Working Papers

We consider the effect a public revelation of information (e.g. rating, grade) has on signaling and trading in a dynamic model. Competing buyers offer prices to a privately informed seller who can reject these offers and delay trade. This delay…

The subjective framework for reasoning is extended to incorporate the representation of unawareness in games. Both unawareness of actions and decision makers are modeled as well as reasoning about others’ unawareness. It is shown that a small…

We suggest a test for discovering whether a potential expert is informed of the distribution of a stochastic process. In a non-Bayesian non-parametric setting, the expert is asked to make a prediction which is tested against a single realization…

Many firms issue stock options to all employees. We consider three potential economic justifications for this practice: providing incentives to employees, inducing employees to sort, and helping firms retain employees. We gather data on firms’…

Three things happen when emerging economies open their stock markets to foreign investors. First, the aggregate dividend yield falls by 240 basis points. Second, the growth rate of the capital stock increases by an average of 1.1 percentage…

Bekaert, Harvey and Lundblad (BHL) are to be congratulated for producing another paper on equity market liberalizations in emerging markets, and it is a pleasure to discuss their work. Yet, there are three reasons why I may not be an impartial…

The stock market appreciates by an average of 60 percent in real dollar terms when countries announce debt relief agreements under the Brady Plan. In contrast, there is no significant increase in market value for a control group of countries that…

We study the electricity consumption of San Diego-area households following a series of price changes and related events during California’s energy crisis in 2000-01. The analysis uses a five-year panel of disaggregate billing and weather data…

Contrary to the predictions of standard economic theory, capital market liberalization has been a mixed blessing for many countries. Liberalization of debt inflows exposes economies to the risk of crises stemming from sudden changes in investor…

We show that hedonic price indexes may be biased when not all product characteristics are observed. We derive two primary sources of bias. The first is a classical selection problem that arises due to changes over time in the values of unobserved…

Debt relief is unlikely to stimulate investment and growth in the worlds highly indebted poor countries (HIPCs). This is because the HIPCs do not suffer from debt overhang. The principal obstacle to investment and growth in the worlds poorest…

This paper uses daily fund flow data to examine the extent of late trading in the mutual fund industry. Using data from a 10-15 percent subsample of the industry, I find annual long-term shareholder losses due to late trading of about 5 basis…

When Less Developed Countries (LDCs) announce debt relief agreements under the Brady Plan, their stock markets appreciate by an average of 60 percent in real dollar termsa $42 billion increase in shareholder value. In contrast, there is no…

The use of modern microeconomics in policy is illustrated by the markets for spectrum, electricity, greenhouse-gas reductions, defense procurement, and Treasury bills. Further examples are antitrust divestiture rules, market-based redistribution…

We develop a model in which firms set their salary levels before matching with workers. Wages fall relative to any competitive equilibrium while profits rise almost as much, implying little inefficiency. Furthermore, the best firms gain the most…

This chapter explains the logic of structural econometric models and compares them to other types of econometric models. We provide a framework researchers can use to develop and evaluate structural econometric models. This framework pays…

Paragraph IV of the Hatch-Waxman Act provides a mechanism for the litigation of pharmaceutical patent infringement disputes. Many of these cases have been settled with reverse payments by the brand to the generic in return for delayed generic…

Debt relief is unlikely to stimulate investment and growth in the nations being considered for debt relief under the highly indebted poor countries (HIPCs) initiative. This is because the HIPCs do not suffer from debt overhang. The principal…

This paper revisits the empirical evidence on the relationship between economic integration and economic growth. First, we present an updated dataset of openness indicators and trade liberalization dates for a wide cross-section of countries in…

Much of the recent growth and development literature is based on the notion that economies may exhibit multiple equilibria. An economy may get stuck in a vicious circle of poverty as a result of a coordination failure. Little attention has been…