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National Bureau of Economic Research

The Latest NBER Research (2008-08-18)‏

THE LATEST WORKING PAPERS

NBER (bulletin@nber.org)

Jean Roth (jroth+nwp2008-08-189@nber.org)

National Bureau of Economic Research

Week of August 18, 2008

Tue 8/19/08

The following NBER Working Papers that match your selections
were released in electronic format this week. Abbreviations
in parentheses refer to NBER Research Programs. (visit
http://www.nber.org/programs.html for Program information.)

1. Organizational Fragmentation and Care Quality in the U.S. Health Care System
by Randall D. Cebul, James B. Rebitzer, Lowell J. Taylor, Mark Votruba #14212 (HC LS)
http://papers.nber.org/papers/W14212

2. Market Penetration Costs and the New Consumers Margin in International Trade
by Costas Arkolakis #14214 (ITI)
http://papers.nber.org/papers/W14214

3. What’s News in Business Cycles
by Stephanie Schmitt-Grohe, Martin Uribe #14215 (EFG)
http://papers.nber.org/papers/W14215

4. Does Innovation Stimulate Employment? A Firm-Level Analysis Using Comparable Micro-Data from Four European Countries
by Rupert Harrison, Jordi Jaumandreu, Jacques Mairesse, Bettina Peters #14216 (LS PR)
http://papers.nber.org/papers/W14216

5. Financial Stability, the Trilemma, and International Reserves
by Maurice Obstfeld, Jay C. Shambaugh, Alan M. Taylor #14217 (IFM)
http://papers.nber.org/papers/W14217

6. Securities Laws, Disclosure, and National Capital Markets in the Age of Financial Globalization
by René M. Stulz #14218 (CF)
http://papers.nber.org/papers/W14218

7. The Burden of the Nondiversifiable Risk of Entrepreneurship
by Robert E. Hall, Susan E. Woodward #14219 (EFG ME)
http://papers.nber.org/papers/W14219

8. Happiness Inequality in the United States
by Betsey Stevenson, Justin Wolfers #14220 (LE LS PE)
http://papers.nber.org/papers/W14220

9. What’s a Recession, Anyway?
by Edward E. Leamer #14221 (EFG)
http://papers.nber.org/papers/W14221

10. Liquidity Needs in Economies with Interconnected Financial Obligations
by Julio J. Rotemberg #14222 (EFG ME)
http://papers.nber.org/papers/W14222

11. Daily Monetary Policy Shocks and the Delayed Response of New Home Sales
by James D. Hamilton #14223 (EFG ME)
http://papers.nber.org/papers/W14223

12. Inventor Moral Hazard in University Licensing: The Role of Contracts
by Emmanuel Dechenaux, Jerry Thursby, Marie C. Thursby #14226 (PR)
http://papers.nber.org/papers/W14226

13. An Economic Model of the Planning Fallacy
by Markus K. Brunnermeier, Filippos Papakonstantinou, Jonathan A. Parker #14228 ( EFG AP)
http://papers.nber.org/papers/W14228

14. How Does Charitable Giving Respond to Incentives and Income? Dynamic Panel Estimates Accounting for Predictable Changes in Taxation
by Jon Bakija, Bradley Heim #14237 (PE)
http://papers.nber.org/papers/W14237

15. The Greenness of Cities: Carbon Dioxide Emissions and Urban Development
by Edward L. Glaeser, Matthew E. Kahn #14238 (EEE)
http://papers.nber.org/papers/W14238

16. Dynamics and Stability of Constitutions, Coalitions, and Clubs
by Daron Acemoglu, Georgy Egorov, Konstantin Sonin #14239 (EFG POL)
http://papers.nber.org/papers/W14239

17. Distributional Effects of Environmental and Energy Policy: An Introduction
by Don Fullerton #14241 (EEE PE)
http://papers.nber.org/papers/W14241

18. The Macroeconomic Implications of a Key Currency
by Matthew Canzoneri, Robert E. Cumby, Behzad Diba, David Lopez-Salido #14242 (IFM)
http://papers.nber.org/papers/W14242

19. Modeling the Long Run: Valuation in Dynamic Stochastic Economies
by Lars Peter Hansen #14243 (AP EFG)
http://papers.nber.org/papers/W14243

20. Monetary Aggregates and Liquidity in a Neo-Wicksellian Framework
by Matthew Canzoneri, Robert E. Cumby, Behzad Diba, David Lopez-Salido #14244 (IFM ME)
http://papers.nber.org/papers/W14244

21. Why Do Foreign Firms Leave U.S. Equity Markets? An Analysis of Deregistrations Under SEC Exchange Act Rule 12h-6
by Craig Doidge, G. Andrew Karolyi, René M. Stulz #14245 (CF IFM)
http://papers.nber.org/papers/W14245

22. Estimating Trends in US Income Inequality Using the Current Population Survey:
The Importance of Controlling for Censoring
by Richard V. Burkhauser, Shuaizhang Feng, Stephen P. Jenkins, Jeff Larrimore #14247 (LS PE TWP)
http://papers.nber.org/papers/W14247

23. HIV and Fertility in Africa: First Evidence from Population Based Surveys
by Chinhui Juhn, Sebnem Kalemli-Ozcan, Belgi Turan #14248 (EFG HE LS)
http://papers.nber.org/papers/W14248

24. Crises and Sudden Stops:
Evidence from International Bond and Syndicated-Loan Markes
by Graciela L. Kaminsky #14249 (IFM)
http://papers.nber.org/papers/W14249

25. Information, Learning, and Drug Diffusion: the Case of Cox-2 Inhibitors
by Pradeep Chintadunta, Renna Jiang, Ginger Z. Jin #14252 (IO)
http://papers.nber.org/papers/W14252

———————————————————————-

1. Organizational Fragmentation and Care Quality in the U.S. Health
Care System
by Randall D. Cebul, James B. Rebitzer, Lowell J. Taylor, Mark Votruba – #14212 (HC LS)

Abstract:

Many goods and services can be readily provided through a series of
unconnected transactions, but in health care close coordination over
time and within care episodes improves both health outcomes and
efficiency. Close coordination is problematic in the US health care
system because the financing and delivery of care is distributed
across a variety of distinct and often competing entities, each with
its own objectives, obligations and capabilities. These fragmented
organizational structures lead to disrupted relationships, poor
information flows, and misaligned incentives that combine to degrade
care quality and increase costs. We illustrate our argument with
examples taken from the insurance and the hospital industries, and
discuss possible responses to the problems resulting from
organizational fragmentation.

http://papers.nber.org/papers/W14212

2. Market Penetration Costs and the New Consumers Margin in
International Trade
by Costas Arkolakis – #14214 (ITI)

Abstract:

I develop a new theory of marketing costs and introduce it into a
model of trade with product differentiation and firm productivity
heterogeneity. In this model, a firm enters a market if it makes
profits by reaching a single consumer there and pays an increasing
marginal cost to access additional consumers. This market
penetration cost introduces an extensive margin of new consumers in
firms’ sales. I calibrate the key parameters of the model to match
data on French firms from Eaton, Kortum and Kramarz, in particular
the higher sales in France of firms that choose to export to more
destinations. The model predicts that most firms do not export, and
that a large proportion of firms that export in particular markets do
so in small amounts. These predictions are in line with the French
data, but together create a puzzle for models with a fixed cost of
exporting, such as those of Melitz and Chaney. Looking at the
comparative statics of trade liberalization, I find that the model
predicts large increases in trade in goods with positive but little
previous trade, in line with Kehoe and Ruhl. The model implies that
these increases can contribute to new trade significantly more than
the corresponding increases due to new exporters.

http://papers.nber.org/papers/W14214

3. What’s News in Business Cycles
by Stephanie Schmitt-Grohe, Martin Uribe – #14215 (EFG)

Abstract:

In this paper, we perform a structural Bayesian estimation of the
contribution of anticipated shocks to business cycles in the postwar
United States. Our theoretical framework is a real-business-cycle
model augmented with four real rigidities: investment adjustment
costs, variable capacity utilization, habit formation in consumption,
and habit formation in leisure. Business cycles are assumed to be
driven by permanent and stationary neutral productivity shocks,
permanent investment-specific shocks, and government spending shocks.
Each of these shocks is buffeted by four types of structural
innovations: unanticipated innovations and innovations anticipated
one, two, and three quarters in advance. We find that anticipated
shocks account for more than two thirds of predicted aggregate
fluctuations. This result is robust to estimating a variant of the
model featuring a parametric wealth elasticity of labor supply.

http://papers.nber.org/papers/W14215

4. Does Innovation Stimulate Employment? A Firm-Level Analysis
Using Comparable Micro-Data from Four European Countries
by Rupert Harrison, Jordi Jaumandreu, Jacques Mairesse, Bettina Peters – #14216 (LS PR)

Abstract:

This paper studies the impact of process and product innovations
introduced by firms on employment growth in these firms. A simple
model that relates employment growth to process innovations and to
the growth of sales separately due to innovative and unchanged
products is developed and estimated using comparable firm-level data
from France, Germany, Spain and the UK. Results show that
displacement effects induced by productivity growth in the production
of old products are large, while those associated with process
innovations, which are likely to be compensated by price decreases,
appear to be small. The effects related to product innovations are,
however, strong enough to overcompensate these displacement effects.

http://papers.nber.org/papers/W14216

5. Financial Stability, the Trilemma, and International Reserves
by Maurice Obstfeld, Jay C. Shambaugh, Alan M. Taylor – #14217 (IFM)

Abstract:

The rapid growth of international reserves—a development
concentrated in the emerging markets—remains a puzzle. In this
paper we suggest that a model based on financial stability and
financial openness goes far toward explaining reserve holdings in the
modern era of globalized capital markets. The size of domestic
financial liabilities that could potentially be converted into
foreign currency (M2), financial openness, the ability to access
foreign currency through debt markets, and exchange rate policy are
all significant predictors of reserve stocks. Our empirical
financial-stability model seems to outperform both traditional models
and recent explanations based on external short-term debt.

http://papers.nber.org/papers/W14217

6. Securities Laws, Disclosure, and National Capital Markets in the
Age of Financial Globalization
by Ren̩ M. Stulz Р#14218 (CF)

Abstract:

As barriers to international investment fall and technology improves,
the cost advantages for a firm’s securities to trade publicly in the
country in which that firm is located and for that country to have a
market for publicly traded securities distinct from the capital
markets of other countries will progressively disappear. However,
securities laws remain an important determinant of whether and where
securities are issued, how they are valued, who owns them, and where
they trade. The value of public firms depends on these laws, so that
identical firms subject to different laws are likely to have
different values. We show that mandatory disclosure through
securities laws can decrease agency costs between corporate insiders
and minority shareholders, but only provided the investors can act on
the information disclosed and the laws cannot be weakened ex post too
much through lobbying by corporate insiders. With financial
globalization, national disclosure laws can have wide-ranging effects
on a country’s welfare, on firms and on investor portfolios,
including the extent to which share holdings reveal a home bias. In
equilibrium, if firms can choose the securities laws they are subject
to when they go public, some firms will choose stronger securities
laws than those of the country in which they are located and some
firms will do the opposite. These effects of securities laws can be
expected to become smaller if differences in national laws and their
enforcement decrease and if the costs of private solutions to manage
corporate agency conflicts that are substitutes for securities laws
fall.

http://papers.nber.org/papers/W14218

7. The Burden of the Nondiversifiable Risk of Entrepreneurship
by Robert E. Hall, Susan E. Woodward – #14219 (EFG ME)

Abstract:

In the standard venture capital contract, entrepreneurs have a large
fraction of equity ownership in the companies they found and are paid
a sub-market salary by the investors who provide the money to develop
the idea. The big rewards come only to those whose companies go
public or are acquired on favorable terms, forcing entrepreneurs to
bear a substantial burden of idiosyncratic risk. We study this
burden in the case of high-tech companies funded by venture capital.
Over the past 20 years, the typical venture-backed entrepreneur
earned an average of $4.4 million from companies that succeeded in
attracting venture funding. Entrepreneurs with a coefficient of
relative risk aversion of two and with less than $0.7 million would
be better off in a salaried position than in a startup, despite the
prospect of an average personal payoff of $4.4 million and the
possibility of payoffs over $1 billion. We conclude that startups
attract entrepreneurs with lower risk aversion, higher initial
assets, preferences for entrepreneurship over employment, and
optimistic beliefs about the payoffs from their products.

http://papers.nber.org/papers/W14219

8. Happiness Inequality in the United States
by Betsey Stevenson, Justin Wolfers – #14220 (LE LS PE)

Abstract:

This paper examines how the level and dispersion of self-reported
happiness has evolved over the period 1972-2006. While there has
been no increase in aggregate happiness, inequality in happiness has
fallen substantially since the 1970s. There have been large changes
in the level of happiness across groups: Two-thirds of the
black-white happiness gap has been eroded, and the gender happiness
gap has disappeared entirely. Paralleling changes in the income
distribution, differences in happiness by education have widened
substantially. We develop an integrated approach to measuring
inequality and decomposing changes in the distribution of happiness,
finding a pervasive decline in within-group inequality during the
1970s and 1980s that was experienced by even narrowly-defined
demographic groups. Around one-third of this decline has
subsequently been unwound. Juxtaposing these changes with large
rises in income inequality suggests an important role for
non-pecuniary factors in shaping the well-being distribution.

http://papers.nber.org/papers/W14220

9. What’s a Recession, Anyway?
by Edward E. Leamer – #14221 (EFG)

Abstract:

Monthly US data on payroll employment, civilian employment,
industrial production and the unemployment rate are used to define a
recession-dating algorithm that nearly perfectly reproduces the NBER
official peak and trough dates. The only substantial point of
disagreement is with respect to the NBER November 1973 peak. The
algorithm prefers September 1974. In addition, this algorithm
indicates that the data through June 2008 do not yet exceed the
recession threshold, and will do so only if things get much worse.

http://papers.nber.org/papers/W14221

10. Liquidity Needs in Economies with Interconnected Financial
Obligations
by Julio J. Rotemberg – #14222 (EFG ME)

Abstract:

A model is developed where firms in a financial system have to settle
their debts to each other by using a liquid asset. The question that
is studied is how many firms must obtain how much of this asset from
outside the financial system to make sure that all debts within the
system are settled. The main result is that these liquidity needs
are larger when these firms are more interconnected through their
debts, i.e. when they borrow from and lend to more firms. Two
pecuniary externalities are discussed. One involves the choice of
paying one creditor first rather than another. The second involves
the extent to which firms borrow and acquire claims on other firms
with the proceeds. When a group of firms raises their involvement in
this activity, firms outside the group may face more difficulties in
settling their debts.

http://papers.nber.org/papers/W14222

11. Daily Monetary Policy Shocks and the Delayed Response of New
Home Sales
by James D. Hamilton – #14223 (EFG ME)

Abstract:

This paper offers an explication of the hump-shaped response of real
economic activity to changes in monetary policy, focusing on the
particular channel operating through new home sales. I suggest that
the conventional notion of a monetary policy shock as a surprise
change in the fed funds rate is misspecified. The primary news for
market participants is not what the Fed just did, but is instead new
information about what the Fed is going to do in the near future.
Revisions in these anticipations show up instantaneously in long-term
mortgage rates. Although mortgage rates respond well before the Fed
actually changes its target rate, home sales do not respond until
much later. The paper attributes this delay to cross-sectional
heterogeneity in search times. This framework offers a description
of the lags in the effects of monetary policy that is both more
detailed, allowing us in principle to measure the consequences at the
daily frequency, and more believable than traditional measures.

http://papers.nber.org/papers/W14223

12. Inventor Moral Hazard in University Licensing: The Role of
Contracts
by Emmanuel Dechenaux, Jerry Thursby, Marie C. Thursby – #14226 (PR)

Abstract:

We examine commonly observed forms of payment, such as milestones,
royalties, or consulting contracts as ways of engaging inventors in
the development of licensed inventions. Our theoretical model shows
that when milestones are feasible, royalties are not optimal unless
the licensing firm is risk averse. The model also predicts the use
of consulting contracts which improve the firm’s ability to monitor
inventor effort. Because these contracts increase the firm’s
expected profits, the upfront fee that the university can charge is
higher than otherwise. These results therefore support the commonly
observed university policy of allowing faculty to consult with
licensing firms outside of their university contracts. They also
support firm policies of including milestones. An empirical analysis
based on a survey of 112 businesses that license-in university
inventions supports the complementarity of milestones and consulting
suggested by the theory.

http://papers.nber.org/papers/W14226

13. An Economic Model of the Planning Fallacy
by Markus K. Brunnermeier, Filippos Papakonstantinou, Jonathan A. Parker – #14228 ( EFG AP)

Abstract:

People tend to underestimate the work involved in completing tasks
and consequently finish tasks later than expected or do an inordinate
amount of work right before projects are due. We present a theory in
which people underpredict and procrastinate because the ex-ante
utility benefits of anticipating that a task will be easy to complete
outweigh the average ex-post costs of poor planning. We show that,
given a commitment device, people self-impose deadlines that are
binding but require less smoothing of work than those chosen by a
person with objective beliefs. We test our theory using extant
experimental evidence on differences in expectations and behavior.
We find that reported beliefs and behavior generally respond as our
theory predicts. For example, monetary incentives for accurate
prediction ameliorate the planning fallacy while incentives for rapid
completion aggravate it.

http://papers.nber.org/papers/W14228

14. How Does Charitable Giving Respond to Incentives and Income?
Dynamic Panel Estimates Accounting for Predictable Changes in
Taxation
by Jon Bakija, Bradley Heim – #14237 (PE)

Abstract:

We estimate the elasticity of charitable giving with respect to its
price and after-tax income using a panel of over 550,000
disproportionately high-income tax returns spanning the years 1979
through 2005. Improvements relative to the previous literature
include: using state tax variation to help identify our model while
controlling for both individual- and time-specific unobserved
heterogeneity; carefully dealing with expectations; allowing people
at different income levels to have different degrees responsiveness
to taxation and different time paths of unobservable influences on
giving; and using a measure of charitable giving that more closely
approximates current donations. To address the omitted variable bias
that would otherwise arise from failing to control for unobservable
expectations of future prices and future incomes, we use predictable
changes in future federal and state marginal tax rates and tax
liabilities, arising from their pre-announced and phased-in nature,
as instruments for future changes in prices and income. Our estimate
of the elasticity of giving with respect to a persistent price change
for the full sample is about -0.7; this elasticity is generally
larger when the sample is limited to high-income people and we
control for time-varying unobservable influences on charity in a
flexible fashion. We find some evidence, particularly among very
high-income people, of re-timing giving in response to expected
future changes in price, but this finding is sensitive to the source
of identification for the price effects. Our estimates are broadly
consistent the permanent income hypothesis. Expenditures on
charitable giving are estimated to respond more strongly to
persistent changes in income than to transitory fluctuations in
income. Moreover, we find evidence in some specifications that
people will increase their charitable giving now in response to a
predictable reduction in future tax liability arising from tax
reform.

http://papers.nber.org/papers/W14237

15. The Greenness of Cities: Carbon Dioxide Emissions and Urban
Development
by Edward L. Glaeser, Matthew E. Kahn – #14238 (EEE)

Abstract:

Carbon dioxide emissions may create significant social harm because
of global warming, yet American urban development tends to be in low
density areas with very hot summers. In this paper, we attempt to
quantify the carbon dioxide emissions associated with new
construction in different locations across the country. We look at
emissions from driving, public transit, home heating, and household
electricity usage. We find that the lowest emissions areas are
generally in California and that the highest emissions areas are in
Texas and Oklahoma. There is a strong negative association between
emissions and land use regulations. By restricting new development,
the cleanest areas of the country would seem to be pushing new
development towards places with higher emissions. Cities generally
have significantly lower emissions than suburban areas, and the
city-suburb gap is particularly large in older areas, like New York.

http://papers.nber.org/papers/W14238

16. Dynamics and Stability of Constitutions, Coalitions, and Clubs
by Daron Acemoglu, Georgy Egorov, Konstantin Sonin – #14239 (EFG POL)

Abstract:

A central feature of dynamic collective decision-making is that the
rules that govern the procedures for future decision-making and the
distribution of political power across players are determined by
current decisions. For example, current constitutional change must
take into account how the new constitution may pave the way for
further changes in laws and regulations. We develop a general
framework for the analysis of this class of dynamic problems. Under
relatively natural acyclicity assumptions, we provide a complete
characterization of dynamically stable states as functions of the
initial state and determine conditions for their uniqueness. We show
how this framework can be applied in political economy, coalition
formation, and the analysis of the dynamics of clubs. The explicit
characterization we provide highlights two intuitive features of
dynamic collective decision-making: (1) a social arrangement is made
stable by the instability of alternative arrangements that are
preferred by sufficiently many members of the society; (2)
efficiency-enhancing changes are often resisted because of further
social changes that they will engender.

http://papers.nber.org/papers/W14239

17. Distributional Effects of Environmental and Energy Policy: An
Introduction
by Don Fullerton – #14241 (EEE PE)

Abstract:

This chapter reviews literature on the distributional effects of
environmental and energy policy. In particular, many effects of such
policy are likely regressive. First, it raises the price of
fossil-fuel-intensive products, expenditures on which are a high
fraction of low-income budgets. Second, if abatement technologies
are capital-intensive, then any mandate to abate pollution may induce
firms to use more capital. If demand for capital is raised relative
to labor, then a lower relative wage may also hurt low-income
households. Third, pollution permits handed out to firms bestow
scarcity rents on well-off individuals who own those firms. Fourth,
low-income individuals may place more value on food and shelter than
on incremental improvements in environmental quality. If high-income
individuals get the most benefit of pollution abatement, then this
effect is regressive as well. Fifth, low-income renters miss out on
house price capitalization of air quality benefits. Well-off
landlords may reap those gains. Sixth, transition effects could well
hurt the unemployed who are already at some disadvantage. These six
effects might all hurt the poor more than the rich. This paper
discusses whether these fears are valid, and whether anything can be
done about them.

http://papers.nber.org/papers/W14241

18. The Macroeconomic Implications of a Key Currency
by Matthew Canzoneri, Robert E. Cumby, Behzad Diba, David Lopez-Salido – #14242 (IFM)

Abstract:

What are the macroeconomic consequences of the dominant role of the
dollar in the international monetary system? Here, we present a
calibrated two country model in which exports are invoiced in the key
currency, and government bonds denominated in the key currency are
held internationally to facilitate trade. Domestic government bonds
and money are held in each country to facilitate domestic
transactions. Our model generates deviations from uncovered interest
parity that are as volatile as some empirical estimates, but much too
small by others. Our model also speaks to some other empirical
anomalies, such as the Backus – Smith puzzle. Shocks affecting asset
supplies — such as bond financed tax cuts, and open market
operations — have large effects in our model because they generate
non-Ricardian changes in household wealth. Generally, shocks
emanating from the key currency country do more to destabilize the
world economy than equal sized shocks coming from the other country.
Similarly, monetary and fiscal policy innovations in the key currency
country are more potent than those in the other country. On the
other hand, the key currency country is more vulnerable to financial
market turbulence, such as a sell off of key currency bonds, which
can lower consumption dramatically.

http://papers.nber.org/papers/W14242

19. Modeling the Long Run: Valuation in Dynamic Stochastic
Economies
by Lars Peter Hansen – #14243 (AP EFG)

Abstract:

I explore the equilibrium value implications of economic models that
incorporate reactions to a stochastic environment. I propose a
dynamic value decomposition (DVD) designed to distinguish components
of an underlying economic model that influence values over long
horizons from components that impact only the short run. To quantify
the role of parameter sensitivity and to impute long-term risk
prices, I develop an associated perturbation technique. Finally, I
use DVD methods to study formally some example economies and to
speculate about others. A DVD is enabled by constructing operators
indexed by the elapsed time between the date of pricing and the date
of the future payoff (i.e. the future realization of a consumption
claim). Thus formulated, methods from applied mathematics permit me
to characterize valuation behavior as the time between price
determination and payoff realization becomes large. An outcome of
this analysis is the construction of a multiplicative martingale
component of a process that is used to represent valuation in a
dynamic economy with stochastic growth. I contrast the differences
in the applicability between this multiplicative martingale method
and an additive martingale method familiar from time series analysis
that is used to identify shocks with long-run economic consequences.

http://papers.nber.org/papers/W14243

20. Monetary Aggregates and Liquidity in a Neo-Wicksellian
Framework
by Matthew Canzoneri, Robert E. Cumby, Behzad Diba, David Lopez-Salido – #14244 (IFM ME)

Abstract:

Woodford (2003) describes a popular class of neo-Wicksellian models
in which monetary policy is characterized by an interest-rate rule,
and the money market and financial institutions are typically not
even modeled. Critics contend that these models are incomplete and
unsuitable for monetary-policy evaluation. Our Banks and Bonds model
starts with a standard neo-Wicksellian model and then adds banks and
a role for bonds in the liquidity management of households and banks.
The Banks and Bonds model gives a more complete description of the
economy, but the neo-Wicksellian model has the virtue of simplicity.
Our purpose here is to see if the neo-Wicksellian model gives a
reasonably accurate account of macroeconomic behavior in the more
complete Banks and Bonds model. We do this by comparing the models’
second moments, variance decompositions and impulse response
functions. We also study the role of monetary aggregates and
velocity in predicting inflation in the two models.

http://papers.nber.org/papers/W14244

21. Why Do Foreign Firms Leave U.S. Equity Markets? An Analysis of
Deregistrations Under SEC Exchange Act Rule 12h-6
by Craig Doidge, G. Andrew Karolyi, Ren̩ M. Stulz Р#14245 (CF IFM)

Abstract:

On March 21, 2007, the Securities and Exchange Commission (SEC)
adopted Exchange Act Rule 12h-6 which makes it easier for foreign
private issuers to deregister and terminate the reporting obligations
associated with a listing on a major U.S. exchange. We examine the
characteristics of 59 firms that immediately announced they would
deregister under the new rules, their potential motivations for doing
so, as well as the economic consequences of their decisions. We find
that these firms experienced significantly slower growth and lower
stock returns than other U.S. exchange-listed foreign firms in the
years preceding the decision. There is weak evidence that firms
experience negative stock returns when they announce deregistration
and stronger evidence that the stock-price reaction is worse for
firms with higher growth. When we examine stock-price reactions
around events associated with the passage of the Sarbanes-Oxley Act
(SOX), we find negative average stock-price reactions with some
specifications but not others. Further, there is no evidence that
deregistering firms were affected more negatively by SOX than
foreign-listed firms that did not deregister. Our evidence supports
the hypothesis that foreign firms list shares in the U.S. in order to
raise capital at the lowest possible cost to finance growth
opportunities and that, when those opportunities disappear, a listing
becomes less valuable to corporate insiders so that firms are more
likely to deregister and go home.

http://papers.nber.org/papers/W14245

22. Estimating Trends in US Income Inequality Using the Current
Population Survey:
The Importance of Controlling for Censoring
by Richard V. Burkhauser, Shuaizhang Feng, Stephen P. Jenkins, Jeff Larrimore – #14247 (LS PE TWP)

Abstract:

Using internal and public use March Current Population Survey (CPS)
data, we analyze trends in US income inequality (1975-2004). We find
that the upward trend in income inequality prior to 1993
significantly slowed thereafter once we control for top coding in the
public use data and censoring in the internal data. Because both
series do not capture trends at the very top of the income
distribution, we use a multiple imputation approach in which values
for censored observations are imputed using draws from a Generalized
Beta distribution of the Second Kind (GB2) fitted to internal data.
Doing so, we find income inequality trends similar to those derived
from unadjusted internal data. Our trend results are generally
robust to the choice of inequality index, whether Gini coefficient or
other commonly-used indices. When we compare our best estimates of
the income shares held by the richest tenth with those reported by
Piketty and Saez (2003), our trends fairly closely match their
trends, except for the top 1 percent of the distribution. Thus, we
argue that if United States income inequality has been substantially
increasing since 1993, such increases are confined to this very high
income group.

http://papers.nber.org/papers/W14247

23. HIV and Fertility in Africa: First Evidence from Population
Based Surveys
by Chinhui Juhn, Sebnem Kalemli-Ozcan, Belgi Turan – #14248 (EFG HE LS)

Abstract:

The historical pattern of the demographic transition suggests that
fertility declines follow mortality declines, followed by a rise in
human capital accumulation and economic growth. The HIV/AIDS
epidemic threatens to reverse this path. A recent paper by Young
(2005), however, suggests that similar to the “Black Death” episode
in Europe, HIV/AIDS will actually lead to higher growth per capita
among the affected African countries. Not only will population
decline, behavioral responses in fertility will reinforce this
decline by reducing the willingness to engage in unprotected sex. We
utilize recent rounds of the Demographic and Health Surveys which
link an individual woman’s fertility outcomes to her HIV status based
on testing. The data allows us to distinguish the effect of own
positive HIV status on fertility (which may be due to lower fecundity
and other physiological reasons) from the behavioral response to
higher mortality risk, as measured by the local community HIV
prevalence. We show that HIV-infected women have significantly lower
fertility. In contrast to Young (2005), however, we find that local
community HIV prevalence has no significant effect on non-infected
women’s fertility.

http://papers.nber.org/papers/W14248

24. Crises and Sudden Stops:
Evidence from International Bond and Syndicated-Loan Markes
by Graciela L. Kaminsky – #14249 (IFM)

Abstract:

The crises in Mexico, Thailand, and Russia in the 1990s spread quite
rapidly to countries as far apart as South Africa and Pakistan. In
the aftermath of these crises, many emerging economies lost access to
international capital markets. Using data on international primary
issuance, this paper studies the determinants of contagion and sudden
stops following those crises. The results indicate that contagion
and sudden stops tend to occur in economies with financial fragility
and current account problems. They also show that high integration
in international capital markets exposes countries to sudden stops
even in the absence of domestic vulnerabilities.

http://papers.nber.org/papers/W14249

25. Information, Learning, and Drug Diffusion: the Case of Cox-2
Inhibitors
by Pradeep Chintadunta, Renna Jiang, Ginger Z. Jin – #14252 (IO)

Abstract:

The recent withdrawal of Cox-2 Inhibitors has generated debate on the
role of information in drug diffusion: can the market learn the
efficacy of new drugs, or does it depend solely on manufacturer
advertising and FDA updates? In this study, we use a novel data set
to study the diffusion of three Cox-2 Inhibitors ? Celebrex, Vioxx
and Bextra ? before the Vioxx withdrawal. Our study has two unique
features: first, we observe each patient?s reported satisfaction
after consuming a drug. This patient level data set, together with
market level data on FDA updates, media coverage, academic articles,
and pharmaceutical advertising, allows us to model individual
prescription decisions. Second, we distinguish across-patient
learning of a drug?s general efficacy from the within-patient
learning of the match between a drug and a patient. Our results
suggest that prescription choice is sensitive to many sources of
information. At the beginning of 2001 and upon Bextra entry in
January 2002, doctors held a strong prior belief about the efficacy
of Celebrex, Vioxx, and Bextra. As a result, the learning from
patient satisfaction is gradual and more concentrated on drug-patient
match than on across-patient spillovers. News articles are weakly
beneficial for Cox-2 drug sales, but academic articles appear to be
detrimental. The impact of FDA updates is close to zero once we
control for academic articles, which suggests that FDA updates follow
academic articles and therefore deliver little new information to
doctors. We find that drug advertising also influences the choice of
a patient?s medication. A number of counterfactual experiments are
carried out to quantify the influence of information on market
shares.

http://papers.nber.org/papers/W14252

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The Latest NBER Research (2008-08-18)‏

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