The Three Arab Worlds

By James E. Rauch and Scott Kostyshak

Journal of Economic Perspectives, Summer 2009

Given the attention currently focused on the Arab world in part as a result of adjustments in U.S. foreign policy, a fresh look at Arab socioeconomic performance is in order. The Arab world is defined by language rather than ethnicity. The League of Arab ...

US Environmental Regulation and FDI: Evidence from a Panel of US-Based Multinational Firms

By Rema Hanna

American Economic Journal: Applied Economics, July 2010

This paper measures the response of US-based multinationals to the Clean Air Act Amendments (CAAA). Using a panel of firm-level data over the period 1966-1999, I estimate the effect of regulation on a multinational's foreign production decisions. The CAAA...

Measuring Market Inefficiencies in California's Restructured Wholesale Electricity Market

By Severin Borenstein, James B. Bushnell, and Frank A. Wolak

American Economic Review, December 2002

We present a method for decomposing wholesale electricity payments into production costs, inframarginal competitive rents, and payments resulting from the exercise of market power. Using data from June 1998 to October 2000 in California, we find significa...

Understanding Trend and Cycle in Asset Values: Reevaluating the Wealth Effect on Consumption

By Martin Lettau and Sydney C. Ludvigson

American Economic Review, March 2004

Rewriting Monetary Policy 101: What's the Fed's Preferred Post-Crisis Approach to Raising Interest Rates?

By Jane E. Ihrig, Ellen E. Meade, and Gretchen C. Weinbach

Journal of Economic Perspectives, Fall 2015

For many years prior to the global financial crisis, the Federal Open Market Committee set a target for the federal funds rate and achieved that target through small purchases and sales of securities in the open market. In the aftermath of the finan...

Why Does Misallocation Persist?

By Abhijit V. Banerjee and Benjamin Moll

American Economic Journal: Macroeconomics, January 2010

Recent papers argue that the misallocation of resources can explain large cross-country TFP differences. This argument is underpinned by empirical evidence documenting substantial dispersion in the marginal products of resources, particularly capital, in ...

Electronic Trading in Stock Markets

By Hans R. Stoll

Journal of Economic Perspectives, Winter 2006

Modern trading technology clashes with the traditional organization of a stock exchange, where transactions were consummated via face-to-face negotiation. The modern trading facility is no longer a place. Rather, it is a computer system over which transac...

Trade Liberalization and Markup Dispersion: Evidence from China's WTO Accession

By Yi Lu and Linhui Yu

American Economic Journal: Applied Economics, October 2015

In this paper, we empirically investigate whether trade liberalization affects markup dispersion, a potential source of resource misallocation. The identification uses China's WTO accession at the end of 2001. We show that trade liberalization reduces mar...

On the (Ir)Relevance of Distribution and Labor Supply Distortion to Government Policy

By Louis Kaplow

Journal of Economic Perspectives, Fall 2004

Should the assessment of government policies, such as the provision of public goods and the control of externalities, deviate from first-best principles to account for distributive effects and the distortionary cost of labor income taxation? For example, ...

Cap and Escape in Trade Agreements

By Mostafa Beshkar and Eric W. Bond

American Economic Journal: Microeconomics, November 2017

We propose a model of flexible trade agreements in which verifying the prevailing contingencies is possible but costly. Two types of flexibility emerge: contingent protection, which requires governments to verify the state of the world, and discretionary ...

Optimal Pricing Mechanisms with Unknown Demand

By Ilya Segal

American Economic Review, June 2003

The standard profit-maximizing multiunit auction intersects the submitted demand curve with a preset reservation supply curve, which is determined using the distribution from which the buyers' valuations are drawn. However, when this distribution is unkno...

The Effect of Health Risk on Housing Values: Evidence from a Cancer Cluster

By Lucas W. Davis

American Economic Review, December 2004

An Economic Theory of GATT

By Kyle Bagwell and Robert W. Staiger

American Economic Review, March 1999

The authors propose a unified theoretical framework within which to interpret and evaluate the foundational principles of GATT. Working within a general equilibrium trade model, they represent government preferences in a way that is consistent with nation...

Free to Leave? A Welfare Analysis of Divorce Regimes

By Raquel Fernández and Joyce Cheng Wong

American Economic Journal: Macroeconomics, July 2017

During the 1970s, the United States switched from mutual consent to a unilateral divorce regime. Who benefited/lost from this change? We develop a dynamic life cycle model in which agents make consumption, saving, work, and marital-status decisions under ...

Economists as Public Policy Advisers

[Symposium: Economists as Policy Advocates]

By Lee H. Hamilton

Journal of Economic Perspectives, Summer 1992

As a member of the Joint Economic Committee for over 15 years I have had ample occasion to observe economists testifying. When I was Chairman of the Committee in the last Congress, for example, we held over 100 hearings and heard from at least that many d...

Generational Accounting: A Meaningful Way to Evaluate Fiscal Policy

[Symposium: Generational Accounting]

By Alan J. Auerbach, Jagadeesh Gokhale, and Laurence J. Kotlikoff

Journal of Economic Perspectives, Winter 1994

This paper illustrates the technique of generational accounting, a new way to evaluate fiscal policy that overcomes the inherent ambiguities of traditional deficit accounting. The authors illustrate why there is no 'correct' measure of the deficit and how...

Conventional and Unconventional Monetary Policy with Endogenous Collateral Constraints

By Aloísio Araújo, Susan Schommer, and Michael Woodford

American Economic Journal: Macroeconomics, January 2015

We consider the effects of central bank purchases of a risky asset as an additional dimension of policy alongside "conventional" interest rate policy in a general-equilibrium model of asset pricing with endogenous collateral constraints. The effects of as...

How Much of South Korea's Growth Miracle Can Be Explained by Trade Policy?

By Michelle Connolly and Kei-Mu Yi

American Economic Journal: Macroeconomics, October 2015

This paper assesses the importance of trade policy reforms in South Korea, as well as the General Agreement on Tariffs and Trade (GATT) tariff reductions, in explaining Korea's growth miracle. We develop a model of neoclassical growth and trade in which l...

Individual Behavior and Group Membership

By Gary Charness, Luca Rigotti, and Aldo Rustichini

American Economic Review, September 2007

People who are members of a group and identify with it behave differently from people who perceive themselves as isolated individuals. This paper shows that group membership affects preferences over outcomes, and saliency of the group affects the perce...

Follow the Money: Quantifying Domestic Effects of Foreign Bank Shocks in the Great Recession

By Nicola Cetorelli and Linda S. Goldberg

American Economic Review, May 2012

Foreign banks pulled significant funding from their US branches during the Great Recession. We estimate that the average-sized branch experienced a twelve percent net internal fund "withdrawal," with the fund transfer disproportionately bigger for larger ...