Front Matter

American Economic Journal: Macroeconomics, October 2017

Gender Gaps and the Rise of the Service Economy

By L. Rachel Ngai and Barbara Petrongolo

American Economic Journal: Macroeconomics, October 2017

This paper investigates the role of the rise in services in the narrowing of gender gaps in hours and wages in recent decades. We highlight the between-industry component of differential gender trends for the United States and propose a model economy with...

Demand for Value Added and Value-Added Exchange Rates

By Rudolfs Bems and Robert C. Johnson

American Economic Journal: Macroeconomics, October 2017

We examine how cross-border input linkages shape the response of demand for value added to international relative price changes. We define a novel value-added real effective exchange rate (REER), which aggregates bilateral value-added price changes. Spill...

Untitled Land, Occupational Choice, and Agricultural Productivity

By Chaoran Chen

American Economic Journal: Macroeconomics, October 2017

The prevalence of untitled land in poor countries helps explain the international agricultural productivity differences. Since untitled land cannot be traded across farmers, it creates land misallocation and distorts individuals' occupational choice betwe...

Noisy News in Business Cycles

By Mario Forni, Luca Gambetti, Marco Lippi, and Luca Sala

American Economic Journal: Macroeconomics, October 2017

We investigate the role of "noise" shocks as a source of business cycle fluctuations. To do so we set up a simple model of imperfect information and derive restrictions for identifying the noise shock in a VAR model. The novelty of our approach is that id...

Why Don't Households Smooth Consumption? Evidence from a $25 Million Experiment

By Jonathan A. Parker

American Economic Journal: Macroeconomics, October 2017

This paper evaluates theoretical explanations for the propensity of households to increase spending in response to the arrival of predictable, lump-sum payments, using households in the Nielsen Consumer Panel who received $25 million in randomly distribut...

Knowledge Capital and Aggregate Income Differences: Development Accounting for US States

By Eric A. Hanushek, Jens Ruhose, and Ludger Woessmann

American Economic Journal: Macroeconomics, October 2017

Improvement in human capital is often presumed to be important for state economic development, but little research links better education to state incomes. We develop detailed measures of worker skills in each state that incorporate cognitive skills from ...

The Substitution Elasticity, Factor Shares, and the Low-Frequency Panel Model

By Robert S. Chirinko and Debdulal Mallick

American Economic Journal: Macroeconomics, October 2017

The value of the elasticity of substitution between labor and capital (σ) is a crucial assumption in understanding the secular decline in the labor share of income. This paper develops and implements a new strategy for estimating this crucial parame...

How Important Are Sectoral Shocks?

By Enghin Atalay

American Economic Journal: Macroeconomics, October 2017

I quantify the contribution of sectoral shocks to business cycle fluctuations in aggregate output. I develop and estimate a multi-industry general equilibrium model in which each industry employs the material and capital goods produced by other sectors. U...

Front Matter

American Economic Review, October 2017

Includes Julio Rotemberg: In Memoriam, Distinguished Fellow, 1953-2017.

How Local Are Labor Markets? Evidence from a Spatial Job Search Model

By Alan Manning and Barbara Petrongolo

American Economic Review, October 2017

This paper models the optimal search strategies of the unemployed across space to characterize local labor markets. Our methodology allows for linkages between numerous areas, while preserving tractability. We estimate that labor markets are quite local, ...

Trade Liberalization and Regional Dynamics

By Rafael Dix-Carneiro and Brian K. Kovak

American Economic Review, October 2017

We study the evolution of trade liberalization's effects on Brazilian local labor markets. Regions facing larger tariff cuts experienced prolonged declines in formal sector employment and earnings relative to other regions. The impact of tariff changes on...

Steering the Climate System: Using Inertia to Lower the Cost of Policy

By Derek Lemoine and Ivan Rudik

American Economic Review, October 2017

Common views hold that the efficient way to limit warming to a chosen level is to price carbon emissions at a rate that increases exponentially. We show that this Hotelling tax on carbon emissions is actually inefficient. The least-cost policy path takes ...

Defensive Investments and the Demand for Air Quality: Evidence from the NOx Budget Program

By Olivier Deschênes, Michael Greenstone, and Joseph S. Shapiro

American Economic Review, October 2017

The demand for air quality depends on health impacts and defensive investments, but little research assesses the empirical importance of defenses. A rich quasi-experiment suggests that the Nitrogen Oxides (NOx) Budget Program (NBP), a cap-and-trade market...

Competing for Loyalty: The Dynamics of Rallying Support

By Matias Iaryczower and Santiago Oliveros

American Economic Review, October 2017

We consider a class of dynamic collective action problems in which either a single principal or two competing principals vie for the support of members of a group. We focus on the dynamic problem that emerges when agents negotiate and commit their support...

Politician Family Networks and Electoral Outcomes: Evidence from the Philippines

By Cesi Cruz, Julien Labonne, and Pablo Querubín

American Economic Review, October 2017

We demonstrate the importance of politician social networks for electoral outcomes. Using large-scale data on family networks from over 20 million individuals in 15,000 villages in the Philippines, we show that candidates for public office are disproporti...

Financial Intermediation, International Risk Sharing, and Reserve Currencies

By Matteo Maggiori

American Economic Review, October 2017

I model the equilibrium risk sharing between countries with varying financial development. The most financially developed country takes greater risks because its financial intermediaries deal with funding problems better. In good times, the more financial...

New Evidence on the Aftermath of Financial Crises in Advanced Countries

By Christina D. Romer and David H. Romer

American Economic Review, October 2017

This paper examines the aftermath of postwar financial crises in advanced countries. We construct a new semiannual series on financial distress in 24 OECD countries for the period 1967-2012. The series is based on assessments of the health of countries' f...

The Costs of Sovereign Default: Evidence from Argentina

By Benjamin Hébert and Jesse Schreger

American Economic Review, October 2017

We estimate the causal effect of sovereign default on the equity returns of Argentine firms. We identify this effect by exploiting changes in the probability of Argentine sovereign default induced by legal rulings in the case of NML Capital, Ltd. v. Repub...

Search at the Margin

By José A. Carrasco and Lones Smith

American Economic Review, October 2017

We extend search theory to multiple indivisible units and perfectly divisible assets, solving them respectively with induction and recursion. Buyer demands and prices are random, and the seller can partially exercise orders. With divisible assets, the Bel...