Knowledge that Transforms

Alwyn Young (2000) argues that barriers to interprovincial trade in China have increased during the reform period. This paper critically examines each of his five arguments and the evidence he presents. In all five instances, the argument is problematic and the evidence not robust. A comparison with the United States shows the Chinese evidence to be well within the range of that of a normal, relatively integrated large economy.

An important issue with conducting economic analysis in the lab is whether the results generalize to real-world environments where the stakes and subject pool are considerably different. We examine data from the game show The Weakest Link to determine whether the gender of one's opponent affects performance. We then attempt to replicate the competitive structure of the game show in the lab with an undergraduate subject pool. The results in the lab only match when we both employ high stakes in the lab (≥ $50) and limit our analysis to young contestants in the game show (age < 33).

This paper investigates the effect of disadvantaged business enterprise subcontractor goals on the winning bids for highway construction contracts using California's Proposition 209, which prohibited the consideration of race or gender in awarding state-funded contracts. After Proposition 209, prices on state-funded contracts fell by 5.6% relative to federally funded projects, for which preferences still applied. Most of the price decline after Proposition 209 resulted from the mix of subcontractors employed, which seems to arise from the higher costs of firms located in high-minority areas. Finally, short-run barriers to entry and expansion may increase the cost of affirmative action.

Quota restrictions on United States imports of apparel and textiles under the multifiber arrangement (MFA) ended abruptly in January 2005. This change in policy was large, predetermined, and fully anticipated, making it an ideal natural experiment for testing the theory of trade policy. Prices of quota-constrained categories from China fell by 38% in 2005, with smaller declines from other exporters. Prices in unconstrained categories from all countries changed little. We also find substantial quality downgrading in imports from China in previously constrained categories. The annual cost of the MFAto U.S. consumers was $63 per household.

Consumption by couples rises sharply in the beginning and falls later in life; the causes of the early rise are hotly contested. Among the suggestions are rule of thumb behavior, demographics, liquidity constraints, the precautionary motive, and nonseparabilities between consumption and labor supply. We develop two tests of the extreme hypothesis that only changes in family structure matter. We estimate effects of the numbers and ages of children on consumption. These estimates allow us to rationalize all of the increase in consumption without recourse to any of the causal mechanisms. Our estimates can be interpreted either as giving upper bounds on the effects of children or as evidence that the other causes are not important.

This paper shows that workers can affect the productivity of their coworkers based on income maximization considerations, rather than relying on behavioral considerations such as peer pressure, social norms, and shame. We show that a worker's effort has a positive effect on the effort of coworkers if they are complements in production, and a negative effect if they are substitutes. The theory is tested using a panel data set of baseball players from 1970 to 2003. The results are consistent with the idea that the effort choices of workers interact in ways that are dependent on the technology of production.

We showed 10-second, silent video clips of unfamiliar gubernatorial debates to a group of experimental participants and asked them to predict the election outcomes. The participants' predictions explain more than 20 percent of the variation in the actual two-party vote share across the 58 elections in our study, and their importance survives a range of controls, including state fixed effects. In a horse race of alternative forecasting models, participants' forecasts significantly outperform economic variables in predicting vote shares, and are comparable in predictive power to a measure of incumbency status. Participants' forecasts seem to rest on judgments of candidates' personal attributes (such as likeability), rather than inferences about candidates' policy positions. Though conclusive causal inference is not possible in our context, our findings may be seen as suggestive evidence of a causal effect of candidate appeal on election outcomes.

The literature on schooling externalities in U.S. cities and states is rather mixed: positive external effects of average education levels are hardly found while positive externalities from the share of college graduates are more often identified. We propose a simple model to reconcile this mixed evidence. Our model predicts positive externalities from increased college education and negligible external effects from high school education. Using compulsory attendance/child labor laws, push-driven immigration of highly educated workers, and the location of land-grant colleges as instruments for schooling attainments, we test and confirm the model predictions with data on U.S. states for the period 1960–2000.

Bigger firms pay higher wages. This note reports tests of the hypothesis that this big-firm premium (BFP) occurs because workers in big firms are more skilled. We use the International Adult Literacy Survey, which gives richer skill measures than those typically available in labor market surveys, to measure the BFP in nine countries with and without controls for worker skill. The results show that the BFP is not as universal as is often suggested, but in countries where it exists controlling for skills does little to reduce the size of the BFP.

This paper explores whether lobbies slow down technology diffusion. To answer this question, we exploit the differential effect of various institutional attributes that should affect the costs of erecting barriers when the new technology has a technologically close predecessor but not otherwise. We implement this test using a data set that covers the diffusion of twenty technologies for 23 countries over the past two centuries. We find that each of the relevant institutional variables that affect the costs of erecting barriers has a significantly larger effect on the diffusion of technologies with a competing predecessor technology than when no such technology exists. These effects are quantitatively important. Thus, we conclude that lobbies are an important barrier to technology adoption and to development.