Job Seekers' Perceptions and Employment Prospects: Heterogeneity, Duration Dependence, and Bias

By Andreas I. Mueller, Johannes Spinnewijn, and Giorgio Topa

American Economic Review, January 2021

This paper uses job seekers' elicited beliefs about job finding to disentangle the sources of the decline in job-finding rates by duration of unemployment. We document that beliefs have strong predictive power for job finding, but are not revised downward...

Going Negative at the Zero Lower Bound: The Effects of Negative Nominal Interest Rates

By Mauricio Ulate

American Economic Review, January 2021

After the Great Recession several central banks started setting negative nominal interest rates in an expansionary attempt, but the effectiveness of this measure remains unclear. Negative rates can stimulate the economy by lowering the rates that commerci...

Using Models to Persuade

By Joshua Schwartzstein and Adi Sunderam

American Economic Review, January 2021

We present a framework where "model persuaders" influence receivers' beliefs by proposing models that organize past data to make predictions. Receivers are assumed to find models more compelling when they better explain the data, fixing receivers' prior b...

2020 in Research Highlights

[Research Highlight]

December 17, 2020

Economists tackled racial discrimination, border walls, collusion, and more.

Front Matter

American Economic Journal: Applied Economics, January 2021

Gambling, Saving, and Lumpy Liquidity Needs

By Sylvan Herskowitz

American Economic Journal: Applied Economics, January 2021

I present evidence that unmet liquidity needs for indivisible, "lumpy," expenditures increase demand for betting as a second-best method of liquidity generation in the presence of financial constraints. With a sample of 1,708 sports bettors in Kampala, Ug...

The Black-White Gap in Noncognitive Skills among Elementary School Children

By Todd Elder and Yuqing Zhou

American Economic Journal: Applied Economics, January 2021

Using two nationally representative datasets, we find large differences between Black and White children in teacher-reported measures of noncognitive skills. We show that teacher reports understate true Black-White skill gaps because of reference bias: te...

Turbulence, Firm Decentralization, and Growth in Bad Times

By Philippe Aghion, Nicholas Bloom, Brian Lucking, Raffaella Sadun, and John Van Reenen

American Economic Journal: Applied Economics, January 2021

What is the optimal form of firm organization during "bad times"? The greater turbulence following macro shocks may benefit decentralized firms because the value of local information increases (the "localist" view). On the other hand, the need to make t...

A Dose of Managed Care: Controlling Drug Spending in Medicaid

By David Dranove, Christopher Ody, and Amanda Starc

American Economic Journal: Applied Economics, January 2021

We study the effect of privatizing Medicaid drug benefits on drug prices and utilization. Drug spending would decrease by 21.3 percent if private insurers administered all drug benefits. One-third of the decrease is driven by private insurers' ability to ...

Front Matter

American Economic Journal: Macroeconomics, January 2021

Are We Approaching an Economic Singularity? Information Technology and the Future of Economic Growth

By William D. Nordhaus

American Economic Journal: Macroeconomics, January 2021

What are the prospects for long-run economic growth? One prominent line of economic thinking is the trend toward stagnation. Stagnationism has a long history in economics, beginning prominently with Malthus and occasionally surfacing in different guises. ...

Consumption Insurance against Wage Risk: Family Labor Supply and Optimal Progressive Income Taxation

By Chunzan Wu and Dirk Krueger

American Economic Journal: Macroeconomics, January 2021

We show that a calibrated life cycle two-earner household model with endogenous labor supply can rationalize the extent of consumption insurance against shocks to male and female wages, as estimated empirically by Blundell, Pistaferri, and Saporta-Ekste...

Optimal Positive Capital Taxes at Interior Steady States

By Jess Benhabib and Bálint Szőke

American Economic Journal: Macroeconomics, January 2021

We generalize recent results of Bassetto and Benhabib (2006 ) and Straub and Werning (2019 ) in a neoclassical model with endogenous labor-leisure choice where all agents are allowed to save and accumulate capital. We provide a sufficient condition under ...

The Size Distribution of Firms and Industrial Water Pollution: A Quantitative Analysis of China

By Ji Qi, Xin Tang, and Xican Xi

American Economic Journal: Macroeconomics, January 2021

We argue that misallocation across firms amplifies industrial water pollution by distorting the firm size distribution in China. Firm-level data indicate that larger firms are more likely to use clean technology but face higher distortions. In a heterogen...

The Productivity J-Curve: How Intangibles Complement General Purpose Technologies

By Erik Brynjolfsson, Daniel Rock, and Chad Syverson

American Economic Journal: Macroeconomics, January 2021

General purpose technologies (GPTs) like AI enable and require significant complementary investments. These investments are often intangible and poorly measured in national accounts. We develop a model that shows how this can lead to underestimation of pr...

Ten Facts on Declining Business Dynamism and Lessons from Endogenous Growth Theory

By Ufuk Akcigit and Sina T. Ates

American Economic Journal: Macroeconomics, January 2021

In this paper, we review the literature on declining business dynamism and its implications in the United States and propose a unifying theory to analyze the symptoms and the potential causes of this decline. We first highlight 10 pronounced stylized fa...

The Labor Market Impact of Immigration: Job Creation versus Job Competition

By Christoph Albert

American Economic Journal: Macroeconomics, January 2021

This paper studies the labor market effects of both documented and undocumented immigration in a search model featuring nonrandom hiring. As immigrants accept lower wages, they are preferably chosen by firms and therefore have higher job finding rates tha...

Interactions and Coordination between Monetary and Macroprudential Policies

By Alejandro Van der Ghote

American Economic Journal: Macroeconomics, January 2021

I study monetary and macroprudential policy intervention in a general equilibrium economy with recurrent boom-bust cycles. Recurrence causes forward-looking variables to also react to policy intervention during phases in which the intervention is inactive...

College Quality and Attendance Patterns: A Long-Run View

By Lutz Hendricks, Christopher Herrington, and Todd Schoellman

American Economic Journal: Macroeconomics, January 2021

We construct a time series of college attendance patterns for the United States and document a reversal: family background was a better predictor of college attendance before World War II, but academic ability was afterward. We construct a model of colleg...

Sectoral Price Facts in a Sticky-Price Model

By Carlos Carvalho, Jae Won Lee, and Woong Yong Park

American Economic Journal: Macroeconomics, January 2021

We develop a multisector sticky-price DSGE model that can endogenously deliver differential responses of prices to aggregate and sectoral shocks. Input-output production linkages and a (standard) monetary policy rule contribute to a slow response of price...