The Coordination Value of Monetary Exchange: Experimental Evidence

By Gabriele Camera and Marco Casari

American Economic Journal: Microeconomics, February 2014

What institutions can sustain cooperation in groups of strangers? Here we study the role of monetary systems. In an experiment, subjects sometimes needed help and sometimes could incur a cost to help an anonymous counterpart. In the absence of money, the...

Financing Experimentation

By Mikhail Drugov and Rocco Macchiavello

American Economic Journal: Microeconomics, February 2014

Entrepreneurs must experiment to learn how good they are at a new activity. What happens when the experimentation is financed by a lender? Under common scenarios, i.e., when there is the opportunity to learn by "starting small" or when "noncompete" claus...

Front Matter

American Economic Journal: Microeconomics, February 2014

The Incapacitation Effect of Incarceration: Evidence from Several Italian Collective Pardons

By Alessandro Barbarino and Giovanni Mastrobuoni

American Economic Journal: Economic Policy, February 2014

We estimate the "incapacitation effect" on crime using variation in Italian prison population driven by eight collective pardons passed between 1962 and 1990. The prison releases are sudden (within one day), very large (up to 35 percent of the entire p...

Consumer Inertia and Firm Pricing in the Medicare Part D Prescription Drug Insurance Exchange

By Keith M. Marzilli Ericson

American Economic Journal: Economic Policy, February 2014

I use the Medicare Part D prescription drug insurance market to examine the dynamics of firm interaction with consumers on an insurance exchange. Enrollment data show that consumers face switching frictions leading to inertia in plan choice, and a regr...

The End of Bank Secrecy? An Evaluation of the G20 Tax Haven Crackdown

By Niels Johannesen and Gabriel Zucman

American Economic Journal: Economic Policy, February 2014

During the financial crisis, G20 countries compelled tax havens to sign bilateral treaties providing for exchange of bank information. Policymakers have celebrated this global initiative as the end of bank secrecy. Exploiting a unique panel dataset, ou...

Paging Inspector Sands: The Costs of Public Information

By Sacha Kapoor and Arvind Magesan

American Economic Journal: Economic Policy, February 2014

We exploit the introduction of pedestrian countdown signals—timers that indicate when traffic lights will change—to evaluate a policy that improves the information of all market participants. We find that although countdown signals reduce the numbe...

The Dividend Clientele Hypothesis: Evidence from the 2003 Tax Act

By Laura Kawano

American Economic Journal: Economic Policy, February 2014

This paper provides evidence that dividend and capital gains tax rates importantly influence household portfolio choices. Using data from the Surveys of Consumer Finances around the 2003 dividend tax reductions, I estimate the relationship between taxe...

Watch Your Step: Optimal Policy in a Tipping Climate

By Derek Lemoine and Christian Traeger

American Economic Journal: Economic Policy, February 2014

We investigate the optimal policy response to the possibility of abrupt, irreversible shifts in system dynamics. The welfare cost of a tipping point emerges from the policymaker's response to altered system dynamics. Our policymaker also learns about a...

Stimulating Local Public Employment: Do General Grants Work?

By Heléne Lundqvist, Matz Dahlberg, and Eva Mörk

American Economic Journal: Economic Policy, February 2014

We apply the regression kink design to the Swedish grant system and estimate causal effects of intergovernmental grants on local public employment. Our robust conclusion is that grants do not stimulate local public employment. We find no statistically ...

The Revenue Demands of Public Employee Pension Promises

By Robert Novy-Marx and Joshua Rauh

American Economic Journal: Economic Policy, February 2014

We calculate increases in contributions required to achieve full funding of state and local pension systems in the United States over 30 years. Without policy changes, contributions would have to increase by 2.5 times, reaching 14.1 percent of the tota...

Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities

By Thomas Piketty, Emmanuel Saez, and Stefanie Stantcheva

American Economic Journal: Economic Policy, February 2014

This paper derives optimal top tax rate formulas in a model where top earners respond to taxes through three channels: labor supply, tax avoidance, and compensation bargaining. The optimal top tax rate increases when there are zero-sum compensation-bar...

Airline Pricing, Price Dispersion, and Ticket Characteristics on and off the Internet

By Anirban Sengupta and Steven N. Wiggins

American Economic Journal: Economic Policy, February 2014

This paper uses transaction data to investigate the effects of Internet purchase on airline fares. Our data include ticket characteristics, restrictions, flight load factors, and dates and channel of purchase. Controlling for ticket and flight characte...

Corrigendum: The Price Effects of a Large Merger of Manufacturers: A Case Study of Maytag Whirlpool

By Orley C. Ashenfelter, Daniel S. Hosken, and Matthew C. Weinberg

American Economic Journal: Economic Policy, February 2014

Front Matter

American Economic Journal: Economic Policy, February 2014

Collateral Crises

By Gary Gorton and Guillermo Ordoñez

American Economic Review, February 2014

Short-term collateralized debt, private money, is efficient if agents are willing to lend without producing costly information about the collateral backing the debt. When the economy relies on such informationally insensitive debt, firms with low qualit...

A Macroeconomic Model with a Financial Sector

By Markus K. Brunnermeier and Yuliy Sannikov

American Economic Review, February 2014

This article studies the full equilibrium dynamics of an economy with financial frictions. Due to highly nonlinear amplification effects, the economy is prone to instability and occasionally enters volatile crisis episodes. Endogenous risk, driven by a...

Finance and Misallocation: Evidence from Plant-Level Data

By Virgiliu Midrigan and Daniel Yi Xu

American Economic Review, February 2014

We use producer-level data to evaluate the role of financial frictions in determining total factor productivity (TFP). We study a model of establishment dynamics in which financial frictions reduce TFP through two channels. First, finance frictions dis...

Tracing Value-Added and Double Counting in Gross Exports

By Robert Koopman, Zhi Wang, and Shang-Jin Wei

American Economic Review, February 2014

This paper proposes an accounting framework that breaks up a country's gross exports into various value-added components by source and additional double-counted terms. Our parsimonious framework bridges a gap between official trade statistics (in gross ...

Market Size, Competition, and the Product Mix of Exporters

By Thierry Mayer, Marc J. Melitz, and Gianmarco I. P. Ottaviano

American Economic Review, February 2014

We build a theoretical model of multi-product firms that highlights how competition across market destinations affects both a firm's exported product range and product mix. We show how tougher competition in an export market induces a firm to skew its ...