The Rise of the Machines: Automation, Horizontal Innovation, and Income Inequality

By David Hémous and Morten Olsen

American Economic Journal: Macroeconomics, January 2022

We build an endogenous growth model with automation (the replacement of low-skill workers with machines) and horizontal innovation (the creation of new products). Over time, the share of automation innovations endogenously increases through an increase in...

Slow Debt, Deep Recessions

By Joachim Jungherr and Immo Schott

American Economic Journal: Macroeconomics, January 2022

Business credit lags GDP growth by about one year. This contributes to high leverage during recessions and slow deleveraging. We show that a model in which firms use risky long-term debt replicates this slow adjustment of firm debt. In the model, slow-mov...

Declining Worker Turnover: The Role of Short-Duration Employment Spells

By Michael J. Pries and Richard Rogerson

American Economic Journal: Macroeconomics, January 2022

Using the Quarterly Workforce Indicators database, we document that a significant amount of the decline in labor market turnover during the last two decades is accounted for by the decline in employment spells that last just one or two quarters. This phen...

The Cyclical Behavior of Unemployment and Wages under Information Frictions

By Camilo Morales-Jiménez

American Economic Journal: Macroeconomics, January 2022

I propose a new mechanism for sluggish wages based on workers' noisy information about the state of the economy. Wages do not respond immediately to a positive aggregate shock because workers do not (yet) have enough information to demand higher wages. Th...

The American Mortgage in Historical and International Context

[Symposium: Housing Markets]

By Richard K. Green and Susan M. Wachter

Journal of Economic Perspectives, Fall 2005

The U.S. mortgage before the 1930s would be nearly unrecognizable today: it featured variable interest rates, high down payments and short maturities. The authors compare the form of U.S. home mortgages today with those in other countries. The U.S. mortga...

Endogenous Separations, Wage Rigidities, and Unemployment Volatility

By Mikael Carlsson and Andreas Westermark

American Economic Journal: Macroeconomics, January 2022

We show that in microdata, as well as in a search and matching model with flexible wages for new hires, wage rigidities of incumbent workers have substantial effects on separations and unemployment volatility. Allowing for an empirically relevant degree o...

Offshoring, Automation, Low-Skilled Immigration, and Labor Market Polarization

By Federico S. Mandelman and Andrei Zlate

American Economic Journal: Macroeconomics, January 2022

We show that the observed polarization of employment toward the high- and low-skill occupations disappears when only native workers are considered. Instead, low-skilled immigration explains employment growth at the low tail of the skill distribution. More...

Accounting for Stock Options

[Symposium: Stock Options Now and Then]

By Jeremy Bulow and John B. Shoven

Journal of Economic Perspectives, Fall 2005

As public companies begin their new fiscal years, they are implementing a new and controversial Financial Accounting Standards Board (FASB, 2004) proposal for expensing stock options. Applied to 2003 and 2004, this rule would have slashed reported earning...

Front Matter

American Economic Review, February 2022

Can You Move to Opportunity? Evidence from the Great Migration

By Ellora Derenoncourt

American Economic Review, February 2022

This paper shows that racial composition shocks during the Great Migration (1940–1970) reduced the gains from growing up in the northern United States for Black families and can explain 27 percent of the region's racial upward mobility gap today. I iden...

Imperfect Markets versus Imperfect Regulation in US Electricity Generation

By Steve Cicala

American Economic Review, February 2022

This paper evaluates changes in electricity generation costs caused by the introduction of market mechanisms to determine production in the United States. I use the staggered transition to markets from 1999 to 2012 to estimate the causal impact of liberal...

Political Turnover, Bureaucratic Turnover, and the Quality of Public Services

By Mitra Akhtari, Diana Moreira, and Laura Trucco

American Economic Review, February 2022

We study how political turnover in mayoral elections in Brazil affects public service provision by local governments. Exploiting a regression discontinuity design for close elections, we find that municipalities with a new party in office experience uphea...

A Satellite Account for Health in the United States

By David M. Cutler, Kaushik Ghosh, Kassandra L. Messer, Trivellore Raghunathan, Allison B. Rosen, and Susan T. Stewart

American Economic Review, February 2022

This paper develops a satellite account for the US health sector and measures productivity growth in health care for the elderly population between 1999 and 2012. We measure the change in medical spending and health outcomes for a comprehensive set of 80 ...

The Original Management Incentive Schemes

[Symposium: Stock Options Now and Then]

By Richard T. Holden

Journal of Economic Perspectives, Fall 2005

During the 1990s, the structure of pay for top corporate executives shifted markedly as the use of stock options greatly expanded. By the early 2000s, as the dot-com boom ended and the Nasdaq stock index melted down, these modern executive incentive schem...

Consumer Information and the Limits to Competition

By Mark Armstrong and Jidong Zhou

American Economic Review, February 2022

This paper studies competition between firms when consumers observe a private signal of their preferences over products. Within the class of signal structures that induce pure-strategy pricing equilibria, we derive signal structures that are optimal for f...

Hospital Network Competition and Adverse Selection: Evidence from the Massachusetts Health Insurance Exchange

By Mark Shepard

American Economic Review, February 2022

Health insurers increasingly compete on their networks of medical providers. Using data from Massachusetts's insurance exchange, I find substantial adverse selection against plans covering the most prestigious and expensive "star" hospitals. I highlight a...

Incomplete Information Bargaining with Applications to Mergers, Investment, and Vertical Integration

By Simon Loertscher and Leslie M. Marx

American Economic Review, February 2022

We provide an incomplete information bargaining framework that captures the effects of differential bargaining power in markets with multiple buyers and multiple suppliers. The market is modeled as a mechanism that maximizes the expected weighted welfare ...

An Equilibrium Model of the International Price System

By Dmitry Mukhin

American Economic Review, February 2022

What explains the central role of the dollar in world trade? Will the US currency retain its dominant status in the future? This paper develops a quantitative general equilibrium framework with endogenous currency choice that can address these questions...