Cap and Escape in Trade Agreements

By Mostafa Beshkar and Eric W. Bond

American Economic Journal: Microeconomics, November 2017

We propose a model of flexible trade agreements in which verifying the prevailing contingencies is possible but costly. Two types of flexibility emerge: contingent protection, which requires governments to verify the state of the world, and discretionary ...

Optimal Pricing Mechanisms with Unknown Demand

By Ilya Segal

American Economic Review, June 2003

The standard profit-maximizing multiunit auction intersects the submitted demand curve with a preset reservation supply curve, which is determined using the distribution from which the buyers' valuations are drawn. However, when this distribution is unkno...

The Effect of Health Risk on Housing Values: Evidence from a Cancer Cluster

By Lucas W. Davis

American Economic Review, December 2004

An Economic Theory of GATT

By Kyle Bagwell and Robert W. Staiger

American Economic Review, March 1999

The authors propose a unified theoretical framework within which to interpret and evaluate the foundational principles of GATT. Working within a general equilibrium trade model, they represent government preferences in a way that is consistent with nation...

Free to Leave? A Welfare Analysis of Divorce Regimes

By Raquel Fernández and Joyce Cheng Wong

American Economic Journal: Macroeconomics, July 2017

During the 1970s, the United States switched from mutual consent to a unilateral divorce regime. Who benefited/lost from this change? We develop a dynamic life cycle model in which agents make consumption, saving, work, and marital-status decisions under ...

Economists as Public Policy Advisers

[Symposium: Economists as Policy Advocates]

By Lee H. Hamilton

Journal of Economic Perspectives, Summer 1992

As a member of the Joint Economic Committee for over 15 years I have had ample occasion to observe economists testifying. When I was Chairman of the Committee in the last Congress, for example, we held over 100 hearings and heard from at least that many d...

Generational Accounting: A Meaningful Way to Evaluate Fiscal Policy

[Symposium: Generational Accounting]

By Alan J. Auerbach, Jagadeesh Gokhale, and Laurence J. Kotlikoff

Journal of Economic Perspectives, Winter 1994

This paper illustrates the technique of generational accounting, a new way to evaluate fiscal policy that overcomes the inherent ambiguities of traditional deficit accounting. The authors illustrate why there is no 'correct' measure of the deficit and how...

Conventional and Unconventional Monetary Policy with Endogenous Collateral Constraints

By Aloísio Araújo, Susan Schommer, and Michael Woodford

American Economic Journal: Macroeconomics, January 2015

We consider the effects of central bank purchases of a risky asset as an additional dimension of policy alongside "conventional" interest rate policy in a general-equilibrium model of asset pricing with endogenous collateral constraints. The effects of as...

How Much of South Korea's Growth Miracle Can Be Explained by Trade Policy?

By Michelle Connolly and Kei-Mu Yi

American Economic Journal: Macroeconomics, October 2015

This paper assesses the importance of trade policy reforms in South Korea, as well as the General Agreement on Tariffs and Trade (GATT) tariff reductions, in explaining Korea's growth miracle. We develop a model of neoclassical growth and trade in which l...

Individual Behavior and Group Membership

By Gary Charness, Luca Rigotti, and Aldo Rustichini

American Economic Review, September 2007

People who are members of a group and identify with it behave differently from people who perceive themselves as isolated individuals. This paper shows that group membership affects preferences over outcomes, and saliency of the group affects the perce...

Follow the Money: Quantifying Domestic Effects of Foreign Bank Shocks in the Great Recession

By Nicola Cetorelli and Linda S. Goldberg

American Economic Review, May 2012

Foreign banks pulled significant funding from their US branches during the Great Recession. We estimate that the average-sized branch experienced a twelve percent net internal fund "withdrawal," with the fund transfer disproportionately bigger for larger ...

Avoiding Invalid Instruments and Coping with Weak Instruments

By Michael P. Murray

Journal of Economic Perspectives, Fall 2006

Archimedes said, "Give me the place to stand, and a lever long enough, and I will move the Earth." Economists have their own powerful lever: the instrumental variable estimator. The instrumental variable estimator can avoid the bias that ordinary least s...

Does Culture Affect Economic Outcomes?

[Symposium: Cultural Economics]

By Luigi Guiso, Paola Sapienza, and Luigi Zingales

Journal of Economic Perspectives, Spring 2006

Until recently, economists have been reluctant to rely on culture as a possible determinant of economic phenomena. Much of this reluctance stems from the very notion of culture: it is so broad and the channels through which it can enter the economic disco...

Melioration: A Theory of Distributed Choice

By Richard J. Herrnstein and Drazen Prelec

Journal of Economic Perspectives, Summer 1991

In this paper, we develop a theory of individual choice called melioration, which implies that choices distributed over a period of time may be reliably and predictably suboptimal, in terms of the person's own preferences. Consider some typical examples o...

Verifying the Solution from a Nonlinear Solver: A Case Study: Reply

By B. D. McCullough and H. D. Vinod

American Economic Review, March 2004

The Investment Strategies of Sovereign Wealth Funds

By Shai Bernstein, Josh Lerner, and Antoinette Schoar

Journal of Economic Perspectives, Spring 2013

Sovereign wealth funds have emerged as major investors in corporate and real resources worldwide. After an overview of their magnitude, we consider the institutional arrangements under which many of the sovereign wealth funds operate. We focus on a specif...

Taxing Top CEO Incomes

By Laurence Ales and Christopher Sleet

American Economic Review, November 2016

We use a firm-CEO assignment framework to model the market for CEO effective labor. In the model's equilibrium, more talented CEOs match with and supply more effort to larger firms. Taxation of CEO incomes affects the equilibrium pricing of CEO effective ...

Bundling Health Insurance and Microfinance in India: There Cannot Be Adverse Selection If There Is No Demand

By Abhijit Banerjee, Esther Duflo, and Richard Hornbeck

American Economic Review, May 2014

Microfinance institutions have started to bundle their basic loans with other financial services, such as health insurance. Using a randomized control trial in Karnataka, India, we evaluate the impact on loan renewal from mandating the purchase of actuari...

Recommendations for Further Reading

By Timothy Taylor

Journal of Economic Perspectives, Summer 2011

Cross-Border Media and Nationalism: Evidence from Serbian Radio in Croatia

By Stefano DellaVigna, Ruben Enikolopov, Vera Mironova, Maria Petrova, and Ekaterina Zhuravskaya

American Economic Journal: Applied Economics, July 2014

How do nationalistic media affect animosity between ethnic groups? We consider one of Europe's deadliest conflicts since WWII, the Serbo-Croatian conflict. We show that, after a decade of peace, cross-border nationalistic Serbian radio triggers ethnic hat...