Knowledge that Transforms

We use panel data from the U.S. Health and Retirement Study, 1992–2002, to estimate the effect of self-assessed health limitations on the active labor market participation of older men. Self-assessments of health are likely to be endogenous to labor supply due to justification bias and individual-specific heterogeneity in subjective evaluations. We address both concerns. We propose a semiparametric binary choice procedure that incorporates nonadditive correlated individual-specific effects. Our estimation strategy identifies and estimates the average partial effects of health and functioning on labor market participation. The results indicate that poor health plays a major role in labor market exit decisions.

I look for divisions to clusters among academic departments in three disciplines: economics, mathematics, and comparative literature. I define clusters as subsets of departments with unexpectedly little hiring across the cluster lines. The division within economics is by far the strongest, is consistent with anecdotal evidence about “freshwater” and “saltwater” schools of thought and has been stable over time. There is also a significant division within comparative literature, but the hiring patterns among top mathematics departments are consistent with random matching.

We use newly compiled top income data and structural breaks techniques to estimate common trends and breaks in inequality across countries over the twentieth century. Our results both confirm earlier findings and offer new insights. In particular, the division into an Anglo-Saxon and a Continental European experience is not as clear-cut as previously suggested. Some Continental European countries seem to have, experienced increases in top income shares, just as Anglo-Saxon countries have, but typically with a lag. Most notably, Nordic countries display a marked Anglo-Saxon pattern, with sharply increased top income shares, especially when including realized capital gains. Our results help inform theories about the causes of the recent rise in inequality.

In this paper, we estimate the extent of misclassification in patent examination decisions between the European Patent Office (EPO) and the Japanese Patent Office (JPO), that is, applications that are incorrectly refused a patent or incorrectly granted a patent. Using a proxy for inventive step as the predictor of the correct decision, we find that the probability that a “true grant” application is refused is 6.1%, while the probability that a “true refusal” application is granted is 9.8%. However, we find no evidence of an increasing trend of granting “bad” patents at the EPO and JPO.

Careful examination of the structure determining treatment choice and outcomes, as advocated by Heckman (2008), is central to the design of treatment effect estimators and, in particular, proper choice of covariates. Here, we demonstrate how causal diagrams developed in the machine learning literature by Judea Pearl and his colleagues, but not so well known to economists, can play a key role in this examination by using these methods to give a detailed analysis of the choice of efficient covariates identified by Hahn (2004).

U.S. federal law calls for an end to overfishing, but measuring overfishing requires knowledge of bioeconomic parameters. Using microlevel economic data from the commercial fishery, this paper proposes a two-stage approach to estimate these parameters for a generalized fishery model. In the first stage, a fishery production function is consistently estimated by a within-period estimator treating the latent stock as a fixed effect. The estimated stock is then substituted into an equation of fish stock dynamics to estimate all other biological parameters. The bootstrap approach is used to correct the standard errors in the two-stage model. This method is applied to the reef-fish fishery in the northeastern Gulf of Mexico. The traditional method, which uses catch-per-unit-effort as a stock proxy, significantly overstates the optimal harvest level.

This paper provides cross‐sectional evidence of convenient prices—prices that simplify and expedite transactions, reducing the time costs from physically making a transaction. Firms may wish to set convenient prices for items that are typically purchased with cash, are sold alone or with a few similar items, and are high‐traffic transactions, that is, that require queuing or are frequently purchased. I collect a new data set and find broad support for the use of convenient prices in locations where making a rapid transaction is important. Convenience also appears to predominantly affect goods and services with above‐average price rigidity.

We compare the effects of selective and nonselective secondary education on children's test scores, using British data from the National Child Development Study. Test scores are modeled as the output of an additive production function. An important input is the child's unobserved initial endowment, which may be correlated with the education system attended. In this model, we generalize the difference-in-differences approach and identify the entire counterfactual distribution of potential outcomes. Our results suggest that the better performance of selective schools relative to nonselective ones is essentially due to differences in pupils' composition.

This paper considers the decision of Gentiles whether to rescue Jews during the Holocaust, a situation of altruistic behavior under life-or-death stakes. I examine the role to which economic factors may have influenced the decision to be a rescuer. Using cross-country data and detailed individual-level data on rescuers and nonrescuers, I find that richer countries had many more rescuers than poorer ones, and within countries, richer people were more likely to be rescuers than poorer people. The individual-level effect of income on being a rescuer remains significant after controlling for ease-of-rescue variables, such as the number of rooms in one's home, suggesting that the correlation of income and rescue is not solely driven by richer people having more resources for rescue. Given that richer people might be thought to have more to lose by rescuing, the evidence is consistent with the view that altruism increases with income.

There has been fierce debate over the imposition of stronger intellectual property rights laws for pharmaceutical products in developing countries. This paper uses data from the Indian pharmaceutical industry to develop a structural model of demand, supply and entry. The estimation yields demand and supply parameters that indicate significant heterogeneity among firms both within and across different therapeutic segments. The estimated parameters are used to simulate patent enforcement and price deregulation for 43 drugs, which predicts large losses for consumers and relatively small gains in profits for the global patent holders.