Overconfident Investors, Predictable Returns, and Excessive Trading

[Symposium: Overconfidence]

By Kent Daniel and David Hirshleifer

Journal of Economic Perspectives, Fall 2015

The last several decades have witnessed a shift away from a fully rational paradigm of financial markets toward one in which investor behavior is influenced by psychological biases. Two principal factors have contributed to this evolution: a body of...

State and Development: The Need for a Reappraisal of the Current Literature

By Pranab Bardhan

Journal of Economic Literature, September 2016

This essay tries to bring out some of the complexities that are overlooked in the usual treatment of the state in the institutional economics literature and supplement the latter with a discussion of some alternative approaches to looking at the possible ...

Distributive Politics and Electoral Incentives: Evidence from Seven US State Legislatures

By Toke S. Aidt and Julia Shvets

American Economic Journal: Economic Policy, August 2012

We study the effect of electoral incentives on the allocation of public services across legislative districts. We develop a model in which elections encourage legislators to cater to parochial interests and thus aggravate the common pool problem. Using u...

Sovereign Default Risk and Uncertainty Premia

By Demian Pouzo and Ignacio Presno

American Economic Journal: Macroeconomics, July 2016

This paper studies how international investors' concerns about model misspecification affect sovereign bond spreads. We develop a general equilibrium model of sovereign debt with endogenous default wherein investors fear that the probability model of the ...

Long Run Risk, the Wealth-Consumption Ratio, and the Temporal Pricing of Risk

By Ralph S. J. Koijen, Hanno Lustig, Stijn Van Nieuwerburgh, and Adrien Verdelhan

American Economic Review, May 2010

Mechanism Design: How to Implement Social Goals

By Eric S. Maskin

American Economic Review, June 2008

Slow Moving Capital

By Mark Mitchell, Lasse Heje Pedersen, and Todd Pulvino

American Economic Review, May 2007

Fiscal Policy and Economic Recovery: The Case of the 1936 Veterans' Bonus

By Joshua K. Hausman

American Economic Review, April 2016

Conventional wisdom has it that in the 1930s fiscal policy did not work because it was not tried. This paper shows that fiscal policy was tried in 1936. The veterans' bonus of 1936 paid 2 percent of GDP to 3.2 million veterans; the typical veteran rece...

Too-Systemic-to-Fail: What Option Markets Imply about Sector-Wide Government Guarantees

By Bryan Kelly, Hanno Lustig, and Stijn Van Nieuwerburgh

American Economic Review, June 2016

We examine the pricing of financial crash insurance during the 2007-2009 financial crisis in US option markets, and we show that a large amount of aggregate tail risk is missing from the cost of financial sector crash insurance during the crisis. The diff...

Are Preferential Trading Arrangements Trade-Liberalizing or Protectionist?

By Anne O. Krueger

Journal of Economic Perspectives, Fall 1999

Preferential trade arrangements, and especially free trade agreements, have mushroomed in importance in the 1990s. This has revived research on the effects of these arrangements, both on the welfare of the member countries and those excluded, and on the m...

Immigration Policy and Immigrant Quality: The Australian Points System

By Paul W. Miller

American Economic Review, May 1999

Efficient Retail Pricing in Electricity and Natural Gas Markets

By Steven L. Puller and Jeremy West

American Economic Review, May 2013

A long line of research investigates whether the retail prices of electricity and natural gas send proper signals about scarcity in order to induce efficient consumption. Historically, regulated utilities have not designed tariffs that set marginal price...

Minimax Estimation and Forecasting in a Stationary Autoregression Model

By Gary Chamberlain

American Economic Review, May 2001

Regional Labor Markets, Network Externalities and Migration: The Case of German Reunification

By Harald Uhlig

American Economic Review, May 2006

Bias in the Consumer Price Index: What Is the Evidence?

By Brent R. Moulton

Journal of Economic Perspectives, Fall 1996

Recent research has suggested that the upward bias of the U.S. consumer price index may be significant, and correcting the biases would have important long-run effects on the federal budget deficit. The author describes the sampling procedures used in con...

Efficiency Gains from Team-Based Coordination—Large-Scale Experimental Evidence

By Francesco Feri, Bernd Irlenbusch, and Matthias Sutter

American Economic Review, September 2010

The need for efficient coordination is ubiquitous in organizations and industries. The literature on the determinants of efficient coordination has focused on individual decision making so far. In reality, however, teams often have to coordinate with othe...

Together at Last: Trade Costs, Demand Structure, and Welfare

By Monika Mrázová and J. Peter Neary

American Economic Review, May 2014

We show that relaxing the assumption of CES preferences in monopolistic competition has surprising implications when trade is restricted. Integrated and segmented markets behave differently, the latter typically exhibiting reciprocal dumping. Globalizatio...

Cleaning Up Third World Debt without Getting Taken to the Cleaners

[Symposium: New Institutions for Developing Country Debt]

By Jeremy Bulow and Kenneth Rogoff

Journal of Economic Perspectives, Winter 1990

Should taxpayers of wealthy countries finance a leveraged buyout of third world debt? The case for establishing an international debt discount facility rests on the belief that the overhang of foreign commercial bank debt is stifling growth in the Highly ...

Three Sides of Harberger Triangles

By James R. Hines

Journal of Economic Perspectives, Spring 1999

Harberger triangles are used to calculate the efficiency costs of taxes, government regulations, monopolistic practices, and various other market distortions. This paper considers the historical development of Harberger triangles, the associated theoretic...

Kinship, Incentives, and Evolution

By Ingela Alger and Jörgen W. Weibull

American Economic Review, September 2010

We analyze how family ties affect incentives, with focus on the strategic interaction between two mutually altruistic siblings. The siblings exert effort to produce output under uncertainty, and they may transfer output to each other. With equally altruis...