Murat Iyigun
Luther and Suleyman
Quarterly Journal of Economics, forthcoming, November 2008

Abstract
Various historical accounts have suggested that the Ottomans’ rise helped the Protestant Reform movement as well as its offshoots, such as Zwinglianism, Anabaptism, and Calvinism, survive their infancy and mature. Utilizing a comprehensive dataset on violent confrontations for the interval between 1401 and 1700, I show that the incidence of military engagements between the Protestant Reformers and the Counter-Reformation forces between the 1520s and 1650s depended negatively on Ottomans’ military activities in Europe. Furthermore, I document that the impact of the Ottomans on Europe went beyond suppressing ecclesiastical conflicts only: at the turn of the 16th century, Ottoman conquests lowered the number of all newly-initiated conflicts among the Europeans roughly by 25 percent, while they dampened all longer-running feuds by more than 15 percent. The Ottomans’ military activities influenced the length of intra-European feuds too, with each Ottoman-European military engagement shortening the duration of intra-European conflicts by more than 50 percent. Thus, while the Protestant Reformation might have benefitted from – and perhaps even capitalized on – the Ottoman advances in Europe, the latter seems to have played some role in reducing conflicts within Europe more generally.

Wolfgang Keller
Multinational Enterprises, International Trade, and Productivity Growth: Firm- Level Evidence from the United States
Review of Economics and Statistics, forthcoming. (with Stephen R. Yeaple).

Abstract
We estimate international technology spillovers to U.S. manufacturing firms via imports and foreign direct investment (FDI) between the years of 1987 and 1996. In contrast to earlier work, our results suggest that FDI leads to substantial productivity gains for domestic firms. The size of FDI spillovers is economically important, accounting for about 14% of productivity growth in U.S. firms between 1987 and 1996. FDI spillovers are particularly strong in high-tech sectors, whereas they are largely absent in low-tech sectors. Small firms with low productivity benefit more from FDI spillovers than larger and more productivity firms. The evidence for import spillovers is much weaker.

Carol Shiue and Wolfgang Keller
Markets in China and Europe on the Eve of the Industrial Revolution
American Economic Review, Sept. 2007.

Abstract
An influential view on why industrialization began in Western Europe places a great deal of emphasis on how European allocative institutions were both necessary and sufficient conditions for modern growth. Western Europe’s exceptionally well-functioning markets supported with a set of institutions led to more efficient resource use and provided far greater incentives to make investments needed to industrialize. This paper examines this hypothesis by comparing the actual performance of markets in terms of market integration in Western Europe and China, two regions of the world that were relatively advanced in the pre-industrial period, but would start to industrialize about 150 years apart. Using cointegration analysis on grain prices for about 250 markets from the 17th to the 19th century, the analysis covers economies that in total account for about two-fifths of the world’s population in the mid-18th century. Our main findings include: first, the performance of markets in China and Western Europe overall was comparable in the late 18th century. Second, market performance in England was higher than in the Yangzi Delta region, and markets in England also performed better than in continental Western Europe. Third, the performance of markets in Western Europe improved between 1780 and 1830 in a dramatic and sudden fashion in comparison to what came before. Rather than being a key condition for subsequent growth, improvements in market performance and growth might have occurred simultaneously. The paper also compares the conditions and institutions that were underlying grain trade in the two regions; this provides the initial means to better understand what the advantages of England over China really were, and it adds to our knowledge on what institutions are necessary for industrialization and growth.

Wolfgang Keller and Carol H. Shiue
The Origins of Spatial Interaction, Journal of Econometrics, Sept. 2007.

Abstract
This paper uses spatial empirical methods to detect and analyze trade patterns in a historical data set on Chinese rice prices. Our results suggest that spatial features were important for the expansion of interregional trade. Geography dictates, first, over what distances trade was possible in different regions, because the costs of ship transport were considerably below those for land transport. Spatial features also influence the direction in which a trading network is expanding. Moreover, our analysis captures the impact of new trade routes both within and outside the trading areas.

Keith E. Maskus
Vertical Distribution, Parallel Trade, and Price Divergence in Integrated Markets
European Economic Review, May 2007. (with Mattias Ganslandt).

We develop a model of vertical pricing in which an original manufacturer sets wholesale prices in two markets that are integrated at the distributor level by parallel imports (PI). The manufacturing firm needs to set these two prices to balance three competing interests: restricting competition in the PI-recipient market, avoiding resource wastes due to actual trade, and reducing the double-markup problem in the PI-source nation. These tradeoffs imply the counterintuitive result that retail prices could diverge as a result of declining trading costs, even as the volume of PI increases. Thus, in some circumstances it may be misleading to think that permitting PI is an unambiguous force for price integration.

Murat Iyigun
Building the Family Nest: Pre-Marital Investments, Marriage Markets and Spousal Allocations
Review of Economic Studies, April 2007. (with Randall Walsh)

We develop a transferable utility model of the household in which the marriage market is characterized by (negative or positive) assortative matching, and spousal allocations are determined by premarital investments. We demonstrate that all sharing rules along the assortative order support efficient outcomes both in terms of premarital investments and intra-household allocations. The efficiency of premarital choices and household allocations then enables us to show that, for each couple, the marriage market generates a unique and maritally sustainable sharing rule that is a function of the distribution of premarital endowments and the sex ratios in the market. According to our results, transfers among spouses occur on two margins: premarital investments and intra-marital spousal allocations. Asymmetries in the sex ratios in the marriage markets produce gender differences in premarital investments and consumption that are larger for individuals with small premarital endowments than those with larger endowments. A corollary of these findings is that, when men are in short supply in the marriage markets, women can invest more than men even when the returns to investment are lower or the costs are higher for women.

Yongmin Chen
Vertical Integration, Exclusive Dealing, and ex post Cartelization
RAND Journal of Economics, Spring 2007. (with Michael Riordan).

This article uncovers an unnoticed connection between exclusive contracts and vertical organization. A vertically integrated firm can use exclusive dealing to foreclose an equally efficient upstream competitor and to cartelize the downstream industry. Neither vertical integration nor exclusive dealing alone achieves these anticompetitive effects. The cartelization effect of these two practices may be limited when downstream firms are heterogeneous and supply contracts are not contingent on uncertain market conditions. The extent of cartelization also depends on the degree of downstream market concentration and on the degree to which downstream competition is localized.

update:4/30/2008