Knowledge that Transforms

Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Reply by David Card and Alan B. Krueger. Published in volume 90, issue 5, pages 1397-1420 of American Economic Review, December 2000

The dramatic reduction in the black–white earnings gap from 1965 to 1975 represents the most significant period of economic progress for African-Americans in the post World War II era. After 25 years of contentious research, economists have arrived at a consensus that Title VII of the 1964 Civil Rights Act, which outlawed employment discrimination, was a major factor underlying the post-1965 trend break in relative earnings (John J. Donahue and James J. Heckman, 1991; David Card and Alan Krueger, 1993). A key piece of supporting evidence is that most gains were concentrated among black workers in the South, where Title VII had its biggest impact. The mortality rate of black infants relative to white infants is another clearly important measure of the relative well-being of AfricanAmericans. Surprisingly, and in contrast to the relative-earnings literature, there are very few studies that focus on long-run trends in the relative health of black infants over time. In addition, the existing research is based on highly aggregated data, both across regions and over time, which provide little information on the precise location and timing of infant mortality changes by race. Consequently, the evidence on the specific factors underlying significant changes in black–white infant health outcomes is sparse and often anecdotal. An examination of infant death rates within a year of birth for whites and nonwhites and the nonwhite–white infant-mortality-rate (IMR) ratio from 1933–1990 in the United States reveals many striking patterns (figure available from authors upon request). Immediately before World War II, about 4.1 percent of white infants and 7.5 percent of black infants died within a year of birth. During World War II, there was a large decline in black infant mortality rates and in the black–white ratio. Since World War II there has been a secular increase in the black– white IMR ratio with one notable exception. In the narrow period of 1965–1970, the black IMR and the black–white ratio declined sharply relative to preexisting trends. Relatively stable during 1961–1965, the black IMR fell 30 percent from 4.0 (per 100 live births) in 1965 to 2.8 in 1971. At the same time, the black–white ratio fell from 1.9 to 1.65, the only prolonged convergence in the post-World War II era. The national patterns suggest that 1965–1970 is the key period for improvements in the relative health of black infants over the past 50 years. This study examines trends in black– white rates of infant death during 1955–1975. To document the location of the improvements, we collected data by race at the state and rural– urban levels, which has not been previously done. Using simple descriptive models, we find † Discussants: David Meltzer, University of Chicago and NBER; Kenneth Chay, University of California–Berkeley and NBER; Jeffrey Grogger, University of California–Los Angeles and NBER; Dan Black, Syracuse University.

Tax Competition When Governments Lack Commitment: Excess Capacity as a Countervailing Threat by Eckhard Janeba. Published in volume 90, issue 5, pages 1508-1519 of American Economic Review, December 2000

Mistakes give us a window into the brain. Just as optical illusions help us understand visual information processing, mistaken choices help us understand decision-making. The mistakes described below suggest that economics can usefully segregate decision mechanisms into two broad categories - those based on thoughts and those based on feelings. Consideration of these mistakes suggests that economists will be better able to interpret the growing body of seemingly anomalous evidence about human behavior if they treat thoughts and feelings more symmetrically.

Economists have not explicitly denied the existence and significance of visceral factors but have traditionally left them out of their analyses, whether because their influence is perceived as transient and hence unimportant, or because they are seen as too unpredictable and complex to be amenable to formal modeling. An attempt is made to show that both of these assumptions are false. Visceral factors have important, but often underappreciated, consequences for behavior. Moreover, both the determinants of visceral factors and their impact on behavior are not only systematic, but amenable to formal modeling.

This paper introduces various sources of consumer heterogeneity in one-sector representative consumer (RC) growth models and develops tools to study the evolution of the distribution of consumptions, assets, and incomes. These tools are applied to the Ramsey-Cass-Koopmans model of optimal savings and the Arrow-Romer model of productive spillovers. The RC property per se places very few restrictions on the nature of observed distributions, and a wide range of distributive dynamics and income mobility patterns can arise as the equilibrium outcome. An example illustrates how to use these tools to generate quantitative predictions and compare them to the data.

Floating, Fixed, or Super-Fixed? Dollarization Joins the Menu of Exchange-Rate Options by Blake LeBaron and Rachel McCulloch. Published in volume 90, issue 2, pages 32-37 of American Economic Review, May 2000

Understanding Black-White Wage Differentials, 1960-1990 Author(s): James J. Heckman, Thomas M. Lyons, Petra E. Todd Source: The American Economic Review, Vol. 90, No. 2, Papers and Proceedings of the One Hundred Twelfth Annual Meeting of the American Economic Association, (May, 2000), pp. 344 -349 Published by: American Economic Association Stable URL: http://www.jstor.org/stable/117248 Accessed: 16/08/2008 00:56

Generational Accounts for the United States: An Update by Jagadeesh Gokhale, Benjamin Page, Joan Potter and John Sturrock. Published in volume 90, issue 2, pages 293-296 of American Economic Review, May 2000