the collateral channel how real estate shocks affect corporate investment abstract what is the impact of real estate prices on corporate investment in the presence of financing frictions firms use pledgeable assets as collateral to finance new projects through this collateral channel shocks to the value of real estate can have a large impact on aggregate investment to compute the sensitivity of investment to collateral value we use local variations in real estate prices as shocks to the collateral value of firms that own real estate over the 1993 2007 period the representative us corporation invests 0 06 out of each 1 of collateral jel d22 g31 r30

hospital choices hospital prices and financial incentives to physicians we estimate an insurer speci c preference function which rationalizes hospital referrals for privately insured births in california the function is additively separable in a hospital price paid by the insurer the distance traveled and plan and severity speci c hospital xed eects capturing hospital quality we use an inequality estimator that allows for errors in price and detailed hospital severity interactions and obtain markedly dierent results than those from a logit the estimates indicate that insurers with more capitated physicians are more responsive to price capitated plans send patients further to utilize similar quality lower priced hospitals but the cost quality trade odoes not vary with capitation rates the patient protection and aordable care act of 2010 includes provisions to establish ac countable care organizations acos in the medicare program these are groups of health care providers that oer services to a large number of patients and are eligible to share in any cost savings they achieve for the medicare program 1 private sector acos are forming in parallel to this initiative often with very similar structures and payment arrangements the proportion of savings acos keep is linked to their performance on quality standards the goal of the initiative is to reduce health care costs in both medicare and private insurance and to improve coordination of care the tying of cost savings to quality standards is designed to mitigate the concern that an increase in incentives to control costs might lead to a decrease in the quality of care the health policy literature has noted that similar cost control incentives are currently utilized by some health maintenance organizations hmos in california and elsewhere 2 in this paper we investigate the impact of these incentives on the cost and quality of care provided to patients focusing in particular on the choice of hospital for privately insured patients giving birth we use

the effect of cash injections evidence from the 1980s farm debt crisis what is the effect of cash injections during financial crises exploiting county level variation arising from random weather shocks during the 1980s farm debt crisis we analyze and measure the effect of local cash flow shocks on the real and financial sector we show that such cash flow shocks have significant impact on a host of economic outcomes including land values loan delinquency rates the probability of bank failure employment and wages estimates of the effect of local cash flow shocks on county income levels during the financial crisis yield a multiplier of 1 63

physician payment reform and hospital referrals commercial health insurers in california use provider capitation payments to different extents these are similar to arrangements introduced by the recent health reforms to give physicians incentives to control costs in a previous paper we showed that patients whose insurers used capitation incentives traveled further to access lower priced similar quality hospitals than other same severity patients this paper predicts the implied effects of a move to widespread capitation we show that if the introduction of capitation prompted low capitation insurers to act like high capitation insurers this would generate a 4 5 percent cost saving with some reduction in patient convenience but no reduction in quality

race and human capital while human capital has been used with some success to analyze recent changes in racial income differences scholars have repeatedly pointed to a major empirical problem that appears to severely limit the historical relevanlce and scope of skill based theories as applied to racial questions the challenge they raise is legitimate put simply if measured skill disparities between the races narrowed throughout the twentieth century why did income ratios first begin to converge in the 1960 s in this paper i address this question relying on some unexploited census data by race on education literacy occupations and income using these data that begin with the 1890 census i present new estimates of agespecific relative income positions of black men for all postslavery birth cohorts in addition to reconciling the apparently inconsistent skill and income series these income ratios offer a very different historical record than many economists believe to have been the case to cite a prominent example gunnar myrdal s classic work 1944 saw the economic position of his contemporary black america not only as dismal but made even more so by its sense of hopelessness given the absence of any hint of progress or change while myrdal s pessimism is understandable it appears that even in his day seeds had long been sown that were already permanently altering and improving the relative economic status of black men

racial segregation in the public schools and adult labor market outcomes the case of black americans residential segregation has played a central role in theories of minority entrepreneurship and in the diversification of the u s labor market racial diversity in public accommodations including schools has been an issue of continuous public policy debate at least since the u s supreme court s plessy versus ferguson decision 1896 this study applies theory from the literature on social capital to an examination of the role of racial segregation in the public schools of blacks during childhood on their adult likelihood to become self employed and their level of occupational status the model results indicate that after controlling for a number of individual household and metropolitan area factors lower rates of segregation during public schooling results in higher likelihood of wage salary employment and self employment among a cohort of black americans that attended public schools during the 1960s

the economic impacts of climate change evidence from agricultural output and random fluctuations in weather fisher et al 2012 hereafter fhrs have uncovered coding and data errors in our paper deschenes and greenstone 2007 hereafter dg we acknowledge and are embarrassed by these mistakes we are grateful to fhrs for uncovering them we hope that this reply will also contribute to advancing the literature on the vital question of the impact of climate change on the us agricultural sector fhrs main critiques of dg are as follows i there are errors in the weather data and climate change projections used by dg ii the climate change projections are based on the hadley 2 model and scenarios rather than the more recent hadley 3 model and scenarios iii standard errors are biased due to spatial correlation iv the inclusion of state by year fixed effects does not leave enough weather variation to obtain meaningful estimates of the relationship between agriculture profits and weather v storage and inventory adjustment in response to yield shocks invalidate the use of annual profit data and vi fhrs argue that a better specified hedonic model produces robust estimates unlike the results reported in dg four of these critiques have little basis and we respond to them here in the introduction specifically with respect to ii the more recent daily climate predictions were not available when we wrote dg nevertheless the most important issue is providing the reliable estimates of climate change and in this note we report estimates based on the climate model we used in dg and a more recent one that we gained access to in the meantime iii in the primary table on agricultural profits dg reports two sets of standard errors with the first clustered at the county level and the second based on a variance covariance matrix that accounts for spatial correlation using the method proposed in conley 1999 thus the claim of fhrs 2012 seems overblown nevertheless to ease comparisons of papers in this literature this note will adopt the fhrs convention of reporting estimated standard errors clustered at the county and state levels we find that inference is largely unaffected by the choice between these different assumptions about the variance covariance matrix

central city crime and suburban economic growth this paper explores the relationship between inner city crime patterns and suburban income growth analysing data on 318 us counties for selected metropolitan statistical areas of 32 states within the united states from 1982 to 1997 the findings suggest that violent crime does seem to have a negative impact on close in suburbs with a less negative impact farther away from the central city becoming positive at some point while results are not as robust as we had hoped they are consistent with flight to further out suburbs rather than migration to different metropolitan areas in response to urban crime

will u s agriculture really benefit from global warming accounting for irrigation in the hedonic approach will u s agriculture really benefit from global warming accounting for irrigation in the hedonic approach wolfram schlenker w michael hanemann and anthony c fisher there has been a lively debate about the potential impact of global climate change on u s agriculture most of the early agro economic studies predict large damages see for example richard m adams 1989 harry m kaiser et al 1993 and adams et al 1995 in an innovative paper robert mendelsohn william d nordhaus and daigee shaw 1994 hereafter mns propose a new approach using the variation in temperature and precipitation across u s counties to estimate a reduced form hedonic equation with the value of farmland as the dependent variable a change in temperature and or precipitation is then associated with a change in farmland value which can be interpreted as the impact of climate change adams et al 1998 characterize the hedonic approach as a spatial analogue approach and acknowledge that the strength of the spatial analogue approach is that structural changes and farm responses are implicit in the analysis freeing the analyst from the burden of estimating the e ects of climate change on particular region speci c crops and farmer responses on the other hand one of the potential disadvantages of the hedonic approach is that it is a partial equilibrium analysis i e agricultural prices are assumed to remain constant 1 while year to year uctuations in annual weather conditions certainly have the potential to impact current commodity prices especially for crops produced only in a relatively localized area such as citrus fruits which are grown mainly in california and florida changes in long run weather patterns i e changes in climate might have a smaller e ect on commodity prices because of the greater potential for economic adaptation particularly shifts in growing regions 2 the hedonic approach as implemented by mns predicts that existing agricultural land on average might be more productive and hence result in bene ts for u s farmers 3 the hedonic approach has received considerable attention in our judgment in part because the conclusions are at variance with those of some other studies

on measuring the effects of fiscal policy in recessions we do not have a good measure of the effects of fiscal policy in a recession because the methods that we use to estimate the effects of fiscal policy both those using the observed outcomes following different policies in aggregate data and those studying counterfactuals in fitted model economies almost entirely ignore the state of the economy and estimate the government multiplier which is presumably a weighted average of the one we care about the multiplier in a recession and one we care less about the multiplier in an expansion notable exceptions to this general claim sug gest this difference is potentially large our lack of knowledge stems significantly from the focus on linear dynamics vector autoregressions and linearized or close to linear dynamic stochastic general equilibrium dsge models our lack of knowledge also reflects a lack of data deep recessions are few and nonlinearities hard to measure the lack of statistical power in the estimation of nonlinear models using aggregate data can be addressed by exploiting estimates of partial equilibrium responses in disaggregated data microeconomic estimates of the partial equilibrium causal effects of a policy can discipline the causal channels inherent in any dsge model of the general equilibrium effects of policy microeconomic studies can also provide measures of the dependence of the effects of a policy on the states of different agents which is a key component of the dependence of the general equilibrium effects of fiscal policy on the state of the

a macroeconomic model with a financial sector this paper studies a macroeconomic model in which financial experts borrow from less productive agents we pursue four sets of results i the economy is prone to instability and occasionally enters volatile episodes as volatility spikes agents precautionary motive increases depressing prices even further log linear approximations fail to capture these non linear effects that can cause economies to be significantly depressed for long periods of time ii endogenous risk during volatile episodes increases asset price correlations iii financial experts impose a negative externality on each other and on the labor sector by not maintaining adequate capital cushion and funding structure iv while risk sharing within the financial sector through securitization and derivatives contracts reduces many inefficiencies it can also amlify systemic risks

internal net worth and the investment process an application to u s agriculture recent models of firm investment decisions stressing informational imperfections in capital markets provide a foundation for interpreting evidence that movements in internal finance can predict investment spending even after one controls for measures of firms investment opportunities while such evidence is suggestive it is often open to other interpretations we examine these models using data on equipment investment in the u s agricultural sector this sector is particularly interesting because it has experienced large fluctuations in net worth and the profitability of investment and reasonable measures of net worth can be constructed our findings provide support for a class of internal funds models of investment under asymmetric information

the impact of global warming on agriculture a ricardian analysis reply we measure the economic impact of climate on land prices using cross sectional data on climate farmland prices and other economic and geophysical data for almost 3 000 counties in the united states we find that higher temperatures in all seasons except autumn reduce average farm values while more precipitation outside of autumn increases farm values applying the model to a global warming scenario shows a significantly lower estimated impact of global warming on u s agriculture than the traditional production function approach and in one case suggests that even without co sub 2 fertilization global warming may have economic benefits for agriculture 16 refs 5 figs 5 tabs

the human capital approach to black white earnings inequality some unsettled questions the persistence of earnings differences between blacks and whites in the united states has been a topic that has received a substantial amount of attention in both theoretical and empirical research in economics the differential in earnings typically is tied to racial differences in human capital accumulation this paper advances a systematic critique of the human capital approach to black white inequality inadequacies are identified in human capital theory as a general theory of inequality as well as a specific theory of racial inequality the critique suggests that a serious analysis of the black white earnings gap will require an entirely new approach to the study of racial income inequality

optimal financial crises empirical evidence suggests that banking panics are related to the business cycle and are not simply the result of sunspots panics occur when depositors perceive that the returns on bank assets are going to be unusually low we develop a simple model of this in this setting bank runs can be first best efficient they allow efficient risk sharing between early and late withdrawing depositors and they allow banks to hold efficient portfolios however if costly runs or markets for risky assets are introduced central bank intervention of the right kind can lead to a pareto improvement in welfare from the earliest times banks have been plagued by the problem of bank runs in which many or all of the bank s depositors attempt to withdraw their funds simultaneously because banks issue liquid liabilities in the form of deposit contracts but invest in illiquid assets in the form of loans they are vulnerable to runs that can lead to closure and liquidation a financial crisis or banking panic occurs when depositors at many or all of the banks in a region or a country attempt to withdraw their funds simultaneously prior to the twentieth century banking panics occurred frequently in europe and the united states panics were generally regarded as a bad thing and the development of central banks to eliminate panics and ensure financial stability has been an important feature of the history of financial systems it has been a long and involved process the first cerntral bank the bank of sweden was established more than 300 years ago the bank of england played an especially important role in the development of effective stabilization policies in the eighteenth and nineteenth centuries by the end of the nineteenth century banking panics had been eliminated in europe the last true panic in england was the overend gurney company crisis of 1866

financial and legal constraints to growth does firm size matter using a unique firm level survey database covering 54 countries we investigate the effect of financial legal and corruption problems on firms growth rates whether these factors constrain growth depends on firm size it is consistently the smallest firms that are most constrained financial and institutional development weakens the constraining effects of financial legal and corruption obstacles and it is again the small firms that benefit the most there is only a weak relation between firms perception of the quality of the courts in their country and firm growth we also provide evidence that the corruption of bank officials constrains firm growth

what do we learn from the weather the new climate economy literature a rapidly growing body of research applies panel methods to examine how temperature precipitation and windstorms influence economic outcomes these studies focus on changes in weather realizations over time within a given spatial area and demonstrate impacts on agricultural output industrial output labor productivity energy demand health conflict and economic growth among other outcomes by harnessing exogenous variation over time within a given spatial unit these studies help credibly identify i the breadth of channels linking weather and the economy ii heterogeneous treatment effects across different types of locations and iii nonlinear effects of weather variables this paper reviews the new literature with two purposes first we summarize recent work providing a guide to its methodologies datasets and findings second we consider applications of the new literature including insights for the damage function within models that seek to assess the potential economic effects of future climate change jel c51 d72 o13 q51 q54

the short run relationship between inequality and growth evidence from oecd regions during the great recession abstractthis paper provides evidence on the relationship between income inequality and economic growth in organisation for economic co operation and development oecd regions during the decade 2003 13 it combines household survey data and macroeconomic databases covering over 200 comparable regions in 15 oecd countries the econometric results based on two alternative sets of instruments highlight a general negative association between inequalities and economic growth since the start of the economic crisis this relationship is sensitive to the type of urban structure higher inequalities seem to be more detrimental for growth in regions characterized by medium to large sized cities while regions characterized by small cities and rural areas are less affected

community differences in business births and business growths abstract the published literature relating to the location of a business tends to support two different kinds of theories 1 that business locations are selected to minimize costs or 2 that decision makers select locations because of personal preferences this study attempts to find explanations as to why certain communities have grown faster than others and to provide a model for the location decision of a start up business we find a negative correlation of two entrepreneurship measures to environmental factors that are usually considered to be desirable i e health care and the environment climate and terrain recreation and low crime we find a weak correlation between community attitudes and the entrepreneurship measures we also find a positive correlation of entrepreneurship with a high number of college graduates a negative correlation when a high proportion of the population is over age 65 population mobility and low unemployment are also positively correlated with the measures but those factors seem at least as likely to be results as to be causes of business births and business growth we believe that start ups are vital for any community that wishes to grow therefore the location decision of start up businesses seems important we propose a model of the location decision of a start up a model that emphasizes the individuality of the decision maker and the specific success requirements of the business the driving force behind a start up can be a decision maker s desire for personal gain a problem that begs a solution or a solution that is looking for a problem in some cases the reason for starting a business will dictate its location in other cases success requirements of the business will dominate we believe that researchers can gain a true understanding of the location decision only by considering both the preference of the decision maker and the requirements of the specific business

is hospital competition socially wasteful we study the consequences of hospital competition for medicare beneficiaries heart attack care from 1985 to 1994 we examine how relatively exogenous determinants of hospital choice such as travel distances influence the competitiveness of hospital markets and how hospital competition interacts with the influence of managed care organizations to affect the key determinants of social welfare expenditures on treatment and patient health outcomes in the 1980s the welfare effects of competition were ambiguous but in the 1990s competition unambiguously improves social welfare increasing hmo enrollment over the sample period partially explains the dramatic change in the impact of hospital competition

the employment effects of credit market disruptions firm level evidence from the 2008 9 financial crisis this article investigates the effect of bank lending frictions on employment outcomes i construct a new data set that combines information on banking relationships and employment at 2 000 nonfinancial firms during the 2008 9 crisis the article first verifies empirically the importance of banking relationships which imply a cost to borrowers who switch lenders i then use the dispersion in lender health following the lehman crisis as a source of exogenous variation in the availability of credit to borrowers i find that credit matters firms that had precrisis relationships with less healthy lenders had a lower likelihood of obtaining a loan following the lehman bankruptcy paid a higher interest rate if they did borrow and reduced employment by more compared to precrisis clients of healthier lenders consistent with frictions deriving from asymmetric information the effects vary by firm type lender health has an economically and statistically significant effect on employment at small and medium firms but the data cannot reject the hypothesis of no effect at the largest or most transparent firms abstracting from general equilibrium effects i find that the withdrawal of credit accounts for between one third and one half of the employment decline at small and medium firms in the sample in the year

presidential address asset price dynamics with slow moving capital i describe asset price dynamics caused by the slow movement of investment capital to trading opportunities the pattern of price responses to supply or demand shocks typically involves a sharp reaction to the shock and a subsequent and more extended reversal the amplitude of the immediate price impact and the pattern of the subsequent recovery can reflect institutional impediments to immediate trade such as search costs for trading counterparties or time to raise capital by intermediaries i discuss special impediments to capital formation during the recent financial crisis that caused asset price distortions which subsided afterward after presenting examples of price reactions to supply shocks in normal market settings i offer a simple illustrative model of price dynamics associated with slow moving capital due to the presence of inattentive investors i address the implications for asset price dynamics of the apparent slow movement of investment capital to trading opportunities the arrival of new capital to an investment opportunity can be delayed by fractions of a second in some markets for example an electronic limit order book market for equities or by months in other markets such as that for catastrophe risk insurance accordingly prices respond to supply or demand shocks with a sharp reaction because of the relatively small subset of capital and thus risk bearing capacity that is immediately available to absorb a shock on short notice such a price impact is substantially reversed over time as additional capital becomes available the amplitude of the immediate price impact and the pattern of the subsequent recovery can reflect many sorts of attention costs to trade as well as institutional impediments to capital movement such as search costs for trading

migration and interregional employment redistribution in the united states during the 1970 s the south and west census regions accounted for 89 9 percent of incremental u s population and 72 5 percent of incremental nonagricultural employment these figures are sharply higher than corresponding figures for any other decade in u s history for example during the 1930 s the south and west gained 65 4 percent of incremental national population which was the highest share previously recorded the immediate cause of the interregional population shifts is fairly heavy net out migration from the northeast and north central regions to the south and west combined with birth rates that are near historical low levels interactive relationships that cause employment growth and migration to reinforce one another are probably operating but these relationships are not well understood they are the focus of this paper using a new and unique set of time series data on migration and employment we develop and estimate a time series model of migration and employment growth for each of 171 u s regions our primary emphasis in this paper is on the 57 major metropolitan

agricultural decisions after relaxing credit and risk constraints the investment decisions of small scale farmers in developing countries are conditioned by their financial environment binding credit market constraints and incomplete insurance can limit investment in activities with high expected profits we conducted several experiments in northern ghana in which farmers were randomly assigned to receive cash grants grants of or opportunities to purchase rainfall index insurance or a combination of the two demand for index insurance is strong and insurance leads to significantly larger agricultural investment and riskier production choices in agriculture the binding constraint to farmer investment is uninsured risk when provided with insurance against the primary catastrophic risk they face farmers are able to find resources to increase expenditure on their farms demand for insurance in subsequent years is strongly increasing with the farmer s own receipt of insurance payouts with the receipt of payouts by others in the farmer s social network and with recent poor rain in the village both investment patterns and the demand for index insurance are consistent with the presence of important basis risk associated with the index insurance imperfect trust that promised