Front Matter

American Economic Journal: Microeconomics, February 2018

Risk and Return in Village Economies

By Krislert Samphantharak and Robert M. Townsend

American Economic Journal: Microeconomics, February 2018

This paper provides a theory-based empirical framework for understanding the risk and return on productive capital assets and their allocation across activities in an economy characterized by idiosyncratic and aggregate risk and thin formal markets for re...

Incomplete Disclosure: Evidence of Signaling and Countersignaling

By Benjamin B. Bederson, Ginger Zhe Jin, Phillip Leslie, Alexander J. Quinn, and Ben Zou

American Economic Journal: Microeconomics, February 2018

In 2011, Maricopa County adopted voluntary restaurant hygiene grade cards (A, B, C, D). Using inspection results between 2007 and 2013, we show that only 58 percent of the subsequent inspections led to online grade posting. Although the disclosure rate in...

Industry Dynamics of Offshoring: The Case of Hard Disk Drives

By Mitsuru Igami

American Economic Journal: Microeconomics, February 2018

This paper uncovers a novel pattern of offshoring dynamics in a high-tech industry, and proposes a structural model to explain it. Specifically, the hard disk drive industry (1976-1998) witnessed massive waves of entry, exit, and the relocation of manufac...

Revealed Preference with Limited Consideration

By Thomas Demuynck and Christian Seel

American Economic Journal: Microeconomics, February 2018

We derive revealed preference tests for models where individuals use consideration sets to simplify their consumption problem. Our basic test provides necessary and sufficient conditions for consistency of observed choices with the existence of considerat...

Partial Vertical Integration, Ownership Structure, and Foreclosure

By Nadav Levy, Yossi Spiegel, and David Gilo

American Economic Journal: Microeconomics, February 2018

We study the incentive to acquire a partial stake in a vertically related firm and then foreclose rivals. We show that whether such partial acquisitions are profitable depends crucially on the initial ownership structure of the target firm and on corporat...

How Transparency Kills Information Aggregation: Theory and Experiment

By Sebastian Fehrler and Niall Hughes

American Economic Journal: Microeconomics, February 2018

We investigate the potential of transparency to influence committee decision-making. We present a model in which career concerned committee members receive private information of different type-dependent accuracy, deliberate, and vote. We study three leve...

Coarse Grades: Informing the Public by Withholding Information

By Rick Harbaugh and Eric Rasmusen

American Economic Journal: Microeconomics, February 2018

Certifiers of quality often report only coarse grades to the public despite having measured quality more finely, e.g., "Pass" or "Certified" instead of "73 out of 100." Why? We show that coarse grades result in more information being provided to the publi...

Product versus Process: Innovation Strategies of Multiproduct Firms

By Lisandra Flach and Michael Irlacher

American Economic Journal: Microeconomics, February 2018

We investigate the effects of better access to foreign markets on innovation strategies of multiproduct firms in industries with different scope for product differentiation. Industry-specific demand and cost linkages induce a distinction between the retur...

Honest Equilibria in Reputation Games: The Role of Time Preferences

By Melis Kartal

American Economic Journal: Microeconomics, February 2018

New relationships are often plagued with uncertainty because one of the players has some private information about her "type." The reputation literature has shown that equilibria that reveal this private information typically involve breach of trust and c...

Reverse Bayesianism: A Comment

By Christopher P. Chambers and Takashi Hayashi

American Economic Journal: Microeconomics, February 2018

Karni and Vierø (2013) present an interesting theory of decisions in the presence of new actions and consequences. We establish results on the observable implications of the model. When introducing new consequences, arbitrary preference reversals over fe...

Front Matter

Journal of Economic Perspectives, Winter 2018

The Economic Implications of Housing Supply

[Symposium: Housing]

By Edward Glaeser and Joseph Gyourko

Journal of Economic Perspectives, Winter 2018

In this essay, we review the basic economics of housing supply and the functioning of US housing markets to better understand the distribution of home prices, household wealth, and the spatial distribution of people across markets. We employ a cost-base...

Homeownership and the American Dream

[Symposium: Housing]

By Laurie S. Goodman and Christopher Mayer

Journal of Economic Perspectives, Winter 2018

For decades, it was taken as a given that an increased homeownership rate was a desirable goal. But after the financial crises and Great Recession, in which roughly eight million homes were foreclosed on and about $7 trillion in home equity was erased, ...

Sand Castles before the Tide? Affordable Housing in Expensive Cities

[Symposium: Housing]

By Gabriel Metcalf

Journal of Economic Perspectives, Winter 2018

This article focuses on cities with unprecedented economic success and a seemingly permanent crisis of affordable housing. In the expensive cities, policymakers expend great amounts of energy trying to bring down housing costs with subsidies for afforda...

Friedman's Presidential Address in the Evolution of Macroeconomic Thought

[Symposium: Friedman's Natural Rate Hypothesis after 50 Years]

By N. Gregory Mankiw and Ricardo Reis

Journal of Economic Perspectives, Winter 2018

Milton Friedman's presidential address, "The Role of Monetary Policy," which was delivered 50 years ago in December 1967 and published in the March 1968 issue of the American Economic Review, is unusual in the outsized role it has played. What ex...

Should We Reject the Natural Rate Hypothesis?

[Symposium: Friedman's Natural Rate Hypothesis after 50 Years]

By Olivier Blanchard

Journal of Economic Perspectives, Winter 2018

Fifty years ago, Milton Friedman articulated the natural rate hypothesis. It was composed of two sub-hypotheses: First, the natural rate of unemployment is independent of monetary policy. Second, there is no long-run trade-off between the deviation of u...

Short-Run and Long-Run Effects of Milton Friedman's Presidential Address

[Symposium: Friedman's Natural Rate Hypothesis after 50 Years]

By Robert E. Hall and Thomas J. Sargent

Journal of Economic Perspectives, Winter 2018

The centerpiece of Milton Friedman's (1968) presidential address to the American Economic Association, delivered in Washington, DC, on December 29, 1967, was the striking proposition that monetary policy has no longer-run effects on the real economy. Fr...

Exchange-Traded Funds 101 for Economists

By Martin Lettau and Ananth Madhavan

Journal of Economic Perspectives, Winter 2018

Exchange-traded funds (ETFs) represent one of the most important financial innovations in decades. An ETF is an investment vehicle, with a specific architecture that typically seeks to track the performance of a specific index. The first US-listed ETF, ...

Frictions or Mental Gaps: What's Behind the Information We (Don't) Use and When Do We Care?

By Benjamin Handel and Joshua Schwartzstein

Journal of Economic Perspectives, Winter 2018

Consumers suffer significant losses from not acting on available information. These losses stem from frictions such as search costs, switching costs, and rational inattention, as well as what we call mental gaps resulting from wrong priors/worldviews, o...