Knowledge that Transforms

Effects of Environmental and Land Use Regulation in the Oil and Gas Industry Using the Wyoming Checkerboard as an Experimental Design by Mitch Kunce, Shelby Gerking and William Morgan. Published in volume 92, issue 5, pages 1588-1593 of American Economic Review, December 2002

This paper presents dual estimates of total factor productivity growth (TFPG) for East Asian countries. While the dual estimates of TFPG for Korea and Hong Kong are similar to the primal estimates, they exceed the primal estimates by 1 percent a year for Taiwan and by more than 2 percent for Singapore. The reason for the large discrepancy for Singapore is because the return to capital has remained constant, despite the high rate of capital accumulation indicated by Singapore's national accounts. This discrepancy is not explained by financial market controls, capital income taxes, risk premium changes, and public investment subsidies.

65 years ago, Ronald Coase (1937) asked what determines whether production will be organized in a firm or through the market, later coined the decision. This question was put center stage by Oliver Williamson (1975, 1985) who further developed Transaction Costs Economics(TCE), arguing that incomplete contracts and specific relationships overshadowed by opportunism, asymmetric information and bounded rationality, will lead vertical processes to integrate. Benjamin Klein et al. (1978) enhanced TCE with the problem: in the face of incomplete contracts, specificity and opportunistic behavior, integration can help promote ex ante investment incentives. Sanford Grossman and Oliver Hart (1986) (followed by Hart and John Moore (1990)) developed the Property Rights Theory (PRT) of the firm (See Hart, 1995). PRT formally model the hold-up problem, offered a precise definition of integration via ownership and residual control rights, and analyzed the costs and benefits of integration in a unified manner. However, PRT narrowed the focus of the make-or-buy question on one type of transaction cost - the hold up problem. This paper focuses attention on a different kind of transaction cost: haggling and friction due to ex post changes and adaptations when contracts are incomplete. The level of a transaction's complexity, which is associated with contractual incompleteness, will be the shifting parameter that determines both incentive schemes and integration decisions. This focus is motivated by a careful examination of procurement decisions in industry, and has strong empirical content since the exogenous shifter (complexity) seems easier to measure than specificity.

In contemporary data, the measured factor content of trade is far smaller than its predicted magnitude in the pure Heckscher-Ohlin-Vanek framework, the so-called 'missing trade' mystery. Authors wonder if this problem has been there from the beginning: that is, authors ask if the Heckscher-Ohlin theory was so much at odds with reality at its time of conception. Authors apply contemporary tests to historical data, focusing on the major trading zone that inspired the factor abundance theory, the Old and New Worlds of the pre-1914 'Greater Atlantic' economy. This places autor's analysis in a very different context than contemporary studies: an era with lower trade barriers, higher transport costs, a more skewed global distribution of the relevant factors (especially land), and comparably large productivity divergence. These conditions might seem more favorable to the theory, but the results are still very poor.

Contrary to simple theoretical predictions, existing evidence suggests that federal grants do not crowd out state government spending. A legislative bargaining model with endogenous grants documents a positive correlation between grant receipts and preferences for public goods; this correlation has likely biased existing work against measuring crowd-out. To correct for such endogeneity, the model motivates instruments based on the political power of state congressional delegations. Exploiting this exogenous variation in grants, the instrumental variables estimator reports crowd-out that is statistically and economically significant. This endogeneity may explain the flypaper effect, a nonequivalence between grant receipts and private income.

Do Women Pay More for New Vehicles? Evidence from Transaction Price Data by David W. Harless and George E. Hoffer. Published in volume 92, issue 1, pages 270-279 of American Economic Review, March 2002

Reservation Wages: An Analysis of the Effects of Reservations on Employment of American Indian Men by J. Gitter and Patricia B. Reagan. Published in volume 92, issue 4, pages 1160-1168 of American Economic Review, September 2002

We document the existence of a strong seasonal effect in stock returns based on

Antidumping Investigations and the Pass-Through of Antidumping Duties and Exchange Rates by Bruce A. Blonigen and Stephen E. Haynes. Published in volume 92, issue 4, pages 1044-1061 of American Economic Review, September 2002

Colombia used lotteries to distribute vouchers which partially covered the cost of private secondary school for students who maintained satisfactory academic progress. Three years after the lotteries, winners were about 10 percentage points more likely to have finished 8th grade, primarily because they were less likely to repeat grades, and scored 0.2 standard deviations higher on achievement tests. There is some evidence that winners worked less than losers and were less likely to marry or cohabit as teenagers. Benefits to participants likely exceeded the $24 per winner additional cost to the government of supplying vouchers instead of public-school places.