Forty million people are infected with HIV worldwide; twenty-five million of them are in Sub-Saharan Africa. This paper addresses the question of why Africa has been so heavily affected by HIV, and what explains the variation within Africa. I present a model that decomposes epidemic level into differences in sexual behavior and differences in viral transmission rates. I argue, using evidence drawn from the existing medical literature, that Africa has very high HIV transmission rates, likely due to high rates of other untreated sexually transmitted infections, while transmission rates in the United States are low. The difference in transmission rates is large enough to explain the observed difference in prevalence between the United States and Sub-Saharan Africa. The model also provides a good fit to cross-country data within Africa and suggests that, in contrast to the intra-continental results, differences within that continent can be attributed to differences in sexual behavior and epidemic timing. The results suggest that cost-effective policy interventions would focus on decreasing transmission rates within Africa, possibly by treating other untreated sexually transmitted infections.

This paper studies The Netherlands' private sector self-regulation initiative (“The Peters Committee”) to improve corporate governance practices. We examine the relation between firm value and corporate governance characteristics before and after the private sector initiative. We find the initiative had no effect on corporate governance characteristics or their relationship with firm value. Event study results suggest the market was skeptical about the success of self-regulation of corporate governance practices in The Netherlands. Our results on The Netherlands self-regulation initiative suggest little should be expected from initiatives that rely on monitoring without enforcement (e.g., similar or weaker initiatives in other European Union (EU) countries).

ABSTRACT The popular press and scholarly studies have noted a number of trends in corporate governance. This article addresses, from a theoretical perspective, whether these trends are linked. And, if so, how? The article finds that a trend toward greater board diligence will lead, sometimes through subtle or indirect mechanisms, to trends toward more external candidates becoming CEO, shorter tenures for CEOs, more effort/less perquisite consumption by CEOs (even though such behavior is not directly monitored), and greater CEO compensation. An additional prediction is that, under plausible conditions, externally hired CEOs should have shorter tenures, on average, than internally hired CEOs.

Should the manufacturer of a product be held legally responsible when a consumer, while using the product, harms someone else? We show that if consumers have deep pockets, then manufacturer liability is not desirable. If homogeneous consumers have limited assets, then the best rule is “residual-manufacturer liability” where the manufacturer pays the shortfall in damages not paid by the consumer. Residual-manufacturer liability distorts the market quantity when consumers' willingness to pay is correlated with their propensity to cause harm. It distorts product safety when consumers differ in their wealth levels. In both cases, consumer-only liability may be preferred.

The Journal of Economic Literature (JEL) regularly reviews books of interest to the economics profession. The Economic Report of the President (ERP) falls under that purview and beginning this year, the JEL will be reviewing the ERP. Toward that end, I have asked a handful of very prominent economists to review the 2005 ERP. Reviewers were chosen to reflect expertise on what I guessed would be key issues. Reviewers were given the following instructions: The ERP in principle should provide an accurate assessment of the consensus professional views of economists on any given issue, based on the research to date. Does the discussion in the ERP in fact accurately summarize what we as economists know? Reviewers were given free rein over what material they would review in the ERP but were urged to focus on their areas of particular expertise. In the reviews that follow, Joel Slemrod reviews the discussion of tax reform. Joe Farrell reviews the ERP's chapter titled “Innovation and the Information Economy.” Gordon Hanson reviews the chapters on international trade and on immigration. Robert Hall reviews the discussion of the adverse macroeconomic impact of rising oil prices while Jonathan Gruber reviews the ERP chapter titled “Expanding Individual Choice and Control.” Many thanks to the reviewers for the quick turnaround.

ABSTRACT Data on corporate governance and disclosure practices reveal wide within‐country variation that decreases with the strength of investors' legal protection. A simple model identifies three firm attributes related to that variation: investment opportunities, external financing, and ownership structure. Using firm‐level governance and transparency data from 27 countries, we find that all three firm attributes are related to the quality of governance and disclosure practices, and firms with higher governance and transparency rankings are valued higher in stock markets. All relations are stronger in less investor‐friendly countries, demonstrating that firms adapt to poor legal environments to establish efficient governance practices.

We present a theoretical model of airport searches. The model extends previous work in the area in that detection conditional on search is imperfect. The hit rates tests for racial bias developed in Knowles, Persico, and Todd (2001) is shown to apply even in the presence of imperfections in monitoring. We then study two channels for improving airport security: better targeting and better detection. We show that better targeting does not necessarily decrease the overall crime rate, although it will decrease crime in the group that is targeted. Improved detection rates unambiguously decrease crime. Group-specific improvements in detection do not necessarily increase the number of searches for those groups. The analysis is extended to allow for the possibility that criminal passengers disguise themselves as members of low-crime groups.

There is an extensive theoretical literature that postulates a tradeoff between child quantity and quality within a family. However, there is little causal evidence that speaks to this theory. Using a rich dataset on the entire population of Norway over an extended period of time, we examine the effects of family size and birth order on the educational attainment of children. While we find a negative correlation between family size and children's education, when we include indicators for birth order and/or use twin births as an instrument, family size effects become negligible. In addition, birth order has a significant and large negative effect on children's education. We also study adult earnings, employment, and teenage childbearing, and find strong evidence for birth order effects with these outcomes, particularly among women. These findings suggest the need to revisit economic models of fertility and child "production", focusing not only on differences across families but differences within families as well.

ABSTRACT This paper develops a theory of strategic trading in markets with large arbitrageurs. If arbitrageurs are not well capitalized, capital constraints make their trades predictable. Other market participants can exploit this by trading against them. Competitors may find it optimal to lend to arbitrageurs that are financially fragile; additional capital makes the arbitrageurs more viable, and lenders can reap profits from trading against them for a longer time. The strategic behavior of these market participants has implications for the functioning of financial markets. Strategic trading may produce significant price distortions, increase price manipulation, and trigger forced liquidations of large traders.

The Collapse of a Medical Labor Clearinghouse (and Why Such Failures Are Rare) by C. Nicholas McKinney, Muriel Niederle and Alvin E. Roth. Published in volume 95, issue 3, pages 878-889 of American Economic Review, June 2005