I’ve been the Managing Editor of the Journal of Financial Views because the first difficulty in Summer season 1987. The JEP is revealed by the American Financial Affiliation, which determined again in 2011–to my delight–that the journal can be freely out there on-line, from the present difficulty all the way in which again to the primary difficulty. You may obtain particular person articles or total points, and it’s out there in numerous e-reader codecs, too. Right here, I’ll begin with the Desk of Contents for the just-released Spring 2025 difficulty, which within the Taylor family is called difficulty #152. Under which might be abstracts and direct hyperlinks for the entire papers. I plan to weblog extra particularly about a number of the papers within the few weeks, as properly.
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Symposium: Drug Pricing and Regulation
“Economic Markets and Pharmaceutical Innovation,” by Craig Garthwaite
Pharmaceutical improvements attain the market after an extended and dangerous course of that requires giant, mounted, and sunk investments. Governments present incentives for corporations to make these investments via numerous types of mental property safety that try to supply a return on capital for buyers. Consequently, pharmaceutical innovation outcomes from an specific intersection of public coverage and personal market incentives. Creating optimum coverage due to this fact requires understanding market options equivalent to how innovation is financed, how corporations commercialize pharmaceutical merchandise, the affect of insurance coverage protection on consumption and spending, and the way competitors emerges after mental property safety ends.
“Patents, Innovation, and Competition in Pharmaceuticals: The Hatch-Waxman Act after 40 Years,” by C. Scott Hemphill and Bhaven N. Sampat
A central coverage difficulty in prescribed drugs is methods to steadiness the dynamic advantages of recent medication towards the static advantages of low costs for current medication. In the US, that steadiness is ready by the Hatch-Waxman Act. We evaluation the Act’s origins and key options, then current proof on its results on competitors and innovation. On the competitors aspect, we present how the Act creates incentives for manufacturers to build up patents and generics to problem them, with the outcome being a tough stalemate. We additionally focus on methods deployed by manufacturers to delay generic entry. On the innovation aspect, we present that the Act’s patent extension provisions—which intention to permit branded corporations to make up for time misplaced throughout medical trials and regulatory evaluation—are incomplete, leading to potential distortions. The web result’s a convoluted and costly strategy to balancing innovation and competitors.
“Lessons for the United States from Pharmaceutical Regulation Abroad,” by Margaret Okay. Kyle
Pharmaceutical markets are characterised by boundaries to entry and knowledge issues. Many international locations intervene within the pricing and reimbursement of medicine to a larger extent than the US authorities so far. Continued stress from politicians and up to date laws are prone to change the marketplace for prescribed drugs in the US. This text discusses the approaches adopted in different developed international locations and the implications of their use in the US, which because of its measurement, has far larger affect over the speed and path of innovation. Different coverage selections and the challenges of their implementation are additionally reviewed.
“The Economics of Generic Drug Shortages: The Limits of Competition,” Rena M. Conti and Marta E. Wosińska
We look at the economics of the US generic prescription drug market, which includes nearly all of medicines bought. The market is well known for its advantages within the type of top quality and low costs for shoppers however can be more and more challenged by shortages which will disrupt affected person care. Shortages within the generic drug market current an financial puzzle—within the face of a scarcity, costs ought to rise, encouraging entry, but we observe shortages growing in quantity and persistence. Furthermore, if shortages trigger affected person hurt, why don’t markets pay a premium for a dependable provide chain? We argue that the puzzle will be defined by the lack of generic drug costs to regulate simply because of regulatory and contracting frictions, and the coexisting presence of uneven data and company issues within the US market. We conclude with a dialogue of coverage interventions aimed toward addressing these challenges to make sure resilient US generic drug provide.
Symposium: Earnings Inequality
“Measuring Income and Income Inequality,” by Conor Clarke and Wojciech Kopczuk
Earnings inequality is necessary, however makes an attempt to measure it arrive at strikingly completely different conclusions. Why? We use current disputes over measuring United States revenue inequality to return to first ideas about each the revenue idea and inequality measurement. We emphasize two broad factors. First, no measure of the revenue distribution is actually complete, or may try and be complete with out making controversial selections. We doc the sensible and conceptual issues that the usual splendid—complete Haig-Simons revenue—raises. Second, a lot of the controversy on this space activates the numerous tradeoffs between beginning with particular person tax information versus extra expansive revenue ideas. Particular person tax information replicate solely a shrinking subset of a extra complete revenue idea–however they’re particular person information. Extra expansive alternate options, then again, are more durable to allocate to people. We doc a number of the most necessary and contestable assumptions that such an allocation requires.
“Macro Perspectives on Income Inequality,” by Matthieu Gomez
Inequality has grow to be a defining problem for contemporary economies and a central focus of financial analysis over the previous 20 years. I start by revisiting the foundations of revenue measurement, exhibiting that customary definitions—taxable revenue, issue revenue, and Haig-Simons revenue—endure from necessary conceptual limitations. I distinction these revenue measures with the best notion of revenue from a welfare perspective—Hicksian revenue—which captures a person’s capability to devour or save for future consumption. I then look at the drivers of rising high revenue inequality, with specific consideration to the surge in entrepreneurial incomes. I spotlight three key forces behind this phenomenon: increased returns on capital (technological elements), decrease exterior financing prices (monetary elements), and a lighter tax burden on enterprise homeowners (fiscal elements).
“Public Finance Implications of Economic Inequality,” by Alan J. Auerbach
This paper considers questions in regards to the implications of rising inequality for the speculation and observe of public finance. It begins by addressing basic the reason why the distribution of revenue or wealth on an annual foundation earlier than taxes and transfers affords inadequate data: (1) it doesn’t inform us what sources are literally out there to households for consumption; and (2) in offering a snapshot of the sources out there to people of various ages at a given second in time, with out controlling for life-cycle associated variations or revenue dynamics, it will possibly present a deceptive estimate of the underlying diploma of inequality. The paper then considers the implications of excessive and maybe rising financial inequality for the design of presidency coverage: high marginal tax charges, phase-outs of presidency insurance policies for these with increased incomes, the political financial system of inequality, and different topics.
Symposium: Bond Markets
“A Hitchhiker’s Guide to Federal Reserve Participation in Fixed Income Markets,” by Nina Boyarchenko and Or Shachar
We evaluation US dealer-intermediated mounted revenue markets, together with Treasuries, company mortgage-backed securities, company bonds, and municipal bonds. By the lenses of major sellers’ positions, we present these markets’ evolution over the previous decade and the consequences of current episodes of abrupt deterioration in market functioning. We then overview how the Federal Reserve interacts with mounted revenue markets for the needs of financial coverage implementation and liquidity interventions. We conclude by discussing the shifting composition of buyers in US mounted revenue markets, and what penalties such adjustments within the investor base might have for financial coverage transmissions.
“How US Treasuries Can Remain the World’s Safe Haven,” by Darrell Duffie
Weaknesses within the design of the marketplace for US Treasuries have lowered the effectiveness of world’s favored safe-haven asset. Because the World Monetary Disaster, the market’s intermediation capability is much extra constrained by the steadiness sheets of vendor banks, which deal with nearly all investor trades. Since 2007, the whole measurement of major vendor steadiness sheets per greenback of Treasuries excellent has shrunk by an element of 4. This pattern continues due to giant US fiscal deficits and post-GFC regulatory capital constraints, that are vital for monetary stability however restrict the supply of liquidity below stress. For US Treasuries to stay a strong protected haven, the intermediation capability of the market will have to be expanded and additional supported by official-sector backstops.
“US Corporate Bond Markets: Bigger and (Maybe) Better?” by Maureen O’Hara and Xing (Alex) Zhou
The US company bond market has expanded considerably, fueled by digital buying and selling, institutional innovation, and rising retail participation through mutual and exchange-traded funds. These developments have improved effectivity by decreasing prices and enhancing transparency, but they’ve additionally launched new vulnerabilities. The market’s shift from relationship-based to transaction-based buying and selling has weakened its capability to soak up stress, particularly during times of widespread promoting. We look at the structural adjustments which have lowered vendor intermediation, the restricted liquidity advantages of digital platforms, and the destabilizing function of fund flows. The COVID-19 disaster uncovered these weaknesses, prompting the Federal Reserve to behave as a “market maker of last resort.” We argue that whereas the market is “better” in some ways, enhancing resilience via transparency and long-term investor participation is crucial for future stability.
“Why Is the Fragmented Municipal Bond Market So Costly to Investors and Issuers” by John M. Griffin, Nicholas Hirschey, and Samuel Kruger
The municipal bond market performs an important function in offering capital to US municipalities and capabilities via a community of underwriters, municipal advisors, credit standing businesses, insurers, particular person and institutional buyers, and a number of regulators. Many of those market contributors have important uneven data and conflicting incentive constructions, which might generally result in disparate and seemingly inefficient outcomes. Puzzles documented within the educational literature embrace excessive underwriting prices, conflicting roles by municipal advisors, excessive and broadly various commerce markups, funding holdings which might be usually not tax-efficient, inconsistent implied marginal tax charges, a heavy reliance on credit score rankings, little profit however widespread use of insurance coverage, delayed use of name provisions, and inconsistent remedy of accounting data. We evaluation points within the municipal bond market and suggest implementable recommendations that will hopefully permit for a extra aggressive and low-cost marketplace for each taxpayers and buyers.
Options
“Retrospectives: Yair Mundlak and the Fixed Effects Estimator,” by Marc F. Bellemare and Daniel L. Millimet
We focus on Yair Mundlak’s (1927–2015) contribution to econometrics via the lens of the mounted results estimator. We set the stage by discussing Mundlak’s life and his seminal 1961 article within the Journal of Farm Economics, exhibiting the way it was trying on the proper utility—the research of agricultural productiveness, which had hitherto been regarded as marred by the presence of administration bias—that led Mundlak to make use of the mounted results estimator. After discussing Mundlak’s contribution, we briefly focus on the historic financial and statistical contexts through which he made that contribution. We then spotlight the dialogue that happened between the proponents of mounted versus random results and focus on how Mundlak settled the controversy in his 1978 Econometrica article. We conclude by discussing how, between mounted and random results, the mounted results estimator gained the day, turning into the de facto estimator of selection amongst utilized economists due to the Credibility Revolution, culminating within the reputation these days of difference-in-differences designs and of two-way mounted results estimators.
“Recommendations for Further Reading,” by Timothy Taylor
