A Behavioral New Keynesian Model

By Xavier Gabaix

American Economic Review, August 2020

This paper analyzes how bounded rationality affects monetary and fiscal policy via an empirically relevant enrichment of the New Keynesian model. It models agents' partial myopia toward distant atypical events using a new microfounded "cognitive discounti...

Using Aggregated Relational Data to Feasibly Identify Network Structure without Network Data

By Emily Breza, Arun G. Chandrasekhar, Tyler H. McCormick, and Mengjie Pan

American Economic Review, August 2020

Social network data are often prohibitively expensive to collect, limiting empirical network research. We propose an inexpensive and feasible strategy for network elicitation using Aggregated Relational Data (ARD): responses to questions of the form "how ...

Long-Run Growth of Financial Data Technology

By Maryam Farboodi and Laura Veldkamp

American Economic Review, August 2020

"Big data" financial technology raises concerns about market inefficiency. A common concern is that the technology might induce traders to extract others' information, rather than to produce information themselves. We allow agents to choose how much they ...

Cities in Bad Shape: Urban Geometry in India

By Mariaflavia Harari

American Economic Review, August 2020

The spatial layout of cities is an important feature of urban form, highlighted by urban planners but overlooked by economists. This paper investigates the causal economic implications of city shape in India. I measure cities' geometric properties over ti...

Financial Crises, Dollarization, and Lending of Last Resort in Open Economies

By Luigi Bocola and Guido Lorenzoni

American Economic Review, August 2020

Foreign currency debt is considered a source of financial instability in emerging markets. We propose a theory in which liability dollarization arises from an insurance motive of domestic savers. Since financial crises are associated to depreciations, sav...

Escalation of Scrutiny: The Gains from Dynamic Enforcement of Environmental Regulations

By Wesley Blundell, Gautam Gowrisankaran, and Ashley Langer

American Economic Review, August 2020

The US Environmental Protection Agency (EPA) uses a dynamic approach to enforcing air pollution regulations, with repeat offenders subject to high fines and designation as high priority violators (HPV). We estimate the value of dynamic enforcement by deve...

Bartik Instruments: What, When, Why, and How

By Paul Goldsmith-Pinkham, Isaac Sorkin, and Henry Swift

American Economic Review, August 2020

The Bartik instrument is formed by interacting local industry shares and national industry growth rates. We show that the typical use of a Bartik instrument assumes a pooled exposure research design, where the shares measure differential exposure to commo...

Stability and Bayesian Consistency in Two-Sided Markets

By Qingmin Liu

American Economic Review, August 2020

We propose a criterion of stability for two-sided markets with asymmetric information. A central idea is to formulate off-path beliefs conditional on counterfactual pairwise deviations and on-path beliefs in the absence of such deviations. A matching-be...

Subsidy Policies and Insurance Demand

By Jing Cai, Alain de Janvry, and Elisabeth Sadoulet

American Economic Review, August 2020

Using data from a two-year pricing experiment, we study the impact of subsidy policies on weather insurance take-up. Results show that subsidies increase future insurance take-up through their influence on payout experiences. Exploring mechanisms of the p...

Representation matters

[Page]

How much can role models help to diversify the economics profession?

Front Matter

American Economic Journal: Economic Policy, August 2020

Is Occupational Licensing a Barrier to Interstate Migration?

By Janna E. Johnson and Morris M. Kleiner

American Economic Journal: Economic Policy, August 2020

Occupational licensure may limit the interstate movement of workers because it adds to the cost of moving between states. We analyze the interstate migration of 22 licensed occupations, proxying for the difficulty of the regulations by comparing state-spe...

The Rise of Working Mothers and the 1975 Earned Income Tax Credit

By Jacob Bastian

American Economic Journal: Economic Policy, August 2020

The rise of working mothers radically changed the US economy and the role of women in society. In one of the first studies of the 1975 introduction of the Earned Income Tax Credit, I find that this program increased maternal employment by 6 percent, repre...

Bunching to Maximize Tax Credits: Evidence from Kinks in the US Tax Schedule

By Jacob A. Mortenson and Andrew Whitten

American Economic Journal: Economic Policy, August 2020

We explore bunching at US income tax kinks using a panel of 258 million tax returns from 1996 to 2014. We find bunching at seven kinks, with nearly all bunching occurring at kinks maximizing tax credits. In our sample period, the total number of bunchers ...

Misunderstanding Nonlinear Prices: Evidence from a Natural Experiment on Residential Electricity Demand

By Blake Shaffer

American Economic Journal: Economic Policy, August 2020

This paper examines how consumers respond to nonlinear prices. Exploiting a natural experiment with electricity consumers in British Columbia, I find evidence that some households severely misunderstand nonlinear prices—incorrectly perceiving that the m...

Adopt or Innovate: Understanding Technological Responses to Cap-and-Trade

By Raphael Calel

American Economic Journal: Economic Policy, August 2020

One important motivation for creating cap-and-trade programs for carbon emissions is the expectation that they will stimulate much-needed low-carbon innovation. I construct a new panel of British firms to investigate this hypothesis, finding that the Euro...

The Perils of High-Powered Incentives: Evidence from Colombia's False Positives

By Daron Acemoglu, Leopoldo Fergusson, James Robinson, Dario Romero, and Juan F. Vargas

American Economic Journal: Economic Policy, August 2020

We investigate the use of high-powered incentives for the Colombian military and show that this practice produced perverse side effects. Innocent civilians were killed and misrepresented as guerillas (a phenomenon known in Colombia as "false positives"). ...

Price-Linked Subsidies and Imperfect Competition in Health Insurance

By Sonia Jaffe and Mark Shepard

American Economic Journal: Economic Policy, August 2020

Policymakers subsidizing health insurance often face uncertainty about future market prices. We study the implications of one policy response: linking subsidies to prices to target a given postsubsidy premium. We show that these price-linked subsidies wea...

Long-Term Care Insurance: Information Frictions and Selection

By M. Martin Boyer, Philippe De Donder, Claude Fluet, Marie-Louise Leroux, and Pierre-Carl Michaud

American Economic Journal: Economic Policy, August 2020

This paper conducts a stated-choice experiment where respondents are asked to rate various insurance products aimed to protect against financial risks associated with long-term care needs. Using exogenous variation in prices from the survey design and ind...

Peer Effects in Residential Water Conservation: Evidence from Migration

By Bryan Bollinger, Jesse Burkhardt, and Kenneth T. Gillingham

American Economic Journal: Economic Policy, August 2020

Social interactions are widely understood to influence consumer decisions in many choice settings. This paper identifies causal peer effects in residential water conservation during the summer using variation from movers. We classify high-resolution remot...