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Showing papers in "Journal of Economic Literature in 2008"


Journal ArticleDOI
TL;DR: In the last two decades, much research has been done on the econometric and statistical analysis of such causal effects as discussed by the authors, which has reached a level of maturity that makes it an important tool in many areas of empirical research in economics, including labor economics, public finance, development economics, industrial organization, and other areas in empirical microeconomics.
Abstract: Many empirical questions in economics and other social sciences depend on causal effects of programs or policies. In the last two decades, much research has been done on the econometric and statistical analysis of such causal effects. This recent theoreti- cal literature has built on, and combined features of, earlier work in both the statistics and econometrics literatures. It has by now reached a level of maturity that makes it an important tool in many areas of empirical research in economics, including labor economics, public finance, development economics, industrial organization, and other areas of empirical microeconomics. In this review, we discuss some of the recent developments. We focus primarily on practical issues for empirical research- ers, as well as provide a historical overview of the area and give references to more technical research.

3,175 citations


Journal ArticleDOI
TL;DR: In this paper, the authors review the evidence on relative income from the subjective well-being literature and discuss the relation (or not) between happiness and utility, and discuss some nonhappiness research (behavioral, experimental, neurological) related to income comparisons.
Abstract: The well-known Easterlin paradox points out that average happiness has remained constant over time despite sharp rises in GNP per head. At the same time, a micro literature has typically found positive correlations between individual income and individual measures of subjective well-being. This paper suggests that these two findings are consistent with the presence of relative income terms in the utility function. Income may be evaluated relative to others (social comparison) or to oneself in the past (habituation). We review the evidence on relative income from the subjective well-being literature. We also discuss the relation (or not) between happiness and utility, and discuss some nonhappiness research (behavioral, experimental, neurological) related to income comparisons. We last consider how relative income in the utility function can affect economic models of behavior in the domains of consumption, investment, economic growth, savings, taxation, labor supply, wages, and migration.

2,179 citations


Journal ArticleDOI
TL;DR: The authors argued that the historical origin of a country's laws is highly correlated with a broad range of its legal rules and regulations, as well as with economic outcomes, and they summarized this evidence and attempted a unified interpretation.
Abstract: In the last decade, economists have produced a considerable body of research suggesting that the historical origin of a country's laws is highly correlated with a broad range of its legal rules and regulations, as well as with economic outcomes. We summarize this evidence and attempt a unified interpretation. We also address several objections to the empirical claim that legal origins matter. Finally, we assess the implications of this research for economic reform.

2,134 citations


Journal ArticleDOI
TL;DR: The role of cognitive skills in pro- moting economic well-being, with a particular focus on the role of school quality and quantity, has been reviewed in this paper, concluding that there is strong evidence that the cognitive skills of the population are powerfully related to indi- vidual earnings, to the distribution of income, and to economic growth.
Abstract: The role of improved schooling, a central part of most development strategies, has become controversial because expansion of school attainment has not guaranteed improved economic conditions. This paper reviews the role of cognitive skills in pro- moting economic well-being, with a particular focus on the role of school quality and quantity. It concludes that there is strong evidence that the cognitive skills of the population—rather than mere school attainment—are powerfully related to indi- vidual earnings, to the distribution of income, and to economic growth. New empiri- cal results show the importance of both minimal and high level skills, the comple- mentarity of skills and the quality of economic institutions, and the robustness of the relationship between skills and growth. International comparisons incorporating expanded data on cognitive skills reveal much larger skill deficits in developing coun - tries than generally derived from just school enrollment and attainment. The mag- nitude of change needed makes clear that closing the economic gap with developed countries will require major structural changes in schooling institutions.

1,396 citations


Journal ArticleDOI
TL;DR: The authors survey the literature on central bank communication and find that communication can be an important and powerful part of the central bank's toolkit since it has the ability to move financial markets, to enhance the predictability of monetary policy decisions, and potentially to help achieve central banks' macroeconomic objectives.
Abstract: Over the last two decades, communication has become an increasingly important aspect of monetary policy. These real-world developments have spawned a huge new scholarly literature on central bank communication-mostly empirical, and almost all of it written in this decade. We survey this ever-growing literature. The evidence suggests that communication, can be an important and powerful part of the central bank's toolkit since it has the ability to move financial markets, to enhance the predictability of monetary policy decisions, and potentially to help achieve central banks' macroeconomic objectives. However, the large variation in communication, strategies across central banks suggests that a. consensus has yet to emerge, on what constitutes an optimal communication strategy.

1,188 citations


Posted Content
TL;DR: The authors acknowledge the help of three referees and of John Pencavel on several earlier drafts, as well as the assistance of the modelers whose work is referred to in the paper.
Abstract: We wish to acknowledge the help of three referees and of John Pencavel on several earlier drafts, as well as the assistance of the modelers, whose work is referred to in the paper. They corrected our lack of understanding of their work and provided many other helpful comments. Excellent research and bibliographical assistance have been provided by Debbie Fretz, Radwan Shaban, and Janet Stotsky. Helpful comments have been made by Charles Ballard, Michael Boskin, Lans Bovenberg, Sylvester Damus, Harvey Galper, Glenn Harrison, Gordon Lenjosek, Jack Mutti, Serena Ng, T. N. Srinivasan, Charles Stuart, and Eric Toder. The authors also acknowledgefinancial support from the National Bureau of Economic Research, the National Science Foundation, International Business Machines, and the Social Sciences and Humanities Research Council: Ottawa, Canada.

814 citations


Journal ArticleDOI
TL;DR: In this article, a number of the key issues in this debate are addressed: What are energy price shocks and where do they come from? How responsive is energy demand to changes in energy prices? How do consumers' expenditure patterns evolve in response to energy price spikes? How does energy price changes affect U.S. real output, inflation and stock prices? Why do energy price increases seem to cause recessions, but energy price decreases do not seem to lead to expansions?
Abstract: Large fluctuations in energy prices have been a distinguishing characteristic of the U.S. economy since the 1970s. Turmoil in the Middle East, rising energy prices in the U.S. and evidence of global warming recently have reignited interest in the link between energy prices and economic performance. This paper addresses a number of the key issues in this debate: What are energy price shocks and where do they come from? How responsive is energy demand to changes in energy prices? How do consumers’ expenditure patterns evolve in response to energy price shocks? How do energy price shocks affect U.S. real output, inflation and stock prices? Why do energy price increases seem to cause recessions, but energy price decreases do not seem to cause expansions? Why has there been a surge in the price of oil in recent years? Why has this new energy price shock not caused a recession so far? Have the effects of energy price shocks waned since the 1980s and, if so, why? As the paper demonstrates, it is critical to account for the endogeneity of energy prices and to differentiate between the effects of demand and supply shocks in energy markets, when answering these questions.

800 citations


Journal ArticleDOI
TL;DR: In this paper, the authors summarized many of the questions for which real-time data analysis has provided answers, including how structural modeling is affected by data revisions, how data revisions affect forecasting, the impact of data revisions on monetary policy analysis, and the use of realtime data in current analysis.
Abstract: In the past ten years, researchers have explored the impact of data revisions in many different contexts. Researchers have examined the properties of data revisions, how structural modeling is affected by data revisions, how data revisions affect forecasting, the impact of data revisions on monetary policy analysis, and the use of real-time data in current analysis. This paper summarizes many of the questions for which real-time data analysis has provided answers. In addition, researchers and institutions have developed better real-time data sets around the world. Still, additional research is needed in key areas and research to date has uncovered even more fruitful areas worth exploring. (JEL C52, C53, C80, E01)

324 citations


Journal ArticleDOI
TL;DR: In this article, the authors review the recent literature on global interpersonal income inequality and conclude that there is insufficient evidence to determine the direction of change in global interpersonal inequality in recent decades.
Abstract: In this paper, we review the recent literature on global interpersonal income inequality. While all estimates agree that the level is very high, with a Gini of between 0.630 and 0.686 in the 1990s, there is no consensus regarding the direction of change. We discuss methodological issues, including the use of national accounts versus survey-based estimates of mean income (or consumption) and the choice of purchasing power parity exchange rates. Findings of a rise or fall in global income inequality are not robust across different estimation methods and datasets. Given the diversity of estimates and various sources of uncertainty, including gaps and errors in the underlying data, we conclude there is insufficient evidence to determine the direction of change in global interpersonal inequality in recent decades.

302 citations


Journal ArticleDOI
TL;DR: In this article, the authors review theoretical explanations for in-kind transfers in light of the limited empirical evidence and conclude that paternalism and interdependent preferences are leading overall explanations for the existence of such programs, but that some of the other arguments may apply to specific cases.
Abstract: We review theoretical explanations for in-kind transfers in light of the limited empirical evidence. After reviewing the traditional paternalistic arguments, we consider explanations based on imperfect information and self-targeting. We then discuss the large literature on in-kind programs as a way of improving the efficiency of the tax system and a range of other possible explanations, including the "Samaritan's Dilemma," pecuniary effects, credit constraints, asymmetric information amongst agents, and political economy considerations. Our reading of the evidence suggests that paternalism and interdependent preferences are leading overall explanations for the existence of in-kind transfer programs but that some of the other arguments may apply to specific cases. Political economy considerations must also be part of the story.

249 citations


Journal ArticleDOI
TL;DR: In this article, the authors survey the major economic issues around covering the uninsured and examine policy options to address the problem of the uninsured, beginning with a discussion of the key issues and available evidence and then turning to estimates from a micro-simulation model of the impact of alternative interventions to increase insurance coverage.
Abstract: One of the major social policy issues facing the United States in the first decade of the twenty-first century is the large number of Americans lacking health insurance. This article surveys the major economic issues around covering the uninsured. I review the facts on insurance coverage and the nature of the uninsured; explore explanations for why the United States has such a large, and growing, uninsured population; and discuss why we should care if individuals are uninsured. I then examine policy options to address the problem of the uninsured, beginning with a discussion of the key issues and available evidence and then turning to estimates from a micro-simulation model of the impact of alternative interventions to increase insurance coverage.

Journal ArticleDOI
Robert C. Allen1
TL;DR: A Farewell to Alms as discussed by the authors argues that the preindustrial world was in a Malthusian preventive check equilibrium, living standards were unchanging and above subsistence for the last 100,000 years, bad institutions were not the cause of economic backwardness, successful economic growth was due to the spread of "middle class" values from the elite to the rest of society for "biological" reasons.
Abstract: A Farewell to Alms advances striking claims about the economic history of the world. These include (1) the preindustrial world was in a Malthusian preventive check equilibrium, (2) living standards were unchanging and above subsistence for the last 100,000 years, (3) bad institutions were not the cause of economic backwardness, (4) successful economic growth was due to the spread of "middle class" values from the elite to the rest of society for "biological" reasons, (5) workers were the big gainers in the British Industrial Revolution, and (6) the absence of middle class values, for biological reasons, explains why most of the world is poor. The empirical support for these claims is examined, and all are questionable.

Journal ArticleDOI
TL;DR: In this paper, the authors review the recent but growing economic literature on the worldwide growth of obesity, relating the review to a recent anthology of articles, Obesity, Business and Public Policy.
Abstract: We review the recent but growing economic literature on the worldwide growth of obesity, relating the review to a recent anthology of articles—Obesity, Business and Public Policy. We discuss the competing explanations for the growth of obesity as well as the role of governments in attempting to limit it.

Journal ArticleDOI
Kaushik Basu1
TL;DR: The authors in this article argued that the cause of India's high growth does not fit into any easy ideological category as suggested by Virmani and there is reason to expect the growth to be sustainable, although destabilizing political tensions will arise from the increasing inequality.
Abstract: India's high growth over the last fifteen years has inspired several recent books and papers to examine the growth's source and sustainability--the two-volume study by Arvind Virmani being a case in point. This paper evaluates these recent works. It is argued that the cause of the take-off does not fit into any easy ideological category as suggested by Virmani. The current high growth has been achieved in several steps, with distinct factors of propulsion behind each step. There is reason to expect the growth to be sustainable, although destabilizing political tensions will arise from the increasing inequality. The paper also evaluates how India's growth relates to the global economy.

Journal ArticleDOI
TL;DR: This paper found that the use of closed economy models without frictions is not useful for the analysis of short-run variations in the rate of economic growth, leaving the reader no closer to understanding these periods of depression and slow growth.
Abstract: This book collects essays, most of which were published earlier, into an advertisement for real business cycle (RBC) analysis. Half of the essays discuss the Great Depression; half discuss events of the 1980s and 1990s. They all use the general equilibrium model of economic growth to analyze short-run fluctuations in the rate of economic growth of various countries. I find that the use of closed economy models without frictions is not useful for the analysis of short-run variations in the rate of economic growth. Almost all of these essays end by claiming that variations in the rate of GDP growth were due to changes in the rate of total factor productivity (TFP) growth. They do not provide any explanation for fluctuations in the rate of TFP growth, leaving the reader no closer to understanding these periods of depression and slow growth. I discuss in turn the essays on the Great Depression, the essays on more recent fluctuations, and the definition of "great depressions" used in this volume.

Journal ArticleDOI
TL;DR: In this article, the authors of Full Disclosure: The Perils and Promise of Transparency provide a thorough discussion of government mandated disclosure policies and use their book to frame an empirical assessment of whether these?and other information policies?have significantly reduced the costs to consumers created by imperfect information.
Abstract: The economics of information has identified an important role for government to correct situations where competition is not sufficient to reveal valuable information to consumers. Archon Fung, Mary Graham, and David Weil's Full Disclosure: The Perils and Promise of Transparency provides a thorough discussion of government mandated disclosure policies. I use their book to frame an empirical assessment of whether these?and other information policies?have significantly reduced the costs to consumers created by imperfect information. My conclusion, which calls for more research, is that government information policies have amounted to weak solutions in search of a problem.

Journal ArticleDOI
TL;DR: In this paper, Fair updated the model to incorporate the most recent data and used it to analyze several important empirical questions, such as whether the U.S. economy moved into a new age of high productivity in the last half of the 1990s and the dynamics of prices, output, and unemployment.
Abstract: Ray Fair's Estimating How the Macroeconomy Works is the latest in a series of books by Fair that build, estimate, and apply his macroeconometric model to study the U.S. economy. In this book, Fair updates the model to incorporate the most recent data and uses it to analyze several important empirical questions, such as whether the U.S. economy moved into a new age of high productivity in the last half of the 1990s and the dynamics of prices, output, and unemployment. This review places his work in the context of the historical evolution of aggregate econometric models, compares it with the current developments in the estimation of dynamic stochastic general equilibrium models, and discusses some salient aspects of Fair's contributions.

Journal ArticleDOI
Stephen Nickell1
TL;DR: The authors of America Works as discussed by the authors proposed a law that entitled all employees in the United States to four weeks paid holiday per year in addition to public holidays, and this may transform summertime in United States.
Abstract: America Works is a splendid book and Richard Freeman is to be congratulated on producing a work that sets out what is right and what is wrong with the U.S. labor market while being a joy to read. While I am generally sympathetic to both the analysis and the conclusions, there are a number of points of disagreement that I highlight in this review. In particular, I would add to his policy recommendations by taking a gamble and enacting a law that entitled all employees in the United States to four weeks paid holiday per year in addition to public holidays. This may transform summertime in the United States.

Journal ArticleDOI
TL;DR: This article reviewed the memoirs of Janos Kornai, the famous Hungarian economist who describes his life experiences and the concurrent history of Hungary, leading us through his intellectual evolution, explaining how his thinking evolved, how it was influenced by events, how one research question led to another.
Abstract: This article reviews the memoirs of Janos Kornai. The famous Hungarian economist describes his life experiences and the concurrent history of Hungary. More impor- tantly, he leads us through his intellectual evolution, explaining how his thinking evolved, how it was influenced by events, how one research question led to another. This brings alive the intellectual and historical developments that led to Kornai's work on socialist incentives, on the theory of planning, on the economics of shortage, and on the transition from socialism to capitalism. The book takes us on a journey that encompasses large elements of the history of economic thought in the second half of the twentieth century, as well as the history of Central Europe.

Journal ArticleDOI
TL;DR: The authors conducted interviews with students in selected leading U.S. programs and found that most of the core of graduate instruction (except macro) is handled very well, and that the lack of attention to training teachers is well founded.
Abstract: David Colander's update/reworking of his 1987 volume draws conclusions about graduate study in economics from interviews with students in selected leading U.S. programs. Although not formally statistical, the interviews support the conclusion that most of the core of graduate instruction (except macro) is handled very well. Colander's concern about the lack of attention to training teachers is well founded. His conclusion that fewer idiots savants are being trained than in the 1980s is overly optimistic, and his worry about stresses that graduate students express is misplaced.

Journal ArticleDOI
TL;DR: In this article, the authors reviewed how funded pension plans might be restructured to better meet the policy challenges of global aging and showed that the pension institution must be reformulated to better provide for both economic growth and demographic aging.
Abstract: Global aging will impose greater economic demands on the young and may entail dramatic consumption shortfalls for the old. Against this gloomy backdrop, many analysts hail the world’s funded pension systems as a means to protect future retirement security. The monographs reviewed ask how funded pension plans might be restructured to better meet the policy challenges of global aging. Both show that the pension institution must be reformulated to better provide for both economic growth and demographic aging. Questions remain regarding how retirement policy can better integrate intergenerational adequacy and incentive considerations.