Teen out-of-wedlock mothers have lower education and earnings than do peers who have children later. This study uses the National Educational Longitudinal Survey of 1988 to examine the extent to which the apparent effects of out-of-wedlock teen childbearing are due to preexisting disadvantages of the young women and their families. We use a novel method that matches teen mothers to similar young women in their junior high school (that is, prior to pregnancy). We find that out-of-wedlock fertility reduces education substantially, although far less than the cross-sectional comparisons of means suggest. We further find that this effect is larger among those with lower probabilities of having a child out of wedlock.

This paper argues that incompleteness of intertemporal financial markets has little effect (on welfare, prices, or consumption) in an economy with a single consumption good, provided that traders are long–lived and patient, a riskless bond is traded, shocks are transitory, and there is no aggregate risk. In an economy with aggregate risk, a similar conclusion holds, provided traders share the same CRRA utility function and the right assets are traded. Examples demonstrate that these conclusions need not hold if the wrong assets are traded or if the economy has multiple consumption goods.

This paper compares two different models in a common environment. The first model has liquidity constraints in that consumers save a single asset that they cannot sell short. The second model has debt constraints in that consumers cannot borrow so much that they would want to default, but is otherwise a standard complete markets model. Both models share the features that individuals are unable to completely insure against idiosyncratic shocks and that interest rates are lower than subjective discount rates. In a stochastic environment, the two models have quite different dynamic properties, with the debt constrained model exhibiting simple stochastic steady states, while the liquidity constrained model has greater persistence of shocks.

The authors study repeated games in which players observe a public outcome that imperfectly signals the actions played. They provide conditions guaranteeing that any feasible, individually rational payoff vector of the stage game can arise as a perfect equilibrium of the repeated game with sufficiently little discounting. The central condition requires that there exist action profiles with the property that, for any two players, no two deviations--one by either player--give rise to the same probability distribution over public outcomes. The results apply to principal-agent, partnership, oligopoly, and mechanism-design models, and to one-shot games with transferable utilities. Copyright 1994 by The Econometric Society.

Does a pure exchange economy with an infinite time horizon have determinate perfect foresight equilibria? When there is a finite number of infinitely lived agents equilibria are generically determinate. This is not true with overlapping generations of finitely lived agents. We ask whether the initial conditions together with the requirement of convergence to a steady state locally determine an equilibrium price path. In this framework there are many economies with isolated equilibria, many with continua of equilibria, and many with no equilibria at all. With two or more goods in every period not only can the price level be indeterminate but relative prices as well. Furthermore, such indeterminacy can occur whether or not there is fiat money and whether or not the equilibria are Pareto efficient. THIS PAPER CONSIDERS whether infinite horizon economies have determinate perfect foresight equilibria. This question is of crucial importance. If instead equilibria are locally indeterminate, not only are we unable to make comparative static predictions, but the agents in the model are unable to determine the consequences of unanticipated shocks. The idea underlying perfect foresight is that agents' expectations should be the actual future sequence predicted by the model; if the model does not make determinate predictions, the concept of perfect foresight is meaningless. We consider two extreme cases: the first with a finite number of infinitely lived consumers and the second with an infinite number of finitely lived consumers, an overlapping generations model. Both are models of stationary pure exchange economies. No production, including the storage of goods between periods, can occur. These models are unrealistic but are the easiest to study. Extensions of the results of this paper to models with production, infinitely lived assets, and mixtures of the two types of consumers are presented by Muller and Woodford [29]. When there is a finite number of infinitely lived consumers, we argue that equilibria are generically determinate. This is because the effective number of equations determining equilibria is not infinite, but equal to the number of agents minus one and must determine the marginal utility of income for all but one agent. Generically, near an equilibrium, these equations are independent and exactly determine the unknowns. When there are infinitely many overlapping generations, this reasoning breaks down: An infinite number of equations is not necessarily sufficient to determine

We consider two kinds of “outside opportunity” that a seller of an indivisible good might have: selling to a different buyer and consuming the good herself. In both models the seller is uncertain about the buyer's valuation, and becomes more pessimistic over time. When the seller becomes sufficiently pessimistic, she prefers the outside opportunity, so she will not bargain indefinitely with the current buyer. Despite the resulting finite-horizon nature of negotiations, the link between the buyer's willingness to accept an offer and the seller's eagerness to go “outside” generates multiple equilibria.

We propose that a simple "dual-self" model gives a unified explanation for several empirical regularities, including the apparent time inconsistency that has motivated models of quasi-hyperbolic discounting and Rabin’s paradox of risk aversion in the large and small. The model also implies that self-control costs imply excess delay, as in the O'Donoghue and Rabin models of quasi-hyperbolic utility, and it explains experimental evidence that increased cognitive load makes temptations harder to resist. The base version of our model is consistent with the Gul-Pesendorfer axioms, but we argue that these axioms must be relaxed to account for the effect of cognitive load.

We argue that some, but not all, superstitions can persist when learning is rational and players are patient, and illustrate our argument with an example inspired by the Code of Hammurabi. The code specified an “appeal by surviving in the river” as a way of deciding whether an accusation was true. According to our theory, a mechanism that uses superstitions two or more steps off the equilibrium path, such as “appeal by surviving in the river,” is more likely to persist than a superstition where the false beliefs are only one step off the equilibrium path.