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...

On the Controversies behind the Origins of the Federal Economic Statistics

[Symposium: Public Provision of Economic Data]

By Hugh Rockoff

Journal of Economic Perspectives, Winter 2019

Our federal economic statistics originated in the economic and political divisions in the United States and the bitter debates over economic policy they engendered at the end of the 19th century and during the world wars and Great Depression. Workers we...

Making Moves Matter: Experimental Evidence on Incentivizing Bureaucrats through Performance-Based Postings

By Adnan Q. Khan, Asim Ijaz Khwaja, and Benjamin A. Olken

American Economic Review, January 2019

Bureaucracies often post staff to better or worse locations, ostensibly to provide incentives. Yet we know little about whether this works, with heterogeneity in preferences over postings impacting effectiveness. We propose a performance-ranked serial dic...

Household Matters: Revisiting the Returns to Capital among Female Microentrepreneurs

By Arielle Bernhardt, Erica Field, Rohini Pande, and Natalia Rigol

American Economic Review: Insights, September 2019

Multiple field experiments report positive financial returns to capital shocks for male and not female microentrepreneurs. But these analyses overlook the fact that female entrepreneurs often reside with male entrepreneurs. Using data from experiments in ...

Vulnerable Growth

By Tobias Adrian, Nina Boyarchenko, and Domenico Giannone

American Economic Review, April 2019

We study the conditional distribution of GDP growth as a function of economic and financial conditions. Deteriorating financial conditions are associated with an increase in the conditional volatility and a decline in the conditional mean of GDP growth, l...

Do the Rich Get Richer in the Stock Market? Evidence from India

By John Y. Campbell, Tarun Ramadorai, and Benjamin Ranish

American Economic Review: Insights, September 2019

We use data on Indian stock portfolios to show that return heterogeneity is the primary contributor to increasing inequality of wealth held in risky assets by Indian individual investors. Return heterogeneity increases equity wealth inequality through two...

Racial Differences in Police Use of Force: Evidence from the 1960s Civil Disturbances

By Jamein P. Cunningham and Rob Gillezeau

AEA Papers and Proceedings, May 2018

There is little empirical evidence as to whether protests against policy brutality impact the behavior of police forces. We seek to close this gap by considering the impact of the racial civil disturbances in the 1960s and 1970s on deaths by legal interve...

Who Really Benefits from Consumption Tax Cuts? Evidence from a Large VAT Reform in France

By Youssef Benzarti and Dorian Carloni

American Economic Journal: Economic Policy, February 2019

This paper evaluates the incidence of a large cut in value-added taxes (VATs) for French sit-down restaurants in 2009. In contrast to previous studies, which only focus on the price effects of VAT reforms, we estimate the effects of the VAT cut on four gr...

Optimal Income Taxation with Unemployment and Wage Responses: A Sufficient Statistics Approach

By Kory Kroft, Kavan Kucko, Etienne Lehmann, and Johannes Schmieder

American Economic Journal: Economic Policy, February 2020

We derive a sufficient statistics tax formula in a model that incorporates unemployment and endogenous wages to study the shape of the optimal income tax. Key sufficient statistics are the macro employment response to taxation, the micro and macro partici...

Text as Data

By Matthew Gentzkow, Bryan Kelly, and Matt Taddy

Journal of Economic Literature, September 2019

An ever-increasing share of human interaction, communication, and culture is recorded as digital text. We provide an introduction to the use of text as an input to economic research. We discuss the features that make text different from other forms of dat...

The Dynamics of Motivated Beliefs

By Florian Zimmermann

American Economic Review, February 2020

A key question in the literature on motivated reasoning and self-deception is how motivated beliefs are sustained in the presence of feedback. In this paper, we explore dynamic motivated belief patterns after feedback. We establish that positive feedback ...

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...

Dynamic Debt Deleveraging and Optimal Monetary Policy

By Pierpaolo Benigno, Gauti B. Eggertsson, and Federica Romei

American Economic Journal: Macroeconomics, April 2020

This paper proposes a postcrisis New Keynesian model that incorporates agent heterogeneity in borrowing and lending with a minimum set of assumptions. Unlike the standard framework, this model makes the natural rate of interest endogenous and dependent on...

Cyclical Job Ladders by Firm Size and Firm Wage

By John C. Haltiwanger, Henry R. Hyatt, Lisa B. Kahn, and Erika McEntarfer

American Economic Journal: Macroeconomics, April 2018

We study whether workers progress up firm wage and size job ladders, and the cyclicality of this movement. Search theory predicts that workers should flow toward larger, higher paying firms. However, we see little evidence of a firm size ladder, partly be...

Should First-Price Auctions Be Transparent?

By Dirk Bergemann and Johannes Hörner

American Economic Journal: Microeconomics, August 2018

We investigate the role of market transparency in repeated first-price auctions. We consider a setting with independent private and persistent values. We analyze three distinct disclosure regimes regarding the bid and award history. In the minimal disclos...

Political Kludges

By Keiichi Kawai, Ruitian Lang, and Hongyi Li

American Economic Journal: Microeconomics, November 2018

This paper explores the origins of policy complexity. It studies a model where policy is difficult to undo because policy elements are entangled with each other. Policy complexity may accumulate as successive policymakers layer new rules upon existing pol...

Optimal Forward Guidance

By Florin O. Bilbiie

American Economic Journal: Macroeconomics, October 2019

Optimal forward guidance is the simple policy of keeping interest rates low for some optimally determined number of periods after the liquidity trap ends and moving to normal-times optimal policy thereafter. I solve for the optimal duration in closed form...

Annotated Listing of New Books

Journal of Economic Literature, December 2018

When Demand Increases Cause Shakeouts

By Thomas N. Hubbard and Michael J. Mazzeo

American Economic Journal: Microeconomics, November 2019

Standard models that guide competition policy imply that demand increases should lead to more, not fewer firms. However, Sutton's (1991) model shows that demand increases instead can lead to shakeouts if non-price competition takes the form of fixed inves...

How Are SNAP Benefits Spent? Evidence from a Retail Panel

By Justine Hastings and Jesse M. Shapiro

American Economic Review, December 2018

We use a novel retail panel with detailed transaction records to study the effect of the Supplemental Nutrition Assistance Program (SNAP) on house-hold spending. We use administrative data to motivate three approaches to causal inference. The marginal pro...