Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages

By Beata Smarzynska Javorcik

American Economic Review, June 2004

Many countries strive to attract foreign direct investment (FDI) hoping that knowledge brought by multinationals will spill over to domestic industries and increase their productivity. In contrast with earlier literature that failed to find positive intra...

Pareto-Improving Campaign Finance Policy

By Stephen Coate

American Economic Review, June 2004

This paper argues that campaign finance policy, in the form of contribution limits and matching public financing, can be Pareto improving even under very optimistic assumptions concerning the role of campaign advertising and the rationality of voters. The...

Workers' Education, Spillovers, and Productivity: Evidence from Plant-Level Production Functions

By Enrico Moretti

American Economic Review, June 2004

I assess the magnitude of human capital spillovers by estimating production functions using a unique firm-worker matched data set. Productivity of plants in cities that experience large increases in the share of college graduates rises more than the produ...

Is There a Politically Optimal Level of Judicial Independence?

By F. Andrew Hanssen

American Economic Review, June 2004

Independent courts render current policy more durable (by raising the cost of future policy changes) but may also engage in policy-making of their own. This paper asks: Is there an optimal level of judicial independence from the perspective of incumbent o...

Money Does Matter! Evidence from Increasing Real Income and Life Satisfaction in East Germany Following Reunification

By Paul Frijters, John P. Haisken-DeNew, and Michael A. Shields

American Economic Review, June 2004

Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty: Comment

By Antonio Ciccone

American Economic Review, June 2004

Opportunism in Multilateral Vertical Contracting: Nondiscrimination, Exclusivity, and Uniformity: Comment

By Leslie M. Marx and Greg Shaffer

American Economic Review, June 2004

Opportunism in Multilateral Vertical Contracting: Nondiscrimination, Exclusivity, and Uniformity: Reply

By R. Preston McAfee and Marius Schwartz

American Economic Review, June 2004

Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach

By Xavier Sala-I-Martin, Gernot Doppelhofer, and Ronald I. Miller

American Economic Review, September 2004

This paper examines the robustness of explanatory variables in cross-country economic growth regressions. It introduces and employs a novel approach, Bayesian Averaging of Classical Estimates (BACE), which constructs estimates by averaging OLS coefficient...

Why Does the Cyclical Behavior of Real Wages Change Over Time?

By Kevin X.D. Huang, Zheng Liu, and Louis Phaneuf

American Economic Review, September 2004

The cyclical behavior of real wages has evolved from mildly countercyclical during the interwar period to modestly procyclical in the postwar era. This paper presents a general-equilibrium business-cycle model that helps explain the evolution. In the mode...

Inequality Aversion, Efficiency, and Maximin Preferences in Simple Distribution Experiments

By Dirk Engelmann and Martin Strobel

American Economic Review, September 2004

We present simple one-shot distribution experiments comparing the relative importance of efficiency concerns, maximin preferences, and inequality aversion, as well as the relative performance of the fairness theories by Gary E Bolton and Axel Ockenfels an...

The Long and Short of the Canada-U. S. Free Trade Agreement

By Daniel Trefler

American Economic Review, September 2004

The Canada-U. S. Free Trade Agreement provides a unique window onto the effects of a reciprocal trade agreement on an industrialized economy (Canada). For industries that experienced the deepest Canadian tariff cuts, the contraction of low-productivity pl...

Desegregation and Black Dropout Rates

By Jonathan Guryan

American Economic Review, September 2004

In 1954 the United States Supreme Court ruled that separate schools for black and white children were "inherently unequal." This paper studies whether the desegregation plans of the next 30 years benefited black and white students in desegregated school d...

The Opportunity Criterion: Consumer Sovereignty Without the Assumption of Coherent Preferences

By Robert Sugden

American Economic Review, September 2004

This paper proposes a formulation of consumer sovereignty, for use in normative economics, which does not presuppose individuals' preferences to be coherent. The fundamental intuition, that opportunity and responsibility have moral value, is formalized as...

The Politician and the Judge: Accountability in Government

By Eric Maskin and Jean Tirole

American Economic Review, September 2004

We build a simple model to capture the major virtues and drawbacks of making public officials accountable (i. e., subjecting them to reelection): On the one hand, accountability allows the public to screen and discipline their officials; on the other, it ...

Rational Overoptimism (and Other Biases)

By Eric Van den Steen

American Economic Review, September 2004

Rational agents with differing priors tend to be overoptimistic about their chances of success. In particular, an agent who tries to choose the action that is most likely to succeed, is more likely to choose an action of which he overestimated, rather tha...

Effects of Technology on Incentive Design of Share Contracts

By Priyanka Pandey

American Economic Review, September 2004

A Comment on the Economics of Labor Adjustment: Mind the Gap

By Russell Cooper and Jonathan L. Willis

American Economic Review, September 2004

Bad Beta, Good Beta

By John Y. Campbell and Tuomo Vuolteenaho

American Economic Review, December 2004

This paper explains the size and value "anomalies" in stock returns using an economically motivated two-beta model. We break the beta of a stock with the market portfolio into two components, one reflecting news about the market's future cash flows and on...

Does Fund Size Erode Mutual Fund Performance? The Role of Liquidity and Organization

By Joseph Chen, Harrison Hong, Ming Huang, and Jeffrey D. Kubik

American Economic Review, December 2004

We investigate the effect of scale on performance in the active money management industry. We first document that fund returns, both before and after fees and expenses, decline with lagged fund size, even after accounting for various performance benchmark...