The Microsoft case has attracted more attention than perhaps any antitrust case in history - far more than the mammoth IBM case of the 1970's, with which it is sometimes compared. I was the chief economics witness for IBM in U.S. v. IBM and the chief economics witness for the United States in U.S. v. Microsoft. I did not switch sides. Even though both cases involved bundling and charges of leveraging, the facts were different, and the principles of economic analysis led to different outcomes. In particular, Microsoft's actions did what IBM's could not have done -- excluded competitors by protecting an important barrier to entry into the market in which it held monopoly power.
Dale Jorgenson has bestowed a great honor and no small challenge by inviting me to give this lecture: a great honor because of the distinguished list of economists who have preceded me; a challenge because of the standard they have set, and because there is no greater challenge for any economist than providing a coherent account of significant events to his scientific peers. I am sometimes asked by friends about the differences between academic life and life as a public official. There are many. Two stand out. First, as an academic, the gravest sin one can commit is to sign one’s name to something one did not write. As a public official it is a mark of effectiveness to do so as often as possible. Second, as an academic, if a problem is too hard and does not admit of a satisfactory solution, there is an obvious response: work on a different problem. That is not a luxury that one has in government. I have been reminded of this often in recent years as we have grappled with financial crises in a number of what had previously been considered emerging markets with unrestrained futures. Anyone who doubts the social importance of what economists do should consider the debates surrounding these crises. Hundreds of millions of people who expected rapidly rising standards of living have seen their living standards fall; hundreds of thousands if not millions of children have been forced to drop out of school and go to work; hundreds of billions of dollars of apparent wealth has been lost; the stability of large nations as nations has been called into question; and the United States has made its largest nonmilitary foreign-policyrelated financial commitments since the Marshall Plan. Almost all the issues involved in understanding, preventing, and mitigating these crises are the stuff of economics courses and research: fixed versus flexible exchange rates, moral hazard and multiple equilibria, speculation and liquidity, fiscal and monetary policies, regulation and competition. What economists think, say, and do has profound implications for the lives of literally billions of their fellow citizens. Whether it is discussing the role of derivatives in signaling exchange-rate commitments with Chinese Premier Zhu Rongji, or discussing an NBER working paper on inflation targeting with the Brazilian central bank governor Arminio Fraga, or discussing alternative approaches to bankruptcy law with Indonesia’s economic team, or optimal debt durations with the Mexican authorities, I am consistently struck by the impact of the kind of research discussed at the AEA meetings. The future well-being of the world’s people in large part will depend on how the ongoing process of global integration works out. This is a strong statement, but one that is supported by the global economy’s post-World War I failure and its post-World War II success. Central to global integration is financial integration: the flow of funds and of capital across international borders. And as the events of the late 1920’s and early 1930’s remind us, central to global disintegration can be international financial breakdowns. Today, I want to reflect on the issue of global financial integration in light of the dramatic and largely unpredicted events of recent years. It is perhaps a good time for reflection: there has been enough repair that priority can shift from * U.S. Department of the Treasury, 1500 Pennsylvania Avenue, Washington, DC 20005. This lecture reflects many things I have learned from experiences I have shared with colleagues in the United States government and governments around the world. I thank Brad DeLong, Marty Feldstein, Stephanie Flanders, Ken Rogoff, Andrei Shleifer, and Ted Truman for useful comments and suggestions. I am especially grateful to Nouriel Roubini and Stephanie Flanders for valuable discussions and assistance in the preparation of this lecture. The usual disclaimer applies.
This paper presents new information on the fraction of adjusted gross income, and of wages and salaries, that is reported by taxpayers in the top one half of one percent of the income distribution. This corresponds to roughly five hundred thousand households in the late 1990s. This paper relies on data from the Treasury's Individual Income Tax Model for the period 1960-1995. The definition of adjusted gross income is standardized, so that changes in the tax law do not affect the measured concentration of AGI. The results suggest that the share of AGI reported by the highest income households increased significantly between the early 1980s and the mid-1990s, with most of the increase taking place in the years immediately following the Tax Reform Act of 1986. While we find some evidence of transitory changes in the concentration of income around major tax changes, which may be the result of income retiming by high income taxpayers, re-timing does not seem to explain most of the changes since 1986.
International racial and ethnic economic inequality is examined. The international record shows disparity across nations and regions, between racial and ethnic groups within countries, and within groups in the same country. Subalternate racial and ethnic populations, whether in the majority or minority, suffer remarkably similar economic outcomes across the globe. Institutional racism and cultural discrimination affect subcultures and different classes in multiple ways. In every country, those who get the short stick continue to face poor prospects for economic inclusion and justice.
131 enroll. While membership is an entitlement that can be activated, the entitlement is restricted by family membership. As in other developing regions, formal institutions are weak in modern Africa, and persons therefore tend to organize economic relationships through social institutions. One way of augmenting the stock of capital is through education; another is through migration to the city. To a great degree, it is families who organize the flow of resources that promote both urban migration and the acquisition of skills. Recognizing the central role of families in the formation of capital, one can achieve a better grasp of the relationship between modernization and ethnicity. To a significant degree, modernization is achieved through the process of human-capital formation. This process is privately organized; that is to say, it is organized by families. Families organize the flow of resources between generations and sectors, thus promoting the acquisition of skills and urban migration, and thus the modernization of societies. It is by stabilizing the contract between generations within family units that ethnic groups facilitate the process of investment. To illustrate, I use data collected from a village in Luapula Province, Zambia, which supplies labor to the mining centers of Zambia and Congo. When conducting my field work, I focused on links between town and country and found that the income rural dwellers derived from town varied systematically with the structure (size, age composition, and education) of their families. The coefficients in the “remittance” function suggested that an additional child yields, on average, 3.23 kwacha in the form of financial Those who study modern Africa commonly highlight three features: its poverty, its instability, and its ethnic diversity. Whether in lurid popularizations (e.g., Robert Kaplan, 1994) or in social scientific research (e.g., William Easterly and Ross Levine, 1997; but see also Paul Collier and A. Hoeffler [1998]) scholars reason that Africa is poor because it is unstable and that its instability derives from its ethnic complexity. Ethnicity thus lies, it is held, at the root of Africa’s development crisis. This essay critiques the conventional wisdom by mounting an alternative interpretation. Using both qualitative and quantitative data from Africa, this article argues that:
Knowledge Spillovers and Patent Citations: Evidence from a Survey of Inventors by Adam B. Jaffe, Manuel Trajtenberg and Michael S. Fogarty. Published in volume 90, issue 2, pages 215-218 of American Economic Review, May 2000
This paper tests for the existence of asymmetric information between the Federal Reserve and the public by examining Federal Reserve and commercial inflation forecasts. It demonstrates that the Federal Reserve has considerable information about inflation beyond what is known to commercial forecasters. It also shows that monetary-policy actions provide signals of the Federal Reserve's information and that commercial forecasters modify their forecasts in response to those signals. These findings may explain why long-term interest rates typically rise in response to shifts to tighter monetary policy.
We consider a market with “red” and “green” workers, where labels are payoff irrelevant. Workers may acquire skills. Skilled workers search for vacancies, while firms search for workers. A unique symmetric equilibrium exists in which color is irrelevant. There are also asymmetric equilibria in which firms search only for green workers, more green than red workers acquire skills, skilled green workers receive higher wages, and the unemployment rate is higher among skilled red workers. Discrimination between ex ante identical individuals arises in equilibrium, and yet firms have perfect information about their workers, and strictly prefer to hire minority workers.
Casual evidence as well as daily experience suggest that many people have a strong aversion against being the 'sucker' in social dilemma situations. As a consequence, those who cooperate may be willing to punish free-riding, even if this is costly for them and even if they cannot expect future benefits from their punishment activities. A main purpose of this paper is to show experimentally that there is indeed a widespread willingness of the cooperators to punish the free-riders. Our results indicate that this holds true even if punishment is costly and does not provide any material benefits for the punisher. In addition, we provide evidence that free-riders are punished the more heavily the more they deviate from the cooperation levels of the cooperators. Potential free-riders, therefore, can avoid or at least reduce punishment by increasing their cooperation levels. This, in turn, suggests that in the presence of punishment opportunities there will be less free riding. Testing this conjecture is the other major aim of our paper.