The Demand for Insurance and Rationale for a Mandate: Evidence from Workers' Compensation Insurance

By Marika Cabral, Can Cui, and Michael Dworsky

American Economic Review, May 2022

Workers' compensation insurance, which provides no-fault coverage for work-related injuries, is mandatory in nearly all states. We use administrative data from a unique market without a coverage mandate to estimate the demand for workers' compensation ins...

Signaling and Employer Learning with Instruments

By Gaurab Aryal, Manudeep Bhuller, and Fabian Lange

American Economic Review, May 2022

This paper considers the use of instruments to identify and estimate private and social returns to education within a model of employer learning. What an instrument identifies depends on whether it is hidden from, or transparent (i.e., observed) to, the e...

Multidimensional Auctions of Contracts: An Empirical Analysis

By Yunmi Kong, Isabelle Perrigne, and Quang Vuong

American Economic Review, May 2022

In this paper, we conduct a structural analysis of multi-attribute auctions of contracts with a general allocation rule when private information is multidimensional. Upon modeling bidders' contract value that accounts for their endogenous ex post actions,...

Bargaining over Contingent Contracts under Incomplete Information

By Geoffroy de Clippel, Jack Fanning, and Kareen Rozen

American Economic Review, May 2022

We study bargaining over contingent contracts in problems where private information becomes public or verifiable when the time comes to implement the agreement. We suggest a simple, two-stage game that incorporates important aspects of bargaining. We char...

Macroeconomic Implications of COVID-19: Can Negative Supply Shocks Cause Demand Shortages?

By Veronica Guerrieri, Guido Lorenzoni, Ludwig Straub, and Iván Werning

American Economic Review, May 2022

Motivated by the effects of the COVID-19 pandemic, we present a theory of Keynesian supply shocks: shocks that reduce potential output in a sector of the economy, but that, by reducing demand in other sectors, ultimately push aggregate activity below pote...

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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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...