The Spending and Debt Response to Minimum Wage Hikes

By Daniel Aaronson, Sumit Agarwal, and Eric French

American Economic Review, December 2012

Immediately following a minimum wage hike, household income rises on average by about $250 per quarter and spending by roughly $700 per quarter for households with minimum wage workers. Most of the spending response is caused by a small number of house...

Diagnosing Consumer Confusion and Sub-optimal Shopping Effort: Theory and Mortgage-Market Evidence

By Susan E. Woodward and Robert E. Hall

American Economic Review, December 2012

Mortgage loans are leading examples of transactions where experts on one side of the market take advantage of consumers' lack of knowledge and experience. We study the compensation that borrowers pay to mortgage brokers for assistance from application to...

Estimating Time Preferences from Convex Budgets

By James Andreoni and Charles Sprenger

American Economic Review, December 2012

Experimentally elicited discount rates are frequently higher than what seems reasonable for economic decision-making. Such high rates are often attributed to present-biased discounting. A well-known bias of standard measurements is the assumption of li...

Married with Children: A Collective Labor Supply Model with Detailed Time Use and Intrahousehold Expenditure Information

By Laurens Cherchye, Bram De Rock, and Frederic Vermeulen

American Economic Review, December 2012

We propose a collective labor supply model with household production that generalizes a model of Blundell, Chiappori, and Meghir (2005). Adults' preferences depend not only on own leisure and individual private consumption of market goods. They also dep...

Who Gets the Job Referral? Evidence from a Social Networks Experiment

By Lori Beaman and Jeremy Magruder

American Economic Review, December 2012

We use recruitment into a laboratory experiment in Kolkata, India to analyze how social networks select individuals for jobs. The experiment allows subjects to refer actual network members for casual jobs as experimental subjects under exogenously varied...

Life Insurance and Household Consumption

By Jay H. Hong and José-Víctor Ríos-Rull

American Economic Review, December 2012

Using life insurance holdings by age, sex, and marital status, we infer how individuals value consumption in different demographic stages. We estimate equivalence scales and bequest motives simultaneously within a fully specified model where agents face U...

Revolving Door Lobbyists

By Jordi Blanes i Vidal, Mirko Draca, and Christian Fons-Rosen

American Economic Review, December 2012

Washington's "revolving door"—the movement from government service into the lobbying industry—is regarded as a major concern for policy-making. We study how ex-government staffers benefit from the personal connections acquired during their pub...

Social Learning with Coarse Inference

By Antonio Guarino and Philippe Jehiel

American Economic Journal: Microeconomics, February 2013

We study social learning by boundedly rational agents. Agents take a decision in sequence, after observing their predecessors and a private signal. They are unable to make perfect inferences from their predecessors' decisions: they only understand the r...

The Demand for Food of Poor Urban Mexican Households: Understanding Policy Impacts Using Structural Models

By Manuela Angelucci and Orazio Attanasio

American Economic Journal: Economic Policy, February 2013

We use Oportunidades, a conditional cash transfer to women, to show that standard demand models do not represent the sample's behavior: Oportunidades increases eligible households' food budget shares, despite food being a necessity; demand for food and...

Targeting with Agents

By Paul Niehaus, Antonia Atanassova, Marianne Bertrand, and Sendhil Mullainathan

American Economic Journal: Economic Policy, February 2013

Targeting assistance to the poor is a central problem in development. We study the problem of designing a proxy means test when the implementing agent is corruptible. Conditioning on more poverty indicators may worsen targeting in this environment beca...

Smoke Gets in Your Eyes: Cigarette Tax Salience and Regressivity

By Jacob Goldin and Tatiana Homonoff

American Economic Journal: Economic Policy, February 2013

Recent evidence suggests consumers pay less attention to commodity taxes levied at the register than to taxes included in a good's posted price. If this attention gap is larger for high-income consumers than for low-income consumers, policymakers can m...

Are Consumers Myopic? Evidence from New and Used Car Purchases

By Meghan R. Busse, Christopher R. Knittel, and Florian Zettelmeyer

American Economic Review, February 2013

We investigate whether car buyers are myopic about future fuel costs. We estimate the effect of gasoline prices on short-run equilibrium prices of cars of different fuel economies. We then compare the implied changes in willingness-to-pay to the associat...

Making Sense of Nonbinding Retail-Price Recommendations

By Stefan Buehler and Dennis L. Gärtner

American Economic Review, February 2013

We model retail-price recommendations (RPRs) as a communication device in vertical supply relations with private manufacturer information on production costs and consumer demand. With static trade, RPRs are irrelevant, and the equilibrium outcome is inef...

Preferences for Truthfulness: Heterogeneity among and within Individuals

By Rajna Gibson, Carmen Tanner, and Alexander F. Wagner

American Economic Review, February 2013

We conduct an experiment assessing the extent to which people trade off the economic costs of truthfulness against the intrinsic costs of lying. The results allow us to reject a type-based model. People's preferences for truthfulness do not identify them ...

School Inputs, Household Substitution, and Test Scores

By Jishnu Das, Stefan Dercon, James Habyarimana, Pramila Krishnan, Karthik Muralidharan, and Venkatesh Sundararaman

American Economic Journal: Applied Economics, April 2013

Empirical studies of the relationship between school inputs and test scores typically do not account for household responses to changes in school inputs. Evidence from India and Zambia shows that student test scores are higher when schools receive unan...

Making Yourself Attractive: Pre-marital Investments and the Returns to Education in the Marriage Market

By Jeanne Lafortune

American Economic Journal: Applied Economics, April 2013

I explore how a gender's scarcity may impact educational investments using exogenous variation in the marriage market of second generation Americans in early twentieth century. I find that worse marriage market conditions spur higher pre-marital investme...

Texting Bans and Fatal Accidents on Roadways: Do They Work? Or Do Drivers Just React to Announcements of Bans?

By Rahi Abouk and Scott Adams

American Economic Journal: Applied Economics, April 2013

Since 2007, many states passed laws prohibiting text messaging while driving. Using vehicular fatality data from across the United States and standard difference-in-differences techniques, bans appear moderately successful at reducing single-vehicle, si...

Is There a Trade-Off between Inflation and Output Stabilization?

By Alejandro Justiniano, Giorgio E. Primiceri, and Andrea Tambalotti

American Economic Journal: Macroeconomics, April 2013

We find that the answer is no in an estimated DSGE model of the US economy in which exogenous movements in workers' market power are not a major driver of observed economic fluctuations. If they are, the tension between the conflicting stabilization ob...

Intermediary Asset Pricing

By Zhiguo He and Arvind Krishnamurthy

American Economic Review, April 2013

We model the dynamics of risk premia during crises in asset markets where the marginal investor is a financial intermediary. Intermediaries face an equity capital constraint. Risk premia rise when the constraint binds, reflecting the capital scarcity. T...

Public Monopoly and Economic Efficiency: Evidence from the Pennsylvania Liquor Control Board's Entry Decisions

By Katja Seim and Joel Waldfogel

American Economic Review, April 2013

We estimate a spatial model of liquor demand to analyze the impact of government-controlled retailing on entry patterns. In the absence of the Pennsylvania Liquor Control Board, the state would have roughly 2.5 times the current number of stores, highe...