Supply and Demand in Disaggregated Keynesian Economies with an Application to the COVID-19 Crisis

By David Baqaee and Emmanuel Farhi

American Economic Review, May 2022

We study supply and demand shocks in a disaggregated model with multiple sectors, multiple factors, input-output linkages, downward nominal wage rigidities, credit-constraints, and a zero lower bound. We use the model to understand how the COVID-19 cris...

Rebel on the Canal: Disrupted Trade Access and Social Conflict in China, 1650–1911

By Yiming Cao and Shuo Chen

American Economic Review, May 2022

This paper examines the effects of the abandonment of China's Grand Canal—the world's largest and oldest artificial waterway—which served as a disruption to regional trade access. Using an original dataset covering 575 counties over 262 years, we show...

How Do National Firms Respond to Local Cost Shocks?

By R. Andrew Butters, Daniel W. Sacks, and Boyoung Seo

American Economic Review, May 2022

Recent research shows prices are insensitive to local demand conditions because national chains charge geographically uniform prices. We examine the price response to local cost shocks, including 68 excise tax changes, 76 sales tax changes, and other geog...

Effective Demand Failures and the Limits of Monetary Stabilization Policy

By Michael Woodford

American Economic Review, May 2022

The challenge for stabilization policy presented by the COVID-19 pandemic stems above all from disruption of the circular flow of payments, resulting in a failure of what Keynes (1936) calls "effective demand." As a consequence, economic activity in many ...

Bargaining over a Divisible Good in the Market for Lemons

By Dino Gerardi, Lucas Maestri, and Ignacio Monzón

American Economic Review, May 2022

We study bargaining with divisibility and interdependent values. A buyer and a seller trade a divisible good. The seller is privately informed about its quality, which can be high or low. Gains from trade are positive and decreasing in quantity. The buyer...

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Front Matter

American Economic Journal: Economic Policy, May 2022

Mortality, Temperature, and Public Health Provision: Evidence from Mexico

By François Cohen and Antoine Dechezleprêtre

American Economic Journal: Economic Policy, May 2022

We examine the impact of temperature on mortality in Mexico using daily data over the period 1998–2017 and find that 3.8 percent of deaths in Mexico are caused by suboptimal temperature (26,000 every year). However, 92 percent of weather-related deaths ...

Does Hospital Crowding Matter? Evidence from Trauma and Orthopedics in England

By Thomas P. Hoe

American Economic Journal: Economic Policy, May 2022

This paper estimates the impact of hospital crowding on medical treatment decisions and patient health outcomes. Exploiting pseudorandom variation in emergency admissions, I find that a one-standard-deviation admission shock increases the unplanned readmi...

The Labor Market Impacts of Universal and Permanent Cash Transfers: Evidence from the Alaska Permanent Fund

By Damon Jones and Ioana Marinescu

American Economic Journal: Economic Policy, May 2022

Since 1982, all Alaskan residents have received a yearly cash dividend from the Alaska Permanent Fund. Using the Current Population Survey and a synthetic control method, this paper shows that the dividend had no effect on employment and increased part-ti...

The Long-Term Effects of Measles Vaccination on Earnings and Employment

By Alicia Atwood

American Economic Journal: Economic Policy, May 2022

The measles vaccine was introduced in 1963. Take-up of the vaccine in the United States occurred quickly and universally, leading to reductions in morbidity and mortality. New biological evidence on how the measles virus interacts with our immune system i...

Raising the Bar: Minimum Wages and Employers' Hiring Standards

By Sebastian Butschek

American Economic Journal: Economic Policy, May 2022

Many scholars have studied the employment effects of minimum wages, but little is known about effects on the composition of hires. I investigate whether Germany's minimum wage introduction raised hiring standards, using worker fixed effects as a proxy for...

Mentoring and the Dynamics of Affirmative Action

By Michèle Müller-Itten and Aniko Öry

American Economic Journal: Economic Policy, May 2022

We analyze the long-term workforce composition when the quality of mentoring available to majority and minority juniors depends on their representation in the workforce. A workforce with at least 50 percent majority workers invariably converges to one whe...

When Does Product Liability Risk Chill Innovation? Evidence from Medical Implants

By Alberto Galasso and Hong Luo

American Economic Journal: Economic Policy, May 2022

Liability laws designed to compensate for harms caused by defective products may also affect innovation. We examine this issue by exploiting a major quasi-exogenous increase in liability risk faced by US suppliers of polymers used to manufacture medical i...

Drug Diffusion through Peer Networks: The Influence of Industry Payments

By Leila Agha and Dan Zeltzer

American Economic Journal: Economic Policy, May 2022

Pharmaceutical companies market to physicians through individual detailing accompanied by monetary or in-kind transfers. Large compensation payments to a small number of physicians account for most of this promotional spending. Studying US promotional pay...

Homeownership, Labor Supply, and Neighborhood Quality

By Naomi Hausman, Tamar Ramot-Nyska, and Noam Zussman

American Economic Journal: Economic Policy, May 2022

This paper provides evidence on the external benefits of homeownership among low-income populations. A natural experiment in Israel generated large changes in neighborhood homeownership rates while holding fixed the residents and housing stock, two primar...

Do Environmental Regulations Affect the Decision to Export?

By Jevan Cherniwchan and Nouri Najjar

American Economic Journal: Economic Policy, May 2022

This paper investigates how a common form of environmental regulation—air quality standards—affects exporters. We develop a simple theoretical model to show how the design of these standards causes (i) some firms to stop exporting and (ii) a reduction...

The Electric Gini: Income Redistribution through Energy Prices

By Arik Levinson and Emilson Silva

American Economic Journal: Economic Policy, May 2022

In theory, regulators concerned about inequality will deviate from efficient two-part tariffs, charging lower-than-efficient fixed monthly fees and higher-than-efficient per-kilowatt-hour prices. To quantify that relationship, we develop a measure of the ...

How Do Beliefs about the Gender Wage Gap Affect the Demand for Public Policy?

By Sonja Settele

American Economic Journal: Economic Policy, May 2022

I conduct a survey experiment to study the relationship between people's beliefs about the size of the gender wage gap and their demand for policies aimed at mitigating it. Beliefs causally affect support for equal pay legislation and affirmative action p...

The Valuation of Local School Quality under School Choice

By Angela Zheng

American Economic Journal: Economic Policy, May 2022

School choice programs break the link between residential location and school attendance, and should weaken the capitalization of school quality into house prices. For the first time, I quantify the effect of one such program—charter school expansionsâ€...