Knowledge that Transforms

Recent technological advances have dramatically lowered the cost of transmitting information over large distances. In the late 1990s, the New York Times implemented a national distribution strategy, expanding delivery in over 100 cities. Using cross-sectional and longitudinal data on local newspaper circulation, Times penetration, and local newspapers characteristics, we find that as Times circulation grows in a market, local newspaper circulation declines among college-educated readers. Local newspapers reposition toward local and away from national coverage, raising circulation among individuals without a degree. Availability of national newspapers in local markets changes the relationship between local preferences and local products.

We analyze the effects of financial and trade globalization on the likelihood of financial crashes in emerging markets. While trade globalization always makes crashes less likely, financial globalization may make them more likely, especially when trade costs are high. Pessimistic expectations can be self-fulfilling and lead to a collapse in demand for goods and assets. Such a crash comes with a current account reversal and drops in income and investment. Lower-income countries are more prone to such demand-based financial crises. A quantitative evaluation shows our model is consistent with the main stylized facts of financial crashes in emerging markets.

The paper presents descriptive evidence from quantile regressions and more “structural” estimates from a human capital model with heterogenous returns to show that most of the increase in wage inequality between 1973 and 2005 is due to a dramatic increase in the return to post-secondary education. The model with heterogenous returns also helps explain why both the relative wages and the within-group dispersion among highlyeducated workers have increased in tandem over time. These findings add to the growing evidence that, far from being ubiquitous, changes in wage inequality are increasingly concentrated in the very top end of the wage distribution.

I show existing evidence on labor supply behavior places an upper bound on risk aversion in the expected utility model. I derive a formula for the coefficient of relative risk aversion (γ) in terms of the ratio of the income elasticity of labor supply to wage elasticity and degree of complementarity between consumption and labor. I bound the degree of complementarity using data on consumption choices when labor supply varies across states. Using labor supply elasticity estimates, I find a mean estimate of [Formula: see text], then show generating γ > 2 requires that wage increases cause sharper labor supply reductions.

Gender and Performance: Evidence from School Assignment by Randomized Lottery by Justine S. Hastings, Thomas J. Kane and Douglas O. Staiger. Published in volume 96, issue 2, pages 232-236 of American Economic Review, May 2006

The Impact of Group Membership on Cooperation and Norm Enforcement: Evidence Using Random Assignment to Real Social Groups by Lorenz Goette, David Huffman and Stephan Meier. Published in volume 96, issue 2, pages 212-216 of American Economic Review, May 2006

The Impact of State Licensing Regulations on Low-Skilled Immigrants: The Case of Vietnamese Manicurists by Maya N. Federman, David E. Harrington and Kathy J. Krynski. Published in volume 96, issue 2, pages 237-241 of American Economic Review, May 2006

Human capital investments are not independent of the aggregate state of labor markets: frictions and slackness of the labor market raise the returns to specific human capital investments relative to general investments. We build a macroeconomic model with two pure strategy regimes. In the pure G-regime, workers invest in general skills. This occurs when they face high turnover labor markets and in the absence of employment protection. The pure 5-regime in which workers invest in skills specific to their job appears when employment protection is high enough. Implications for a characterization of Europe-United States differences are provided in conclusion.

Valuing Consumer Products by the Time Spent Using Them: An Application to the Internet by Austan Goolsbee and Peter J. Klenow. Published in volume 96, issue 2, pages 108-113 of American Economic Review, May 2006

Some recent empirical studies, motivated by Grossman and Helpman's (1994) “protection-for-sale” model, suggest that very few factors (none of them labor related) determine trade protection. This paper reexamines the roles that labor issues play in the determination of trade policy. We introduce collective bargaining, differences in inter industry labor mobility, and trade union lobbying into the protection-for-sale model, and show that the equilibrium protection rate in our model depends upon these labor market variables. We test our model predictions using data from U.S. manufacturing and find that labor market considerations do seem to matter for U.S. trade policy.