longevity risk subjective survival expectations and individual saving behavior abstract we provide evidence of individuals awareness of longevity risk the uncertainty about future survival probabilities based on subjective survival expectations elicited in the survey of health ageing and retirement in europe share and matching data on longevity risk from the human mortality database we find a positive relationship between the forecast dispersion in subjective survival estimates and longevity risk which indicates that individuals are to some extent aware of longevity risk our analysis of savings behavior shows that the dispersion in survival estimates is primarily explained by individuals disagreeing on the survival probability and not by their true awareness of the underlying uncertainty individuals do not save more on average when faced with longevity risk although theory suggests they should

commodity price shocks and civil conflict evidence from colombia how do income shocks aect armed con ict theory suggests two op posite eects if labor is used to appropriate resources violently higher wages may lower con ict by reducing labor supplied to appropriation this is the opportunity cost eect alternatively a rise in contestable income may increase violence by raising gains from appropriation this is the rapacity eect our paper exploits exogenous price shocks in inter national commodity markets and a rich dataset on civil war in colombia to assess how dierent income shocks aect con ict we examine changes in the price of agricultural goods which are labor intensive and natural resources which are capital intensive we focus on coee and oil the two largest exports we nd that a sharp fall in coee prices in the 1990s increased violence dierentially in regions growing more coee by lower ing wages and the opportunity cost of joining armed groups in contrast a rise in oil prices increased violence dierentially in the oil region by in creasing municipal revenue siphoned through rapacity this pattern holds in several other agricultural and natural resource sectors providing robust evidence that price shocks aect con ict in opposite directions depending on the factor intensity of the commodity

drawn into violence evidence on what makes a criminal from the vietnam draft lotteries draft lottery number assignment during the vietnam era provides a natural experiment to examine the effects of military service on crime using exact dates of birth for inmates in state and federal prisons in 1979 1986 and 1991 we find that draft eligibility increases incarceration for violent crimes but decreases incarceration for nonviolent crimes among whites this is particularly evident in 1979 where two sample instrumental variable estimates indicate that military service increases the probability of incarceration for a violent crime by 0 34 percentage points and decreases the probability of incarceration for a nonviolent crime by 0 30 percentage points we conduct two falsification tests one that applies each of the three binding lotteries to unaffected cohorts and another that considers the effects of lotteries that were not used to draft servicemen jel k42 h56

measuring positive externalities from unobservable victim precaution an empirical analysis of lojack lojack is a hidden radio transmitter device used for retrieving stolen vehicles because there is no external indication that lojack has been installed it does not directly affect the likelihood that a protected car will be stolen there may however be positive externalities due to general deterrence we find that the availability of lojack is associated with a sharp fall in auto theft rates of other crime do not change appreciably at least historically the marginal social benefit of an additional unit of lojack has been fifteen times greater than the marginal social cost in high crime areas those who install lojack however obtain less than 10 percent of the total social benefits leading to underprovision by the market

uma investigacao economica da influencia do mercado de drogas il ocitas sobre a criminalidade brasileira this study examines the relationship between drug market and criminality a panel data of the brazilian states was used for estimation based on the becker economic model of crime there are strong evidences of the presence of unobservable state effects affecting the crime rates so it was used a methodology to take into account the presence of the individual heterogeneity among the states the results indicated that the drug market the income inequality and the urbanization rate affect the criminality positively it was also observed that the rotation of the job market is inversely related to criminality finally public security and private security effects on the criminality were not significant although of negatives according to economic theory of crime

research on the motion picture industry state of the art and new directions off the beaten track away from theatrical release the motion picture industry has been subject of extensive academic research over the last decades however most scholars focused on the u s theatrical motion picture market the number of research activities regarding even more profitable release windows such as home video or television has been substantially lower although international distribution is essential for a motion picture project to break even there has been little significant re search on most other markets this paper aims at summarizing the current state of research on the motion picture industry particularly from marketing and management perspective revealing research gaps and proposing recommendations for future research endeavors therefore a three pillar scheme is developed to systemize previous findings research on intraorganizational decision making contractual relationships between national stakeholders and international market competition are differentiated since these insights are mainly derived from u s theatrical exhibition they can hardly be applied to other markets and exhibition windows thus potential research areas are identified to expand knowledge of posttheatrical and international markets

internal cocaine trafficking and armed violence in colombia this paper exploits time variations in international cocaine prices and potential trafficking routes within colombia to estimate the effect of the illegal cocaine trade on changes in municipality homicide rates i construct the potential internal cocaine trafficking network and exploit the fact that different regions in colombia have comparative advantages in serving different international markets my results suggest that when cocaine prices increase in either the united states or europe homicide rates increase in municipalities strategically placed to serve each international market jel d74 k42 f19

the economics of rising stars this paper analyzes an occupation in which there is substantial uncertainty about individual performance and past performance is correlated with future outcomes in equilibrium only the young enter the occupation and only the successful stay on the young are numerous and earn incomes well below what their current alternative o ffers success is rare and rewarded highly the implied distribution of earnings must have positive skewness copyright 1988 by american economic association

target zones and exchange rate dynamics this paper develops a simple model of exchange rate behavior under a target zone regime it shows that the expectation that monetary policy will be adjusted to limit exchange rate variation affects exchange rate behavior even when the exchange rate lies inside the zone and is thus not being defended actively somewhat surprisingly the analysis of target zones turns out to have a strong formal similarity to problems in option pricing and investment under uncertainty

new evidence on the monetary approach of exchange rate determination in mexico 1994 2007 a cointegrated svar model abstract we provide empirical evidence supporting the validity of both short and long run versions of the monetary approach of exchange rate determination for the mexican peso u s dollar exchange rate from 1994 to 2007 using a cointegrated svar model we estimate not only the long run relationship between the variables of the monetary model for the exchange rate but also the very short run effects which have been often ignored in previous empirical work we show that there are robust short and long run relationships between the mexican monetary aggregates and the exchange rate which ultimately responds to what bilson s variant of maer predicts

dead man walking an empirical reassessment of the deterrent effect of capital punishment using the bounds testing approach to cointegration this paper empirically estimates a murder supply equation for the united states from 1965 to 2001 within a cointegration and error correction framework our findings suggest that any support for the deterrence hypothesis is sensitive to the inclusion of variables for the effects of guns and other crimes in the long run we find that real income and the conditional probability of receiving the death sentence are the main factors explaining variations in the homicide rate in the short run the aggravated assault rate and robbery rate are the most important determinants of the homicide rate

at the movies the economics of exhibition contracts i introduction the literature on profit sharing stresses asymmetric information profit sharing occurs when a party has private information that cannot be credibly revealed or when a party s actions cannot be observed economists avoid taste based explanations such as risk sharing stigler and becker 1977 and other factors that may lead to sharing such as measurement costs we describe a real world sharing contract that is widely used the movie exhibition contract and argue that asymmetric information is not the main cause of sharing two explanations based on difficulties with forecasting revenue fit the facts better the first is that movie distributors studios or independent distributors and exhibitors theater owners are both risk averse and exhibition contracts are designed to share risk the second is that the sharing rules accompanied by ex post adjustments economize on measurement costs transaction costs and long term relationships also affect contractual practices we use an original data set of 2 769 exhibition contracts to inform our models and test hypotheses the data includes all contracts involving 13 theaters owned by wehrenberg theatres a prominent st louis exhibitor over roughly two years our models explain the sharing that occurs and the conditions that lead to adjustments and our findings may be relevant for other contracting environments our explanations for the features of exhibition contracts complement those of de vany and eckert 1991 and de vany and walls 1996 who emphasize that difficulties with forecasting demand necessitate the use of short term contingency rich contracts some other work on nonexhibition aspects of the movie business also compares asymmetric information models to alternatives ravid 1999 tests and rejects a model of asymmetric information at the project selection stage ravid and basuroy 2004 consider risk aversion at the project selection stage chisholm 1993 1997 and weinstein 1998 compare principal agent models to alternatives in studies of contracts between studios and talent in the next subsection we describe the basic features of modern exhibition contracts after that we describe how the sharing rules evolved over time and argue that asymmetric information does not explain the sharing rules section ii contains our models section iii contains our empirical work and section iv concludes the modern movie exhibition contract the unit of analysis is a single movie in a single theater a theater is a building that may contain multiple auditoriums although there is typically a boilerplate contract between each distributor and exhibitor that specifies general conditions that apply to all individual contracts terms such as sharing rules and run lengths vary by movie and theater a typical run ends after four to eight weeks but the run may be adjusted after early revenues are observed and holdover clauses may be used to extend the run as long as revenue is sufficiently high de vany and eckert 1991 and de vany and walls 1996 attribute adjustable runs to imprecise forecasts we focus on explaining the peculiar revenue sharing rule that is common in modern contracts some contracts are aggregate deals in which each side s percentage share remains fixed throughout the run but most are sliding scale deals in a sliding scale deal each week the distributor gets the maximum of two possible payments 1 90 of the movie s weekly ticket revenue over the house nut which is a flat payment to the exhibitor 2 a floor payment some percentage of the weekly ticket revenue that typically declines according to a sliding scale as the weeks go by perhaps 70 in the first week 60 by the third week and as low as 30 at the end of the run if the parties anticipate that revenue might peak in the second or later weeks which can occur when the movie opens before a holiday weekend for example the contract includes a best weeks clause that ensures that the high floor payments are associated with the high demand weeks

does the disclosure of gun ownership affect crime evidence from new york abstract while the social costs of gun violence are high opponents of gun restrictions argue that gun ownership deters crime and creates a positive externality by increasing unobserved risk to criminals this paper investigates the evidence for these two deterrence channels exploiting the sudden disclosure of all handgun permit holders names and addresses in two new york counties permit holders have more crime incidents at their homes relative to non permit holders in the baseline which is not driven by selection into neighborhoods i find little evidence in favor of direct deterrence and little evidence of peer deterrence instead i find that victimization is associated with a higher likelihood of future gun ownership

testing for the effects of concealed weapons laws specification errors and robustness abstract in 1997 john lott and david mustard published an important paper in which they found that right to carry concealed weapons laws reduce violent crime although lott and mustard appear to do all possible variations of the analysis a closer reading reveals that the study might suffer from several possibly important errors i reestimate the model and check for incorrect functional form omitted variables and possible second order bias in the t ratios lott and mustard s basic conclusions are generally robust with respect to these potential econometric problems overall right to carry concealed weapons laws tend to reduce violent crime the effect on property crime is more uncertain i find evidence that these laws also reduce burglary

model uncertainty and the effect of shall issue right to carry laws on crime in this paper we explore the role of model uncertainty in explaining the different findings in the literature regarding the effect of shall issue right to carry concealed weapons laws on crime in particular we systematically examine how different modeling assumptions affect the results we find little support for some widely used assumptions in the literature e g population weights but find that allowing for the effect of the law to be heterogeneous across both counties and over time is important for explaining the observed patterns of crime in terms of model uncertainty we find that there is substantial variation in the estimated effects for each model across all dimensions of the model space this suggests that one should be cautious in using the results from any particular model to inform policy decisions

more guns more crime this paper examines the relationship between gun ownership and crime previous research has suffered from a lack of reliable data on gun ownership i exploit a unique data set to reliably estimate annual rates of gun ownership at both the state and the county levels during the past two decades my findings demonstrate that changes in gun ownership are significantly positively related to changes in the homicide rate with this relationship driven almost entirely by an impact of gun ownership on murders in which a gun is used the effect of gun ownership on all other crime categories is much less marked recent reductions in the fraction of households owning a gun can explain one third of the differential decline in gun homicides relative to nongun homicides since 1993

the social costs of gun ownership abstract this paper provides new estimates of the effect of household gun prevalence on homicide rates and infers the marginal external cost of handgun ownership the estimates utilize a superior proxy for gun prevalence the percentage of suicides committed with a gun which we validate using county and state level panels for 20 years we estimate the elasticity of homicide with respect to gun prevalence as between 0 1 and 0 3 all of the effect of gun prevalence is on gun homicide rates under certain reasonable assumptions the average annual marginal social cost of household gun ownership is in the range 100 to 1800

managerial objectives the r rating puzzle and the production of violent films we analyze project choice in the motion picture industry and find evidence consistent with revenue maximization and excessive hedging we find that movies that are very violent or feature sex and violence do not provide excess returns but they increase revenues particularly in the international market further they tend to lose money less often and their returns are more predictable even though there are never mega hits this evidence is consistent with studies of other industries and it partially explains the r rating puzzle that is the preponderance of r rated films although most studies find that g and pg rated films perform better

international commodity prices growth and the outbreak of civil war in sub saharan africa to learn more about the effect of economic conditions on civil war we examine whether sub saharan civil wars are more likely to start following downturns in the international price of countries main export commodities the data show a robust effect of commodity price downturns on the outbreak of civil wars we also find that sub saharan countries are more likely to see civil wars following economic downturns in their main oecd export destinations

sales maximization and specific human capital profit maximizing owners of firms may find it optimal to provide managers with incentives to maximize sales in addition to profits this influences the outcome of the bargaining game between workers and managers over workers wages and helps to solve the problem of underinvestment by workers in specific human capital iinvestigate optimal managerial contracts from this point of view and show that the optimal contract is a function of sales in addition to profits

do movie contents influence box office revenues abstractthis article studies the determinants of box office revenues in the motion picture industry we first adopt an approach that takes into account quality signals e g talent concentration movie budget and oscar awards among others to analyse the empirical relationship between category specific parenthood ratings r ratings and box office revenues then by matching movie contents with economic performance records our original approach reveals that offensive contents like profanity or nudity may be a hindrance to achieve economic returns while violent contents seems to enhance box office revenues further research is needed to clarify the interaction in this regard between production budget and movie contents

the impact of gun laws a model of crime and self defense abstract we develop a model of crime and self defense that provides a rationale both for the right to bear arms and for regulating this right it also suggests that a severe punishment for gun crime might best guarantee both the security and freedom of potential victims

the optimal use of fines and imprisonment when wealth is unobservable abstract this article studies the optimal use of fines and imprisonment when an offender s level of wealth cannot be observed by the enforcement authority i employ a model in which there are two types of offenders a low wealth type and a high wealth type the consequence of the unobservability of wealth depends on whether the enforcement authority would employ fines alone or would also impose imprisonment sentences if wealth were observable in the former case the inability to observe wealth lowers social welfare but in the latter case the unobservability of wealth does not lower social welfare in both cases offering offenders a choice of sanctions can induce high wealth offenders to pay higher fines even though their wealth is unobservable specifically a relatively high imprisonment sentence must accompany the payment of a low fine so that high wealth offenders will prefer to pay a higher fine and bear a lower possibly no imprisonment sentence

exchange rates innovations and forecasting in this paper an ex post forecasting experiment is performed on the basis of a version of the news model of exchange rate determination for several exchange rates the news formulation of monetary exchange rate models leads to relatively accurate ex port exchange rate forecasts at a number of forecasting horizons for a majority of the exchange rates studied however the results do not compare favorably with those obtained from the naive random walk forecasting rule thus the findings in this article provide mixed evidence with regard to a suggestion in the literature that the finding by meese and rogoff that structural models do not even outperform the random walk in an ex post forecasting experiment may be due to the fact that these models were not properly tested in a news framework the forecasting performance of structural exchange rate models has recently received considerable attention meese and rogoff 1983a b have studied the forecasting performance of several important structural exchange rate models while in sample studies of these models usually show quite satisfactory fits meese and rogoff s out of sample results based on instrumental variables estimates were not very encouraging the structural models failed to improve upon the simple random walk forecasting rule even though the models forecasts were based

inequality and crime this paper considers the relationship between inequality and crime using data from urban counties the behavior of property and violent crime are quite different inequality has no effect on property crime but a strong and robust impact on violent crime with an elasticity above 0 5 by contrast poverty and police activity have significant effects on property crime but little on violent crime property crime is well explained by the economic theory of crime while violent crime is better explained by strain and social disorganization theories

organized crime corruption and punishment we analyze an oligopoly model in which differentiated criminal organizations globally compete on criminal activities and engage in local corruption to avoid punishment when bribing costs are low that is badly paid and dishonest law enforcers work in a weak governance environment and the rents from criminal activity are sufficiently high we find that increasing policing and sanctions can generate higher crime rates indeed beyond a threshold further increases in intended expected punishment create incentives for organized crime to extend corruption rings and ensuing impunity results in a fall of actual expected punishment that yields more rather than less crime

guns laws and public shootings in the united states abstractsince the late 1990s there have been increasing numbers of public shootings carried out with firearms in the united states these tragedies continually renew the regulatory debate concerning public safety while considering civil liberties using a unique data set we investigate whether laws correspond to whether an event occurs and the effects of event specific characteristics on public shooting outcomes in particular we analyse how state specific gun laws the types of firearms the shooting venues and the mental health of the gunman impact the outcomes of public shootings results show that most gun laws are unrelated to whether an event occurs in addition common state and federal gun laws that outlaw assault weapons are unrelated to the likelihood of an assault weapon being used during a public shooting event moreover results show that the use of assault weapons is not related to more victims or fatalities than other types of guns however the use of hand guns shot guns and high capac

does the lucas critique apply during hyperinflation empirical evidence from four hyperinflationary episodes farmer review of economic studies 58 321 32 1991 suggests that in a model in which there are multiple rational expectations equilibria agents may find it useful to coordinate their expectations in a unique rational expectations equilibrium which is supported by a self fulfilling forecast rule having the property of being immune to the lucas critique in this paper farmer s hypothesis is tested using data from hyperinflationary episodes it is believed that those episodes are suitable for testing this hypothesis because an agent who lives in a hyperinflationary environment usually faces frequent changes in policy regime the agent may thus choose a selffulfilling forecast rule which is immune to the lucas critique as a way of hedging against unanticipated policy regime switches the empirical results show mixed evidence on farmer s hypothesis during the hyperinflationary episodes studied

does drug illegality beget violence evidence from the crack cocaine wave in sao paulo mimicking the so called great american crime decline violent crime in the state of sao paulo dropped sharply in the 2000s after rising steadily throughout the 1980s and 1990s this paper evaluates the role of crack cocaine in explaining the aggregate dynamics in violence four facts are established first the aggregate data show a tight comovement between the prevalence of crack cocaine and homicides second using city level apprehension and possession data i find a strong elasticity of violent crime with respect to crack cocaine after controlling for year fixed effects city effects and many time varying covariates i use the estimated elasticity to compute the contribution of crack cocaine to aggregate violence crack explains 30 percent of time series variation in the data third only drug trafficking not drug possession has an impact on homicides finally i find no impact on property crimes a weaker impact on attempted murder and interestingly a weak negative impact on aggravated assault the theory suggests that both facts only trafficking matters and crack affects only homicides not property crime can be rationalized only if drug induced crime is driven by systemic violence induced by illegality itself these results are important for policy because they suggest that violence will not follow the legalization of both the possession and trade of powdered cocaine or crack cocaine

a theory of rational addiction we develop a theory of rational addiction in which rationality means a consistent plan to maximize utility over time strong addiction to a good requires a big effect of past consumption of the good on current consumption such powerful complementarities cause some steady states to be unstable they are an important part of our analysis because even small deviations from the consumption at an unstable steady state can lead to large cumulative rises over time in addictive consumption or to rapid falls in consumption to abstention our theory also implies that cold turkey is used to end strong addictions that addicts often go on binges that addicts respond more to permanent than to temporary changes in prices of addictive goods and that anxiety and tensions can precipitate an addiction

do state minimum wages affect the incarceration rate because of historically unprecedented increases in the prison population since the late 1970s the united states has the highest incarceration rate in the world using becker s 1968 framework on crime this study investigates the causal relationship between incarceration rates and state minimum wages our identification strategy consists of a state level fixed effects model and autor and dorn s 2013 two stage least squares 2sls approach using the historical local industry structure we predict the change in employment shares of manual task intensive occupations and use those as an instrument for state minimum wages the fixed effects and 2sls estimates suggest that a one dollar increase in state minimum wage leads to approximately 12 25 fewer incarcerations per 100 000 state residents estimates of the heterogeneous impacts by race and gender indicate that the aggregate impact of state minimum wages is entirely driven by men

does hollywood make too many r rated movies risk stochastic dominance and the illusion of expectation we estimate the probability distributions of budgets revenues returns and profits to g pg pg13 and r rated movies the distributions are non gaussian and show a self similar stable paretian form with nonfinite variance and nonstationary mean the profit distributions have asymmetric tails which means that hollywood could trim its downside risk while increasing its upside possibilities by shifting production dollars out of r rated movies into g pg and pg13 rated movies stars who are willing to appear in edgy counterculture r rated movies for their prestige value may induce an illusion of expectation leading studios to green light movies that have biased expectations

the impact of mass shootings on gun policy abstract there have been dozens of high profile mass shootings in recent decades this paper presents three main findings about the impact of mass shootings on gun policy first mass shootings evoke large policy responses a single mass shooting leads to a 15 increase in the number of firearm bills introduced within a state in the year after a mass shooting this effect increases with the extent of media coverage second mass shootings account for a small portion of all gun deaths but have an outsized influence relative to other homicides third when looking at bills that were actually enacted into law the impact of mass shootings depends on the party in power the annual number of laws that loosen gun restrictions doubles in the year following a mass shooting in states with republican controlled legislatures we find no significant effect of mass shootings on laws enacted when there is a democrat controlled legislature nor do we find a significant effect of mass shootings on the enactment of laws that tighten gun restrictions

market evidence of misperceived mortality risk we construct and implement a test of rational consumer behavior in a high stakes financial market in particular we test whether consumers make systematic mistakes in perceiving their mortality risks we implement this test using data from secondary life insurance markets where consumers with a life threatening illness sell their life insurance policies to firms in return for an up front payment we compare predictions from two models one with consumers who correctly perceive their mortality risk and one with consumers who are misguided about their life expectancy and find that our data are most consistent with the predictions made by the second model

selection on observed and unobserved variables assessing the effectiveness of catholic schools in this paper we measure the effect of catholic high school attendance on educational attainment and test scores because we do not have a good instrumental variable for catholic school attendance we develop new estimation methods based on the idea that the amount of selection on the observed explanatory variables in a model provides a guide to the amount of selection on the unobservables we also propose an informal way to assess selectivity bias based on measuring the ratio of selection on unobservables to selection on observables that would be required if one is to attribute the entire effect of catholic school attendance to selection bias we use our methods to estimate the effect of attending a catholic high school on a variety of outcomes our main conclusion is that catholic high schools substantially increase the probability of graduating from high school and more tentatively attending college we find little evidence of an effect on test scores

privately produced general deterrence in this study we use county data on private security establishments and employment for 1977 92 to test two hypotheses first we test whether private security deters crime second we test whether john lott and david mustard s estimates of the impact of shall issue laws on crime are biased because of a lack of controls for private security we find little evidence that private security reduces the crime rates for assault or larceny some estimates suggest murder robbery and or auto theft may be deterred by private security although these results are not robust of all the index crime categories only rape is estimated to have a consistent negative relationship with private security in addition we find little evidence that the lott and mustard results are biased because of a lack of controls for the private security measures employed in this study

the economic case against drug prohibition this paper discusses the costs and benefits of drug prohibition it offers a detailed outline of the economic consequences of drug prohibition and a systematic analysis of the relevant empirical evidence the bottom line is that a relatively free market in drugs is likely to be vastly superior to the current policy of prohibition

guns violence and the efficiency of illegal markets in economics the standard mechanism for allocating scarce resources is the market a smoothly functioning market however is built upon legally enforceable contracts and property rights in the absence of law it is likely that violence or the threat thereof rather than prices is the means by which resources will be allocated interactions among animals provide clear evidence for this claim dominance hierarchies based on fighting ability also sometimes known as pecking orders have been documented across a wide variety of species e g primates chickens and other birds reptiles lobsters and a broad range of resources including food nesting sites and access to mates warder c allee 1938 john alcock 1993 evidence suggests that violence also plays a critical role in human interactions when property rights are not legally enforceable e g drug dealing and extortion see e g peter reuter 1983 geoffrey canada 1995 in this paper we analyze the determinants of the efficiency with which illegal markets allocate scarce resources we develop a stylized model in which players compete for a fixed prize with the winner determined by fighting ability efficiency in this context is determined by the amount of resources spent on fighting two factors affecting efficiency emerge from the model lethality and predictability perhaps surprisingly the use of more lethal mechanisms for resolving disputes does not have a clear impact on the social costs of violence the intuition underlying this result is that as the costs of losing a fight rise the willingness to fight falls we show that holding other factors constant the resources spent on fighting are lowest when the cost of losing is either very low or very high e g nuclear deterrence but over a wide range of lethality levels the overall social costs of fighting are fairly stable in contrast the costs of violence are critically linked to the predictability of dispute outcomes i e the certainty with which potential combatants know who will be victorious ex ante when the outcome of a conflict is highly correlated with observable characteristics such as strength or size there is little need to actually fight thus unpredictability all else equal increases the expected payoff to fighting for the lower ranked member leading to more conflicts

the monopoly of violence evidence from colombia many states in latin america africa and asia lack the monopoly of violence even though this was identified by max weber as the foundation of the state and thus the capacity to govern effectively in this paper we develop a new perspective on the establishment of the monopoly of violence we build a model to explain the incentive of central states to eliminate nonstate armed actors paramilitaries in a democracy the model is premised on the idea that paramilitaries may choose to and can influence elections since paramilitaries have preferences over policies this reduces the incentives of the politicians they favor to eliminate them we then investigate these ideas using data from colombia between 1991 and 2006 we first present regression and case study evidence supporting our postulate that paramilitary groups can have significant effects on elections for the legislature and the executive next we show that the evidence is also broadly consistent with the implication of the model that paramilitaries tend to persist to the extent that they deliver votes to candidates for the executive whose preferences are close to theirs and that this effect is larger in areas where the presidential candidate would have otherwise not done as well finally we use roll call votes to illustrate a possible quid pro quo between the executive and paramilitaries in colombia language en

estimating the economic model of crime employment versus punishment effects ann dryden witte 1980 has recently argued in this journal that new support is found for the deterrent hypothesis or the economic model of crime when individual data are employed to estimate the determinants of rearrest rates witte estimates a conventional economic model of crime using a rich and carefully constructed microdata set of released prisoners in north carolina her principal findings are that 1 increases in the certainty and severity of punishment tend to reduce participation in crime measured by number of arrests or convictions per month free and 2 higher legal wages have an extremely weak deterrent effect on crime in this comment i describe two separate data sets within which i find just the opposite results using a sample of offenders released from federal prisons in 1972 i find that increases in the severity of punishment are weakly related to participation in crime while increases in the certainty of punishment are positively related to participation in crime in addition using a sample of male repeat property offenders released from maryland prisons i find that higher wages have a strong and consistent deterrent effect on crime the conclusion is reached at least from these data sets that improving legitimate employment opportunities may be as effective if not more effective in reducing crime as is an increase in punishment

trafficking networks and the mexican drug war abstract drug trade related violence has escalated dramatically in mexico since 2007 and recent years have also witnessed large scale efforts to combat trafficking spearheaded by mexico s conservative pan party this study examines the direct and spillover effects of mexican policy toward the drug trade regression discontinuity estimates show that drug related violence increases substantially after close elections of pan mayors empirical evidence suggests that the violence reflects rival traffickers attempts to usurp territories after crackdowns have weakened incumbent criminals moreover the study uses a network model of trafficking routes to show that pan victories divert drug traffic increasing violence along alternative drug routes jel d72 d85 k42 o17 z13

causal parameters and policy analysis in economics a twentieth century retrospective the major contributions of twentieth century econometrics to knowledge were the definition of causal parameters within well defined economic models in which agents are constrained by resources and markets and causes are interrelated the analysis of what is required to recover causal parameters from data the identification problem and clarification of the role of causal parameters in policy evaluation and in forecasting the effects of policies never previously experienced this paper summarizes the development of these ideas by the cowles commission the response to their work by structural econometricians and var econometricians and the response to structural and var econometrics by calibrators advocates of natural and social experiments and by nonparametric econometricians and statisticians this paper considers the definition and identification of causal parameters in economics and their role in econometric policy analysis it assesses different research programs designed to recover causal parameters from data at the beginning of this century economic theory was mainly intuitive and empirical support for it was largely anecdotal at the end of the century economics has a rich array of formal models and a high quality database empirical regularities motivate theory in many areas of economics and data are routinely used to test theory many economic theories have been developed as measurement frameworks to suggest what data should be collected and how they should be interpreted econometric theory was developed to analyze and interpret economic data most econometric theory adapts methods originally developed in statistics the major exception to this rule is the econometric analysis of the identification problem and the companion analyses of structural equations causality and economic policy evaluation although an economist did not invent the phrase correlation does not imply causation 1 economists clari

an empirical examination of information barriers to trade in insurance this paper uses direct evidence to evaluate whether asymmetric information is a barrier to trade in the largest market for private insurance in the world life insurance we report several findings that seem difficult to reconcile with the conventional theory of insurance under asymmetric information we conjecture that sellers may know their costs of production better than consumers in this market as in those for most other products

the interaction between potential criminals and victims demands for guns abstract i develop a model with endogenous gun ownership and study the interaction between the demands for guns by heterogeneous potential offenders and victims i show that the interaction depends on pervasiveness of guns injury probabilities and in particular the impact of the gun on the probability of success against armed relative to unarmed adversaries while the sanction on armed offense is maximal under plausible conditions the sanction on unarmed offense balances direct deterrence benefits against marginal deterrence costs and corresponding net property losses optimal gun control policy disarms all offenders but allows the attractive potential victims to own guns the paper also discusses the effects of enforcement and price controls on the demands for guns and welfare

top management compensation and capital structure the interrelationship between top management compensation and the design and mix of external claims issued by a firm is studied the optimal managerial compensation structures depend on not only the agency relationship between shareholders and management but also the conflicts of interests which arise in the other contracting relationships for which the firm serves as a nexus we analyze in detail the optimal management compensation for the cases when the external claims are 1 equity and risky debt and 2 equity and convertible debt in addition to the role of aligning managerial incentives with shareholder interests managerial compensation in a levered firm also serves as a precommitment device to minimize the agency costs of debt the optimal management compensation derived has low pay performance sensitivity with convertible debt instead of straight debt the corresponding optimal managerial compensation has high pay to performance sensitivity a negative relationship between pay performance sensitivity and leverage is derived our results provide a reconciliation of the puzzling evidence of jensen and murphy 1990 with agency theory other testable implications include 1 a relationship between the risk premium in corporate bond yields and top management compensation structures and 2 the announcement effect of adoption of executive stock option plans on bond prices the model yields implications for management compensation in banks and federal deposit insurance reform our results explain the dynamics of top management compensation in firms going through financial distress and reorganization

pricing an option on revenue from an innovation an application to movie box office revenue we develop a model for valuing revenue streams from innovations the stochastic properties of revenue from innovations create a more difficult environment in which to value options than when the underlying is a security there is no initial revenue and cumulative revenue cannot decrease revenues from innovations are characterized by different lives and different rates of the resolution of uncertainty a common deterministic model for predicting revenue from an innovation is known as the bass model we embed the bass model in a gamma process resulting in a stochastic process with moments proportional to the mean of the bass model to illustrate this model we choose the valuation of options on movie box office revenue these options enable film distributors to manage the risk of a movie and they offer diversification opportunities for investors we develop the econometric methodology for ex ante parameter estimation and a bayesian updating scheme using markov chain monte carlo simulation as data after release become available call prices obtained using the maximum likelihood ml parameter estimates from the full data set closely approximate the average discounted value of ex post call payouts that would have occurred at option maturity

was the money demand during the german hyperinflation time varying two versions of cagan s model are estimated to analyse whether or not the money supply was endogenous during the german hyperinflation the first version is the original version of cagan s model with rational expectations the second version which is called the alternative version builds on cagan s model by considering that the semi elasticity of the demand for money is a time varying parameter the estimation results for both models support the hypothesis that the alternative version provides a better fit to the german hyperinflation data than the original version and that the money supply was endogenous

crime apprehension and clearance rates panel data evidence from canadian provinces the becker 1968 model of crime establishes the importance of the probability of apprehension as a key factor in a rational individual s decision to commit a crime in this respect most empirical studies based on us data have relied on variation in the number of police officers to estimate the impact of the probability of apprehension or capture we measure the probability of apprehension by clearance rates and study their effects on crime rates employing a panel of canadian provinces from 1986 to 2005 ols gmm gls and iv estimates yield statistically significant elasticities of clearance rates ranging from 0 2 to 0 4 for violent crimes and from 0 5 to 0 6 for property crimes these findings reflect the importance of police force crime solving productivity

choosing to cofinance analysis of project specific alliances in the movie industry we use a movie industry project by project dataset to analyze the choice of financing a project internally versus financing it through outside alliances the results indicate that project risk is positively correlated with alliance formation movie studios produce a variety of films and tend to develop their safest projects internally our findings are consistent with internal capital market explanations we find mixed evidence regarding resource pooling i e sharing the cost of large projects finally the evidence shows that projects developed internally perform similarly to projects developed through outside alliances

alcohol availability and crime lessons from liberalized weekend sales restrictions in february 2000 the swedish state monopoly alcohol retail company launched a largescale experiment in which all stores in selected counties were allowed to keep open onsaturdays we assess the ef

solving estimating and testing a nonlinear stochastic equilibrium model with an example of the asset returns and inflation relationship abstract this paper describes a method for solving estimating and testing a fully specified nonlinear stochastic equilibrium model by simulation a nonlinear stochastic asset pricing model with production and money is formulated which aims to explain observed empirical relations between inflation and asset returns complete solution paths to the equilibrium model are generated through a backwards mapping method the parameters of the model are estimated by simulation taking account of the broad range of dynamics of the model and overidentifying restrictions of the model are tested by extending gmm procedures

more sneezing less crime health shocks and the market for offenses abstract a large literature points out that exposure to criminal victimization has far reaching effects on public health what remains surprisingly unexplored is that role that health shocks play in explaining aggregate fluctuations in offending this research finds novel evidence that crime is sensitive to health shocks we consider the responsiveness of crime to a pervasive and common health shock which we argue shifts costs and benefits for offenders and victims seasonal allergies leveraging daily variation in city specific pollen counts we present evidence that violent crime declines in u s cities on days in which the local pollen count is unusually high and that these effects are driven by residential violence while past literature suggests that property crimes have more instrumental motives require planning and hence are particularly sensitive to permanent changes in the cost and benefits of crime we find that violence may be especially sensitive to health shocks

diamonds are forever wars are not is conflict bad for private firms this paper studies the relationship between civil war and the value of firms in a poor resource abundant country using microeconomic data for angola we focus on diamond mining firms and conduct an event study on the sudden end of the conflict marked by the death of the rebel movement leader in 2002 we find that the stock market perceived this event as bad news rather than good news for companies holding concessions in angola as their abnormal returns declined by 4 percentage points the event had no effect on a control portfolio of otherwise similar diamond mining companies this finding is corroborated by other events and by the adoption of alternative methodologies we interpret our findings in light of conflict generated entry barriers government bargaining power and transparency in the licensing process jel d74 g32 o13 o17 q34

demand and supply dynamics for sequentially released products in international markets the case of motion pictures we develop an econometric model to study a setting in which a new product is launched first in its domestic market and only at a later stage in foreign markets and where the product s performance demand and availability supply are highly interdependent over time within and across markets integrating literature on international diffusion success breeds success trends and the theatrical motion picture industry the focus of the empirical analysis we develop a dynamic simultanenous equations model of the drivers and interrelationship of the behavior of consumers audiences and retailers exhibitors our findings emphasize the importance of considering the endogeneity and simultaneity of audience and exhibitor behavior and challenge conventional wisdom on the determinants of box office performance which is predominantly based on modeling frameworks that fail to account for the interdependence of performance and availability specifically we find that variables such as movie attributes and advertising expenditures which are usually assumed to influence audiences directly mostly influence revenuesindirectly namely through their impact on exhibitors screen allocations in addition consistent with the idea that the buzz for a movie is perishable we find that the longer is the time lag between releases the weaker is the relationship between domestic and foreign market performance an effect mostly driven by foreign exhibitors screen allocations

the monetary approach to exchange rate in an efficient foreign exchange market tests based on volatility the variance bounds on exchange rate movements implied by the monetary approach to exchange rate in an efficient foreign exchange market is shown to be violated by sample data the paper also presents evidence showing that the forecast errors implied by the monetary model can be forecasted using historical data the results are interpreted to suggest either the incompatibility of the monetary approach with sample data or an inefficient foreign exchange market or both models of exchange rate determination based on the monetary approach to the balance of payments imply when coupled with an interest rate parity relation and the assumption of an efficient foreign exchange market that exchange rates are related to a long average of money stocks differentials 1 2 the long average is analogous to the difference across countries of the long average of expected future money stocks which was supposed to characterize the price level of a single country see e g sargent and wallace 20 since long averages are known to have certain smoothing properties it appears that the observed volatility of exchange rates may be inconsistent with these models thus alternative tests of the models may be produced which rely on those properties the aim of this paper is to determine if the observed volatility is consistent with those properties the paper is the first to use tests based on the volatility of the exchange rate in an efficient market model of the monetary approach the first set of tests is based on the property of implied variance bounds for exchange rate movements and the second set consists of the more familiar efficient market tests of forecastability the empirical results violate these two sets of tests of the model thus casting doubt on the model even though the claim that exchange rates are too volatile has been commonly made few direct attempts have been made in the past to determine the validity of the claim some studies have presented estimates of variances of spot and forward rates but lacking an objective criterion to determine what constitutes

colombia s income from the drug trade abstract we estimate the net dollar proceeds that colombia receives from the drug trade making use of production data recently compiled by us authorities care is taken in assuring that our estimations are consistent with previous research on cocaine consumption in the united states and production in bolivia and peru we show that net dollar proceeds which used to represent around 7 of gdp and 70 of exports in the early 1980s now represent around 3 of gdp and 25 of exports these numbers though significant pale in comparison with those suggested in the popular press according to which colombia s economy has been all but overtaken by the drug trade

testing the canonical model of exchange rates with unobservable fundamentals in this paper the authors test the asset market approach or canonical model of exchange rates they treat exchange rate fundamentals as unobservable the empirical results do not reject the canonical model and therefore the embedded rational expectations assumption in sharp contrast with previous empirical evidence the authors also find evidence of feedback from the exchange rate to fundamentals which is normally omitted in the theoretical literature copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

precautionary saving in the small and in the large the theory of precautionary saving is shown to be isomorphic to the arrow pratt theory of risk aversion making possible the application of a large body of knowledge about risk aversion to precautionary saving and more generally to the theory of optimal choice under risk in particular a measure of the strength of the precautionary saving motive analogous to the arrow pratt measure of risk aversion is used to establish a number of new propositions about precautionary saving and to give a new interpretation of the dreze modigliani substitution effect copyright 1990 by the econometric society