The Dynamic Effects of Personal and Corporate Income Tax Changes in the United States

By Karel Mertens and Morten O. Ravn

American Economic Review, June 2013

This paper estimates the dynamic effects of changes in taxes in the United States. We distinguish between changes in personal and corporate income taxes and develop a new narrative account of federal tax liability changes in these two tax components. We...

A Theory of Strategic Voting in Runoff Elections

By Laurent Bouton

American Economic Review, June 2013

This paper analyzes the properties of runoff electoral systems when voters are strategic. A model of three-candidate runoff elections is presented, and two new features are included: the risk of upset victory in the second round is endogenous, and many...

Going to a Better School: Effects and Behavioral Responses

By Cristian Pop-Eleches and Miguel Urquiola

American Economic Review, June 2013

This paper applies a regression discontinuity design to the Romanian secondary school system, generating two findings. First, students who have access to higher achievement schools perform better in a (high stakes) graduation test. Second, the stratifi...

The Lure of Authority: Motivation and Incentive Effects of Power

By Ernst Fehr, Holger Herz, and Tom Wilkening

American Economic Review, June 2013

Authority and power permeate political, social, and economic life, but empirical knowledge about the motivational origins and consequences of authority is limited. We study the motivation and incentive effects of authority experimentally in an authorit...

Preferences and Incentives of Appointed and Elected Public Officials: Evidence from State Trial Court Judges

By Claire S. H. Lim

American Economic Review, June 2013

We study how two selection systems for public officials, appointment and election, affect policy outcomes, focusing on state court judges and their criminal sentencing decisions. First, under appointment, policy congruence with voter preferences is att...

Just Luck: An Experimental Study of Risk-Taking and Fairness

By Alexander W. Cappelen, James Konow, Erik Ø. Sørensen, and Bertil Tungodden

American Economic Review, June 2013

Choices involving risk significantly affect the distribution of income and wealth in society. This paper reports the results of the first experiment, to our knowledge, to study fairness views about risktaking, specifically whether such views are based ...

The Gravity of Knowledge

By Wolfgang Keller and Stephen Ross Yeaple

American Economic Review, June 2013

We analyze the international operations of multinational firms to measure the spatial barriers to transferring knowledge. We model firms that can transfer bits of knowledge to their foreign affiliates in either embodied (traded intermediates) or disemb...

Nonconvexities, Retirement, and the Elasticity of Labor Supply

By Richard Rogerson and Johanna Wallenius

American Economic Review, June 2013

We consider two life cycle models of labor supply that use nonconvexities to generate retirement. In each case we derive a link between hours worked prior to retirement, the intertemporal elasticity of substitution for labor (IES), and the size of the non...

Lemons Markets and the Transmission of Aggregate Shocks

By Pablo Kurlat

American Economic Review, June 2013

I study a dynamic economy featuring adverse selection in asset markets. Borrowing-constrained entrepreneurs sell past projects to finance new investment, but asymmetric information creates a lemons problem. I show that this friction is equivalent to a tax...

Placebo Reforms

By Ran Spiegler

American Economic Review, June 2013

I study a dynamic model of strategic reform decisions that potentially affect the stochastic evolution of a publicly observed economic variable. Policy makers maximize their evaluation by a boundedly rational public. Specifically, the public follows a rul...

Discretionary Tax Changes and the Macroeconomy: New Narrative Evidence from the United Kingdom

By James Cloyne

American Economic Review, June 2013

This paper provides new estimates of the macroeconomic effects of tax changes using a new narrative dataset for the United Kingdom. Identification is achieved by isolating "exogenous" tax policy changes using the Romer and Romer narrative strategy. I find...

Even (Mixed) Risk Lovers Are Prudent

By David Crainich, Louis Eeckhoudt, and Alain Trannoy

American Economic Review, June 2013

The purpose of this note is to analyze properties of the risk lovers' utility function beyond the positive sign of its second order derivative. We show that—contrarily to a priori beliefs—risk lovers are prudent and are willing to accumulate precautio...

Even (Mixed) Risk Lovers Are Prudent: Comment

By Sebastian Ebert

American Economic Review, June 2013

Crainich, Eeckhoudt, and Trannoy (2013) show that mixed risk lovers are prudent. I show that common risk loving utility functions may not exhibit mixed risk loving—as is typical for risk aversion and mixed risk aversion—and thus these traits should be...

Investment Behavior, Observable Expectations, and Internal Funds: Corrigendum

By Jason G. Cummins, Kevin A. Hassett, and Stephen D. Oliner

American Economic Review, June 2013

Front Matter

American Economic Review, June 2013

Independent Auditor's Report

American Economic Review, June 2013

How Deep Are the Roots of Economic Development?

By Enrico Spolaore and Romain Wacziarg

Journal of Economic Literature, June 2013

The empirical literature on economic growth and development has moved from the study of proximate determinants to the analysis of ever deeper, more fundamental factors, rooted in long-term history. A growing body of new empirical work focuses on the me...

U.S. High School Graduation Rates: Patterns and Explanations

By Richard J. Murnane

Journal of Economic Literature, June 2013

I survey the evidence on patterns in U.S. high school graduation rates over the period 1970–2010 and report the results of new research conducted to fill in holes in the evidence. I begin by pointing out the strengths and limitations of existing data ...

Political Economy of Public Policies: Insights from Distortions to Agricultural and Food Markets

By Kym Anderson, Gordon Rausser, and Johan Swinnen

Journal of Economic Literature, June 2013

The agricultural and food sector is an ideal case for investigating the political economy of public policies. Many of the policy developments in this sector since the 1950s have been sudden and transformational, while others have been gradual but persis...

What's the Good of the Market? An Essay on Michael Sandel's What Money Can't Buy

By Timothy Besley

Journal of Economic Literature, June 2013

This essay will discuss the criticisms of the economic approach to markets offered by Michael Sandel's What Money Can't Buy. After reviewing the main arguments, the essay looks at these from three main angles. First, it relates them to different tradit...