Risk-Sensitive Consumption and Savings under Rational Inattention

By Yulei Luo and Eric R. Young

American Economic Journal: Macroeconomics, October 2010

This paper studies the consumption-savings behavior of households who have risk-sensitive preferences and suffer from limited information-processing capacity (rational inattention or RI). We first solve the model explicitly and show that RI increases prec...

Industrial Policy in an Export-Propelled Economy: Lessons from South Korea's Experience

[Symposium: The State and Economic Development]

By Larry E. Westphal

Journal of Economic Perspectives, Summer 1990

Korea provides an illuminating case of state intervention to promote economic development. Like many other third world governments, Korea's government has selectively intervened to affect the allocation of resources among industrial activities. It has use...

Weak Identification in Maximum Likelihood: A Question of Information

By Isaiah Andrews and Anna Mikusheva

American Economic Review, May 2014

In this paper we connect the discrepancy between two estimates of Fisher information, one based on the quadratic variation of the score and the other based on the negative Hessian of the log-likelihood, to weak identification. Classical asymptotic approxi...

Empirical Strategies in Contract Economics: Information and the Boundary of the Firm

By George Baker and Thomas N. Hubbard

American Economic Review, May 2001

The Interest Rate, Learning, and Inventory Investment

By Louis J. Maccini, Bartholomew J. Moore, and Huntley Schaller

American Economic Review, December 2004

This paper presents a model that provides an explanation, based on regime switching in the real interest rate and learning, of why tests based on stock adjustment models, Euler equations, or decision rules—which emphasize short-run fluctuations in inven...

Average Earnings and Long-Term Mortality: Evidence from Administrative Data

By Daniel Sullivan and Till von Wachter

American Economic Review, May 2009

Property Rights to Technical Knowledge in Premodern Europe, 1300 -1800

By Stephan R. Epstein

American Economic Review, May 2004

Institutions and Democratic Invention in 19th-Century America: Evidence from "Great Inventors," 1790-1930

By Zorina Khan and Kenneth L. Sokoloff

American Economic Review, May 2004

Design Choices in Privatized Social-Security Systems: Learning from the Swedish Experience

By Henrik Cronqvist and Richard H. Thaler

American Economic Review, May 2004

Persuasion in Politics

By Kevin M. Murphy and Andrei Shleifer

American Economic Review, May 2004

Identifying the Effects of the Americans with Disabilities Act Using State-Law Variation: Preliminary Evidence on Educational Participation Effects

By Christine Jolls

American Economic Review, May 2004

Why Barriers to Entry Are Barriers to Understanding

By Dennis W. Carlton

American Economic Review, May 2004

Risk and Volatility: Econometric Models and Financial Practice

By Robert Engle

American Economic Review, June 2004

Liquidity, Efficiency, and Bank Bailouts

By Gary Gorton and Lixin Huang

American Economic Review, June 2004

Governments can efficiently provide liquidity, as when the banking system is bailed out. We study a model in which not all assets can be used to purchase all other assets at every date. Agents sometimes want to sell projects. The market price of the proje...

Irreversible Decisions and Record-Setting News Principles

By Svetlana Boyarchenko

American Economic Review, June 2004

In the now-classical real options theory, the price of an underlying asset is modeled as a geometric Brownian motion, and optimal exercise strategies are described by simple explicit formulas. This paper extends the classical theory to allow any geometric...

Labor and the Market Value of the Firm

By Monika Merz and Eran Yashiv

American Economic Review, September 2007

What role does labor play in firms' market value? We use a production-based asset pricing model with factor adjustment costs and forward-looking agents to explore this question. We posit that the hiring of labor is akin to investment in capital and that t...

Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages

By Beata Smarzynska Javorcik

American Economic Review, June 2004

Many countries strive to attract foreign direct investment (FDI) hoping that knowledge brought by multinationals will spill over to domestic industries and increase their productivity. In contrast with earlier literature that failed to find positive intra...

Pareto-Improving Campaign Finance Policy

By Stephen Coate

American Economic Review, June 2004

This paper argues that campaign finance policy, in the form of contribution limits and matching public financing, can be Pareto improving even under very optimistic assumptions concerning the role of campaign advertising and the rationality of voters. The...

Workers' Education, Spillovers, and Productivity: Evidence from Plant-Level Production Functions

By Enrico Moretti

American Economic Review, June 2004

I assess the magnitude of human capital spillovers by estimating production functions using a unique firm-worker matched data set. Productivity of plants in cities that experience large increases in the share of college graduates rises more than the produ...

Is There a Politically Optimal Level of Judicial Independence?

By F. Andrew Hanssen

American Economic Review, June 2004

Independent courts render current policy more durable (by raising the cost of future policy changes) but may also engage in policy-making of their own. This paper asks: Is there an optimal level of judicial independence from the perspective of incumbent o...