Zhao (2008) presents an interesting “all-or-nothing monitoring” result for a multitask moral hazard agency problem with partial effort observation. We argue that the optimal contract based on the non-verifiable observation of the agent's effort in Zhao (2008) can be regarded as a limitation on the incentive schemes available to the principal. I then propose some arguably more appropriate approaches for analyzing such agency problems. (D82, D86, M54)
I revisit the question of indeterminacy in US monetary policy using limited-information identification-robust methods. I find that the conclusions of Clarida, Galí, and Gernter (2000) that policy was inactive before 1979 are robust, but the evidence over the Volcker-Greenspan periods is inconclusive. I show that this is in fact consistent with policy being active over that period. Problems of identification also arise because policy reaction has been more gradual recently. At a methodological level, the paper demonstrates that identification issues should be taken seriously, and that identification-robust methods can be informative even when they produce wide confidence sets. (E31, E32, E52, E65,)
A key area of personnel economics focuses on the provision of human resource practices by firms, such as why one type of compensation is offered over another (Edward P. Lazear and Paul Oyer 2007). While this area of research includes various types of wage compensation, it also includes types of nonwage compensation, which have been shown to have sizable effects on worker behavior, such as mobility in the case of health insurance and traditional pension plans. The present analysis examines the effect of employer sponsored investment in general human capital, administered through tuition reimbursement programs, on employee turnover. Employer provided tuition reimbursement is a widespread program in which firms provide financial assistance for the direct cost of coursework taken by employees. Estimates of the percentage of firms that offer this program are as high as 85 percent (Peter Cappelli 2004). These programs support investment in an employee’s general human capital—skills that are transferable across employers—because accredited academic institutions are responsible for curriculum development, instruction, and certification and serve students employed at a wide variety of establishments. These programs represent a puzzle because firms are unlikely to make general human capital investments without some expectation of receiving an ex post return, but standard human capital theory Human Capital, Work, and outComes
The controversy over how much to charge for health products in the developing world rests, in part, on whether higher prices can increase use, either by targeting distribution to high-use households (a screening effect), or by stimulating use psychologically through a sunk-cost effect. We develop a methodology for separating these two effects. We implement the methodology in a field experiment in Zambia using door-to-door marketing of a home water purification solution. We find evidence of economically important screening effects. By contrast, we find no consistent evidence of sunk-cost effects.
Using Student Performance Data to Identify Effective Classroom Practices by John H. Tyler, Eric S. Taylor, Thomas J. Kane and Amy L. Wooten. Published in volume 100, issue 2, pages 256-60 of American Economic Review, May 2010
I discuss the measurement of world poverty and inequality, with particular attention to the role of purchasing power parity (PPP) price indexes from the International Comparison Project. Global inequality increased with the latest revision of the ICP, and this reduced the global poverty line relative to the US dollar. The recent large increase of nearly half a billion poor people came from an inappropriate updating of the global poverty line, not from the ICP revisions. Even so, PPP comparisons between widely different countries rest on weak theoretical and empirical foundations. I argue for wider use of self-reports from international monitoring surveys, and for a global poverty line that is truly denominated in US dollars.
Crises and sharp economic downturns, while undesirable, provide economists with a unique opportunity to test and hone economic theory. Indeed, some of the most influential advance ments in economic thought, including Milton Friedman’s monetarist tradition, John Maynard Keynes’ fiscal theory, and Irving Fisher’s debtdeflation hypothesis, emerged from analysis of the Great Depression. The current economic malaise, which we refer to as “The Great Recession,” provides another watershed moment to reevaluate our core economic beliefs. However, in contrast to our peers in previous crises, we are fortunate to have access to large-scale microeconomic datasets and advancements in computational capacity. These advantages allow for a more rigorous analysis of the current recession and therefore a more informed understanding of its origins, propagation, and consequences. Our purpose is to highlight how a micro-level analysis of the Great Recession provides us with important clues to understand the origins of the crisis, the link between credit and asset prices, the feedback effect from asset prices to the real economy, and the role of household leverage in explaining the downturn. We hope that our discussion also serves as an example of the useful ness of incorporating microeconomic data and techniques in answering traditional macroeco nomic questions. I. What Were the Origins of the Credit Cycle: Credit Demand or Credit Supply?
We design a field experiment to explore the use of social comparison to increase contributions to an online community. We find that, after receiving behavioral information about the median user's total number of movie ratings, users below the median demonstrate a 530 percent increase in the number of monthly movie ratings, while those above the median decrease their ratings by 62 percent. When given outcome information about the average user's net benefit score, above-average users mainly engage in activities that help others. Our findings suggest that effective personalized social information can increase the level of public goods provision.
On the job search is a key feature of real life labor markets. Yet, traditional equilibrium unemployment theory has not been able to account for on-thejob search in a satisfactory manner. In this paper we present an equilibrium model which includes on-thejob search as an optimal response to search frictions and differences in firm productivity. Our model is laid out in detail in ongoing research by Garibaldi and Moen (2009). In our model, on-the-job search is an optimal response to firm heterogeneity and search frictions in the labor market. The model has three key elements. First, it applies the competitive search equilibrium concept, initially proposed by Moen (1997). Thus, firms post wages and vacancies to minimize search and waiting costs, and the labor market is endogenously separated into submarkets. Second, firms have convex costs of maintaining vacancies (in our simulations, the number of vacancies per firm is fixed). Third, contracting between a firm and its employees is efficient, so that their joint income is maximized. The model tends toward an equilibrium characterization in which there is a job ladder in the labor market. Low productivity firms pay low wages, face high turnover rates, grow slowly and hire directly from the unemployment pool. More efficient firms pay higher wages, grow more quickly and hire from the employment pool. This characterization is qualitatively consistent with a variety of stylized facts about industry dynamics and worker ows: 1) workers move from low-wage to high-wage occupations, 2) more productive firms are larger and pay higher wages than less productive firms, 3) job-to-job mobility falls with average firm size and worker tenure, 4) wages increase with firm size, and 5) wages are higher in fast-growing firms. We also show that compared to traditional labor market models, our equilibrium model with on-thejob search delivers unexpected effects, even though
We study costless pre-play communication of intentions among inexperienced players. Using the level-k model of strategic thinking to describe players' beliefs, we fully characterize the effects of preplay communication in symmetric 2×2 games. One-way communication weakly increases coordination on Nash equilibrium outcomes, although average payoffs sometimes decrease. Two-way communication further improves payoffs in some games but is detrimental in others. Moving beyond the class of symmetric 2 × 2 games, we find that communication facilitates coordination in common interest games with positive spillovers and strategic complementarities, but there are also games in which any type of communication hampers coordination.