The Effect of Corporate Taxation on Investment and Financial Policy: Evidence from the DPAD

By Eric Ohrn

American Economic Journal: Economic Policy, May 2018

This study estimates the investment, financing, and payout responses to variation in a firm's effective corporate income tax rate in the United States. I exploit quasi-experimental variation created by the Domestic Production Activities Deduction, a corpo...

Front Matter

American Economic Journal: Microeconomics, May 2018

International Trade with Indirect Additivity

By Paolo Bertoletti, Federico Etro, and Ina Simonovska

American Economic Journal: Microeconomics, May 2018

We develop a general equilibrium model of trade that features "indirectly additive" preferences and heterogeneous firms. Monopolistic competition generates markups that are increasing in firm productivity and in destination country per capita income, but ...

Dynamic Certification and Reputation for Quality

By Iván Marinovic, Andrzej Skrzypacz, and Felipe Varas

American Economic Journal: Microeconomics, May 2018

We study firm's incentives to build and maintain reputation for quality, when quality is persistent and can be certified at a cost. We characterize all reputation-dependent MPEs. They vary in frequency of certification and payoffs. Low payoffs arise in eq...

Revealed Preferences for Diamond Goods

By Sam Cosaert

American Economic Journal: Microeconomics, May 2018

When consumers care not only for the quantity but also the value of a product, it could be rational to purchase products as they become more expensive. This study provides nonparametric—revealed preference—conditions to measure consumers' marg...

A Theory of Indicative Bidding

By Daniel Quint and Kenneth Hendricks

American Economic Journal: Microeconomics, May 2018

When selling a business by auction, sellers typically use indicative bids—nonbinding preliminary bids—to select a small number of bidders to conduct due diligence and submit binding offers. We show that if entry into the auction is costly, ind...

Career Concerns and the Nature of Skills

By Gonzalo Cisternas

American Economic Journal: Microeconomics, May 2018

I examine how career concerns are shaped by the nature of productive actions taken by workers. A worker's skills follow a Gaussian process with an endogenous component reflecting human-capital accumulation. Effort and skills are substitutes both in th...

Revisiting the Relationship between Competition and Price Discrimination

By Ambarish Chandra and Mara Lederman

American Economic Journal: Microeconomics, May 2018

We revisit the relationship between competition and price discrimination. Theoretically, we show that if consumers differ in terms of both their underlying willingness-to-pay and their brand loyalty, competition may increase price differences between some...

Dynamic Noisy Signaling

By Sander Heinsalu

American Economic Journal: Microeconomics, May 2018

This article studies costly signaling. The signaling effort is chosen in multiple periods and observed with noise. The signaler benefits from the belief of the market, not directly from the effort or the signal. Optimal signaling behavior in time-varying ...

Markets with Multidimensional Private Information

By Veronica Guerrieri and Robert Shimer

American Economic Journal: Microeconomics, May 2018

This paper explores price formation when sellers are privately informed about their preferences and the quality of their asset. There are many equilibria, including a semi-separating one in which each seller's price depends on a one-dimensional index of h...

A Mechanism for Eliciting Second-Order Beliefs and the Inclination to Choose

By Edi Karni

American Economic Journal: Microeconomics, May 2018

This paper describes a direct revelation mechanism for eliciting decision makers' introspective beliefs on sets of subjective prior or posterior probabilities. The proposed scheme constitutes a revealed-preference procedure for measuring the inclination o...

Approximating the Cost-of-Living Index for a Storable Good

By Matthew Osborne

American Economic Journal: Microeconomics, May 2018

This paper estimates a cost-of-living index using a dynamic structural model for two storable product categories. In each category, regime shifts to higher or lower retail prices are observed. Fixed-base indexes do a poor job of capturing changes in welfa...

Front Matter

Journal of Economic Perspectives, Spring 2018

The US Gains from Trade: Valuation Using the Demand for Foreign Factor Services

[Symposium: Does the US Really Gain From Trade?]

By Arnaud Costinot and Andrés Rodríguez-Clare

Journal of Economic Perspectives, Spring 2018

About eight cents out of every dollar spent in the United States is spent on imports. What if, because of a wall or some other extreme policy intervention, imports were to remain on the other side of the US border? How much would US consumers be willing t...

Alternative Sources of the Gains from International Trade: Variety, Creative Destruction, and Markups

[Symposium: Does the US Really Gain From Trade?]

By Robert C. Feenstra

Journal of Economic Perspectives, Spring 2018

The modern theory of international trade identifies several additional sources of the gains from international trade beyond the gains from traditional comparative advantage. These are the gains from importing new product varieties; the gains from "creativ...

New Perspectives on the Decline of US Manufacturing Employment

[Symposium: Does the US Really Gain From Trade?]

By Teresa C. Fort, Justin R. Pierce, and Peter K. Schott

Journal of Economic Perspectives, Spring 2018

We use relatively unexplored dimensions of US microdata to examine how US manufacturing employment has evolved across industries, firms, establishments, and regions. These data provide support for both trade- and technology-based explanations of the overa...

What Do Trade Agreements Really Do?

[Symposium: Does the US Really Gain From Trade?]

By Dani Rodrik

Journal of Economic Perspectives, Spring 2018

Economists have a tendency to associate "free trade agreements" all too closely with "free trade." They may be unaware of some of the new (and often problematic) beyond-the-border features of current trade agreements. As trade agreements have evolved ...

Modeling Risk Aversion in Economics

[Symposium: Risk in Economics and Psychology]

By Ted O'Donoghue and Jason Somerville

Journal of Economic Perspectives, Spring 2018

To capture the risk-aversion intuition, the standard approach in economics has been to utilize the model of expected utility, in which risk aversion derives from diminishing marginal utility for wealth (or diminishing marginal utility for aggregate co...

On the Relationship between Cognitive Ability and Risk Preference

[Symposium: Risk in Economics and Psychology]

By Thomas Dohmen, Armin Falk, David Huffman, and Uwe Sunde

Journal of Economic Perspectives, Spring 2018

This paper will focus on the relationship between cognitive ability and decision-making under risk and uncertainty. Taken as a whole, this research indicates that cognitive ability is associated with risk-taking behavior in various contexts and life dom...

Are Risk Preferences Stable?

[Symposium: Risk in Economics and Psychology]

By Hannah Schildberg-Hörisch

Journal of Economic Perspectives, Spring 2018

It is ultimately an empirical question whether risk preferences are stable over time. The evidence comes from diverse strands of literature, covering the stability of risk preferences in panel data over shorter periods of time, life-cycle dynamics in ri...