We use earnings forecasts from securities analysts to construct a new measure of the neoclassical fundamentals that drive investment spending. We find that investment responds significantly to our new measure of fundamentals but is insensitive to cash flow, even for firms typically thought to be liquidity constrained. These results have two key implications. First, fundamentals may be more important for investment spending than would be suggested by the results to date from investment-q models. Second, the positive cash-flow effects obtained in such models may reflect a failure to control properly for fundamentals rather than the presence of financial constraints.

have provided us with a wealth of information about the newest products of U.S. Ph.D. programs. Among the notable facts are the continuing decline in the share of U.S. natives among these new graduates, their continued success at landing academic and other professional jobs, and their high level of professional fulfillment, in terms of both job satisfaction and outcomes measuring up to expectations. There are also a variety of intriguing results. For example, (from their table 5) students completing the top Ph.D. programs were younger, less likely to be married, and more likely to be foreign than those in the overall sample. Perhaps most disturbing, (from their table 6) median starting full-time academic salaries were lowest in public economics, a result that cannot be accounted for in salary regressions with other covariates. This clearly is an inversion of the appropriate ranking. In my comments, I will focus on two selected aspects of Ph.D. programs and the Ph.D. job market.

The Effects of Environmental Regulation on Technology Diffusion: The Case of Chlorine Manufacturing by Lori D. Snyder, Nolan H. Miller and Robert N. Stavins. Published in volume 93, issue 2, pages 431-435 of American Economic Review, May 2003

Interest in national welfare reform has generated several recent income-maintenance and employment and training demonstration projects targeted at welfare recipients and low-income persons. Incomemaintenance programs typically operate by providing cash grants to poor families in amounts decreasing with earned income. Employment and training programs focus on increasing employability through skill development and job placement. While income maintenance strategies address problems of poverty and income inequality, they do not consider the capability of the disadvantaged to achieve economic independence; also, marginal tax rates on benefits have been found to decrease labor supplied (see Michael Keeley et al.). Programs employing a social services and training approach address the issues of employment and labor supply more directly. Analysis of one such program, however, suggests only slight increments to annual earnings have accrued in the postprogram period, and these only for a select group of participants (see Bradley Schiller). Several explanations for these outcomes can be posited, one being that barriers to employability of welfare and low-income persons have not been adequately assessed or remedied. Many of these persons are unmarried female heads of household with little prior work experience, job skills, or labor market familiarity. Real barriers to employability exist for these women, some of which can be corrected via a regimen of training and improvement of existing skills, and others which are more difficult to ascertain and correct. These barriers must be overcome before individuals can be expected to benefit from any program designed to reduce their dependence on welfare. Once these barriers are overcome incentives may be used to increase their commitment to the workforce and to foster economic self-sufficiency. The Minnesota Work Equity Project was funded as a two-year demonstration, employment, and training program serving clients from a variety of public assistance programs (AFDC, GA, Food Stamp) via a common service delivery system. This experiment addresses issues of barriers to employability and incentive to work by guaranteeing a job to all clients deemed employable according to statutory criteria. Employable clients are in effect required to work as one aspect of program services, though emphasis is on employability development through counseling or training. In this paper we identify barriers to employability faced by Work Equity Program clients using preliminary data from the first months of program operation. We analyze clients' five-year preprogram work histories, determinants of the decision to work, and returns to labor market investments. We also discuss clients' reservation wage expectations which provide information about labor market orientation. Finally, we discuss policy implications of these results. *Abt Associates Inc., Harvard University and Abt Associates Inc., and University of Chicago and Abt Associates Inc., respectively. This paper is based on a larger report prepared under contract with the U.S. Department of Labor. We would like to thank Ernst W. Stromsdorfer, principal investigator of the Work Equity Project evaluation, for advice and encouragement throughout our work on this project, and for many helpful remarks on earlier drafts of this paper. The opinions expressed here are our sole responsibility and should not be attributed to the U.S. Department of Labor or any agency or other individuals associated with the Work Equity Project.

This paper investigates the conditions under which a can find a set of prices and a set of products that are sustainable against competitive entry. By a natural monopoly we mean an industry whose cost function over some given set of products is such that no combination of several firms can produce an industry output vector as cheaply as it can be provided by a single supplier. A sustainable vector is a stationary equilibrium set of product quantities and prices which does not attract rivals into the industry. Even if a vector is not sustainable, a monopoly may still be able to protect itself from entry by changing its prices whenever and however necessary, in response to any entry that threatens at that moment. But, by definition, only a sustainable vector can prevent entry and yet remain stationary.

Investigates the conditions under which a 'natural monopoly' can find a set of prices and a set of products that are sustainable against competitive entry. Ramsey rule for Pareto optimal pricing under a budget constraint; Relation between subadditivity of costs and sustainability; Conditions sufficient for sustainable prices; Uncertainty of sustainability. (Из Ebsco)

We use administrative and survey-based micro data to study the relationship between cognitive abilities (IQ), the formation of inflation expectations, and the consumption plans of a representative male population. High-IQ men display 50 % lower forecast errors for inflation than other men. High-IQ men, but not others, have consistent inflation expectations and perceptions over time. In terms of choice, only high-IQ men increase their consumption propensity when expecting higher inflation as the consumer Euler equation prescribes. Education levels, income, other expectations, and socio-economic status, although important, do not explain the variation in expectations and choice by IQ. Recent modelling attempts to incorporate boundedly rational agents into macro models do not fully capture all the facts we document. We discuss which dimensions of expectations formation and choice are important for heterogeneous-agents models of household consumption and for the transmission of fiscal and monetary policy.

We examine the welfare effects of provision of local public goods in an empirically relevant setting using a multi-community model with mobile and heterogeneous households and with flexible housing supplies. We characterize the first-best allocation and show efficiency can be implemented with decentralization using head taxes. We calibrate the model and compare welfare in property-tax equilibria, both decentralized and centralized, to the efficient allocation. Inefficiencies with decentralization and property taxation are large, dissipating most if not all the potential welfare gains that efficient decentralization could achieve. In property-tax equilibrium, centralization is frequently more efficient! An externality in community choice underlies the failure to achieve efficiency with decentralization and property taxes: poorer households crowd richer communities and free ride by consuming relatively little housing thereby avoiding taxes.

We offer an explanation for the forward premium puzzle in foreign exchange markets based upon investor overconfidence. In the model, overconfident individuals overreact to their information about future inflation, which causes greater overshooting in the forward rate than in the spot rate. Thus, when agents observe a signal of higher future inflation, the consequent rise in the forward premium predicts a subsequent downward correction of the spot rate. The model can explain the magnitude of the forward premium bias and several other stylized facts related to the joint behaviour of forward and spot exchange rates. Our approach is also consistent with the availability of profitable carry trade strategies.

We study the (perfect Bayesian) equilibrium of a sequential learning model over a general social network. Each individual receives a signal about the underlying state of the world, observes the past actions of a stochastically generated neighbourhood of individuals, and chooses one of two possible actions. The stochastic process generating the neighbourhoods defines the network topology. We characterize pure strategy equilibria for arbitrary stochastic and deterministic social networks and characterize the conditions under which there will be asymptotic learning—convergence (in probability) to the right action as the social network becomes large. We show that when private beliefs are unbounded (meaning that the implied likelihood ratios are unbounded), there will be asymptotic learning as long as there is some minimal amount of “expansion in observations”. We also characterize conditions under which there will be asymptotic learning when private beliefs are bounded.