NewDemand Shocks as Technology Shocks 9 June 2025 Yan Bai, José-Víctor Ríos-Rull, and Kjetil StoreslettenWe provide a macroeconomic theory where demand for goods has a productive role. A search friction prevents perfect matching between producers and potential customers. Larger demand induces more search, which in turn increases GDP and measured TFP. We embed the product-market friction in a standard neoclassical model and estimate it using Bayesian techniques.
NewPseudo Lindahl Equilibrium as a Collective Choice Rule 8 June 2025 Faruk Gul and Wolfgang PesendorferA collective choice problem specifies a finite set of alternatives from which a group of expected utility maximizers must choose. We associate a collective pseudo market with every collective choice problem and establish the existence and efficiency of pseudo Lindahl equilibrium (PLE) allocations. We also associate a cooperative bargaining problem with every collective choice problem and define a set-valued solution concept, the ω-weighted Nash bargaining set where ω is a vector of welfare weights. We provide axioms that characterize the ω-weighted Nash bargaining set.
NewSurviving Childhood: Effects of Removing a Child From Home 8 June 2025 Ronja HelénsdotterThis paper studies the effects of the court-ordered removal of children from home on health, crime, and education. To isolate causal effects, I exploit quasi-random variation in judge assignment together with across-judge variation in the tendency to favor removal in an instrumental variable (IV) design. Using a novel data set (N=26,579) based on Swedish court documents that I transcribe and link with detailed register data, I find that court-ordered out-of-home placement has large adverse effects on the mortality of the marginal child.
NewGood Dispersion, Bad Dispersion 8 June 2025 Matthias Kehrig and Nicolas VincentWe document that most dispersion in marginal revenue products of inputs occurs across plants within firms rather than between firms. This is commonly thought to reflect misallocation: dispersion is “bad.” However, we show that eliminating frictions hampering internal capital markets in a multi-plant firm model may in fact increase productivity dispersion and raise output: dispersion can be “good.” This arises as firms optimally stagger investment activity across their plants over time to avoid raising costly external finance, instead relying on reallocating internal funds.
NewPublic Listing Choice with Persistent Hidden Information 24 May 2025 Francesco Celentano and Mark RempelHow much does firm intangibility amplify CEOs’ persistent private information and reduce firms’ public listing propensity? We develop a model of competing public and private investors financing firms heterogeneously exposed to persistent private cash flows. Equilibrium financing is driven by information rent differentials in CEO compensation. We validate and structurally estimate the model using firm listing and CEO compensation data.
NewHiring as Exploration 24 May 2025 Danielle Li, Lindsey Raymond, and Peter BergmanThis paper views hiring as a contextual bandit problem: to find the best workers over time, firms must balance “exploitation” (selecting from groups with proven track records) with “exploration” (selecting from under-represented groups to learn about quality). Yet modern hiring algorithms, based on supervised learning approaches, are designed solely for exploitation. Instead, we build a resume screening algorithm that values exploration by evaluating candidates according to their statistical upside potential.
NewComplexity and Satisficing: Theory with Evidence from Chess 24 May 2025 Yuval Salant and Jörg L. SpenkuchWe develop a satisficing model of choice in which the available alternatives differ in their inherent complexity. We assume—and experimentally validate—that complexity leads to errors in the perception of alternatives’ values. The model yields sharp predictions about the effect of complexity on choice probabilities, some of which qualitatively contrast with those of maximization-based choice models.
NewExtreme Categories and Overreaction to News 18 May 2025 Spencer Kwon and Johnny TangWhat characteristics of news generate over-or-underreaction? We study the asset-pricing consequences of diagnostic expectations, a model of belief formation based on the representativeness heuristic, in a setting where news events are drawn from categories with extreme distributions of fundamentals. Our model predicts greater over-reaction to news belonging to categories with more extreme outliers, or tail events. We test our theory on a comprehensive database of corporate news that includes news from 24 different categories, including earnings announcements, product launches, M&A, business expansions, and client-related news.
