Knowledge that Transforms

Traditional justifications for patents are based on direct or indirect contribution to product creation. Non-practicing entities (NPEs) might provide such innovation, either directly, through working the patent or transfer of technology to others who do, or indirectly, when others copy. Available evidence suggests, however, that ex post licensing demands from NPEs do not normally involve these activities. Some have argued that patents are valuable without01/technology transfer because the ability to exclude may drive commercialization that would not otherwise occur. We demonstrate that even if commercialization theories sometimes justify patent protection, they cannot justify most NPE lawsuits or licensing demands.

We develop a framework to characterize strategic behavior in sequential markets under imperfect competition and restricted entry in arbitrage. Our theory predicts that these two elements can generate a systematic price premium. We test the model predictions using microdata from the Iberian electricity market. We show that the observed price differences and firm behavior are consistent with the model. Finally, we quantify the welfare effects of arbitrage using a structural model. In the presence of market power, we show that full arbitrage is not necessarily welfare-enhancing, reducing consumer costs but increasing deadweight loss.

The standard economic view suggests that people will commit an action if its expected benefits outweigh its costs. But before people weigh the costs and benefits of an action, what affects whether they think of the action in the first place? We argue that actions are more likely to enter into consideration when they are cognitively accessible. We describe three psychological parameters that influence accessibility: automatic assumptions, identity, and perceptions of privacy. These parameters make it possible to identify new interventions for behavior change.

This paper links the sharp drop in US manufacturing employment after 2000 to a change in US trade policy that eliminated potential tariff increases on Chinese imports. Industries more exposed to the change experience greater employment loss, increased imports from China, and higher entry by US importers and foreign-owned Chinese exporters. At the plant level, shifts toward less labor-intensive production and exposure to the policy via input-output linkages also contribute to the decline in employment. Results are robust to other potential explanations of employment loss, and there is no similar reaction in the European Union, where policy did not change.

Schulz (2016) replicates the findings of van Binsbergen, Brandt, and Koijen (2012)—henceforth, BBK—and agrees that the average pretax returns on short-term dividend strips are higher than those of the index, but argues that the after-tax returns are not. He thus provides a possible economic interpretation of the results in BBK: taxes. Schulz (2016) estimates the differential tax rates of dividends versus capital gains from ex-dividend day returns. We show that these estimated tax rates are suspect and imprecisely measured, peaking at over 100 percent in some periods. The results in BBK are robust to using tax rates from the literature (Sialm 2009). The arguments in Schulz (2016) thus crucially depend on implausibly large tax esti mates. We further discuss two other financial market imperfections discussed in the literature and show that they are also unlikely to explain the results in BBK.

Based on experimental dictator games with probabilistic prospects, Brock, Lange, and Ozbay (2013) conclude that neither ex post nor ex ante comparisons can fully account for observed behavior. We argue that their conclusion that ex ante comparisons cannot explain the data is at best weakly supported by their results, and do so on three grounds: (i) the absence of significant differences between the most relevant treatments, (ii) the implicit assumption of subjects' risk neu trality, and (iii) the asymmetry of treatments regarding the disclosure of dictators' choice.

An important unresolved issue in the search literature is the question to what extent suboptimal search reflects “traditional search frictions,” and to what extent it reflects behavioral biases. The distinction is important for assessing welfare, predicting firm behavior, and making policy choices. In order to make progress on this question, we need a precise theoretical distinction and micro data. I argue that Schneider's (2016) analysis and data confirm and complement the main findings in Malmendier and Lee (2011), but neither his nor our data permit us to quantitatively assess the relative importance of these determinants. I propose several feasible identification strategies.

Official statistical data on the structure, evolution and performance of the U.S. economy are produced by a variety federal, state and local agencies. Much of the methodology, policy frameworks and infrastructure for U.S. economic measurement have been in place for decades. There are growing concerns that the economy is evolving more rapidly than are the economic statistics we use to monitor it. We discuss both the challenges and opportunities to modernizing federal economic statistics. We describe an incremental approach that federal statistics agencies can follow to build a 21st century economic measurement system.

Expensive infrastructure is ineffective if it doesn't travel the last mile. In nineteenth-century New York and modern Africa, disease has spread when urbanites chose not to use newly built sanitation infrastructure to save money. Either subsidies or Pigouvian fines can internalize the externalities that occur when people don't use sanitation infrastructure, but with weak institutions subsidies generate waste and fines lead to extortion. Our model illustrates the complementarity between infrastructure and institutions and shows how institutional weaknesses determine whether fines, subsidies, both or neither are optimal. Contrary to Becker (1968), the optimal fine is often mild to reduce extortion.

Does welfare improve when firms are better informed about the state of the economy and can thus better coordinate their production and pricing decisions? We address this question in an elementary business-cycle model that highlights how the dispersion of information can impede both kinds of decisions and, in this sense, be the source of both real and nominal rigidity. Within this context we develop a taxonomy for how the social value of information depends on the two rigidities, on the sources of the business cycle, and on the conduct of monetary policy.