Labor Market Power

By David Berger, Kyle Herkenhoff, and Simon Mongey

American Economic Review, April 2022

We develop, estimate, and test a tractable general equilibrium model of oligopsony with differentiated jobs and concentrated labor markets. We estimate key model parameters by matching new evidence on the relationship between firms' local labor market sha...

Measuring Geopolitical Risk

By Dario Caldara and Matteo Iacoviello

American Economic Review, April 2022

We present a news-based measure of adverse geopolitical events and associated risks. The geopolitical risk (GPR) index spikes around the two world wars, at the beginning of the Korean War, during the Cuban Missile Crisis, and after 9/11. Higher geopolitic...

Self-Persuasion: Evidence from Field Experiments at International Debating Competitions

By Peter Schwardmann, Egon Tripodi, and Joël J. van der Weele

American Economic Review, April 2022

Laboratory evidence shows that when people have to argue for a given position, they persuade themselves about the position's factual and moral superiority. Such self-persuasion limits the potential of communication to resolve conflict and reduce polarizat...

Public Procurement in Law and Practice

By Erica Bosio, Simeon Djankov, Edward Glaeser, and Andrei Shleifer

American Economic Review, April 2022

We examine a new dataset of public procurement laws, practice, and outcomes in 187 countries. We measure regulation as restrictions on the discretion of the procuring entities. We find that laws and practice are highly correlated with each other across co...

Does Context Outweigh Individual Characteristics in Driving Voting Behavior? Evidence from Relocations within the United States

By Enrico Cantoni and Vincent Pons

American Economic Review, April 2022

We measure the overall influence of contextual versus individual factors (e.g., voting rules and media as opposed to race and education) on voter behavior, and explore underlying mechanisms. Using a US-wide voter-level panel, 2008–2018, we examine voter...

Dynamic Price Competition, Learning-by-Doing, and Strategic Buyers

By Andrew Sweeting, Dun Jia, Shen Hui, and Xinlu Yao

American Economic Review, April 2022

We examine how strategic buyer behavior affects equilibrium outcomes in a model of dynamic price competition where sellers benefit from learning-by-doing by allowing each buyer to expect to capture a share of future buyer surplus. Many equilibria that exi...

Wetlands, Flooding, and the Clean Water Act

By Charles A. Taylor and Hannah Druckenmiller

American Economic Review, April 2022

In 2020 the Environmental Protection Agency narrowed the definition of "waters of the United States," significantly limiting wetland protection under the Clean Water Act. Current policy debates center on the uncertainty around wetland benefits. We estimat...

Selling Consumer Data for Profit: Optimal Market-Segmentation Design and Its Consequences

By Kai Hao Yang

American Economic Review, April 2022

A data broker sells market segmentations to a producer with private cost who sells a product to a unit mass of consumers. This paper characterizes the revenue-maximizing mechanisms for the data broker. Every optimal mechanism induces quasi-perfect price d...

Front Matter

American Economic Journal: Macroeconomics, April 2022

High Marginal Tax Rates on the Top 1 Percent? Lessons from a Life-Cycle Model with Idiosyncratic Income Risk

By Fabian Kindermann and Dirk Krueger

American Economic Journal: Macroeconomics, April 2022

This paper argues that high marginal labor income tax rates on top earners are an effective tool for social insurance even when households have high labor supply elasticity, households make dynamic savings decisions, and policies have general equilibrium ...

Credit Spreads, Financial Crises, and Macroprudential Policy

By Ozge Akinci and Albert Queralto

American Economic Journal: Macroeconomics, April 2022

Credit spreads display occasional spikes and are more strongly countercyclical in times of elevated financial stress. Financial crises are extreme cases of this nonlinear behavior, featuring skyrocketing credit spreads, sharp losses in bank equity, and de...

Income Differences, Productivity, and Input-Output Networks

By Harald Fadinger, Christian Ghiglino, and Mariya Teteryatnikova

American Economic Journal: Macroeconomics, April 2022

We study the importance of input-output (IO) linkages and sectoral productivity (TFP) in determining cross-country income differences. We find that while highly connected sectors are more productive than the typical sector in poor countries, the opposite ...

Optimal Currency Areas with Labor Market Frictions

By Rohan Kekre

American Economic Journal: Macroeconomics, April 2022

I study efficiency and optimal monetary policy in a two-country monetary union with frictional labor markets. With heterogeneity in labor market frictions, the constrained efficient allocation generically cannot be achieved even if productivity shocks aff...

Skewed Idiosyncratic Income Risk over the Business Cycle: Sources and Insurance

By Christopher Busch, David Domeij, Fatih Guvenen, and Rocio Madera

American Economic Journal: Macroeconomics, April 2022

We provide new evidence on business cycle fluctuations in skewed labor income risk in the United States, Germany, Sweden, and France. We document four results. First, in all countries, the skewness of individual income growth is strongly procyclical, wher...

Sectoral Heterogeneity and Monetary Policy

By Jonathan Kreamer

American Economic Journal: Macroeconomics, April 2022

Since sectors differ in their sensitivity to interest rates, monetary policy produces inefficient sectoral fluctuations. In a model with sectoral heterogeneity, I show that policymakers should weight sectors proportionally to their interest elasticities, ...

Does Consumption Respond to Transitory Shocks? Reconciling Natural Experiments and Semistructural Methods

By Jeanne Commault

American Economic Journal: Macroeconomics, April 2022

Studies based on natural experiments find that consumption responds strongly and significantly to a transitory variation in income, while semistructural estimations find no pass-through of transitory shocks to consumption. I develop a more robust semistru...

A Theory of Structural Change That Can Fit the Data

By Simon Alder, Timo Boppart, and Andreas Müller

American Economic Journal: Macroeconomics, April 2022

We study structural change in the historical consumption expenditure of the United States, the United Kingdom, Canada, and Australia over more than a century. We characterize the most general class of preferences in a time-additive setting that admits agg...

Pigouvian Cycles

By Renato Faccini and Leonardo Melosi

American Economic Journal: Macroeconomics, April 2022

Current and expected unemployment rates contain information that is highly useful to estimate the effect of news about TFP and to allow a general equilibrium rational expectations model to generate Pigouvian cycles: a large fraction of the comovement of o...

Asset Price Booms and Macroeconomic Policy: A Risk-Shifting Approach

By Franklin Allen, Gadi Barlevy, and Douglas Gale

American Economic Journal: Macroeconomics, April 2022

This paper uses a risk-shifting model to analyze policy responses to asset price booms. We show risk shifting leads to inefficient asset and credit booms in which asset prices can exceed fundamentals. However, the inefficiencies associated with risk shift...

Entry Barriers, Idiosyncratic Distortions, and the Firm Size Distribution

By Roberto N. Fattal-Jaef

American Economic Journal: Macroeconomics, April 2022

This paper studies the interaction between barriers to firm entry and distortions to allocative efficiency in a standard model of firm dynamics. We derive a strategy to infer entry barriers based on cross-country differences in the firm size distribution ...