Current Table of Contents

• An Operational Measure of Riskiness
  Journal of Political Economy, Volume 117, Issue 5, Page 785-814, October 2009. <br/> We propose a measure of riskiness of “gambles” (risky assets) that is objective: it depends only on the gamble and not on the decision maker. The measure is based on identifying for every gamble the critical wealth level below which it becomes “risky” to accept the gamble.
• Opinions as Incentives
  Journal of Political Economy, Volume 117, Issue 5, Page 815-860, October 2009. <br/> We study costs and benefits of differences of opinion between an adviser and a decision maker. Even when they share the same underlying preferences over decisions, a difference of opinion about payoff‐relevant information leads to strategic information acquisition and transmission. A decision maker faces a fundamental trade‐off: a greater difference of opinion increases an adviser's incentives to acquire information but exacerbates the strategic disclosure of any information that is acquired. Nevertheless, when choosing from a rich pool of opinion types, it is optimal for a decision maker to select an adviser with some difference of opinion. Centralization of authority is essential to harness these incentive gains since delegation to the adviser can discourage effort.
• Efficiency of Simultaneous Search
  Journal of Political Economy, Volume 117, Issue 5, Page 861-913, October 2009. <br/> This paper presents an equilibrium labor search model in which workers can simultaneously apply to multiple firms to increase their search intensity. They observe firms’ wage postings before choosing where to apply. Owing to coordination frictions, a firm may not receive any applications; otherwise it is able to hire unless all its applicants have better offers. It is shown that the equilibrium converges to the efficient Walrasian outcome as application costs vanish. Even for nonnegligible application costs, the entry of firms, the search intensity, and the number of filled vacancies are constrained efficient. Wage dispersion is essential for constrained efficiency.
• Firm‐Specific Human Capital: A Skill‐Weights Approach
  Journal of Political Economy, Volume 117, Issue 5, Page 914-940, October 2009. <br/> The theory of human capital is agnostic on what constitutes firm‐specific skills. The theory specifies that specific skills contribute to productivity only at the current firm. A broader approach lets all skills be general, but firms use them with different weights attached. For example, computer programming, economics, and accounting are general skills, but there may be only one firm that wants workers trained in all three. One implication is that wage profiles and the split of human capital costs depend on thickness of the market. Another is that firms pay for what appears to be general training.
• Durability of Output and Expected Stock Returns
  Journal of Political Economy, Volume 117, Issue 5, Page 941-986, October 2009. <br/> The demand for durable goods is more cyclical than that for nondurable goods and services. Consequently, the cash flows and stock returns of durable‐good producers are exposed to higher systematic risk. Using the benchmark input‐output accounts of the National Income and Product Accounts, we construct portfolios of durable‐good, nondurable‐good, and service producers. In the cross section, an investment strategy that is long on the durable‐good portfolio and short on the service portfolio earns a risk premium exceeding 4 percent annually. In the time series, an investment strategy that is long on the durable‐good portfolio and short on the market portfolio earns a countercyclical risk premium. We explain these findings in a general equilibrium asset‐pricing model with endogenous production.
• Journal of Political Economy: acknowledges the assistance of
  Journal of Political Economy, Volume 117, Issue 5, Page In Back Cover, October 2009. <br/>
• Abraham Lincoln on the Perils of Debt Deflection
  Journal of Political Economy, Volume 117, Issue 5, Page Back Cover, October 2009. <br/>