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...

Satisfaction Guaranteed: When Moral Hazard Meets Moral Preferences

By James Andreoni

American Economic Journal: Microeconomics, November 2018

The fear of moral hazard—especially in the age of Internet commerce—can depress or prevent profitable trades. Experiments show, however, that many people prefer honesty to deceit and would not succumb to moral hazard. This paper asks a whether we can ...

Cartels Uncovered

By Ari Hyytinen, Frode Steen, and Otto Toivanen

American Economic Journal: Microeconomics, November 2018

How many cartels are there, and how long do they live? The answers to these questions are important in assessing the need for competition policy. We present a Hidden Markov Model that takes into account that often it is not known whether a cartel exists o...

Choice, Consideration Sets, and Attribute Filters

By Mert Kimya

American Economic Journal: Microeconomics, November 2018

It is well known that decision makers do not always consider all of the available alternatives when making a choice. When the alternatives have attributes, these attributes provide a natural way to form the consideration set. I assume a procedure in which...

A Foundation for Efficiency Wage Contracts

By John Y. Zhu

American Economic Journal: Microeconomics, November 2018

In many jobs, the worker generates only subjective performance measures privately observed by the employer, and contracts must rely on employer reports about these measures. This setting is a game with private monitoring, and prior work suggests that the ...

Majority Choice of an Income-Targeted Educational Voucher

By Dennis Epple, Richard Romano, and Sinan Sarpça

American Economic Journal: Microeconomics, November 2018

A model of majority choice of voucher characteristics with quantitative counterpart explains observed income eligibility requirements for educational vouchers. Households differ by income and preference for religious schooling. They elect a policy maker w...

Front Matter

American Economic Review, November 2018

Firm Sorting and Agglomeration

By Cecile Gaubert

American Economic Review, November 2018

To account for the uneven distribution of economic activity in space, I propose a theory of the location choices of heterogeneous firms in a variety of sectors across cities. In equilibrium, the distribution of city sizes and the sorting patterns of firms...

Near-Feasible Stable Matchings with Couples

By Thành Nguyen and Rakesh Vohra

American Economic Review, November 2018

The National Resident Matching program seeks a stable matching of medical students to teaching hospitals. With couples, stable matchings need not exist. Nevertheless, for any student preferences, we show that each instance of a matching problem has a "nea...

The Costs of Patronage: Evidence from the British Empire

By Guo Xu

American Economic Review, November 2018

I combine newly digitized personnel and public finance data from the British colonial administration for the period 1854-1966 to study how patronage affects the promotion and incentives of governors. Governors are more likely to be promoted to higher sala...

The Logic of Insurgent Electoral Violence

By Luke N. Condra, James D. Long, Andrew C. Shaver, and Austin L. Wright

American Economic Review, November 2018

Competitive elections are essential to establishing the political legitimacy of democratizing regimes. We argue that insurgents undermine the state's mandate through electoral violence. We study insurgent violence during elections using newly declassified...

Strategic Patient Discharge: The Case of Long-Term Care Hospitals

By Paul J. Eliason, Paul L. E. Grieco, Ryan C. McDevitt, and James W. Roberts

American Economic Review, November 2018

Medicare's prospective payment system for long-term acute-care hospitals (LTCHs) provides modest reimbursements at the beginning of a patient's stay before jumping discontinuously to a large lump-sum payment after a prespecified number of days. We show th...

Measuring and Bounding Experimenter Demand

By Jonathan de Quidt, Johannes Haushofer, and Christopher Roth

American Economic Review, November 2018

We propose a technique for assessing robustness to demand effects of findings from experiments and surveys. The core idea is that by deliberately inducing demand in a structured way we can bound its influence. We present a model in which participants resp...

Mismatch of Talent: Evidence on Match Quality, Entry Wages, and Job Mobility

By Peter Fredriksson, Lena Hensvik, and Oskar Nordström Skans

American Economic Review, November 2018

We examine the impact of mismatch on entry wages, separations, and wage growth using unique data on worker talents. We show that workers are sorted on comparative advantage across jobs within occupations. The starting wages of inexperienced workers are un...

Temporary Protection and Technology Adoption: Evidence from the Napoleonic Blockade

By Réka Juhász

American Economic Review, November 2018

This paper uses a natural experiment to estimate the causal effect of temporary trade protection on long-term economic development. I find that regions in the French Empire which became better protected from trade with the British for exogenous reasons du...

The Long-Run Effects of Disruptive Peers

By Scott E. Carrell, Mark Hoekstra, and Elira Kuka

American Economic Review, November 2018

A large and growing literature has documented the importance of peer effects in education. However, there is relatively little evidence on the long-run educational and labor market consequences of childhood peers. We examine this question by linking admin...

BKK the EZ Way: International Long-Run Growth News and Capital Flows

By Ric Colacito, Max Croce, Steven Ho, and Philip Howard

American Economic Review, November 2018

We study the response of international investment flows to short- and long-run growth news. Among developed G7 countries, positive long-run news for domestic productivity induces a net outflow of investments, in contrast to the effects of short-run growth...

Innovation, Reallocation, and Growth

By Daron Acemoglu, Ufuk Akcigit, Harun Alp, Nicholas Bloom, and William Kerr

American Economic Review, November 2018

We build a model of firm-level innovation, productivity growth, and reallocation featuring endogenous entry and exit. A new and central economic force is the selection between high- and low-type firms, which differ in terms of their innovative capacity. W...

Front Matter

American Economic Journal: Economic Policy, November 2018

Supply-Side Drug Policy in the Presence of Substitutes: Evidence from the Introduction of Abuse-Deterrent Opioids

By Abby Alpert, David Powell, and Rosalie Liccardo Pacula

American Economic Journal: Economic Policy, November 2018

Overdose deaths from prescription opioid pain relievers nearly quadrupled between 1999 and 2010. We study the consequences of one of the largest supply disruptions to date to abusable opioids—the introduction of an abuse-deterrent version of OxyContin i...