Classroom education has public good aspects. The technology is such that when one student disrupts the class, learning is reduced for all other students. A disruption model of educational production is presented. It is shown that optimal class size is larger for better-behaved students, which helps explain why it is difficult to find class size effects in the data. Additionally, the role of discipline is analyzed and applied to differences in performance of Catholic and public schools. An empirical framework is discussed where the importance of sorting students, teacher quality, and other factors can be assessed.

We develop a baseline model of monetary and fiscal transmission in interdependent economies. The welfare effects of expansionary policies are related to monopolistic supply in production and monopoly power of a country in trade. An unanticipated exchange rate depreciation can be beggar-thyself rather than beggar-thy-neighbor, as gains in domestic output are offset by deteriorating terms of trade. Smaller and more open economies are more prone to suffer from inflationary shocks. Larger economies benefit from moderate demand-led expansions, but may be worse off if policy-makers attempt to close the output gap. Fiscal shocks are generally beggar-thy-neighbor in the long run; in the short run they raise domestic demand at given terms of trade, thus reducing the welfare benefits from monetary expansions. Analytical tractability makes our model uniquely suitable as a starting point to approach the recent “new open-economy macroeconomic” literature.

This paper presents a theory of parliamentary systems with a proportional representation electoral system, a formateur selected based on party representation in parliament, and parties that cannot commit to the policies they will implement once in government. Government formation involves efficient proto-coalition bargaining, and elections yield unique strong Nash equilibrium outcomes. Depending on the status quo, minimal-majority, surplus, or consensus governments can form. If parties and voters are myopic and the status quo is subject to shocks, consensus governments and centrist policies occur only in a crisis. Otherwise, governments are minimal winning, and policies reflect only the preferences of the government parties.

This paper analyzes institutional investors' demand for stock characteristics and the implications of this demand for stock prices and returns. We find that "large" institutional investors nearly doubled their share of the stock market from 1980 to 1996. Overall, this compositional shift tends to increase demand for the stock of large companies and decrease demand for the stock of small companies. The compositional shift can, by itself, account for a nearly 50 percent increase in the price oflarge-company stock relative to small-company stock and can explain part of the disappearance of the historical small-company stock premium.

This paper uses data from a randomized housing-mobility experiment to study the effects of relocating families from high- to low-poverty neighborhoods on juvenile crime. Outcome measures come from juvenile arrest records taken from government administrative data. Our findings seem to suggest that providing families with the opportunity to move to lower-poverty neighborhoods reduces violent criminal behavior by teens.

This project tests for the effect of social status in a laboratory experimental market. We consider a special “box design” market in which a vertical overlap in supply and demand ensure that there are multiple equilibrium prices. We manipulate the relative social status of our subjects by awarding high status to a subset of the group based on one of two procedures. In the first, a subject's score on a trivia quiz determines his or her status; in another, subjects are assigned randomly to a higher-status or lower-status group. In both treatments we find that average prices are higher in markets where higher-status sellers face lowerstatus buyers, and lower when buyers have higher status than sellers. Across all sessions, the higher-status side of the market captures a greater share of the surplus, earning significantly more than their lower-status counterparts.