How should benefit-cost analysis account for the value that benevolent individuals place on others' enjoyment of public goods? When adding up the benefits to be compared with costs, should we sum the private valuations, the altruistic valuations, or something else? This paper argues that private valuations are appropriate if concern for the well-being of others respects their private preferences. The discussion has implications for family decision-making, welfare economics, and the design of applied contingent valuation studies.

Nobel Prize Lecture, December 8, 2005

What I am going to describe for you is a revolution in macroeconomics, a transformation in methodology that has reshaped how we conduct our science. Prior to the transformation, macroeconomics was largely separate from the rest of economics. Indeed, some considered the study

I worked as a consultant in the Financial Stability Department (FSD) of the Bank of England for several years (2002–2004). In this paper I reflect on issues relating to the work of such an FSD, starting with the difficulty of defining or measuring ‘financial stability’. Stress tests are commonly used, but, for an FSD, should relate to the system as a whole, not just to individual institutions. FSDs need to assess the probability, virulence and speed of occurrence of potential shocks. There is a need to develop appropriate analytical models. The focus on capital adequacy has diverted attention from concern about having sufficient liquidity.

Since the seminal work of Krugman, product variety has played a central role in models of trade and growth. In spite ofthe general use oflove-of-variety models, there has been no systematic study of how the import of new varieties has contributed to national welfare gains in the United States. In this paper we show that the unmeasured growth in product variety from U. S. imports has been an important source of gains from trade over the last three decades (1972–2001). Using extremely disaggregated data, we show that the number of imported product varieties has increased by a factor of three. We also estimate the elasticities of substitution for each available category at the same level of aggregation, and describe their behavior across time and SITC industries. Using these estimates, we develop an exact aggregate price index and find that the upward bias in the conventional import price index over this time period was 28 percent or 1.2 percentage points per year. We estimate the value to U. S. consumers of the expanded import varieties between 1972 and 2001 to be 2.6 percent of GDP.

This note revisits the identification theorems of Brown (1983) and Roehrig (1988). We describe an error in the proofs of the main identification theorems in these papers, and provide an important counterexample to the theorems on the identification of the reduced form. Specifically, the reduced form of a nonseparable simultaneous equations model is not identified even under the assumptions of these papers. We provide conditions under which the reduced form is identified and is recoverable using the distribution of the endogenous variables conditional on the exogenous variables. However, these conditions place substantial limitations on the structural model. We conclude the note with a conjecture that it may be possible to use classical exclusion restrictions to recover some of the key implications of the theorems in more general settings.

We distinguish novelty from newness and argue that the tasks of new venture top management teams vary with new venture novelty. We argue that as novelty increases, the information processing requirements on the TMT change as well. Because a team's demographic characteristics influence its information processing abilities, venture performance should reflect, at least partially, the fit between the characteristics of the TMT and the level of venture novelty. Evidence from a large sample of ventures supports this view.

In this article we investigate the disincentive effects of shortening the potential duration of unemployment insurance (UI) benefits. We identify these disincentive effects by exploiting changes in Slovenia’s unemployment insurance system—a “natural experiment” that involved substantial reductions in the potential duration of benefits for four groups of workers plus no change in benefits for another group (which served as a natural control). We find that the change had a positive effect on the exit rate from unemployment—to new jobs and other options—for unemployment spells of various lengths and for several categories of unemployed workers.

Advertising is one of the key marketing tools managers have at their disposal to influence their customers into purchasing a new product. The overall objective of new product advertising is to inform and persuade customers. Drawing up an advertising plan for a new product that is under the influence of diffusion phenomenon is not an easy task. Hence, research in this area is very limited. In our research, we use an empirically proven diffusion demand function that explicitly incorporates the advertising component. Our results suggest that optimal advertising is determined by the advertising effectiveness, discount rate, and the ratio of advertisement to profits. Depending upon the interplay among these factors, the optimal advertising takes decrease-increase, increase-decrease, monotonically increasing or monotonically decreasing shape.

We document that net equity issuance is considerably more sensitive to aggregate stock returns and Q's than to firm-level stock returns and Q's. Very similar patterns also emerge when we look at merger activity. In light of earlier work (Campbell 1991, Vuolteenaho 2002) which finds that aggregate stock returns are less informative about future cashflows than are firm-level stock returns--and thus, potentially more strongly influenced by investor sentiment--these results suggest that both equity issuance and mergers are to a significant extent driven by market-timing considerations, as opposed to by purely fundamental factors.