The Growth Potential of Startups over the Business Cycle

By Petr Sedláček and Vincent Sterk

American Economic Review, October 2017

This paper shows that employment in cohorts of US firms is strongly influenced by aggregate conditions at the time of their entry. Employment fluctuations of startups are procyclical, they persist into later years, and cohort-level employment variations a...

Exporter Dynamics and Partial-Year Effects

By Andrew B. Bernard, Esther Ann Boler, Renzo Massari, Jose-Daniel Reyes, and Daria Taglioni

American Economic Review, October 2017

Two identical firms who start exporting in different months, one each in January and December, will report dramatically different exports for the first calendar year. This partial-year effect biases down first-year export levels and biases up first-year e...

The Cyclicality of Sales, Regular, and Effective Prices: Business Cycle and Policy Implications: Comment

By Etienne Gagnon, David López-Salido, and Jason Sockin

American Economic Review, October 2017

Coibion, Gorodnichenko, and Hong (2015) argue that the CPI underestimates the deceleration in consumer prices during economic downturns because the index fails to account for the reallocation of consumer spending from high-price to low-price stores. We sh...

News Shocks and the Slope of the Term Structure of Interest Rates: Comment

By Danilo Cascaldi-Garcia

American Economic Review, October 2017

Kurmann and Otrok (2013) establish that the effects on economic activity from news on future productivity growth are similar to the effects from unexpected changes in the slope of the yield curve. This comment shows that these results become substantially...

News Shocks and the Slope of the Term Structure of Interest Rates: Reply

By André Kurmann and Christopher Otrok

American Economic Review, October 2017

This reply to Cascaldi-Garcia's (2017) comment argues that by using the original code of Kurmann and Otrok (2013) with new data on utilization-adjusted TFP, Cascaldi-Garcia (2017) confounds positive and negative news shocks. With a small modification to t...

Front Matter

American Economic Journal: Microeconomics, November 2017

Call Market Experiments: Efficiency and Price Discovery through Multiple Calls and Emergent Newton Adjustments

By Charles R. Plott and Kirill Pogorelskiy

American Economic Journal: Microeconomics, November 2017

We study multiple-unit, laboratory experimental call markets in which orders are cleared by a single price at a scheduled "call." The markets are independent trading "days" with two calls each day preceded by a continuous and public order flow. Markets ap...

If Many Seek, Ye Shall Find: Search Externalities and New Goods

By Maciej H. Kotowski and Richard J. Zeckhauser

American Economic Journal: Microeconomics, November 2017

Consumer search serves productive roles in an economy with multiple goods. In equilibrium, search promotes the sorting of consumers among producers, thereby enabling the market for new goods, and potentially increasing welfare and profits above the benchm...

Comparing Voting by Committees According to Their Manipulability

By R. Pablo Arribillaga and Jordi Massó

American Economic Journal: Microeconomics, November 2017

We consider the class of voting by committees to be used by a society to collectively choose a subset from a given set of objects. We offer a simple criterion to compare two voting by committees without dummy agents according to their manipulability. This...

Ideology as Opinion: A Spatial Model of Common-Value Elections

By Joseph McMurray

American Economic Journal: Microeconomics, November 2017

Spatial election literature attributes voters' political differences to irreconcilable conflicts of interest. Alternatively, voters may merely hold differing beliefs regarding which policies best promote the public interest, as in the classic common-value...

The Coevolution of Segregation, Polarized Beliefs, and Discrimination: The Case of Private versus State Education

By Gilat Levy and Ronny Razin

American Economic Journal: Microeconomics, November 2017

In this paper we analyze the coevolution of segregation into private and state schools, beliefs about the educational merits of different schools, and labor market discrimination. In a dynamic model, we characterize a necessary and sufficient condition on...

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 ...

Management Quality and Firm Hierarchy in Industry Equilibrium

By Cheng Chen

American Economic Journal: Microeconomics, November 2017

I incorporate a monitoring-based firm hierarchy into an industry equilibrium model with heterogeneous firms. I then use the theory to study aggregate impacts of an economy-wide improvement in monitoring efficiency. This shock generates a selection effect,...

Persistence and Change in Culture and Institutions under Autarchy, Trade, and Factor Mobility

By Marianna Belloc and Samuel Bowles

American Economic Journal: Microeconomics, November 2017

Differences among nations in culture (preferences including social norms) and institutions (contracts) may result in specialization and gains from trade even in the absence of exogenous differences in factor endowments or technologies. Goods differ in t...

Partner Uncertainty and the Dynamic Boundary of the Firm

By Thomas Hellmann and Veikko Thiele

American Economic Journal: Microeconomics, November 2017

We develop a new theory of the dynamic boundary of the firm where asset owners may want to change partners ex post. We identify a fundamental trade-off between (i) a "displacement externality" under non-integration, where a partner leaves a relationship e...

Welfare Consequences of Information Aggregation and Optimal Market Size

By Kei Kawakami

American Economic Journal: Microeconomics, November 2017

We analyze the welfare implications of information aggregation in a trading model where traders have both idiosyncratic endowment risk and asymmetric information about security payoffs. The optimal market size balances two forces: (i) the risk-sharing rol...

Centralized Decision Making and Informed Lobbying

By Rafael Costa Lima, Humberto Moreira, and Thierry Verdier

American Economic Journal: Microeconomics, November 2017

We address the trade-off between centralized and decentralized decision making subject to influence from privately informed lobbies. We focus on informative equilibria with separating differentiable contribution schedules and identify an information trans...

Front Matter

American Economic Journal: Economic Policy, November 2017

Consumption Responses to Temporary Tax Incentives: Evidence from State Sales Tax Holidays

By Sumit Agarwal, Nathan Marwell, and Leslie McGranahan

American Economic Journal: Economic Policy, November 2017

States offer sales tax holidays (STHs) temporarily exempting items like clothes, shoes, and school supplies from the state sales tax. Spending response to these temporary tax changes are investigated using two datasets: the Diary portion of the Consumer E...

Street Prostitution Zones and Crime

By Paul Bisschop, Stephen Kastoryano, and Bas van der Klaauw

American Economic Journal: Economic Policy, November 2017

This paper studies the effects of legal street prostitution zones on registered and perceived crime. We exploit a unique setting in the Netherlands where these tippelzones were opened in nine cities under different regulation systems. Our difference-in-di...