Posts

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.

Optimal Pricing of a New Utility Service: The Case of Piped Water in Vietnam

Quy-Toan Do and Hanan G. Jacoby

As 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.

Excess Capacity and Demand Driven Business Cycles

Tiancheng Sun

I build a macroeconomic model that features chronic excess capacity. Firms can use capacity to compete for buyers who are not fully attentive to prices. If one firm expands capacity while other firms do not, it “steals” or attracts profitable demand from others. Theoretically, I show that this capacity competition can cause an over-accumulation of capacity. In the presence of chronic excess capacity, capital resources can be slack, and demand shocks can have large effects on output.

A Structural Analysis of Mental Health and Labor Market Trajectories

Gregory Jolivet and Fabien Postel-Vinay

We analyze the joint life-cycle dynamics of labor market and mental health outcomes while allowing for two-way interactions between work and mental health. We model selection into jobs on a labor market with search frictions, accounting for the level of exposure to stress in each job using data on occupational health contents. Taking our model to British data from Understanding Society combined with information from O*NET, we estimate the impact of job characteristics on health dynamics and the effects of health and job stress contents on career choices.

Feedback and Learning: The Causal Effects of Reversals on Judicial Decision-Making

Manudeep Bhuller and Henrik Sigstad

Do judges respond to reversals of their decisions? Using random assignment of cases across two stages of the criminal justice system in Norway and a novel dataset linking trial court decisions to reversals in appeals courts, we provide causal evidence on feedback effects in judicial decision-making. By exploiting differences in the tendencies of randomly assigned appeal panels to reverse trial court decisions, we show that trial court judges who receive a reversal of a sentence respond by updating the likelihood of imposing a prison sentence in the direction of the reversal in future cases.

Imagining the Future: Memory, Simulation, and Beliefs

Pedro Bordalo, Giovanni Burro, Katherine Cofmann, Nicola Gennaioli, and Andrei Shleifer

How do people form beliefs about novel risks, with which they have little or no experience? Motivated by survey data on beliefs about Covid we collected in 2020, we build a model based on the psychology of selective memory. When a person thinks about an event, different experiences compete for retrieval, and retrieved experiences are used to simulate the event based on how similar they are to it. The model predicts that different experiences interfere with each other in recall and that non domain-specific experiences can bias beliefs based on their similarity to the assessed event.

Convicting Corrupt Officials: Evidence from Randomly Assigned Cases

Sebastian Axbard

Can the judiciary help root out government corruption? This paper exploits the random assignment of court cases to justices who exhibit varying degrees of strictness to examine how convicting corrupt officials affects local government outcomes in the Philippines. I document that convictions improve the management of local public finances and reduce associated corruption. An exploration of mechanisms suggests that legal deterrence effects contribute to these findings.

Stock Market Participation, Inequality, and Monetary Policy

Davide Melcangi and Vincent Sterk

Recent literature has shown that the fraction of liquidity-constrained households in the population critically determines the mix of transmission channels of monetary policy. In this paper, we bring a different but important dimension of heterogeneity to the forefront: stock market participation. We show that the stock market participation rate not only shapes the mix of policy channels, but also heavily affects the aggregate responses.

Follow us

The Review of Economic Studies Follow

The official account of the Review of Economic Studies, one of the world's top economics journals.

RevEconStudies

"New study finds salary benchmarking cuts pay gaps by 25%. Pay dispersion partly arises from firms’ uncertainty about market rates, with key implications for pay transparency policy."

New paper from @pereztruglia, @zoebcullen, @ShengwuLi:

https://www.restud.com/whats-my-employee-worth-the-effects-of-salary-benchmarking/

#econtwitter

Reply on Twitter 1968264633686560917 Retweet on Twitter 1968264633686560917 1 Like on Twitter 1968264633686560917 13 Twitter 1968264633686560917

"Competition via repo contracts resolves the lemons problem! A closed-form solution
for the unique pooling equilibrium explains why markets feature high haircuts and
low repo rates."

New paper from @SakiBigio & @liyan_shi:

https://www.restud.com/repurchase-options-in-the-market-for-lemons/

#econtwitter
#REStud

Reply on Twitter 1968259737650446683 Retweet on Twitter 1968259737650446683 Like on Twitter 1968259737650446683 5 Twitter 1968259737650446683

"Wars disrupt supply chains, but firms adapt by reorganizing them. The 2014 war cut
Ukraine’s output in nonconflict areas by 5.5%, with one-third mitigated by link
reorganization."

New paper from @KorovkinVasily, @alexeymakarin & @MiyauchiYuhei:

https://www.restud.com/supply-chain-disruption-and-reorganization-theory-and-evidence-from-ukraines-war/
#REStud

Reply on Twitter 1968257548605440431 Retweet on Twitter 1968257548605440431 7 Like on Twitter 1968257548605440431 20 Twitter 1968257548605440431

Recently accepted to #REStud, "Normalizations and misspecification in skill formation models," from Joachim Freyberger:

https://www.restud.com/normalizations-and-misspecification-in-skill-formation-models/

Reply on Twitter 1966215956834693494 Retweet on Twitter 1966215956834693494 3 Like on Twitter 1966215956834693494 21 Twitter 1966215956834693494
Load More