This paper makes two contributions to the empirical literature on agglomeration economies. First, the paper uses a unique and rich database in conjunction with mapping software to measure the geographic extent of agglomerative externalities. Previous papers have been forced to assume that agglomeration economies are club goods that operate at a metropolitan scale. Second, the paper tests for the existence of organizational agglomeration economies of the kind studied qualitatively by Saxenian (1994). This is a potentially important source of increasing returns that previous empirical work has not considered. Results indicate that localization economies attenuate rapidly and that industrial organization affects the benefits of agglomeration.

A class of model-based filters for extracting trends and cycles in economic time series is presented. These lowpass and bandpass filters are derived in a mutually consistent manner as the joint solution to a signal extraction problem in an unobserved-components model. The resulting trends and cycles are computed in finite samples using the Kalman filter and associated smoother. The filters form a class which is a generalization of the class of Butterworth filters, widely used in engineering. They are very flexible and have the important property of allowing relatively smooth cycles to be extracted from economic time series. Perfectly sharp, or ideal, bandpass filters emerge as a limiting case. Applying the method to quarterly series on U.S. investment and GDP shows a clearly defined cycle.

We investigate the impact of founding family ownership structure on the agency cost of debt. We find that founding family ownership is common in large, publicly traded firms and is related, both statistically and economically, to a lower cost of debt financing. Our results are consistent with the idea that founding family firms have incentive structures that result in fewer agency conflicts between equity and debt claimants. This suggests that bond holders view founding family ownership as an organizational structure that better protects their interests.

We use a simple model to outline the conditions under which corporate investment is sensitive to nonfundamental movements in stock prices. The key prediction is that stock prices have a stronger impact on the investment of “equity-dependent” firms—firms that need external equity to finance marginal investments. Using an index of equity dependence based on the work of Kaplan and Zingales, we find support for this hypothesis. In particular, firms that rank in the top quintile of the KZ index have investment that is almost three times as sensitive to stock prices as firms in the bottom quintile.

This study examines the pricing of global initial public offerings made by US companies as compared to purely domestic offerings. We find that global participation can significantly reduce underpricing by about four percentage points. Moreover, the degree of underpricing declines as larger proportions of shares are allocated to foreign investors. Our results suggest that US companies time their global offerings when foreign demand for US shares is high. There is also evidence that global offerings alleviate the downward pricing pressure associated with new share offerings.

Motivated by the potential for opportunistic behavior in pay decisions, recent SEC and IRS regulations essentially preclude inside directors from serving on a firm’s compensation committee (CC). We examine whether greater CC independence promotes shareholder interests and whether the CEO’s presence on the CC leads to opportunistic pay structure. We find little evidence that greater committee independence affects executive pay. Moreover, committees consisting of insiders or the CEO do not award excessive pay or lower overall incentives. For example, we find no evidence that pay decreases or total incentives increase when CEOs come off the CC. Our results suggest that regulations governing committee structure may not reduce levels of pay or achieve efficiencies in incentive contracts.

The natural rate of interest—the real interest rate consistent with output equaling its natural rate and stable inflation—plays a central role in macroeconomic theory and monetary policy. Estimation of the natural rate of interest, however, has received little attention. We apply the Kalman filter to estimate jointly time-varying natural rates of interest and output and trend growth. We find a close link between the natural rate of interest and the trend growth rate, as predicted by theory. Estimates of the natural rate of interest, however, are very imprecise and subject to considerable real-time measurement error.

The endogenous two-break unit root test of Lumsdaine and Papell is derived assuming no structural breaks under the null. Thus, rejection of the null does not necessarily imply rejection of a unit root per se, but may imply rejection of a unit root without break. Similarly, the alternative does not necessarily imply trend stationarity with breaks, but may indicate a unit root with breaks. In this paper, we propose an endogenous two-break Lagrange multiplier unit root test that allows for breaks under both the null and alternative hypotheses. As a result, rejection of the null unambiguously implies trend stationarity.

Although bargaining is common in markets for heterogeneous goods, it has largely been ignored in the hedonic literature. In a break from that tradition, we establish sufficient conditions that permit one to identify the effect of buyer and seller bargaining on hedonic models. Our model is estimated using a previously overlooked feature of the American Housing Survey that permits us to observe characteristics of both buyers and sellers. Results suggest that household wealth, gender, and other demographic traits influence bargaining power. In addition, variation in bargaining power arising from the presence of school-age children accounts for anomalous seasonal patterns reported in various widely cited indices of quality-adjusted house prices.

We show that under typical conditions the simple “excess‐burden triangle” formula substantially underestimates the excess burden of commodity taxes, in some cases by a factor of 10 or more. This formula performs poorly because it ignores general equilibrium interactions—most important, interactions between the taxed commodity and the labor market. Many prior studies have shown that general equilibrium interactions affect excess burden but have not appreciated the bias associated with ignoring these interactions or the quantitative importance of this bias. We derive an implementable alternative to the simple formula. This alternative formula captures interactions that the simple formula omits; as a result it is both unbiased and usually more accurate.