Knowledge that Transforms

Cyclicality in the supply of business credit has been the focus of a considerable amount of research. This cyclicality can stem from shocks to borrowers’ collateral, which affect firms’ ability to raise capital if agency and information problems are significant (Ben S. Bernanke and Mark Gertler, 1989). Or it can stem from shocks to bank capital, which affects the supply of bank loans if agency and information problems limit the ability of banks to raise additional capital (Bernanke, 1983). In this paper, we examine cyclicality in the supply of credit in the context of modern forms of banking, often referred to as the “originate-to-distribute” model. In particular, we focus on the role of syndicated lending.

Wal-Mart, Toys R Us, and other large retail chains are often identified with cheap imports. We use data from the Census of Retail Trade and the International Trade Commission over the period 1997-2002 to test whether big chains serve as platforms for imports from LDCs. Using difference-in-difference specifications we show that Chinese and other LDC imports have increased disproportionately in retail sectors with the sharpest consolidation into chains. To quantify the importance of chain growth to import growth we apply a numerical algorithm that generates marginal propensities to import by firm size. The largest retail firms' propensity to import from China is 17 percentage points higher than that of smaller retailers; the corresponding difference in import propensities from LDCs as a whole is 27 points. The disproportionate growth of large retailers between 1997 and 2002 explains 5% of the overall growth in consumer goods imports, 20% of the growth in consumer goods imports from China, and 22% of the growth in consumer goods imports from LDCs..

Coping with Political Instability: Micro Evidence from Kenya's 2007 Election Crisis by Pascaline Dupas and Jonathan Robinson. Published in volume 100, issue 2, pages 120-24 of American Economic Review, May 2010

This reply responds to a comment that correctly identifies an invalid assumption in our original article that antidumping (AD) duties are subtracted from the U.S. price when calculating AD duties in administrative reviews. While this point invalidates our theoretical explanation and empirical evidence on the magnitude of AD duty pass-through, it does not affect our original article's theory or empirical evidence on the magnitude of exchange rate pass-through, or the presence of structural breaks in both the AD duty and exchange-rate pass-through coefficients stemming from AD investigations and orders.

Within economics, there has been a recent effort to better understand the notion of culture, typically defined as beliefs, values, and norms held by individuals. Empirical work has focused on identifying systematic cultural differences between individuals from different ethnic and national backgrounds. More recently, attention has turned to the historical origins of cultural differences (e.g., Luigi Guiso, Paolo Sapienza, and Luigi Zingales 2008; Nathan Nunn and Leonard Wantchekon 2009). Colonial Africa provides a natural laboratory to examine how an external intervention can have lasting impacts on people’s beliefs and values. This study examines the effect of European missionary activities in colonial Africa on the subsequent evolution of culture, as measured by religious beliefs. The empirical results show that descendants of ethnic groups that experienced greater missionary contact are today more likely to self-identify as Christian. This correlation provides evidence that foreign missionaries altered the religious beliefs of Africans, and that these beliefs persist as they are passed on from parents to children. Put differently, the results show that historic events can have a lasting impact on culture. The findings also provide rare empirical evidence of the historical determinants of longrun religious conversion. Studies of conversion typically focus on contemporary determinants (see Jason Hwang and Robert Barro 2007 and the references therein). Although a number of studies have examined the long-term impacts of missionary activities, they have not considered their long-run impacts on religious beliefs and values (e.g., Robert D. Woodberry 2004). One of the few papers that consider a historical determinant of long-run conversion is by Murat Religious Conversion in Colonial Africa

Why do firms cluster near one another? We test Marshall's theories of industrial agglomeration by examining which industries locate near one another, or coagglomerate. We construct pairwise coagglomeration indices for US manufacturing industries from the Economic Census. We then relate coagglomeration levels to the degree to which industry pairs share goods, labor, or ideas. To reduce reverse causality, where collocation drives input-output linkages or hiring patterns, we use data from UK industries and from US areas where the two industries are not collocated. All three of Marshall's theories of agglomeration are supported, with input-output linkages particularly important. (JEL L14, L60, O33, R23, R32)

Estimation of De Facto Flexibility Parameter and Basket Weights in Evolving Exchange Rate Regimes by Jeffrey Frankel and Daniel Xie. Published in volume 100, issue 2, pages 568-72 of American Economic Review, May 2010

The Failure and Promise of Mandated Consumer Mortgage Disclosures: Evidence from Qualitative Interviews and a Controlled Experiment with Mortgage Borrowers by James M. Lacko and Janis K. Pappalardo. Published in volume 100, issue 2, pages 516-21 of American Economic Review, May 2010

There is an extensive economics and finance literature that addresses the potential benefits of financial integration. If on the one hand there is consensus on the significant inherent gain that may be attained in terms of portfolio diversification, decreased cost of equity capital, and reduced financing constraints, on the other hand, economics modeling has typically stumbled in the prediction of negligible welfare gains. Although the models adopted so far in the literature are able to accurately characterize the joint behavior of a large set of economic variables, they are typically silent about how closely they can track stock markets dynamics. Equivalently, it is still not clear what are the welfare benefits of financial integration when one wants to explain simultaneously prices and quantities. In order to address this point, we propose a general equilibrium model that is able to simultaneously explain: (i) the volatility of exchange rate and stochastic discount factors; and both (ii) the volatility of net exports and (iii) the amount of cross-country correlation and persistence of consumption growth rates. In our economy agents have risk-sensitive preferences in the sense of Hansen and Sargent (1995). This implies that investors have a preference for the timing of the resolution of uncertainty. We conduct our analysis for the case in which consumption is a Cobb-Douglas aggregation of domestic and foreign goods, both of which are tradable. Furthermore we let the dynamics of the growth rate of the endowments of ∗ Both authors are affiliated with the University

As health care reform moves forward in the United States, one common feature of virtually all proposals is to expand coverage for low income populations not through a traditional public insurance model, but rather through a “defined contribution exchange” mechanism. Under this approach, low income individuals would have a choice of a number of options for their insurance coverage. Individuals would receive a subsidy to purchase insurance that was tied to the lowest-cost plan (or some index of low-cost plans) and would pay some part of the difference if they chose a more expensive plan. This major departure from the traditional free/single-choice public payer model raises a number of important questions, but the key initial question is: How price-sensitive will lowincome consumers be in choosing across plans? While there is now a sizable literature evaluating plan choice in the context of employerprovided insurance, there are no previous studies of how these very low income populations will respond to choice in publicly financed insurance programs. In this paper, we study the plan choice of low-income enrollees in Massachusetts’ Commonwealth Care program that was established as part of the state’s health reform in April 2006. Enrollees in Commonwealth Care were given a choice of up to four Medicaid Managed The MassachuseTTs healTh Insurance experIMenT: early experIences †