Front Matter

American Economic Review, April 2015

Sharing High Growth across Generations: Pensions and Demographic Transition in China

By Zheng Song, Kjetil Storesletten, Yikai Wang, and Fabrizio Zilibotti

American Economic Journal: Macroeconomics, April 2015

We analyze intergenerational redistribution in emerging economies with the aid of an overlapping generations model with endogenous labor supply. Growth is initially high but declines over time. A version of the model calibrated to China is used to analyze...

Welfare Cost of Business Cycles with Idiosyncratic Consumption Risk and a Preference for Robustness

By Martin Ellison and Thomas J. Sargent

American Economic Journal: Macroeconomics, April 2015

The welfare cost of random consumption fluctuations is known from De Santis (2007) to be increasing in the level of uninsured idiosyncratic consumption risk. It is known from Barillas, Hansen, and Sargent (2009) to increase if agents care about robustness...

Demographic Patterns and Household Saving in China

By Chadwick C. Curtis, Steven Lugauer, and Nelson C. Mark

American Economic Journal: Macroeconomics, April 2015

This paper studies how demographic variation affects the aggregate household saving rate. We focus on China because it is experiencing an historic demographic transition and has had a massive increase in household saving. We conduct a quantitative investi...

Consumption Volatility, Marketization, and Expenditure in an Emerging Market Economy

By Daniel L. Hicks

American Economic Journal: Macroeconomics, April 2015

In response to income fluctuations, households smooth consumption by substituting between market expenditure and time inputs. This paper provides evidence of this substitution in the context of food consumption over transitory and permanent income fluctua...

Optimal Labor-Market Policy in Recessions

By Philip Jung and Keith Kuester

American Economic Journal: Macroeconomics, April 2015

Within a search and matching model with risk-averse workers, endogenous hiring and separation, and unobservable search effort, we show how to decentralize the constrained-efficient allocation by a combination of a production tax and three labor-market pol...

Understanding Markups in the Open Economy

By Beatriz de Blas and Katheryn N. Russ

American Economic Journal: Macroeconomics, April 2015

This paper presents a new model of Bertrand competition between heterogeneous firms in the open economy where the macroeconomic distribution of markups responds to the degree of trade openness and the underlying level of technology in each trading partner...

Measured Aggregate Gains from International Trade

By Ariel Burstein and Javier Cravino

American Economic Journal: Macroeconomics, April 2015

We examine the implications of workhorse trade models for how aggregate productivity, real GDP and real consumption, as measured by statistical agencies, respond to changes in trade costs. In a range of models, changes in measured productivity are equal t...

Optimal Mirrleesean Taxation in a Ben-Porath Economy

By Marek Kapička

American Economic Journal: Macroeconomics, April 2015

I characterize optimal taxes in a life-cycle economy where ability and human capital are unobservable. I show that unobservable human capital effectively makes preferences over labor nonseparable across age. I generalize the static optimal tax formulas to...

Unemployment Insurance Fraud and Optimal Monitoring

By David L. Fuller, B. Ravikumar, and Yuzhe Zhang

American Economic Journal: Macroeconomics, April 2015

An important incentive problem for the design of unemployment insurance is the fraudulent collection of unemployment benefits by workers who are gainfully employed. We show how to efficiently use a combination of tax/subsidy and monitoring to prevent such...

Front Matter

American Economic Journal: Macroeconomics, April 2015

Quality Disclosure Programs and Internal Organizational Practices: Evidence from Airline Flight Delays

By Silke J. Forbes, Mara Lederman, and Trevor Tombe

American Economic Journal: Microeconomics, May 2015

Disclosure programs exist in many industries in which consumers are poorly informed about product quality. We study a disclosure program for airline on-time performance, which ranks airlines based on the fraction of their flights that arrive less than 15 ...

Formal versus Informal Monitoring in Teams

By Alex Gershkov and Eyal Winter

American Economic Journal: Microeconomics, May 2015

In this paper we analyze a principal's optimal monitoring strategies in a team environment. In doing so we study the interaction between formal monitoring and informal (peer) monitoring. We show that if the technology satisfies complementarity, peer monit...

Becoming the Neighbor Bidder: Endogenous Winner's Curse in Dynamic Mechanisms

By Alejandro Francetich

American Economic Journal: Microeconomics, May 2015

This paper addresses the problem of sequentially allocating time sensitive goods, or one-period leases on a durable good, among agents who compete through time and learn about the common component of their valuation privately through experience. I show th...

Testing Ambiguity Models through the Measurement of Probabilities for Gains and Losses

By Aurélien Baillon and Han Bleichrodt

American Economic Journal: Microeconomics, May 2015

This paper reports on two experiments that test the descriptive validity of ambiguity models using a natural source of uncertainty (the evolution of stock indices) and both gains and losses. We observed violations of probabilistic sophistication, violatio...

Loss Aversion and Consumption Choice: Theory and Experimental Evidence

By Heiko Karle, Georg Kirchsteiger, and Martin Peitz

American Economic Journal: Microeconomics, May 2015

We analyze a consumer-choice model with price uncertainty, loss aversion, and expectation-based reference points. The implications of this model are tested in an experiment in which participants have to make a consumption choice between two sandwiches. Pa...

Innovation, Trade, and Finance

By Peter Egger and Christian Keuschnigg

American Economic Journal: Microeconomics, May 2015

Heterogeneous firms invest in R&D and expansion investment. Venture capital specializes in R&D financing where problems are largest. Marginal firms get funded by venture capital, while firms with larger debt capacity obtain cheaper bank financing. In the ...

Organizing to Adapt and Compete

By Ricardo Alonso, Wouter Dessein, and Niko Matouschek

American Economic Journal: Microeconomics, May 2015

We examine the relationship between the organization of a multi-divisional firm and its ability to adapt production decisions to changes in the environment. We show that even if lower-level managers have superior information about local conditions, and in...

Affiliation and Entry in First-Price Auctions with Heterogeneous Bidders: An Analysis of Merger Effects

By Tong Li and Bingyu Zhang

American Economic Journal: Microeconomics, May 2015

We study the effects of mergers in timber sale auctions in Oregon. We propose an entry and bidding model within the affiliated private value (APV) framework and with heterogeneous bidders, and establish existence of the entry equilibrium and existence and...

Assessing Sale Strategies in Online Markets Using Matched Listings

By Liran Einav, Theresa Kuchler, Jonathan Levin, and Neel Sundaresan

American Economic Journal: Microeconomics, May 2015

We use data from eBay to identify hundreds of thousands of instances in which retailers posted otherwise identical product listings with targeted variation in pricing and auction design. We use these matched listings to measure the dispersion in auction p...