Current Table of Contents

• Prejudice and Wages: An Empirical Assessment of Becker’s The Economics of Discrimination
  Journal of Political Economy, Volume 116, Issue 5, Page 773-809, October 2008. <br/> We test the predictions from Becker’s () seminal work on employer prejudice and find that relative black wages (a) vary negatively with the prejudice of the “marginal” white in a state, (b) vary negatively with the prejudice in the lower tail of the prejudice distribution but are unaffected by the prejudice of the most prejudiced persons in a state, and (c) vary negatively with the fraction of a state that is black. Our estimates suggest that one‐quarter of the racial wage gap is due to prejudice, with nontrivial consequences for black lifetime earnings.
• An Economic Index of Riskiness
  Journal of Political Economy, Volume 116, Issue 5, Page 810-836, October 2008. <br/> Define the riskiness of a gamble as the reciprocal of the absolute risk aversion (ARA) of an individual with constant ARA who is indifferent between taking and not taking that gamble. We characterize this index by axioms, chief among them a “duality” axiom that, roughly speaking, asserts that less risk‐averse individuals accept riskier gambles. The index is positively homogeneous, continuous, and subadditive; respects first‐ and second‐order stochastic dominance; and for normally distributed gambles is half of variance/mean. Examples are calculated, additional properties are derived, and the index is compared with others.
• Input and Technology Choices in Regulated Industries: Evidence from the Health Care Sector
  Journal of Political Economy, Volume 116, Issue 5, Page 837-880, October 2008. <br/> This paper examines the implications of regulatory change for input mix and technology choices of regulated industries. We study the increase in the relative price of labor faced by U.S. hospitals that resulted from the move from full cost to partial cost reimbursement under the Medicare Prospective Payment System (PPS) reform. Using the interaction of hospitals’ pre‐PPS Medicare share of patient days with the introduction of PPS, we document substantial increases in capital‐labor ratios and declines in labor inputs following PPS. Most interestingly, we find that PPS seems to have encouraged the adoption of a range of new medical technologies.
• Early Marriage, Age of Menarche, and Female Schooling Attainment in Bangladesh
  Journal of Political Economy, Volume 116, Issue 5, Page 881-930, October 2008. <br/> Using data from rural Bangladesh, we explore the hypothesis that women attain less schooling as a result of social and financial pressure to marry young. We isolate the causal effect of marriage timing using age of menarche as an instrumental variable. Our results indicate that each additional year that marriage is delayed is associated with 0.22 additional year of schooling and 5.6 percent higher literacy. Delayed marriage is also associated with an increase in use of preventive health services. In the context of competitive marriage markets, we use the above results to obtain estimates of the change in equilibrium female education that would arise from introducing age of consent laws.
• Intertemporal Cost Allocation and Investment Decisions
  Journal of Political Economy, Volume 116, Issue 5, Page 931-950, October 2008. <br/> This paper considers the profit‐maximization problem of a firm that must make sunk investments in long‐lived assets to produce output. It is shown that if per‐period accounting income is calculated using a simple and natural allocation rule for investment, called the relative replacement cost (RRC) rule, under a broad range of plausible circumstances, the firm can choose the fully optimal sequence of investments over time simply by choosing a level of investment each period in order to maximize the next period’s accounting income. Furthermore, in a model in which shareholders delegate the investment decision to a better‐informed manager, it is shown that if accounting income based on the RRC allocation rule is used as a performance measure for the manager, robust incentives are created for the manager to choose the profit‐maximizing sequence of investments, regardless of the manager’s own personal discount rate or other aspects of the manager’s personal preferences.
• The Small World of Investing: Board Connections and Mutual Fund Returns
  Journal of Political Economy, Volume 116, Issue 5, Page 951-979, October 2008. <br/> This paper uses social networks to identify information transfer in security markets. We focus on connections between mutual fund managers and corporate board members via shared education networks. We find that portfolio managers place larger bets on connected firms and perform significantly better on these holdings relative to their nonconnected holdings. A replicating portfolio of connected stocks outperforms nonconnected stocks by up to 7.8 percent per year. Returns are concentrated around corporate news announcements, consistent with portfolio managers gaining an informational advantage through the education networks. Our results suggest that social networks may be important mechanisms for information flow into asset prices.
• Journal of Political Economy: acknowledges the assistance of
  Journal of Political Economy, Volume 116, Issue 5, Page In Back Cover, October 2008. <br/>
• Purification of a Mixed Strategy Equilibrium
  Journal of Political Economy, Volume 116, Issue 5, Page Back Cover, October 2008. <br/>