Electronic data interchange (EDI) is an information technology that standardizes the exchange of information between transacting parties. Using data from a major U.S. office furniture manufacturer that adopted EDI primarily to improve the efficiency of accounting transactions, we evaluate whether EDI reduces order-processing time (the time from sales order receipt to sales order scheduling) and whether this improvement is greater for more complex orders. Our measure of complexity reflects both the mix of different products the dealer orders as well as features and options the dealer selects for each product in the order. We find that EDI is associated with faster order processing, independent of complexity, and that EDI mitigates most of the negative effects of complexity on processing time. We also find that dealers learn to submit error-free orders to the manufacturer, and that previous errors provide feedback that helps dealers submit more accurate orders. However, we find only mixed evidence that order complexity impedes learning.

Use It or Lose It: Teaching Literacy in the Economics Principles Course by W. Lee Hansen, Michael K. Salemi and John J. Siegfried. Published in volume 92, issue 2, pages 463-472 of American Economic Review, May 2002

ABSTRACT We propose using the price range in the estimation of stochastic volatility models. We show theoretically, numerically, and empirically that range‐based volatility proxies are not only highly efficient, but also approximately Gaussian and robust to microstructure noise. Hence range‐based Gaussian quasi‐maximum likelihood estimation produces highly efficient estimates of stochastic volatility models and extractions of latent volatility. We use our method to examine the dynamics of daily exchange rate volatility and find the evidence points strongly toward two‐factor models with one highly persistent factor and one quickly mean‐reverting factor.

Do Women Pay More for New Vehicles? Evidence from Transaction Price Data by David W. Harless and George E. Hoffer. Published in volume 92, issue 1, pages 270-279 of American Economic Review, March 2002

This paper reports analyses of data obtained using a field-based questionnaire in which 253 auditors from one Big 5 firm recalled and described 515 specific experiences they had with clients who they believe were attempting to manage earnings. This approach enables us to analyze separately managers' decisions about how to attempt earnings management and auditors' decisions about whether to prevent earnings management by requiring adjustment of the financial statements. Our results indicate that managers are more likely to attempt earnings management, and auditors are less likely to adjust earnings management attempts, which are structured (not structured) with respect to precise (imprecise) standards. We also find that managers are more likely to make attempts that increase current-year income, but auditors are more likely to require that those attempts be adjusted, that managers are more likely to make attempts that decrease current-year income with unstructured transactions and/or when standards are imprecise, and that auditors are more likely to require adjustment of attempts that they identify as material or that are attempted by small clients.

the 2002 meetings of the American Economics Association. Governments sometimes bail out banks by recapitalizing them, or offering to insure their liabilities. The government’s goal may be to rescue borrowers, bankers, or depositors – and economists have developed rationales why each of these constituencies may merit protection (e.g., Diamond [2001)). These potential benefits have to be weighed against the costs of a bailout, which are typically thought to be those of the damage to long-run incentives that such intervention engenders. In this paper, we would like to present a different effect of bank bailouts: Bank bailouts alter the availability of aggregate liquidity in the economy. While a well-targeted bailout can help rescue an otherwise collapsing banking system (see Diamond-Rajan [2001a]), a poorly targeted bailout can even tip a banking system into a systemic crisis. This (ex-post crisis) cost of bank bailouts has, to the best of our knowledge, not been examined elsewhere, and is the focus of this paper. The Framework We consider a world with entrepreneurs, investors, and lenders. The economy lasts for two periods and three dates-- date 0 to date 2. There are two kinds of goods in the economy-consumption goods and machinery. Each entrepreneur has a project, requiring 1 unit of

Estimating Individual Discount Rates in Denmark: A Field Experiment by Glenn W. Harrison, Morten I. Lau and Melonie B. Williams. Published in volume 92, issue 5, pages 1606-1617 of American Economic Review, December 2002