Natural Resources and Local Communities: Evidence from a Peruvian Gold Mine

By Fernando M. Aragón and Juan Pablo Rud

American Economic Journal: Economic Policy, May 2013

This paper examines the local economic impact of Yanacocha, a large gold mine in Northern Peru. Using annual household data from 1997 to 2006, we find evidence of a positive effect of the mine's demand for local inputs on real income. The effects are o...

Feeling the Florida Heat? How Low-Performing Schools Respond to Voucher and Accountability Pressure

By Cecilia Elena Rouse, Jane Hannaway, Dan Goldhaber, and David Figlio

American Economic Journal: Economic Policy, May 2013

While numerous studies have found that school accountability boosts test scores, it is uncertain whether estimated test score gains reflect genuine improvements or merely "gaming" behaviors. This paper brings to bear new evidence from a unique five-yea...

The Contagion Effect of Neighboring Foreclosures

By Charles Towe and Chad Lawley

American Economic Journal: Economic Policy, May 2013

We examine the contagion effect of residential foreclosures and find strong evidence of a social interactions influence on default decisions where the interaction is based on neighbors' behavior in a previous period. Using a unique spatially explicit p...

Finance: Function Matters, Not Size

[Symposium: The Growth of the Financial Sector]

By John H. Cochrane

Journal of Economic Perspectives, Spring 2013

It's fun to pass judgment on waste, size, usefulness, complexity, and excessive compensation. But as economists, we have an analytical structure for thinking about these questions. "I don't understand it" doesn't mean "it's bad," or "regulation will impro...

Investing in Preschool Programs

[Symposium: Early and Later Interventions]

By Greg J. Duncan and Katherine Magnuson

Journal of Economic Perspectives, Spring 2013

We summarize the available evidence on the extent to which expenditures on early childhood education programs constitute worthy social investments in the human capital of children. We provide an overview of existing early childhood education programs, an...

Intergenerational Occupational Mobility in Great Britain and the United States since 1850

By Jason Long and Joseph Ferrie

American Economic Review, June 2013

The US tolerates more inequality than Europe and believes its economic mobility is greater than Europe's, though they had roughly equal rates of intergenerational occupational mobility in the late twentieth century. We extend this comparison into the n...

The Lure of Authority: Motivation and Incentive Effects of Power

By Ernst Fehr, Holger Herz, and Tom Wilkening

American Economic Review, June 2013

Authority and power permeate political, social, and economic life, but empirical knowledge about the motivational origins and consequences of authority is limited. We study the motivation and incentive effects of authority experimentally in an authorit...

The Gravity of Knowledge

By Wolfgang Keller and Stephen Ross Yeaple

American Economic Review, June 2013

We analyze the international operations of multinational firms to measure the spatial barriers to transferring knowledge. We model firms that can transfer bits of knowledge to their foreign affiliates in either embodied (traded intermediates) or disemb...

Discretionary Tax Changes and the Macroeconomy: New Narrative Evidence from the United Kingdom

By James Cloyne

American Economic Review, June 2013

This paper provides new estimates of the macroeconomic effects of tax changes using a new narrative dataset for the United Kingdom. Identification is achieved by isolating "exogenous" tax policy changes using the Romer and Romer narrative strategy. I find...

Even (Mixed) Risk Lovers Are Prudent

By David Crainich, Louis Eeckhoudt, and Alain Trannoy

American Economic Review, June 2013

The purpose of this note is to analyze properties of the risk lovers' utility function beyond the positive sign of its second order derivative. We show that—contrarily to a priori beliefs—risk lovers are prudent and are willing to accumulate precautio...

Even (Mixed) Risk Lovers Are Prudent: Comment

By Sebastian Ebert

American Economic Review, June 2013

Crainich, Eeckhoudt, and Trannoy (2013) show that mixed risk lovers are prudent. I show that common risk loving utility functions may not exhibit mixed risk loving—as is typical for risk aversion and mixed risk aversion—and thus these traits should be...

U.S. High School Graduation Rates: Patterns and Explanations

By Richard J. Murnane

Journal of Economic Literature, June 2013

I survey the evidence on patterns in U.S. high school graduation rates over the period 1970–2010 and report the results of new research conducted to fill in holes in the evidence. I begin by pointing out the strengths and limitations of existing data ...

International Contagion through Leveraged Financial Institutions

By Eric van Wincoop

American Economic Journal: Macroeconomics, July 2013

The 2008–2009 financial crises, while originating in the United States, witnessed a drop in asset prices and output that was at least as large in the rest of the world. We investigate, in the context of a simple two-country model, whether this could ...

Sharing the Burden: Monetary and Fiscal Responses to a World Liquidity Trap

By David Cook and Michael B. Devereux

American Economic Journal: Macroeconomics, July 2013

This paper analyzes optimal policy responses to a global liquidity trap. The key feature of this environment is that relative prices respond perversely. A fall in demand in one country causes an appreciation of its terms of trade, exacerbating the initia...

Strategic Private Experimentation

By Mike Felgenhauer and Elisabeth Schulte

American Economic Journal: Microeconomics, November 2014

We consider a model of persuasion in which an agent who tries to persuade a decision maker can sequentially acquire imperfect signals. The agent's information acquisition is unobservable and he has the option to hide unfavorable signals. Nevertheless, if ...

Human Capital and the Lifetime Costs of Impatience

By Brian C. Cadena and Benjamin J. Keys

American Economic Journal: Economic Policy, August 2015

In this paper, we examine the role of impatience in human capital formation—arguably the most important investment decision individuals make during their lifetimes. We focus on a set of investment behaviors that cannot be explained solely by variation i...

Credit Constraints and Growth in a Global Economy

By Nicolas Coeurdacier, Stéphane Guibaud, and Keyu Jin

American Economic Review, September 2015

We show that in an open-economy OLG model, the interaction between growth differentials and household credit constraints—more severe in fast-growing countries—can explain three prominent global trends: a divergence in private saving rates between adva...

Averting Catastrophes: The Strange Economics of Scylla and Charybdis

By Ian W. R. Martin and Robert S. Pindyck

American Economic Review, October 2015

Faced with numerous potential catastrophes—nuclear and bioterrorism, mega-viruses, climate change, and others—which should society attempt to avert? A policy to avert one catastrophe considered in isolation might be evaluated in cost-benefit terms. Bu...

Wintertime for Deceptive Advertising?

By Jonathan Zinman and Eric Zitzewitz

American Economic Journal: Applied Economics, January 2016

Casual empiricism suggests that deceptive advertising about product quality is prevalent, and several classes of theories explore its causes and consequences. We provide unusually sharp empirical evidence on its extent, mechanics, and dynamics. Ski resort...

Are Sticky Prices Costly? Evidence from the Stock Market

By Yuriy Gorodnichenko and Michael Weber

American Economic Review, January 2016

We show that after monetary policy announcements, the conditional volatility of stock market returns rises more for firms with stickier prices than for firms with more flexible prices. This differential reaction is economically large and strikingly robust...