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

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.

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

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.

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Counterfactual Identification and Latent Space Enumeration in Discrete Outcome Models

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.

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Quantifying the Benefits of Labor Mobility in a Currency Union

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.

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Bargaining Foundations for the Outside Option Principle

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.

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Search Direction: Position Externalities and Position Auction Bias

Simon P. Anderson and Régis Renault

We formulate a tractable model of pricing under directed search with heterogeneous firm demands. Demand characteristics drive bids in a position auction and enable us to bridge insights from the ordered search literature to those in the position auction literature. Equilibrium pricing implies that the marginal consumer’s surplus decreases down the search order, so consumers optimally follow the firms’ position ordering. A firm suffers from “business stealing” by firms that precede it and “search appeal” from subsequent firms.

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Recently accepted to #REStud, "Estimating Welfare Effects in a Nonparametric Choice Model: The Case of School Vouchers," from Kamat and Norris:

https://www.restud.com/estimating-welfare-effects-in-a-nonparametric-choice-model-the-case-of-school-vouchers/

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Recently accepted to #REStud, "Bewley Banks," from Jamilov @RustamJamilov and Monacelli @monacelt:

https://www.restud.com/bewley-banks/

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"How large are the costs of regulating banks? This paper shows that raising capital requirements have small effects when banks compete with lenders outside the traditional sector."

New paper from Kyle Dempsey @KyleDempsey1:

https://www.restud.com/capital-requirements-with-non-bank-finance/

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#REStud

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"What is the effect of extending unemployment benefits on unemployment? How relevant are different channels for the total effect: search effort, separations and spill-over?"

From Jonas Jessen, @robinjessen, Gałecka-Burdziak, Góra & Kluve:

https://www.restud.com/the-micro-and-macro-effects-of-changes-in-the-potential-benefit-duration/

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