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Since the onset of the AIDS epidemic, the Centers for Disease Control and Prevention (CDC) has allocated several billion dollars for the prevention of HIV and other sexually transmitted diseases (STDs) in the United States. Using state-level data from 1981 to 1998, the authors found that greater amounts of prevention funding in a given year are associated with reductions in reported gonorrhea incidence rates in subsequent years. The authors conclude that funding for STD and HIV prevention, on the whole, appears to have a discernable impact on the incidence of STDs.

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This paper presents the first comprehensive test of whether well-known conflicts of interest at bond rating agencies importantly influence their actions. This hypothesis is tested against the alternative that rating agency actions are primarily influenced by a countervailing incentive to protect their reputations as delegated monitors. These two hypotheses generate a number of testable predictions regarding the anticipation of credit-rating downgrades by the bond market, which we investigate using a new data set of about 2,000 credit rating migrations from Moody's and Standard & Poor's, and matching issuer-level bond prices. The findings strongly indicate that rating changes do not appear to be importantly influenced by rating agency conflicts of interest but, rather, suggest that rating agencies are motivated primarily by reputation-related incentives.1 This goal is articulated in Moody's (2003), for instance. 2 In other settings, it has been shown that reputations mitigate moral hazard problems, as in Diamond (1991). Of course, there are also examples of when reputations are ineffective (as in Bulow and Rogoff, 1989).