Knowledge that Transforms

Using industry-level data disaggregated by states, this paper finds a positive impact of trade liberalization on (the absolute values of) labor demand elasticities in the Indian manufacturing sector. The magnitudes of these elasticities turn out to be negatively related to protection levels that vary across industries and over time. Furthermore, we find that these elasticities are not only larger in size for Indian states with more flexible labor regulations, they are also impacted there to a larger degree by trade reforms. Finally, we find that the reforms have led to a reduction in the share of labor in total output and value added, possibly due to the reduction in the bargaining power of workers.

Conventional evaluations of voting systems focus on ballots for which no vote can be recorded (that is, “residual” votes). However, recorded votes that misrepresent voter intent are another potentially important, but less easily measured, source of error. I present evidence that a nontrivial number of voters in the recent California recall election mistakenly voted for one of the four candidates positioned next to the two major candidates on the ballot. I also find that punch-card systems significantly increased the frequency of these errors. These results indicate that future assessments of voting technologies should consider their effects on both recorded and residual votes.

There has been renewed interest in the possible use of employment programs for disadvantaged male youth as a policy to reduce drug crime, but little evidence exists on the youth employment/drug crime relationship and theory suggests that these programs may increase rather than decrease the amount of drug crime. In this paper, panel data at the neighborhood level are used to investigate the relationship between drug crime and young males' intraurban job accessibility. Results obtained from models that control for time and fixed effects, as well as other potential sources of bias, suggest that modest improvements in job access can substantially reduce the amount of drug crime within poor inner-city neighborhoods.

This paper analyzes the extent of risk-sharing among stockholders and nonstockholders. To evaluate the empirical importance of market incompleteness, it is essential to determine whether idiosyncratic shocks are important for the wealthy who have access to better insurance opportunities, but also face different risks, than the average household. We study a model where each period households decide whether to participate in the stock market by paying a fixed cost. Due to this endogenous entry decision, the testable implications of perfect risk-sharing take the form of a sample selection model, which we estimate using a semiparametric GMM estimator proposed by Kyriazidou (2001). Using data from PSID, we strongly reject perfect risk-sharing among stockholders, but perhaps surprisingly, do not find evidence against it among nonstockholders. This result appears to be robust to several extensions. This finding suggests further focus on risk factors that primarily affect the wealthy, such as entrepreneurial income risk.

In this paper we estimate New Keynesian Phillips curves (NKPC) for U.S. manufacturing industries defined at the SIC two digit level over the period 1959 to 1996. This enables us to measure the extent of nominal inertia across industrial sectors. A key innovation in this research is the use of intermediate-goods costs rather than labor costs as a measure of marginal costs. Intermediate-goods costs are a more significant element of costs for the firms populating our sample and are not subject to the criticism that wage rates are nonallocative. We find that there is statistically significant variability in estimates of price stickiness, ranging from eight months to two years. We also find that estimates of backward-looking price-setting behavior vary, with some industries characterized by 81% of pricing decisions made in a purely forward-looking manner, while in others only 52% of pricing decisions are made that way. Market concentration (as captured by the Herfindahl-Hirschman index) appears to be associated with increased price stickiness, but reduced rule-of-thumb behavior, in setting prices. Finally, firms are also more likely to follow simple rules of thumb when output in their industry is more volatile.

Quarterly evidence on participation in IMF programs for the period 1974–2003 is examined using the techniques of hazard analysis and error-correction estimation. Three hypotheses are proposed and tested. An increase in cumulative prior participation in IMF programs is found to cause a reduction on average in the length of a new spell of participation. The length of time between participation spells is reduced significantly with an increase in prior participation in IMF programs. Reserve adequacy is shown to be significantly and positively affected by participation in IMF programs. The results support a “revolving door” explanation of participation in IMF programs.

Critics argue that electronic voting is vulnerable to fraud. We test whether voting technology affected electoral outcomes in the 2000 and 2004 presidential elections. We find a positive correlation between use of electronic voting and George Bush vote share. The effect could have been large enough to influence the final results in some swing states. While this pattern would appear to be consistent with allegations of voting irregularities, a closer examination suggests this interpretation is unlikely. We find no evidence that electronic voting had a larger effect in swing states, or in states with a Republican secretary of state. We also find that electronic voting has a negative effect on turnout rates of Hispanics (who tend to favor Democrats). Electronic voting was more likely to be used in counties with a higher fraction of Hispanics; especially in swing states.

Keller and Levinson (2002) utilize state-level panel data on inflows of foreign direct investment along with an innovative measure of relative pollution abatement costs to assess the impact of environmental stringency on capital flows. Using standard parametric panel data models, the authors find moderate evidence that capital flows are sensitive to abatement costs. Using recently developed nonparametric methods, we assess the robustness of this conclusion. The nonparametric approach reveals that (a) some of the parametric results are not robust, and (b) the impact of relative abatement costs is heterogeneous across states and generally of smaller magnitude than previously suggested.

Most Americans are now in some form of managed care plan that restricts access to services in order to reduce costs. It is difficult to determine whether these restrictions affect health because individuals and firms self-select into managed care. We investigate the effect of managed care using a California law that required some pregnant women on Medicaid to enter managed care. We use a unique longitudinal database of California births in which we observe changes in the regime faced by individual mothers between births. We find that Medicaid managed care reduced the quality of prenatal care and increased low birth weight, prematurity, and neonatal death.

In 2000, a genetically modified corn variety called StarLink that was not approved for human consumption was discovered in the food-corn supply. To estimate the price impact of this event on the U.S. corn market, we develop the relative price of a substitute method. This method applies not only to the StarLink event but also to rare events in other markets. We find that the contamination led to a 6.8% discount in corn prices and that the suppression of prices lasted for at least a year.