Unintended Consequences of Welfare Cuts on Children and Adolescents

By Christian Dustmann, Rasmus Landersø, and Lars Højsgaard Andersen

American Economic Journal: Applied Economics, October 2024

This paper studies the effects of a large welfare benefit reduction on the children in the affected families. The welfare cut targeted adult refugees who received residency in Denmark, and it reduced their disposable income by 30 percent on average over t...

Front Matter

American Economic Review, October 2024

Public Discourse and Socially Responsible Market Behavior

By Björn Bartling, Vanessa Valero, Roberto A. Weber, and Lan Yao

American Economic Review, October 2024

We investigate the causal impact of public discourse on socially responsible market behavior. Across three laboratory experiments, having market participants engage in public discourse generally increases market social responsibility. These positive impac...

Optimally Imprecise Memory and Biased Forecasts

By Rava Azeredo da Silveira, Yeji Sung, and Michael Woodford

American Economic Review, October 2024

We propose a model of optimal decision-making subject to a memory constraint in the spirit of models of rational inattention. Our theory differs from that of Sims (2003) in not assuming costless memory of past cognitive states. The model implies that both...

Monitoring in Small Firms: Experimental Evidence from Kenyan Public Transit

By Erin M. Kelley, Gregory Lane, and David Schönholzer

American Economic Review, October 2024

Small firms struggle to grow beyond a few employees. We introduce monitoring devices into commuter minibuses in Kenya and randomize which minibus owners have access to the data using a novel mobile app. We find that treated vehicle owners modify the terms...

Efficiency and Equity Impacts of Urban Transportation Policies with Equilibrium Sorting

By Panle Jia Barwick, Shanjun Li, Andrew Waxman, Jing Wu, and Tianli Xia

American Economic Review, October 2024

We estimate an equilibrium sorting model of housing location and commuting mode choice with endogenous traffic congestion to evaluate urban transportation policies. Leveraging fine-scale data from travel diaries and housing transactions identifying reside...

Sufficient Statistics for Nonlinear Tax Systems with General Across-Income Heterogeneity

By Antoine Ferey, Benjamin B. Lockwood, and Dmitry Taubinsky

American Economic Review, October 2024

This paper provides empirically implementable sufficient statistics formulas for optimal nonlinear tax systems in the presence of across-income heterogeneity in preferences, inheritances, income-shifting capabilities, and other sources. We characterize op...

Rising Top, Falling Bottom: Industries and Rising Wage Inequality

By John Haltiwanger, Henry R. Hyatt, and James R. Spletzer

American Economic Review, October 2024

Most of the rise in overall earnings inequality from 1996 to 2018 is accounted for by rising between-industry dispersion. The contribution of industries is right-skewed with the top 10 percent of four-digit NAICS industries dominating. The top 10 percent ...

Dynamic Outside Options and Optimal Negotiation Strategies

By Andrew McClellan

American Economic Review, October 2024

We study the design of negotiation strategies when a principal and agent must decide how to split a pie while the agent's outside option changes over time. The principal's optimal strategy under commitment demonstrates a new, but intuitive, set of negotia...

The Social Costs of Keystone Species Collapse: Evidence from the Decline of Vultures in India

By Eyal Frank and Anant Sudarshan

American Economic Review, October 2024

Scientific evidence has documented we are undergoing a mass extinction of species, caused by human activity. However, allocating conservation resources is difficult due to scarce evidence on damages from losing individual species. This paper studies the c...

The Price of Power: Costs of Political Corruption in Indian Electricity

By Meera Mahadevan

American Economic Review, October 2024

Politicians may target public goods to benefit their constituents, at the expense of others. I study corruption in the context of Indian electricity and estimate the welfare consequences. Using new administrative billing data and close-election regression...

Women Left Behind: Gender Disparities in Utilization of Government Health Insurance in India

By Pascaline Dupas and Radhika Jain

American Economic Review, October 2024

We document large gender disparities within a government program that entitles 46 million poor individuals to free hospital care. We show that care is not free in practice and higher costs are associated with larger disparities. Lowering care costs increa...

Front Matter

American Economic Journal: Macroeconomics, October 2024

A Simple Explanation of Countercyclical Uncertainty

By Joshua Bernstein, Michael Plante, Alexander W. Richter, and Nathaniel A. Throckmorton

American Economic Journal: Macroeconomics, October 2024

This paper documents that labor search and matching frictions generate countercyclical uncertainty because the inherent nonlinearity in the flow of new matches makes employment uncertainty increasing in the number of people searching for work. Quantitativ...

The Optimal Quantity of CBDC in a Bank-Based Economy

By Lorenzo Burlon, Manuel A. Muñoz, and Frank Smets

American Economic Journal: Macroeconomics, October 2024

We show that the estimated effect of digital euro news on bank stock valuations and lending depends on the bank's deposit reliance and the central bank digital currency (CBDC) design features. Using a quantitative DSGE model calibrated to the euro area ec...

Automation, Bargaining Power, and Labor Market Fluctuations

By Sylvain Leduc and Zheng Liu

American Economic Journal: Macroeconomics, October 2024

We argue that the threat of automation weakens workers' bargaining power in wage negotiations, dampening wage adjustments and amplifying unemployment fluctuations. We make this argument based on a business cycle model with labor market search frictions, g...

The Elasticity of Aggregate Output with Respect to Capital and Labor

By Dietrich Vollrath

American Economic Journal: Macroeconomics, October 2024

It is often assumed that the elasticity of GDP with respect to capital is one-third, but this assumes zero markups and an aggregate production function. I estimate the elasticity allowing markups to vary by industry and with a rich input-output structure....

International Friends and Enemies

By Benny Kleinman, Ernest Liu, and Stephen J. Redding

American Economic Journal: Macroeconomics, October 2024

We examine whether, as countries become more economically dependent on a trade partner, they realign politically toward that trade partner. We use network measures of economic exposure to foreign productivity growth derived from the class of trade models ...

Fiscal and Monetary Policy Interactions in a Model with Low Interest Rates

By Jianjun Miao and Dongling Su

American Economic Journal: Macroeconomics, October 2024

We provide a new Keynesian model where entrepreneurs face uninsurable idiosyncratic investment risk and credit constraints. Government bonds provide liquidity services. Multiple steady states with positive values of public debt can be supported for a give...

Entrepôt: Hubs, Scale, and Trade Costs

By Sharat Ganapati, Woan Foong Wong, and Oren Ziv

American Economic Journal: Macroeconomics, October 2024

We study the global trade network and quantify its trade and welfare impact. We document that the trade network is a hub-and-spoke system where 80 percent of trade is shipped indirectly and largely via entrepôts—major hubs that facilitate trade between...