THE AMERICAN ECONOMIC REVIEW VOLUME LXXxXII BOARD OF EDITORS JoseEPH G. ALTONII Rosert H. HAVEMAN JAMES E. ANDERSON Rosert J. Hoprick ALAN J. AUERBACH Kevin D. Hoover KyLe W. BAGWELL JOHN H. KAGEL Rosin W. Boapway JOHN F. KENNAN TimotHy F. BRESNAHAN R. PREsTON MCAFEE Lorne H. CARMICHAEL JOHN McMILLAN STEPHEN G. CECCHETTI JOHN ROBERTS LAWRENCE J. CHRISTIANO RICHARD ROLL GeorGeE W. Evans THOMAS ROMER Henry S. FARBER Davip E. M. SApPINGTON MaryorigE A. FLAVIN SUZANNE A. SCOTCHMER RosBert P. FLoop Rosert H. Tope Nancy GALLINI HA R. VARIAN Jo ANNA GRAY KENNETH WEST REUBEN GRONAU JoHN D. WiLson DanieL S. HAMERMESH LestigE YOUNG EDITOR ORLEY ASHENFELTER CO-EDITORS JOHN Y. CAMPBELL ROGER H. GORDON PAUL R. MILGROM THE AMERICAN ECONOMIC ASSOCIATION Executive Office: Nashville, Tennessee Editorial Office: 209 Nassau Street, Princeton, NJ 08542-4607 Copyright 1992 All Rights Reserved AMERICAN Economic ASSOCIATION CONTENTS OF ARTICLES AND SHORTER PAPERS T. C. Schelling: Some Economics of Global M. Hashimoto and J. Raisian: Employment Warming Tenure and Earnings Profiles in Japan and C. H. Paxson: Using Weather Variability to Esti- the United States: Reply mate the Response of Savings to Transitory R. F. Gorman and J. B. Kehr: Fairness as a Income in Thailand Constraint on Profit Seeking: Comment... . J. Y. Lin: Rural Reforms and Agricultural K. H. Baik and J. F. Shogren: Strategic Behavior Growth in China in Contests: Comment K. O. Moene: Poverty and Landownership ... . Z. J. Acs, D. B. Audretsch, and M. P. Feldman: J. E. Anderson: Domino Dumping, I: Competi- Real Effects of Academic Research: Com- tive Exporters D. Laussel: Strategic Commercial Policy Re- C. Driver: The Origin of Predictable Behavior: visited: A Supply-Function Equilibrium Comment J. Bound and G. Johnson: Changes in the Struc- P. C. Crampton and J. S. Tracy: Strikes and ture of Wages in the 1980’s: An Evaluation of Holdouts in Wage Bargaining: Theory and Alternative Explanations G. R. Solon: Intergenerational Income Mobility S. G. Allen: Changes in the Cyclical Sensitivity of in the United States Wages in the United States, 1981-1987 .... D. J. Zimmerman: Regression Toward Medi- S. G. Cecchetti: Prices During the Great Depres- ocrity in Economic Stature sion: Was the Deflation of 1930-1932 Really L. J. Christiano and M. Eichenbaum: Current Real-Business-Cycle Theories and Aggregate J. D. Hamilton: Was the Deflation During the Labor-Market Fluctuations Great Depression Anticipated? Evidence L. E. Jones and R. E. Manuelli: The Coordina- from the Commodity Futures Market tion Problem and Equilibrium Theories of G. A. Calvo and L. Leiderman: Optimal Inflation Recessions Tax Under Psecommitment: Theory and Evi- B. M. Friedman and K. N. Kuttner: Money, In- dence .. come, Prices, and Interest Rates L. Danziger: () the Prevalence of Labor Con- P. Howitt and R. P. McAfee: Animal Spirits. . tracts with Fixed Duration M. Goodfriend: Information-Aggregation Bias . . G. W. Evans and G. Ramey: Expectation Calcu- G. Bertola and R. J. Caballero: Target Zones lation and Macroeconomic Dynamics and Realignments K. D. Hoover and S. M. Sheffrin: Causation, A. Cukierman, S. Edwards, and G. Tabellini: Spending, and Taxes: Sand in the Sandbox or Seigniorage and Political Instability D. Mookherjee and I. P. L. Png: Monitoring vis- T. Besley and S. Coate: Workfare versus Wel- a-vis Investigation in Enforcement of Law. . . fare: Incentive Arguments for Work Require- J. Crémer and F. Khalil: Gathering Information ments in Poverty-Alleviation Programs Before Signing a Contract J. A. Bishop, J. P. Formby, and P. D. Thistle: R. P. McAfee and J. McMillan: Bidding Rings . . Convergence of the South and Non-South Income Distributions, 1969-1979 A. Rubinstein and A. Wolinsky: Renegotiation- Proof Implementation and Time Prefer- S. Lohmann: Optimal Commitmeni in Monetary CROES «0:45 6c. ee aabeeee ew aloe ees Policy: Credibility versus Fiexibility R. Lopez and A. Panagariya: On the Theory of A. Fishman: Search Technology, Staggered Piecemeal Tariff Reform: The Case of Pure Price-Setting, and Price Dispersion Imported Intermediate Inputs L. M. Lynch: Private-Sector Training and the S. van Wijnbergen: Trade Reform, Policy Uncer- tainty, and the Current Account: A Non- M. Baker: Unemployment Duration: Composi- Expected-Utility Approach tional Effects and Cyclical Variability W. Harless: Actions versus Prospects: M. Ureta: The Importance of Lifetime Jobs ‘n The Effects of Problem Representation on the U.S. Economy, Revisited R. L. Clark and N. Ogawa: Employment Tenure ;. Hollander: Malthus’s Abandonment of Agri- and Earnings Profiles in Japan and the United cultural Protectionism: A Discovery in the States: Comment History of Economic Thought - Knoblauch: A Tight Upper Bound on the C. J. Waller: The Choice of a Conservative Cen- Money Metric Utility Function tral Banker in a Multisector Economy . Kroll and H. Levy: Further Tests of the Sepa- L. Kaplow: Income Tax Deductions for Losses as ration Theorem and the Capital Asset Pricing Insurance J. Alm, B. Jackson, and M. McKee: Institutional M. Parkman: Unilateral Divorce and the Uncertainty and Taxpayer Compliance .. . Labor-Force Participation Rate of Married J. R. Baumgardner: Medicare Physician-Pay- Women, Revisited ment Reform and the Resource-Based Rela- . W. Allen: Marriage and Divorce: Comment . . tive Value Scale: A Re-creation of Efficient . E. Peters: Marriage and Divorce: Reply... . . Reiffen: Equilibrium Vertical Foreclosure: E. Sadoulet: Labor-Service Tenancy Contracts in Comment a Latin American Context . A. Ordover, G. Saloner, and S. C. Salop: G. Holtham and A. Hughes Hallett: Interne- Equilibrium Vertical Foreclosure: Reply . . tional Macroeconomic Policy Coordination When Policymakers Do Not Agree on the . H. Coase: The Institutional Structure ¢f Pro- True Model: Comment duction J. Frankel, S. Erwin, and K. Rockett: Interna- . Skaperdas: Cooperation, Conflict, and Power tional Macroeconomic Policy Coordination in the Absence of Property Rights When Policymakers Do Not Agree on the . Klemperer: Equilibrium Product Lines: Com- True Model: Reply peting Head-to-Head May Be Less Competi- B. Craig and J. Pencavel: The Behavior of Worker Cooperatives: The Plywood Compa- . Smith and R. Wright: Why Is Autoiaobile nies of the Pacific Northwest Insurance in Philadelphia So Damn Expen- T. W. Gilligan: Imperfect Competition and Basing-Point Pricing: Evidence from the Soft- . M. Cohen and S. Klepper: The Anatomy of wood Plywood Industry Industry R&D Intensity Distributions S. J. Kachelmeier and M. Shehata: Examining . S. Grossman: Deposit Insurance, Regulation, Risk Preferences Under High Monetary In- and Moral Hazard in the Thrift Industry: centives: Experimental Evidence from the Evidence from the 1930’s People’s Republic of China . A. Graham: Public Expenditure Under Un- R. Forsythe, F. Nelson, G. R. Neumann, and certainty: The Net-Benefit Criteria J. Wright: Anatomy of an Experimental Polit- Casella: Participation in a Currency Union . . ical Stock Market . K. Backus and P. J. Kehoe: International T. Stratmann: The Effects of Logrolling on Con- Evidence on the Historical Properties of Busi- gressional Voting ness Cycles J. G. Altonji, F. Hayashi, and L. J. Kotlikoff: Is . T. Hoen and E. S. Phelps: Macroeconomic the Extended Family Altruistically Linked? Shocks in Dynamized Model of the Natural Direct Tests Using Micro Data Rate of Unemployment . S. Bernanke and A. S. Blinder: The Federal D. Altig and S. J. Davis: The Timing of Intergen- Funds Rate and the Channels of Monetary erational Transfers, Tax Policy, and Aggre- Transmission gate Savings . W. Wilcox: The Construction of U.S. Con- C. Fershtman and A. Fishman: Price Cycles and sumption Data: Some Facts and Their Impli- Booms: Dynamic Search Equilibrium cations for Empirical Work M. C. Burda and S. Gerlach: Intertemporal . Levine and D. Renelt: A Sensitivity Analysis Prices and the U.S. Trade Balance of Cross-Country Growth Regressions R. Guesnerie: An Exploration of the Eductive . R. Hulten: Growth Accounting When Techni- Justifications of the Rational-Expectations cal Change Is Embodied in Capital Hypothesis . F. LeRoy and W. R. Parke: Stock Price R. J. Caballero: A Fallacy of Composition . . Volatility: Tests Based on the Geometric Random Walk M. I. Kamien, E. Muller, and I. Zang: Research . X. Diebold and G. D. Rudebusch: Have Joint Ventures and R&D Cartels Postwar Economic Fluctuations Been Sta- K. Suzumura: Cooperative and Noncooperative bilized? R&D in an Oligopoly with Spillovers T. R. Lewis and D. E. M. Sappington: Incentives D. Friedman: Theory and Misbehavior of First- for Conservation and Quality-Improvement by Price Auctions: Comment Public Utilities J. H. Kagel and A. E. Roth: Theory and Misbe- P.-A. Edin and J. Zetterberg: Interindustry Wage havior of First-Price Auctions: Comment . . Differentials: Evidence from Sweden and a Comparison with the United States J. C. Cox, V. L. Smith, and J. M. Walker: Theory J. Brandts and C. A. Holt: An Experimental Test and Misbehavior of First-Price Auctions: of Equilibrium Dominance in Signaling Comment A. Merlo and A. R. Schotter: Theory and Misbe- R. R. Boyce, T. C. Brown, G. H. McClelland, G. havior of First-Price Auctions: Comment .. . 1413 L. Peterson, and W. D. Schulze: An Experi- mental Examination of Intrinsic Values as a G. W. Harrison: Theory and Misbehavior of Source of the WTA-WTP Disparity First-Price Auctions: Reply CONTENTS OF THE PAPERS AND PROCEEDINGS (May Issue) Richard T. Ely Lecture D. J. Neven: Regulatory Reform in the Euro- J. Kornai: The Postsocialist Trausition and the pean Community State: Reflections in the Light of Hungarian 1. A. Winters: The Welfare and Policy Implica- Fiscal Problems tions of the International Trade Conse- quences of “1992” The Road Back from Serfdom: A Tribute to Friedrich A. Hayek Political Economy, International Trade, and Eco- S. Carrington: The Remonetization of the Com- nomic Integration monwealth of Independent States A. O. Krueger: Government, Trade, and Eco- A. Bergson: Communist Economic Efficiency nomic Integration Revisited A. Casella: On Markets and Clubs: Economic R. I. McKinnon: Spontaneous Order on the and Political Integration of Regions with Road Back from Socialism: An Asian Per- Unequal Productivity spective R. H. Clarida and R. Findlay: Government, Trade, and Comparative Advantage Key Issues of Soviet Economic Reform S. Fischer and J. Frenkel: Macroeconomic Issues Historical Perspectives on the Economics of Trade of Soviet Reform A. Greif: Institutions and International Trade: J. D. Sachs: Privatization in Russia: Some Lessons from the Commercial Revolution. . Lessons from Eastern Europe D. A. Irwin: Strategic Trade Policy and Mercan- P. Desai: Reforming the Soviet Grain Economy: tilist Trade Rivalries Performance, Problems, and Solutions. . . . A. M. Carles: Principal-Agent Problems in Eariy Trading Companies: A Tale of Two Firms. . Conflict and Peace Economics: Analyses and Man- agement of Trade Conflicts The Origins of Uneven Development: The Rise of J. H. Bergstrand: Real Exchange Rates, Na- the West and the Lag of the Rest tional Price Levels, and the Peace Divi- A. K. Dutt: The Origins of Uneven Develop- ment: The Indian Subcontinent C. E. Petersen: Trade Conflict and Resolution J. E. Inikori: Slavery and Atlantic Commerce, Methodologies 1650-1800 R. Findlay: The Roots of Divergence: Western Economic Pluralism: Asia-Pacific Economies Economic History in Comparative Perspec- ti M. Dutta: Economic Regionalization in Western Europe: Asia-Pacific Economics (Macro- W. Darity, Jr.: A Model of “Original Sin”: Rise economic Core: Microeconomic Optimiza- of the West and Lag of the Rest A. Elek: Trade Policy Options for the Asia-Pacific Intertemporal Dimensions of International Eco- Region in the 1990’s: The Potential of Open nomics Regionalism P. L. Brock: External Shocks and Financial Col- D. Kim: Open Regionalism in the Pacific: A lapse: Foreign-Loari Guarantees and In- tertemporal Substitution of Investment in D. Lorenz: Economic Geography and the Politi- Texas and Chile cal Economy of Regionalization: The Exam- M. Gavin: Intertemporal Dimensions of Interna- ple of Western Europe tional Economic Adjustment: Evidence from the Franco-Prussian War Indemnity European Economic Integration: Where Do We M. Gersovitz and C. H. Paxson: Institutional and Stand? Intertemporal Influences on the Trade of D. Bureau and P. Champsaur: Fiscal Federalism Developing Countries and European Economic Unification G. Dang N’Guyen and R. F. Owen: High-Tech International Factor Mobility: New Issues Competition and Industrial Restructuring in J. N. Bhagwati, E. Dinopoulos, and K. Wong: Light of the Single Market Quid Pro Quo Foreign Investment J. D. Wilson: Optimal Income Taxation and In- B. M. Friedman: Learning from the Reagan Def- ternational Personal Mobility J. A. Frankel: Measuring International Capital W. Vickrey: Meaningfully Defining Deficits and Mobility: A Review Is There a Global Economic Consensus? Political-Economic Equilibrium R. A. Alston, J. R. Kearl, and M. B. Vaughan: Is R. Perotti: Income Distribution, Politics, and There a Consensus Among Economists in Growth A. Caplin and B. Nalebuff: Individuals and Insti- M. Ricketts and E. Shoesmith: British Economic (WHEE... od ain ail we oe ate a Opinion: Positive Science or Normative J. S. Feinstein: Public-Good Provision and Politi- Judgment cal Stability in Europe B. S. Frey and R. Eichenberger: Economics and Economists: A European Perspective ... . Achieving High Employment Without Inflation K. J. Koford and J. B. Miller: Macroeconomic Japanese Public Finance Since the Shoup Commis- Market Incentive Plans: History and Theo- sion retical Rationale K. Kaizuka: The Shoup Tax System and the D. Colander: A Reali Theory of Inflation and Postwar Development of the Japanese Incentive Anti-Inflation Plans Economy W. Vickrey: Chock-Full Employment Without In- Y. Noguchi: The Changing Japanese Economy creased Inflation: A Proposal for Mar- and the Need for a Fundamental Shift in ketable Markup Warrants the Tax System T. Hatta: The Nakasone-Takeshita Tax Reform: Recent Developments in Macroeconomics A Critical Evaluation L. J. Christiano and M. Eichenbaum: Liquid- Empirical Public Finance ity Effects and the Monetary Transmission Mechanism J. M. Poterba: Taxation and Housing: Old Ques- tions, New Answers O. J. Blanchard and P. Diamond: The Flow Ap- proach to Labor Markets T. E. MaCurdy: Work Disincentive Effects of Taxes: A Reexamination of Some Evi- R. J. Caballero and E. M. R. A. Engel: Beyond the Partial-Adjustment Model J. Slemrod: Do Taxes Matter? Lessons from the Vesoeconomics (A Micro-Macro Analysis with Nonperfect Competition and Its Application) Federal Tax Policy for the 1990's Y.-K. Ng: Business Confidence and Depression W. Vickrey: An Updated Agenda for Progressive Prevention: A Mesoeconomic Perspective . . Taxation H. Shi: Continuum of Equilibria and Business A. J. Auerbach: On the Design and Reform of Cycles: A Dynamic Model of Mesoeco- Capital-Gains Taxation ROMMGS << abd bene Ceo ede et J. J. Minarik: Federal Tax Policy for the 1990's: K. Abayasiri-silva: Aggregate Supply Functions The Prospect from the Hill in Closed and Open Economies: A Meso- economic ABOIIS s..< i. s «0.00 68 Ke The Ethics of Land-Value Taxation M. Gaffney: Equity Premises and the Case for Specialization and Rethinking Trade and Growth Taxing Rent Theory T. N. Tideman: Being Just While Conceptions of J. Borland and X. Yang: Specialization and a Justice Are Changing New Approach to Economic Organization D. Friedman: Choosing Metarules for Legal and Growth X. Yang and H. Shi: Specialization and Product Diversity Deficits: Which, How Much, and So What? J. Devereux and L. Locay: Specialization, House- W. H. Buiter and K. M. Kletzer: Who’s Afraid of hold Production, and the Measurement of (POR OE, 8k ee ewesoe oe Economic Growth R. Eisner: Deficit: Which, How Much, and So S. Kim and H. Mohtadi: Labor Specialization and Endogenous Growth Endogenous Growth in Open Economies Transportation Economics L. K. Cheng and E. Dinopoulos: Schumpeter- K. A. Small: Trip Scheduling in Urban Trans- ian Growth and International Business portation Analysis J. F. Kain: The Use of Straw Men in the Eco- R. C. Feenstra, J. R. Markusen, and W. Zeile: nomic Evaluation of Rail Transport Pro- Accounting for Growth with New Inputs: Theory and Evidence A. de Palma: A Game-Theoretic Approach L. A. Rivera-Batiz and D. Xie: GATT, Trade, to the Analysis of Simple Congested Net- and Growth Empirical Evidence on Auction Theory (In Honor X-Inefficiency After a Quarter of a Century of William Vickrey) H. Leibenstein and S. Maital: Empirical Estima- O. Ashenfelter and D. Genesove: Testing for Price tion and Partitioning of X-Inefficiency: A Anomalies in Real-Estate Auctions Data-Envelopment Approach K. Hendricks and R. H. Portner: Joint Biding in R. Frantz: X-Efficiency and Allocative Effi- Federal OCS Auctions R. P. McAfee and D. Vincent: Updating the Re- serve Price in Common-Value Auctions. . . K. J. Button and T. G. Weyman-Jones: Owner- ship Structure, Institutional Organization Gender and Labor-Market Outcomes and Measured X-Efficiency S. A. Kossoudji and L. J. Dresser: The End of a Externalities, Government Intervention, and Indi- Riveting Experience: Occupational Shifts at vidual Responses Ford after World War II C. Rapaport: Rent Regulation and Housing- P. J. Loprest: Gender Differences in Wage Market Dynamics Growth and Job Mobility F. D. Blau and K. M. Kahn: The Gender Earn- R. Michener and C. E. Tighe: A Poisson Regres- ings Gap: Learning from International Com- sion Model of Highway Fatalities....... parisons P. A. Nold: Public Choice and the Allocation of Public Goods: An Empirical Analysis of Lo- Trends in Nonwage Inequality cal School Expenditures D. E. Bloom and R. B. Freeman: The Fall in Private Pension Coverage in the United Economics of the Environment R. W. Hahn and R. N. Stavins: Economic Incen- D. M. Cutler and L. F. Katz: Rising Inequality? tives for Environmental Protection: Inte- Changes in the Distribution of Income and grating Theory and Practice Consumption in the 1980’s E. N. Wolff: Changing Inequality of Wealth... . M. L. Cropper, S. K. Aydede, and P. R. Portney: Rates of Time Preference for Saving Alternative Pedagogies and Economic Education R. L. Bartlett and S. F. Feiner: Balancing the R. B. Howarth and R. B. Norgaard: Environmen- Economics Curriculum: Content, Method, tal Valuation under Sustainable Develop- and Pedagogy C. A. Conrad: Evaluating Undergraduate H. Hettige, R. E. B. Lucas, and D. Wheeler: Courses on Women in the Economy The Toxic Intensity of Industrial Produc- J. Shackelford: Feminist Pedagogy: A Means for tion: Global Patterns, Trends, and Trade Bringing Critical Thinking and Creativity to the Economics Classroom ®