NewRacial Discrimination and the Social Contract: Evidence from U.S. Army Enlistment during WWII 18 May 2025 Nancy Qian and Marco TabelliniThis paper documents that the Pearl Harbor attack triggered a sharp increase in volunteer enlistment rates of American men, the magnitude of the increase was smaller for Black men than for white men and the Black-white gap was larger in counties with higher levels of racial discrimination. The results suggest that political exclusion and discrimination can undermine support for the government during critical times such as war.
NewCascades and Fluctuations in an Economy with an Endogenous Production Network 18 May 2025 Mathieu Taschereau-DumouchelThis paper studies the efficient allocation in an economy in which firms are connected through input-output linkages and must pay a fixed cost to produce. When economic conditions are poor, some firms might decide not to operate, thereby severing the links with their neighbors and changing the structure of the production network. Since producers benefit from having access to additional suppliers, nearby firms tend to operate, or not, together. As a result, the production network features clusters of operating firms, and the exit of a producer can create a cascade of firm shutdowns.
NewThe Economics and Econometrics of Gene – Environment Interplay 11 May 2025 Pietro Biroli, Titus Galama, Stephanie von Hinke, Hans van Kippersluis, Cornelius A. Rietveld, and Kevin ThomWe discuss how to estimate the interplay between genes (nature) and environments (nurture), with an empirical illustration of the moderating effect of school-starting age on one’s genetic predisposition towards educational attainment. We argue that gene–environment (G × E) studies can be instrumental for (i) assessing treatment effect heterogeneity, (ii) testing theoretical predictions, and (iii) uncovering mechanisms, thereby improving understanding of how (policy) interventions affect population subgroups.
NewA Q-theory of Banks 11 May 2025 Juliane Begenau, Saki Bigio, Jeremy Majerovitz, and Matias VieyraBank capital requirements are based on book values, which are slow to reflect losses. In this paper, we develop a dynamic model of banks to study the interaction of regulation and delayed accounting. Our model explains four stylized facts: book and market values diverge during crises, the market-to-book ratio predicts future profitability, book leverage constraints rarely bind strictly even as market leverage fans out during crises, and banks delever gradually after net-worth shocks.
NewPareto Improvements in the Contest for College Admissions 7 May 2025 Kala Krishna, Sergey Lychagin, Wojciech Olszewski, Ron Siegel, and Chloe TergimanMany countries base college admissions on a centrally-administered test. Students invest a great deal of resources to improve their performance on the test, and there is growing concern about the high costs associated with these activities. We consider modifying the test by introducing performance-disclosure policies that pool intervals of performance rankings. Pooling affects the equilibrium allocation of students to colleges, which hurts some students and benefits others, but also affects students’ effort.
NewHow Important Is Health Inequality for Lifetime Earnings Inequality? 5 May 2025 Roozbeh Hosseini, Karen Kopecky, and Kai ZhaoUsing a dynamic panel approach, we provide empirical evidence that negative health shocks significantly reduce earnings. The effect is primarily driven by the participation margin and is concentrated among the less educated and those in poor health. Next, we develop a life cycle model of labor supply featuring risky and heterogeneous frailty profiles that affect individuals’ productivity, likelihood of access to social insurance, disutility from work, mortality, and medical expenses.
NewEfficient Conservation of the Brazilian Amazon: Estimates from a Dynamic Model 5 May 2025 Rafael Araujo, Francisco Costa, and Marcelo Sant'AnnaThis paper estimates the Brazilian Amazon’s carbon-efficient forest cover – i.e. when farmers internalize the social cost of carbon. We propose a dynamic discrete choice land-use model and estimate it using a panel of land use and carbon stock of 5.7 billion pixels between 2008 and 2017. The business-as-usual scenario implies an inefficient release of 42 billion tons of CO2 in the long run resulting from the deforestation of an area twice the size of France.
