Front Matter

American Economic Review, April 2017

Narrative Economics

By Robert J. Shiller

American Economic Review, April 2017

This address considers the epidemiology of narratives relevant to economic fluctuations. The human brain has always been highly tuned toward narratives, whether factual or not, to justify ongoing actions, even such basic actions as spending and investing....

Banks as Secret Keepers

By Tri Vi Dang, Gary Gorton, Bengt Holmström, and Guillermo Ordoñez

American Economic Review, April 2017

Banks produce short-term debt for transactions and storing value. The value of this debt must not vary over time so agents can easily trade it at par like money. To produce money-like safe liquidity, banks keep detailed information about their loans secre...

Escaping the Great Recession

By Francesco Bianchi and Leonardo Melosi

American Economic Review, April 2017

We show that policy uncertainty about how the rising public debt will be stabilized accounts for the lack of deflation in the US economy at the zero lower bound. We first estimate a Markov-switching VAR to highlight that a zero-lower-bound regime captures...

The Social Cost of Near-Rational Investment

By Tarek A. Hassan and Thomas M. Mertens

American Economic Review, April 2017

We show that the stock market may fail to aggregate information even if it appears to be efficient, and that the resulting decrease in the information content of prices may drastically reduce welfare. We solve a macroeconomic model in which information ab...

The Macrodynamics of Sorting between Workers and Firms

By Jeremy Lise and Jean-Marc Robin

American Economic Review, April 2017

We develop an equilibrium model of on-the-job search with ex ante heterogeneous workers and firms, aggregate uncertainty, and vacancy creation. The model produces rich dynamics in which the distributions of unemployed workers, vacancies, and worker-firm m...

Financing Innovation: Evidence from R&D Grants

By Sabrina T. Howell

American Economic Review, April 2017

Governments regularly subsidize new ventures to spur innovation. This paper conducts the first large-sample, quasi-experimental evaluation of R&D subsidies. I use data on ranked applicants to the US Department of Energy's SBIR grant program. An early-...

Reducing Crime and Violence: Experimental Evidence from Cognitive Behavioral Therapy in Liberia

By Christopher Blattman, Julian C. Jamison, and Margaret Sheridan

American Economic Review, April 2017

We show that a number of noncognitive skills and preferences, including patience and identity, are malleable in adults, and that investments in them reduce crime and violence. We recruited criminally engaged men and randomized one-half to eight weeks of c...

Does the Gender Composition of Scientific Committees Matter?

By Manuel Bagues, Mauro Sylos-Labini, and Natalia Zinovyeva

American Economic Review, April 2017

We analyze how a larger presence of female evaluators affects committee decision-making using information on 100,000 applications to associate and full professorships in Italy and Spain. These applications were assessed by 8,000 randomly selected evaluato...

A Comprehensive Approach to Revealed Preference Theory

By Hiroki Nishimura, Efe A. Ok, and John K.-H. Quah

American Economic Review, April 2017

We develop a version of Afriat's theorem that is applicable in a variety of choice environments beyond the setting of classical consumer theory. This allows us to devise tests for rationalizability in environments where the set of alternatives is not the ...

Correlation Misperception in Choice

By Andrew Ellis and Michele Piccione

American Economic Review, April 2017

We present a decision-theoretic analysis of an agent's understanding of the interdependencies in her choices. We provide the foundations for a simple and flexible model that allows the misperception of correlated risks. We introduce a framework in which t...

Balanced Growth Despite Uzawa

By Gene M. Grossman, Elhanan Helpman, Ezra Oberfield, and Thomas Sampson

American Economic Review, April 2017

The evidence for the United States points to balanced growth despite falling investment good prices and a less-than-unitary elasticity of substitution between capital and labor. This is inconsistent with the Uzawa Growth Theorem. We extend Uzawa's theorem...

Geographic Dispersion of Economic Shocks: Evidence from the Fracking Revolution

By James Feyrer, Erin T. Mansur, and Bruce Sacerdote

American Economic Review, April 2017

We track the geographic and temporal propagation of local economic shocks from new oil and gas production generated by hydrofracturing. Each million dollars of new production produces $80,000 in wage income and $132,000 in royalty and business income with...

Borrowing on the Wrong Credit Card? Evidence from Mexico

By Alejandro Ponce, Enrique Seira, and Guillermo Zamarripa

American Economic Review, April 2017

We establish new facts about the way consumers allocate debt among their credit cards using data for a representative sample of cardholders in Mexico. We find that relative prices are weak predictors of the allocation of debt, purchases, and payments. Con...

How to Control Controlled School Choice: Comment

By Battal Doğan

American Economic Review, April 2017

Echenique and Yenmez (2015), in Theorem 2, characterize choice rules that are "generated by reserves for the priority." We show that the "only if" part is not correct. We exhibit a choice rule that is generated by reserves for the priority b...

Front Matter

American Economic Journal: Macroeconomics, April 2017

Job Ladders and Earnings of Displaced Workers

By Pawel Krolikowski

American Economic Journal: Macroeconomics, April 2017

Workers who suffer job displacement experience surprisingly large and persistent earnings losses. This paper proposes an explanation for this robust empirical puzzle in a model of search with a significant job ladder and increased separation rates for the...

Bank Leverage Cycles

By Galo Nuño and Carlos Thomas

American Economic Journal: Macroeconomics, April 2017

We propose a general equilibrium framework with financial intermediaries subject to endogenous leverage constraints, and assess its ability to explain the observed fluctuations in intermediary leverage and real economic activity. In the model, intermediar...

The Great Housing Boom of China

By Kaiji Chen and Yi Wen

American Economic Journal: Macroeconomics, April 2017

China's housing prices have been growing nearly twice as fast as national income over the past decade, despite a high vacancy rate and a high rate of return to capital. This paper interprets China's housing boom as a rational bubble emerging naturally fro...

The Effects of the Real Oil Price on Regional Wage Dispersion

By Matthias Kehrig and Nicolas L. Ziebarth

American Economic Journal: Macroeconomics, April 2017

We find that oil supply shocks decrease average real wages, particularly skilled wages, and increase wage dispersion across regions, particularly unskilled wage dispersion. In a model with spatial energy intensity differences and nontradables, labor deman...