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Drilling Deadlines and Oil and Gas Development Econometrica (IF 6.1) Pub Date : 2024-01-30 Evan Herrnstadt, Ryan Kellogg, Eric Lewis
Oil and gas leases between mineral owners and extraction firms typically specify a date by which the firm must either drill a well or lose the lease. These deadlines are known as primary terms. Using data from the Louisiana shale boom, we first show that well drilling is substantially bunched just before the primary term deadline. This bunching is not necessarily surplus-reducing: using an estimated
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Learning in Repeated Interactions on Networks Econometrica (IF 6.1) Pub Date : 2024-01-30 Wanying Huang, Philipp Strack, Omer Tamuz
We study how long-lived, rational agents learn in a social network. In every period, after observing the past actions of his neighbors, each agent receives a private signal, and chooses an action whose payoff depends only on the state. Since equilibrium actions depend on higher-order beliefs, it is difficult to characterize behavior. Nevertheless, we show that regardless of the size and shape of the
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Can Restorative Justice Conferencing Reduce Recidivism? Evidence From the Make-it-Right Program Econometrica (IF 6.1) Pub Date : 2024-01-30 Yotam Shem-Tov, Steven Raphael, Alissa Skog
This paper studies the effect of a restorative justice intervention targeted at 143 youth ages 13 to 17 facing felony charges of medium severity (e.g., burglary, assault). Eligible youths were randomly assigned to participate in the Make-it-Right (MIR) restorative justice program or a control group where they faced standard criminal prosecution. We estimate the effects of MIR on the likelihood that
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Designing Disability Insurance Reforms: Tightening Eligibility Rules or Reducing Benefits? Econometrica (IF 6.1) Pub Date : 2024-01-30 Andreas Haller, Stefan Staubli, Josef Zweimüller
This paper develops a sufficient statistics framework for analyzing the welfare effects of disability insurance (DI). We derive social-optimality conditions for the two main DI policy parameters: (i) eligibility rules and (ii) benefit levels. Applying this framework to two restrictive DI reforms in Austria, we find that tighter DI eligibility rules triggered higher fiscal cost savings and lower insurance
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Do not Blame Bellman: It Is Koopmans' Fault Econometrica (IF 6.1) Pub Date : 2024-01-30 Gaetano Bloise, Cuong Le Van, Yiannis Vailakis
We provide a unified approach to stochastic dynamic programming with recursive utility based on an elementary application of Tarski's fixed point theorem. We establish that the exclusive source of multiple values is the presence of multiple recursive utilities consistent with the given aggregator, each yielding a legitimate value of the recursive program. We also present sufficient conditions ensuring
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“Near” Weighted Utilitarian Characterizations of Pareto Optima Econometrica (IF 6.1) Pub Date : 2024-01-30 Yeon-Koo Che, Jinwoo Kim, Fuhito Kojima, Christopher Thomas Ryan
We give two characterizations of Pareto optimality via “near” weighted utilitarian welfare maximization. One characterization sequentially maximizes utilitarian welfare functions using a finite sequence of nonnegative and eventually positive welfare weights. The other maximizes a utilitarian welfare function with a certain class of positive hyperreal weights. The social welfare ordering represented
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A Comment on: “Expected Uncertain Utility” Econometrica (IF 6.1) Pub Date : 2024-01-30 Simon Grant, Sh. L. Liu, Jingni Yang
1 Introduction In an innovative paper, replete with many important results and insights, Gul and Pesendorfer (2014) (hereafter, GP) proposed a novel model for choice under uncertainty. They considered a setting of purely subjective uncertainty in which the objects of choice are acts that, for each state of nature , deliver a monetary prize x from a set of final prizes , with . We denote the set of
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Presidential Address: Demand-Side Constraints in Development. The Role of Market Size, Trade, and (In)Equality Econometrica (IF 6.1) Pub Date : 2023-12-07 Pinelopi Koujianou Goldberg, Tristan Reed
What is the pathway to development in a world marked by rising economic nationalism and less international integration? This paper answers this question within a framework that emphasizes the role of demand-side constraints on national development, which is identified with sustained poverty reduction. In this framework, development is linked to the adoption of an increasing returns to scale technology
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Rethinking the Welfare State Econometrica (IF 6.1) Pub Date : 2023-12-07 Nezih Guner, Remzi Kaygusuz, Gustavo Ventura
The United States spends significant amounts on non-medical transfers for its working-age population in a wide range of programs that support low- and middle-income households. How valuable are these programs for U.S. households? Are there simpler, welfare-improving ways to transfer resources that are supported by a majority? What are the macroeconomic effects of such alternatives? We answer these
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Algorithmic Mechanism Design With Investment Econometrica (IF 6.1) Pub Date : 2023-12-07 Mohammad Akbarpour, Scott Duke Kominers, Kevin Michael Li, Shengwu Li, Paul Milgrom
We study the investment incentives created by truthful mechanisms that allocate resources using approximation algorithms. Some approximation algorithms guarantee nearly 100% of the optimal welfare in the allocation problem but guarantee nothing when accounting for investment incentives. An algorithm's allocative and investment guarantees coincide if and only if its confirming negative externalities
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Price Setting With Strategic Complementarities as a Mean Field Game Econometrica (IF 6.1) Pub Date : 2023-12-07 Fernando Alvarez, Francesco Lippi, Panagiotis Souganidis
We study the propagation of monetary shocks in a sticky-price general equilibrium economy where the firms' pricing strategy features a complementarity with the decisions of other firms. In a dynamic equilibrium, the firm's price-setting decisions depend on aggregates, which in turn depend on the firms' decisions. We cast this fixed-point problem as a Mean Field Game and prove several analytic results
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An Adversarial Approach to Structural Estimation Econometrica (IF 6.1) Pub Date : 2023-12-07 Tetsuya Kaji, Elena Manresa, Guillaume Pouliot
We propose a new simulation-based estimation method, adversarial estimation, for structural models. The estimator is formulated as the solution to a minimax problem between a generator (which generates simulated observations using the structural model) and a discriminator (which classifies whether an observation is simulated). The discriminator maximizes the accuracy of its classification while the
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The Cross-Sectional Implications of the Social Discount Rate Econometrica (IF 6.1) Pub Date : 2023-12-07 Maya Eden
In this paper, I consider two normative questions: (1) how should policymakers approach tradeoffs that involve different age groups, and (2) at what rate should policymakers discount the consumption of future generations? I demonstrate that, under standard assumptions, these two questions are equivalent: caring more about the future means caring less about the elderly. Even small differences between
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Tail Risk in Production Networks Econometrica (IF 6.1) Pub Date : 2023-12-07 Ian Dew-Becker
This paper describes the response of the economy to large shocks in a nonlinear production network. A sector's tail centrality measures how a large negative shock transmits to GDP, that is, the systemic risk of the sector. Tail centrality is theoretically and empirically very different from local centrality measures such as sales share—in a benchmark case, it is measured as a sector's average downstream
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Same Root Different Leaves: Time Series and Cross-Sectional Methods in Panel Data Econometrica (IF 6.1) Pub Date : 2023-12-07 Dennis Shen, Peng Ding, Jasjeet Sekhon, Bin Yu
One dominant approach to evaluate the causal effect of a treatment is through panel data analysis, whereby the behaviors of multiple units are observed over time. The information across time and units motivates two general approaches: (i) horizontal regression (i.e., unconfoundedness), which exploits time series patterns, and (ii) vertical regression (e.g., synthetic controls), which exploits cross-sectional
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Estimation Based on Nearest Neighbor Matching: From Density Ratio to Average Treatment Effect Econometrica (IF 6.1) Pub Date : 2023-12-07 Zhexiao Lin, Peng Ding, Fang Han
Nearest neighbor (NN) matching is widely used in observational studies for causal effects. Abadie and Imbens (2006) provided the first large-sample analysis of NN matching. Their theory focuses on the case with the number of NNs, M fixed. We reveal something new out of their study and show that once allowing M to diverge with the sample size an intrinsic statistic in their analysis constitutes a consistent
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Urban Growth and Its Aggregate Implications Econometrica (IF 6.1) Pub Date : 2023-12-07 Gilles Duranton, Diego Puga
We develop an urban growth model where human capital spillovers foster entrepreneurship and learning in heterogeneous cities. Incumbent residents limit city expansion through planning regulations so that commuting and housing costs do not outweigh productivity gains from agglomeration. The model builds on strong microfoundations, matches key regularities at the city and economy-wide levels, and generates
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Mixed Strategies in the Indefinitely Repeated Prisoner's Dilemma Econometrica (IF 6.1) Pub Date : 2023-12-07 Julian Romero, Yaroslav Rosokha
Identifying the strategies that are played is critical to understanding behavior in repeated games. This process is difficult because only choices (not strategies) are observable. Recently, a debate has emerged regarding whether subjects play mixed strategies in the indefinitely repeated prisoner's dilemma. We use an experimental approach to elicit mixed strategies from human subjects, thereby providing
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Intertemporal Hedging and Trade in Repeated Games With Recursive Utility Econometrica (IF 6.1) Pub Date : 2023-12-07 Asen Kochov, Yangwei Song
Two key features distinguish the general class of recursive preferences from the standard model of dynamic choice: (i) agents may care about the intertemporal distribution of risk, and (ii) their rates of time preference, rather than being fixed, may vary with the level of consumption. We investigate what these features imply in the context of a repeated strategic interaction. First, we show that opportunities
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Corporate Tax Cuts and the Decline in the Manufacturing Labor Share Econometrica (IF 6.1) Pub Date : 2023-12-07 Barış Kaymak, Immo Schott
We document a strong empirical connection between corporate taxation and the manufacturing labor share, both in the US and across OECD countries. Our estimates associate 30 to 60% of the observed decline in labor shares with the fall in corporate taxation. Using an equilibrium model of an industry where firms differ in their capital intensities, we show that lower corporate tax rates reduce the labor
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The Anatomy of Sorting—Evidence From Danish Data Econometrica (IF 6.1) Pub Date : 2023-12-07 Rasmus Lentz, Suphanit Piyapromdee, Jean-Marc Robin
In this paper, we formulate and estimate a flexible model of job mobility and wages with two-sided heterogeneity. The analysis extends the finite mixture approach of Bonhomme, Lamadon, and Manresa (2019) and Abowd, McKinney, and Schmutte (2019) to develop a new Classification Expectation-Maximization algorithm that ensures both worker and firm latent-type identification using wage and mobility variations
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A Comment on: “Low Interest Rates, Market Power, and Productivity Growth” Econometrica (IF 6.1) Pub Date : 2023-12-07 Craig A. Chikis, Jonathan Goldberg, David López-Salido
Using an endogenous growth model, Liu, Mian, and Sufi (2022) (LMS) show that a decline in the interest rate can lead to a fall in productivity growth and a rise in leader-laggard productivity gaps and firm profits. We identify two issues in their quantitative analysis of transition dynamics: a time-scale error and the omission of composition terms in calculating productivity growth along the transition
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Mitigating Disaster Risks in the Age of Climate Change Econometrica (IF 6.1) Pub Date : 2023-10-03 Harrison Hong, Neng Wang, Jinqiang Yang
Emissions abatement alone cannot address the consequences of global warming for weather disasters. We model how society adapts to manage disaster risks to capital stock. Optimal adaptation—a mix of firm-level efforts and public spending—varies as society learns about the adverse consequences of global warming for disaster arrivals. Taxes on capital are needed alongside those on carbon to achieve the
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A Quantitative Theory of the Credit Score Econometrica (IF 6.1) Pub Date : 2023-10-02 Satyajit Chatterjee, Dean Corbae, Kyle Dempsey, José-Víctor Ríos-Rull
What is the role of credit scores in credit markets? We argue that it is, in part, the market's assessment of a person's unobservable type, which here we take to be patience. We postulate a model of persistent hidden types where observable actions shape the public assessment of a person's type via Bayesian updating. We show how dynamic reputation can incentivize repayment. Importantly, we show how
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The Macro Impact of Short-Termism Econometrica (IF 6.1) Pub Date : 2023-10-03 Stephen J. Terry
R&D investment reduces current profits, so short-term pressure to hit profit targets may distort R&D. In the data, firms just meeting Wall Street forecasts have lower R&D growth and subsequent innovation, while managers just missing receive lower pay. But short-termist distortions might not quantitatively matter if aggregation or equilibrium dampen their impact. So I build and estimate a quantitative
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Regret-Minimizing Project Choice Econometrica (IF 6.1) Pub Date : 2023-10-02 Yingni Guo, Eran Shmaya
An agent observes the set of available projects and proposes some, but not necessarily all, of them. A principal chooses one or none from the proposed set. We solve for a mechanism that minimizes the principal's worst-case regret. We compare the single-project environment in which the agent can propose only one project with the multiproject environment in which he can propose many. In both environments
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Infinite Debt Rollover in Stochastic Economies Econometrica (IF 6.1) Pub Date : 2023-10-03 Narayana R. Kocherlakota
This paper shows that there is more scope for a borrower to engage in a sustainable infinite debt rollover (a “Ponzi scheme”) when interest/growth rates are stochastic. In this context, I prove that the relevant “r vs. g” comparison uses the yield rlong to an infinite-maturity zero-coupon bond. I show that rlong is lower than the risk-neutral expectation of the short-term yield when it is variable
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The Investment Effects of Market Integration: Evidence From Renewable Energy Expansion in Chile Econometrica (IF 6.1) Pub Date : 2023-10-03 Luis E. Gonzales, Koichiro Ito, Mar Reguant
We study the investment effects of market integration on renewable energy expansion. Our theory highlights that market integration not only improves allocative efficiency by gains from trade but also incentivizes new investment in renewable power plants. To test our theoretical predictions, we examine how recent grid expansions in the Chilean electricity market changed electricity production, wholesale
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What Can Time-Series Regressions Tell Us About Policy Counterfactuals? Econometrica (IF 6.1) Pub Date : 2023-10-02 Alisdair McKay, Christian K. Wolf
We show that, in a general family of linearized structural macroeconomic models, knowledge of the empirically estimable causal effects of contemporaneous and news shocks to the prevailing policy rule is sufficient to construct counterfactuals under alternative policy rules. If the researcher is willing to postulate a loss function, our results furthermore allow her to recover an optimal policy rule
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Monitoring versus Discounting in Repeated Games Econometrica (IF 6.1) Pub Date : 2023-10-03 Takuo Sugaya, Alexander Wolitzky
We study how discounting and monitoring jointly determine whether cooperation is possible in repeated games with imperfect (public or private) monitoring. Our main result provides a simple bound on the strength of players' incentives as a function of discounting, monitoring precision, and on-path payoff variance. We show that the bound is tight in the low-discounting/low-monitoring double limit, by
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Platform Design When Sellers Use Pricing Algorithms Econometrica (IF 6.1) Pub Date : 2023-10-03 Justin P. Johnson, Andrew Rhodes, Matthijs Wildenbeest
We investigate the ability of a platform to design its marketplace to promote competition, improve consumer surplus, and increase its own payoff. We consider demand-steering rules that reward firms that cut prices with additional exposure to consumers. We examine the impact of these rules both in theory and by using simulations with artificial intelligence pricing algorithms (specifically Q-learning
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Scaling Auctions as Insurance: A Case Study in Infrastructure Procurement Econometrica (IF 6.1) Pub Date : 2023-08-02 Valentin Bolotnyy, Shoshana Vasserman
Most U.S. government spending on highways and bridges is done through “scaling” procurement auctions, in which private construction firms submit unit price bids for each piece of material required to complete a project. Using data on bridge maintenance projects undertaken by the Massachusetts Department of Transportation (MassDOT), we present evidence that firm bidding behavior in this context is consistent
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A Theory of Simplicity in Games and Mechanism Design Econometrica (IF 6.1) Pub Date : 2023-08-02 Marek Pycia, Peter Troyan
We study extensive-form games and mechanisms allowing agents that plan for only a subset of future decisions they may be called to make (the planning horizon). Agents may update their so-called strategic plan as the game progresses and new decision points enter their planning horizon. We introduce a family of simplicity standards which require that the prescribed action leads to unambiguously better
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Ideology and Performance in Public Organizations Econometrica (IF 6.1) Pub Date : 2023-08-02 Jörg L. Spenkuch, Edoardo Teso, Guo Xu
We combine personnel records of the United States federal bureaucracy from 1997 to 2019 with administrative voter registration data to study how ideological alignment between politicians and bureaucrats affects turnover and performance. We document significant partisan cycles and turnover among political appointees. By contrast, we find no political cycles in the civil service. At any point in time
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The Effect of Macroeconomic Uncertainty on Firm Decisions Econometrica (IF 6.1) Pub Date : 2023-08-02 Saten Kumar, Yuriy Gorodnichenko, Olivier Coibion
Using a new survey of firms in New Zealand, we document how exogenous variation in the macroeconomic uncertainty perceived by firms affects their economic decisions. We use randomized information treatments that provide different types of information about the first and/or second moments of future economic growth to generate exogenous changes in the perceived macroeconomic uncertainty of some firms
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Robust Inference on Infinite and Growing Dimensional Time-Series Regression Econometrica (IF 6.1) Pub Date : 2023-08-02 Abhimanyu Gupta, Myung Hwan Seo
We develop a class of tests for time-series models such as multiple regression with growing dimension, infinite-order autoregression, and nonparametric sieve regression. Examples include the Chow test and general linear restriction tests of growing rank p. Employing such increasing p asymptotics, we introduce a new scale correction to conventional test statistics, which accounts for a high-order long-run
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Dynamic Information Provision: Rewarding the Past and Guiding the Future Econometrica (IF 6.1) Pub Date : 2023-08-02 Ian Ball
I study the optimal provision of information in a long-term relationship between a sender and a receiver. The sender observes a persistent, evolving state and commits to send signals over time to the receiver, who sequentially chooses public actions that affect the welfare of both players. I solve for the sender's optimal policy in closed form: the sender reports the value of the state with a delay
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Testing Hurwicz Expected Utility Econometrica (IF 6.1) Pub Date : 2023-08-02 Han Bleichrodt, Simon Grant, Jingni Yang
Gul and Pesendorfer (2015) propose a promising theory of decision under uncertainty, they dub Hurwicz expected utility (HEU). HEU is a special case of α-maxmin EU that allows for preferences over sources of uncertainty. It is consistent with most of the available empirical evidence on decision under risk and uncertainty. We show that HEU is also tractable and can readily be measured and tested. We
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Networks, Phillips Curves, and Monetary Policy Econometrica (IF 6.1) Pub Date : 2023-08-02 Elisa Rubbo
This paper revisits the New Keynesian framework, theoretically and quantitatively, in an economy with multiple sectors and input-output linkages. Analytical expressions for the Phillips curve and welfare, derived as a function of primitives, show that the slope of all sectoral and aggregate Phillips curves is decreasing in intermediate input shares, while productivity fluctuations endogenously generate
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Sequential Veto Bargaining With Incomplete Information Econometrica (IF 6.1) Pub Date : 2023-08-02 S. Nageeb Ali, Navin Kartik, Andreas Kleiner
We study sequential bargaining between a proposer and a veto player. Both have single-peaked preferences, but the proposer is uncertain about the veto player's ideal point. The proposer cannot commit to future proposals. When players are patient, there can be equilibria with Coasian dynamics: the veto player's private information can largely nullify proposer's bargaining power. Our main result, however
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Equilibrium Effects of Pay Transparency Econometrica (IF 6.1) Pub Date : 2023-05-16 Zoë B. Cullen, Bobak Pakzad-Hurson
The discourse around pay transparency has focused on partial equilibrium effects: how workers rectify pay inequities through informed renegotiation. We investigate how employers respond in equilibrium. We study a model of bargaining under two-sided incomplete information. Our model predicts that transparency reduces the individual bargaining power of workers, leading to lower average wages. A key insight
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Equilibrium Effects of Food Labeling Policies Econometrica (IF 6.1) Pub Date : 2023-05-16 Nano Barahona, Cristóbal Otero, Sebastián Otero
We study a regulation in Chile that mandates warning labels on products whose sugar or caloric concentration exceeds certain thresholds. We show that consumers substitute from labeled to unlabeled products—a pattern mostly driven by products that consumers mistakenly believe to be healthy. On the supply side, we find substantial reformulation of products and bunching at the thresholds. We develop and
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Financial Frictions and the Wealth Distribution Econometrica (IF 6.1) Pub Date : 2023-05-16 Jesús Fernández-Villaverde, Samuel Hurtado, Galo Nuño
We postulate a continuous-time heterogeneous agent model with a financial sector and households to study the nonlinear linkages between aggregate and financial variables. In our model, the interaction between the supply of bonds by the financial sector and the precautionary demand for bonds by households produces significant endogenous aggregate risk. This risk makes the economy transition between
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Searching for Job Security and the Consequences of Job Loss Econometrica (IF 6.1) Pub Date : 2023-05-16 Gregor Jarosch
Job loss comes with large present value earnings losses which elude workhorse models of unemployment and labor market policy. I propose a parsimonious model of a frictional labor market in which jobs differ in terms of unemployment risk and workers search off- and on-the-job. This gives rise to a job ladder with slippery bottom rungs where unemployment spells beget unemployment spells. I allow for
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A Sieve-SMM Estimator for Dynamic Models Econometrica (IF 6.1) Pub Date : 2023-05-16 Jean-Jacques Forneron
This paper proposes a Sieve Simulated Method of Moments (Sieve-SMM) estimator for the parameters and the distribution of the shocks in nonlinear dynamic models where the likelihood and the moments are not tractable. An important concern with SMM, which matches sample with simulated moments, is that a parametric distribution is required. However, economic quantities that depend on this distribution
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Decomposing the Growth of Top Wealth Shares Econometrica (IF 6.1) Pub Date : 2023-05-16 Matthieu Gomez
What drives the dynamics of top wealth inequality? To answer this question, I propose an accounting framework that decomposes the growth of the share of aggregate wealth owned by a top percentile into three terms: a within term, which is the average wealth growth of individuals initially in the top percentile relative to the economy; a between term, which accounts for individuals entering and exiting
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Relational Contracts: Public versus Private Savings Econometrica (IF 6.1) Pub Date : 2023-05-16 Francesc Dilmé, Daniel F. Garrett
Work on relational employment agreements often predicts low payments or termination for poor performance. The possibility of saving can, however, limit the effectiveness of monetary incentives in motivating an employee with diminishing marginal utility for consumption. We study the role of savings and their observability in optimal relational contracts. We focus on the case where players are not too
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Pareto-Improving Tax Reforms and the Earned Income Tax Credit Econometrica (IF 6.1) Pub Date : 2023-05-16 Felix J. Bierbrauer, Pierre C. Boyer, Emanuel Hansen
We develop a new approach for the identification of Pareto-improving tax reforms. This approach yields necessary and sufficient conditions for the existence of Pareto-improving reform directions. A main insight is that “Two brackets are enough”: When the system cannot be improved by altering tax rates in one or two income brackets, then there is no continuous reform direction that is Pareto-improving
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Distributional Synthetic Controls Econometrica (IF 6.1) Pub Date : 2023-05-16 F. F. Gunsilius
The method of synthetic controls is a fundamental tool for evaluating causal effects of policy changes in settings with observational data. In many settings where it is applicable, researchers want to identify causal effects of policy changes on a treated unit at an aggregate level while having access to data at a finer granularity. This article proposes an extension of the synthetic controls estimator
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Unemployment and Endogenous Reallocation Over the Business Cycle Econometrica (IF 6.1) Pub Date : 2023-05-16 Carlos Carrillo-Tudela, Ludo Visschers
This paper studies the extent to which the cyclicality of occupational mobility shapes that of aggregate unemployment and its duration distribution. We document the relation between workers' occupational mobility and unemployment duration over the long run and business cycle. To interpret this evidence, we develop a multisector business cycle model with heterogenous agents. The model is quantitatively
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Online Corrigendum to “Social Media and Protest Participation: Evidence From Russia” Econometrica (IF 6.1) Pub Date : 2023-05-16 Ruben Enikolopov, Alexey Makarin, Maria Petrova
This document corrects an error in the construction of two control variables used in Enikolopov, Makarin, and Petrova (2020). While working on a new project that uses data from Enikolopov, Makarin, and Petrova (2020), it was noticed that the coordinates of 58 out of 625 cities in the sample were incorrect. As a result, two of the control variables used in the paper—spherical distances to Moscow and
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Corrigendum: Long-Term Contracting With Time-Inconsistent Agents Econometrica (IF 6.1) Pub Date : 2023-05-16 Alex Citanna, Daniel Gottlieb, Paolo Siconolfi, Xingtan Zhang
The main result in Gottlieb and Zhang (2021, Theorem 1) showed that in any equilibrium of the game between firms and a time-inconsistent agent, the inefficiency arising from naive present-bias vanishes as the number of periods grows. While this result is correct, the paper failed to note that an equilibrium may not exist. This document corrects this issue and provides general conditions for existence
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Corrigendum: A Preferred-Habitat Model of the Term Structure of Interest Rates Econometrica (IF 6.1) Pub Date : 2023-05-16 Dimitri Vayanos, Jean-Luc Vila
Note: This document contains a list of one typo in the main text and six typos in the online appendix of the article. Each typo is followed by an explanation of why it is only a typo and does not affect the analysis in the article. The main text and online appendix refer to the documents in the journal's website https://www.econometricsociety.org/publications/econometrica/2021/01/01/preferred-habi
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Erratum to “Savage's P3 is Redundant” Econometrica (IF 6.1) Pub Date : 2023-05-16 Gabriel Frahm, Lorenz Hartmann
In Hartmann (2020), the axioms P5 and P6 are incorrectly stated as they do not conform precisely to the original axioms in Savage (1954). Their correct statements are as follows: P5: There exist such that . P6: For with and , there exists a partition of S, , such that for every , With this change, everything in the original paper is correct as written. The axioms P5 and P6 are not needed to show the
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Bidding in Common-Value Auctions With an Unknown Number of Competitors Econometrica (IF 6.1) Pub Date : 2023-03-17 Stephan Lauermann, Andre Speit
This paper studies a first-price common-value auction in which bidders do not know the number of their competitors. In contrast to the case of common-value auctions with a known number of rival bidders, the inference from winning is not monotone, and a “winner's blessing” emerges at low bids. As a result, bidding strategies may not be strictly increasing, but instead may contain atoms. Moreover, an
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Constrained Conditional Moment Restriction Models Econometrica (IF 6.1) Pub Date : 2023-03-17 Victor Chernozhukov, Whitney K. Newey, Andres Santos
Shape restrictions have played a central role in economics as both testable implications of theory and sufficient conditions for obtaining informative counterfactual predictions. In this paper, we provide a general procedure for inference under shape restrictions in identified and partially identified models defined by conditional moment restrictions. Our test statistics and proposed inference methods
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Dynamic Spatial General Equilibrium Econometrica (IF 6.1) Pub Date : 2023-03-17 Benny Kleinman, Ernest Liu, Stephen J. Redding
We incorporate forward-looking capital accumulation into a dynamic discrete choice model of migration. We characterize the steady-state equilibrium; generalize existing dynamic exact-hat algebra techniques to incorporate investment; and linearize the model to provide an analytical characterization of the economy's transition path using spectral analysis. We show that capital and labor dynamics interact
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Optimal Regulation of Noncompete Contracts Econometrica (IF 6.1) Pub Date : 2023-03-17 Liyan Shi
I study regulation of noncompete employment contracts, assessing the trade-off between restricting worker mobility and encouraging firm investment. I develop an on-the-job search model in which firms and workers sign dynamic wage contracts with noncompete clauses and firms invest in their workers' general human capital. Employers use noncompete clauses to enforce buyout payments when their workers
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Synthetic Control as Online Linear Regression Econometrica (IF 6.1) Pub Date : 2023-03-17 Jiafeng Chen
This paper notes a simple connection between synthetic control and online learning. Specifically, we recognize synthetic control as an instance of Follow-The-Leader (FTL). Standard results in online convex optimization then imply that, even when outcomes are chosen by an adversary, synthetic control predictions of counterfactual outcomes for the treated unit perform almost as well as an oracle weighted
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Connecting to Power: Political Connections, Innovation, and Firm Dynamics Econometrica (IF 6.1) Pub Date : 2023-03-17 Ufuk Akcigit, Salomé Baslandze, Francesca Lotti
How do political connections affect firm dynamics, innovation, and creative destruction? We extend a Schumpeterian growth model with political connections that help firms ease bureaucratic and regulatory burden. The model highlights how political connections influence an economy's business dynamism and innovation, and generates a number of implications guiding our empirical analysis. We construct a