Knowledge that Transforms

The asymptotic refinements attributable to the block bootstrap for time series are not as large as those of the nonparametric iid bootstrap or the parametric bootstrap. One reason is that the independence between the blocks in the block bootstrap sample does not mimic the dependence structure of the original sample. This is the join-point problem. In this paper, we propose a method of solving this problem. The idea is not to alter the block bootstrap. Instead, we alter the original sample statistics to which the block bootstrap is applied. We introduce block statistics that possess join-point features that are similar to those of the block bootstrap versions of these statistics. We refer to the application of the block bootstrap to block statistics as the block–block bootstrap. The asymptotic refinements of the block–block bootstrap are shown to be greater than those obtained with the block bootstrap and close to those obtained with the nonparametric iid bootstrap and parametric bootstrap.

To study the behavior of agents who are susceptible to temptation in infinite horizon consumption problems under uncertainty, we define and characterize dynamic self-control (DSC) preferences. DSC preferences are recursive and separable. In economies with DSC agents, equilibria exist but may be inefficient; in such equilibria, steady state consumption is independent of initial endowments and increases in self-control. Increasing the preference for commitment while keeping self-control constant increases the equity premium.

We develop the measurement theory of polarization for the case in which income distributions can be described using density functions. The main theorem uniquely characterizes a class of polarization measures that fits into what we call the “identity-alienation” framework, and simultanously satisfies a set of axioms. Second, we provide sample estimators of population polarization indices that can be used to compare polarization across time or entities. Distribution-free statistical inference results are also used in order to ensure that the orderings of polarization across entities are not simply due to sampling noise. An illustration of the use of these tools using data from 21 countries shows that polarization and inequality orderings can often differ in practice.

The Amsterdam auction has been used to sell real estate in the Dutch capital for centuries. By awarding a premium to the highest losing bidder, the Amsterdam auction favors weak bidders without having the implementation difficulties of Myerson's (1981) optimal auction. In a series of experiments, we compare the standard first-price and English auctions, the optimal auction, and two variants of the Amsterdam auction. With strongly asymmetric bidders, the second-price Amsterdam auction raises substantially more revenues than standard formats and only slightly less than the optimal auction. Copyright Econometric Society 2004.

We analyze bidding behavior in auctions when risk-averse bidders bid for an object whose value is risky. We show that, as risk increases, decreasingly risk-averse bidders will reduce their bids by more than the risk premium. Ceteris paribus, bidders will be better off bidding for a more risky object in first-price, second-price, English, and allpay auctions with affiliated private values. We then extend the results to common value settings. This 'precautionary bidding' effect arises because the expected marginal utility of income increases with risk, so bidders are reluctant to bid so highly. We show that precautionary bidding also arises in response to common values risk. This precautionary bidding behavior can make decreasingly risk-averse bidders better off when they face a 'winner's curse' than when they do not.

Bank for providing research funding and support. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors, and do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent. Non-Technical Summary Product variety plays an important role in the theoretical work on monopolistic competition and trade, and recent empirical work has begun to quantify this for aggregate and disaggregate import demands. The objective of this paper is to discuss the measurement of product variety in trade, using a broad cross-section of advanced and developing countries and disaggregating across sectors. We calculate the export variety of countries in their sales to the United States, and relate the export variety indexes to country productivities. We confirm that countries with greater product variety in exports also have higher productivity. This may be due to their own development of, and access to, these products. 2 1.

The conventional wisdom is that African-Americans, Hispanics, and American Indians are underrepresented among faculty in postsecondary institutions because they are underrepresented among Ph.D. recipients. Thus, the putative solution to the problem of minority faculty underrepresentation is to increase the supply of minority Ph.D.’s. In our book, Faculty of Color in Academe: Bittersweet Success (Turner and Myers, 2000) we point out that the supply-side argument has several flaws. In this and a companion paper (Myers and Turner, 2003) we replicate and update the analysis performed in Chapter 7 of our book using more recent census data and a larger sample for 1990. Once again, we demonstrate that an autonomous increase in the Ph.D. supply, uniform across all groups, would leave the representation of African-American and Hispanic faculty largely unchanged. This conclusion challenges the view that the underrepresentation of minority faculty is solely a supply-side phenomenon that can be addressed primarily by increasing the pipeline for new minority Ph.D.’s. Although a strong case can be made for increasing the minority pipeline, the pipeline itself does not appear to be the central cause of the continued underrepresentation of minority faculty. I. The Problem: At every point in the educational pipeline from the Bachelor’s degree to the doctoral degree, African-Americans, Hispanics, and American Indians are substantially underrepresented.

Repetition and Reputation: Implications for Trust and Trustworthiness When Institutions Change by Iris Bohnet and Steffen Huck. Published in volume 94, issue 2, pages 362-366 of American Economic Review, May 2004

The types of knowledge, skills, and proficiencies that should be imparted to students in graduate economics programs are a matter of long-standing controversy. A 1953 American Economic Association (AEA) report cataloged major shortcomings in graduate economic education and recommended changes to enhance the quality and effectiveness of economics Ph.D. programs (Howard R. Bowen, 1953). By the 1980’s, the perception grew that economics Ph.D. programs devoted excessive attention to theoretical work at the expense of real-world application (Wassily Leontief, 1982). This development triggered David Colander and Arjo Klamer (1987) to conduct an independent study based on interviews with graduate students at elite Ph.D. programs. Their study reinforced the views of many, including leaders in the AEA, the National Science Foundation, and several private foundations, that something was amiss. In 1988, the AEA established the Commission on Graduate Education in Economics (COGEE) to undertake a thorough study of graduate training. The Commission’s major concern, based on extensive surveys and interviews of graduate students, faculty, and employers, was that graduate education in economics had removed itself from real-world economic problems (Anne O. Krueger et al., 1991). The COGEE study is distinguished by its attempt to determine the emphasis given to cultivating a set of economic proficiencies in graduate school and the importance of an array of skills for success in graduate school and later on the job (Hansen, 1991). The proficiencies included in the COGEE study were: providing rigorous training in economic theory, providing training in econometrics and measurement, applying theory to real-world problems, using economic theory in empirical applications, and conducting independent economic research. For this study, we added three proficiencies to the COGEE list: understanding economic institutions and history and understanding the history of economic ideas, to capture concerns about curriculum changes that eliminated or scaled back training in these two fields, and developing teaching skills, to reflect recent emphasis on improving the quality of instruction (William E. Becker, 2003). The skills included in the COGEE study were: critical judgment (analyzing ideas, reviewing literature, formulating pertinent comments), analytics (understanding and solving problems, making and analyzing logical arguments), application (seeing practical implications of abstract ideas, analyzing real-world policies and processes), mathematics (constructing and analyzing proofs, manipulating mathematical abstractions), computation (effectively and quickly finding and manipulating relevant data, estimating economic relationships using statistical software), communication (speaking and writing effectively, quickly understanding spoken and written ideas of others, explaining ideas clearly), and creativity (conceiving interesting questions, finding new means of analysis). We added instruction (being an effective classroom teacher) to the skills list for the same reason mentioned above.

We estimate the effect of high school graduation on participation in criminal activity accounting for endogeneity of schooling. We begin by analyzing the effect of high school graduation on incarceration using Census data. Instrumental variable estimates using changes in state compulsory attendance laws as an instrument for high school graduation uncover a significant reduction in incarceration for both blacks and whites. When estimating the impact of high school graduation only, OLS and IV estimators estimate different weighted sums of the impact of each schooling progression on the probability of incarceration. We clarify the relationship between OLS and IV estimates and show that the "weights" placed on the impact of each schooling progression can explain differences in the estimates. Overall, the estimates suggest that completing high school reduces the probability of incarceration by about .76 percentage points for whites and 3.4 percentage points for blacks. We corroborate these findings using FBI data on arrests that distinguish among different types of crimes. The biggest impacts of graduation are associated with murder, assault, and motor vehicle theft. We also examine the effect of drop out on self-reported crime in the NLSY and find that our estimates for imprisonment and arrest are caused by changes in criminal behavior and not educational differences in the probability of arrest or incarceration conditional on crime. We estimate that the externality of education is about 14-26% of the private return to schooling, suggesting that a significant part of the social return to education comes in the form of externalities from crime reduction.