Misclassification Errors and the Underestimation of the US Unemployment Rate

By Shuaizhang Feng and Yingyao Hu

American Economic Review, April 2013

Using recent results in the measurement error literature, we show that the official US unemployment rate substantially underestimates the true level of unemployment, due to misclassification errors in the labor force status in the Current Population Surve...

Self-Enforcing Trade Agreements: Evidence from Time-Varying Trade Policy

By Chad P. Bown and Meredith A. Crowley

American Economic Review, April 2013

The Bagwell and Staiger (1990) theory of cooperative trade agreements predicts new tariffs (i) increase with imports, (ii) increase with the inverse of the sum of the import demand and export supply elasticities, and (iii) decrease with the variance of im...

A Theory of Charitable Fund-Raising with Costly Solicitations

By Alvaro J. Name-Correa and Huseyin Yildirim

American Economic Review, April 2013

We present a theory of charitable fund-raising in which it is costly to solicit donors. We fully characterize the solicitation strategy that maximizes donations net of fund-raising costs. It is optimal for the fund-raiser to target only the "net contribut...

Front Matter

American Economic Review, April 2013

Strategic Immunization and Group Structure

By Andrea Galeotti and Brian W. Rogers

American Economic Journal: Microeconomics, May 2013

We consider the spread of a harmful state through a population divided into two groups. Interaction patterns capture the full spectrum of assortativity possibilities. We show that a central planner who aims for eradication optimally either divides equa...

Marry for What? Caste and Mate Selection in Modern India

By Abhijit Banerjee, Esther Duflo, Maitreesh Ghatak, and Jeanne Lafortune

American Economic Journal: Microeconomics, May 2013

This paper analyzes how preferences for a noneconomic characteristic (e.g., caste) can affect equilibrium patterns of matching, and empirically evaluates this in the context of middle-class Indian arranged marriages. We show theoretically how the equil...

Why People Vote: Ethical Motives and Social Incentives

By S. Nageeb Ali and Charles Lin

American Economic Journal: Microeconomics, May 2013

Some individuals vote because they are motivated by a civic duty to do so, whereas others may vote because they wish to appear prosocial to others. This paper proposes a simple framework that captures these motivations, and provides results consistent ...

Preference Signaling in Matching Markets

By Peter Coles, Alexey Kushnir, and Muriel Niederle

American Economic Journal: Microeconomics, May 2013

Many labor markets share three stylized facts: employers cannot give full attention to all candidates, candidates are ready to provide information about their preferences for particular employers, and employers value and are prepared to act on this inf...

Testing for Factor Price Equality with Unobserved Differences in Factor Quality or Productivity

By Andrew B. Bernard, Stephen J. Redding, and Peter K. Schott

American Economic Journal: Microeconomics, May 2013

We develop a method for identifying departures from relative factor price equality that is robust to unobserved variation in factor productivity. We implement this method using data on the relative wage bills of nonproduction and production workers acros...

Assignment of Arrival Slots

By James Schummer and Rakesh V. Vohra

American Economic Journal: Microeconomics, May 2013

Industry participants agree that, when inclement weather forces the FAA to reassign airport landing slots, incentives and property rights should be respected. We show that the FAA's Compression algorithm is incentive compatible, but fails to guarantee ...

Go Figure: The Strategy of Nonliteral Speech

By Hugo M. Mialon and Sue H. Mialon

American Economic Journal: Microeconomics, May 2013

We develop a model of figurative or indirect speech, which may convey a meaning that differs from its literal meaning. The model yields analytical conditions for speech to be figurative in equilibrium and delivers a number of comparative statics results. ...

Trust, Reciprocity, and Favors in Cooperative Relationships

By Atila Abdulkadiroğlu and Kyle Bagwell

American Economic Journal: Microeconomics, May 2013

We study trust, reciprocity, and favors in a repeated trust game with private information. In our main analysis, players are willing to exhibit trust and thereby facilitate cooperative gains only if such behavior is regarded as a favor that must be rec...

Front Matter

American Economic Journal: Microeconomics, May 2013

Natural Resources and Local Communities: Evidence from a Peruvian Gold Mine

By Fernando M. Aragón and Juan Pablo Rud

American Economic Journal: Economic Policy, May 2013

This paper examines the local economic impact of Yanacocha, a large gold mine in Northern Peru. Using annual household data from 1997 to 2006, we find evidence of a positive effect of the mine's demand for local inputs on real income. The effects are o...

Improving College Performance and Retention the Easy Way: Unpacking the ACT Exam

By Eric P. Bettinger, Brent J. Evans, and Devin G. Pope

American Economic Journal: Economic Policy, May 2013

Improving college performance and retention can be difficult. We propose a simple and low-cost change in the way colleges use the ACT exam in their admission decisions that can greatly increase their ability to identify students at a high risk of under...

Does Less Income Mean Less Representation?

By Eric Brunner, Stephen L. Ross, and Ebonya Washington

American Economic Journal: Economic Policy, May 2013

We assemble a novel dataset of matched legislative and constituent votes and demonstrate that less income does not mean less representation. We show: (i) The opinions of high- and low-income voters are highly correlated; the legislator's vote often refle...

Multi-Product Firms and Exchange Rate Fluctuations

By Arpita Chatterjee, Rafael Dix-Carneiro, and Jade Vichyanond

American Economic Journal: Economic Policy, May 2013

This paper studies the effect of exchange rate shocks on export behavior of multi-product firms. We provide a theoretical framework illustrating how firms adjust their prices, quantities, product scope, and sales distribution across products in the eve...

How Do Mortgage Subsidies Affect Home Ownership? Evidence from the Mid-Century GI Bills

By Daniel K. Fetter

American Economic Journal: Economic Policy, May 2013

The largest twentieth-century increase in US home ownership occurred between 1940 and 1960, associated largely with declining age at first ownership. I shed light on the contribution of coincident government mortgage market interventions by examining h...

Evaluating US Fuel Economy Standards in a Model with Producer and Household Heterogeneity

By Mark R. Jacobsen

American Economic Journal: Economic Policy, May 2013

This paper employs an empirically estimated model to study the equilibrium effects of an increase in the US corporate average fuel economy (CAFE) standards. I identify and model heterogeneity across firms and find that the profit impacts of CAFE fall alm...

The EITC, Tax Refunds, and Unemployment Spells

By Sara LaLumia

American Economic Journal: Economic Policy, May 2013

The earned income tax credit generates large average tax refunds for low-income parents, and these refunds are distributed in a narrow time frame. I rely on this plausibly exogenous source of variation in liquidity to investigate the effect of cash on ...