Knowledge that Transforms

The Impact of Unexpected Maternal Death on Education: First Evidence from Three National Administrative Data Links by Stacey H. Chen, Yen-Chien Chen and Jin-Tan Liu. Published in volume 99, issue 2, pages 149-53 of American Economic Review, May 2009

The twentieth century saw a dramatic increase in the number of women in the labor force, as well as a steady increase in the number of selfemployed women during the past three decades. This increase in labor force participation represents a striking change in the allocation of women’s time between work and home activities. Despite the growing literature examining self-employed women, little is known about how self-employed women divide their time between work and other life activities. The flexibility afforded by self-employment is often regarded as a way to better balance work and home activities. Indeed, the existing econometric studies indicate that women choose self-employment primarily because of family or lifestyle factors (Theresa Devine 1994; Richard K. Caputa and Arthur Dolinsky 1998; Richard J. Boden 1999; Greg Hundley 2000). Yet studies outside the economics literature seem to indicate that self-employed women do not necessarily experience more family satisfaction (Holly E. Buttner and Dorothy P. Moore 1997; Saroj Parasuraman and Claire A. Simmers 2001; Richard DeMartino, Robert Barbato, and Paul H. Jacques 2006). A source of the difference might be that the econometric studies use Human Capital aCquisition and EntrEprEnEursHip †

This paper explores how to optimally set taxes and transfers when taxation authorities are uninformed about individuals' value of time in both market and nonmarket activities; and can observe both market-income and time allocated to market employment. We show that optimal redistribution in this environment involves a cutoff wage whereby workers above the cutoff are taxed as they increase their income, while workers earning a wage below the cutoff receive an income supplement as they increase their income. Finally, we show that the optimal program transfers zero income to individuals who choose not to work.

International audience

In August 1982, after a year in a deep recession that had several months left to run, Congress passed the Tax Equity and Fiscal Responsibility Act (TEFRA), scaling back the large Reagan tax cuts that had been enacted just over one year earlier as part of the Economic Recovery Tax Act (ERTA). Legislation over the same period cut near-term federal spending, with reductions in nondefense spending swamping additions to defense spending (Congressional Budget Office 1983, Table 8). Together, the spending reductions and TEFRA were estimated to have increased the fiscal-year 1983 primary surplus by $50 billion, or about 1.5 percent of GDP. During the next U.S. recession, in October 1990, a budget summit meeting of President Bush and Congressional leaders produced legislation aimed at reducing the cumulative deficit by $500 billion over five fiscal years, including $33 billion in fiscal-year 1991. The summit also produced the Budget Enforcement Act (BEA), introducing new budget rules aimed at controlling budget deficits and discretionary spending. As in the previous recession, budget deficits captured the attention of policy makers and strongly influenced their fiscal policy actions. As 2008 drew to a close one year into the most serious U.S. recession at least since 1982, Congress and the incoming Obama administration were moving toward adopting legislation of a

We experimentally test an endogenous-timing investment model in which subjects privately observe their cost of investing and a signal correlated with the common investment return. Subjects overinvest, relative to Nash. We separately consider whether subjects draw inferences, in hindsight, and use foresight to delay profitable investment and learn from market activity. In contrast to Nash, cursed equilibrium, and level-k predictions, behavior hardly changes across our experimental treatments. Maximum likelihood estimates are inconsistent with belief-based theories. We offer an explanation in terms of boundedly rational rules of thumb, based on insights about the game, which provides a better fit than quantal response equilibrium.

Consistent with mental accounting, we document that investors sometimes choose the asset allocation for one account without considering the asset allocation of their other accounts. The setting is a firm that changed its 401(k) matching rules. Initially, 401(k) enrollees chose the allocation of their own contributions, but the firm chose the match allocation. These enrollees ignored the match allocation when choosing their own-contribution allocation. In the second regime, enrollees simultaneously selected both accounts' allocations, leading them to mentally integrate the two. Own-contribution allocations before the rule change equal the combined own- and match-contribution allocations afterwards, whereas combined allocations differ sharply across regimes.

A central idea in political economy is that vot ers who are not ideologically attached to a politi cal party, so-called “swing voters,” attract policy favors and redistribution because they become the focus of electoral competition. In many parts of the world, however, politicians do not just use carrots to win elections, they also use sticks— coercion and violence. In this paper, we show that expanding the “policy space” to incorporate this can completely overturn the predictions of the standard model. The reason for this is simple. With all groups of voters at play, political competition does indeed lead to a chase for the sup

We invent Implicit Marshallian demands, which combine desirable features of Hicksian and Marshallian demands. We propose and estimate the Exact Affine Stone Index (EASI) implicit Marshallian demand system. Like the Almost Ideal Demand (AID) system, EASI budget shares are linear in parameters given real expenditures. However, unlike the AID, EASI demands can have any rank and its Engel curves can have any shape over real expenditures. EASI error terms equal random utility parameters to account for unobserved preference heterogeneity. EASI demand functions can be estimated using GMM or three stage least squares, and, like AID, an approximate EASI model can be estimated by linear regression.

Economists have long seen the patent system as a crucial lever through which policymakers affect the speed and nature of innovation in the economy. It is not surprising, then, that the profound changes which have roiled the global patent system over the past 20 years are attracting increasing attention from the economics profession. A critical question relates to the impact of these shifts: to what extent do they really affect the pace of innovative discovery and diffusion? Much of the theoretical economics literature, such as Richard Gilbert and Carl Shapiro [1990], has assumed an unambiguous relationship between the strength of patent protection and the rate of innovation. This assumption has been relaxed in a line of work on sequential innovation, beginning with Suzanne Scotchmer and Jerry Green [1990]. This research addresses this question by examining the impact of major patent policy shifts in sixty nations over the past 150 years. I examine the changes in patent applications by residents of the nation undertaking the policy change. While I tabulate domestic filings by residents and non-residents alike, confounding factors may influence