Knowledge that Transforms

Originators seek to mitigate the loss of monopoly power by authorizing generic entry prior to patent expiry. Off-patent competition may be adversely affected if authorized generic entry substantially lowers the attractiveness of subsequent generic entry. This study assesses the impact of authorized generic entry on independent generic entry in recent cases of patent expiry in Germany. The results of a recursive bivariate probit regression, accounting for the endogeneity of authorized generic entry, show that authorized generic entry has no significant effect on the likelihood of generic entry. Business scope expansion and rent-seeking motives drive authorized generic entry decisions.

Abstract We argue that the rise of online travel agencies changed the nature of competition in the airline industry—from competition on elapsed scheduled flight times to price competition. Using flight-level data between 1997 and 2007 and geographical Internet growth patterns, we find a positive relationship between Internet access and flight times. The magnitude of this relationship is larger in competitive markets without low-cost carriers and for flights with shortest scheduled times. We also find that flight delays increased as more passengers gained Internet access. These findings suggest that the Internet may adversely affect firms’ performance and incentives to provide high-quality products.

This paper capitalizes on a unique situation in Israel where car insurance coverage is often distributed as a benefit by employers. In our sample, employer-determined coverage resulted in an average $235 discount in accident costs. Using instrumental variable analysis on data provided by an insurance firm in Israel (2001–2008), we find that each $100 reduction in accident costs results in a 1.7 percentage point increase in the probability of an accident. At an average accident rate of 16.3 percent, this 10 percent increase in auto accidents can be interpreted as the effect of moral hazard on car accidents.

We propose a methodology for estimating the competition effects from entry when firms sell differentiated products. We first derive precise conditions under which Bresnahan and Reiss’s entry threshold ratios (ETRs) can be used to measure competition effects. We then augment the traditional entry model with a revenue equation. This serves to adjust the ETRs by the extent of market expansion from entry, giving unbiased estimates of the competition effects. We apply our approach to seven local service sectors. We find that entry typically leads to significant market expansion, implying that traditional ETRs may substantially underestimate the competition effects from entry.

Do banks matter for growth, and if so, how? This paper examines the effects of national banks in the United States from 1870 to 1900. I use the discontinuity in entry caused by a large minimum size requirement to identify the effects of banking. For the counties on the margin between getting a bank and not, gaining a bank increased production per person by 10%. National banks in rural areas improved agriculture over manufacturing, moving counties toward geographic comparative advantage. Since these banks made few long-term loans, the evidence suggests that the provision of working capital and liquidity matters for growth.

This paper presents a new empirical regularity between the volatility of productivity growth and long-run unemployment for a given level of long-run productivity growth. A theoretical framework based on asymmetric real wage rigidities is shown to have the potential to rationalize this finding. The model tends to fit U.S. long-run unemployment better than a specification based on long-run productivity growth only, especially during the Great Moderation and the Great Recession.

We examine peer effects in teen childbearing among close friends, using miscarriages as a natural experiment. We use 775 women from the core sample of Add Health who had a friend with a teen pregnancy. We find a sizable negative treatment effect: a close friend’s teen birth is associated with a 6 percentage point reduction in the likelihood of own teen pregnancy and childbearing. There is evidence that this effect operates through a learning mechanism by changing beliefs regarding early childbearing. Effects of teen pregnancy prevention policies may be partially offset by reductions in the opportunities for social learning.

Using a microlevel data set of wind turbine installations in Denmark and Germany, we estimate a structural oligopoly model with cross-border trade and heterogeneous firms. Our approach separately identifies border-related from distance-related variable costs and bounds the fixed cost of exporting for each firm. In the data, firms’ market shares drop precipitously at the border. We find that 40% to 50% of the gap can be attributed to national border costs. Counterfactual analysis indicates that eliminating national border frictions would increase total welfare in the wind turbine industry by 4% in Denmark and 6% in Germany.

This paper empirically tests the association between genetically determined resistance to infectious disease and cross-country health differences. A country-level measure of genetic diversity for the system of genes associated with the recognition and disposal of foreign pathogens is constructed. Genetic diversity within this system has been shown to reduce the virulence and prevalence of infectious diseases and is hypothesized to have been naturally selected from historical exposure to infectious pathogens. Base estimation shows a statistically strong, robust, and positive relationship between this constructed measure and country-level health outcomes in times prior to, but not after, the international epidemiological transition.