ARTICLES JORDIGALÍ Monetary Policy and Rational Asset Price Bubbles
EM1 NAKAMURA AND JÓN STE1NSSON Fiscal Stimulus in a Monetary Union: Evidence from US Regions
GITA GOP1NATH AND BRENT NE1MAN Trade Adjustment and Productivity in Large Crises
PIERRE DUBOIS, RACHEL GR1FFITH, AND AV1V NEVO Do Prices and Attributes Explain Internatíonal Differences in Food Purchases?
DAVID BESANKO, ULR1CH DORASZELSK1, AND YAROSLAV KRYUKOV The Economics of Predation: What Drives Pricing When There Is Learning-by-Doing?
YANN BRAMOULLÉ, RACHEL KRANTON, Strategic Interactlon and Networks
AND MARTIN D'AMOURS
JEFFREY R. BROWN, STEPHEN G. DIMMOCK, JUN-KOO KANG, AND SCOTT J. WE1SBENNER How University Endowments Respond to Financial Market Shocks: Evidence and Implícatíons
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SHORTER PAPERS: R. Hornbeck and S. Naidu; D. J. Deming, J. S. Hastings, T. J. Kane, and D. O. Stàiger; S. Eriksson and D.-O. Rooth; P. Apps, Y. Andrienko, and R. Rees; L. Petersen and A. Winn; E. Fehr and J."R. Tyran; J. Iversen and U. Sodersrrõm
MARCH 2014
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HAROLD DEMSETZ DISTINGUISHED
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2013 Harold Demsetz is one of the most creative and deep microeconomists of the twentieth century. Several of his contributions anticipated subsequent research by years or even decades and have offered unusualIy insightfúl analyses of fundamental problems of economic theory. Demsetz's most famous paper, "Production, Information Costs, and Economic Organization," written with Armen Alchian, is one of the most cited papers in all of economics. Published in the American Economic Review in 1972, it analyzes the fundamental question first raised by Coase, "What is a firm?", and tries to understand the difference between contracts occurring inside the firm (for example, with employees) and those occurring in the market (for example, with customers). Alchian and Demsetz argue that some contracts are efficiently brought inside the firm because doing so reduces the costs of monitoring of performance, especialIy when production occurs in teams. Alchian and Demsetz's approach has been chalIenged by more recent developments, such as Grossman and Hart (1986), but remains a elassic in the theory ofthe firmo In 1968, Demsetz asked the question "Why regulate utilities?" and argued that it is more efficient to get potential suppliers to compete in prices and terms by offering customers contracts than to control prices. Demsetz's framing of the problem has become the dominant approach to the modern theory of regulation; see, for example, Laffont and Tirole (1993). In the same year, Demsetz published "The Cost of Transacting" in the Quarterly Journal of Economics, which raised fundamental questions about the determinants of transaction costs, and empiricalIy documented the negative relationship between transaction costs and trading volume on different stocks on the New York Stock Exchange. The enormous subfield of finance now known as market microstructure begins with this hugely original artiele. In 1967, Demsetz published a short but tremendously insightful artiele in the American Economic Review, titled "Toward a Theory of Property Rights," in which he analyzed the amount of property rights protection from the efficiency perspective. The artiele argued that property rights are expensive to enforce, and that institutions enforcing them arise efficiently when the benefit of secure property rights outweighs the costs of these institutions. Today, the economic study of institutions is a massive field, and Demsetz's artiele can be justly seen as a founding contribution. In 1985, together with Kenneth Lehn, Demsetz published an empirical artiele in the Journal of Political Economy, titled "The Structure of Corporate Ownership: Causes and Consequences." In that artiele, the authors •.document high ownership concentration of US firms in some sectors, such as newspapers and sports teams, and argue that the amenity potential of running these businesses (now known as "private benefits of control") explains ownership concentration. In modern corporate finance, concentrated corporate ownership is seen as a norm rather than an exception, and private benefits of.control as central determinants of ownership structures. Here again, Demsetz's work carne early and accurately grasped both the empirical reality and the fundamental theoretical issues. The number of are as in which Harold Demsetz's contributions have stood the test of time is remarkable. His work is highly original, independent of prevailing intelIectual currents, and enduring.
HAROLD DEMSETZ
THE
AMERICAN
ECONOMIC
REVIEW
March 2014 Editor PINELOPI KOUJIANOU GOLDBERG
VOLUME
104,
Coeditors MARKAGUIAR MARIANNE BERTRAND MARTIN EICHENBAUM HILARY HOYNES LUIGI PISTAFERRI DEBRAJRAY LARRY SAMUELSON ANDRZEJSKRZYPACZ
Managing Editor
NUMBER
3 COTA
Articles
f,jQit
M
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N? EX._.----.
Monetary Policy and Rational Asset Price Bubbles U j\!'l . Jordi Galí 721 Fiscal Stimulus in a Monetary Union: Evidence from US Regions Emi Nakamura and lón Steinsson
753
Trade Adjustment and Productivity in Large Crises Gita Gopinath and Brent Neiman
793
Do Prices and Attributes Explain International Differences in Food Purchases? Pierre Dubois, Rachei Griffith, and Aviv Nevo
832
The Economics of Predation: What Drives Pricing When There Is Learning-by-Doing? David Besanko, Ulrich Doraszelski, and Yaroslav Kryukov
868
Strategic Interaction and Networks Yann Bramoullé, Rachei Kranton, and Martin D'Amours
898
How University Endowments Respond to Financial Market Shocks: Evidence and Implications leffrey R. Brown, Stephen G. Dimmock, lun-Koo Kang, and Scott 1. Weisbenner
931
STEVEN M. STELLING
Assistant Managing Editor KELLY MARKEL
Board of Editors MANUEL AMADOR POLANTRÀS MARCO BASSETTO SIMONBOARD CRAIG BURNSIDE ARIEL BURSTEIN STEVEN CALLANDER SYLVAIN CHASSANG DIRK ENGELMANN TIMOTHY FEDDERSEN MICHAEL FISHMAN WILLIAM FUCHS GITA GOPINATH GAUTAM GOWRISANKARAN VERONICA GUERRIERI IGALHENDEL SEEMA JAYACHANDRAN SHACHAR KARIV NAVIN KARTIK BRIAN KNIGHT ILANKREMER ARVIND KRISHNAMURTHY JONATHAN LEVIN GILATLEVY BARTLIPMAN HAMISHLOW SHELLY LUNDBERG MATTHEW MITCHELL DILIP MOOKHERJEE GIUSEPPE MOSCARINI TED O'DONOGHUE PHILIP OREOPOULOS JONATHAN PARKER PARAG PATHAK NINA PAVCNIK FABRlZIO PERRI RICARDO REIS JESSE ROTHSTEIN RAJIVSETHI JÓN STEINSSON AMIR SUFI CHRISTOPHER TIMMINS SARAH TURNER ERIC VERHOOGEN LISE VESTERLUND LEEATYARIV
Shorter Papers When the Levee Breaks: Black Migration and Economic Development in the American South Richard Hornbeck and Suresh; 'Naidu
/963
School Choice, School Quality, and Postsecondary Attainment David 1. Deming, lustine S. Hastings, Thomas 1. Kane, anel.Douglas O. Staiger
991
Do Employers Use Unemployment as a Sorting Criterion When Hiring? Evidence from a Field Experiment Stefan Eriksson and Dan-Olof Rooth
1014
Risk and Precautionary Saving in Two-Person Households Patricia Apps, Yuri Andrienko, and Ray Rees
1040
Does Money Illusion Matter?: Comment Luba Petersen and Abel Winn
1047
Ernst Fehr and Jean-Robert Tyran
1063
Does Money Illusion Matter?: Reply
The Dynamic Behavior of the Real Exchange Rate in Sticky Price Models: Comment Jens Iversen and Ulf Sõderstrõm
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