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We test the hypothesis that information and communication technologies (ICT) polarize labor markets by increasing demand for the highly educated at the expense of the middle educated, with little effect on low-educated workers. Using data on the United States, Japan, and nine European countries from 1980 to 2004, we find that industries with faster ICT growth shifted demand from middle-educated workers to highly educated workers, consistent with ICT-based polarization. Trade openness is also associated with polarization, but this is not robust to controlling for R&D. Technologies account for up to a quarter of the growth in demand for highly educated workers.

We show that democratic change may be triggered by transitory economic shocks. Our approach uses within-country variation in rainfall as a source of transitory shocks to sub-Saharan African economies. We find that negative rainfall shocks are followed by significant improvement in democratic institutions. This result is consistent with the economic approach to political transitions, where transitory negative shocks can open a window of opportunity for democratic improvement. Instrumental variables estimates indicate that following a transitory negative income shock of 1 percent, democracy scores improve by 0.9 percentage points and the probability of a democratic transition increases by 1.3 percentage points.

This paper argues that, contrary to the conventional wisdom, stock return synchronicity (or R2) can increase when transparency improves. In a simple model, we show that, in more transparent environments, stock prices should be more informative about future events. Consequently, when the events actually happen in the future, there should be less “surprise” (i.e., less new information is impounded into the stock price). Thus a more informative stock price today means higher return synchronicity in the future. We find empirical support for our theoretical predictions in 3 settings: namely, firm age, seasoned equity offerings (SEOs), and listing of American Depositary Receipts (ADRs).

We study the importance of family ties on economic behavior. We define our measure of family ties using individual responses from the World Value Survey (WVS) regarding the role of the family and the love and respect that children are expected to have for their parents in 81 countries. We show that with strong family ties home production is higher and families larger, labor force participation of women and youngsters, and geographical mobility lower. To assess causality, we look at the behavior of second generation immigrants. Our results overall indicate a significant influence of the strength of family ties on economic outcomes.

This paper studies the role of job displacement in the household bankruptcy decision. Using an event-study methodology, I find that NLSY respondents are over three times more likely to file for bankruptcy immediately following a job loss. Using county-level data, I find similar magnitudes in the aggregate, with significant effects lasting two to three years. The results suggest that unemployment spells can have significant long-term consequences on households’ credit market outcomes.

Most empirical evidence suggests that the Fisher effect, stating that inflation and nominal interest rates should cointegrate with a unit slope on inflation, does not hold, a finding at odds with many theoretical models. This paper argues that these results can be attributed in part to the low power of univariate tests, and that the use of panel data can generate more powerful tests. For this purpose, we propose two new panel cointegration tests that can be applied under very general conditions, and that are shown by simulation to be more powerful than other existing tests. These tests are applied to a panel of quarterly data covering 20 OECD countries between 1980 and 2004. The evidence suggest that the Fisher effect cannot be rejected once the panel evidence on cointegration has been taken into account.

We document a link between U.S. credit supply and rising personal bankruptcy rates. We exploit the exogenous variation in market contestability brought on by banking deregulation—the relaxation of entry restrictions in the 1980s and 1990s—at the state level. We find deregulation explains at least 10% of the rise in bankruptcy rates. We also find that deregulation leads to increased lending, lower loss rates on loans, and higher lending productivity. Our findings indicate that increased competition prompted banks to adopt sophisticated credit rating technology, allowing for new credit extension to existing and previously excluded households.

Natural disasters are one of the major problems facing humankind. Between 1980 and 2004, two million people were reported killed and five billion people cumulatively affected by around 7,000 natural disasters, according to the dataset maintained by the Centre for Research on the Epidemiology of Disasters (CRED) at University of Louvain (Belgium). The economic costs are considerable and rising. The direct economic damage from natural disasters between 1980–2004 is estimated at around $1 trillion. This paper starts by describing the incidence of natural disasters, where they strike, and their development over time. It then discusses how societal factors act to protect people from or expose them to natural hazards. The final section discusses the determinants and targets of international aid to disaster victims.

This paper develops panel data tests for the null hypothesis of no error correction in a model with common stochastic trends. The asymptotic distributions of the new test statistics are derived and simulation results are provided to suggest that they perform well in small samples.

There is little evidence in the literature on the relative importance of the underlying sources of merger gains. Prior literature suggests that synergies could arise due to taxes, market power, or efficiency improvements. Based on Value Line forecasts, we estimate the average synergy gains in a broad sample of 264 large mergers to be 10.03% of the combined equity value of the merging firms. The detailed data in Value Line projections allow for the decomposition of these gains into underlying operating and financial synergies. We estimate that tax savings contribute only 1.64% in additional value, while operating synergies account for the remaining 8.38%. Operating synergies are higher in focused mergers, while tax savings constitute a large fraction of the gains in diversifying mergers. The operating synergies are generated primarily by cutbacks in investment expenditures rather than by increased operating profits. Overall, the evidence suggests that mergers generate gains by improving resource allocation rather than by reducing tax payments or increasing the market power of the combined firm.