Knowledge that Transforms

Inputs and Impacts in Charter Schools: KIPP Lynn by Joshua D. Angrist, Susan M. Dynarski, Thomas J. Kane, Parag A. Pathak and Christopher R. Walters. Published in volume 100, issue 2, pages 239-43 of American Economic Review, May 2010

We study the dynamic selection of governments. A government consists of a subset of the individuals in the society. The competence level of the government in o ce determines collective utilities (e.g., by determining the amount and quality of public goods), and each individual derives additional utility from being part of the government (e.g., corruption or rents from holding o ce). We characterize the dynamic evolution of governments and determine structure of stable governments, which arise and persist in equilibrium. Our main focus is on the impact of di erent political institutions on the selection of governments. Perfect democracy, where current members of the government do not have an incumbency advantage or special powers, always leads to the emergence of the most competent government. However, any deviation from perfect democracy destroys this result. There is always at least one other, less competent government that is also stable and can persist forever. In addition, even the least competent government can persist forever in o ce. When there are stochastic shocks to the competence levels of di erent governments or to the rules determining the election of new governments, political institutions with a greater degree of democracy (less power for incumbents) are shown to perform better, because they can adapt to changes more successfully. This suggests that a particular advantage of democratic regimes is their relative exibility. We also show that, in the presence of stochastic shocks, \\royalty-like" dictatorships may be more successful than \\junta-like " dictatorships, because they might also be more adaptable to change.

Intrafirm Trade and Product Contractibility by Andrew B. Bernard, J. Bradford Jensen, Stephen J. Redding and Peter K. Schott. Published in volume 100, issue 2, pages 444-48 of American Economic Review, May 2010

This paper considers the relationship between adult child international migration and the health outcomes of elderly parents left behind in Mexico. Overall, the evidence suggests that having a migrant child is associated with a higher probability that the elderly parent in Mexico will be in poor physical and mental health. These results call into question the popular view that family members left behind in source countries undoubtedly benefit from the international migration of their relatives.

Investigating Income Effects in Scanner Data: Do Gasoline Prices Affect Grocery Purchases? by Dora Gicheva, Justine Hastings and Sofia Villas-Boas. Published in volume 100, issue 2, pages 480-84 of American Economic Review, May 2010

One lingering puzzle is why voluntary contributions to public goods decline over time in experimental and real-world settings. We show that the decline of cooperation is driven by individual preferences for imperfect conditional cooperation. Many people's desire to contribute less than others, rather than changing beliefs of what others will contribute over time or people's heterogeneity in preferences makes voluntary cooperation fragile. Universal free riding thus eventually emerges, despite the fact that most people are not selfish. (D12, D 83, H41, Z13)

Changes in Transportation Infrastructure and Commuting Patterns in US Metropolitan Areas, 1960-2000 by Nathaniel Baum-Snow. Published in volume 100, issue 2, pages 378-82 of American Economic Review, May 2010

A long tradition in macroeconomics dating back to Arthur Okun (1965) and Walter Oi (1962) regards cyclical productivity fluctuations as an artifact, a residual generated from the incomplete and lagged response of employment and labor hours to demand-driven fluctuations in real output. In Okun’s version a one percent decline in output relative to trend is divided up into a reduction of 1 ⁄3 point in productivity and 2 ⁄3 point in aggregate hours. The latter is further subdivided into a reduction of 1 ⁄3 point in the employment rate, with the remaining adjustment taking the form of lower hours per employee and in the labor force participation rate (hereafter LFPR). Yet this tradition of regarding cyclical productivity fluctuations as a byproduct of demand-driven output cycles has been almost forgotten over the past three decades as a result of widespread adoption of the real business cycle (RBC) model in which productivity shocks are treated as exogenous, as unexplained, as unrelated to aggregate demand, and as the sole driver of business cycles. Even in the more enlightened modern macro work on Dynamic Stochastic General Equilibrium Models, aggregate demand and sticky prices have reappeared, but most recent papers still include an autonomous “technology shock” as one of several causes of short-term business cycle fluctuations. Revisiting and Rethinking the Business CyCle †

The literature on school choice assumes that families can submit a preference list over all the schools they want to be assigned to. However, in many real-life instances families are only allowed to submit a list containing a limited number of schools. Subjects' incentives are drastically affected, as more individuals manipulate their preferences. Including a safety school in the constrained list explains most manipulations. Competitiveness across schools plays an important role. Constraining choices increases segregation and affects the stability and efficiency of the final allocation. Remarkably, the constraint reduces significantly the proportion of subjects playing a dominated strategy

Cyclicality in the supply of business credit has been the focus of a considerable amount of research. This cyclicality can stem from shocks to borrowers’ collateral, which affect firms’ ability to raise capital if agency and information problems are significant (Ben S. Bernanke and Mark Gertler, 1989). Or it can stem from shocks to bank capital, which affects the supply of bank loans if agency and information problems limit the ability of banks to raise additional capital (Bernanke, 1983). In this paper, we examine cyclicality in the supply of credit in the context of modern forms of banking, often referred to as the “originate-to-distribute” model. In particular, we focus on the role of syndicated lending.