Does Money Illusion Matter?

By Ernst Fehr and Jean-Robert Tyran

American Economic Review, December 2001

This paper shows that a small amount of individual-level money illusion may cause considerable aggregate nominal inertia after a negative nominal shock. In addition, our results indicate that negative and positive nominal shocks have asymmetric effects be...

Trading Away Wide Brands for Cheap Brands

By Swati Dhingra

American Economic Review, October 2013

Firms face competing needs to expand product variety and reduce production costs. Access to larger markets enables innovation to reduce costs. Although firm scale increases, foreign competition reduces markups. Firms' ability to recapture lost markups dep...

How Do Electricity Shortages Affect Industry? Evidence from India

By Hunt Allcott, Allan Collard-Wexler, and Stephen D. O'Connell

American Economic Review, March 2016

We estimate the effects of electricity shortages on Indian manufacturers, instrumenting with supply shifts from hydroelectric power availability. We estimate that India's average reported level of shortages reduces the average plant's revenues and prod...

Tracing Value-Added and Double Counting in Gross Exports: Comment

By Bart Los, Marcel P. Timmer, and Gaaitzen J. de Vries

American Economic Review, July 2016

In a recent contribution to the AER, Koopman, Wang, and Wei (2014) proposed a decomposition of a country's gross exports into value-added components and double-counted terms. It is motivated by complex manipulation of basic accounting identities. In this ...

Health Capital and the Prenatal Environment: The Effect of Ramadan Observance during Pregnancy

By Douglas Almond and Bhashkar Mazumder

American Economic Journal: Applied Economics, October 2011

This paper uses the Islamic holy month of Ramadan as a natural experiment in diurnal fasting and fetal health. Among births to Arab parents in Michigan, we find prenatal exposure to Ramadan results in lower birth weight. Exposure in the first month of ges...

Naïve Herding in Rich-Information Settings

By Erik Eyster and Matthew Rabin

American Economic Journal: Microeconomics, November 2010

In social-learning environments, we investigate implications of the assumption that people naïvely believe that each previous person's action reflects solely that person's private information. Naïve herders inadvertently over-weight early movers...

How Will Energy Demand Develop in the Developing World?

[Symposium: Energy Challenges]

By Catherine Wolfram, Orie Shelef, and Paul Gertler

Journal of Economic Perspectives, Winter 2012

Over the next 25 to 30 years, nearly all of the growth in energy demand, fossil fuel use, associated local pollution, and greenhouse gas emissions is forecast to come from the developing world. This paper argues that the world's poor and near-poor will pl...

Marginal Jobs, Heterogeneous Firms, and Unemployment Flows

By Michael W. L. Elsby and Ryan Michaels

American Economic Journal: Macroeconomics, January 2013

This paper introduces a notion of firm size into a search and matching model with endogenous job destruction. The outcome is a rich, yet analytically tractable framework that can be used to analyze a broad set of features of both the cross-section and ...

Inheritance Law and Investment in Family Firms

By Andrew Ellul, Marco Pagano, and Fausto Panunzi

American Economic Review, December 2010

Entrepreneurs may be legally bound to bequeath a minimal stake to noncontrolling heirs. The size of this stake can reduce investment in family firms, by reducing the future income they can pledge to external financiers. Using a purpose-built indicator of ...

State Misallocation and Housing Prices: Theory and Evidence from China

By Shing-Yi Wang

American Economic Review, August 2011

This paper examines the equilibrium price effects of the privatization of housing assets that were previously owned and allocated by the state. I develop a theoretical framework that shows that privatization can have ambiguous effects on prices in the pri...

Do We Follow Others When We Should? A Simple Test of Rational Expectations: Comment

By Anthony Ziegelmeyer, Christoph March, and Sebastian Krügel

American Economic Review, October 2013

The payoff of actions is estimated and the resulting empirical payoff is controlled for in regression analyses to formulate a test of rational expectations in information cascade experiments. We show that the empirical payoff of actions is a function of e...

What Do You Think Would Make You Happier? What Do You Think You Would Choose?

By Daniel J. Benjamin, Ori Heffetz, Miles S. Kimball, and Alex Rees-Jones

American Economic Review, August 2012

Would people choose what they think would maximize their subjective well-being (SWB)? We present survey respondents with hypothetical scenarios and elicit both choice and predicted SWB rankings of two alternatives. While choice and predicted SWB rankings ...

Education and Labor Market Discrimination

By Kevin Lang and Michael Manove

American Economic Review, June 2011

Using a model of statistical discrimination and educational sorting, we explain why blacks get more education than whites of similar cognitive ability, and we explore how the Armed Forces Qualification Test (AFQT), wages, and education are related. The...

Structural Transformation, the Mismeasurement of Productivity Growth, and the Cost Disease of Services

By Alwyn Young

American Economic Review, November 2014

If workers self-select into industries based upon their relative productivity in different tasks, and comparative advantage is aligned with absolute advantage, then the average efficacy of a sector's workforce will be negatively correlated with its emp...

Effective Exchange Rates and the Classical Gold Standard Adjustment

By Luis A. V. Catão and Solomos N. Solomou

American Economic Review, September 2005

Using a new international dataset of trade-weighed exchange rates, this paper highlights a neglected adjustment mechanism in the classical gold standard literature. Since gold-pegged countries traded extensively with economies operating more flexible mone...

Tax Reform as Political Choice

[Symposium: Tax Reform]

By James M. Buchanan

Journal of Economic Perspectives, Summer 1987

Public choice theory explains and interprets politics as the interaction among constituents and agents seeking to advance or to express their own interests. Applied to an observed political event like the 1986 tax reform legislation, any such analysis mus...

The Enigma of India

By Kaushik Basu

Journal of Economic Literature, June 2008

India's high growth over the last fifteen years has inspired several recent books and papers to examine the growth's source and sustainability—the two-volume study by Arvind Virmani being a case in point. This paper evaluates these recent works. It is...

Dividend Taxes and Firm Valuation: New Evidence

By Alan J. Auerbach and Kevin A. Hassett

American Economic Review, May 2006

Report of the Director: Job Openings for Economists

By John J. Siegfried

American Economic Review, May 2016

Paying on the Margin for Medical Care: Evidence from Breast Cancer Treatments

By Liran Einav, Amy Finkelstein, and Heidi Williams

American Economic Journal: Economic Policy, February 2016

We present a simple graphical framework to illustrate the potential welfare gains from a "top-up" health insurance policy requiring patients to pay the incremental price for more expensive treatment options. We apply this framework to breast cancer treatm...