We document that net equity issuance is considerably more sensitive to aggregate stock returns and Q's than to firm-level stock returns and Q's. Very similar patterns also emerge when we look at merger activity. In light of earlier work (Campbell 1991, Vuolteenaho 2002) which finds that aggregate stock returns are less informative about future cashflows than are firm-level stock returns--and thus, potentially more strongly influenced by investor sentiment--these results suggest that both equity issuance and mergers are to a significant extent driven by market-timing considerations, as opposed to by purely fundamental factors.
How should benefit-cost analysis account for the value that benevolent individuals place on others' enjoyment of public goods? When adding up the benefits to be compared with costs, should we sum the private valuations, the altruistic valuations, or something else? This paper argues that private valuations are appropriate if concern for the well-being of others respects their private preferences. The discussion has implications for family decision-making, welfare economics, and the design of applied contingent valuation studies.
The Caring Hand that Cripples: The East German Labor Market after Reunification by Dennis J. Snower and Christian Merkl. Published in volume 96, issue 2, pages 375-382 of American Economic Review, May 2006
We illustrate problems of measuring discrimination using elections to AEA offices. With a new econometric technique, we find female candidates have a much better than random chance of victory. This advantage is either reverse discrimination or reflects beliefs that women are more productive. The former interpretation could be explained by an unchanging median voter whose preferences were not satisfied by suppliers of candidates; but there was a structural change in voting behavior in the mid-1970s. The results suggest it is generally impossible to claim differences in rewards, for different groups measure the extent of discrimination or even its direction.
Nearly a quarter-century after Paul Volcker’s declaration of war on inflation on October 6, 1979, Alan Greenspan declared that the goal had been achieved. Drawing on the extensive historical record, I examine the views of Chairmen Volcker and Greenspan on some aspects of the evolving monetary policy debate and explore some of the distinguishing characteristics of the disinflation.
Examination of firms in 47 countries shows a widespread overlap of controlling shareholders and top officers who are connected with national parliaments or governments, particularly in countries with higher levels of corruption, with barriers to foreign investment, and with more transparent systems. Connections are diminished when regulations set more limits on official behavior. Additionally, I show that the announcement of a new political connection results in a significant increase in value.
We argue that some, but not all, superstitions can persist when learning is rational and players are patient, and illustrate our argument with an example inspired by the Code of Hammurabi. The code specified an “appeal by surviving in the river” as a way of deciding whether an accusation was true. According to our theory, a mechanism that uses superstitions two or more steps off the equilibrium path, such as “appeal by surviving in the river,” is more likely to persist than a superstition where the false beliefs are only one step off the equilibrium path.
An effective climate change treaty must promote the joint supply of two global public goods: climate change mitigation and knowledge of new technologies that can lower mitigation costs. R&D is especially needed to bring about substantial, long-term reductions in atmospheric concentrations of greenhouse gases, for this will require the development and diffusion of revolutionary, “breakthrough ” technologies (Martin I. Hoffert et al. 2002). In principle, such an outcome could be realized by the Kyoto Protocol approach, if that agreement were strengthened over time. However, that response may be inadequate (Kyoto makes no provision for R&D)—and, as I shall demonstrate, unlikely to succeed in any event. Can a treaty system relying directly on targeted R&D and the adoption of breakthrough technologies perform better in this same setting of anarchic international relations? I shall show that, as a general rule, the answer is no. Essentially, the same forces that undermine Kyoto also challenge the R&D and technology approach. There is one exception to this rule: R&D leading to breakthrough technologies exhibiting increasing returns can improve dramatically on the Kyoto approach, even when these technologies are otherwise inferior to the alternatives available. This suggests that our approach to treaty design should be strategic. 2I. The Kyoto Approach Begin by considering the abatement decisions of countries in the absence of a multilateral agreement. Let qi denote country i’s abatement and let Q denote aggregate abatement; with N countries, Q = qi i=1 N Â. Finally, let country i’s payoff be given by p i = bQ- c qi
Yes. We construct a measure of aggregate technology change, controlling for aggregation effects, varying utilization of capital and labor, nonconstant returns, and imperfect competition. On impact, when technology improves, input use and nonresidential investment fall sharply. Output changes little. With a lag of several years, inputs and investment return to normal and output rises strongly. The standard one-sector real-business-cycle model is not consistent with this evidence. The evidence is consistent, however, with simple sticky-price models, which predict the results we find: when technology improves, inputs and investment generally fall in the short run, and output itself may also fall.