Knowledge that Transforms

This paper investigates if the R&D of an industry changes due to the R&D of an industry's suppliers and/or demanders. Using an annual industry-level panel of manufacturing R&D in the United States, I find that regressing the R&D of an industry on the lagged values of another industry's R&D suggests R&D comovement between industries with a strong supplier-demander relationship. Variance decompositions indicate that the R&D of an industry has high forecasting power over the R&D variance of another industry if the two industries share a strong supplier-demander relationship.

This paper examines the implications of a binary action, binary outcome decision problem for estimating risk. We use data on the invasiveness of biological imports to develop the first comparison of two classical methods—maximum likelihood and Bayesian—against a third, the recently developed maximum utility (MU) approach. MU estimation uniquely takes advantage of the structure of the decision problem, which depends on a local rather than global fit to the model. Extending methods to account for an endogenously stratified sample, we show that the MU approach is less sensitive to specification error and can offer significant economic gains under model uncertainty.

This paper investigates the extent of vengeful feelings and their determinants using data on more than 116,000 individuals from 66 countries. Country characteristics as well as personal attributes of the individuals influence vengeful feelings. The magnitude of vengeful feelings is greater for people in countries with low levels of education, low-income countries, and interrupted democracies. Personal education has an impact on vengeful feelings in lower-income countries. The results suggest that some puzzles about individual choice can best be explained by considering the interplay of personal and economic factors.

Countercyclical variation in individuals' idiosyncratic labor income risk could generate substantial welfare costs. Following past research, we infer income volatility—the variance of permanent income shocks, a standard proxy for income risk—from the rate at which cross-sectional variances of income rise over the life cycle for a given cohort. Our novelty lies in exploiting cross-state variation in state economic conditions or state sensitivity to national economic conditions. We find that income volatility is higher in good state times than bad; during good national times, we find volatility is higher in states that are more sensitive to national conditions.

We measure unit value electricity prices using 2 million annual observations on U.S. manufacturing plants from 1963 to 2000. These prices display tremendous cross-sectional dispersion, 85–95% of which reflects differences by plant location and purchase quantity. Spatial differentials decline markedly until the late 1980s for large purchasers but rise over time for small purchasers. Unit value price gaps between larger and smaller purchasers are enormous, diminish through the late 1970s, and then stabilize at still-high levels. There are major differences across states in cost and regulatory factors that we relate to the changing structure of unit value prices.

Pension benefit guarantees have been introduced in several countries to protect private plan members from the loss of income associated with the termination of an underfunded plan. Most such schemes face financial difficulty. Consequently, policy reforms are being contemplated. Economic theory suggests that such schemes will suffer moral hazard problems. We test a specific theoretical prediction: insured plans will invest more heavily in risky assets. Our test exploits policy differences across Canadian jurisdictions. We find that insured plans invest about 5% more in equities than do similar plans without benefit guarantees.

The literature documents that charitable giving is responsive to tax subsidies but often ignores the spillover effects of such policies. This paper investigates the spillover effects of charitable subsidies on religious participation using individual-level panel data. The results show that religious giving and participation are complements. The implied cross-price elasticity of religious participation with respect to the after-tax price of giving is −0.27. Furthermore, a 1% increase in the amount of religious contributions is associated with a 0.4% increase in religious attendance. These results are robust under several different specifications and highlight the positive externalities created by charitable subsidies.

We examine the issue of market foreclosure by airline partnerships with antitrust immunity. Overlapping data on frequency of service and passenger volumes on nonstop transatlantic routes with information on the dynamics of airline partnerships, we find evidence consistent with the airlines operating under antitrust immunity refusing to accept connecting passengers from the outside carriers at respective hub airports. Following the antitrust immunity, airlines outside the partnership reduce their traffic to the partner airlines' hub airports by 4.1% to 11.5%. We suggest regulators should take possible market foreclosure effects into account when assessing the competitive effects of antitrust immunity for airline alliances.

We investigate to what extent worker heterogeneity explains the well-known wage and productivity exporter premiums, employing a matched employer-employee data set for Norwegian manufacturing. The wage premium falls by roughly 50% after controlling for observed and unobserved worker characteristics, while the total factor productivity premium falls by 25% to 40%, suggesting that sorting explains up to half of these premiums. Recent trade models emphasize the role of within-industry reallocation of labor in response to various shocks to the economy. Our findings suggest that aggregate productivity gains due to reallocation may be overstated if not controlling for sorting between firms and workers.

We study the effectiveness of nonexperimental strategies in adjusting for comparison group differences when using data from several programs, each implemented at a different location, to compare their effect if implemented at alternative locations. First, we adjust for individual characteristics differences simultaneously across all groups using unconfoundedness-based and conditional difference-in-difference methods for multiple treatments. Second, we adjust for differences in local economic conditions and stress their role after program participation. Our results show that it is critical to have sufficient overlap across locations in both dimensions and illustrate the difficulty of adjusting for local economic conditions that differ greatly across locations.