We present a method for decomposing wholesale electricity payments into production costs, inframarginal competitive rents, and payments resulting from the exercise of market power. Using data from June 1998 to October 2000 in California, we find significant departures from competitive pricing during the high-demand summer months and near-competitive pricing during the lower-demand months of the first two years. In summer 2000, wholesale electricity expenditures were $8.98 billion up from $2.04 billion in summer 1999. We find that 21 percent of this increase was due to production costs, 20 percent to competitive rents, and 59 percent to market power.

The scope for growth of trade in services is vast. Although services currently make up over 60 percent of world production, they account for only about 20 percent of world trade. A primary reason why international trade in services has been limited is that the performance of many services necessitates physical contact between producers and consumers, a condition that renders service provision to distant locations infeasible. New technology, in particular, the Internet, provides a medium of exchange that overcomes such historical trading hurdles for many services, effectively reducing transport costs from infinity to virtually nothing. There is ample anecdotal evidence that the Internet is having just this sort of an effect on services trade. The accounting firm Netlink maintains the books for 6,000 employees in Reyanosa, Mexico, from their offices in Manhattan. Infosys of India provides softwareconsulting services to international clients, including Apple Computers, Lucent Technologies, and Microsoft. A medical-transcription company in South Africa, ITS, receives digital recordings from abroad electronically and returns a transcribed text file the next day. Still, the question remains as to whether electronic sharing of information is an important enough development to alter significantly the geography of service provision. Indeed, many services need to be tailored to the consumer’s needs and monitored for quality, and these are likely to be more effective if the provider is close by and speaks the same language. In addition, in the event of a dispute, resolution will be less complicated if both parties are subject to the same legal system. Finally, there may be security concerns with allowing foreign access to some documents or systems. Thus, for some services, especially those where familiarity, communication, and non-standardization contribute to quality, the Internet would not be expected to have a large impact on international trade. To determine whether the Internet has significantly affected international service provision in practice, we estimate a general model of services trade across countries and examine whether the inclusion of data on Internet penetration, as measured by the number of Internet hosts in a country, is statistically significant. Overall, our results offer evidence that the Internet is related to growth in services trade. After controlling for GDP and exchange-rate movements, we find that a 10-percent increase in Internet penetration in a foreign country is associated with about a 1.7-percentage-point increase in export growth and a 1.1-percentagepoint increase in import growth. The results are robust to a number of alternative specifications.

This paper analyzes airport congestion when carriers are nonatomistic, showing how the results of the road-pricing literature are modified when the economic agents causing congestion have market power. The analysis shows that when an airport is dominated by a monopolist, congestion is fully internalized, yielding no role for congestion pricing under monopoly conditions. Under a Cournot oligopoly, however, carriers are shown to internalize only the congestion they impose on themselves. A toll that captures the uninternalized portion of congestion may then improve the allocation of traffic. The analysis is supported by some rudimentary empirical evidence

Strategic complementarity games have found applications in many fields, including macroeconomics, development, and labor economics.' They provide a useful framework within which to address questions like: What generates the disparity across regions and countries? Why are there booms and recessions? and What causes gender and race discrimination in the labor market? In short, they help us think about the diversity and variations across space, time, and groups. The literature on complementarity games has emphasized coordination failures as the key notion to understand these questions. This paper argues that such emphasis is misplaced; the key to understand the diversity is symmetrybreaking. The notion of coordination failures is not only irrelevant, but also misleading when thinking about the diversity

We analyze politically motivated privatization in a bipartisan environment. When median-class voters a priori favor redistributive policies, a strategic privatization program allocating them enough shares can induce a voting shift away from left-wing parties whose policy would reduce the value of shareholdings. To induce median-class voters to buy enough shares to shift political preferences, strategic rationing and underpricing is often necessary. In the extreme, this may lead to free share distribution and voucher privatization. Shifting voting preferences becomes impossible when strong ex ante political constraints require large upfront transfers to insiders or when social inequality is extreme.

We consider the distribution of economic activity within a country in light of three leading theories—increasing returns, random growth, and locational fundamentals. To do so, we examine the distribution of regional population in Japan from the Stone Age to the modern era. We also consider the Allied bombing of Japanese cities in WWII as a shock to relative city sizes. Our results support a hybrid theory in which locational fundamentals establish the spatial pattern of relative regional densities, but increasing returns help to determine the degree of spatial differentiation. Long-run city size is robust even to large temporary shocks.

This paper shows how competition generates reputation-building behavior in repeated interactions when the product quality observed by consumers is a noisy signal of firms' effort level. There are two types of firms and “good” firms try to distinguish themselves from “bad” firms. Although consumers get convinced that firms which are repeatedly successful in providing high quality are good firms, competition endogenously generates the outside option inducing disappointed consumers to leave firms. This threat of exit induces good firms to choose high effort, allowing good reputations to be valuable, but its uncompromising execution forces good firms out of the market

Throughout history wives have been the property of their husbands. Only in the past two centuries has this institution broken down in the world’s most developed regions. In America and England, the doctrine of coverture restricted women’s choices in virtually every aspect of their lives until the beginning of the 20th century. A married woman (a feme covert) could not make contracts, buy and sell property, sue or be sued, or draft wills (Joel P. Bishop, 1875; John C. Wells, 1878; John F. Kelly, 1882). Her husband owned any wages she earned, and he controlled any property she brought to the marriage. A husband also could control his wife’s economic activities outside the home, such as limiting a particular shopkeeper from selling to his wife (Marylynn Salmon, 1986). Even in the rare case of divorce, the children of the marriage fell under the father’s custody. Today the doctrine of coverture is extinct in most developed countries. Women now control rights to themselves and the products of their labor. No formal restrictions remain on a woman’s ability to own or convey title to land or other forms of real property. Women are able to contract freely and enforce their contractual rights. No formal restrictions remain on a woman’s capacity to sue or be sued in tort. Rape is no longer a crime against a husband’s property interest in his wife, but a crime in which the woman is the sole victim. No formal restrictions limit a woman’s ability to alienate her labor and own the wages she earns. Whether married or single, women today have practically all the rights of their male counterparts. We use a property-rights analysis to explain the demise of coverture in the United States. We characterize the modern property-rights structure to human beings as a system in which all adults are self-owners. Men and women have essentially equal rights and are able to contract fully inside and outside of marriage, so marriage is a share contract (Douglas W. Allen, 1992). Coverture, in contrast to self-ownership, is characterized as a principal–agent system in which the man (husband) legally owned his wife and her flow of value. Under coverture a wife was an agent, severely constrained by the system of property rights, which denied her the right to freely choose human-capital investments and consumption as well as to capture the full returns from her actions. The husband’s economic ownership was imperfect, however, allowing the woman to deviate from the man’s directives. Human ownership regimes are important because they affect incentives to acquire and develop human capital (T. W. Schultz, 1968; Stanley Engerman, 1973). In particular, we argue that economic growth with attendant increases in wealth and specialized markets leads * Geddes: Department of Policy Analysis and Management, Cornell University, 107 MVR Hall, Ithaca, NY 14853, and Hoover Institution (e-mail: [email protected]); Lueck: Montana State University and University of Virginia School of Law (e-mail: [email protected]). Geddes was supported by the Earhart Foundation. Lueck was supported as John M. Olin Faculty Fellow at the Yale Law School. Cynthia Powell, Hui-Ping Chao, and Mary Godfrey provided research assistance. We have also benefited from comments from Doug Allen, Lee Alston, Ian Ayres, David Barker, Parantap Basu, Gary Becker, Mary Beth Combs, Lee Craig, Joe Ferrie, Andy Hanssen, Gillian Hamilton, Shawn Kantor, Dean Lillard, Robin Lumsdaine, Steve Margolis, Joel Mokyr, Bart Moore, Lee Redding, Glen Whitman, Paul Zak, two anonymous referees, and participants in numerous seminars and conferences. 1 While married women’s property belonged to their husbands, most single women were dependents of their male relatives. Although a single woman legally had the same property rights as a man, powerful norms and private restrictions severely limited the rights of divorcees, spinsters, and widows (Mary Beth Norton, 1980). 2 We recognize a potential divergence between economic and purely legal rights because enforcement costs limit the application of legal doctrine (Yoram Barzel, 1977). Here, however, we treat economic and legal rights as virtually synonymous since coverture codified customs and norms and because coverture’s restrictions extended beyond the family into markets and society.

The U.S. and U.K. Great Depressions Through the Lens of Neoclassical Growth Theory by Harold L. Cole and Lee E. Ohanian. Published in volume 92, issue 2, pages 28-32 of American Economic Review, May 2002

One of the most sizable and least predictable shocks to economic opportunities in developing countries is major illness. We investigate the extent to which families are able to insure consumption against major illness using a unique panel data set from Indonesia that combines excellent measures of health status with consumption information. We find that there are significant economic costs associated with major illness, and that there is very imperfect insurance of consumption over illness episodes. These estimates suggest that public disability insurance or subsidies for medical care may improve welfare by providing consumption insurance.