I. Introduction, 603. — II. Variations in factor inputs that are less than proportionate to changes in output, 604. — III. The influence of risk on the scale of operations, 607. — IV. More fundamental difficulties with constant factor proportions, 608. — V. The management factor and economies of scale, 611. — VI. Conclusion, 612.

In the context of an overlapping-generations model, we show that Uquidity constraints on households (i) raise the saving rate, (ii) strengthen the effect of growth on saving, (iii) increase the growth rate if productivity growth is endogenous, and (iv) may increase welfare. The first three positions are supported by cross-country regressions of saving and growth rates on indicators of liquidity contraints on households. The results suggest that financial deregulation in the 1980s has contributed to the decline in national saving and growth rates in the OECD countries.

Evidence on central banks’ twin objective, monetary and financial stability, is scarce. We suggest an integrated micro–macro approach with two core virtues. First, we measure financial stability directly at the bank level as the probability of distress. Second, we integrate a microeconomic hazard model for bank distress and a standard macroeconomic model. The advantage of this approach is to incorporate micro information, to allow for non-linearities and to permit general feedback effects between financial distress and the real economy. We base the analysis on German bank and macro data between 1995 and 2004. Our results confirm the existence of a trade-off between monetary and financial stability. An unexpected tightening of monetary policy increases the probability of distress. This effect disappears when neglecting microeffects and non-linearities, underlining their importance. Distress responses are largest for small cooperative banks, weak distress events, and at times when capitalization is low. An important policy implication is that the separation of financial supervision and monetary policy requires close collaboration among members in the European System of Central Banks and national bank supervisors.

When a homeowner uses an agent to sell his property, he may have less information than his agent and be disadvantaged in price setting and negotiating. This study examines whether the percentage commission structure in real estate brokerage creates agency problems. We investigate whether agents are able to use their information advantage to either sell their own property faster or for a higher price than their clients’ properties. The empirical results confirm our theoretical predictions of agency problems, as we find that agent-owned houses sell no faster than client-owned houses, but they do sell at a price premium of approximately 4.5%.

Environmental regulation in the United States has undergone a slow evolution from command and control strategies towards market-based regulations. One such innovation is the Toxics Release Inventory (TRI), a regulation that requires polluting firms to publicly disclose information about their toxic emissions. The basic tenet of this regulation is that it corrects for informational asymmetries between polluters and households, allowing communities to pressure polluters to decrease their emissions. Policy-makers have judged the TRI a tremendous success, as national releases declined by 43% between 1988 and 1999. Yet many of the fundamental problems which are known to lead to the classic failure of the Coase theorem (such as high transaction costs and difficulties in organizing) cast doubt on the effectiveness of disclosure rules, alone, to lead to an efficient outcome in the case of pollution. We use an event study methodology with high-quality data on house prices and other local attributes to assess the extent to which the public values changes in toxic releases and thus the success of TRI. Our major findings include: (1) declines in toxic releases appear unrelated to any political economy variables that might lead to public activism; (2) initial information released under TRI had no significant effect on the distribution of house prices; and (3) house prices show no significant impact of declines in reported toxic releases over time. Standard errors are small enough that we can reject the hypothesis that large declines in toxic releases lead to more than a 0.5% increase in house prices. These results also hold when we control for differences in the availability of information on TRI and the possible effect of expectations. Our findings cast doubt on the ability of the public to process complex information on hazardous emissions and support the Coase theorem in that right-to-know laws such as TRI may not be the most effective form of environmental regulation.

Most transplanted kidneys are from cadavers, but there are also many transplants from live donors. Recently, there have started to be kidney exchanges involving two donor-patient pairs such that each donor cannot give a kidney to the intended recipient because of immunological incompatibility, but each patient can receive a kidney from the other donor. Exchanges are also made in which a donor-patient pair makes a donation to someone waiting for a cadaver kidney, in return for the patient in the pair receiving high priority for a compatible cadaver kidney when one becomes available. There are stringent legal/ethical constraints on how exchanges can be conducted. We explore how larger scale exchanges of these kinds can be arranged efficiently and incentive compatibly, within existing constraints. The problem resembles some of the “housing” problems studied in the mechanism design literature for indivisible goods, with the novel feature that while live donor kidneys can be assigned simultaneously, cadaver kidneys cannot. In addition to studying the theoretical properties of the proposed kidney exchange, we present simulation results suggesting that the welfare gains from larger scale exchange would be substantial, both in increased number of feasible live donation transplants, and in improved match quality of transplanted kidneys.