Economic Inquiry

Articles from Vol. 42, No. 4, October

Diagnosis Murder: The Death of State Death Taxes
Since 1976, more than 30 states have eliminated their "death" taxes and many others have reduced them. This unexplored case of interstate tax competition presents a unique opportunity to develop a new, more satisfying definition of competitor based...
Does Asymmetry of International Shocks Matter for the U.S. Business Cycle?
This article proposes and investigates the asymmetry hypothesis, which predicts that an international asymmetric shock tends to have a stronger and longer effect on the U.S. business cycle than a symmetric shock. The hypothesis finds empirical support...
Exogeneity within the M2 Demand Function: Evidence from a Large Macroeconomic System
A large body of literature investigates whether a stable and predictable long-run association between money and its arguments exists. One point of variation between models is whether to include an interest rate measure directly within the long-run...
Financial Variables and the Simulated Out-of-Sample Forecastability of U.S. Output Growth since 1985: An Encompassing Approach
We reconsider the out-of-sample forecasting ability of a large number of financial variables with respect to real output growth over the 1985:1 1999:4 period. We show that models including financial variables display almost no forecasting ability relative...
Government Debt and Excess Sensitivity of Private Consumption: Estimates from OECD Countries
This article investigates the role of government debt in the degree of excess sensitivity of private consumption to current disposable income. Because this type of excess sensitivity is generally attributed to liquidity constraints, this amounts to...
Growth with Endogenous Risk of Biological Invasion
We model biological invasions as an unintended by-product of capital accumulation. We distinguish three spillover effects: (1) a negative production externality, (2) a negative or positive consumption externality and (3) an increase in the risk of...
International and Intersectoral R&D Spillovers in the OECD and East Asian Economies
This study empirically explores international and intersectoral R&D spillover effects on the total factor productivity growth of manufacturing and nonmanufacturing sectors based on a pooled time-series data set of 14 OECD economies and 3 East Asian...
Labor Market Search and Optimal Retirement Policy
A popular and long-standing view is that social security is a means for young, unemployed people to "purchase" jobs from older workers. Can social security, by encouraging retirement and hence creating job vacancies for the young, improve the allocation...
Life Expectancy, Schooling Time, Retirement, and Growth
I analyze how changes in life expectancy affect retirement age, education time, and growth rates of economies. I set up a continuous time, overlapping generations model of endogenous growth with externalities in human capital production. I find that...
Mutual Raiding of Production and the Emergence of Exchange
Joint exchange and raiding can emerge in a world of mutual raiding when the appropriated production is less valuable to the appropriator than to the defender and the defense is not too inferior to attack. The amounts of resources allocated to production...
On the Internal Contradictions of the Law of One Price
As stated originally, the venerable law of one price succinctly describes long-run equilibrium in a perfectly competitive market. The law was later amended, defining a market as the geographic area within which the same thing sells for the same price...
The Economics of the Counter-Reformation: Incumbent-Firm Reaction to Market Entry
The Catholic Church reacted to the Protestant Reformation by taking on the defensive posture of an incumbent-firm monopoly fighting to survive in the face of new competition. Contemporary firms typically respond to rival entry by rewriting their corporate...
Time Preference and Life Cycle Consumption with Endogenous Survival
I. INTRODUCTION Economic theory has traditionally regarded preferences as given. As a result, there is little guidance for economists on how to formulate intertemporal preferences. The standard approach, derived from Samuelson (1937), is to assume...
Two-Player Asymmetric Contests with Ratio-Form Contest Success Functions
I examine players' equilibrium effort levels in two-player asymmetric contests with ratio-form contest success functions. I first characterize the Nash equilibrium of the simultaneous-move game. I show that the equilibrium effort ratio is equal to...