Knowledge that Transforms

This paper proposes a market test for racial discrimination in salary setting in English league soccer over the period 1978–93 using a balanced panel of 39 clubs. If there is a competitive market for the services of players, the wage bill of the club will reflect their productivity and hence the performance of the club in the league. Discrimination can be said to exist if clubs fielding an above‐average proportion of black players systematically outperform clubs with a below‐average proportion of black players, after one controls for the wage bill. Statistically significant evidence of discrimination in this sense is found.

This article uses a unique data set on medical malpractice disputes in Florida to estimate the parameters of a bargaining game with asymmetric information. The main findings of the article suggest that the bargaining game can replicate most of the qualitative and quantitative features of the data. The article also simulates alternative policy regimes to quantify the effects of possible tort reforms, such as imposing limits on contingency fees and caps on jury awards.

This paper develops a general equilibrium model with putty‐clay technology, investment irreversibility, and variable capacity utilization. Low short‐run capital‐labor substitutability induces the putty‐clay effect of a tight link between changes in capacity and movements in employment and output. Permanent shocks to technology or factor prices generate a hump‐shaped response of hours, persistence in output growth, and positive comovement in the forecastable components of output and hours. Capacity constraints result in asymmetric responses to large shocks with recessions deeper than expansions. Estimation of a two‐sector model supports a significant role for putty‐clay capital in explaining business cycle and medium‐run dynamics.

This paper researches motivations for charitable bequests by looking at gifts to the poor in wills written in Suffolk, England, in the 1620s and 1630s. The findings that wealthier and more religious individuals and those with fewer children give more to the poor support an altruistic model of testator utility. However, the result that individuals who give to more people outside of their immediate families are more likely to give to the poor contradicts the simple altruism model. This result is consistent with a model that suggests that charitable giving is partially driven by the approbation granted to charitable behavior.

The number of producers in the U.S. tire industry grew for 25 years and then declined sharply, and the industry evolved to be an oligopoly. The role of technological change in shaping the industry’s market structure is explored. A model of industry evolution featuring technological change is used to derive predictions that are tested using a novel data set on firm entry, exit, size, location, distribution networks, and technological choices prior to the shakeout of producers. Consistent with the model, earlier‐entering and larger firms survived longer, principally because of the influence of age and size on technological change.

This paper studies how communication allows for the specialized acquisition of knowledge. It shows that a knowledge-based hierarchy is a natural way to organize the acquisition of knowledge when matching problems with those who know how to solve them is costly. In such an organization, production workers acquire knowledge about the most common or easiest problems confronted, and specialized problem solvers deal with the more exceptional or harder problems. The paper shows that the model is consistent with stylized facts in the theory of organizations and uses it to analyze the impact of changes in production and information technology on organizational design.

Bimetallism has been the subject of considerable debate: Was it a viable monetary system? Was it desirable? In our model, the amounts of each metal are split between coined metal, satisfying a cash‐in‐advance constraint, and uncoined metal, yielding utility. The ratio of the monies in the cash‐in‐advance constraint is endogenous. Bimetallism is feasible: we find a continuum of steady states indexed by the constant exchange rate of the monies. Bimetallism is not desirable: among steady states, welfare under monometallism is higher than under any bimetallic equilibrium. Long‐run trends in gold and silver production placed limits on the maintenance of bimetallism at any given ratio, but its sudden collapse in 1873 remains a puzzle.

Although majoritarian decision rules are the norm in legislatures, relatively few democracies use simple majority rule at the electoral stage, adopting instead some form of multiparty proportional representation. Moreover, aggregate data suggest that average income tax rates are higher, and distributions of posttax income flatter, in countries with proportional representation than in those with majority rule. While there are other differences between these countries, this paper explores how variations in the political system per se influence equilibrium redistributive tax rates and income distributions. A three‐party proportional representation model is developed in which taxes are determined through legislative bargaining among successful electoral parties, and the economic decision for individuals is occupational choice. Political‐economic equilibria for this model and for a two‐party, winner‐take‐all, majoritarian system are derived and compared.

We propose a model with micropolitical foundations to compare the public …nance outcomes under a presidential-congressional and a parliamentary system. Compared to a parliamentary system, a presidentialcongressional system has less incentives for legislative cohesion, but has a clearer separation of powers. These features make public …nance outcomes radically di¤erent in the two systems. A Parliamentary system has redistribution towards a majority, less underprovision of public goods, more rents to politicians and a higher tax burden, whereas a presidential-congressional system has redistribution towards powerful minorities, more underprovision of public goods, but less rents to politicians and a smaller size of government. JEL classi…cation: H00, D72, D78.

We characterize efficient self‐enforcing divisions of political or economic surplus between two parties that interact repeatedly. The party in power can decide the allocation, and the parties' political strength changes according to a Markov process. We find that the share of the party currently in power depends not only on its current strength but also on whether it had previously been even stronger since it last came to power. We find that the constitutional supermajority requirements that attempt to constrain the use of power can counterproductively create less compromise.