Knowledge that Transforms

Household Resource Allocation in Stepfamilies: Darwin Reflects on the Plight of Cinderella by Anne Case, I-Fen Lin and Sara McLanahan. Published in volume 89, issue 2, pages 234-238 of American Economic Review, May 1999

Based on results from a 1999 national survey, William Becker and Michael Watts found that student evaluations of teaching were by far the most widely used, and often the only method used by economics departments, to evaluate teaching in undergraduate economics courses. To investigate whether departments of economics have moved beyond the use of student evaluations of teaching, in 2011 the current authors conducted a national survey of departments based largely on questions used in the 1999 survey. The surveys included items on how courses and teaching are evaluated, and on how that information is used in departmental promotion and salary decisions.

In this paper, we build a version of the putty-clay model in which there is a large variety of types of capital goods which are combined with energy in different fixed proportions. Our principal contribution is to establish easily checked conditions under which the problem of solving for the equilibrium of the model economy reduces to a dynamic programming problem with only two endogenous state variables, regardless of the number of different types of capital goods that are allowed. In appropriate applications, this result allows us to avoid the 'curse of dimensionality' that typically plagues attempts to analyze the dynamics of economies with a wide variety of capital goods and binding non-negativity constraints on investment. We apply these results to study the equilibrium dynamics of value-added, investment, wages, and energy use in a simple model of energy use with putty-clay capital.

One of the standard propositions in the migration literature is that migrants tend to be favorably `self-selected for labor-market success. That is economic migrants are described as tending on average to be more able ambitious aggressive entrepreneurial or otherwise more favorably selected than similar individuals who choose to remain in their place of origin.... In recent years there have been challenges to the general proposition of the favorable selectivity of migrants. In addressing this issue this paper considers alternative specifications of the migration model that are relevant for the issue of migrant selectivity. (EXCERPT)

The Grossman-Helpman "Protection for Sale" model, concerning the political economy of trade protection, yields clear predictions for the cross-sectional structure of import barriers. Our objective is to check whether the predictions of the Grossman-Helpman model are consistent with the data and, if the model finds support, to estimate its key structural parameters. We find that the pattern of protection in the United States in 1983 is broadly consistent with the predictions of the model. A surprising finding is that the weight of welfare in the government's objective function is many times larger than the weight of contributions.

The key implication of rational expectations and the basic life-cycle/permanent-income hypothesis: that predictable changes in income have no effect on the growth rate of consumption expenditures, is examined. This implication is important for understanding the effectiveness and optimal timing of fiscal policy, the causes and propagation of business cycles, and the effects of income fluctuations on the growth rate of the economy. Using household-level consumption data from the Consumer Expenditure Survey, whether expenditures on nondurable goods increase contemporaneously with predictable changes in Social Security tax withholding is tested. It is found that households do change their consumption expenditures in response to the predictable fluctuations in income induced by the Social Security tax system.

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. (JEL D72)

Technological progress comes in waves. The British Industrial Revolution ( 1760 – 1850) ushered in Cort’s puddling and rolling process for making iron, Crompton’s mule for spinning cotton, and the Watt steam engine. The Second Industrial Revolution ( 1890 – 1930) witnessed the rise of electricity, the internal-combustion engine, and the chemical industry. The birth of information technology (IT) may herald the start of a Third Industrial Revolution. A new technology or product is often developed by the single entrepreneur who initially finds it hard to get funds, develop the product, and find customers. But if the product is good, customers eventually line up, and investors flock in. Other firms then move in to make the product and may drive the innovator out or acquire him. Whether he reaches the initial public offering (IPO) stage or is acquired by a listed firm, though, it takes time for the innovator to add value to the stock market. Indeed, the innovation may, at first, reduce the market’s value because some firms, usually large or old, will cling to old technologies that have lost their momentum. Figure 1 plots the market value of U.S. equity relative to GDP. This paper argues that (a) the market declined in the late 1960’s because it felt that the old technologies either had lost their momentum or would give way to IT, and that (b) IT innovators boosted the stock market’s value only in the 1980’s. If the stock market provides a forecast of future events, then the recent dramatic upswing represents a rosy estimate about growth in future profits for the economy. This translates into a forecast of higher output and productivity growth, holding other things equal (such as capital’s share

In recent years workplace smoking policies have become increasingly prevalent and restrictive. Using data from two large-scale national surveys, we investigate whether these policies reduce smoking. Our estimates suggest that workplace bans reduce smoking prevalence by 5 percentage points and daily consumption among smokers by 10 percent. Although workers with better health habits are more likely to work at firms with smoking bans, estimates from systems of equations indicate that these results are not subject to an omitted variables bias. The rapid increase in bans can explain all of the recent drop in smoking among workers relative to nonworkers.