Accepted Papers

New

Capital Requirements with Non-Bank Finance

16 July 2025

Kyle Dempsey

I quantitatively analyze the macroeconomic impacts of raising capital requirements in a model in which heterogeneous firms may choose either intermediated or direct finance. Heterogeneous banks compete with other banks and the bond market, fund loans with insured deposits and costly equity (subject to a minimum capital to asset ratio), and monitor borrowers. I find that tighter capital requirements reduce costly bank failures while having only small effects on key macroeconomic aggregates, and that raising capital requirements above current levels can be welfare-improving.

New

The Micro and Macro Effects of Changes in the Potential Benefit Duration

13 July 2025

Jonas Jessen, Robin Jessen, Ewa Gałecka-Burdziak, Marek Góra, and Jochen Kluve

We quantify micro and macro effects of changes in the potential benefit duration (PBD) in unemployment insurance. In Poland, the PBD is 12 months for the newly unemployed if the previous year’s county unemployment rate is more than 150% of the national average, and 6 months otherwise. We exploit this cut-off using regression discontinuity estimates on registry data containing the universe of unemployed from 2005 to 2019.

New

Does Tax-Benefit Linkage Matter for the Incidence of Payroll Taxes?

13 July 2025

Antoine Bozio, Thomas Breda, Julien Grenet, and Arthur Guillouzouic

We analyze earnings responses to six large payroll tax and income tax reforms in France. Our findings indicate full pass-through to workers when there is a strong and transparent link between contributions and expected benefits. In contrast, employer payroll taxes with no tax-benefit linkage exhibit limited pass-through to workers, while income tax nominally borne by employees show nearly full pass-through.

New

A Tale of Two Networks: Common Ownership and Product Market Rivalry

13 July 2025

Florian Ederer and Bruno Pellegrino

We study the welfare implications of the rise of common ownership in the United States from 1995 to 2021. We build a general equilibrium model with a hedonic demand system in which firms compete in a network game of oligopoly. Firms are connected through two large networks: the first reflects ownership overlap, the second product market rivalry. In our model, common ownership of competing firms induces unilateral incentives to soften competition and the magnitude of the common ownership effect depends on how much the two networks overlap.

New

Counterfactual Identification and Latent Space Enumeration in Discrete Outcome Models

13 July 2025

Jiaying Gu, Thomas M. Russell, and Thomas Stringham

This paper provides a unified framework for studying the identification of counterfactual parameters in a general class of discrete outcome models, allowing for endogenous regressors and multidimensional latent variables, all without parametric distributional assumptions. Our main theoretical result is that, when the covariates are discrete, the infinite-dimensional latent variable distribution can be replaced with a finite-dimensional version that is equivalent from an identification perspective.

Quantifying the Benefits of Labor Mobility in a Currency Union

29 June 2025

Christopher L. House, Christian Proebsting, and Linda L. Tesar

Unemployment differentials are greater between countries in the euro area than between U.S. states. In both regions, net migration responds to unemployment differentials, though the response is smaller in the euro area compared to the United States. We use a multi-country DSGE model with cross-border migration to quantify Mundell’s hypothesis that labor mobility could substitute for independent monetary policy in a currency union.

Endogenous clustering and analogy-based expectation equilibrium

26 June 2025

Philippe Jehiel and Giacomo Weber

Normal-form two-player games are categorized by players into K analogy classes so as to minimize the prediction error about the behavior of the opponent. This results in Clustered Analogy-Based Expectation Equilibria in which strategies are analogy-based expectation equilibria given the analogy partitions and analogy partitions minimize the prediction errors given the strategies.

Bargaining Foundations for the Outside Option Principle

26 June 2025

Dilip Abreu and Mihai Manea

We study a bargaining game in which a seller can trade with one of two buyers, who have values h and l (h > l). The outside option principle (OOP) predicts that the seller trades with the high-value buyer with probability converging to 1 at a price converging to max(h/2, l) as players become patient. While this prediction is supported by the Markov perfect equilibrium (MPE), a wide range of trading outcomes may emerge in subgame perfect equilibria (SPEs): in the patient limit, the seller can obtain any price in the interval [h/2, h] (and no other); moreover, allocative inefficiency and costly delay are possible.