If informed voters receive favorable policies, then the invention of a new mass medium may affect government policies since it affects who is informed and who is not. These ideas are developed in a voting model. The model forms the basis for an empirical investigation of a major New Deal relief program implemented in the middle of the expansion period of the radio. The main empirical finding is that US counties with many radio listeners received more relief funds. More funds were allocated to poor counties with high unemployment, but controlling for these and other variables, the effects of the radio are large and highly significant. If other government funds were distributed in a similar fashion, then the introduction of the radio led to a major shift in government policies.

I examine the "fiscal theory of the price level" according to which "non-Ricardian" policy and predetermined nominal government debt fiscally determine prices. I argue that the non-Ricardian policy assumption and, by implication, fiscal price level determination are inconsistent with an equilibrium in which all asset holdings reflect optimal household choices. In such an equilibrium, policy must be Ricardian even if, in some states of nature, the government defaults or commits to an arbitrary real primary surplus sequence. I propose an alternative to the fiscal theory of the price level, based on nominal flows instead of nominal stocks. While this alternative framework establishes a consistent link between fiscal policy and the price level, it does not introduce inflationary fiscal effects beyond those suggested by Sargent and Wallace.

When markets are incomplete, individuals may choose to marry to diversify their labor income risk. Love, however, can complicate the picture. If love is fleeting or the resolution of agents’ income uncertainty occurs predominantly later in life, then marriages with good economic matches last longer. In contrast, if love is persistent and the resolution of uncertainty to agents’ income occurs early, then marriages with good economic matches are more likely to be caught short with too little love to save a marriage. Consequently, once married, the partners will be more likely to divorce. Evidence is provided to distinguish between these alternative scenarios.

In recent years, subprime lending has grown substantially as an important sector of the credit markets. This paper is concerned with the risk management of subprime loan portfolios and the importance of default correlation in measuring that risk. Using a large portfolio of residential subprime loans from an anonymous subprime lender, we show that default correlation is substantial for this lender. In particular, the significance of default correlation increases as the internal credit rating declines. Our results suggest that lenders and regulators would be well served investing in the understanding of default correlation in subprime portfolios.

Theory suggests that voluntary disclosure decisions are a function of conflicting incentives vis-a`-vis multiple audiences. However, few opportunities exist to investigate this issue empirically. We identify a setting that offers us such an opportunity: the electric utility industry as it transitions toward deregulation. We consider two types of voluntary disclosures: strategies to protect the firm's existing customer base and plans to exploit emerging opportunities under deregulation. We examine these particular disclosures since they are voluntary, relevant to all sample firms, and convey positive information about the firm's prospects in a deregulated environment. We consider three target audiences: industry regulators, capital market participants, and product market competitors. We find that our disclosure index is negatively associated with the magnitude of utilities' stranded costs in jurisdictions where the stranded cost recovery issue is unresolved, consistent with our predicted regulatory incentives. Further, our evidence indicates that capital market-related incentives are positively associated with our disclosure index. Finally, we find that product market-related incentives play a deterrent role in disclosure, but only after regulatory concerns have been resolved.

Accounting for Exchange-Rate Variability in Present-Value Models When the Discount Factor Is Near 1 by Charles Engel and Kenneth D. West. Published in volume 94, issue 2, pages 119-125 of American Economic Review, May 2004

School officials and legislators have long been concerned with the possibility of declining teacher quality (see e.g., Sean Corcoran et al., 2002). Beginning in the 1960's, states began testing prospective teachers in a direct effort to ensure that teachers meet minimum standards for basic skills and subject knowledge. By 1999, 41 states required applicants to pass some sort of standardized certification test. As a theoretical matter, however, the impact of such testing is ambiguous. Test requirements may establish a minimum achievement standard, as their proponents hope. On the other hand, testing and other certification requirements may deter some qualified applicants from teaching if these requirements are perceived as costly. This is the barriers-to-entry story first noted in the occupational licensing context by Milton F. Friedman and Simon Kuznets (1945). Another concern with job applicant testing is the possibility of an adverse impact on minority candidates, who usually do worse on tests (see David Autor and David Scarborough [2003] for a recent study). Paralleling increased state involvement in teacher certification is the increase in teachers' educational credentials, especially in public schools. For example, in 1971, over two-thirds of public-school teachers had a B.A., while only 27 percent had a master's or education specialist's degree. By 1991, however, over half of public school teachers (52.6 percent) had a master's or education specialist's degree. In contrast, the proportion of private-school teachers