Information, School Choice, and Academic Achievement: Evidence from Two Experiments*Hastings, Justine S.; Weinstein, Jeffrey M.
doi: 10.1162/qjec.2008.123.4.1373pmid: N/A
We examine a natural experiment and a field experiment that provided direct information on school test scores to lower-income families in a public school choice plan. Receiving information significantly increases the fraction of parents choosing higher-performing schools. Parents with high-scoring alternatives nearby were more likely to choose nonguaranteed schools with higher test scores. Using random variation from each experiment, we find that attending a higher-scoring school increases student test scores. The results imply that school choice will most effectively increase academic achievement for disadvantaged students when parents have easy access to test score information and good options from which to choose.
Five Facts about Prices: A Reevaluation of Menu Cost Models*Nakamura, Emi; Steinsson, Jón
doi: 10.1162/qjec.2008.123.4.1415pmid: N/A
We establish five facts about prices in the U.S. economy: (1) For consumer prices, the median frequency of nonsale price change is roughly half of what it is including sales (9–12% per month versus 19–20% per month for identical items; 11–13% per month versus 21–22% per month including product substitutions). The median frequency of price change for finished-goods producer prices is comparable to that of consumer prices excluding sales. (2) One-third of nonsale price changes are price decreases. (3) The frequency of price increases covaries strongly with inflation, whereas the frequency of price decreases and the size of price increases and price decreases do not. (4) The frequency of price change is highly seasonal: it is highest in the first quarter and then declines. (5) We find no evidence of upwardsloping hazard functions of price changes for individual products. We show that the first, second, and third facts are consistent with a benchmark menu-cost model, whereas the fourth and fifth facts are not.
Luther and Suleyman*Iyigun, Murat
doi: 10.1162/qjec.2008.123.4.1465pmid: N/A
Various historical accounts have suggested that the Ottomans' rise helped the Protestant Reformation as well as its offshoots, such as Zwinglianism, Anabaptism, and Calvinism, survive their infancy and mature. Utilizing a comprehensive data set on violent confrontations for the interval between 1401 and 1700 CE, I show that the incidence of military engagements between the Protestant Reformers and the Counter-Reformation forces between the 1520s and 1650s depended negatively on the Ottomans' military activities in Europe. Furthermore, I document that the impact of the Ottomans on Europe went beyond suppressing ecclesiastical conflicts only: at the turn of the sixteenth century, Ottoman conquests lowered the number of all newly initiated conflicts among the Europeans roughly by 25 percent, while they dampened all longer-running feuds by more than 15 percent. The Ottomans' military activities influenced the length of intra-European feuds too, with each Ottoman-European military engagement shortening the duration of intra-European conflicts by more than 50 percent. Thus, while the Protestant Reformation might have benefited from—and perhaps even capitalized on—the Ottoman advances in Europe, the latter seems to have played some role in reducing conflicts within Europe more generally.
Cross-Border Returns Differentials*Curcuru, Stephanie E.; Dvorak, Tomas; Warnock, Francis E.
doi: 10.1162/qjec.2008.123.4.1495pmid: N/A
Using a monthly data set on the foreign equity and bond portfolios of U.S. investors and the U.S. equity and bond portfolios of foreign investors, we find that the returns differential for portfolio securities is far smaller than previously reported. Examining all U.S. claims and liabilities, we find that previous estimates of large differentials are biased upward. The bias owes to computing implied returns from an internally inconsistent data set of revised data; original data produce a much smaller differential. We also attempt to reconcile our findings with observed patterns of cumulated current account deficits, the net international investment position, and the net income balance. Overall, we find no evidence that the United States can count on earning substantially more on its claims than it pays on its liabilities.
Does Regionalism Affect Trade Liberalization Toward Nonmembers?*Estevadeordal, Antoni; Freund, Caroline; Ornelas, Emanuel
doi: 10.1162/qjec.2008.123.4.1531pmid: N/A
We examine the effect of regionalism on unilateral trade liberalization using industry-level data on applied most-favored nation (MFN) tariffs and bilateral preferences for ten Latin American countries from 1990 to 2001. We find that preferential tariff reduction in a given sector leads to a reduction in the external (MFN) tariff in that sector. External liberalization is greater if preferences are granted to important suppliers. However, these “complementarity effects” of preferential liberalization on external liberalization do not arise in customs unions. Overall, our results suggest that concerns about a negative effect of preferential liberalization on external trade liberalization are unfounded.
Impacts of Entry by Counterfeiters*Qian, Yi
doi: 10.1162/qjec.2008.123.4.1577pmid: N/A
This paper uses a natural experiment to test the impact of counterfeiting under weak intellectual property rights. I collect new panel data from Chinese shoe companies from 1993–2004. By exploiting the discontinuity of government enforcement efforts for the footwear sector in 1995 and the differences in authentic companies' relationships with the government, I identify and measure the effects of counterfeit entry on authentic prices, qualities, and other market outcomes. The results show that brands with less government protection differentiate their products through innovation, self-enforcement, vertical integration of downstream retailers, and subtle high-price signals. These strategies push up authentic prices and are effective in reducing counterfeit sales.
How Do Incumbents Respond to the Threat of Entry? Evidence from the Major Airlines*Goolsbee, Austan; Syverson, Chad
doi: 10.1162/qjec.2008.123.4.1611pmid: N/A
We examine how incumbents respond to the threat of entry by competitors (as distinct from how they respond to actual entry). We look specifically at passenger airlines, using the evolution of Southwest Airlines' route network to identify particular routes where the probability of future entry rises abruptly. We find that incumbents cut fares significantly when threatened by Southwest's entry. Over half of Southwest's total impact on incumbent fares occurs before Southwest starts flying. These cuts are only on threatened routes, not those out of non-Southwest competing airports. The evidence on whether incumbents are seeking to deter or accommodate entry is mixed.
Liquidation Values and the Credibility of Financial Contract Renegotiation: Evidence from U.S. Airlines*Benmelech, Efraim; Bergman, Nittai K.
doi: 10.1162/qjec.2008.123.4.1635pmid: N/A
How do liquidation values affect financial contract renegotiation? While the “incomplete-contracting” theory of financial contracting predicts that liquidation values determine the allocation of bargaining power between creditors and debtors, there is little empirical evidence on financial contract renegotiations and the role asset values play in such bargaining. This paper attempts to fill this gap. We develop an incomplete-contracting model of financial contract renegotiation and estimate it using data on the airline industry in the United States. We find that airlines successfully renegotiate their lease obligations downward when their financial position is sufficiently poor and when the liquidation value of their fieet is low. Our results show that strategic renegotiation is common in the airline industry. Moreover, the results emphasize the importance of the incomplete contracting perspective to real-world financial contract renegotiation.
Competing with the New York Stock Exchange*Brown, William O.; Mulherin, J. Harold; Weidenmier, Marc D.
doi: 10.1162/qjec.2008.123.4.1679pmid: N/A
Research on information economics and securities markets dating back to Stigler (Journal of Political Economy, 69 (1961), 213–225; Journal of Business, 37 (1964), 117–142) argues that trading will tend to centralize in major market centers such as the New York Stock Exchange (NYSE). The NYSE's recent mergers with Archipelago and Euronext bring questions about the viability and effects of competition between stock exchanges to the policy forefront. We examine the largely forgotten but unparalleled episode of competition between the NYSE and the Consolidated Stock Exchange of New York (Consolidated) from 1885 to 1926. The Consolidated averaged 23% of NYSE volume for approximately forty years by operating a second market for the most liquid securities that traded on the Big Board. Our results suggest that NYSE bid-ask spreads fell by more than 10% when the Consolidated began to trade NYSE stocks and subsequently increased when the Consolidated ceased operations. The empirical analysis suggests that this historical episode of stock market competition improved consumer welfare by an amount equivalent to US$9.6 billion today.