Misallocation under Trade Liberalization

By Yan Bai, Keyu Jin, and Dan Lu

American Economic Review, July 2024

This paper formalizes a classic idea that in second-best environments trade can induce welfare losses: incremental income losses from distortions can outweigh trade gains. In a Melitz model with distortionary taxes, we derive sufficient statistics for wel...

Demographic Origins of the Start-up Deficit

By Fatih Karahan, Benjamin Pugsley, and Ayşegül Şahin

American Economic Review, July 2024

We propose a simple explanation for the long-run decline in the US start-up rate. It originates from a slowdown in labor supply growth since the late 1970s, largely predetermined by demographics. This channel can explain roughly half of the decline and wh...

Opportunity Unraveled: Private Information and the Missing Markets for Financing Human Capital

By Daniel Herbst and Nathaniel Hendren

American Economic Review, July 2024

We examine whether adverse selection has unraveled private markets for equity and state-contingent debt contracts for financing higher education. Using survey data on beliefs, we show a typical college-goer would have to repay $1.64 in present value for e...

Bank Runs, Fragility, and Credit Easing

By Manuel Amador and Javier Bianchi

American Economic Review, July 2024

We present a tractable dynamic general equilibrium model of self-fulfilling bank runs, where banks trade capital in competitive and liquid markets but remain vulnerable to runs due to a loss of creditor confidence. We characterize how the vulnerability of...

100 Years of Rising Corporate Concentration

By Spencer Y. Kwon, Yueran Ma, and Kaspar Zimmermann

American Economic Review, July 2024

We collect data on the size distribution of US businesses for 100 years, and use these data to estimate the concentration of production (e.g., asset share or sales share of top businesses). The data show that concentration has increased persistently over ...

Personalized Pricing and Competition

By Andrew Rhodes and Jidong Zhou

American Economic Review, July 2024

We study personalized pricing in a general oligopoly model. The impact of personalized pricing relative to uniform pricing hinges on the degree of market coverage. If market conditions are such that coverage is high (e.g., the production cost is low or th...

Organized Crime and Economic Growth: Evidence from Municipalities Infiltrated by the Mafia

By Alessandra Fenizia and Raffaele Saggio

American Economic Review, July 2024

This paper studies the long-run economic impact of dismissing city councils infiltrated by organized crime. Applying a matched difference-in-differences design to the universe of Italian social security records, we find that city council dismissals (CCDs)...

The Gift of a Lifetime: The Hospital, Modern Medicine, and Mortality

By Alex Hollingsworth, Krzysztof Karbownik, Melissa A. Thomasson, and Anthony Wray

American Economic Review, July 2024

We explore how access to modern hospitals and medicine affects mortality by leveraging efforts of the Duke Endowment to modernize hospitals in the early twentieth century. The Endowment helped communities build and expand hospitals, obtain state-of-the-ar...

The Behavioral Effects of Welfare Time Limits

By Jeffrey Grogger

American Economic Review, May 2002

Front Matter

American Economic Journal: Macroeconomics, July 2024

Measuring Employer-to-Employer Reallocation

By Shigeru Fujita, Giuseppe Moscarini, and Fabien Postel-Vinay

American Economic Journal: Macroeconomics, July 2024

We revisit measurement of employer-to-employer (EE) transitions in the monthly Current Population Survey. The incidence of missing answers to the question on change of employer sharply increases starting with the introduction of a new software instrument ...

Asymmetric Reciprocity and the Cyclical Behavior of Wages, Effort, and Job Creation

By Marco Fongoni

American Economic Journal: Macroeconomics, July 2024

This paper develops a search and matching framework in which workers are characterized by asymmetric reference-dependent reciprocity and firms set wages by considering the effect that these can have on workers' effort and, therefore, on output. The cyclic...

Aggregate and Intergenerational Implications of School Closures: A Quantitative Assessment

By Youngsoo Jang and Minchul Yum

American Economic Journal: Macroeconomics, July 2024

This paper quantitatively investigates the medium- and long-term macroeconomic and distributional consequences of school closures through intergenerational channels. The model economy is a dynastic overlapping-generations general equilibrium model in whic...

Reassessing the Relevance of Financial Shocks in an Estimated Heterogeneous Firm Model

By Xing Guo

American Economic Journal: Macroeconomics, July 2024

I study the transmission of financial shocks using an estimated heterogeneous firm model. Following a contractionary financial shock, financially constrained firms cut investment, but unconstrained firms increase investment due to the lower capital price ...

World Productivity: 1996–2014

By Mehrdad Esfahani, John G. Fernald, and Bart Hobijn

American Economic Journal: Macroeconomics, July 2024

We use a new growth accounting method to quantify the drivers of world total factor productivity (TFP) growth during 1996–2014 and uncover four main results. World productivity growth is volatile from year to year. This mainly reflects reallocation of l...

The Wage Gap and Public Support for Social Security

By Assaf Razin, Efraim Sadka, and Phillip Swagel

American Economic Review, May 2002

Macroeconomic Frameworks: Reconciling Evidence and Model Predictions from Demand Shocks

By Alan J. Auerbach, Yuriy Gorodnichenko, and Daniel Murphy

American Economic Journal: Macroeconomics, July 2024

How do demand shocks affect the economy? We exploit detailed data on US defense spending to examine a large set of outcome variables in response to well-identified local demand shocks, jointly examining new outcomes (e.g., firm entry and housing rents) an...

Optimal Foreign Reserves and Central Bank Policy under Financial Stress

By Luis Felipe Céspedes and Roberto Chang

American Economic Journal: Macroeconomics, July 2024

We study foreign reserves accumulation and liquidity policy in an open economy under financial stress. Firms and households finance investment and consumption by borrowing from banks, which borrow from abroad. Binding financial constraints cause the domes...

Why Didn't the College Premium Rise Everywhere? Employment Protection and On-the-Job Investment in Skills

By Matthias Doepke and Ruben Gaetani

American Economic Journal: Macroeconomics, July 2024

Why has the college wage premium risen rapidly in the United States since the 1980s but not in European economies such as Germany? We argue that differences in employment protection can account for much of the gap. We develop a model in which firms and wo...

Delayed Overshooting: The Case for Information Rigidities

By Gernot J. Müller, Martin Wolf, and Thomas Hettig

American Economic Journal: Macroeconomics, July 2024

We provide evidence that the delayed overshooting puzzle reflects a slow adjustment of exchange rate expectations to monetary policy shocks rather than a failure of uncovered interest parity. Consistent with this evidence, we put forward a New Keynesian m...