Contracting with Heterogeneous Externalities

By Shai Bernstein and Eyal Winter

American Economic Journal: Microeconomics, May 2012

We model situations in which a principal offers contracts to a group of agents to participate in a project. Agents' benefits from participation depend on the identity of other participating agents. We assume heterogeneous externalities and characterize th...

Trust, Reciprocity, and Favors in Cooperative Relationships

By Atila Abdulkadiroğlu and Kyle Bagwell

American Economic Journal: Microeconomics, May 2013

We study trust, reciprocity, and favors in a repeated trust game with private information. In our main analysis, players are willing to exhibit trust and thereby facilitate cooperative gains only if such behavior is regarded as a favor that must be rec...

Evaluating Welfare Reform Waivers under Section 1115

By Carol Harvey, Michael J. Camasso, and Radha Jagannathan

Journal of Economic Perspectives, Fall 2000

Beginning in 1962, Section 1115 of the Social Security Act allowed the U.S. Secretary of Health and Human Services to waive specific provisions of the act within individual states, allowing them to implement welfare experiments or demonstration projects t...

Giving Mom a Break: The Impact of Higher EITC Payments on Maternal Health

By William N. Evans and Craig L. Garthwaite

American Economic Journal: Economic Policy, May 2014

The 1993 expansions of the Earned Income Tax Credit created the first meaningful separation in benefits between families containing two or more children and those with only one child. If income is protective of health, we should see improvements over t...

Firm-Level Dispersion in Productivity: Is the Devil in the Details?

By Lucia Foster, Cheryl Grim, John Haltiwanger, and Zoltan Wolf

American Economic Review, May 2016

We explore current interpretations of firm-level dispersion in revenue-based productivity measures. Since revenue function estimates using proxy methods differ from factor elasticities, the residual emerging from this method remains a combination of deman...

Housing, Health, and Happiness

By Matias D. Cattaneo, Sebastian Galiani, Paul J. Gertler, Sebastian Martinez, and Rocio Titiunik

American Economic Journal: Economic Policy, February 2009

We investigate the impact of a large-scale Mexican program to replace dirt floors with cement floors on child health and adult happiness. We find that replacing dirt floors with cement significantly improves the health of young children measured by dec...

Testing the General Validity of the Heckscher-Ohlin Theorem

By Daniel M. Bernhofen and John C. Brown

American Economic Journal: Microeconomics, November 2016

We exploit Japan's mid-nineteenth century transition from autarky to open trade to test Alan Deardorff's (1982) seminal and parsimonious autarky price formulation of the Heckscher-Ohlin theorem. Factor price data from Japan's late autarky period impose a ...

Tax Morale

[Symposium: Tax Enforcement and Compliance]

By Erzo F. P. Luttmer and Monica Singhal

Journal of Economic Perspectives, Fall 2014

There is an apparent disconnect between much of the academic literature on tax compliance and the administration of tax policy. In the benchmark economic model, the key policy parameters affecting tax evasion are the tax rate, the detection probability, a...

Dividend and Corporate Taxation in an Agency Model of the Firm

By Raj Chetty and Emmanuel Saez

American Economic Journal: Economic Policy, August 2010

Recent evidence on the effect of dividend taxes on firm behavior is inconsistent with neoclassical theories of dividend and corporate taxation. We develop a simple agency model in which managers and shareholders have conflicting interests to explain the e...

Hedge Funds: Past, Present, and Future

By René M. Stulz

Journal of Economic Perspectives, Spring 2007

Assets managed by hedge funds have grown faster over the last ten years than assets managed by mutual funds. Hedge funds and mutual funds perform the same economic function, but hedge funds are largely unregulated while mutual funds are tightly regulated....

Innovation, Trade, and Finance

By Peter Egger and Christian Keuschnigg

American Economic Journal: Microeconomics, May 2015

Heterogeneous firms invest in R&D and expansion investment. Venture capital specializes in R&D financing where problems are largest. Marginal firms get funded by venture capital, while firms with larger debt capacity obtain cheaper bank financing. In the ...

The Tax Gradient: Spatial Aspects of Fiscal Competition

By David R. Agrawal

American Economic Journal: Economic Policy, May 2015

State borders create a discontinuous tax treatment of retail sales. In a Nash game, local tax rates will be higher on the low state tax side of a border. Local taxes will decrease from the nearest high-tax border and increase from the low-tax border. Usin...

Nudging Farmers to Use Fertilizer: Theory and Experimental Evidence from Kenya

By Esther Duflo, Michael Kremer, and Jonathan Robinson

American Economic Review, October 2011

We model farmers as facing small fixed costs of purchasing fertilizer and assume some are stochastically present biased and not fully sophisticated about this bias. Such farmers may procrastinate, postponing fertilizer purchases until later periods, when ...

Implementation Details for Frequent Batch Auctions: Slowing Down Markets to the Blink of an Eye

By Eric Budish, Peter Cramton, and John Shim

American Economic Review, May 2014

Our recent research (Budish, Cramton, and Shim 2013) proposes frequent batch auctions—uniform-price sealed-bid double auctions conducted at frequent but discrete time intervals—as a market design alternative to continuous-time trading in finan...

Report of the Editor: American Economic Review

By Robert A. Moffitt

American Economic Review, May 2010

Coordinated Admissions Program

By Rodney J. Andrews

American Economic Review, May 2016

In the wake of challenges to affirmative action, access to oversubscribed elite public universities remains a contentious issue. Much of the research on these issues focuses on freshman admissions. This paper examines the University of Texas at Austin's C...

The Information-Technology Revolution and the Stock Market: Evidence

By Bart Hobijn and Boyan Jovanovic

American Economic Review, December 2001

Why did the stock market decline so much in the early 1970s and remain low until the early 1980s? We argue that it was because information technology arrived on the scene and the stock-market incumbents of the day were not ready to implement it. Instead, ...

A New Approach to Estimating the Production Function for Housing

By Dennis Epple, Brett Gordon, and Holger Sieg

American Economic Review, June 2010

Dating to the classic works of Alonso, Mills, and Muth, the production function for housing has played a central role in urban economics and local public finance. This paper provides a new flexible approach for estimating the housing production function ...

Runs on Money Market Mutual Funds

By Lawrence Schmidt, Allan Timmermann, and Russ Wermers

American Economic Review, September 2016

We study daily money market mutual fund flows at the individual share class level during September 2008. This fine granularity of data allows new insights into investor and portfolio holding characteristics conducive to run risk in cash-like asset pools. ...

Tradeoffs from Integrating Diagnosis and Treatment in Markets for Health Care

By Christopher C. Afendulis and Daniel P. Kessler

American Economic Review, June 2007

To identify the important tradeoffs in consulting a single expert for both diagnosis and treatment, we examine the costs and health outcomes of elderly Medicare beneficiaries with coronary artery disease. We compare the empirical consequences of diagnosis...