We examine interest and inflation rates from 1879 to 1913. Deflation prior to 1896 was followed by inflation. Average U. S. inflation was 3.1 percentage points higher in the years after 1896, yet nominal interest rates were no higher after 1896. This nonadjustment of nominal rates would be consistent with rational expectations if inflation was not forecastable, and indeed univariate tests show little sign of serial correlation. But gold production does forecast inflation. The relationship between mining and inflation was such that expected inflation should have risen 300 basis points between 1890 and 1910. We consider explanations of this failure to foresee the shift in inflation after 1896 and conclude that it is not persuasive evidence that investors ignored relevant information, but does suggest great uncertainty about the appropriate model for analyzing the economy.

We examine the effect of credit default swaps (CDSs) on debt specialization. We argue that reference firms in CDS contracts, seeking to minimize creditor conflicts and bankruptcy costs, exhibit higher debt concentration than firms on which no CDSs are traded. Our results show that firms engage in greater debt specialization and are more likely to specialize following the inception of CDS trading. Additionally, we find that, while lender concentration in firms increases, the number of bank lenders drops, lead arranger share rises, and the probability that lead arrangers and lenders are repeated increases following the onset of CDS trading. Our results are robust to instrumental variable estimation, propensity-score matching, different model specifications, and different subsamples.

Authors often add covariates to a base model sequentially either to test a particular coefficient’s “robustness” or to account for the “effects” on this coefficient of adding covariates. This is problematic, due to sequence sensitivity when added covariates are intercorrelated. Using the omitted variables bias formula, I construct a conditional decomposition that accounts for various covariates’ role in moving base regressors’ coefficients. I also provide a consistent covariance formula. I illustrate this conditional decomposition with NLSY data in an application that exhibits sequence sensitivity. Related extensions include instrumental variables, the fact that my decomposition nests the Oaxaca-Blinder decomposition, and a Hausman test result.

Volunteer activity is work performed without monetary recompense. This article shows that volunteering is a sizeable economic activity in the United States, that volunteers have high skills and opportunity costs of time, that standard labor supply explanations of volunteering account for only a minor part of volunteer behavior, and that many volunteer only when requested to do so. This suggests that volunteering is a "conscience good or activity"-something that people feel morally obligated to do when asked, but which they would just as soon let someone else do.

This article demonstrates that state collective bargaining laws are important determinants of union and nonunion public employee compensation. State laws that provide stronger bargaining rights and ensure closure to the bargaining process increase the direct effect of police unions on compensation. Moreover, indirect threat effects on the pay of nonunion police also increase with stronger bargaining laws. In each law category investigated, nonunion police receive most of the compensation premium enjoyed by unionized police. Previous studies that have not adequately controlled for these effects of bargaining laws have therefore underestimated the full effect of public-sector unions on compensation.

The steady-state effect on inequality of linear redistributive schemes based on the taxation of earnings, inheritances, or some combination of the two is examined. Dynasties that exhibit asexual reproduction and altruism are modeled. Earnings ability, which may be correlated across generations, is exogenous and drawn from a stationary distribution. Taxing inheritances increases inequality by reducing the intergenerational averaging of "luck." In an example, paying out the tax revenue in uniform transfers typically does not reverse this result. Taxing lifetime wealth or income adds a lump-sum tax on earnings, making redistribution more successful. However, this success is sensitive to the relative size of mean earnings and inheritances.

This paper examines how measurement error biases longitudinal estimates of union effects. It develops numerical examples, statistical models, and econometric estimates which indicate that measurement error is a major problem in longitudinal data sets, so that longitudinal analyses do not provide the research panacea for determining the effects of unionism (or other economic forces) some have suggested. There are three major findings: