Knowledge that Transforms

This paper presents a theory of the maturity of international sovereign debt, and derives its implications for the reform of the international financial architecture. The analysis is based on a model in which the need to roll over external debt disciplines the policies of debtor countries, but makes them vulnerable to unwarranted debt crises due to bad shocks. The paper presents a welfare analysis of several measures that have been discussed in recent debates, such as international lending-in-last-resort or the establishment of a mechanism for suspending payments on the external debt of crisis countries.

Choice problems in the spirit of Ellsberg (1961) suggest that rank-dependent (“Choquet expected utility”) preferences over subjective gambles might be subject to the same difficulties that Ellsberg's earlier examples posed for subjective expected utility. These difficulties stem from event-separability properties that rank-dependent preferences partially retain from expected utility, and suggest that nonseparable models of preferences might be better at capturing features of behavior that lead to these paradoxes.

Our goal is to evaluate variations in rice yields for likely climate changes for Southeast Asia. To do so we integrate economic modeling with soil science crop growth simulation model, weather simulation model and global climate change models. We estimate impacts of climate change under two different climate scenarios, one assuming high future global anthropogenic pollution emissions,

Payday Loans and Credit Cards: New Liquidity and Credit Scoring Puzzles? by Sumit Agarwal, Paige Marta Skiba and Jeremy Tobacman. Published in volume 99, issue 2, pages 412-17 of American Economic Review, May 2009

Principal-agent models usually invoke the strong assumption that the parties know for sure ex ante whether a variable is verifiable or not. This paper assumes that only the probability of verification is known, and that this probability is endogenously determined. We analyze a principal-agent relationship where the verifiability of the agent's output is determined by the principal's investment in drafting an explicit contract. The model is well suited for analyzing the relationship between explicit contracting, legal courts, trust, and relational contracting. In particular, we show how trust—established through repeated interaction—and legal courts may induce contractual incompleteness.

Child health in the United States improved dramatically over the twentieth century. Data from the National Center for Health Statistics indicate the infant mortality rate was 23 times greater in 1900 than in 2004. The mortality rate of one-to four-year-old children, although lower in absolute terms, had a larger proportionate decline: the value in 1900 was 66 times that in 2004. The proximate cause of the mortality decline was a reduction in infectious disease. Between 1900 and 1998, the percentage of deaths of children age 1 to 19 due to infectious disease is estimated to have declined from 61.6 percent to 2 percent (Bernard Guyer et al. 2000). Major causes of child death included diarrhea, pneumonia and other respiratory infections, diphtheria, typhoid, measles, scarlet fever, whooping cough, and tuberculosis (Guyer et al. 2000). The mortality decline was accompanied by reductions in morbidity among surviving children. There were also declines in the prevalence of a host of illnesses, such as hookworm and trachoma, which were not deadly but which impaired children’s quality of life (C. Hoyt Bleakley 2007; Shannen K. Allen and Richard D. Semba 2002). Early life exposures to infectious disease may also have adverse effects on health and well-being into old age. If true, then the benefits of the twentieth century decline in infectious disease in the United States are still being realized. We examine whether the disease environments experienced by American children in the first half of the twentieth century are associated with their cognitive abilities at older ages. We match region-level historical data on mortality from a variety of infectious diseases, as well as total infant mortality, with information on the cognitive function of older Americans followed by the Health and Retirement Study (HRS). We find evidence that the burden of disease in early life—measured using either mortality rates by cause or the overall infant mortality rate—is significantly associated with performance on cognitive tests in old age.

The cornerstone of cartel enforcement in the United States and elsewhere is a commitment to the lenient prosecution of early confessors. A burgeoning game-theoretical literature is ambiguous regarding the impacts of leniency. I develop a theoretical model of cartel behavior that provides empirical predictions and moment conditions, and apply the model to the complete set of indictments and information reports issued over a 20-year span. Statistical tests are consistent with the notion that leniency enhances deterrence and detection capabilities. The results have implications for market efficiency and enforcement efforts against cartels and other forms of organized crime.

Empirical research has reached the puzzling conclusion that stronger patents do little or nothing to encourage innovation. We show that the facts that have led to the assumption of fixed cost in the discovery process can be equally well explained by a standard model of diminishing returns. This may explain much of the misunderstanding of the (supposedly positive) role of monopoly in innovation and growth, thereby accounting for the empirical puzzle.

border is not a new phenomenon, with previous surges occurring in the 1920s and 1950s, persis tent mass migration did not take hold until late in the twentieth century. Among the factors contributing to emigration from Mexico are weak growth in the country's labor demand and strong growth in its labor sup ply. Mexico's economy stagnated in the 1980s and 1990s, such that per capita GDP in the early 2000s was unchanged from two decades before. During periods of wage decline in Mexico, emi gration from the country spiked. Perhaps less appreciated is that the 1980s were also a period of accelerated growth in Mexico's relative labor supply. With the US baby boom peaking in 1960, the number of US native born individuals coming of working age actually declined in the 1980s. Adding in the secular increase in US educational attain ment, the number of native born American workers with less than a high school education has dropped sharply. In Mexico, high levels of fertility in the 1960s and 1970s meant that two decades hence the country had large numbers of young adults entering the labor force. While educational attainment has also increased in

This paper argues that Malthusian regimes are capable of sustained changes in per capita incomes. Shifting mortality and fertility schedules can lead to different steady-state income levels, with long periods of growth during the transition. Europe checked the downward pressure on wages through late marriage, which reduced fertility, and a mortality regime that combined high death rates with high incomes. We argue that both emerged as a result of the Black Death.