Optimal Contracting with Subjective Evaluation

By W. Bentley MacLeod

American Economic Review, March 2003

This paper extends the standard principal-agent model to allow for subjective evaluation. The optimal contract results in more compressed pay relative to the case with verifiable performance measures. Moreover, discrimination against an individual implies...

Firm Responses and Wage Effects of Foreign Demand Shocks with Fixed Labor Costs and Monopsony

By Emmanuel Dhyne, Ayumu Ken Kikkawa, Toshiaki Komatsu, Magne Mogstad, and Felix Tintelnot

American Economic Review, December 2025

We quantify the firm responses and real wage effects of foreign demand shocks. We use Belgian microdata to construct firm-specific measures of demand shocks, which capture that firms pass on foreign demand shocks to domestic suppliers. Our estimates of fi...

First-Generation Elite: The Role of School Social Networks

By Sarah Cattan, Kjell G. Salvanes, and Emma Tominey

American Economic Review, December 2025

High school students from non-elite backgrounds are less likely to have peers with elite-educated parents than their elite counterparts. This difference in social capital is a key driver of the high intergenerational persistence in elite education. We ide...

Incentive Complexity, Bounded Rationality, and Effort Provision

By Johannes Abeler, David Huffman, and Collin Raymond

American Economic Review, December 2025

Using field and laboratory experiments, we demonstrate that the complexity of incentive schemes and worker bounded rationality can affect effort provision. This is because some attributes of the incentives become opaque; that is, workers do not take them ...

Changing Income Risk across the US Skill Distribution: Evidence from a Generalized Kalman Filter

By J. Carter Braxton, Kyle Herkenhoff, Jonathan Rothbaum, and Lawrence Schmidt

American Economic Review, December 2025

For whom has earnings risk changed, and why? We answer these questions by combining the Kalman filter and EM algorithm to estimate persistent and temporary earnings for every individual at every point in time. We apply our method to administrative earning...

An Equilibrium Analysis of the Effects of Neighborhood-Based Interventions on Children

By Eric Chyn and Diego Daruich

American Economic Review, December 2025

This paper studies housing vouchers and urban redevelopment programs by incorporating neighborhood effects into a general equilibrium overlapping-generations model with endogenous location choice and child development. We calibrate the model using US data...

Allocation Mechanisms with Mixture-Averse Preferences

By David Dillenberger and Uzi Segal

American Economic Review, December 2025

Consider an economy with equal amounts of N types of goods, to be allocated to agents with strict quasi-convex preferences over lotteries. We show that ex ante, all Pareto-efficient allocations give almost all agents lotteries over at most two outcomes. O...

Female Leaders and Intrahousehold Dynamics: Evidence from State Elections in India

By S Anukriti, Bilge Erten, and Priya Mukherjee

American Economic Journal: Economic Policy

We study the impact of women's political representation on the wellbeing of their female constituents, specifically in the domain of health. Increasing women's political representation leads to greater public provision of reproductive healthcare servic...

The Long-Term Effects of Cash Assistance

By David J. Price and Jae Song

American Economic Journal: Applied Economics

We investigate the long-term effects of cash assistance on beneficiaries and their children among participants in the Seattle-Denver Income Maintenance Experiment. Treated families in this randomized experiment received thousands of dollars in extra go...

All Roads Lead to Rome: Global Air Connectivity and Bilateral Trade

By Zheng Wang, Feicheng Wang, and Zhuo Zhou

American Economic Journal: Applied Economics

Using itinerary-level global air traffic data, this paper proposes a novel instrumental variable to estimate the effect of in-person interactions on bilateral trade. By exploiting exogenous variations in air connectivity that are driven by third-countr...

Corporate Lobbying and Commitment Failure in Capital Taxation

By Nicolas Marceau and Michael Smart

American Economic Review, March 2003

Impacts of Corporate Tax Cuts on Firms and Workers: Evidence from Small Businesses

By Yige Duan and Terry S. Moon

American Economic Journal: Economic Policy

This paper assesses the effects of corporate tax cuts on small firms and their workers. Following a reform in Quebec, Canada, firms receiving tax cuts expand and their workers' earnings increase com- pared to workers and firms without tax cuts. We esti...

Sequential Protest Formation

By Benjamin Matta

American Economic Journal: Microeconomics

People participate in protests even though it is costly, benefits are not exclusive to participants, and each individual is unlikely to be pivotal. Building on these characteristics, I propose a sequential model of protest formation where opportunities t...

Front Matter

Journal of Economic Literature, December 2025

Imperfect Competition in Financial Markets: Recent Developments

By Marzena Rostek and Ji Hee Yoon

Journal of Economic Literature, December 2025

This article reviews the theory of imperfectly competitive financial markets, with special attention to recent contributions and rapidly growing areas of research. We highlight the methodological advances that have led to a unified analytic framework for ...

Understanding Economic Behavior Using Open-Ended Survey Data

By Ingar Haaland, Christopher Roth, Stefanie Stantcheva, and Johannes Wohlfart

Journal of Economic Literature, December 2025

We survey the recent literature in economics using open-ended survey data to uncover mechanisms behind economic beliefs and behaviors. We first provide an overview of different applications, including the measurement of motives, mental models, narratives,...

The Economics of Infectious Diseases

By M. Christopher Auld, Eli P. Fenichel, and Flavio Toxvaerd

Journal of Economic Literature, December 2025

We synthesize the literature on economic epidemiology, the interdisciplinary field that draws on the ideas and methods of economics to analyze individual behavior, aggregate disease dynamics, and public policy during infectious disease epidemics. We cover...

China's Macroeconomic Development: The Role of Gradualist Reforms

By Kaiji Chen and Tao Zha

Journal of Economic Literature, December 2025

This paper provides analytic guides to recent literature on China's macroeconomic development, emphasizing the critical role of the gradualist reform approach. Our analysis suggests that from 1978 to 1997, the gradualist approach contributed to China's ag...

The Beautiful Dataset

By Ignacio Palacios-Huerta

Journal of Economic Literature, December 2025

Natural experiments, high stakes, expert subjects, knowledge of the precise objectives and exact rules, clean measurement, observability of strategies, incentives, actions and consequences, large datasets, exogenous rule changes, distinct social effects, ...

Liquidity Traps: A Unified Theory of the Great Depression and the Great Recession

By Gauti B. Eggertsson and Sergei K. Egiev

Journal of Economic Literature, December 2025

This review of liquidity traps unifies three landmark economic downturns—the US Great Depression, the Great Recession, and Japan's Long Recession—into a single analytical framework. We examine various forces that drive natural interest rates negative:...