Front Matter

American Economic Review, July 2019

Consumer Spending during Unemployment: Positive and Normative Implications

By Peter Ganong and Pascal Noel

American Economic Review, July 2019

Using de-identified bank account data, we show that spending drops sharply at the large and predictable decrease in income arising from the exhaustion of unemployment insurance (UI) benefits. We use the high-frequency response to a predictable income decl...

Deliberately Stochastic

By Simone Cerreia-Vioglio, David Dillenberger, Pietro Ortoleva, and Gil Riella

American Economic Review, July 2019

We study stochastic choice as the outcome of deliberate randomization. We derive a general representation of a stochastic choice function where stochasticity allows the agent to achieve from any set the maximal element according to her underlying preferen...

Contractual Managerial Incentives with Stock Price Feedback

By Tse-Chun Lin, Qi Liu, and Bo Sun

American Economic Review, July 2019

We study the effect of financial market frictions on managerial compensation. We embed a market microstructure model into an otherwise standard contracting framework, and analyze optimal pay-for-performance when managers use information they learn from th...

Capital Accumulation, Private Property, and Rising Inequality in China, 1978–2015

By Thomas Piketty, Li Yang, and Gabriel Zucman

American Economic Review, July 2019

We combine national accounts, surveys, and new tax data to study the accumulation and distribution of income and wealth in China from 1978 to 2015. The national wealth-income ratio increased from 350 percent in 1978 to 700 percent in 2015, while the share...

The Political Legacy of Entertainment TV

By Ruben Durante, Paolo Pinotti, and Andrea Tesei

American Economic Review, July 2019

We study the political impact of commercial television in Italy exploiting the staggered introduction of Berlusconi's private TV network, Mediaset, in the early 1980s. We find that individuals with early access to Mediaset all-entertainment content were m...

The Sources of Capital Misallocation

By Joel M. David and Venky Venkateswaran

American Economic Review, July 2019

We develop a methodology to disentangle sources of capital "misallocation," i.e., dispersion in value-added/capital. It measures the contributions of technological/informational frictions and a rich class of firm-specific factors. An application to Chines...

Incentives and the Supply of Effective Charter Schools

By John D. Singleton

American Economic Review, July 2019

Charter school funding is typically set by formulas that provide the same amount for students regardless of advantage or need. I present evidence that this policy skews the distribution of students served by charters toward low-cost populations by influen...

Disability Benefits, Consumption Insurance, and Household Labor Supply

By David Autor, Andreas Kostøl, Magne Mogstad, and Bradley Setzler

American Economic Review, July 2019

There is no evaluation of the consequences of Disability Insurance (DI) receipt that captures the effects on households' net income and consumption expenditure, family labor supply, or benefits from other programs. Combining detailed register data from ...

The Dynamic Effects of Personal and Corporate Income Tax Changes in the United States: Comment

By Carsten Jentsch and Kurt G. Lunsford

American Economic Review, July 2019

Mertens and Ravn (2013) estimate impulse response functions (IRFs) from income tax changes in a structural vector autoregression (SVAR) by using narrative accounts of tax liability changes as proxy variables. To produce confidence intervals for their IRFs...

The Dynamic Effects of Personal and Corporate Income Tax Changes in the United States: Reply

By Karel Mertens and Morten O. Ravn

American Economic Review, July 2019

In this reply to a comment by Jentsch and Lunsford, we show that the evidence for economic and statistically significant macroeconomic effects of tax changes in Mertens and Ravn (2013) remains present for a range of asymptotically valid inference methods.

Front Matter

American Economic Journal: Macroeconomics, July 2019

Forward Guidance and Heterogeneous Beliefs

By Philippe Andrade, Gaetano Gaballo, Eric Mengus, and Benoît Mojon

American Economic Journal: Macroeconomics, July 2019

Central banks' announcements that rates are expected to remain low could signal either a weak macroeconomic outlook, which would slow expenditures, or a more accommodative stance, which may stimulate economic activity. We use the Survey of Professional Fo...

Corporate Cash and Employment

By Philippe Bacchetta, Kenza Benhima, and Céline Poilly

American Economic Journal: Macroeconomics, July 2019

In the aftermath of the US financial crisis, both a sharp drop in employment and a surge in corporate cash have been observed. In this paper, based on US data, we argue that the negative relationship between the corporate cash ratio and employment is syst...

Endogenous Technology Adoption and R&D as Sources of Business Cycle Persistence

By Diego Anzoategui, Diego Comin, Mark Gertler, and Joseba Martinez

American Economic Journal: Macroeconomics, July 2019

We examine the hypothesis that the slowdown in productivity following the Great Recession was in significant part an endogenous response to the contraction in demand that induced the downturn. We motivate, develop, and estimate a model with an endogenous ...

Menu Costs, Aggregate Fluctuations, and Large Shocks

By Peter Karadi and Adam Reiff

American Economic Journal: Macroeconomics, July 2019

We document that the aggregate price level responds flexibly and asymmetrically to large positive and negative value-added tax changes. We present a price-setting model with menu costs, trend inflation, and fat-tailed product-level shocks that is consiste...

Is Government Spending at the Zero Lower Bound Desirable?

By Florin O. Bilbiie, Tommaso Monacelli, and Roberto Perotti

American Economic Journal: Macroeconomics, July 2019

We build a medium-scale DSGE model and calibrate it to fit the main macroeconomic variables during the US Great Recession. Using it to evaluate the welfare effects of increasing government consumption at the zero lower bound beyond what was actually obser...

The Currency Composition of Sovereign Debt

By Pablo Ottonello and Diego J. Perez

American Economic Journal: Macroeconomics, July 2019

We study the currency composition of sovereign debt in emerging economies through the lens of a model in which the government lacks commitment regarding debt and monetary policy. High levels of debt in local currency give rise to incentives to dilute debt...

Asset Bubbles and Global Imbalances

By Daisuke Ikeda and Toan Phan

American Economic Journal: Macroeconomics, July 2019

We analyze the relationships between bubbles, capital flows, and economic activities in a rational bubble model with two large open economies. We establish a reinforcing relationship between global imbalances and bubbles. Capital flows from South to North...

Internal Geography, Labor Mobility, and the Distributional Impacts of Trade

By Jingting Fan

American Economic Journal: Macroeconomics, July 2019

I develop a spatial-equilibrium model to quantify the distributional impacts of international trade in an economy with intranational trade and migration costs. Focusing on China, I find that international trade increases both between-region inequality amo...