Empirical Investigation of a Sufficient Statistic for Monetary Shocks 5 August 2024 Fernando Alvarez, Andrea Ferrara, Erwan Gautier, Hervé Le Bihan, and Francesco LippiIn 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 5 August 2024 Marco Tabellini and Giacomo MagistrettiIn 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 5 August 2024 Mohammad Akbarpour, Julien Combe, YingHua He, Victor Hiller, Robert Shimer, and Olivier TercieuxFor 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 25 July 2024 Christopher Blattman, Gustavo Duncan, Benjamin Lessing, and Santiago TobónCriminal 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 12 July 2024 Juliana Londoño-Vélez and Javier Ávila-MahechaWe 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 12 July 2024 Marcin Kacperczyk, Jaromir Nosal, and Savitar SundaresanWe 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 1 July 2024 Stephane Auray, Michael B Devereux, and Aurelien EyquemThis 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.
Optimal Pricing of a New Utility Service: The Case of Piped Water in Vietnam 24 June 2024 Quy-Toan Do and Hanan G. JacobyAs utility services expand throughout the developing world, providers must grapple with how to set prices to recover average costs. Data from a multi-year randomized pricing experiment among nearly 1500 recently-connected piped water customers in Vietnam reveal month-to-month demand persistence. Based on structural demand estimation, we document how endogenous preferences, if unaccounted for, can lead to low take-up and thereby threaten the financial viability of the new water utility.
