Knowledge that Transforms

Over the last 40 years, an increasing share of U.S. aggregate E&S investment expenditure has been allocated to capital-goods imports. While capital-goods imports were only 3.5 percent of E&S investment in 1967, by 2008 their share had risen tenfold to 36 percent. The goal of this paper is to measure the contribution of capital-goods imports to growth in U.S. output per hour using a simple growth accounting exercise. We find that capital-goods imports have contributed 20 to 30 percent to growth in U.S. output per hour between 1967 and 2008. More importantly, we find that capital-goods imports have been an increasing source of growth for the US economy: the average contribution of capital-goods imports to growth in U.S .output per hour has increased noticeably since 1967.(This abstract was borrowed from another version of this item.)

We modify the principal-agent model with moral hazard by assuming that the agent is expectation-based loss averse according to Kőoszegi and Rabin (2006, 2007). The optimal contract is a binary payment scheme even for a rich performance measure, where standard preferences predict a fully contingent contract. The logic is that, due to the stochastic reference point, increasing the number of different wages reduces the agent's expected utility without providing strong additional incentives. Moreover, for diminutive occurrence probabilities for all signals the agent is rewarded with the fixed bonus if his performance exceeds a certain threshold.

Are There Gender Differences in the Job Mobility Patterns of Academic Economists? by Christiana Hilmer and Michael Hilmer. Published in volume 100, issue 2, pages 353-57 of American Economic Review, May 2010

Tournaments can elicit more effort but sabotage may attenuate the effect of competition. Because it is hard to separate effort and ability, the evidence on tournaments is thin. There is even less evidence on sabotage because these acts often consist of subjective peer evaluation or “office politics.” We discuss real effort experiments in which quality adjusted output and office politics are compared under piece rates and tournaments and find that tournaments increase effort only in the absence of office politics. Competitors subvert each other more in tournaments, and as a result, workers produce less because they expect to be sabotaged. (D82, M54)

Like politics, the process of economic development is intrinsically local. Communities vie ferociously for jobs, offering tax credits, infrastructure improvements, and in some cases cash to attract investment to particular regions, cities, or even neighborhoods. In the U.S., federal and state governments target resources towards particular areas in the hopes of stimulating investment, alleviating poverty, and in some cases even recovering from natural disasters. These place based policies, though hardly new, have just begun to attract serious attention from economists. 1 As evidence on the effects of these programs begins to trickle in, it is useful to develop a theoretical framework within which to evaluate them. To many observers, spatially targeted policies are a sign of waste – an unfortunate cost of the political process. Why after all should governments pay firms to move to less productive areas and incentivize workers to live in neighborhoods they don’t like? Moreover, serious questions exist about the winners and losers of such policies in a general equilibrium environment. I study here the welfare implications of place based policies using some stylized models of spatial equilibrium incorporating taste heterogeneity and agglomeration economies. I. Baseline Model Consider a continuum of workers of measure one, faced with the decision of locating in one of two communities j ��1 � 2 � where they will work and inelastically demand a single unit of housing. 2 Agents have quasi-linear preferences over local amenities and consumption. The value to worker i oflocatingincom-

We investigate political determinants of land reform implementation in the Indian state of West Bengal. Using a village panel spanning 1974–1998, we do not find evidence supporting the hypothesis that land reforms were positively and monotonically related to control of local governments by a Left Front coalition vis-à-vis the right-centrist Congress party, combined with lack of commitment to policy platforms. Instead, the evidence is consistent with a quasi-Downsian theory stressing the role of opportunism (reelection concerns) and electoral competition.

Time Preference, Noncognitive Skills and Well Being across the Life Course: Do Noncognitive Skills Encourage Healthy Behavior? by Ngina Chiteji. Published in volume 100, issue 2, pages 200-204 of American Economic Review, May 2010

This paper analyzes an emissions trading program that was introduced to reduce smog-causing pollution from large stationary sources. Using variation in state level electricity industry restructuring activity, I identify the effect of economic regulation on pollution permit market outcomes. There are two main findings. First, deregulated plants in restructured electricity markets were less likely to adopt more capital intensive environmental compliance options as compared to regulated or publicly owned plants. Second, as a consequence of heterogeneity in electricity market regulations, a larger share of the permitted pollution is being emitted in states where air quality problems tend to be more severe.

We report experiments on sender-receiver games with an incentive for senders to exaggerate. Subjects “overcommunicate”—messages are more informative of the true state than they should be, in equilibrium. Eyetracking shows that senders look at payoffs in a way that is consistent with a level-k model. A combination of sender messages and lookup patterns predicts the true state about twice as often as predicted by equilibrium. Using these measures to infer the state would enable receiver subjects to hypothetically earn 16–21 percent more than they actually do, an economic value of 60 percent of the maximum increment.

into physical capital in a number of countries. However, the gains are found to be quite small.