High Trade Costs and Their Consequences: An Estimated Dynamic Model of African Agricultural Storage and Trade

By Obie Porteous

American Economic Journal: Applied Economics, October 2019

Using a new intranational dataset of monthly grain prices and production and a new approach to identify cost parameters, I estimate and solve a dynamic model of agricultural storage and trade covering all 42 countries of continental sub-Saharan Africa. I ...

Pass-Through as a Test for Market Power: An Application to Solar Subsidies

By Jacquelyn Pless and Arthur A. van Benthem

American Economic Journal: Applied Economics, October 2019

We formalize pass-through over-shifting as a simple yet underutilized test for market power. We apply this test in the market for solar energy. Specifically, we estimate the pass-through of solar subsidies to solar system prices using rich micro-level tra...

Front Matter

American Economic Review, October 2019

The Dynamics of Discrimination: Theory and Evidence

By J. Aislinn Bohren, Alex Imas, and Michael Rosenberg

American Economic Review, October 2019

We model the dynamics of discrimination and show how its evolution can identify the underlying source. We test these theoretical predictions in a field experiment on a large online platform where users post content that is evaluated by other users on the ...

Failures in Contingent Reasoning: The Role of Uncertainty

By Alejandro Martínez-Marquina, Muriel Niederle, and Emanuel Vespa

American Economic Review, October 2019

We propose a new channel to account for the difficulties of individuals with contingent reasoning: the presence of uncertainty. When moving from an environment with one state of known value to one with multiple possible values, two changes occur. First, t...

Equilibrium Effects of Firm Subsidies

By Martin Rotemberg

American Economic Review, October 2019

Subsidy programs have two countervailing effects on firms: direct gains for eligible firms and indirect losses for those whose competitors are eligible. In 2006, India changed the eligibility criteria for small-firm subsidies, and the sales of newly eligi...

Competition and Strategic Incentives in the Market for Credit Ratings: Empirics of the Financial Crisis of 2007

By Chenghuan Sean Chu and Marc Rysman

American Economic Review, October 2019

We study the market for ratings agencies in the commercial mortgage backed securities sector leading up to and including the financial crisis of 2007–2008. Using a structural model adapted from the auctions literature, we characterize the incentives of ...

Is Inflation Default? The Role of Information in Debt Crises

By Marco Bassetto and Carlo Galli

American Economic Review, October 2019

We study the information sensitivity of government debt denominated in domestic versus foreign currency: the former is subject to inflation risk and the latter to default. Default only affects sophisticated bond traders, whereas inflation concerns a large...

Nominal Wage Rigidity in Village Labor Markets

By Supreet Kaur

American Economic Review, October 2019

This paper develops a new approach to test for downward wage rigidity by examining transitory shocks to labor demand (i.e., rainfall) across 600 Indian districts. Nominal wages rise during positive shocks but do not fall during droughts. In addition, tran...

Firms' Internal Networks and Local Economic Shocks

By Xavier Giroud and Holger M. Mueller

American Economic Review, October 2019

Using confidential establishment-level data from the US Census Bureau's Longitudinal Business Database, this paper documents how local shocks propagate across US regions through firms' internal networks of establishments. Consistent with a model of optima...

Quantifying Information and Uncertainty

By Alexander Frankel and Emir Kamenica

American Economic Review, October 2019

We examine ways to measure the amount of information generated by a piece of news and the amount of uncertainty implicit in a given belief. Say a measure of information is valid if it corresponds to the value of news in some decision problem. Say a measur...

Does Regulatory Jurisdiction Affect the Quality of Investment-Adviser Regulation?

By Ben Charoenwong, Alan Kwan, and Tarik Umar

American Economic Review, October 2019

The Dodd-Frank Act shifted regulatory jurisdiction over "midsize" investment advisers from the SEC to state-securities regulators. Client complaints against midsize advisers increased relative to those continuing under SEC oversight by 30 to 40 percent of...

Front Matter

American Economic Journal: Macroeconomics, October 2019

A Macroeconomic Framework for Quantifying Systemic Risk

By Zhiguo He and Arvind Krishnamurthy

American Economic Journal: Macroeconomics, October 2019

Systemic risk arises when shocks lead to states where a disruption in financial intermediation adversely affects the economy and feeds back into further disrupting financial intermediation. We present a macroeconomic model with a financial intermediary se...

"Whatever It Takes" Is All You Need: Monetary Policy and Debt Fragility

By Antoine Camous and Russell Cooper

American Economic Journal: Macroeconomics, October 2019

The valuation of government debt is subject to strategic uncertainty. Pessimistic lenders, fearing default, bid down the price of debt, leaving a government with a higher debt burden. This increases the likelihood of default, thus confirming the pessimism...

Slow Post-financial Crisis Recovery and Monetary Policy

By Daisuke Ikeda and Takushi Kurozumi

American Economic Journal: Macroeconomics, October 2019

Post-financial crisis recoveries tend to be slow and accompanied by slowdowns in total factor productivity (TFP) and permanent losses in GDP. To prevent them, how should monetary policy be conducted? We address this issue by developing a model with endoge...

Some Evidence on Secular Drivers of US Safe Real Rates

By Kurt G. Lunsford and Kenneth D. West

American Economic Journal: Macroeconomics, October 2019

We study long-run correlations between safe real interest rates in the United States and over 30 variables that have been hypothesized to influence real rates. The list of variables is motivated by an intertermporal IS equation, by models of aggregate s...

Monopoly Power and Endogenous Product Variety: Distortions and Remedies

By Florin O. Bilbiie, Fabio Ghironi, and Marc J. Melitz

American Economic Journal: Macroeconomics, October 2019

The inefficiencies related to endogenous product creation and variety under monopolistic competition are two-fold: one static—the misalignment between consumers and producers regarding the value of a new variety; and one dynamic—time variation in mark...

Unemployment Cycles

By Jan Eeckhout and Ilse Lindenlaub

American Economic Journal: Macroeconomics, October 2019

The labor market by itself can create cyclical outcomes, even in the absence of exogenous shocks. We propose a theory in which the search behavior of the employed has profound aggregate implications for the unemployed. There is a strategic complementarity...

Barriers to Reallocation and Economic Growth: The Effects of Firing Costs

By Toshihiko Mukoyama and Sophie Osotimehin

American Economic Journal: Macroeconomics, October 2019

We study how factors that hinder the reallocation of inputs across firms influence aggregate productivity growth. We extend Hopenhayn and Rogerson's (1993) firm-dynamics model to allow for endogenous innovation. We evaluate the effects of firing taxes on ...