Charles F. Walker, Allan H. Meltzer, Edgar Peske, Bion B. Howard, John P. Shelton, Ragnar D. Naess, Developments in the Curriculum and Teaching of Finance: Discussion, The Journal of Finance, Vol. 21, No. 2, Papers and Proceedings of the Twenty-Fourth Annual Meeting of the American Finance Association, New York, New York, December 28-30, 1965 (May, 1966), pp. 423-434

We measure the capitalization of housing market externalities into residential housing values by studying the unanticipated elimination of stringent rent controls in Cambridge, Massachusetts, in 1995. Pooling data on the universe of assessed values and transacted prices of Cambridge residential properties between 1988 and 2005, we find that rent decontrol generated substantial, robust price appreciation at decontrolled units and nearby never-controlled units, accounting for a quarter of the $7.8 billion in Cambridge residential property appreciation during this period. The majority of this contribution stems from induced appreciation of never-controlled properties. Residential investment explains only a small fraction of the total.

We analyze entry, pricing, and product design in a model with differentiated products. Market equilibrium can be “separating,” with multiple sellers and a sorting of heterogeneous consumers across goods, or “exclusionary,” with one seller serving all customer types. Entry into an initially monopolized market can occur because of cost reductions or product improvements, but entry need not lower the incumbent’s price, improve efficiency, or raise consumer welfare. Postentry design incentives favor a softening of price competition and stronger market segmentation, whereas exclusionary design changes typically raise consumer welfare. Potential, as distinct from actual, entry always benefits consumers.

Allegations of Bidder collusion at Forest Service timber sales in the Pacific Northwest were common in the 1970s. Of course, prices may be low for reasons other than collusion. We formulate an empirical model that allows for both bidder collusion and supply effects and in which we control for demand conditions. Noncooperative behavior in which a single unit is sold (the standard auction model) is a special case: it is found to be definitively outperformed by a model of collusion. We also find that supply effects are dominated by collusion in determining the winning bids in the market.

In this paper we explore various criteria for risky decision making and examine the relationship among these rules, full cost pricing, and safety margin maximization. The three rules are alternative versions of the "safety-first" principle; each is concerned with expected profits and with the probability of loss. Since the probability of loss can be identified with the firm's margin of safety, these rules can be viewed as alternative ways of making a compromise between expected profit maximization and high safety margins. They result in various output policies which can be most simply characterized as "full cost" or"safety margin" pricing. Rules of thumb related to recovering full cost are therefore explained by the marginal analysis that was supposed by some to refute them.

Macroeconomic news announcements are elaborate and multidimensional. We consider a framework in which jumps in asset prices around announcements reflect both the response to observed surprises in headline numbers and to latent factors, reflecting other news in the release. Non-headline news, for which there are no expectations surveys, is unobservable to the econometrician but nonetheless elicits a market response. We estimate the model by the Kalman filter, which efficiently combines OLS and heteroskedasticity-based event study estimators in one step. With the inclusion of a single latent surprise factor, essentially all yield curve variance in event windows are explained by news.

This paper examines the effects of globalization on the distribution of worker-specific labor taxes using a unique set of tax calculators. We find a differential effect of higher trade and factor mobility on relative tax burdens in 1980–1993 versus 1994–2007 in the OECD. Prior to 1994, greater openness meant that higher income earners were taxed progressively more. However, after 1994, we document a globalization-induced rise in the labor income tax burden of the middle class, while the top 1 percent of workers and employees faced a reduction in their tax burden of 0.59–1.45 percentage points.

It has long been recognized that commodity movements and factor movements are, to a degree, substitutes for each other in international exchange (see Carl Iverson, Mountifort Longfield, James Meade, Bertil Ohlin, John H. Williams). Yet, until recently, the dominant theory of international trade, the Heckscher-Ohlin (H-O) model, had been rather thoroughly analyzed under the rigid assumption of the immobility of factors. Only in 1957, with the publication of Robert Mundell's important article, was capital mobility in a H-O model explored. This paper presents a fuller treatment of capital mobility in the H-O model. We discuss the model under conditions of tariffs on goods flows and taxes on capital relocations. Nations may trade by exchanging goods or by exchanging their relatively abundant factors which produce those goods. We demonstrate that the substitutability between these two avenues of exchange continues to hold even under conditions of tariffs and taxes. The dynamics and equilibria are demonstrated, showing that a nation will pay for its imports either through exports of goods or through earnings on foreign-placed capital, not through both of these methods. Tariffs and tax rates will dictate which will occur, i.e., tariffs and taxes will be shown to affect the pattern of trade, not merely the quantities of commodities traded. We also correct a hitherto general and unrecognized error. We show that the levying of a tariff does not necessarily generate a relative price differential (of final goods prices) between the trading countries equal to the tariff proportion. The relative price differential will often be less than the tariff proportion, and this holds even though the good is still imported into the country. Further, contrary to previous results (see Ronald Jones 1967), we show that, generally, a tariff-cum-tax levy will not result in the complete specialization of production.

Using Danish administrative data, we estimate the impact of bequests on the level and inequality of wealth. We compare the distributions of wealth over time of people whose parent died and those whose parent did not. Bequests account for 26 percent of the average post-bequest wealth 1-3 years after parental death and significantly affect wealth throughout the distribution. Bequests increase absolute wealth inequality (variance of the distribution censored at the top/bottom 1% increases by 33 percent), but reduce relative inequality (the top 1% share declines by 6 percentage points from the base of 31 percent).