Contracting with Heterogeneous Externalities

By Shai Bernstein and Eyal Winter

American Economic Journal: Microeconomics, May 2012

We model situations in which a principal offers contracts to a group of agents to participate in a project. Agents' benefits from participation depend on the identity of other participating agents. We assume heterogeneous externalities and characterize th...

Ignorance Is Bliss: An Experimental Study of the Use of Ambiguity and Vagueness in the Coordination Games with Asymmetric Payoffs

By Marina Agranov and Andrew Schotter

American Economic Journal: Microeconomics, May 2012

We consider a game where one player, the Announcer, has to communicate the value of a payoff relevant state of the world to a set of players who play a coordination game with multiple equilibria. While the Announcer and the players agree that coordination...

Contracting in Vague Environments

By Marie-Louise Vierø

American Economic Journal: Microeconomics, May 2012

This paper shows that a new trade-off arises in the optimal contract when contracting takes place with vague information (objective ambiguity), reflecting that real-world contracting often takes place under imprecise information. The choice-theoretic fram...

On the Robustness of Anchoring Effects in WTP and WTA Experiments

By Drew Fudenberg, David K. Levine, and Zacharias Maniadis

American Economic Journal: Microeconomics, May 2012

We reexamine the effects of the anchoring manipulation of Ariely, Loewenstein, and Prelec (2003) on the evaluation of common market goods and find very weak anchoring effects. We perform the same manipulation on the evaluation of binary lotteries, and fin...

Contractual and Organizational Structure with Reciprocal Agents

By Florian Englmaier and Stephen Leider

American Economic Journal: Microeconomics, May 2012

We solve for the optimal contract when agents are reciprocal, demonstrating that generous compensation can substitute for performance-based pay. Our results suggest several factors that make firms more likely to use reciprocal incentives. Reciprocity is ...

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...

Front Matter

American Economic Journal: Economic Policy, May 2012

Measuring the Output Responses to Fiscal Policy

By Alan J. Auerbach and Yuriy Gorodnichenko

American Economic Journal: Economic Policy, May 2012

A key issue in current research and policy is the size of fiscal multipliers when the economy is in recession. We provide three insights. First, using regime-switching models, we find large differences in the size of spending multipliers in recessions an...

A Model-Based Evaluation of the Debate on the Size of the Tax Multiplier

By Ryan Chahrour, Stephanie Schmitt-Grohé, and Martín Uribe

American Economic Journal: Economic Policy, May 2012

The SVAR and narrative approaches to estimating tax multipliers deliver significantly different results. The former yields multipliers of about 1 and the latter of about 3. The two approaches differ along two important dimensions: the identification schem...

Fiscal Policy Multipliers on Subnational Government Spending

By Jeffrey Clemens and Stephen Miran

American Economic Journal: Economic Policy, May 2012

Balanced budget requirements lead to substantial pro-cyclicality in state government spending, with the stringency of a state's rules driving the pace at which it must adjust to shocks. We show that fiscal institutions can generate natural experiments in ...

Measuring Tax Multipliers: The Narrative Method in Fiscal VARs

By Carlo Favero and Francesco Giavazzi

American Economic Journal: Economic Policy, May 2012

This paper argues in favor of empirical models built by including in fiscal VAR models structural shocks identified via the narrative method. We first show that "narrative" shocks are orthogonal to the relevant information set a fiscal VAR. We then derive...

Global Savings and Global Investment: The Transmission of Identified Fiscal Shocks

By James Feyrer and Jay Shambaugh

American Economic Journal: Economic Policy, May 2012

This paper examines the effect of exogenous shocks to savings on world capital markets. Exogenous tax increases in the United States (from Romer and Romer 2010) are only partially offset by changes in domestic private savings, and only a small amount is a...

Quantitative Effects of Fiscal Foresight

By Eric M. Leeper, Alexander W. Richter, and Todd B. Walker

American Economic Journal: Economic Policy, May 2012

Legislative and implementation lags imply that substantial time evolves between when news arrives about fiscal changes and when the changes actually take place—time when households and firms can adjust their behavior. We identify two types of fiscal...

Empirical Evidence on the Aggregate Effects of Anticipated and Unanticipated US Tax Policy Shocks

By Karel Mertens and Morten O. Ravn

American Economic Journal: Economic Policy, May 2012

We provide evidence on the dynamic effects of tax liability changes in the United States. We distinguish between surprise and anticipated tax changes. Preannounced but not yet implemented tax cuts give rise to contractions in output, investment, and hours...

Fiscal Imbalances and Borrowing Costs: Evidence from State Investment Losses

By Robert Novy-Marx and Joshua D. Rauh

American Economic Journal: Economic Policy, May 2012

During the last quarter of 2008, financial losses in state pension funds varied from 12 percent to 68 percent of the revenue generated by the state government. We quantify a sovereign default channel in the state municipal market by examining how changes ...

The Effects of Tax Shocks on Output: Not So Large, but Not Small Either

By Roberto Perotti

American Economic Journal: Economic Policy, May 2012

I argue that, on theoretical grounds, the discretionary component of taxation should be allowed to have different effects than the automatic response of tax revenues to macroeconomic variables. Based on a novel dataset, I show two results. First, response...

Front Matter

Journal of Economic Perspectives, Spring 2012

Notes

Journal of Economic Perspectives, Spring 2012

The Journal of Economic Perspectives at 100 (Issues)

[Symposium: 100 Issues of JEP]

By David Autor

Journal of Economic Perspectives, Spring 2012

When I was a graduate student, I discovered that the Journal of Economic Perspectives embodied much of what I love about the field of economics: the clarity that pierces rhetoric to seek the core of a question; the rigor to identify the causal re...

The Journal of Economic Perspectives and the Marketplace of Ideas: A View from the Founding

[Symposium: 100 Issues of JEP]

By Joseph E. Stiglitz

Journal of Economic Perspectives, Spring 2012

I welcome the opportunity to join in the celebration of the twenty-fifth birthday of the Journal of Economic Perspectives. It is wonderful to see how this "baby," which I, along with Carl Shapiro and Timothy Taylor, nurtured through its formative...