By incorporating the probability distribution directly into the analysis, this paper proposes a new theoretical approach to resolving the perennial dilemma of being uncertain about what discount rate to use in cost-benefit analysis. A numerical example is constructed from the results of a survey based on the opinions of 2,160 economists. The main finding is that even if every individual believes in a constant discount rate, the wide spread of opinion on what it should be makes the effective social discount rate decline significantly over time. Implications and ramifications of this proposed “gamma-discounting” approach are discussed.

Firms that entered the stock market in the 1990s were younger than any earlier cohort since World War I. Surprisingly, however, firms that IPO'd at the close of the 19th century were just as young as the companies that are entering today. We argue here that the electrification-era and the IT-era firms came in young because the technologies that they brought in were too productive to be kept out very long. The model assumes that the stage before IPO is a learning period during which the firm refines the idea before committing to it at the IPO stage. The better the idea, the higher is the opportunity cost of a delay in its implementation, and the earlier the firm will have its IPO.

Contrary to the standard economic advice, many regulations of financial intermediaries, as well as other regulations such as blue laws, fishing rules, zoning restrictions, or pollution controls, take the form of quantity controls rather than taxes. We argue that costs of enforcement are crucial to understanding these choices. When violations of quantity regulations are cheaper to discover than failures to pay taxes, the former can emerge as the optimal instrument for the government, even when it is less attractive in the absence of enforcement costs. This analysis is especially relevant to situations where private enforcement of regulations is crucial.

State-Owned and Privately Owned Firms: An Empirical Analysis of Profitability, Leverage, and Labor Intensity by Kathryn L. DeWenter and Paul H. Malatesta. Published in volume 91, issue 1, pages 320-334 of American Economic Review, March 2001

Market Trade in Patents and the Rise of a Class of Specialized Inventors in the 19th-Century United States by Naomi R. Lamoreaux and Kenneth L. Sokoloff. Published in volume 91, issue 2, pages 39-44 of American Economic Review, May 2001

A common claim in the nonrenewable resource literature is that improvements in technology may largely offset the effects of increasing scarcity over time. This study provides perhaps the first empirical evidence on this issue by analyzing the determinants of the average finding cost for additional petroleum reserves in the United States over the 19671990 period. Using a new index of the level of technology, our analysis suggests that technological change played a major role in allaying what would otherwise have been a sharp rise in the average cost of finding additional reserves of natural gas. The impact of technological change on finding costs for U.S. crude oil reserves has been more modest. To place our work in context, we note that in recent years there has been renewed interest in the causes and consequences of technological change. At the macroeconomic level, a huge literature modeling the impact of technological innovation on economic growth and living standards has emerged [see, e.g., Paul Romer (1990) and Gene M. Grossman and Elhanan Helpman (1991)]. At the micro level, increasingly sophisticated methods are being used to assess the links between technological change, productivity, and average or marginal costs at the sectoral level [see, e.g., Samuel Kortum and Saul Lach (1995)]. The potential effects of technological change in alleviating the increasing scarcity of nonrenewable resources are widely discussed in the resource and environmental economics literature. The simplest variant of the Harold Hotelling (1931) model predicts that nonrenewable resource prices should rise at a rate equal to the real rate of interest. It is well known, however, that

Standard econometric analysis incorporates racial classification as an exogenous binary variable. However, econometric specification of racial identity by a simple binary variable masks differences in the meaning and use of racial/ ethnic identity across social groups. Consider an analysis of earnings differences between nonHispanic whites and Hispanics. A white/brown dichotomous variable in the earnings equation is clearly inappropriate since a large fraction of Hispanics either self-identify as white (regardless of how they are seen by others) or have physical features that are indistinguishable from non-Hispanic whites (though they may self

Are firms that engage in trade more vulnerable to exchange rate risk? In this paper we examine the relationship between exchange rate movements, firm value and trade. Our empirical work tests whether exchange rate exposure can be explained by variables that proxy for the level of international activity, firm size, industry affiliation and country affiliation. The results suggest that while a significant fraction of firms in these countries is exposed to exchange rate movements, there is little evidence of a systematic link between exposure and trade. Indeed, what little evidence there is of a link suggests that firms that engage in greater trade exhibit lower degrees of exposure. This may reflect the fact that those firms most engaged in trade are also the most aware of exchange rate risk, and therefore are the most likely to hedge their exposure.

Finance theory suggests that changes in exchange rates should have little influence on asset prices in a world with integrated capital markets. Indeed, the existing literature examining the relationship between international stock prices and exchange rates finds little evidence of systematic exchange rate exposure. We argue in this paper that the absence of evidence may be due to restrictions imposed on the sample of data and the empirical specifications used in previous studies. We study a broad sample of firms in eight countries over an eighteen-year period. We find that firm-level and industry-level share values are significantly influenced by exchange rates. Further, we do not find evidence that exchange rate exposure is falling (or becoming less statistically significant) over time. Our results suggest that significant firm, industry and country-specific differences remain even as financial markets become more and more integrated.

Racial Differences in Transportation Access to Employment in Chicago and Los Angeles, 1980 and 1990 by Chanjin Chung, Samuel L. Myers and Lisa Saunders. Published in volume 91, issue 2, pages 174-177 of American Economic Review, May 2001