This paper evaluates the importance of microeconomic irreversibilities for aggregate dynamics using a real-business-cycle (RBC) model characterized by investment irreversibilities at the establishment level. The main finding is that investment irreversibilities do not play a significant role in an otherwise standard real-business-cycle model: Even though investment irreversibilities are crucial for establishment-level dynamics, aggregate fluctuations are basically the same under fully flexible or completely irreversible investment.

We study the phenomenon of short-run increasing returns to labor (SRIRL) in a sample of 10 interwar U.S. manufacturing industries. Our main findings are that SRIRL was common in the interwar period and that the pattern of SRIRL across industries was similar to that observed in the postwar period. We argue that, since presumably the Depression was not caused by technical regress, these findings are inconsistent with the claim of real business cycle theorists that SRIRL is in general due to procyclical technical shocks. We propose tests for discriminating between two other leading explanations of SRIRL but find that our conclusions differ by industry.

A reduced-form equation relating length of "formal schooling" to market, endowment, and ability parameters was derived for a life-cycle human capital accumulation model with alternative assumptions: (a) equal borrowing and lending rates and (b) no loans for human capital investment. Length of "formal schooling" increases when loans are unavailable. For both cases, length of "formal schooling" varies directly with length of work life, a Hicks-neutral "ability" index, and the ratio of the human capital rental rate to the price of associated inputs, and varies inversely with the discount rate, deterioration rate, and initial human capital stock.

We analyze taxpayer choices of return preparation services. We distinguish between two types of nonpaid preparers, six types of paid third parties, and self-preparation. Among other things, we find significant differences in the factors which explain the demand for paid third parties who are and are not able to represent clients before the IRS. Among these factors are increases in IRS audit rates and the frequency of IRS penalties.

Internet web sites have become an important alternative distribution channel for most banking institutions. However, we still know little about the impact of this delivery channel on bank performance. We observe 424 community banks among the first wave of US banks to adopt transactional banking web sites in the late-1990s, and compare the change in their 1999–2001 financial performance to that of 5175 branching-only community banks. Whereas today virtually all viable community banking franchises offer the Internet banking channel, studying this earlier time period allows us to make clean comparisons between subsamples of “brick-and-mortar” and “click-and-mortar” community banks. We find that Internet adoption improved community bank profitability, chiefly through increased revenues from deposit service charges. Internet adoption was also associated with movements of deposits from checking accounts to money market deposit accounts, increased use of brokered deposits, and higher average wage rates for bank employees. We find little evidence of changes in loan portfolio mix. Our findings suggest that these initial click-and-mortar banks (and their customers) used the Internet channel as a complement to, rather than a substitute for, physical branches.

We develop methods for testing factor models when the weights in portfolios of factors and test assets can vary with lagged information. We derive and evaluate consistent standard errors and finite sample bias adjustments for unconditional maximum squared Sharpe ratios and their differences. Bias adjustment using a second-order approximation performs well. We derive optimal zero-beta rates for models with dynamically trading portfolios. Factor models’ Sharpe ratios are larger but standard test asset portfolios’ maximum Sharpe ratios are larger still when there is dynamic trading. As a result, most of the popular factor models are rejected.

We run a series of experiments involving over 4,000 online participants and over 10,000 school-aged youth. When individuals are asked to subjectively describe their performance on a male-typed task relating to math and science, we find a large gender gap in self-evaluations. This gap arises when self-evaluations are provided to potential employers, and thus measure self-promotion, and when self-evaluations are not driven by incentives to promote. The gender gap in self-evaluations proves to be persistent and arises as early as the sixth grade. No gender gap arises if individuals are asked about their performance on a more female-typed task.

We propose an explanation for the wide variation in rates of taxation across developed economies, based on differences in labor market institutions. In "corporatist" economies, which feature centralized labor markets, taxes on labor input will be less distortionary than when labor supply is determined individually. Since the level of labor supply is set by a small group of decision-makers, these individuals will recognize the linkage between the taxes that workers pay and the benefits that they receive. Labor tax burdens are indeed higher in more corporatist nations, and non-labor taxes are lower, which is consistent with this theory. There is also some evidence that the distortionary effects of labor taxes are lower in more corporatist economies.

Recently, several authors have argued for the use for the use of dynamic preference structures for leisure which incorporate forms of intertemporally nonseparable utility in the analysis of intertemporal labor supply decisions. In this paper, we examine whether such nonseparable utility functions are important in characterizing microdata on life-cycle labor supply. Using longitudinal data on males from the Panel Study of Income Dynamics, we estimate a model of life-cycle labor supply and consumption under uncertainty in which the structure of intertemporal leisure preferences is allowed to be nonseparable in leisure. Our model nests as special cases a number of alternative specifications considered in the literature. We investigate the robustness of our findings to certain forms of population heterogeneity and to some types of model misspecification. Across a number of alternative specifications, we find evidence that the standard assumption of intertemporally separable preferences for leisure is not consistent with data for prime-age males.

In the late nineteenth century, the North American bison was brought to the brink of extinction in less than two decades. We demonstrate that the loss of the bison had immediate, negative consequences for the Native Americans who relied on them and ultimately resulted in a persistent reversal of fortunes. Once amongst the tallest people in the world, the generations of bison-reliant people born after the slaughter lost their entire height advantage. By the early twentieth century, child mortality was 16 percentage points higher and the probability of reporting an occupation 19 percentage points lower in bison nations compared with nations that were never reliant on the bison. Throughout the latter half of the twentieth century and into the present, income per capita has remained 25% lower, on average, for bison nations. This persistent gap cannot be explained by differences in agricultural productivity, self-governance, or application of the Dawes Act. We provide evidence that this historical shock altered the dynamic path of development for formerly bison-reliant nations. We demonstrate that limited access to credit constrained the ability of bison nations to adjust through re-specialization and migration.