Front Matter

American Economic Review, December 2016

Efficient Bailouts?

By Javier Bianchi

American Economic Review, December 2016

We develop a quantitative equilibrium model of financial crises to assess the interaction between ex post interventions in credit markets and the buildup of risk ex ante. During a systemic crisis, bailouts relax balance sheet constraints and mitigate the ...

Breakthroughs, Deadlines, and Self-Reported Progress: Contracting for Multistage Projects

By Brett Green and Curtis R. Taylor

American Economic Review, December 2016

We study the optimal incentive scheme for a multistage project in which the agent privately observes intermediate progress. The optimal contract involves a soft deadline wherein the principal guarantees funding up to a certain date--if the agent reports p...

Are There Environmental Benefits from Driving Electric Vehicles? The Importance of Local Factors

By Stephen P. Holland, Erin T. Mansur, Nicholas Z. Muller, and Andrew J. Yates

American Economic Review, December 2016

We combine a theoretical discrete-choice model of vehicle purchases, an econometric analysis of electricity emissions, and the AP2 air pollution model to estimate the geographic variation in the environmental benefits from driving electric vehicles. The s...

The Determinants of Productivity in Medical Testing: Intensity and Allocation of Care

By Jason Abaluck, Leila Agha, Chris Kabrhel, Ali Raja, and Arjun Venkatesh

American Economic Review, December 2016

A large body of research has investigated whether physicians overuse care. There is less evidence on whether, for a fixed level of spending, doctors allocate resources to patients with the highest expected returns. We assess both sources of inefficiency, ...

Quality and Accountability in Health Care Delivery: Audit-Study Evidence from Primary Care in India

By Jishnu Das, Alaka Holla, Aakash Mohpal, and Karthik Muralidharan

American Economic Review, December 2016

We present unique audit-study evidence on health care quality in rural India, and find that most private providers lacked medical qualifications, but completed more checklist items than public providers and recommended correct treatments equally often. Am...

Sticky Leverage

By João Gomes, Urban Jermann, and Lukas Schmid

American Economic Review, December 2016

We develop a tractable general equilibrium model that captures the interplay between nominal long-term corporate debt, inflation, and real aggregates. We show that unanticipated inflation changes the real burden of debt and, more significantly, leads to a...

Understanding the Gains from Wage Flexibility: The Exchange Rate Connection

By Jordi Galí and Tommaso Monacelli

American Economic Review, December 2016

We study the gains from increased wage flexibility using a small open economy model with staggered price and wage setting. Two results stand out: (i) the effectiveness of labor cost reductions as a means to stimulate employment is much smaller in a curren...

Creative Destruction and Subjective Well-Being

By Philippe Aghion, Ufuk Akcigit, Angus Deaton, and Alexandra Roulet

American Economic Review, December 2016

In this paper we analyze the relationship between turnover-driven growth and subjective well-being. Our model of innovation-led growth and unemployment predicts that: (i) the effect of creative destruction on expected individual welfare should be unambigu...

Income-Induced Expenditure Switching

By Rudolfs Bems and Julian di Giovanni

American Economic Review, December 2016

This paper shows that an income effect can drive expenditure switching between domestic and imported goods. We use a unique Latvian scanner-level dataset, covering the 2008-2009 crisis, to document several empirical findings. First, expenditure switching ...

Choice Inconsistencies among the Elderly: Evidence from Plan Choice in the Medicare Part D Program: Comment

By Jonathan D. Ketcham, Nicolai V. Kuminoff, and Christopher A. Powers

American Economic Review, December 2016

Consumers' enrollment decisions in Medicare Part D can be explained by Abaluck and Gruber's (2011) model of utility maximization with psychological biases or by a neoclassical version of their model that precludes such biases. We evaluate these competing ...

Choice Inconsistencies among the Elderly: Evidence from Plan Choice in the Medicare Part D Program: Reply

By Jason Abaluck and Jonathan Gruber

American Economic Review, December 2016

We explore the in- and out-of-sample robustness of tests for choice inconsistencies based on parameter restrictions in parametric models, focusing on tests proposed by Ketcham, Kuminoff, and Powers (2016). We argue that their nonparametric alternatives ar...

Front Matter

Journal of Economic Literature, December 2016

Is the WTO Passé?

By Kyle Bagwell, Chad P. Bown, and Robert W. Staiger

Journal of Economic Literature, December 2016

The WTO has delivered policy outcomes that are very different from those likely to emerge out of the recent wave of preferential trade agreements (PTAs). Should economists see this as an efficient institutional hand-off, where the WTO has carried trade li...

Executive Compensation: A Modern Primer

By Alex Edmans and Xavier Gabaix

Journal of Economic Literature, December 2016

This article studies traditional and modern theories of executive compensation, bringing them together under a simple unifying framework accessible to the general-interest reader. We analyze assignment models of the level of pay, and static and dynamic mo...

Equality of Opportunity: Theory and Measurement

By John E. Roemer and Alain Trannoy

Journal of Economic Literature, December 2016

During the last third of the twentieth century, political philosophers actively debated about the content of distributive justice; the ruling ethical view of utilitarianism was challenged by various versions of equality of opportunities. Economists formul...

Immigration Economics by George J. Borjas: A Review Essay

By David Card and Giovanni Peri

Journal of Economic Literature, December 2016

We review Immigration Economics by George J. Borjas, published in 2014 by Harvard University Press. The book is written as a graduate-level textbook, and summarizes and updates many of Borjas's important contributions to the field over the past thi...

The Crisis in Economic Theory: A Review Essay

By Kevin D. Hoover

Journal of Economic Literature, December 2016

The Great Recession and the financial crisis of 2007-09 prompted calls for fundamental reforms of economic theory. The role of theory in economics and in recent economic events is considered in light of two recent books: the sociologist Richard Swedberg's...

Male Is a Gender, Too: A Review of Why Gender Matters in Economics by Mukesh Eswaran

By Julie A. Nelson

Journal of Economic Literature, December 2016

Mukesh Eswaran's Why Gender Matters in Economics presents a generally well-researched review of the literature on women and economics, and admirably attempts take a global perspective. Eswaran's analysis is compromised, however, by an unreflective ...

Ontology, Methodological Individualism, and the Foundations of the Social Sciences

By Robert Sugden

Journal of Economic Literature, December 2016

This is a review essay based on a critical assessment of The Ant Trap: Rebuilding the Foundations of the Social Sciences by Brian Epstein. Epstein argues that models in the social sciences are inadequate because they are based on a false ontology o...