Historically, the average return on S&P stocks has far exceeded the average return on short-term U.S. government debt. Rajnish Mehra and Prescott (1985), for example, found that the average difference was 6.2 percent per year in the 1889–1978 period. They tried to account for this difference by assuming it is a premium for bearing nondiversi � able aggregate risk but found that risk accounted for only a tiny fraction of the difference. They concluded that there is an “equity premium puzzle.” Here, we reexamine this puzzle, taking into account some factors ignored by Mehra and Prescott (taxes, regulatory constraints, and diversi� cation costs) and focusing on long-term

Payoffs from Panels in Low-Income Countries: Economic Development and Economic Mobility by Mark R. Rosenzweig. Published in volume 93, issue 2, pages 112-117 of American Economic Review, May 2003

We test whether a nonbinding price ceiling may serve as a focal point for tacit collusion, using data from the credit card market during the 1980’s. Our empirical model can distinguish instances when firms match a binding ceiling from instances when firms tacitly collude at a nonbinding ceiling. The results suggest that tacit collusion at nonbinding state-level ceilings was prevalent during the early 1980’s, but that national integration of the market reduced the sustainability of tacit collusion by the end of the decade. The results highlight a perverse effect of price regulation.

We assemble bank-level and other data for Fed member banks to model determinants of bank failure. Fundamentals explain bank failure risk well. The first two Friedman-Schwartz crises are not associated with positive unexplained residual failure risk, or increased importance of bank illiquidity for forecasting failure. The third Friedman-Schwartz crisis is more ambiguous, but increased residual failure risk is small in the aggregate. The final crisis (early 1933) saw a large unexplained increase in bank failure risk. Local contagion and illiquidity may have played a role in pre-1933 bank failures, even though those effects were not large in their aggregate impact.

The consequences of bank distress for the economy during the Depression remain an area of unresolved controversy. Since John M. Keynes (1931) and Irving Fisher (1933), macroeconomists have argued that bank distress magnified the extent of the economic decline during the Depression. As the intermediaries controlling money and credit, banks were in a special position to transmit their distress to other sectors. But the mechanism through which banking distress mattered for the economy has been hotly contested.

Collusive Practices in Repeated English Auctions: Experimental Evidence on Bidding Rings by Owen R. Phillips, Dale J. Menkhaus and Kalyn T. Coatney. Published in volume 93, issue 3, pages 965-979 of American Economic Review, June 2003

Estimating the Knowledge-Capital Model of the Multinational Enterprise: Reply by David L. Carr, James R. Markusen and Keith E. Maskus. Published in volume 93, issue 3, pages 995-1001 of American Economic Review, June 2003