Accepted Papers

The Review of Economic Studies is one of the most highly respected academic journals in the field of economics. It is known for publishing leading research in all areas of economics, from microeconomics to macroeconomics. The journal is published by the Oxford University Press.

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The Lifetime Costs of Bad Health

Mariacristina De Nardi, Svetlana Pashchenko, and Ponpoje Porapakkarm

What generates the observed differences in economic outcomes by health? How costly it is to be unhealthy? We show that health dynamics are largely driven by ex-ante fixed heterogeneity, or health types, even when controlling for one’s past health history. In fact, health types are the key driver of long spells of bad health. We incorporate these rich health dynamics in an estimated structural model and show that health types and their correlation with other fixed characteristics are important to account for the observed gap in economic outcomes by health.

Empirical Investigation of a Sufficient Statistic for Monetary Shocks

Fernando Alvarez, Andrea Ferrara, Erwan Gautier, Hervé Le Bihan, and Francesco Lippi

In a broad class of sticky-price models the non-neutrality of nominal shocks is captured by a simple sufficient statistic: the ratio of the kurtosis of the price change distribution over the frequency of price changes. We test the sufficient statistic proposition using data for a large sample of products representative of the French economy. We first extend the theory to allow for empirically relevant monetary shocks with a transitory predictable component. We then use the micro data to measure kurtosis and frequency for about 120 PPI industries and 220 CPI categories.

Economic Integration and the Transmission of Democracy

Marco Tabellini and Giacomo Magistretti

In this paper, we study the effects of economic integration with democratic partners on democracy. We assemble a large country-level panel dataset from 1960 to 2015, and exploit improvements in air, relative to sea, transportation to derive a time-varying instrument for economic integration. We find that economic integration with democracies increases countries’ democracy scores, whereas the impact of economic integration with non-democracies is muted. Results are stronger when democratic partners have a longer history of democracy, grow faster, spend more on public goods, are culturally closer, and export higher quality goods.

Unpaired Kidney Exchange: Overcoming Double Coincidence of Wants without Money

Mohammad Akbarpour, Julien Combe, YingHua He, Victor Hiller, Robert Shimer, and Olivier Tercieux

For an incompatible patient-donor pair, kidney exchanges often forbid receipt-before-donation (the patient receives a kidney before the donor donates) and donation-before-receipt, causing a double-coincidence-of-wants problem. We study an algorithm, the Unpaired kidney exchange algorithm, which eliminates this problem. In a dynamic matching model, we show that the waiting time of patients under Unpaired is close to optimal and substantially shorter than under widely-used algorithms.

Gang rule: Understanding and countering criminal governance

Christopher Blattman, Gustavo Duncan, Benjamin Lessing, and Santiago Tobón

Criminal groups govern millions worldwide. Even in strong states, gangs resolve disputes and provide security. Why do these duopolies of coercion emerge? Often, gangs fill vacuums of official power, suggesting that increasing state presence should crowd out criminal governance. We show, however, that state and gang rule are sometimes complements. In particular, gangs could minimize seizures and arrests by keeping neighborhoods orderly and loyal.

Behavioral Responses to Wealth Taxation: Evidence from Colombia

Juliana Londoño-Vélez and Javier Ávila-Mahecha

We study behavioral responses to personal wealth taxes in Colombia. We utilize tax microdata from 1993 to 2016 linked with the leaked Panama Papers to investigate offshoring to the country’s key tax havens. We leverage variation from discrete jumps in tax liability and four major reforms to the wealth tax system, including changes in tax rates and duration, using bunching and difference-in-difference techniques. We find compelling evidence that taxpayers instantly reduce the wealth they declare in response to a wealth tax.

Market Power and Price Informativeness

Marcin Kacperczyk, Jaromir Nosal, and Savitar Sundaresan

We study the distributional effects of asset ownership on price informativeness in a general equilibrium model. The model features investors (oligopolists) with different degrees of price impact and abilities to learn about individual asset payoffs from private and price signals, and a competitive fringe that only learns from asset prices. We show that price informativeness is non-monotonic in the oligopolists’ aggregate size, decreasing in the sector’s concentration and in the size of the passive sector.

Trade Wars, Nominal Rigidities and Monetary Policy

Stephane Auray, Michael B Devereux, and Aurelien Eyquem

This paper shows that the outcome of trade wars for tariffs and welfare will be affected by the monetary policy regime. The key message is that trade policy interacts with monetary policy in a way that magnifies the welfare costs of discretionary monetary policy in an international setting. If countries follow monetary policies of flexible inflation targeting, trade wars are relatively mild, with low equilibrium tariffs and small welfare costs.

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