Economists have long been ambivalent about whether the discipline should focus on the analysis of markets or should be concerned with social interactions more generally. Recently the discipline has sought to broaden its scope while maintaining the rigor of modern economic analysis. Major theoretical developments in game theory, the economics of the family, and endogenous growth theory have taken place. Economists have also performed new empirical research on social interactions, but the empirical literature does not show progress comparable to that achieved in economic theory. This paper examines why and discusses how economists might make sustained contributions to the empirical analysis of social interactions.

This paper reviews research that uses longitudinal microdata to document productivity movements and to examine factors behind productivity growth. The research explores the dispersion of productivity across firms and establishments, the persistence of productivity differentials, the consequences of entry and exit, and the contribution of resource reallocation across firms to aggregate productivity growth. The research also reveals important factors correlated with productivity growth, such as managerial ability, technology use, human capital, and regulation. The more advanced literature in the field has begun to address the more difficult questions of the causality between these factors and productivity growth.

There is currently much interest in the potential for public policies to reduce energy consumption because of concerns about global climate change linked with the combustion of fossil fuels. Basic economic theory suggests that if the price of energy relative to other goods rises, the energy intensity of the economy will fall as a result of a series of behavioral changes: people will turn down their thermostats and drive more slowly; they will replace their furnaces and cars with more efficient models available on the market; and, over the long run, the pace and direction of technological change will be affected, so that the menu of capital goods available for purchase will contain more energy-efficient choices. This last conjecture---that increasing energy prices will lead to technological change that facilitates the commercialization of capital goods that are less energy intensive in use---is a modern manifestation of the "induced innovation" hypothesis of Sir John Hick

This paper uses an extensive micro data set on television viewing habits of 50,000 people to calculate the welfare gains from the introduction of Direct Broadcast Satellites as an alternative to cable television. To do so we use an empirical technique that combines information about the types of television service chosen with the decision of how many hours of the different kinds of television to watch. The results indicate that the introduction of home satellites created a significant amount of consumer surplus. At market prices, we also find considerable price competition between satellite and cable.

This paper studies computationally and theoretically attractive estimators called here Laplace type estimators (LTEs), which include means and quantiles of quasi-posterior distributions dened as transformations of general (nonlikelihood-based) statistical criterion functions, such as those in GMM, nonlinear IV, empirical likelihood, and minimum distance methods. The approach generates an alternative to classical extremum estimation and also falls outside the parametric Bayesian approach. For example, it o ers a new attractive estimation method for such important semi-parametric problems as censored and instrumental quantile regression, nonlinear GMM and value-at-risk models. The LTEs are computed using Markov Chain Monte Carlo methods, which help circumvent the computational curse of dimensionality. Alarge sample theory is obtained and illustrated for regular cases.

We analyze the equilibrium size of networks under alternative market structures. Networks are characterized by positive size externalities (commonly called "network externalities"). That is, the benefits of the addition of an extra node (or an extra customer) exceed the private benefits accruing to the particular node (or customer). A direct consequence of this demand structure is that perfect competition does not implement the optimal outcome. Because of the externality, there exists a range of prices within which three different network sizes can be supported as equilibria: a zero size network, an intermediate size that is unstable, and a large stable and Pareto optimal one. We expect that the market will select the largest of the three equilibrium networks. As a result, small networks will not observed. We call critical mass the size of the smallest network that can be supported in equilibrium. Alternative allocation systems internalize the network externality to different degrees, ...

of fixed effects

To what extent do firms go abroad to access technology available in other locations? Thispaper examines whether and when state technical capabilities attract foreign investment in manufacturing from 1987-1993. We find that on average state R&D intensity does not attract foreign direct investment. Most investing firms are in lower-tech industries and locate in low R&D intensity states, suggesting little interest in state technical capabilities. In con-trast, we find that firms in research-intensive industries are more likely to locate in states with high R&D intensity. Foreign firms in the pharmaceutical industry value state R&D intensity the most, at a level twice that of firms in the semiconductor industry, and four times that of electronics firms. Interestingly, not only firms from technically lagging nations, but also some firms from technically leading nations are attracted to R&D intensive states. This suggests that beyond catching up, firms use knowledge-seeking investments also to source technical diversity.

This paper uses an empirical dynamic oligopoly model of the commercial aircraft industry to analyse industry pricing, industry performance, and optimal industry policy. A novel feature of the model with respect to the previous literature is that entry, exit, prices, and quantities are endogenously determined in Markov perfect equilibrium (MPE). We find that many unusual aspects of the aircraft data, such as high concentration and persistent pricing below static marginal cost, are explained by this model. We also find that the unconstrained MPE is quite efficient from a social perspective, providing only 10 % less welfare on average than a social planner would obtain. Finally, we provide simulation evidence that an anti-trust policy in the form of a concentration restriction would be welfare reducing.

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