Front Matter

Journal of Economic Perspectives, Winter 2014

Correspondence: The One Percent: Robert Solow, N. Gregory Mankiw, Richard V. Burkhauser, and Jeff Larrimore

Journal of Economic Perspectives, Winter 2014

Notes

Journal of Economic Perspectives, Winter 2014

Monetary Policy and Rational Asset Price Bubbles

By Jordi Galí

American Economic Review, March 2014

I examine the impact of alternative monetary policy rules on a rational asset price bubble, through the lens of an overlapping generations model with nominal rigidities. A systematic increase in interest rates in response to a growing bubble is shown to e...

Fiscal Stimulus in a Monetary Union: Evidence from US Regions

By Emi Nakamura and Jón Steinsson

American Economic Review, March 2014

We use rich historical data on military procurement to estimate the effects of government spending. We exploit regional variation in military build-ups to estimate an "open economy relative multiplier" of approximately 1.5. We develop a framework for inte...

Trade Adjustment and Productivity in Large Crises

By Gita Gopinath and Brent Neiman

American Economic Review, March 2014

We empirically characterize the mechanics of trade adjustment during the Argentine crisis. Though imports collapsed by 70 percent from 2000-2002, the entry and exit of firms or products at the country level played a small role. The within-firm churning o...

Do Prices and Attributes Explain International Differences in Food Purchases?

By Pierre Dubois, Rachel Griffith, and Aviv Nevo

American Economic Review, March 2014

Food purchases differ substantially across countries. We use detailed household level data from the US, France and the UK to (i) document these differences; (ii) estimate a demand system for food and nutrients, and (iii) simulate counterfactual choices ...

The Economics of Predation: What Drives Pricing When There Is Learning-by-Doing?

By David Besanko, Ulrich Doraszelski, and Yaroslav Kryukov

American Economic Review, March 2014

We formally characterize predatory pricing in a modern industry-dynamics framework that endogenizes competitive advantage and industry structure. As an illustrative example we focus on learning-by-doing. To disentangle predatory pricing from mere compet...

Strategic Interaction and Networks

By Yann Bramoullé, Rachel Kranton, and Martin D'Amours

American Economic Review, March 2014

Geography and social links shape economic interactions. In industries, schools, and markets, the entire network determines outcomes. This paper analyzes a large class of games and obtains a striking result. Equilibria depend on a single network measure:...

How University Endowments Respond to Financial Market Shocks: Evidence and Implications

By Jeffrey R. Brown, Stephen G. Dimmock, Jun-Koo Kang, and Scott J. Weisbenner

American Economic Review, March 2014

Endowment payouts have become an increasingly important component of universities' revenues in recent decades. We study how universities respond to financial shocks to endowments and thus shed light on a number of existing models of endowment behavior. ...

When the Levee Breaks: Black Migration and Economic Development in the American South

By Richard Hornbeck and Suresh Naidu

American Economic Review, March 2014

In the American South, post-bellum economic development may have been restricted in part by white landowners' access to low-wage black labor. This paper examines the impact of the Great Mississippi Flood of 1927 on black out-migration and subsequent agr...

School Choice, School Quality, and Postsecondary Attainment

By David J. Deming, Justine S. Hastings, Thomas J. Kane, and Douglas O. Staiger

American Economic Review, March 2014

We study the impact of a public school choice lottery in Charlotte-Mecklenburg schools on college enrollment and degree completion. We find a significant overall increase in college attainment among lottery winners who attend their first choice school. ...

Do Employers Use Unemployment as a Sorting Criterion When Hiring? Evidence from a Field Experiment

By Stefan Eriksson and Dan-Olof Rooth

American Economic Review, March 2014

The stigma associated with long-term unemployment spells could create large inefficiencies in labor markets. While the existing literature points toward large stigma effects, it has proven difficult to estimate causal relationships. Using data from a fiel...

Risk and Precautionary Saving in Two-Person Households

By Patricia Apps, Yuri Andrienko, and Ray Rees

American Economic Review, March 2014

The existing literature on precautionary saving is based almost entirely on the assumption that the household acts as if it consisted of a single individual decision-taker. In reality saving decisions are typically taken by two-person households. This p...

Does Money Illusion Matter? Comment

By Luba Petersen and Abel Winn

American Economic Review, March 2014

This paper experimentally investigates whether money illusion generates substantial nominal inertia. Building on the design of Fehr and Tyran (2001), we find no evidence that agents choose high nominal payoffs over high real payoffs. However, participants...

Does Money Illusion Matter? Reply

By Ernst Fehr and Jean-Robert Tyran

American Economic Review, March 2014

The data in Fehr and Tyran (FT, 2001) and Luba Petersen and Abel Winn (PW,2013) show that money illusion plays an important role in nominal price adjustment after a fully anticipated negative monetary shock. Money Illusion affects subjects' expectations,...

The Dynamic Behavior of the Real Exchange Rate in Sticky Price Models: Comment

By Jens Iversen and Ulf Söderström

American Economic Review, March 2014

In an article published in the American Economic Review, Jón Steinsson (2008) argues that two sticky price models driven by real shocks can explain the observed persistence, volatility and hump-shaped impulse response function of the real exchange rate....

Front Matter

American Economic Review, March 2014

The Economic Importance of Financial Literacy: Theory and Evidence

By Annamaria Lusardi and Olivia S. Mitchell

Journal of Economic Literature, March 2014

This paper undertakes an assessment of a rapidly growing body of economic research on financial literacy. We start with an overview of theoretical research, which casts financial knowledge as a form of investment in human capital. Endogenizing financial k...

From Divergence to Convergence: Reevaluating the History behind China's Economic Boom

By Loren Brandt, Debin Ma, and Thomas G. Rawski

Journal of Economic Literature, March 2014

China's long-term economic dynamics pose a formidable challenge to economic historians. The Qing Empire (1644-1911), the world's largest national economy before 1800, experienced a tripling of population during the seventeenth and eighteenth centuries wit...