The Macroeconomic Costs and Benefits of the EMU and Other Monetary Unions: An Overview of Recent Research

By Roel Beetsma and Massimo Giuliodori

Journal of Economic Literature, September 2010

This article provides an overview of recent research into the macroeconomic costs and benefits of monetary unification. We are primarily interested in Europe's monetary union. Given that unification entails the loss of a policy instrument, its potential ...

The Characterological Imperative: On Heckman, Humphries, and Kautz's The Myth of Achievement Tests: The GED and the Role of Character in American Life

By Robert J. Sampson

Journal of Economic Literature, June 2016

James J. Heckman, John Eric Humphries, and Tim Kautz make a powerful case for noncognitive skills—or what they conceptualize as character—as an explanation of educational achievement and other important outcomes in life. They do so while exposing the ...

New Keynesian Models: Not Yet Useful for Policy Analysis

By V. V. Chari, Patrick J. Kehoe, and Ellen R. McGrattan

American Economic Journal: Macroeconomics, January 2009

Macroeconomists have largely converged on method, model design, reduced-form shocks, and principles of policy advice. Our main disagreements today are about implementing the methodology. Some think New Keynesian models are ready to be used for quarter-...

Consumption Inequality and Partial Insurance

By Richard Blundell, Luigi Pistaferri, and Ian Preston

American Economic Review, December 2008

This paper examines the link between income and consumption inequality. We create panel data on consumption for the Panel Study of Income Dynamics using an imputation procedure based on food demand estimates from the Consumer Expenditure Survey. We doc...

Unbiased Value Estimates for Environmental Goods: A Cheap Talk Design for the Contingent Valuation Method

By Ronald G. Cummings and Laura O. Taylor

American Economic Review, June 1999

An Alternative to Signaling: Directed Search and Substitution

By Matthew Levy and Balázs Szentes

American Economic Journal: Microeconomics, November 2016

This paper analyzes a labor market, where: workers can acquire an observable skill at no cost, firms differ in unobserved productivity, workers' skill and firms' productivity are substitutes, and firms' search is directed. The main result is that, if the ...

The International Diversification Puzzle When Goods Prices Are Sticky: It's Really about Exchange-Rate Hedging, Not Equity Portfolios

By Charles Engel and Akito Matsumoto

American Economic Journal: Macroeconomics, July 2009

This paper develops a two-country monetary DSGE model in which households choose a portfolio of home and foreign equities, and a forward position in foreign exchange. Some nominal goods prices are sticky. Trade in these assets achieves the same allocat...

Teacher Quality Policy When Supply Matters

By Jesse Rothstein

American Economic Review, January 2015

Teacher contracts that condition pay and retention on demonstrated performance can improve selection into and out of teaching. I study alternative contracts in a simulated teacher labor market that incorporates dynamic self-selection and Bayesian learning...

A Boundedly Rational Decision Algorithm

By Xavier Gabaix and David I. Laibson

American Economic Review, May 2000

Sunk Investments Lead to Unpredictable Prices

By George J. Mailath, Andrew Postlewaite, and Larry Samuelson

American Economic Review, September 2004

We study transactions that require investments before trading in a competitive market, when forward contracts fixing the transaction price are absent. We show that, despite the market being perfectly competitive and subject to arbitrarily little uncertain...

Dynamic Pricing in the Presence of Antidumping Policy: Theory and Evidence

By Bruce A. Blonigen and Jee-Hyeong Park

American Economic Review, March 2004

Antidumping (AD) trade protection policies allow government agencies to recalculate AD duties based on foreign firms' most recent pricing behavior. We examine the resulting dynamic pricing problem of a foreign firm facing such policy. We show that the exp...

Resolving Conflicting Preferences in School Choice: The "Boston Mechanism" Reconsidered

By Atila Abdulkadiroğlu, Yeon-Koo Che, and Yosuke Yasuda

American Economic Review, February 2011

Despite its widespread use, the Boston mechanism has been criticized for its poor incentive and welfare performances compared to the Gale-Shapley deferred acceptance algorithm (DA). By contrast, when students have the same ordinal preferences and schools ...

Healthy Bodies and Thick Wallets: The Dual Relation between Health and Economic Status

By James P. Smith

Journal of Economic Perspectives, Spring 1999

This paper sketches theoretical reasons why health may alter household savings and provides evidence on the empirical impact of health shocks on household wealth. The impacts on saving are quantitatively large and only partly explained by increased out-of...

The Multi-unit Assignment Problem: Theory and Evidence from Course Allocation at Harvard

By Eric Budish and Estelle Cantillon

American Economic Review, August 2012

We use theory and field data to study the draft mechanism used to allocate courses at Harvard Business School. We show that the draft is manipulable in theory, manipulated in practice, and that these manipulations cause significant welfare loss. Neverthel...

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...

The Capital Asset Pricing Model: Theory and Evidence

[Symposium: Fortieth Anniversary of CAPM]

By Eugene F. Fama and Kenneth R. French

Journal of Economic Perspectives, Summer 2004

The capital asset pricing model (CAPM) of William Sharpe (1964) and John Lintner (1965) marks the birth of asset pricing theory (resulting in a Nobel Prize for Sharpe in 1990). Before their breakthrough, there were no asset pricing models built from first...

Doing Well by Doing Good? Green Office Buildings

By Piet Eichholtz, Nils Kok, and John M. Quigley

American Economic Review, December 2010

This paper provides the first credible evidence on the economic value of "green buildings" derived from impersonal market transactions rather than engineering estimates. We analyze clusters of certified green and nearby buildings, establishing that "rated...

The Economics of Dowry and Brideprice

By Siwan Anderson

Journal of Economic Perspectives, Fall 2007

Payments between families at the time of marriage have existed throughout the history of most developed countries and are currently pervasive in many areas of the developing world. These payments can be substantial enough to affect the welfare of women an...

Anticipated Banking Panics

By Mark Gertler, Nobuhiro Kiyotaki, and Andrea Prestipino

American Economic Review, May 2016

We develop a macroeconomic model with banking instability. Sunspot runs can arise that are harmful to the economy. However, whether a run equilibrium exists depends on fundamentals. In contrast to earlier work, the probability of a sunspot run is the outc...

Family Inequality: Diverging Patterns in Marriage, Cohabitation, and Childbearing

[Symposium: Inequality Beyond Income]

By Shelly Lundberg, Robert A. Pollak, and Jenna Stearns

Journal of Economic Perspectives, Spring 2016

Popular discussions of changes in American families over the past 60 years have revolved around the "retreat from marriage." Concern has focused on increasing levels of nonmarital childbearing, as well as falling marriage rates that stem from both increas...