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Who Bears the Welfare Costs of Monopoly? The Case of the Credit Card Industry

Kyle Herkenhoff and Gajendran Raveendranathan

We measure the distribution of welfare losses from non-competitive behavior in the U.S. credit card industry during the 1970s and 1980s. The early credit card industry was characterized by regional monopolies. Ensuing legal decisions led to competitive reforms that resulted in greater, but still limited, oligopolistic competition. We measure the distributional consequences of these reforms by developing and estimating a heterogeneous agent, defaultable debt framework with oligopolistic lenders.

Moment Conditions for Dynamic Panel Logit Models with Fixed Effects

Bo Honore and Martin Weidner

This paper investigates the construction of moment conditions in discrete choice panel data with individual specific fixed effects. We describe how to systematically explore the existence of moment conditions that do not depend on the fixed effects, and we demonstrate how to construct them when they exist. Our approach is closely related to the numerical “functional differencing” construction in Bonhomme (2012), but our emphasis is to find explicit analytic expressions for the moment functions.

Wealth Taxation and Household Saving: Evidence from Assessment Discontinuities in Norway

Marius A. K. Ring

Neither theory nor existing empirical evidence support the notion that wealth taxation reduces saving. Theoretically, the effect is ambiguous due to opposing income and substitution effects, and empirically, the effect may be masked by misreporting responses. Using geographic discontinuities in the Norwegian annual net-wealth tax and third-party-reported data on savings, I find that wealth taxation causes households to save more. Each additional NOK of wealth tax increases annual net financial saving by 3.76, implying that households increase saving enough to offset both current and future wealth taxes.

Employer Credit Checks: Poverty Traps versus Matching Efficiency

Dean Corbae and Andrew Glover

We develop a framework to understand pre-employment credit screening as a signal from credit markets that alleviates adverse selection in labor markets. In our theory, people differ in both their propensity to default on debt and the profits they create for firms that employ them; in our calibrated economy, highly productive workers have a low default probability. This leads firms to create more jobs for those with good credit, which creates a poverty trap: an unemployed worker with poor credit has a low job finding rate, but cannot improve her credit without a job.

Rational Expectations Models with Higher-Order Beliefs

Zhen Huo and Naoki Takayama

We develop a method of solving rational expectations models with dispersed information and dynamic strategic complementarities. In these types of models, the equilibrium outcome hinges on an infinite number of higher-order expectations which require an increasing number of state variables to keep track of. Despite this complication, we prove that the equilibrium outcome always admits a finite-state representation when the signals follow finite ARMA processes.

Direct and Indirect Effects of Subsidized Dual Apprenticeships

Bruno Crépon and Patrick Premand

Public interventions in the apprenticeship market often aim to increase demand or returns. We set up a double-sided experiment with youth and firms to analyze a subsidized dual apprenticeship program. This intervention seeks to relax financial constraints for youth by offering a wage subsidy and to make apprenticeship more attractive by providing vocational training in technical skills to complement on-the-job training. We document a large increase in youth participation in apprenticeship, yet the inflow of apprentices induces little crowding out of traditional apprentices in firms.

Looming Large or Seeming Small? Attitudes Towards Losses in a Representative Sample

Jonathan Chapman, Erik Snowberg, Stephanie Wang, and Colin Camerer

We measure individual-level loss aversion using three incentivized, representative surveys of the U.S. population (combined N = 3,000). We find that around 50% of the U.S. population is loss tolerant – they are willing to accept negative-expected-value gambles that contain a loss. This is counter to expert predictions and earlier findings which mostly come from lab/student samples that 70-90% of participants are loss averse. Consistent with the different findings in our study versus the prior literature, loss aversion is more prevalent in people with high cognitive ability. Further, our measure of gain-loss attitudes exhibits similar temporal stability and better predictive power outside our survey than measures of risk aversion.

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Recently accepted to #REStud, ``Public Listing Choice with Persistent Hidden Information," from Celentano and Rempel:

https://www.restud.com/public-listing-choice-with-persistent-hidden-information/

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@danielle__li @LindseyRRay & @peterbergman_ show that incorporating exploration into an interview screening algorithm improves demographic diversity & hiring efficiency, while traditional supervised learning-only tools improve hiring rates at the expense of minority applicants.👇

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The recent paper by Salant and @jspenkuch offers a blueprint for incorporating complexity at the level of individual objects into models of choice and for detecting satisficing outside of the laboratory.

https://www.restud.com/complexity-and-satisficing-theory-with-evidence-from-chess/

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Recently accepted to #REStud, ``Extreme Categories and Overreaction to News," from Kwon and @JohnnyJTang:

https://www.restud.com/extreme-categories-and-overreaction-to-news/

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