Knowledge that Transforms

This paper discusses the role of education in shaping the geographical breadth of knowledge spillovers. Data pertaining to 6,051 European inventions reveal that inventors with a high level of education, such as a university or doctoral degree, rely more on external spillovers regardless of the geographical location of their sources. Controlling for this effect, they also access geographically wider knowledge spillovers. This result holds after controlling for alternative explanations, such as the inventors' network and the site where the research is performed. By contributing to individual openness, education thus provides a means to break through geographical barriers to attain knowledge diffusion.

This paper reconciles the persistence of aggregate real exchange rates with the faster adjustment of international relative prices in microeconomic data. Error correction model estimates indicate that a different mix of shocks drives international price deviations at the microeconomic level and that dynamic adjustment works through arbitrage in the goods market rather than the foreign exchange market. When half-lives are estimated conditional on a common set of estimated macro shocks, we find that micro relative prices exhibit every bit as much persistence as aggregate real exchange rates. These results challenge theories of real exchange rate persistence based on sticky prices and heterogeneity across goods.

This paper investigates whether breastfeeding affects 5- to 6-year old children's cognitive development using three U.S. longitudinal data sets. The results for the full samples roughly point to a dose-response effect of breastfeeding on children's cognitive outcomes, with breastfeeding six months or more associated with about one-tenth of a standard deviation increase in cognitive test scores. The breastfeeding effects do not appear to be due to differences in maternal employment, cognitive ability, or parenting skills. In contrast, within-sibling results show no statistically significant breastfeeding effect.

This paper proposes an iterative procedure to discriminate between structural breaks in the coefficients and the disturbance covariance matrix of a system of equations, with recursive procedures then identifying individual coefficient shifts and separating volatility from correlation breaks. Structural breaks in short-term cross-country inflation relations are then examined for major G-7 economies and within the euro area. There is evidence that the euro area leads inflation in North America, while changing short-term interactions apply within the euro area. Covariability generally increases from the late 1990s, while euro-area countries move from essentially idiosyncratic contemporaneous variation to comovement in the 1980s.

The paper contributes to the debate on top performance in research productivity, its persistence over time, and the impact of gender. It uses a panel data set comprising the publications of all biomedical and exact scientists at the University of Leuven in the period 1992 to 2001. We find that women have a significant lower probability of reaching top performance for the first time in their career, particularly for top performance measured through citations, but there is no evidence for a gender bias hindering repeated top performance. On the contrary, women seem to persist in top performance more easily than men do.

Agglomeration is a location pattern frequently observed in service industries such as hotels. This paper empirically examines whether agglomeration facilitates tacit collusion in the lodging industry using a quarterly data set of hotels in Texas. We jointly model a price and occupancy rate equation under a switching regression model to identify a collusive and noncollusive regime. The estimation results indicate that clustered hotels have a higher probability of being in the potential collusive regime than isolated properties in the same town. The identification of a collusive regime is also consistent with other factors considered to affect the sustainability of tacit collusion.

By raising commuting costs, an increase in gasoline prices should reduce the demand for housing in areas far from employment centers relative to locations closer to jobs. Using annual panel data on a large number of postal codes and municipalities from 1981 to 2008, we find that a 10% increase in gas prices leads to a 10% decrease in construction in locations with a long average commute relative to other locations but to no significant change in house prices. Thus, the supply response prevents the change in housing demand from capitalizing in house prices.

Analyzing data from a unique survey of managers of Chinese private firms, we investigate how family ties with firm heads affect managerial compensation and job assignment. We find that family managers earn higher salaries and receive more bonuses, hold higher positions, and are given more decision rights and job responsibilities than nonfamily managers in the same firm. However, family managers face weaker incentives than professional managers, as seen in the lower sensitivity of their bonuses to firm performance. Our findings are consistent with the predictions of a principal-agent model that incorporates family trust and endogenous job assignment decisions.

We provide empirical evidence that automobile manufacturers use cash incentives to offset how gasoline price fluctuations affect the expected fuel expenses of automobile buyers. Regressions based on a database of incentives over 2003 to 2006 suggest that on average, manufacturers offset 40% of the change in relative fuel costs between vehicles due to gasoline price fluctuations. The results highlight that carbon taxes and emissions trading programs likely would generate substantial substitution within vehicle classes, and studies that ignore manufacturer discounting likely underestimate consumer demand for fuel economy. The results also have implications for the optimal design of feebate programs.

Earnings nonresponse in the Current Population Survey is roughly 30% in the monthly surveys and 20% in the March survey. If nonresponse is ignorable, unbiased estimates can be achieved by omitting nonrespondents. Little is known about whether CPS nonresponse is ignorable. Using sample frame measures to identify selection, we find clear-cut evidence among men but limited evidence among women for negative selection into response. Wage equation slope coefficients are affected little by selection, but because of intercept shifts, wages for men and, to a lesser extent, women are understated, as are gender gaps. Selection is least severe among household heads.