Man-Bites-Dog Business Cycles

By Kristoffer P. Nimark

American Economic Review, August 2014

The newsworthiness of an event is partly determined by how unusual it is and this paper investigates the business cycle implications of this fact. Signals that are more likely to be observed after unusual events may increase both uncertainty and disagreem...

Ambiguous Business Cycles

By Cosmin L. Ilut and Martin Schneider

American Economic Review, August 2014

This paper studies a New Keynesian business cycle model with agents who are averse to ambiguity (Knightian uncertainty). Shocks to confidence about future TFP are modeled as changes in ambiguity. To assess the size of those shocks, our estimation uses not...

Not Only What but Also When: A Theory of Dynamic Voluntary Disclosure

By Ilan Guttman, Ilan Kremer, and Andrzej Skrzypacz

American Economic Review, August 2014

We examine a dynamic model of voluntary disclosure of multiple pieces of private information. In our model, a manager of a firm who may learn multiple signals over time interacts with a competitive capital market and maximizes payoffs that increase in bot...

Promotional Reviews: An Empirical Investigation of Online Review Manipulation

By Dina Mayzlin, Yaniv Dover, and Judith Chevalier

American Economic Review, August 2014

Firms' incentives to manufacture biased user reviews impede review usefulness. We examine the differences in reviews for a given hotel between two sites: Expedia.com (only a customer can post a review) and TripAdvisor.com (anyone can post). We argue that ...

Isolated Capital Cities, Accountability, and Corruption: Evidence from US States

By Filipe R. Campante and Quoc-Anh Do

American Economic Review, August 2014

We show that isolated capital cities are robustly associated with greater levels of corruption across US states, in line with the view that this isolation reduces accountability. We then provide direct evidence that the spatial distribution of population ...

Industry Compensation under Relocation Risk: A Firm-Level Analysis of the EU Emissions Trading Scheme

By Ralf Martin, Mirabelle Muûls, Laure B. de Preux, and Ulrich J. Wagner

American Economic Review, August 2014

When regulated firms are offered compensation to prevent them from relocating, efficiency requires that payments be distributed across firms so as to equalize marginal relocation probabilities, weighted by the damage caused by relocation. We formalize thi...

Explaining Job Polarization: Routine-Biased Technological Change and Offshoring

By Maarten Goos, Alan Manning, and Anna Salomons

American Economic Review, August 2014

This paper documents the pervasiveness of job polarization in 16 Western European countries over the period 1993-2010. It then develops and estimates a framework to explain job polarization using routine-biased technological change and offshoring. This mo...

Estimates of the Size and Source of Price Declines Due to Nearby Foreclosures

By Elliot Anenberg and Edward Kung

American Economic Review, August 2014

Using new data on real estate listings, we provide new evidence that foreclosures have a causal effect on nearby house prices and disentangle the effect into two sources: competition and disamenities. We identify the causal effect by showing that sellers ...

The Effect of Third-Party Funding of Plaintiffs on Settlement

By Andrew F. Daughety and Jennifer F. Reinganum

American Economic Review, August 2014

A significant policy concern about the emerging plaintiff legal funding industry is that loans will undermine settlement. When the plaintiff has private information about damages, we find that the optimal (plaintiff-funder) loan induces all plaintiff type...

A Community College Instructor Like Me: Race and Ethnicity Interactions in the Classroom

By Robert W. Fairlie, Florian Hoffmann, and Philip Oreopoulos

American Economic Review, August 2014

Administrative data from a large and diverse community college are used to examine if underrepresented minority students benefit from taking courses with underrepresented minority instructors. To identify racial interactions we estimate models that includ...

Measuring the Impacts of Teachers I: Evaluating Bias in Teacher Value-Added Estimates

By Raj Chetty, John N. Friedman, and Jonah E. Rockoff

American Economic Review, September 2014

Are teachers' impacts on students' test scores ("value-added") a good measure of their quality? One reason this question has sparked debate is disagreement about whether value-added (VA) measures provide unbiased estimates of teachers' causal impacts on s...

Measuring the Impacts of Teachers II: Teacher Value-Added and Student Outcomes in Adulthood

By Raj Chetty, John N. Friedman, and Jonah E. Rockoff

American Economic Review, September 2014

Are teachers' impacts on students' test scores ("value-added") a good measure of their quality? This question has sparked debate partly because of a lack of evidence on whether high value-added (VA) teachers improve students' long-term outcomes. Using sch...

How Much Would You Pay to Resolve Long-Run Risk?

By Larry G. Epstein, Emmanuel Farhi, and Tomasz Strzalecki

American Economic Review, September 2014

Though risk aversion and the elasticity of intertemporal substitution have been the subjects of careful scrutiny, the long-run risks literature as well as the broader literature using recursive utility to address asset pricing puzzles have ignored the ful...

Beyond Happiness and Satisfaction: Toward Well-Being Indices Based on Stated Preference

By Daniel J. Benjamin, Ori Heffetz, Miles S. Kimball, and Nichole Szembrot

American Economic Review, September 2014

This paper proposes foundations and a methodology for survey-based tracking of well-being. First, we develop a theory in which utility depends on "fundamental aspects" of well-being, measurable with surveys. Second, drawing from psychologists, philosopher...

Human Capital and the Wealth of Nations

By Rodolfo E. Manuelli and Ananth Seshadri

American Economic Review, September 2014

We reevaluate the role of human capital in determining the wealth of nations. We use standard human capital theory to estimate stocks of human capital and allow the quality of human capital to vary across countries. Our model can explain differences in sc...

Subways, Strikes, and Slowdowns: The Impacts of Public Transit on Traffic Congestion

By Michael L. Anderson

American Economic Review, September 2014

Public transit accounts for 1 percent of U.S. passenger miles traveled but attracts strong public support. Using a simple choice model, we predict that transit riders are likely to be individuals who commute along routes with severe roadway delays. These ...

Wall Street and the Housing Bubble

By Ing-Haw Cheng, Sahil Raina, and Wei Xiong

American Economic Review, September 2014

We analyze whether mid-level managers in securitized finance were aware of a large-scale housing bubble and a looming crisis in 2004-2006 using their personal home transaction data. We find that the average person in our sample neither timed the market no...

Mortgage Modification and Strategic Behavior: Evidence from a Legal Settlement with Countrywide

By Christopher Mayer, Edward Morrison, Tomasz Piskorski, and Arpit Gupta

American Economic Review, September 2014

We investigate whether homeowners respond strategically to news of mortgage modification programs. We exploit plausibly exogenous variation in modification policy induced by settlement of U.S. state government lawsuits against Countrywide Financial Corpor...

Dynamic Free Riding with Irreversible Investments

By Marco Battaglini, Salvatore Nunnari, and Thomas R. Palfrey

American Economic Review, September 2014

We study the Markov equilibria of a model of free riding in which n infinitely lived agents choose between private consumption and irreversible contributions to a durable public good. We show that the set of equilibrium steady states converges to a unique...

Pass-Through of Emissions Costs in Electricity Markets

By Natalia Fabra and Mar Reguant

American Economic Review, September 2014

We measure the pass-through of emissions costs to electricity prices. We perform both reduced-form and structural estimations based on optimal bidding in this market. Using rich micro-level data, we estimate the channels affecting pass-through in a flexib...