Contextual Inference in Markets: On the Informational Content of Product Lines

By Emir Kamenica

American Economic Review, December 2008

Context can influence decisions. This malleability of choice is usually invoked as evidence that people do not maximize stable preference orderings. In a market equilibrium, however, context conveys payoff-relevant information to consumers. Consequentl...

A Review of the Stern Review on the Economics of Climate Change

By Martin L. Weitzman

Journal of Economic Literature, September 2007

The Stern Review calls for immediate decisive action to stabilize greenhouse gases because "the benefits of strong, early action on climate change outweighs the costs." The economic analysis supporting this conclusion consists mostly of two basic...

Twenty Years of Time Series Econometrics in Ten Pictures

[Symposium: Recent Ideas in Econometrics]

By James H. Stock and Mark W. Watson

Journal of Economic Perspectives, Spring 2017

This review tells the story of the past 20 years of time series econometrics through ten pictures. These pictures illustrate six broad areas of progress in time series econometrics: estimation of dynamic causal effects; estimation of dynamic structural mo...

A Review Essay on Isabel Sawhill's Generation Unbound: Drifting into Sex and Parenting without Marriage and Laurence Steinberg's Age of Opportunity: Lessons from the New Science of Adolescence

By Anna Aizer

Journal of Economic Literature, June 2017

Sawhill and Steinberg approach risky behavior among youth from two different angles: Steinberg argues for intervention during the adolescent years to alter behavior in ways that prioritize patience and self-regulation, while Sawhill advocates intervention...

Standing United or Falling Divided? High Stakes Bargaining in a TV Game Show

By Dennie van Dolder, Martijn J. van den Assem, Colin F. Camerer, and Richard H. Thaler

American Economic Review, May 2015

We examine high stakes three-person bargaining in a game show where contestants bargain over a large money amount that is split into three unequal shares. We find that individual behavior and outcomes are strongly influenced by equity concerns: those who ...

The Great Housing Boom of China

By Kaiji Chen and Yi Wen

American Economic Journal: Macroeconomics, April 2017

China's housing prices have been growing nearly twice as fast as national income over the past decade, despite a high vacancy rate and a high rate of return to capital. This paper interprets China's housing boom as a rational bubble emerging naturally fro...

Anomalies: Cooperation

By Robyn M. Dawes and Richard H. Thaler

Journal of Economic Perspectives, Summer 1988

Much economic analysis -- and virtually all game theory -- starts with the assumption that people are both rational and selfish. The predictions derived from this assumption of rational selfishness are, however, violated in many familiar contexts. In this...

Bank Leverage and Regulatory Regimes: Evidence from the Great Depression and Great Recession

By Christoffer Koch, Gary Richardson, and Patrick Van Horn

American Economic Review, May 2016

In the boom before the Great Depression, capital requirements for commercial banks were low and fixed. Bankers faced double liability. Failing banks were not bailed out. During the boom before the Great Recession, capital requirements were proportional to...

Traditional Beliefs and Learning about Maternal Risk in Zambia

By Nava Ashraf, Erica Field, Giuditta Rusconi, Alessandra Voena, and Roberta Ziparo

American Economic Review, May 2017

Maternal mortality remains very high in many parts of the developing world, especially in sub-Saharan Africa. While maternal deaths are observable, it may not be straightforward for individuals to learn about risk factors. This paper utilizes novel data o...

Cooperation, but No Reciprocity: Individual Strategies in the Repeated Prisoner's Dilemma

By Yves Breitmoser

American Economic Review, September 2015

In the repeated prisoner's dilemma, predictions are notoriously difficult. Recently, however, Blonski, Ockenfels, and Spagnolo (2011)—henceforth, BOS‐showed that experimental subjects predictably cooperate when the discount factor exceeds a par...

Correspondence: Fair Trade Coffee

By Victor V. Claar and Colleen E. Haight

Journal of Economic Perspectives, Winter 2015

The Finnish Great Depression: From Russia with Love

By Yuriy Gorodnichenko, Enrique G. Mendoza, and Linda L. Tesar

American Economic Review, June 2012

Why did Finland experience, in 1991-1993, the deepest recession observed in an industrialized country since the 1930s? Using a dynamic general equilibrium model with labor frictions, we argue that the collapse of the Soviet-Finnish trade was a major cont...

Welfare-Based Optimal Monetary Policy with Unemployment and Sticky Prices: A Linear-Quadratic Framework

By Federico Ravenna and Carl E. Walsh

American Economic Journal: Macroeconomics, April 2011

We derive a linear-quadratic model that is consistent with sticky prices and search and matching frictions in the labor market. We show that the second-order approximation to the welfare of the representative agent depends on inflation and "gaps" that inv...

The Microeconomic Dimensions of the Eurozone Crisis and Why European Politics Cannot Solve Them

By Christian Thimann

Journal of Economic Perspectives, Summer 2015

The academic and policy debate about the crisis in Europe's single currency area is usually dominated by macroeconomic and public sector considerations. The microeconomic dimensions of the crisis and the private sector issues typically get much less att...

Wheat or Strawberries? Intermediated Trade with Limited Contracting

By Kala Krishna and Yelena Sheveleva

American Economic Journal: Microeconomics, August 2017

Why do developing countries fail to specialize in products in which they appear to have a comparative advantage? We propose a model of agricultural trade with intermediation that explains how hold up resulting from poor contracting environments can produc...

Stimulating Local Public Employment: Do General Grants Work?

By Heléne Lundqvist, Matz Dahlberg, and Eva Mörk

American Economic Journal: Economic Policy, February 2014

We apply the regression kink design to the Swedish grant system and estimate causal effects of intergovernmental grants on local public employment. Our robust conclusion is that grants do not stimulate local public employment. We find no statistically ...

Affiliation and Entry in First-Price Auctions with Heterogeneous Bidders: An Analysis of Merger Effects

By Tong Li and Bingyu Zhang

American Economic Journal: Microeconomics, May 2015

We study the effects of mergers in timber sale auctions in Oregon. We propose an entry and bidding model within the affiliated private value (APV) framework and with heterogeneous bidders, and establish existence of the entry equilibrium and existence and...

Does Abolishing User Fees Lead to Improved Health Status? Evidence from Post-apartheid South Africa

By Shinsuke Tanaka

American Economic Journal: Economic Policy, August 2014

Whether user fees for health services should be charged or abolished for the poor has recently been debated. This study examines the impact on child health status of removing user fees in South Africa. Our main innovation is to exploit plausibly exogenous...

The Obstinate Passion of Foreign Exchange Professionals: Technical Analysis

By Lukas Menkhoff and Mark P. Taylor

Journal of Economic Literature, December 2007

Technical analysis involves the prediction of asset price movements from inductive analysis of past movements. We establish a number of stylized facts, including that technical analysis is widespread in the foreign exchange market and that it may be pr...

Opportunities, Welfare, and Social Justice: A Review of Fishkin's Bottlenecks

By François Maniquet

Journal of Economic Literature, June 2017

In his Bottlenecks: A New Theory of Equal Opportunity, Joseph Fishkin claims he presents an entirely new way of thinking about equality of opportunity. The core of the new theory is the call for opportunity pluralism, which consists in enlarging th...