Non-Optimal Mechanism Design

By Jason D. Hartline and Brendan Lucier

American Economic Review, October 2015

The optimal allocation of resources in complex environments—like allocation of dynamic wireless spectrum, cloud computing services, and Internet advertising—is computationally challenging even given the true preferences of the participants. In...

Delinking Land Rights from Land Use: Certification and Migration in Mexico

By Alain de Janvry, Kyle Emerick, Marco Gonzalez-Navarro, and Elisabeth Sadoulet

American Economic Review, October 2015

In many developing countries property rights over rural land are maintained through continuous personal use instead of by land titles. We show that removing the link between land use and land rights through the issuance of ownership certificates can resul...

The Next Generation of the Penn World Table

By Robert C. Feenstra, Robert Inklaar, and Marcel P. Timmer

American Economic Review, October 2015

We describe the theory and practice of real GDP comparisons across countries and over time. Version 8 of the Penn World Table expands on previous versions in three respects. First, in addition to comparisons of living standards using components of real GD...

Competition, Markups, and the Gains from International Trade

By Chris Edmond, Virgiliu Midrigan, and Daniel Yi Xu

American Economic Review, October 2015

We study the procompetitive gains from international trade in a quantitative model with endogenously variable markups. We find that trade can significantly reduce markup distortions if two conditions are satisfied: (i) there is extensive misallocation, an...

Front Matter

American Economic Review, October 2015

Human Capital Risk, Contract Enforcement, and the Macroeconomy

By Tom Krebs, Moritz Kuhn, and Mark L. J. Wright

American Economic Review, November 2015

We use microdata to show that young households with children are underinsured against the risk that an adult member of the household dies. This empirical finding can be explained by a macroeconomic model with human capital risk, age-dependent returns to h...

Optimal Annuitization with Stochastic Mortality and Correlated Medical Costs

By Felix Reichling and Kent Smetters

American Economic Review, November 2015

The conventional wisdom since Yaari (1965) is that households without a bequest motive should fully annuitize their investments. Numerous frictions do not break this sharp result. We modify the Yaari framework by allowing a household's mortality risk itse...

Exclusive Contracts and Market Dominance

By Giacomo Calzolari and Vincenzo Denicolò

American Economic Review, November 2015

We propose a new theory of exclusive dealing. The theory is based on the assumption that a dominant firm has a competitive advantage over its rivals, and that the buyers' willingness to pay for the product is private information. In this setting, the domi...

Fiscal Volatility Shocks and Economic Activity

By Jesús Fernández-Villaverde, Pablo Guerrón-Quintana, Keith Kuester, and Juan Rubio-Ramírez

American Economic Review, November 2015

We study how unexpected changes in uncertainty about fiscal policy affect economic activity. First, we estimate tax and spending processes for the United States with time-varying volatility to uncover evidence of time-varying volatility. Second, we estima...

Estimating Neighborhood Choice Models: Lessons from a Housing Assistance Experiment

By Sebastian Galiani, Alvin Murphy, and Juan Pantano

American Economic Review, November 2015

We use data from a housing-assistance experiment to estimate a model of neighborhood choice. The experimental variation effectively randomizes the rents which households face and helps identify a key structural parameter. Access to two randomly selected t...

Conveniently Upset: Avoiding Altruism by Distorting Beliefs about Others' Altruism

By Rafael Di Tella, Ricardo Perez-Truglia, Andres Babino, and Mariano Sigman

American Economic Review, November 2015

We present results from a "corruption game" (a dictator game modified so that recipients can take a side payment in exchange for accepting a reduction in the overall size of the pie). Dictators (silently) treated to be able to take more of the recipient's...

Optimal Taxation and Debt with Uninsurable Risks to Human Capital Accumulation

By Piero Gottardi, Atsushi Kajii, and Tomoyuki Nakajima

American Economic Review, November 2015

We consider an economy where individuals face uninsurable risks to their human capital accumulation and analyze the optimal level of linear taxes on capital and labor income together with the optimal path of government debt. We show that in the presence o...

Reputation and School Competition

By W. Bentley MacLeod and Miguel Urquiola

American Economic Review, November 2015

Stratification is a distinctive feature of competitive education markets that can be explained by a preference for good peers. Learning externalities can lead students to care about the ability of their peers, resulting in across-school sorting by ability...

Psychological Frictions and the Incomplete Take-Up of Social Benefits: Evidence from an IRS Field Experiment

By Saurabh Bhargava and Dayanand Manoli

American Economic Review, November 2015

We address the role of "psychological frictions" in the incomplete take-up of EITC benefits with an IRS field experiment. We specifically assess the influence of program confusion, informational complexity, and stigma by evaluating response to experimenta...

Front Matter

American Economic Review, November 2015

Uncertainty and Trade Agreements

By Nuno Limão and Giovanni Maggi

American Economic Journal: Microeconomics, November 2015

We explore conditions under which trade agreements can provide gains by reducing trade policy uncertainty. Given the degree of income risk aversion, this is more likely when economies are more open, export supply elasticities are lower, and economies more...

Inefficiencies in Networked Markets

By Matthew Elliott

American Economic Journal: Microeconomics, November 2015

In many markets, relationship specific investments are necessary for trade. These formed relationships constitute a networked market in which not all buyers can trade with all sellers. We show that networked markets can be decomposed to identify how alter...

Market Structure, Reputation, and the Value of Quality Certification

By Daniel W. Elfenbein, Raymond Fisman, and Brian McManus

American Economic Journal: Microeconomics, November 2015

Quality certification programs help consumers identify high-quality products or sellers in markets with information asymmetries. Using data from eBay UK's online marketplace, we study how certification's impact on demand varies with market- and seller- le...

Learning from Others? Decision Rights, Strategic Communication, and Reputational Concerns

By Otto H. Swank and Bauke Visser

American Economic Journal: Microeconomics, November 2015

We examine centralized versus decentralized decision making when experience of agents is private information and communication is necessary to learn from others. An agent has reputational concerns and his market may or may not observe what the other agent...

Collective Dynamic Choice: The Necessity of Time Inconsistency

By Matthew O. Jackson and Leeat Yariv

American Economic Journal: Microeconomics, November 2015

We study collective decisions by time-discounting individuals choosing a common consumption stream. We show that with any heterogeneity in time preferences, every Pareto efficient and non-dictatorial method of aggregating utility functions must be time-in...