Knowledge that Transforms

Dating to the classic works of Alonso, Mills, and Muth, the production function for housing has played a central role in urban economics and local public finance. This paper provides a new flexible approach for estimating the housing production function which treats housing quantities and prices as latent variables. The empirical analysis is based on a comprehensive database of recently built properties in Allegheny County, Pennsylvania. We find that the new method proposed in this paper works well in the application and provides reasonable estimates for the underlying production function. (JEL C51, D24, R11, R31)

This paper describes a series of laboratory experiments studying whether the form in which items are displayed at the time of decision affects the dollar value that subjects place on them. Using a Becker-DeGroot auction under three different conditions—(i) text displays, (ii) image displays, and (iii) displays of the actual items—we find that subjects' willingness-to-pay is 40–61 percent larger in the real than in the image and text displays. Furthermore, follow-up experiments suggest the presence of the real item triggers preprogrammed consummatory Pavlovian processes that promote behaviors that lead to contact with appetitive items whenever they are available. (JEL C91, D03, D12, D87)

The accessibility of quality schools and educational resources for children are key engines of upward mobility in the United States, holding the potential to break the cycle of poverty from one generation to the next. Inequalities in economic status tend to be correlated across generations in part because of intergenerational correlations in health and education (Rucker C. Johnson 2009). Residential segregation by race and class that leads to unequal access to quality schools is often cited as a culprit in perpetuating inequality in attainment outcomes. Over the past four decades, three major government interventions have had substantial impacts on the provision of school resources and have narrowed black-white differences in access to dimensions of school quality: i) court-mandated school desegregation, ii) state legislation and legal action aimed to change the distribution and level of school funding, and iii) the expansion of targeted preschool programs for disadvantaged children through Head Start. Court ordered school desegregation has been described as the most controversial and ambitious social experiment of the past 50 years. Human Capital, HealtH OutCOmes, and inequality †

Ethanol Policy Effects on U.S. Natural Gas Prices and Quantities by Jarrett Whistance, Wyatt W. Thompson and Seth D. Meyer. Published in volume 100, issue 2, pages 178-82 of American Economic Review, May 2010

Can Openness Mitigate the Effects of Weather Shocks? Evidence from India's Famine Era by Robin Burgess and Dave Donaldson. Published in volume 100, issue 2, pages 449-53 of American Economic Review, May 2010

We analyze contract choices, loan-repayment behavior, and welfare in a model of a competitive credit market when borrowers have a taste for immediate gratification. Consistent with many credit cards and subprime mortgages, for most types of nonsophisticated borrowers the baseline repayment terms are cheap, but they are also inefficiently front loaded and delays require paying large penalties. Although credit is for future consumption, nonsophisticated consumers overborrow, pay the penalties, and back load repayment, suffering large welfare losses. Prohibiting large penalties for deferring small amounts of repayment—akin to recent regulations in the US credit-card and mortgage markets—can raise welfare. (JEL D14, D18, D49, D86)

ABSTRACT The aggregate portfolio of actively managed U.S. equity mutual funds is close to the market portfolio, but the high costs of active management show up intact as lower returns to investors. Bootstrap simulations suggest that few funds produce benchmark‐adjusted expected returns sufficient to cover their costs. If we add back the costs in fund expense ratios, there is evidence of inferior and superior performance (nonzero true α ) in the extreme tails of the cross‐section of mutual fund α estimates.

ABSTRACT To identify the most effective mechanisms for detecting corporate fraud, we study all reported fraud cases in large U.S. companies between 1996 and 2004. We find that fraud detection does not rely on standard corporate governance actors (investors, SEC, and auditors), but rather takes a village, including several nontraditional players (employees, media, and industry regulators). Differences in access to information, as well as monetary and reputational incentives, help to explain this pattern. In‐depth analyses suggest that reputational incentives in general are weak, except for journalists in large cases. By contrast, monetary incentives help explain employee whistleblowing.

ABSTRACT We assess the impact of bank deregulation on the distribution of income in the United States. From the 1970s through the 1990s, most states removed restrictions on intrastate branching, which intensified bank competition and improved bank performance. Exploiting the cross‐state, cross‐time variation in the timing of branch deregulation, we find that deregulation materially tightened the distribution of income by boosting incomes in the lower part of the income distribution while having little impact on incomes above the median. Bank deregulation tightened the distribution of income by increasing the relative wage rates and working hours of unskilled workers.