This paper uses the consumption Euler equation to derive a decomposition of consumption growth into four sources. These four sources are new information, and three sources of predictable consumption growth: intertemporal substitution, changes in the preferences for consumption, and incomplete markets for consumption insurance. Using household-level data, we implement this decomposition for the average growth rate of consumption expenditures on nondurable goods in the United States from 1982 to 1997. The economic importance of precautionary saving rivals that of the real interest rate, but the relative importance of each source of movement in the volatility of consumption is not precisely measured.
This paper studies the role of consequences in a person’s decision to lie. Based on findings from an experiment with a deception game, as well as from questionnaires, I propose a simple formulation of preferences to describe deception behavior. The decision maker uses the “truth telling ” outcome as a reference level when evaluating the benefits of lying. The monetary consequences of the lie are compared to this reference level. In the formulation used in this paper the decision maker’s utility depends on her own intentions. She is selfish in the sense of maximizing her own payoffs, but sensitive to the cost her lie imposes on the other side. Sensitivity diminishes with the size of payoffs. Moreover, since perception of the counterpart’s cost is subjective. When there are differences in wealth as in employee-employer relations or a consumer-insurer interactions, the decision maker is more likely to lie the wealthier the counterpart.
We study good-by-good deviations from the Law-of-One-Price (LOP) for over 1,800 retail goods and services between all European Union (EU) countries for the years 1975, 1980, 1985, and 1990. We find that for each of these years, after we control for differences in income and value-added tax (VAT) rates, there are roughly as many overpriced goods as there are underpriced goods between any two EU countries. We also find that good-by-good measures of cross-sectional price dispersion are negatively related to the tradeability of the good, and positively related to the share of non-traded inputs required to produce the good. We argue that these observations are consistent with a model in which retail goods are produced by combining a traded input with a non-traded input.
Large economies export more in absolute terms than do small economies. We use data on shipments by 126 exporting countries to 59 importing countries in 5,000 product categories to answer the question: How? Do big economies export larger quantities of each good (the intensive margin), a wider set of goods (the extensive margin), or higher-quality goods? We find that the extensive margin accounts for around 60 percent of the greater exports of larger economies. Within categories, richer countries export higher quantities at modestly higher prices. We compare these findings to some workhorse trade models. Models with Armington national product differentiation have no extensive margin, and incorrectly predict lower prices for the exports of larger economies. Models with Krugman firm-level product differentiation do feature a prominent extensive margin, but overpredict the rate at which variety responds to exporter size. Models with quality differentiation, meanwhile, can match the price facts. Finally, models with fixed costs of exporting to a given market might explain the tendency of larger economies to export a given product to more countries.
The Volume-Outcome Effect, Scale Economies, and Learning-by-Doing by Martin Gaynor, Harald Seider and William B. Vogt. Published in volume 95, issue 2, pages 243-247 of American Economic Review, May 2005
The Role of Dynamic Scoring in the Federal Budget Process: Closing the Gap between Theory and Practice by Rosanne Altshuler, Nicholas Bull, John Diamond, Tim Dowd and Pamela Moomau. Published in volume 95, issue 2, pages 432-436 of American Economic Review, May 2005
Patent Citations and the Geography of Knowledge Spillovers: A Reassessment: Comment by Rebecca Henderson, Adam Jaffe and Manuel Trajtenberg. Published in volume 95, issue 1, pages 461-464 of American Economic Review, March 2005
What caused the baby boom? And can it be explained within the context of the secular decline in fertility that has occurred over the last 200 years? The hypothesis is that: (a) The secular decline in fertility is due to the relentless rise in real wages that increased the opportunity cost of having children; (b) The baby boom is explained by an atypical burst of technological progress in the household sector that occurred in the middle of the last century. This lowered the cost of having children. A model is developed in an attempt to account, quantitatively, for both the baby boom and bust.
The prices of for-profit academic journals have increased rapidly over the past decade (Barbara Albee and Brenda Dingley, 2001). There remains substantial debate as to the explanation for these increases. Among those put forward are the increased concentration of the journal industry (see e.g., McCabe, 2002) and the relatively recent effort by major publishers to bundle print and electronic journals (Aaron S. Edlin and Rubinfeld, 2004). While both explanations are undoubtedly important, what is missing is the significant role of the primary customers of journal publishers—the academic libraries. As agents of college and university faculties, libraries serve the interests of their principals while having only limited information about faculty journal demands. Facing little or no hard budget constraint, faculty are unlikely or unwilling to make difficult allocative choices. As a result, libraries have been making hard choices for years (between journals and books, and among journals), in a world of increasing budgetary pressure. Given that electronic transmission of knowledge is becoming increasingly important, an understanding of the reasons for the increases in journal prices is a vital element in the ongoing discussion of best mechanisms by which scholarly communications can be disseminated. In this paper, we formulate a model of library journal demand and suggest how it can be used to analyze the optimal pricing of journals by publishers. This represents part of a larger project whose long-range goal is to explain the pattern of journal pricing over time, and to