nonmonetary effects of the financial crisis in propagation of the great depression this paper examines the effects of the financial crisis of the 1930s onthe path of aggregate output during that period our approach is complementary to that of friedman and schwartz who emphasized the monetary impact of the bank failures we focus on non monetary primarily credit related aspects of the financial sector output link and consider the problems of debtors as well as those of the banking system we argue that the financial disruptions of 1930 33 reduced the efficiency of the credit allocation process and that the resulting higher cost and reduced availability of credit acted to depress aggregate demand evidence suggests that effects of this type can help explain the unusual length and depth of the great depression this abstract was borrowed from another version of this item

long run equilibrium modeling of emissions allowance allocation systems in electric power markets carbon dioxide allowance trading systems for electricity generators are in place in the european union and in several u s states an important question in the design of such systems is how allowances are to be initially allocated by auction by giving away fixed amounts grandfathering or by allocating based on present or recent output investment or other decisions the latter system can bias investment operations and product pricing decisions and increase costs relative to the other systems a nonlinear complementarity model is proposed for investigating the long run equilibria that would result under alternative systems for power markets characterized by time varying demand and multiple technology types existence of equilibria is shown under mild conditions solutions for simple systems show that allocating allowances to new capacity based on fuel use or generator type can yield large distortions in capacity investment invert the operating order of power plants and inflate consumer costs the distortions can be smaller for tighter co2 restrictions and are somewhat mitigated if there is also a market for electricity capacity or minimum run restrictions on coal plants distortions are also less if allowances are allocated to plants in proportion to sales rather than capacity

experimentation and job choice in this article we examine optimal job choices when jobs differ in the rate at which they reveal information about workers skills we then analyze how the optimal level of experimentation changes over a worker s career and characterize job transitions and wage growth over the life cycle using the dictionary of occupational titles merged with the national longitudinal survey of youth 1979 we then construct an index of how much information different occupations reveal about workers skills and document patterns of occupational choice and wage growth that are consistent with a trade off between information and wages

copyright protection standards and authors time allocation for centuries it was necessary for performers to be present in real time to supply their services such as music dance or drama labor time and human skill and capital were inextricably related reproducibility the ability to make copies of human services that are adequate substitutes for live performance has meant performers need not be present to supply their services which can be recorded and supplied with economies of scale consumers do not need the live performer to be present to obtain their services demand for performers has therefore fallen the same is of course true for non performing authors such a scenario must have altered the balance of incentives for authors for how they ultimately decide to spend their time the choices between working on producing copyrighted material which will earn them income through royalties over the duration of the copyright working for spot wages either in related or in unrelated activities and to take leisure must be closely related to the ability of copyright law to guarantee future income from copyrights this article considers this situation in terms of a formal model of time allocation copyright 2006 oxford university press

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

the economics of has beens the evolution of technology causes human capital to become obsolete we study this phenomenon in an overlapping generations setting assuming that technology evolves stochastically and that older workers find updating uneconomic experience and learning by doing may offer the old some income protection but technology advance always turns them into has beens to some degree we focus on the determinants demand elasticities persistence of technology change etc of the severity of the has beens effect it can be large even leading to negatively sloped within occupation age earnings profiles and an occupation dominated by a few young high income workers architecture displays the sort of features the theory identifies as magnifying the has beens effect and both anecdotes and some data suggest that the has beens effect in architecture is extreme indeed

what is the cost of a renewable energy based approach to greenhouse gas mitigation energy policies for greenhouse gas ghg mitigation in the united states have set sector specific standards such as the renewable fuel standard rfs and the renewable portfolio standard rps for the transportation and the electricity sectors respectively this paper examines the welfare costs and effectiveness of ghg abatement with these policies and compares them with those under a carbon tax normalized to achieve the same level of abatement over the 2007 2030 period we show that the global welfare cost per ton of ghg abatement with the rfs and rps is 171 while with the carbon tax it is 7

incentives learning and compensation a theoretical and empirical investigation of managerial labor contracts this article analyzes properties and implications of multiperiod managerial labor contracts under two alternative hypotheses incentives in which productivity depends on unobservable effort and learning in which ability is unknown and is revealed over time shared and conflicting implications of these competing models are developed in terms of experienceearnings profiles and the relation between compensation and performance i empirically examine these theoretical results by using a longitudinal sample of 1 488 chief executive officers followed from 1974 1985 the data yield mixed evidence that generally supports the learning hypothesis over the incentive hypothesis

financial factors in the great depression eginning with irving fisher 1933 and john maynard keynes 1931 b 1963 macroeconomists have argued that financial markets were important sources and propagators of decline during the great depression turning points during the depression often coincided with or were preceded by dramatic events in financial markets stock market collapse waves of bankruptcy and bank failure and contractions in the money stock but the mechanism through which financial factors contributed to the depression has been a source of controversy as has been the relative importance of financial factors in explaining the origins and persistence of the depression this essay reviews the literature on the role of financial factors in the depression and draws some lessons that have more general relevance for the study of the depression and for macroeconomics i argue that much of the recent progress that has been made in understanding some of the most important and puzzling aspects of financial real links in the depression followed a paradigm shift in economics a central neglected theoretical piece of the story for financial factors was the allocative effects of imperfections in capital markets which can imply links between disruptions in financial markets and subsequent economic activity also the increasing emphasis on learning and path dependence in economics has helped to explain why financial shocks during the 1930s were so severe and why policy makers failed to prevent the depression

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

economic and emissions implications of load based source based and first seller emissions trading programs under california ab32 in response to assembly bill 32 the state of california considered three types of carbon emissions trading programs for the electric power sector load based source based and first seller they differed in terms of their point of regulation and in whether in state to out of state and out of state to in state electricity sales are regulated in this paper we formulate a market equilibrium model for each of the three approaches considering power markets transmission limitations and emissions trading and making the simplifying assumption of pure bilateral markets we analyze the properties of their solutions and show the equivalence of load based first seller and source based approaches when in state to out of state sales are regulated under the cap a numeric example illustrates the emissions and economic implications of the models in the simulated cases leakage eliminates most of the emissions reductions that the regulations attempt to impose furthermore contract reshuffling occurs to such an extent that all the apparent emissions reductions resulting from changes in sources of imported power are illusory in reality the three systems would not be equivalent because there will also be pool type markets and the three systems provide different incentives for participating in those markets however the equivalence results under our simplifying assumptions show that load based trading has no inherent advantage compared to other systems in terms of costs to consumers contrary to claims elsewhere

fundamentals panics and bank distress during the depression we assemble bank level and other data for fed member banks to model determinants of bank failure fundamentals explain bank failure risk well the first two friedman schwartz crises are not associated with positive unexplained residual failure risk or increased importance of bank illiquidity for forecasting failure the third friedman schwartz crisis is more ambiguous but increased residual failure risk is small in the aggregate the final crisis early 1933 saw a large unexplained increase in bank failure risk local contagion and illiquidity may have played a role in pre 1933 bank failures even though those effects were not large in their aggregate impact

superstars and mediocrities market failure in the discovery of talent a basic problem facing most labor markets is that workers can neither commit to long term wage contracts nor can they self nance the costs of production i study the eects of these imperfections when talent is industry speci c it can only be revealed on the job and once learned becomes public information i show that rms bid exces sively for the pool of incumbent workers at the expense of trying out new talent the workforce is then plagued with an unfavorable selection of individuals there are too many mediocre workers whose talent is not high enough to justify them crowding out novice workers with lower expected talent but with more upside potential the result is an ine ciently low level of output coupled with higher wages for known high talents this problem is most severe where information about talent is initially very imprecise and the complementary costs of production are high i argue that high incomes in pro fessions such as entertainment management and entrepreneurship may be explained by the nature of the talent revelation process rather than by an underlying scarcity of talent jel d30 j31 j6 m5

incentives for information production and optimal job assignment with human capital considerations in this paper we examine the problem of inducing a manager to acquire information which is useful in determining his optimal job assignment but which might also adversely affect his market value we show that spot contracts are optimal and generate the first best effort level when the manager is risk neutral when the manager is risk averse the optimal contact consists either of a partial insurance contract against downward revisions in compensation or a competitive spot contract depending upon the nature of prior information

copyright and artists a view from cultural economics most of the standard economic literature on copyright ignores a number of aspects that have considerable significance for cultural production and for artists the primary creators of copyright works the supply of which copyright is supposed to stimulate specifically there is little mention in that literature of moral rights no distinction is made between copyright for authors and neighbouring rights for performers the distributional effects of copyright are barely referred to and the question of how much artists earn from copyright is ignored in this article i survey work that relates copyright and cultural economics showing that cultural economics offers another view to the standard economics of copyright moreover the case for government intervention in the arts and heritage made by cultural economists has resonance for the economic rationale of copyright

superstars and mediocrities a solution based on personal income taxation abstract the markets for talent often produce large income inequality and therefore raise political attention while such inequality can be due to superstar dynamics or factor complementarities tervio superstars and mediocrities market failure in the discovery of talent the review of economic studies 2009 first proposed a market failure that was previously unknown to the literature pointing to long term contracts as a solution i extend the model in tervio 2009 to include personal income tax policy reforms and demonstrate that tax design can be employed as a solution to the market failure when long term contracts are unfeasible with reasonably small enough entry payments that novice workers would sustain to compensate employers for the possibility to be discovered as high talent types both a progressive tax and a tax incentive on entry wages are found effective the tax incentive on entry wages though can be used even with very large deductible entry payments and with overall negative net entry wages

capital reallocation and liquidity this paper studies the cyclical properties of capital reallocation and the frictions which inhibit such reallocation we show that the amount of capital reallocation and the benefits to reallocation vary at the business cycle frequency the amount of capital reallocation is procyclical in contrast the benefits to capital reallocation appear countercyclical we measure the amount of reallocation using data on flows of capital across firms and the benefits to capital reallocation using several measures of the cross sectional dispersion of the productivity of capital we then study a calibrated model of an economy where capital reallocation is costly and impute the cost of reallocation which is consistent with the amount of and benefits to reallocation in the data we find that the cost of reallocation needs to be substantially countercyclical to be consistent with the observed joint cyclical properties of reallocation and productivity dispersion the cyclical variation in this cost is interpreted as variation in the liquidity of capital broadly defined since physical costs are unlikely to vary countercyclically

the social costs of second best policies evidence from agricultural ghg mitigation abstract this paper investigates the social costs of second best agricultural greenhouse gas ghg mitigation policies adjustments along the land use and input intensity margins are represented within a regionalized optimization model of california crop production calibrated to economic and agronomic information second best policies relying on spatially aggregated ghg emission factors lead to small abatement efficiency losses while policies targeting a single ghg lead to moderate losses in contrast policies targeting a single input entail large abatement efficiency losses which nonetheless can be reduced by combining instruments

the importance of bundling in a gorman lancaster model of earnings the idea that the labor market of individuals can be decomposed into payments to separate productive attributes has an enduring appeal in economics assuming that demographic groups differ only in their endowments of productive characteristics it is possible to rationalize observed demographic earnings differentials without invoking the arguments that characteristics specific to a particular demographic group are direct objects of employer demand by aggregating skills over all demographic groups it is possible to produce a theory of the market determination of the prices of skills held in different amounts by different demographic groups this paper considers conditions under which characteristics are uniformly priced across sectors of a multisector economy the paper presents empirical evidence that rejects uniform pricing of characteristics as a description of the us labor market bundling may account for this evudence but other hypotheses do as well authors

expecting the unexpected emissions uncertainty and environmental market design we study potential equilibria in california s cap and trade market for greenhouse gases ghgs based on information available before the market started we find large ex ante uncertainty in business as usual emissions and in the abatement that might result from non market policies much larger than the reduction that could plausibly occur in response to an allowance price within a politically acceptable range this implies that the market price is very likely to be determined by an administrative price floor or ceiling similar factors seem likely to be present in other cap and trade markets for ghgs

a model of intertemporal emission trading banking and borrowing abstract this paper provides a general treatment of emission trading banking and borrowing in an intertemporal continuous time model using optimal control theory the decentralized behavior of firms is shown to lead to the least cost solution attainable under joint cost minimization explicit solutions for the time paths of emissions and permit prices are derived when firms are allowed to both bank and borrow and when firms are only allowed to bank emission permits the policy implications of emission banking and borrowing are discussed

the value of screening mechanisms under alternative insurance possibilities abstract this paper investigates the welfare implications of symmetrical improvements in information and accompanying screening mechanisms which allow for improved matching of individuals to their respective risk classes unlike previous models used to investigate this phenomenon this paper allows for the possibility that individuals differ not simply according to exogenously specified unequal loss probabilities but rather that individuals possess different self protection technologies moreover various insurance contracting possibilities are also considered it is demonstrated that the structural form of the heterogeneity of technologies and the type of insurance contracts available in the market determine in an interactive way the value of information which improves the matching of individuals to risk class

the nation in depression t he economic cataclysm of the 1930s was an international phenomenon experienced by countries in all parts of the globe countries as diverse as the united states germany chile and japan all experienced significant depressions in the 1930s thus the title of charles kindleberger s classic book the world in depression 1973 captures an important feature of the great depression these international aspects especially the importance of the gold standard in causing the downturn and transmitting depression from one country to another have been emphasized in recent years in excellent books by peter temin 1989 and barry eichengreen 1992 these books have rightly received widespread attention and have successfully changed the focus of much analysis of the great depression from the united states to the world economy while such a change from american provincialism is surely healthy and warranted adopting an international perspective on the great depression risks losing sight of the many ways in which the u s depression differed in timing and severity from depressions elsewhere more important it may obscure the many uniquely american causes of america s great depression this paper examines the ways in which the u s experience during the 1930s resembled that of other countries in some regards and fundamentally differed in other aspects i also evaluate the evidence on the causes of the great depression in the united states and the sources of the eventual recovery i suggest that the path of american output and unemployment before 1931 can be explained quite well with only domestic factors even after 1931

financial frictions and employment during the great depression abstract we provide new evidence that a disruption in credit supply played a quantitatively significant role in the unprecedented contraction of employment during the great depression using a novel hand collected dataset of large industrial firms our identification strategy exploits preexisting variation in the need to raise external funds at a time when public bond markets essentially froze local bank failures inhibited firms ability to substitute public debt for private debt which exacerbated financial constraints we estimate a large and negative causal effect of financing frictions on firm employment we find that the lack of access to credit likely accounted for a substantial fraction of the aggregate decline in employment of large firms between 1928 and 1933

capital structure and debt structure using a novel dataset that records individual debt issues on the balance sheets of public firms we demonstrate that traditional capital structure studies that ignore debt heterogeneity miss substantial capital structure variation relative to high credit quality firms lowcredit quality firms are more likely to have a multi tiered capital structure consisting of both secured bank debt with tight covenants and subordinated non bank debt with loose covenants we discuss the extent to which these findings are consistent with existing theoretical models of debt structure in which firms simultaneously use multiple debt types to reduce incentive conflicts jel g32

mobility and modality trends in us state personal income we examine the mobility and modality trends in us state per capita personal income and its components during the 1929 1999 period we find strong evidence of convergence for states but that the tendency towards convergence and the associated mobility within the distribution varies during the period and especially for the 1980s our analysis of convergence by income component suggests that transfer income contributes more to the observed convergence than does asset income we also note that distributional mobility need not be accompanied by high rank mobility and find that trends toward convergence in the us have tended to preserve rank ordering cet article cherche a examiner les tendances de mobilite et de modalitequant aux revenus personnels par tete et a ses composants aux etats unis pendant la periode qui va de 1929 a1999 il s avere de fortes preuves d une convergence entre etats qui varie au cours de la periode etudiee et qui va de pair avec une variation de la mobilite associee au sein de

monetary intervention mitigated banking panics during the great depression quasi experimental evidence from a federal reserve district border 1929 1933 the federal reserve act divided mississippi between the 6th atlanta and 8th st louis districts during the great depression these districts policies differed atlanta championed monetary activism and the extension of aid to ailing banks st louis eschewed expansionary initiatives during a banking crisis in 1930 atlanta expedited lending to banks in need st louis did not outcomes differed across districts in atlanta banks survived at higher rates lending continued at higher levels commerce contracted less and recovery began earlier these patterns indicate that central bank intervention influenced bank health credit availability and business activity

cyclicality of credit supply firm level evidence abstract we quantify fluctuations in bank loan supply in the time series by studying firms substitution between loans and bonds using firm level data any firm that raises new debt must have a positive demand for external funds conditional on the issuance of new debt we interpret firms switching from loans to bonds as a contraction in bank credit supply we find strong evidence of this substitution at times that are characterized by tight lending standards depressed aggregate lending poor bank performance and tight monetary policy we show that this substitution behavior has strong predictive power for bank borrowing and investments by small firms

distance and private information in lending we study the effects of physical distance on the acquisition and use of private information in informationally opaque credit markets using a unique data set of all loan applications by small firms to a large bank we show that borrower proximity facilitates the collection of soft information leading to a trade off in the availability and pricing of credit which is more readily accessible to nearby firms albeit at higher interest rates ceteris paribus analyzing loan rates and firms decision to switch lenders provides further evidence for banks strategic use of private information however distance erodes our lender s ability to collect proprietary intelligence and to carve out local captive markets suggesting that the requisite soft information is primarily local the author 2010 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please e mail journals permissions oxfordjournals org oxford university press

talent and publicity as determinants of superstar incomes empirical evidence from the motion picture industry by drawing on the two prevailing economic stardom theories the paper investigates the sources of superstardom in the us movie industry for the econometric analysis we use income and popularity d

unilateral co2 reductions and carbon leakage the consequences of international trade in oil and basic materials a recursively dynamic general equilibrium model featuring six world regions with trade in energy and non energy goods is used to simulate the period from 1990 through 2100 in 10 year intervals the simulations explore the effect of unilateral action by the oecd to curb global co2 emissions unilateral cuts create incentives for free riding by non participating regions so that global emissions are reduced by less than the amount that the oecd cuts back its regional emissions carbon leakage occurs through two channels first basic materials production increases in unconstrained regions resulting in increased carbon intensity of gdp second reductions in oecd oil imports cause the world oil price to fall leading to an increased energy intensity in the non participant regions in this paper we use a general equilibrium model to assess the extent to which these two mechanisms reduce the effectiveness of oecd reductions in curbing global co2 concentrations

employment and unemployment in the 1930s the great depression is to economics what the big bang is to physics as an event the depression is largely synonymous with the birth of modern macroeconomics and it continues to haunt successive generations of economists with respect to labor and labor markets these facts evidently include wage rigidity persistently high unemployment rates and long term joblessness traditionally aggregate time series have provided the econometric grist for distinguishing explanations of the great depression recent research on labor markets in the 1930s however has shifted attention from aggregate to disaggregate time series and towards microeconomic evidence this shift in focus is motivated by two factors first disaggregated data provide many more degrees of freedom than the decade or so of annual observations associated with the depression and thus may prove helpful in distinguishin g macroeconomic explanations second disaggregation has revealed aspects of economic behavior hidden in the time series that may be essential to their proper interpretation and in any case are worthy of study in their own right although the substantive findings of recent research are too new to judge their permanent significance i believe that the shift towards disaggregated analysis is an important contribution the paper begins by reviewing the conventional statistics of the united states labor market during the great depression and the paradigms to explain them it then turns to recent studies of employment and unemployment using disaggregated data of various types the paper concludes with discussions of

carbon emission forensic in the energy sector is it worth the effort abstract climate policy has mostly focused on regulating power suppliers there is a growing interest in exploring regulating emissions from the demand side by incentivizing consumers to reduce their energy consumptions or to purchase power from cleaner sources through tracking carbon content of power flow in the transmission network this paper analyzes market outcomes under two approaches producer based and demand based carbon taxes we formulate each approach as a market equilibrium model for the consumer based approach the analysis assumes that a utility procuring electricity on behalf of consumers is subject to the carbon tax for the producer based approach the producers are subject to the carbon tax and therefore pay for their emissions we show that the two approaches are equivalent when the program s coverage is complete however when the coverage is incomplete the consumer based carbon tax is less effective in pricing carbon emissions owing to the fact that sales to unregulated regions are not subject to the carbon tax given that the transaction cost of implementing consumer based tax is likely to be high benefit of tracking power flows in order to estimate carbon content or footprint might not be justified even with a full coverage program

stock volatility and the great depression stock return volatility during the great depression has been labeled a volatility puzzle because the standard deviation of stock returns was 2 to 3 times higher than any other period in american history we investigate this puzzle using a new series of building permits and leverage our results suggest that volatility in building permit growth and financial leverage largely explain the high level of stock volatility during the great depression markets factored in the possibility of a forthcoming economic disaster received september 30 2017 editorial decision august 27 2018 by editor philip e strahan authors have furnished an internet appendix which is available on the oxford university press web site next to the link to the final published paper online

the insurance effect of groups many people belong to groups which partially identify their characteristics this paper argues that when agents are risk averse and where only group characteristics are visible rather than individual characteristics the pareto optimal construction of groups differs in systematic ways from standard notions of how groups should be formed two applications are considered the assignment of workers to jobs where it is shown the optimal contract does not involve maximizing output and accident insurance where the optimal contract does not involve complete insurance many people belong to groups which serve to partially identify otherwise hidden talents or characteristics for example it is possible to find out that certain authors have written an article but their individual contributions are much more difficult to ascertain similarly it may be easy to determine that a worker is a foreman but much more difficult to tell how much better he is than other foremen or that somebody is employed which tells us something about his talents but not whether he is more talented than the average employed person each of these examples illustrates cases where we can see the group to which an agent belongs author foreman employed rather than an individual s characteristics standard notions of efficiency tell us how these groups should be formed academics should write papers together only if their joint product is greater than if they operated separately a worker should be employer as a foreman only if his productivity is higher as a foreman than elsewhere in the organization and so on the principal result of this paper is that when agents are risk averse and where only groups of the type above are visible to some agents rather than individual characteristics these assignment rules may not be pareto optimal instead for example someone who is less competent as a foreman than as an operative may still be employed as a foreman and this yields higher welfare than employing that worker as an operative let me explain the intuition by a simple example assume that workers who join a firm are uncertain of their ability they are risk averse and seek insurance over that uncertainty untalented workers should be fired on standard efficiency grounds as they have higher productivity elsewhere assume that after a period of production information on ability becomes available to the employer and the employee but that other employers must infer this information from whether the

talent and or popularity what does it take to be a superstar the phenomenon of superstars wherein small numbers of people earn enormous amounts of money and dominate the activities in which they engage seems to be increasingly important in the modern world rosen 1981 845 i introduction this the opening sentence of sherwin rosen s seminal paper the economics of superstars applies today more than ever technological change has increased the scope and the intensity of the so called winner takes all markets in the last decades the central question addressed in this article is what does it take to be a superstar why do some artists media stars professional athletes or executives earn disproportionately high salaries while others receive comparatively low remuneration in the literature there are basically two competing but not mutually exclusive theories of superstar formation proposed by rosen 1981 and adler 1985 1 although sherwin rosen explains how small differences in talent translate into large differences in earnings moshe adler argues that superstars might even emerge among equally talented performers due to the positive network externalities of popularity empirical tests of the different driving forces of superstar salaries have proved to be very difficult because an objective measure of a star s talent is often hard to find and even harder to quantify krueger 2005 for example what characterizes the talent of a pop music star the literature offers different approaches hamlen 1991 1994 uses the physical concept of voice quality which measures the frequency of harmonic content that singers use when they sing the word love in one of their songs but is such a high quality voice really a deciding factor for success in pop music krueger 2005 measures star quality by the number of millimeters of print columns devoted to each artist in the rolling stone encyclopedia of rock roll nevertheless as he admits this measure reflects the subjective importance the editors of the encyclopedia implicitly devote to each artist which may correlate both with the artist s talent and with his her popularity in team settings the difficulty of accurately measuring star talent is even greater as individual contributions to team output are mostly unclear however the empirical relevance of stars within teams is undoubted star ceos in top management teams lead singers of rock bands and star athletes on sports teams are just a few examples of superstars embedded in teams this article argues that rank order tournaments in professional sports allow a more accurate determination of talent than in the arts even though each athlete s performance is also affected by random events luck or other factors like weak fitness in individual sports it can typically be assumed that the most talented athlete enjoys the highest probability of winning as we examine superstars in a team setting namely in professional soccer we first estimate a team production function to identify the playing characteristics that significantly influence the probability of a team winning to do so we use the detailed statistics of the opta sports data company which counts and classifies every touch of the ball during the game by each player in a second step we use the individual performance statistics of all variables that have proved to be critical for winning as indicators of the player s talent we estimate the impact of talent popularity and various controls on the player s market value employing individual panel data from the highest german soccer league a player s popularity is measured by the annual press publicity he receives in over 20 different newspapers and magazines purged of the positive influences of on field performance so that our popularity indicator captures the nonperformance related celebrity status of a player we find empirical evidence that both talent and nonperformance related popularity increase the market values of soccer stars

the impact of ceo turnover on equity volatility this study investigates the effect on stock price volatility of a significant event in the life of the firm a change in its ceo we find significant long lived increases in volatility following ceo turnover after controlling for firm characteristics and marketwide volatility these increases are larger after forced departures and outside successions following voluntary departures stock prices also respond more strongly to earnings announcements following turnovers these results are consistent with more informative signals of value driving the increased volatility helping resolve two sources of uncertainty possible changes in the firm s strategy and doubt about the successor ceo s ability

implications of the eu emissions trading system for the south east europe regional electricity market as part of its climate policy the european union eu aims to reduce greenhouse gas ghg emissions levels by 20 by the year 2020 compared to 1990 levels although the eu is projected to reach this goal its achievement of objectives under its emissions trading system ets may be delayed by carbon leakage which is defined as a situation in which the reduction in emissions in the ets region is partially offset by an increase in carbon emissions in the non ets regions we study the interaction between emissions and hydropower availability in order to estimate the magnitude of carbon leakage in the south east europe regional electricity market see rem via a bottom up partial equilibrium framework we find that 6 3 to 40 5 of the emissions reduction achieved in the ets part of see rem could be leaked to the non ets part depending on the price of allowances somewhat surprisingly greater hydropower availability may increase emissions in the ets part of see rem however carbon leakage might be limited by demand response to higher electricity prices in the non ets area of see rem such carbon leakage can affect both the competitiveness of producers in ets member countries on the periphery of the ets and the achievement of eu targets for co2 emissions reduction meanwhile higher non ets electricity prices imply that the current policy can have undesirable outcomes for consumers in non ets countries while non ets producers would experience an increase in their profits due to higher power prices as well as exports the presence of carbon leakage in see rem suggests that current eu policy might become more effective when it is expanded to cover more countries in the future

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

testing the determinants of income distribution in major league baseball i introduction income of professional athletes is a frequent topic of discussion of fans sportscasters and the general public economists have also increasingly been attracted to this topic because the distribution of income of these players has both policy and business implications as a consequence the report of major league baseball s mlb blue ribbon panel formed in 1998 by mlb commissioner bud selig received quite a lot of attention this panel was charged with describing and explaining the economic condition of mlb comprised of such dignitaries as former federal reserve chairman paul volker senator george mitchell yale university president richard levin and columnist george will this panel reported that team payrolls have become increasingly disparate the gap between rich and poor teams is not only wide but is growing levin et al 2000 a case in point is the fact that the salary of the highest paid player in the 2000 season los angeles kevin brown at 15 7 million was 95 of the entire payroll of the poorest team the minnesota twins the effect according to the panel s report is a dramatic decline in parity and competitiveness of mlb since 1994 a team in the top payroll quartile has won every world series game in 1999 the teams with the five largest payrolls had an average winning percentage of 0 557 whereas the five poorest teams had a comparable figure of 0 444 the report discusses various recommendations that may narrow this gap leading to what one might call convergence in team payrolls this article examines the distribution of income in mlb for 1985 to 2000 we revive and extend a technique first suggested by thurow 1970 and show how it can be used to test for time trends versus cross sectional demographic and economic aspects influencing income distribution thurow 1970 discusses the impact of various measures on median income in the present case by calculating the gini coefficient we can discuss the impact that the explanatory variables have on income inequality in the context of mlb we attempt to shed light on the reasons why teams have greater or lesser payroll disparity we leave the question of the effect of between team payroll inequality on team wins and team revenues for future research the issue of whether to use an inequality measure that is based on a particular distribution or one that is distribution free has been widely discussed in the income distribution literature silber 1999 ryu and slottje 1999 in advocating the use of parametric distributions point to several benefits of estimating the lorenz curve in this manner these benefits include the ability to summarize thousands of observation points with a few parameters the ability to estimate the density function at any point an enhanced ability to construct inequality measures and the ability to formulate possible laws that would otherwise not be possible to detect however there are problems associated with the use of a parametric lorenz curve such as the choice of a suitable distribution the problem is compounded by the fact that income data are often grouped and have an open ended highest income category making it difficult to obtain accurate estimates one advantage of using professional sports data is the fact that the salary is available per individual and is not grouped consequently an actual number is available for the highest income this study analyzes payroll inequality in a professional sport by team that is for each year we calculate a measure of inequality for each mlb team and consider the characteristic differences in within team payroll distributions our study is not however the first to consider income inequality within professional team sports depken 2000 and jewell and molina 2004 find that mlb teams with greater wage disparity have fewer wins furthermore sommers 1998 finds a negative relationship between team success and within team payroll inequality using national hockey league data

reach for the stars a strategic bidding game we examine two sided competition in a duopoly market for differentiated products downstream the two firms compete in prices upstream they compete in bidding to hire talent input and there is one unique superstar the outcome depends on the downstream effect of only one firm employing the superstar when this intensifies downstream competition both firms are worse off than they would be if no superstar talent were available when the hiring of the superstar softens downstream competition both firms benefit but a winner s curse emerges in which the firm winning the superstar talent earns less profit than its rival

a stochastic model of superstardom an application of the yule distribution this study employs a stochastic model developed by g udny yule and herbert a simon as the probability mechanism underlying the consumer s choice of artistic products and predicts that artistic outputs will be concentrated among a few lucky individuals we find that the probability distribution implied by the stochastic model provides an excellent description of the empirical data in the popular music industry suggesting that the stochastic model may represent the process generating the superstar phenomenon because the stochastic model does not require differential talents among individuals our empirical results support the notion that the superstar phenomenon could exist among individuals with equal talent copyright 1994 by mit press

variety and superstardom in popular music i introduction alfred marshall 1947 and irving fisher 1925 73 both believed that as average incomes increase the increase in the demand for quality goods and services will be greater than for those goods and services regarded as having lower quality in addition marshall pointed out that innovations in technology and mass production such as those taking place at the turn of the century would lower the per unit price of quality goods and ultimately allow the higher quality goods to capture a greater share of the market rosen 1981 1983 has termed this the superstar phenomenon marshall added a specific view that this situation had not occurred in the field of professional singers since at that time there were insufficient innovations for low cost mass production of sound rosen 1981 857 has suggested that subsequent innovations have since made the field of professional singers i e the recording industry a likely candidate for the superstar phenomenon in a recent paper hamlen 1991 provided some initial empirical evidence which indicates that the modern recording industry for popular music i e 1955 1987 fell short of the predicted marshall rosen superstar phenomenon in that study it was shown that while consumers of popular music recognized differences in quality as measured by an external objective measurement and there was an increase in total record earnings by singers with greater measured levels of ability the increase in these earnings was less than proportional to the increase in ability this would indicate that the marshall rosen concept of superstardom did not hold empirically during the period however there was no attempt in that paper to analyze why the superstar phenomenon failed to occur in a profession that has been viewed in the superstar literature as one of the most likely candidates since the knowledge of quality differences in performers is highly dependent on the transmission of information among different consumers some economists have tried to hypothesize a more precise market scenario to explain how performers with greater talent rise to stardom macdonald 1988 offered a model which he believes is relevant for musicians and singers it is based on a dynamic information accumulation process with multiple market levels singers begin in the entry level market where they compete mostly as unknowns here they share the revenues from lower income consumers who also have lower opportunity costs of time and therefore can afford to listen to many singers of relatively poor quality however in this entry level market some singers exhibit relatively high quality and receive above average success these higher quality singers are then given the opportunity to compete successfully in more select markets where the consumers have higher incomes and higher opportunity costs of time in each higher market level consumers are willing to pay a premium to listen to only the higher quality singers i e those filtered out from the lower market levels under reasonable assumptions macdonald s multi market processes can produce the superstar phenomenon described above adler 1985 pointed out a possible flaw in superstar models such as macdonald s the quality filter described above may be an imperfect filter with both type one errors some high quality singers do poorly and type two errors some lower quality singers do well adler believes that factors other than talent also determine the success and failure of singers these factors consist of those attributes which cannot be directly described as a measure of quality while some of these other factors are measurable and comparable e g musical style sex or race many may never be identified or measured e g charisma song delivery good looks etc the presence and importance of all of these other factors both measurable and nonmeasurable make up the demand for variety and tend to alter the simple relationship between quality ability and success

economic implications of alternative allocation schemes for emission allowances political feasibility of emission trading systems may crucially depend on the free initial allocation of emission allowances to energy intensive industries in order to ameliorate adverse production and employment effects we investigate the potential trade off between such compensation and economic efficiency for alternative allocation rules where emission allowances are based on either emissions or output based on analytical partial equilibrium and numerical general equilibrium analysis we show that in open trading systems the trade off becomes the more severe the higher the international permit price is whenever the permit price can be considered exogenous to firms or industries the output based allocation rule is distinctly less costly than the emission based rule to preserve output and employment in energy intensive sectors the reason is that emission based allocation of allowances not only provides an implicit output subsidy but also lowers the effective price of emission inputs to regulated firms emissionbased allocation is particularly expensive towards higher international permit prices where the implicit subsidies to emission use in energy intensive sectors produce drastic efficiency losses since they imply high expenditures for carbon permit imports rather than high net revenues from efficient carbon permit exports

leakage in regional environmental policy the case of the regional greenhouse gas initiative abstract subglobal and subnational greenhouse gas policies are often thought to be less effective than comprehensive policies as production and emissions of trade exposed industries may move from the regulated to the unregulated regions a process referred to as leakage leakage negates some emission reductions from the regulated regions we use detailed electricity generation and transmission data to show that this is the case for the regional greenhouse gas initiative rggi a co2 cap and trade program for the electricity sector in select northeastern u s states more specifically our results indicate that rggi induced a reduction in coal fired generation in rggi states and an increase in ngcc generation in rggi surrounding regions this finding suggests that the pollution haven hypothesis holds for state level variation in environmental policy even when compliance costs are low

downstream regulation of co2 emissions in california s electricity sector this paper examines the implications of alternative forms of cap and trade regulations on the california electricity market specific focus is given to the implementation of a downstream form of regulation known as the first deliverer policy under this policy importers i e first deliverers of electricity into california are responsible for the emissions associated with the power plants from which the power originated even if those plants are physically located outside of california we find that absent strict non economic barriers to changing import patterns such policies are extremely vulnerable to reshuffling of import resources the net impact implies that the first deliverer policies will be only marginally more effective than a conventional source based regulation

turnover and promotion of lawyers an inquiry into gender differences this paper analyzes the turnover and promotion of male and female lawyers using data on two cohorts of lawyers one which entered law firms between 1969 and 1973 and the other entering between 1980 and 1983 this study considers whether law firm promotion decisions have differed for women and if so whether these differences have declined over time a competing risks duration model is employed to capture the link between the lawyer s decision to stay or leave and the firm s decision to grant or deny promotion we find that over the entire sample period women are considerably less likely to be promoted and slightly more likely to leave the firm without being promoted however we also find that the parametric differential between men and women in partnership hazards has been reduced substantially and in the most general of our specifications eliminated across the two cohorts in contrast the gap between male and female job turnover rates does not appear to change over time we find that the gap between males and females in the cumulative partnership rate at seven years of experience falls from 32 to 14 percent the turnover gap increases about 0 2 percent with females slightly more likely to exit from the firm in the later period

perceived game uncertainty suspense and the demand for sport this study tries bridging between different behavioral economic explanations for the lack of support of the uncertainty of outcome hypothesis in spectator sports we test a measure of perceived game uncertainty that is comparable to objective measures frequently tested in the literature econometric results suggest that fans do not perceive closeness of a game differently than how economists have tended to measure it however fans perceptions of suspensefulness are distinct from their perceptions of game uncertainty moreover the finding that fans preferences for game uncertainty are dominated by loss aversion also emerges independently of fanship status in our stated preference setting jel l83 d12 z2

allocation of co2 emissions permits a general equilibrium analysis of policy instruments what are the effects of different ways of allocating co2 emissions permits under a tradable permit scheme numerical simulations show that using the permit revenue to lower existing taxes implies by far the lowest welfare cost but also a large reduction in employment in energy intensive sectors and substantial stranded costs grandfathering the permits compensates owners for losses on stranded investments but comes at a welfare cost and does not mitigate the adjustment imposed on the economy finally distributing the permits according to market shares reduces the degree of sectoral adjustment but also comes at a high welfare cost

pareto inefficiency of market economies search and efficiency wage models this paper shows that market economies with search and in which wages are affected by efficiency wage considerations are not constrained pareto efficient wages are not set at pareto efficient levels nor is the level of employment unemployment pareto efficient we identify the nature of the biases and the welfare improving government interventions this abstract was borrowed from another version of this item

output based allocation of emissions permits for mitigating tax and trade interactions the allocation of tradable emissions permits has important efficiency as well as distributional effects when tax and trade distortions are taken into account we compare different rules for allocating carbon allowances within sectors lumpsum grandfathering output based allocation oba auctioning and among sectors historical emissions or value added shares the output subsidies implicit in oba mitigate tax interactions unlike grand fathering oba with sectoral distributions based on value added is similar to revenue recycling with auctioning oba based on historical emissions supports heavier polluters more effectively counter acting carbon leakage but at higher welfare costs less energy intensive sectors are also sensitive to allocation rules

baseball specific human capital why good but not great players are more likely to coach in the major leagues the career choice of retiring athletes provides an interesting example of a midcareer transition conditioned on specific human capital previous research examines the determination of earnings in professional sports 3 5 14 but does not consider how skills developed during an athlete s playing years affect subsequent opportunities in this paper i test the hypothesis that skills specific to baseball increase the probability a player will choose to coach the empirical work confirms the importance of baseball specific human capital in the decision to coach and provides some of the first formal evidence that the opportunities of star players differ distinctly from players that are marginally less talented in the theoretical section i develop a random utility model in which a retiring player chooses between coaching and non coaching careers on the basis of potential earnings and a random taste component earnings in either career are determined by a vector of career attributes that embody the player s productivity in each if the random taste component is normally distributed the probability a player chooses a coaching career can be estimated using probit the empirical results support the predictions of the model that baseball specific human capital is positively correlated with the probability of a player coaching and that star players are unlikely to coach because their marginal skill advantage is not baseball specific in particular the findings imply that players with long but unexceptional careers are more likely to coach in the major leagues an extension of the empirical model is applied to the issue of discrimination the insignificance of a black dummy variable suggests that black players have the same probability of coaching as comparably skilled white players however a more complex interactive specification suggests that relatively poor opportunities for black stars outside the game leads to their crowding out those black players who if they were white would most likely coach

does california s co2 price affect wholesale electricity prices in the western u s a abstract using a sample of daily market data we quantify the effect of california s co 2 cap and trade program on the wholesale electricity prices of four interconnected market hubs in the western u s a north of path 15 np15 and south of path 15 sp15 in california mid columbia mid c in the pacific northwest and palo verde pv in the desert southwest a 1 metric ton increase in california s co 2 price is estimated to have increased the electricity prices by 0 41 mwh p value p value p value 0 0056 for mid c and 0 15 mwh p value 0 0925 for pv these estimates reflect a the np15 and sp15 sellers pricing behavior of fully including the co 2 price in their intra state transactions b the mid c price s 100 pass through of the co 2 price in the pacific northwest s hydro export to california and c the statutory obligation of paying the co 2 emissions cost by california s buyers of the electricity imported from the desert southwest the policy implication is that internalization of co 2 s externality in the western u s a requires a cap and trade program with a regional scope that encompasses all four hubs thereby remedying the california program s limited geographic coverage which introduces distortions in neighboring markets