economic deregulation days of reckoning for microeconomists economic deregulation of american industry is one of the most important experiments in economic policy of our time 1 in 1977 17 percent of u s gnp was produced by fully regulated industries 2 by 1988 following ten years of partial and complete economic deregulation of large parts of the transportation communications energy and financial industries that total had been cut significantly to 6 6 percent of gnp 3 the political forces behind the decision to change the market conditions under which roughly 600 billion of u s output is produced were strong and varied but according to political scientists martha derthick and paul quirk 1985 p 36 deregulation would never have occurred if economists especially microeconomists had not generally supported it through their research 4 in retrospect it is fair to ask were microeconomists able to develop a theoretical and empirical framework to explain regulation and its effects and to form predictions of deregulation s effects were they able to predict the actual effects of deregulation this paper surveys the evidence to address these questions and of

definition consistent measurement of exchange market pressure currencies can be under severe pressure but in a managed exchange rate regime that is not fully visible via the change in the exchange rate the literature has proposed a way to measure such exchange market pressure emp indirectly by adding interest rate changes and forex interventions to the exchange rate change we demonstrate that this measure is not consistent with the definition of emp and develop a new measure that is consistent this is first derived within the commonly used monetary exchange rate model then we generalize the analysis by avoiding the use of an exchange rate model we find that the interest rate should not be taken in the first difference form used so far but rather in level form and relative to the interest rate chosen if the country had no exchange rate objective applications on the european monetary system and east asian crises confirm that this improvement is highly relevant in practice

learning about a new technology pineapple in ghana this paper investigates the role of social learning in the diffusion of a new agri cultural technology in ghana we use unique data on farmers communication patterns to define each individual s information neighborhood conditional on many potentially confounding variables we find evidence that farmers adjust their inputs to align with those of their information neighbors who were surpris ingly successful in previous periods the relationship of these input adjustments to experience further indicates the presence of social learning in addition applying the same method to input choices for another crop of known technol ogy correctly indicates an absence of social learning effects jel d83 013 033 q16

the global financial crisis explaining cross country differences in the output impact abstract what explains differences in the crisis impact across developing countries and emerging markets using cross country regressions to assess the factors driving the growth performance in 2009 compared to pre crisis forecasts for that year we find that a small set of variables explain a large share of the variation in the growth impact countries with more leveraged domestic financial systems stronger credit growth and more short term debt tended to suffer a larger effect on economic activity although the relative importance of these factors differs across country groups for emerging markets this financial channel trumps the trade channel for a broader set of developing countries however the trade channel seems to have mattered with more open countries affected more strongly and those exporting food commodities being less hard hit exchange rate flexibility helped in buffering the impact of the shock particularly for emerging markets there is also some evidence that countries with a stronger fiscal position prior to the crisis were impacted less severely we find little evidence for the importance of other policy variables

keep your friends close the effect of local social networks on child human capital outcomes abstract social networks can affect demand for human capital investments by relaxing household time or budget constraints or by defining and reinforcing human capital preferences however empirically identifying the effect of social networks on human capital investment is usually problematic because households self select their networks in ways that may be correlated with their abilities to make these investments in northern ugandan internally displaced persons camps networks were not entirely self selected rebel activity which forced households into camps in 2002 disrupted pre existing social networks in ways that were exogenous to household human capital preferences this paper uses the exogenous variation in network disruption to identify a positive impact of networks on children s long term nutritional outcomes

modeling regional economic dynamics spatial dependence spatial heterogeneity and nonlinearities abstract spatial modeling of economic phenomena requires the adoption of complex econometric tools which allow us to deal with important methodological issues such as spatial dependence spatial unobserved heterogeneity and nonlinearities in this paper we describe some recently developed econometric approaches i e spatial autoregressive semiparametric geoadditive models which address the three issues simultaneously we also illustrate the relative performance of these methods with an application to the case of house prices in the lucas county

meta analysis in model implementation choice sets and the valuation of air quality improvements this research illustrates how the methods developed for meta analysis can serve to document and summarize voluminous information derived from repeated sensitivity analyses our application is to the sensitivity of welfare estimates derived from discrete choice models to assumptions about the choice set these assumptions affect welfare estimates through both the estimated parameters of the model and conditional on the parameters the substitution among alternatives in our specific application the evaluation is in terms of estimated benefits of air quality improvements in los angeles based on discrete choices of neighborhood and housing copyright 2007 john wiley sons ltd

habit formation interdependent preferences and demographic effects in the almost ideal demand system the authors model myopic habit formation interdependence of preferences among consumers and demographic effects as taste shifters in a micro consumer demand model of the almost ideal demand variety the model is estimated for dutch micro data the authors investigate the dynamic properties of the model and find that it behaves very differently from models without interdependence of preferences the implications for micro macro modeling are discussed copyright 1991 by royal economic society

social interactions in small groups most models of endogenous social interactions implicitly assume that individuals are interacting directly or indirectly with a very large innite group of others these models generally feature multiple equilibria when the marginal impact of peers exceeds some strictly positive critical value this paper shows that this result depends critically on the assumption that the size of the peer group is large and analyzes the properties of an alternative model in which the peer groups are small nite i nd that when peer groups are small multiple equilibria exist for any positive degree of peer influence a brief application to the variation in youth smoking rates by ethnicity demonstrates the potential interaction of group size and strength of peer eect in generating a wide range of equilibrium behavior

social networks and technology adoption in northern mozambique despite their potentially strong impact on poverty agricultural innovations are often adopted slowly using a unique household dataset on sunflower adoption in mozambique we analyse whether and how individual adoption decisions depend upon the choices of others in the same social networks since farmers anticipate that they will share information with others we expect farmers to be more likely to adopt when they know many other adopters dynamic considerations however suggest that farmers who know many adopters might strategically delay adoption to free ride on the information gathered by others we present empirical evidence that shows that the relationship between the probability of adoption and the number of known adopters is shaped as an inverse u in line with information sharing the network effect is stronger for farmers who report discussing agriculture with others the data contains information which is needed to ameliorate the identification issues that commonly arise in this context in particular social networks are precisely identified and in addition we can control for village heterogeneity and endogenous group formation

the effect of female education on fertility and infant health evidence from school entry policies using exact date of birth this paper uses age at school entry policies to identify the effect of female education on fertility and infant health we focus on sharp contrasts in schooling fertility and infant health between women born just before and after the school entry date school entry policies affect female education and the quality of a woman s mate and have generally small but possibly heterogeneous effects on fertility and infant health we argue that school entry policies manipulate primarily the education of young women at risk of dropping out of school

child labor and the labor supply of other household members evidence from 1920 america this paper analyses the effect of child labor on household labor supply using 1920 us census micro data the aim of the analysis is to understand who in the household benefits from child labor in order to identify a source of exogenous variation in child labor i use state specific child labor laws i find that a rise in the proportion of working children by household is associated with no variation in parents labor supply i also find a strong negative externality among children as the proportion of working children by household rises everything else equal the probability that each child works falls while the probability that he attends school rises this suggests that parents redistribute entirely the returns from child labor to the children in the household consistent with a model of household labor supply with fully altruistic parents

a multinomial choice model of neighborhood effects this paper provides a model of individual decisionmaking in the presence of neighborhood effects by neighborhood effects we refer to interdependencies between individual decisions and the decisions and characteristics of others within a common neighborhood as such neighborhood effects are forms of social interactions in fact the terms would seem to be interchangeable in many contexts within economics there has developed an increasing recognition that neighborhood effects play a possibly major role in explaining a range of individual behaviors rich empirical and theoretical literatures have developed a failing of much of this work is the absence of strong connections between theory and empirics this paper addresses this limitation by providing a model of multinomial choice with neighborhood effects the model represents a generalization of the binary choice model of william brock and steven durlauf 2001a b the model is econometrically implementable and so has the potential of allowing for structural estimation of neighborhood effects section i outlines a basic choice model with neighborhood effects section ii specializes the structure using a multinomial logit framework section iii considers econometric implementation section iv discusses some limitations of the framework and proposes some research directions proofs of all theorems may be found in brock and durlauf 2001c

the effect of pension design on employer costs and employee retirement choices evidence from oregon abstract we use administrative data from oregon s public employees retirement system pers to study the effect of pension design on employer costs and employee retirement timing decisions during our 1990 2003 sample period pers calculates each member s retirement benefit using up to three different formulas defined benefit db defined contribution dc and a combination of db and dc and pers pays the maximum benefit for which the member is eligible we show that this maximum benefit calculation results in average ex post retirement benefits that are 54 higher than if they had been calculated using only the db formula and that employees receiving dc benefits are significantly more likely than employees receiving db benefits to retire before the plan s normal retirement age monte carlo simulations verify that the higher costs could have been predicted at the start of our sample period exploiting exogenous plan changes we show that employees respond to within year variation in their retirement incentives and consistent with peer effects that they respond more strongly to these incentives when more of their coworkers face similar incentives finally consistent with the emerging literature on financial mistakes by households we show that a small but noteworthy fraction of retirees would have benefited from shifting their retirements by as little as one month

estimating ethnic preferences using ethnic housing quotas in singapore there are many policies around the world aimed at integrating groups gender ethnic national in education employment immigration and housing in the case of housing since prices may not internalize externalities in residential location choices we need to know preferences for welfare analysis this paper estimates people s taste for living with own ethnic groups ethnic preferences using unique policy variation from the ethnic housing quotas in singapore my approach combines policy induced variation commonly used in reduced form settings with a non parametric identi cation strategy in a structural demand estimation framework a la berry levinsohn and pakes 1995 i nd that all groups have strong preferences to live with at least some other

information flows and social externalities in a tanzanian banana growing village this article analyses the role of social networks as facilitators of information flows and banana output increase based on a village census full information is available on the socio economic characteristics and banana production of farmers kinship group members neighbours and informal insurance group members the census data enable us to use individual specific reference groups and include exogenous group controls to tackle standard difficulties related to identification and omitted variables bias when analysing social effects for the survey village of nyakatoke in tanzania the results suggest that information flows exist within all types of groups analysed but output externalities are limited to kinship groups using networks may offer scope for effective information flows on agricultural techniques but our evidence suggests that not just any local network will have a social externality impact requiring a clear understanding of local social networks for maximum impact

does industrial composition matter for wages a test of search and bargaining theory does switching the composition of jobs between low paying and high paying industries have important effects on wages in other sectors in this paper we build on search and bargaining theory to clarify a key general equilibrium channel through which changes in industrial composition could have substantial effects on wages in all sectors in this class of models wage determination takes the form of a social interaction problem and we illustrate how the implied sectoral linkages can be empirically explored using u s census data we find that sector level wages interact as implied by the model and that the predicted general equilibrium effects are present and substantial we interpret our results as highlighting the relevance of search and bargaining theory for understanding the determination of wages and we argue that the results provide support for the view that industrial composition is important for understanding wage outcomes

defined benefit pension plan distribution decisions by public sector employees abstract studies examining pension distribution choices have found that the tendency of private sector workers is to select lump sum distributions instead of life annuities resulting in leakage of retirement savings in the public sector defined benefit pensions usually offer lump sum distributions equal to employee contributions not the present value of the annuity thus for terminating employees that are younger or have shorter tenures the lump sum distribution amount may exceed the present value of the annuity we discuss the factors that may influence the choice to withdraw funds or not in this environment using administrative data from the north carolina state and local government retirement systems we find that over two thirds of public sector workers under age 50 separating prior to retirement from public plans in north carolina left their accounts open and did not request a cash distribution from the pension system within one year of separation furthermore the evidence suggests many separating workers particularly those with short tenure may be forgoing substantial monetary benefits due to lack of knowledge understanding or accessibility of benefits we find no evidence of a bias toward cash distributions for public employees in north carolina

informal groups and health insurance take up evidence from a field experiment summary this paper presents the results of 20 randomized experiments aimed at understanding the low take up of in patient health insurance observed in developing countries take up does not increase when participants receive information about the product or an assistance to register or small subsidies of 2 10 or 30 take up does not increase when the same information is provided by local respected community leaders when participants are offered an in kind gift a chicken if they register when participants are offered the possibility to contribute lower and more frequent payments or the possibility to pay by cellphone a full subsidy generates a mere 45 take up with no retention after one year in contrast to these low take up rates presenting the same information without any subsidies to existing informal groups raises take up to 12 still 7 after one year as well as trust and knowledge of the product social networks play a major role in the adoption of health insurance this paper provides a cost effective way to increase take up of health insurance while subsidies are found to be largely ineffective at raising take up in the long run

identity and the economics of organizations on plebes first day at west point called r day they strip down to their underwear their hair is cut off they are put in uniform they then must address an older cadet with the proper salute and with the statement sir new cadet doe reports to the cadet in the red sash for the first time as ordered plebes must stand and salute and repeat and stand and salute and repeat until they get it exactly right all the while being reprimanded for every tiny mistake in the summary of david lipsky 2003 pp 145 154 who spent four years tracking a company of cadets at west point on r day you surrender your old self in stages but r day is just the beginning of the training and personal re engineering that is to come so that west point graduates emerge four years later as loyal officers in the u s army lipsky shows that despite some failure this tough program is remarkably successful in creating officers with the will to lead in battle economists current picture of organizations and work incentives has no place for the west point program and the motivations it seeks to inculcate in recruits in a standard economic model an individual s preferences are fixed and utility depends only on pecuniary variables the army s aim at west point is to change cadets preferences they wish to inculcate non economic motives in the cadets so that they have the same goals as the u s army alternatively stated the goal of west point is to change the identity of the cadets so they will think of themselves above all else as officers in the u s army they will feel bad about themselves they will lose utility if they fall short of the ideals of such an officer this change in identity

network effects in public transit use evidence from a spatially autoregressive mode choice model for new york this article empirically tests for positive network effects in transit use by applying a spatial autoregressive logit mode choice model with 1997 98 work trip data from new york city positive network effects exist when people prefer to use transit together with other people as a result of social spill over although these network preferences should differ for each person because of statistical restrictions in the model individual network preferences cannot be obtained however it is possible to derive econometrically a measure of aggregate network preference this paper can be seen in the wider context of other recent work focusing on the analysis of spatial dependencies and network effects in travel

workers of the world unite franchise extensions and the threat of revolution in europe 1820 1938 abstract we test the hypothesis that the extension of the voting franchise in europe was related to the threat of revolution we contend that international diffusion of regime contention and information about revolutionary events happening in neighboring countries generate the necessary variation in the perceived threat of revolution using two samples of european countries covering the period from 1820 to 1938 we find robust evidence which is consistent with the threat of revolution hypothesis we also find some evidence that war triggered suffrage reform

monetary policy options for mitigating the impact of the global financial crisis on emerging market economies though the hypothesis that exchange rate regimes fully predetermine monetary policy in the face of external shocks hardly finds any advocates on theoretical ground it has crept in the most of empirical research this study adopts a more discerning empirical approach that looks at monetary policy tools used in order to accommodate the recent financial crisis we investigated the gdp growth in 45 emerging market economies in the most intense phase of the crisis and found out that there is no clear difference in the growth performance between countries at the opposite poles of the exchange rate regime spectrum depreciation cum international reserve depletion outperforms the other policy options especially the rise in the interest rate spread we discovered certain complementarities between the information on the policy option and on exchange rate regime taking into account non gaussian settings we decided to use quantile regression which provide in addition more complete picture of relationship between the covariates and the distribution of the gdp growth

peers at work we study peer effects in the workplace specifically we investigate whether how and why the productivity of a worker depends on the productivity of coworkers in the same team using high frequency data on worker productivity from a large supermarket chain we find strong evidence of positive productiv ity spillovers from the introduction of highly productive personnel into a shift worker effort is positively related to the productivity of workers who see him but not workers who do not see him additionally workers respond more to the presence of coworkers with whom they frequently interact we conclude that social pressure can partially internalize free riding externalities that are built into many workplaces jel j24 l81 m54

prices and social behaviour evidence from adult smoking in canadian aboriginal communities this paper provides estimates of tobacco price elasticity explicitly distinguishing between two price effects the direct effect reflecting individual reaction to a price change and the indirect effect whereby price influences the individual by changing community smoking behaviour canada s aboriginal communities are small and secluded allowing for plausible identification of reference groups on a relatively large scale estimates suggest a 10 increase in price decreases daily smoking by 0 91 percentage points 2 11 occasional smoking by 1 24 percentage points 8 27 and average smoking intensity by 0 15 cigarettes per day 2 9 it is found that the indirect effect almost doubles the response to a change in tobacco prices over the direct effect alone

endogenous peer effects local aggregate or local average a b s t r a c t we develop a unified model embedding different behavioral mechanisms of social interac tions and design a statistical model selection test to differentiate between them in empirical applications this framework is applied to study peer effects in education effort in study ing and sport activities for adolescents in the united states we find that for education students tend to conform to the social norm of their friends while for sport activities both the social multiplier and the social norm effect matter

trading networks and liquidity provision abstract we study the profitability of traders in two fully electronic and highly liquid markets the dow and standard poor s 500 e mini futures markets using unique information that identify counterparties to a transaction we show and seek to explain the fact that the network pattern of trades captures the relations between behavior in the market and returns our approach includes a simple representation of how much a shock is amplified by the network and how widely it is transmitted this representation provides a possible shorthand for understanding the consequences of a fat finger trade a withdrawing of liquidity or other market shock

infrastructure development and regulatory reform in sub saharan africa the case of air transport this technical paper analyses the main policy issues raised by regulatory reform in air transport in sub saharan africa its basic premise is that improving air infrastructure is of paramount importance for the region as it tries to integrate more thoroughly into the world economy on the basis of the experience of oecd countries with privatisation liberalisation and regulatory design the author analyses progress being made in sub saharan africa and identifies three important case studies the restructuring of the regional airline of francophone western africa the sell off of the state owned airline of kenya and the overall reform process in south africa by far the largest market in the sub continent the analysis highlights the importance of regional dynamics in the upgrading of the air transport industry in developing and emerging areas sub saharan africa has made smaller progress in this respect than for instance central america as the start of the millenium round and ce document analyse les principales questions de politique economique soulevees par la reforme de la reglementation du transport aerien en afrique subsaharienne il montre que l amelioration de l infrastructure du transport aerien constitue un enjeu fondamental dans les efforts de la region pour s integrer devantage dans l economie mondiale sur la base des experiences des pays de l ocde dans les domaines de la privatisation de la liberalisation et de la reglementation l auteur analyse les progres realises en afrique subsaharienne et identifie trois etudes de cas particulierement importantes la restructuration de la compagnie aerienne regionale de l afrique de l ouest francophone la vente de la compagnie aerienne publique du kenya et le processus plus general de reformes en afrique du sud de loin le plus grand marche du continent l analyse met en lumiere l importance des dynamiques regionales pour renforcer l industrie du transport aerien dans les pays emergents et en

social ties within school classes the roles of gender ethnicity and having older siblings in this paper we identify the lines along which social ties between high school teenagers are primarily formed to this end we introduce interaction weights between pupils in the same school class that are a function of exogenous individual background characteristics such as gender ethnicity and having older siblings the resulting model with endogenous interactions and school specific fixed effects is estimated using data from the dutch national school youth survey nsys a survey in which in principle all pupils in a sampled class are interviewed by combining the 1992 1996 1999 and 2001 nsys data we are able to identify trends in social relationships of teenagers we find that the roles that gender and ethnicity play in how teenagers interact varies strongly across different types of behaviour for example going out shows strong within ethnicity interactions while expenditures on cell phones and on clothing exhibit mainly between girls interactions having older siblings has a minor effect on within school class social interactions there is weak evidence of decreased ethnic segregation within school classes during the decade considered

understanding regression versus variance tests for social interactions this article considers the relationship between the use of regressions and the use of variance contrast methods to uncover social interactions we illustrate how these methods employ different identifying assumptions and are therefore complementary approaches we also provide formal identification results that extend existing ones for the two methods jel c12 c21 c23 z13 this article is designed to understand the relationshipbetweentwoapproachestotheempirical analysis of social interactions the first approach is the use of linear regressions to uncover social interactions this approach estimates social interaction effects through changes in the conditional linear expectation of individual outcomes when group level variables are included in the conditioning set in econometrics this method was first analyzed by manski 1993 who dubbed it the linearin means model since the group level variables are typically averages of individual variables within the group this model is also studied by brock and durlauf 2001a 2001b cohencole 2006 and graham and hahn 2005 among others durlauf 2004 surveyed empirical studiesof social interactionsbasedonsuch regressions the second approach originally proposed by glaeser sacerdote and scheinkman 1996 and developed into a full inferential procedure by graham 2005 who refers to this approachasvariancecontrasts usesintragroup variation in behavior to infer social interactions the idea in this approach is that social interactions willinduceintragroupdependences in behavior that affect sample variances for intragroup outcomes there has been relatively little work evaluating social interactions using variance contrasts one reason is that with the exception of graham s work there is little formal statistical theory for the approach the purpose of this article was to clarify the relationship between regression and variance contrast tests weclarify how these tests employ different informational assumptions to achieve identification of social interaction specifically we argue that regression and variance contrast approaches correspond to identification via exclusion restrictions in the one case and covariance restrictions on errors in the other as such the two approaches replicate the classes of identification strategies that appear in the classical simultaneous equations literature see fisher 1966 for a classic treatment the remainder of the article is organized as

my end of the bargain are there cross district effects in teacher contract provisions a large literature on teacher collective bargaining describes the potential influence of the provisions in collectively bargained teacher union contracts on teachers and student achievement but li

payoff complementarities and financial fragility evidence from mutual fund outflows the paper provides empirical evidence that strategic complementarities among investors generate fragility in financial markets analyzing mutual fund data we find that consistent with a theoretical model funds with illiquid assets where complementarities are stronger exhibit stronger sensitivity of outflows to bad past performance than funds with liquid assets we also find that this pattern disappears in funds where the shareholder base is composed mostly of large investors we present further evidence that these results are not attributable to alternative explanations based on the informativeness of past performance or on clientele effects we analyze the implications for funds performance and policies

school attendance and child labor a model of collective behavior this paper theoretically investigates how community approval or disap proval aects school attendance and child labor and how aggregate behavior of the community feeds back towards the formation and persistence of an anti or pro schooling norm the proposed community model continues to take aggregate and idiosyncratic poverty into account as an important driver of low school attendance and child labor but it provides also an explanation for why equally poor villages or regions can display dierent attitudes towards schooling distinguishing between three dierent modes of child time allocation school attendance work and leisure the paper shows how the time costs of schooling and child labor productivity con tribute to the existence of a locally stable anti schooling norm it proposes policies that eectively exploit the social dynamics and initiate a permanent escape from the anti schooling equilibrium an extension of the model explores how an education contingent subsidy paid to the poorest families of a community manages to initiate a bandwagon eect towards education for all the optimal mechanism design of

latent homophily or social influence an empirical analysis of purchase within a social network consumers who are close to one another in a social network often make similar purchase decisions this similarity can result from latent homophily or social influence as well as common exogenous factors latent homophily means consumers who are connected to one another are likely to have similar characteristics and product preferences social influence refers to the ability of one consumer to directly influence another consumer s decision based upon their communication we present an empirical study of purchases of caller ring back tones using data from an asian mobile network that predicts consumers purchase timing and choice decisions we simultaneously measure latent homophily and social influence while also accounting for exogenous factors identification is achieved due to our dynamic panel data structure and the availability of detailed communication data we find strong influence effects and latent homophily effects in both the purchase timing and product choice decisions of consumers this paper was accepted by sandra slaughter information systems

does income polarization affect economic growth the case of the european regions ezcurra r does income polarization affect economic growth the case of the european regions regional studies this paper examines the relationship between income polarization and economic growth in the regions of the european union over the period 1993 2003 the results indicate that the level of income polarization is negatively associated with regional growth this finding is in fact robust to various alternative specifications including a number of additional explanatory variables such as initial per capita gross domestic product industry mix human capital stock population density or market potential furthermore it should be noted that the observed negative correlation between polarization and economic performance does not depend on the number of groups used to analyse the degree of income stratification within the sample regions ezcurra r la polarisation des revenus affecte t elle la croissance economique le cas des regions europeennes regional studies cet article etudie les relations en

juvenile crime and punishment evidence from japan over the last decade juvenile crime has become a serious social problem in japan the juvenile law was revised in 2001 to impose harsher punishment on juvenile offenders this revision makes it possible to impose criminal punishment on 14 and 15 year old criminal offenders while those offenders aged 16 19 have always faced criminal punishment both before and after the revision using this revision as a natural experiment this study conducts a difference in differences estimation to examine the effect of punishment on juvenile crime the analysis provides evidence that punishment can deter juvenile crime in addition this research examines the criminal behaviour of 13 year olds who face no change in punishment but who soon will in the near future the results suggest that the revision also had a negative impact on the criminal behaviour of these younger offenders

discrete choice with social interactions this paper provides an analysis of aggregate behavioural outcomes when individual utility exhibits social interaction effects we study generalized logistic models of individual choice which incorporate terms reflecting the desire of individuals to conform to the behaviour of others in an environment of noncooperative decisionmaking laws of large numbers are generated in such environments multiplicity of equilibria in these models which are equivalent to the existence of multiple self consistent means for average choice behaviour will exist when the social interactions exceed a particular threshold local stability of these multiple equilibria is also studied the properties of the noncooperative economy are contrasted with the properties of an economy in which a social planner determines the set of individual choices finally a likelihood function based on the theoretical model is given and conditions for the econometric identifiability of the model are established

optimal pricing for a multinomial logit choice model with network effects we consider a seller s problem of determining revenue maximizing prices for an assortment of products that exhibit network effects customers make purchase decisions according to a multinomial logit choice model modified to incorporate network effects so that the utility each individual customer gains from purchasing a particular product depends on the market s total consumption of that product in the setting of homogeneous products we show that if the network effect is comparatively weak then the optimal pricing decision of the seller is to set identical prices for all products however if the network effect is strong then the optimal pricing decision is to set the price of one product low and to set the prices of all other products to a single high value this boosts the sales of the single low price product in comparison to the sales of all other products we also obtain comparative statics results that describe how optimal prices and sales levels vary with a parameter that determines the strengt

clean evidence on peer effects we study subjects who were asked to fill letters into envelopes with a remuneration independent of output in the pair treatment two subjects worked at the same time in the same room and peer effects were possible in the single treatment subjects worked alone and peer effects were ruled out we find evidence of peer effects in the pair treatment because the standard deviations of output are smaller within pairs than between pairs moreover average output is higher in the pair treatment thus peer effects raise productivity finally low productivity workers are the most sensitive to the behavior of peers

u s state and local fiscal policy and economic activity do we know more now early reviews of the academic literature on the economic effects of state and local taxes and expenditures suggested that not enough was known upon which to base policy the reviews called for better data and improvements in empirical methodology this paper reviews studies conducted since the early literature reviews to assess our current state of knowledge the conclusion of the study is that we know more now but our knowledge is unlikely to ever be sufficient to provide universal policy guidance rather we suggest that more research is needed on specific state and local policies for specific circumstances consistent with the general principles that guide place based policy

macroeconomic shocks and stock market returns the case of korea abstractthis study examines the effects of macroeconomic shocks on key macro variables including stock market returns in korea using the structural vector autoregression svar model we suggest a three variable svar model incorporating inflation output growth and stock returns we adopt a nonzero z ratio restriction for the long run identifying assumption to allow for economically meaningful relationships among variables while our results support the negative positive relation of demand supply shocks to stock returns we also find that demand shocks influence stock market variance more significantly than supply shocks do the sub period analysis finds that global market fluctuations during the global financial crisis have relatively little effect on korean stock market performance we also examine a generalized five variable model that includes the foreign exchange rate and interest rate confirming the results from the three variable case

the marketization of new zealand schools assessing fiske and ladd edward fiske and helen ladd s review of market based educational reforms in new zealand are assessed in light of recent developments we agree that predicted benefits were overstated that there were both losers and winners and that educational nirvana did not result in our view however the main impact was to make schools problems more transparent creating discomforting pressures and attempts to undermine this transparency we examine responses to changes in zoning laws the effects of socioeconomic status on observed outcomes signalling and value added behavior and school accountability we find that educational reforms produce substantial short term changes largely on the demand side

ethnic capital and intergenerational mobility this paper analyzes the extent to which ethnic skill differentials are transmitted across generations i assume that ethnicity acts as an externality in the human capital accumulation process the skills of the next generation depend on parental inputs and on the quality of the ethnic environment in which parents make their investments or ethnic capital the empirical evidence reveals that the skills of today s generation depend not only on the skills of their parents but also on the average skills of the ethnic group in the parent s generation

the role of information and social interactions in retirement plan decisions evidence from a randomized experiment this paper analyzes a randomized experiment to shed light on the role of information and social interactions in employees decisions to enroll in a tax deferred account tda retirement plan within a large university the experiment encouraged a random sample of employees in a subset of departments to attend a benee ts information fair organized by the university by promising a monetary reward for attendance the experiment multiplied by more than e ve the attendance rate of these treated individuals relative to controls and tripled that of untreated individuals within departments where some individuals were treated tda enrollment e ve and eleven months after the fair was signie cantly higher in departments where some individuals were treated than in departments where nobody was treated however the effect on tda enrollment is almost as large for individuals in treated departments who did not receive the encouragement as for those who did we provide three interpretations differential treatment effects social network effects and motivational reward effects to account for these results

participation and investment decisions in a retirement plan the influence of colleagues choices abstract this paper investigates whether peer effects play an important role in retirement savings decisions we use individual data from employees of a large university to study whether individual decisions to enroll in a tax deferred account plan sponsored by the university and the choice of the mutual fund vendor for people who choose to enroll are affected by the decisions of other employees in the same department to overcome the identification problems we divide the departments into sub groups along gender status age and tenure lines and we instrument the average participation of each peer group by the salary or tenure structure in this group our results suggest that peer effects may be an important determinant of savings decisions

strategic interaction in local governments industrial land supply evidence from china land is an important tool for local governments to attract investments and promote local economic growth in china based on panel data of chinese prefecture level cities from 2003 to 2012 this paper employs spatial panel data models to examine the strategic interaction among local governments in industrial land supply and to indentify its possible sources the empirical results show that there exists strategic interaction among local governments in industrial land leasing price local governments industrial land leasing price is significantly impacted by the action of neighbouring cities they mimic each other in terms of industrial land leasing price to attract outside investments empirical evidence reveals that the strategic interaction comes from both yardstick competition and resource flow effects local governments react more to their neighbours industrial land leasing price during political cycle periods

games of social interactions with local and global externalities abstract in this paper we present a result on the existence of pure strategies nash equilibrium which covers a large class of games with local and global social interactions the result highlights common features of well known games analyzed in the literature

exchange rate regimes in the modern era fixed floating and flaky this paper provides a selective survey of the incidence causes and consequences of a country s choice of its exchange rate regime i begin with a critical review of michael klein and jay c shambaugh s 2010 book exchange rate regimes in the modern era and then proceed to provide an alternative overview of what the economics profession knows and needs to know about exchange rate regimes while a fixed exchange rate with capital mobility is a well defined monetary regime floating is not thus it is unclear whether it is theoretically sensible to compare countries across exchange rate regimes this comparison is quite difficult to make empirically it is often hard to figure out what the exchange rate regime of a country is in practice since there are multiple conflicting regime classifications more importantly similar countries choose radically different exchange rate regimes without substantive consequences for macroeconomic outcomes like output growth and inflation that is the profession knows surprisingly little about either the causes or consequences of national choices of exchange rate regimes but since the consequences of these choices are small understanding their causes is of only academic interest jel e52 f33

something to talk about social spillovers in movie consumption we exploit the randomness of weather and the relationship between weather and moviegoing to quantify social spillovers in movie consumption instrumenting for early viewership with plausibly exogenous weather shocks captured in lasso chosen instruments we find that shocks to opening weekend viewership are doubled over the following five weekends our estimated momentum arises almost exclusively at the local level and we find no evidence that it varies with either ex post movie quality or the precision of ex ante information about movie quality suggesting that the observed momentum is driven in part by a preference for shared experience and not only by social learning

does selling state silver generate private gold neighbourhood impacts of state house sales this paper utilises two politically determined natural experiments affecting state provided social housing to examine the impact that housing tenure status has on neighbourhood outcomes from 1990 new zealand s national government sold a substantial number of state houses either to existing tenants home buys or to other purchasers vacant sales from 1999 the labour government ended home buys reduced vacant sales and increased acquisitions while vacant sales had no material effects on local outcomes a higher prevalence of home buys led to increased local house price appreciation despite demographic trends that would otherwise have led to falling relative house prices in those communities

explaining african economic performance africa has had slow growth and a massive exodus of capital in many respects it has been the most capital hostile region we review and interpret the aggregate level and microeconomic literatures to identify the key explanations for this performance there is a reasonable correspondence of the two sets of evidence pointing to four factors as being important these are a lack of openness to international trade a high risk environment a low level of social capital and poor infrastructure these problems are to a substantial extent attributable to government behaviour and the paper includes a review of the political economy literature which addresses that behaviour

a discrete choice model with social interactions with an application to high school teen behavior we develop an empirical discrete choice interaction model with a finite number of agents we characterize its equilibrium properties in particular the correspondence between interaction strength number of agents and the set of equilibria and propose to estimate the model by means of simulation methods in an empirical application we analyze the individual behavior of high school teenagers in almost 500 school classes from 70 schools in our baseline model endogenous social interaction effects are strong for behavior closely related to school truancy somewhat weaker for behavior partly related to school smoking cell phone ownership and moped ownership and absent for behavior far away from school asking parents permission for purchases intra gender interactions are generally much stronger than cross gender interactions in a model with school specific fixed effects social interaction effects are insignificant with the exception of intra gender interactions for truancy copyright c 2007 john wiley sons ltd

estimating housing demand with an application to explaining racial segregation in cities we present a three stage nonparametric estimation procedure to recover willingness to pay for housing attributes in the first stage we estimate a nonparametric hedonic home price function in the second stage we recover each consumer s taste parameters for product characteristics using first order conditions for utility maximization finally in the third stage we estimate the distribution of household tastes as a function of household demographics as an application of our methods we compare alternative explanations for why blacks choose to live in center cities while whites suburbanize

random interactions in the chamber legislators behavior and political distance abstract i investigate the role of social interaction among members of parliament mps and the impact of such interaction on the political distance between parties using the random allocation of seats in the icelandic parliament i find that mp s voting and speech behaviors are affected by the behavior of legislators seated nearby i also show that greater random exposure to mps from different parties ultimately reduces the political distance between parties similar evidence is found using historical data for the u s house of representatives by exploiting the introduction of a lottery mechanism to determine desk assignments in 1845 i argue that random seating arrangements could constitute a low cost way of reducing differences within the political arena

the social multiplier aggregate data is often used to make inferences about individual level behavior if there are social interactions in which one person s actions influence his neighbor s incentives or information then these inferences are inappropriate the presence of positive social interactions or strategic complementarities implies the existence of a social multiplier where aggregate relationships will overstate individual elasticities we present a brief model and then estimate the size of the social multiplier in three areas the impact of education on wages the impact of demographics on crime and group membership among dartmouth roommates in these contexts there is a significant social multiplier jel ho jo co

identification of endogenous social effects the reflection problem this paper examines the reflection problem that arises when a researcher observing the distribution of behaviour in a population tries to infer whether the average behaviour in some group influences the behaviour of the individuals that comprise the group it is found that inference is not possible unless the researcher has prior information specifying the compisition of reference groups if this information is available the prospects for inference depend critically on the population relationship between the variables defining reference groups and those directly affecting outcomes inference is difficult to implossible if these variables are functionally dependent or are statistically independent the prospects are better if the variables defining reference groups and those directly affecting outcomes are moderately related in the population

an epidemic model of investor behavior i test whether social influence affects individual investors trading and stock returns in each of the 20 most active stocks in finland over 9 years the number of owners in a municipality multiplied by the number of investors who do not own a stock a measure of the rate of transmission of diseases and rumors through social contact predicts individual investor trading i control for known determinants of trade including daily news and show that competing explanations for the relation are unlikely socially motivated trades predict stock returns and the effects are not reversed suggesting that individuals share useful information individuals susceptibility to social influence has declined during the period but the opportunities for social influence have increased

education spillovers within the workplace abstract education policies depend in part on the presence of externalities but very little evidence exists to confirm the existence of such externalities in this paper we investigate if there are spillover effects from education within peer groups at the workplace we estimate the effect of increasing the share of higher educated workers in close peer groups on wages using a rich data source linking workers to workplaces and specific occupations our empirical approach accounts for the endogenous sorting of workers into peer groups and workplaces and at the same time avoids the reflection problem in our main specification we find statistically significant but economically small peer effects across all occupations

social networks neighborhood effects and credit access evidence from rural guatemala we measure the extent to which social networks determine sources of credit from a survey of 465 households in western guatemala we estimate correlated contextual and endogenous effects of networks at the neighborhood church and village levels finding that church networks display endogenous effects in credit access we calculate an elasticity of social imitation esi indicating if the percentage of people accessing microfinance in a church network doubles the probability of an individual household accessing microfinance increases by 14 1 percent a magnitude similar to our estimated esis for televisions and cell phones within church and neighbor networks

a social interaction model with ordered choices abstract we introduce a social interaction model with ordered choices we provide a micro foundation for the econometric model based on an incomplete information network game and characterize the sufficient condition for the existence of a unique equilibrium of the game we discuss the identification of the model and propose to estimate the model by the nfxp and npl algorithms we conduct monte carlo simulations to investigate the finite sample performance of these two estimation methods

how resilient and countercyclical were emerging economies to the global financial crisis during the crises of the 1990s emerging economies usually lacked the policy tools to deal with external shocks that were available to advanced economies worldwide turbulent episodes found most emerging economies unable to perform countercyclical policies and in many cases their own vulnerabilities and poor institutional frameworks amplified negative external shocks leading to sharper recessions this paper shows that the 2008 2009 global financial crisis represents a structural break in the way emerging economies conduct their policies with more countercyclical policies pursued before and during the global crisis moreover breaking with the past emerging economies did not fall more than developed economies during the global financial crisis thus becoming more similar to developed economies the resilience of emerging economies during the 2008 2009 crisis might be partly attributed to a combination of sounder macroeconomic and financial policy frameworks with a shift towards safer domestic and international financial stances

modeling choice interdependence in a social network this paper investigates how individuals product choices are influenced by the product choices of their connected others and how the influence mechanism may differ for fashion versus technology related products we conduct a novel field experiment to induce and observe choice interdependence in a closed social network in our experiment we conceptualize individuals choices to be driven by multiattribute utilities and we measure their initial attribute preferences prior to observing their choice interdependence and collecting network information these design elements help alleviate concerns in identifying social interaction effects from other confounds given that we have complete information on choices and their sequence we use a discrete time markov chain model nonetheless we also use a markov random field mrf model as an alternative when the information on choice sequence is missing we find significant social interaction effects our findings show that whereas experts exert asymmetrically gre

fiscal and monetary policies and the cost of sudden stops abstract this article investigates the effects of monetary and fiscal policies on output growth during sudden stop balance of payments crisis in emerging markets and developing countries sudden stops in capital flows and subsequent deep recessions are a frequent occurrence in these countries but there is no professional consensus and little systematic empirical evidence shedding light on the macroeconomic policy mix most likely to limit output losses during these episodes to address this issue we investigate 83 sudden stop crisis in 66 countries using a baseline empirical model to control for the various determinants of output losses during sudden stops we measure the marginal effects of policy on output losses and find strong evidence that monetary tightening rise in the discount rate or unsterilized rise in international reserves and discretionary fiscal contraction are significantly correlated with larger output losses following a sudden stop fiscal expansion is associated with smaller output losses following a sudden stop but monetary expansion has no discernable effect the macroeconomic policy mix associated with the least output loss during a sudden stop financial crisis is a discretionary fiscal expansion combined with a neutral monetary policy

quantifying equilibrium network externalities in the ach banking industry we seek to estimate the causes and magnitudes of network externalities for the automated clearinghouse ach electronic payments system using a panel data set on individual bank usage of ach we construct an equilibrium model of consumer and bank adoption of ach in the presence of a network the model identifies network externalities from correlations of changes in usage levels for banks within a network from changes in usage following changes in market concentration or sizes of competitors and from adoption decisions of banks outside the network with small branches in the network and can separately identify consumer and bank network effects we structurally estimate the parameters of the model by matching equilibrium behavior to the data using simulated maximum likelihood and a data set of localized networks and use a bootstrap to recover confidence intervals the parameters are estimated with high precision and fit various moments of the data reasonably well we find that most of the impediment to ach adoption is due to large consumer fixed costs of adoption the deadweight loss from the network externality is moderate the optimal number of ach transactions is about 16 higher than the equilibrium level

financial literacy externalities this paper uses unique administrative data and a quasi field experiment of exogenous allocation to apartments in sweden to estimate medium and longer run effects on financial behavior from exposure to financially literate neighbors it contributes evidence of causal impact of financial literacy and points to a social multiplier of effective programs to enhance it exposure promotes saving in private retirement accounts and stockholding especially when neighbors have economics or business education but only for educated or male headed households findings point to relevant knowledge transfer through social interactions rather than to labor market or other channels linked to local economic conditions

identification of spatial durbin panel models identi cation of a spatial durbin model is a concern in the spatial econometrics literature the concern is similar to the identi cation of the endogenous eect the contextual eect and correlation eect in social interactions and networks this paper considers identi cation of spatial durbin dynamic panel models under 2sls and ml estimations we show that the parameters are generally identi ed via 2sls moment relations or expected log likelihood or quasi likelihood functions although identi cation might fail under some particular situations with the 2sls moments parameters can be generally identi ed via the quasi likelihood function of a model with intuitively appealing identi cation conditions monte carlo experiments suggest that omitting relevant durbin terms can result in signi cant biases in regression estimates while including an irrelevant durbin term causes no obvious loss of e ciency empirical illustration of the international spillover of economic growth through bilateral trade shows that inclusion of durbin terms can be important

the modern history of exchange rate arrangements a reinterpretation we develop a novel system of reclassifying historical exchange rate regimes one key difference between our study and previous classifications is that we employ monthly data on market determined parallel exchange rates going back to 1946 for 153 countries our approach differs from the imf official classification which we show to be only a little better than random it also differs radically from all previous attempts at historical reclassification our classification points to a rethinking of economic performance under alternative exchange rate regimes indeed the breakup of bretton woods had less impact on exchange rate regimes than is popularly believed

mental health expenditure in england a spatial panel approach we empirically investigate the determinants of local authority mental health expenditure in england we adopt a reduced form demand and supply model extended to incorporate possible interaction among authorities as well as unobserved heterogeneity the model is estimated using an annual panel dataset that allows us to explore both time series and cross municipality variation in mental health expenditure results are consistent with some degree of interdependence between neighbouring municipalities in spending decisions this first attempt to apply spatial panels in investigating health expenditure offers insights and raises new questions