Knowledge that Transforms

Women Helping Women, Men Helping Women? Same-Gender Mentoring, Initial Job Placements, and Early Career Publishing Success for Economics PhDs by Christiana Hilmer and Michael Hilmer. Published in volume 97, issue 2, pages 422-426 of American Economic Review, May 2007

We study the implications for international relative prices of a simple Ricardian model of international trade with imperfect competition and variable markups, providing a tractable account of firm-level and aggregate prices. We show that both trade costs and imperfect competition with variable markups are needed to account for pricing-to-market at the firm and aggregate levels. We also show that international trade costs are essential, but pricing-to-market is not, to account for a high volatility of tradeable consumer prices relative to the overall CPI-based real-exchange rate.

Version of Record

It is well known that when agents are fully rational, compulsory public insurance may make all agents better off in the Rothschild and Stiglitz (1976) model of insurance markets. We find that when sufficiently many agents underestimate their personal risks, compulsory insurance makes low-risk agents worse off. Hence, behavioral biases may weaken some of the well-established rationales for government intervention based on asymmetric information.

In this short paper we take a first look at the question of whether the increasing income inequality that the US has witnessed in the past 25 years has generated increasing unhappiness in those who have been falling behind, despite their real income has risen markedly. If an individual's utility depends not only on the level of her own consumption but also on how that level compares with the consumption of others, then the observed widening of the income distribution may have implications for the happiness of different groups that go beyond those associated with the changes in their respective incomes. We find that people's happiness appears to depend positively on how well their socio-economic group is doing relative to the average in their geographic area, even after controlling for the level of their own income. In addition, we find some evidence that the relationship is much stronger for people whose group has above-average income than for people whose group has below-average income; it would thus appear that relative concerns do not become an issue until a person has attained a certain place within the income distribution.

Patients needing kidney transplants may have donors who cannot donate to them because of blood or tissue incompatibility. Incompatible patient-donor pairs can exchange donor kidneys with other pairs only when there is a "double coincidence of wants." Developing infrastructure to perform three-way as well as two-way exchanges will have a substantial effect on the number of transplants that can be arranged. Larger than three-way exchanges have less impact on efficiency. In a general model of type-compatible exchanges, the size of the largest exchanges required to achieve efficiency equals the number of types.

Neuroeconomic Studies of Impulsivity: Now or Just as Soon as Possible? by Paul William Glimcher, Joseph Kable and Kenway Louie. Published in volume 97, issue 2, pages 142-147 of American Economic Review, May 2007

Systematic asymmetries in exchange behavior have been widely interpreted as support for “endowment effect theory,” an application of prospect theory positing that loss aversion and utility function kinks set by entitlements explain observed asymmetries. We experimentally test an alternative explanation, namely, that asymmetries are explained by classical preference theories finding influence through the experimental procedures typically used. Contrary to the predictions of endowment effect theory, we observe no asymmetries when we modify procedures to remove the influence of classical preference theories. When we return to traditional-type procedures, however, the asymmetries reappear. The results support explanations based in classical preference theories and reject endowment effect theory.

Effects of Environmental and Land Use Regulation in the Oil and Gas Industry Using the Wyoming Checkerboard as a Natural Experiment: Retraction by Shelby Gerking and William E. Morgan. Published in volume 97, issue 3, pages 1032 of American Economic Review, June 2007

Among the thirteen original colonies, Pennsylvania was most successful at issuing paper money with only minimal effects on prices --so much so that the colony's experience is sometimes seen as violating the classical quantity theory of money. Quantity theorists usually attribute this apparent anomaly to mismeasurement of the money stock. In contrast, I use data on money, prices, and real activity in Pennsylvania from 1723 to 1774 and for the United States as a whole from 1790 to 1850 (when the money stock is better measured) to show that the long-run behavior of money and prices is well explained by the quantity theory in both periods, despite the differences in institutional arrangements, once growth in monetized transactions is taken into account.