Knowledge that Transforms

Desire for social esteem is a source of prosocial behavior. We develop a model in which actors' utility of esteem depends on the audience. In a principal-agent setting, we show that the model can account for motivational crowding out. Control systems and pecuniary incentives erode morale by signaling to the agent that the principal is not worth impressing. The model also offers an explanation for why agents are motivated by unconditionally high pay and by mission-oriented principals. (JEL D01, D82)

The National Assessment of Educational Progress in Economics: Findings for General Economics by William B. Walstad and Stephen Buckles. Published in volume 98, issue 2, pages 541-46 of American Economic Review, May 2008

In a seminal paper, Lena Edlund and Evelyn Korn (2002) introduce a puzzling stylized fact? that prostitution is low-skilled, labor intensive, female, and well paid?and offer a provocative explanation: sex workers draw a compensating differential due to the foregone opportunity to sell their fertility in the marriage market. In so doing, they not only provide the first formal model of occupational choice involving prostitu? tion, they also draw an intriguing link between the labor market and the marriage market that holds for only one occupation. When a woman chooses to become a sex worker, she relinquishes the compensation she would otherwise receive in marriage, since taboos prevent prostitutes from marrying. Thus, even in settings where prostitu? tion is legal, it must draw an earnings premium. Beyond drawing considerable media attention, the richness of the Edlund-Korn model has made

We study whether the effects on registered manufacturing output of dismantling the License Raj—a system of central controls regulating entry and production activity in this sector—vary across Indian states with different labor market regulations. The effects are found to be unequal across Indian states with different labor market regulations. In particular, following delicensing, industries located in states with pro-employer labor market institutions grew more quickly than those in pro-worker environments. (JEL J50, L52,L60, O14, O15, O25)

Many employment relationships concede rents to workers. Depending on the political institutions, the presence of such rents allows employers to use the threat of withdrawing them to control their workers' political behavior, such as their votes in the absence of secret ballot. We examine the effects of the introduction of the secret ballot in Chile in 1958 on voting behavior. Before the reforms, localities with more pervasive patron-client relationships tended to exhibit a much stronger support for the right-wing parties, traditionally associated with the landed oligarchy. After the reform, however, this difference across localities completely disappeared. (JEL D72, N46, O13, O15, O17)

The “missing women” phenomenon in many Asian countries has previously been regarded as the result of son preference. However, some studies have argued half of the missing women can be explained by infection with Hepatitis B virus (HBV). We demonstrate that the probability of having a male birth is only slightly higher for HBV mothers than for mothers without HBV. The sex ratio at birth rises for the higher birth order and that in families where the first two children are female. Our findings suggest that HBV status has little impact on the missing women phenomenon. (JEL I12, J16)

This paper studies how prices comove across products, firms and locations to gauge the relative importance of retailer versus manufacturer-level shocks in determining prices. I make use of a large panel data set on prices for a cross-section of retailers in the U.S. I analyze prices at the barcode or Universal Product Code'' (UPC) level for individual stores. I find that only 16% of the variation in prices is common across stores selling an identical product. 65% of the price variation is common to stores within a particular retail chain (but not across retail chains), while 17% is completely idiosyncratic to the store and product. Product categories with frequent temporary sales'' exhibit a disproportionate amount of completely idiosyncratic price variation. My results suggest that most of the observed price variation arises from retail-level rather than manufacturer-level demand and supply shocks. However, the behavior of prices is difficult to relate to observed variation in costs and demand at the retail level. This suggests that retail prices may vary largely as a consequence of dynamic pricing strategies on the part of retailers or manufacturers, rather than static demand and supply shocks.

Empirical and experimental evidence suggests different levels of sophistication among families in the Boston Public School student assignment plan. We analyze the preference revelation game induced by the Boston mechanism with sincere players who report their true preferences and sophisticated players who play a best response. We characterize the set of Nash equilibrium outcomes as the set of stable matchings of a modified economy, where sincere students lose priority to sophisticated students. Any sophisticated student weakly prefers her assignment under the Pareto-dominant Nash equilibrium of the Boston mechanism to her assignment under the recently adopted student-optimal stable mechanism. (JEL D82, I21)

This paper examines the link between income and consumption inequality. We create panel data on consumption for the Panel Study of Income Dynamics using an imputation procedure based on food demand estimates from the Consumer Expenditure Survey. We document a disjuncture between income and consumption inequality over the 1980s and show that it can be explained by changes in the persistence of income shocks. We find some partial insurance of permanent shocks, especially for the college educated and those near retirement. We find full insurance of transitory shocks except among poor households. Taxes, transfers, and family labor supply play an important role in insuring permanent shocks. (JEL D12, D31, D91, E21)

This paper presents findings from an experimental evaluation of Job Corps, the nation's largest training program for disadvantaged youths. The study uses survey data collected over four years and tax data over nine years on a nationwide sample of 15,400 treatments and controls. The Job Corps model has promise; program participation increases educational attainment, reduces criminal activity, and increases earnings for several postprogram years. Based on tax data, however, the earnings gains were not sustained except for the oldest participants. Nonetheless, Job Corps is the only federal training program that has been shown to increase earnings for this population. (JEL I28, I38, J13, J24)