Knowledge that Transforms

Endorsements are a simple language for communication between interest-group leaders and group members. The members, who share policy concerns, may not perfectly understand where their interests lie on certain issues. If their leaders cannot fully explain the issues, they can convey some information by endorsing a candidate or party. When interest groups endorse legislative contenders, the candidates may compete for backing. Policies may favor special interests at the expense of the general public. We examine the conditions under which parties compete for endorsements, the extent to which policy outcomes are skewed, and the normative properties of the political equilibria.

We report on the design of the new clearinghouse adopted by the National Resident Matching Program, which annually fills approximately 20,000 jobs for new physicians. Because the market has complementarities between applicants and between positions, the theory of simple matching markets does not apply directly. However, computational experiments show the theory provides good approximations. Furthermore, the set of stable matchings, and the opportunities for strategic manipulation, are surprisingly small. A new kind of "core convergence" result explains this; that each applicant interviews only a small fraction of available positions is important. We also describe engineering aspects of the design process.

This paper examines the historical evolution of the relationship between population growth, technological change, and the standard of living.It considers several unified models that encompass the transition between three distinct regimes that have characterized the process of economic development: ``The Malthusian Regime," ``The Post-Malthusian Regime," and the ``Modern Growth Regime".We view the unified modeling of this long transition process -from thousand of years of Malthusian stagnation through the demographic transition to modern growth -as one of the most significant research challenges facing economists interested in growth and development.

William Vickrey's predicted equivalences between first-price sealed-bid and Dutch auctions, and between second-price sealed-bid and English auctions, are tested using field experiments that auctioned off collectible trading cards over the Internet. The results indicate that the Dutch auction produces 30-percent higher revenues than the first-price auction format, a violation of the theoretical prediction and a reversal of previous laboratory results, and that the English and second-price formats produce roughly equivalent revenues.

Governments often promote inward foreign investment to encourage technology “spillovers” from foreign to domestic firms. Using panel data on Venezuelan plants, we find that foreign equity participation is positively correlated with plant productivity (the “own-plant” effect), but this relationship is only robust for small enterprises. We then test for spillovers from joint ventures to plants with no foreign investment. Foreign investment negatively affects the productivity of domestically owned plants. The net impact of foreign investment, taking into account these two offsetting effects, is quite small. The gains from foreign investment appear to be entirely captured by joint ventures.

In this comment, it is argued that a balanced-budget rule may cause underinvestment. As a consequence, such a rule is not ex ante efficient: in order to achieve the ex ante optimal outcome, it would be necessary to add an extra rule for the level of public investment. Unfortunately, however, such an investment rule is likely to be very difficult to implement in practice. When there are no rules to prevent underinvestment, it is no longer clear whether a balanced-budget rule is beneficial or not. In some cases, the cost of low levels of investment outweigh the benefits of a balanced budget.

This article begins with the hypothesis that large economic fluctuations--the marked changes in the unemployment rate that characterize market economies--are a consequence of problems of adjustment to disturbances, especially adjustments of wages and prices. The article argues that because different prices (including prices of labor and capital) are determined in different ways, shocks lead to marked changes in relative prices, and those disturbances in relative prices greatly exacerbate economic fluctuations. The author looks closely at the price-setting process, providing further insights into why prices exhibit rigidities and why different prices may adjust at different rates. He then explores the consequences of asymmetric price responses.

Labor productivity