Knowledge that Transforms

Can Mentoring Help Female Assistant Professors? Interim Results from a Randomized Trial by Francine D. Blau, Janet M. Currie, Rachel T. A. Croson and Donna K. Ginther. Published in volume 100, issue 2, pages 348-52 of American Economic Review, May 2010

The Market for College Graduates and the Worldwide Boom in Higher Education of Women by Gary S. Becker, William H. J. Hubbard and Kevin M. Murphy. Published in volume 100, issue 2, pages 229-33 of American Economic Review, May 2010

Many of the most pernicious economic institutions and policies create entry barriers or manipulate factor prices to transfer resources from entrepreneurs and workers to groups that hold political power. These inefficiencies partly result from the fact that direct and efficient fiscal instruments that can be used for taxation and redistribution of resources are absent. One might then conclude that increasing state capacity and expanding the set of available fiscal instruments should improve the allocation of resources by preventing the use of these inefficient, indirect methods of redistribution. This reasoning ignores the effect of greater state capacity and the change in the set of available fiscal instruments on the political equilibrium, however. Because the availability of more efficient means of taxation increases the potential benefits of controlling state power, it also intensifies costly political conflict aimed at capturing the control of the state. This indirect effect counteracts the benefits from more efficient taxation and may dominate the direct benefits. The paper establishes the possibility that the allocation of resources may deteriorate substantially in response to an autonomous increase in state capacity and the set of fiscal instruments. It also argues that in the British case, which is a key historical example that points to the central role of increased state capacity in economic development, this change was not autonomous; instead, it was an equilibrium response to changes in political institutions that placed better checks on the exercise of power by the executive. This reasoning suggests that the study of the effect of fiscal capacity and the evaluation of policies aimed at increasing state capacity in less-developed economies should be done in the context of dynamic models of political economy, in which fiscal capacity and political constraints are jointly determined.

We develop a model that, at the aggregate level, is similar to the one-sector neoclassical growth model; at the disaggregate level, it has implications for the path of observable measures of technology adoption. We estimate it using data on the diffusion of 15 technologies in 166 countries over the last two centuries. Our results reveal that, on average, countries have adopted technologies 45 years after their invention. There is substantial variation across technologies and countries. Newer technologies have been adopted faster than old ones. The cross-country variation in the adoption of technologies accounts for at least 25 percent of per capita income differences. (JEL O33, O41, O47)

In a reasonably calibrated Mortensen and Pissarides matching model, shocks to average labor productivity can account for a small portion of the fluctuations in unemployment and vacancies (Shimer (2005)). I add heterogeneity in jobs (matches) with respect to the time the job is created in the form of different embodied technology levels. I also introduce specific capital that, once adapted for a match, has less value in another match. I show that the augmented model can account for fluctuations in unemployment and vacancies, and that specific capital is important to decreasing the volatility of the destruction rate of existing matches.

Using European data, this paper finds that (i) industry entry and exit rates are positively related to industry rates of investment-specific technical change (ISTC); and (ii) the sensitivity of industry entry and exit rates to cross-country differences in entry costs depends on industry rates of ISTC. The paper constructs a general equilibrium model in which the rate of ISTC varies across industries and new investment-specific technologies can be introduced by entrants or by incumbents. In the calibrated model, equilibrium behavior is consistent with stylized facts (i) and (ii), provided the cost of technology adoption is increasing in the rate of ISTC. (JEL G31, L11, O31, O33)

We propose a model of trade agreements in which contracting is costly, and as a consequence the optimal agreement may be incomplete. In spite of its simplicity, the model yields rich predictions on the structure of the optimal trade agreement and how this depends on the fundamentals of the contracting environment. We argue that taking contracting costs explicitly into account can help explain a number of key features of real trade agreements. (JEL D86, F13)

A dominant aspect of ownership in the developing world is pyramidal structures, which allow shareholders to control corporations with relatively low investments. The uneasy relationship between these controlling investors and minority shareholders, and the potential impact on the broader macro economy, has been well studied by corporate governance scholars. On the one hand, the mismatch of cash flow and control rights leads to a range of agency problems and resultant resource misallocations, potentially impacting the macro economy (see Randall Morck, Daniel Wolfenzon, and Bernard Yeung 2005 for a comprehensive overview). Yet pyramids are one important mechanism that enables the formation of diversified business groups that, too, are a dominant feature of business organization in much of the world. The economics and management literature has taken a more ambivalent view of business groups, with their agency problems and rent seeking behaviors often counterbalanced by productive efficiencies from correcting market failures in weak institutional environments (see, in particular, a survey of the business groups literature by Tarun Khanna and Yishay Yafeh 2007 which emphasizes this tension). Often, the channels that enable value extraction by controlling interests overlap with those required to overcome market failures. For example, consider a controlling shareholder of a publicly listed firm that has a separate, completely owned, Trade and The InTernal OrganIzaTIOn Of fIrms

This article studies the effects of demographics on the mix of tax rates on labor and capital. It uses a quantitative general-equilibrium, overlapping-generations model where tax rates are voted without past commitments in every period and characterized as a Markov equilibrium. In the United States, the younger voting-age population in 1990 compared to 1965 accounts for the observed decline in the relative capital tax rate between those two years. A younger population raises the net return to capital, leads voters to increase their savings, and results in a preference for lower taxes on capital. Conversely, aging might increase capital taxation. (JEL E13, H24, H25, J11)

In other work (Moscarini and Postel-Vinay, 2008, 2009a), we find a distinct cyclical pattern of the relative performance of large and small businesses in terms of net job creation. Large employers destroy proportionally more jobs during and right after recessions, and create proportionally more jobs late in expansions, relative to small employers. Differential size growth between small and large firms is strongly positively correlated with the unemployment rate. This pattern is observer both in a 1978-2005 census of U.S. employers, the Business Dynamics Statistics, and among listed companies, in Compustat. In this paper, we show that this cyclical pattern of relative performance is also reflected in stock returns. Specifically, we show that the difference in returns between benchmark portfolios of small cap stocks and portfolios of large cap stocks is also positively correlated with the unemployment rate. Financial consultants and fund managers commonly recommend investing in small cap stocks during business cycle recoveries. Our findings, while consistent with that advice, pertain to all phases of the business cycle. We propose an explanation of both facts based on dynamic competition between employers of different sizes and different productivities. The model is a stochastic dynamic version of the job search and wage posting model of Kenneth Burdett and Dale T. Mortensen (1998), which we analyze in detail in Moscarini and Postel-Vinay (2009b). It is a job ladder model, where smaller firms are smaller because they are less productive, offer lower wages, therefore are less attractive to workers and less successful in poaching workers out of competing firms. This lack of competitiveness on the labor market is more of a drawback