Three Principles for Market-Based Credit Regulation

By Perry Mehrling

American Economic Review, May 2012

A key lesson of the financial crisis 2007-09 is that the Bagehot Rule, "lend freely but at a high rate," needs to be updated for the emerging market-based credit system. A modern rule is suggested: Markets, not Banks; Outside spread, not Inside spread;...

Does the EITC Buffer against Neighborhood Transition? Evidence from Washington, DC

By LaTanya Brown-Robertson, Marcus Casey, Bradley Hardy, and Daniel Muhammad

American Economic Review, May 2016

Gentrification in major cities has led to concerns that poor and nonwhite residents are being displaced. This paper uses administrative data on tax filing households in Washington DC to examine the potential role that increases in the Earned Income Tax Cr...

Taxes, Cigarette Consumption, and Smoking Intensity: Reply

By Jérôme Adda and Francesca Cornaglia

American Economic Review, December 2013

This paper shows that smoking intensity, i.e. the amount of nicotine extracted per cigarette smoked, responds to changes in excise taxes and tobacco prices. We exploit NHANES data covering the period 1988 to 2006 across many US states. Moreover, using ...

Mood-Driven Behavior in Strategic Interactions

By Mónica C. Capra

American Economic Review, May 2004

Distinguished Lecture on Economics in Government: Fighting Poverty: Lessons from Recent U.S. History

By Rebecca M. Blank

Journal of Economic Perspectives, Spring 2000

Welfare reform efforts in the 1990s aimed at reducing welfare dependence and moving women into work. Public assistance use fell and labor force participation among mothers rose at a stunning rate over the decade. Poverty declined, but at a slower rate. Th...

Designing Matching Mechanisms under General Distributional Constraints

By Masahiro Goto, Fuhito Kojima, Ryoji Kurata, Akihisa Tamura, and Makoto Yokoo

American Economic Journal: Microeconomics, May 2017

To handle various applications, we study matching under constraints. The only requirement on the constraints is heredity; given a feasible matching, any matching with fewer students at each school is also feasible. Heredity subsumes existing constraints s...

Migration, Remittances, and Agricultural Productivity in China

By Scott Rozelle, J. Edward Taylor, and Alan deBrauw

American Economic Review, May 1999

Medicare Part D and Portfolio Choice

By Padmaja Ayyagari and Daifeng He

American Economic Review, May 2016

Economic theory suggests that medical spending risk affects the extent to which households are willing to accept financial risk, and consequently their investment portfolios. In this study, we focus on the elderly for whom medical spending represents a su...

Too Far Away? The Effect of Distance to Headquarters on Business Establishment Performance

By Arturs Kalnins and Francine Lafontaine

American Economic Journal: Microeconomics, August 2013

In the population of over 1.7 million Texan sales-tax collecting business establishments, we show that greater distance to owner headquarters is associated with shorter establishment longevity. For the lodging industry, where we have revenue data, inc...

The Market for Evaluations

By Christopher Avery, Paul Resnick, and Richard Zeckhauser

American Economic Review, June 1999

Recent developments in computer networks have driven the cost of distributing information virtually to zero, creating extraordinary opportunities for sharing product evaluations. The authors present pricing and subsidy mechanisms that operate through a co...

Private Monitoring and Communication in Cartels: Explaining Recent Collusive Practices

By Joseph E. Harrington and Andrzej Skrzypacz

American Economic Review, October 2011

Motivated by recent cartel practices, a stable collusive agreement is characterized when firms' prices and quantities are private information. Conditions are derived whereby an equilibrium exists in which firms truthfully report their sales and then make ...

What Does Human Capital Do? A Review of Goldin and Katz's The Race between Education and Technology

By Daron Acemoglu and David Autor

Journal of Economic Literature, June 2012

Goldin and Katz's The Race between Education and Technology is a monumental achievement that supplies a unified framework for interpreting how the demand and supply of human capital have shaped the distribution of earnings in the U.S. labor market over t...

Heterogeneity, Demand for Insurance, and Adverse Selection

By Johannes Spinnewijn

American Economic Journal: Economic Policy, February 2017

Recent evidence underlines the importance of demand frictions distorting insurance choices. Heterogeneous frictions cause the willingness to pay for insurance to be biased upward (relative to value) for those purchasing insurance, but downward for those w...

Mnemonomics: The Sunk Cost Fallacy as a Memory Kludge

By Sandeep Baliga and Jeffrey C. Ely

American Economic Journal: Microeconomics, November 2011

We offer a theory of the sunk cost fallacy as an optimal response to limited memory. As new information arrives, a decision-maker may not remember all the reasons he began a project. The sunk cost gives additional information about future profits and info...

Shifts in US Federal Reserve Goals and Tactics for Monetary Policy: A Role for Penitence?

[Symposium: The First 100 Years of the Federal Reserve]

By Julio J. Rotemberg

Journal of Economic Perspectives, Fall 2013

This paper considers some of the large changes in the Federal Reserve's approach to monetary policy. It shows that, in some important cases, critics who were successful in arguing that past Fed approaches were responsible for mistakes that caused harm ...

The Big One: A Review of Richard Posner's Catastrophe: Risk and Response

By Edward A. Parson

Journal of Economic Literature, March 2007

Richard Posner's Catastrophe: Risk and Response (Oxford University Press, 2004) examines four risks whose worst cases could end advanced human civilization or worse: asteroid impacts, a catastrophic chain reaction initiated in high-energy particle ...

Beggar-Thy-Neighbor Effects of Exchange Rates: A Study of the Renminbi

By Aaditya Mattoo, Prachi Mishra, and Arvind Subramanian

American Economic Journal: Economic Policy, November 2017

This paper estimates the effect of China's exchange rate changes on exports of developing countries in third markets. The degree of competition between China and its developing country competitors in specific products and destinations plays a key role in ...

Uncertainty and Trade Agreements

By Nuno Limão and Giovanni Maggi

American Economic Journal: Microeconomics, November 2015

We explore conditions under which trade agreements can provide gains by reducing trade policy uncertainty. Given the degree of income risk aversion, this is more likely when economies are more open, export supply elasticities are lower, and economies more...

Information Choice Technologies

By Christian Hellwig, Sebastian Kohls, and Laura Veldkamp

American Economic Review, May 2012

Theories based on information costs or frictions have become increasing popular in macroeconomics and macro-finance. The literature has used various types of information choices, such as rational inattention, inattentiveness, information markets and costl...

Does the Market for Women's Labor Need Fixing?

[Symposium: Women in the Labor Market]

By Barbara R. Bergmann

Journal of Economic Perspectives, Winter 1989

I will start by reviewing the evidence that discrimination against women is currently serious and has important consequences for their pay and status. Some of this evidence is of a variety that economists do not commonly examine or take account of. On the...