Informality and Development

[Symposium: Classic Ideas in Development]

By Rafael La Porta and Andrei Shleifer

Journal of Economic Perspectives, Summer 2014

In developing countries, informal firms account for up to half of economic activity. They provide livelihood for billions of people. Yet their role in economic development remains controversial with some viewing informality as pent-up potential and others...

Tax Compliance and Loss Aversion

By Per Engström, Katarina Nordblom, Henry Ohlsson, and Annika Persson

American Economic Journal: Economic Policy, November 2015

We study if taxpayers are loss averse when filing returns. Preliminary deficits might be viewed as losses assuming zero preliminary balances as reference points. Swedish taxpayers can to try to escape such losses by claiming deductions after receiving inf...

Does Wage Persistence Matter for Employment Fluctuations? Evidence from Displaced Workers

By Johannes F. Schmieder and Till von Wachter

American Economic Journal: Applied Economics, July 2010

Previous literature has found that tight labor market conditions during a job raise wages. Using the Displaced Worker Survey from 1984 to 2006, we show that wage gains associated with good labor market conditions disappear at job loss. We also find that ...

Human Capital Investment and the Gender Division of Labor in a Brawn-Based Economy

By Mark M. Pitt, Mark R. Rosenzweig, and Mohammad Nazmul Hassan

American Economic Review, December 2012

A model of human capital investment and activity choice is used to explain facts describing gender differentials in the levels and returns to human capital investments and occupational choice. These include the higher return to and level of schooling, the...

In the Right Place at the Wrong Time: The Role of Firms and Luck in Young Workers' Careers

By Till von Wachter and Stefan Bender

American Economic Review, December 2006

We examine administrative data on young German workers and their employers to study the long-term effects of an early career job loss. To account for nonrandom sorting of workers into firms with different turnover rates and for selective job mobility, ...

Understanding Productivity: Lessons from Longitudinal Microdata

By Eric J. Bartelsman and Mark Doms

Journal of Economic Literature, September 2000

This paper reviews research that uses longitudinal microdata to document productivity movements and to examine factors behind productivity growth. The research explores the dispersion of productivity across firms and establishments, the persistence of pro...

The Role of Bequests in Shaping Wealth Inequality: Evidence from Danish Wealth Records

By Simon H. Boserup, Wojciech Kopczuk, and Claus T. Kreiner

American Economic Review, May 2016

Using Danish administrative data, we estimate the impact of bequests on the level and inequality of wealth. We compare the distributions of wealth over time of people whose parent died and those whose parent did not. Bequests account for 26 percent of the...

International Competition and Inflation: A New Keynesian Perspective

By Luca Guerrieri, Christopher Gust, and J. David López-Salido

American Economic Journal: Macroeconomics, October 2010

We develop and estimate an open economy New Keynesian Phillips Curve (NKPC) in which variable demand elasticities give rise to movements in desired markups in response to changes in competitive pressure from abroad. A parametric restriction yields the sta...

Heterogeneity and Aggregation: Implications for Labor-Market Fluctuations: Comment

By Shuhei Takahashi

American Economic Review, April 2014

Chang and Kim (2007) develop an incomplete asset markets model incorporating discrete labor supply and idiosyncratic labor productivity. Their results resolve long-standing puzzles for business cycle models. Specifically, they produce a low correlation...

Financial Instability, Reserves, and Central Bank Swap Lines in the Panic of 2008

By Maurice Obstfeld, Jay C. Shambaugh, and Alan M. Taylor

American Economic Review, May 2009

Importers, Exporters, and Exchange Rate Disconnect

By Mary Amiti, Oleg Itskhoki, and Jozef Konings

American Economic Review, July 2014

Large exporters are simultaneously large importers. We show that this pattern is key to understanding low aggregate exchange rate pass-through as well as the variation in pass-through across exporters. We develop a theoretical framework with variable mark...

Choice Inconsistencies among the Elderly: Evidence from Plan Choice in the Medicare Part D Program

By Jason Abaluck and Jonathan Gruber

American Economic Review, June 2011

We evaluate the choices of elders across their insurance options under the Medicare Part D Prescription Drug plan, using a unique dataset of prescription drug claims matched to information on the characteristics of choice sets. We document that elders ...

Returns to Education: Evidence from U.K. Twins

By Dorothe Bonjour, Lynn F. Cherkas, Jonathan E. Haskel, Denise D. Hawkes, and Tim D. Spector

American Economic Review, December 2003

Risk Preferences Are Not Time Preferences

By James Andreoni and Charles Sprenger

American Economic Review, December 2012

Risk and time are intertwined. The present is known while the future is inherently risky. This is problematic when studying time preferences since uncontrolled risk can generate apparently present-biased behavior. We systematically manipulate risk in a...

Regional Effects of Trade Reform: What Is the Correct Measure of Liberalization?

By Brian K. Kovak

American Economic Review, August 2013

A growing body of research examines the regional effects of trade liberalization using a weighted average of trade policy changes across industries. This paper develops a specific-factors model of regional economies that provides a theoretical foundation ...

Consumption and Labor Supply with Partial Insurance: An Analytical Framework

By Jonathan Heathcote, Kjetil Storesletten, and Giovanni L. Violante

American Economic Review, July 2014

We develop a model with partial insurance against idiosyncratic wage shocks to quantify risk sharing. Closed-form solutions are obtained for equilibrium allocations and for moments of the joint distribution of consumption, hours, and wages. We prove ident...

Misclassification Errors and the Underestimation of the US Unemployment Rate

By Shuaizhang Feng and Yingyao Hu

American Economic Review, April 2013

Using recent results in the measurement error literature, we show that the official US unemployment rate substantially underestimates the true level of unemployment, due to misclassification errors in the labor force status in the Current Population Surve...

Overborrowing and Systemic Externalities in the Business Cycle

By Javier Bianchi

American Economic Review, December 2011

Credit constraints linking debt to market-determined prices embody a systemic credit externality that drives a wedge between competitive and constrained socially optimal equilibria, inducing private agents to overborrow. This externality arises because pr...

Policy Watch: Did Nasdaq Market Makers Implicitly Collude?

By William G. Christie and Paul H. Schultz

Journal of Economic Perspectives, Summer 1995

This paper chronicles the research that led to the conclusion that Nasdaq marketmakers implicitly colluded to maintain supracompetitive spreads (Christie and Schultz, 1994). The paper provides a brief description of the differences between a dealer and an...

Competition in Multi-sided Markets: Divide and Conquer

By Bruno Jullien

American Economic Journal: Microeconomics, November 2011

This paper studies Stackelberg price competition in a multi-sided market. The second-mover can engage in divide-and-conquer strategies, which involve cross-subsidies between sides. The paper recovers bounds on profits, and refines the results with a selec...