Avoiding Invalid Instruments and Coping with Weak Instruments

By Michael P. Murray

Journal of Economic Perspectives, Fall 2006

Archimedes said, "Give me the place to stand, and a lever long enough, and I will move the Earth." Economists have their own powerful lever: the instrumental variable estimator. The instrumental variable estimator can avoid the bias that ordinary least s...

Does Culture Affect Economic Outcomes?

[Symposium: Cultural Economics]

By Luigi Guiso, Paola Sapienza, and Luigi Zingales

Journal of Economic Perspectives, Spring 2006

Until recently, economists have been reluctant to rely on culture as a possible determinant of economic phenomena. Much of this reluctance stems from the very notion of culture: it is so broad and the channels through which it can enter the economic disco...

Melioration: A Theory of Distributed Choice

By Richard J. Herrnstein and Drazen Prelec

Journal of Economic Perspectives, Summer 1991

In this paper, we develop a theory of individual choice called melioration, which implies that choices distributed over a period of time may be reliably and predictably suboptimal, in terms of the person's own preferences. Consider some typical examples o...

Verifying the Solution from a Nonlinear Solver: A Case Study: Reply

By B. D. McCullough and H. D. Vinod

American Economic Review, March 2004

The Investment Strategies of Sovereign Wealth Funds

By Shai Bernstein, Josh Lerner, and Antoinette Schoar

Journal of Economic Perspectives, Spring 2013

Sovereign wealth funds have emerged as major investors in corporate and real resources worldwide. After an overview of their magnitude, we consider the institutional arrangements under which many of the sovereign wealth funds operate. We focus on a specif...

Taxing Top CEO Incomes

By Laurence Ales and Christopher Sleet

American Economic Review, November 2016

We use a firm-CEO assignment framework to model the market for CEO effective labor. In the model's equilibrium, more talented CEOs match with and supply more effort to larger firms. Taxation of CEO incomes affects the equilibrium pricing of CEO effective ...

Bundling Health Insurance and Microfinance in India: There Cannot Be Adverse Selection If There Is No Demand

By Abhijit Banerjee, Esther Duflo, and Richard Hornbeck

American Economic Review, May 2014

Microfinance institutions have started to bundle their basic loans with other financial services, such as health insurance. Using a randomized control trial in Karnataka, India, we evaluate the impact on loan renewal from mandating the purchase of actuari...

Recommendations for Further Reading

By Timothy Taylor

Journal of Economic Perspectives, Summer 2011

Cross-Border Media and Nationalism: Evidence from Serbian Radio in Croatia

By Stefano DellaVigna, Ruben Enikolopov, Vera Mironova, Maria Petrova, and Ekaterina Zhuravskaya

American Economic Journal: Applied Economics, July 2014

How do nationalistic media affect animosity between ethnic groups? We consider one of Europe's deadliest conflicts since WWII, the Serbo-Croatian conflict. We show that, after a decade of peace, cross-border nationalistic Serbian radio triggers ethnic hat...

What Makes Firm-Based Vocational Training Schemes Successful? The Role of Commitment

By Christian Dustmann and Uta Schönberg

American Economic Journal: Applied Economics, April 2012

This paper studies a possible market failure in the firm-based vocational training market: training may be too complex to be specified in a contract so that it is legally enforceable, resulting in the inability of firms to commit to training provision. We...

Financial Intermediation, International Risk Sharing, and Reserve Currencies

By Matteo Maggiori

American Economic Review, October 2017

I model the equilibrium risk sharing between countries with varying financial development. The most financially developed country takes greater risks because its financial intermediaries deal with funding problems better. In good times, the more financial...

Micro-loans, Insecticide-Treated Bednets, and Malaria: Evidence from a Randomized Controlled Trial in Orissa, India

By Alessandro Tarozzi, Aprajit Mahajan, Brian Blackburn, Dan Kopf, Lakshmi Krishnan, and Joanne Yoong

American Economic Review, July 2014

We describe findings from the first large-scale cluster randomized controlled trial in a developing country that evaluates the uptake of a health-protecting technology, insecticide-treated bednets (ITNs), through micro-consumer loans, as compared to free ...

Indirect Liability for Copyright Infringement: Napster and Beyond

[Symposium: Cultural Economics]

By William Landes and Douglas Lichtman

Journal of Economic Perspectives, Spring 2003

When individuals infringe copyright, they often use tools, services, and venues provided by other parties. An enduring legal question asks to what extent those other parties should be held liable for the resulting infringement. For example, should a firm ...

Choosing How to Compete: Strategies and Tactics in Standardization

[Symposium: Network Externalities]

By Stanley M. Besen and Joseph Farrell

Journal of Economic Perspectives, Spring 1994

In a network industry, each firm must decide whether or not it wants its product to be compatible with those of rivals. This horizontal compatibility strategy determines whether competition is a battle to establish a standard or the more conventional comp...

Stages of Diversification

By Jean Imbs and Romain Wacziarg

American Economic Review, March 2003

This paper studies the evolution of sectoral concentration in relation to the level of per capita income. We show that various measures of sectoral concentration follow a U-shaped pattern across a wide variety of data sources: countries first diversify, i...

Heterogeneity in Intra-monthly Consumption Patterns, Self-Control, and Savings at Retirement

By Giovanni Mastrobuoni and Matthew Weinberg

American Economic Journal: Economic Policy, August 2009

Using data from the Continuing Survey of Food Intake by Individuals, this paper describes the shape of consumption profiles over the month for Social Security benefit recipients that have saved different amounts for retirement. Individuals with income ...

A Rothschild-Stiglitz Approach to Bayesian Persuasion

By Matthew Gentzkow and Emir Kamenica

American Economic Review, May 2016

Rothschild and Stiglitz (1970) represent random variables as convex functions (integrals of the cumulative distribution function). Combining this representation with Blackwell's Theorem (1953), we characterize distributions of posterior means that can be ...

Globalization and U.S. Wages: Modifying Classic Theory to Explain Recent Facts

[Symposium: International Trade]

By Jonathan Haskel, Robert Z. Lawrence, Edward E. Leamer, and Matthew J. Slaughter

Journal of Economic Perspectives, Spring 2012

This paper seeks to review how globalization might explain the recent trends in real and relative wages in the United States. We begin with an overview of what is new during the last 10-15 years in globalization, productivity, and patterns of U.S. earning...

Monetary Policy, Financial Stability, and the Zero Lower Bound

By Stanley Fischer

American Economic Review, May 2016

Much has happened in the world of central banking in the past decade. In this paper, I focus on three issues associated with the zero lower bound (ZLB) on short-term nominal interest rates and the nexus between monetary policy and financial stability: 1) ...

Owner-Occupied Housing and the Composition of the Household Portfolio

By Marjorie Flavin and Takashi Yamashita

American Economic Review, March 2002