneth S. Rogoff
Author-Person: pro164
Note: IFM ME
Number: 15639
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15639
File-URL: http://www.nber.org/papers/w15639.pdf
File-Format: application/pdf
Publication-Status: published as Carmen M. Reinhart & Kenneth S. Rogoff, 2010. "Growth in a Time of Debt," American Economic Review, American Economic Association, vol. 100(2), pages 573-78, May.
Abstract: We study economic growth and inflation at different levels of government and external debt. Our analysis is based on new data on forty-four countries spanning about two hundred years. The dataset incorporates over 3,700 annual observations covering a wide range of political systems, institutions, exchange rate arrangements, and historic circumstances. Our main findings are: First, the relationship between government debt and real GDP growth is weak for debt/GDP ratios below a threshold of 90 percent of GDP. Above 90 percent, median growth rates fall by one percent, and average growth falls considerably more. We find that the threshold for public debt is similar in advanced and emerging economies. Second, emerging markets face lower thresholds for external debt (public and private)--which is usually denominated in a foreign currency. When external debt reaches 60 percent of GDP, annual growth declines
for higher levels, growth rates are roughly cut in half. Third, there is no apparent contemporaneous link between inflation and public debt levels for the advanced countries as a group (some countries, such as the United States, have experienced higher inflation when debt/GDP is high.) The story is entirely different for emerging markets, where inflation rises sharply as debt increases.
Handle: RePEc:nbr:nberwo:15639
Template-Type: ReDIF-Paper 1.0
Title: The Long Reach of Childhood Health and Circumstance: Evidence from the Whitehall II Study
Classification-JEL: I12; J24; J45
Author-Name: Anne Case
Author-Person: pca108
Author-Name: Christina Paxson
Author-Person: ppa335
Note: AG CH HC POL
Number: 15640
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15640
File-URL: http://www.nber.org/papers/w15640.pdf
File-Format: application/pdf
Publication-Status: published as Anne Case & Christina Paxson, 2011. "The Long Reach of Childhood Health and Circumstance: Evidence from the Whitehall II Study," Economic Journal, Royal Economic Society, vol. 121(554), pages F183-F204, 08.
Abstract: We use data from the Whitehall II study to examine the potential role played by early-life health and circumstances in determining health and employment status in middle and older ages.
The population from which the Whitehall II cohort was drawn consisted almost exclusively of white collar civil servants. We demonstrate that estimates of the impact of early-life conditions based on the Whitehall II cohort provide a lower bound on the effect of early-life circumstances on adult health and economic status for the population as a whole. That said, using the Whitehall II cohort data, we find early life circumstances are all predictive of entry grade and promotion to higher grade in Whitehall. Even with controls for entry grade or current grade, we find that childhood circumstances predict cohort members' current health status. Using fixed effect and first-difference models of self-assessed health status and civil service employment grade, we find no evidence of civil service grade affecting future self-assessed health. However, we find self-assessed health has a significant effect on future civil service grade.
Handle: RePEc:nbr:nberwo:15640
Template-Type: ReDIF-Paper 1.0
Title: Identification in Differentiated Products Markets Using Market Level Data
Classification-JEL: C35; L0
Author-Name: Steven T. Berry
Author-Person: pbe18
Author-Name: Philip A. Haile
Author-Person: pha381
Number: 15641
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15641
File-URL: http://www.nber.org/papers/w15641.pdf
File-Format: application/pdf
Publication-Status: published as Steven Berry and Philip Haile (2014), \Identication in Dierentiated Products Markets Using Market Level Data," forthcoming Econometrica (an earlier version is Cowles Foundation Discussion Paper # 1744R.)
Abstract: We consider nonparametric identification in models of differentiated products markets, using only market level observables. On the demand side we consider a nonparametric random utility model nesting random coefficients discrete choice models widely used in applied work. We allow for product/market-specific unobservables, endogenous product characteristics (e.g., prices), and high-dimensional taste shocks with arbitrary correlation and heteroskedasticity. On the supply side we specify marginal costs nonparametrically, allow for unobserved firm heterogeneity, and nest a variety of equilibrium oligopoly models. We pursue two approaches to identification. One relies on instrumental variables conditions used previously to demonstrate identification in a nonparametric regression framework. With this approach we can show identification of the demand side without reference to a particular supply model. Adding the supply side allows identification of firms' marginal costs as well. Our second approach, more closely linked to classical identification arguments for supply and demand models, employs a change of variables approach. This leads to constructive identification results relying on exclusion and support conditions. Our results lead to a testable restriction that provides the first general formalization of Bresnahan's (1982) intuition for empirically discriminating between alternative models of oligopoly competition.
Handle: RePEc:nbr:nberwo:15641
Template-Type: ReDIF-Paper 1.0
Title: Virtual Borders: Online Nominal Rigidities and International Market Segmentation
Classification-JEL: E30; F3; F4; L16
Author-Name: Jean Boivin
Author-Person: pbo43
Author-Name: Robert Clark
Author-Name: Nicolas Vincent
Author-Person: pvi316
Note: EFG IFM ME
Number: 15642
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15642
File-URL: http://www.nber.org/papers/w15642.pdf
File-Format: application/pdf
Publication-Status: published as Jean Boivin & Robert Clark & Nicolas Vincent, 2012. "Virtual borders," Journal of International Economics, vol 86(2), pages 327-335.
Abstract: Do prices respond to macro shocks? Does the mere presence of international frontiers hinder trade? We revisit these questions by studying a dataset of online book prices for a number of US and Canadian retailers. We believe our dataset is well suited to this task for a number of reasons: (1) data for multiple ret (2) the products sold are identi (3) the sample spans a period of large fluctuations in the bil (4) the nature of the industry is such that physical distance is irrelevant beyond shipping costs
(5) nominal frictions in the form of menu costs
and (6) proxies for sales are available for most retailers. Given the unique nature of our dataset, the first objective of the paper is to document the degree of price rigidity and price dispersion. Our main findings are: online book prices display si there is a large degree of heterogeneity across retailers in terms of price rigidity
price dispersion is high both within and across borders. Also, price levels do not appear to respond to exchange rate fluctuations. Building on the predictions from a simple two-country, multi-firm model and by exploiting information contained both in prices and quantities, we show that market segmentation is probably behind this disconnect .
Handle: RePEc:nbr:nberwo:15642
Template-Type: ReDIF-Paper 1.0
Title: Elected Versus Appointed Policymakers: Evidence from City Treasurers
Classification-JEL: D7; H1; H7
Author-Name: Alexander Whalley
Author-Person: pwh20
Note: PE POL
Number: 15643
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15643
File-URL: http://www.nber.org/papers/w15643.pdf
File-Format: application/pdf
Publication-Status: published as Alexander Whalley, 2013. "Elected versus Appointed Policy Makers: Evidence from City Treasurers," Journal of Law and Economics, University of Chicago Press, vol. 56(1), pages 39 - 81.
Abstract: This paper investigates whether methods of public official selection affect policymaking in cities. I draw on the unique characteristics of California's city referendum process to identify the causal effect of city treasurers' method of selection on their cities' debt management policies. I utilize a regression discontinuity strategy based on the effect of narrowly-passing appointive city treasurer referendums on city borrowing costs. The results indicate that appointive treasurers reduce a city's cost of borrowing by 13% to 23%. The results imply that if all cities in California with elected treasurers were to appoint them, total borrowing expenditures would be reduced by more than $20 million per year.
Appointive city treasurers appear to reduce borrowing costs primarily through the refinancing of expensive debt at lower interest rates.
Handle: RePEc:nbr:nberwo:15643
Template-Type: ReDIF-Paper 1.0
Title: Quality Disclosure and Certification: Theory and Practice
Classification-JEL: D18; D8; L15; L51
Author-Name: David Dranove
Author-Person: pdr111
Author-Name: Ginger Zhe Jin
Number: 15644
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15644
File-URL: http://www.nber.org/papers/w15644.pdf
File-Format: application/pdf
Publication-Status: published as David Dranove & Ginger Zhe Jin, 2010. "Quality Disclosure and Certification: Theory and Practice," Journal of Economic Literature, American Economic Association, vol. 48(4), pages 935-63, December.
Abstract: This essay reviews the theoretical and empirical literature on quality disclosure and certification. After comparing quality disclosure with other quality assurance mechanisms and describing a brief history of quality disclosure,
we address three key theoretical issues: (i) Why don't sellers voluntarily disclose through a process of "unraveling?" (ii) When should government mandate disclosure? and (iii) Do certifiers necessarily report unbiased and accurate information?
We further review empirical evidence on these issues, with a particular focus on healthcare, education, and finance.
The empirical review covers quality measurement, the effect of third party disclosure on consumer choice and seller behavior, as well as the economics of certifiers.
Handle: RePEc:nbr:nberwo:15644
Template-Type: ReDIF-Paper 1.0
Title: The Great Recession and the Great Depression
Classification-JEL: E32; E65; N12
Author-Name: Peter Temin
Author-Person: pte231
Note: DAE EFG ME
Number: 15645
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15645
File-URL: http://www.nber.org/papers/w15645.pdf
File-Format: application/pdf
Publication-Status: published as Peter Temin, 2010. "The Great Recession & the Great Depression," Daedalus, vol 139(4), pages 115-124.
Abstract: This paper discusses parallels between our current recession and the Great Depression for the intelligent general public.
It stresses the role of economic models and ideas in public policy and argues that gold-standard mentality still holds sway today.
The parallels are greatest in the generation of the crises, and they also illuminate the policy choices being made today.
We have escaped a repeat of the Depression, but we appear to have lost the opportunity for significant financial reform.
Handle: RePEc:nbr:nberwo:15645
Template-Type: ReDIF-Paper 1.0
Title: On the Size of the Active Management Industry
Classification-JEL: G10; G20
Author-Name: Lubos Pastor
Author-Person: ppa276
Author-Name: Robert F. Stambaugh
Author-Person: pst282
Number: 15646
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15646
File-URL: http://www.nber.org/papers/w15646.pdf
File-Format: application/pdf
Publication-Status: published as &Lubo?? P??stor & Robert F. Stambaugh, 2012. "On the Size of the Active Management Industry," Journal of Political Economy, University of Chicago Press, vol. 120(4), pages 740 - 781.
Abstract: We argue that active management's popularity is not puzzling despite the industry's poor track record. Our explanation features decreasing returns to scale: As the industry's size increases, every manager's ability to outperform passive benchmarks declines. The poor track record occurred before the growth of indexing modestly reduced the share of active management to its current size. At this size, better performance is expected by investors who believe in decreasing returns to scale. Such beliefs persist because persistence in industry size causes learning about returns to scale to be slow. The industry should shrink only moderately if its underperformance continues.
Handle: RePEc:nbr:nberwo:15646
Template-Type: ReDIF-Paper 1.0
Title: Finance and Misallocation: Evidence from Plant-level Data
Classification-JEL: O11; O4
Author-Name: Virgiliu Midrigan
Author-Person: pmi156
Author-Name: Daniel Yi Xu
Author-Person: pxu119
Note: EFG PR
Number: 15647
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15647
File-URL: http://www.nber.org/papers/w15647.pdf
File-Format: application/pdf
Publication-Status: published as Virgiliu Midrigan & Daniel Yi Xu, 2014. "Finance and Misallocation: Evidence from Plant-Level Data," American Economic Review, American Economic Association, vol. 104(2), pages 422-58, February.
Abstract: We study a model of industry dynamics in which idiosyncratic risk is uninsurable and establishments are subject to a financing constraint. We ask: does the model, when parameterized to match salient characteristics of plant-level data (Colombia and South Korea), predict large aggregate TFP losses from misallocation of factors across productive units? Our answer is: no. We estimate financing frictions that are fairly large: one-half of the establishments in both countries are constrained and face an external finance premium of 5% on average. Efficient establishments are, nonetheless, able to accumulate internal funds and quickly grow out of their borrowing constraints. Parameterizations of the model that hinder this process of internal accumulation can, in principle, cause very large TFP losses. Such parameterizations are, however, at odds with important features of plant-level data, most notably the difference in returns to factors across establishments that expand/contract (young vs. old) and the variability and persistence of plant-level sales.
Handle: RePEc:nbr:nberwo:15647
Template-Type: ReDIF-Paper 1.0
Title: Calorie Posting in Chain Restaurants
Classification-JEL: I18; L15
Author-Name: Bryan Bollinger
Author-Name: Phillip Leslie
Author-Name: Alan Sorensen
Note: HC HE IO
Number: 15648
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15648
File-URL: http://www.nber.org/papers/w15648.pdf
File-Format: application/pdf
Publication-Status: published as Bryan Bollinger & Phillip Leslie & Alan Sorensen, 2011. "Calorie Posting in Chain Restaurants," American Economic Journal: Economic Policy, American Economic Association, vol. 3(1), pages 91-128, February.
Abstract: We study the impact of mandatory calorie posting on consumers' purchase decisions, using detailed data from Starbucks. We find that average calories per transaction falls by 6%. The effect is almost entirely related to changes in consumers' food choices--there is almost no change in purchases of beverage calories. There is no impact on Starbucks profit on average, and for the subset of stores located close to their competitor Dunkin Donuts, the effect of calorie posting is actually to increase Starbucks revenue. Survey evidence and analysis of commuters suggest the mechanism for the effect is a combination of learning and salience.
Handle: RePEc:nbr:nberwo:15648
Template-Type: ReDIF-Paper 1.0
Title: Terminal Care and The Value of Life Near Its End
Classification-JEL: H0; I0
Author-Name: Tomas J. Philipson
Author-Person: pph37
Author-Name: Gary Becker
Author-Name: Dana Goldman
Author-Name: Kevin M. Murphy
Author-Person: pmu108
Note: HC HE PE
Number: 15649
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15649
File-URL: http://www.nber.org/papers/w15649.pdf
File-Format: application/pdf
Abstract: Medical care at the end of life, estimated to contribute up to a quarter of US health care spending, often encounters skepticism from payers and policy makers who question its high cost and often minimal health benefits.
However, though many observers have claimed that such spending is often irrational and wasteful, little explicit analysis exists on the incentives that determine end of life health care spending. This paper attempts to provide the first rational and systematic analysis of the incentives behind end of life care.
The main argument we make is that existing theoretical and empirical analysis of the value of life do not apply, and often under-values, the value of life near its end and terminal care. We argue that several factors drive up the value of life near its end including the low opportunity cost of medical spending
near ones death, the value of hope including living into new innovations, and the potential positive effect of on the value of life from being frail. We calibrate the ex-post value of hope associated with treatments for HIV patients to be as much as four times as high as standard per-capita estimates of treatment effects and as many as two and a half times as high as aggregate values across all cohorts.
Handle: RePEc:nbr:nberwo:15649
Template-Type: ReDIF-Paper 1.0
Title: Securitization in the 1920's
Classification-JEL: L85; N0; N2
Author-Name: William N. Goetzmann
Author-Person: pgo59
Author-Name: Frank Newman
Number: 15650
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15650
File-URL: http://www.nber.org/papers/w15650.pdf
File-Format: application/pdf
Abstract: This paper quantifies the scale and scope of the commercial real estate mortgage bond market in the period surrounding the 1920s in an attempt to better understand the role of retail mortgage debt in early urban development.
In particular, this paper quantifies the size of the market, identifies risk factors affecting the coupon yield spread over Treasuries and utilizes a unique data set to construct a commercial mortgage price index over the period . A substantial retail appetite for real estate securities during this period may have significantly contributed to a real construction boom, but overly optimistic speculation in these securities may have led to overbuilding.
The rapid deterioration of these securities and a near complete drop in issuance show, ex post, that investors were overconfident in building fundamentals during the boom years.
The breakdown in the value of real estate securities as collateral assets preceded the crash of 1929 and may have contributed to the fall of asset prices more generally.
Handle: RePEc:nbr:nberwo:15650
Template-Type: ReDIF-Paper 1.0
Title: Efficient Regulation
Classification-JEL: K12; K13; L51
Author-Name: Andrei Shleifer
Author-Person: psh93
Note: LE POL
Number: 15651
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15651
File-URL: http://www.nber.org/papers/w15651.pdf
File-Format: application/pdf
Publication-Status: published as , Andrei Shleifer. in , Kessler. 2011
Abstract: Regulation of economic activity is ubiquitous around the world, yet standard theories predict it should be rather uncommon.
I argue that the ubiquity of regulation is explained not so much by the failure of markets, or by asymmetric information, as by the failure of courts to solve contract and tort disputes cheaply, predictably, and impartially.
The approach accounts for the ubiquity of regulation, for its growth over time, as well as for the fact that contracts themselves are heavily regulated.
It also makes predictions, both across activities and across jurisdictions, for the efficiency of regulation and litigation as strategies of enforcing efficient conduct.
Handle: RePEc:nbr:nberwo:15651
Template-Type: ReDIF-Paper 1.0
Title: Asset Fire Sales and Credit Easing
Classification-JEL: E51; E58; G21
Author-Name: Andrei Shleifer
Author-Person: psh93
Author-Name: Robert W. Vishny
Note: CF EFG
Number: 15652
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15652
File-URL: http://www.nber.org/papers/w15652.pdf
File-Format: application/pdf
Publication-Status: published as Andrei Shleifer & Robert W. Vishny, 2010. "Asset Fire Sales and Credit Easing," American Economic Review, American Economic Association, vol. 100(2), pages 46-50, May.
Abstract: In a January 2009 lecture on the financial crisis, Federal Reserve Chairman Bernanke advocated a new Fed policy of credit easing, defined as a combination of lending to financial institutions, providing liquidity directly to key credit markets, and buying of long term securities.
We show that Bernanke's analysis and recommendations can be naturally considered in a model of "unstable banking," which relies on two mechanisms: 1) fire sales reduce asset prices below fundamental values, and 2) financial institutions prefer speculation to new lending when markets are dislocated.
We analyze credit easing and compare it to alternative government interventions during the crisis.
Handle: RePEc:nbr:nberwo:15652
Template-Type: ReDIF-Paper 1.0
Title: Rollover Risk and Credit Risk
Classification-JEL: G01; G33
Author-Name: Zhiguo He
Author-Name: Wei Xiong
Author-Person: pxi88
Note: AP CF ME
Number: 15653
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15653
File-URL: http://www.nber.org/papers/w15653.pdf
File-Format: application/pdf
Publication-Status: published as Zhiguo He & Wei Xiong, 2012. "Rollover Risk and Credit Risk," Journal of Finance, American Finance Association, vol. 67(2), pages 391-430, 04.
Abstract: This paper models a firm's rollover risk generated by conflict of interest between debt and equity holders. When the firm faces losses in rolling over its maturing debt, its equity holders are willing to absorb the losses only if the option value of keeping the firm alive justifies the cost of paying off the maturing debt. Our model shows that both deteriorating market liquidity and shorter debt maturity can exacerbate this externality and cause costly firm bankruptcy at higher fundamental thresholds. Our model provides implications on liquidity-spillover effects, the flight-to-quality phenomenon, and optimal debt maturity structures.
Handle: RePEc:nbr:nberwo:15653
Template-Type: ReDIF-Paper 1.0
Title: Can we infer social preferences from the lab? Evidence from the trust game
Classification-JEL: C9; D64; H41
Author-Name: Nicole M. Baran
Author-Name: Paola Sapienza
Author-Person: psa155
Author-Name: Luigi Zingales
Note: EEE IO PE
Number: 15654
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15654
File-URL: http://www.nber.org/papers/w15654.pdf
File-Format: application/pdf
Abstract: We show that a measure of reciprocity derived from the Berg et al. (1995) trust game in a laboratory setting predicts the reciprocal behavior of the same subjects in a real-world situation. By using the Crowne and Marlowe (1960) social desirability scale, we do not find any evidence that a desire to conform to social norms distorts results in the lab, yet we do find evidence that it affects results in the field.
Handle: RePEc:nbr:nberwo:15654
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Employment Protection on Worker Effort: Evidence from Public Schooling
Classification-JEL: I20; I21; I28; J3; J45; J5; J63
Author-Name: Brian A. Jacob
Note: CH ED LS PE
Number: 15655
Creation-Date: 2010-02
Order-URL: http://www.nber.org/papers/w15655
File-URL: http://www.nber.org/papers/w15655.pdf
File-Format: application/pdf
Publication-Status: published as
The Effect of Employment Protection on Teacher Effort Brian A. Jacob Journal of Labor Economics Vol. 31, No. 4 (October 2013), pp. 727-761
Abstract: This paper studies the effect of employment protection on worker productivity and firm output in the context of a public school system. In 2004, the Chicago Public Schools (CPS) and Chicago Teachers Union (CTU) signed a new collective bargaining agreement that gave principals the flexibility to dismiss probationary teachers (defined as those with less than five years of experience) for any reason, and without the elaborate documentation and hearing process typical in many large, urban school districts. Results suggest that the policy reduced annual teacher absences by roughly 10 percent and reduced the prevalence of teachers with 15 or more annual absences by 20 percent. The effects were strongest among teachers in elementary schools and in low-achieving, predominantly African-American high schools, and among teachers with highpredicted absences. There is also evidence that the impact of the policy increased substantially after its first year.
Handle: RePEc:nbr:nberwo:15655
Template-Type: ReDIF-Paper 1.0
Title: Targeted Savings and Labor Supply
Classification-JEL: D11; D91; H24; H31; H55; J22; J26
Author-Name: Louis Kaplow
Author-Person: pka44
Note: LS PE
Number: 15656
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15656
File-URL: http://www.nber.org/papers/w15656.pdf
File-Format: application/pdf
Publication-Status: published as Targeted Savings and Labor Supply, International Tax and Public Finance , vol. 18, pp. 507-518 (2011).
Abstract: Substantial evidence suggests that savings behavior may depart from neoclassical optimization.
This article examines the implications of raising the savings rate - whether through social security, retirement plans, or otherwise - for labor supply, where labor supply is determined by behavioral utility functions that reflect the non-neoclassical character of savings behavior.
Under one formulation, raising the targeted savings rate has the same effect on labor supply as that of raising the l under a second, raising the targeted savings rate has no ef and under a third, raising the targeted savings rate increases labor supply regardless of the slope of the labor supply curve.
Effects on labor supply are particularly consequential because of the significant preexisting distortion due to labor income taxation.
Handle: RePEc:nbr:nberwo:15656
Template-Type: ReDIF-Paper 1.0
Title: Real-Time Macroeconomic Monitoring: Real Activity, Inflation, and Interactions
Classification-JEL: E3
Author-Name: S. Boragan Aruoba
Author-Person: par34
Author-Name: Francis X. Diebold
Author-Person: pdi1
Note: AP EFG IFM
Number: 15657
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15657
File-URL: http://www.nber.org/papers/w15657.pdf
File-Format: application/pdf
Publication-Status: published as S. Borağan Aruoba & Francis X. Diebold, 2010. "Real-Time Macroeconomic Monitoring: Real Activity, Inflation, and Interactions," American Economic Review, American Economic Association, vol. 100(2), pages 20-24, May.
Abstract: We sketch a framework for monitoring macroeconomic activity in real-time and push it in new directions. In particular, we focus not only on real activity, which has received most attention to date, but also on inflation and its interaction with real activity. As for the recent recession, we find that (1) it likely ended around July 2009; (2) its most extreme aspects concern a real activity decline that was unusually long but less unusually deep, and an inflation decline that was unus and (3) its real activity and inflation interactions were strongly positive, consistent with an adverse demand shock.
Handle: RePEc:nbr:nberwo:15657
Template-Type: ReDIF-Paper 1.0
Title: Intended and Unintended Effects of Youth Bicycle Helmet Laws
Classification-JEL: I0; K0
Author-Name: Christopher S. Carpenter
Author-Person: pca802
Author-Name: Mark F. Stehr
Author-Person: pst259
Note: CH HE LE
Number: 15658
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15658
File-URL: http://www.nber.org/papers/w15658.pdf
File-Format: application/pdf
Publication-Status: published as “Intended and Unintended Consequences of Youth Bicy cle Helmet Laws” Christopher Carpenter and Mark Stehr, Journal of Law and Economics (): 305-324.
Abstract: Over 20 states have adopted laws requiring youths to wear a helmet when riding a bicycle.
We confirm previous research indicating that these laws reduced fatalities and increased helmet use, but we also show that the laws significantly reduced youth bicycling.
We find this result in standard two-way fixed effects models of parental reports of youth bicycling, as well as in triple difference models of self-reported bicycling among high school youths that explicitly account for bicycling by youths just above the helmet law age threshold.
Our results highlight important intended and unintended consequences of a well-intentioned public policy.
Handle: RePEc:nbr:nberwo:15658
Template-Type: ReDIF-Paper 1.0
Title: Overconfidence and Early-life Experiences: The Impact of Managerial Traits on Corporate Financial Policies
Classification-JEL: D03; D21; D23; D53; D82; G14; G3; G31; G32; H2; H32
Author-Name: Ulrike Malmendier
Author-Person: pma1397
Author-Name: Geoffrey Tate
Author-Name: Jonathan Yan
Note: CF LE LS PE
Number: 15659
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15659
File-URL: http://www.nber.org/papers/w15659.pdf
File-Format: application/pdf
Publication-Status: published as ULRIKE MALMENDIER & GEOFFREY TATE & JON YAN, 2011. "Overconfidence and Early-Life Experiences: The Effect of Managerial Traits on Corporate Financial Policies," The Journal of Finance, vol 66(5), pages .
Abstract: We show that measurable managerial characteristics have significant explanatory power for corporate financing decisions beyond traditional capital-structure determinants. First, managers who believe that their firm is undervalued view external financing as overpriced, especially equity. Such overconfident managers use less external finance and, conditional on accessing risky capital, issue less equity than their peers. Second, CEOs with Depression experience are averse to debt and lean excessively on internal finance. Third, CEOs with military experience pursue more aggressive policies, including heightened leverage. Complementary measures of CEO traits based on press portrayals confirm the results.
Handle: RePEc:nbr:nberwo:15659
Template-Type: ReDIF-Paper 1.0
Title: Wholesalers and Retailers in U.S. Trade (Long Version)
Classification-JEL: F1; L8; L81
Author-Name: Andrew B. Bernard
Author-Name: J. Bradford Jensen
Author-Person: pje75
Author-Name: Stephen J. Redding
Author-Person: pre64
Author-Name: Peter K. Schott
Author-Person: psc98
Number: 15660
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15660
File-URL: http://www.nber.org/papers/w15660.pdf
File-Format: application/pdf
Publication-Status: published as Wholesalers and Retailers in US Trade American Economic Review Papers and Proceedings, 2010, Vol. 100, No. 2, May, 408-413 (with J. Bradford Jensen, Stephen J. Redding,and Peter K. Schott)
Abstract: We combine data on individual trade transactions from U.S. customs records with comprehensive information on firms' employment from the Census Bureau's business register to examine wholesalers and retailers in U.S. exports and imports. Exporters and importers with 100 percent employment in wholesale and retail differ from pure "producer and consumer" trading firms along a number of dimensions: they are smaller in terms of employment, trade value and domestic sales, operate fewer U.S. establishments and are present in fewer U.S. states. "Mixed" firms, i.e., those with both production/consumption and wholesale retail within the boundaries of the firm, on the other hand, are substantially larger. They trade more products, trade with more countries, and are more likely to engage in related-party trade.
Handle: RePEc:nbr:nberwo:15660
Template-Type: ReDIF-Paper 1.0
Title: Innovators: Architects
Classification-JEL: A0
Author-Name: David W. Galenson
Number: 15661
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15661
File-URL: http://www.nber.org/papers/w15661.pdf
File-Format: application/pdf
Abstract: Frank Lloyd Wright, Le Corbusier, and Frank Gehry were experimental architects: all worked visually, and arrived at their designs by discovering forms as they sketched.
Their styles evolved gradually over long periods, and all three produced the buildings that are generally considered their greatest masterpieces after the age of 60.
In contrast, Maya Lin is a conceptual architect: her designs originate in ideas, and they arrive fully formed.
The work that dominates her career, the Vietnam Veterans Memorial, was designed as an assignment for a course she took during her senior year of college.
The dominance of a single early work makes Lin's career comparable to
those of a number of precocious conceptual innovators in other arts, including the painter Paul Sérusier, the sculptor Meret Oppenheim, the novelist J.D. Salinger, and the poet Allen Ginsberg.
Handle: RePEc:nbr:nberwo:15661
Template-Type: ReDIF-Paper 1.0
Title: Interpreting the Unconventional U.S. Monetary Policy of 2007-09
Classification-JEL: E42; E5; E61
Author-Name: Ricardo Reis
Author-Person: pre73
Note: AP CF EFG ME
Number: 15662
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15662
File-URL: http://www.nber.org/papers/w15662.pdf
File-Format: application/pdf
Publication-Status: published as Ricardo Reis, 2009. "Interpreting the Unconventional U.S. Monetary Policy of 2007-09," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 40(2 (Fall)), pages 119-182.
Abstract: This paper reviews the unconventional U.S. monetary policy responses to the financial and real crises of 2007-09, divided into three groups: interest rate policy, quantitative policy, and credit policy. To interpret interest rate policy, it compares the Federal Reserve's actions with the literature on optimal policy in a liquidity trap. The theory suggests that, to minimize the length and severity of the recession, would require a stronger commitment to low interest rates for an extended period of time. To interpret quantitative policy, the paper reviews the determination of inflation under different policy regimes. The main danger for inflation from current actions is that the Federal Reserve may lose its a beneficial side effect of the crisis is that the Friedman rule can be implemented by paying interest on reserves. To interpret credit policy, the paper presents a new model of capital market imperfections with different financial institutions and a role for securitization, leveraging, and mark-to-market accounting. The model suggests that providing credit to traders in securities markets can restore liquidity with fewer government funds than extending credit to the originators of loans.
Handle: RePEc:nbr:nberwo:15662
Template-Type: ReDIF-Paper 1.0
Title: Who Owns Children and Does it Matter?
Classification-JEL: D6; E1; H55; J13
Author-Name: Alice Schoonbroodt
Author-Name: Michèle Tertilt
Author-Person: pte114
Number: 15663
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15663
File-URL: http://www.nber.org/papers/w15663.pdf
File-Format: application/pdf
Abstract: Is there an economic rationale for pronatalist policies? In this paper we propose and analyze a particular market failure that may lead to inefficiently low equilibrium fertility and therefore to a need for government intervention. The friction we investigate is related to the ownership of children. If parents have no claim on their children's income, then the private benefit from producing a child may be smaller than the social benefit. We present an overlapping-generations (OLG) model with fertility choice and altruism, and model ownership by introducing a minimum constraint on transfers from parents to children. Using the efficiency concepts proposed in Golosov, Jones, and Tertilt (2007), we find that whenever the transfer floor is binding, fertility choices are inefficient. We show how this inefficiency relates to dynamic inefficiency in standard OLG models with exogenous fertility and Millian efficiency in models with endogenous fertility. In particular, we show that the usual conditions for efficiency are no longer sufficient. Further, we analyze several government policies in this context. We find that, in contrast to settings with exogenous fertility, a PAYG social security system cannot be used to implement the efficient allocation. To achieve the efficient outcome, government transfers need to be tied to a person's fertility choice in order to provide incentives for child-bearing.
Handle: RePEc:nbr:nberwo:15663
Template-Type: ReDIF-Paper 1.0
Title: Estimating the Technology of Cognitive and Noncognitive Skill Formation
Classification-JEL: C31; J13
Author-Name: Flavio Cunha
Author-Person: pcu47
Author-Name: James Heckman
Author-Name: Susanne Schennach
Note: CH ED
Number: 15664
Creation-Date: 2010-02
Order-URL: http://www.nber.org/papers/w15664
File-URL: http://www.nber.org/papers/w15664.pdf
File-Format: application/pdf
Publication-Status: published as Flavio Cunha & James J. Heckman & Susanne M. Schennach, 2010. "Estimating the Technology of Cognitive and Noncognitive Skill Formation," Econometrica, Econometric Society, vol. 78(3), pages 883-931, 05.
Abstract: This paper formulates and estimates multistage production functions for children's cognitive and noncognitive skills. Skills are determined by parental environments and investments at different stages of childhood. We estimate the elasticity of substitution between investments in one period and stocks of skills in that period to assess the benefits of early investment in children compared to later remediation. We establish nonparametric identification of a general class of production technologies based on nonlinear factor models with endogenous inputs. A by-product of our approach is a framework for evaluating childhood and schooling interventions that does not rely on arbitrarily scaled test scores as outputs and recognizes the differential effects of the same bundle of skills in different tasks. Using the estimated technology, we determine optimal targeting of interventions to children with different parental and personal birth endowments. Substitutability decreases in later stages of the life cycle in the production of cognitive skills. It is roughly constant across stages of the life cycle in the production of noncognitive skills. This finding has important implications for the design of policies that target the disadvantaged. For most configurations of disadvantage, our estimates imply that it is optimal to invest relatively more in the early stages of childhood than in later stages.
Handle: RePEc:nbr:nberwo:15664
Template-Type: ReDIF-Paper 1.0
Title: Research in Accounting for Income Taxes
Classification-JEL: H25; M41; M48
Author-Name: John Graham
Author-Name: Jana Raedy
Author-Name: Douglas Shackelford
Author-Person: psh631
Number: 15665
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15665
File-URL: http://www.nber.org/papers/w15665.pdf
File-Format: application/pdf
Publication-Status: published as Graham, John R. & Raedy, Jana S. & Shackelford, Douglas A., 2012. "Research in accounting for income taxes," Journal of Accounting and Economics, Elsevier, vol. 53(1), pages 412-434.
Abstract: This paper comprehensively reviews Accounting for Income Taxes (AFIT). The first half provides background and a primer on AFIT. The second half reviews existing studies in detail and offers suggestions for future research. We emphasize the research questions that have been addressed (most of which relate to whether the tax accounts are used to manage earnings, and whether the tax accounts are priced by equity market participants) and highlight areas that have not received much research attention.
We close with a call for a theoretical framework, more study of the inconsistencies between research and practice, and improved econometrics.
Handle: RePEc:nbr:nberwo:15665
Template-Type: ReDIF-Paper 1.0
Title: Heterogeneous Harm vs. Spatial Spillovers: Environmental Federalism and US Air Pollution
Classification-JEL: H4; H7; Q5
Author-Name: H. Spencer Banzhaf
Author-Person: pba328
Author-Name: B. Andrew Chupp
Author-Person: pch712
Note: EEE PE
Number: 15666
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15666
File-URL: http://www.nber.org/papers/w15666.pdf
File-Format: application/pdf
Publication-Status: published as "Fiscal Federalism and Interjurisdictional Extern alities: New Results and an Application to US Air Pollution," Journal of Public Economics 96, 2012, pp. 449-464 (with B.A. Chupp).
Abstract: The economics of environmental federalism identifies two book-end departures from the first-best, which equates marginal costs and benefits in all local jurisdictions.
Local governments may respond to local conditions, but ignore inter-jurisdictional spillovers.
Alternatively, central governments may internalize spillovers, but impose uniform regulations ignoring local hetero-geneity.
We provide a simple model that demonstrates that the choice of policy depends crucial-ly on the shape of marginal abatement costs.
If marginal costs are increasing and convex, then abatement cost elasticities will tend to be higher around the local policies.
This increases the deadweight loss of those policies relative to the centralized policy, ceteris paribus. Using a large simulation model, we then empirically explore the tradeoffs between local versus second-best uniform policies for US air pollution.
We find that US states acting in their own interest lose about 31.5% of the potential first-best benefits, whereas the second-best uniform policy loses only 0.2% of benefits.
The centralized policy outperforms the state policy for two reasons.
First, inter-state spillovers are simply more important that inter-state hetero-geneity in this application.
Second, welfare losses are especially small under the uniform policy because elasticities are much higher over the relevant range of the cost functions.
Handle: RePEc:nbr:nberwo:15666
Template-Type: ReDIF-Paper 1.0
Title: Oil and Democracy in Russia
Classification-JEL: H1; H3; N54
Author-Name: Daniel Treisman
Author-Person: ptr286
Number: 15667
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15667
File-URL: http://www.nber.org/papers/w15667.pdf
File-Format: application/pdf
Publication-Status: published as Daniel Treisman. "Rethinking Russia : Is Russia Cursed by Oil?" Vol. 63, No. 2, Spring/Summer 2010. Page 85-102
Abstract: Russia is often considered a perfect example of the so-called "resource curse"--the argument that natural resource wealth tends to undermine democracy. Given high oil prices, some observers see the country as virtually condemned to authoritarian government for the foreseeable future. Reexamining various data, I show that such fears are exaggerated. Evidence from around the world suggests that for countries like Russia with an established oil industry, even large increases in the scale of mineral incomes have only a minor effect on the political regime. In addition, Russia--a country with an industrialized economy, a highly educated, urbanized population, and an oil sector that remains majority private-owned--is unlikely to be susceptible to most of the hypothesized pernicious effects of resource dependence.
Handle: RePEc:nbr:nberwo:15667
Template-Type: ReDIF-Paper 1.0
Title: Private Information, Human Capital, and Optimal "Home Bias" in Financial Markets
Classification-JEL: D82; F30; G11; G12; G15; J24
Author-Name: Isaac Ehrlich
Author-Person: peh1
Author-Name: Jong Kook Shin
Author-Name: Yong Yin
Author-Person: pyi17
Number: 15668
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15668
File-URL: http://www.nber.org/papers/w15668.pdf
File-Format: application/pdf
Publication-Status: published as Isaac Ehrlich & Jong Kook Shin & Yong Yin, 2011. "Private Information, Human Capital, and Optimal "Home Bias" in Financial Markets," Journal of Human Capital, University of Chicago Press, vol. 5(3), pages 255 - 301
Abstract: By allowing for imperfectly informed markets and the role of private information, we offer new insights about observed deviations of portfolio concentrations in domestic relative to foreign risky assets, or "home bias", from what standard finance models predict. Our model ascribes the "bias" to endogenous information acquisition bolstered by investors' human capital. We develop discriminating hypotheses about the influence of "specific" and "general" human capital endowments and direct and opportunity costs of managing risky assets in determining whether to hold these assets, and how the assets' portfolio shares vary across investors and financial markets. These hypotheses are supported by numerical and econometric analyses of panel data from the US over , and 23 international financial markets over . The results indicate the existence of differences across countries in the degree to which home asset prices are "information-revealing", which may be relevant for fully understanding the global financial crisis of 2007-09.
Handle: RePEc:nbr:nberwo:15668
Template-Type: ReDIF-Paper 1.0
Title: Did Frederick Brodie Discover the World's First Environmental Kuznets Curve? Coal Smoke and the Rise and Fall of the London Fog
Classification-JEL: N13; N3; N5; Q0; Q38; Q53; Q54; Q58
Author-Name: Karen Clay
Author-Person: pcl25
Author-Name: Werner Troesken
Author-Person: ptr352
Note: DAE EEE HE
Number: 15669
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15669
File-URL: http://www.nber.org/papers/w15669.pdf
File-Format: application/pdf
Publication-Status: published as , Karen Clay, Werner Troesken. in , Libecap and Steckel. 2011
Abstract: In a paper presented to the Royal Meteorological Society, Brodie (1905) presented a data series that presaged the modern Environmental Kuznets Curve: in the decades leading up to 1890, the number of foggy days in London rose steadily, but after 1891, the fogs began to subside.
Brodie attributed the rise and fall of the London fog to variation in emissions of coal smoke, arguing that before 1890 Londoners burned excessive amounts of soft coal, while in the years following, a series of legal, demographic, and technological changes mitigated the production of coal smoke.
This paper asks two questions.
First, are Brodie's underlying data trustworthy?
Do other, independent sources of evidence same patterns Brodie identified?
Was London's atmosphere becoming more polluted and foggy for most of the nineteenth century, only to improve around 1890?
Second, if so, is Brodie's interpretation of the data correct?
Can the changes in London's atmosphere be attributed to changes in the production of coal smoke, or were they the result of some broader meteorological phenomenon.
The evidence we present here is consistent Brodie's data and interpretation.
Handle: RePEc:nbr:nberwo:15669
Template-Type: ReDIF-Paper 1.0
Title: Searching for Irving Fisher
Classification-JEL: E4; G1; N2
Author-Name: Kris James Mitchener
Author-Name: Marc D. Weidenmier
Author-Person: pwe14
Note: DAE ME
Number: 15670
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15670
File-URL: http://www.nber.org/papers/w15670.pdf
File-Format: application/pdf
Abstract: There is a long-standing debate as to whether the Fisher effect operated during the classical gold standard period. We break new ground on this question by developing a market-based measure of general inflation expectations during the gold standard. Since the gold-silver price ratio was widely used to track inflation during the gold standard period, we are able to derive a measure of inflation expectations using the interest-rate differential between Austrian silver and gold perpetuity bonds with identical terms. Our empirical evidence suggests that inflation expectations exhibited significant persistence at the weekly, monthly, and annual frequencies. We also find that market participants updated long-run inflation expectations following short-run changes in the forward silver price of gold. The evidence suggests the operation of a long-run Fisher effect during the classical gold standard period.
Handle: RePEc:nbr:nberwo:15670
Template-Type: ReDIF-Paper 1.0
Title: Peer Migration in China
Classification-JEL: J6; O12; R23
Author-Name: Yuyu Chen
Author-Person: pch138
Author-Name: Ginger Zhe Jin
Author-Name: Yang Yue
Author-Person: pyu95
Number: 15671
Creation-Date: 2010-01
Order-URL: http://www.nber.org/papers/w15671
File-URL: http://www.nber.org/papers/w15671.pdf
File-Format: application/pdf
Abstract: We aim to quantify the role of social networks in job-related migration. With over 130 million rural labors migrating to the city each year, China is experiencing the largest internal migration in the human history. Using instrumental variables in the 2006 China Agricultural Census, we find that }