Long‐Term Debt and Optimal Policy in the Fiscal Theory of the Price Level

The fiscal theory says that the price level is determined by the ratio of nominal debt to the present value of real primary surpluses. I analyze long‐term debt and optimal policy in the fiscal theory. I find that the maturity structure of the debt matters. For example, it determines whether news of future deficits implies current inflation or future inflation. When long‐term debt is present, the government can trade current inflation for future inflation by debt operations; this tradeoff is not present if the government rolls over short‐term debt. The maturity structure of outstanding debt acts as a “budget constraint” determining which periods' price levels the government can affect by debt variation alone. In addition, debt policy—the expected pattern of future state‐contingent debt sales, repurchases and redemptions—matters crucially for the effects of a debt operation. I solve for optimal debt policies to minimize the variance of inflation. I find cases in which long‐term debt helps to stabilize inflation. I also find that the optimal policy produces time series that are similar to U.S. surplus and debt time series. To understand the data, I must assume that debt policy offsets the inflationary impact of cyclical surplus shocks, rather than causing price level disturbances by policy‐induced shocks. Shifting the objective from price level variance to inflation variance, the optimal policy produces much less volatile inflation at the cost of a unit root in the price level; this is consistent with the stabilization of U.S. inflation after the gold standard was abandoned.     

Behavior in Multi‐Unit Demand Auctions: Experiments with Uniform Price and Dynamic Vickrey Auctions

We experimentally investigate the sensitivity of bidders demanding multiple units of a homogeneous commodity to the demand reduction incentives inherent in uniform price auctions. There is substantial demand reduction in both sealed bid and ascending price clock auctions with feedback regarding rivals' drop‐out prices. Although both auctions have the same normal form representation, bidding is much closer to equilibrium in the ascending price auctions. We explore the behavioral process underlying these differences along with dynamic Vickrey auctions designed to eliminate the inefficiencies resulting from demand reduction in the uniform price auctions.     

Blazing the Trail: Eight Years of Change in Handling International Development

Rarely do serving senior civil servants speak in public or write for the record: that has tended to be the prerogative of the ministers whom they support. Until February 2002, Sir John Vereker was Permanent Secretary of the UK Department for International Development (DFID). He was invited to address an audience of politicians and development experts, at the All‐Party Parliamentary Group on Overseas Development, on his unique experience of serving for equal periods as head of the former Overseas Development Administration and DFID, at a time of intense policy change. He secured the assent of his Secretary of State and the Editors of Development Policy Review judged that his contribution deserved to be read by a wider audience.     

Life Shocks and Crime: A Test of the “Turning Point” Hypothesis

Other researchers have posited that important events in men's lives-such as employment, marriage, and parenthood-strengthen their social ties and lead them to refrain from crime. A challenge in empirically testing this hypothesis has been the issue of self-selection into life transitions. This study contributes to this literature by estimating the effects of an exogenous life shock on crime. We use data from the Fragile Families and Child Wellbeing Study, augmented with information from hospital medical records, to estimate the effects of the birth of a child with a severe health problem on the likelihood that the infant's father engages in illegal activities. We conduct a number of auxiliary analyses to examine exogeneity assumptions. We find that having an infant born with a severe health condition increases the likelihood that the father is convicted of a crime in the three-year period following the birth of the child, and at least part of the effect appears to operate through work and changes in parental relationships. These results provide evidence that life events can cause crime and, as such, support the "turning point" hypothesis.     

Estimating the Effect of Smoking on Slowdowns in Mortality Declines in Developed Countries

Declines in mortality rates for females at older ages in some developed countries, including the United States, have slowed in recent decades even as decreases have steadily continued in some other countries. This study presents a modified version of the indirect Peto-Lopez method, which uses lung cancer mortality rates as a proxy for smoking exposure, to analyze this trend. The modified method estimates smoking-attributable mortality for more-specific age groups than does the Peto-Lopez method. An adjustment factor is also introduced to account for low mortality in the indirect method’s study population. These modifications are shown to be useful specifically in the estimation of deaths attributable to smoking for females at older ages, and in the estimation of smoking-attributable mortality more generally. In a comparison made between the United States and France with the modified method, smoking is found to be responsible for approximately one-half the difference in life expectancy for females at age 65.     

Designing Lateral Organizations: An Analysis of the Benefits,Costs, and Enablers of Nonhierarchical Organizational Forms*

Twenty-first century organizations will require designs that enable them to cope with turbulent environments. Organizations have experimented with lateral organizational designs for this purpose, but research evidence concerning these forms is sparse. We analyzed data obtained from 512 employees within eight diverse organizations implementing flexible lateral organizations. Using a sequence comparison methodology, we were able to identify and categorize the major costs, benefits, and enablers associated with implementing these forms of complex organizations. Propositions for effectively managing lateral relations were tested and managerial implications were explored.     

Growth and Poverty Reduction in Uganda, 1999–2000: Panel Data Evidence

To explore factors underlying growth and poverty reduction in Africa while overcoming some of the limitations of cross‐country analysis, this article uses micro‐level survey and panel‐data evidence from Uganda spanning 1992–2000. The high elasticity of both income growth and poverty reduction with respect to agricultural output (coffee) prices confirms the benefits from Uganda's decisive liberalisation of output markets. It also suggests the importance of product diversification to protect the poor against price shocks and the potential of cotton‐market improvements in tackling persistent poverty in the North. The importance of improving access to basic education and health care emerges more clearly than in cross‐country analysis, but benefits depend on complementary investments in electricity and other infrastructure, and reductions in civil strife.     

A Great Place to Start: The Role of Military Service on Human Capital Formation

The earnings of African–American males have increased over the past 50 years, but differences remain in their economic progress relative to either white or Asian Americans. Labor market disadvantages in the past were the result of overt discrimination; however, the earnings gap experienced over the last four decades has been linked to human capital differences. It is hypothesized that military service provides a buffer for adverse labor market characteristics for young African–American males and this paper discusses the returns from military service as reflected in their post–service wages.