THE AMERICAN ECONOMIC REVIEW VOLUME XCIiIl BOARD OF EDITORS JAMES ANDREONI PATRICK KEHOE JosHUA D. ANGRIST PETER J. KLENOW SUSAN ATHEY RACHEL E. KRANTON ANDREW ATKESON Tracy R. Lewis A. CRAIG BURNSIDE Rosert A. Marco CoLIN CAMERER R. PrReEsTON McAFEE ANNE C. CASE ENRIQUE G. MENDOZA DoNALD Davis GILBERT E. METCALF ALLAN DRAZEN STEPHEN Morris CHARLES ENGEL Tuomas J. NECHYBA DENNIS N. EppLe RAGHURAM G. RAJAN RoBerT C. FEENSTRA MICHAEL R RANSOM DANIEL FRIEDMAN JAMES B. REBITZER JEFFREY C. FUHRER CARMEN M. REINHART MartTIN S. GAYNOR MICHAEL H. RIORDAN Davip GENESOVE ILYA SEGAL BENJAMIN E. HERMALIN RosBert W. STAIGER CHARLES A. HOLT M. Scotr TAyLor HiLary Hoynes DANIEL R. VINCENT PETER N. IRELAND KENNETH WOLPIN EDITOR BEN S. BERNANKE CO-EDITORS B. DOUGLAS BERNHEIM TIMOTHY J. BESLEY DAVID CARD RICHARD ROGERSON MANAGING EDITOR LYNN FLEISHER THE AMERICAN ECONOMIC ASSOCIATION Executive Office: Nashville, Tennessee Editorial Office: 209 Nassau Street, Princeton, NJ 08542-4601 Copyright 2003 All Rights Reserved AMERICAN ECONOMIC ASSOCIATION CONTENTS OF ARTICLES AND SHORTER PAPERS R. E. Lucas, Jr.: Macroeconomic Priorities . Evidence from the Classical Gold Standard J. A. Chevalier, A. K Kashyap, and P. E. Rossi: Why Don’t Prices Rise During Periods of Peak B. D. Bernheim, L. Forni, J. Gokhale, and L. J. Demand? Evidence from Scanner Data... . Kotlikoff: The Mismatch Between Life Insur- ance Holdings and Financial Vulnerabilities: T. G. Andersen, T. Bollerslev, F. X. Diebold, and Evidence from the Health and Retirement C. Vega: Micro Effects of Macro Announce- Study ments: Real-Time Price Discovery in Foreign Exchange D. Masclet, C. Noussair, S. Tucker, and M.-C. Villeval: Monetary and Nonmonetary Punish- J. Imbs and R. Wacziarg: Stages of Diversification ment in the Voluntary Contributions Mecha- nism J. Hassler, J. V. R. Mora, K. Storesletten, and F. M. D. Shapiro and J. Slemrod: Consumer Response Zilibotti: The Survival of the Welfare to Tax Rebates C.-T. Hsieh: Do Consumers React to Anticipated A. Abadie and J. Gardeazabal: The Economic Income Changes? Evidence from the Alaska Costs of Conflict: A Case Study of the Basque Permanent Fund Country M. Stephens Jr.: “3rd of tha Month”: Do Social V. P. Crawford: Lying for Strategic Advantage: Security Recipients Smooth Consumption Be- Rational and Boundedly Rational Misrepresen- tween Checks? tation of Intentions B. Dup . and W.-F. Liu: Jealousy and Equilibrium A. J. Robson and H. S. Kaplan: The Evolution of Overconsumption Human Life Expectancy and Intelligence in F. D. Blau, L. M. Kehn, J. Y. Moriarty, and A. P. Hunter-Gatherer Economies . . . Souza: The Role of the Family in Immigrants’ J. E. Anderson and E. van Wincoop: Gravity with Labor-Market Activity: An Evaluation of Alter- Gravitas: A Solution to the Border Puzzle native Explanations: Comment J. Agnew, P. Balduzzi, and A. Sundén: Portfolio C. C. de Fontenay and J. S. Gans: Organizational Choice and Trading in a Large 401(k) Plan Design and Technology Choice under Intrafirm W. B. MacLeod: Optimal Contracting with Subjec- Bargaining: Comment tive Evaluation L. A. Stole and J. Zwiebel: Organizational Design and Technology Choice under Intrafirm Bar- N. Marceau and M. Smart: Corporate Lobbying and gaining: Reply Commitment Failure in Capital Taxation . . E. Y. Amiran and D. A. Hagen: Willingness To Pay J. Komlos: Access to Food and the Biological Stan- and Willingness To Accept: How Much Can dard of Living: Perspectives on the Nutritional They Differ? Comment Status of Native Americans W. M. Hanemann: Willingness To Pay and Will- S. Jain and S. W. Mukand: Redistributive Promises ingness To Accept: How Much Can They Dif- and the Adoption of Economic Reform . . . fer? Reply C. E. Walsh: Speed Limit Policies: The Output Gap V. L. Smith: Constructivist and Ecological Rational- and Optimal Monetary Policy ity in Economics S. M. Dynarski: Does Aid Matter? Measuring the I. Segal: Optimal Pricing Mechanisms with Un- Effect of Student Aid on College Attendance known Demand and Completion . P. Francois and H. Lloyd-Ellis: Animal Spirits V. A. Ginsburgh and J. C. van Ours: Expert Opin Through Creative Destruction ion and Compensation: Evidence from a Musi- cal Competition. . . G. P. Baker and T. N. Hubbard: Make Versus Buy in Trucking: Asset Ownership, Job Design, and E. J. Miravete: Choosing the Wrong Calling Plan? Information Ignorance and Learning P. Beaudry and D. A. Green: Wages and Employ- C. Wei: Energy, the Stock Market, and the Putty- ment in the United States and Germany: What Clay Investment Model Explains the Differences? M. J. Kamstra, L. A. Kramer, and M. D. Levi: C. Chamley: Dynamic Speculative Attacks Winter Blues: A SAD Stock Market Cycle . \. Levin, V. Wieland, and J. C. Williams: The J. E. Lépez-Cérdova and C. M. Meissner: Ex- Performance of Forecast-Based Monetary Pol- change-Rate Regimes and International Trade: icy Rules Under Model Uncertainty Y.-K. Che and I. Gale: Optimal Design of Research C.-W. Li: Endogenous Growth Without Scale Ef- REESE 20 ise eettnns og hoa e Py alte See a eee fects: Comment J. Andreoni, M. Castillo, and R. Petrie: What Do E. L. Glaeser and E. F. P. Luttmer: The Misallo- Bargainers’ Preferences Look Like? Experi- cation of Housing Under Rent Control .. . . ments with a Convex Ultimatum Game... . P. Diamond and Jj. Geanakoplos: Social Security P. K. Schott: One Size Fits All? Heckscher-Ohlin Investment in Equities Specialization in Global Production L. M. B. Cabral and J. Mata: On the Evolution of the M. Thoenig and T. Verdier: A Theory of Defensive Firm Size Distribution: Facts and Theory. . . . Skill-Biased Innovation and Globalization . . D. de la Croix and M. Doepke: Inequality and A. Abdulkadiroglu and T. Sénmez: School Choice: Growth: Why Differential Fertility Matters . . A Mechanism Design Approach R. Blundell, H. Reed, and T. M. Stoker: Interpret- J. P. Johnson and D. P. Myatt: Multiproduct Qual- ing Aggregate Wage Growth: The Role of La- ity Competition: Fighting Brands and Product bor Market Participation TSUN REA MEE 5 6° hd 562 8a ele a kee Ss R. Pande: Can Mandated Political Representation In- J. E. Rauch and V. Trindade: Information, Inter- crease Policy Influence for Disadvantaged Minor- national Substitutability, and Globalization . . ities? Theory and Evidence from India J. Andreoni and A. A. Payne: Do Government D. Focarelli and F. Panetta: Are Mergers Beneficial Grants to Private Charities Crowd Out Giving to Consumers? Evidence from the Market for or Fund-raising? Bank Deposits A. Rangel: Forward and Backward Intergenerational E. Levy-Yeyati and F. Sturzenegger: To Float or to Goods: Why Is Social Security Good for the Fix: Evidence on the Impact of Exchange Rate Regimes on Growth J. Levin: Relational Incentive Contracts C. Mayer and T. Sinai: Network Effects, Conges- J. Chan and E. Eyster: Does Banning Affirmative tion Externalities, and Air Traffic Delays: Or Action Lower College Student Quality? ... . Why Not All Delays Are Evil B. D. McCullough and H. D. Vinod: Verifying the M. A. Kose, C. Otrok, and C. H. Whiteman: In- Solution from a Nonlinear Solver: A Case ternational Business Cycles: World, Region, and Country-Specific Factors J. Andreoni, W. Harbaugh, and L. Vesterlund: J. Laitner and D. Stolyarov: Technological Change The Carrot or the Stick: Rewards, Punishments, and the Stock Market and Cooperation A. B. Bernard, J. Eaton, J. B. Jensen, and S. S. Kalemli-Ozcan, B. E. Sgrensen, and O. Yosha: Kortum: Plants and Productivity in Interna- Risk Sharing and Industrial Specialization: Re- tional Trade gional and International Evidence W. P. Rogerson: Simple Menus of Contracts in C. L. Evans: The Economic Significance of National Border Effects Cost-Based Procurement and Regulation . . . N. Wang: Caballero Meets Bewley: The Permanent- D. A. Black, J. A. Smith, M. C. Berger, and B. J. Income Hypothesis in General Equilibrium Noel: Is the Threat of Reemployment Services More Effective Than the Services Themselves? C. W. Calomiris and J. R. Mason: Consequences of Evidence from Random Assignment in the UI Bank Distress During the Great Depression . . System I. Palacios-Huerta: An Empirical Analysis of the T. N. Hubbard: Information, Decisions, and Produc- Risk Properties of Human Capital Returns . . tivity: On-Board Computers and Capacity Uti- O. R. Phillips, D. J. Menkhaus, and K. T. Coatney: lization in Trucking Collusive Practices in Repeated English Auc- T. Hertz: Upward Bias in the Estimated Returns to tions: Experimental Evidence on Bidding Education: Evidence from South Africa... . Rings S. Holden and J. C. Driscoll: Inflation Persistence B. A. Blonigen, R. B. Davies, and K. Head: Esti- and Relative Contracting mating the Knowledge-Capital Model of the Multinational Enterprise: Comment M. A. Thomasson: The Importance of Group Cov- D. L. Carr, J. R. Markusen, and K. E. Maskus: erage: How Tax Policy Shaped U.S. Health Estimating the Knowledge-Capital Model of Insurance the Multinational Enterprise: Reply 995 H. Shalit and S. Yitzhaki: An Asset Allocation A. J. Field: The Most Technologically Progressive Puzzle: Comment 1002 Decade of the Century C. Hanes and J. A. James: Wage Adjustment Under C. W. Calomiris and J. R. Mason: Fundamentals, Low Inflation: Evidence from U.S. History . Panics, and Bank Distress During the Depres- sion M. Raith: Competition, Risk, and Managerial Incen- P. W. Rhode and K. S. Strumpf: Assessing the Importance of Tiebout Sorting: Local Hetero- E. H. Bulte, R. D. Horan, and J. F. Shogren: geneity from 1850 to 1990 Elephants: Comment J. Tirole: Inefficient Foreign Borrowing: A Dual- - Kremer and C. Morcom: Elephants: Reply . and Common-Agency Perspective . Kahneman: Maps of Bounded Rationality: Psy- C. R. Knittel and V. Stango: Price Ceilings as Focal chology for Behavioral Economics Points for Tacit Collusion: Evidence from A. Marcet and J. P. Nicolini: Recurrent Hyperin- Credit Cards flations and Learning. ..... E. La Ferrara: Kin Groups and Reciprocity: A . P. Attanasio and S. Rohwedder: Pension Wealth Model of Credit Transactions in Ghana. . . . and Household Saving: Evidence from Pension W. D. Bradford: Pregnancy and the Demand for Reforms in the United Kingdom... . 1499 Cigarettes terakar . Dixit and L. Lambertini: Interactions of Com K. Burdett, R. Lagos, and R. Wright: Crime, In- mitment and Discretion in Monetary and Fiscal equality, and Unemployment Policies F. Grubb: Creating the U.S. Dollar Currency Union, . J. Rotemberg: Stochastic Technical Progress, 1748-1811: A Quest for Monetary Stability or Smooth Trends, and Nearly Distinct Business a Usurpation of State Sovereignty for Personal Gain? . A. Jacob and L. Lefgren: Are Idle Hands the D. Bonjour, L. F. Cherkas, J. E. Haskel, D. D. Devil's Workshop? Incapacitation, Concentra- Hawkes, and T. D. Spector: Returns to Edu- tion, and Juvenile Crime cation: Evidence from U.K. Twins A. Pakes: A Reconsideration of Hedonic Price In J. Currie and M. Stabile: Socioeconomic Status and dexes with an Application to PC’s Child Health: Why Is the Relationship Stronger for Older Children? W. A. Brock and A. Xepapadeas: Valuing Biodi- versity from an Economic Perspective: A Uni- A. Dixit: Clubs with Entrapment fied Economic, Ecological, and Genetic S. Hart and A. Mas-Colell: Uncoupled Dynamics Approach . . . Do Not Lead to Nash Equilibrium CONTENTS OF THE PAPERS AND PROCEEDINGS (May Issue) Richard T. Ely Lecture M. R. Rosenzweig: Payoffs from Panels in Low- S. Fischer: Globalization and Its Challenges .. . . Income Countries: Economic Development and Economic Mobility The Future of the IMF and World Bank Recent Advances in Econometric Methodology R. J. Caballero: The Future of the IMF for Policy Analysis A. V. Banerjee and R. He: The World Bank of the J. Hahn and J. Hausman: Weak Instruments: Future Diagnosis and Cures in Empirical Econo- S. Fischer, A. H. Meltzer, J. D. Sachs, and N. metrics Stern: The Future of the IMF and World Bank: G. W. Imbens: Sensitivity to Exogeneity Assump- Panel Discussion tions in Program Evaluation International Transmission of Business Cycles J. M. Wooldridge: Cluster-Sample Methods in Ap- in an Increasing Integrated World Econ- omy Impact of Modern Economic Theory on Policy M. Baxter and M. A. Kouparitsas: Trade Structure, and Empirical Research Industrial Structure, and International Business RN ii cals cece est DS Sy oee ele To Ruthu s J. McMillan: Market Design: The Policy Uses of Theory M. A. Kose, E. S. Prasad, and M. E. Terrones: How Does Globalization Affect the Synchroni- R. E. Hall: Modern Theory of Unemployment Fluc- zation of Busimess Cycles? . .... .. 2a. as tuations: Empirics and Policy Applications . . J. Heathcote and F. Perri: Why Has the U.S. Econ- P.-A. Chiappori and S. D. Levitt: An Examination omy Become Less Correlated with the Rest of of the Influence of Theory and Individual The- J oe a leG hA la S PaO le ae es orists on Empirical Research in Microeconom- POS a tae sets, hie scree ce aa ee New Approaches to Resolving Emerging- Market Financial Crises Views of Economics from Neighboring Social Sciences A. Krueger: Sovereign Debt Restructuring: Messy L. M. Bartels and H. E. Brady: Economic Behavior in Political Context R. S. Kroszner: Sovereign Debt Restructuring . . . D. Kahneman: A Psychological Perspective on Eco- B. Eichengreen and A. Mody: Is Aggregation a nomics Problem for Sovereign Debt Restructuring? . . J. M. Podolny: A Picture Is Worth a Thousand Symbols: A Sociologist’s View of the Eco- Debt, Equity, and Financial Openness nomic Pursuit of Truth A. Shleifer: Will the Sovereign Debt Market Sur- Behavioral Economics, Public Policy, and Pa- P. B. Henry: Capital-Account Liberalization, the ternalism Cost of Capital, and Economic Growth... . R. H. Thaler and C. R. Sunstein: Libertarian Pa- R. Martell and R. M. Stulz: Equity-Market Liber- ternalism .. . alizations as Country IPO’s J. J. Choi, D. Laibson, B. C. Madrian, and A. Metrick: Optimal Defaults The Contribution of Recent Innovations in Data T. O’Donoghue and M. Rabin: Studying Optimal Collection to Development Economics Paternalism, Illustrated by a Model of Sin M. Kremer: Randomized Evaluations of Educa- tional Programs in Developing Countries: Some PMOMMIB RUT AR TANS cwh is Laiysisein se tavin Rew is #3 Experimental Economics C. Udry: Fieldwork, Economic Theory, and Research C. Camerer, T. Ho, and K. Chong: Models of Think- on Institutions in Developing Countries.... . 107 ing, Learning, and Teaching in Games.... . 192 A. Schotter: Decision Making with Naive Advice . . Vew Research on Welfare Reform D. J. Cooper and J. H. Kagel: Lessons Learned: J. Grogger, S. J. Haider, and J. Klerman: Why Did Generalizing Learning Across Games... . the Welfare Rolls Fall During the 1990's? The T. N. Cason and V.-L. Mui: Testing Political Econ- Importance of Entry omy Models of Reform in the Laboratory M. P. Bitler, J. B. Gelbach, and H. W. Hoynes: Some Evidence on Race, Welfare Reform, and Household Income Assessing Living Standards: From the Pre- E. Clark-Kauffman, G. J. Duncan, and P. Morris: Columbian Era to the Present How Welfare Policies Affect Child and Ado- R. H. Steckel: What Can Be Learned from Skeletons lescent Achievement that Might Interest Economists, Historians, and R. M. Blank and R. F. Schoeni: Changes in the Other Social Scientists? Distribution of Children’s Family Income Over H.-J. Voth: Living Standards During the Industrial the 1990’s Revolution: An Economist's Guide Catching Up D. L. Costa and M. E. Kahn: The Rising Price of Nonmarket Goods J. O'Neill: The Gender Gap in Wages, circa 2000 . J. P. Smith: Assimilation across the Latino Genera- tions Maternity and Motherhood F. Welch: Catching Up: Wages of Black Men. . . J. L. Hotchkiss and M. M. Pitts: At What Level of Labor-Market Intermittency Are Women Penal The Political Economy of Ending Racism and the WCAR W. Darity, Jr. and D. Frank: The Economics of Reparations C. Amuedo-Dorantes and K. Mundra: Impact of S. L. Myers, Jr., L. T. Lange, and B. Corrie: The Immigration on Prenatal Care Use and Birth Political Economy of Antiracism Initiatives in the Post-Durban Round Weight: Evidence from California in the NeeeR Me een tian hea. Sya yS ie KS ene 5V-' G. C. Loury: Racial Stigma: Toward a New Para- R. Baughman and S. Dickert-Conlin: Did Expand- digm for Discrimination Theory ing the EITC Promote Motherhood? J. K. S.: Rethinking Economic Discrimination . . . The Implications of Financial and Nonfinancial Risk for Public Pension Reform Health Insurance, Retirement, and Monetary Policy R. J. Shiller: Social Security and Individual Ac- counts as Elements of Overall Risk- I. Dushi and M. Honig: Price and Spouse's i ae ay a eeOee Meret aea e ee Coverage in Employee Demand for Health Insurance S. Nataraj and J. B. Shoven: Comparing the Risks of Social Security with and without Individual M.-E. Lachance and O. S. Mitchell: Guaranteeing Accounts Individual Accounts G. Burtless: What Do We Know About the Risk of E. T. Powers and D. Neumark: The Interaction of Individual Account Pensions? Evidence From Public Retirement Income Programs in the Industrialized Countries United States A. Tuladhar: Monetary Policy Under Imperfect Estate Taxation Capital Markets in a Small Open Economy . . J. M. Poterba and S. J. Weisbenner: Inter-asset Dif- ferences in Effective Estate-Tax Burdens... . J. M. Bakija, W. G. Gale, and J. B. Slemrod: Reducing the Uninsured by Shifting Risk in Charitable Bequests and Taxes on Inheritances Health Insurance and Estates: Aggregate Evidence from across J. Gruber: Evaluating Alternative Approaches to States and Time Incremental Health-Insurance Expansion . . . J. Slemrod: Thanatology and Economics: The Be- J. Holahan, L. M. Nichols, L. J. Blumberg, and havioral Economics of Death Y.-C. Shen: A New Approach to Risk-Spread- ing via Coverage-Expansion Subsidies .. . . The Macroeconomics of Stock-Market Returns K. Swartz: Reducing Risk to Increase Access to J. A. Parker: Consumption Risk and Expected Stock Health Insurance Returns A. Vissing-Jorgensen and O. P. Attanasio: Stock- The Effects of Environmental Regulations on Market Participation, Intertemporal Substitu- Pollution Emissions: Evidence from tion, and Risk-Aversion Plant-Level Data E. R. McGrattan and E. C. Prescott: Average Debt L. D. Snyder, N. H. Miller, and R. N. Stavins: The and Equity Returns: Puzzling? Effects of Environmental Regulation on Tech- nology Diffusion: The Case of Chlorine Man- WACO 6 os. 505, eon a aaa) e Been ee Lessons from Enron W. Antweiler: How Effective Is Green Regulatory J. M. Poterba: Employer Stock and 401(k) Threat? Plans M. Greenstone: Estimating Regulation-Induced W. Guay, S. P. Kothari, and R. Sloan: Accounting Substitution: The Effect of the Clean Air Act on for Employee Stock Options Water and Ground Pollution S. Huddart and P. J. Liang: Accounting in Partner- Preparing and Improving the Economics Teacher Competition Policy in Network Industries W. B. Walstad and W. E. Becker: The Instructional Use and Teaching Preparation of Graduate Stu- S. Borenstein and N. L. Rose: The Impact of Bank- dents in U.S. Ph.D.-Granting Economics De- ruptcy on Airline Service Levels partments J. Farrell: Integration and Independent Innovation M. K. Salemi: A Model Teacher-Education Program on a Network for Economics F. A. Wolak: Unilateral Market Power in Wholesale R. J. B. Goodman, M. Maier, and R. L. Moore: Electricity Markets: The California Market, Regional Workshops to Improve the Teaching 1998-2000 Skills of Economics Faculty