Parental Education and Offspring Outcomes: Evidence from the Swedish Compulsory School Reform

By Petter Lundborg, Anton Nilsson, and Dan-Olof Rooth

American Economic Journal: Applied Economics, January 2014

We use the Swedish compulsory school reform to estimate the causal effect of parental education on sons' outcomes. To this end, we use data from the Swedish military enlistment register on the entire population of males and consider outcomes, such as c...

Front Matter

American Economic Journal: Applied Economics, January 2014

Estimating Models with Dispersed Information

By Leonardo Melosi

American Economic Journal: Macroeconomics, January 2014

We conduct likelihood evaluation of a DSGE model in which firms have imperfect common knowledge. Imperfect common knowledge is found to be more successful than price stickiness á la Calvo to account for the highly persistent effects of nominal shocks...

Credit Constraints and Self-Fulfilling Business Cycles

By Zheng Liu and Pengfei Wang

American Economic Journal: Macroeconomics, January 2014

We argue that credit constraints not only amplify fundamental shocks, they can also lead to self-fulfilling business cycles. We study a model with heterogeneous firms, in which imperfect contract enforcement implies that productive firms face binding c...

Some Evidence on the Importance of Sticky Wages

By Alessandro Barattieri, Susanto Basu, and Peter Gottschalk

American Economic Journal: Macroeconomics, January 2014

We present evidence on the frequency of nominal wage adjustment using SIPP data adjusted for measurement error. The SIPP is a representative sample of the US population. Our main results are: (i) The average quarterly probability of a nominal wage chan...

Wage Rigidity and Disinflation in Emerging Countries

By Julián Messina and Anna Sanz-de-Galdeano

American Economic Journal: Macroeconomics, January 2014

This paper examines the consequences of rapid disinflation for downward wage rigidities in two emerging countries, Brazil and Uruguay. Although wage rigidities are altered by disinflation, in neither of the two countries does price stability eliminate ...

Quantifying the Contribution of Search to Wage Inequality

By Volker Tjaden and Felix Wellschmied

American Economic Journal: Macroeconomics, January 2014

We empirically establish that one-third of job transitions leads to wage losses. Using a quantitative on-the-job search model, we find that 60 percent of them are movements down the job ladder. Accounting for them, our baseline calibration matches the ...

Can Tax Rebates Stimulate Consumption Spending in a Life-Cycle Model?

By Jonathan Huntley and Valentina Michelangeli

American Economic Journal: Macroeconomics, January 2014

We build a life-cycle model with earnings risk, liquidity constraints, and portfolio choice over tax-deferred and taxable assets to evaluate how household consumption changes in response to shocks to transitory anticipated income, such as the 2001 inco...

A Theory of Countercyclical Government Multiplier

By Pascal Michaillat

American Economic Journal: Macroeconomics, January 2014

I develop a New Keynesian model in which a type of government multiplier doubles when unemployment rises from 5 percent to 8 percent. This multiplier indicates the additional number of workers employed when one worker is hired in the public sector. Gra...

Front Matter

American Economic Journal: Macroeconomics, January 2014

At Least Do No Harm: The Use of Scarce Data

By Alvaro Sandroni

American Economic Journal: Microeconomics, February 2014

When data is scarce, it is difficult to screen the opinions of informed and uninformed experts. In spite of this difficulty it is possible to deliver incentives for informed experts to honestly reveal their views, and for uninformed experts to do no harm ...

Extension Rules or What Would the Sage Do?

By Ehud Lehrer and Roee Teper

American Economic Journal: Microeconomics, February 2014

Quite often, decision makers face choices that involve new aspects and alternatives never considered before. Scenarios of this sort may arise, for instance, as a result of technological progress or from individual circumstances such as growing awareness. ...

Pooling with Essential and Nonessential Patents

By Daniel Quint

American Economic Journal: Microeconomics, February 2014

Several recent technological standards were accompanied by patent pools—arrangements to license relevant intellectual property as a package. A key distinction made by regulators—between patents essential to a standard and patents with substitutes—ha...

Risk-Taking and Risk-Sharing Incentives under Moral Hazard

By Mohamed Belhaj, Renaud Bourlès, and Frédéric Deroïan

American Economic Journal: Microeconomics, February 2014

This paper explores the effect of moral hazard on both risk-taking and informal risk-sharing incentives. Two agents invest in their own project, each choosing a level of risk and effort, and share risk through transfers. This can correspond to farmers in...

Detection, Identification, and Estimation of Loss Aversion: Evidence from an Auction Experiment

By A. Banerji and Neha Gupta

American Economic Journal: Microeconomics, February 2014

We provide a novel experimental auction design, in which (i) an exogenous decrease in the probability of winning, conditional on the bid, reduces the optimal bid of a loss averse agent whose reference point is expectations based; (ii) observed bid distri...

Overconfidence and Diversification

By Yuval Heller

American Economic Journal: Microeconomics, February 2014

Experimental evidence suggests that people tend to be overconfident in the sense that they overestimate the accuracy of their private information. In this paper, we show that risk-averse principals might prefer overconfident agents in various strategic i...

On the Political Economy of Urban Growth: Homeownership versus Affordability

By François Ortalo-Magné and Andrea Prat

American Economic Journal: Microeconomics, February 2014

We study the equilibrium properties of an overlapping-generation economy where agents choose where to locate and how much housing to own, and city residents vote on the number of new building permits every period. Undersupply of housing persists in equil...

Coalition Formation in a Legislative Voting Game

By Nels Christiansen, Sotiris Georganas, and John H. Kagel

American Economic Journal: Microeconomics, February 2014

We experimentally investigate the Jackson and Moselle (2002) model where legislators bargain over policy proposals and the allocation of private goods. Key comparative static predictions of the model hold with the introduction of private goods, including...

Optimal Tax and Expenditure Policy with Aggregate Uncertainty

By Felix J. Bierbrauer

American Economic Journal: Microeconomics, February 2014

We study optimal income taxation and public-goods provision under the assumption that the cross-section distributions of productive abilities or public-goods preferences are not known a priori. A conventional Mirrleesian treatment is shown to provoke ma...

House Allocation with Overlapping Generations

By Morimitsu Kurino

American Economic Journal: Microeconomics, February 2014

Many real-life applications of house allocation problems are dynamic. For example, each year college freshmen move in and seniors move out of on-campus housing. Each student stays on campus for only a few years. A student is a "newcomer" in the beginning...