From Peer Pressure to Biased Norms

By Moti Michaeli and Daniel Spiro

American Economic Journal: Microeconomics, February 2017

This paper studies a coordination game between a continuum of players with heterogeneous tastes who perceive peer pressure when behaving differently from each other. It characterizes the conditions under which a social norm--a mode of behavior followed by...

The Stock Market and Capital Accumulation

By Robert E. Hall

American Economic Review, December 2001

The value of a firm's securities measures the value of the firm's productive assets. If the assets include only capital goods and not a permanent monopoly franchise, the value of the securities measures the value of the capital. Finally, if the price of t...

Will the Sovereign Debt Market Survive?

By Andrei Shleifer

American Economic Review, May 2003

Parental Job Loss and Children's Long-Term Outcomes: Evidence from 7 Million Fathers' Layoffs

By Nathaniel G. Hilger

American Economic Journal: Applied Economics, July 2016

How do parental layoffs and their large attendant income losses affect children's long-term outcomes? This question has proven difficult to answer due to the endogeneity of parental layoffs. I overcome this problem by exploiting the timing of 7 million fa...

Managing Conflicts in Relational Contracts

By Jin Li and Niko Matouschek

American Economic Review, October 2013

A manager and a worker are in an infinitely repeated relationship in which the manager privately observes her opportunity costs of paying the worker. We show that the optimal relational contract generates periodic conflicts during which effort and expe...

Identity Economics 2016: Where Do Social Distinctions and Norms Come From?

By Rachel E. Kranton

American Economic Review, May 2016

Identity economics provides a framework to analyze economic outcomes by establishing people's identities--not just pecuniary incentives--as primary motivations for choice. The heart of the framework is social difference and norms. This paper engages the e...

Entropy and the Value of Information for Investors

By Antonio Cabrales, Olivier Gossner, and Roberto Serrano

American Economic Review, February 2013

Consider an investor who fears ruin when facing investments that satisfy no-arbitrage. Before investing he can purchase information about the state of nature as an information structure. Given his prior, information structure α investment dominat...

Self-Fulfilling Risk Panics

By Philippe Bacchetta, Cédric Tille, and Eric van Wincoop

American Economic Review, December 2012

Recent crises have seen large spikes in asset price risk. We propose an explanation for such panics based on self-fulfilling shifts in beliefs about risk. A negative link between the current level and the future risk of an asset price leads to a circular ...

Grade Information and Grade Inflation: The Cornell Experiment

[Symposium: Grade Differences and Inflation]

By Talia Bar, Vrinda Kadiyali, and Asaf Zussman

Journal of Economic Perspectives, Summer 2009

Grade inflation and high grade levels have been subjects of concern and public debate in recent decades. In the mid-1990s, Cornell University's Faculty Senate had a number of discussions about grade inflation and what might be done about it. In April 1996...

The War on Drugs: Methamphetamine, Public Health, and Crime

By Carlos Dobkin and Nancy Nicosia

American Economic Review, March 2009

In mid-1995, a government effort to reduce the supply of methamphetamine precursors successfully disrupted the methamphetamine market and interrupted a trajectory of increasing usage. The price of methamphetamine tripled and purity declined from 90 per...

Do Wealth Fluctuations Generate Time-Varying Risk Aversion? Micro-evidence on Individuals

By Markus K. Brunnermeier and Stefan Nagel

American Economic Review, June 2008

We use data from the Panel Study of Income Dynamics to investigate how households portfolio allocations change in response to wealth fluctuations. Persistent habits, consumption commitments, and subsistence levels can generate time-varying risk aversio...

A Sociological Perspective on Gender and Career Outcomes

[Symposium: Sociology and Economics]

By Barbara F. Reskin and Denise D. Bielby

Journal of Economic Perspectives, Winter 2005

Powering Up China: Income Distributions and Residential Electricity Consumption

By Maximilian Auffhammer and Catherine D. Wolfram

American Economic Review, May 2014

Current forecasts suggest that the vast majority of growth in energy demand will come from the developing world, and that China will play a major part in that growth. This paper presents evidence suggesting that the shape of the income distribution, which...

Incentive Schemes, Sorting, and Behavioral Biases of Employees: Experimental Evidence

By Ian Larkin and Stephen Leider

American Economic Journal: Microeconomics, May 2012

We investigate how the convexity of a firm's incentives interacts with worker overconfidence to affect sorting decisions and performance. We demonstrate, experimentally, that overconfident employees are more likely to sort into a nonlinear incentive schem...

A Quantitative Analysis of the Used-Car Market

By Alessandro Gavazza, Alessandro Lizzeri, and Nikita Roketskiy

American Economic Review, November 2014

We quantitatively investigate the allocative and welfare effects of secondary markets for cars. An important source of gains from trade in these markets is the heterogeneity in the willingness to pay for higher-quality (newer) goods, but transaction co...

The Value of Postsecondary Credentials in the Labor Market: An Experimental Study

By David J. Deming, Noam Yuchtman, Amira Abulafi, Claudia Goldin, and Lawrence F. Katz

American Economic Review, March 2016

We study employers' perceptions of the value of postsecondary degrees using a field experiment. We randomly assign the sector and selectivity of institutions to fictitious resumes and apply to real vacancy postings for business and health jobs on a lar...

Medium-Term Business Cycles

By Diego Comin and Mark Gertler

American Economic Review, June 2006

Over the postwar period, many industrialized countries have experienced significant medium-frequency oscillations between periods of robust growth versus relative stagnation. Conventional business cycle filters, however, tend to sweep these oscillations...

The Limits of Trade Policy Reform in Developing Countries

[Symposium: Trade Liberalization and Development]

By Dani Rodrik

Journal of Economic Perspectives, Winter 1992

Trade reform is now raising some new issues. This paper deals with three sets of questions: First, how can trade reform be sustained? Can governments convince business, labor, or consumers that trade reform will be lasting, so as to forestall possible adv...

The Latin American State

[Symposium: The State and Economic Development]

By Albert Fishlow

Journal of Economic Perspectives, Summer 1990

The role of the state in Latin American economic development is undergoing fundamental reconsideration. This essay focuses on the reasons underlying the new commitment to reduced state participation. In particular, I suggest that the impetus comes less fr...

Learning from Experience and Learning from Others: An Exploration of Learning and Spillovers in Wartime Shipbuilding

By Rebecca Achee Thornton and Peter Thompson

American Economic Review, December 2001

A new data set facilitates study of learning spillovers in World War II shipbuilding. Our results contain two principal but contrasting themes. First, learning spillovers were a significant source of productivity growth, and may have contributed more than...