Knowledge that Transforms

This paper re-examines the returns to computer use using a new matched workplace-employee data from Canada. We control for potential selection using instrumental variables. Results suggest that it is not merely the employee having a computer on his desk, but rather having complementary computer skills, that causes wages to increase.(This abstract was borrowed from another version of this item.)

Does Competition for Capital Discipline Governments? Decentralization, Globalization, and Public Policy by Hongbin Cai and Daniel Treisman. Published in volume 95, issue 3, pages 817-830 of American Economic Review, June 2005

Will U.S. Agriculture Really Benefit from Global Warming? Accounting for Irrigation in the Hedonic Approach by Wolfram Schlenker, W. Michael Hanemann and Anthony C. Fisher. Published in volume 95, issue 1, pages 395-406 of American Economic Review, March 2005

People may be surprised to notice certain regularities that hold in existing knowledge they have had for some time. That is, they may learn without getting new factual information. We argue that this can be partly explained by computational complexity. We show that, given a knowledge base, finding a small set of variables that obtain a certain value of R 2 is computationally hard, in the sense that this term is used in computer science. We discuss some of the implications of this result and of fact-free learning in general.

Welfare-Enhancing Technological Change and the Growth of Obesity by Darius Lakdawalla, Tomas Philipson and Jay Bhattacharya. Published in volume 95, issue 2, pages 253-257 of American Economic Review, May 2005

The controversy over dynamic scoring in the United States is not new.1 But the possibility that dynamic scoring might be adopted has moved closer to reality recently, with initial attempts by

We investigate the market for news under two assumptions: that readers hold beliefs which they like to see confirmed, and that newspapers can slant stories toward these beliefs. We show that, on the topics where readers share common beliefs, one should not expect accuracy even from competitive media: competition results in lower prices, but common slanting toward reader biases. On topics where reader beliefs diverge (such as politically divisive issues), however, newspapers segment the market and slant toward extreme positions. Yet in the aggregate, a reader with access to all news sources could get an unbiased perspective. Generally speaking, reader heterogeneity is more important for accuracy in media than competition per se.

In Search of the Holy Grail: Policy Convergence, Experimentation, and Economic Performance by Sharun W. Mukand and Dani Rodrik. Published in volume 95, issue 1, pages 374-383 of American Economic Review, March 2005

Following a recession, the aggregate labor market is slack–employment remains below normal and recruiting efforts of employers, as measured by help-wanted advertising and vacancies, are low. A model of matching friction explains the qualitative responses of the labor market to adverse shocks, but requires implausibly large shocks to account for the magnitude of observed fluctuations. The incorporation of wage stickiness vastly increases the sensitivity of the model to driving forces. I develop a new model of the way that wage stickiness affects unemployment. The stickiness arises in an economic equilibrium and satisfies the condition that no worker-employer pair has an unexploited opportunity for mutual improvement. Sticky wages neither interfere with the efficient formation of employment matches nor cause inefficient job loss. Thus the model provides an answer to the fundamental criticism previously directed at sticky-wage models of fluctuations.

This note corrects an error in an example in Meetings with Costly Participation (AER 90(4), 927-943). It characterizes the set of equilibria for the example under the assumptions in the paper, shows that in all the equilibria an interval of moderate po- sitions is devoid of participants, and provides assumptions under which the result as originally stated is correct.