How Large Is the Housing Wealth Effect? A New Approach

This paper presents a simple new method for estimating the size of ‘wealth effects’ on aggregate consumption. The method exploits the well-documented sluggishness of consumption growth (often interpreted as ‘habits’ in the asset pricing literature) to distinguish between short-run and long-run wealth effects. In U.S. data, we estimate that the immediate (next-quarter) marginal propensity to consume from a $1 change in housing wealth is about 2 cents, with a final longrun effect around 9 cents. Consistent with most recent studies, we find a housing wealth effect that is substantially larger than the stock wealth effect. We believe that our approach has sounder theoretical foundations than the currently popular cointegration-based estimation methods, because neither theory nor evidence provides any reason for faith in the existence of a stable cointegrating vector.

Welfare Work Requirements with Paternalistic Government Preferences

Work requirements in means-tested transfer programs have grown in importance in the U.S. and in some other countries. The theoretical literature which considers their possible optimality generally operates within a traditional welfarist framework where some function of the utility of the poor is maximized. Here we consider a case where society is paternalistic and instead has preferences over the actual work allocations of welfare recipients. With this social welfare function, optimality of work requirements is possible but depends on the accuracy of the screening mechanism which assigns work requirements to some benefit recipients and not others. Numerical simulations show that the accuracy must be high for such optimality to occur. The simulations also show that earnings subsidies can be justified with the type of social welfare function used here.

Handedness and Earnings

We examine whether handedness is related to performance in the labor market and, in particular, earnings. Though handedness is not found to be significantly related to earnings for the population as a whole, there is a significant wage effect for left-handed men with high levels of education. This positive wage effect is strongest among those who have lower than average earnings relative to those of similar high education. This effect is not found among women.

Modelling the Birth and Death of Cartels with an Application to Evaluating Antitrust Policy

One of the primary challenges to measuring the impact of antitrust policy on collusion is that the cartel population is unobservable; we observe only the population of discovered cartels. To address this challenge, a model of cartel creation and dissolution is developed to endogenously derive the populations of cartels and discovered cartels. It is then shown how one can infer the impact of antitrust policy on the population of cartels by measuring its impact on the population of discovered cartels. In particular, the change in the distribution on the duration of discovered cartels could be informative in assessing whether a new antitrust policy is reducing the latent rate of cartels.

How Do Cartels Operate?

This paper distills and organizes facts about cartels from about 20 European Commission decisions over 1999-2004. It describes the properties of a collusive outcome, monitoring and punishment methods for enforcing it, the frequency of meetings, the organizational structure of cartels, and what preceded cartel formation.

Precautionary Saving and Precautionary Wealth

This is an entry for The New Palgrave Dictionary of Economics, 2nd Ed.