Popular discussions often treat the great housing boom of the 1996-2006 period as if it were a national phenomenon with similar impacts across locales, but across metropolitan areas, price growth was dramatically higher in warmer, less educated cities with less initial density and higher initial housing values. Within metropolitan areas, price growth was faster in neighborhoods closer to the city center. The centralization of price growth during the boom was particularly dramatic in those metropolitan areas where income is higher away from the city center. We consider a number of different explanations for this connection, and find that the connection between centralized price growth and decentralized income seems to be most explained by the faster price growth in central cities that use relatively more public transit.

Why did Finland experience, in 1991–1993, the deepest recession observed in an industrialized country since the 1930s? Using a dynamic general equilibrium model with labor frictions, we argue that the collapse of the Soviet-Finnish trade was a major contributor to the contraction. Finland's experience mirrors that of the transition economies of Eastern Europe, which suffered similar deep recessions coupled with institutional changes. By focusing on the Finnish case, we isolate the effects of the Finnish-Soviet trade collapse and shed new light on the sources of recessions in transition economies.

Consumers need information to compare alternatives for markets to function efficiently. Recognizing this, public policies often pair competition with easy access to comparative information. The implicit assumption is that comparison friction—the wedge between the availability of comparative information and consumers' use of it—is inconsequential because when information is readily available, consumers will access this information and make effective choices. We examine the extent of comparison friction in the market for Medicare Part D prescription drug plans in the United States. In a randomized field experiment, an intervention group received a letter with personalized cost information. That information was readily available for free and widely advertised. However, this additional step—providing the information rather than having consumers actively access it—had an impact. Plan switching was 28% in the intervention group, versus 17% in the comparison group, and the intervention caused an average decline in predicted consumer cost of about $100 a year among letter recipients—roughly 5% of the cost in the comparison group. Our results suggest that comparison friction can be large even when the cost of acquiring information is small and may be relevant for a wide range of public policies that incorporate consumer choice.

Depression is pervasive in the US particularly among women. The costs in terms of direct medical costs and forgone earnings are substantial. This paper investigates an additional cost of depression. Using data from the National Longitudinal Survey of Adolescent Health, we use a unique instrument, the attacks of September 11, which have been linked to depression, to identify the effect of depression on risky sexual behaviors. We find that depressed women are more likely to be sexually active, to engage in oral sex and to have sex without a condom, even after controlling for a rich set of covariates.

Since 1970, the fraction of mixed-race black-white births has increased nearly ninefold. This paper describes basic facts about the behaviors and outcomes of black-white mixed-race individuals. Unsurprisingly, on a host of background and achievement characteristics, as well as adult outcomes, mixed-race individuals fall in between whites and blacks. When it comes to engaging in risky and antisocial adolescent behavior, however, mixed-race adolescents are stark outliers compared to both blacks and whites. We argue that these behavioral patterns are most consistent with a two-sector Roy model, in which mixed-race adolescents, not having a predetermined peer group, engage in more risky behaviors in order to be accepted.

This paper investigates managerial discretion in compensation decisions in a team setting, in which a measure of the team's aggregate performance is readily available from the accounting system. Specifically, we examine the willingness of managers to obtain additional, costly information that would supplement this measure and allow the managers to more accurately assess individual contributions to team output. Using theory from behavioral economics that incorporates social preferences (i.e., fairness and trust reciprocity) into the managers' utility function, we predict and demonstrate experimentally that managers' willingness to obtain the costly information increases as the team's aggregate performance becomes a more noisy measure of individual performance. Further, we predict and demonstrate that managers' willingness will be greater for relatively high versus relatively low levels of aggregate performance. The study contributes to the literature on subjective performance evaluation by identifying how social preferences influence managers' use of discretion in evaluation processes. Data Availability: The data from this study and the set of instructions for the experimental task are available from the researchers upon request.

This study examines the effects of taxation on the incentives of multinational firms to develop and use intellectual property. We model optimal investment and production decisions by firms that engage in a patent race by making R&D investments. We investigate how taxes affect the level and efficiency of R&D investments, and how these effects depend on whether the winner of the patent race uses it by either producing in the country in which the patent was developed (the domestic country) or in a foreign country. A higher domestic tax rate decreases investment in R&D if production occurs in the domestic country, but increases investment in R&D if production occurs in the foreign country. The present value of domestic tax revenues is strictly positive if production occurs in the domestic country, but is weakly negative if production occurs in the foreign country.

That the employment rate appears to respond to changes in trend growth is an enduring macroeconomic puzzle. This paper shows that, in the presence of a return to experience, a slowdown in productivity growth raises reservation wages, thereby lowering aggregate employment. The paper develops new evidence that shows this mechanism is important for explaining the growth-employment puzzle. The combined effects of changes in aggregate wage growth and returns to experience account for all the increase from 1968 to 2006 in nonemployment among low-skilled men and for approximately half the increase in nonemployment among all men.

We extend research on the determinants of corporate tax avoidance to include the role of Internal Revenue Service (IRS) monitoring. Our evidence from large samples implies that U.S. public firms undertake less aggressive tax positions when tax enforcement is stricter. Reflecting its first-order economic impact on firms, our coefficient estimates imply that raising the probability of an IRS audit from 19 percent (the 25th percentile in our data) to 37 percent (the 75th percentile) increases their cash effective tax rates, on average, by nearly two percentage points, which amounts to a 7 percent increase in cash effective tax rates. These results are robust to controlling for firm size and time, which determine our primary proxy for IRS enforcement, in different ways; specifying several alternative dependent and test variables; and confronting potential endogeneity with instrumental variables and panel data estimations, among other techniques.