How to sample and when to stop sampling: The generalized Wald problem and minimax policies 31 March 2025 Karun AdusumilliWe study sequential experiments where sampling is costly and a decision-maker aims to determine the best treatment for full scale implementation by (1) adaptively allocating units between two possible treatments, and (2) stopping the experiment when the expected welfare (inclusive of sampling costs) from implementing the chosen treatment is maximized. Working under a continuous time limit, we characterize the optimal policies under the minimax regret criterion.
Unemployment insurance reforms and labor market dynamics 20 March 2025 Benjamin Hartung, Philip Jung, and Moritz KuhnA key question in labor market research is how the unemployment insurance system affects unemployment rates and labor market dynamics. We provide new answers to this old question by studying one of the largest unemployment insurance reforms in recent decades, the German Hartz reforms. On average, lower separation rates into unemployment account for 76% of declining unemployment after the reform, a fact unexplained by existing research focusing on job-finding rates.
‘Bad’ Oil, ‘Worse’ Oil and Carbon Misallocation 10 March 2025 Renaud Coulomb, Fanny Henriet, and Léo ReitzmannNot all barrels of oil are created equal: their extraction varies in both private cost and carbon intensity. Leveraging a comprehensive micro-dataset on world oil fields, alongside detailed estimates of carbon intensities and private extraction costs, this study quantifies the additional emissions and costs from having extracted the ’wrong’ deposits. We do so by comparing historical deposit-level supplies to counterfactuals that factor in pollution costs, while keeping annual global consumption unchanged.
Global Value Chains and Trade Policy 3 March 2025 Emily J. Blanchard, Chad P. Bown, and Robert C. JohnsonHow do global value chain (GVC) linkages modify countries’ incentives to impose import protection? Are these linkages important determinants of trade policy in practice? We develop a new approach to modeling tariff setting with GVCs, in which optimal policy depends on the nationality of value-added content embedded in home and foreign final goods.
Identification and Inference in First-Price Auctions with Risk Averse Bidders and Selective Entry 3 March 2025 Xiaohong Chen, Matthew Gentry, Tong Li, and Jingfeng LuWe study identification and inference in first-price auctions with risk averse bidders and selective entry, building on a flexible framework we call the Affiliated Signal with Risk Aversion (AS-RA) model. Assuming exogenous variation in either the number of potential bidders (N) or a continuous instrument (z) shifting opportunity costs of entry, we provide a sharp characterization of the nonparametric restrictions implied by equilibrium bidding. This characterization implies that risk neutrality is nonparametrically testable.
Institutions, Comparative Advantage, and the Environment 21 February 2025 Joseph S. ShapiroThis paper proposes that strong institutions provide comparative advantage in clean industries, and thereby improve a country’s environmental quality. I study financial, judicial, and labor market institutions. Five complementary tests evaluate and assess implications of this hypothesis. First, industries that depend on institutions are clean. Second, strong institutions increase relative exports in clean industries. Third, an industry’s complexity helps explain the link between institutions and clean goods.
A Network Formation Model Based on Subgraphs 21 February 2025 Arun G. Chandrasekhar and Matthew O. JacksonWe develop a new class of random graph models for the statistical estimation of network formation—subgraph generated models (SUGMs). Various subgraphs—e.g., links, triangles, cliques, stars—are generated and their union results in a network. We show that SUGMs are identified and establish the consistency and asymptotic distribution of parameter estimators in empirically relevant cases. We show that a simple four-parameter SUGM matches basic patterns in empirical networks more closely than four standard models (with many more dimensions).
Simultaneous Search and Adverse Selection 21 February 2025 Sarah Auster, Piero Gottardi, and Ronald WolthoffWe study the effect of diminishing search frictions in markets with adverse selection by presenting a model in which agents with private information can simultaneously contact multiple trading partners. We highlight a new trade-off: facilitating contacts reduces coordination frictions but also the ability to screen agents’ types. We find that, when agents can contact sufficiently many trading partners, fully separating equilibria obtain only if adverse selection is sufficiently severe. When this condition fails, equilibria feature partial pooling and multiple equilibria co-exist.
