Title,doi,Abstract,Journal,Year,word_count,char_count,top_topics,top_keywords
Arbitraging Covered Interest Rate Parity Deviations and Bank Lending,10.1257/aer.20230425,"I propose and test a new channel through which covered interest rate parity (CIP) deviations can affect bank lending in emerging economies. I argue that when CIP deviations exist, banks attempt to arbitrage them. To do so, banks must borrow in a particular currency. When this currency is scarce, bank lending in the currency required to arbitrage decreases, while they use this currency in their arbitrage activities. I test this channel by exploiting differences in the abilities of Peruvian banks to arbitrage CIP deviations. I find evidence that supports the proposed channel. (JEL F31, G01, G13, G21, O16)",AER,2024,98,610,"['Banking Systems', 'Monetary Policy', 'Financial Markets', 'Economic Development', 'Regulatory Frameworks']","['CIP deviations', 'covered interest rate parity', 'bank lending', 'emerging economies', 'arbitrage', 'currency', 'Peruvian banks', 'abilities', 'channel', 'evidence']"
Revealing Choice Bracketing,10.1257/aer.20210877,"Experiments suggest that people fail to take into account interdependencies between their choices—they do not broadly bracket. Researchers often instead assume people narrowly bracket, but existing designs do not test it. We design a novel experiment and revealed preference tests for how someone brackets their choices. In portfolio allocation under risk, social allocation, and induced-value shopping experiments, 40–43 percent of subjects are consistent with narrow bracketing, and 0–16 percent with broad bracketing. Adjusting for each model’s predictive precision, 74 percent of subjects are best described by narrow bracketing, 13 percent by broad bracketing, and 6 percent by intermediate cases. (JEL D12, D81, D91)",AER,2024,103,722,"['Behavioral Economics', 'Financial Markets', 'Risk Management', 'Consumer Behavior', 'Investment Strategies']","['experiments', 'interdependencies', 'choices', 'bracketing', 'portfolio allocation', 'risk', 'social allocation', 'induced-value shopping', 'predictive precision', 'subjects']"
Valuing Long-Term Property Rights with Anticipated Political Regime Shifts,10.1257/aer.20211242,"We identify exposure to political risk by exploiting a unique variation around land lease extension protection after 2047 in Hong Kong’s housing market due to historical arrangements. Relative to properties that have been promised an extension protection, those with unprotected leases granted by the current government are sold at a discount of 8 percent; those with colonial leases suffer an additional discount of 8 percent. Incorporating estimated structural parameters that suggest an additional 20 percent ground rent after 2047, our model matches empirical discounts well across lease horizons. Discounts increase over time, particularly in areas with greater pessimism about the city’s future. (JEL D72, G12, R31, R38)",AER,2024,107,726,"['Housing Market Trends', 'Political Risk', 'Financial Markets', 'Urban Development', 'Economic Development']","['political risk', 'land lease extension', 'Hong Kong', 'housing market', 'discount', 'ground rent', 'lease horizons', ""city's future"", 'structural parameters', 'empirical discounts']"
Age Set versus Kin: Culture and Financial Ties in East Africa,10.1257/aer.20211856,"We study how social organization shapes patterns of economic interaction and the effects of national policy, focusing on the distinction between age-based and kin-based groups in sub-Saharan Africa. Motivated by ethnographic accounts suggesting that this distinction affects redistribution, we analyze a cash transfer program in Kenya and find that in age-based societies there are consumption spillovers within the age cohort, but not the extended family, while in kin-based societies we find the opposite. Next, we document that social structure shapes the impact of policy by showing that Uganda’s pension program had positive effects on child nutrition only in kin-based societies. (JEL H23, I12, I38, J13, O15, Z13)",AER,2024,107,720,"['Social Policy', 'Economic Development', 'Public Policy', 'Labor Market Dynamics', 'Pension Systems']","['social organization', 'economic interaction', 'national policy', 'age-based groups', 'kin-based groups', 'sub-Saharan Africa', 'redistribution', 'cash transfer program', 'Kenya', 'Uganda']"
Investing in the Next Generation: The Long-Run Impacts of a Liquidity Shock,10.1257/aer.20220296,"Poor entrepreneurs must frequently choose between business investment and children’s education. To examine this trade-off, we exploit experimental variation in short-run microenterprise growth among a sample of Indian households and track schooling and business outcomes over eleven years. Treated households, who experience higher initial microenterprise growth, are on average one-third more likely to send children to college. However, educational investment and schooling gains are concentrated among literate-parent households, whose enterprises eventually stagnate. In contrast, illiterate-parent households experience long-run business gains but declines in children’s education. Our findings suggest that microenterprise growth has the potential to reduce relative intergenerational educational mobility. (JEL I21, I26, I32, J13, L25, L26, O12)",AER,2024,108,852,"['Entrepreneurship', 'Educational Equity', 'Economic Development', 'Income Inequality', 'Public Policy']","['microenterprise growth', ""children's education"", 'households', 'schooling', 'business investment', 'Indian', 'literate-parent', 'illiterate-parent', 'educational investment', 'intergenerational educational mobility']"
Big Loans to Small Businesses: Predicting Winners and Losers in an Entrepreneurial Lending Experiment,10.1257/aer.20220616,"We experimentally study the impact of relatively large enterprise loans in Egypt. Larger loans generate small average impacts, but machine learning using psychometric data reveals “ top performers” (those with the highest predicted treatment effects) substantially increase profits, while profits drop for poor performers. The large differences imply that lender credit allocation decisions matter for aggregate income, yet we find existing practice leads to substantial misallocation. We argue that some entrepreneurs are overoptimistic and squander the opportunities presented by larger loans by taking on too much risk, and show the promise of allocations based on entrepreneurial type relative to firm characteristics. (JEL C45, D22, G21, G32, L25, L26, O16)",AER,2024,109,762,"['Entrepreneurship', 'Credit Markets', 'Economic Development', 'Banking Systems', 'Risk Management']","['enterprise loans', 'Egypt', 'machine learning', 'psychometric data', 'top performers', 'profits', 'credit allocation', 'misallocation', 'risk', 'entrepreneurial type']"
In-Kind Transfers as Insurance,10.1257/aer.20220822,"Households in developing countries often face variation in the prices of consumption goods. We develop a model demonstrating that in-kind transfers will provide insurance benefits against price risk if the covariance between the marginal utility of income and price is positive. Using calorie shortfalls as a proxy for marginal utility, we find that this condition holds for low-income Indian households. Expansions in India’s flagship in-kind food transfer program not only increase caloric intake but also reduce caloric sensitivity to prices. Our results contribute to ongoing debates about the optimal form of social protection programs. (JEL D12, H53, I18, I38, O12, O15)",AER,2024,101,676,"['Social Policy', 'Public Policy', 'Economic Development', 'Income Inequality', 'Healthcare Systems']","['households', 'developing countries', 'prices', 'in-kind transfers', 'insurance benefits', 'price risk', 'marginal utility', 'income', 'India', 'social protection programs']"
Spending and Job-Finding Impacts of Expanded Unemployment Benefits: Evidence from Administrative Micro Data,10.1257/aer.20220973,"We show that the largest increase in unemployment benefits in US history had large spending impacts and small job-finding impacts. This finding has three implications. First, increased benefits were important for explaining aggregate spending dynamics—but not employment dynamics—during the pandemic. Second, benefit expansions allow us to study the MPC of normally low-liquidity households in a high-liquidity state. These households still have high MPCs. This suggests a role for permanent behavioral characteristics, rather than just current liquidity, in driving spending behavior. Third, the mechanisms driving our results imply that temporary benefit supplements are a promising countercyclical tool. (JEL E21, E24, E32, E62, E71, G51, J65)",AER,2024,104,746,"['Labor Market Dynamics', 'Fiscal Policy', 'Consumer Behavior', 'Economic Development', 'Public Policy']","['unemployment benefits', 'spending impacts', 'job-finding impacts', 'aggregate spending dynamics', 'employment dynamics', 'benefit expansions', 'MPC', 'liquidity households', 'countercyclical tool', 'temporary benefit supplements']"
Experimentation in Networks,10.1257/aer.20230233,"We propose a model of strategic experimentation on social networks in which forward-looking agents learn from their own and neighbors’ successes. In equilibrium, private discovery is followed by social diffusion. Social learning crowds out own experimentation, so total information decreases with network density; we determine density thresholds below which agents’ asymptotic learning is perfect. By contrast, agent welfare is single peaked in network density and achieves a second-best benchmark level at intermediate levels that strike a balance between discovery and diffusion. (JEL D82, D83, D86, O31, O33, Z13)",AER,2024,88,616,"['Social Policy', 'Behavioral Economics', 'Economic Development', 'Social Networks', 'Public Finance']","['strategic experimentation', 'social networks', 'agents', 'equilibrium', 'social diffusion', 'social learning', 'network density', 'asymptotic learning', 'agent welfare', 'discovery']"
Comparisons of Signals,10.1257/aer.20230430,"A signal is a description of an information source that specifies both its correlation with the state and its correlation with other signals. Extending Blackwell (1953), we characterize when one signal is more valuable than another regardless of preferences and regardless of access to other signals. This comparison is equivalent to reveal-or-refine: every realization of the more valuable signal reveals the state or refines the realization of the less valuable signal. We also study other comparisons of signals, including sufficiency, martingale dominance, and Lehmann. Reveal-or-refine is also equivalent to making any of these comparisons robust to access to other signals. (JEL C90, D82, D83)",AER,2024,104,699,"['Economic Development', 'Financial Markets', 'Risk Management', 'Monetary Policy', 'Public Finance']","['signal', 'information source', 'correlation', 'Blackwell', 'valuable', 'preferences', 'access', 'reveal-or-refine', 'sufficiency', 'Lehmann']"
Monotone Function Intervals: Theory and Applications,10.1257/aer.20230330,"A monotone function interval is the set of monotone functions that lie pointwise between two fixed, -monotone functions. We characterize the set of extreme points of monotone function intervals and apply this to a number of economic settings. First, we leverage the main result to characterize the set of distributions of posterior quantiles that can be induced by a signal, with applications to political economy, Bayesian persuasion, and the psychology of judgment. Second, we combine our characterization with properties of convex optimization problems to unify and generalize seminal results in the literature on security design under adverse selection and moral hazard. (JEL C61, C65, D72, D82, D91, G12)",AER,2024,108,709,"['Economic Development', 'Bayesian Persuasion', 'Security Design', 'Monetary Policy', 'Fiscal Policy']","['monotone functions', 'interval', 'extreme points', 'economic settings', 'distributions', 'posterior quantiles', 'signal', 'political economy', 'Bayesian persuasion', 'convex optimization']"
"Long-Run Trends in Long-Maturity Real Rates, 1311–2022",10.1257/aer.20221352,"Taking advantage of key recent advances in long-run economic and financial data, we analyze the statistical properties of global long-maturity real interest rates over the past seven centuries. In contrast to existing consensus, we find that real interest rates are in fact trend stationary and exhibit a persistent downward trend since the Renaissance. We investigate structural breaks in real interest rates over time and find that overall the Black Death and the 1557 “Trinity default” appear as consistent inflection points. We further show that demographic and productivity factors do not represent convincing drivers of real interest rates over long spans. (JEL E43, F30, N20)",AER,2024,104,682,"['Financial Markets', 'Economic Growth', 'Demographic Shifts', 'Monetary Policy', 'Historical Data Analysis']","['economic', 'financial data', 'real interest rates', 'trend stationary', 'structural breaks', 'Black Death', 'Trinity default', 'demographic', 'productivity factors', 'long spans']"
Indirect Effects of Access to Finance,10.1257/aer.20220711,"We created experimental variation across markets in China in the share of firms having access to a new loan product. Access to finance had a large positive direct effect on the performance of treated firms but a similar-sized negative indirect effect on that of firms with treated competitors, leading to nondetectable gains in producer surplus. Access to finance had a positive direct effect on business quality and consumer satisfaction and a negative effect on price, which were not offset by indirect effects, implying net gains in consumer surplus. We document other indirect effects and combine effects in a welfare evaluation. (JEL D22, G21, G32, L81, O16, P31, P34)",AER,2024,108,673,"['Financial Markets', 'Credit Markets', 'Consumer Behavior', 'Economic Development', 'Public Policy']","['finance', 'firms', 'loan product', 'performance', 'producer surplus', 'business quality', 'consumer satisfaction', 'price', 'consumer surplus', 'welfare evaluation']"
Strengthening State Capacity: Civil Service Reform and Public Sector Performance during the Gilded Age,10.1257/aer.20230019,"We use newly digitized records from the post office to study the effects of strengthened state capacity between 1875 and 1901. Exploiting the implementation of the Pendleton Act—a landmark statute that shielded bureaucrats from political interference—across US cities over two waves, we find that civil service reform reduced postal delivery errors and increased productivity. These improvements were most pronounced during election years when the reform dampened bureaucratic turnover. We provide suggestive evidence that reformed cities witnessed declining local partisan newspapers. Separating politics from administration, therefore, not only improved state effectiveness but also weakened the role of local politics. (JEL D24, D73, H83, J45, L82, L87, N41)",AER,2024,106,761,"['Public Policy', 'Labor Market Dynamics', 'Political Risk', 'Economic Development', 'Urban Development']","['post office', 'state capacity', 'Pendleton Act', 'civil service reform', 'bureaucratic turnover', 'productivity', 'election years', 'partisan newspapers', 'administration', 'state effectiveness']"
Repeated Trading: Transparency and Market Structure,10.1257/aer.20230114,"We analyze the effect of transparency of past trading volumes in markets where an informed long-lived seller can repeatedly trade with short-lived uninformed buyers. Transparency allows buyers to observe previously sold quantities. In markets with intraperiod monopsony (single buyer each period), transparency reduces welfare if the ex ante expected quality is low but improves welfare if the expected quality is high. The effect is reversed in markets with intraperiod competition (multiple buyers each period). This discrepancy in the efficiency implications of transparency is explained by how buyer competition affects the seller’s ability to capture rents, which, in turn, influences market screening. (JEL D40, D82, D83, G14, L15)",AER,2024,107,737,"['Financial Markets', 'Market Transparency', 'Economic Development', 'Corporate Governance', 'Regulatory Frameworks']","['transparency', 'trading volumes', 'markets', 'sellers', 'buyers', 'welfare', 'quality', 'monopsony', 'competition', 'efficiency']"
"Learning by Necessity: Government Demand, Capacity Constraints, and Productivity Growth",10.1257/aer.20230033,"This paper studies how firms adapt to demand shocks when facing capacity constraints. I show that increases in government purchases raise total factor productivity in quantity units at the production line level. Productivity gains are concentrated in plants facing tighter capacity constraints, a phenomenon I call “learning by necessity.” Evidence is based on newly digitized archival data on US World War II aircraft production. Shifts in demand across aircraft with different strategic roles provide an instrument for aircraft demand. I show that plants adapted to surging demand by improving production methods, outsourcing, and combating absenteeism, primarily when facing tighter capacity constraints. (JEL D22, D24, E62, L93, N12, N42, N62)",AER,2024,109,747,"['Productivity', 'Public Policy', 'Labor Market Dynamics', 'Economic Development', 'Trade and Globalization']","['firms', 'adapt', 'demand shocks', 'capacity constraints', 'government purchases', 'total factor productivity', 'production line', 'learning by necessity', 'World War II aircraft production', 'production methods']"
A Discrimination Report Card,10.1257/aer.20230700,"We develop an empirical Bayes ranking procedure that assigns ordinal grades to noisy measurements, balancing the information content of the assigned grades against the expected frequency of ranking errors. Applying the method to a massive correspondence experiment, we grade the race and gender contact gaps of 97 US employers, the identities of which we disclose for the first time. The grades are presented alongside measures of uncertainty about each firm’s contact gap in an accessible report card that is easily adaptable to other settings where ranks and levels are of simultaneous interest. (JEL C11, D22, J15, J16, J71)",AER,2024,98,627,"['Labor Market Dynamics', 'Economic Development', 'Social Policy', 'Data Privacy', 'Public Policy']","['empirical Bayes ranking procedure', 'ordinal grades', 'noisy measurements', 'ranking errors', 'correspondence experiment', 'race', 'gender contact gaps', 'US employers', 'uncertainty', 'report card']"
Crowding in School Choice,10.1257/aer.20220626,"We consider the market design problem of matching students to schools in the presence of crowding effects. These effects are salient in parents’ decision-making and the empirical literature; however, they cause difficulties in the design of satisfactory mechanisms and, as such, are not currently considered. We propose a new framework and an equilibrium notion that accommodates crowding, no-envy, and respect for priorities. The equilibrium has a student-optimal element that induces an incentive-compatible mechanism and is implementable via a novel algorithm. Moreover, analogs of fundamental structural results of the matching literature (the rural hospitals theorem, welfare lattice, etc.) survive. (JEL D47, H75, I21, I28)",AER,2024,103,729,"['Market Design', 'Educational Equity', 'Economic Development', 'Public Policy', 'Algorithm']","['market design', 'crowding effects', 'mechanism design', 'equilibrium', 'incentive-compatible mechanism', 'algorithm', 'matching literature', 'welfare lattice', 'student-optimal', 'school matching']"
"Data, Competition, and Digital Platforms",10.1257/aer.20230478,"A monopolist platform uses data to match heterogeneous consumers with multiproduct sellers. The consumers can purchase the products on the platform or search off the platform. The platform sells targeted ads to sellers that recommend their products to consumers and reveals information to consumers about their match values. The revenue-optimal mechanism is a managed advertising campaign that matches products and preferences efficiently. In equilibrium, sellers offer higher qualities at lower unit prices on than off platform. The platform exploits its information advantage to increase its bargaining power vis-à-vis the sellers. Finally, privacy-respecting data-governance rules can lead to welfare gains for consumers. (JEL D11, D42, D44, D82, D83, M37)",AER,2024,108,759,"['Data Privacy', 'Consumer Behavior', 'Market Transparency', 'Economic Development', 'Regulatory Frameworks']","['monopolist platform', 'data', 'consumers', 'sellers', 'targeted ads', 'revenue-optimal mechanism', 'equilibrium', 'qualities', 'prices', 'data-governance rules']"
Buying from a Group,10.1257/aer.20230914,"A buyer procures a good owned by a group of sellers whose heterogeneous cost of trade is private information. The buyer must either buy the whole good or nothing, and sellers share the transfer in proportion to their share of the good. We characterize the optimal mechanism: trade occurs if and only if the buyer’s benefit of trade exceeds a weighted average of sellers’ virtual costs. These weights are endogenous, with sellers who are ex ante less inclined to trade receiving higher weight. This mechanism always outperforms posted-price mechanisms. An extension characterizes the entire Pareto frontier. (JEL D44, D63, D82, Q15, Q24)",AER,2024,102,636,"['Trade and Globalization', 'Economic Development', 'Public Policy', 'Market Transparency', 'Industrial Policy']","['buyer', 'good', 'sellers', 'trade', 'mechanism', 'optimal', 'costs', 'posted-price', 'Pareto frontier', 'information']"
Information Choice in Auctions,10.1257/aer.20221297,"The choice of an auction mechanism influences which object characteristics bidders learn about and whether the object is allocated efficiently. Some object characteristics are valued equally by all bidders and thus are inconsequential for the efficient allocation. Others matter only to certain bidders and thus determine the bidder with the highest valuation. I show when the second-price auction is ex ante efficient by inducing bidders to seek socially relevant information. When facing a continuous learning trade-off, bidders learn more about socially relevant components and less about common characteristics of the object in a second-price auction than a first-price auction. (JEL D44, D83)",AER,2024,102,697,"['Auction Mechanisms', 'Information Acquisition', 'Second-Price Auction', 'Socially Relevant Information', 'Learning Trade-Off']","['auction mechanism', 'object characteristics', 'bidders', 'allocation', 'efficient', 'second-price auction', 'socially relevant information', 'learning', 'trade-off', 'first-price auction']"
Revealing Stereotypes: Evidence from Immigrants in Schools,10.1257/aer.20191184,"We study how people change their behavior after being made aware of bias. Teachers in Italian schools give lower grades to immigrant students relative to natives of comparable ability. In two experiments, we reveal to teachers their own stereotypes, measured by an Implicit Association Test (IAT). In the first, we find that learning one’s IAT before assigning grades reduces the native-immigrant grade gap. In the second, IAT disclosure and generic debiasing have similar average effects, but there is heterogeneity: teachers with stronger negative stereotypes do not respond to generic debiasing but change their behavior when informed about their own IAT. (JEL D91, I24, J15, J45)",AER,2024,105,683,"['Educational Equity', 'Labor Market Dynamics', 'Behavioral Economics', 'Immigration and Labor', 'Public Policy']","['teachers', 'behavior change', 'bias awareness', 'immigrant students', 'grades', 'implicit association test (IAT)', 'stereotypes', 'debiasing', 'heterogeneity', 'negative stereotypes']"
Misallocation under Trade Liberalization,10.1257/aer.20200596,"This paper formalizes a classic idea that in second-best environments trade can induce welfare losses: incremental income losses from distortions can outweigh trade gains. In a Melitz model with distortionary taxes, we derive sufficient statistics for welfare gains/losses and show departures from the efficient case (Arkolakis, Costinot, and Rodríguez-Clare 2012) can be captured by the gap between an input and output share and domestic extensive margin elasticities. The loss reflects an endogenous selection of more subsidized firms into exporting. Using Chinese manufacturing data in 2005 and model-inferred firm-level distortions, we demonstrate that a sizable negative fiscal externality can potentially offset conventional gains. (JEL D22, F14, H25, L60, O19, P31, P33)",AER,2024,110,777,"['Trade and Globalization', 'Fiscal Policy', 'Taxation', 'Economic Development', 'Public Policy']","['trade', 'welfare losses', 'distortions', 'Melitz model', 'taxes', 'welfare gains', 'efficient case', 'fiscal externality', 'Chinese manufacturing', 'distortions']"
Demographic Origins of the Start-up Deficit,10.1257/aer.20210362,"We propose a simple explanation for the long-run decline in the US start-up rate. It originates from a slowdown in labor supply growth since the late 1970s, largely predetermined by demographics. This channel can explain roughly half of the decline and why incumbent firm survival and average growth over the life cycle have changed little. We show these results in a standard model of firm dynamics and test the mechanism using cross-state variation in labor supply growth. Finally, we show that a longer entry rate series imputed using historical establishment tabulations rises over the 1960s–1970s period of accelerating labor force growth. (JEL D22, D25, E24, J11, J22, J23, M11)",AER,2024,109,684,"['Labor Market Dynamics', 'Economic Growth', 'Entrepreneurship', 'Public Policy', 'Startups and Innovation']","['long-run decline', 'US start-up rate', 'labor supply growth', 'demographics', 'incumbent firm', 'firm dynamics', 'cross-state variation', 'entry rate series', 'historical establishment tabulations', 'labor force growth']"
Opportunity Unraveled: Private Information and the Missing Markets for Financing Human Capital,10.1257/aer.20211653,"We examine whether adverse selection has unraveled private markets for equity and state-contingent debt contracts for financing higher education. Using survey data on beliefs, we show a typical college-goer would have to repay $1.64 in present value for every $1 of financing to overcome adverse selection in an equity market. We find that risk-averse college-goers are not willing to accept these terms, so markets unravel. We discuss why moral hazard, biased beliefs, and outside credit options are less likely to explain the absence of these markets. We quantify the welfare gains for subsidizing equity-like contracts that mitigate college-going risks. (JEL D82, D83, G51, I22, I23, I26, J24)",AER,2024,107,696,"['Financial Markets', 'Risk Management', 'Educational Equity', 'Public Policy', 'Economic Development']","['adverse selection', 'private markets', 'equity', 'state-contingent debt', 'financing', 'higher education', 'risk-averse', 'moral hazard', 'biased beliefs', 'welfare gains']"
"Bank Runs, Fragility, and Credit Easing",10.1257/aer.20220328,"We present a tractable dynamic general equilibrium model of self-fulfilling bank runs, where banks trade capital in competitive and liquid markets but remain vulnerable to runs due to a loss of creditor confidence. We characterize how the vulnerability of an individual bank depends on its leverage position and the economy-wide asset prices. We study the effect of credit easing policies, in the form of asset purchases. When a banking crisis is generated by runs, credit easing can reduce the number of defaulting banks and enhance welfare. When the crisis is driven by fundamentals, credit easing may have adverse consequences. (JEL E32, E44, E58, G01, G21, G28, G33)",AER,2024,107,670,"['Financial Markets', 'Banking Systems', 'Monetary Policy', 'Credit Markets', 'Public Policy']","['dynamic general equilibrium model', 'self-fulfilling bank runs', 'creditor confidence', 'leverage position', 'asset prices', 'credit easing policies', 'asset purchases', 'banking crisis', 'defaulting banks', 'welfare']"
100 Years of Rising Corporate Concentration,10.1257/aer.20220621,"We collect data on the size distribution of US businesses for 100 years, and use these data to estimate the concentration of production (e.g., asset share or sales share of top businesses). The data show that concentration has increased persistently over the past century. Rising concentration was stronger in manufacturing and mining before the 1970s, and stronger in services, retail, and wholesale after the 1970s. The results are robust to different measurement methods and consistent across different historical sources. Our findings suggest that large firms have become more important in the US economy for a long period of time. (JEL D22, E24, L11, L25, N12)",AER,2024,105,665,"['Economic Growth', 'Industrial Policy', 'Corporate Governance', 'Trade and Globalization', 'Labor Market Dynamics']","['size distribution', 'US businesses', 'concentration', 'production', 'asset share', 'sales share', 'manufacturing', 'mining', 'services', 'large firms']"
Personalized Pricing and Competition,10.1257/aer.20221524,"We study personalized pricing in a general oligopoly model. The impact of personalized pricing relative to uniform pricing hinges on the degree of market coverage. If market conditions are such that coverage is high (e.g., the production cost is low or the number of firms is high), personalized pricing harms firms and benefits consumers, whereas the opposite is true if coverage is low. When only some firms have data to personalize prices, consumers can be worse off compared to when either all or no firms personalize prices. (JEL D21, D43, D82)",AER,2024,91,549,"['Industrial Policy', 'Consumer Behavior', 'Monetary Policy', 'Consumer Finance', 'Economic Development']","['personalized pricing', 'oligopoly model', 'market coverage', 'production cost', 'number of firms', 'harms firms', 'benefits consumers', 'data', 'personalize prices', 'consumers']"
Organized Crime and Economic Growth: Evidence from Municipalities Infiltrated by the Mafia,10.1257/aer.20221687,"This paper studies the long-run economic impact of dismissing city councils infiltrated by organized crime. Applying a matched difference-in-differences design to the universe of Italian social security records, we find that city council dismissals (CCDs) increase employment, the number of firms, and industrial real estate prices. The effects are concentrated in Mafia-dominated sectors and in municipalities where fewer incumbents are reelected. The dismissals generate large economic returns by weakening the Mafia and fostering trust in local institutions. The analysis suggests that CCDs represent an effective intervention for establishing legitimacy and spurring economic activity in areas dominated by organized crime. (JEL D73, H77, K42, R11, R23)",AER,2024,105,757,"['Public Policy', 'Economic Development', 'Labor Market Dynamics', 'Organizational Behavior', 'Urban Development']","['dismissals', 'city councils', 'organized crime', 'economic impact', 'employment', 'firms', 'real estate prices', 'Mafia', 'intervention', 'legitimacy']"
"The Gift of a Lifetime: The Hospital, Modern Medicine, and Mortality",10.1257/aer.20230008,"We explore how access to modern hospitals and medicine affects mortality by leveraging efforts of the Duke Endowment to modernize hospitals in the early twentieth century. The Endowment helped communities build and expand hospitals, obtain state-of-the-art medical technology, attract qualified medical personnel, and refine management practices. We find that Duke support increased the size and quality of the medical sector, fostering growth in not-for-profit hospitals and high-quality physicians. Duke funding reduced both infant mortality—with larger effects for Black infants than White infants—and long-run mortality. Finally, we find that communities aided by Duke benefited more from medical innovations. (JEL I11, I12, J13, J15, L31, N32, O31)",AER,2024,105,753,"['Healthcare Systems', 'Healthcare Innovation', 'Economic Development', 'Social Policy', 'Public Policy']","['modern hospitals', 'medicine', 'mortality', 'Duke Endowment', 'hospitals', 'medical technology', 'medical personnel', 'management practices', 'infant mortality', 'medical innovations']"
Local Economic and Political Effects of Trade Deals: Evidence from NAFTA,10.1257/aer.20220425,"Why have white, less-educated voters left the Democratic Party? We highlight the role of the 1994 North American Free Trade Agreement (NAFTA). In event-study analysis, we demonstrate that counties whose 1990 employment depended on industries vulnerable to NAFTA suffered large and persistent employment losses after its implementation. Voters in these counties (and protectionist voters regardless of geography) turned away from the party of President Clinton, who promoted the agreement. This shift is larger for whites (especially men and those without a college degree) and social conservatives, suggesting that racial identity and social-issue positions mediate reactions to economic policies. (JEL D72, F15, F16, J15)",AER,2024,103,722,"['Trade and Globalization', 'Labor Market Dynamics', 'Public Policy', 'Economic Development', 'Income Inequality']","['NAFTA', 'Democratic Party', 'white voters', 'less-educated', 'employment', 'counties', 'protectionist voters', 'President Clinton', 'racial identity', 'social conservatives']"
Status Externalities in Education and Low Birth Rates in Korea,10.1257/aer.20220583,"South Koreans appear to be preoccupied with their offspring's education and also have the lowest total fertility rate in the world. We propose a novel theory with status externalities and endogenous fertility connecting these facts, motivated by novel empirical evidence on private education spillovers. Using a quantitative model calibrated to Korea, we find that fertility would be 28 percent higher without the externality. We explore the effects of government policy: a pro-natal transfer or an education tax can increase fertility and reduce education spending. An education tax of 22 percent together with moderate pro-natal transfers maximizes the current generation's welfare. (JEL D31, D62, E24, I21, I26, I28, J13, O40)",AER,2024,109,729,"['Educational Equity', 'Public Policy', 'Economic Development', 'Taxation', 'Labor Market Dynamics']","[""offspring's education"", 'fertility rate', 'South Koreans', 'status externalities', 'endogenous fertility', 'private education', 'government policy', 'pro-natal transfer', 'education tax', 'welfare.']"
Welfare Comparisons for Biased Learning,10.1257/aer.20210410,"We study robust welfare comparisons of learning biases (misspecified Bayesian and some forms of non-Bayesian updating). Given a true signal distribution, we deem one bias more harmful than another if it yields lower objective expected payoffs in all decision problems. We characterize this ranking in static and dynamic settings. While the static characterization compares posteriors signal by signal, the dynamic characterization employs an “efficiency index” measuring how fast beliefs converge. We quantify and compare the severity of several well-documented biases. We also highlight disagreements between the static and dynamic rankings, and that some “large” biases dynamically outperform other “vanishingly small” biases. (JEL D60, D82, D83, D91)",AER,2024,106,753,"['Behavioral Economics', 'Economics', 'Decision Making', 'Bayesian Updating', 'Welfare Analysis']","['learning biases', 'welfare comparisons', 'Bayesian updating', 'non-Bayesian updating', 'objective expected payoffs', 'decision problems', 'static settings', 'dynamic settings', 'efficiency index', 'severity of biases']"
The Flight to Safety and International Risk Sharing,10.1257/aer.20211319,"We study a business cycle model of the international monetary system featuring a time-varying demand for safe dollar bonds, greater risk-bearing capacity in the United States than the rest of the world, and nominal rigidities. A flight to safety generates a dollar appreciation and decline in global output. Dollar bonds thus command a negative risk premium, and the United States holds a levered portfolio of capital financed in dollars. We quantify the effects of safety shocks and heterogeneity in risk-bearing capacity for global macroeconomic volatility, US external adjustment, and policy transmission, as of dollar swap lines. (JEL E32, E43, E44, E52, F44, G11, G15)",AER,2024,104,673,"['Financial Markets', 'Monetary Policy', 'Risk Management', 'Globalization', 'Public Policy']","['business cycle model', 'international monetary system', 'safe dollar bonds', 'risk-bearing capacity', 'United States', 'nominal rigidities', 'flight to safety', 'global output', 'risk premium', 'capital finance']"
Long-Run Effects of Incentivizing Work after Childbirth,10.1257/aer.20220792,"This paper identifies the impact of increasing post-childbirth work incentives on mothers’ long-run careers. We exploit variation in work incentives across mothers based on the timing of a first birth and eligibility for the 1993 expansion of the Earned Income Tax Credit. Ten to nineteen years after a first birth, single mothers who were exposed to the expansion immediately after birth (“early”), rather than 3–6 years later (“late”), have 0.62 more years of work experience and 4.2 percent higher earnings conditional on working. We show that higher earnings are primarily explained by improved wages due to greater work experience. (JEL H24, H31, J16, J22, J31)",AER,2024,105,666,"['Labor Market Dynamics', 'Public Policy', 'Taxation', 'Income Inequality', 'Economic Development']","['impact', 'post-childbirth', 'work incentives', 'mothers', 'careers', 'Earned Income Tax Credit', 'work experience', 'earnings', 'wages', 'single mothers']"
Task-Based Discrimination,10.1257/aer.20220234,"We develop a task-based model of occupational sorting to identify and quantify the effect of discrimination, racial skill gaps, and aggregate task prices on Black-White differences in labor market outcomes over time. At the heart of our framework is the idea that the size and nature of racial barriers faced by Black workers vary by the task requirements of each job. We define a new task that measures the extent to which individuals interact with others as part of their job. We show that this measure is a good proxy for the extent of discrimination in the economy. (JEL J15, J23, J31, J71, M51)",AER,2024,104,599,"['Labor Market Dynamics', 'Income Inequality', 'Racial Discrimination', 'Economic Development', 'Public Policy.']","['task-based model', 'occupational sorting', 'discrimination', 'racial skill gaps', 'aggregate task prices', 'Black-White differences', 'labor market outcomes', 'racial barriers', 'task requirements', 'discrimination.']"
Information Technology and Returns to Scale,10.1257/aer.20220522,"What are the implications of the dramatic fall in IT prices for aggregate technology? When firm-level technologies are continuously differentiable, a factor price shock leads to (i) a substitution between factors and/or (ii) an endogenous response of returns to scale. The second channel is governed by the output elasticity of relative factor demand. Using detailed firm-level data from France, we estimate this elasticity to be positive for IT factor demand. A quantitative exercise accounting for both technological channels shows that falling IT prices can explain much of the changes in concentration and the composition of aggregate labor share in France. (JEL D22, D24, D33, E25, L63, L86)",AER,2024,107,696,"['Technological Adoption', 'Economic Growth', 'Labor Market Dynamics', 'Digital Transformation', 'Innovation']","['IT prices', 'aggregate technology', 'firm-level technologies', 'factor price shock', 'returns to scale', 'output elasticity', 'relative factor demand', 'France', 'concentration', 'labor share']"
Breaking Gender Barriers: Experimental Evidence on Men in Pink-Collar Jobs,10.1257/aer.20220582,"I investigate men’s limited entry into female-dominated sectors through a large-scale field experiment. The design exogenously varies recruitment messages by showing photographs of current workers (male or female) and providing information on the share of workers who received high evaluations in the past (higher or lower). A male photograph has no impact on men’s applications, but informing about a lower share of high evaluations encourages men to apply and enables the employer to hire and retain more talented men. The impact of this informational intervention remains positive for the employer also accounting for its effects on female applicants and hires. (JEL C93, D83, J16, J22, J23, J24, M51)",AER,2024,108,704,"['Labor Market Dynamics', 'Gender Equality', 'Corporate Governance', 'Public Policy', 'Social Policy']","['limited entry', 'female-dominated sectors', 'field experiment', 'recruitment messages', 'photographs', 'current workers', 'high evaluations', 'male applicants', 'informational intervention', 'employer']"
Financial Access and Labor Market Outcomes: Evidence from Credit Lotteries,10.1257/aer.20230585,"We assess the employment and income effects of access to credit dedicated to investment in individual mobility by exploiting time-series variation in access to credit through lotteries for participants in a group-lending mechanism in Brazil. We find that access to credit for investment in individual mobility increases formal employment rates and salaries, yielding an annual rate of return of 12 to 15 percent. Consistent with a geographically broader job search, individuals transition to jobs farther from home and public transportation. Our results suggest that accessing distant labor markets through credit for investment in individual mobility yields high and persistent returns. (JEL D44, E24, G21, G51, J61, J64, O15)",AER,2024,108,727,"['Credit Markets', 'Labor Market Dynamics', 'Economic Development', 'Investment Strategies', 'Income Inequality']","['employment', 'income effects', 'access to credit', 'investment', 'individual mobility', 'formal employment', 'salaries', 'rate of return', 'job search', 'labor markets']"
"Shocks, Frictions, and Inequality in US Business Cycles",10.1257/aer.20201875,"We show how a heterogeneous agent New Keynesian (HANK) model with incomplete markets and portfolio choice can be estimated in state space using a Bayesian approach. To render estimation feasible, the structure of the economy can be exploited and the dimensionality of the model automatically reduced based on the Bayesian priors. We apply this approach to analyze how much inequality matters for the business cycle and vice versa. Even when the model is estimated on aggregate data alone and with a set of shocks and frictions designed to match aggregate data, it broadly reproduces observed US inequality dynamics. (JEL D31, D52, E12, E32, E52, E62)",AER,2024,105,650,"['Income Inequality', 'Monetary Policy', 'Economic Development', 'Public Policy', 'Labor Market Dynamics']","['heterogeneous agent', 'New Keynesian', 'HANK model', 'incomplete markets', 'portfolio choice', 'Bayesian approach', 'inequality', 'business cycle', 'aggregate data', 'US inequality dynamics']"
Household Labor Supply and the Value of Social Security Survivors Benefits,10.1257/aer.20190813,"We combine quasi-experimental variation in spousal death and age eligibility for survivors benefits using US tax records to study the effects on American households’ labor supply and the design of social security’s survivors insurance. Benefit eligibility at the exact age of 60 induces sharp reductions in the labor supply of newly widowed households, highlighting the value of survivors benefits and the liquidity they provide following the shock. Among eligible widows, the spousal death event induces no increases in labor supply, suggesting little residual need to self-insure. Using theory, we underscore the program’s protective insurance role and its high valuation among survivors. (JEL D12, D91, G22, G51, H55, J16, J22)",AER,2024,109,730,"['Social Policy', 'Labor Market Dynamics', 'Public Policy', 'Financial Markets', 'Risk Management']","['spousal death', 'age eligibility', 'survivors benefits', 'labor supply', 'social security', 'survivors insurance', 'households', 'widows', 'insurance role', 'valuation']"
Creating Moves to Opportunity: Experimental Evidence on Barriers to Neighborhood Choice,10.1257/aer.20200407,"Low-income families often live in low-upward-mobility neighborhoods. We study why by using a randomized trial with housing voucher recipients that provided information, financial support, and customized search assistance to move to high-opportunity neighborhoods. The treatment increased the fraction moving to high-upward-mobility areas from 15 to 53 percent. A second trial reveals this treatment effect is driven primarily by customized search assistance. Qualitative interviews show that the intervention relaxed bandwidth constraints and addressed family-specific needs. Our findings imply many low-income families do not have strong preferences to stay in low-opportunity areas and that barriers in housing search significantly increase residential segregation by income. (JEL D83, G51, R21, R23, R31, R38)",AER,2024,109,812,"['Housing Market Trends', 'Social Policy', 'Urban Development', 'Income Inequality', 'Labor Market Dynamics']","['low-income families', 'neighborhoods', 'randomized trial', 'housing voucher recipients', 'high-opportunity neighborhoods', 'customized search assistance', 'residential segregation', 'upward mobility', 'financial support', 'intervention']"
From Fog to Smog: The Value of Pollution Information,10.1257/aer.20200956,"In 2013, China launched a landmark program to monitor air quality and disclose real-time data, significantly increasing the public’s access to and awareness of pollution information. The program triggered cascading behavioral changes such as stronger avoidance of outdoor pollution exposure and increased spending on protective products. These behavioral responses mitigated the mortality impact of air pollution. Conservative estimates indicate that the program’s health benefits outweigh the costs by an order of magnitude. The findings highlight the benefits of improving public access to pollution information in developing countries which often experience severe air pollution but lack pollution data collection and dissemination. (JEL D83, D91, I12, O13, P28, Q51, Q53)",AER,2024,108,775,"['Public Policy', 'Environmental Sustainability', 'Healthcare Systems', 'Economic Development', 'Climate Change Economics']","['China', 'air quality', 'pollution', 'program', 'public access', 'awareness', 'behavioral changes', 'mortality impact', 'health benefits', 'pollution information']"
Urban Public Works in Spatial Equilibrium: Experimental Evidence from Ethiopia,10.1257/aer.20220471,"This paper evaluates a large urban public works program randomly rolled out across neighborhoods of Addis Ababa, Ethiopia. We find the program increased public employment and reduced private labor supply among beneficiaries and improved local amenities in treated locations. We then combine a spatial equilibrium model and unique commuting data to estimate the spillover effects of the program on private sector wages across neighborhoods: under full program rollout, wages increased by 18.6 percent. Using our model, we show that welfare gains to the poor are six times larger when we include the indirect effects on private wages and local amenities. (JEL H76, I38, J22, J31, O15, O18, R23)",AER,2024,108,692,"['Public Policy', 'Labor Market Dynamics', 'Economic Development', 'Urban Development', 'Income Inequality']","['urban public works program', 'Addis Ababa', 'Ethiopia', 'public employment', 'private labor supply', 'local amenities', 'spatial equilibrium model', 'commuting data', 'spillover effects', 'private sector wages']"
Resisting Social Pressure in the Household Using Mobile Money: Experimental Evidence on Microenterprise Investment in Uganda,10.1257/aer.20220717,"I examine whether changing the form of disbursement of a microfinance loan enables female microfinance borrowers to overcome intra-household sharing pressure and grow their businesses. Using a field experiment with 3,000 borrowers in Uganda, I compare the disbursement of a loan as cash to disbursement onto a digital account. After 8 months, women who received their microfinance loan on the digital account had 11 percent higher (US$70) business capital and 15 percent higher (US$18) profits compared to those who received their loan as cash. Impacts were greatest for women who experienced pressure to share money with others in the household at baseline. (JEL C93, D13, G51, J16, O12, O16)",AER,2024,109,693,"['Financial Inclusion', 'Gender Equality', 'Microfinance', 'Digital Payments', 'Entrepreneurship']","['microfinance loan', 'disbursement', 'female borrowers', 'intra-household sharing', 'business growth', 'field experiment', 'Uganda', 'digital account', 'business capital', 'profits']"
A Framework for Economic Growth with Capital-Embodied Technical Change,10.1257/aer.20221180,"Technological advance is often embodied in capital inputs, like computers, airplanes, and robots. This paper builds a framework where capital inputs advance through (i) increased automation and (ii) increased productivity. The interplay of these two innovation dimensions can produce balanced growth, satisfying the Uzawa Growth Theorem even though technological progress is capital-embodied. The framework can further address structural transformation, general-purpose technologies, the limited macroeconomic impact of computing, and declining productivity growth and labor shares. Overall, this tractable framework can help resolve puzzling tensions between micro-level observations of innovation and balanced growth while providing new perspectives on numerous macroeconomic phenomena. (JEL E22, E23, E24, E25, L16, O33, O41)",AER,2024,107,828,"['Innovation', 'Economic Growth', 'Technological Adoption', 'Productivity', 'Labor Market Dynamics']","['technological advance', 'capital inputs', 'automation', 'productivity', 'innovation', 'Uzawa Growth Theorem', 'structural transformation', 'general-purpose technologies', 'computing', 'productivity growth']"
On Binscatter,10.1257/aer.20221576,"Binscatter is a popular method for visualizing bivariate relationships and conducting informal specification testing. We study the properties of this method formally and develop enhanced visualization and econometric binscatter tools. These include estimating conditional means with optimal binning and quantifying uncertainty. We also highlight a methodological problem related to covariate adjustment that can yield incorrect conclusions. We revisit two applications using our methodology and find substantially different results relative to those obtained using prior informal binscatter methods. General purpose software in Python, R, and Stata is provided. Our technical work is of independent interest for the nonparametric partition-based estimation literature. (JEL C13, C14, C18, C51, O31, R32)",AER,2024,107,803,"['Econometric Binscatter Tools', 'Nonparametric Partition-Based Estimation', 'Data Visualization', 'Covariate Adjustment', 'Software Development']","['binscatter', 'bivariate relationships', 'specification testing', 'visualization', 'econometric tools', 'conditional means', 'optimal binning', 'uncertainty', 'covariate adjustment', 'nonparametric partition-based estimation']"
Is Journalistic Truth Dead? Measuring How Informed Voters Are about Political News,10.1257/aer.20211003,"To investigate general patterns in news information in the United States, we combine a protocol for identifying major political news stories, 11 monthly surveys with 15,000 participants, and a model of news discernment. When confronted with a true and a fake news story, 47 percent of subjects confidently choose the true story, 3 percent confidently choose the fake story, and the remaining half are uncertain. Socioeconomic differences are associated with large variations in the probability of selecting the true news story. Partisan congruence between an individual and a news story matters, but its impact is up to an order of magnitude smaller. (JEL D72, D83, L82)",AER,2024,106,670,"['Public Policy', 'Political Risk', 'Behavioral Economics', 'Income Inequality', 'Social Policy']","['news information', 'United States', 'political news stories', 'surveys', 'participants', 'news discernment', 'true news story', 'fake news story', 'socioeconomic differences', 'partisan congruence']"
Anticipatory Anxiety and Wishful Thinking,10.1257/aer.20191068,"Across five experiments (N = 1,714), we test whether people engage in wishful thinking to alleviate anxiety about adverse future outcomes. Participants perform pattern recognition tasks in which some patterns may result in an electric shock or a monetary loss. Diagnostic of wishful thinking, participants are less likely to correctly identify patterns that are associated with a shock or loss. Wishful thinking is more pronounced under more ambiguous signals and only reduced by higher accuracy incentives when participants’ cognitive effort reduces ambiguity. Wishful thinking disappears in the domain of monetary gains, indicating that negative emotions are important drivers of the phenomenon. (JEL C91, D12, D83, D91)",AER,2024,106,722,"['Behavioral Economics', 'Emotional Economics', 'Risk Management', 'Consumer Behavior', 'Cognitive Psychology']","['wishful thinking', 'anxiety', 'future outcomes', 'pattern recognition tasks', 'electric shock', 'monetary loss', 'ambiguity', 'cognitive effort', 'negative emotions', 'incentives']"
Motivated Errors,10.1257/aer.20191849,"Myriad environments allow for the possibility of confusion. Agents may appeal to such confusion—or the possibility of making an honest mistake—to justify their behavior. In three sets of experiments involving thousands of subjects, we document evidence of such motivated errors. We document this evidence in a simple environment in which the scope for errors is small and in more complex environments in which subjects display correlation neglect and an anchoring bias. (JEL C91, D12, D64, D81, D83, D91)",AER,2024,78,504,"['Behavioral Economics', 'Economic Development', 'Public Policy', 'Market Transparency', 'Consumer Behavior']","['environments', 'confusion', 'agents', 'behavior', 'experiments', 'subjects', 'errors', 'correlation neglect', 'anchoring bias', 'evidence']"
When Tariffs Disrupt Global Supply Chains,10.1257/aer.20211519,"We study unanticipated tariffs in a setting with firm-to-firm supply relationships. Firms conduct costly searches and negotiate with potential suppliers that pass a reservation level of match productivity. Global supply chains form in anticipation of free trade. Then, the home government surprises with an input tariff. This can lead to renegotiation with initial suppliers or search for replacements. Calibrating the model’s parameters to match initial import shares and the estimated responses to the US tariffs imposed on China, we find an overall welfare loss of 0.12 percent of GDP, with substantial contributions from changes in input sourcing and search costs. (JEL D72, F13, F14, L14, O19, P33)",AER,2024,107,703,"['Trade and Globalization', 'Public Policy', 'Global Supply Chains', 'Economic Development', 'Fiscal Policy']","['tariffs', 'firm-to-firm supply relationships', 'global supply chains', 'input tariff', 'renegotiation', 'search costs', 'welfare loss', 'import shares', 'US tariffs', 'China']"
Local Productivity Spillovers,10.1257/aer.20211589,"Using Canadian administrative data, this paper presents evidence of revenue and productivity spillovers across firms at fine spatial scales. Accounting for the endogenous sorting of firms across space, we estimate an average elasticity of firm revenue and productivity with respect to the average quality of other firms within 75 meters of 0.024. We find scant evidence that the average firm benefits from being surrounded by a greater amount of economic activity at this spatial scale. Sorting of higher-quality firms into more productive locations and higher average and aggregate quality peer groups is salient in the data. (JEL D22, D24, G32, L25, R11, R32)",AER,2024,103,661,"['Productivity', 'Economic Development', 'Urban Development', 'Regional Economic Integration', 'Public Policy']","['revenue', 'productivity', 'spillovers', 'firms', 'spatial scales', 'sorting', 'elasticity', 'economic activity', 'locations', 'peer groups']"
Redesigning the US Army's Branching Process: A Case Study in Minimalist Market Design,10.1257/aer.20211743,"We present a proof-of-concept for minimalist market design (Sönmez 2023) as an effective methodology to enhance an institution based on stakeholders’ desiderata with minimal interference. Four objectives— respecting merit, increasing retention, aligning talent, and enhancing trust—guided reforms to the US Army’s centralized branching process of cadets to military specialties since 2006. USMA’s mechanism for the class of 2020 exacerbated challenges in implementing these objectives. Formulating the Army’s desiderata as rigorous axioms, we analyze their implications. Under our minimalist approach to institution redesign, the Army’s objectives uniquely identify a branching mechanism. Our design is now adopted at USMA and ROTC. (JEL D47, H56, J45)",AER,2024,103,752,"['Public Policy', 'Military Policy', 'Educational Equity', 'Institutional Design', 'Market Design']","['minimalist market design', 'proof-of-concept', 'institution', 'stakeholders', 'US Army', 'branching process', 'cadets', 'military specialties', 'USMA', 'ROTC']"
The Political Development Cycle: The Right and the Left in People's Republic of China from 1953,10.1257/aer.20220249,"We quantify the effects of the political development cycle—the fluctuations between the Left (Maoist) and the Right (pragmatist) development policies—on growth and structural transformation of China in 1953–1978. The left policies prioritized structural transformation toward nonagricultural production and consumption at the expense of agricultural development. The right policies prioritized agricultural consumption through slower structural transformation. The imperfect implementation of these policies led to large welfare costs of the political development cycle in a distorted economy undergoing a structural change. (JEL D72, N15, N45, N55, O21, P21, P24)",AER,2024,87,664,"['Economic Growth', 'Public Policy', 'Political Risk', 'Economic Development', 'Structural Transformation']","['political development cycle', 'Left', 'Right', 'growth', 'structural transformation', 'China', 'policies', 'agricultural development', 'welfare costs', 'economy']"
The Opportunity Cost of Debt Aversion,10.1257/aer.20221509,"We provide evidence of the existence of debt aversion and its negative implications for financial decisions. In a new experimental design where subjects are assigned debt randomly, we quantify the opportunity cost of subjects’ debt-biased decisions. One-third of our participants neglect high returns and focus instead on debt repayments. In addition, borrowing to invest is 50 percent less likely when it leads to indebtedness. On average, participants perceive $1 less in debt as equivalent to $1.03 in savings. Hence, a debt-averse agent will undertake a 10 percent guaranteed investment only if the cost of borrowing does not exceed 6.80 percent. (JEL C91, D91, G51)",AER,2024,104,670,"['Debt Management', 'Financial Markets', 'Behavioral Economics', 'Consumer Behavior', 'Investment Strategies']","['debt aversion', 'financial decisions', 'experimental design', 'opportunity cost', 'debt-biased decisions', 'borrowing', 'investment', 'indebtedness', 'savings', 'guaranteed investment']"
Nurturing Childhood Curiosity to Enhance Learning: Evidence from a Randomized Pedagogical Intervention,10.1257/aer.20230084,"We evaluate a pedagogical intervention aimed at improving learning in elementary school children by fostering their curiosity. We test the effectiveness of the pedagogy using achievement scores and a novel measure of curiosity. The latter involves creating a sense of information deprivation and quantifying the urge to acquire information and retention ability. The intervention increases curiosity, knowledge retention, and science test scores, with the effects persisting into middle school years. It also leads to more information sharing and peer learning in the classroom. The evidence can help design better pedagogical tools to increase pupil engagement and the quality of learning. (JEL D83, I21, I26, J13, O15)",AER,2024,106,720,"['Educational Equity', 'Economic Development', 'Public Policy', 'Entrepreneurship', 'Knowledge Economy']","['pedagogical intervention', 'learning', 'elementary school children', 'curiosity', 'achievement scores', 'information deprivation', 'knowledge retention', 'science test scores', 'information sharing', 'peer learning.']"
The Economics of the Public Option: Evidence from Local Pharmaceutical Markets,10.1257/aer.20211547,"We study the effects of competition by state-owned firms, leveraging the decentralized entry of public pharmacies to local markets in Chile. Public pharmacies sell the same drugs at a third of private pharmacy prices, because of stronger upstream bargaining and market power in the private sector, but are of lower quality. Public pharmacies induced market segmentation and price increases in the private sector, which benefited the switchers to the public option but harmed the stayers. The countrywide entry of public pharmacies would reduce yearly consumer drug expenditure by 1.6 percent. (JEL D22, I18, L32, L65, O14)",AER,2024,96,622,"['Competition', 'Healthcare Systems', 'Economic Development', 'Public Policy', 'Consumer Behavior']","['competition', 'state-owned firms', 'public pharmacies', 'local markets', 'Chile', 'market power', 'market segmentation', 'price increases', 'consumer drug expenditure', 'market entry']"
The Effect of Macroeconomic Uncertainty on Household Spending,10.1257/aer.20221167,"We use randomized 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 treated households. The effects on their spending decisions relative to an untreated control group are measured in follow-up surveys. Our results indicate that, after taking into account first moments, higher macroeconomic uncertainty induces households to significantly and persistently reduce their total monthly spending in subsequent months. Changes in spending are broad based across spending categories and apply to larger durable good purchases as well. (JEL D12, D81, D84, E21, E23, G51)",AER,2024,101,708,"['Economic Growth', 'Consumer Behavior', 'Monetary Policy', 'Fiscal Policy', 'Macroeconomic Uncertainty']","['macroeconomic uncertainty', 'spending decisions', 'households', 'randomized treatments', 'economic growth', 'perceived', 'exogenous changes', 'total monthly spending', 'durable goods', 'follow-up surveys']"
Optimal Inference for Spot Regressions,10.1257/aer.20221338,"Betas from return regressions are commonly used to measure systematic financial market risks. “Good” beta measurements are essential for a range of empirical inquiries in finance and macroeconomics. We introduce a novel econometric framework for the nonparametric estimation of time-varying betas with high-frequency data. The “local Gaussian” property of the generic continuous-time benchmark model enables optimal “finite-sample” inference in a well-defined sense. It also affords more reliable inference in empirically realistic settings compared to conventional large-sample approaches. Two applications pertaining to the tracking performance of leveraged ETFs and an intraday event study illustrate the practical usefulness of the new procedures. (JEL C22, C58, G12, G23)",AER,2024,105,776,"['Financial Markets', 'Risk Management', 'Econometric Framework', 'High-Frequency Data', 'Leveraged ETFs']","['Betas', 'Return regressions', 'Systematic risk', 'Financial market', 'Econometric framework', 'Nonparametric estimation', 'Time-varying', 'High-frequency data', 'Local Gaussian', 'Inference.']"
The Comparative Statics of Sorting,10.1257/aer.20210890,"We create a general and tractable theory of increasing sorting in pairwise matching models with monetary transfers. The positive quadrant dependence partial order subsumes Becker (1973) as the extreme cases with most and least sorting and implies increasing regression coefficients. Our theory turns on synergy—the cross-partial difference or derivative of match production. This reflects basic economic forces: diminishing returns, technological convexity, insurance, and learning dynamics. We prove sorting increases if match synergy globally increases, and is cross-sectionally monotone or single crossing. We use our results to derive sorting predictions in major economics sorting papers and in new applications. (JEL C78, D21, D82, D86, J12)",AER,2024,104,747,"['Productivity', 'Economic Growth', 'Labor Market Dynamics', 'Trade and Globalization', 'Financial Markets']","['sorting', 'pairwise matching models', 'monetary transfers', 'positive quadrant dependence', 'regression coefficients', 'synergy', 'match production', 'economic forces', 'diminishing returns', 'sorting predictions']"
Mental Models and Learning: The Case of Base-Rate Neglect,10.1257/aer.20201004,"We experimentally document persistence of suboptimal behavior despite ample opportunities to learn from feedback in a canonical updating problem where people suffer from base-rate neglect. Our results provide insights on the mechanisms hindering learning from feedback. Importantly, our results suggest mistakes are more likely to be persistent when they are driven by incorrect mental models that miss or misrepresent important aspects of the environment. Such models induce confidence in initial answers, limiting engagement with and learning from feedback. We substantiate these insights in an alternative scenario where individuals involved in a voting problem overlook the importance of being pivotal. (JEL D83, D91)",AER,2024,102,721,"['Behavioral Economics', 'Learning from Feedback', 'Voting Behavior', 'Mental Models', 'Decision-making.']","['persistence', 'suboptimal behavior', 'feedback', 'base-rate neglect', 'mental models', 'environment', 'engagement', 'learning', 'voting problem', 'pivotal.']"
Hub-and-Spoke Cartels: Theory and Evidence from the Grocery Industry,10.1257/aer.20211337,"Numerous recently uncovered cartels operated along the supply chain, with firms at one end facilitating collusion at the other—hub-and-spoke arrangements. These cartels are hard to rationalize because they induce double marginalization and higher costs. We examine Canada’s alleged bread cartel and provide the first comprehensive analysis of hub-and-spoke collusion. Using court documents and pricing data, we make three contributions: (i) we show that collusion was effective, increasing inflation by about 50 percent; (ii) we provide evidence that collusion existed at both ends of the supply chain; and (iii) we develop a model explaining why this form of collusion arose. (JEL E31, K21, L12, L14, L22, L42, L81)",AER,2024,107,716,"['Supply Chain Resilience', 'Market Transparency', 'Inflation Trends', 'Economic Policy Evaluation', 'Corporate Governance']","['cartels', 'supply chain', 'collusion', 'hub-and-spoke arrangements', 'double marginalization', 'costs', 'Canada', 'bread cartel', 'inflation', 'pricing data']"
Does the Squeaky Wheel Get More Grease? The Direct and Indirect Effects of Citizen Participation on Environmental Governance in China,10.1257/aer.20221215,"We conducted a nationwide field experiment in China to evaluate the direct and indirect impacts of assigning firms to public or private citizen appeals when they violate pollution standards. There are three main findings. First, public appeals to the regulator through social media substantially reduce violations and pollution emissions, while private appeals cause more modest environmental improvements. Second, public appeals appear to tilt regulators’ focus away from facilitating economic growth and toward avoiding pollution-induced public unrest. Third, pollution reductions by treated firms are not offset by control firms, based on randomly varying the proportion of treated firms at the prefecture level. (JEL D22, L82, P28, P31, Q52, Q53, Q58)",AER,2024,109,755,"['Public Policy', 'Environmental Sustainability', 'Economic Growth', 'Climate Change Economics', 'Regulatory Frameworks']","['nationwide field experiment', 'China', 'pollution standards', 'public appeals', 'private appeals', 'social media', 'environmental improvements', 'economic growth', 'pollution reductions', 'treated firms']"
The Gender Gap in Confidence: Expected but Not Accounted For,10.1257/aer.20221413,"We investigate how the gender gap in confidence affects the views that evaluators (e.g., employers) hold about men and women. We find the confidence gap is contagious, causing evaluators to form overly pessimistic beliefs about women. This result arises even though the confidence gap is expected and even though the confidence gap shouldn’t be contagious if evaluators are Bayesian. Only an intervention that facilitates Bayesian updating proves (somewhat) effective. Additional results highlight how similar findings follow even when there is no room for discriminatory motives or differences in priors because evaluators are asked about arbitrary, rather than gender-specific, groups. (JEL D82, D83, D91, J16, J22, M51)",AER,2024,106,722,"['Gender Equality', 'Labor Market Dynamics', 'Behavioral Economics', 'Organizational Behavior', 'Economic Policy Evaluation']","['gender gap', 'confidence', 'evaluators', 'beliefs', 'Bayesian', 'intervention', 'discriminatory', 'priors', 'groups', 'effectiveness']"
Distinguishing Common Ratio Preferences from Common Ratio Effects Using Paired Valuation Tasks,10.1257/aer.20221535,"Without strong assumptions about how noise manifests in choices, we can infer little from existing empirical observations of the common ratio effect (CRE) about whether there exists an underlying common ratio preference (CRP). We propose to solve this inferential challenge using paired valuations, which yield valid inference under common assumptions. Using this approach in an online experiment with 900 participants, we find no evidence of a systematic CRP. To reconcile our findings with existing evidence, we present the same participants with paired choice tasks and demonstrate how noise can generate a CRE even for individuals without an associated CRP. (JEL C91, D81, D91)",AER,2024,103,681,"['Behavioral Economics', 'Economic Development', 'Experimental Economics', 'Public Policy', 'Decision Making']","['noise', 'choices', 'common ratio effect', 'CRE', 'underlying common ratio preference', 'CRP', 'paired valuations', 'online experiment', 'evidence', 'systematic CRP']"
The Immigrant Next Door,10.1257/aer.20220376,"We study how decades-long exposure to individuals of a given foreign descent shapes natives’ attitudes and behavior toward that group. Using individualized donations data, we show that long-term exposure to a given foreign ancestry leads to more generous behavior specifically toward that group’s ancestral country. Focusing on exposure to Arab Muslims to examine mechanisms, we show that long-term exposure (i) decreases explicit and implicit prejudice against Arab Muslims, (ii) reduces support for policies and political candidates hostile toward Arab Muslims, (iii) increases charitable donations to Arab countries, (iv) leads to more personal contact with Arab Muslims, and (v) increases knowledge of Arab Muslims and Islam. (JEL D64, D83, D91, J15)",AER,2024,110,754,"['Social Policy', 'Public Policy', 'Consumer Behavior', 'Immigration and Labor', 'Knowledge Economy']","['long-term exposure', 'foreign descent', 'attitudes', 'behavior', 'natives', 'generous behavior', 'ancestral country', 'Arab Muslims', 'prejudice', 'charitable donations']"
The Nurture of Nature and the Nature of Nurture: How Genes and Investments Interact in the Formation of Skills,10.1257/aer.20220456,"This paper studies the interplay between genetics and family investments in the process of skill formation. We model and estimate the joint evolution of skills and parental investments throughout early childhood. We document three genetic mechanisms: the direct effect of child genes on skills, the indirect effect of child genes via parental investments, and family genetic influences captured by parental genes. We show that genetic effects are dynamic, increase over time, and operate via environmental channels. Our paper highlights the value of integrating biological and social perspectives into a single unified framework. (JEL I24, I26, J12, J13, J24)",AER,2024,98,659,"['Genetics', 'Skill Formation', 'Educational Equity', 'Family Investments', 'Social Policy']","['genetics', 'family investments', 'skill formation', 'parental investments', 'child genes', 'genetic mechanisms', 'environmental channels', 'biological', 'social perspectives', 'unified framework']"
Prolonged Learning and Hasty Stopping: The Wald Problem with Ambiguity,10.1257/aer.20221149,"This paper studies sequential information acquisition by an ambiguity-averse decision-maker (DM), who decides how long to collect information before taking an irreversible action. The agent optimizes against the worst-case belief and updates prior by prior. We show that the consideration of ambiguity gives rise to rich dynamics: compared to the Bayesian DM, the DM here tends to experiment excessively when facing modest uncertainty and, to counteract it, may stop experimenting prematurely when facing high uncertainty. In the latter case, the DM’s stopping rule is nonmonotonic in beliefs and features randomized stopping. (JEL C61, D81, D83, D91)",AER,2024,96,651,"['Decision Theory', 'Risk Management', 'Behavioral Economics', 'Financial Markets', 'Economic Policy Evaluation']","['sequential information acquisition', 'ambiguity-averse', 'decision-maker', 'worst-case belief', 'dynamics', 'experimentation', 'uncertainty', 'stopping rule', 'randomized stopping', 'prior beliefs']"
Gender Differences in Medical Evaluations: Evidence from Randomly Assigned Doctors,10.1257/aer.20220349,"Little is known about what drives gender disparities in health care and related social insurance benefits. Using data and variation from the Texas workers’ compensation program, we study the impact of gender match between doctors and patients on medical evaluations and associated disability benefits. Compared to differences among their male patient counterparts, female patients randomly assigned a female doctor rather than a male doctor are 5.2 percent more likely to be evaluated as disabled and receive 8.6 percent more subsequent cash benefits on average. There is no analogous gender-match effect for male patients. Our estimates indicate that increasing the share of female patients evaluated by female doctors may substantially shrink gender gaps in medical evaluations and associated outcomes. (JEL H75, I11, I12, J14, J16, J28)",AER,2024,125,839,"['Healthcare Systems', 'Gender Equality', 'Labor Market Dynamics', 'Social Policy', 'Public Policy']","['gender disparities', 'health care', 'social insurance benefits', 'Texas workers’ compensation program', 'gender match', 'doctors', 'patients', 'medical evaluations', 'disability benefits', 'gender gaps']"
Pricing Power in Advertising Markets: Theory and Evidence,10.1257/aer.20220943,"Existing theories of media competition imply that advertisers will pay a lower price in equilibrium to reach consumers who multi-home across competing outlets. We generalize and extend this theoretical result and test it using data from television and social media advertising. We find that the model is a good match, qualitatively and quantitatively, to variation in advertising prices across demographic groups, outlets, platforms, and over time. We use the model to quantify the effects of competition within and across platforms. (JEL G34, K21, L13, L82, M37)",AER,2024,86,563,"['Advertising Prices', 'Competition', 'Media Competition', 'Consumer Behavior', 'Platform Competition']","['media competition', 'advertisers', 'equilibrium', 'consumers', 'outlets', 'advertising prices', 'demographic groups', 'platforms', 'competition', 'data']"
Asset-Based Microfinance for Microenterprises: Evidence from Pakistan,10.1257/aer.20210169,"We run a field experiment offering graduated microcredit clients the opportunity to finance a business asset worth four times their usual borrowing limit. We implement this using a hire-purchase contract; our control group is offered a zero interest loan at the usual borrowing limit. We find large, significant, and persistent effects: treated microenterprise owners run larger businesses with higher profits; consequently, household consumption increases, particularly on food and children’s education. A dynamic structural model with nonconvex capital adjustment costs rationalizes our results and allows counterfactual analysis; this highlights the potential for welfare improvements through large capital injections that are financially sustainable. (JEL C93, D22, G21, G32, L25, O14, O16)",AER,2024,109,794,"['Entrepreneurship', 'Credit Markets', 'Economic Development', 'Financial Markets', 'Public Policy']","['microcredit', 'field experiment', 'business asset', 'hire-purchase contract', 'profits', 'household consumption', 'structural model', 'capital injection', 'welfare improvements', 'financial sustainability']"
"Old Age Risks, Consumption, and Insurance",10.1257/aer.20220555,"In the United States, after age 65, households face income and health risks, and a large fraction of these risks are transitory. While consumption significantly responds to transitory income shocks, out-of-pocket medical expenses do not. In contrast, both consumption and out-of-pocket medical expenses respond to transitory health shocks. Thus, most US elderly keep their out-of-pocket medical expenses close to a satiation point that varies with health. Consumption responds to health shocks mostly because adverse health shocks reduce the marginal utility of consumption. The effect of health on marginal utility changes the optimal transfers due to health shocks. (JEL D12, E21, G22, G51, I10, J14, J26)",AER,2024,105,707,"['Healthcare Systems', 'Consumer Behavior', 'Public Policy', 'Labor Market Dynamics', 'Income Inequality']","['income', 'health risks', 'transitory', 'consumption', 'out-of-pocket medical expenses', 'elderly', 'satiation point', 'marginal utility', 'health shocks', 'optimal transfers']"
Disentangling Moral Hazard and Adverse Selection,10.1257/aer.20220100,"While many real-world principal-agent problems have both moral hazard and adverse selection, existing tools largely analyze only one at a time. Do the insights from the separate analyses survive when the frictions are combined? We develop a simple method—decoupling—to study both problems at once. When decoupling works, everything we know from the separate analyses carries over, but interesting interactions also arise. We provide simple tests for whether decoupling is valid. We develop and numerically implement an algorithm to calculate the decoupled solution and check its validity. We also provide primitives for decoupling to work and analyze several extensions. (JEL D82, D86)",AER,2024,101,685,"['Financial Markets', 'Risk Management', 'Corporate Governance', 'Public Policy', 'Monetary Policy']","['moral hazard', 'adverse selection', 'principal-agent problems', 'decoupling', 'frictions', 'analyses', 'interactions', 'validity', 'algorithm', 'extensions']"
Universal Basic Income: A Dynamic Assessment,10.1257/aer.20221099,"Universal basic income (UBI) is an increasingly popular policy proposal, but there is no evidence regarding its longer-term consequences. We find that UBI generates large welfare losses in a general equilibrium model with imperfect capital markets, labor market shocks, and intergenerational linkages via skill formation and transfers. This conclusion is robust to various alternative ways of financing UBI. By using observationally equivalent models that eliminate different sources of endogenous dynamic linkages (equilibrium capital market and parental investment in child skills), we show that the latter are largely responsible for the negative welfare consequences. (JEL H24, H31, I38, J22, J24, J62)",AER,2024,100,706,"['Public Policy', 'Labor Market Dynamics', 'Social Policy', 'Economic Growth', 'Fiscal Policy']","['Universal basic income', 'policy proposal', 'welfare losses', 'general equilibrium model', 'imperfect capital markets', 'labor market shocks', 'intergenerational linkages', 'skill formation', 'transfers', 'financing UBI']"
Retirement Consumption and Pension Design,10.1257/aer.20221426,"This paper analyzes consumption to evaluate the distributional effects of pension reforms. Using Swedish administrative data, we show that on average, workers who retire earlier consume less while retired and experience larger drops in consumption around retirement. Interpreted via a theoretical model, these findings imply that reforms incentivizing later retirement incur a substantial consumption smoothing cost. Turning to other features of pension policy, we find that reforms that redistribute based on early-career labor supply would have opposite-signed redistributive effects, while differentiating on wealth may help to target pension benefits toward those who are vulnerable to larger drops in consumption around retirement. (JEL E21, G51, H23, H55, J22, J26)",AER,2024,108,771,"['Pension Systems', 'Public Policy', 'Labor Market Dynamics', 'Income Inequality', 'Consumer Behavior']","['consumption', 'distributional effects', 'pension reforms', 'retirement', 'Swedish', 'administrative data', 'consumption smoothing', 'pension policy', 'labor supply', 'wealth']"
The Ends of 27 Big Depressions,10.1257/aer.20221479,"How did countries recover from the Great Depression? In this paper, we explore the argument that leaving the gold standard helped by boosting inflationary expectations, lowering real interest rates, and stimulating interest-sensitive expenditures. We do so for a sample of 27 countries, using modern nowcasting methods and a new data-set containing more than 230,000 monthly and quarterly observations for over 1,500 variables. In those cases where the departure from gold happened on well-defined dates, inflationary expectations clearly rose in the wake of departure. Instrumental variable, difference-in-difference, and synthetic matching techniques suggest that the relationship is causal. (JEL E31, E32, E42, E43, F30, N10, N20)",AER,2024,104,733,"['Monetary Policy', 'Economic Growth', 'Trade and Globalization', 'Financial Markets', 'Public Policy']","['Great Depression', 'countries', 'recovery', 'gold standard', 'inflationary expectations', 'real interest rates', 'interest-sensitive expenditures', 'nowcasting methods', 'data-set', 'departure']"
The Economic Impact of Depression Treatment in India: Evidence from Community-Based Provision of Pharmacotherapy,10.1257/aer.20210687,"This study evaluates the impact of depression treatment on economic behavior in Karnataka, India. We cross-randomize pharmacotherapy and livelihoods assistance among 1,000 depressed adults and evaluate impacts on depression severity, socioeconomic outcomes, and several potential pathways. When combined, the interventions reduce depression severity, with benefits that persist after treatment concludes. Pharmacotherapy alone has a weaker effect that is only marginally significant and dissipates sooner. Depression treatment does not significantly increase earnings, consumption, or human capital investment in children. (JEL I12, I15, I18, J13, J22, J31, O15)",AER,2024,86,662,"['Mental Health Economics', 'Healthcare Systems', 'Labor Market Dynamics', 'Economic Development', 'Healthcare Innovation']","['depression treatment', 'economic behavior', 'Karnataka', 'India', 'pharmacotherapy', 'livelihoods assistance', 'depression severity', 'socioeconomic outcomes', 'interventions', 'human capital investment']"
Market Power and Innovation in the Intangible Economy,10.1257/aer.20201079,"This paper offers a unified explanation for the slowdown of productivity growth, the decline in business dynamism, and the rise of market power. Using a quantitative framework, I show that the rise of intangible inputs, such as software, can explain these trends. Intangibles reduce marginal costs and raise fixed costs, which gives firms with high-intangible adoption a competitive advantage, in turn deterring other firms from entering. I structurally estimate the model on French and US micro data. After initially boosting productivity, the rise of intangibles causes a decline in productivity growth, consistent with the empirical trends observed since the mid-1990s. (JEL D22, D24, E23, L11, O31, O47)",AER,2024,107,707,"['Productivity', 'Innovation', 'Technological Adoption', 'Economic Growth', 'Public Policy']","['slowdown', 'productivity growth', 'decline', 'business dynamism', 'rise', 'market power', 'intangible inputs', 'software', 'competitive advantage', 'productivity trend']"
Propagation and Insurance in Village Networks,10.1257/aer.20220892,"Firms in developing countries are embedded in supply chains and labor networks. These linkages may propagate or attenuate shocks. Using panel data from Thai villages, we document three facts: as households facing idiosyncratic shocks adjust their production, these shocks propagate to other households on both the production and consumption sides; propagation is greater via labor than supply chain links; and shocks in denser networks and to more central households propagate more, while access to formal or informal insurance reduces propagation. Social benefits from expanding safety nets may be higher than private benefits. (JEL D13, D22, G22, I10, L14, L26, O10)",AER,2024,100,668,"['Labor Market Dynamics', 'Social Policy', 'Economic Development', 'Risk Management', 'Public Policy']","['supply chains', 'labor networks', 'shocks', 'propagation', 'panel data', 'Thai villages', 'production', 'consumption', 'networks', 'insurance']"
Competing to Commit: Markets with Rational Inattention,10.1257/aer.20221605,"Two homogeneous-good firms compete for a consumer’s unitary demand. The consumer is rationally inattentive and pays entropy costs to process information about firms’ offers. Compared to a collusion benchmark, competition produces two effects. As in standard models, competition puts downward pressure on prices. But, additionally, an attention effect arises: the consumer engages in trade more often. This alleviates the commitment problem that firms have when facing inattentive consumers and increases trade efficiency. For high enough attention costs, the attention effect dominates the effect on prices: firms’ profits are higher under competition than under collusion. (JEL D11, D21, D43, D83, L12)",AER,2024,100,703,"['Consumer Behavior', 'Competition', 'Pricing', 'Information Processing', 'Industrial Organization']","['competition', 'consumer', 'attention', 'entropy costs', 'collusion', 'prices', 'trade efficiency', 'profits', 'inattentive', 'homogeneous-good']"
The (Lack of) Anticipatory Effects of the Social Safety Net on Human Capital Investment,10.1257/aer.20230010,"How does the expectation that a child will receive government benefits in adulthood affect parental investments in the child’s human capital? Most parents whose children receive Supplemental Security Income (SSI) benefits overestimate the likelihood that their child will receive SSI benefits in adulthood. We present randomly selected families with the predicted likelihood that their child will receive SSI benefits in adulthood. Reducing parents’ expectations that children will receive benefits in adulthood does not increase investments in children’s human capital. This zero effect is precisely estimated. Likely explanations include parents working more themselves, nonfinancial goals influencing investment, and families facing investment constraints. (JEL G52, I26, I38, J13, J24, J31)",AER,2023,108,794,"['Social Policy', 'Labor Market Dynamics', 'Educational Equity', 'Public Policy', 'Income Inequality']","['government benefits', 'parental investments', 'human capital', 'Supplemental Security Income', 'SSI benefits', 'adulthood', 'expectations', 'investments', 'children', 'families']"
Identifying the Benefits from Homeownership: A Swedish Experiment,10.1257/aer.20171449,"Homeownership is widely stimulated by policy, yet its economic effects are poorly understood. We exploit quasi-random variation in homeownership generated by privatization decisions of municipally owned buildings and use granular data on demographics, income, housing, financial wealth, and debt that allow us to construct high-quality measures of spending. Homeownership causes wealth accumulation via house price appreciation, increases consumption, and improves consumption smoothing across time and states of the world. It increases mobility for young households, who move up the property ladder, and amplifies wealth accumulation for older households, who take more risk in their financial portfolio. (JEL D15, E21, G51, R21, R23, R31, R38)",AER,2023,104,745,"['Housing Market Trends', 'Financial Markets', 'Wealth Distribution', 'Consumer Behavior', 'Economic Development']","['homeownership', 'policy', 'economic effects', 'wealth accumulation', 'house price appreciation', 'consumption', 'consumption smoothing', 'mobility', 'financial portfolio', 'privatization decisions']"
Intergenerational Mobility in American History: Accounting for Race and Measurement Error,10.1257/aer.20200292,"A large body of evidence finds that relative mobility in the US has declined over the past 150 years. However, long-run mobility estimates are usually based on White samples and therefore do not account for the limited opportunities available for nonwhite families. Moreover, historical data measure the father’s status with error, which biases estimates toward greater mobility. Using linked census data from 1850 to 1940, I show that accounting for race and measurement error can double estimates of intergenerational persistence. Updated estimates imply that there is greater equality of opportunity today than in the past, mostly because opportunity was never that equal. (JEL J15, J62, N31, N32)",AER,2023,107,700,"['Income Inequality', 'Labor Market Dynamics', 'Educational Equity', 'Public Policy', 'Race and Ethnicity.']","['mobility', 'relative mobility', 'US', 'White', 'nonwhite families', 'historical data', 'intergenerational persistence', 'race', 'measurement error', 'equality of opportunity']"
Populist Leaders and the Economy,10.1257/aer.20202045,"Populism at the country level is at an all-time high, with more than 25 percent of nations currently governed by populists. How do economies perform under populist leaders? We build a new long-run cross-country database to study the macroeconomic history of populism. We identify 51 populist presidents and prime ministers from 1900 to 2020 and show that the economic cost of populism is high. After 15 years, GDP per capita is 10 percent lower compared to a plausible nonpopulist counterfactual. Economic disintegration, decreasing macroeconomic stability, and the erosion of institutions typically go hand in hand with populist rule. (JEL D72, E23, N10, N40, O43)",AER,2023,104,665,"['Economic Growth', 'Public Policy', 'Fiscal Policy', 'Monetary Policy', 'Economic Development']","['populism', 'economies', 'leaders', 'macroeconomic', 'database', 'presidents', 'prime ministers', 'GDP per capita', 'economic cost', 'institutions']"
Happy Times: Measuring Happiness Using Response Times,10.1257/aer.20211051,"Surveys measuring happiness or preferences generate discrete ordinal data. Ordered response models, which are used to analyze such data, suffer from an identification problem. Their conclusions depend on distributional assumptions about a latent variable. We propose using response times to solve that problem. Response times contain information about the distribution of the latent variable through a chronometric effect. Using an online survey experiment, we verify the chronometric effect. We then provide theoretical conditions for testing conventional distributional assumptions. These assumptions are rejected in some cases, but overall our evidence is consistent with the qualitative validity of the conventional models. (JEL C14, D60, D91, I31)",AER,2023,104,752,"['Economic Growth', 'Behavioral Economics', 'Data Privacy', 'Market Transparency', 'Statistical Modeling']","['happiness', 'preferences', 'ordinal data', 'ordered response models', 'identification problem', 'latent variable', 'response times', 'online survey experiment', 'distributional assumptions', 'chronometric effect']"
"America, Jump-Started: World War II R&D and the Takeoff of the US Innovation System",10.1257/aer.20221365,"During World War II, the US government’s Office of Scientific Research and Development (OSRD) supported one of the largest public investments in applied R&D in US history. Using data on all OSRD-funded invention, we show this shock had a formative impact on the US innovation system, catalyzing technology clusters across the country, with accompanying increases in high-tech entrepreneur-ship and employment. These effects persist until at least the 1970s and appear to be driven by agglomerative forces and endogenous growth. In addition to creating technology clusters, wartime R&D permanently changed the trajectory of overall US innovation in the direction of OSRD-funded technologies. (JEL H56, N42, N72, O31, O33, O38, R11)",AER,2023,109,738,"['Innovation', 'Entrepreneurship', 'Economic Growth', 'Public Policy', 'Technological Adoption']","['US government', 'Office of Scientific Research and Development', 'World War II', 'innovation system', 'technology clusters', 'high-tech entrepreneurship', 'employment', 'agglomerative forces', 'endogenous growth', 'R&D.']"
"Taking It to the Limit: Effects of Increased Student Loan Availability on Attainment, Earnings, and Financial Well-Being",10.1257/aer.20210926,"Growing reliance on student loans and repayment difficulties have raised concerns of a student debt crisis in the United States, but little is known about the effects of student borrowing on human capital and long-run financial well-being. We use variation induced by recent expansions in federal loan limits combined with administrative data-sets to identify the effects of increased access to student loans on credit-constrained students’ educational attainment, earnings, debt, and loan repayment. Increased student loan availability raises student debt and improves degree completion, later-life earnings, and student loan repayment, while having no effect on homeownership or other types of debt. (JEL G51, I22, I23, I26, J24)",AER,2023,106,731,"['Educational Equity', 'Credit Markets', 'Debt Management', 'Labor Market Dynamics', 'Public Policy']","['student loans', 'debt crisis', 'human capital', 'financial well-being', 'federal loan limits', 'educational attainment', 'earnings', 'loan repayment', 'degree completion', 'homeownership']"
Who Benefits from State Corporate Tax Cuts? A Local Labor Market Approach with Heterogeneous Firms: Reply,10.1257/aer.20230208,"In Suárez Serrato and Zidar (2016), we estimate the incidence of state corporate taxes. Malgouyres, Mayer, and Mazet-Sonilhac (2023) highlight two errors, ignoring effects on firm composition and characterizing capital costs inconsistently. This reply corrects the structural model and corresponding incidence estimates. The incidence results are similar to the originally reported estimates and the confidence intervals widen for some estimates. In the corrected structural model, the firm owner incidence share estimate changes by 1.6 percentage points relative to the original version (i.e., 38.1 percent versus 36.5 percent). The worker share estimate is 35.0 percent. Landowners bear the remaining 26.8 percent. (JEL H22, H25, H32, H71, R23, R51)",AER,2023,107,751,"['Taxation', 'Public Policy', 'Labor Market Dynamics', 'Economic Development', 'Fiscal Policy']","['incidence', 'state corporate taxes', 'errors', 'firm composition', 'capital costs', 'structural model', 'estimates', 'firm owner', 'worker share', 'landowners']"
A Sufficient Statistics Approach for Macro Policy,10.1257/aer.20220581,"The evaluation of macroeconomic policy decisions has traditionally relied on the formulation of a specific economic model. In this work, we show that two statistics are sufficient to detect, often even correct, nonoptimal policies, i.e., policies that do not minimize the loss function. The two sufficient statistics are (i) forecasts for the policy objectives conditional on the policy choice and (ii) the impulse responses of the policy objectives to policy shocks. Both statistics can be estimated without relying on a specific structural economic model. We illustrate the method by studying US monetary policy decisions. (JEL E24, E31, E32, E43, E52, E58)",AER,2023,101,659,"['Monetary Policy', 'Economic Policy Evaluation', 'Macroeconomic Policy', 'Forecasting', 'Policy Analysis']","['macroeconomic policy', 'evaluation', 'economic model', 'statistics', 'nonoptimal policies', 'loss function', 'forecasts', 'policy objectives', 'policy shocks', 'US monetary policy']"
Beyond Teachers: Estimating Individual School Counselors' Effects on Educational Attainment,10.1257/aer.20200847,"Counselors are a common school resource for students navigating complicated and consequential education choices. I estimate counselors’ causal effects using quasi-random assignment policies in Massachusetts. Counselors vary substantially in their effectiveness at increasing high school graduation and college attendance, selectivity, and persistence. Counselor effects on educational attainment are similar in magnitude to teacher effects, but they flow through improved information and assistance more than cognitive or noncognitive skill development. Counselor effectiveness is most important for low-income and low-achieving students, so improving access to effective counseling may be a promising way to increase educational attainment and close socioeconomic gaps in education. (JEL H75, I21, I24, I28)",AER,2023,105,808,"['Educational Equity', 'Public Policy', 'Labor Market Dynamics', 'Economic Development', 'Social Policy']","['counselors', 'school resource', 'students', 'education choices', 'Massachusetts', 'high school graduation', 'college attendance', 'counselor effectiveness', 'educational attainment', 'low-income']"
The Impact of Regulation on Innovation,10.1257/aer.20210107,"We present a framework that can be used to assess the equilibrium impact of regulation on endogenous innovation with heterogeneous firms. We implement this model using French firm-level panel data, where there is a sharp increase in the burden of labor regulations on companies with 50 or more employees. Consistent with the model’s qualitative predictions, we find a fall in the fraction of innovating firms just to the left of the regulatory threshold. Furthermore, we find a reduction in the innovation response of firms to demand shocks just below the threshold. Regulation reduces aggregate innovation by 5.7 percent. (JEL D22, K31, L11, L25, L51, O31, O34)",AER,2023,106,662,"['Regulatory Frameworks', 'Innovation', 'Labor Market Dynamics', 'Economic Development', 'Public Policy']","['regulation', 'innovation', 'firms', 'equilibrium impact', 'heterogeneous', 'labor regulations', 'French', 'panel data', 'demand shocks', 'aggregate innovation']"
Selection on Welfare Gains: Experimental Evidence from Electricity Plan Choice,10.1257/aer.20210150,"We study a problem in which policymakers need to screen self-selected individuals by unobserved heterogeneity in social welfare gains from a policy intervention. In our framework, the marginal treatment effects and marginal treatment responses arise as key statistics to characterize social welfare. We apply this framework to a randomized field experiment on electricity plan choice. Consumers were offered welfare-improving dynamic pricing with randomly assigned take-up incentives. We find that price-elastic consumers—who generate larger welfare gains—are more likely to self-select. Our counterfactual simulations quantify the optimal take-up incentives that exploit observed and unobserved heterogeneity in selection and welfare gains. (JEL C93, D12, L11, L94, L98)",AER,2023,104,771,"['Public Policy', 'Consumer Behavior', 'Energy Transition', 'Economic Development', 'Regulatory Frameworks']","['policymakers', 'screening', 'self-selected individuals', 'unobserved heterogeneity', 'social welfare gains', 'marginal treatment effects', 'marginal treatment responses', 'randomized field experiment', 'electricity plan choice', 'dynamic pricing']"
Unpacking P-hacking and Publication Bias,10.1257/aer.20210795,"We use unique data from journal submissions to identify and unpack publication bias and p-hacking. We find initial submissions display significant bunching, suggesting the distribution among published statistics cannot be fully attributed to a publication bias in peer review. Desk-rejected manuscripts display greater heaping than those sent for review; i.e., marginally significant results are more likely to be desk rejected. Reviewer recommendations, in contrast, are positively associated with statistical significance. Overall, the peer review process has little effect on the distribution of test statistics. Lastly, we track rejected papers and present evidence that the prevalence of publication biases is perhaps not as prominent as feared. (JEL A11, A14, C13, L82)",AER,2023,110,775,"['Peer Review', 'Publication Bias', 'Statistical Significance', 'Research Methods', 'Publication Process']","['publication bias', 'p-hacking', 'journal submissions', 'peer review', 'desk-rejected manuscripts', 'statistical significance', 'test statistics', 'rejected papers', 'prevalence', 'evidence']"
Is There a VA Advantage? Evidence from Dually Eligible Veterans,10.1257/aer.20211638,"We study public versus private provision of health care for veterans aged 65 and older who may receive care provided by the US Department of Veterans Affairs (VA) and in private hospitals financed by Medicare. Utilizing the ambulance design of Doyle et al. (2015), we find that the VA reduces 28-day mortality by 46 percent (4.5 per centage points) and that these survival gains are persistent. The VA also reduces 28-day spending by 21 percent and delivers strikingly different reported services relative to private hospitals. We find suggestive evidence of complementarities between continuity of care, health IT, and integrated care. (JEL H51, I11, I12, I18, J14)",AER,2023,106,666,"['Healthcare Systems', 'Public Policy', 'Economic Development', 'Healthcare Innovation', 'Public Finance']","['public provision', 'private provision', 'health care', 'veterans', 'US Department of Veterans Affairs', 'Medicare', 'mortality', 'spending', 'services', 'continuity of care']"
Measuring Upward Mobility,10.1257/aer.20220316,"We conceptualize and measure upward mobility over income or wealth. At the core of our exercise is the Growth Progressivity Axiom: transfers of instantaneous growth rates from relatively rich to poor individuals increases upward mobility. This axiom, along with mild auxiliary restrictions, identifies an “upward mobility kernel” with a single free parameter, in which mobility is linear in individual growth rates, with geometrically declining weights on baseline incomes. We extend this kernel to trajectories over intervals. The analysis delivers an upward mobility index that does not rely on panel data. That significantly expands our analytical scope to data-poor settings. (JEL D31, D63, I32, O15, O40)",AER,2023,105,709,"['Income Inequality', 'Economic Growth', 'Public Policy', 'Data Privacy', 'Social Policy']","['upward mobility', 'Growth Progressivity Axiom', 'transfers', 'growth rates', 'individuals', 'kernel', 'trajectories', 'intervals', 'upward mobility index', 'panel data']"
Who Controls the Agenda Controls the Legislature,10.1257/aer.20221578,"We model legislative decision-making with an agenda setter who can propose policies sequentially, tailoring each proposal to the status quo that prevails after prior votes. Voters are sophisticated, and the agenda setter cannot commit to future proposals. Nevertheless, the agenda setter obtains her favorite outcome in every equilibrium regardless of the initial default policy. Central to our results is a new condition on preferences, manipulability, that holds in rich policy spaces, including spatial settings and distribution problems. Our findings therefore establish that, despite the sophistication of voters and the absence of commitment power, the agenda setter is effectively a dictator. (JEL D71, D72, D78)",AER,2023,104,719,"['Public Policy', 'Political Risk', 'Economic Development', 'Behavioral Economics', 'Game Theory']","['legislative decision-making', 'agenda setter', 'policies', 'voters', 'equilibrium', 'preferences', 'manipulability', 'policy spaces', 'dictatorship', 'commitment power']"
The Economic Origins of Government,10.1257/aer.20201919,"We test between cooperative and extractive theories of the origins of government. We use river shifts in southern Iraq as a natural experiment, in a new archeological panel dataset. A shift away creates a local demand for a government to coordinate because private river irrigation needs to be replaced with public canals. It disincentivizes local extraction as land is no longer productive without irrigation. Consistent with a cooperative theory of government, a river shift away led to state formation, canal construction, and the payment of tribute. We argue that the first governments coordinated between extended households which implemented public good provision. (JEL D72, H11, H41, N45, N55, Q15)",AER,2023,108,705,"['Public Policy', 'Economic Development', 'Climate Change Economics', 'Water Resource Management', 'Governance']","['origins of government', 'cooperative theories', 'extractive theories', 'river shifts', 'southern Iraq', 'natural experiment', 'archeological panel dataset', 'state formation', 'canal construction', 'tribute']"
Regulation Design in Insurance Markets,10.1257/aer.20210710,"Regulators often impose rules that constrain the behavior of market participants. We study the design of regulatory policy in an insurance market as a delegation problem. A regulator restricts the menus of contracts an informed firm is permitted to offer, the firm offers a permitted menu to each consumer, and consumers choose contracts from offered menus. If consumer types and firm signals are ordered in a way that reflects coverage need, the regulator can leverage the firm’s information by forcing the firm to offer specified additional options on each menu. Several extensions illustrate the practical application of our results. (JEL D21, D43, D82, D86, G22, G28, L51)",AER,2023,107,676,"['Regulatory Frameworks', 'Financial Markets', 'Risk Management', 'Public Policy', 'Insurance Market']","['insurance market', 'regulatory policy', 'delegation problem', 'contracts', 'firm signals', 'coverage need', 'consumer types', 'market participants', 'regulator', 'menus']"
"Optimal Insurance: Dual Utility, Random Losses, and Adverse Selection",10.1257/aer.20221247,"We study a generalization of the classical monopoly insurance problem under adverse selection (see Stiglitz 1977) where we allow for a random distribution of losses, possibly correlated with the agent’s risk parameter that is private information. Our model explains patterns of observed customer behavior and predicts insurance contracts most often observed in practice: these consist of menus of several deductible-premium pairs or menus of insurance with coverage limits–premium pairs. A main departure from the classical insurance literature is obtained here by endowing the agents with risk-averse preferences that can be represented by a dual utility functional (Yaari 1987). (JEL D81, D82, D86, D91, G22)",AER,2023,104,710,"['Insurance', 'Risk Management', 'Consumer Behavior', 'Monetary Policy', 'Behavioral Economics']","['monopoly insurance', 'adverse selection', 'risk parameter', 'insurance contracts', 'deductible', 'premium', 'coverage limits', 'risk-averse preferences', 'utility functional', 'Yaari 1987']"
Intrinsic Information Preferences and Skewness,10.1257/aer.20171474,"We examine whether people have an intrinsic preference for negatively skewed or positively skewed information structures and how these preferences relate to intrinsic preferences for informativeness. The results from lab experiments show a strong intrinsic preference for positively skewed information and suggest that providing such information can improve information uptake. Evidence from field studies in decision- and ego-relevant contexts replicates these findings. We discuss our findings through the lens of existing theories and the potential trade-offs in information provision policies. (JEL C91, C93, D12, D82, D83)",AER,2023,86,627,"['Behavioral Economics', 'Information Provision', 'Decision Making', 'Public Policy', 'Trade and Globalization']","['preference', 'skewed', 'information structures', 'informativeness', 'lab experiments', 'information uptake', 'field studies', 'decision-relevant', 'ego-relevant', 'information provision policies']"
A Signal to End Child Marriage: Theory and Experimental Evidence from Bangladesh,10.1257/aer.20220720,"Child marriage remains common even where female schooling and employment opportunities have grown. We experimentally evaluate a financial incentive to delay marriage alongside a girls’ empowerment program in Bangladesh. While girls eligible for two years of incentive are 19 percent less likely to marry underage, the empowerment program failed to decrease adolescent marriage. We show that these results are consistent with a signaling model in which bride type is imperfectly observed but preferred types (socially conservative girls) have lower returns to delaying marriage. Consistent with our theoretical prediction, we observe substantial spillovers of the incentive on untreated nonpreferred types. (JEL C93, D91, J12, J13, J16, 012)",AER,2023,106,740,"['Social Policy', 'Gender Equality', 'Educational Equity', 'Economic Development', 'Labor Market Dynamics']","['child marriage', 'schooling', 'employment opportunities', 'financial incentive', ""girls' empowerment program"", 'Bangladesh', 'adolescent marriage', 'signaling model', 'socially conservative girls', 'spillovers']"
Matching Mechanisms for Refugee Resettlement,10.1257/aer.20210096,"Current refugee resettlement processes account for neither the preferences of refugees nor the priorities of hosting communities. We introduce a new framework for matching with multidimensional knapsack constraints that captures the (possibly multidimensional) sizes of refugee families and the capacities of communities. We propose four refugee resettlement mechanisms and two solution concepts that can be used in refugee resettlement matching under various institutional and informational constraints. Our theoretical results and simulations using refugee resettlement data suggest that preference-based matching mechanisms can improve match efficiency, respect priorities of communities, and incentivize refugees to report where they would prefer to settle. (JEL C78, D82, J15, J18)",AER,2023,104,786,"['Public Policy', 'Immigration and Labor', 'Economic Development', 'Refugee Resettlement', 'Trade Policies']","['refugee resettlement', 'preferences', 'priorities', 'framework', 'multidimensional knapsack constraints', 'match efficiency', 'communities', 'mechanisms', 'solution concepts', 'simulations']"
The Behavioral Foundations of Default Effects: Theory and Evidence from Medicare Part D,10.1257/aer.20210013,"We show in two natural experiments that default rules in Medicare Part D have large, persistent effects on enrollment and drug utilization of low-income beneficiaries. The implications of this phenomenon for welfare and optimal policy depend on the sensitivity of passivity to the value of the default option. Using random assignment to default options, we show that beneficiary passivity is extremely insensitive, even when enrolling in the default option would result in substantial drug consumption losses. A third natural experiment suggests that variation in active choice is driven by random transitory shocks rather than the inherent attentiveness of some beneficiaries. (JEL D91, I13, I18, I38, L65)",AER,2023,106,707,"['Healthcare Systems', 'Public Policy', 'Consumer Behavior', 'Behavioral Economics', 'Economic Policy Evaluation']","['Medicare Part D', 'default rules', 'enrollment', 'drug utilization', 'low-income beneficiaries', 'welfare', 'optimal policy', 'passivity', 'random assignment', 'active choice']"
"Profits, Scale Economies, and the Gains from Trade and Industrial Policy",10.1257/aer.20210419,"This paper examines the efficacy of second-best trade restrictions at correcting sectoral misallocation due to scale economies or profit-generating markups. To this end, we characterize optimal trade and industrial policies in an important class of quantitative trade models with scale effects and profits, estimating the structural parameters that govern policy outcomes. Our estimates reveal that standalone trade policy measures are remarkably ineffective at correcting mis-allocation, even when designed optimally. Unilateral adoption of corrective industrial policies is also ineffective due to immiserizing growth effects. But industrial policies coordinated internationally via a deep agreement are more transformative than any unilateral policy alternative. (JEL F12, F13,14. L52, O19, O25)",AER,2023,106,798,"['Trade Policies', 'Industrial Policy', 'Economic Growth', 'Globalization', 'International Cooperation']","['efficacy', 'trade restrictions', 'sectoral misallocation', 'scale economies', 'profit-generating markups', 'trade models', 'industrial policies', 'structural parameters', 'international coordination', 'deep agreement']"
Worth Your Weight: Experimental Evidence on the Benefits of Obesity in Low-Income Countries,10.1257/aer.20211879,"I study the economic value of obesity—a status symbol in poor countries associated with raised health risks. Randomizing decision-makers in Kampala, Uganda to view weight-manipulated portraits, I find that obesity is perceived as a reliable signal of wealth but not of beauty or health. Thus, leveraging a real-stakes experiment involving professional loan officers, I show that being obese facilitates access to credit. The large obesity premium, comparable to raising borrower self-reported earnings by over 60 percent, is driven by asymmetric information and drops significantly when providing more financial information. Notably, obesity benefits and wealth-signaling value are commonly overestimated, suggesting market distortions. (JEL D82, G21, G51, I12, O16, Z13)",AER,2023,108,771,"['Credit Markets', 'Financial Markets', 'Economic Development', 'Behavioral Economics', 'Income Inequality']","['obesity', 'economic value', 'status symbol', 'health risks', 'wealth', 'beauty', 'health', 'real-stakes experiment', 'credit', 'asymmetric information']"
Imperfect Financial Markets and Investment Inefficiencies,10.1257/aer.20170725,"We analyze the consequences of noisy information aggregation for investment. Market imperfections create endogenous rents that cause overinvestment in upside risks and underinvestment in downside risks. In partial equilibrium, these inefficiencies are particularly severe if upside risks are coupled with easy scalability of investment. In general equilibrium, the shareholders’ collective attempts to boost value of individual firms leads to a novel externality operating through price that amplifies investment distortions with downside risks but offsets distortions with upside risks. (JEL D21, D25, D83, G14, G32, G41)",AER,2023,85,622,"['Financial Markets', 'Investment Strategies', 'Corporate Governance', 'Risk Management', 'Economic Growth']","['investment', 'noisy information aggregation', 'market imperfections', 'endogenous rents', 'upside risks', 'downside risks', 'partial equilibrium', 'general equilibrium', 'shareholders', 'externality']"
A Road to Efficiency through Communication and Commitment,10.1257/aer.20171014,"We experimentally examine the efficacy of a novel pre-play institution in a well-known coordination game—the minimum-effort game—in which coordination failures are robust and persistent phenomena. This new institution allows agents to communicate while incrementally committing to their words, leading to a distinct theoretical prediction: the efficient outcome is uniquely selected in the extended coordination game. We find that commitment-enhanced communication significantly increases subjects’ payoffs and achieves higher efficiency levels than various nonbinding forms of communication. We further identify the key ingredients of the institution that are central to achieving such gains. (JEL C73, C92, D83)",AER,2023,95,713,"['Innovation', 'Economic Development', 'Behavioral Economics', 'Experimental Economics', 'Communication']","['novel', 'pre-play institution', 'coordination game', 'commitment-enhanced communication', 'efficiency', 'coordination failures', 'experimental', 'communication', 'subjects', 'payoffs']"
"Market Structure, Oligopsony Power, and Productivity",10.1257/aer.20210383,"I examine the effects of oligopsony power on allocative efficiency and income redistribution by studying a size regulation in the Chinese tobacco industry that led to ownership consolidation. I show that separate identification of input price markdowns, goods price markups, and productivity is challenging when a subset of inputs is nonsubstitutable, which often holds for materials, and construct and estimate a model to overcome this challenge. I find that the regulation increased input price markdowns by 37 percent on average. This increase in oligopsony power led to a decline in allocative efficiency and redistributed income away from rural households. (JEL D24, D31, G32, G34, L13, L66, P31)",AER,2023,107,701,"['Income Inequality', 'Economic Development', 'Public Policy', 'Labor Market Dynamics', 'Trade and Globalization']","['oligopsony power', 'allocative efficiency', 'income redistribution', 'size regulation', 'Chinese tobacco industry', 'ownership consolidation', 'input price markdowns', 'goods price markups', 'productivity', 'rural households']"
The Macroeconomics of the Greek Depression,10.1257/aer.20210864,"Greece experienced a boom until 2007, followed by a collapse of unprecedented magnitude and persistence. We assess the sources of the boom and the bust, using a rich estimated dynamic general equilibrium model. External demand and government consumption fueled the boom in production, whereas transfers fueled the boom in consumption. Different from the standard narrative, wages and prices declined substantially during the bust. Tax policy accounts for the largest fraction of the bust in production, whereas uninsurable risk accounts for the bust in consumption and wages. We assess how the composition of fiscal adjustment and bailouts affected the crisis. (JEL E21, E23, E24, E32, E62, F41, H20)",AER,2023,107,700,"['Fiscal Policy', 'Taxation', 'Economic Growth', 'Labor Market Dynamics', 'Risk Management']","['Greece', 'boom', 'collapse', 'sources', 'dynamic general equilibrium model', 'external demand', 'government consumption', 'transfers', 'wages', 'prices']"
Second-Best Fairness: The Trade-off between False Positives and False Negatives,10.1257/aer.20211015,"A main focus in economics is how to design optimal policies in second-best situations, which often requires a trade-off between giving some individuals more than they deserve, false positives, and others less than they deserve, false negatives. This paper provides novel evidence on people’s second-best fairness preferences from large-scale experimental studies in the United States and Norway. The majority of people are more concerned with false negatives than with false positives, but we document substantial heterogeneity in second-best fairness preferences between the countries and across the political spectrum. The findings shed light on the political economy of social insurance and redistribution. (JEL D63, D72, D78, H23, I38)",AER,2023,107,739,"['Public Policy', 'Social Policy', 'Income Inequality', 'Economic Development', 'Behavioral Economics']","['economics', 'optimal policies', 'second-best situations', 'trade-off', 'false positives', 'false negatives', 'fairness preferences', 'experimental studies', 'social insurance', 'redistribution']"
Choice Screen Auctions,10.1257/aer.20220699,"Choice screen auctions have been recently deployed in 31 European countries, allowing consumers to choose their preferred search engine on Google’s Android platform instead of being automatically defaulted to Google’s own search engine. I show that a seemingly minor detail in the design of these auctions—whether they are conducted on a “per appearance” or a “per install” basis—plays a major role in the mix and characteristics of auction winners and, consequently, in their expected market share. Furthermore, per install auctions distort search engines’ incentives. Empirical evidence from Android choice screen auctions conducted in 2020 is consistent with my theoretical results. (JEL D44, D47, K21, L40, L86)",AER,2023,106,715,"['Digital Transformation', 'Consumer Behavior', 'Regulatory Frameworks', 'Market Transparency', 'Economic Development']","['auctions', 'choice screen', 'search engine', 'Google', 'Android platform', 'market share', 'winners', 'per appearance', 'per install', 'incentives']"
Does Identity Affect Labor Supply?,10.1257/aer.20211826,"How does identity influence economic behavior in the labor market? I investigate this question in rural India, focusing on the effect of caste identity on job-specific labor supply. In a field experiment, laborers choose whether to take up various job offers, which differ in associations with specific castes. Workers are less willing to accept offers that are linked to castes other than their own, especially when those castes rank lower in the social hierarchy. Workers forgo large payments to avoid job offers that conflict with their caste identity, even when these decisions are made in private. (JEL C93, D91, J15, J22, O12, Z13)",AER,2023,103,637,"['Labor Market Dynamics', 'Social Policy', 'Economic Development', 'Income Inequality', 'Public Policy']","['identity', 'economic behavior', 'labor market', 'rural India', 'caste', 'job-specific labor supply', 'field experiment', 'social hierarchy', 'payments', 'private decisions']"
The Reversal Interest Rate,10.1257/aer.20190150,"The reversal interest rate is the rate at which accommodative monetary policy reverses and becomes contractionary for lending. We theoretically demonstrate its existence in a macroeconomic model featuring imperfectly competitive banks that face financial frictions. When interest rates are cut too low, further monetary stimulus cuts into banks’ profit margins, depressing their net worth and curtailing their credit supply. Similarly, when interest rates are low for too long, the persistent drag on bank profitability eventually outweighs banks’ initial capital gains, also stifling credit supply. We quantify the importance of this mechanism within a calibrated New Keynesian model. (JEL E12, E32, E43, E44, E52, G21, L25)",AER,2023,105,725,"['Monetary Policy', 'Financial Markets', 'Banking Systems', 'Credit Markets', 'Economic Growth']","['reversal interest rate', 'accommodative monetary policy', 'contractionary', 'lending', 'macroeconomic model', 'imperfectly competitive banks', 'financial frictions', 'monetary stimulus', 'profit margins', 'credit supply']"
Individuals and Organizations as Sources of State Effectiveness,10.1257/aer.20191598,"Bureaucrats implement policy. How important are they for a state’s productivity? And do the trade-offs between policies depend on their effectiveness? Using data on 16 million public purchases in Russia, we show that 39 percent of the variation in prices paid for narrowly defined items is due to the individual bureaucrats and organizations who manage procurement. Low-price buyers also display higher spending quality. Theory suggests that such differences in effectiveness can be pivotal for policy design. To illustrate, we show that a common one—bid preferences for domestic suppliers—substantially improves procurement performance, but only when implemented by ineffective bureaucrats. (JEL D73, H57, H83, L14, P26)",AER,2023,104,721,"['Public Policy', 'Economic Development', 'Trade and Globalization', 'Regulatory Frameworks', 'Procurement']","['Bureaucrats', 'Policy implementation', 'State productivity', 'Trade-offs', 'Policies', 'Effectiveness', 'Public purchases', 'Russia', 'Procurement', 'Bid preferences']"
The Political Economy of International Regulatory Cooperation,10.1257/aer.20200780,"We examine international regulatory agreements that are negotiated under lobbying pressures from producer groups. The way in which lobbying influences the cooperative setting of regulatory policies, as well as the welfare impacts of international agreements, depend crucially on whether the interests of producers in different countries are aligned or in conflict. The former situation tends to occur for product standards, while the latter tends to occur for process standards. We find that, if producer lobbies are strong enough, agreements on product standards lead to excessive deregulation and decrease welfare, while agreements on process standards tighten regulations and enhance welfare. (JEL F13, F14, F15, L15, L51)",AER,2023,105,725,"['International Agreements', 'Regulatory Policies', 'Producer Groups', 'Lobbying Pressures', 'Welfare Impacts']","['international regulatory agreements', 'lobbying pressures', 'producer groups', 'cooperative setting', 'regulatory policies', 'welfare impacts', 'product standards', 'process standards', 'excessive deregulation', 'process standards']"
The Micro Anatomy of Macro Consumption Adjustments,10.1257/aer.20201931,"We study crises characterized by large adjustments of aggregate consumption through their microlevel patterns. We document the cross-sectional patterns of consumption adjustment across the income distribution and find large adjustments for top-income households, who exhibit consumption-income elasticities similar to or larger than the average. We construct a heterogeneous-agent open economy model of consumption under income fluctuations and show that the data patterns are largely consistent with theories that attribute the dynamics of aggregate consumption to changes in aggregate permanent income. We also discuss our findings’ implications for theories based on the tightening of households’ borrowing constraints and analyze policy implications. (JEL D31, E21, E32, F33, G51, O11, O12)",AER,2023,108,794,"['Income Inequality', 'Monetary Policy', 'Fiscal Policy', 'Credit Markets', 'Economic Development']","['crises', 'consumption adjustment', 'income distribution', 'households', 'consumption-income elasticities', 'heterogeneous-agent model', 'open economy', 'income fluctuations', 'permanent income', 'borrowing constraints']"
The Missing Intercept: A Demand Equivalence Approach,10.1257/aer.20211751,"I give conditions under which changes in private spending are accommodated in general equilibrium exactly like changes in aggregate fiscal expenditure. Under such demand equivalence, researchers can use time series evidence on fiscal multipliers to recover the general equilibrium “missing intercept” of shocks to private spending identified in the cross section. Through the lens of this theory, time series estimates of a fiscal multiplier around one suggest a missing intercept close to zero—an observation that I illustrate with an application to the 2008 tax rebates. I also discuss the robustness of this aggregation approach to plausible violations of demand equivalence. (JEL E12, E21, E24, E62, G51, H24, H31)",AER,2023,108,718,"['Fiscal Policy', 'Economic Development', 'Public Finance', 'Taxation', 'Consumer Behavior']","['private spending', 'aggregate fiscal expenditure', 'general equilibrium', 'fiscal multipliers', 'time series evidence', 'missing intercept', 'shocks', 'cross section', 'fiscal multiplier', 'tax rebates.']"
Who Benefits from State Corporate Tax Cuts? A Local Labor Markets Approach with Heterogeneous Firms: Comment,10.1257/aer.20201753,"Suárez Serrato and Zidar (2016) identify state corporate tax incidence in a spatial equilibrium model with imperfectly mobile firms. Their identification argument rests on comparative statics omitting a channel implied by their model: the link between common determinants of a location’s attractiveness and the average idiosyncratic productivity of firms choosing that location. This compositional margin causes the labor demand elasticity to be independent from the product demand elasticity, impeding the identification of incidence from the four estimated reduced-form effects. Assigning consensual values to the unidentified parameters, we find that the incidence share borne by firm owners is closer to 25 percent than 40 percent. (JEL H22, H25, H32, H71, R23, R51)",AER,2023,111,770,"['Taxation', 'Public Policy', 'Economic Development', 'Labor Market Dynamics', 'Fiscal Policy']","['state corporate tax', 'tax incidence', 'spatial equilibrium model', 'mobile firms', 'identification argument', 'location attractiveness', 'idiosyncratic productivity', 'labor demand elasticity', 'product demand elasticity', 'firm owners']"
The Old Boys' Club: Schmoozing and the Gender Gap,10.1257/aer.20210863,"Offices are social places. Employees and managers take breaks together and talk about family and hobbies. In this study, we show that employees’ social interactions with their managers can be advantageous for their careers, and that this phenomenon contributes to the gender pay gap. We use administrative and survey data from a large financial institution and exploit quasi-random variation induced by the rotation of managers. We provide evidence that when employees have more face-to-face interactions with their managers, they are promoted at a higher rate. This mechanism could explain a third of the gender gap in promotions at this firm. (JEL G21, J16, J31, J71, M12, M51, Z13)",AER,2023,108,684,"['Labor Market Dynamics', 'Gender Equality', 'Income Inequality', 'Corporate Governance', 'Public Policy']","['social interactions', 'managers', 'employees', 'careers', 'gender pay gap', 'promotions', 'face-to-face interactions', 'administrative data', 'survey data', 'financial institution']"
Optimal Monetary Policy According to HANK,10.1257/aer.20200239,"We study optimal monetary policy in an analytically tractable heterogeneous agent New Keynesian model with rich cross-sectional heterogeneity. Optimal policy differs from a representative agent benchmark because monetary policy can affect consumption inequality, by stabilizing consumption risk arising from both idiosyncratic shocks and unequal exposures to aggregate shocks. The trade-off between consumption inequality, productive efficiency, and price stability is summarized in a simple linear-quadratic problem yielding interpretable target criteria. Stabilizing consumption inequality requires putting some weight on stabilizing the level of output, and correspondingly reducing the weights on the output gap and price level relative to the representative agent benchmark. (JEL E12, E23, E31, E32, E52, E62)",AER,2023,107,814,"['Monetary Policy', 'Income Inequality', 'Consumption Inequality', 'Economic Development', 'Financial Markets']","['monetary policy', 'heterogeneous agent', 'New Keynesian model', 'consumption inequality', 'idiosyncratic shocks', 'aggregate shocks', 'productive efficiency', 'price stability', 'output gap', 'linear-quadratic problem']"
Optimal Policy under Dollar Pricing,10.1257/aer.20200636,"Empirical evidence shows that most international prices are sticky in dollars. This paper studies the policy implications of this fact in the context of an open economy model with general preferences, technologies, asset markets, nominal rigidities, and a rich set of shocks. We show that although monetary policy is less efficient and cannot implement the flexible-price allocation, inflation targeting and a floating exchange rate remain robustly optimal in non-US economies. The capital controls cannot unilaterally improve the allocation and are useful only when coordinated across countries. International cooperation benefits other economies, but is not in the self-interest of the United States. (JEL E31, E52, F14, F31, F38, F41)",AER,2023,108,737,"['Monetary Policy', 'Fiscal Policy', 'International Cooperation', 'Capital Controls', 'Exchange Rate']","['international prices', 'sticky', 'dollars', 'policy implications', 'open economy model', 'nominal rigidities', 'inflation targeting', 'floating exchange rate', 'capital controls', 'international cooperation']"
Evidence and Lessons on the Health Impacts of Public Health Funding from the Fight against HIV/AIDS,10.1257/aer.20220089,"HIV/AIDS has been one of the largest public health crises in recent history, and the US federal government has spent hundreds of billions of dollars fighting the disease. This study examines the impact of the large amounts of federal funding allocated to US cities to combat HIV/AIDS through the Ryan White CARE Act’s first title. The findings indicate that the cost to avoid an HIV/AIDS death through the program is roughly $334,000, that the program has saved approximately 57,000 lives through 2018, and that funding disparities are responsible for the uneven progress in combating HIV/AIDS across the United States. (JEL H51, H75, I12, I18)",AER,2023,104,644,"['Public Policy', 'Healthcare Systems', 'Economic Development', 'Healthcare Innovation', 'Public Health Policy']","['HIV/AIDS', 'public health', 'US federal government', 'funding', 'Ryan White CARE Act', 'death', 'program', 'lives saved', 'funding disparities', 'United States']"
Heroes and Villains: The Effects of Heroism on Autocratic Values and Nazi Collaboration in France,10.1257/aer.20211509,"We measure how a network of heroes can legitimize and diffuse extreme political behaviors. We exploit newly declassified intelligence files, novel voting data, and regimental histories to show that home municipalities of French line regiments arbitrarily rotated under Philippe Pétain’s generalship through the heroic World War I battlefield of Verdun diverge politically thereafter, particularly following Pétain’s own overt espousal of authoritarian views. Further, under Pétain’s collaborationist Vichy regime (1940–1944), they raise 7 percent more active Nazi collaborators per capita. These effects extend across all forms of Nazi collaboration and diffuse beyond the veterans themselves. (JEL D72, D74, N34, N44, Z13)",AER,2023,100,723,"['Political Risk', 'Public Policy', 'Labor Market Dynamics', 'Economic Development', 'Trade Policies']","['network', 'heroes', 'extreme political behaviors', 'intelligence files', 'voting data', 'regimental histories', 'French line regiments', 'Philippe Pétain', 'Vichy regime', 'Nazi collaborators']"
"Confidence, Self-Selection, and Bias in the Aggregate",10.1257/aer.20220915,"The influence of behavioral biases on aggregate outcomes depends in part on self-selection: whether rational people opt more strongly into aggregate interactions than biased individuals. In betting market, auction and committee experiments, we document that some errors are strongly reduced through self-selection, while others are not affected at all or even amplified. A large part of this variation is explained by differences in the relationship between confidence and performance. In some tasks, they are positively correlated, such that self-selection attenuates errors. In other tasks, rational and biased people are equally confident, such that self-selection has no effects on aggregate quantities. (JEL C91, D44, D91)",AER,2023,104,727,"['Behavioral Economics', 'Financial Markets', 'Market Transparency', 'Consumer Behavior', 'Economic Development']","['influence', 'behavioral biases', 'aggregate outcomes', 'self-selection', 'rational people', 'biased individuals', 'betting market', 'auction', 'committee experiments', 'confidence']"
Prudential Policy with Distorted Beliefs,10.1257/aer.20210753,"This paper studies leverage regulation when equity investors and/or creditors have distorted beliefs relative to a planner. We characterize how the optimal regulation responds to arbitrary changes in investors’/creditors’ beliefs, relating our results to practical scenarios. We show that the optimal regulation depends on the type and magnitude of such changes. Optimism by investors calls for looser leverage regulation, while optimism by creditors, or jointly by both investors/creditors, calls for tighter leverage regulation. Our results apply to environments with (i) planners with imperfect knowledge of investors’/creditors’ beliefs, (ii) monetary policy, (iii) bailouts and pecuniary externalities, and (iv) endogenous beliefs. (JEL D62, D83, E52, G01, G21, G28, H81)",AER,2023,107,776,"['Monetary Policy', 'Financial Markets', 'Credit Markets', 'Regulatory Frameworks', 'Public Policy']","['leverage regulation', 'equity investors', 'creditors', 'distorted beliefs', 'optimal regulation', 'investors', 'creditors', 'optimism', 'monetary policy', 'bailouts']"
The Value of Working Conditions in the United States and the Implications for the Structure of Wages,10.1257/aer.20190846,"We document variation in working conditions in the United States, present estimates of how workers value these conditions, and assess the impact of working conditions on estimates of wage inequality. We conduct a series of stated-preference experiments to estimate workers’ willingness to pay for a broad set of working conditions, which we validate with actual job choices. We find that working conditions vary substantially, play a significant role in job choice, and are central components of the compensation received by workers. We find that accounting for differences in preferences for working conditions often exacerbates wage differentials and intensifies measures of wage inequality. (JEL J22, J28, J31, J81)",AER,2023,107,718,"['Labor Market Dynamics', 'Income Inequality', 'Public Policy', 'Economic Development', 'Social Policy']","['working conditions', 'United States', 'estimates', 'workers', 'wage inequality', 'stated-preference experiments', 'willingness to pay', 'job choices', 'compensation', 'preferences']"
Dividend Taxes and the Allocation of Capital: Comment,10.1257/aer.20221432,"Boissel and Matray (2022) find that investment increased after 2013 in French firms facing higher dividend taxes. We identify an alteration in the code plotting the event study of the effect of this reform on investment. Using identical data and removing this alteration, we find differential pre-trends between treated and control firms. We also establish that the controls referred to as “size growth,” used in all the difference-in-difference specifications, effectively are controls for lagged investment, i.e., the main outcome variable. Removing such controls attenuates differential pre-trends but leaves no clear event study evidence of a positive effect of dividend taxation on investment. (JEL D22, G31, G35, H25, H32)",AER,2023,108,728,"['Taxation', 'Investment Strategies', 'Public Policy', 'Financial Markets', 'Economic Development']","['investment', 'dividend taxes', 'French firms', 'event study', 'reform', 'pre-trends', 'controls', 'difference-in-difference', 'lagged investment', 'dividend taxation']"
Presidential Address: Does Monetary Policy Matter? The Narrative Approach after 35 Years,10.1257/aer.113.6.1395,"The narrative approach to macroeconomic identification uses qualitative sources, such as newspapers or government records, to provide information that can help establish causal relationships. This paper discusses the requirements for rigorous narrative analysis using fresh research on the impact of monetary policy as the focal application. We read the historical Minutes and Transcripts of Federal Reserve policymaking meetings to identify significant contractionary and expansionary changes in monetary policy not taken in response to current or prospective developments in real activity for the period 1946 to 2016. We find that such monetary shocks have large and significant effects on unemployment, output, and inflation in the expected directions. Analysis of available policy records suggests that a contractionary monetary shock likely occurred in 2022. Based on the empirical estimates of the effect of previous shocks, one would expect substantial negative impacts on real GDP and inflation in 2023 and 2024. (JEL E31, E52, E58, E65, N12)",AER,2023,153,1050,"['Monetary Policy', 'Economic Growth', 'Labor Market Dynamics', 'Fiscal Policy', 'Inflation Trends']","['narrative approach', 'macroeconomic identification', 'qualitative sources', 'newspapers', 'government records', 'causal relationships', 'monetary policy', 'Federal Reserve', 'contractionary', 'expansionary']"
The Birth of a Nation: Media and Racial Hate,10.1257/aer.20201867,"This paper documents the impact of popular media on racial hate by examining the first American blockbuster: 1915’s The Birth of a Nation, a fictional portrayal of the KKK’s founding rife with racist stereotypes. Exploiting the film’s five-year “road show,” I find a sharp spike in lynchings and race riots coinciding with its arrival in a county. Instrumenting for road show destinations using the location of theaters prior to the movie’s release, I show that the film significantly increased local Klan support in the 1920s. Road show counties continue to experience higher rates of hate crimes and hate groups a century later. (JEL J15, K42, L82, N31, N32, N41, Z13)",AER,2023,110,670,"['Social Policy', 'Public Policy', 'Economic Development', 'Labor Market Dynamics', 'Political Risk']","['popular media', 'racial hate', 'American blockbuster', 'The Birth of a Nation', 'KKK', 'racist stereotypes', 'lynchings', 'race riots', 'hate crimes', 'hate groups']"
Reconciliation Narratives: The Birth of a Nation after the US Civil War,10.1257/aer.20210413,"We study how the spread of the Lost Cause narrative—a revisionist and racist retelling of the US Civil War—shifted opinions and behaviors toward national reunification and racial discrimination against African Americans. Looking at screenings of The Birth of a Nation, a blockbuster movie that greatly popularized the Lost Cause after 1915, we find that the film shifted the public discourse toward a more patriotic and less divisive language, increased military enlistment, and fostered cultural convergence between former enemies. We document how the racist content of the narrative connects to reconciliation through a “common-enemy” type of argument. (JEL J15, L82, N31, N32, N41, Z13)",AER,2023,103,689,"['Social Policy', 'Public Policy', 'Labor Market Dynamics', 'Race Relations', 'Cultural Impact']","['Lost Cause narrative', 'US Civil War', 'racial discrimination', 'African Americans', 'The Birth of a Nation', 'patriotic', 'divisive language', 'military enlistment', 'cultural convergence', 'racist content']"
Optimal Procurement with Quality Concerns,10.1257/aer.20211437,"Adverse selection in procurement arises when low-cost bidders are also low-quality suppliers. We propose a mechanism called LoLA (lowball lottery auction) which, under some conditions, maximizes any combination of buyer’s and social surplus, subject to incentive compatibility, in the presence of adverse selection. The LoLA features a floor price, and a reserve price. The LoLA has a dominant strategy equilibrium that, under mild conditions, is unique. In a counterfactual analysis of Italian government auctions, we compute the gain that the government could have made, had it used the optimal procurement mechanism (a LoLA), relative to a first-price auction (the adopted format). (JEL D44, D82, H57, L14)",AER,2023,106,709,"['Public Policy', 'Economic Development', 'Auctions', 'Procurement', 'Incentive Compatibility']","['adverse selection', 'procurement', 'LoLA', 'lowball lottery auction', ""buyer's surplus"", 'social surplus', 'incentive compatibility', 'dominant strategy equilibrium', 'counterfactual analysis', 'government auctions']"
Optimal Contracting with Altruistic Agents: Medicare Payments for Dialysis Drugs,10.1257/aer.20210208,"We study health-care provider agency and optimal payments, considering an expensive medication for dialysis patients. Using Medicare claims data we estimate a structural model of treatment decisions, in which providers differ in their altruism and marginal costs, and this heterogeneity is unobservable to the government. In a novel application of nonlinear pricing methods, we empirically characterize the optimal contracts in this environment. The optimal contracts eliminate medically excessive dosages and reduce expenditures, resulting in approximately $300 million in annual gains from better contracting. This approach could be applied to a broad class of problems in health-care payment policy. (JEL D64, D86, H51, I11, I13, J33, L21)",AER,2023,106,742,"['Healthcare Systems', 'Public Policy', 'Economic Development', 'Healthcare Innovation', 'Fiscal Policy']","['health-care provider', 'agency', 'optimal payments', 'expensive medication', 'dialysis patients', 'Medicare claims data', 'structural model', 'treatment decisions', 'nonlinear pricing methods', 'health-care payment policy']"
The Common-Probability Auction Puzzle,10.1257/aer.20191927,"This paper presents a puzzle in the behavior of experimental subjects in what we call common-probability auctions. In common-value auctions, uncertainty is defined over values, while in common-probability auctions, uncertainty is defined over probabilities. We find that in contrast to the substantial overbidding found in common-value auctions, bidding in strategically equivalent common-probability auctions is consistent with Nash equilibrium. To explain our results, we run treatments to identify whether this difference stems from the way subjects estimate the good’s value in a competitive environment rather than the way they bid conditional on these valuations. We conclude it is the former. (JEL C70, C90, D44, D81)",AER,2023,104,724,"['Game Theory', 'Auctions', 'Behavioral Economics', 'Experimental Economics', 'Value Estimation']","['experimental subjects', 'common-probability auctions', 'common-value auctions', 'uncertainty', 'overbidding', 'Nash equilibrium', 'valuations', 'competitive environment', ""good's value"", 'bidding']"
When Losses Turn into Loans: The Cost of Weak Banks,10.1257/aer.20190149,"We provide evidence that banks distort the composition of credit supply in order to comply with ratio-based capital requirements in times of economic distress. An unexpected intervention by the European Banking Authority provides a natural experiment to study how banks respond to falling below minimum required capital ratios during an economic downturn. We show that affected banks respond by cutting lending but also by reallocating credit to distressed firms with underreported loan losses. We develop a method to detect underreported losses using loan-level data. The credit reallocation leads to a reallocation of inputs across firms. We calculate that the resulting increase in input misallocation accounts for about 22 percent of the decline in productivity in Portugal in 2012. (JEL E23, E32, G21, G28, G32, G38)",AER,2023,125,821,"['Banking Systems', 'Credit Markets', 'Economic Growth', 'Financial Markets', 'Productivity']","['banks', 'credit supply', 'capital requirements', 'European Banking Authority', 'intervention', 'minimum required capital ratios', 'economic downturn', 'lending', 'underreported loan losses', 'productivity']"
Occupational Exposure to Capital-Embodied Technical Change,10.1257/aer.20211478,"We study differences in exposure to factor-biased technical change among occupations by providing the first measures of capital-embodied technical change (CETC) and of the elasticity of substitution between capital and labor at the occupational level. We document sizable occupational heterogeneity in both measures, but quantitatively, it is the heterogeneity in factor substitutability that fuels workers’ exposure to CETC. In a general equilibrium model of worker sorting across occupations, CETC accounts for almost all of the observed labor reallocation in the US between 1984 and 2015. Absent occupational heterogeneity in factor substitutability, CETC accounts for only 17 percent of it (JEL I26, J16, J24, J31, O33)",AER,2023,105,723,"['Labor Market Dynamics', 'Economic Development', 'Technological Adoption', 'Trade and Globalization', 'Public Policy']","['exposure', 'factor-biased technical change', 'occupations', 'capital-embodied technical change', 'elasticity of substitution', 'labor', 'occupational heterogeneity', 'factor substitutability', 'general equilibrium model', 'worker sorting']"
"Nobel Lecture: Banking, Credit, and Economic Fluctuations",10.1257/aer.113.5.1143,"Credit markets, including the market for bank loans, are characterized by imperfect and asymmetric information. These informational frictions can interact with other economic forces to produce periods of credit-market stress, in which intermediation is unusually costly and households and businesses have difficulty obtaining credit. A high level of credit-market stress, as in a severe financial crisis, may in turn produce a deep and prolonged recession. I present evidence that financial distress and disrupted credit markets were important sources of the Great Depression of the 1930s and the Great Recession of 2007–2009. Changes in the state of credit markets also play a role in “ garden-variety” business cycles and in the transmission of monetary policy to the economy. (JEL D82, E32, E44, E52, G21, N22)",AER,2023,124,813,"['Financial Markets', 'Credit Markets', 'Monetary Policy', 'Economic Development', 'Banking Systems']","['credit markets', 'bank loans', 'information', 'economic forces', 'credit-market stress', 'intermediation', 'households', 'businesses', 'financial crisis', 'Great Depression']"
"Information, Mobile Communication, and Referral Effects",10.1257/aer.20200187,"This paper uses the universe of cellphone records from a Chinese telecommunication provider for a northern Chinese city to examine the role of information exchange in urban labor markets. We provide the first direct evidence of increased communication among referral pairs around job changes. Information provided by social contacts mitigates information asymmetry and improves labor market performance. (JEL D82, J62, O18, P23, P25, R23, Z13)",AER,2023,65,443,"['Labor Market Dynamics', 'Urban Development', 'Information Asymmetry', 'Social Contacts', 'Economic Development']","['cellphone records', 'Chinese telecommunication provider', 'northern Chinese city', 'information exchange', 'urban labor markets', 'social contacts', 'information asymmetry', 'labor market performance', 'referral pairs', 'job changes']"
The Costs of Job Displacement over the Business Cycle and Its Sources: Evidence from Germany,10.1257/aer.20200252,"We document the sources behind the costs of job loss over the business cycle using administrative data from Germany. Losses in annual earnings after displacement are large, persistent, and highly cyclical, nearly doubling in size during downturns. A large part of the long-term earnings losses and their cyclicality is driven by declines in wages. Key to these long-lasting wage declines and their cyclicality are changes in employer characteristics, as displaced workers switch to lower-paying firms. These losses increase with duration of nonemployment. Changes in characteristics of displaced workers or displacing firms, and other post-job loss career outcomes explain little of the cyclicality. (JEL E24, E32, J31, J63, J64, J65)",AER,2023,109,734,"['Labor Market Dynamics', 'Income Inequality', 'Public Policy', 'Social Policy', 'Economic Development']","['job loss', 'business cycle', 'earnings', 'displacement', 'wages', 'long-term', 'cyclicality', 'employer characteristics', 'nonemployment', 'career outcomes']"
Law and Norms: Empirical Evidence,10.1257/aer.20210970,"A large theoretical literature argues laws exert a causal effect on norms, but empirical evidence remains scant. Using a novel identification strategy, we provide a compelling empirical test of this proposition. We use incentivized vignette experiments to directly measure social norms relating to actions subject to legal thresholds. Our large-scale experiments (n = 7,000) run in the United Kingdom, United States, and China show that laws can causally influence social norms. Results are robust across different samples and methods of measuring norms, and are consistent with a model of social image concerns where individuals care about the inferences others make about their underlying prosociality. (JEL C91, C92, D91, K00, K42, P37)",AER,2023,111,739,"['Social Policy', 'Public Policy', 'Behavioral Economics', 'Regulatory Frameworks', 'Economic Development']","['laws', 'norms', 'empirical evidence', 'identification strategy', 'social norms', 'incentivized vignette experiments', 'legal thresholds', 'social image concerns', 'prosociality', 'experiments']"
Social Exclusion and Social Preferences: Evidence from Colombia's Leper Colony,10.1257/aer.20201332,"This paper explores the intergenerational consequences of social exclusion on prosociality. A lab-in-the-field approach in the historical region of Colombia’s leper colony reveals that descendants of socially excluded individuals are locally altruistic and extend such altruism to outsiders who have undergone similar circumstances. These individuals also display mistrust toward those who have, historically, been exclusionary—in this case, doctors. The content of historical narratives shared by ancestors who were excluded, which emphasize the endured mistreatment and doctors’ historical misinformation, is one mechanism that partially explains the intergenerational patterns. (JEL D64, H51, I12, I18, N36, N96, Z13)",AER,2023,95,720,"['Social Policy', 'Healthcare Systems', 'Historical Narratives', 'Mistrust', 'Prosociality']","['social exclusion', 'intergenerational consequences', 'prosociality', 'altruism', 'mistrust', 'historical narratives', 'mistreatment', 'doctors', 'Colombia', 'leper colony']"
Smart Contracts and the Coase Conjecture,10.1257/aer.20220357,"This paper reconsiders the problem of a durable-good monopolist who cannot make intertemporal commitments. The buyer’s valuation is binary and his private information. The seller has access to dynamic contracts and, in each period, decides whether to deploy the previous period’s contract or to replace it with a new one. The main result of the paper is that the Coase conjecture fails: the monopo-list’s payoff is bounded away from the low valuation irrespective of the discount factor. (JEL D42, D82, D86, L12)",AER,2023,82,512,"['Monetary Policy', 'Industrial Policy', 'Market Transparency', 'Consumer Behavior', 'Trade and Globalization']","['durable-good monopolist', 'intertemporal commitments', ""buyer's valuation"", 'private information', 'dynamic contracts', 'Coase conjecture', 'payoff', 'discount factor', 'JEL D42', 'JEL D82']"
The Cost of Information: The Case of Constant Marginal Costs,10.1257/aer.20190185,"We develop an axiomatic theory of information acquisition that captures the idea of constant marginal costs in information production: the cost of generating two independent signals is the sum of their costs, and generating a signal with probability half costs half its original cost. Together with Blackwell monotonicity and a continuity condition, these axioms determine the cost of a signal up to a vector of parameters. These parameters have a clear economic interpretation and determine the difficulty of distinguishing states. (JEL D82, D83)",AER,2023,83,547,"['Economic Growth', 'Financial Markets', 'Monetary Policy', 'Data Privacy', 'Machine Learning Applications']","['information acquisition', 'axiomatic theory', 'constant marginal costs', 'independent signals', 'Blackwell monotonicity', 'continuity condition', 'economic interpretation', 'distinguishing states', 'parameters', 'difficulty']"
The Long and Short (Run) of Trade Elasticities,10.1257/aer.20210225,"When countries change most favored nation (MFN) tariffs, partners that trade on MFN terms experience plausibly exogenous tariff changes. Using this variation, we estimate the trade elasticity at short and long horizons with local projections. We find that the elasticity of tariff-exclusive trade flows is −0.76 in the short run, and approximately −2 in the long run. Our long-run estimates are smaller than typical in the literature, and it takes 7 to10 years to converge to the long run, implying that (i) the welfare gains from trade are high and (ii) there are substantial convexities in the costs of adjusting exports. (JEL C51, F13, F14)",AER,2023,105,643,"['Trade and Globalization', 'Economic Development', 'Public Policy', 'Fiscal Policy', 'Regulatory Frameworks']","['MFN tariffs', 'trade elasticity', 'local projections', 'short run', 'long run', 'literature', 'welfare gains', 'convexities', 'adjusting exports', 'plausibly exogenous']"
How to Use Natural Experiments to Estimate Misallocation,10.1257/aer.20190609,"We propose a method to estimate the effect of firm policies (e.g., bankruptcy laws) on allocative efficiency using (quasi-)experimental evidence. Our approach takes general equilibrium effects into account and requires neither a structural estimation nor a precise assumption on how the experiment affects firms. Our aggregation formula relies on treatment effects of the policy on the distribution of output-to-capital ratios, which are easily estimated. We show this method is valid for a large class of commonly used models in macrofinance. We apply it to the French banking deregulation episode of the mid- 1980s and find an increase in aggregate TFP of 5 percent. (JEL G21, G24, G28, G31, G32, H25)",AER,2023,110,703,"['Financial Markets', 'Banking Systems', 'Economic Growth', 'Public Policy', 'Monetary Policy']","['firm policies', 'allocative efficiency', 'quasi-experimental evidence', 'general equilibrium effects', 'structural estimation', 'aggregation formula', 'treatment effects', 'output-to-capital ratios', 'macrofinance models', 'French banking deregulation']"
Globalization and Pandemics,10.1257/aer.20201479,"We provide theory and evidence on the relationship between globalization and pandemics. Business travel facilitates trade and travel leads to human interactions that transmit disease. Trade-motivated travel generates an epidemiological externality across countries. If infections lead to deaths, or reduce individual labor supply, we establish a general equilibrium social distancing effect, whereby increases in relative prices in unhealthy countries reduce travel to those countries. If agents internalize the threat of infection, we show that their behavioral responses lead to a reduction in travel that is larger for higher-trade-cost locations, which initially reduces the ratio of trade to output. (JEL D91, F14, F60, I12, N30, N70, Z31)",AER,2023,106,744,"['Trade and Globalization', 'Public Policy', 'Healthcare Systems', 'Labor Market Dynamics', 'Economic Growth']","['globalization', 'pandemics', 'business travel', 'trade', 'human interactions', 'disease transmission', 'epidemiological externality', 'social distancing', 'relative prices', 'behavioral responses']"
The Matching Multiplier and the Amplification of Recessions,10.1257/aer.20210254,"This paper shows that the unequal incidence of recessions in the labor market amplifies aggregate shocks. Using administrative data from the United States, I document a positive covariance between workers' marginal propensities to consume (MPCs) and their elasticities of earnings to GDP, which is a key moment for a new class of heterogeneous-agent models. I define the matching multiplier as the increase in the multiplier stemming from this matching of high MPC workers to more cyclical jobs. I show that this covariance is large enough to increase the aggregate MPC by 20 percent over an equal exposure benchmark. (JEL E21, E23, E24, E32)",AER,2023,103,642,"['Labor Market Dynamics', 'Economic Growth', 'Monetary Policy', 'Fiscal Policy', 'Income Inequality']","['incidence', 'recessions', 'labor market', 'aggregate shocks', 'administrative data', 'United States', 'marginal propensities to consume', 'elasticities of earnings', 'heterogeneous-agent models', 'matching multiplier']"
What Happens When Employers Can No Longer Discriminate in Job Ads?,10.1257/aer.20211127,"When employers' explicit gender requests were unexpectedly removed from a Chinese job board overnight, pools of successful applicants became more integrated: women's (men's) share of callbacks to jobs that had requested men (women) rose by 61 (146) percent. The removal “worked” in this sense because it generated a large increase in gender-mismatched applications, and because those applications were treated surprisingly well by employers, suggesting that employers' gender requests often represented relatively weak preferences or outdated stereotypes. The job titles that were integrated by the ban, however, were not the most gendered ones, and were disproportionately lower-wage jobs. (JEL J16, J23, J41, J63, J71, M51, P31)",AER,2023,105,730,"['Labor Market Dynamics', 'Gender Equality', 'Social Policy', 'Public Policy', 'Economic Development']","['employers', 'gender requests', 'Chinese job board', 'successful applicants', 'callbacks', 'gender-mismatched applications', 'job titles', 'ban', 'lower-wage jobs', 'preferences']"
Why Do Households Leave School Value Added on the Table? The Roles of Information and Preferences,10.1257/aer.20210949,"Romanian households could choose schools with one standard deviation worth of additional value added. Why do households leave value added “on the table”? We study two possibilities: (i) information and (ii) preferences for other school traits. In an experiment, we inform randomly selected households about schools' value added. These households choose schools with up to 0.2 standard deviations of additional value added. We then estimate a discrete choice model and show that households have preferences for a variety of school traits. As a result, fully correcting households' beliefs would eliminate at most a quarter of the value added that households leave unexploited. (JEL D12, D83, I21, I28)",AER,2023,107,700,"['Educational Equity', 'Consumer Behavior', 'Public Policy', 'Labor Market Dynamics', 'Behavioral Economics']","['schools', 'households', 'value added', 'preferences', 'information', 'traits', 'experiment', 'discrete choice model', 'beliefs', 'unexploited']"
Mobility and Congestion in Urban India,10.1257/aer.20181662,"We develop a methodology to estimate robust city-level vehicular speed indices, exactly decomposable into uncongested speed and congestion. We apply it to 180 Indian cities using 57 million simulated trips measured by a web mapping service. We verify the reliability of our simulated trips using a number of alternative data sources, including data on actual trips. We find wide variation in speed across cities that is driven more by differences in uncongested speed than congestion. Denser and more populated cities are slower, only in part because of congestion. Urban economic development is correlated with faster speed despite worse congestion. (JEL O15, O18, R23, R41)",AER,2023,104,675,"['Urban Development', 'Transportation Economics', 'Economic Development', 'Public Policy', 'Urban Housing Crisis']","['methodology', 'city-level', 'vehicular speed indices', 'congestion', 'Indian cities', 'simulated trips', 'web mapping service', 'uncongested speed', 'urban economic development', 'congestion']"
Is There Too Much Benchmarking in Asset Management?,10.1257/aer.20210476,"We propose a tractable model of asset management in which benchmarking arises endogenously, and analyze its welfare consequences. Fund managers' portfolios are not contractible and they incur private costs in running them. Incentive contracts for fund managers create a pecuniary externality through their effect on asset prices. Benchmarking inflates asset prices and creates crowded trades. The crowding reduces the effectiveness of benchmarking in incentive contracts for others, which fund investors fail to account for. A social planner, recognizing the crowding, opts for contracts with less benchmarking and less incentive provision. The planner also delivers lower asset management costs. (JEL D82, D86, G11, G12, G23, G41)",AER,2023,105,731,"['Financial Markets', 'Asset Management', 'Incentive Contracts', 'Benchmarking', 'Welfare Consequences']","['asset management', 'benchmarking', 'fund managers', 'incentive contracts', 'pecuniary externality', 'asset prices', 'crowded trades', 'social planner', 'asset management costs', 'contracts.']"
When a Doctor Falls from the Sky: The Impact of Easing Doctor Supply Constraints on Mortality,10.1257/aer.20210701,"This paper describes the results of a policy experiment conducted in coordination with the Nigerian government. In this experiment, some communities were randomly selected to receive a new doctor. These doctors were posted to the local public health center. Prior to their arrival, health care was provided by midlevel health-care providers (MLP). To separate the effect of (ostensibly higher) quality from that of quantity, another group of communities was provided with an additional midlevel provider. A third group of communities received no additional workers. No other inputs were provided. I find a measurable decrease in mortality in communities assigned a doctor but not in communities assigned an MLP, suggesting that quality in the health-care sector is a significant constraint. (JEL I11, I12, O15, O18)",AER,2023,124,815,"['Healthcare Systems', 'Public Policy', 'Economic Development', 'Healthcare Innovation', 'Mortality.']","['policy experiment', 'Nigerian government', 'doctor', 'midlevel health-care providers', 'health center', 'mortality', 'quality', 'health-care sector', 'constraint', 'communities']"
Relinquishing Riches: Auctions versus Informal Negotiations in Texas Oil and Gas Leasing,10.1257/aer.20191594,"This paper compares outcomes from informally negotiated oil and gas leases to those awarded via centralized auction. We focus on Texas, where legislative decisions in the early twentieth century assigned thousands of proximate parcels to different mineral allocation mechanisms. We show that during the fracking boom, which began unexpectedly decades later, auctioned leases generated at least 55 percent larger up-front payments and 40 percent more output than negotiated leases did. These results suggest large potential gains from employing centralized, formal mechanisms in markets that traditionally allocate in an unstructured fashion, including the broader $3 trillion market for privately owned minerals. (JEL D44, L71, Q35)",AER,2023,104,732,"['Energy Transition', 'Economic Development', 'Market Transparency', 'Regulatory Frameworks', 'Public Policy']","['oil', 'gas', 'leases', 'auction', 'Texas', 'fracking', 'up-front payments', 'output', 'centralized mechanisms', 'mineral allocation']"
"An Alternative Explanation for the ""Fed Information Effect""",10.1257/aer.20201220,"Regressions of private-sector macroeconomic forecast revisions on monetary policy surprises often produce coefficients with signs opposite to standard macroeconomic models. The “Fed information effect” argues these puzzling results are due to monetary policy surprises revealing Fed private information. We show they are also consistent with a “Fed response to news” channel, where both the Fed and professional forecasters respond to incoming economic news. We present new evidence challenging the Fed information effect and supporting the Fed response to news channel, including: regressions that control for economic news, our own survey of professional forecasters, and financial market responses to FOMC announcements. (JEL D82, E23, E27, E43, E44, E52, E58)",AER,2023,108,763,"['Monetary Policy', 'Financial Markets', 'Economic Development', 'Forecasting', 'Financial Market Responses']","['private-sector', 'macroeconomic', 'forecast revisions', 'monetary policy surprises', 'Fed information effect', 'Fed response to news', 'economic news', 'professional forecasters', 'financial market responses', 'FOMC announcements']"
Partisanship and Fiscal Policy in Economic Unions: Evidence from US States,10.1257/aer.20210147,"Partisanship of state governors affects the efficacy of US federal fiscal policy. Using close election data, we find partisan differences in the marginal propensity to spend federal intergovernmental transfers: Republican governors spend less than Democratic governors. Correspondingly, Republican-led states have lower debt, (delayed) lower taxes, and initially lower economic activity. A New Keynesian model of partisan states in a monetary union implies sizable aggregate effects: The intergovernmental transfer impact multiplier rises by 0.58 if Republican governors spend like Democratic governors, but due to delayed tax cuts, the long-run multiplier is higher with more Republican governors, generating an intertemporal policy trade-off. (JEL D72, E12, E62, H71, H72, H74, H77)",AER,2023,108,784,"['Fiscal Policy', 'Public Finance', 'Monetary Policy', 'Debt Management', 'Economic Development']","['partisanship', 'governors', 'fiscal policy', 'intergovernmental transfers', 'Republican', 'Democratic', 'debt', 'taxes', 'economic activity', 'monetary union']"
Not Too Late: Improving Academic Outcomes among Adolescents,10.1257/aer.20210434,"Improving academic outcomes for economically disadvantaged students has proven challenging, particularly for children at older ages. We present two large-scale randomized controlled trials of a high-dosage tutoring program delivered to secondary school students in Chicago. One innovation is to use paraprofessional tutors to hold down cost, thereby increasing scalability. Participating in math tutoring increases math test scores by 0.18 to 0.40 standard deviations, and increases math and nonmath course grades. These effects persist into future years. The data are consistent with increased personalization of instruction as a mechanism. The benefit-cost ratio is comparable to many successful early childhood programs. (JEL H75, I21, I24, I26, I32, J13, J15)",AER,2023,107,763,"['Educational Equity', 'Public Policy', 'Economic Development', 'Labor Market Dynamics', 'Investment in Education']","['academic outcomes', 'economically disadvantaged students', 'high-dosage tutoring', 'secondary school students', 'Chicago', 'paraprofessional tutors', 'math tutoring', 'personalization of instruction', 'benefit-cost ratio', 'randomized controlled trials']"
"Subjective Performance Evaluation, Influence Activities, and Bureaucratic Work Behavior: Evidence from China",10.1257/aer.20211207,"Subjective performance evaluation could induce influence activities: employees might devote too much effort to pleasing their evaluator, relative to working toward the goals of the organization itself. We conduct a randomized field experiment among Chinese local civil servants to study the existence and implications of influence activities. We find that civil servants do engage in evaluator-specific influence to affect evaluation outcomes, partly in the form of reallocating work efforts toward job tasks that are more important and observable to the evaluator. Importantly, we show that introducing uncertainty about the evaluator’s identity discourages evaluator-specific influence activities and improves bureaucratic work performance. (JEL D73, H83, J45, M54, O17, O18, P25)",AER,2023,108,782,"['Public Policy', 'Labor Market Dynamics', 'Organizational Behavior', 'Economic Development', 'Behavioral Economics']","['performance evaluation', 'influence activities', 'employees', 'organization', 'randomized field experiment', 'Chinese local civil servants', 'evaluator-specific influence', 'work efforts', 'bureaucratic work performance', 'uncertainty']"
Persuasion through Slanted Language: Evidence from the Media Coverage of Immigration,10.1257/aer.20211537,"I study the persuasive effects of slanted language, exploiting a ban on the politically charged term “illegal immigrant” by the Associated Press (AP) news wire. My empirical strategy combines the timing of the ban with variation across media outlets in their baseline reliance on AP copy. I document sizable diffusion of the ban from AP copy to media outlets. Moreover, individuals exposed to the ban through local media show significantly lower support for restrictive immigration policies. This effect is more pronounced for moderates and in locations with fewer immigrants, and does not transfer to views on issues other than immigration. (JEL D72, L82, Z13)",AER,2023,104,661,"['Public Policy', 'Immigration and Labor', 'Social Policy', 'Political Risk', 'Economic Development']","['persuasive effects', 'slanted language', 'ban', 'illegal immigrant', 'Associated Press', 'news wire', 'diffusion', 'immigration policies', 'moderates', 'immigrants']"
Nonlinear Pricing with Underutilization: A Theory of Multi-part Tariffs,10.1257/aer.20220199,"We study the nonlinear pricing of goods whose usage generates revenue for the seller and of which buyers can freely dispose. The optimal price schedule is a multi-part tariff, featuring tiers within which buyers pay a marginal price of zero. We apply our model to digital goods, for which advertising, data generation, and network effects make usage valuable, but monitoring legitimate usage is infeasible. Our results rationalize common pricing schemes including free products, free trials, and unlimited subscriptions. The possibility of free disposal harms producer and consumer welfare and makes both less sensitive to changes in usage-based revenue and demand. (JEL D11, D21, D42, L86, M37)",AER,2023,106,695,"['Digital Transformation', 'Consumer Behavior', 'Pricing', 'Consumer Welfare', 'Economic Development']","['nonlinear pricing', 'goods', 'revenue', 'price schedule', 'multi-part tariff', 'digital goods', 'advertising', 'data generation', 'network effects', 'pricing schemes']"
Technological Change and the Consequences of Job Loss,10.1257/aer.20210182,"We examine the role of technological change in explaining the large and persistent decline in earnings following job loss. Using detailed skill requirements from the near universe of online vacancies, we estimate technological change by occupation and find that technological change accounts for 45 percent of the decline in earnings after job loss. Technological change lowers earnings after job loss by requiring workers to have new skills to perform newly created jobs in their prior occupation. When workers lack the required skills, they move to occupations where their skills are still employable but are paid a lower wage. (JEL J24, J31, J63, O33)",AER,2023,103,654,"['Labor Market Dynamics', 'Technological Adoption', 'Income Inequality', 'Educational Equity', 'Economic Development']","['technological change', 'earnings', 'job loss', 'skills', 'occupation', 'workers', 'decline', 'online vacancies', 'new skills', 'lower wage']"
Trade with Correlation,10.1257/aer.20190781,"We develop a trade model with correlation in productivity across countries. The model spans the full class of generalized extreme value import demand systems and implies that countries with relatively dissimilar technology gain more from trade. In the context of a multisector trade model, we provide a tractable and flexible estimation procedure for correlation based on compressing highly disaggregate sectoral data into a few latent factors related to technology classes. We estimate significant heterogeneity in correlation across sectors and countries, which leads to quantitative predictions that are significantly different from estimates of models assuming independent productivity across sectors or countries. (JEL C38, F11, F13, F14, L16, O30)",AER,2023,107,753,"['Trade and Globalization', 'Productivity', 'Economic Development', 'Technological Adoption', 'Data Privacy']","['trade model', 'correlation', 'productivity', 'countries', 'import demand systems', 'technology', 'sectors', 'estimation procedure', 'heterogeneity', 'latent factors']"
Constrained-Efficient Capital Reallocation,10.1257/aer.20210902,"We characterize efficiency in an equilibrium model of investment and capital reallocation with heterogeneous firms facing collateral constraints. The model features two types of pecuniary externalities: collateral externalities, because the resale price of capital affects collateral constraints, and distributive externalities, because buyers of old capital are more financially constrained than sellers, consistent with empirical evidence. We prove that the stationary equilibrium price of old capital is inefficiently high because the distributive externality exceeds the collateral externality, by a factor of two when we calibrate the model. New investment reduces the future price of old capital, providing a rationale for new-investment subsidies. (JEL D21, D24, D25, D62, E22, G31, G32)",AER,2023,109,794,"['Financial Markets', 'Investment Strategies', 'Monetary Policy', 'Economic Growth', 'Public Policy']","['efficiency', 'equilibrium model', 'investment', 'capital reallocation', 'heterogeneous firms', 'collateral constraints', 'pecuniary externalities', 'distributive externalities', 'new-investment subsidies', 'calibration']"
Enabling or Limiting Cognitive Flexibility? Evidence of Demand for Moral Commitment,10.1257/aer.20201333,"Moral behavior is more prevalent when individuals cannot easily distort their beliefs self-servingly. Do individuals seek to limit or enable their ability to distort beliefs? How do these choices affect behavior? Experiments with over 9,000 participants show preferences are heterogeneous—30 percent of participants prefer to limit belief distortion, while over 40 percent prefer to enable it, even if costly. A random assignment mechanism reveals that being assigned to the preferred environment is necessary for curbing or enabling self-serving behavior. Third parties can anticipate these effects, suggesting some sophistication about the cognitive constraints to belief distortion. (JEL C91, D82, D83, D91)",AER,2023,100,710,"['Behavioral Economics', 'Cognitive Constraints', 'Experimental Economics', 'Belief Distortion', 'Third-Party Anticipation']","['Moral behavior', 'Belief distortion', 'Preferences', 'Self-serving behavior', 'Experiments', 'Participants', 'Random assignment mechanism', 'Third parties', 'Cognitive constraints', 'Behavioral economics']"
"Droughts, Deluges, and (River) Diversions: Valuing Market-Based Water Reallocation",10.1257/aer.20201434,"This paper develops and applies a method to value water trading on a river network. The framework relies on regulatory variation in diversion caps to identify production functions for irrigated farms, then uses the estimated shadow values to assess the market’s reallocation. I apply this framework to the largest water market in human history, located in southeastern Australia. Observed water trading increased output by 4–6 percent from 2007 to 2015, equivalent to avoiding an 8–12 percent uniform decline in water resources. Reallocation and average surplus both increase substantially during drought, implying that water markets can be most valuable when climatic variability is most severe. (JEL D23, D24, Q12, Q15, Q25, Q54)",AER,2023,111,731,"['Water Resource Management', 'Climate Change Economics', 'Economic Development', 'Environmental Sustainability', 'Market Transparency']","['water trading', 'river network', 'production functions', 'irrigated farms', 'shadow values', 'market reallocation', 'water market', 'southeastern Australia', 'drought', 'climatic variability']"
"Technology Gaps, Trade, and Income",10.1257/aer.20201940,"This paper quantifies the contribution of technology gaps to international income inequality. I develop an endogenous growth model where cross-country differences in R&D efficiency and cross-industry differences in innovation and adoption opportunities together determine equilibrium technology gaps, trade patterns, and income inequality. Countries with higher R&D efficiency are richer and have comparative advantage in more innovation-dependent industries. I calibrate R&D efficiency by country and innovation dependence by industry using R&D, patent, and bilateral trade data. Counterfactual analysis implies technology gaps account for one-quarter to one-third of nominal wage variation within the OECD. (JEL D21, D24, D31, F14, O31, O33, O47)",AER,2023,100,764,"['Income Inequality', 'Innovation', 'Trade and Globalization', 'Economic Growth', 'Technological Adoption']","['technology gaps', 'international income inequality', 'endogenous growth model', 'R&D efficiency', 'innovation', 'adoption opportunities', 'trade patterns', 'income inequality', 'OECD', 'counterfactual analysis']"
Electronic Food Vouchers: Evidence from an At-Scale Experiment in Indonesia,10.1257/aer.20210461,"We compare how in-kind food assistance and an electronic voucher-based program affect the delivery of aid in practice. The Government of Indonesia randomized across 105 districts the transition from in-kind rice to approximately equivalent electronic vouchers redeemable for rice and eggs at a network of private agents. Targeted households received 46 percent more assistance in voucher areas. For the bottom 15 percent of households at baseline, poverty fell 20 percent. Voucher recipients received higher-quality rice, and increased consumption of eggs. The results suggest moving from a manual in-kind to electronic voucher-based program reduced poverty through increased adherence to program design. (JEL H53, I18, I32, I38, O12)",AER,2023,106,734,"['Public Policy', 'Economic Development', 'Social Policy', 'Poverty', 'Financial Markets']","['food assistance', 'electronic voucher-based program', 'aid delivery', 'Indonesia', 'randomized', 'in-kind rice', 'electronic vouchers', 'poverty', 'program design', 'consumption']"
The Voice of Monetary Policy,10.1257/aer.20220129,"We develop a deep learning model to detect emotions embedded in press conferences after the Federal Open Market Committee meetings and examine the influence of the detected emotions on financial markets. We find that, after controlling for the Federal Reserve’s actions and the sentiment in policy texts, a positive tone in the voices of Federal Reserve chairs leads to significant increases in share prices. Other financial variables also respond to vocal cues from the chairs. Hence, how policy messages are communicated can move the financial market. Our results provide implications for improving the effectiveness of central bank communications. (JEL D83, E31, E44, E52, E58, F31, G14)",AER,2023,106,690,"['Monetary Policy', 'Financial Markets', 'Market Transparency', 'Economic Development', 'Public Policy']","['deep learning', 'emotions', 'press conferences', 'Federal Open Market Committee meetings', 'financial markets', 'Federal Reserve', 'share prices', 'policy messages', 'central bank communications', 'vocal cues']"
Retail Pharmacies and Drug Diversion during the Opioid Epidemic,10.1257/aer.20210357,"This study investigates the role of retail pharmacy ownership in the opioid epidemic. Using data of prescription opioid orders, we show that compared with chain pharmacies, independent pharmacies dispense 39.1 percent more opioids and 60.5 percent more OxyContin. After an independent pharmacy becomes a chain pharmacy, opioid dispensing decreases. Using the OxyContin reformulation, which reduced nonmedical demand but not the legitimate medical demand, we show that at least one-third of the difference in the amount of OxyContin dispensed can be attributed to nonmedical demand. We show that differences in competitive pressure and whether pharmacists own the pharmacy drive our estimates. (JEL G32, I12, L22, L81)",AER,2023,105,717,"['Healthcare Systems', 'Public Policy', 'Consumer Behavior', 'Regulatory Frameworks', 'Economic Development']","['retail pharmacy ownership', 'opioid epidemic', 'prescription opioid orders', 'chain pharmacies', 'independent pharmacies', 'OxyContin', 'reformulation', 'nonmedical demand', 'competitive pressure', 'pharmacists']"
Conflict and Intergroup Trade: Evidence from the 2014 Russia-Ukraine Crisis,10.1257/aer.20191701,"Does armed conflict reduce trade, even in noncombat areas, through the destruction of intergroup social capital? We analyze Ukrainian trade transactions before and after the 2014 Russia-Ukraine conflict. In a difference-in-differences framework, we find that Ukrainian firms from districts with fewer ethnic Russians experienced a deeper decline in trade with Russia. This decline is economically signifi-cant, persistent, and can be explained by erosion of intergroup trust. Affected Ukrainian firms suffered a decrease in performance and diverted trade to other countries. Our results suggest that, through social effects, conflict can be economically damaging even away from combat areas. (JEL D74, F14, F51, J15, P31, P33, Z13)",AER,2023,105,731,"['Trade and Globalization', 'Economic Development', 'Social Policy', 'Public Policy', 'Conflict Economics']","['armed conflict', 'trade', 'social capital', 'Ukraine', 'Russia', 'ethnic Russians', 'intergroup trust', 'performance', 'other countries', 'economic damage']"
What Caused Racial Disparities in Particulate Exposure to Fall? New Evidence from the Clean Air Act and Satellite-Based Measures of Air Quality,10.1257/aer.20191957,"This project links administrative census microdata to spatially continuous measures of particulate pollution (PM2.5) to first document and then decompose the key drivers of convergence in black-white pollution exposure differences. We use quantile regression to show that a significant portion of the convergence in Black-White exposure is attributable to differential impacts of the Clean Air Act (CAA) in Black and White communities. Areas with larger Black populations saw greater CAA-related declines in PM2.5. We show that the CAA can account for over 60 percent of the racial convergence in PM2.5 pollution exposure in the United States since 2000. (JEL J15, K32, Q51, Q53, Q58)",AER,2023,104,684,"['Public Policy', 'Environmental Sustainability', 'Climate Change Economics', 'Regulatory Frameworks', 'Economic Development']","['administrative census microdata', 'spatially continuous', 'particulate pollution', 'PM2.5', 'convergence', 'black-white', 'exposure differences', 'quantile regression', 'Clean Air Act', 'racial convergence']"
Multigenerational Impacts of Childhood Access to the Safety Net: Early Life Exposure to Medicaid and the Next Generation's Health,10.1257/aer.20210937,"We examine multigenerational impacts of positive in utero health interventions using a new research design that exploits sharp increases in prenatal Medicaid eligibility that occurred in some states. Our analyses are based on US Vital Statistics natality files, which enables linkages between individuals’ early life Medicaid exposure and the next generation’s health at birth. We find evidence that the health benefits associated with treated generations’ early life program exposure extend to later offspring. Our results suggest that the returns on early life health investments may be substantively underestimated. (JEL I12, I13, I18, I38, J13, J16)",AER,2023,95,653,"['Healthcare Systems', 'Public Policy', 'Economic Development', 'Social Policy', 'Healthcare Innovation']","['in utero health interventions', 'multigenerational impacts', 'prenatal Medicaid eligibility', 'US Vital Statistics', 'natality files', 'early life program exposure', 'health benefits', 'offspring', 'early life health investments', 'Medicaid exposure']"
Unobserved-Offers Bargaining,10.1257/aer.20211524,"I study ultimatum bargaining with imperfectly observed offers. Imperfectly observed offers must be rejected with positive probability, even when the players’ preferences are common knowledge. Noisier observations imply a greater risk of rejection. In repeated ultimatum bargaining, the responding party can obtain a positive payoff if his signal of the opponent’s offer is also observed by the opponent herself, but not if his signal is private. In alternating-offers bargaining, a player is better off when her own offers are observed more precisely and her opponent’s offers are observed less precisely. Possible applications include international relations, regulation, principal-agency, and product quality provision. (JEL C73, C78, D82)",AER,2023,105,741,"['Risk Management', 'Game Theory', 'Public Policy', 'International Relations', 'Economic Development']","['ultimatum bargaining', 'imperfectly observed offers', 'rejection', 'preferences', 'noisier observations', 'repeated ultimatum bargaining', 'alternating-offers bargaining', 'payoff', 'international relations', 'regulation']"
Did US Politicians Expect the China Shock?,10.1257/aer.20210140,"Information sets, expectations, and preferences of politicians are fundamental, but unobserved determinants of their policy choices. Employing repeated votes in the US House of Representatives on China’s normal trade relations (NTR) status during the two decades straddling China’s World Trade Organization (WTO) accession, we apply a moment inequality approach designed to deliver consistent estimates under weak informational assumptions on the information sets of members of Congress. This methodology offers a robust way to test hypotheses about what information politicians have at the time of their decision and to estimate the weight that constituents, ideology, and other factors have in policy making and voting. (JEL D72, D78, D83, D84, F14, P33)",AER,2023,110,756,"['Public Policy', 'Trade and Globalization', 'Political Risk', 'Economic Development', 'Fiscal Policy']","['politicians', 'policy choices', 'US House of Representatives', 'China', 'normal trade relations', 'WTO accession', 'moment inequality approach', 'information sets', 'constituents', 'ideology']"
Signaling and Discrimination in Collaborative Projects,10.1257/aer.20211729,"We study collaborative work in pairs when potential collaborators are motivated by the reputational implications of (joint or solo) projects. In equilibrium, individual collaboration strategies both influence and are influenced by the public assignment of credit for joint work across the two partners. We investigate the fragility of collaboration to small biases in the public’s credit assignment. When collaborators are symmetric, symmetric equilibria are often fragile, and in nonfragile equilibria individuals receive asymmetric collaborative credit based on payoff-irrelevant “identities.” We study payoff distributions across identities within asymmetric equilibria, and compare aggregate welfare across symmetric and asymmetric equilibria. (JEL A11, D82, I23)",AER,2023,101,767,"['Collaborative Work', 'Credit Assignment', 'Public Policy', 'Economic Development', 'Behavioral Economics']","['collaborative work', 'pairs', 'potential collaborators', 'reputational implications', 'projects', 'equilibrium', 'collaboration strategies', 'public assignment', 'credit', 'identities']"
Judging Judge Fixed Effects,10.1257/aer.20201860,"We propose a nonparametric test for the exclusion and monotonicity assumptions invoked in instrumental variable (IV) designs based on the random assignment of cases to judges. We show its asymptotic validity and demonstrate its finite-sample performance in simulations. We apply our test in an empirical setting from the literature examining the effects of pretrial detention on defendant outcomes in New York. When the assumptions are not satisfied, we propose weaker versions of the usual exclusion and monotonicity restrictions under which the IV estimator still converges to a proper weighted average of treatment effects. (JEL H76, K41)",AER,2023,96,641,"['Econometric Methods', 'Legal Systems', 'Social Policy', 'Economic Development', 'Public Policy']","['nonparametric test', 'exclusion assumptions', 'monotonicity assumptions', 'instrumental variable designs', 'random assignment', 'asymptotic validity', 'finite-sample performance', 'simulations', 'pretrial detention', 'defendant outcomes']"
Earnings Inequality and the Minimum Wage: Evidence from Brazil,10.1257/aer.20181506,"Increases in the minimum wage can substantially reduce earnings inequality. To demonstrate this, we combine administrative and survey data with an equilibrium model of the Brazilian labor market. We find that a 128 percent increase in the real minimum wage in Brazil between 1996 and 2018 had far-reaching spillover effects on wages higher up in the distribution. The increased minimum wage accounts for 45 percent of a large fall in earnings inequality over this period. At the same time, the effects of the minimum wage on employment and output are muted by reallocation of workers toward more productive firms.. (JEL D31, E23, E24, J31, J38, O15)",AER,2022,106,649,"['Labor Market Dynamics', 'Income Inequality', 'Economic Development', 'Public Policy', 'Social Policy']","['minimum wage', 'earnings inequality', 'Brazil', 'labor market', 'spillover effects', 'wages', 'distribution', 'employment', 'output', 'productive firms']"
"Interaction, Stereotypes, and Performance: Evidence from South Africa",10.1257/aer.20181805,"We exploit a policy designed to randomly allocate roommates in a large South African university to investigate whether interracial interaction affects stereotypes, attitudes and performance. Using implicit association tests, we find that living with a roommate of a different race reduces White students' negative stereotypes towards Black students and increases interracial friendships. Interaction also affects academic outcomes: Black students improve their GPA, pass more exams and have lower dropout rates. This effect is not driven by roommate's ability. (JEL D91, I23, J15, O12)",AER,2022,83,585,"['Social Policy', 'Educational Equity', 'Labor Market Dynamics', 'Economic Development', 'Race Relations']","['interracial interaction', 'stereotypes', 'attitudes', 'performance', 'implicit association tests', 'GPA', 'exams', 'dropout rates', 'South African university', ""roommate's ability""]"
Dynamic Matching in Overloaded Waiting Lists,10.1257/aer.20201111,"This paper introduces a stylized model to capture distinctive features of waiting list allocation mechanisms. First, agents choose among items with associated expected wait times. Waiting times serve a similar role to that of monetary prices in directing agents' choices and rationing items. Second, the expected wait for an item is endogenously determined and randomly fluctuates over time. We evaluate welfare under these endogenously determined waiting times and find that waiting time fluctuations lead to misallocation and welfare loss. A simple randomized assignment policy can reduce misallocation and increase welfare. (JEL C78, D61, D82, D83)",AER,2022,95,651,"['Public Policy', 'Economic Development', 'Market Transparency', 'Monetary Policy', 'Welfare Economics']","['waiting list', 'allocation mechanisms', 'expected wait times', 'monetary prices', 'agents', 'items', 'endogenously determined', 'welfare', 'misallocation', 'randomized assignment policy']"
Optimality of Matched-Pair Designs in Randomized Controlled Trials,10.1257/aer.20201856,"In randomized controlled trials, treatment is often assigned by stratified randomization. I show that among all stratified randomization schemes that treat all units with probability one half, a certain matched-pair design achieves the maximum statistical precision for estimating the average treatment effect. In an important special case, the optimal design pairs units according to the baseline outcome. In a simulation study based on datasets from ten randomized controlled trials, this design lowers the standard error for the estimator of the average treatment effect by 10 percent on average, and by up to 34 percent, relative to the original designs. (JEL C13, C21)",AER,2022,102,673,"['Economic Development', 'Healthcare Innovation', 'Data Privacy', 'Statistical Precision', 'Randomized Controlled Trials']","['stratified randomization', 'treatment', 'matched-pair design', 'statistical precision', 'average treatment effect', 'baseline outcome', 'simulation study', 'randomized controlled trials', 'standard error', 'estimator']"
Convex Supply Curves,10.1257/aer.20210811,"We provide evidence that industries' supply curves are convex. To guide our empirical analysis, we develop a model in which capacity constraints at the firm level generate supply curves that are convex in logs at the industry level. The industry's capacity utilization rate is a sufficient statistic for the supply elasticity. Using data on capacity utilization and three different instruments, we estimate the supply curve and find robust evidence for an economically sizable degree of convexity. The nonlinearity we identify has several macroeconomic implications, including that responses to shocks are state dependent and that the Phillips curve is convex. (JEL D21, E22, E23, E32, E62, L60)",AER,2022,106,695,"['Industrial Policy', 'Monetary Policy', 'Economic Development', 'Supply Chain Resilience', 'Macroeconomic Implications']","['industries', 'supply curves', 'convex', 'model', 'capacity constraints', 'firm level', 'industry level', 'capacity utilization rate', 'supply elasticity', 'nonlinearity']"
Trading on Sunspots,10.1257/aer.20210972,"In a model with multiple Pareto-ranked equilibria, we show that the set of equilibria shrinks if we allow trade in assets that pay based on the realization of a sunspot acting as an equilibrium-selection device. When the probability of a low-output outcome is high, the desire to insure against it leads the poor to promise large transfers to the rich in the high-output state. The rich then lose the incentive to exert the effort needed to sustain the high output. Thus the opening of financial markets may destroy the high equilibrium. (JEL D51, D53, D82, E44, G12, G14, G21)",AER,2022,99,577,"['Financial Markets', 'Risk Management', 'Trade and Globalization', 'Income Inequality', 'Credit Markets']","['equilibria', 'Pareto-ranked', 'assets', 'sunspot', 'equilibrium-selection device', 'low-output outcome', 'transfers', 'financial markets', 'high equilibrium', 'incentive']"
Learning from Manipulable Signals,10.1257/aer.20211158,"We study a dynamic stopping game between a principal and an agent. The principal gradually learns about the agent's private type from a noisy performance measure that can be manipulated by the agent via a costly and hidden action. We fully characterize the unique Markov equilibrium of this game. We find that terminations/market crashes are often preceded by a spike in manipulation intensity and (expected) performance. Moreover, due to endogenous signal manipulation, too much transparency can inhibit learning and harm the principal. As the players get arbitrarily patient, the principal elicits no useful information from the observed signal. (JEL C73, D82, D83, G24, M13)",AER,2022,104,677,"['Financial Markets', 'Market Transparency', 'Behavioral Economics', 'Information Asymmetry', 'Game Theory']","['dynamic stopping game', 'principal', 'agent', 'private type', 'noisy performance measure', 'manipulation', 'Markov equilibrium', 'terminations', 'market crashes', 'transparency']"
Dynamic Amnesty Programs,10.1257/aer.20211428,"A regulator faces a stream of agents engaged in crimes with stochastic returns. The regulator designs an amnesty program, committing to a time path of punishments for criminals who report their crimes. In an optimal program, time variation in the returns from crime can generate time variation in the generosity of amnesty. I construct an optimal time path and show that it exhibits amnesty cycles. Amnesty becomes increasingly generous over time until it hits a bound, after which the cycle resets. Agents engaged in high return crime report at the end of each cycle, while agents engaged in low return crime report always. (JEL D82, D86, K42)",AER,2022,107,644,"['Public Policy', 'Regulatory Frameworks', 'Economic Development', 'Risk Management', 'Behavioral Economics']","['regulator', 'agents', 'crimes', 'amnesty program', 'punishments', 'time path', 'optimal program', 'time variation', 'generosity', 'cycles']"
The End of Economic Growth? Unintended Consequences of a Declining Population,10.1257/aer.20201605,"In many models, economic growth is driven by people discovering new ideas. These models typically assume either a constant or growing population. However, in high income countries today, fertility is already below its replacement rate: women are having fewer than two children on average. It is a distinct possibility that global population will decline rather than stabilize in the long run. In standard models, this has profound implications: rather than continued exponential growth, living standards stagnate for a population that vanishes. Moreover, even the optimal allocation can get trapped in this outcome if there are delays in implementing optimal policy. (JEL I12, J11, J13, O41)",AER,2022,105,691,"['Economic Growth', 'Population Dynamics', 'Public Policy', 'Economic Development', 'Fiscal Policy']","['economic growth', 'ideas', 'population', 'fertility', 'global population', 'living standards', 'exponential growth', 'optimal allocation', 'policy', 'high income countries']"
Persistent Polarizing Effects of Persuasion: Experimental Evidence from Turkey,10.1257/aer.20201892,"I evaluate randomly varied neighborhood exposure to information campaigns regarding either executive performance, or increases in executive power, prior to a Turkish referendum on weakening checks and balances on the executive. The campaigns increased voter polarization over the referendum, and subsequently changed party affiliation in national and local elections over the next two years, leading to partisan polarization. My results suggest that, when voters disagree on whether increasing executive power is a good policy, more information can increase voter polarization. Finally, I conclude that because potential polarization is often ignored, the impact of information campaigns on civil society is underestimated. (JEL D72, D83, O17)",AER,2022,104,743,"['Public Policy', 'Political Risk', 'Social Policy', 'Economic Development', 'Information Campaigns']","['information campaigns', 'executive performance', 'executive power', 'Turkish referendum', 'checks and balances', 'voter polarization', 'party affiliation', 'national elections', 'local elections', 'civil society']"
Job Search and Hiring with Limited Information about Workseekers' Skills,10.1257/aer.20200961,"We assess South African workseekers’ skills and disseminate the assessment results to explore how limited information affects firm and workseeker behavior. Giving workseekers assessment results that they can credibly share with firms increases workseekers’ employment and earnings and better aligns their skills, beliefs and search strategies. Giving workseekers assessment results that they cannot easily share with firms has similar effects on beliefs and search, but smaller effects on employment and earnings. Giving assessment results only to firms shifts interview decisions. These findings show that getting credible skill information to the right agents can improve outcomes in the labor market. (JEL J22, J23, J24, J31, J41, J64, O15)",AER,2022,107,743,"['Labor Market Dynamics', 'Economic Development', 'Public Policy', 'Workforce Automation', 'Educational Equity']","['skills', 'assessment results', 'workseekers', 'firms', 'employment', 'earnings', 'beliefs', 'search strategies', 'labor market', 'agents']"
Evaluating Deliberative Competence: A Simple Method with an Application to Financial Choice,10.1257/aer.20210290,"We examine methods for evaluating interventions designed to improve decision-making quality when people misunderstand the consequences of their choices. In an experiment involving financial education, conventional outcome metrics (financial literacy and directional behavioral responses) imply that two interventions are equally beneficial even though only one reduces the average severity of errors. We trace these failures to violations of the assumptions embedded in the conventional metrics. We propose a simple, intuitive, and broadly applicable outcome metric that properly differentiates between the interventions, and is robustly interpretable as a measure of welfare loss from misunderstanding consequences even when additional biases distort choices. (JEL D83, D91, G51, G53)",AER,2022,105,785,"['Economic Development', 'Financial Literacy', 'Behavioral Economics', 'Education Equity', 'Public Policy']","['evaluating interventions', 'decision-making quality', 'consequences', 'choices', 'financial education', 'outcome metrics', 'errors', 'assumptions', 'welfare loss', 'biases']"
Vulnerability and Clientelism,10.1257/aer.20190565,"This study argues that economic vulnerability causes citizens to participate in clientelism, a phenomenon with various pernicious consequences. To examine how reduced vulnerability affects citizens’ participation in clientelism, we employ two exogenous shocks to vulnerability. First, we designed a randomized control trial to reduce household vulnerability: our development intervention constructed residential water cisterns in drought-prone areas of Brazil. Second, we exploit rainfall shocks. We find that reducing vulnerability significantly decreases requests for private goods from politicians, especially among citizens likely to be in clientelist relationships. Moreover, reducing vulnerability decreases votes for incumbent mayors, who typically have more resources for clientelism. (JEL D72, H41, I38, O12, O17, Q54)",AER,2022,107,827,"['Public Policy', 'Economic Development', 'Climate Change Economics', 'Political Risk', 'Behavioral Economics']","['economic vulnerability', 'citizens', 'clientelism', 'participation', 'exogenous shocks', 'randomized control trial', 'household vulnerability', 'development intervention', 'rainfall shocks', 'incumbent mayors']"
Social Media and Mental Health,10.1257/aer.20211218,"We provide quasi-experimental estimates of the impact of social media on mental health by leveraging a unique natural experiment: the staggered introduction of Facebook across US colleges. Our analysis couples data on student mental health around the years of Facebook’s expansion with a generalized difference-in-differences empirical strategy. We find that the rollout of Facebook at a college had a negative impact on student mental health. It also increased the likelihood with which students reported experiencing impairments to academic performance due to poor mental health. Additional evidence on mechanisms suggests the results are due to Facebook fostering unfavorable social comparisons. (JEL D91, I12, I23, L82)",AER,2022,104,723,"['Social Policy', 'Mental Health Economics', 'Consumer Behavior', 'Behavioral Economics', 'Social Media']","['social media', 'mental health', 'Facebook', 'quasi-experimental', 'natural experiment', 'student', 'academic performance', 'social comparisons', 'impact', 'empirical strategy']"
The Psychosocial Value of Employment: Evidence from a Refugee Camp,10.1257/aer.20211616,"Employment may be important to well-being for reasons beyond its role as an income source. This paper presents a causal estimate of the psychosocial value of employment in refugee camps in Bangladesh. We involve 745 individuals in a field experiment with three arms: a control arm, a weekly cash arm, and an employment arm of equal value. Employment raises psychosocial well-being substantially more than cash alone, and 66 percent of the employed are willing to forgo cash payments to continue working temporarily for free. Despite material poverty, those in our context both experience and recognize a nonmonetary, psychosocial value to employment. (JEL C93, D91, I31, J15, J22, O15)",AER,2022,108,685,"['Labor Market Dynamics', 'Economic Development', 'Public Policy', 'Social Policy', 'Refugee Camps.']","['employment', 'psychosocial value', 'refugee camps', 'Bangladesh', 'field experiment', 'cash payments', 'material poverty', 'nonmonetary', 'well-being', 'income source']"
Human Capital Depreciation and Returns to Experience,10.1257/aer.20201571,"Human capital can depreciate if skills are unused. But estimating human capital depreciation is challenging, as worker skills are difficult to measure and less productive workers are more likely to spend time in nonemployment. We overcome these challenges with new administrative data on teachers’ assignments and their students’ outcomes, and quasi-random variation from the teacher assignment process in Greece. We find significant losses to output, as a one-year increase in time without formal employment lowers students’ test scores by 0.05 standard deviations. Using a simple production model, we estimate a skill depreciation rate of 4.3 percent and experience returns of 6.8 percent. (JEL I21, J24, J45, J64, J65)",AER,2022,108,721,"['Labor Market Dynamics', 'Educational Equity', 'Economic Development', 'Public Policy', 'Trade and Globalization']","['human capital', 'depreciation', 'skills', 'nonemployment', 'teachers', 'students', 'test scores', 'skill depreciation rate', 'experience returns', 'production model']"
Immigration and Spatial Equilibrium: The Role of Expenditures in the Country of Origin,10.1257/aer.20211241,"We document that international migrants concentrate more in expensive cities—the more so, the lower the prices in their origin countries are—and consume less locally than comparable natives. We rationalize this empirical evidence by introducing a quantitative spatial equilibrium model, in which a part of immigrants’ income goes toward consumption in their origin countries. Using counter-factual simulations, we show that, due to this novel consumption channel, immigrants move economic activity toward expensive, high-productivity locations. This leads to a more efficient spatial allocation of labor and, as a result, increases the aggregate output and welfare of natives. (JEL F24, J15, J31, J61, R23)",AER,2022,101,706,"['Immigration and Labor', 'Productivity', 'Economic Growth', 'Public Policy', 'Urban Development']","['international migrants', 'expensive cities', 'origin countries', 'consumption', 'spatial equilibrium model', 'economic activity', 'high-productivity locations', 'labor allocation', 'aggregate output', 'welfare']"
Persistent Overconfidence and Biased Memory: Evidence from Managers,10.1257/aer.20190668,"A long-standing puzzle is how overconfidence can persist in settings characterized by repeated feedback. This paper studies managers who participate repeatedly in a high-powered tournament incentive system, learning relative performance each time. Using reduced form and structural methods we find that (i) managers make over-confident predictions about future performance; (ii) managers have overly positive memories of past performance; (iii) the two phenomena are linked at an individual level. Our results are consistent with models of motivated beliefs in which individuals are motivated to distort memories of feedback and preserve unrealistic expectations. (JEL D82, D83, J33, L25, L81, M52, M54)",AER,2022,99,703,"['Behavioral Economics', 'Corporate Governance', 'Organizational Behavior', 'Market Transparency', 'Cognitive Bias']","['overconfidence', 'managers', 'tournament incentive system', 'predictions', 'performance', 'memories', 'motivated beliefs', 'feedback', 'unrealistic expectations', 'repeated feedback']"
Religious Festivals and Economic Development: Evidence from the Timing of Mexican Saint Day Festivals,10.1257/aer.20211094,"Does variation in how religious festivals are celebrated have economic consequences? We study the economic impacts of the timing of Catholic patron saint day festivals in Mexico. For causal identification, we exploit cross-locality variation in festival dates and in the timing of agricultural seasons. We estimate the impact of “ agriculturally coinciding” festivals (those coinciding with peak planting or harvest months) on long-run economic development of localities. Agriculturally coinciding festivals lead to lower household income and worse development outcomes overall. These negative effects are likely due to lower agricultural productivity, which inhibits structural transformation out of agriculture. Agriculturally coinciding festivals may nonetheless persist because they also lead to higher religiosity and social capital. (JEL O12, O13, O18, 043, Q12, Z12, Z13)",AER,2022,121,878,"['Economic Development', 'Social Policy', 'Agriculture', 'Religion', 'Income Inequality']","['religious festivals', 'economic consequences', 'Catholic patron saint day', 'Mexico', 'festival dates', 'agricultural seasons', 'household income', 'economic development', 'agricultural productivity', 'social capital']"
Posterior Separable Cost of Information,10.1257/aer.20211252,"We provide testable conditions under which the cost of acquiring information is given by the expected reduction of a measure of uncertainty (e.g., entropy). The assumption, under the name of posterior separability, is nearly universal in the literature of rational inattention; yet, a testable characterization has been lacking. In applications to experimental data, we indicate situations in which posterior separability is—and is not—a compelling assumption for the cost of information; we propose a generalization to address some of its shortcomings. We also show how to identify and estimate nonparametrically the cost of information from observable choice behavior. (JEL C91, D11, D12, D81, D91)",AER,2022,103,700,"['Information Economics', 'Experimental Economics', 'Decision Making', 'Nonparametric Methods', 'Observable Behavior']","['testable conditions', 'cost of acquiring information', 'measure of uncertainty', 'entropy', 'posterior separability', 'rational inattention', 'experimental data', 'assumption', 'generalization', 'nonparametrically']"
Valid t-Ratio Inference for IV,10.1257/aer.20211063,"In the single-IV model, researchers commonly rely on t-ratio-based inference, even though the literature has quantified its potentially severe large-sample distortions. Building on Stock and Yogo (2005), we introduce the tF critical value function, leading to a standard error adjustment that is a smooth function of the first-stage F-statistic. For one-quarter of specifications in 61 AER papers, corrected standard errors are at least 49 and 136 percent larger than conventional 2SLS standard errors at the 5 percent and 1 percent significance levels, respectively. tF confidence intervals have shorter expected length than those of Anderson and Rubin (1949), whenever both are bounded. (JEL C13, C26)",AER,2022,104,703,"['Econometrics', 'Financial Markets', 'Research Methods', 'Statistical Analysis', 'Economic Journals']","['t-ratio-based inference', 'large-sample distortions', 'Stock and Yogo', 'tF critical value function', 'standard error adjustment', 'first-stage F-statistic', 'AER papers', '2SLS standard errors', 'confidence intervals', 'Anderson and Rubin']"
"Credit, Attention, and Externalities in the Adoption of Energy Efficient Technologies by Low-Income Households",10.1257/aer.20210766,"We study an energy efficient charcoal cookstove in an experiment with 1,000 households in Nairobi. We estimate a 39 percent reduction in charcoal spending, which matches engineering estimates, generating a 295 percent annual return. Despite fuel savings of $237 over the stove’s two-year lifespan—and $295 in emissions reductions—households are only willing to pay $12. Drawing attention to energy savings does not increase demand. However, a loan more than doubles willingness to pay: credit constraints prevent adoption of privately optimal technologies. Energy efficient technologies could drive sustainable development by slowing greenhouse emissions while saving households money. (JEL D12, D91, G51, O12, O13, O32, Q54)",AER,2022,103,725,"['Energy Transition', 'Climate Change Economics', 'Financial Markets', 'Credit Markets', 'Economic Development']","['energy efficient', 'charcoal cookstove', 'households', 'charcoal spending', 'return', 'fuel savings', 'emissions reductions', 'loan', 'credit constraints', 'sustainable development']"
Demagogues and the Economic Fragility of Democracies,10.1257/aer.20211125,"We investigate the susceptibility of democracies to demagogues, studying tensions between representatives who guard voters’ long-run interests and demagogues who cater to voters’ short-run desires. Parties propose consumption and investment. Voters base choices on current-period consumption and valence shocks. Younger/poorer economies and economically disadvantaged voters are attracted to the demagogue’s disinvestment policies, forcing farsighted representatives to mimic them. This electoral competition can destroy democracy: if capital falls below a critical level, a death spiral ensues with capital stocks falling thereafter. We identify when economic development mitigates this risk and characterize how the death-spiral risk declines as capital grows large. (JEL D72, E21, E22, E32)",AER,2022,104,793,"['Political Risk', 'Economic Development', 'Capital Allocation', 'Public Policy', 'Fiscal Policy']","['democracies', 'demagogues', 'representatives', 'voters', 'consumption', 'investment', 'economic development', 'capital', 'death spiral', 'electoral competition']"
"Fake News, Voter Overconfidence, and the Quality of Democratic Choice",10.1257/aer.20201844,"This paper studies, theoretically and experimentally, the effects of overconfidence and fake news on information aggregation and the quality of democratic choice in a common-interest setting. We theoretically show that overconfidence exacerbates the adverse effects of widespread misinformation (i.e., fake news). We then analyze richer models that allow for partisanship, targeted misinformation intended to sway public opinion, and news signals correlated across voters (due to media ownership concentration or censorship). In our experiment, overconfidence severely undermines information aggregation, suggesting that the effect of overconfidence can be much more pronounced at the collective than at the individual level. (JEL C91, D12, D72, D82, D83, L82)",AER,2022,104,760,"['Behavioral Economics', 'Public Policy', 'Information Aggregation', 'Fake News', 'Experimental Economics.']","['overconfidence', 'fake news', 'information aggregation', 'democratic choice', 'misinformation', 'partisanship', 'targeted misinformation', 'public opinion', 'news signals', 'experiment']"
Reference Dependence in the Housing Market,10.1257/aer.20191766,"We quantify reference dependence and loss aversion in the housing market using rich Danish administrative data. Our structural model includes loss aversion, reference dependence, financial constraints, and a sale decision, and matches key nonparametric moments, including a “hockey stick” in listing prices with nominal gains, and bunching at zero realized nominal gains. Households derive substantial utility from gains over the original house purchase price; losses affect households roughly 2.5 times more than gains. The model helps explain the positive correlation between aggregate house prices and turnover, but cannot explain visible attenuation in reference dependence when households are more financially constrained. (JEL D12, D91, G51, R21, R31)",AER,2022,106,757,"['Housing Market Trends', 'Financial Markets', 'Consumer Behavior', 'Behavioral Economics', 'Monetary Policy']","['reference dependence', 'loss aversion', 'housing market', 'Danish', 'administrative data', 'structural model', 'financial constraints', 'sale decision', 'listing prices', 'nominal gains']"
How Merchant Towns Shaped Parliaments: From the Norman Conquest of England to the Great Reform Act,10.1257/aer.20200885,"We study the emergence of urban self-governance in the late medieval period. We focus on England after the Norman Conquest of 1066, building a novel comprehensive dataset of 554 medieval towns. During the Commercial Revolution (twelfth to thirteenth centuries), many merchant towns obtained Farm Grants: the right of self-governed tax collection and law enforcement. Self-governance, in turn, was a stepping stone for parliamentary representation: Farm Grant towns were much more likely to be summoned directly to the medieval English Parliament than otherwise similar towns. We also show that self-governed towns strengthened the role of Parliament and shaped national institutions over the subsequent centuries. (JEL D02, D72, D73, K11, K34, N43, N93)",AER,2022,111,753,"['Urban Development', 'Public Policy', 'Economic Development', 'Fiscal Policy', 'Regulatory Frameworks']","['urban self-governance', 'late medieval period', 'England', 'Norman Conquest', 'medieval towns', 'Commercial Revolution', 'Farm Grants', 'parliamentary representation', 'English Parliament', 'national institutions']"
Belief Elicitation and Behavioral Incentive Compatibility,10.1257/aer.20201248,"Subjective beliefs are crucial for economic inference, yet behavior can challenge the elicitation. We propose that belief elicitation should be incentive compatible not only theoretically but also in a de facto behavioral sense. To demonstrate, we show that the binarized scoring rule, a state-of-the-art elicitation, violates two weak conditions for behavioral incentive compatibility: (i) within the elicitation, information on the incentives increases deviations from truthful reporting; and (ii) in a pure choice over the set of incentives, most deviate from the theorized maximizer. Moreover, we document that deviations are systematic and center-biased, and that the elicited beliefs substantially distort inference. (JEL D83, D91)",AER,2022,103,737,"['Behavioral Economics', 'Incentive Compatibility', 'Elicitation Methods', 'Economic Inference', 'Information Distortion.']","['beliefs', 'economic inference', 'behavior', 'belief elicitation', 'incentive compatible', 'scoring rule', 'behavioral incentive compatibility', 'truthful reporting', 'systematic deviations', 'inference']"
The Rise and Fall of Local Elections in China,10.1257/aer.20181249,"We posit that autocrats introduce local elections when their bureaucratic capacity is low. Local elections exploit citizens’ informational advantage in keeping local officials accountable, but they also weaken vertical control. As bureaucratic capacity increases, the autocrat limits the role of elected bodies to regain vertical control. We argue that these insights can explain the introduction of village elections in rural China and the subsequent erosion of village autonomy years later. We construct a novel dataset to document political reforms, policy outcomes, and de facto power for almost four decades. We find that the introduction of elections improves popular policies and weakens unpopular ones. Increases in regional government resources lead to loss of village autonomy, but less so in remote villages. These patterns are consistent with an organizational view of local elections within autocracies. (JEL D72, D73, D83, O17, O18, P25, P26)",AER,2022,141,956,"['Political Risk', 'Public Policy', 'Economic Development', 'Social Policy', 'Organizational Behavior']","['autocrats', 'local elections', 'bureaucratic capacity', 'citizens', 'accountability', 'vertical control', 'village elections', 'rural China', 'village autonomy', 'political reforms']"
Rational Illiquidity and Consumption: Theory and Evidence from Income Tax Withholding and Refunds,10.1257/aer.20191385,"Low liquidity and a high marginal propensity to consume are tightly linked. This paper analyzes this link in the context of income tax withholding and refunds. A theory of rational cash management with income uncertainty endogenizes the relationship between illiquidity and the marginal propensity to consume, and can explain the finding that households tend to spend tax refunds as if they valued liquidity, yet do not act to increase liquidity by reducing their withholding. The theory is supported by individual-level evidence based on financial account records, including a positive correlation between the size of tax refunds and the marginal propensity to consume out of those refunds. (JEL E21, G51, H24, H31)",AER,2022,111,716,"['Taxation', 'Financial Markets', 'Consumer Behavior', 'Monetary Policy', 'Economic Development']","['liquidity', 'marginal propensity to consume', 'income tax withholding', 'refunds', 'cash management', 'income uncertainty', 'illiquidity', 'households', 'financial account records', 'tax refunds']"
Measuring Racial Discrimination in Bail Decisions,10.1257/aer.20201653,"We develop new quasi-experimental tools to measure disparate impact, regardless of its source, in the context of bail decisions. We show that omitted variables bias in pretrial release rate comparisons can be purged by using the quasi-random assignment of judges to estimate average pretrial misconduct risk by race. We find that two-thirds of the release rate disparity between White and Black defendants in New York City is due to the disparate impact of release decisions. We then develop a hierarchical marginal treatment effect model to study the drivers of disparate impact, finding evidence of both racial bias and statistical discrimination. (JEL J15, K42)",AER,2022,103,664,"['Judges', 'Racial Bias', 'Discrimination', 'Pretrial Release', 'Disparate Impact']","['quasi-experimental tools', 'disparate impact', 'bail decisions', 'omitted variables bias', 'pretrial release rate', 'quasi-random assignment', 'judges', 'pretrial misconduct risk', 'racial bias', 'statistical discrimination']"
Separating Ownership and Information,10.1257/aer.20211069,"This paper identifies an upside of the separation of ownership and control, typically the source of inefficiencies in the theory of the firm. Because insiders obtain private information by exercising control, the separation of ownership and control leads to a separation of ownership and information. We show that this separation is necessary for efficient trade in the market for corporate control. The analysis reveals how strategic communication between inside and outside shareholders facilitates takeovers by eliciting external bidders’ private information. Our results call into question mandatory disclosure requirements during takeovers. (JEL D21, D82, G32, G34)",AER,2022,95,670,"['Corporate Governance', 'Financial Markets', 'Trade and Globalization', 'Market Transparency', 'Regulatory Frameworks']","['separation of ownership and control', 'private information', 'market for corporate control', 'strategic communication', 'inside shareholders', 'outside shareholders', 'takeovers', 'mandatory disclosure requirements', 'theory of the firm', 'inefficiencies']"
Dispersed Behavior and Perceptions in Assortative Societies,10.1257/aer.20190486,"We formulate a model of social interactions and misinferences by agents who neglect assortativity in their society, mistakenly believing that they interact with a representative sample of the population. A key component of our approach is the interplay between this bias and agents’ strategic incentives. We highlight a mechanism through which assortativity neglect, combined with strategic complementarities in agents’ behavior, drives up action dispersion in society (e.g., socioeconomic disparities in education investment). We also suggest that the combination of assortativity neglect and strategic incentives may be relevant in understanding empirically documented misperceptions of income inequality and political attitude polarization. (JEL C78, D11, D31, D72, D82, D91)",AER,2022,106,778,"['Income Inequality', 'Educational Equity', 'Behavioral Economics', 'Social Policy', 'Economic Development']","['social interactions', 'misinferences', 'agents', 'assortativity', 'bias', 'strategic incentives', 'action dispersion', 'socioeconomic disparities', 'education investment', 'income inequality.']"
Experimental Cost of Information,10.1257/aer.20210879,"We relate two main representations of the cost of acquiring information: a cost that depends on the experiment performed, as in statistical decision theory, and a cost that depends on the distribution of posterior beliefs, as in applications of rational inattention. We show that in many cases of interest, posterior-based costs are inconsistent with a primitive model of costly experimentation. The inconsistency is at the core of known limits to the application of rational inattention in games and, more broadly, in equilibrium analyses where beliefs are endogenous; we show that an experiment-based approach helps to understand and overcome these difficulties. (JEL D82, D83)",AER,2022,103,679,"['Economic Development', 'Behavioral Economics', 'Monetary Policy', 'Financial Markets', 'Game Theory']","['experiment', 'information cost', 'statistical decision theory', 'distribution', 'posterior beliefs', 'rational inattention', 'costly experimentation', 'equilibrium analyses', 'endogenous beliefs', 'game theory']"
Methods Matter: p-Hacking and Publication Bias in Causal Analysis in Economics: Comment,10.1257/aer.20210121,"Brodeur, Cook, and Heyes (2020) study hypothesis tests from economic articles and find evidence for p-hacking and publication bias, in particular for instrumental variable and difference-in-difference studies. When adjusting for rounding errors (introducing a novel method), statistical evidence for p-hacking from randomization tests and caliper tests at the 5 percent significance threshold vanishes for difference-in-differnce studies but remains for instrumental variable studies. Results at the 1 percent and 10 percent significance thresholds remain largely similar. In addition, Brodeur, Cook, and Heyes derive latent distributions of z-statistics absent publication bias using two different approaches. We establish for each approach a result that challenges its applicability. (JEL A14, C12, C52)",AER,2022,108,805,"['Economic Development', 'Public Policy', 'Statistical Analysis', 'Publication Bias', 'Research Methods']","['hypothesis tests', 'economic articles', 'p-hacking', 'publication bias', 'instrumental variable', 'difference-in-difference studies', 'rounding errors', 'randomization tests', 'caliper tests', 'z-statistics']"
Methods Matter: p-Hacking and Publication Bias in Causal Analysis in Economics: Reply,10.1257/aer.20220277,"In Brodeur, Cook, and Heyes (2020) we present evidence that instrumental variable (and to a lesser extent difference-in-difference) articles are more p-hacked than randomized controlled trial and regression discontinuity design articles. We also find no evidence that (i) articles published in the top five journals are different; (ii) the “revise and resubmit” process mitigates the problem; (iii) things are improving through time. Kranz and Pütz (2022) apply a novel adjustment to address rounding errors. They successfully replicate our results with the exception of our shakiest finding: after adjusting for rounding errors, bunching of test statistics for difference-in-difference articles is now smaller around the 5 percent level (and coincidentally larger at the 10 percent level). (JEL A14, C12, C52)",AER,2022,118,810,"['Economic Policy Evaluation', 'Data Privacy', 'Behavioral Economics', 'Financial Markets', 'Statistical Methods']","['instrumental variable', 'difference-in-difference', 'randomized controlled trial', 'regression discontinuity design', 'p-hacked', 'top five journals', 'revise and resubmit', 'time', 'rounding errors', 'test statistics.']"
Sentiment and Speculation in a Market with Heterogeneous Beliefs,10.1257/aer.20200505,"We present a model featuring risk-averse investors with heterogeneous beliefs. Individuals who are correct in hindsight—whether through luck or judgment—get rich, so sentiment is bullish following good news and bearish following bad news. Sentiment makes extreme outcomes far more important for pricing and has asymmetric effects on left- and right-skewed assets. Investors take speculative positions that can conflict with their fundamental views. Moderate investors are contrarian: they trade against excess volatility created by extremists. All investors view speculation as socially costly; but they also think it is in their self-interest, and the market can collapse entirely if speculation is banned. (JEL D81, D83, G11, G12, G41)",AER,2022,106,737,"['Financial Markets', 'Behavioral Economics', 'Market Transparency', 'Speculation', 'Investment Strategies']","['risk-averse investors', 'heterogeneous beliefs', 'sentiment', 'bullish', 'bearish', 'extreme outcomes', 'pricing', 'speculative positions', 'contrarian', 'excess volatility']"
Market Access and Quality Upgrading: Evidence from Four Field Experiments,10.1257/aer.20210122,"Smallholder farming in many developing countries is characterized by low productivity and low-quality output. Low quality limits the price farmers can command and their potential income. We conduct a series of experiments among maize farmers in Uganda to shed light on the barriers to quality upgrading and to study its potential. We find that the causal return to quality is zero. Providing access to a market where quality is paid a market premium led to an increase in farm productivity and income from farming. Our findings reveal the importance of demand-side constraints in limiting rural income and productivity growth. (JEL C93, L14, L15, L22, O13, Q12, Q13)",AER,2022,107,666,"['Productivity', 'Economic Growth', 'Agricultural Innovation', 'Income Inequality', 'Rural Development']","['smallholder farming', 'developing countries', 'low productivity', 'low-quality output', 'maize farmers', 'Uganda', 'quality upgrading', 'market premium', 'farm productivity', 'income']"
The Impact of Childhood Social Skills and Self-Control Training on Economic and Noneconomic Outcomes: Evidence from a Randomized Experiment Using Administrative Data,10.1257/aer.20200224,"A childhood intervention to improve the social skills and self-control of at-risk kindergarten boys in the 1980s had positive impacts over the life course: higher trust and self-control as adolescents; increased social group membership, education, and reduced criminality as young adults; and increased marriage and employment as adults. Using administrative data, we find this intervention increased average yearly employment income by about 20 percent and decreased average yearly social transfers by almost 40 percent. We estimate that $1 invested in this program around age 8 yields about $11 in benefits by age 39, with an internal rate of return of around 17 percent. (JEL I21, I26, I28, J13, J24, J31, Z13)",AER,2022,111,713,"['Social Policy', 'Labor Market Dynamics', 'Economic Development', 'Public Policy', 'Investment in Education']","['intervention', 'social skills', 'self-control', 'at-risk', 'kindergarten boys', 'adolescence', 'social group membership', 'education', 'criminality', 'employment']"
Community Colleges and Upward Mobility,10.1257/aer.20181756,"Two-year community colleges enroll nearly half of all first-time undergraduates in the United States, but to ambiguous effect: low persistence rates and the potential for diverting students from four-year institutions cast ambiguity over two-year colleges’ contributions to upward mobility. This paper develops a new instrumental variables approach to identifying causal effects along multiple treatment margins, and applies it to linked education and earnings registries to disentangle the net impacts of two-year college access into two competing causal margins: significant value added for two-year entrants who otherwise would not have attended college, but negative impacts on students diverted from immediate four-year entry. (JEL I23, I26, I28, J24, J31)",AER,2022,107,761,"['Educational Equity', 'Labor Market Dynamics', 'Public Policy', 'Economic Development', 'Income Inequality']","['community colleges', 'undergraduates', 'persistence rates', 'four-year institutions', 'upward mobility', 'instrumental variables', 'causal effects', 'education', 'earnings', 'college access']"
All Eyes on Them: A Field Experiment on Citizen Oversight and Electoral Integrity,10.1257/aer.20210778,"Can information and communication technologies help citizens monitor their elections? We analyze a large-scale field experiment designed to answer this question in Colombia. We leveraged Facebook advertisements sent to over 4 million potential voters to encourage citizen reporting of electoral irregularities. We also cross-randomized whether candidates were informed about the campaign in a subset of municipalities. Total reports, and evidence-backed ones, experienced a large increase. Across a wide array of measures, electoral irregularities decreased. Finally, the reporting campaign reduced the vote share of candidates dependent on irregularities. This light-touch intervention is more cost-effective than monitoring efforts traditionally used by policymakers. (JEL C93, D12, D72, D83, O17)",AER,2022,106,799,"['Public Policy', 'Political Risk', 'Economic Development', 'Digital Transformation', 'Technological Adoption']","['information', 'communication technologies', 'citizens', 'elections', 'field experiment', 'Colombia', 'Facebook advertisements', 'electoral irregularities', 'monitoring', 'policymakers']"
Capital Gains Taxes and Real Corporate Investment: Evidence from Korea,10.1257/aer.20201272,"This paper assesses the effects of capital gains taxes on investment in the Republic of Korea (hereafter, Korea), where capital gains tax rates vary at the firm level by firm size. Following a reform in 2014, firms with a tax cut increased investment by 34 log points and issued more equity by 9 cents per dollar of lagged revenue, relative to unaffected firms. Additionally, the effects were larger for firms that appeared more cash constrained or went public after the reform. Taken together, these findings are consistent with the “traditional view” predicting that lower payout taxes spur equity-financed investment by increasing marginal returns on investment. (JEL D25, G31, G32, H25, H32, L25)",AER,2022,112,700,"['Taxation', 'Investment Strategies', 'Corporate Governance', 'Public Policy', 'Economic Development']","['capital gains taxes', 'investment', 'Republic of Korea', 'tax cut', 'equity', 'revenue', 'cash constrained', 'public', 'payout taxes', 'marginal returns']"
Supply Network Formation and Fragility,10.1257/aer.20210220,"We model the production of complex goods in a large supply network. Each firm sources several essential inputs through relationships with other firms. Individual supply relationships are at risk of idiosyncratic failure, which threatens to disrupt production. To protect against this, firms multisource inputs and strategically invest to make relationships stronger, trading off the cost of investment against the benefits of increased robustness. A supply network is called fragile if aggregate output is very sensitive to small aggregate shocks. We show that supply networks of intermediate productivity are fragile in equilibrium, even though this is always inefficient. The endogenous configuration of supply networks provides a new channel for the powerful amplification of shocks. (JEL D21, G31, L14)",AER,2022,117,806,"['Supply Chain Resilience', 'Risk Management', 'Economic Development', 'Financial Markets', 'Corporate Governance']","['production', 'complex goods', 'supply network', 'firms', 'relationships', 'investment', 'robustness', 'fragility', 'aggregate shocks', 'configuration']"
The Economic Effects of Mafia: Firm Level Evidence,10.1257/aer.20201015,"We analyze the effects of Mafia infiltration in the legal economy. Combining information from investigative records with panel data on firms’ governance and balance sheets, we build an indicator of infiltration in firms located in an area with no tradition of Mafia. We show that Mafia targets young and less efficient firms and that infiltration generates a significant rise in firms’ revenues, with no proportionate growth in production inputs and a deterioration of the firm’s financial situation leading to market exit. These findings are consistent with a story of predatory behavior in which infiltration is used for money laundering or rent extraction. (JEL D22, G32, G34, K42, L25)",AER,2022,108,689,"['Corporate Governance', 'Financial Markets', 'Economic Development', 'Market Transparency', 'Criminal Behavior']","['Mafia', 'infiltration', 'legal economy', 'firms', 'governance', 'balance sheets', 'revenues', 'production inputs', 'financial situation', 'money laundering']"
The Human Side of Structural Transformation,10.1257/aer.20201157,"We document that nearly half of the global decline in agricultural employment was driven by new cohorts entering the labor market. A new dataset of policy reforms supports an interpretation of these cohort effects as human capital. Using a model of frictional labor reallocation, we conclude that human capital growth led to a sharp decline in the agricultural labor supply, accounting, at fixed prices, for 40 percent of the decrease in agricultural employment. This aggregate effect is halved in general equilibrium and it reflects the role of human capital as both a mediating factor and an independent driver of labor reallocation. (JEL J22, J24, J43, L16, O13, O14, Q10)",AER,2022,109,675,"['Labor Market Dynamics', 'Economic Growth', 'Human Capital', 'Agricultural Employment', 'Public Policy']","['agricultural employment', 'labor market', 'cohort effects', 'human capital', 'policy reforms', 'frictional labor reallocation', 'labor supply', 'fixed prices', 'general equilibrium', 'mediating factor']"
Dynamic Oligopoly and Price Stickiness,10.1257/aer.20201739,"How does market concentration affect the potency of monetary policy? To address this question we embed a dynamic oligopolistic game into a general-equilibrium macroeconomic model. We provide a sufficient-statistic formula for the response to monetary shocks involving demand elasticities, concentration and markups. We discipline our model with evidence on pass-through and find that higher concentration amplifies nonneutrality and stickiness. We isolate strategic effects from oligopoly by comparing our model to one with naive firms. We derive an exact Phillips curve featuring novel higher-order terms, but show that a standard New Keynesian one recalibrated with higher stickiness provides an excellent approximation. (JEL D43, E12, E21, E31, E43, E51, E52)",AER,2022,108,762,"['Monetary Policy', 'Oligopoly', 'Market Concentration', 'Phillips Curve', 'New Keynesian Model']","['market concentration', 'potency', 'monetary policy', 'oligopolistic game', 'general-equilibrium macroeconomic model', 'monetary shocks', 'demand elasticities', 'pass-through', 'nonneutrality', 'stickiness']"
Monopsony in the US Labor Market,10.1257/aer.20200025,"This paper quantifies employer market power in US manufacturing and how it has changed over time. Using administrative data, we estimate plant-level markdowns—the ratio between a plant’s marginal revenue product of labor and its wage. We find most manufacturing plants operate in a monopsonistic environment, with an average markdown of 1.53, implying a worker earning only 65 cents on the marginal dollar generated. To investigate long-term trends for the entire sector, we propose a novel, theoretically grounded measure for the aggregate markdown. We find that it decreased between the late 1970s and the early 2000s, but has been sharply increasing since. (JEL J24, J31, J38, J42, L13, L60)",AER,2022,108,694,"['Labor Market Dynamics', 'Economic Growth', 'Public Policy', 'Trade and Globalization', 'Fiscal Policy']","['employer market power', 'US manufacturing', 'administrative data', 'plant-level markdowns', 'monopsonistic environment', 'wage', 'long-term trends', 'sector', 'aggregate markdown', 'JEL J24']"
"Productivity Shocks, Long-Term Contracts, and Earnings Dynamics",10.1257/aer.20161622,"This paper examines how employer- and worker-specific productivity shocks transmit to earnings and employment. We develop an equilibrium search model and characterize the optimal contract offered by firms. Risk-neutral firms provide partial insurance against shocks to risk-averse workers and offer contingent contracts, where payments are backloaded in good times and frontloaded in bad times. The model is estimated on matched employer-employee data from Sweden. Firms absorb persistent worker and firm shocks, with respective passthrough values of 26 and 10 percent. We evaluate the effects of redistributive policies and find that 30 percent of government insurance is undone by crowding out firm insurance. (JEL D86, H23, J24, J31, J41, J62)",AER,2022,109,746,"['Labor Market Dynamics', 'Public Policy', 'Risk Management', 'Income Inequality', 'Social Policy']","['employer-specific productivity shocks', 'worker-specific productivity shocks', 'earnings', 'employment', 'equilibrium search model', 'optimal contract', 'firms', 'contingent contracts', 'risk-averse workers', 'redistributive policies']"
Heterogeneous Global Booms and Busts,10.1257/aer.20181830,"We investigate the heterogeneous boom and bust patterns across countries that emerge as a result of global shocks. Our analysis sheds light on the emergence of core and periphery countries, and the joint determination of the depth of recessions and tightness of credit across countries. The model implies that interest rates are similar across core and periphery countries in booms, with larger credit and output growth in periphery countries. However, a common global shock that leads to a credit crunch across the globe gives rise to a sharper spike in interest rates and a deeper recession in periphery countries, while a credit flight to the core alleviates the adverse consequences in these countries. (JEL E21, E32, E43, E44, F44, G01, G15)",AER,2022,121,746,"['Financial Markets', 'Credit Markets', 'Monetary Policy', 'Globalization', 'Economic Development']","['global shocks', 'boom', 'bust patterns', 'core countries', 'periphery countries', 'recessions', 'credit', 'interest rates', 'output growth', 'credit crunch']"
Using the Retail Distribution of Sellers to Impute Expenditure Shares,10.1257/aer.20190896,"Many price indices must be constructed without quantity data at the elementary level. The paper shows that for some consumer goods in the United States and other countries, one can approximate expenditure shares using weights derived from the retail distribution of sellers. These weights are based on the share of outlets selling an item, or the share of outlets adjusted by the total number of items sold in each. Relative to using no weights, the paper finds that using such imputed weights substantially reduces bias in the frequency of price changes, in annual inflation, and in price comparisons across countries. (JEL E31, L11, L81, O11, O14)",AER,2022,106,649,"['Public Policy', 'Economic Development', 'Monetary Policy', 'Trade and Globalization', 'Consumer Behavior']","['price indices', 'quantity data', 'elementary level', 'consumer goods', 'United States', 'countries', 'expenditure shares', 'weights', 'retail distribution', 'bias']"
When Choices Are Mistakes,10.1257/aer.20201550,"Using a laboratory experiment, we identify whether decision-makers consider it a mistake to violate canonical choice axioms. To do this, we incentivize subjects to report axioms they want their decisions to satisfy. Then, subjects make lottery choices which might conflict with their axiom preferences. In instances of conflict, we give subjects the opportunity to re-evaluate their decisions. We find that many individuals want to follow canonical axioms and revise their choices to be consistent with the axioms. In a shorter online experiment, we show correlations of mistakes with response times and measures of cognition. (JEL C91, D12, D44, D91)",AER,2022,99,651,"['Experimental Economics', 'Decision-Making', 'Cognitive Psychology', 'Behavioral Economics', 'Online Experiments']","['laboratory experiment', 'decision-makers', 'canonical choice axioms', 'subjects', 'lottery choices', 'conflict', 're-evaluate', 'canonical axioms', 'revise', 'online experiment']"
Belief Distortions and Macroeconomic Fluctuations,10.1257/aer.20201713,"This paper combines a data-rich environment with a machine learning algorithm to provide new estimates of time-varying systematic expectational errors (“belief distortions”) embedded in survey responses. We find sizable distortions even for professional forecasters, with all respondent-types overweighting the implicit judgmental component of their forecasts relative to what can be learned from publicly available information. Forecasts of inflation and GDP growth oscillate between optimism and pessimism by large margins, with belief distortions evolving dynamically in response to cyclical shocks. The results suggest that artificial intelligence algorithms can be productively deployed to correct errors in human judgment and improve predictive accuracy. (JEL C45, D83, E23, E27, E31, E32, E37)",AER,2022,108,800,"['Machine Learning Applications', 'Economic Growth', 'Forecasting', 'Artificial Intelligence', 'Monetary Policy']","['data-rich environment', 'machine learning algorithm', 'time-varying systematic expectational errors', 'belief distortions', 'survey responses', 'professional forecasters', 'judgmental component', 'forecasts', 'inflation', 'GDP growth oscillate']"
Factor Market Failures and the Adoption of Irrigation in Rwanda,10.1257/aer.20210059,"Factor market failures can limit adoption of profitable technologies. We leverage a plot-level spatial regression discontinuity design in the context of irrigation use by farmers provided free access to water. Using irrigation boosts profits by 43–62 percent. Yet, farmers only irrigate 30 percent of plots because of labor costs. We demonstrate inefficient irrigation use, by showing farmers irrigating one plot reduce their irrigation use on other plots. This inefficiency is largest for smaller households and wealthier households, suggesting labor market frictions constrain use of irrigation. (JEL D24, O13, Q12, Q15, Q16)",AER,2022,91,627,"['Labor Market Dynamics', 'Technological Adoption', 'Economic Development', 'Climate Change Economics', 'Agricultural Economics']","['irrigation', 'farmers', 'labor costs', 'inefficient', 'technology adoption', 'spatial regression', 'discontinuity design', 'factor market failures', 'profits', 'households']"
Monetary Policy with Opinionated Markets,10.1257/aer.20210271,"We build a model in which the Fed and the market disagree about future aggregate demand. The market anticipates monetary policy “mistakes,” which affect current demand and induce the Fed to partially accommodate the market’s view. The Fed expects to implement its view gradually. Announcements that reveal an unexpected change in the Fed’s belief provide a microfoundation for monetary policy shocks. Tantrum shocks arise when the market misinterprets the Fed’s belief and overreacts to its announcement. Uncertainty about tantrums motivates further gradualism and communication. Finally, disagreements affect the market’s expected inflation and induce a policy trade-off similar to “ cost-push” shocks. (JEL D83, E12, E31, E43, E44, E52, E58)",AER,2022,109,743,"['Monetary Policy', 'Financial Markets', 'Market Transparency', 'Inflation Trends', 'Behavioral Economics']","['Fed', 'market', 'aggregate demand', 'monetary policy', 'mistakes', 'accommodative', 'announcements', 'tantrum shocks', 'gradualism', 'inflation']"
Estimating Spillovers from Publicly Funded R&D: Evidence from the US Department of Energy,10.1257/aer.20210678,"We quantify the magnitude of R&D spillovers created by grants to small firms from the US Department of Energy. Our empirical strategy leverages variation due to state-specific matching policies, and we develop a new approach to measuring both geographic and technological spillovers that does not rely on an observable paper trail. Our estimates suggest that for every patent produced by grant recipients, three more are produced by others who benefit from spillovers. Sixty percent of these spillovers occur within the United States, and many of them occur in technological areas substantially different from those targeted by the grants. (JEL H81, L25, O33, O34, Q40)",AER,2022,104,673,"['Innovation', 'Economic Development', 'Energy Transition', 'Venture Capital', 'Public Policy']","['R&D spillovers', 'grants', 'small firms', 'Department of Energy', 'patents', 'geographic spillovers', 'technological spillovers', 'United States', 'state-specific matching policies', 'empirical strategy']"
Digital Addiction,10.1257/aer.20210867,"Many have argued that digital technologies such as smartphones and social media are addictive. We develop an economic model of digital addiction and estimate it using a randomized experiment. Temporary incentives to reduce social media use have persistent effects, suggesting social media are habit forming. Allowing people to set limits on their future screen time substantially reduces use, suggesting self-control problems. Additional evidence suggests people are inattentive to habit formation and partially unaware of self-control problems. Looking at these facts through the lens of our model suggests that self-control problems cause 31 percent of social media use. (JEL D12, D61, D90, D91, I31, L86, O33)",AER,2022,105,712,"['Digital Transformation', 'Behavioral Economics', 'Consumer Behavior', 'Economic Development', 'Public Policy']","['digital addiction', 'economic model', 'social media', 'habit formation', 'self-control problems', 'incentives', 'randomized experiment', 'screen time', 'inattentive', 'awareness']"
Design-Based Research in Empirical Microeconomics,10.1257/aer.112.6.1773,"I briefly review the emergence of “ design-based” research methods in labor economics in the 1980s and early 1990s. These methods were seen as a partial solution to the problems of credible inference identified by Ashenfelter (1974), Leamer (1978), Hendry (1980), and others. Designed-based studies typically use a simplified one-equation model of the outcome of interest—in contrast to model-based studies that specify a data generating process for all factors determining the outcome. I discuss some of the strengths and weaknesses of the design-based approach and the value of such research in the field. (JEL C20, J01, J24, J31, J38, J51, J53)",AER,2022,101,647,"['Labor Market Dynamics', 'Economic Development', 'Public Policy', 'Regulatory Frameworks', 'Economic Policy Evaluation']","['design-based research', 'labor economics', 'credible inference', 'Ashenfelter', 'Leamer', 'Hendry', 'one-equation model', 'model-based studies', 'data generating process', 'strengths']"
The Welfare Effects of Peer Entry: The Case of Airbnb and the Accommodation Industry,10.1257/aer.20180260,"We study the welfare effects of enabling peer supply through Airbnb in the accommodation industry. We present a model of competition between flexible and dedicated sellers (peer hosts and hotels) who provide differentiated products. We estimate this model using data from major US cities and quantify the welfare effects of Airbnb on travelers, hosts, and hotels. The welfare gains are concentrated in specific locations (New York) and times (New Year’s Eve) when hotel capacity is constrained. This occurs because peer hosts are responsive to market conditions, expand supply as hotels fill up, and keep hotel prices down as a result. (JEL L11, L83, L86, L88, Z31)",AER,2022,106,665,"['Urban Development', 'Economic Development', 'Public Policy', 'Housing Market Trends', 'Consumer Behavior']","['welfare effects', 'peer supply', 'Airbnb', 'accommodation industry', 'competition', 'flexible sellers', 'dedicated sellers', 'differentiated products', 'US cities', 'welfare gains']"
Aggregating Distributional Treatment Effects: A Bayesian Hierarchical Analysis of the Microcredit Literature,10.1257/aer.20181811,"Expanding credit access in developing contexts could help some households while harming others. Microcredit studies show different effects at different quantiles of household profit, including some negative effects; yet these findings also differ across studies. I develop new Bayesian hierarchical models to aggregate the evidence on these distributional effects for mixture-type outcomes such as household profit. Applying them to microcredit, I find a precise zero effect from the fifth to seventy-fifth quantiles, and uncertain yet large effects on the upper tails, particularly for households with business experience. These quantile estimates are more reliable than averages because the data are fat tailed. (JEL G21, G51, L25, O16, P34)",AER,2022,107,743,"['Credit Markets', 'Financial Markets', 'Economic Development', 'Bayesian Hierarchical Models', 'Household Profit']","['microcredit', 'household profit', 'Bayesian hierarchical models', 'quantiles', 'distributional effects', 'mixture-type outcomes', 'credit access', 'developing contexts', 'business experience', 'fat tailed']"
"Offshore Profit Shifting and Aggregate Measurement: Balance of Payments, Foreign Investment, Productivity, and the Labor Share",10.1257/aer.20190285,"We show how offshore profit shifting by US multinational enterprises affects several key measures of the US economy. Profits shifted out of the United States grew rapidly from the mid-1990s to 2010 and have since waned. From 1982–2016, on average, 38 percent of income attributed to US direct investment abroad is reattributable to the United States. We find that adjusting for profit shifting shrinks the trade deficit, decreases the return on US foreign direct investment abroad, boosts productivity growth rates in the late 1990s and early 2000s, and lowers labor’s share of income. (JEL E23, E25, F14, F23, H25, H87, L25)",AER,2022,101,625,"['Taxation', 'Trade and Globalization', 'Economic Growth', 'Labor Market Dynamics', 'Income Inequality']","['offshore profit shifting', 'US multinational enterprises', 'US economy', 'profits shifted', 'United States', 'income', 'direct investment', 'trade deficit', 'productivity growth rates', ""labor's share of income""]"
Migrants and Firms: Evidence from China,10.1257/aer.20191234,"How does rural-urban migration shape urban production in developing countries? We use longitudinal data on Chinese manufacturing firms between 2000 and 2006, and exploit exogenous variation in rural-urban migration induced by agricultural income shocks for identification. We find that, when immigration increases, manufacturing production becomes more labor intensive and productivity declines. We investigate the reorganization of production using patent applications and product information. We show that rural-urban migration induces both labor-oriented technological change and the adoption of labor intensive product varieties. (JEL D24, L23, L60, O33, P25, P31, R23)",AER,2022,89,673,"['Labor Market Dynamics', 'Technological Adoption', 'Economic Development', 'Urban Development', 'Trade and Globalization']","['rural-urban migration', 'urban production', 'developing countries', 'Chinese manufacturing firms', 'agricultural income shocks', 'labor intensive', 'productivity', 'patent applications', 'technological change', 'labor intensive product varieties']"
Concentration Thresholds for Horizontal Mergers,10.1257/aer.20201038,"Concentration-based thresholds for horizontal mergers, such as those in the US Horizontal Merger Guidelines, play a central role in merger analysis but their basis remains unclear. We show that there is both a theoretical and an empirical basis for focusing solely on the change in concentration, and ignoring its level, in screening mergers for whether their unilateral price effects will harm consumers. We also argue that current threshold levels likely are too lax, unless one expects efficiency gains of 5 percent or greater, or other factors such as entry and product repositioning to significantly constrain the exercise of market power postmerger. (JEL D43, G34, G38, K21, L13, L41)",AER,2022,108,690,"['Monetary Policy', 'Competition Policy', 'Industrial Organization', 'Mergers and Acquisitions', 'Market Power']","['horizontal mergers', 'concentration-based thresholds', 'US Horizontal Merger Guidelines', 'merger analysis', 'change in concentration', 'unilateral price effects', 'consumers', 'efficiency gains', 'entry', 'market power']"
Screening Inattentive Buyers,10.1257/aer.20201098,"Information plays a crucial role in mechanism design problems. A potential complication is that buyers may be inattentive, and so their information may endogenously and flexibly depend on the offered mechanism. I show that it is without loss of generality to consider contour mechanisms, which comprise triplets of allocation probabilities, prices, and beliefs, and are uniquely determined by a single such point. The mechanism design problem then reduces to Bayesian persuasion along the optimal contour. This reduction has significant implications for both the implementation of the optimal mechanism and the revenues that can be achieved. (JEL C11, D11, D82, D83)",AER,2022,100,666,"['Mechanism Design', 'Bayesian Persuasion', 'Public Policy', 'Economic Development', 'Market Transparency']","['mechanism design', 'information', 'buyers', 'inattentive', 'contour mechanisms', 'allocation probabilities', 'prices', 'beliefs', 'Bayesian persuasion', 'optimal mechanism']"
Spreading Gangs: Exporting US Criminal Capital to El Salvador,10.1257/aer.20201540,"This paper shows how deportation policies can backfire by disseminating not only ideas between countries but also criminal networks, spreading gangs, in this case, across El Salvador, and spurring migration back to the United States. In 1996, the US Illegal Immigration Responsibility Act increased the number of criminal deportations. In particular, the members of large Salvadoran gangs developed in Los Angeles were sent back to El Salvador. Using variation in criminal deportations over time and across cohorts, combined with geographical variation in US gangs’ location, I find that these deportations led to an increase in homicide rates and gang activity, as well as an increase in gang recruitment and migration of children. (JEL J15, J18, K37, K42, O17)",AER,2022,118,762,"['Public Policy', 'Immigration and Labor', 'Economic Development', 'Crime Policy', 'Labor Market Dynamics']","['deportation policies', 'criminal networks', 'gangs', 'El Salvador', 'migration', 'United States', 'Illegal Immigration Responsibility Act', 'homicide rates', 'gang activity', 'gang recruitment']"
Efficient Matching in the School Choice Problem,10.1257/aer.20210240,"Stable matchings in school choice needn’t be Pareto efficient and can leave thousands of students worse off than necessary. Call a matching μ priority-neutral if no matching can make any student whose priority is violated by μ better off without violating the priority of some student who is made worse off. Call a matching priority-efficient if it is priority-neutral and Pareto efficient. We show that there is a unique priority-efficient matching and that it dominates every priority-neutral matching and every stable matching. Moreover, truth-telling is a maxmin optimal strategy for every student in the mechanism that selects the priority-efficient matching. (JEL C78, I21, I28)",AER,2022,104,684,"['Educational Equity', 'Economic Development', 'Public Policy', 'Labor Market Dynamics', 'Mechanism Design']","['stable matchings', 'school choice', 'Pareto efficient', 'priority-neutral', 'priority-efficient', 'mechanism', 'truth-telling', 'students', 'priority', 'matching']"
Bargaining with Mechanisms,10.1257/aer.20210626,"Two players bargain over a single indivisible good and a transfer, with one-sided incomplete information about preferences. Both players can offer arbitrary mechanisms to determine the allocation. We show that there is a unique perfect Bayesian equilibrium outcome. In the equilibrium, one of the players proposes a menu that is optimal for the uninformed player among all menus, such that each type of the informed player receives at least her payoff under complete information. The optimal menu can be implemented with at most three allocations. Under a natural assumption on the uninformed player’s beliefs, the optimal menu coincides with the Myerson’s neutral solution to the bargaining problem in this environment. (JEL C78, D82, D83)",AER,2022,114,740,"['Game Theory', 'Information Asymmetry', 'Mechanism Design', 'Bargaining Theory', 'Bayesian Equilibrium']","['bargain', 'indivisible good', 'transfer', 'incomplete information', 'mechanisms', 'perfect Bayesian equilibrium', 'menu', 'allocation', ""Myerson's neutral solution"", 'bargaining problem.']"
Supply and Demand in Disaggregated Keynesian Economies with an Application to the COVID-19 Crisis,10.1257/aer.20201229,"We study supply and demand shocks in a disaggregated model with multiple sectors, multiple factors, input-output linkages, downward nominal wage rigidities, credit-constraints, and a zero lower bound. We use the model to understand how the COVID-19 crisis, an omnibus supply and demand shock, affects output, unemployment, and inflation, and leads to the coexistence of tight and slack labor markets. We show that negative sectoral supply shocks are stagflationary, whereas negative demand shocks are deflationary, even though both can cause Keynesian unemployment. Furthermore, complementarities in production amplify Keynesian spillovers from supply shocks but mitigate them for demand shocks. This means that complementarities reduce the effectiveness of aggregate demand stimulus. In a stylized quantitative model of the United States, we find supply and demand shocks each explain about one-half of the reduction in real GDP from February to May 2020. Although there was as much as 6 percent Keynesian unemployment, this was concentrated in certain markets. Hence, aggregate demand stimulus is one quarter as effective as in a typical recession where all labor markets are slack. (JEL E12, E23, E24, E31, E32, E62, I12)",AER,2022,182,1224,"['Labor Market Dynamics', 'Monetary Policy', 'Fiscal Policy', 'Economic Development', 'Keynesian unemployment']","['supply', 'demand shocks', 'COVID-19 crisis', 'output', 'unemployment', 'inflation', 'Keynesian unemployment', 'production', 'aggregate demand stimulus', 'recession']"
Macroeconomic Implications of COVID-19: Can Negative Supply Shocks Cause Demand Shortages?,10.1257/aer.20201063,"Motivated by the effects of the COVID-19 pandemic, we present a theory of Keynesian supply shocks: shocks that reduce potential output in a sector of the economy, but that, by reducing demand in other sectors, ultimately push aggregate activity below potential. A Keynesian supply shock is more likely when the elasticity of substitution between sectors is relatively low, the intertemporal elasticity of substitution is relatively high, and markets are incomplete. Fiscal policy can display a smaller multiplier, but the insurance benefit of fiscal transfers can be enhanced. Firm exits and job destruction can amplify and propagate the shock. (JEL D52, E23, E24, E32, E62, I12, I18)",AER,2022,106,684,"['Fiscal Policy', 'Labor Market Dynamics', 'Economic Development', 'Monetary Policy', 'Public Finance']","['Keynesian supply shocks', 'COVID-19 pandemic', 'potential output', 'sector', 'demand', 'aggregate activity', 'elasticity of substitution', 'intertemporal elasticity', 'fiscal policy', 'fiscal transfers.']"
Effective Demand Failures and the Limits of Monetary Stabilization Policy,10.1257/aer.20201529,"The challenge for stabilization policy presented by the COVID-19 pandemic stems above all from disruption of the circular flow of payments, resulting in a failure of what Keynes (1936) calls “effective demand.” As a consequence, economic activity in many sectors can be inefficiently low, and interest-rate policy cannot eliminate the distortions—not because of a limit on the extent to which interest rates can be reduced, but because interest-rate reductions fail to stimulate demand of the right sorts. Fiscal transfers are instead well suited to addressing the fundamental problem, and can under certain circumstances achieve a first-best allocation of resources. (JEL E23, E32, E43, E52, E62, E63, H63)",AER,2022,107,707,"['Fiscal Policy', 'Monetary Policy', 'Economic Growth', 'Public Policy', 'Financial Markets']","['stabilization policy', 'COVID-19 pandemic', 'circular flow', 'payments', 'Keynes', 'effective demand', 'economic activity', 'sectors', 'interest-rate policy', 'fiscal transfers']"
Bargaining over Contingent Contracts under Incomplete Information,10.1257/aer.20201026,"We study bargaining over contingent contracts in problems where private information becomes public or verifiable when the time comes to implement the agreement. We suggest a simple, two-stage game that incorporates important aspects of bargaining. We characterize equilibria in which parties always reach agreement, and study their limits as bargaining frictions vanish. Under mild regularity conditions, we show all interim-efficient limits belong to Myerson’s (1984) axiomatic solution. Furthermore, all limits must be interim efficient if equilibrium beliefs satisfy no-signaling-what-you-don’ t-know. Results extend to other bargaining protocols. (JEL C78, D82, D83, D86)",AER,2022,91,675,"['Economic Development', 'Public Policy', 'Trade and Globalization', 'Game Theory', 'Information Economics']","['bargaining', 'contingent contracts', 'private information', 'implementation', 'equilibria', 'bargaining frictions', 'interim-efficient', 'limits', 'Myerson', 'axiomatic solution']"
"Rebel on the Canal: Disrupted Trade Access and Social Conflict in China, 1650–1911",10.1257/aer.20201283,"This paper examines the effects of the abandonment of China’s Grand Canal—the world’s largest and oldest artificial waterway—which served as a disruption to regional trade access. Using an original dataset covering 575 counties over 262 years, we show that the canal’s abandonment contributed to the social turmoil that engulfed North China in the nineteenth century. Counties along the canal experienced an additional 117 percent increase in rebelliousness after the canal’s closure relative to their non-canal counterparts. Our findings highlight the important role that continued access to trade routes plays in reducing conflict. (JEL D74, N75, N95, O18, O22, R12, R42)",AER,2022,100,673,"['Trade and Globalization', 'Economic Development', 'Public Policy', 'Social Policy', 'Labor Market Dynamics']","['abandonment', 'China', 'Grand Canal', 'trade access', 'regional trade', 'social turmoil', 'North China', 'rebelliousness', 'trade routes', 'conflict.']"
Bargaining over a Divisible Good in the Market for Lemons,10.1257/aer.20201718,"We study bargaining with divisibility and interdependent values. A buyer and a seller trade a divisible good. The seller is privately informed about its quality, which can be high or low. Gains from trade are positive and decreasing in quantity. The buyer makes offers over time. Divisibility introduces a new channel of competition between the buyer’s present and future selves. The buyer’s temptation to split the purchases of the high-quality good is detrimental to him. As bargaining frictions vanish and the good becomes arbitrarily divisible, the high-quality good is traded smoothly over time and the buyer’s payoff shrinks to zero. (JEL C78, D82, L15)",AER,2022,104,659,"['Bargaining Frictions', 'Divisible Goods', 'Economic Development', 'Consumer Behavior', 'Trade and Globalization']","['bargaining', 'divisibility', 'interdependent values', 'divisible good', 'quality', 'gains from trade', 'competition', 'buyer', 'seller', 'payoff']"
The Demand for Insurance and Rationale for a Mandate: Evidence from Workers' Compensation Insurance,10.1257/aer.20190261,"Workers’ compensation insurance, which provides no-fault coverage for work-related injuries, is mandatory in nearly all states. We use administrative data from a unique market without a coverage mandate to estimate the demand for workers’ compensation insurance, leveraging regulatory premium updates for identification. We find that a 1 percent increase in premiums leads to approximately a 0.3 percent decline in coverage. Drawing upon these estimates and data on costs, we examine potential justifications for government intervention to increase coverage. This analysis suggests that several forms of market failure—such as adverse selection, market power, and externalities—may not justify a mandate in this setting. (JEL G22, G52, J28, K13, K31)",AER,2022,107,750,"['Financial Markets', 'Public Policy', 'Labor Market Dynamics', 'Regulatory Frameworks', 'Economic Development']","[""workers' compensation insurance"", 'coverage', 'premiums', 'demand', 'market failure', 'adverse selection', 'market power', 'externalities', 'government intervention', 'costs']"
Signaling and Employer Learning with Instruments,10.1257/aer.20200146,"This paper considers the use of instruments to identify and estimate private and social returns to education within a model of employer learning. What an instrument identifies depends on whether it is hidden from, or transparent (i.e., observed ) to, the employers. A hidden instrument identifies private returns to education, and a transparent instrument identifies social returns to education. We use variation in compulsory schooling laws across noncentral and central municipalities in Norway to, respectively, construct hidden and transparent instruments. We estimate a private return of 7.9 percent, of which 70 percent is due to increased productivity and the remaining 30 percent is due to signaling. (JEL D82, H75, I26, I28, J24, J31)",AER,2022,113,743,"['Education', 'Labor Market Dynamics', 'Economic Development', 'Public Policy', 'Trade and Globalization']","['instruments', 'private returns', 'social returns', 'education', 'model', 'employer learning', 'compulsory schooling laws', 'Norway', 'productivity', 'signaling']"
Multidimensional Auctions of Contracts: An Empirical Analysis,10.1257/aer.20200864,"In this paper, we conduct a structural analysis of multi-attribute auctions of contracts with a general allocation rule when private information is multidimensional. Upon modeling bidders’ contract value that accounts for their endogenous ex post actions, we nonparametrically identify bidders’ private information from their bids and estimate their joint distribution. Analyzing cash-royalty auctions of Louisiana oil leases, we find government revenue worse and development rates no better than in a cash auction with a fixed royalty in view of adverse selection and moral hazard. Our findings revise conventional wisdom on the optimality of multi-attribute auctions. (JEL D44, D82, D86, H82, Q35)",AER,2022,101,699,"['Economic Development', 'Public Policy', 'Energy Transition', 'Auctions', 'Regulatory Frameworks']","['structural analysis', 'multi-attribute auctions', 'contracts', 'private information', 'multidimensional', 'bidders', 'cash-royalty auctions', 'Louisiana oil leases', 'government revenue', 'adverse selection']"
How Do National Firms Respond to Local Cost Shocks?,10.1257/aer.20201524,"Recent research shows prices are insensitive to local demand conditions because national chains charge geographically uniform prices. We examine the price response to local cost shocks, including 68 excise tax changes, 76 sales tax changes, and other geographically based cost differences, using data on 35,151 retail stores in 96 multi-state chains. We find local cost shocks are passed through to local prices, with no spillovers to unaffected stores in otherwise affected chains, and at similar rates for national and local chains. Firms adjust local prices according to local cost changes, suggesting retailers respond asymmetrically to local cost and demand shocks. (JEL D22, D40, H22, H25, H71, L10, L81)",AER,2022,108,710,"['Taxation', 'Consumer Behavior', 'Economic Development', 'Public Policy', 'Corporate Governance']","['local demand conditions', 'national chains', 'prices', 'local cost shocks', 'excise tax changes', 'sales tax changes', 'cost differences', 'retail stores', 'multi-state chains', 'local prices']"
Who Set Your Wage?,10.1257/aer.112.4.1075,"I discuss the recent literature that has led to new interest in the idea of monopsonistic wage setting. Building on advances in search theory and in models of differentiated products, researchers have used a number of different strategies to identify the elasticity of firm-specific labor supply. A growing consensus is that firms have some wage-setting power, though many questions remain about the sources of that power. (JEL B21, D21, D24, D43, J22, J31, J42)",AER,2022,74,462,"['Labor Market Dynamics', 'Monetary Policy', 'Public Policy', 'Corporate Governance', 'Trade and Globalization']","['monopsonistic wage setting', 'search theory', 'differentiated products', 'firm-specific labor supply', 'wage-setting power', 'sources', 'elasticity', 'literature', 'models', 'power']"
Public Procurement in Law and Practice,10.1257/aer.20200738,"We examine a new dataset of public procurement laws, practice, and outcomes in 187 countries. We measure regulation as restrictions on the discretion of the procuring entities. We find that laws and practice are highly correlated with each other across countries, and better practice is correlated with better outcomes, but laws themselves are not correlated with outcomes. A closer look shows that stricter laws correlate with improved outcomes, but only in countries with low public sector capacity. We present a model of procurement in which both regulatory rules and public sector capacity determine procurement outcomes. In the model, regulation is effective in countries with low public sector capacity, but not in countries with high capacity because it inhibits the socially optimal exercise of discretion to exclude low quality bidders. (JEL D73, H11, H57, K12, K42, O17)",AER,2022,136,880,"['Public Policy', 'Regulatory Frameworks', 'Economic Development', 'Public Finance', 'Procurement']","['public procurement', 'laws', 'practice', 'outcomes', 'regulation', 'discretion', 'entities', 'countries', 'public sector capacity', 'bidders']"
Self-Persuasion: Evidence from Field Experiments at International Debating Competitions,10.1257/aer.20200372,"Laboratory evidence shows that when people have to argue for a given position, they persuade themselves about the position’s factual and moral superiority. Such self-persuasion limits the potential of communication to resolve conflict and reduce polarization. We test for this phenomenon in a field setting, at international debating competitions that randomly assign experienced and motivated debaters to argue one side of a topical motion. We find self-persuasion in factual beliefs and confidence in one’s position. Effect sizes are smaller than in the laboratory, but robust to a one-hour exchange of arguments and a tenfold increase in incentives for accuracy. (JEL C93, D12, D72, D83, D91, I23)",AER,2022,106,700,"['Social Policy', 'Behavioral Economics', 'Public Policy', 'Labor Market Dynamics', 'Economic Development']","['self-persuasion', 'communication', 'conflict', 'polarization', 'international debating competitions', 'factual beliefs', 'confidence', 'incentives', 'accuracy', 'field setting']"
Labor Market Power,10.1257/aer.20191521,"We develop, estimate, and test a tractable general equilibrium model of oligopsony with differentiated jobs and concentrated labor markets. We estimate key model parameters by matching new evidence on the relationship between firms’ local labor market share and their employment and wage responses to state corporate tax changes. The model quantitatively replicates quasi-experimental evidence on imperfect productivity-wage pass-through and strategic wage setting of dominant employers. Relative to the efficient allocation, welfare losses from labor market power are 7.6 percent, while output is 20.9 percent lower. Lastly, declining local concentration added 4 percentage points to labor’s share of income between 1977 and 2013. (JEL E25, H71, J24, J31, J42, R23)",AER,2022,109,766,"['Labor Market Dynamics', 'Taxation', 'Economic Development', 'Income Inequality', 'Public Policy']","['oligopsony', 'general equilibrium model', 'labor markets', 'employment', 'wage responses', 'corporate tax changes', 'productivity-wage pass-through', 'strategic wage setting', 'welfare losses', 'local concentration']"
Measuring Geopolitical Risk,10.1257/aer.20191823,"We present a news-based measure of adverse geopolitical events and associated risks. The geopolitical risk (GPR) index spikes around the two world wars, at the beginning of the Korean War, during the Cuban Missile Crisis, and after 9/11. Higher geopolitical risk foreshadows lower investment and employment and is associated with higher disaster probability and larger downside risks. The adverse consequences of the GPR index are driven by both the threat and the realization of adverse geopolitical events. We complement our aggregate measures with industry- and firm-level indicators of geopolitical risk. Investment drops more in industries that are exposed to aggregate geopolitical risk. Higher firm-level geopolitical risk is associated with lower firm-level investment. (JEL C43, E32, F51, F52, G31, H56, N40)",AER,2022,120,817,"['Political Risk', 'Investment Strategies', 'Financial Markets', 'Risk Management', 'Economic Development']","['geopolitical risk', 'adverse events', 'investment', 'employment', 'disaster probability', 'downside risks', 'threat', 'realization', 'industry-level indicators', 'firm-level indicators']"
Does Context Outweigh Individual Characteristics in Driving Voting Behavior? Evidence from Relocations within the United States,10.1257/aer.20201660,"We measure the overall influence of contextual versus individual factors (e.g., voting rules and media as opposed to race and education) on voter behavior, and explore underlying mechanisms. Using a US-wide voter-level panel, 2008–2018, we examine voters who relocate across state and county lines, tracking changes in registration, turnout, and party affiliation to estimate location and individual fixed effects in a value-added model. Location explains 37 percent of the cross-state variation in turnout (to 63 percent for individual characteristics) and an only slightly smaller share of variation in party affiliation. Place effects are larger for young and White voters. (JEL D12, D72, I20, J15, L82, R23)",AER,2022,106,711,"['Voter Behavior', 'Public Policy', 'Economic Development', 'Labor Market Dynamics', 'Educational Equity']","['contextual factors', 'individual factors', 'voter behavior', 'voting rules', 'media', 'race', 'education', 'location', 'party affiliation', 'voter turnout']"
Understanding the Scarring Effect of Recessions,10.1257/aer.20160449,"This paper documents that the earnings cost of job loss is concentrated among workers who find reemployment in lower-skill occupations, and that the cost and incidence of such occupation displacement is higher for workers who lose their job during a recession. I propose a model where hiring is endogenously more selective during recessions, leading some unemployed workers to optimally search for reemployment in lower-skill jobs. The model accounts for existing estimates of the size and cyclicality of the present value cost of job loss, and the cost of entering the labor market during a recession. (JEL E24, E32, J23, J24, J31, J63, J64)",AER,2022,103,642,"['Labor Market Dynamics', 'Economic Development', 'Fiscal Policy', 'Monetary Policy', 'Public Policy']","['earnings cost', 'job loss', 'reemployment', 'lower-skill occupations', 'recession', 'hiring', 'unemployed workers', 'labor market', 'cyclicality', 'present value cost']"
"Dynamic Price Competition, Learning-by-Doing, and Strategic Buyers",10.1257/aer.20202016,"We examine how strategic buyer behavior affects equilibrium outcomes in a model of dynamic price competition where sellers benefit from learning-by-doing by allowing each buyer to expect to capture a share of future buyer surplus. Many equilibria that exist when buyers consider only their immediate payoffs are eliminated when buyers expect to capture even a modest share of future surplus, and the equilibria that survive are those where long-run market competition is more likely to be preserved. Our results are relevant for antitrust policy and our approach may be useful for future analyses of dynamic competition. (JEL C73, D21, D43, D83, K21, L13, L40)",AER,2022,104,660,"['Market Transparency', 'Antitrust Policy', 'Dynamic Competition', 'Economic Development', 'Public Policy']","['strategic buyer behavior', 'equilibrium outcomes', 'dynamic price competition', 'learning-by-doing', 'buyer surplus', 'equilibria', 'market competition', 'antitrust policy', 'dynamic competition', 'future analyses']"
"Wetlands, Flooding, and the Clean Water Act",10.1257/aer.20210497,"In 2020 the Environmental Protection Agency narrowed the definition of “waters of the United States,” significantly limiting wetland protection under the Clean Water Act. Current policy debates center on the uncertainty around wetland benefits. We estimate the value of wet-lands for flood mitigation across the United States using detailed flood claims and land use data. We find the average hectare of wetland lost between 2001 and 2016 cost society $1,840 annually, and over $8,000 in developed areas. We document significant spatial heterogeneity in wetland benefits, with implications for flood insurance policy and the 50 percent of “isolated ” wetlands at risk of losing federal protection. (JEL K32, Q24, Q25, Q53, Q58)",AER,2022,111,727,"['Environmental Sustainability', 'Climate Change Economics', 'Risk Management', 'Public Policy', 'Water Resource Management']","['Environmental Protection Agency', 'wetlands', 'Clean Water Act', 'flood mitigation', 'land use', 'wetland benefits', 'flood insurance policy', 'isolated wetlands', 'federal protection', 'spatial heterogeneity']"
Selling Consumer Data for Profit: Optimal Market-Segmentation Design and Its Consequences,10.1257/aer.20210616,"A data broker sells market segmentations to a producer with private cost who sells a product to a unit mass of consumers. This paper characterizes the revenue-maximizing mechanisms for the data broker. Every optimal mechanism induces quasi-perfect price discrimination. All the consumers with values above a cost-dependent cutoff buy by paying their values while the rest of consumers do not buy. The characterization implies that market outcomes remain unchanged even if the data broker becomes more powerful—either by gaining the ability to sell access to consumers or by becoming a retailer who purchases the product and sells to the consumers exclusively. (JEL D42, D82, D83, L81, M31)",AER,2022,107,689,"['Data Privacy', 'Consumer Behavior', 'Market Transparency', 'Business Strategy', 'Regulatory Frameworks']","['data broker', 'market segmentation', 'revenue-maximizing mechanisms', 'price discrimination', 'consumers', 'market outcomes', 'access to consumers', 'retailer', 'product', 'private cost']"
State-Dependent Effects of Monetary Policy: The Refinancing Channel,10.1257/aer.20191244,"This paper studies how the impact of monetary policy depends on the distribution of savings from refinancing mortgages. We show that the efficacy of monetary policy is state dependent, varying in a systematic way with the pool of potential savings from refinancing. We construct a quantitative dynamic life-cycle model that accounts for our findings and use it to study how the response of consumption to a change in mortgage rates depends on the distribution of savings from refinancing. These effects are strongly state dependent. We also use the model to study the impact of a long period of low interest rates on the potency of monetary policy. We find that this potency is substantially reduced both during the period and for a substantial amount of time after interest rates renormalize. (JEL D15, E21, E43, E52, G21, G51, R31)",AER,2022,138,833,"['Monetary Policy', 'Financial Markets', 'Housing Market Trends', 'Interest Rates', 'Economic Development']","['monetary policy', 'savings', 'refinancing', 'mortgage rates', 'consumption', 'interest rates', 'life-cycle model', 'potency', 'low interest rates', 'renormalize']"
Local Elites as State Capacity: How City Chiefs Use Local Information to Increase Tax Compliance in the Democratic Republic of the Congo,10.1257/aer.20201159,"This paper investigates the trade-offs between local elites and state agents as tax collectors in low-capacity states. We study a randomized policy experiment assigning neighborhoods of a large Congolese city to property tax collection by city chiefs or state agents. Chief collection raised tax compliance by 3.2 percentage points, increasing revenue by 44 percent. Chiefs collected more bribes but did not undermine tax morale or trust in government. Results from a hybrid treatment arm in which state agents consulted with chiefs before collection suggest that chief collectors achieved higher compliance by using local information to more efficiently target households with high payment propensities, rather than by being more effective at persuading households to pay conditional on having visited them. (JEL D73, D83, H24, H26, H71, O12, O17)",AER,2022,127,848,"['Taxation', 'Economic Development', 'Public Policy', 'Fiscal Policy', 'Behavioral Economics']","['tax collectors', 'low-capacity states', 'trade-offs', 'local elites', 'state agents', 'property tax collection', 'tax compliance', 'revenue', 'bribes', 'trust']"
"Fictional Money, Real Costs: Impacts of Financial Salience on Disadvantaged Students",10.1257/aer.20201661,"Disadvantaged students perform differentially worse when randomly given a financially salient mathematics exam. For students with socioeconomic indicators below the national median, a 10 percentage point increase in the share of monetary themed questions depresses exam performance by 0.026 standard deviations, about 6 percent of their performance gap. Using question-level data, I confirm the role of financial salience by comparing performance on monetary and highly similar non-monetary questions. Leveraging the randomized ordering of questions, I identify an effect on subsequent questions, providing evidence that the attention capture effects of poverty affect policy relevant outcomes outside of experimental settings. (JEL G53, I21, I24, I32, J13, O15)",AER,2022,105,762,"['Educational Equity', 'Public Policy', 'Behavioral Economics', 'Poverty', 'Economic Development']","['students', 'disadvantaged', 'exam', 'financial salience', 'mathematics', 'socioeconomic indicators', 'performance', 'poverty', 'attention capture effects', 'policy relevant outcomes']"
Does Race Matter for Police Use of Force? Evidence from 911 Calls,10.1257/aer.20201292,"This paper examines race and police use of force using data on 1.6 million 911 calls in two cities, neither of which allows for discretion in officer dispatch. Results indicate White officers increase force much more than minority officers when dispatched to more minority neighborhoods. Estimates indicate Black (Hispanic) civilians are 55 (75) percent more likely to experience any force, and five times as likely to experience a police shooting, compared to if White officers scaled up force similarly to minority officers. Additionally, 14 percent of White officers use excess force in Black neighborhoods relative to our statistical benchmark. (JEL H76, J15, K42, R23)",AER,2022,104,673,"['Social Policy', 'Race and Police Use of Force', 'Public Policy', 'Labor Market Dynamics', 'Urban Development']","['race', 'police use of force', '911 calls', 'officer dispatch', 'minority neighborhoods', 'civilians', 'police shooting', 'excess force', 'White officers', 'Black neighborhoods']"
Targeting High Ability Entrepreneurs Using Community Information: Mechanism Design in the Field,10.1257/aer.20200751,"Identifying high-growth microentrepreneurs in low-income countries remains a challenge due to a scarcity of verifiable information. With a cash grant experiment in India we demonstrate that community knowledge can help target high-growth microentrepreneurs; while the average marginal return to capital in our sample is 9.4 percent per month, microentrepreneurs reported in the top third of the community are estimated to have marginal returns to capital between 24 percent and 30 percent per month. Further we find evidence that community members distort their predictions when they can influence the distribution of resources. Finally, we demonstrate that simple mechanisms can realign incentives for truthful reporting. (JEL D82, G21, I38, L25, L26, O12, O16)",AER,2022,111,762,"['Entrepreneurship', 'Economic Development', 'Financial Markets', 'Capital Allocation', 'Public Policy']","['high-growth microentrepreneurs', 'low-income countries', 'cash grant experiment', 'India', 'community knowledge', 'marginal return', 'capital', 'community members', 'predictions', 'incentives']"
Reshaping Adolescents' Gender Attitudes: Evidence from a School-Based Experiment in India,10.1257/aer.20201112,"This paper evaluates an intervention in India that engaged adolescent girls and boys in classroom discussions about gender equality for two years, aiming to reduce their support for societal norms that restrict women's and girls' opportunities. Using a randomized controlled trial, we find that the program made attitudes more supportive of gender equality by 0.18 standard deviations, or, equivalently, converted 16 percent of regressive attitudes. When we resurveyed study participants two years after the intervention had ended, the effects had persisted. The program also led to more gender-equal self-reported behavior, and we find weak evidence that it affected two revealed-preference measures. (JEL D63, D91, I21, J13, J16, 012)",AER,2022,108,736,"['Gender Equality', 'Educational Equity', 'Social Policy', 'Behavioral Economics', 'Public Policy']","['intervention', 'India', 'adolescent girls', 'boys', 'gender equality', 'societal norms', 'attitudes', 'randomized controlled trial', 'self-reported behavior', 'revealed-preference measures']"
Misspecified Politics and the Recurrence of Populism,10.1257/aer.20210154,"We develop a dynamic model of political competition between two groups that differ in their subjective model of the data generating process for a common outcome. One group has a simpler model than the other group as they ignore some relevant policy variables. We show that policy cycles must arise and that simple world views—which can be interpreted as populist world views—imply extreme policy choices. Periods in which those with a more complex model govern increase the specification error of the simpler world view, leading the latter to overestimate the positive impact of a few extreme policy actions. (JEL D72, D83, K42)",AER,2022,102,628,"['Public Policy', 'Political Risk', 'Behavioral Economics', 'Economic Development', 'Knowledge Economy']","['dynamic model', 'political competition', 'groups', 'subjective model', 'data generating process', 'policy variables', 'policy cycles', 'simple world views', 'populist world views', 'extreme policy choices']"
Designing Deadlines,10.1257/aer.20200212,"I study how an organization should manage a project of uncertain scope, when it is advised by a privately informed expert who prefers to prolong his employment. The optimal long-term contract combines a deadline for project completion and incentive payments which decline as the deadline approaches. When the firm can additionally learn about the project's state from output, the optimal deadline exhibits variable sensitivity to output, with a hard deadline at the outset of the project and increasingly soft deadlines as the project's performance declines. (JEL D21, D82, D86, G31, J33, M52, M54)",AER,2022,93,598,"['Risk Management', 'Corporate Governance', 'Labor Market Dynamics', 'Financial Markets', 'Organizational Behavior']","['organization', 'project management', 'uncertain scope', 'privately informed expert', 'long-term contract', 'deadline', 'incentive payments', 'project completion', 'output', 'project performance']"
Employer Incentives and Distortions in Health Insurance Design: Implications for Welfare and Costs,10.1257/aer.20181917,"This paper studies employer incentives in designing health insurance provider networks and whether observed offerings reflect preferences that are aligned with employees. I estimate a model of supply and demand where I endogenize employer health plan offerings with respect to hospital and physician networks. I find that employers “overprovide” broad networks by overweighting the preferences of certain employees, specifically older workers and those in regions with less provider competition, over the preferences of the average employee household. Shifting employers toward offering different provider networks in different geographic markets could yield substantial gains to surplus, with minimal distributional or selection effects. (JEL G22, G28, I13, J32, M52)",AER,2022,106,768,"['Healthcare Systems', 'Labor Market Dynamics', 'Public Policy', 'Economic Development', 'Healthcare Innovation']","['employer incentives', 'health insurance', 'provider networks', 'preferences', 'supply and demand', 'hospital', 'physician', 'older workers', 'provider competition', 'geographic markets']"
Estimating Social Preferences and Gift Exchange at Work,10.1257/aer.20190920,"We design three field experiments to estimate how workers' social preferences toward their employer motivates their work effort. We vary the pay rates offered to workers, the return to the employer, and employer generosity demonstrated via unexpected gifts. Workers exert effort even without private incentives, but their effort is insensitive to the return to the employer. This is consistent with “warm glow” but not pure altruism. The gifts have no effect on productivity, but engender extra work. This difference is explained partly by the finding that extra work is much more responsive to incentives than is productivity. (JEL C93, J24, J28, J33, M52)",AER,2022,103,657,"['Labor Market Dynamics', 'Behavioral Economics', 'Corporate Social Responsibility', 'Incentives', 'Productivity']","['social preferences', 'work effort', 'pay rates', 'employer generosity', 'incentives', 'warm glow', 'altruism', 'productivity', 'extra work', 'incentives']"
Can You Move to Opportunity? Evidence from the Great Migration,10.1257/aer.20200002,"This paper shows that racial composition shocks during the Great Migration (1940–1970) reduced the gains from growing up in the northern United States for Black families and can explain 27 percent of the region’s racial upward mobility gap today. I identify northern Black share increases by interacting pre-1940 Black migrants’ location choices with predicted southern county out-migration. Locational changes, not negative selection of families, explain lower upward mobility, with persistent segregation and increased crime and policing as plausible mechanisms. The case of the Great Migration provides a more nuanced view of moving to opportunity when destination reactions are taken into account. (JEL H75, H76, J15, J62, K42, N32, R23)",AER,2022,109,741,"['Labor Market Dynamics', 'Social Policy', 'Economic Development', 'Income Inequality', 'Public Policy']","['Great Migration', 'racial composition shocks', 'Black families', 'northern United States', 'upward mobility', 'segregation', 'crime', 'policing', 'moving to opportunity', 'destination reactions']"
Imperfect Markets versus Imperfect Regulation in US Electricity Generation,10.1257/aer.20172034,"This paper evaluates changes in electricity generation costs caused by the introduction of market mechanisms to determine production in the United States. I use the staggered transition to markets from 1999 to 2012 to estimate the causal impact of liberalization using a differences-in-difference design on a comprehensive hourly panel of electricity demand, generators’ costs, capacities, and output. I find that markets reduce production costs by 5 percent by reallocating production: gains from trade across service areas increase by 55 percent based on a 25 percent increase in traded electricity, and costs from using uneconomical units fall 16 percent. (JEL L51, L94, L98, Q41, Q48)",AER,2022,104,688,"['Energy Transition', 'Economic Growth', 'Public Policy', 'Trade and Globalization', 'Climate Change Economics']","['electricity generation costs', 'market mechanisms', 'production', 'United States', 'liberalization', 'differences-in-difference design', 'electricity demand', 'generators', 'production costs', 'traded electricity']"
"Political Turnover, Bureaucratic Turnover, and the Quality of Public Services",10.1257/aer.20171867,"We study how political turnover in mayoral elections in Brazil affects public service provision by local governments. Exploiting a regression discontinuity design for close elections, we find that municipalities with a new party in office experience upheavals in the municipal bureaucracy: new personnel are appointed across multiple service sectors, and at both managerial and non-managerial levels. In education, the increase in the replacement rate of personnel in schools controlled by the municipal government is accompanied by test scores that are 0.05–0.08 standard deviations lower. In contrast, turnover of the mayor’s party does not impact local (non-municipal) schools. These findings suggest that political turnover can adversely affect the quality of public services when the bureaucracy is not shielded from the political process. (JEL D72, D73, H75, H76, J45, O17)",AER,2022,128,879,"['Public Policy', 'Labor Market Dynamics', 'Educational Equity', 'Economic Development', 'Political Risk']","['political turnover', 'mayoral elections', 'Brazil', 'public service provision', 'local governments', 'regression discontinuity design', 'municipal bureaucracy', 'education', 'test scores', 'public services']"
A Satellite Account for Health in the United States,10.1257/aer.20201480,"This paper develops a satellite account for the US health sector and measures productivity growth in health care for the elderly population between 1999 and 2012. We measure the change in medical spending and health outcomes for a comprehensive set of 80 conditions. Medical care has positive productivity growth over the time period, with aggregate productivity growth of 1.5 percent per year. However, there is significant heterogeneity in productivity growth. Care for cardiovascular disease has had very high productivity growth. In contrast, care for people with musculoskeletal conditions has been costly but has not led to improved outcomes. (JEL E01, H51, I10)",AER,2022,102,668,"['Healthcare Systems', 'Productivity', 'Economic Growth', 'Public Policy', 'Healthcare Innovation']","['satellite account', 'US health sector', 'productivity growth', 'health care', 'elderly population', 'medical spending', 'health outcomes', 'cardiovascular disease', 'musculoskeletal conditions', 'productivity']"
Consumer Information and the Limits to Competition,10.1257/aer.20210083,"This paper studies competition between firms when consumers observe a private signal of their preferences over products. Within the class of signal structures that induce pure-strategy pricing equilibria, we derive signal structures that are optimal for firms and those that are optimal for consumers. The firm-optimal policy amplifies underlying product differentiation, thereby relaxing competition, while ensuring consumers purchase their preferred product, thereby maximizing total welfare. The consumer-optimal policy dampens differentiation, which intensifies competition, but induces some consumers to buy their less preferred product. Our analysis sheds light on the limits to competition when the information possessed by consumers can be designed flexibly. (JEL D11, D21, D43, D82, D83, L13)",AER,2022,109,801,"['Consumer Behavior', 'Competition', 'Information Design', 'Pricing Equilibria', 'Market Structure']","['competition', 'firms', 'consumers', 'signal', 'preferences', 'products', 'pricing', 'equilibria', 'differentiation', 'welfare']"
Hospital Network Competition and Adverse Selection: Evidence from the Massachusetts Health Insurance Exchange,10.1257/aer.20201453,"Health insurers increasingly compete on their networks of medical providers. Using data from Massachusetts’s insurance exchange, I find substantial adverse selection against plans covering the most prestigious and expensive “star” hospitals. I highlight a theoretically distinct selection channel: consumers loyal to star hospitals incur high spending, conditional on their medical state, because they use these hospitals’ expensive care. This implies heterogeneity in consumers’ incremental costs of gaining access to star hospitals, posing a challenge for standard selection policies. Along with selection on unobserved sickness, I find this creates strong incentives to exclude star hospitals, even with risk adjustment in place. (JEL D82, G22, H75, I11, I13, I18)",AER,2022,107,767,"['Healthcare Systems', 'Consumer Behavior', 'Public Policy', 'Risk Management', 'Healthcare Innovation']","['health insurers', 'networks', 'medical providers', 'adverse selection', 'star hospitals', 'consumer loyalty', 'expensive care', 'incremental costs', 'risk adjustment', 'selection policies']"
"Incomplete Information Bargaining with Applications to Mergers, Investment, and Vertical Integration",10.1257/aer.20201092,"We provide an incomplete information bargaining framework that captures the effects of differential bargaining power in markets with multiple buyers and multiple suppliers. The market is modeled as a mechanism that maximizes the expected weighted welfare of the firms, subject to the constraints of incentive compatibility, individual rationality, and no deficit. We show that, in this model, there is no basis for the presumption that vertical integration increases equally weighted social surplus, while it is possible that horizontal mergers that appropriately change bargaining weights increase social surplus. Moreover, efficient bargaining implies that in equilibrium noncontractible investments are efficient. (JEL C78, D82, D83, G34, K21, L22, L40)",AER,2022,106,756,"['Industrial Policy', 'Market Transparency', 'Corporate Governance', 'Trade and Globalization', 'Economic Development']","['information bargaining', 'differential bargaining power', 'markets', 'multiple buyers', 'multiple suppliers', 'welfare', 'incentive compatibility', 'vertical integration', 'horizontal mergers', 'investments.']"
An Equilibrium Model of the International Price System,10.1257/aer.20181550,"What explains the central role of the dollar in world trade? Will the US currency retain its dominant status in the future? This paper develops a quantitative general equilibrium framework with endogenous currency choice that can address these questions. Complementarities in price setting and input-output linkages across firms generate complementarities in currency choice making exporters coordinate on the same currency of invoicing. The dollar is more likely to play this role because of the large size of the US economy, a widespread peg to the dollar, and the history dependence in currency choice. Calibrated using the world input-output tables and exchange rate moments, the model can successfully replicate the key empirical facts about the use of currencies at the global level, across countries, and over time. According to the counterfactual analysis, the peg to the dollar in other economies ensures that the US currency is unlikely to lose its global status because of the falling US share in the world economy, but can be replaced by the renminbi in case of a negative shock in the US economy. If the peg is abandoned, the world is likely to move to a new equilibrium with multiple regional currencies. (JEL D21, E31, E42, F14, F31, F33)",AER,2022,204,1253,"['Trade and Globalization', 'Monetary Policy', 'Economic Development', 'Global Supply Chains', 'Currency Markets.']","['dollar', 'world trade', 'currency choice', 'exporters', 'invoicing', 'US economy', 'peg', 'exchange rate', 'renminbi', 'regional currencies']"
Taxes and Turnout: When the Decisive Voter Stays at Home,10.1257/aer.20171927,"We develop a model of political competition with endogenous turnout and endogenous platforms. Parties trade off incentivizing their supporters to vote and discouraging the supporters of the competing party from voting. We show that the latter objective is particularly pronounced for a party with an edge in the political race. Thus, an increase in political support for a party may lead to the adoption of policies favoring its opponents so as to asymmetrically demobilize them. We study the implications for the political economy of redistributive taxation. Equilibrium tax policy is typically aligned with the interest of voters who are demobilized. (JEL D63, D72, H23, H24)",AER,2022,105,677,"['Public Policy', 'Political Risk', 'Taxation', 'Economic Development', 'Fiscal Policy']","['political competition', 'endogenous turnout', 'endogenous platforms', 'parties', 'voting', 'political support', 'policies', 'demobilize', 'redistributive taxation', 'equilibrium tax policy']"
"Consumption Response to Credit Expansions: Evidence from Experimental Assignment of 45,307 Credit Lines",10.1257/aer.20191178,"In a field experiment that constructs a randomized credit limit shock, participants borrow to spend 11 cents on the dollar in the first quarter and 28 cents by the third year. Effects extend to those far from the limit, those who had the new limits as available credit, and those with a liquid asset buffer. In the short-run, flexible and installment contracts are used in tandem, with unconstrained using installments more. Long-run borrowing is predominantly using installments. Near limits, participants borrow when credit expands but save out of constraints when limits are tight. Findings support a buffer-stock interpretation emphasizing precautionary saving. (JEL C93, E21, G21, G51, O12, O16)",AER,2022,108,700,"['Credit Markets', 'Monetary Policy', 'Consumer Behavior', 'Financial Markets', 'Economic Development']","['field experiment', 'credit limit shock', 'borrowing', 'spending', 'effects', 'credit', 'installment contracts', 'liquid asset buffer', 'saving', 'precautionary saving']"
Information Networks and Collective Action: Evidence from the Women's Temperance Crusade,10.1257/aer.20180124,"How do social interactions shape collective action, and how are they mediated by networked information technologies? We answer these questions studying the Temperance Crusade, a wave of anti-liquor protest activity spreading across 29 states between 1873 and 1874. Relying on exogenous variation in network links generated by railroad accidents, we provide causal evidence of social interactions driving the diffusion of the movement, mediated by rail and telegraph information about neighboring activity. Local newspaper coverage of the crusade was a key channel mediating these effects. Using an event-study methodology, we find strong complementarities between rail and telegraph networks in driving the movement’s spread. (JEL D83, J16, L92, L96, N31, N41, N71)",AER,2022,110,765,"['Social Policy', 'Economic Growth', 'Trade and Globalization', 'Technological Adoption', 'Public Policy']","['social interactions', 'collective action', 'networked information technologies', 'Temperance Crusade', 'anti-liquor protest', 'railroad accidents', 'diffusion', 'movement', 'telegraph networks', 'event-study methodology']"
College Tuition and Income Inequality,10.1257/aer.20181027,"This paper evaluates the role of rising income inequality in explaining observed growth in college tuition. We develop a competitive model of the college market, in which college quality depends on instructional expenditure and the average ability of admitted students. An innovative feature of our model is that it allows for a continuous distribution of college quality. We find that observed increases in US income inequality can explain more than half of the observed rise in average net tuition since 1990 and that rising income inequality has also depressed college attendance. (JEL D31, I22, I23, I24)",AER,2022,96,608,"['Income Inequality', 'Educational Equity', 'Labor Market Dynamics', 'Public Policy', 'Economic Growth']","['income inequality', 'college tuition', 'competitive model', 'instructional expenditure', 'college quality', 'admitted students', 'US', 'net tuition', 'college attendance', 'growth']"
Measuring the Welfare Effects of Shame and Pride,10.1257/aer.20190433,"Public recognition is frequently used to motivate desirable behavior, yet its welfare effects—such as costs of shame or gains from pride— are rarely measured. We develop a portable empirical methodology for measuring and monetizing social image utility, and we deploy it in experiments on exercise and charitable behavior. In all experiments, public recognition motivates desirable behavior but creates highly unequal image payoffs. High-performing individuals enjoy significant utility gains, while low-performing individuals incur significant utility losses. We estimate structural models of social signaling, and we use the models to explore the social efficiency of public recognition policies. (JEL C93, D64, D82, D91)",AER,2022,101,723,"['Social Policy', 'Behavioral Economics', 'Economic Policy Evaluation', 'Public Finance', 'Income Inequality']","['public recognition', 'desirable behavior', 'social image utility', 'experiments', 'exercise', 'charitable behavior', 'social signaling', 'utility gains', 'utility losses', 'public recognition policies']"
"Imperfect Competition, Compensating Differentials, and Rent Sharing in the US Labor Market",10.1257/aer.20190790,"We quantify the importance of imperfect competition in the US labor market by estimating the size of labor market rents earned by American firms and workers. We construct a matched employer-employee panel dataset by combining the universe of US business and worker tax records for the period 2001–2015. Using this panel data, we identify and estimate an equilibrium model of the labor market with two-sided heterogeneity where workers view firms as imperfect substitutes because of heterogeneous preferences over nonwage job characteristics. The model allows us to draw inference about imperfect competition, worker sorting, compensating differentials, and rent sharing. (JEL D24, H24, H25, J22, J24, J31, J42)",AER,2022,106,710,"['Labor Market Dynamics', 'Income Inequality', 'Public Policy', 'Economic Development', 'Taxation']","['imperfect competition', 'US labor market', 'labor market rents', 'American firms', 'workers', 'employer-employee panel dataset', 'equilibrium model', 'two-sided heterogeneity', 'compensating differentials', 'rent sharing']"
Employment Structure and the Rise of the Modern Tax System,10.1257/aer.20191528,"This paper builds a new microdatabase that covers 100 countries at all income levels and long-run time series in the United States (1870–2010) and Mexico ( 1960–2010) to document how the modern tax system arises over development. I establish a new set of stylized facts, which show that the income tax exemption threshold decreases in the income distribution as a country develops, tracking growth in the employee share of employment that occurs gradually further down the income distribution. Additional evidence supports the interpretation that the rise in third-party covered income through increases in employee share drives expansions of the income tax base over development. (JEL D31, H23, H24, H71, J22, J23, N40)",AER,2022,112,720,"['Taxation', 'Economic Development', 'Labor Market Dynamics', 'Public Policy', 'Income Inequality']","['microdatabase', 'countries', 'income levels', 'time series', 'United States', 'Mexico', 'tax system', 'development', 'income tax exemption threshold', 'income distribution']"
The Relative Efficiency of Skilled Labor across Countries: Measurement and Interpretation,10.1257/aer.20191852,"I study how the relative efficiency of high- and low-skill labor varies across countries. Using microdata for countries at different stages of development, I document that differences in relative quantities and wages are consistent with high-skill workers being relatively more productive in rich countries. I exploit variation in the skill premia of foreign-educated migrants to discriminate between two possible drivers of this pattern: cross-country differences in the skill bias of technology and in the relative human capital of skilled labor. I find that the former is quantitatively more important, and discuss the implications of this result for development accounting. (JEL I26, J24, J31, J61, L16, O15)",AER,2022,106,712,"['Labor Market Dynamics', 'Economic Development', 'International Migration', 'Development Accounting', 'Technological Adoption']","['efficiency', 'high-skill labor', 'low-skill labor', 'wages', 'productivity', 'rich countries', 'technology', 'human capital', 'skilled labor', 'development accounting']"
A/B Contracts,10.1257/aer.20200732,"This paper aims to improve the practical applicability of the classic theory of incentive contracts under moral hazard. We establish conditions under which the information provided by an A/B test of incentive contracts is sufficient for answering the question of how best to improve a status quo incentive contract, given a priori knowledge of the agent’s monetary preferences. We assess the empirical relevance of this result using data from DellaVigna and Pope’s (2018) study of a variety of incentive contracts. Finally, we discuss how our framework can be extended to incorporate additional considerations beyond those in the classic theory. (JEL D82, D86, D91)",AER,2022,103,665,"['Incentive Contracts', 'Empirical Analysis', 'Economic Theory', 'Behavioral Economics', 'Data Analysis']","['incentive contracts', 'moral hazard', 'A/B test', 'status quo', 'monetary preferences', 'empirical relevance', 'DellaVigna', 'Pope', 'study', 'classic theory']"
When Should There Be Vertical Choice in Health Insurance Markets?,10.1257/aer.20201073,"We study the welfare effects of offering choice over coverage levels—“vertical choice”—in regulated health insurance markets. We emphasize that heterogeneity in efficient coverage level is not sufficient to motivate choice. When premiums cannot reflect individuals’ costs, it may not be in consumers’ best interest to select their efficient coverage level. We show that vertical choice is efficient only if consumers with higher willingness to pay have a higher efficient level of coverage. We investigate this condition empirically and find that as long as a minimum coverage level can be enforced, the welfare gains from vertical choice are either zero or economically small. (JEL D82, G22, H75, I13, I21)",AER,2022,108,707,"['Healthcare Systems', 'Public Policy', 'Consumer Behavior', 'Economic Development', 'Regulatory Frameworks']","['welfare effects', 'vertical choice', 'coverage levels', 'health insurance markets', 'premiums', 'consumers', 'willingness to pay', 'efficient level of coverage', 'minimum coverage level', 'welfare gains']"
Counterfactuals with Latent Information,10.1257/aer.20210496,"We describe a methodology for making counterfactual predictions in settings where the information held by strategic agents and the distribution of payoff-relevant states of the world are unknown. The analyst observes behavior assumed to be rationalized by a Bayesian model, in which agents maximize expected utility, given partial and differential information about the state. A counterfactual prediction is desired about behavior in another strategic setting, under the hypothesis that the distribution of the state and agents’ information about the state are held fixed. When the data and the desired counterfactual prediction pertain to environments with finitely many states, players, and actions, the counterfactual prediction is described by finitely many linear inequalities, even though the latent parameter, the information structure, is infinite dimensional. (JEL D44, D82, D83)",AER,2022,126,888,"['Machine Learning Applications', 'Economic Development', 'Public Policy', 'Behavioral Economics', 'Financial Markets']","['counterfactual predictions', 'strategic agents', 'Bayesian model', 'expected utility', 'information structure', 'linear inequalities', 'payoff-relevant states', 'information held', 'distribution', 'behavior']"
"Product Innovation, Product Diversification, and Firm Growth: Evidence from Japan's Early Industrialization",10.1257/aer.20201656,"We explore how firms grow by adding products. We leverage detailed data from Japan’s cotton spinning industry at the turn of the last century to do so. This setting allows us to fully characterize the type of differentiation (vertical or horizontal) of new product introductions as well as whether the product is within or outside of the firm’s prior technological capabilities. We find that trying to introduce innovative products beyond the firm’s previous technologically feasible set, even if such trials fail, is a key to firm growth. Indeed, it mostly facilitates growth through the firm’s later success in horizontal product diversification. In long-term outcomes, the right tail of the firm size distribution becomes dominated by firms that first moved into technologically challenging products and then later applied their newly acquired technical competence to horizontal expansion of their product portfolios. Two mechanisms through which this knowledge transfer occurs are greater production system flexibility and higher product appeal to downstream buyers. (JEL D22, L11,L67, N65, N85, O31, O33)",AER,2021,166,1109,"['Innovation', 'Economic Growth', 'Technological Adoption', 'Business Strategy', 'Knowledge Economy']","['firms', 'products', 'growth', 'differentiation', 'technological capabilities', 'innovation', 'horizontal product diversification', 'firm size distribution', 'knowledge transfer', 'production system flexibility']"
Tax Administration versus Tax Rates: Evidence from Corporate Taxation in Indonesia,10.1257/aer.20201237,"We compare two approaches to increasing tax revenue: tax administration and tax rates. We show that when Indonesia moved top regional firms into “medium taxpayer offices,” with high staff-to-taxpayer ratios, tax revenue more than doubled. Examining nonlinear changes to corporate income tax rates, we estimate an elasticity of taxable income of 0.579. Combining these estimates, improved tax administration is equivalent to raising top rates on all firms by 8 percentage points. On net, improved tax administration can have significant returns for developing countries. (JEL H25, H26, K34, O17)",AER,2021,88,594,"['Taxation', 'Public Finance', 'Fiscal Policy', 'Economic Development', 'Regulatory Frameworks']","['tax revenue', 'tax administration', 'tax rates', 'Indonesia', 'firms', 'corporate income tax', 'taxable income', 'elasticity', 'developing countries', 'staff-to-taxpayer ratios']"
Sectoral Media Focus and Aggregate Fluctuations,10.1257/aer.20191895,"We formalize the editorial role of news media in a multisector economy and show that media can be an independent source of business cycle fluctuations, even when they report accurate information. Public reporting about a subset of sectoral developments that are newsworthy but unrepresentative causes firms across all sectors to hire too much or too little labor. We construct historical measures of US sectoral news coverage and use them to calibrate our model. Time-varying media focus generates demand-like fluctuations that are orthogonal to productivity, even in the absence of non-TFP shocks. Presented with historical sectoral productivity, the model reproduces the 2009 Great Recession. (JEL D22, D83, E32, L82)",AER,2021,108,719,"['Labor Market Dynamics', 'Economic Growth', 'Public Policy', 'Financial Markets', 'Fiscal Policy']","['news media', 'business cycle fluctuations', 'sectoral developments', 'labor', 'US', 'sectoral news coverage', 'media focus', 'demand-like fluctuations', 'productivity', 'Great Recession']"
Team-Specific Human Capital and Team Performance: Evidence from Doctors,10.1257/aer.20201238,"This paper studies whether team members’ past collaboration creates team-specific human capital and influences current team performance. Using administrative Medicare claims for two heart procedures, I find that shared work experience between the doctor who performs the procedure (“proceduralist”) and the doctors who provide care to the patient during the hospital stay for the procedure (“physicians”) reduces patient mortality rates. A one standard deviation increase in proceduralist-physician shared work experience leads to a 10–14 percent reduction in patient 30-day mortality. Patient medical resource use also declines with shared work experience, even as survival improves. (JEL I10, J24, M12, M54)",AER,2021,99,709,"['Healthcare Systems', 'Labor Market Dynamics', 'Economic Development', 'Healthcare Innovation', 'Healthcare Accessibility']","['team members', 'collaboration', 'human capital', 'team performance', 'Medicare claims', 'heart procedures', 'patient mortality rates', 'shared work experience', 'medical resource use', 'survival']"
Prep School for Poor Kids: The Long-Run Impacts of Head Start on Human Capital and Economic Self-Sufficiency,10.1257/aer.20181801,"This paper evaluates the long-run effects of Head Start using large-scale, restricted administrative data. Using the county roll-out of Head Start between 1965 and 1980 and age-eligibility cutoffs for school entry, we find that Head Start generated large increases in adult human capital and economic self-sufficiency, including a 0. 65-year increase in schooling, a 2.7 percent increase in high school completion, an 8.5 percent increase in college enrollment, and a 39 percent increase in college completion. These estimates imply sizable, long-term returns to investments in means-tested, public preschool programs. (JEL I21, I26, I28, I38, J24)",AER,2021,95,648,"['Educational Equity', 'Public Policy', 'Economic Development', 'Investment in Education', 'Public Finance']","['Head Start', 'long-run effects', 'human capital', 'economic self-sufficiency', 'schooling', 'high school completion', 'college enrollment', 'college completion', 'investments', 'preschool programs']"
M Equilibrium: A Theory of Beliefs and Choices in Games,10.1257/aer.20201683,"We introduce a set-valued solution concept, M equilibrium, to capture empirical regularities from over half a century of game theory experiments. We show M equilibrium serves as a meta theory for various models that hitherto were considered unrelated. M equilibrium is empirically robust and, despite being set-valued, falsifiable. Results from a series of experiments that compare M equilibrium to leading behavioral game theory models demonstrate its virtues in predicting observed choices and stated beliefs. Data from experimental games with a unique pure-strategy Nash equilibrium and multiple M equilibria exhibit coordination problems that could not be anticipated through the lens of existing models. (JEL C72, C90, D83)",AER,2021,106,728,"['Game Theory', 'Behavioral Economics', 'Experimental Economics', 'Nash Equilibrium', 'Economic Research.']","['equilibrium', 'solution concept', 'game theory experiments', 'meta theory', 'behavioral game theory models', 'coordination problems', 'set-valued', 'empirical regularities', 'Nash equilibrium', 'experimental games']"
Delegation in Veto Bargaining,10.1257/aer.20201817,"A proposer requires a veto player’s approval to change a status quo. Proposer is uncertain about Vetoer’s preferences. We show that Vetoer is typically given a non-singleton menu, or delegation set, of options to pick from. The optimal set balances the extent of compromise with the risk of a veto. We identify conditions for certain delegation sets to emerge, including “full delegation”: Vetoer can choose any action between the status quo and Proposer’s ideal action. By contrast to expertise-based delegation, Proposer gives less discretion to Vetoer when their preferences are more (likely to be) aligned. (JEL D72, D82)",AER,2021,98,625,"['Public Policy', 'Economic Development', 'Regulatory Frameworks', 'Decision Making', 'Game Theory']","['approval', 'status quo', 'preferences', 'delegation', 'veto', 'menu', 'compromise', 'risk', 'full delegation', 'discretion']"
Synthetic Difference-in-Differences,10.1257/aer.20190159,"We present a new estimator for causal effects with panel data that builds on insights behind the widely used difference-in-differences and synthetic control methods. Relative to these methods we find, both theoretically and empirically, that this “synthetic difference-in-differences” estimator has desirable robustness properties, and that it performs well in settings where the conventional estimators are commonly used in practice. We study the asymptotic behavior of the estimator when the systematic part of the outcome model includes latent unit factors interacted with latent time factors, and we present conditions for consistency and asymptotic normality. (JEL C23, H25, H71, I18, L66)",AER,2021,99,694,"['Econometrics', 'Public Policy', 'Labor Market Dynamics', 'Economic Development', 'Financial Markets']","['causal effects', 'panel data', 'estimator', 'synthetic difference-in-differences', 'robustness properties', 'latent unit factors', 'latent time factors', 'consistency', 'asymptotic normality', 'systematic part']"
"Market Entry, Fighting Brands, and Tacit Collusion: Evidence from the French Mobile Telecommunications Market",10.1257/aer.20190540,"We study a major new entry in the French mobile telecommunications market, followed by the introduction of fighting brands by the three incumbents. Using an empirical oligopoly model, we find that the incumbents’ fighting brand strategies are difficult to rationalize as unilateral best responses. Instead, their strategies are consistent with a breakdown of tacit semi-collusion: before entry, the incumbents could successfully coordinate on restricting product variety to avoid cannibalization; after entry, this outcome became harder to sustain because of increased business stealing incentives. Consumers gained considerably from the added variety and, to a lesser extent, from the incumbents’ price responses. (JEL L13, L21, L96, M31)",AER,2021,105,739,"['Business Strategy', 'Consumer Behavior', 'Market Transparency', 'Economic Development', 'Trade and Globalization']","['French', 'mobile telecommunications', 'market', 'fighting brands', 'incumbents', 'oligopoly model', 'semi-collusion', 'product variety', 'cannibalization', 'price responses']"
Bargaining under the Illusion of Transparency,10.1257/aer.20150004,"This paper studies bargaining with noncommon priors where the buyer projects and exaggerates the probability that her private information may leak to the seller. Letting the buyer name her price first, raises the seller’s payoff above his payoff from posting a price. In seller-offer bargaining, projection implies a partial reversal of classic Coasian comparative static results. Weakening price commitment can benefit the seller and, as long as the relative speed at which imaginary information versus offers arrive does not converge to zero too quickly, frictionless bargaining converges to a fast haggling process which allows the seller to extract all surplus from trade. Bargaining under common prior transparency is instead slow and becomes equivalent to simply waiting. The comparative static predictions are consistent with experimental evidence. (JEL C78, D82)",AER,2021,128,870,"['Bargaining', 'Consumer Behavior', 'Experimental Evidence', 'Comparative Statics', 'Economic Development']","['bargaining', 'noncommon priors', 'projection', 'exaggerates', 'seller-offer bargaining', 'price commitment', 'frictionless bargaining', 'haggling process', 'surplus', 'trade']"
Naïve Learning with Uninformed Agents,10.1257/aer.20181151,"The DeGroot model has emerged as a credible alternative to the standard Bayesian model for studying learning on networks, offering a natural way to model naïve learning in a complex setting. One unattractive aspect of this model is the assumption that the process starts with every node in the network having a signal. We study a natural extension of the DeGroot model that can deal with sparse initial signals. We show that an agent’s social influence in this generalized DeGroot model is essentially proportional to the degree-weighted share of uninformed nodes who will hear about an event for the first time via this agent. This characterization result then allows us to relate network geometry to information aggregation. We show information aggregation preserves “wisdom” in the sense that initial signals are weighed approximately equally in a model of network formation that captures the sparsity, clustering, and small-world properties of real-world networks. We also identify an example of a network structure where essentially only the signal of a single agent is aggregated, which helps us pinpoint a condition on the network structure necessary for almost full aggregation. Simulating the modeled learning process on a set of real-world networks, we find that there is on average 22.4 percent information loss in these networks. We also explore how correlation in the location of seeds can exacerbate aggregation failure. Simulations with real-world network data show that with clustered seeding, information loss climbs to 34.4 percent. (JEL D83, D85, Z13)",AER,2021,244,1570,"['Social Policy', 'Economic Development', 'Information Aggregation', 'Network Formation', 'Simulation']","['DeGroot model', 'Bayesian model', 'learning networks', 'social influence', 'information aggregation', 'network geometry', 'wisdom', 'network formation', 'real-world networks', 'information loss']"
"Incentive Constrained Risk Sharing, Segmentation, and Asset Pricing",10.1257/aer.20181707,"Incentive problems make securities’ payoffs imperfectly pledgeable, limiting agents’ ability to issue liabilities. We analyze the equilibrium consequences of such endogenous incompleteness in a dynamic exchange economy. Because markets are endogenously incomplete, agents have different intertemporal marginal rates of substitution, so that they value assets differently. Consequently, agents hold different portfolios. This leads to endogenous markets segmentation, which we characterize with optimal transport methods. Moreover, there is a basis going always in the same direction: the price of a security is lower than that of replicating portfolios of long positions. Finally, equilibrium expected returns are concave in factor loadings. (JEL D51, D52, G11, G12)",AER,2021,104,766,"['Financial Markets', 'Risk Management', 'Capital Allocation', 'Monetary Policy', 'Investment Strategies']","['securities', 'payoffs', 'agents', 'liabilities', 'equilibrium', 'endogenous incompleteness', 'dynamic exchange economy', 'markets', 'segmentation', 'optimal transport methods']"
Venting Out: Exports during a Domestic Slump,10.1257/aer.20181853,"We study the relationship between domestic-demand shocks and exports using data for Spanish manufacturing firms in 2002–2013. Exploiting plausibly exogenous geographical variation caused by the Great Recession, we find that firms whose domestic sales declined by more experienced a larger increase in export flows, controlling for firms’ supply determinants. This result illustrates the capacity of export markets to counteract the negative impact of local demand shocks. By structurally estimating a heterogeneous-firm model of exporting with nonconstant marginal costs of production, we conclude that these firm-level responses accounted for half of the spectacular increase in Spanish goods exports over the period 2009–2013. (JEL D22, E32, F14, L60)",AER,2021,106,753,"['Trade and Globalization', 'Economic Growth', 'Fiscal Policy', 'Labor Market Dynamics', 'Economic Development']","['domestic-demand shocks', 'exports', 'Spanish manufacturing firms', 'Great Recession', 'geographical variation', 'export flows', 'supply determinants', 'export markets', 'local demand shocks', 'heterogeneous-firm model']"
The Causal Interpretation of Two-Stage Least Squares with Multiple Instrumental Variables,10.1257/aer.20190221,"Empirical researchers often combine multiple instrumental variables (IVs) for a single treatment using two-stage least squares (2SLS). When treatment effects are heterogeneous, a common justification for including multiple IVs is that the 2SLS estimand can be given a causal interpretation as a positively weighted average of local average treatment effects (LATEs). This justification requires the well-known monotonicity condition. However, we show that with more than one instrument, this condition can only be satisfied if choice behavior is effectively homogeneous. Based on this finding, we consider the use of multiple IVs under a weaker, partial monotonicity condition. We characterize empirically verifiable sufficient and necessary conditions for the 2SLS estimand to be a positively weighted average of LATEs under partial monotonicity. We apply these results to an empirical analysis of the returns to college with multiple instruments. We show that the standard monotonicity condition is at odds with the data. Nevertheless, our empirical checks reveal that the 2SLS estimate retains a causal interpretation as a positively weighted average of the effects of college attendance among complier groups. (JEL C26, I23, I26, J24, J31, R23)",AER,2021,182,1248,"['Economic Development', 'Labor Market Dynamics', 'Educational Equity', 'Trade and Globalization', 'Income Inequality']","['instrumental variables', 'two-stage least squares', 'treatment effects', 'local average treatment effects', 'monotonicity condition', 'multiple instruments', 'empirical analysis', 'returns to college', 'causal interpretation', 'complier groups']"
Constrained Pseudo-Market Equilibrium,10.1257/aer.20201769,"We propose a pseudo-market solution to resource allocation problems subject to constraints. Our treatment of constraints is general: including bihierarchical constraints due to considerations of diversity in school choice, or scheduling in course allocation; and other forms of constraints needed to model, for example, the market for roommates, combinatorial assignment problems, and knapsack constraints. Constraints give rise to pecuniary externalities, which are internalized via prices. Agents pay to the extent that their purchases affect the value the of relevant constraints at equilibrium prices. The result is a constrained-efficient market-equilibrium outcome. The outcome is fair to the extent that constraints treat agents symmetrically. (JEL D47, D61, D63, I11, I21)",AER,2021,108,780,"['Market Transparency', 'Economic Policy Evaluation', 'Consumer Behavior', 'Trade and Globalization', 'Educational Equity']","['pseudo-market', 'resource allocation', 'constraints', 'bihierarchical', 'diversity', 'school choice', 'scheduling', 'market', 'equilibrium', 'fair']"
Labor Supply Responses to Learning the Tax and Benefit Schedule,10.1257/aer.20201877,"Despite the implications for policy, empirical evidence on the relative importance of factors that shape labor supply responses is missing. This paper helps fill this gap and quantifies the role of information frictions versus other frictions by combining notches in the Norwegian welfare system and quasi-experimental variation in access to information about the slope and location of kinks. While we estimate a frictionless elasticity of 0.3, overall frictions attenuate this elasticity by about 70 percent. We find the information letter increased the earnings elasticity from 0.06 to 0.15, implying that information frictions account for at least 30 percent of total attenuation. (JEL D83, H24, I38, J22, J28, J31)",AER,2021,108,718,"['Labor Market Dynamics', 'Public Policy', 'Economic Growth', 'Social Policy', 'Information Frictions']","['labor supply', 'information frictions', 'empirical evidence', 'policy implications', 'Norway', 'welfare system', 'information', 'elasticity', 'earnings', 'frictions']"
The Intergenerational Effects of a Large Wealth Shock: White Southerners after the Civil War,10.1257/aer.20191422,"The nullification of slave wealth after the US Civil War (1861–1865) was one of the largest episodes of wealth compression in history. We document that White Southern households that owned more slaves in 1860 lost substantially more wealth by 1870, relative to Southern households that had been equally wealthy before the war. Yet, their sons almost entirely recovered from this wealth shock by 1900, and their grandsons completely converged by 1940. Marriage networks and connections to other elite families may have aided in recovery, whereas transmission of entrepreneurship and skills appear less central. (JEL D31, G51, J15, J24, N31, N32)",AER,2021,100,644,"['Wealth Distribution', 'Economic Development', 'Entrepreneurship', 'Labor Market Dynamics', 'Social Policy']","['slave wealth', 'US Civil War', 'wealth compression', 'White Southern households', 'slaves', 'wealth', 'marriage networks', 'elite families', 'entrepreneurship', 'skills']"
Jobs for Sale: Corruption and Misallocation in Hiring,10.1257/aer.20201062,"Corrupt government hiring is common in developing countries. This paper uses original data to document the operation and consequences of corrupt hiring in a health bureaucracy. Hires pay bribes averaging 17 months of salary, but contrary to conventional wisdom, their observable quality is comparable to counterfactual merit-based hires. Exploiting variation across jobs, I show that the consequences of corrupt allocations depend on the correlation between wealth and quality among applicants: service delivery outcomes are good for jobs where this was positive and poor when negative. In this setting, the correlation was typically positive, leading to relatively good performance of hires. (JEL D73, I11, J16, J24, J45, M51, O17)",AER,2021,108,732,"['Public Policy', 'Labor Market Dynamics', 'Healthcare Systems', 'Economic Development', 'Economic Policy Evaluation']","['corrupt hiring', 'government', 'developing countries', 'bribes', 'quality', 'service delivery', 'outcomes', 'wealth', 'applicants', 'performance']"
Oligopolistic Price Leadership and Mergers: The United States Beer Industry,10.1257/aer.20190913,"We study a repeated game of price leadership in which a firm proposes supermarkups over Bertrand prices to a coalition of rivals. Supermarkups and marginal costs are recoverable from data on prices and quantities using the model’s structure. In an application to the beer industry, we find that price leadership increases profit relative to Bertrand competition by 17 percent in fiscal years 2006 and 2007, and by 22 percent in 2010 and 2011, with the change mostly due to consolidation. We simulate two mergers, which relax binding incentive compatibility constraints and increase supermarkups. These coordinated effects arise even with efficiencies that offset price increases under Bertrand competition. (JEL G34, K21, L13, L14, L41, L66)",AER,2021,114,741,"['Industrial Policy', 'Trade Policies', 'Corporate Governance', 'Market Transparency', 'Economic Development']","['price leadership', 'supermarkups', 'Bertrand prices', 'repeated game', 'coalition', 'rivals', 'profit', 'beer industry', 'mergers', 'consolidation']"
"Mistakes, Overconfidence, and the Effect of Sharing on Detecting Lies",10.1257/aer.20191295,"Mistakes and overconfidence in detecting lies could help lies spread. Participants in our experiments observe videos in which senders either tell the truth or lie, and are incentivized to distinguish between them. We find that participants fail to detect lies, but are overconfident about their ability to do so. We use these findings to study the determinants of sharing and its effect on lie detection, finding that even when incentivized to share truthful videos, participants are more likely to share lies. Moreover, the receivers are more likely to believe shared videos. Combined, the tendency to believe lies increases with sharing. (JEL C91, D83, D91, L82)",AER,2021,105,664,"['Behavioral Economics', 'Information Sharing', 'Social Influence', 'Decision Making', 'Deception Detection']","['lies', 'overconfidence', 'lie detection', 'sharing', 'truth', 'videos', 'experiments', 'incentivized', 'receivers', 'belief']"
Labor Rationing,10.1257/aer.20201385,"This paper measures excess labor supply in equilibrium. We induce hiring shocks—which employ 24 percent of the labor force in external month-long jobs—in Indian local labor markets. In peak months, wages increase instantaneously and local aggregate employment declines. In lean months, consistent with severe labor rationing, wages and aggregate employment are unchanged, with positive employment spillovers on remaining workers, indicating that over a quarter of labor supply is rationed. At least 24 percent of lean self-employment among casual workers occurs because they cannot find jobs. Consequently, traditional survey approaches mismeasure labor market slack. Rationing has broad implications for labor market analysis. (JEL E24, J22, J23, J31, J64, O15, R23)",AER,2021,109,767,"['Labor Market Dynamics', 'Economic Development', 'Public Policy', 'Income Inequality', 'Entrepreneurship']","['excess labor supply', 'equilibrium', 'hiring shocks', 'Indian local labor markets', 'wages', 'aggregate employment', 'labor rationing', 'self-employment', 'labor market slack', 'labor market analysis']"
Neighborhood-Based Information Costs,10.1257/aer.20200154,"We derive a new cost of information in rational inattention problems, the neighborhood-based cost functions, starting from the observation that many settings involve exogenous states with a topological structure. These cost functions are uniformly posterior separable and capture notions of perceptual distance. This second property ensures that neighborhood-based costs, unlike mutual information, make accurate predictions about behavior in perceptual experiments. We compare the implications of our neighborhood-based cost functions with those of the mutual information in a series of applications: perceptual judgments, the general environment of binary choice, regime-change games, and linear-quadratic-Gaussian settings. (JEL C70, D11, D82, D83, D91)",AER,2021,99,756,"['Economic Development', 'Behavioral Economics', 'Game Theory', 'Information Theory', 'Decision Making']","['information cost', 'rational inattention', 'neighborhood-based cost functions', 'perceptual distance', 'mutual information', 'perceptual experiments', 'perceptual judgments', 'binary choice', 'regime-change games', 'linear-quadratic-Gaussian']"
Projection of Private Values in Auctions,10.1257/aer.20200988,"We explore how taste projection—the tendency to overestimate how similar others’ tastes are to one’s own—affects bidding in auctions. In first-price auctions with private values, taste projection leads bidders to exaggerate the intensity of competition and, consequently, to overbid—irrespective of whether values are independent, affiliated, or (a)symmetric. Moreover, the optimal reserve price is lower than the rational benchmark, and decreasing in the extent of projection and the number of bidders. With an uncertain common-value component, projecting bidders draw distorted inferences about others’ information. This misinference is stronger in second-price and English auctions, reducing their allocative efficiency compared to first-price auctions. (JEL D11, D44, D82, D83)",AER,2021,105,781,"['Auctions', 'Behavioral Economics', 'Market Transparency', 'Economic Development', 'Auctions']","['taste projection', 'bidding', 'auctions', 'private values', 'competition', 'reserve price', 'bidders', 'common-value component', 'second-price auctions', 'English auctions']"
From Mad Men to Maths Men: Concentration and Buyer Power in Online Advertising,10.1257/aer.20190811,"This paper analyzes the impact of intermediary concentration on the allocation of revenue in online platforms. We study sponsored search documenting how advertisers increasingly bid through a handful of specialized intermediaries. This enhances automated bidding and data pooling, but lessens competition whenever the intermediary represents competing advertisers. Using data on nearly 40 million Google keyword auctions, we first apply machine learning algorithms to cluster keywords into thematic groups serving as relevant markets. Using an instrumental variable strategy, we estimate a decline in the platform’s revenue of approximately 11 percent due to the average rise in concentration associated with intermediary merger and acquisition activity. (JEL C45, D44, G34, L13, L81, M37)",AER,2021,110,789,"['Market Transparency', 'Digital Transformation', 'Data Privacy', 'Monetary Policy', 'Corporate Governance']","['intermediary concentration', 'revenue allocation', 'online platforms', 'sponsored search', 'bidding', 'data pooling', 'competition', 'Google keyword auctions', 'machine learning algorithms', 'merger and acquisition.']"
The Effect of High-Tech Clusters on the Productivity of Top Inventors,10.1257/aer.20191277,"The high-tech sector is concentrated in a small number of cities. The ten largest clusters in computer science, semiconductors, and biology account for 69 percent, 77 percent, and 59 percent of all US inventors, respectively. Using longitudinal data on 109,846 inventors, I find that geographical agglomeration results in significant productivity gains. When an inventor moves to a city with a large cluster of inventors in the same field, she experiences a sizable increase in the number and quality of patents produced. The presence of significant productivity externalities implies that the agglomeration of inventors generates large gains in the aggregate amount of innovation produced in the United States. (JEL D62, J24, L60, O31, 034, R32)",AER,2021,114,746,"['Productivity', 'Innovation', 'Economic Growth', 'Urban Development', 'Technological Adoption']","['high-tech sector', 'cities', 'clusters', 'computer science', 'semiconductors', 'biology', 'inventors', 'geographical agglomeration', 'productivity gains', 'innovation']"
Quantifying the Supply Response of Private Schools to Public Policies,10.1257/aer.20151723,"School policies that cause a large demand shift between public and private schooling may cause some private schools to enter or exit the market. We study how the policy effects differ under a fixed versus changing market structure in the context of a public school funding reform in New York City. We find evidence of a reduction in private schools in response to the reform. Using a model of demand for and supply of private schooling, we estimate that 20 percent of the reform’s effect on school enrollments came from increased private school exit and reduced private school entry. (JEL H75, I21, I22, I28)",AER,2021,104,608,"['Public Policy', 'Education Equity', 'Educational Equity', 'Economic Development', 'Labor Market Dynamics']","['school policies', 'demand shift', 'public schooling', 'private schooling', 'market structure', 'public school funding reform', 'New York City', 'private schools', 'school enrollments', 'supply']"
Assortative Matching or Exclusionary Hiring? The Impact of Employment and Pay Policies on Racial Wage Differences in Brazil,10.1257/aer.20181596,"We measure the effects of firm policies on racial pay differences in Brazil. Non-Whites are less likely to be hired by high-wage firms, explaining about 20 percent of the racial wage gap for both genders. Firm-specific pay premiums for non-Whites are also compressed relative to Whites, contributing another 5 percent for that gap. A counterfactual analysis reveals that about two-thirds of the underrepresentation of non-Whites at higher-wage firms is explained by race-neutral skill-based sorting. Non-skill-based sorting and differential wage setting are largest for college-educated workers, suggesting that the allocative costs of discriminatory hiring and pay policies may be relatively large in Brazil. (JEL J15, J24, J31, J41, J46, J71, O15)",AER,2021,110,749,"['Labor Market Dynamics', 'Income Inequality', 'Economic Development', 'Educational Equity', 'Public Policy']","['firm policies', 'racial pay differences', 'Brazil', 'Non-Whites', 'high-wage firms', 'racial wage gap', 'gender', 'pay premiums', 'counterfactual analysis', 'skill-based sorting']"
Inattention and Switching Costs as Sources of Inertia in Medicare Part D,10.1257/aer.20170471,"Consumers’ health plan choices are highly persistent even though optimal plans change over time. This paper separates two sources of inertia, inattention to plan choice and switching costs. We develop a panel data model with separate attention and choice stages, linked by heterogeneity in acuity, i.e., the ability and willingness to make diligent choices. Using data from Medicare Part D, we find that inattention is an important source of inertia but switching costs also play a role, particularly for low-acuity individuals. Separating the two stages and allowing for heterogeneity is crucial for counterfactual simulations of interventions that reduce inertia. (JEL D12, G22, H51, I13, I18, L65)",AER,2021,106,700,"['Consumer Behavior', 'Healthcare Systems', 'Public Policy', 'Economic Development', 'Behavioral Economics']","['health plan choices', 'persistence', 'optimal plans', 'inertia', 'inattention', 'switching costs', 'panel data model', 'acuity', 'Medicare Part D', 'counterfactual simulations']"
The Risk-Adjusted Carbon Price,10.1257/aer.20180517,"The social cost of carbon is the expected present value of damages from emitting one ton of carbon today. We use perturbation theory to derive an approximate tractable expression for this cost adjusted for climatic and economic risk. We allow for different aversion to risk and intertemporal fluctuations, skewness and dynamics in the risk distributions of climate sensitivity and the damage ratio, and correlated shocks. We identify prudence, insurance, and exposure effects, reproduce earlier analytical results, and offer analytical insights into numerical results on the effects of economic and damage ratio uncertainty and convex damages on the optimal carbon price. (JEL E12, G22, H23, O44, Q35, Q51, Q54)",AER,2021,108,711,"['Climate Change Economics', 'Risk Management', 'Fiscal Policy', 'Environmental Sustainability', 'Energy Transition']","['social cost of carbon', 'perturbation theory', 'climatic risk', 'economic risk', 'aversion to risk', 'intertemporal fluctuations', 'risk distributions', 'climate sensitivity', 'damage ratio', 'optimal carbon price']"
Implementation by Vote-Buying Mechanisms,10.1257/aer.20190197,"Vote-buying mechanisms allow agents to express any level of support for their preferred alternative at an increasing cost. Focusing on large societies with wealth inequality, we prove that the family of binary social choice rules implemented by well-behaved vote-buying mechanisms is indexed by a single parameter, which determines the importance assigned to the agents’ willingness to pay to affect outcomes and to the number of supporters for each alternative. This parameter depends solely on the elasticity of the cost function near its origin: as this elasticity decreases, the intensities of support matter relatively more for outcomes than the supporters’ count. (JEL D63, D71, D72)",AER,2021,104,689,"['Public Policy', 'Social Policy', 'Economic Development', 'Income Inequality', 'Trade and Globalization']","['vote-buying mechanisms', 'agents', 'social choice rules', 'wealth inequality', 'binary', 'parameter', 'elasticity', 'cost function', 'supporters', 'outcomes']"
Mortgage Prepayment and Path-Dependent Effects of Monetary Policy,10.1257/aer.20181857,"How much ability does the Fed have to stimulate the economy by cutting interest rates? We argue that the presence of substantial debt in fixed-rate, prepayable mortgages means that the ability to stimulate the economy by cutting interest rates depends not just on their current level but also on their previous path. Using a household model of mortgage prepayment matched to detailed loan-level evidence on the relationship between prepayment and rate incentives, we argue that recent interest rate paths will generate substantial headwinds for future monetary stimuli. (JEL E32, E43, E52, E58, G21, G51)",AER,2021,94,604,"['Monetary Policy', 'Credit Markets', 'Debt Management', 'Housing Market Trends', 'Economic Development']","['Fed', 'stimulate', 'economy', 'interest rates', 'debt', 'fixed-rate', 'prepayable mortgages', 'household model', 'monetary stimuli', 'prepayment']"
Asymmetric Attention,10.1257/aer.20191432,"We document that the expectations of households, firms, and professional forecasters in standard surveys simultaneously extrapolate from recent events and underreact to new information. Existing models of expectation formation, whether behavioral or rational, cannot account for these observations. We develop a rational theory of extrapolation based on limited attention, which is consistent with this evidence. In particular, we show that limited, asymmetric attention to procyclical variables can explain the coexistence of extrapolation and underreactions. We illustrate these mechanisms in a microfounded macroeconomic model, which generates expectations consistent with the survey data, and show that asymmetric attention increases business cycle fluctuations. (JEL C53, D83, D84, E23, E27, E32)",AER,2021,107,801,"['Economic Growth', 'Monetary Policy', 'Behavioral Economics', 'Financial Markets', 'Macroeconomic Modeling']","['expectations', 'households', 'firms', 'professional forecasters', 'surveys', 'extrapolation', 'new information', 'limited attention', 'procyclical variables', 'business cycle fluctuations']"
The Effects of Parental and Sibling Incarceration: Evidence from Ohio,10.1257/aer.20190415,"Every year, millions of Americans experience the incarceration of a family member. Using 30 years of administrative data from Ohio and exploiting differing incarceration propensities of randomly assigned judges, this paper provides the first quasi-experimental estimates of the effects of parental and sibling incarceration in the United States. Parental incarceration has beneficial effects on some important outcomes for children, reducing their likelihood of incarceration by 4.9 percentage points and improving their adult neighborhood quality. While estimates on academic performance and teen parenthood are imprecise, we reject large positive or negative effects. Sibling incarceration leads to similar reductions in criminal activity. (JEL H76, J13, K42)",AER,2021,104,761,"['Public Policy', 'Social Policy', 'Labor Market Dynamics', 'Economic Development', 'Educational Equity']","['parental incarceration', 'sibling incarceration', 'family member', 'administrative data', 'Ohio', 'judges', 'quasi-experimental', 'children', 'criminal activity', 'United States']"
From Weber to Kafka: Political Instability and the Overproduction of Laws,10.1257/aer.20190672,"With inefficient bureaucratic institutions, the effects of laws are hard to assess and incompetent politicians may pass laws to build a reputation as skillful reformers. Since too many laws curtail bureaucratic efficiency, this mechanism can generate a steady state with Kafkaesque bureaucracy. Temporary surges in political instability heighten the incentives to overproduce laws and can shift the economy towards the Kafkaesque state. Consistent with the theory, after a surge in political instability in the early 1990s, Italy experienced a significant increase in the amount of poor-quality legislation and a decrease in bureaucratic efficiency. (JEL D72, D73)",AER,2021,96,664,"['Public Policy', 'Bureaucratic Efficiency', 'Political Instability', 'Legislation', 'Economic Development']","['bureaucratic institutions', 'laws', 'politicians', 'reformers', 'Kafkaesque bureaucracy', 'political instability', 'economy', 'Italy', 'legislation', 'efficiency']"
Justified Communication Equilibrium,10.1257/aer.20201692,"Justified communication equilibrium (JCE) is an equilibrium refinement for signaling games with cheap-talk communication. A strategy profile must be a JCE to be a stable outcome of nonequilibrium learning when receivers are initially trusting and senders play many more times than receivers. In the learning model, the counterfactual “speeches” that have been informally used to motivate past refinements are messages that are actually sent. Stable profiles need not be perfect Bayesian equilibria, so JCE sometimes preserves equilibria that existing refinements eliminate. Despite this, it resembles the earlier refinements D1 and NWBR, and it coincides with them in co-monotonic signaling games. (JEL C70, D82, D83, J23, M51)",AER,2021,106,727,"['Game Theory', 'Signaling Games', 'Equilibrium Refinement', 'Learning Model', 'Bayesian Equilibrium']","['justified communication equilibrium', 'JCE', 'equilibrium refinement', 'signaling games', 'cheap-talk communication', 'nonequilibrium learning', 'stable outcome', 'counterfactual', 'refinements', 'perfect Bayesian equilibria']"
The Challenges of Universal Health Insurance in Developing Countries: Experimental Evidence from Indonesia's National Health Insurance,10.1257/aer.20200523,"To investigate barriers to universal health insurance in developing countries, we designed a randomized experiment involving about 6,000 households in Indonesia who are subject to a government health insurance program with a weakly enforced mandate. Time-limited subsidies increased enrollment and attracted lower-cost enrollees, in part by reducing the strategic timing of enrollment to correspond with health needs. Registration assistance also increased enrollment, but increased attempted enrollment much more, as over one-half of households who attempted to enroll did not successfully do so. These findings underscore how weak administrative capacity can create important challenges in developing countries for achieving widespread coverage. (JEL D82, G22, H51, I13, I18, O15)",AER,2021,107,782,"['Healthcare Systems', 'Public Policy', 'Economic Development', 'Public Finance', 'Regulatory Frameworks']","['barriers', 'universal health insurance', 'developing countries', 'randomized experiment', 'households', 'Indonesia', 'government health insurance', 'subsidies', 'enrollment', 'administrative capacity']"
"Media, Pulpit, and Populist Persuasion: Evidence from Father Coughlin",10.1257/aer.20200513,"I study the political impact of the first populist radio personality in American history. Father Charles Coughlin blended populist demagoguery, anti-Semitism, and fascist sympathies to create a hugely popular radio program that attracted 30 million weekly listeners in the 1930s. I find that exposure to Father Coughlin’s anti-Roosevelt broadcast reduced Franklin D. Roosevelt’s vote share in the 1936 presidential election. Coughlin’s effects were larger among Catholics and persisted after Coughlin left the air. Moreover, places more exposed to Coughlin’s broadcast were more likely to form a local branch of the pro-Nazi German-American Bund and sold fewer war bonds during World War II. (JEL D72, L82, N32, N42, Z12)",AER,2021,108,721,"['Political Risk', 'Public Policy', 'Social Policy', 'Economic Development', 'Trade and Globalization']","['populist radio personality', 'Father Charles Coughlin', 'demagoguery', 'anti-Semitism', 'fascist sympathies', '1930s', 'Franklin D. Roosevelt', 'presidential election', 'Catholics', 'Nazi German-American Bund.']"
Lapse-Based Insurance,10.1257/aer.20160868,"Most individual life insurance policies lapse, with lapsers cross-subsidizing non-lapsers. We show that policies and lapse patterns predicted by standard rational expectations models are the opposite of those observed empirically. We propose two behavioral models consistent with the evidence: (i) consumers forget to pay premiums and (ii) consumers understate future liquidity needs. We conduct two surveys with a large insurer. New buyers believe that their own lapse probabilities are small compared to the insurer’s actual experience. For recent lapsers, forgetfulness accounts for 37.8 percent of lapses while unexpected liquidity accounts for 15.4 percent. (JEL D91, G22, G52)",AER,2021,97,682,"['Insurance', 'Consumer Behavior', 'Behavioral Economics', 'Financial Markets', 'Economic Policy Evaluation']","['individual life insurance', 'lapse', 'cross-subsidizing', 'rational expectations models', 'behavioral models', 'forgetfulness', 'liquidity needs', 'surveys', 'insurer', 'lapse probabilities']"
Daily Labor Supply and Adaptive Reference Points,10.1257/aer.20170768,"This paper provides field evidence on how reference points adjust, a degree of freedom in reference-dependence models. Examining this in the context of cabdrivers’ daily labor-supply behavior, we ask how the within-day timing of earnings affects decisions. Drivers work less in response to higher accumulated income, with a strong effect for recent earnings that gradually diminishes for earlier earnings. We estimate a structural model in which drivers work toward a reference point that adjusts to deviations from expected earnings with a lag. This dynamic view of reference dependence reconciles conflicting “neoclassical” and “behavioral” interpretations of evidence on daily labor-supply decisions. (JEL J22, J31, L94)",AER,2021,104,723,"['Labor Market Dynamics', 'Behavioral Economics', 'Economic Development', 'Public Policy', 'Income Inequality']","['reference points', 'reference-dependence models', 'cabdrivers', 'labor-supply behavior', 'within-day timing', 'earnings', 'structural model', 'expected earnings', 'dynamic view', 'daily labor-supply decisions']"
Mediation in Reputational Bargaining,10.1257/aer.20191321,"Can an uninformed mediator improve outcomes in a dynamic reputational bargaining model? I show that a simple communication protocol used by professional mediators, of announcing an agreement only if both parties privately accept its terms, can increase the payoffs of rational bargainers, but only if communication is noisy: the mediator must sometimes fail to suggest a deal even when both bargainers accept it. (JEL C78, D74, D83)",AER,2021,67,432,"['Mediation', 'Communication Protocols', 'Bargaining Models', 'Social Policy', 'Behavioral Economics']","['uninformed mediator', 'outcomes', 'dynamic reputational bargaining model', 'communication protocol', 'professional mediators', 'agreement', 'payoffs', 'rational bargainers', 'noisy communication', 'mediator']"
What to Expect from the Lower Bound on Interest Rates: Evidence from Derivatives Prices,10.1257/aer.20181461,"This paper analyzes the effects of the lower bound for interest rates on the distributions of inflation and interest rates. In a New Keynesian model with a lower bound, two equilibria emerge: policy is mostly unconstrained in the “target equilibrium,” whereas policy is mostly constrained in the “liquidity trap equilibrium.” Using options data on interest rates and inflation, we find forecast densities consistent with the target equilibrium and find no evidence in favor of the liquidity trap equilibrium. The lower bound has a sizable effect on the distribution of interest rates, but its impact on inflation is relatively modest. (JEL E12, E23, E31, E43, E52, G13)",AER,2021,106,669,"['Monetary Policy', 'Financial Markets', 'Inflation Trends', 'Economic Development', 'Banking Systems']","['interest rates', 'lower bound', 'inflation', 'New Keynesian model', 'equilibria', 'policy', 'liquidity trap', 'options data', 'forecast densities', 'impact']"
The Impacts of a Multifaceted Prenatal Intervention on Human Capital Accumulation in Early Life,10.1257/aer.20191726,"We evaluate an intervention targeting early life nutrition and well-being for households in extreme poverty in Northern Nigeria. The intervention leads to large and sustained improvements in children’s anthropometric and health outcomes, including an 8 percent reduction in stunting 4 years, post-intervention. These impacts are partly driven by information-related channels. However, the certain and substantial flow of cash transfers is also key. They induce positive labor supply responses among women, and enables them to undertake productive investments in livestock. These provide protein rich diets for children, and generate higher household earnings streams long after the cash transfers expire. (JEL I12, I32, I38, J13, J16, J22, O12)",AER,2021,106,744,"['Public Policy', 'Economic Development', 'Healthcare Systems', 'Income Inequality', 'Nutrition']","['intervention', 'early life nutrition', 'well-being', 'extreme poverty', 'Northern Nigeria', 'anthropometric', 'health outcomes', 'stunting', 'cash transfers', 'labor supply']"
"The Long-Run Effects of Childhood Insurance Coverage: Medicaid Implementation, Adult Health, and Labor Market Outcomes",10.1257/aer.20171671,"This paper estimates the long-run effects of childhood Medicaid eligibility on adult health and economic outcomes using the program’s original introduction ( 1966–1970) and its mandated coverage of welfare recipients. The design compares cohorts born in different years relative to Medicaid implementation, in states with different preexisting welfare-based eligibility. Early childhood Medicaid eligibility reduces mortality and disability, increases employment, and reduces receipt of disability transfer programs up to 50 years later. Medicaid has saved the government more than its original cost and saved more than 10 million quality adjusted life years. (JEL H51, I12, I18, I32, I38, J13)",AER,2021,98,694,"['Public Policy', 'Healthcare Systems', 'Social Policy', 'Economic Development', 'Labor Market Dynamics']","['Medicaid eligibility', 'childhood', 'adult health', 'economic outcomes', 'mortality', 'disability', 'employment', 'transfer programs', 'government savings', 'quality adjusted life years']"
Identifying Present Bias from the Timing of Choices,10.1257/aer.20191258,"A (partially naïve) quasi-hyperbolic discounter repeatedly chooses whether to complete a task. Her net benefits of task completion are drawn independently between periods from a time-invariant distribution. We show that the probability of completing the task conditional on not having done so earlier increases towards the deadline. Conversely, we establish nonidentifiability by proving that for any time-preference parameters and any dataset with such (weakly increasing) task-completion probabilities, there exists a stationary payoff distribution that rationalizes the agent’s behavior if she is either sophisticated or fully naïve. Additionally, we provide sharp partial identification for the case of observable continuation values. (JEL C14, D11, D15, D90, D91)",AER,2021,105,768,"['Behavioral Economics', 'Economic Development', 'Data Privacy', 'Financial Markets', 'Monetary Policy']","['quasi-hyperbolic discounter', 'task completion', 'time-preference parameters', 'dataset', 'task-completion probabilities', 'stationary payoff distribution', 'rationalizes behavior', 'sophisticated', 'naïve', 'observable continuation values']"
Entry-Proofness and Discriminatory Pricing under Adverse Selection,10.1257/aer.20190189,"This paper studies competitive allocations under adverse selection. We first provide a general necessary and sufficient condition for entry on an inactive market to be unprofitable. We then use this result to characterize, for an active market, a unique budget-balanced allocation implemented by a market tariff making additional trades with an entrant unprofitable. Motivated by the recursive structure of this allocation, we finally show that it emerges as the essentially unique equilibrium outcome of a discriminatory ascending auction. These results yield sharp predictions for competitive nonexclusive markets. (JEL D11, D43, D82, D86)",AER,2021,92,641,"['Public Policy', 'Financial Markets', 'Trade and Globalization', 'Market Transparency', 'Regulatory Frameworks']","['competitive allocations', 'adverse selection', 'entry', 'market', 'unprofitable', 'budget-balanced allocation', 'market tariff', 'trades', 'equilibrium outcome', 'discriminatory ascending auction.']"
Targeting In-Kind Transfers through Market Design: A Revealed Preference Analysis of Public Housing Allocation,10.1257/aer.20190516,"Public housing benefits are rationed through wait lists. Theoretical work on public housing allocation has debated how much choice applicants should have over units, identifying a possible trade-off between efficiency and redistribution. This paper empirically establishes the existence and economic importance of this trade-off using wait list data from Cambridge, Massachusetts. I estimate a model of public housing preferences in a setting where heterogeneous apartments are rationed through waiting time. Eliminating choice would improve targeting but reduce tenant welfare by more than 30 percent. Such a change is only justified on targeting grounds by a strong social preference for redistribution. (JEL D47, H75, I38, R38)",AER,2021,105,730,"['Public Policy', 'Social Policy', 'Housing Market Trends', 'Economic Development', 'Income Inequality']","['public housing', 'wait lists', 'allocation', 'choice', 'efficiency', 'redistribution', 'empirical', 'Cambridge', 'preferences', 'targeting']"
Place-Based Drivers of Mortality: Evidence from Migration,10.1257/aer.20190825,"We estimate the effect of current location on elderly mortality by analyzing outcomes of movers in the Medicare population. We control for movers’ origin locations as well as a rich vector of pre-move health measures. We also develop a novel strategy to adjust for remaining unobservables, using the correlation of residual mortality with movers’ origins to gauge the importance of omitted variables. We estimate substantial effects of current location. Moving from a tenth to a ninetieth percentile location would increase life expectancy at age 65 by 1.1 years, and equalizing location effects would reduce cross-sectional variation in life expectancy by 15 percent. Places with favorable life expectancy effects tend to have higher quality and quantity of health care, less extreme climates, lower crime rates, and higher socioeconomic status. (JEL H51, I1, I11)",AER,2021,132,865,"['Healthcare Systems', 'Public Policy', 'Economic Development', 'Climate Change Economics', 'Social Policy']","['elderly mortality', 'location', 'movers', 'Medicare population', 'health measures', 'unobservables', 'life expectancy', 'cross-sectional variation', 'health care', 'socioeconomic status']"
Notching R&D Investment with Corporate Income Tax Cuts in China,10.1257/aer.20191758,"We study a Chinese policy that awards substantial tax cuts to firms with R&D investment over a threshold or “notch.” Quasi-experimental variation and administrative tax data show a significant increase in reported R&D that is partly driven by firms relabeling expenses as R&D. Structural estimates show relabeling accounts for 24.2 percent of reported R&D and that doubling R&D would increase productivity by 9 percent. Policy simulations show that firm selection and relabeling determine the cost-effectiveness of stimulating R&D, that notch-based policies are more effective than tax credits when relabeling is prevalent, and that modest spillovers justify the program from a welfare perspective. (JEL D22, D24, H25, O14, O32, P31, P35)",AER,2021,110,762,"['Taxation', 'Innovation', 'Public Policy', 'Economic Development', 'Fiscal Policy']","['Chinese policy', 'tax cuts', 'R&D investment', 'notch', 'quasi-experimental', 'administrative data', 'relabeling', 'productivity', 'policy simulations', 'welfare perspective.']"
Unwatched Pollution: The Effect of Intermittent Monitoring on Air Quality,10.1257/aer.20181346,"Intermittent monitoring of environmental standards may induce strategic changes in polluting activities. This paper documents local strategic responses to a cyclical, once-every-six-day air quality monitoring schedule under the federal Clean Air Act. Using satellite data of monitored areas, I show that air quality is significantly worse on unmonitored days. This effect is explained by short-term suppression of pollution on monitored days, especially during high-pollution periods when the city’s noncompliance risk is high. Cities’ use of air quality warnings increases on monitored days, which suggests local governments’ role in coordinating emission reductions. (JEL K32, Q35, Q58, R11)",AER,2021,96,693,"['Public Policy', 'Environmental Sustainability', 'Climate Change Economics', 'Urban Development', 'Regulatory Frameworks']","['environmental standards', 'monitoring', 'strategic changes', 'polluting activities', 'air quality', 'satellite data', 'pollution', 'noncompliance risk', 'air quality warnings', 'emission reductions']"
How to Avoid Black Markets for Appointments with Online Booking Systems,10.1257/aer.20191204,"Allocating appointment slots is presented as a new application for market design. Online booking systems are commonly used by public authorities to allocate appointments for visa interviews, driver’s licenses, passport renewals, etc. We document that black markets for appointments have developed in many parts of the world. Scalpers book the appointments that are offered for free and sell the slots to appointment seekers. We model the existing first-come-first-served booking system and propose an alternative batch system. The batch system collects applications for slots over a certain time period and then randomly allocates slots to applicants. The theory predicts and lab experiments confirm that scalpers profitably book and sell slots under the current system with sufficiently high demand, but that they are not active in the proposed batch system. We discuss practical issues for the implementation of the batch system and its applicability to other markets with scalping. (JEL C92, D47)",AER,2021,150,999,"['Public Policy', 'Market Transparency', 'Economic Development', 'Labor Market Dynamics', 'Regulatory Frameworks']","['market design', 'appointment slots', 'online booking systems', 'black markets', 'scalpers', 'first-come-first-served', 'batch system', 'theory', 'lab experiments', 'scalping']"
Adverse and Advantageous Selection in the Laboratory,10.1257/aer.20200304,"We study two-player games where one-sided asymmetric information can lead to either adverse or advantageous selection. We contrast behavior in these games with settings where both players are uninformed. We find stark differences, suggesting that subjects do account for endogenous selection effects. Removing strategic uncertainty increases the fraction of subjects who account for selection. Subjects respond more to adverse than advantageous selection. Using additional treatments where we vary payoff feedback, we connect this difference to learning. We also observe a significant fraction of subjects who appear to understand selection effects but do not apply that knowledge. (JEL C92, D82, D91)",AER,2021,100,701,"['Behavioral Economics', 'Learning', 'Information Asymmetry', 'Experimental Economics', 'Economic Theory']","['asymmetric information', 'adverse selection', 'advantageous selection', 'strategic uncertainty', 'payoff feedback', 'learning', 'selection effects', 'two-player games', 'behavior', 'subjects']"
Pay Me Later: Savings Constraints and the Demand for Deferred Payments,10.1257/aer.20191657,"We study a simple savings scheme that allows workers to defer receipt of part of their wages for three months at zero interest. The scheme significantly increases savings during the deferral period, leading to higher postdisbursement spending on lumpy goods. Two years later, after two additional rounds of the savings scheme, we find that treated workers have made permanent improvements to their homes. The popularity of the scheme implies a lack of good alternative savings options. The results of a follow-up experiment suggest that demand for the scheme is partly due to its ability to address self-control issues. (JEL D91, G51, J31, O12, O13)",AER,2021,104,649,"['Labor Market Dynamics', 'Consumer Behavior', 'Housing Market Trends', 'Behavioral Economics', 'Financial Inclusion']","['savings scheme', 'workers', 'deferral', 'wages', 'postdisbursement spending', 'lumpy goods', 'improvements', 'homes', 'alternative savings options', 'self-control issues']"
"Recruitment, Effort, and Retention Effects of Performance Contracts for Civil Servants: Experimental Evidence from Rwandan Primary Schools",10.1257/aer.20191972,"This paper reports on a two-tiered experiment designed to separately identify the selection and effort margins of pay for performance (P4P). At the recruitment stage, teacher labor markets were randomly assigned to a “pay-for-percentile” or fixed-wage contract. Once recruits were placed, an unexpected, incentive-compatible, school-level re-randomization was performed so that some teachers who applied for a fixed-wage contract ended up being paid by P4P, and vice versa. By the second year of the study, the within-year effort effect of P4P was 0.16 standard deviations of pupil learning, with the total effect rising to 0.20 standard deviations after allowing for selection. (JEL C93, I21, J23, J33, J41, J45, O15)",AER,2021,108,718,"['Labor Market Dynamics', 'Educational Equity', 'Public Policy', 'Economic Development', 'Trade and Globalization']","['experiment', 'pay for performance', 'P4P', 'teacher labor markets', 'recruitment', 'fixed-wage contract', 'incentive-compatible', 'school-level', 'pupil learning', 'selection']"
Market Fragmentation,10.1257/aer.20200829,"We model a simple market setting in which fragmentation of trade of the same asset across multiple exchanges improves allocative efficiency. Fragmentation reduces the inhibiting effect of price-impact avoidance on order submission. Although fragmentation reduces market depth on each exchange, it also isolates cross-exchange price impacts, leading to more aggressive overall order submission and better rebalancing of unwanted positions across traders. Fragmentation also has implications for the extent to which prices reveal traders’ private information. While a given exchange price is less informative in more fragmented markets, all exchange prices taken together are more informative. (JEL D47, D82, G14)",AER,2021,99,711,"['Financial Markets', 'Market Transparency', 'Trade and Globalization', 'Information Economics', 'Asset Pricing.']","['market setting', 'fragmentation', 'trade', 'exchanges', 'price-impact avoidance', 'order submission', 'market depth', 'price impacts', 'rebalancing', 'private information']"
Security Transitions,10.1257/aer.20200412,"How do foreign powers disengage from a conflict? We study this issue by examining the recent, large-scale security transition from international troops to local forces in the ongoing civil conflict in Afghanistan. We construct a new dataset that combines information on this transition process with declassified conflict outcomes and previously unreleased quarterly survey data of residents’ perceptions of local security. Our empirical design leverages the staggered roll-out of the transition, and employs a novel instrumental variables approach to estimate the impact. We find a significant, sharp, and timely decline of insurgent violence in the initial phase: the security transfer to Afghan forces. We find that this is followed by a significant surge in violence in the second phase: the actual physical withdrawal of foreign troops. We argue that this pattern is consistent with a signaling model, in which the insurgents reduce violence strategically to facilitate the foreign military withdrawal to capitalize on the reduced foreign military presence afterward. Our findings clarify the destabilizing consequences of withdrawal in one of the costliest conflicts in modern history, and yield potentially actionable insights for designing future security transitions. (JEL D74, F51, F52, O17)",AER,2021,190,1300,"['Public Policy', 'Conflict Economics', 'Military Withdrawal', 'Security Transitions', 'Insurgent Violence']","['foreign powers', 'conflict disengagement', 'security transition', 'international troops', 'local forces', 'Afghanistan', 'insurgent violence', 'military withdrawal', 'signaling model', 'security transitions']"
The Economic Consequences of Bankruptcy Reform,10.1257/aer.20191311,"A more generous consumer bankruptcy system provides greater insurance against financial risks but may also raise the cost of credit. We study this trade-off using the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), which increased the costs of filing for bankruptcy. We identify the effects of BAPCPA on borrowing costs using variation in the effects of the reform across credit scores. We find that a one-percentage-point reduction in bankruptcy filing risk decreased credit card interest rates by 70–90 basis points. Conversely, BAPCPA reduced the insurance value of bankruptcy, with uninsured hospitalizations 70 percent less likely to obtain bankruptcy relief after the reform. (JEL D18, G15, I13, K35)",AER,2021,109,729,"['Banking Systems', 'Credit Markets', 'Consumer Behavior', 'Financial Markets', 'Public Policy']","['consumer bankruptcy', 'insurance', 'financial risks', 'cost of credit', 'Bankruptcy Abuse Prevention and Consumer Protection Act', 'borrowing costs', 'credit scores', 'bankruptcy filing risk', 'credit card interest rates', 'uninsured hospitalizations']"
On Her Own Account: How Strengthening Women's Financial Control Impacts Labor Supply and Gender Norms,10.1257/aer.20200705,"Can increasing control over earnings incentivize a woman to work, and thereby influence norms around gender roles? We randomly varied whether rural Indian women received bank accounts, training in account use, and direct deposit of public sector wages into their own (versus husbands’) accounts. Relative to the accounts only group, women who also received direct deposit and training worked more in public and private sector jobs. The private sector result suggests gender norms initially constrained female employment. Three years later, direct deposit and training broadly liberalized women’s own work-related norms, and shifted perceptions of community norms. (JEL G51, G53, J16, J31, O12, O16, Z13)",AER,2021,104,703,"['Gender Equality', 'Labor Market Dynamics', 'Public Policy', 'Economic Development', 'Social Policy']","['control', 'earnings', 'incentivize', 'woman', 'work', 'gender roles', 'bank accounts', 'training', 'direct deposit', 'gender norms']"
Closing the Gap: The Effect of Reducing Complexity and Uncertainty in College Pricing on the Choices of Low-Income Students,10.1257/aer.20200451,"High-achieving, low-income students attend selective colleges at far lower rates than upper-income students with similar achievement. Behavioral biases, intensified by complexity and uncertainty in the admissions and aid process, may explain this gap. In a large-scale experiment we test an early commitment of free tuition at a flagship university. The intervention did not increase aid: rather, students were guaranteed before application the same grant aid that they would qualify for in expectation if admitted. The offer substantially increased application (68 percent versus 26 percent) and enrollment rates (27 percent versus 12 percent). The results suggest that uncertainty, present bias, and loss aversion loom large in students’ college decisions. (JEL I22, I23, I24, D31, I28)",AER,2021,114,788,"['Educational Equity', 'Behavioral Economics', 'Public Policy', 'Income Inequality', 'College Decision-making']","['students', 'low-income', 'selective colleges', 'achievement', 'behavioral biases', 'admissions', 'aid process', 'experiment', 'tuition', 'enrollment']"
The Selection of Talent: Experimental and Structural Evidence from Ethiopia,10.1257/aer.20190586,"We study how search frictions in the labor market affect firms’ ability to recruit talented workers. In a field experiment in Ethiopia, we show that an employer can attract more talented applicants by offering a small monetary incentive for making a job application. Estimates from a structural model suggest that the intervention is effective because the cost of making a job application is large, and positively correlated with jobseeker ability. We provide evidence that this positive correlation is driven by dynamic selection. In a second experiment, we show that local recruiters underestimate the positive impacts of application incentives. (JEL J23, J24, J31, J64, O15)",AER,2021,104,677,"['Labor Market Dynamics', 'Economic Development', 'Behavioral Economics', 'Public Policy', 'Workforce Automation']","['search frictions', 'labor market', 'firms', 'recruit', 'talented workers', 'field experiment', 'Ethiopia', 'monetary incentive', 'job application', 'structural model']"
Types of Contact: A Field Experiment on Collaborative and Adversarial Caste Integration,10.1257/aer.20191780,"I estimate the effects of collaborative and adversarial intergroup contact. I randomly assigned Indian men from different castes to participate in cricket leagues or to serve as a control group. League players faced variation in collaborative contact, through random assignment to homogeneous-caste or mixed-caste teams, and adversarial contact, through random assignment of opponents. Collaborative contact increases cross-caste friendships and efficiency in trade, and reduces own-caste favoritism. In contrast, adversarial contact generally reduces cross-caste interaction and efficiency. League participation reduces intergroup differences, suggesting that the positive aspects of intergroup contact more than offset the negative aspects in this setting. (JEL C93, D83, D91, J15, O15, Z13, Z21)",AER,2021,106,798,"['Social Policy', 'Trade and Globalization', 'Labor Market Dynamics', 'Economic Development', 'Educational Equity']","['effects', 'collaborative', 'adversarial', 'intergroup contact', 'Indian men', 'castes', 'cricket leagues', 'cross-caste friendships', 'own-caste favoritism', 'intergroup differences']"
Feedbacks: Financial Markets and Economic Activity,10.1257/aer.20180733,"Is credit expansion a sign of desirable financial deepening or the prelude to an inevitable bust? We study this question in modern US data using a structural VAR model of 10 monthly frequency variables, identified by heteroskedasticity. Negative reduced-form responses of output to credit growth are caused by endogenous monetary policy response to credit expansion shocks. On average, credit and output growth remain positively associated. “Financial stress” shocks to credit spreads cause declines in output and credit levels. Neither credit aggregates nor spreads provide much advance warning of the 2008–2009 crisis, but spreads improve within-crisis forecasts. (JEL C51, E23, E31, E43, E44, E52, G01)",AER,2021,104,705,"['Credit Markets', 'Monetary Policy', 'Financial Markets', 'Economic Development', 'Financial Crisis']","['credit expansion', 'financial deepening', 'bust', 'US data', 'structural VAR model', 'monetary policy', 'output growth', 'financial stress', 'credit spreads', '2008-2009 crisis']"
Can Policy Change Culture? Government Pension Plans and Traditional Kinship Practices,10.1257/aer.20190098,"Policies may change the incentives that allow cultural practices to persist. To test this, I study matrilocality and patrilocality, kinship traditions that determine daughters’ and sons’ post-marriage residences, and thus, which gender lives with and supports parents in their old age. Two separate policy experiments in Ghana and Indonesia show that pension policies reduce the practice of these traditions. I also show that these traditions incentivize parents to invest in the education of children who traditionally coreside with them. Consequently, when pension plans change cultural practices, they also reduce educational investment. This finding further demonstrates that policy can change culture. (JEL G51, I20, J15, J16, J32, Z13)",AER,2021,107,741,"['Public Policy', 'Economic Development', 'Educational Equity', 'Pension Systems', 'Cultural Change']","['policies', 'cultural practices', 'matrilocality', 'patrilocality', 'kinship traditions', 'daughters', 'sons', 'post-marriage residences', 'pension policies', 'educational investment']"
Can Network Theory-Based Targeting Increase Technology Adoption?,10.1257/aer.20200295,"Can targeting information to network-central farmers induce more adoption of a new agricultural technology? By combining social network data and a field experiment in 200 villages in Malawi, we find that targeting central farmers is important to spur the diffusion process. We also provide evidence of one explanation for why centrality matters: a diffusion process governed by complex contagion. Our results are consistent with a model in which many farmers need to learn from multiple people before they adopt themselves. This means that without proper targeting of information, the diffusion process can stall and technology adoption remains perpetually low. (JEL O13, O18, O33, Q12, Q16)",AER,2021,105,691,"['Technological Adoption', 'Social Policy', 'Economic Development', 'Climate Change Economics', 'Agricultural Innovation']","['agricultural technology', 'targeting', 'network-central farmers', 'social network data', 'field experiment', 'Malawi', 'diffusion process', 'complex contagion', 'technology adoption', 'information targeting']"
Digitization and Pre-purchase Information: The Causal and Welfare Impacts of Reviews and Crowd Ratings,10.1257/aer.20200153,"Digitization has led to many new creative products, straining the capacity of professional critics and consumers. Yet, the digitization of retailing has also delivered new crowd-based sources of pre-purchase information. We compare the relative impacts of professional critics and crowd-based Amazon star ratings on consumer welfare in book publishing. Using various fixed effects and discontinuity-based empirical strategies, we estimate their causal impacts on sales. We use these causal estimates to calibrate a structural demand model. The aggregate effect of star ratings on consumer surplus is, in our baseline estimates, more than ten times the effect of traditional review outlets. (JEL D83, L15, L81, L82)",AER,2021,104,714,"['Consumer Behavior', 'Digital Transformation', 'Economic Development', 'Trade and Globalization', 'Public Policy']","['digitization', 'creative products', 'professional critics', 'consumers', 'retailing', 'crowd-based', 'Amazon star ratings', 'consumer welfare', 'book publishing', 'sales']"
Discrete Choice under Risk with Limited Consideration,10.1257/aer.20190253,"This paper is concerned with learning decision-makers’ preferences using data on observed choices from a finite set of risky alternatives. We propose a discrete choice model with unobserved heterogeneity in consideration sets and in standard risk aversion. We obtain sufficient conditions for the model’s semi-nonparametric point identification, including in cases where consideration depends on preferences and on some of the exogenous variables. Our method yields an estimator that is easy to compute and is applicable in markets with large choice sets. We illustrate its properties using a dataset on property insurance purchases. (JEL D81, D83, D91, G22, G52)",AER,2021,98,663,"['Risk Management', 'Financial Markets', 'Consumer Behavior', 'Insurance', 'Data Analysis']","['decision-makers', 'preferences', 'discrete choice model', 'unobserved heterogeneity', 'risk aversion', 'identification', 'estimator', 'markets', 'choice sets', 'property insurance']"
Digital Dystopia,10.1257/aer.20201214,"Autocratic regimes, democratic majorities, private platforms, and religious or professional organizations can achieve social control by managing the flow of information about individuals’ behavior. Bundling the agents’ political, organizational, or religious attitudes with information about their prosocial conduct makes them care about behaviors that they otherwise would not. The incorporation of the individuals’ social graph in their social score further promotes soft control but destroys the social fabric. Both bundling and guilt by association are most effective in a society that has weak ties and is politically docile. (JEL D64, D72, D83, D91, K38, Z13)",AER,2021,95,665,"['Political Risk', 'Social Policy', 'Behavioral Economics', 'Organizational Behavior', 'Market Transparency']","['autocratic regimes', 'democratic majorities', 'private platforms', 'social control', 'information flow', 'behavior', 'social score', 'soft control', 'social fabric', 'guilt by association']"
A Few Bad Apples? Racial Bias in Policing,10.1257/aer.20181607,"We estimate the degree to which individual police officers practice racial discrimination. Using a bunching estimation design and data from the Florida Highway Patrol, we show that minorities are less likely to receive a discount on their speeding tickets than White drivers. Disaggregating this difference to the individual police officer, we estimate that 42 percent of officers practice discrimination. We then apply our officer- level discrimination measures to various policy-relevant questions in the literature. In particular, reassigning officers across locations based on their lenience can effectively reduce the aggregate disparity in treatment (JEL H76, J15, K42)",AER,2021,96,675,"['Public Policy', 'Labor Market Dynamics', 'Race and Discrimination', 'Economic Development', 'Law Enforcement']","['police officers', 'racial discrimination', 'minorities', 'speeding tickets', 'individual', 'discrimination', 'policy', 'reassigning officers', 'lenience', 'treatment']"
"How Research Affects Policy: Experimental Evidence from 2,150 Brazilian Municipalities",10.1257/aer.20190830,"Can research findings change political leaders’ beliefs and policies? We use experiments with 2,150 Brazilian municipalities to measure mayors’ demand for and response to research information. In one experiment, we find that mayors are willing to pay to learn the results of evaluation studies, and update their beliefs when informed of the findings. They value larger-sample studies more, while not distinguishing between studies in rich and poor countries. In a second experiment, we find that informing mayors about research on a simple and effective policy, taxpayer reminder letters, increases the probability the policy is implemented by 10 percentage points. (JEL D72, D78, D83, O17, O18)",AER,2021,105,695,"['Public Policy', 'Economic Development', 'Behavioral Economics', 'Political Risk', 'Economic Policy Evaluation']","['research findings', 'political leaders', 'beliefs', 'policies', 'experiments', 'Brazilian municipalities', 'mayors', 'demand', 'response', 'evaluation studies']"
Five Facts about Beliefs and Portfolios,10.1257/aer.20200243,"We study a newly designed survey administered to a large panel of wealthy retail investors. The survey elicits beliefs that are important for macroeconomics and finance, and matches respondents with administrative data on their portfolio composition, their trading activity, and their login behavior. We establish five facts inthese data. (i) Beliefs are reflected in portfolio allocations. The sensitivity of portfolios to beliefs is small on average, but varies significantly with investor wealth, attention, trading frequency, and confidence. (ii) Belief changes do not predict when investors trade, but conditional on trading, they affect both the direction and the magnitude of trades. (iii) Beliefs are mostly characterized by large and persistent individual heterogeneity. Demographic characteristics explain only asmall part of why some individuals are optimistic and some are pessimistic. (iv) Expected cash flow growth and expected returns are positively related, both within and across investors. (v) Expected returns and the subjective probability of rare disasters are negatively related, both within and across investors. These five facts provide useful guidance for the design of macro-finance models. (JEL D83, E23, G11, G12, G41, G51)",AER,2021,180,1251,"['Financial Markets', 'Risk Management', 'Behavioral Economics', 'Monetary Policy', 'Economic Development']","['survey', 'beliefs', 'portfolio', 'trading', 'wealth', 'attention', 'confidence', 'heterogeneous', 'returns', 'disasters']"
"Dynastic Human Capital, Inequality, and Intergenerational Mobility",10.1257/aer.20190553,"We estimate long-run intergenerational persistence in human capital using information on outcomes for the extended family: the dynasty. A dataset including the entire Swedish population, linking four generations, allows us to identify parents’ siblings and cousins, their spouses, and spouses’ siblings. Using various human capital measures, we show that traditional parent-child estimates underestimate long-run intergenerational persistence by at least one-third. By adding outcomes for more distant ancestors, we show that almost all of the persistence is captured by the parental generation. Data on adoptees show that at least one- third of long-term persistence is attributed to environmental factors. (JEL I24, I26, J12, J24, J62)",AER,2021,104,737,"['Education Equity', 'Labor Market Dynamics', 'Economic Development', 'Environmental Sustainability', 'Behavioral Economics']","['intergenerational persistence', 'human capital', 'dynasty', 'Swedish population', 'parents', 'siblings', 'cousins', 'adoptees', 'environmental factors', 'outcomes']"
The Role of Behavioral Frictions in Health Insurance Marketplace Enrollment and Risk: Evidence from a Field Experiment,10.1257/aer.20190823,"We experimentally varied information mailed to 87,000 households in California’s health insurance marketplace to study the role of frictions in insurance take-up. Reminders about the enrollment deadline raised enrollment by 1.3 pp (16 percent) in this typically low take-up population. Heterogeneous effects of personalized subsidy information indicate misperceptions about program benefits. Consistent with an adverse selection model with frictional enrollment costs, the intervention lowered average spending risk by 5.1 percent, implying that marginal respondents were 37 percent less costly than inframarginal consumers. We observe the largest positive selection among low income consumers, who exhibit the largest frictions in enrollment. Finally, we estimate the implied value of the letter intervention to be $25 to $53 per month in subsidy dollars. These results suggest that frictions may partially explain low take-up for marketplace insurance, and that interventions reducing them can improve enrollment and market risk in exchanges. (JEL C93, G22, G52, H75, I13)",AER,2021,151,1074,"['Healthcare Systems', 'Risk Management', 'Consumer Behavior', 'Public Policy', 'Economic Development']","['health insurance', 'marketplace', 'enrollment', 'frictions', 'subsidies', 'adverse selection', 'low income', 'intervention', 'enrollment costs', 'take-up']"
An Experiment in Candidate Selection,10.1257/aer.20200125,"Are ordinary citizens or political party leaders better positioned to select candidates? While the American primary system lets citizens choose, most democracies rely instead on party officials to appoint or nominate candidates. The consequences of these distinct design choices are unclear: while officials are often better informed about candidate qualifications, they may value traits, like party loyalty or willingness to pay for the nomination, at odds with identifying the best performer. We partnered with both major political parties in Sierra Leone to experimentally vary how much say voters have in selecting Parliamentary candidates. Estimates suggest that more democratic procedures increase the likelihood that parties select voters’ most preferred candidates and favor candidates with stronger records of public goods provision. (JEL D72, H41, O17)",AER,2021,123,862,"['Public Policy', 'Political Risk', 'Economic Development', 'Social Policy', 'Public Finance']","['citizens', 'political party leaders', 'candidates', 'American primary system', 'democracies', 'party officials', 'appoint', 'nominate', 'democratic procedures', 'Parliamentary candidates']"
Stock Market Wealth and the Real Economy: A Local Labor Market Approach,10.1257/aer.20200208,"We provide evidence of the stock market consumption wealth effect by using a local labor market analysis. An increase in local stock wealth driven by aggregate stock prices increases local employment and payroll in nontradable industries and in total, with no effect on employment in tradable industries. In a model of geographic heterogeneity in stock wealth, these responses imply an MPC of 3.2 cents per year and that a 20 percent increase in stock valuations, unless countered by monetary policy, increases the aggregate labor bill by at least 1.7 percent and aggregate hours by at least 0.7 percent two years after the shock. (JEL E21, E24, E52, G12, G51, R22, R23 )",AER,2021,112,671,"['Financial Markets', 'Labor Market Dynamics', 'Monetary Policy', 'Economic Growth', 'Public Policy']","['stock market', 'consumption', 'wealth effect', 'local labor market', 'stock wealth', 'employment', 'nontradable industries', 'tradable industries', 'monetary policy', 'labor bill']"
Efficiency and Equity Impacts of Energy Subsidies,10.1257/aer.20180441,"Economic theory suggests that energy subsidies can lead to excessive consumption and environmental degradation. However, the precise impact of energy subsidies is not well understood. We analyze a large energy subsidy: the California Alternate Rates for Energy (CARE). CARE provides a price reduction for low-income consumers of natural gas and electricity. Using a natural field experiment, we estimate the price elasticity of demand for natural gas to be about −0.35 for CARE customers. An economic model of this subsidy yields three results. First, the natural gas subsidy appears to reduce welfare. Second, the economic impact of various policies, such as cap-and-trade, depends on whether prices for various customers move closer to the marginal social cost. Third, benefits to CARE customers need to increase by 6 percent to offset the costs of the program. (JEL C93, D61, H24, L94, L95, L98, Q48)",AER,2021,141,903,"['Energy Transition', 'Environmental Sustainability', 'Public Policy', 'Economic Development', 'Consumer Behavior']","['energy subsidies', 'consumption', 'environmental degradation', 'California Alternate Rates for Energy', 'CARE', 'price elasticity of demand', 'natural gas', 'welfare', 'cap-and-trade', 'marginal social cost.']"
Cross-Region Transfer Multipliers in a Monetary Union: Evidence from Social Security and Stimulus Payments,10.1257/aer.20190240,"US federal transfers to individuals are large, countercyclical, vary geographically, and are often credited with helping to stabilize regional economies. This paper estimates the short-run effects of these transfers using plausibly exogenous regional variation in temporary stimulus payments and permanent Social Security benefit increases. States that received larger transfers tended to grow faster contemporaneously, with a multiplier of around 1.5 for permanent transfers and 1/3 for temporary transfers. Results are broadly consistent with an open-economy New Keynesian model. At business cycle frequencies, cross-region transfer multipliers are not large, suggesting only modest gains in regional stabilization from US federal automatic stabilizers. (JEL E12, E32, E62, H23, H55, R12)",AER,2021,107,790,"['Fiscal Policy', 'Economic Growth', 'Public Policy', 'Monetary Policy', 'Regional Economic Integration']","['transfers', 'individuals', 'countercyclical', 'regional', 'economies', 'stimulus payments', 'Social Security', 'multipliers', 'open-economy', 'stabilization']"
Behavioral Constraints on the Design of Subgame-Perfect Implementation Mechanisms,10.1257/aer.20170297,"We study subgame-perfect implementation (SPI) mechanisms that have been proposed as a solution to incomplete contracting problems. We show that these mechanisms, which are based on off-equilibrium arbitration clauses that impose large fines for lying and the inappropriate use of arbitration, have severe behavioral constraints because the fines induce retaliation against legitimate uses of arbitration. Incorporating reciprocity preferences into the theory explains the observed behavioral patterns and helps us develop a new mechanism that is more robust and achieves high rates of truth-telling and efficiency. Our results highlight the importance of tailoring implementation mechanisms to the underlying behavioral environment. (JEL C92, D44, D82, D86, D91)",AER,2021,105,762,"['Behavioral Economics', 'Corporate Governance', 'Economic Development', 'Public Policy', 'Regulatory Frameworks']","['subgame-perfect implementation', 'SPI mechanisms', 'incomplete contracting problems', 'off-equilibrium arbitration clauses', 'fines', 'retaliation', 'reciprocity preferences', 'behavioral patterns', 'implementation mechanisms', 'efficiency']"
Reference Points for Retirement Behavior: Evidence from German Pension Discontinuities,10.1257/aer.20191136,"This paper studies the large concentration of retirement behavior around statutory retirement ages, a puzzling stylized fact. To investigate this fact, I estimate bunching responses to 644 pension benefit discontinuities, using administrative data on the universe of German retirees. Financial incentives alone cannot explain retirement patterns, but there is a large direct effect of statutory retirement ages. I argue that the framing of statutory ages as reference points for retirement provides a plausible explanation. Simulations based on a model with reference dependence highlight that shifting statutory ages via pension reforms is an effective policy to influence retirement behavior. (JEL D91, H55, J26, J32)",AER,2021,103,719,"['Labor Market Dynamics', 'Public Policy', 'Pension Systems', 'Economic Development', 'Behavioral Economics']","['retirement behavior', 'statutory retirement ages', 'pension benefit discontinuities', 'German retirees', 'financial incentives', 'reference points', 'retirement patterns', 'statutory ages', 'reference dependence', 'pension reforms.']"
Myopia and Anchoring,10.1257/aer.20191436,"We develop an equivalence between the equilibrium effects of incomplete information and those of two behavioral distortions: myopia, or extra discounting of the future; and anchoring of current behavior to past behavior, as in models with habit persistence or adjustment costs. We show how these distortions depend on higher-order beliefs and GE mechanisms, and how they can be disciplined by evidence on expectations. We finally illustrate the use of our toolbox with a quantitative application in the context of inflation, a bridge to the HANK literature, and an extension to networks. (JEL C53, D83, D85, E12, E31, E37)",AER,2021,98,622,"['Monetary Policy', 'Behavioral Economics', 'Inflation Trends', 'Economic Development', 'Trade and Globalization']","['equilibrium effects', 'incomplete information', 'behavioral distortions', 'myopia', 'anchoring', 'habit persistence', 'adjustment costs', 'higher-order beliefs', 'GE mechanisms', 'inflation']"
Parental Resources and College Attendance: Evidence from Lottery Wins,10.1257/aer.20171272,"We examine US children whose parents won the lottery to trace out the effect of financial resources on college attendance. The analysis leverages federal tax and financial aid records and substantial variation in win size and timing. While per-dollar effects are modest, the relationship is weakly concave, with a high upper bound for amounts greatly exceeding college costs. Effects are smaller among low-SES households, not sensitive to how early in adolescence the shock occurs, and not moderated by financial aid crowd-out. The results imply that households derive consumption value from college, and household financial constraints alone do not inhibit attendance. (JEL G51, I22, I23, I24, I26, I28, J24, J31)",AER,2021,109,714,"['Public Policy', 'Educational Equity', 'Income Inequality', 'Financial Markets', 'Consumer Behavior']","['lottery', 'financial resources', 'college attendance', 'federal tax', 'financial aid', 'low-SES households', 'adolescence', 'financial constraints', 'consumption value', 'attendance']"
Impacts of Performance Pay for Hospitals: The Readmissions Reduction Program,10.1257/aer.20171825,"US policy increasingly ties payments for providers to performance on quality measures, though little empirical evidence guides the design of such incentives. I deploy administrative data to study a large federal program that penalizes hospitals with high readmissions rates. Using policy-driven variation in the penalty incentive across hospitals for identification, I find that hospital responses to the penalty account for two-thirds of the observed decrease in readmissions over this period, as well as a decrease in heart attack mortality. Quality improvement accounts for about one-half of the decrease in readmissions; the remainder is explained by selective admission of returning patients. (JEL G22, H51, I11, I12, I13, I18)",AER,2021,107,732,"['Healthcare Systems', 'Public Policy', 'Healthcare Innovation', 'Economic Development', 'Public Finance']","['penalty', 'hospitals', 'readmissions', 'quality measures', 'performance', 'incentives', 'administrative data', 'federal program', 'heart attack mortality', 'quality improvement']"
The Legacy of Colonial Medicine in Central Africa,10.1257/aer.20180284,"Between 1921 and 1956, French colonial governments organized medical campaigns to treat and prevent sleeping sickness. Villagers were forcibly examined and injected with medications with severe, sometimes fatal, side effects. We digitized 30 years of archival records to document the locations of campaign visits at a granular geographic level for five central African countries. We find that greater campaign exposure reduces vaccination rates and trust in medicine, as measured by willingness to consent to a blood test. We examine relevance for present-day health initiatives; World Bank projects in the health sector are less successful in areas with greater exposure. (JEL F54, I12, I15, I18, N37, N47, Z13)",AER,2021,107,712,"['Public Policy', 'Healthcare Systems', 'Economic Development', 'Healthcare Innovation', 'Public Health Policy']","['French colonial governments', 'medical campaigns', 'sleeping sickness', 'archival records', 'geographic level', 'central African countries', 'vaccination rates', 'trust in medicine', 'blood test', 'health initiatives']"
Risk-Based Selection in Unemployment Insurance: Evidence and Implications,10.1257/aer.20180820,"This paper studies whether adverse selection can rationalize a universal mandate for unemployment insurance (UI). Building on a unique feature of the unemployment policy in Sweden, where workers can opt for supplemental UI coverage above a minimum mandate, we provide the first direct evidence for adverse selection in UI and derive its implications for UI design. We find that the unemployment risk is more than twice as high for workers who buy supplemental coverage. Exploiting variation in risk and prices, we show how 25–30 percent of this correlation is driven by risk-based selection, with the remainder driven by moral hazard. Due to the moral hazard and despite the adverse selection we find that mandating the supplemental coverage to individuals with low willingness-to-pay would be suboptimal. We show under which conditions a design leaving choice to workers would dominate a UI system with a single mandate. In this design, using a subsidy for supplemental coverage is optimal and complementary to the use of a minimum mandate. (JEL D82, G22, J65)",AER,2021,169,1061,"['Labor Market Dynamics', 'Social Policy', 'Public Policy', 'Risk Management', 'Insurance']","['adverse selection', 'unemployment insurance', 'UI design', 'Sweden', 'supplemental coverage', 'risk-based selection', 'moral hazard', 'willingness-to-pay', 'subsidy', 'mandate']"
When Does Regulation Distort Costs? Lessons from Fuel Procurement in US Electricity Generation: Comment,10.1257/aer.20200679,"We revisit one of the results in Cicala (2015) and show that the previously estimated large and significant effects of US electricity restructuring on fuel procurement are not robust to the presence of outliers. Using methodologies from the robust statistics literature, we estimate the effect to be less than one-half of the previous estimate and not statistically different from zero. The robust methodology also identifies as outliers the plants owned by a single company whose coal contracts were renegotiated before discussions about restructuring even started. (JEL D83, O13, O33, Q16)",AER,2021,90,591,"['Energy Transition', 'Climate Change Economics', 'Economic Development', 'Regulatory Frameworks', 'Data Privacy']","['Cicala', 'results', 'US electricity restructuring', 'fuel procurement', 'outliers', 'robust statistics', 'estimate', 'statistically different', 'coal contracts', 'single company']"
When Does Regulation Distort Costs? Lessons from Fuel Procurement in US Electricity Generation: Reply,10.1257/aer.20201872,"The average effect of deregulatory policies on fuel prices at coal-fired power plants is strongly influenced by plants that were initially paying the highest prices for fuel. Primary sources document that these plants were locked into long-term, high-cost fuel contracts, and only secured market rates post-deregulation. While these plants' fuel costs were unusual, their response to deregulation was not: both coal- and gas-fired plants reduce fuel prices one-for-one with the amount they were initially paying above their neighbors' costs. Our understanding of deregulation is not improved by excluding those who stand to benefit most. (JEL L51, L71, L94, L98, Q35, Q41, Q48)",AER,2021,102,677,"['Energy Transition', 'Regulatory Frameworks', 'Economic Development', 'Climate Change Economics', 'Public Policy']","['deregulatory policies', 'fuel prices', 'coal-fired power plants', 'fuel contracts', 'market rates', 'coal-fired plants', 'gas-fired plants', ""neighbors' costs"", 'deregulation', 'benefit']"
Rank Uncertainty in Organizations,10.1257/aer.20200555,"A principal incentivizes a team of agents to work by privately offering them bonuses contingent on team success. We study the principal’s optimal incentive scheme that implements work as a unique equilibrium. This scheme leverages rank uncertainty to address strategic uncertainty. Each agent is informed only of a ranking distribution and his own bonus, the latter making work dominant provided that higher-rank agents work. If agents are symmetric, their bonuses are identical. Thus, discrimination is strictly suboptimal, in sharp contrast with the case of public contracts (Winter 2004). We characterize how agents’ ranking and compensation vary with asymmetric effort costs. (JEL D23, D62, D81, D82, D86)",AER,2021,106,709,"['Labor Market Dynamics', 'Incentive Schemes', 'Asymmetric Effort Costs', 'Compensation', 'Economic Development']","['principal', 'incentivizes', 'team', 'agents', 'bonuses', 'equilibrium', 'uncertainty', 'ranking', 'compensation', 'effort costs']"
What Motivates Paternalism? An Experimental Study,10.1257/aer.20191039,"We study experimentally when, why, and how people intervene in others’ choices. Choice Architects (CAs) construct opportunity sets containing bundles of time-indexed payments for Choosers. CAs frequently prevent impatient choices despite opportunities to provide advice, believing Choosers benefit. They violate common behavioral welfare criteria by removing impatient options even when all payoffs are delayed. CAs intervene not by removing options they wish they could resist when choosing for themselves (mistakes-projective paternalism), but rather as if they seek to align others’ choices with their own aspirations (ideals-projective paternalism). Laboratory choices predict subjects’ support for actual paternalistic policies. (JEL C92, D12, D15)",AER,2021,100,753,"['Behavioral Economics', 'Public Policy', 'Consumer Behavior', 'Economic Development', 'Laboratory Choices']","['experimentally', 'intervene', 'choices', 'Choice Architects', 'opportunity sets', 'payments', 'impatient choices', 'advice', 'behavioral welfare criteria', 'paternalism']"
"Social Media, News Consumption, and Polarization: Evidence from a Field Experiment",10.1257/aer.20191777,"Does the consumption of ideologically congruent news on social media exacerbate polarization? I estimate the effects of social media news exposure by conducting a large field experiment randomly offering participants subscriptions to conservative or liberal news outlets on Facebook. I collect data on the causal chain of media effects: subscriptions to outlets, exposure to news on Facebook, visits to online news sites, and sharing of posts, as well as changes in political opinions and attitudes. Four main findings emerge. First, random variation in exposure to news on social media substantially affects the slant of news sites that individuals visit. Second, exposure to counter-attitudinal news decreases negative attitudes toward the opposing political party. Third, in contrast to the effect on attitudes, I find no evidence that the political leanings of news outlets affect political opinions. Fourth, Facebook’s algorithm is less likely to supply individuals with posts from counter-attitudinal outlets, conditional on individuals subscribing to them. Together, the results suggest that social media algorithms may limit exposure to counter-attitudinal news and thus increase polarization. (JEL C93, D72, L82)",AER,2021,176,1221,"['Social Policy', 'Political Risk', 'Social Media', 'Media Effects', 'Public Policy']","['social media', 'news exposure', 'field experiment', 'political opinions', 'attitudes', 'news outlets', 'Facebook', 'polarization', 'algorithms', 'counter-attitudinal']"
Knowledge Spillovers and Corporate Investment in Scientific Research,10.1257/aer.20171742,"Using data on 800,000 corporate publications and patent citations to these publications between 1980 and 2015, we study how corporate investment in research is linked to its use in the firm’s inventions, and to spillovers to rivals. We find that private returns to corporate research depend on the balance between two opposing forces: the benefits from the use of science in own downstream inventions, and the costs of spillovers to rivals. Consistent with this, firms produce more research when it is used internally, but less research when it is used by rivals. As firms become more sensitive to rivals using their science, they are likely to reduce the share of research in R&D. (JEL D22, D25, G31, I23, O31, O33, O34)",AER,2021,121,725,"['Innovation', 'Corporate Governance', 'Economic Growth', 'Technological Adoption', 'Research and Development']","['corporate publications', 'patent citations', 'corporate investment', 'research', 'inventions', 'spillovers', 'rivals', 'internal use', 'R&D', 'science']"
Job Displacement Insurance and (the Lack of) Consumption-Smoothing,10.1257/aer.20190388,"We study the spending profile of workers who experience both a positive transitory income shock (lump-sum severance pay) and a negative permanent income shock (layoff). Using de-identified expenditure and employment data from Brazil, we show that workers increase spending at layoff by 35 percent despite experiencing a 14 percent long-term loss. We find high sensitivity of spending to cash-on-hand across consumption categories and for several sources of variation, including predictable income drops. A model with present-biased workers can rationalize our findings, and highlights the importance of the timing of benefit disbursement for the consumption-smoothing gains of job displacement insurance policies. (JEL D12, G51, J65, J63, O12)",AER,2021,106,743,"['Labor Market Dynamics', 'Consumer Behavior', 'Public Policy', 'Economic Development', 'Income Inequality']","['spending', 'income shock', 'layoff', 'consumption', 'cash-on-hand', 'present-biased', 'benefit disbursement', 'consumption-smoothing', 'job displacement insurance policies', 'Brazil']"
The Efficiency of Race-Neutral Alternatives to Race-Based Affirmative Action: Evidence from Chicago's Exam Schools,10.1257/aer.20161290,"Several K-12 and university systems have adopted race-neutral affirmative action in place of race-based alternatives. This paper explores whether these plans are effective substitutes for racial quotas in Chicago Public Schools (CPS), which now employs a race-neutral, place-based affirmative action system at its selective exam high schools. The CPS plan is ineffective compared to plans that explicitly consider race: about three-quarters of the reduction in average entrance scores at the top schools could have been avoided with the same level of racial diversity. Moreover, the CPS plan is less effective at adding low-income students than was the previous system of racial quotas. We develop a theoretical framework that motivates quantifying the inefficiency of race-neutral policies based on the distortion in student preparedness they create for a given level of diversity and use it to evaluate several alternatives. The CPS plan can be improved in several ways, but no race-neutral policy restores minority representation to prior levels without substantially greater distortions, implying significant efficiency costs from prohibitions on the explicit use of race. (JEL H75, I21, I28, J15)",AER,2021,177,1201,"['Educational Equity', 'Public Policy', 'Economic Development', 'Social Policy', 'Labor Market Dynamics']","['race-neutral', 'affirmative action', 'racial quotas', 'Chicago Public Schools', 'selective exam high schools', 'diversity', 'low-income students', 'inefficiency', 'student preparedness', 'minority representation']"
The Abolition of Immigration Restrictions and the Performance of Firms and Workers: Evidence from Switzerland,10.1257/aer.20181779,"We study a reform that granted European cross-border workers free access to the Swiss labor market and had a stronger effect on regions close to the border. The greater availability of cross-border workers increased foreign employment substantially. Although many cross-border workers were highly educated, wages of highly educated natives increased. The reason is a simultaneous increase in labor demand: the reform increased the size, productivity, and innovation performance of skill-intensive incumbent firms and attracted new firms, creating opportunities for natives to pursue managerial jobs. These effects are mainly driven by firms that reported skill shortages before the reform. (JEL J15, J23, J24, J31, J61, K37)",AER,2021,105,724,"['Labor Market Dynamics', 'Innovation', 'Trade and Globalization', 'Corporate Governance', 'Economic Development']","['European', 'cross-border workers', 'Swiss labor market', 'foreign employment', 'highly educated', 'wages', 'labor demand', 'productivity', 'innovation performance', 'skill shortages.']"
The Financial Transmission of Housing Booms: Evidence from Spain,10.1257/aer.20191410,"How does a housing boom affect credit to non-housing firms? Using bank, firm, and loan-level microdata, we show that the Spanish housing boom reduced non-housing credit growth during its first years, but stimulated it later on. These patterns can be rationalized by financial constraints for banks. Constrained banks initially accommodated higher housing credit demand by reducing non-housing credit. Eventually, however, the housing boom increased bank net worth and expanded credit supply. A quantitative model, disciplined by our cross-sectional estimates, indicates that the crowding-out effect was substantial but temporary, and had been fully absorbed by the end of the boom. (JEL E32, E44, G21, R21, R31)",AER,2021,105,711,"['Financial Markets', 'Credit Markets', 'Housing Market Trends', 'Banking Systems', 'Monetary Policy']","['housing boom', 'credit', 'non-housing firms', 'bank', 'firm', 'loan-level microdata', 'Spanish', 'financial constraints', 'net worth', 'quantitative model']"
Employer Consolidation and Wages: Evidence from Hospitals,10.1257/aer.20190690,"We test whether wage growth slows following employer consolidation by examining hospital mergers. We find evidence of reduced wage growth in cases where both (i) the increase in concentration induced by the merger is large and (ii) workers’ skills are industry-specific. In all other cases, we fail to reject zero wage effects. We consider alternative explanations and find that the observed patterns are unlikely to be explained by merger-related changes besides labor market power. Wage growth slowdowns are attenuated in markets with strong labor unions, and wage growth does not decline after out-of-market mergers that leave local employer concentration unchanged. (JEL G34, I11, J22, J24, J31, J42, R32)",AER,2021,108,709,"['Labor Market Dynamics', 'Healthcare Systems', 'Corporate Governance', 'Public Policy', 'J24']","['wage growth', 'employer consolidation', 'hospital mergers', 'concentration', 'labor market power', 'industry-specific skills', 'labor unions', 'out-of-market mergers', 'local employer concentration', 'wage effects']"
Aggregate Nominal Wage Adjustments: New Evidence from Administrative Payroll Data,10.1257/aer.20190318,"Using administrative payroll data from the largest US payroll processing company, we measure the extent of nominal wage rigidity in the United States. The data allow us to define a worker’s per-period base contract wage separately from other forms of compensation such as overtime premiums and bonuses. We provide evidence that firms use base wages to cyclically adjust the marginal cost of their workers. Nominal base wage declines are much rarer than previously thought with only 2 percent of job-stayers receiving a nominal base wage cut during a given year. Approximately 35 percent of workers receive no base wage change year over year. We document strong evidence of both time and state dependence in nominal base wage adjustments. In addition, we provide evidence that the flexibility of new hire base wages is similar to that of existing workers. Collectively, our results can be used to discipline models of nominal wage rigidity. (JEL E24, E32, J31, J41)",AER,2021,156,964,"['Labor Market Dynamics', 'Monetary Policy', 'Economic Development', 'Wage Inequality', 'Business Strategy']","['nominal wage rigidity', 'base wage', 'compensation', 'overtime premiums', 'bonuses', 'marginal cost', 'job-stayers', 'wage cut', 'new hire', 'wage adjustments']"
"Leadership in Social Movements: Evidence from the ""Forty-Eighters"" in the Civil War",10.1257/aer.20191137,"This paper studies the role of leaders in the social movement against slavery that culminated in the US Civil War. Our analysis is organized around a natural experiment: leaders of the failed German revolution of 1848–1849 were expelled to the United States and became antislavery campaigners who helped mobilize Union Army volunteers. Towns where Forty-Eighters settled show two-thirds higher Union Army enlistments. Their influence worked through local newspapers and social clubs. Going beyond enlistment decisions, Forty-Eighters reduced their companies’ desertion rate during the war. In the long run, Forty-Eighter towns were more likely to form a local chapter of the NAACP. (JEL D74, J15, J45, J61, N31, N41)",AER,2021,108,716,"['Public Policy', 'Labor Market Dynamics', 'Economic Development', 'Social Policy', 'Trade and Globalization']","['leaders', 'social movement', 'slavery', 'US Civil War', 'German revolution', 'Union Army', 'volunteers', 'enlistments', 'newspapers', 'NAACP']"
Intertemporal Labor Supply Substitution? Evidence from the Swiss Income Tax Holidays,10.1257/aer.20180746,"This paper estimates intertemporal labor supply responses to two-year long income tax holidays staggered across Swiss cantons. Cantons shifted from an income tax system based on the previous two years’ income to a standard annual pay as you earn system, leaving two years of income untaxed. We find significant but quantitatively very small responses of wage earnings with an intertemporal elasticity of 0.025 overall. High wage income earners and especially the self-employed display larger responses with elasticities around 0.1 and 0.25, respectively, most likely driven by tax avoidance. We find no effects along the extensive margin at all. (JEL H24, H26, J22, J23, J31, R23)",AER,2021,105,680,"['Taxation', 'Labor Market Dynamics', 'Income Inequality', 'Public Policy', 'Fiscal Policy']","['income tax holidays', 'labor supply responses', 'Swiss cantons', 'income tax system', 'wage earnings', 'intertemporal elasticity', 'high wage income earners', 'self-employed', 'tax avoidance', 'extensive margin']"
The Nature of Firm Growth,10.1257/aer.20190748,"About one-half of all startups fail within five years, and those that survive grow at vastly different speeds. Using Census microdata, we estimate that most of these differences are determined by ex ante heterogeneity rather than persistent ex post shocks. Embedding such heterogeneity in a firm dynamics model shows that the presence of ex ante heterogeneity (i) is a key determinant of the firm size distribution and firm dynamics, (ii) can strongly affect the macroeconomic effects of firm-level frictions, and (iii) helps understand the recently documented decline in business dynamism by showing a disappearance of high-growth startups (“gazelles”) since the mid-1980s. (JEL D22, D24, E24, J23, L11, M13)",AER,2021,108,709,"['Entrepreneurship', 'Economic Growth', 'Firm Dynamics', 'Business Dynamism', 'Startups and Innovation']","['startups', 'fail', 'survive', 'heterogeneity', 'firm dynamics', 'firm size distribution', 'macroeconomic effects', 'frictions', 'business dynamism', 'high-growth startups']"
Intergenerational Mobility of Immigrants in the United States over Two Centuries,10.1257/aer.20191586,"Using millions of father-son pairs spanning more than 100 years of US history, we find that children of immigrants from nearly every sending country have higher rates of upward mobility than children of the US-born. Immigrants’ advantage is similar historically and today despite dramatic shifts in sending countries and US immigration policy. Immigrants achieve this advantage in part by choosing to settle in locations that offer better prospects for their children. (JEL J15, J18, J62, K37, N31, N32)",AER,2021,78,503,"['Immigration and Labor', 'Economic Development', 'Public Policy', 'Labor Market Dynamics', 'Social Policy']","['father-son pairs', 'upward mobility', 'immigrants', 'sending country', 'US-born', 'US history', 'immigration policy', 'settlement locations', 'prospects', 'advantage']"
Speculative Fever: Investor Contagion in the Housing Bubble,10.1257/aer.20171611,"Historical anecdotes abound of new investors being drawn into a booming asset market, only to suffer when the market turns. While the role of investor contagion in asset bubbles has been explored extensively in the theoretical literature, causal empirical evidence on the topic is much rarer. This paper studies the recent boom and bust in the US housing market and establishes that many novice investors entered the market as a direct result of observing investing activity of multiple forms in their own neighborhoods and that “infected” investors performed poorly relative to other investors along several dimensions. (JEL D84, G12, G51, R31)",AER,2021,101,645,"['Financial Markets', 'Housing Market Trends', 'Investment Strategies', 'Behavioral Economics', 'Market Transparency']","['investors', 'asset market', 'investor contagion', 'asset bubbles', 'empirical evidence', 'US housing market', 'novice investors', 'investing activity', 'neighborhoods', 'infected investors']"
Exchange Rates and Prices: Evidence from the 2015 Swiss Franc Appreciation,10.1257/aer.20181415,"We dissect the impact of a large and sudden exchange rate appreciation on Swiss border import prices, retail prices, and consumer expenditures on domestic and imported nondurable goods, following the removal of the EUR/CHF floor in January 2015. Cross-sectional variation in border price changes by currency of invoicing carries over to consumer prices and allocations, impacting retail prices of imports and competing domestic goods, as well as import expenditures. We provide measures of the sensitivity of retail import prices to border prices and the sensitivity of import shares to relative prices, which is higher when using retail prices than border prices. (JEL E21, E31, F14, F31, L11)",AER,2021,107,694,"['Trade and Globalization', 'Monetary Policy', 'Consumer Behavior', 'Retail Prices', 'Import Expenditures']","['exchange rate appreciation', 'Swiss', 'import prices', 'retail prices', 'consumer expenditures', 'EUR/CHF floor', 'border price changes', 'currency invoicing', 'retail import prices', 'import shares']"
Testing the Waters: Behavior across Participant Pools,10.1257/aer.20181065,"We leverage a large-scale incentivized survey eliciting behaviors from (almost) an entire undergraduate university student population, a representative sample of the US population, and Amazon Mechanical Turk (MTurk) to address concerns about the external validity of experiments with student participants. Behavior in the student population offers bounds on behaviors in other populations, and correlations between behaviors are similar across samples. Furthermore, non-student samples exhibit higher levels of noise. Adding historical lab participation data, we find a small set of attributes over which lab participants differ from non-lab participants. An additional set of lab experiments shows no evidence of observer effects. (JEL C83, D90, D91)",AER,2021,104,751,"['Labor Market Dynamics', 'Behavioral Economics', 'Data Privacy', 'Economic Development', 'Educational Equity']","['large-scale', 'survey', 'undergraduate', 'university student', 'US population', 'Amazon Mechanical Turk', 'external validity', 'experiments', 'lab participation', 'observer effects']"
A Theory of Chosen Preferences,10.1257/aer.20190390,"We propose and develop a dynamic theory of endogenous preference formation in which people adopt worldviews that shape their judgments about their experiences. The framework highlights the role of mindset flexibility, a trait that determines the relative weights the decision-maker places on her current and anticipated worldviews when evaluating future outcomes. The theory generates rich behavioral dynamics, thereby illuminating a wide range of applications and providing potential explanations for a variety of observed phenomena. (JEL D11, D81, D91, Z13)",AER,2021,79,559,"['Behavioral Economics', 'Economic Development', 'Consumer Behavior', 'Public Policy', 'Social Policy']","['dynamic theory', 'endogenous preference formation', 'worldviews', 'judgment', 'mindset flexibility', 'decision-maker', 'future outcomes', 'behavioral dynamics', 'applications', 'observed phenomena']"
Going Negative at the Zero Lower Bound: The Effects of Negative Nominal Interest Rates,10.1257/aer.20190848,"After the Great Recession several central banks started setting negative nominal interest rates in an expansionary attempt, but the effectiveness of this measure remains unclear. Negative rates can stimulate the economy by lowering the rates that commercial banks charge on loans, but they can also erode bank profitability by squeezing deposit spreads. This paper studies the effects of negative rates in a new DSGE model where banks intermediate the transmission of monetary policy. I use bank-level data to calibrate the model and find that monetary policy in negative territory is between 60 and 90 percent as effective as in positive territory. (JEL E12, E32, E43, E52, E58, G21)",AER,2021,108,684,"['Monetary Policy', 'Banking Systems', 'Economic Development', 'Financial Markets', 'Fiscal Policy']","['central banks', 'negative nominal interest rates', 'expansionary', 'effectiveness', 'stimulate the economy', 'commercial banks', 'bank profitability', 'DSGE model', 'monetary policy', 'bank-level data']"
Mobilizing the Masses for Genocide,10.1257/aer.20160999,"Do political elites use armed groups to foster civilian participation in genocidal violence? Are armed groups employed strategically? How do they mobilize civilians? I investigate these questions using data from the Rwandan Genocide. To establish causality, I exploit exogenous variation in armed groups’ transport costs induced by weather fluctuations: the shortest distance of each village to the main road interacted with rainfall along the dirt tracks between main road and village. I find (i) 1 additional armed-group member resulted in 7.3 more civilian perpetrators; (ii) armed-group leaders employed their men strategically; and (iii) armed groups invoked civilians’ obedience. (JEL D72, D74, O17, Q54)",AER,2021,103,710,"['Political Risk', 'Armed Groups', 'Genocide', 'Civilian Participation', 'Data Analysis']","['political elites', 'armed groups', 'civilian participation', 'genocidal violence', 'mobilize civilians', 'Rwandan Genocide', 'causality', 'armed-group leaders', 'civilian perpetrators', 'obedience']"
"Equilibrium Technology Diffusion, Trade, and Growth",10.1257/aer.20151645,"We study how opening to trade affects economic growth in a model where heterogeneous firms can adopt new technologies already in use by other firms in their home country. We characterize the growth rate using a summary statistic of the profit distribution: the mean-min ratio. Opening to trade increases the profit spread through increased export opportunities and foreign competition, induces more rapid technology adoption, and generates faster growth. Quantitatively, these forces produce large welfare gains from trade by increasing an inefficiently low rate of technology adoption and economic growth. (JEL D21, D24, F14, F43, O33)",AER,2021,95,636,"['Trade and Globalization', 'Technological Adoption', 'Economic Growth', 'Public Policy', 'Innovation']","['trade', 'economic growth', 'firms', 'technologies', 'technology adoption', 'export opportunities', 'foreign competition', 'growth rate', 'welfare gains', 'technology adoption']"
The Distributional Consequences of Public School Choice,10.1257/aer.20151147,"School choice systems aspire to delink residential location and school assignments by allowing children to apply to schools outside of their neighborhood. However, choice programs also affect incentives to live in certain neighborhoods, and this feedback may undermine the goals of choice. We investigate this possibility by developing a model of public school and residential choice. School choice narrows the range between the highest and lowest quality schools compared to neighborhood assignment rules, and these changes in school quality are capitalized into equilibrium housing prices. This compressed distribution generates an ends-against-the-middle trade-off with school choice compared to neighborhood assignment. Paradoxically, even when choice results in improvement in the lowest-performing schools, the lowest type residents need not benefit. (JEL H75, I21, I28, R23, R31)",AER,2021,123,886,"['Educational Equity', 'Housing Market Trends', 'Public Policy', 'Economic Development', 'Urban Development']","['school choice', 'residential location', 'neighborhood assignment', 'incentives', 'neighborhoods', 'public school', 'housing prices', 'trade-off', 'lowest-performing schools', 'residents']"
Politically Feasible Reforms of Nonlinear Tax Systems,10.1257/aer.20190021,"We study reforms of nonlinear income tax systems from a political economy perspective. We present a median voter theorem for monotonic tax reforms, reforms so that the change in the tax burden is a monotonic function of income. We also provide an empirical analysis of tax reforms, with a focus on the United States. We show that past reforms have, by and large, been monotonic. We also show that support by the median voter was aligned with majority support in the population. Finally, we develop sufficient statistics that enable to test whether a given tax system admits a politically feasible reform. (JEL D72, H21, H24)",AER,2021,105,624,"['Public Policy', 'Taxation', 'Political Risk', 'Economic Development', 'Empirical Analysis']","['nonlinear income tax systems', 'political economy', 'reforms', 'median voter theorem', 'monotonic tax reforms', 'empirical analysis', 'United States', 'majority support', 'sufficient statistics', 'politically feasible reform']"
Asymmetric Consumption Smoothing,10.1257/aer.20181735,"Analyzing account-level data from an account aggregator, we find that households increase consumption when they receive expected tax refunds, as if they face liquidity constraints. However, these same households smooth consumption when making payments in other years, primarily by transferring funds among liquid accounts. Even households carrying credit card debt smooth consumption when making payments, and even highly liquid households spend out of refunds. This behavior is inconsistent with pure liquidity constraints or hand-to-mouth behavior and is most consistent with a mental accounting life-cycle model. (JEL D12, E21, G51, H24, H31)",AER,2021,91,645,"['Consumer Behavior', 'Credit Markets', 'Monetary Policy', 'Taxation', 'Behavioral Economics']","['liquidity constraints', 'consumption', 'account aggregator', 'tax refunds', 'households', 'payments', 'funds', 'credit card debt', 'mental accounting', 'life-cycle model']"
Lack of Selection and Limits to Delegation: Firm Dynamics in Developing Countries,10.1257/aer.20180555,"Delegating managerial tasks is essential for firm growth. Most firms in developing countries, however, do not hire outside managers but instead rely on family members. In this paper, we ask if this lack of managerial delegation can explain why firms in poor countries are small and whether it has important aggregate consequences. We construct a model of firm growth where entrepreneurs have a fixed time endowment to run their daily operations. As firms grow large, the need to hire outside managers increases. Firms’ willingness to expand therefore depends on the ease with which delegation can take place. We calibrate the model to plant-level data from the United States and India. We identify the key parameters of our theory by targeting the experimental evidence on the effect of managerial practices on firm performance from Bloom et al. (2013). We find that inefficiencies in the delegation environment account for 11 percent of the income per capita difference between the United States and India. They also contribute to the small size of Indian producers, but would cause substantially more harm for US firms. The reason is that US firms are larger on average and managerial delegation is especially valuable for large firms, thus making delegation efficiency and other factors affecting firm growth complements. (JEL D22, G32, L25, L26, O14)",AER,2021,216,1354,"['Entrepreneurship', 'Economic Growth', 'Corporate Governance', 'Economic Development', 'Trade and Globalization']","['managerial tasks', 'firm growth', 'developing countries', 'family members', 'managerial delegation', 'poor countries', 'firm size', 'delegation environment', 'income per capita', 'firm performance']"
Using Models to Persuade,10.1257/aer.20191074,"We present a framework where “model persuaders” influence receivers’ beliefs by proposing models that organize past data to make predictions. Receivers are assumed to find models more compelling when they better explain the data, fixing receivers’ prior beliefs. Model persuaders face a trade-off: better-fitting models induce less movement in receivers’ beliefs. Consequently, a receiver exposed to the true model can be most misled by persuasion when that model fits poorly, competition between persuaders tends to neutralize the data by pushing toward better-fitting models, and a persuader facing multiple receivers is more effective when he can send tailored, private messages. (JEL C50, D82, D83)",AER,2021,103,702,"['Economic Development', 'Behavioral Economics', 'Market Transparency', 'Machine Learning Applications', 'Public Policy']","['model persuaders', 'beliefs', 'data', 'predictions', 'receivers', 'persuasion', 'competition', 'fitting models', 'private messages', 'framework']"
"Job Seekers' Perceptions and Employment Prospects: Heterogeneity, Duration Dependence, and Bias",10.1257/aer.20190808,"This paper uses job seekers’ elicited beliefs about job finding to disentangle the sources of the decline in job-finding rates by duration of unemployment. We document that beliefs have strong predictive power for job finding, but are not revised downward when remaining unemployed and are subject to optimistic bias, especially for the long-term unemployed. Leveraging the predictive power of beliefs, we find substantial heterogeneity in job finding with the resulting dynamic selection explaining most of the observed negative duration dependence in job finding. Moreover, job seekers’ beliefs underreact to heterogeneity in job finding, distorting search behavior and increasing long-term unemployment. (JEL D83, E24, J22, J64, J65)",AER,2021,106,736,"['Labor Market Dynamics', 'Economic Development', 'Unemployment', 'Behavioral Economics', 'Job Search']","['job finding', 'beliefs', 'unemployment', 'predictive power', 'heterogeneity', 'duration dependence', 'search behavior', 'long-term unemployed', 'underreact', 'job seekers']"
"Lumpy Investment, Business Cycles, and Stimulus Policy",10.1257/aer.20161723,"I study the aggregate implications of micro-level lumpy investment in a model consistent with the empirical dynamics of the real interest rate. The elasticity of aggregate investment with respect to shocks is procyclical because more firms are likely to make an extensive margin investment in expansions than in recessions. Matching the dynamics of the real interest rate is key to generating this result because it disciplines the interest-elasticity of investment and avoids counterfactual behavior of the model that would otherwise eliminate most of the procyclical responsiveness. Therefore, data on interest rates place important discipline in aggregating micro-level investment behavior. (JEL D25, E13, E22, E23, E43, G31, H25)",AER,2021,107,733,"['Monetary Policy', 'Investment Strategies', 'Financial Markets', 'Economic Growth', 'Data Privacy']","['aggregate investment', 'lumpy investment', 'real interest rate', 'elasticity', 'shocks', 'extensive margin', 'expansions', 'recessions', 'interest rates', 'micro-level investment behavior']"
Competition and Entry in Agricultural Markets: Experimental Evidence from Kenya,10.1257/aer.20171397,"African agricultural markets are characterized by low farmer revenues and high consumer food prices. Many have worried that this wedge is partially driven by imperfect competition among intermediaries. This paper provides experimental evidence from Kenya on intermediary market structure. Randomized cost shocks and demand subsidies are used to identify a structural model of market competition. Estimates reveal that traders act consistently with joint profit maximization and earn median markups of 39 percent. Exogenously induced firm entry has negligible effects on prices, and low take-up of subsidized entry offers implies large fixed costs. We estimate that traders capture 82 percent of total surplus. (JEL L13, O13, Q11, Q12, Q13)",AER,2020,108,739,"['Market Transparency', 'Economic Development', 'Trade and Globalization', 'Consumer Behavior', 'Agricultural Economics']","['agricultural markets', 'farmer revenues', 'consumer food prices', 'imperfect competition', 'intermediaries', 'Kenya', 'market structure', 'cost shocks', 'demand subsidies', 'markups']"
Discounts and Deadlines in Consumer Search,10.1257/aer.20190460,"We present a new equilibrium search model where consumers initially search among discount opportunities, but are willing to pay more as a deadline approaches, eventually turning to full-price sellers. The model predicts equilibrium price dispersion and rationalizes discount and full-price sellers coexisting without relying on ex ante heterogeneity. We apply the model to online retail sales via auctions and posted prices, where failed attempts to purchase reveal consumers' reservation prices. We find robust evidence supporting the theory. We quantify dynamic search frictions arising from deadlines and show how, with deadline-constrained buyers, seemingly neutral platform fee increases can cause large market shifts. (JEL D11, D44, D83, L81)",AER,2020,106,748,"['Consumer Behavior', 'Online Retail Sales', 'Auctions', 'Market Dynamics', 'Digital Transformation']","['equilibrium search model', 'discount opportunities', 'deadline', 'full-price sellers', 'online retail sales', 'auctions', 'posted prices', 'reservation prices', 'dynamic search frictions', 'platform fee']"
A Model of Competing Narratives,10.1257/aer.20191099,"We formalize the argument that political disagreements can be traced to a “clash of narratives.” Drawing on the “Bayesian Networks” literature, we represent a narrative by a causal model that maps actions into consequences, weaving a selection of other random variables into the story. Narratives generate beliefs by interpreting long-run correlations between these variables. An equilibrium is defined as a probability distribution over narrative-policy pairs that maximize a representative agent's anticipatory utility, capturing the idea that people are drawn to hopeful narratives. Our equilibrium analysis sheds light on the structure of prevailing narratives, the variables they involve, the policies they sustain, and their contribution to political polarization. (JEL D72, D83, D85, F52)",AER,2020,112,795,"['Political Risk', 'Behavioral Economics', 'Public Policy', 'Economic Development', 'Income Inequality']","['political disagreements', 'narratives', 'Bayesian Networks', 'causal model', 'actions', 'consequences', 'random variables', 'beliefs', 'equilibrium analysis', 'political polarization']"
A Few Bad Apples Spoil the Barrel: An Anti-folk Theorem for Anonymous Repeated Games with Incomplete Information,10.1257/aer.20200068,"We study anonymous repeated games where players may be “commitment types” who always take the same action. We establish a stark anti-folk theorem: if the distribution of the number of commitment types satisfies a smoothness condition and the game has a “pairwise dominant” action, this action is almost always taken. This implies that cooperation is impossible in the repeated prisoner's dilemma with anonymous random matching. We also bound equilibrium payoffs for general games. Our bound implies that industry profits converge to zero in linear-demand Cournot oligopoly as the number of firms increases. (JEL C72, C73, D83)",AER,2020,96,626,"['Game Theory', 'Industrial Organization', 'Market Structure', 'Oligopoly Theory', 'Cournot Competition']","['anonymous repeated games', 'commitment types', 'anti-folk theorem', 'cooperation', ""repeated prisoner's dilemma"", 'random matching', 'equilibrium payoffs', 'general games', 'industry profits', 'Cournot oligopoly']"
Screening and Selection: The Case of Mammograms,10.1257/aer.20191191,"We analyze selection into screening in the context of recommendations that breast cancer screening start at age 40. Combining medical claims with a clinical oncology model, we document that compliers with the recommendation are less likely to have cancer than younger women who select into screening or women who never screen. We show this selection is quantitatively important: shifting the recommendation from age 40 to 45 results in three times as many deaths if compliers were randomly selected than under the estimated patterns of selection. The results highlight the importance of considering characteristics of compliers when making and designing recommendations. (JEL I12, I18, J16)",AER,2020,104,690,"['Healthcare Systems', 'Public Policy', 'Healthcare Innovation', 'Economic Development', 'Social Policy']","['selection', 'screening', 'breast cancer', 'age 40', 'medical claims', 'clinical oncology model', 'compliers', 'women', 'deaths', 'recommendations']"
Missing Events in Event Studies: Identifying the Effects of Partially Measured News Surprises,10.1257/aer.20181470,"Macroeconomic news announcements are elaborate and multidimensional. We consider a framework in which jumps in asset prices around announcements reflect both the response to observed surprises in headline numbers and to latent factors, reflecting other news in the release. Non-headline news, for which there are no expectations surveys, is unobservable to the econometrician but nonetheless elicits a market response. We estimate the model by the Kalman filter, which efficiently combines OLS and heteroskedasticity-based event study estimators in one step. With the inclusion of a single latent surprise factor, essentially all yield curve variance in event windows are explained by news. (JEL C51, E43, E52, G12, G14)",AER,2020,106,720,"['Financial Markets', 'Macroeconomic News', 'Asset Prices', 'Econometrician', 'Event Study']","['Macroeconomic news', 'announcements', 'asset prices', 'jumps', 'headline numbers', 'latent factors', 'non-headline news', 'econometrician', 'Kalman filter', 'yield curve.']"
What Makes a Rule Complex?,10.1257/aer.20191717,"We study the complexity of rules by paying experimental subjects to implement a series of algorithms and then eliciting their willingness-to-pay to avoid implementing them again in the future. The design allows us to examine hypotheses from the theoretical “automata” literature about the characteristics of rules that generate complexity costs. We find substantial aversion to complexity and a number of regularities in the characteristics of rules that make them complex and costly for subjects. Experience with a rule, the way a rule is represented, and the context in which a rule is implemented (mentally versus physically) also influence complexity. (JEL C73, D11, D12, D83, D91)",AER,2020,105,685,"['Economic Development', 'Behavioral Economics', 'Consumer Behavior', 'Regulatory Frameworks', 'Technological Adoption']","['complexity', 'rules', 'experimental subjects', 'algorithms', 'willingness-to-pay', 'automata', 'characteristics', 'aversion', 'regularities', 'context']"
Changing Business Dynamism and Productivity: Shocks versus Responsiveness,10.1257/aer.20190680,"The pace of job reallocation has declined in the United States in recent decades. We draw insight from canonical models of business dynamics in which reallocation can decline due to (i ) lower dis persion of idiosyncratic shocks faced by businesses, or (ii ) weaker marginal responsiveness of businesses to shocks. We show that shock dispersion has actually risen, while the responsiveness of business-level employment to productivity has weakened. Moreover, declining responsiveness can account for a significant fraction of the decline in the pace of job reallocation, and we find suggestive evidence this has been a drag on aggregate productivity. (JEL D24, E24, E32, J21, J23, J24, L60)",AER,2020,108,690,"['Labor Market Dynamics', 'Economic Growth', 'Productivity', 'Public Policy', 'Monetary Policy']","['job reallocation', 'United States', 'business dynamics', 'shock dispersion', 'responsiveness', 'employment', 'productivity', 'aggregate productivity', 'canonical models', 'idiosyncratic shocks']"
Detecting Potential Overbilling in Medicare Reimbursement via Hours Worked: Comment,10.1257/aer.20180812,"Fang and Gong (2017) develop a procedure to detect potential over-billing of Medicare by physicians. In their empirical analysis, they use aggregated claims data that can overstate the number of services performed due to features of Medicare billing. In this comment, I show how auditors can use detailed claims-level data to better target improper overbilling. (JEL H51, I13, I18, J22, J44)",AER,2020,61,391,"['Healthcare Systems', 'Public Policy', 'Economic Development', 'Regulatory Frameworks', 'Data Privacy']","['procedure', 'detect', 'potential', 'over-billing', 'Medicare', 'physicians', 'aggregated claims data', 'auditors', 'detailed claims-level data', 'overbilling']"
Detecting Potential Overbilling in Medicare Reimbursement via Hours Worked: Reply,10.1257/aer.20191970,"Matsumoto (2020) pointed out data and coding errors in Fang and Gong (2017). We show that these errors have limited impacts: all qualitative findings remain after correcting them. Matsumoto also discussed potential service overcounting in the aggregated utilization data we used to illustrate our method, and then quantified the extent of overcounting with a sample of Medicare claims. We acknowledge the issue but discuss the noise and the bias in his quantification. Overall, our proposed method remains useful, as regulators who are interested in applying the method are unlikely to be subject to the data limitations. (JEL H51, I13, I18, J22, J44)",AER,2020,102,651,"['Public Policy', 'Healthcare Systems', 'Regulatory Frameworks', 'Data Privacy', 'Economic Development']","['Matsumoto', 'data errors', 'coding errors', 'qualitative findings', 'service overcounting', 'aggregated utilization data', 'Medicare claims', 'bias', 'proposed method', 'regulators']"
"Seasonal Liquidity, Rural Labor Markets, and Agricultural Production",10.1257/aer.20180607,"Rural economies in many developing countries are characterized by a lean season in the months preceding harvest, when farmers have depleted their cash and grain savings from the previous year. To identify the impacts of liquidity during the lean season, we offered subsidized loans in randomly selected villages in rural Zambia. Ninety-eight percent of households took up the loan. Loan eligibility led to increases in on-farm labor and agricultural output, driving up wages in local labor markets. Larger effects for poorer households suggest that liquidity constraints contribute to inequality in rural economies. (JEL O13, O15, O18, Q11, Q12, R23)",AER,2020,99,650,"['Financial Markets', 'Labor Market Dynamics', 'Income Inequality', 'Economic Development', 'Credit Markets']","['liquidity', 'lean season', 'rural economies', 'subsidized loans', 'Zambia', 'on-farm labor', 'agricultural output', 'wages', 'inequality', 'households']"
Arrival of Young Talent: The Send-Down Movement and Rural Education in China,10.1257/aer.20191414,"This paper estimates the effects on rural education of the send-down movement during the Cultural Revolution, when about 16 million urban youth were mandated to resettle in the countryside. Using a county-level dataset compiled from local gazetteers and population censuses, we show that greater exposure to the sent-down youths significantly increased rural children’s educational achievement. This positive effect diminished after the urban youth left the countryside in the late 1970s but never disappeared. Rural children who interacted with the sent-down youths were also more likely to pursue more-skilled occupations, marry later, and have smaller families than those who did not. (JEL I21, J13, J24, N35, O15, P36, R23)",AER,2020,108,727,"['Educational Equity', 'Labor Market Dynamics', 'Economic Development', 'Social Policy', 'Public Policy']","['rural education', 'send-down movement', 'Cultural Revolution', 'urban youth', 'countryside', 'educational achievement', 'skilled occupations', 'marriage', 'family size', 'dataset']"
Does Information Break the Political Resource Curse? Experimental Evidence from Mozambique,10.1257/aer.20190842,"Natural resources can have a negative impact on the economy through corruption and civil conflict. This paper tests whether information can counteract this political resource curse. We implement a large-scale field experiment following the dissemination of information about a substantial natural gas discovery in Mozambique. We measure outcomes related to the behavior of citizens and local leaders through georeferenced conflict data, behavioral activities, lab-in-the-field experiments, and surveys. We find that information targeting citizens and their involvement in public deliberations increases local mobilization and decreases violence. By contrast, when information reaches only local leaders, it increases elite capture and rent-seeking. (JEL C73, D72, D74, O13, O17, Q33, Q34)",AER,2020,107,788,"['Political Risk', 'Economic Development', 'Public Policy', 'Energy Transition', 'Behavioral Economics']","['natural resources', 'economy', 'corruption', 'civil conflict', 'information', 'political resource curse', 'field experiment', 'Mozambique', 'violence', 'elite capture']"
"Devotion and Development: Religiosity, Education, and Economic Progress in Nineteenth-Century France",10.1257/aer.20191054,"This paper studies when religion can hamper diffusion of knowledge and economic development, and through which mechanism. I examine Catholicism in France during the Second Industrial Revolution (1870–1914). In this period, technology became skill-intensive, leading to the introduction of technical education in primary schools. I find that more religious locations had lower economic development after 1870. Schooling appears to be the key mechanism: more religious areas saw a slower adoption of the technical curriculum and a push for religious education. In turn, religious education was negatively associated with industrial development 10 to 15 years later, when schoolchildren entered the labor market. (JEL D83, I21, I26, N33, Z12)",AER,2020,107,739,"['Economic Development', 'Educational Equity', 'Labor Market Dynamics', 'Technological Adoption', 'Industrial Development']","['religion', 'diffusion of knowledge', 'economic development', 'Catholicism', 'France', 'Second Industrial Revolution', 'technology', 'technical education', 'schooling', 'industrial development']"
Gambling over Public Opinion,10.1257/aer.20181495,"We consider bargaining environments in which public opinion provides leverage by making compromises costly. Two parties make initial demands, before knowing the public opinion. If deadlocked, they can bargain again after public opinion forms, but suffer reputation costs if they compromise, i.e., scale back their demands. We show that in equilibrium, parties may choose to make incompatible demands initially and gamble over public opinion even though one or both parties must bear a cost later. We characterize when deadlocks arise, and how this affects the welfare of the public in a representative two-party democracy compared to a direct democracy. (JEL C78, D72)",AER,2020,102,668,"['Public Policy', 'Economic Development', 'Political Risk', 'Behavioral Economics', 'Market Transparency']","['bargaining', 'public opinion', 'compromises', 'demands', 'deadlock', 'reputation costs', 'equilibrium', 'incompatible demands', 'welfare', 'democracy']"
From Extreme to Mainstream: The Erosion of Social Norms,10.1257/aer.20171175,"Social norms, usually persistent, can change quickly when new public information arrives, such as a surprising election outcome. People may become more inclined to express views or take actions previously perceived as stigmatized and may judge others less negatively for doing so. We examine this possibility using two experiments. We first show via revealed preference experiments that Donald Trump’s rise in popularity and eventual victory increased individuals’ willingness to publicly express xenophobic views. We then show that individuals are sanctioned less negatively if they publicly expressed a xenophobic view in an environment where that view is more popular. (JEL D72, D85, Z13)",AER,2020,102,691,"['Political Risk', 'Behavioral Economics', 'Social Policy', 'Public Policy', 'Regulatory Frameworks']","['social norms', 'public information', 'surprising election outcome', 'stigmatized', 'experiments', 'Donald Trump', 'xenophobic views', 'sanctions', 'popular environment', 'JEL D72']"
Small and Large Firms over the Business Cycle,10.1257/aer.20181499,"This paper uses new confidential Census data to revisit the relationship between firm size, cyclicality, and financial frictions. First, we find that large firms (the top 1 percent by size) are less cyclically sensitive than the rest. Second, high and rising concentration implies that the higher cyclicality of the bottom 99 percent of firms only has a modest impact on aggregate fluctuations. Third, differences in cyclicality are not simply explained by financing, and in fact appear largely unrelated to proxies for financial strength. We instead provide evidence for an alternative mechanism based on the industry scope of the very largest firms. (JEL D22, E32, G32, L25)",AER,2020,106,676,"['Financial Markets', 'Corporate Governance', 'Economic Growth', 'Trade and Globalization', 'Monetary Policy']","['firm size', 'cyclicality', 'financial frictions', 'concentration', 'aggregate fluctuations', 'financing', 'proxies', 'financial strength', 'industry scope', 'largest firms']"
Does When You Die Depend on Where You Live? Evidence from Hurricane Katrina,10.1257/aer.20181026,"We follow Medicare cohorts to estimate Hurricane Katrina’s long-run mortality effects on victims initially living in New Orleans. Including the initial shock, the hurricane improved eight-year survival by 2.07 percentage points. Migration to lower-mortality regions explains most of this survival increase. Those migrating to low- versus high-mortality regions look similar at baseline, but their subsequent mortality is 0.83–1.01 percentage points lower per percentage point reduction in local mortality, quantifying causal effects of place on mortality among this population. Migrants’ mortality is also lower in destinations with healthier behaviors and higher incomes but is unrelated to local medical spending and quality. (JEL I12, Q51, Q54, R23)",AER,2020,105,752,"['Healthcare Systems', 'Migration and Labor Market Dynamics', 'Public Policy', 'Economic Development', 'Climate Change Economics']","['Medicare cohorts', 'Hurricane Katrina', 'mortality effects', 'New Orleans', 'survival', 'migration', 'low-mortality regions', 'causal effects', 'place on mortality', 'healthier behaviors']"
Methods Matter: p-Hacking and Publication Bias in Causal Analysis in Economics,10.1257/aer.20190687,"The credibility revolution in economics has promoted causal identification using randomized control trials (RCT), difference-in-differences (DID), instrumental variables (IV) and regression discontinuity design (RDD). Applying multiple approaches to over 21,000 hypothesis tests published in 25 leading economics journals, we find that the extent of p-hacking and publication bias varies greatly by method. IV (and to a lesser extent DID) are particularly problematic. We find no evidence that (i) papers published in the Top 5 journals are different to others; (ii) the journal “revise and resubmit” process mitigates the problem; (iii) things are improving through time. (JEL A14, C12, C52)",AER,2020,99,692,"['Public Policy', 'Economic Development', 'Financial Markets', 'Labor Market Dynamics', 'Regulatory Frameworks']","['credibility revolution', 'economics', 'causal identification', 'randomized control trials', 'difference-in-differences', 'instrumental variables', 'regression discontinuity design', 'p-hacking', 'publication bias', 'hypothesis tests']"
How Well Targeted Are Soda Taxes?,10.1257/aer.20171898,"Soda taxes aim to reduce excessive sugar consumption. We assess who is most impacted by soda taxes. We estimate demand using micro longitudinal data covering on-the-go purchases, and exploit the panel dimension to estimate individual-specific preferences. We relate these preferences and counterfactual predictions to individual characteristics and show that soda taxes are relatively effective at targeting the sugar intake of the young, are less successful at targeting the intake of those with high total dietary sugar, and are unlikely to be strongly regressive especially if consumers benefit from averted internalities. (JEL D12, H22, H25, H71)",AER,2020,95,650,"['Taxation', 'Consumer Behavior', 'Public Policy', 'Healthcare Systems', 'Economic Development']","['soda taxes', 'sugar consumption', 'demand estimation', 'micro longitudinal data', 'individual-specific preferences', 'sugar intake', 'young', 'dietary sugar', 'regressive', 'internalities.']"
Misperceived Social Norms: Women Working Outside the Home in Saudi Arabia,10.1257/aer.20180975,"We show that the vast majority of young married men in Saudi Arabia privately support women working outside the home (WWOH) and substantially underestimate support by other similar men. Correcting these beliefs increases men’s (costly) willingness to help their wives search for jobs. Months later, wives of men whose beliefs were corrected are more likely to have applied and interviewed for a job outside the home. In a recruitment experiment with a local company, randomly informing women about actual support for WWOH leads them to switch from an at-home temporary enumerator job to a higher-paying, outside-the-home version of the job. (JEL D83, J16, J22, O15, Z13)",AER,2020,106,670,"['Gender Equality', 'Labor Market Dynamics', 'Public Policy', 'Social Policy', 'Trade and Globalization']","['young married men', 'Saudi Arabia', 'women working outside the home', 'support', 'beliefs', 'job search', 'recruitment experiment', 'local company', 'enumerator job', 'higher-paying']"
Business-Cycle Anatomy,10.1257/aer.20181174,"We propose a new strategy for dissecting the macroeconomic time series, provide a template for the business-cycle propagation mechanism that best describes the data, and use its properties to appraise models of both the parsimonious and the medium-scale variety. Our findings support the existence of a main business-cycle driver but rule out the following candidates for this role: technology or other shocks that map to TFP movements; news about future productivity; and inflationary demand shocks of the textbook type. Models aimed at accommodating demand-driven cycles without a strict reliance on nominal rigidity appear promising. (JEL C22, E10, E32)",AER,2020,98,656,"['Monetary Policy', 'Economic Development', 'Business Strategy', 'Technological Adoption', 'Fiscal Policy']","['macroeconomic time series', 'business-cycle propagation mechanism', 'models', 'technology shocks', 'TFP movements', 'news', 'productivity', 'inflationary demand shocks', 'demand-driven cycles', 'nominal rigidity.']"
Patronage and Selection in Public Sector Organizations,10.1257/aer.20181491,"In all modern bureaucracies, politicians retain some discretion in public employment decisions, which may lead to frictions in the selection process if political connections substitute for individual competence. Relying on detailed matched employer-employee data on the universe of public employees in Brazil over 1997–2014, and on a regression discontinuity design in close electoral races, we establish three main findings. First, political connections are a key and quantitatively large determinant of employment in public organizations, for both bureaucrats and frontline providers. Second, patronage is an important mechanism behind this result. Third, political considerations lead to the selection of less competent individuals. (JEL D72, D73, J45, O17)",AER,2020,105,760,"['Public Policy', 'Labor Market Dynamics', 'Political Risk', 'Economic Development', 'Public Finance']","['politicians', 'discretion', 'public employment decisions', 'frictions', 'selection process', 'political connections', 'individual competence', 'public employees', 'Brazil', 'patronage']"
Liquidity versus Wealth in Household Debt Obligations: Evidence from Housing Policy in the Great Recession,10.1257/aer.20181243,"We exploit variation in mortgage modifications to disentangle the impact of reducing long-term obligations with no change in short-term payments (“wealth”), and reducing short-term payments with no change in long-term obligations (“liquidity”). Using regression discontinuity and difference-in-differences research designs with administrative data measuring default and consumption, we find that principal reductions that increase wealth without affecting liquidity have no effect, while maturity extensions that increase only liquidity have large effects. This suggests that liquidity drives default and consumption decisions for borrowers in our sample and that distressed debt restructurings can be redesigned with substantial gains to borrowers, lenders, and taxpayers. (JEL E21, G21, G51, R38)",AER,2020,105,798,"['Financial Markets', 'Credit Markets', 'Debt Management', 'Consumer Finance', 'Housing Market Trends']","['mortgage modifications', 'long-term obligations', 'short-term payments', 'wealth', 'liquidity', 'default', 'consumption', 'principal reductions', 'maturity extensions', 'distressed debt restructurings']"
Importing Political Polarization? The Electoral Consequences of Rising Trade Exposure,10.1257/aer.20170011,"Has rising import competition contributed to the polarization of US politics? Analyzing multiple measures of political expression and results of congressional and presidential elections spanning the period 2000 through 2016, we find strong though not definitive evidence of an ideological realignment in trade-exposed local labor markets that commences prior to the divisive 2016 US presidential election. Exploiting the exogenous component of rising import competition by China, we find that trade exposed electoral districts simultaneously exhibit growing ideological polarization in some domains, meaning expanding support for both strong-left and strong-right views, and pure rightward shifts in others. Specifically, trade-impacted commuting zones or districts saw an increasing market share for the Fox News channel (a rightward shift), stronger ideological polarization in campaign contributions (a polarized shift), and a relative rise in the likelihood of electing a Republican to Congress (a rightward shift). Trade-exposed counties with an initial majority White population became more likely to elect a GOP conservative, while trade-exposed counties with an initial majority-minority population became more likely to elect a liberal Democrat, where in both sets of counties, these gains came at the expense of moderate Democrats (a polarized shift). In presidential elections, counties with greater trade exposure shifted toward the Republican candidate (a rightward shift). These results broadly support an emerging political economy literature that connects adverse economic shocks to sharp ideological realignments that cleave along racial and ethnic lines and induce discrete shifts in political preferences and economic policy. (JEL D72, F14, J15, L82, R23)",AER,2020,247,1774,"['Trade and Globalization', 'Labor Market Dynamics', 'Political Risk', 'Income Inequality', 'Public Policy']","['import competition', 'political expression', 'ideological realignment', 'trade-exposed', 'polarization', 'ideological polarization', 'rightward shift', 'Republican', 'Democrat', 'economic shocks']"
Sources of Inaction in Household Finance: Evidence from the Danish Mortgage Market,10.1257/aer.20180865,"We build an empirical model to attribute delays in mortgage refinancing to psychological costs inhibiting refinancing until incentives are sufficiently strong; and behavior, potentially attributable to information-gathering costs, lowering the probability of household refinancing per unit time at any incentive. We estimate the model on administrative panel data from Denmark, where mortgage refinancing without cash-out is unconstrained. Middle-aged and wealthy households act as if they have high psychological refinancing costs; but older, poorer, and less-educated households refinance with lower probability irrespective of incentives, thereby achieving lower savings. We use the model to understand frictions in the mortgage channel of monetary policy transmission. (JEL E52, G21, G51, R31)",AER,2020,107,797,"['Mortgage Market Trends', 'Monetary Policy', 'Behavioral Economics', 'Financial Markets', 'Housing Market Trends']","['mortgage refinancing', 'psychological costs', 'incentives', 'behavior', 'information-gathering costs', 'household', 'administrative panel data', 'Denmark', 'monetary policy transmission', 'frictions']"
Sources of Displaced Workers' Long-Term Earnings Losses,10.1257/aer.20180652,"We estimate the magnitudes of reduced earnings, work hours, and wage rates of workers displaced during the Great Recession using linked employer-employee panel data from Washington state. Displaced workers’ earnings losses occurred mainly because hourly wage rates dropped at the time of displacement and recovered sluggishly. Lost employer-specific premiums explain only 17 percent of these losses. Fully 70 percent of displaced workers moved to employers paying the same or higher wage premiums than the displacing employers, but these workers nevertheless suffered substantial wage rate losses. Loss of valuable specific worker-employer matches explains more than one-half of the wage losses. (JEL E32, J22, J31, J63, R23)",AER,2020,105,725,"['Labor Market Dynamics', 'Income Inequality', 'Public Policy', 'Taxation', 'Economic Development']","['earnings', 'work hours', 'wage rates', 'displaced workers', 'Great Recession', 'employer-employee panel data', 'hourly wage rates', 'employer-specific premiums', 'valuable specific worker-employer matches', 'wage losses']"
"Artificial Intelligence, Algorithmic Pricing, and Collusion",10.1257/aer.20190623,"Increasingly, algorithms are supplanting human decision-makers in pricing goods and services. To analyze the possible consequences, we study experimentally the behavior of algorithms powered by Artificial Intelligence (Q-learning) in a workhorse oligopoly model of repeated price competition. We find that the algorithms consistently learn to charge supracompetitive prices, without communicating with one another. The high prices are sustained by collusive strategies with a finite phase of punishment followed by a gradual return to cooperation. This finding is robust to asymmetries in cost or demand, changes in the number of players, and various forms of uncertainty. (JEL D21, D43, D83, L12, L13)",AER,2020,101,702,"['Artificial Intelligence', 'Pricing Strategies', 'Oligopoly Model', 'Collusion', 'Competition']","['algorithms', 'human decision-makers', 'pricing', 'goods', 'services', 'Artificial Intelligence', 'Q-learning', 'oligopoly model', 'price competition', 'collusive strategies']"
Voter Turnout with Peer Punishment,10.1257/aer.20170476,"We introduce a model where social norms of voting participation are strategically chosen by competing political parties and determine voters’ turnout. Social norms must be enforced through costly peer monitoring and punishment. When the cost of enforcement of social norms is low, the larger party is always advantaged. Otherwise, in the spirit of Olson (1965), the smaller party may be advantaged. Our model shares features of the ethical voter model and it delivers novel and empirically relevant comparative statics results. (JEL D72, Z13)",AER,2020,83,542,"['Political Risk', 'Public Policy', 'Behavioral Economics', 'Economic Development', 'Social Policy']","['social norms', 'voting participation', 'political parties', 'voters’ turnout', 'peer monitoring', 'punishment', 'enforcement', 'Olson', 'ethical voter model', 'comparative statics']"
Upping the Ante: The Equilibrium Effects of Unconditional Grants to Private Schools,10.1257/aer.20180924,"We assess whether financing can help private schools, which now account for one-third of primary school enrollment in low- and middle-income countries. Our experiment allocated unconditional cash grants to either one (L) or all (H) private schools in a village. In both arms, enrollment and revenues increased, leading to above-market returns. However, test scores increased only in H schools, accompanied by higher fees, and a greater focus on teachers. We provide a model demonstrating that market forces can provide endogenous incentives to increase quality and increased financial saturation can be used to leverage competition, generating socially desirable outcomes. (JEL I21, I22, I25, I28, L22, L26, N75, O15, O16)",AER,2020,108,722,"['Financial Markets', 'Economic Development', 'Educational Equity', 'Public Policy', 'Market Forces']","['financing', 'private schools', 'cash grants', 'enrollment', 'revenues', 'test scores', 'market forces', 'quality', 'financial saturation', 'competition']"
Household Debt Revaluation and the Real Economy: Evidence from a Foreign Currency Debt Crisis,10.1257/aer.20181585,"We examine the consequences of a sudden increase in household debt burdens by exploiting variation in exposure to household foreign currency debt during Hungary’s late-2008 currency crisis. The revaluation of debt burdens causes higher default rates and a collapse in spending. These responses lead to a worse local recession, driven by a decline in local demand, and negative spillover effects on nearby borrowers without foreign currency debt. The estimates translate into an output multiplier on higher debt service of 1.67. The impact of debt revaluation is particularly severe when foreign currency debt is concentrated on household, rather than firm, balance sheets. (JEL E21, E32, F34, G51)",AER,2020,106,697,"['Debt Management', 'Financial Markets', 'Economic Development', 'Fiscal Policy', 'Credit Markets']","['household debt', 'debt burdens', 'foreign currency debt', 'currency crisis', 'default rates', 'spending', 'recession', 'debt service', 'output multiplier', 'firm balance sheets']"
"Rich Pickings? Risk, Return, and Skill in Household Wealth",10.1257/aer.20170666,"We investigate wealth returns on an administrative panel containing the disaggregated balance sheets of Swedish residents. The expected return on household net wealth is strongly persistent, determined primarily by systematic risk, and increasing in net worth, exceeding the risk-free rate by the size of the equity premium for households in the top 0.01 percent. Idiosyncratic risk is transitory but generates substantial long-term dispersion in returns in top brackets. Systematic and idiosyncratic risk both drive the cross-sectional distribution of the geometric average return over a generation. Furthermore, wealth returns explain most of the historical increase in top wealth shares. (JEL D31, G11, G51)",AER,2020,102,710,"['Financial Markets', 'Risk Management', 'Wealth Distribution', 'Income Inequality', 'Economic Development']","['wealth returns', 'administrative panel', 'balance sheets', 'Swedish residents', 'systematic risk', 'net worth', 'equity premium', 'idiosyncratic risk', 'cross-sectional distribution', 'top wealth shares']"
Overreaction in Macroeconomic Expectations,10.1257/aer.20181219,"We study the rationality of individual and consensus forecasts of macroeconomic and financial variables using the methodology of Coibion and Gorodnichenko (2015), who examine predictability of forecast errors from forecast revisions. We find that individual forecasters typically overreact to news, while consensus forecasts under-react relative to full-information rational expectations. We reconcile these findings within a diagnostic expectations version of a dispersed information learning model. Structural estimation indicates that departures from Bayesian updating in the form of diagnostic overreaction capture important variation in forecast biases across different series, yielding a belief distortion parameter similar to estimates obtained in other settings. (JEL C53, D83, D84, E13, E17, E27, E47)",AER,2020,107,810,"['Monetary Policy', 'Financial Markets', 'Economic Development', 'Behavioral Economics', 'Forecasting']","['rationality', 'individual forecasts', 'consensus forecasts', 'macroeconomic', 'financial variables', 'forecast errors', 'predictability', 'Bayesian updating', 'belief distortion', 'structural estimation']"
Self-Fulfilling Debt Dilution: Maturity and Multiplicity in Debt Models,10.1257/aer.20180831,"We establish that creditor beliefs regarding future borrowing can be self-fulfilling, leading to multiple equilibria with markedly different debt accumulation patterns. We characterize such indeterminacy in the Eaton-Gersovitz sovereign debt model augmented with long maturity bonds. Two necessary conditions for the multiplicity are (i) the government is more impatient than foreign creditors, and (ii) there are deadweight losses from default. The multiplicity is dynamic and stems from the self-fulfilling beliefs of how future creditors will price bonds; long maturity bonds are therefore a crucial component of the multiplicity. We introduce a third party with deep pockets to discuss the policy implications of this source of multiplicity and identify the potentially perverse consequences of traditional “lender of last resort” policies. (JEL E44, E62, F34, H63, G12)",AER,2020,125,874,"['Debt Management', 'Financial Markets', 'Monetary Policy', 'Public Policy', 'Credit Markets']","['creditor beliefs', 'self-fulfilling', 'equilibria', 'debt accumulation', 'Eaton-Gersovitz model', 'long maturity bonds', 'multiplicity', 'indeterminacy', 'default', 'lender of last resort']"
Nonrivalry and the Economics of Data,10.1257/aer.20191330,"Data is nonrival: a person’s location history, medical records, and driving data can be used by many firms simultaneously. Nonrivalry leads to increasing returns. As a result, there may be social gains to data being used broadly across firms, even in the presence of privacy considerations. Fearing creative destruction, firms may choose to hoard their data, leading to the inefficient use of nonrival data. Giving data property rights to consumers can generate allocations that are close to optimal. Consumers balance their concerns for privacy against the economic gains that come from selling data broadly. (JEL C80, D11, D21, D83, E22, K11, O34)",AER,2020,102,649,"['Data Privacy', 'Economic Development', 'Consumer Behavior', 'Public Policy', 'Regulatory Frameworks']","['data', 'nonrival', 'firms', 'privacy', 'property rights', 'consumers', 'social gains', 'increasing returns', 'hoard', 'optimal']"
An Estimated Structural Model of Entrepreneurial Behavior,10.1257/aer.20170370,"Using a rich panel of owner-operated New York dairy farms, we provide new evidence on entrepreneurial behavior. We formulate a dynamic model of farms facing uninsured risks and financial constraints. Farmers derive nonpecuniary benefits from operating their businesses. We estimate the model via simulated minimum distance, matching both production and financial data. We find that financial factors and nonpecuniary benefits are of first-order importance. Collateral constraints and liquidity restrictions inhibit borrowing and the accumulation of capital, especially among high-productivity firms seeking to expand. The nonpecuniary benefits to farming are large and keep small, low-productivity farms in business. Although farmers are risk averse, eliminating uninsured production risk has only modest effects on capital and output. (JEL C51, D24, G32, Q12, Q14)",AER,2020,120,865,"['Entrepreneurship', 'Financial Markets', 'Risk Management', 'Capital Allocation', 'Economic Growth']","['entrepreneurial behavior', 'dynamic model', 'financial constraints', 'nonpecuniary benefits', 'collateral constraints', 'liquidity restrictions', 'borrowing', 'capital accumulation', 'risk aversion', 'production risk']"
Policy Language and Information Effects in the Early Days of Federal Reserve Forward Guidance,10.1257/aer.20181721,"I show that the nature of the Federal Open Market Committee’s (FOMC’s) forward guidance language shapes the private sector’s responses to monetary policy statements. From February 2000 to June 2003, the FOMC only gave forward guidance about economic outlook risks, and a decrease in the expected federal funds rate path caused stock prices to fall, GDP growth forecasts to fall, and the unemployment rate to rise. From August 2003 to May 2006, the FOMC added forward guidance about policy inclinations, and a decrease in the expected federal funds rate path had the opposite effects. These results suggest that forward guidance that emphasizes economic outlook risks causes stronger information effects than forward guidance that emphasizes policy inclinations. (JEL D83, E52, E58, E66)",AER,2020,121,786,"['Monetary Policy', 'Financial Markets', 'Economic Growth', 'Risk Management', 'Public Policy']","['Federal Open Market Committee', 'forward guidance', 'private sector', 'monetary policy', 'economic outlook risks', 'expected federal funds rate', 'stock prices', 'GDP growth forecasts', 'unemployment rate', 'policy inclinations']"
Job Matching under Constraints,10.1257/aer.20190780,"Studying job matching in a Kelso-Crawford framework, we consider arbitrary constraints imposed on sets of doctors that a hospital can hire. We characterize all constraints that preserve the substitutes condition (for all revenue functions that satisfy the substitutes condition), a critical condition on hospitals’ revenue functions for well-behaved competitive equilibria. A constraint preserves the substitutes condition if and only if it is a “generalized interval constraint,” which specifies the minimum and maximum numbers of hired doctors, forces some hires, and forbids others. Additionally, “generalized polyhedral constraints” are precisely those that preserve the substitutes condition for all “group separable” revenue functions. (JEL C78, D47, I11, J23, J41, J44)",AER,2020,107,776,"['Labor Market Dynamics', 'Healthcare Systems', 'Public Policy', 'Economic Development', 'Healthcare Innovation']","['job matching', 'Kelso-Crawford framework', 'constraints', 'doctors', 'hospital', 'substitutes condition', 'revenue functions', 'competitive equilibria', 'generalized interval constraint', 'generalized polyhedral constraints']"
Ultimatum Bargaining with Rational Inattention,10.1257/aer.20170620,"A seller bargains with a rationally inattentive buyer (Sims 2003) over a good of random quality. After observing quality, the seller makes a take-it-or-leave-it offer. The buyer pays attention to the seller’s product and offer at a cost proportional to expected entropy reduction. Because attention is free off-path, multiple equilibria emerge, many of which are efficient. A trembling-hand-like refinement (Selten 1975) rules out efficiency, delivering complete disagreement when attention is expensive and a unique equilibrium with trade when attention is cheap. In this equilibrium, the buyer overpays for low-quality goods, underpays for high-quality goods, and earns a strictly positive payoff. (JEL C78, D82, D83, D86, L15)",AER,2020,106,729,"['Consumer Behavior', 'Economic Development', 'Trade and Globalization', 'Behavioral Economics', 'Market Transparency']","['seller', 'buyer', 'quality', 'attention', 'equilibrium', 'efficiency', 'trade', 'goods', 'payoff', 'entropy']"
Two-Way Fixed Effects Estimators with Heterogeneous Treatment Effects,10.1257/aer.20181169,"Linear regressions with period and group fixed effects are widely used to estimate treatment effects. We show that they estimate weighted sums of the average treatment effects (ATE ) in each group and period, with weights that may be negative. Due to the negative weights, the linear regression coefficient may for instance be negative while all the ATEs are positive. We propose another estimator that solves this issue. In the two applications we revisit, it is significantly different from the linear regression estimator. (JEL C21, C23, D72, J31, J51, L82)",AER,2020,90,560,"['Econometric Methods', 'Public Policy', 'Labor Market Dynamics', 'Economic Development', 'Regulatory Frameworks']","['linear regressions', 'period fixed effects', 'group fixed effects', 'treatment effects', 'average treatment effects', 'negative weights', 'estimator', 'applications', 'JEL C21', 'JEL C23']"
A Behavioral New Keynesian Model,10.1257/aer.20162005,"This paper analyzes how bounded rationality affects monetary and fiscal policy via an empirically relevant enrichment of the New Keynesian model. It models agents’ partial myopia toward distant atypical events using a new microfounded “cognitive discounting” parameter. Compared to the rational model, (i) there is no forward guidance puzzle; (ii) the Taylor principle changes: with passive monetary policy but enough myopia equilibria are determinate and economies stable; (iii) the zero lower bound is much less costly; (iv) price-level targeting is not optimal; (v) fiscal stimulus is effective; (vi) the model is “ neo-Fisherian” in the long run, Keynesian in the short run. (JEL E12, E31, E43, E52, E62, E70)",AER,2020,109,713,"['Monetary Policy', 'Fiscal Policy', 'Economic Growth', 'Financial Markets', 'Behavioral Economics']","['bounded rationality', 'monetary policy', 'fiscal policy', 'New Keynesian model', 'cognitive discounting', 'forward guidance', 'Taylor principle', 'zero lower bound', 'price-level targeting', 'fiscal stimulus']"
"Multidimensional Skills, Sorting, and Human Capital Accumulation",10.1257/aer.20162002,"We construct a structural model of on-the-job search in which workers differ in skills along several dimensions and sort themselves into jobs with heterogeneous skill requirements along those same dimensions. Skills are accumulated when used, and depreciate when not used. We estimate the model combining data from O*NET with the NLSY79. We use the model to shed light on the origins and costs of mismatch along heterogeneous skill dimensions. We highlight the deficiencies of relying on a unidimensional model of skill when decomposing the sources of variation in the value of lifetime output between initial conditions and career shocks. (JEL J24, J41, J64)",AER,2020,103,659,"['Labor Market Dynamics', 'Economic Development', 'Skill Development', 'Income Inequality', 'Economic Growth']","['structural model', 'on-the-job search', 'workers', 'skills', 'heterogeneous', 'skill requirements', 'O*NET', 'NLSY79', 'mismatch', 'skill dimensions']"
Cities in Bad Shape: Urban Geometry in India,10.1257/aer.20171673,"The spatial layout of cities is an important feature of urban form, highlighted by urban planners but overlooked by economists. This paper investigates the causal economic implications of city shape in India. I measure cities’ geometric properties over time using satellite imagery and historical maps. I develop an instrument for urban shape based on geographic obstacles encountered by expanding cities. Compact city shape is associated with faster population growth and households display positive willingness to pay for more compact layouts. Transit accessibility is an important channel. Land use regulations can contribute to deteriorating city shape. (JEL O18, R14, R23, R52, R58)",AER,2020,101,687,"['Urban Development', 'Economic Growth', 'Public Policy', 'Housing Market Trends', 'Land Use Regulations']","['cities', 'urban form', 'urban planners', 'economists', 'India', 'satellite imagery', 'historical maps', 'geometric properties', 'population growth', 'land use regulations']"
Subsidy Policies and Insurance Demand,10.1257/aer.20190661,"Using data from a two-year pricing experiment, we study the impact of subsidy policies on weather insurance take-up. Results show that subsidies increase future insurance take-up through their influence on payout experiences. Exploring mechanisms of the payout effect, we find that for households that randomly benefited from financial education, receiving a payout provides a one-time learning experience that improves take-up permanently. In contrast, households with poor insurance knowledge continuously update take-up decisions based on recent experiences with disasters and payouts. Combining subsidy policies with financial education can thus be effective in promoting long-run insurance adoption. (JEL G22, G52, G53, Q54)",AER,2020,100,729,"['Insurance', 'Financial Education', 'Subsidy Policies', 'Risk Management', 'Economic Development']","['subsidy policies', 'weather insurance', 'take-up', 'payout experiences', 'financial education', 'households', 'insurance knowledge', 'disasters', 'long-run insurance adoption', 'subsidy policies']"
Using Aggregated Relational Data to Feasibly Identify Network Structure without Network Data,10.1257/aer.20170861,"Social network data are often prohibitively expensive to collect, limiting empirical network research. We propose an inexpensive and feasible strategy for network elicitation using Aggregated Relational Data (ARD): responses to questions of the form “how many of your links have trait k ?” Our method uses ARD to recover parameters of a network formation model, which permits sampling from a distribution over node- or graph-level statistics. We replicate the results of two field experiments that used network data and draw similar conclusions with ARD alone. (JEL C81, C93, D85, Z13)",AER,2020,90,585,"['Economic Development', 'Social Policy', 'Machine Learning Applications', 'Data Privacy', 'Public Policy']","['social network data', 'empirical network research', 'network elicitation', 'Aggregated Relational Data', 'network formation model', 'node-level statistics', 'graph-level statistics', 'field experiments', 'network data', 'ARD']"
Long-Run Growth of Financial Data Technology,10.1257/aer.20171349,"“Big data” financial technology raises concerns about market inefficiency. A common concern is that the technology might induce traders to extract others’ information, rather than to produce information themselves. We allow agents to choose how much they learn about future asset values or about others’ demands, and we explore how improvements in data processing shape these information choices, trading strategies and market outcomes. Our main insight is that unbiased technological change can explain a market-wide shift in data collection and trading strategies. However, in the long run, as data processing technology becomes increasingly advanced, both types of data continue to be processed. Two competing forces keep the data economy in balance: data resolve investment risk, but future data create risk. The efficiency results that follow from these competing forces upend two pieces of common wisdom: our results offer a new take on what makes prices informative and whether trades typically deemed liquidity-providing actually make markets more resilient. (JEL C55, D83, G12, G14, O33)",AER,2020,163,1096,"['Financial Markets', 'Data Privacy', 'Technological Adoption', 'Investment Strategies', 'Market Transparency']","['financial technology', 'market inefficiency', 'data processing', 'information choices', 'trading strategies', 'market outcomes', 'data collection', 'investment risk', 'data economy', 'liquidity-providing']"
"Financial Crises, Dollarization, and Lending of Last Resort in Open Economies",10.1257/aer.20180830,"Foreign currency debt is considered a source of financial instability in emerging markets. We propose a theory in which liability dollarization arises from an insurance motive of domestic savers. Since financial crises are associated to depreciations, savers ask for a risk premium when saving in local currency. This force makes domestic currency debt expensive, and incentivizes borrowers to issue foreign currency debt. Providing ex post support to borrowers can alleviate the effect of the crisis on savers’ income, lowering their demand for insurance, and, surprisingly, it can reduce ex ante incentives to borrow in foreign currency. (JEL E21, E42, E44, F34, G01)",AER,2020,102,669,"['Financial Markets', 'Risk Management', 'Monetary Policy', 'Debt Management', 'Economic Development']","['foreign currency debt', 'financial instability', 'emerging markets', 'liability dollarization', 'insurance motive', 'financial crises', 'risk premium', 'domestic currency debt', 'ex post support', 'borrowers.']"
Escalation of Scrutiny: The Gains from Dynamic Enforcement of Environmental Regulations,10.1257/aer.20181012,"The US Environmental Protection Agency (EPA) uses a dynamic approach to enforcing air pollution regulations, with repeat offenders subject to high fines and designation as high priority violators (HPV). We estimate the value of dynamic enforcement by developing and estimating a dynamic model of a plant and regulator, where plants decide when to invest in pollution abatement technologies. We use a fixed grid approach to estimate random coefficient specifications. Investment, fines, and HPV designation are costly to most plants. Eliminating dynamic enforcement would raise pollution damages by 164 percent with constant fines or raise fines by 519 percent with constant pollution damages. (JEL Q52, Q53, Q58)",AER,2020,106,712,"['Environmental Sustainability', 'Regulatory Frameworks', 'Economic Development', 'Climate Change Economics', 'Public Policy']","['US Environmental Protection Agency', 'air pollution regulations', 'dynamic enforcement', 'repeat offenders', 'high fines', 'high priority violators', 'pollution abatement technologies', 'random coefficient specifications', 'investment', 'pollution damages']"
"Bartik Instruments: What, When, Why, and How",10.1257/aer.20181047,"The Bartik instrument is formed by interacting local industry shares and national industry growth rates. We show that the typical use of a Bartik instrument assumes a pooled exposure research design, where the shares measure differential exposure to common shocks, and identification is based on exogeneity of the shares. Next, we show how the Bartik instrument weights each of the exposure designs. Finally, we discuss how to assess the plausibility of the research design. We illustrate our results through two applications: estimating the elasticity of labor supply, and estimating the elasticity of substitution between immigrants and natives. (JEL C51, F14, J15, J22, L60, R23, R32)",AER,2020,105,687,"['Labor Market Dynamics', 'Economic Development', 'Trade and Globalization', 'Immigration and Labor', 'Elasticity of Labor Supply']","['Bartik instrument', 'industry shares', 'national industry growth rates', 'exposure research design', 'common shocks', 'exogeneity', 'weights', 'plausibility', 'elasticity of labor supply', 'elasticity of substitution']"
Stability and Bayesian Consistency in Two-Sided Markets,10.1257/aer.20181186,"We propose a criterion of stability for two-sided markets with asymmetric information. A central idea is to formulate off-path beliefs conditional on counterfactual pairwise deviations and on-path beliefs in the absence of such deviations. A matching-belief configuration is stable if the matching is individually rational with respect to the system of on-path beliefs and is not blocked with respect to the system of off-path beliefs. The formulation provides a language for assessing matching outcomes with respect to their supporting beliefs and opens the door to further belief-based refinements. The main refinement analyzed in the paper requires the Bayesian consistency of on-path and off-path beliefs with prior beliefs. We define concepts of Bayesian efficiency, the rational expectations competitive equilibrium, and the core. Their contrast with pairwise stability manifests the role of information asymmetry in matching formation. (JEL C78, D40, D82, D83)",AER,2020,140,967,"['Market Transparency', 'Information Asymmetry', 'Bayesian Consistency', 'Economic Development', 'Financial Markets']","['stability', 'two-sided markets', 'asymmetric information', 'beliefs', 'matching', 'individually rational', 'Bayesian consistency', 'efficiency', 'competitive equilibrium', 'information asymmetry']"
"Experimentation, Innovation, and Economics",10.1257/aer.110.7.1974,"The experimental method not only helps identify causal relationships, but also provides economists with a rich sense of context, focuses research on specific practical questions, stimulates collaboration with practitioners and specialists from other fields, and allows for rapid iteration. In this lecture, I present a series of examples illustrating how together these features make the experimental approach a powerful tool for advancing scientific understanding, informing policy, and promoting innovation. I then discuss how institutions can be designed to accelerate innovation and direct it toward the world’s most pressing needs. (JEL B31, C90, I10, O15, O30, O43)",AER,2020,96,671,"['Innovation', 'Economic Development', 'Public Policy', 'Technological Adoption', 'Sustainable Agriculture']","['experimental method', 'causal relationships', 'economists', 'context', 'practical questions', 'collaboration', 'practitioners', 'specialists', 'rapid iteration', 'scientific understanding']"
Risk Premia and the Real Effects of Money,10.1257/aer.20180203,"This paper proposes a flexible-price theory of the role of money in an economy with incomplete idiosyncratic risk sharing. When the risk premium goes up, money provides a safe store of value that prevents interest rates from falling, reducing investment. Investment is too high during booms when risk is low, and too low during slumps when risk is high. Monetary policy cannot correct this: money is superneutral and Ricardian equivalence holds. The optimal allocation requires the Friedman rule and a tax/subsidy on capital. The real effects of money survive even in the cashless limit. (JEL E32, E41, E43, E44, E52)",AER,2020,100,617,"['Monetary Policy', 'Risk Management', 'Capital Allocation', 'Fiscal Policy', 'Investment Strategies']","['money', 'risk sharing', 'investment', 'monetary policy', 'Friedman rule', 'capital tax', 'safe store of value', 'interest rates', 'Ricardian equivalence', 'real effects']"
The Competitive Impact of Vertical Integration by Multiproduct Firms,10.1257/aer.20180071,"We study the impact of vertical integration on pricing incentives in multiproduct industries. To do so, we exploit recent variation in vertical structure in the US carbonated-beverage industry. While the elimination of double marginalization with vertical integration is normally characterized as procompetitive, economic theory predicts that it may cause anticompetitive price increases in multiproduct industries. We indeed find that vertical integration causes price decreases in products with eliminated double margins but price increases in the other products sold by the integrated firm. These results provide new evidence of anticompetitive effects of vertical mergers. (JEL D22, D43, G34, L13, L22, L66)",AER,2020,100,711,"['Vertical Integration', 'Pricing Incentives', 'Anticompetitive Effects', 'Multiproduct Industries', 'Economic Theory']","['vertical integration', 'pricing incentives', 'multiproduct industries', 'double marginalization', 'procompetitive', 'anticompetitive', 'price increases', 'economic theory', 'vertical mergers', 'US carbonated-beverage industry']"
Tax-Exempt Lobbying: Corporate Philanthropy as a Tool for Political Influence,10.1257/aer.20180615,"We explore the role of charitable giving as a means of political influence. For philanthropic foundations associated with large US corporations, we present three different identification strategies that consistently point to the use of corporate social responsibility in ways that parallel the strategic use of political action committee (PAC) spending. Our estimates imply that 6.3 percent of corporate charitable giving may be politically motivated, an amount 2.5 times larger than annual PAC contributions and 35 percent of federal lobbying. Absent of disclosure requirements, charitable giving may be a form of corporate political influence undetected by voters and subsidized by taxpayers. (JEL D22, D64, D72, L31)",AER,2020,105,719,"['Public Policy', 'Corporate Governance', 'Taxation', 'Political Risk', 'Corporate Social Responsibility']","['charitable giving', 'political influence', 'philanthropic foundations', 'US corporations', 'corporate social responsibility', 'political action committee', 'PAC spending', 'federal lobbying', 'corporate political influence', 'disclosure requirements']"
The Production Relocation and Price Effects of US Trade Policy: The Case of Washing Machines,10.1257/aer.20190611,"We estimate the price effect of US import restrictions on washers. The 2012 and 2016 antidumping duties against South Korea and China were accompanied by downward or minor price movements along with production relocation to other export platform countries. With the 2018 tariffs, on nearly all source countries, the price of washers increased nearly 12 percent. Interestingly, the price of dryers—not subject to tariffs—increased by an equivalent amount. Factoring in dryer prices and price increases by domestic brands, the 2018 tariffs on washers imply a tariff elasticity of consumer prices of above one. (JEL F13, F14, F23, L68, 019, P33)",AER,2020,100,642,"['Trade Policies', 'Consumer Behavior', 'Economic Development', 'Taxation', 'Fiscal Policy']","['price effect', 'US import restrictions', 'washers', 'antidumping duties', 'tariffs', 'source countries', 'dryers', 'domestic brands', 'consumer prices', 'tariff elasticity']"
Acquiring Information through Peers,10.1257/aer.20181798,"We develop an endogenous network formation model, in which agents form connections to acquire information. Our model features complementarity in actions as agents care not only about accuracy of their decision-making but also about the actions of other agents. In equilibrium, the information structure is a hierarchical network, and, under weakly convex cost of forming links, the equilibrium network is core-periphery. Although agents are ex ante identical, there is ex post heterogeneity in payoffs and actions. (JEL D83, D85, Z13)",AER,2020,80,534,"['Network Formation', 'Information Structure', 'Equilibrium Network', 'Core-Periphery', 'Payoffs']","['endogenous network formation model', 'agents', 'connections', 'information', 'complementarity', 'equilibrium', 'hierarchical network', 'core-periphery', 'heterogeneity', 'payoffs.']"
"Relational Contracting, Negotiation, and External Enforcement",10.1257/aer.20180427,"We study relational contracting and renegotiation in environments with external enforcement of long-term contractual arrangements. A long-term contract governs the stage games that the contracting parties will play in the future (depending on verifiable stage-game outcomes) until they renegotiate. In a contractual equilibrium, the parties choose their individual actions rationally, jointly optimize when selecting a contract, and exercise their relative bargaining power. Our main result is that in a wide variety of settings, the optimal contract is semi-stationary, with stationary terms for all future periods but special terms for the current period. In each period the parties renegotiate to this same contract. For example, in a simple principal-agent model with a choice of costly monitoring technology, the optimal contract specifies mild monitoring for the current period but intense monitoring for future periods. Because the parties renegotiate in each new period, intense monitoring arises only off the equilibrium path after a failed renegotiation. (JEL C73, C78, D23, D86)",AER,2020,157,1089,"['Corporate Governance', 'Economic Development', 'Financial Markets', 'Risk Management', 'Trade and Globalization']","['relational contracting', 'renegotiation', 'external enforcement', 'long-term contract', 'stage games', 'contractual equilibrium', 'individual actions', 'bargaining power', 'optimal contract', 'monitoring technology']"
Incentivized Kidney Exchange,10.1257/aer.20170950,"Over the last 15 years, kidney exchange has become a mainstream paradigm to increase transplants. However, compatible pairs do not participate, and full benefits from exchange can be realized only if they do. We propose incentivizing compatible pairs to participate in exchange by insuring their patients against future renal failure via increased priority in deceased-donor queue. We analyze equity and welfare benefits of this scheme through a new dynamic continuum model. We calibrate the model with US data and quantify substantial gains from adopting incentivized exchange, both in terms of access to living-donor transplants and reduced competition for deceased-donor transplants. (JEL D47, I11, I12, I18)",AER,2020,105,711,"['Healthcare Systems', 'Economic Development', 'Public Policy', 'Healthcare Innovation', 'Organizational Behavior']","['kidney exchange', 'compatible pairs', 'incentivizing', 'renal failure', 'deceased-donor queue', 'equity', 'welfare benefits', 'dynamic continuum model', 'living-donor transplants', 'deceased-donor transplants']"
Home Values and Firm Behavior,10.1257/aer.20180649,"The homes of firm owners are an important source of finance for ongoing businesses. We use UK microdata to show that a £1 increase in the value of the homes of a firm’s directors increases the firm’s investment by £0.03. This effect is concentrated among firms whose directors’ homes are valuable relative to the firm’s assets, that are financially constrained, and that have directors who are personally highly levered. An aggregation exercise shows that directors’ homes are as important as corporate property for collateral driven fluctuations in aggregate investment demand. (JEL D22, D25, E22, G31, G34, R31)",AER,2020,97,613,"['Financial Markets', 'Investment Strategies', 'Housing Market Trends', 'Corporate Governance', 'Economic Development']","['firm owners', 'finance', 'ongoing businesses', 'UK microdata', 'homes', 'investment', 'directors', 'assets', 'financially constrained', 'levered']"
"Mortgage Debt, Consumption, and Illiquid Housing Markets in the Great Recession",10.1257/aer.20170772,"Using a quantitative heterogeneous agents macro-housing model and detailed microdata, this paper studies the drivers of the 2006–2011 housing bust, its spillovers to consumption and the credit market, and the ability of mortgage rate interventions to accelerate the recovery. The model features tenure choice between owning and renting, rich portfolio choice, long-term defaultable mortgages, and endogenously illiquid housing from search frictions. The equilibrium analysis and empirical evidence suggest that the deterioration in house prices and liquidity, transmitted to consumption via balance sheets that vary in composition and depth, is central to explaining the observed aggregate and cross-sectional patterns. (JEL E23, E32, E44, G21, R31)",AER,2020,104,749,"['Housing Market Trends', 'Credit Markets', 'Monetary Policy', 'Financial Markets', 'Economic Development']","['heterogeneous agents', 'macro-housing model', 'housing bust', 'spillovers', 'consumption', 'credit market', 'mortgage rate interventions', 'tenure choice', 'portfolio choice', 'defaultable mortgages']"
Turnover Liquidity and the Transmission of Monetary Policy,10.1257/aer.20170045,"We provide empirical evidence of a novel liquidity-based transmission mechanism through which monetary policy influences asset markets, develop a model of this mechanism, and assess the ability of the quantitative theory to match the evidence. (JEL E44, E52, G12, G14, G35)",AER,2020,41,273,"['Monetary Policy', 'Financial Markets', 'Economic Development', 'Banking Systems', 'Investment Strategies']","['liquidity', 'transmission mechanism', 'monetary policy', 'asset markets', 'empirical evidence', 'quantitative theory', 'model', 'influence', 'match', 'evidence']"
The Elephant in the Room: The Impact of Labor Obligations on Credit Markets,10.1257/aer.20170156,"We show that labor market frictions are first-order for understanding credit markets. Wage growth and labor share forecast aggregate credit spreads and debt growth as well as or better than alternative predictors. They also predict credit risk and debt growth in a cross section of international firms. Finally, high labor share firms choose lower financial leverage. A model with labor market frictions and risky long-term debt can explain these findings, and produce large credit spreads despite realistically low default probabilities. This is because precommitted payments to labor make other committed payments (i.e., interest) riskier. (JEL D33, E23, E24, E25, E44, F23, G32)",AER,2020,102,681,"['Labor Market Dynamics', 'Credit Markets', 'Financial Markets', 'Corporate Governance', 'Monetary Policy']","['labor market frictions', 'credit markets', 'wage growth', 'labor share', 'credit spreads', 'debt growth', 'credit risk', 'financial leverage', 'risky long-term debt', 'default probabilities']"
Expert-Captured Democracies,10.1257/aer.20181396,"Does public cheap talk by a biased expert benefit voters? The answer depends on the nature of democratic institutions and the extent of communication possibilities. Expert endorsements induce office-seeking parties to serve the expert’s interests, hurting voters. Expert advocacy makes policies respond to information, helping voters. Together, policy advocacy and partisan endorsements are often better than either alone. Their interaction creates a delegation benefit that makes indirect democracy superior to direct democracy and office-seeking parties better than those motivated by public interest. But voter welfare is highest when an expert captured technocratic party competes against an uninformed populist one. (JEL D72, D82)",AER,2020,102,735,"['Public Policy', 'Political Risk', 'Economic Development', 'Technological Adoption', 'Corporate Governance']","['public cheap talk', 'biased expert', 'voters', 'democratic institutions', 'communication possibilities', 'expert endorsements', 'office-seeking parties', 'expert advocacy', 'policies', 'indirect democracy']"
Social Ties and the Selection of China's Political Elite,10.1257/aer.20180841,"We study how sharing a hometown or college connection with an incumbent member of China’s Politburo affects a candidate’s likelihood of selection as a new member. In specifications that include fixed effects to absorb quality differences across cities and colleges, we find that hometown and college connections are each associated with 5–9 percentage point reductions in selection probability. This “connections penalty” is equally strong for retiring Politburo members, arguing against quota-based explanations, and it is much stronger for junior Politburo members, consistent with a role for intra-factional competition. Our findings differ from earlier work because of our emphasis on within-group variation, and our focus on shared hometown and college, rather than shared workplace, connections. (JEL D72, O17, P26, Z13)",AER,2020,119,826,"['Political Risk', 'Public Policy', 'Labor Market Dynamics', 'Economic Development', 'Public Finance']","['China', 'Politburo', 'hometown', 'college connection', 'selection probability', 'connections penalty', 'quota-based explanations', 'intra-factional competition', 'shared hometown', 'shared college']"
Revealed Preferences over Risk and Uncertainty,10.1257/aer.20180210,"We develop a nonparametric method, called Generalized Restriction of Infinite Domains (GRID), for testing the consistency of budgetary choice data with models of choice under risk and under uncertainty. Our test can allow for risk-loving and elation-seeking attitudes, or it can require risk aversion. It can also be used to calculate, via Afriat’s efficiency index, the magnitude of violations from a particular model. We evaluate the performance of various models under risk (expected utility, disappointment aversion, rank-dependent utility, and stochastically monotone utility) using data collected from several recent portfolio choice experiments. (JEL C14, D11, D12, D81)",AER,2020,96,677,"['Risk Management', 'Financial Markets', 'Behavioral Economics', 'Data Privacy', 'Economic Development']","['method', 'Generalized Restriction of Infinite Domains', 'testing', 'consistency', 'budgetary choice data', 'models', 'risk', 'uncertainty', 'Afriat’s efficiency index', 'portfolio choice.']"
Is the Cure Worse Than the Disease? Unintended Effects of Payment Reform in a Quantity-Based Transfer Program,10.1257/aer.20160164,"Quantity vouchers are used in redistributive programs to shield participants from price variation and alter their consumption patterns. However, because participants are insensitive to prices, vendors of program goods are incentivized to price discriminate between program and non-program customers. I study these trade-offs in the context of a reform to reduce price discrimination in the Supplemental Nutrition Program for Women, Infants, and Children (WIC), which provides a quantity voucher for nutritious foods to low-income mothers and children. The reform caused vendors to drop out, reducing program take-up. In addition, smaller vendors increased prices charged to non-WIC shoppers by 6.4 percent. (JEL H75, I18, I32, I38, J13, J16)",AER,2020,107,741,"['Social Policy', 'Consumer Behavior', 'Public Policy', 'Economic Development', 'Trade and Globalization']","['quantity vouchers', 'redistributive programs', 'price variation', 'consumption patterns', 'price discrimination', 'Supplemental Nutrition Program', 'WIC', 'reform', 'vendors', 'low-income mothers']"
Regulation by Shaming: Deterrence Effects of Publicizing Violations of Workplace Safety and Health Laws,10.1257/aer.20180501,"Publicizing firms’ socially undesirable actions may enhance firms’ incentives to avoid such actions. In 2009, the Occupational Safety and Health Administration (OSHA) began issuing press releases about facilities that violated safety and health regulations. Using quasi-random variation arising from a cutoff rule OSHA followed, I find that publicizing a facility’s violations led other facilities to substantially improve their compliance and experience fewer occupational injuries. OSHA would need to conduct 210 additional inspections to achieve the same improvement in compliance as achieved with a single press release. Evidence suggests that employers improve compliance to avoid costly responses from workers. (JEL J28, J81, K32, L51, M54)",AER,2020,104,746,"['Public Policy', 'Labor Market Dynamics', 'Regulatory Frameworks', 'Workplace Automation', 'Occupational Safety']","['firms', 'socially undesirable actions', 'Occupational Safety and Health Administration', 'press releases', 'violations', 'compliance', 'occupational injuries', 'inspections', 'employers', 'workers']"
Geographic Dispersion of Economic Shocks: Evidence from the Fracking Revolution: Comment,10.1257/aer.20180888,"Feyrer, Mansur, and Sacerdote (2017) estimates the spatial dispersion of the effects of the recent shale-energy boom by unconditionally regressing income and employment on energy production at various levels of geographic aggregation. However, producing counties tend to be located near each other and receive inward spillovers from neighboring production. This inflates the estimated effect of own-county production and spatial aggregation does not address this. We propose an alternative estimation strategy that accounts for these spillovers and identify reduced propagation effects. The proposed estimation strategy can be applied more generally to estimate the dispersion of multiple, simultaneously occurring economic shocks. (JEL E24, E32, J31, Q35, Q43, R11, R23)",AER,2020,107,771,"['Energy Transition', 'Economic Development', 'Public Policy', 'Labor Market Dynamics', 'Trade and Globalization']","['shale-energy boom', 'spatial dispersion', 'effects', 'energy production', 'geographic aggregation', 'spillovers', 'estimation strategy', 'economic shocks', 'propagation effects', 'inward spillovers.']"
Geographic Dispersion of Economic Shocks: Evidence from the Fracking Revolution: Reply,10.1257/aer.20190448,"Measuring the geographic spillovers from an economic shock remains a challenging econometric problem. In Feyrer, Mansur, and Sacerdote (2017) we study the propagation of positive shocks from the recent boom in oil and gas production in the United States. We regress changes in income per capita on new energy production per capita within increasingly larger geographic circles. James and Smith (2020) proposes instead a single regression of county income per capita on energy production from successively larger donuts around the county. This method controls for production outside of the circle of interest and is likely the appropriate estimation method for estimating the impact of within-county production. Their results suggest that FMS overestimates the impact of new production. We show that we can incorporate similar controls using our basic estimation method and that (unlike James and Smith) these controls do not significantly change our results. To explore these differences, we perform simulation exercises which show that the James-Smith estimation method is biased downward with the heterogeneous population distributions across counties that we observe in the data. (JEL E24, E32, J31, Q35, Q43, R11, R23)",AER,2020,183,1222,"['Energy Transition', 'Economic Development', 'Climate Change Economics', 'Regional Economic Integration', 'Urban Development']","['geographic spillovers', 'economic shock', 'oil and gas production', 'income per capita', 'energy production', 'regression', 'county income', 'estimation method', 'controls', 'simulation exercises']"
A Model of Complex Contracts,10.1257/aer.20190283,"I study a mechanism design problem involving a principal and a single, boundedly rational agent. The agent transitions among belief states by combining current beliefs with up to K pieces of information at a time. By expressing a mechanism as a complex contract—a collection of clauses, each providing limited information about the mechanism—the principal manipulates the agent into believing truthful reporting is optimal. I show that such bounded rationality expands the set of implementable functions and that optimal contracts are robust not only to variation in K, but to several plausible variations on the agent’s cognitive procedure. (JEL D82, D86)",AER,2020,100,656,"['Economic Growth', 'Behavioral Economics', 'Mechanism Design', 'Cognitive Procedures', 'Information Manipulation']","['mechanism design', 'principal', 'agent', 'bounded rationality', 'belief states', 'information', 'mechanism', 'implementable functions', 'optimal contracts', 'cognitive procedure']"
Heterogeneous Beliefs and School Choice Mechanisms,10.1257/aer.20170129,"This paper studies how welfare outcomes in centralized school choice depend on the assignment mechanism when participants are not fully informed. Using a survey of school choice participants in a strategic setting, we show that beliefs about admissions chances differ from rational expectations values and predict choice behavior. To quantify the welfare costs of belief errors, we estimate a model of school choice that incorporates subjective beliefs. We evaluate the equilibrium effects of switching to a strategy-proof deferred acceptance algorithm, and of improving households’ belief accuracy. We find that a switch to truthful reporting in the DA mechanism offers welfare improvements over the baseline given the belief errors we observe in the data, but that an analyst who assumed families had accurate beliefs would have reached the opposite conclusion. (JEL D83, H75, I21, I28)",AER,2020,134,888,"['Educational Equity', 'Behavioral Economics', 'Public Policy', 'Market Transparency', 'Economic Development']","['welfare outcomes', 'centralized school choice', 'assignment mechanism', 'beliefs', 'admissions chances', 'rational expectations', 'choice behavior', 'welfare costs', 'belief errors', 'deferred acceptance algorithm']"
Interest Rates under Falling Stars,10.1257/aer.20171822,"Macro-finance theory implies that trend inflation and the equilibrium real interest rate are fundamental determinants of the yield curve. However, empirical models of the term structure of interest rates generally assume that these fundamentals are constant. We show that accounting for time variation in these underlying long-run trends is crucial for understanding the dynamics of Treasury yields and predicting excess bond returns. We introduce a new arbitrage-free model that captures the key role that long-run trends play in determining interest rates. The model also provides new, more plausible estimates of the term premium and accurate out-of-sample yield forecasts. (JEL E31, E43, E47)",AER,2020,102,696,"['Monetary Policy', 'Financial Markets', 'Economic Development', 'Investment Strategies', 'Debt Management']","['inflation', 'real interest rate', 'yield curve', 'term structure', 'time variation', 'long-run trends', 'Treasury yields', 'excess bond returns', 'arbitrage-free model', 'term premium']"
"Losing Prosociality in the Quest for Talent? Sorting, Selection, and Productivity in the Delivery of Public Services",10.1257/aer.20180326,"We embed a field experiment in a nationwide recruitment drive for a new health care position in Zambia to test whether career benefits attract talent at the expense of prosocial motivation. In line with common wisdom, offering career opportunities attracts less prosocial applicants. However, the trade-off exists only at low levels of talent; the marginal applicants in treatment are more talented and equally prosocial. These are hired, and perform better at every step of the causal chain: they provide more inputs, increase facility utilization, and improve health outcomes including a 25 percent decrease in child malnutrition. (JEL H83, I11, I13, J24, M51, O15, Z13)",AER,2020,104,672,"['Healthcare Innovation', 'Public Policy', 'Economic Development', 'Healthcare Systems', 'Impact Evaluation.']","['field experiment', 'recruitment drive', 'health care', 'Zambia', 'career benefits', 'talent', 'prosocial motivation', 'applicants', 'child malnutrition', 'facility utilization']"
The Reach of Radio: Ending Civil Conflict through Rebel Demobilization,10.1257/aer.20181135,"We examine the role of FM radio in mitigating violent conflict. We collect original data on radio broadcasts encouraging defections during the Lord’s Resistance Army (LRA) insurgency. This constitutes the first quantitative evaluation of an active counterinsurgency policy that encourages defections through radio messages. Exploiting random topography-driven variation in radio coverage along with panel variation at the grid-cell level, we identify the causal effect of messaging on violence. Broadcasting defection messages increases defections and reduces fatalities, violence against civilians, and clashes with security forces. Income shocks have opposing effects on both the conflict and the effectiveness of messaging. (JEL D74, L82, O17)",AER,2020,102,746,"['Public Policy', 'Economic Development', 'Violence', 'Income Inequality', 'Behavioral Economics']","['FM radio', 'violent conflict', 'Lord’s Resistance Army', 'insurgency', 'counterinsurgency policy', 'defections', 'radio messages', 'violence', 'civilians', 'security forces']"
Forced Migration and Human Capital: Evidence from Post-WWII Population Transfers,10.1257/aer.20181518,"We study the long-run effects of forced migration on investment in education. After World War II, millions of Poles were forcibly uprooted from the Kresy territories of eastern Poland and resettled (primarily) in the newly acquired Western Territories, from which the Germans were expelled. We combine historical censuses with newly collected survey data to show that, while there were no pre-WWII differences in educational attainment, Poles with a family history of forced migration are significantly more educated today than other Poles. These results are driven by a shift in preferences away from material possessions toward investment in human capital. (JEL I25, I26, J24, N34, R23)",AER,2020,105,688,"['Investment in Education', 'Economic Development', 'Labor Market Dynamics', 'Educational Equity', 'Public Policy']","['forced migration', 'investment', 'education', 'World War II', 'Poles', 'historical censuses', 'survey data', 'educational attainment', 'human capital', 'preferences']"
Learning under Diverse World Views: Model-Based Inference,10.1257/aer.20190080,"People reason about uncertainty with deliberately incomplete models. How do people hampered by different, incomplete views of the world learn from each other? We introduce a model of “ model-based inference.” Model-based reasoners partition an otherwise hopelessly complex state space into a manageable model. Unless the differences in agents’ models are trivial, interactions will often not lead agents to have common beliefs or beliefs near the correct-model belief. If the agents’ models have enough in common, then interacting will lead agents to similar beliefs, even if their models also exhibit some bizarre idiosyncrasies and their information is widely dispersed. (JEL D82, D83)",AER,2020,102,687,"['Machine Learning Applications', 'Behavioral Economics', 'Economic Policy Evaluation', 'Information Asymmetry', 'Decision Making']","['model-based inference', 'uncertainty', 'incomplete models', 'state space', 'common beliefs', 'correct-model belief', 'interactions', ""agents' models"", 'idiosyncrasies', 'information']"
Do Parents Value School Effectiveness?,10.1257/aer.20172040,"School choice may lead to improvements in school productivity if parents’ choices reward effective schools and punish ineffective ones. This mechanism requires parents to choose schools based on causal effectiveness rather than peer characteristics. We study relationships among parent preferences, peer quality, and causal effects on outcomes for applicants to New York City’s centralized high school assignment mechanism. We use applicants’ rank-ordered choice lists to measure preferences and to construct selection-corrected estimates of treatment effects on test scores, high school graduation, college attendance, and college quality. Parents prefer schools that enroll high-achieving peers, and these schools generate larger improvements in short- and long-run student outcomes. Preferences are unrelated to school effectiveness and academic match quality after controlling for peer quality. (JEL D12, H75, I21, I26, I28)",AER,2020,126,928,"['Educational Equity', 'Labor Market Dynamics', 'Public Policy', 'Economic Development', 'Consumer Behavior']","['school choice', 'parents', 'peer quality', 'causal effects', 'New York City', 'high school assignment', 'preferences', 'test scores', 'college attendance', 'school effectiveness']"
Why Special Economic Zones? Using Trade Policy to Discriminate across Importers,10.1257/aer.20180384,"Tariffs are generally assumed to depend on the product, not the identity of the importer. However, special economic zones are a common, economically important policy used worldwide to lower tariffs on selected goods for selected manufacturers. I show this is motivated by policymakers’ desire to discriminate across buyers when a tax is intended to raise prices for sellers, through a mechanism distinct from existing theories of optimal taxation. Using a new dataset compiled from public records and exogenous changes in imports of intermediate goods, I find the form, composition, and size of US zones are consistent with the theory. (JEL F13, F14, L60, R32)",AER,2020,104,660,"['Trade Policies', 'Taxation', 'Economic Development', 'Public Policy', 'Labor Market Dynamics']","['tariffs', 'special economic zones', 'policymakers', 'discriminate', 'buyers', 'tax', 'optimal taxation', 'dataset', 'intermediate goods', 'US zones']"
Building Nations through Shared Experiences: Evidence from African Football,10.1257/aer.20180805,"We examine whether shared collective experiences help build a national identity, by looking at the impact of national football teams’ victories in sub-Saharan Africa. We find that individuals surveyed in the days after an important victory of their country’s national team are 37 percent less likely to identify primarily with their ethnic group, and 30 percent more likely to trust other ethnicities, than those interviewed just before. Crucially, national team achievements also reduce violence: countries that (barely) qualified to the Africa Cup of Nations experience less civil conflict (9 percent fewer episodes) in the following months than countries that (barely) did not. (JEL D74, J15, L83, O15, O17, Z21)",AER,2020,109,715,"['Social Policy', 'Economic Development', 'Political Risk', 'Public Policy', 'Violence']","['national identity', 'collective experiences', 'national football teams', 'victories', 'sub-Saharan Africa', 'ethnic group', 'trust', 'violence', 'civil conflict', 'Africa Cup of Nations']"
The New Tools of Monetary Policy,10.1257/aer.110.4.943,"To overcome the limits on traditional monetary policy imposed by the effective lower bound on short-term interest rates, in recent years the Federal Reserve and other advanced-economy central banks have deployed new policy tools. This lecture reviews what we know about the new monetary tools, focusing on quantitative easing (QE) and forward guidance, the principal new tools used by the Fed. I argue that the new tools have proven effective at easing financial conditions when policy rates are constrained by the lower bound, even when financial markets are functioning normally, and that they can be made even more effective in the future. Accordingly, the new tools should become part of the standard central bank toolkit. Simulations of the Fed’s FRB/US model suggest that, if the nominal neutral interest rate is in the range of 2–3 percent, consistent with most estimates for the United States, then a combination of QE and forward guidance can provide the equivalent of roughly 3 percentage points of policy space, largely offsetting the effects of the lower bound. If the neutral rate is much lower, however, then overcoming the effects of the lower bound may require additional measures, such as a moderate increase in the inflation target or greater reliance on fiscal policy for economic stabilization. (JEL D78, E31, E43, E52, E58, E62)",AER,2020,217,1349,"['Monetary Policy', 'Financial Markets', 'Fiscal Policy', 'Economic Development', 'Inflation Trends']","['monetary policy', 'Federal Reserve', 'central banks', 'quantitative easing', 'forward guidance', 'financial conditions', 'policy rates', 'lower bound', 'interest rates', 'inflation target']"
Targeted Debt Relief and the Origins of Financial Distress: Experimental Evidence from Distressed Credit Card Borrowers,10.1257/aer.20171541,"We study the drivers of financial distress using a large-scale field experiment that offered randomly selected borrowers a combination of (i) immediate payment reductions to target short-run liquidity write-downs to target long-run debt constraints. We identify the separate effects of the payment reductions and interest write-downs using both the experiment and cross-sectional variation in treatment intensity. We find that the interest write-downs significantly improved both financial and labor market outcomes, despite not taking effect for three to five years. In sharp contrast, there were no positive effects of the more immediate payment reductions. These results run counter to the widespread view that financial distress is largely the result of short-run constraints. (JEL G56, K35)",AER,2020,114,795,"['Financial Markets', 'Risk Management', 'Labor Market Dynamics', 'Debt Management', 'Economic Development']","['financial distress', 'field experiment', 'payment reductions', 'interest write-downs', 'debt constraints', 'labor market outcomes', 'treatment intensity', 'short-run constraints', 'long-run debt', 'borrowers']"
The Effects of Income Transparency on Well-Being: Evidence from a Natural Experiment,10.1257/aer.20160256,"In 2001, Norwegian tax records became easily accessible online, allowing everyone in the country to observe the incomes of everyone else. According to the income comparisons model, this change in transparency can widen the gap in well-being between richer and poorer individuals. Using survey data from 1985–2013 and multiple identification strategies, we show that the higher transparency increased the gap in happiness between richer and poorer individuals by 29 percent, and it increased the life satisfaction gap by 21 percent. We provide back-of-the-envelope estimates of the importance of income comparisons, and discuss implications for the ongoing debate on transparency policies. (JEL D31, H24, I31, K34)",AER,2020,105,713,"['Taxation', 'Income Inequality', 'Public Policy', 'Market Transparency', 'Economic Development']","['Norwegian', 'tax records', 'online', 'incomes', 'transparency', 'well-being', 'happiness', 'life satisfaction', 'income comparisons', 'transparency policies']"
Industrial Espionage and Productivity,10.1257/aer.20171732,"In this paper, we investigate the economic returns to industrial espionage. We show that the flow of information provided by East German informants in the West over the period 1970–1989 led to a significant narrowing of sectoral TFP gaps between West and East Germany. These economic returns were primarily driven by relatively few high-quality pieces of information and particularly large in sectors closer to the West German technological frontier. Our findings suggest that the East-to-West German TFP ratio would have been 13.3 percent lower at the end of the Cold War had East Germany not engaged in industrial espionage in the West. (JEL L16, N44, O33, O38, O47, P24)",AER,2020,109,673,"['Productivity', 'Economic Growth', 'Trade and Globalization', 'Industrial Policy', 'Economic Development']","['economic returns', 'industrial espionage', 'East German informants', 'TFP gaps', 'West Germany', 'technological frontier', 'Cold War', 'sectors', 'information', 'East Germany']"
Are Ideas Getting Harder to Find?,10.1257/aer.20180338,"Long-run growth in many models is the product of two terms: the effective number of researchers and their research productivity. We present evidence from various industries, products, and firms showing that research effort is rising substantially while research productivity is declining sharply. A good example is Moore’s Law. The number of researchers required today to achieve the famous doubling of computer chip density is more than 18 times larger than the number required in the early 1970s. More generally, everywhere we look we find that ideas, and the exponential growth they imply, are getting harder to find. (JEL D24, E23, O31, O47)",AER,2020,102,645,"['Productivity', 'Technological Adoption', 'Innovation', 'Economic Growth', 'Digital Transformation']","['researchers', 'research productivity', 'industries', 'products', 'firms', ""Moore's Law"", 'computer chip density', 'ideas', 'exponential growth', 'JEL D24']"
Who Acquires Information in Dealer Markets?,10.1257/aer.20170690,"We study information acquisition in dealer markets. We first identify a one-sided strategic complementarity in information acquisition: the more informed traders are, the larger market makers’ gain from becoming informed. When quotes are observable, this effect in turn induces a strategic complementarity in information acquisition amongst market makers. We then derive the equilibrium pattern of information acquisition and examine the implications of our analysis for market liquidity and price discovery. We show that increasing the cost of information can decrease market liquidity and improve price discovery. (JEL O82, O83, G14)",AER,2020,90,635,"['Financial Markets', 'Market Transparency', 'Monetary Policy', 'Economic Development', 'Regulatory Frameworks']","['information acquisition', 'dealer markets', 'strategic complementarity', 'market makers', 'quotes', 'observable', 'equilibrium', 'market liquidity', 'price discovery', 'cost of information']"
Time Discounting and Wealth Inequality,10.1257/aer.20181096,"This paper documents a large association between individuals’ time discounting in incentivized experiments and their positions in the real-life wealth distribution derived from Danish high-quality administrative data for a large sample of middle-aged individuals. The association is stable over time, exists through the wealth distribution and remains large after controlling for education, income profile, school grades, initial wealth, parental wealth, credit constraints, demographics, risk preferences, and additional behavioral parameters. Our results suggest that savings behavior is a driver of the observed association between patience and wealth inequality as predicted by standard savings theory. (JEL C91, D15, D31, E21)",AER,2020,98,731,"['Income Inequality', 'Savings Behavior', 'Wealth Distribution', 'Behavioral Economics', 'Economic Development']","['time discounting', 'incentivized experiments', 'wealth distribution', 'Danish', 'administrative data', 'middle-aged individuals', 'savings behavior', 'wealth inequality', 'standard savings theory', 'education']"
"A Theory of Experimenters: Robustness, Randomization, and Balance",10.1257/aer.20171634,"This paper studies the problem of experiment design by an ambiguity-averse decision-maker who trades off subjective expected performance against robust performance guarantees. This framework accounts for real-world experimenters’ preference for randomization. It also clarifies the circumstances in which randomization is optimal: when the available sample size is large and robustness is an important concern. We apply our model to shed light on the practice of rerandomization, used to improve balance across treatment and control groups. We show that rerandomization creates a trade-off between subjective performance and robust performance guarantees. However, robust performance guarantees diminish very slowly with the number of rerandomizations. This suggests that moderate levels of rerandomization usefully expand the set of acceptable compromises between subjective performance and robustness. Targeting a fixed quantile of balance is safer than targeting an absolute balance objective. (JEL C90, D81)",AER,2020,137,1011,"['Experimental Design', 'Rerandomization', 'Robustness', 'Decision-making under Ambiguity', 'Balance Improvement']","['experiment design', 'ambiguity-averse decision-maker', 'subjective performance', 'robust performance guarantees', 'randomization', 'sample size', 'rerandomization', 'balance', 'compromise', 'quantile']"
Steering the Climate System: Using Inertia to Lower the Cost of Policy: Comment,10.1257/aer.20190089,"Lemoine and Rudik (2017) argues that it is efficient to delay reducing carbon emissions, due to supposed inertia in the climate system’s response to emissions. This conclusion rests upon misunderstanding the relevant earth system modeling: there is no substantial lag between CO<jats:sub>2</jats:sub> emissions and warming. Applying a representation of the earth system that captures the range of responses seen in complex earth system models invalidates the original article’s implications for climate policy. The least-cost policy path that limits warming to 2°C implies that the carbon price starts high and increases at the interest rate. It cannot rely on climate inertia to delay reducing and allow greater cumulative emissions. (JEL H23, Q54, Q58)",AER,2020,112,754,"['Climate Change Economics', 'Carbon Pricing', 'Environmental Sustainability', 'Economic Policy Evaluation', 'Fiscal Policy']","['carbon emissions', 'climate system', 'earth system modeling', 'CO2 emissions', 'warming', 'climate policy', 'least-cost policy', 'carbon price', 'interest rate', 'cumulative emissions']"
Steering the Climate System: Using Inertia to Lower the Cost of Policy: Reply,10.1257/aer.20191814,"Mattauch et al. (2020) claims that the quantitative conclusions in Lemoine and Rudik (2017)—henceforth, LR17—are not robust to using a climate model consistent with recent scientific results. We observe that LR17 in fact analyzes an extension to a more realistic carbon model that generates an efficient emission tax trajectory very similar to that in Mattauch et al. (2020), and we here show that simplifications in the temperature model of LR17 do not qualitatively affect their policy conclusions. Accounting for inertia reduces the initial emission tax by 42 percent and reduces the present value of abatement cost by 39 percent. (JEL H23, Q54, Q58)",AER,2020,103,653,"['Climate Change Economics', 'Carbon Pricing', 'Public Policy', 'Taxation', 'Environmental Sustainability']","['climate model', 'carbon model', 'emission tax', 'trajectory', 'temperature model', 'policy conclusions', 'inertia', 'abatement cost', 'scientific results', 'quantitative conclusions']"
The Welfare Effects of Social Media,10.1257/aer.20190658,"The rise of social media has provoked both optimism about potential societal benefits and concern about harms such as addiction, depression, and political polarization. In a randomized experiment, we find that deactivating Facebook for the four weeks before the 2018 US midterm election (i) reduced online activity, while increasing offline activities such as watching TV alone and socializing with family and friends; (ii) reduced both factual news knowledge and political polarization; (iii) increased subjective well-being; and post-experiment Facebook use. Deactivation reduced post-experiment valuations of Facebook, suggesting that traditional metrics may overstate consumer surplus. (JEL D12, D72, D90, I31, L82, L86, Z13)",AER,2020,101,729,"['Social Policy', 'Public Policy', 'Consumer Behavior', 'Economic Development', 'Digital Transformation']","['social media', 'Facebook', 'addiction', 'depression', 'political polarization', 'experiment', 'US midterm election', 'offline activities', 'subjective well-being', 'consumer surplus']"
Dominant Currency Paradigm,10.1257/aer.20171201,"We propose a “dominant currency paradigm” with three key features: dominant currency pricing, pricing complementarities, and imported inputs in production. We test this paradigm using a new dataset of bilateral price and volume indices for more than 2,500 country pairs that covers 91 percent of world trade, as well as detailed firm-product-country data for Colombian exports and imports. In strong support of the paradigm we find that (i) noncommodities terms-of-trade are uncorrelated with exchange rates; (ii) the dollar exchange rate quantitatively dominates the bilateral exchange rate in price pass-through and trade elasticity regressions, and this effect is increasing in the share of imports invoiced in dollars; (iii) US import volumes are significantly less sensitive to bilateral exchange rates, compared to other countries’ imports; (iv) a 1 percent US dollar appreciation against all other currencies predicts a 0.6 percent decline within a year in the volume of total trade between countries in the rest of the world, controlling for the global business cycle. We characterize the transmission of, and spillovers from, monetary policy shocks in this environment. (JEL E52, F14, F31, F44)",AER,2020,181,1203,"['Trade and Globalization', 'Monetary Policy', 'Global Supply Chains', 'Economic Development', 'Financial Markets']","['dominant currency paradigm', 'pricing complementarities', 'imported inputs', 'bilateral price indices', 'volume indices', 'exchange rates', 'price pass-through', 'trade elasticity', 'US dollar appreciation', 'monetary policy shocks.']"
Segmented Housing Search,10.1257/aer.20141772,"We study housing markets with multiple segments searched by heterogeneous clienteles. In the San Francisco Bay Area, search activity and inventory covary negatively across cities, but positively across market segments within cities. A quantitative search model shows how the endogenous flow of broad searchers to high-inventory segments within their search ranges induces a positive relationship between inventory and search activity across segments with a large common clientele. The prevalence of broad searchers shapes the response of housing markets to localized supply and demand shocks. Broad searchers help spread shocks across many segments and reduce their effect on local market activity. (JEL D83, R21, R31)",AER,2020,104,718,"['Housing Market Trends', 'Urban Development', 'Economic Development', 'Public Policy', 'Labor Market Dynamics']","['housing markets', 'segments', 'clienteles', 'San Francisco Bay Area', 'search activity', 'inventory', 'quantitative search model', 'broad searchers', 'supply and demand shocks', 'market activity']"
Nondogmatic Social Discounting,10.1257/aer.20161007,"The long-run social discount rate has an enormous effect on the value of climate mitigation, infrastructure projects, and other long-term public policies. Its value is however highly contested, in part because of normative disagreements about social time preferences. I develop a theory of “nondogmatic” social planners, who are insecure in their current normative judgments and entertain the possibility that they may change. Although each nondogmatic planner advocates an idiosyncratic theory of intertemporal social welfare, all such planners agree on the long-run social discount rate. Nondogmatism thus goes some way toward resolving normative disagreements, especially for long-term public projects. (JEL D61, H43)",AER,2020,101,720,"['Public Policy', 'Climate Change Economics', 'Social Policy', 'Economic Growth', 'Public Finance']","['social discount rate', 'climate mitigation', 'infrastructure projects', 'long-term public policies', 'normative disagreements', 'social time preferences', 'nondogmatic social planners', 'intertemporal social welfare', 'long-term public projects', 'normative disagreements']"
Endogenous Monitoring in a Partnership Game,10.1257/aer.20161491,"I consider a repeated game in which, due to imperfect monitoring, no collusion can be sustained. I add a self-interested monitor who commits to obtain private signals of firms’ actions and sends a public message. The monitor makes an offer specifying the precision of the signals obtained and the amount to be paid in return. First, with a low monitoring cost, collusive equilibria exist. Second, collusive equilibria are monitor-preferred. Third, in monitor-preferred equilibria, firms’ payoffs are decreasing in the discount factor. My model helps explain cartel agreements between self-interested parties and firms in legal industries in the United States and Europe. (JEL C73, D43, D82, L12)",AER,2020,106,695,"['Corporate Governance', 'Cartel Agreements', 'Legal Industries', 'Collusive Equilibria', 'Public Policy']","['repeated game', 'imperfect monitoring', 'collusion', 'self-interested monitor', 'private signals', 'public message', 'monitoring cost', 'equilibria', 'discount factor', 'cartel agreements']"
Rural Roads and Local Economic Development,10.1257/aer.20180268,"Nearly one billion people worldwide live in rural areas without access to national paved road networks. We estimate the impacts of India’s $40 billion national rural road construction program using a fuzzy regression discontinuity design and comprehensive household and firm census microdata. Four years after road construction, the main effect of new feeder roads is to facilitate the movement of workers out of agriculture. However, there are no major changes in agricultural outcomes, income, or assets. Employment in village firms expands only slightly. Even with better market connections, remote areas may continue to lack economic opportunities. (JEL J43, O13, O18, R23, R42)",AER,2020,102,682,"['Rural Development', 'Labor Market Dynamics', 'Economic Development', 'Infrastructure Development', 'Public Policy']","['national paved road networks', 'rural areas', 'India', 'national rural road construction program', 'feeder roads', 'agriculture', 'income', 'assets', 'employment', 'economic opportunities']"
"Maternal Depression, Women's Empowerment, and Parental Investment: Evidence from a Randomized Controlled Trial",10.1257/aer.20180511,"We evaluate the medium-term impacts of treating maternal depression on women’s mental health, financial empowerment, and parenting decisions. We leverage variation induced by a cluster-randomized controlled trial that provided psychotherapy to 903 prenatally depressed mothers in rural Pakistan. It was one of the world’s largest psych otherapy interventions, and it dramatically reduced postpartum depression. Seven years after psychotherapy concluded, we returned to the study site to find that impacts on women’s mental health had persisted, with a 17 percent reduction in depression rates. The intervention also improved women’s financial empowerment and increased both time- and money-intensive parental investments by between 0.2 and 0.3 standard deviations. (JEL G51, I12, J16, O15)",AER,2020,110,789,"['Mental Health Economics', 'Healthcare Innovation', 'Gender Equality', 'Financial Empowerment', 'Parenting Decisions']","['maternal depression', ""women's mental health"", 'financial empowerment', 'parenting decisions', 'psychotherapy', 'cluster-randomized controlled trial', 'postpartum depression', 'rural Pakistan', 'parental investments', 'intervention']"
"Fiscal Rules, Bailouts, and Reputation in Federal Governments",10.1257/aer.20181432,"Expectations of transfers by central governments incentivize overborrowing by local governments. In this paper, we ask if fiscal rules can reduce overborrowing if central governments cannot commit to enforce penalties when rules are violated. We study a model in which the central government’s type is unknown and show that fiscal rules increase overborrowing if the central government’s reputation is low. In contrast, fiscal rules are effective in lowering debt if the central government’s reputation is high. Even when the central government’s reputation is low, binding fiscal rules will arise in the equilibrium of a signaling game. (JEL E62, H62, H63, H77, H81)",AER,2020,102,667,"['Fiscal Policy', 'Public Finance', 'Debt Management', 'Regulatory Frameworks', 'Economic Development']","['transfers', 'central governments', 'overborrowing', 'fiscal rules', 'local governments', 'penalties', 'reputation', 'debt', 'equilibrium', 'signaling game']"
Raising Capital from Heterogeneous Investors,10.1257/aer.20190234,"A firm raises capital from multiple investors to fund a project. The project succeeds only if the capital raised exceeds a stochastic threshold, and the firm offers payments contingent on success. We study the firm’s optimal unique-implementation scheme, namely the scheme that guarantees the firm the maximum payoff. This scheme treats investors differently based on size. We show that if the distribution of the investment threshold is log-concave, larger investors receive higher net returns than smaller investors. Moreover, higher dispersion in investor size increases the firm’s payoff. Our analysis highlights strategic risk as an important potential driver of inequality. (JEL D21, D86, G24, G32)",AER,2020,104,704,"['Risk Management', 'Financial Markets', 'Income Inequality', 'Corporate Governance', 'Investment Strategies']","['firm', 'capital', 'investors', 'project', 'threshold', 'payments', 'scheme', 'distribution', 'risk', 'inequality']"
The Race to the Base,10.1257/aer.20181606,"We study multi-district legislative elections between two office-seeking parties when one party has an initial valence advantage that may shift and even reverse during the campaign; and, each party cares not only about winning a majority, but also about its share of seats. When the initial imbalance favoring one party is small, each party targets the median voter. For moderate imbalances, the advantaged party maintains the centre-ground, but the disadvantaged party retreats to target its core supporters; and for large imbalances, the advantaged party advances toward its opponent, raiding its moderate supporters in pursuit of an outsized majority. (JEL D72)",AER,2020,100,664,"['Political Risk', 'Public Policy', 'Behavioral Economics', 'Electoral Politics', 'Labor Market Dynamics']","['multi-district legislative elections', 'valence advantage', 'campaign', 'majority', 'share of seats', 'imbalance', 'median voter', 'advantaged party', 'disadvantaged party', 'supporters']"
The Dynamics of Motivated Beliefs,10.1257/aer.20180728,"A key question in the literature on motivated reasoning and self-deception is how motivated beliefs are sustained in the presence of feedback. In this paper, we explore dynamic motivated belief patterns after feedback. We establish that positive feedback has a persistent effect on beliefs. Negative feedback, instead, influences beliefs in the short run, but this effect fades over time. We investigate the mechanisms of this dynamic pattern, and provide evidence for an asymmetry in the recall of feedback. Finally, we establish that, in line with theoretical accounts, incentives for belief accuracy mitigate the role of motivated reasoning. (JEL C91, D83, D91)",AER,2020,101,664,"['Behavioral Economics', 'Motivated Reasoning', 'Feedback Mechanisms', 'Incentives', 'Financial Markets']","['motivated reasoning', 'self-deception', 'feedback', 'beliefs', 'positive feedback', 'negative feedback', 'dynamic pattern', 'asymmetry', 'recall', 'incentives']"
Outsourcing Education: Experimental Evidence from Liberia,10.1257/aer.20181478,"In 2016, the Liberian government delegated management of 93 randomly selected public schools to private providers. Providers received US$50 per pupil, on top of US$50 per pupil annual expenditure in control schools. After one academic year, students in outsourced schools scored 0.18 σ higher in English and mathematics. We do not find heterogeneity in learning gains or enrollment by student characteristics, but there is significant heterogeneity across providers. While outsourcing appears to be a cost-effective way to use new resources to improve test scores, some providers engaged in unforeseen and potentially harmful behavior, complicating any assessment of welfare gains. (JEL H41, I21, I28, O15)",AER,2020,104,706,"['Educational Equity', 'Public Policy', 'Economic Development', 'Public Finance', 'Economic Policy Evaluation']","['Liberian government', 'public schools', 'private providers', 'academic year', 'learning gains', 'enrollment', 'test scores', 'cost-effective', 'providers', 'welfare gains.']"
"Factory Productivity and the Concession System of Incorporation in Late Imperial Russia, 1894–1908",10.1257/aer.20151656,"In Imperial Russia, incorporation required an expensive special concession, yet over 4,000 Russian firms incorporated before 1914. I identify the characteristics of incorporating firms and measure the productivity gains and growth in machine power enjoyed by corporations using newly-constructed factory-level panel data compiled from Russian factory censuses. Factories owned by corporations were larger, more productive, and more mechanized than unincorporated factories. Higher productivity factories were more likely to incorporate and, after incorporating, added machine power and became even more labor productive. Russian firms sought the corporate form’s full set of advantages, not just stock markets access, to obtain scarce long-term financing. (JEL D24, G31, G32, L60, N43, N63)",AER,2020,108,790,"['Productivity', 'Economic Growth', 'Financial Markets', 'Corporate Governance', 'Capital Allocation']","['Imperial Russia', 'incorporation', 'Russian firms', 'productivity gains', 'growth', 'machine power', 'corporations', 'factory-level panel data', 'stock markets access', 'long-term financing']"
Bargaining and News,10.1257/aer.20181316,"We study a bargaining model in which a buyer makes frequent offers to a privately informed seller, while gradually learning about the seller’s type from “news.” We show that the buyer’s ability to leverage this information to extract more surplus from the seller is remarkably limited. In fact, the buyer gains nothing from the ability to negotiate a better price despite the fact that a negotiation must take place in equilibrium. During the negotiation, the buyer engages in a form of costly “experimentation” by making offers that are sure to earn her negative payoffs if accepted, but speed up learning and improve her continuation payoff if rejected. We investigate the effects of market power by comparing our results to a setting with competitive buyers. Both efficiency and the seller’s payoff can decrease by introducing competition among buyers. (JEL C78, D82, D83)",AER,2020,141,875,"['Labor Market Dynamics', 'Market Transparency', 'Economic Development', 'Consumer Behavior', 'Competitive Strategies']","['bargaining model', 'buyer', 'seller', 'information', 'surplus', 'negotiation', 'experimentation', 'market power', 'competition', 'payoff']"
Loss in the Time of Cholera: Long-Run Impact of a Disease Epidemic on the Urban Landscape,10.1257/aer.20190759,"How do geographically concentrated income shocks influence the long-run spatial distribution of poverty within a city? We examine the impact on housing prices of a cholera epidemic in one neighborhood of nineteenth century London. Ten years after the epidemic, housing prices are significantly lower just inside the catchment area of the water pump that transmitted the disease. Moreover, differences in housing prices persist over the following 160 years. We make sense of these patterns by building a model of a rental market with frictions in which poor tenants exert a negative externality on their neighbors. This showcases how a locally concentrated income shock can persistently change the tenant composition of a block. (JEL D62, O18, R21, R31)",AER,2020,117,752,"['Housing Market Trends', 'Urban Development', 'Income Inequality', 'Economic Development', 'Labor Market Dynamics']","['geographically concentrated income shocks', 'spatial distribution', 'poverty', 'housing prices', 'cholera epidemic', 'London', 'catchment area', 'water pump', 'rental market', 'tenant composition']"
A Single-Judge Solution to Beauty Contests,10.1257/aer.20170519,"We show that the equilibrium policy rule in beauty contest models is equivalent to that of a single agent’s forecast of the economic fundamental. This forecast is conditional on a modified information process, which simply discounts the precision of idiosyncratic shocks by the degree of strategic complementarity. The result holds for any linear Gaussian signal process (static or persistent, stationary or nonstationary, exogenous or endogenous), and also extends to network games. Theoretically, this result provides a sharp characterization of the equilibrium and its properties under dynamic information. Practically, it provides a straightforward method to solve models with complicated information structures. (JEL C72, D82, D83, D84)",AER,2020,105,741,"['Monetary Policy', 'Economic Development', 'Business Strategy', 'Information Economics', 'Network Games']","['equilibrium policy rule', 'beauty contest models', 'single agent', 'forecast', 'economic fundamental', 'information process', 'strategic complementarity', 'linear Gaussian signal process', 'network games', 'dynamic information']"
Online Privacy and Information Disclosure by Consumers,10.1257/aer.20181052,"I study the welfare and price implications of consumer privacy. A consumer discloses information to a multiproduct seller, which learns about his preferences, sets prices, and makes product recommendations. Although the consumer benefits from accurate recommendations, the seller may use the information to price discriminate. I show that the seller prefers to commit to not use information for pricing in order to encourage information disclosure. However, this commitment hurts the consumer, who could be better off by precommitting to withhold some information. In contrast to single-product models, total surplus may be lower if the seller can base prices on information. (JEL D11, D83, L81, M31)",AER,2020,105,700,"['Consumer Behavior', 'Data Privacy', 'Pricing', 'Information Disclosure', 'Market Transparency']","['consumer privacy', 'welfare', 'price implications', 'multiproduct seller', 'information disclosure', 'price discrimination', 'total surplus', 'product recommendations', 'commitment', 'information withholding']"
Strategyproof Choice of Social Acts,10.1257/aer.20171553,"We model uncertain social prospects as acts mapping states of nature to (social ) outcomes. A social choice function (or SCF ) assigns an act to each profile of subjective expected utility preferences over acts. An SCF is strategyproof if no agent ever has an incentive to misrepresent her beliefs about the states of nature or her valuation of the outcomes. It is unanimous if it picks the feasible act that all agents find best whenever such an act exists. We offer a characterization of the class of strategyproof and unanimous SCFs in two settings. In the setting where all acts are feasible, the chosen act must yield the favorite outcome of some ( possibly different) agent in every state of nature. The set of states in which an agent’s favorite outcome is selected may vary with the reported belief profile; it is the union of all states assigned to her by a collection of constant, bilaterally dictatorial, or bilaterally consensual assignment rules. In a setting where each state of nature defines a possibly different subset of available outcomes, bilaterally dictatorial or consensual rules can only be used to assign control rights over states characterized by identical sets of available outcomes. (JEL D71, D81, R53)",AER,2020,205,1231,"['Social Policy', 'Economic Development', 'Public Policy', 'Labor Market Dynamics', 'Market Transparency']","['social prospects', 'acts', 'states of nature', 'social choice function', 'SCF', 'strategyproof', 'unanimous', 'subjective expected utility preferences', 'feasible act', 'valuation']"
Putting the Cycle Back into Business Cycle Analysis,10.1257/aer.20190789,"Are business cycles mainly a response to persistent exogenous shocks, or do they instead reflect a strong endogenous mechanism which produces recurrent boom-bust phenomena? In this paper we present evidence in favor of the second interpretation and we highlight the set of key elements that influence our answer. The elements that tend to favor this type of interpretation of business cycles are (i) slightly extending the frequency window one associates with business cycle phenomena, (ii) allowing for strategic complementarities across agents that arise due to financial frictions, and (iii) allowing for a locally unstable steady state in estimation. (JEL E22, E24, E23, E44)",AER,2020,103,679,"['Monetary Policy', 'Financial Markets', 'Business Strategy', 'Economic Development', 'Credit Markets']","['business cycles', 'exogenous shocks', 'endogenous mechanism', 'recurrent', 'boom-bust phenomena', 'strategic complementarities', 'financial frictions', 'steady state', 'estimation', 'evidence']"
Estimating the Production Function for Human Capital: Results from a Randomized Controlled Trial in Colombia,10.1257/aer.20150183,"We examine the channels through which a randomized early childhood intervention in Colombia led to significant gains in cognitive and socio-emotional skills among a sample of disadvantaged children aged 12 to 24 months at baseline. We estimate the determinants of parents’ material and time investments in these children and evaluate the impact of the treatment on such investments. We then estimate the production functions for cognitive and socio-emotional skills. The effects of the program can be explained by increases in parental investments, emphasizing the importance of parenting interventions at an early age. (JEL I24, I28, J13, J24, O15)",AER,2020,98,649,"['Educational Equity', 'Parenting Interventions', 'Cognitive Skills', 'Socio-emotional Skills', 'Public Policy']","['early childhood intervention', 'Colombia', 'cognitive skills', 'socio-emotional skills', 'disadvantaged children', ""parents' investments"", 'production functions', 'parenting interventions', 'parental investments', 'program effects']"
Positive Long-Run Capital Taxation: Chamley-Judd Revisited,10.1257/aer.20150210,"According to the Chamley-Judd result, capital should not be taxed in the long run. In this paper, we overturn this conclusion, showing that it does not follow from the very models used to derive it. For the main model in Judd (1985), we prove that the long-run tax on capital is positive and significant, whenever the intertemporal elasticity of substitution is below one. For higher elasticities, the tax converges to zero but may do so at a slow rate, after centuries of high tax rates. The main model in Chamley (1986) imposes an upper bound on capital taxes. We provide conditions under which these constraints bind forever, implying positive long-run taxes. When this is not the case, the long-run tax may be zero. However, if preferences are recursive and discounting is locally nonconstant (e.g., not additively separable over time), a zero long-run capital tax limit must be accompanied by zero private wealth (zero tax base) or by zero labor taxes (first-best). Finally, we explain why the equivalence of a positive capital tax with ever-increasing consumption taxes does not provide a firm rationale against capital taxation. (JEL H21, H25)",AER,2020,188,1150,"['Taxation', 'Capital Allocation', 'Public Policy', 'Economic Growth', 'Fiscal Policy']","['Chamley-Judd result', 'capital taxation', 'long-run tax', 'intertemporal elasticity of substitution', 'recursive preferences', 'discounting', 'private wealth', 'labor taxes', 'consumption taxes', 'capital taxation rationale']"
"Regulating Innovation with Uncertain Quality: Information, Risk, and Access in Medical Devices",10.1257/aer.20180946,"We study the impact of regulating product entry and quality information requirements on an oligopoly equilibrium and consumer welfare. Product testing can reduce consumer uncertainty, but also increase entry costs and delay entry. Using variation between EU and US medical device regulations, we document patterns consistent with valuable learning from more stringent US requirements. To derive welfare implications, we pair the data with a model of supply, demand, and testing regulation. US policy is indistinguishable from the policy that maximizes total surplus in our estimated model, while the European Union could benefit from more testing. “Post-market surveillance” could further increase surplus. (JEL D43, I18, L13, L51, L64, O31, O38)",AER,2020,109,746,"['Regulatory Frameworks', 'Healthcare Systems', 'Economic Development', 'Public Policy', 'Consumer Behavior']","['regulating', 'product entry', 'quality information', 'oligopoly equilibrium', 'consumer welfare', 'product testing', 'EU', 'US', 'medical device regulations', 'total surplus']"
Efficient Child Care Subsidies,10.1257/aer.20170581,"We study the design of child care subsidies in an optimal welfare problem with heterogeneous private market productivities. The optimal subsidy schedule is qualitatively similar to the existing US scheme. Efficiency mandates a subsidy on formal child care costs, with higher subsidies paid to lower income earners and a kink as a function of child care expenditure. Marginal labor income tax rates are set lower than the labor wedges, with the potential to generate negative marginal tax rates. We calibrate our simple model to features of the US labor market and focus on single mothers with children aged below 6. The optimal program provides stronger participation but milder intensive margin incentives for low-income earners with subsidy rates starting very high and decreasing with income more steeply than those in the United States. (JEL D82, H21, H24, J13, J16, J32)",AER,2020,139,875,"['Public Policy', 'Labor Market Dynamics', 'Social Policy', 'Taxation', 'Economic Development']","['child care subsidies', 'optimal welfare problem', 'heterogeneous', 'subsidy schedule', 'formal child care costs', 'labor income tax rates', 'US labor market', 'single mothers', 'participation', 'low-income earners']"
Way Down in the Hole: Adaptation to Long-Term Water Loss in Rural India,10.1257/aer.20180976,"Worsening environmental conditions threaten to undermine progress in reducing rural poverty. Little is known, however, about the prospects for farmer adaptations to mitigate this threat, in particular through opportunities for income diversification presented by recent non-agricultural growth. We study the effects of increasing water scarcity in India using quasi-random, geologically determined differences in access to groundwater. The drying up of wells results in a precipitous and persistent decline in farm income and wealth, with little evidence of agricultural adaptation. However, labor reallocation to off-farm employment appears successful in maintaining overall income, particularly in locations with a more developed manufacturing sector. (JEL O13, O18, Q12, Q15, Q18, Q25, Q28)",AER,2020,108,793,"['Water Resource Management', 'Environmental Sustainability', 'Labor Market Dynamics', 'Economic Development', 'Climate Change Economics']","['environmental conditions', 'rural poverty', 'farmer adaptations', 'income diversification', 'water scarcity', 'India', 'groundwater access', 'farm income', 'off-farm employment', 'manufacturing sector']"
Diffusion Games,10.1257/aer.20180601,"Behaviors and information often spread via person-to-person diffusion. This paper highlights how diffusion processes can facilitate coordination. I study contagion in a discrete network with Bayesian players. In addition to characterizing the extent and rate of adoption, we uncover a new effect: when large cascades are possible in equilibrium, exposure conveys information about a player’s network position. This effect underscores a novel trade-off in the design of marketing campaigns, suggesting conditions under which word-of-mouth is relatively more effective. A generalization of the model to multi-type networks suggests a new approach to targeted seeding. (JEL D83, D85, M31, M37, Z13)",AER,2020,99,695,"['Technological Adoption', 'Consumer Behavior', 'Marketing Campaigns', 'Social Policy', 'Trade and Globalization']","['diffusion', 'coordination', 'contagion', 'discrete network', 'Bayesian players', 'adoption', 'cascades', 'exposure', 'information', 'word-of-mouth.']"
Diffusing Coordination Risk,10.1257/aer.20171034,"In a regime change game, privately informed agents sequentially decide whether to attack without observing others’ previous actions. To dissuade them from attacking, a principal adopts a dynamic information disclosure policy, frequent viability tests. A viability test publicly discloses whether the regime has survived the previous attacks. When such tests are sufficiently frequent, in the unique cutoff equilibrium, agents never attack if the regime passes the latest test, regardless of their private signals. We apply this theory to demonstrate that a borrower can eliminate panic-based runs by sufficiently diffusing the rollover choices across different maturity dates. (JEL C72, D82, G21)",AER,2020,100,696,"['Financial Markets', 'Risk Management', 'Credit Markets', 'Monetary Policy', 'Debt Management']","['regime change game', 'privately informed agents', 'attack', 'dynamic information disclosure policy', 'viability tests', 'cutoff equilibrium', 'private signals', 'theory', 'borrower', 'panic-based runs']"
Optimal Taxation with Behavioral Agents,10.1257/aer.20151079,"This paper develops a theory of optimal taxation with behavioral agents. We use a general framework that encompasses a wide range of biases such as misperceptions and internalities. We revisit the three pillars of optimal taxation: Ramsey (linear commodity taxation to raise revenues and redistribute), Pigou (linear commodity taxation to correct externalities), and Mirrlees (nonlinear income taxation). We show how the canonical optimal tax formulas are modified and lead to novel economic insights. We also show how to incorporate nudges in the optimal taxation framework, and jointly characterize optimal taxes and nudges. (JEL D62, D91, H21)",AER,2020,96,646,"['Taxation', 'Behavioral Economics', 'Public Policy', 'Economic Development', 'Fiscal Policy']","['optimal taxation', 'behavioral agents', 'biases', 'misperceptions', 'internalities', 'Ramsey', 'Pigou', 'Mirrlees', 'economic insights', 'nudges']"
Trading Against the Random Expiration of Private Information: A Natural Experiment,10.1111/jofi.12844,"For years, the Securities and Exchange Commission (SEC) accidentally distributed securities disclosures to some investors before the public. We exploit this setting, which is unique because the delay until public disclosure was exogenous and the private information window was well defined, to study informed trading with a random stopping time. Trading intensity and the pace at which prices incorporate information decrease with the expected delay until public release, but the relation between trading intensity and time elapsed varies with traders' learning process. Noise trading and relative information advantage play similar roles as in standard microstructure theories assuming a fixed time window.",JoF,2020,101,707,"['Financial Markets', 'Market Transparency', 'Monetary Policy', 'Behavioral Economics', 'Corporate Governance']","['Securities and Exchange Commission', 'SEC', 'securities disclosures', 'informed trading', 'random stopping time', 'public disclosure', 'trading intensity', 'prices', 'information', 'microstructure theories']"
Access to Collateral and the Democratization of Credit: France's Reform of the Napoleonic Security Code,10.1111/jofi.12846,"France's <jats:italic>Ordonnance 2006‐346</jats:italic> repudiated the notion of <jats:italic>possessory ownership</jats:italic> in the Napoleonic Code, easing the pledge of physical assets in a country where credit was highly concentrated. A differences‐test strategy shows that firms operating newly pledgeable assets significantly increased their borrowing following the reform. Small, young, and financially constrained businesses benefitted the most, observing improved credit access and real‐side outcomes. Start‐ups emerged with higher “at‐inception” leverage, located farther from large cities, with more assets‐in‐place than before. Their exit and bankruptcy rates declined. Spatial analyses show that the reform reached firms in rural areas, reducing credit access inequality across France's countryside.",JoF,2020,100,814,"['Credit Markets', 'Financial Markets', 'Economic Development', 'Startups and Innovation', 'Urban Development']","['Ordonnance 2006‐346', 'possessory ownership', 'Napoleonic Code', 'physical assets', 'credit', 'borrowing', 'small businesses', 'start-ups', 'leverage', 'rural areas.']"
Words Speak Louder without Actions,10.1111/jofi.12834,"Information and control rights are central aspects of leadership, management, and corporate governance. This paper studies a principal‐agent model that features both communication and intervention as alternative means to exert influence. The main result shows that a principal's power to intervene in an agent's decision limits the ability of the principal to effectively communicate her private information. The perverse effect of intervention on communication can harm the principal, especially when the cost of intervention is low or the underlying agency problem is severe. These novel results are applied to managerial leadership, corporate boards, private equity, and shareholder activism.",JoF,2020,98,695,"['Corporate Governance', 'Leadership', 'Intervention', 'Communication', 'Principal-Agent Model']","['leadership', 'management', 'corporate governance', 'principal-agent model', 'communication', 'intervention', 'influence', 'private information', 'agency problem', 'shareholder activism']"
Learning from Coworkers: Peer Effects on Individual Investment Decisions,10.1111/jofi.12830,"Using unique data on employee stock purchase plans (ESPPs), we examine the influence of networks on investment decisions. Comparing employees within a firm during the same election window with metro area fixed effects, we find that the choices of coworkers in the firm's ESPP exert a significant influence on employees’ own decisions to participate and trade. Moreover, we find that the presence of high‐information employees magnifies the effects of peer networks. Given participation in an ESPP is value‐maximizing, our analysis suggests the potential of networks and targeted investor education to improve financial decision‐making.",JoF,2020,93,635,"['Financial Markets', 'Investment Strategies', 'Behavioral Economics', 'Consumer Finance', 'Educational Equity']","['employee stock purchase plans', 'ESPPs', 'networks', 'investment decisions', 'coworkers', 'metro area fixed effects', 'peer networks', 'high-information employees', 'participation', 'financial decision-making']"
Why Don't We Agree? Evidence from a Social Network of Investors,10.1111/jofi.12852,"We study sources of investor disagreement using sentiment of investors from a social media investing platform, combined with information on the users' investment approaches (e.g., technical, fundamental). We examine how much of overall disagreement is driven by different information sets versus differential interpretation of information by studying disagreement within and across investment approaches. Overall disagreement is evenly split between both sources of disagreement, but within‐group disagreement is more tightly related to trading volume than cross‐group disagreement. Although both sources of disagreement are important, our findings suggest that information differences are more important for trading than differences across market approaches.",JoF,2020,99,759,"['Financial Markets', 'Investment Strategies', 'Market Transparency', 'Information Differences', 'Trading Volume']","['investor disagreement', 'sentiment', 'social media', 'investment approaches', 'technical', 'fundamental', 'information sets', 'interpretation', 'trading volume', 'market approaches']"
The Impact of Salience on Investor Behavior: Evidence from a Natural Experiment,10.1111/jofi.12851,"We test whether the display of information causally affects investor behavior in a high‐stakes trading environment. Using investor‐level brokerage data from China and a natural experiment, we estimate the impact of a shock that increased the salience of a stock's purchase price but did not change the investor's information set. We employ a difference‐in‐differences approach and find that the salience shock causally increased the disposition effect by 17%. We use microdata to document substantial heterogeneity across investors in the treatment effect. A previously documented trading pattern, the “rank effect,” explains heterogeneity in the change in the disposition effect.",JoF,2020,98,680,"['Financial Markets', 'Investor Behavior', 'Behavioral Economics', 'Market Transparency', 'Investment Strategies']","['investor behavior', 'information display', 'high-stakes trading', 'brokerage data', 'China', 'natural experiment', 'salience shock', 'disposition effect', 'heterogeneity', 'rank effect']"
Stimulating Housing Markets,10.1111/jofi.12847,"We study temporary fiscal stimulus designed to support distressed housing markets by inducing demand from buyers in the private market. Using difference‐in‐differences and regression kink research designs, we find that the First‐Time Homebuyer Credit increased home sales by 490,000 (9.8%), median home prices by $2,400 (1.1%) per standard deviation increase in program exposure, and the transition rate into homeownership by 53%. The policy response did not reverse immediately. Instead, demand comes from several years in the future: induced buyers were three years younger in 2009 than typical first‐time buyers. The program's market‐stabilizing benefits likely exceeded its direct stimulus effects.",JoF,2020,99,702,"['Fiscal Policy', 'Housing Market Trends', 'Economic Development', 'Public Policy', 'Consumer Behavior']","['fiscal stimulus', 'distressed housing markets', 'private market', 'First-Time Homebuyer Credit', 'home sales', 'median home prices', 'program exposure', 'transition rate', 'homeownership', 'market-stabilizing benefits']"
Houses as ATMs: Mortgage Refinancing and Macroeconomic Uncertainty,10.1111/jofi.12842,"Mortgage refinancing activity associated with extraction of home equity contains a strongly countercyclical component consistent with household demand for liquidity. We estimate a structural model of liquidity management featuring countercyclical idiosyncratic labor income uncertainty, long‐ and short‐term mortgages, and realistic borrowing constraints. We empirically evaluate its predictions for households' choices of leverage, liquid assets, and mortgage refinancing using microlevel data. Taking the observed historical paths of house prices, aggregate income, and interest rates as given, the model accounts for many salient features in the evolution of balance sheets and consumption in the cross‐section of households over 2001 to 2012.",JoF,2020,99,746,"['Housing Market Trends', 'Financial Markets', 'Risk Management', 'Debt Management', 'Labor Market Dynamics']","['mortgage', 'refinancing', 'home equity', 'countercyclical', 'liquidity', 'structural model', 'idiosyncratic labor income uncertainty', 'borrowing constraints', 'leverage', 'consumption']"
A Tale of Two Premiums: The Role of Hedgers and Speculators in Commodity Futures Markets,10.1111/jofi.12845,"This paper studies the dynamic interaction between the net positions of traders and risk premiums in commodity futures markets. Short‐term position changes are driven mainly by the liquidity demands of noncommercial traders, while long‐term variation is driven primarily by the hedging demands of commercial traders. These two components influence expected futures returns with opposite signs. The gains from providing liquidity by commercials largely offset the premium they pay for obtaining price insurance.",JoF,2020,72,510,"['Financial Markets', 'Risk Management', 'Commodity Markets', 'Hedging', 'Liquidity Management']","['traders', 'risk premiums', 'commodity futures markets', 'position changes', 'liquidity demands', 'noncommercial traders', 'hedging demands', 'commercial traders', 'expected futures returns', 'price insurance']"
"Pledgeability, Industry Liquidity, and Financing Cycles",10.1111/jofi.12831,"Why do firms choose high debt when they anticipate high valuations, and underperform subsequently? We propose a theory of financing cycles where the importance of creditors’ control rights over cash flows (“pledgeability”) varies with industry liquidity. The market allows firms take on more debt when they anticipate higher future liquidity. However, both high anticipated liquidity and the resulting high debt limit their incentives to enhance pledgeability. This has prolonged adverse effects in a downturn. Because these effects are hard to contract upon, higher anticipated liquidity can also reduce a firm's current access to finance.",JoF,2020,94,640,"['Debt Management', 'Financial Markets', 'Corporate Governance', 'Credit Markets', 'Monetary Policy']","['firms', 'debt', 'valuations', 'financing cycles', 'creditors', 'control rights', 'pledgeability', 'industry liquidity', 'anticipated liquidity', 'downturn']"
The Insurance Is the Lemon: Failing to Index Contracts,10.1111/jofi.12856,"We model the widespread failure of contracts to share risk using available indices. A borrower and lender can share risk by conditioning repayments on an index. The lender has private information about the ability of this index to measure the true state that the borrower would like to hedge. The lender is risk‐averse and thus requires a premium to insure the borrower. The borrower, however, might be paying something for nothing if the index is a poor measure of the true state. We provide sufficient conditions for this effect to cause the borrower to choose a nonindexed contract instead.",JoF,2020,99,593,"['Risk Management', 'Financial Markets', 'Credit Markets', 'Contracting', 'Information Asymmetry']","['failure', 'contracts', 'risk', 'indices', 'borrower', 'lender', 'repayments', 'index', 'hedge', 'nonindexed']"
Robust Inference for Consumption‐Based Asset Pricing,10.1111/jofi.12855,"The reliability of traditional asset pricing tests depends on: (i) the correlations between asset returns and factors; (ii) the time series sample size <jats:italic>T</jats:italic> compared to the number of assets <jats:italic>N</jats:italic>. For macro‐risk factors, like consumption growth, (i) and (ii) are often such that traditional tests cannot be trusted. We extend the Gibbons‐Ross‐Shanken statistic to test identification of risk premia and construct their 95% confidence sets. These sets are wide or unbounded when <jats:italic>T</jats:italic> and <jats:italic>N</jats:italic> are close, but show that average returns are not fully spanned by betas when <jats:italic>T</jats:italic> exceeds <jats:italic>N</jats:italic> considerably. Our findings indicate when meaningful empirical inference is feasible.",JoF,2020,103,814,"['Financial Markets', 'Risk Management', 'Economic Development', 'Investment Strategies', 'Economic Policy Evaluation']","['reliability', 'asset pricing', 'correlations', 'factors', 'time series', 'sample size', 'macro-risk factors', 'risk premia', 'identification', 'confidence sets']"
On Comparing Asset Pricing Models,10.1111/jofi.12854,"Revisiting the framework of (Barillas, Francisco, and Jay Shanken, 2018, Comparing asset pricing models, <jats:italic>The Journal of Finance</jats:italic> 73, 715–754). BS henceforth, we show that the Bayesian marginal likelihood‐based model comparison method in that paper is unsound : the priors on the nuisance parameters across models must satisfy a change of variable property for densities that is violated by the Jeffreys priors used in the BS method. Extensive simulation exercises confirm that the BS method performs unsatisfactorily. We derive a new class of improper priors on the nuisance parameters, <jats:italic>starting from a single improper prior</jats:italic>, which leads to valid marginal likelihoods and model comparisons. The performance of our marginal likelihoods is significantly better, allowing for reliable Bayesian work on which factors are risk factors in asset pricing models.",JoF,2020,128,907,"['Bayesian Work', 'Asset Pricing Models', 'Risk Factors', 'Financial Markets', 'Model Comparison']","['framework', 'asset pricing models', 'Bayesian', 'marginal likelihood', 'model comparison', 'priors', 'nuisance parameters', 'Jeffreys priors', 'simulation exercises', 'risk factors']"
Brokers and Order Flow Leakage: Evidence from Fire Sales,10.1111/jofi.12840,"Using trade‐level data, we study whether brokers play a role in spreading order flow information in the stock market. We focus on large portfolio liquidations that result in temporary price drops, and identify the brokers who intermediate these trades. These brokers’ clients are more likely to predate on the liquidating funds than to provide liquidity. Predation leads to profits of about 25 basis points over 10 days and increases the liquidation costs of the distressed fund by 40%. This evidence suggests a role of information leakage in exacerbating fire sales.",JoF,2020,90,567,"['Financial Markets', 'Market Transparency', 'Investment Strategies', 'Risk Management', 'Capital Allocation']","['brokers', 'order flow information', 'stock market', 'portfolio liquidations', 'price drops', 'intermediaries', 'predation', 'profits', 'information leakage', 'fire sales']"
What Is a Patent Worth? Evidence from the U.S. Patent “Lottery”,10.1111/jofi.12867,"We provide evidence on the value of patents to startups by leveraging the quasi‐random assignment of applications to examiners with different propensities to grant patents. Using unique data on all first‐time applications filed at the U.S. Patent Office since 2001, we find that startups that win the patent “lottery” by drawing lenient examiners have, on average, 55% higher employment growth and 80% higher sales growth five years later. Patent winners also pursue more, and higher quality, follow‐on innovation. Winning a first patent boosts a startup’s subsequent growth and innovation by facilitating access to funding from venture capitalists, banks, and public investors.",JoF,2020,101,678,"['Startups and Innovation', 'Venture Capital', 'Economic Growth', 'Financial Markets', 'Innovation']","['patents', 'startups', 'value', 'employment growth', 'sales growth', 'innovation', 'patent lottery', 'examiners', 'funding', 'venture capitalists']"
Relationship Trading in Over‐the‐Counter Markets,10.1111/jofi.12864,"We examine the network of trading relationships between insurers and dealers in the over‐the‐counter (OTC) corporate bond market. Regulatory data show that one‐third of insurers use a single dealer, whereas other insurers have large dealer networks. Execution prices are nonmonotone in network size, initially declining with more dealers but increasing once networks exceed 20 dealers. A model of decentralized trade in which insurers trade off the benefits of repeat business and faster execution quantitatively fits the distribution of insurers' network size and explains the price–network size relationship. Counterfactual analysis shows that regulations to unbundle trade and nontrade services can decrease welfare.",JoF,2020,101,719,"['Financial Markets', 'Regulatory Frameworks', 'Trade and Globalization', 'Economic Development', 'Public Policy']","['network', 'trading relationships', 'insurers', 'dealers', 'over-the-counter', 'corporate bond market', 'execution prices', 'decentralized trade', 'regulations', 'welfare']"
Tax‐Efficient Asset Management: Evidence from Equity Mutual Funds,10.1111/jofi.12843,"We investigate the relation between tax burdens and mutual fund performance from both a theoretical and an empirical perspective. The theoretical model introduces heterogeneous tax clienteles in an environment with decreasing returns to scale and shows that the equilibrium performance of mutual funds depends on the size of the tax clienteles. Our empirical results show that the performance of U.S. equity mutual funds is related to their tax burdens. We find that tax‐efficient funds exhibit not only superior after‐tax performance, but also superior before‐tax performance due to lower trading costs, favorable style exposures, and better selectivity.",JoF,2020,96,655,"['Taxation', 'Financial Markets', 'Investment Strategies', 'Fiscal Policy', 'Economic Development']","['tax burdens', 'mutual fund performance', 'theoretical model', 'heterogeneous tax clienteles', 'decreasing returns to scale', 'empirical results', 'U.S. equity mutual funds', 'tax-efficient funds', 'after-tax performance', 'trading costs']"
Measuring Innovation and Product Differentiation: Evidence from Mutual Funds,10.1111/jofi.12853,"We study innovation and product differentiation using a uniqueness measure based on textual analysis of prospectuses. We find that small and start‐up families have higher start rates than larger families, and their products are more unique. Unique strategies attract more inflows in the first three years, and investors respond more to text‐based uniqueness than other measures such as holdings or returns uniqueness. For established funds, word uniqueness has weak negative power for explaining returns, so investors in competitive equilibrium do not sacrifice much performance to get specialized products. Uniqueness attenuates the flow‐performance relation, reducing the risk of investor outflows.",JoF,2020,99,700,"['Innovation', 'Financial Markets', 'Investment Strategies', 'Venture Capital', 'Business Strategy']","['innovation', 'product differentiation', 'uniqueness measure', 'textual analysis', 'prospectuses', 'start-up families', 'inflows', 'investors', 'returns uniqueness', 'flow-performance relation']"
Beyond Random Assignment: Credible Inference and Extrapolation in Dynamic Economies,10.1111/jofi.12862,"We derive analytical relationships between shock responses and theory‐implied causal effects (comparative statics) in dynamic settings with linear profits and linear‐quadratic stock accumulation costs. For permanent profitability shocks, responses can have incorrect signs, undershoot, or overshoot depending on the size and sign of realized changes. For profitability shocks that are i.i.d., uniformly distributed, binary, or unanticipated and temporary, there is attenuation bias, which exceeds 50% under plausible parameterizations. We derive a novel sufficient condition for profitability shock responses to equal causal effects: martingale profitability. We establish a battery of sufficient conditions for correct sign estimation, including stochastic monotonicity. Simple extrapolation/error correction formulas are presented.",JoF,2020,104,833,"['Financial Markets', 'Economic Growth', 'Risk Management', 'Monetary Policy', 'Economic Development']","['shock responses', 'theory-implied', 'causal effects', 'dynamic settings', 'linear profits', 'linear-quadratic', 'stock accumulation costs', 'profitability shocks', 'attenuation bias', 'martingale profitability']"
The Market for Conflicted Advice,10.1111/jofi.12848,"We present a model of the market for advice in which advisers have conflicts of interest and compete for heterogeneous customers through information provision. The competitive equilibrium features information dispersion and partial disclosure. Although conflicted fees lead to distorted information, they are irrelevant for customers' welfare: banning conflicted fees improves only the information quality, not customers' welfare. Instead, financial literacy education for the least informed customers can improve all customers' welfare because of a spillover effect. Furthermore, customers who trade through advisers realize lower average returns, which rationalizes empirical findings.",JoF,2020,90,687,"['Financial Markets', 'Consumer Behavior', 'Investment Strategies', 'Financial Literacy', 'Economic Development']","['market', 'advice', 'conflicts of interest', 'information provision', 'competitive equilibrium', 'information dispersion', 'partial disclosure', 'conflicted fees', 'financial literacy education', 'average returns']"
Does Borrowing from Banks Cost More than Borrowing from the Market?,10.1111/jofi.12849,"This paper investigates the pricing of bank loans relative to capital market debt. The analysis uses a novel sample of loans matched with bond spreads from the same firm on the same date. After accounting for seniority, lenders earn a large premium relative to the bond‐implied credit spread. In a sample of secured term loans to noninvestment‐grade firms, the average premium is 140 to 170 bps or about half of the all‐in‐drawn spread. This is the first direct evidence of firms' willingness to pay for bank credit and raises questions about the nature of competition in the loan market.",JoF,2020,99,588,"['Credit Markets', 'Banking Systems', 'Market Transparency', 'Financial Markets', 'Competition']","['bank loans', 'capital market debt', 'pricing', 'bond spreads', 'credit spread', 'seniority', 'premium', 'secured term loans', 'noninvestment-grade firms', 'competition']"
How Does Credit Supply Expansion Affect the Real Economy? The Productive Capacity and Household Demand Channels,10.1111/jofi.12869,"Credit supply expansion can affect an economy by increasing productive capacity or by boosting household demand. In this study, we develop a test to determine if the household demand channel is present, and we implement the test using both a natural experiment in the United States in the 1980s and an international panel of 56 countries over the last several decades. Consistent with the importance of the household demand channel, we find that credit supply expansion boosts nontradable sector employment and the price of nontradable goods, with limited effects on tradable sector employment. Such credit expansions amplify the business cycle and lead to more severe recessions.",JoF,2020,106,680,"['Credit Markets', 'Labor Market Dynamics', 'Economic Growth', 'Monetary Policy', 'Business Strategy']","['credit supply expansion', 'economy', 'productive capacity', 'household demand', 'natural experiment', 'United States', 'international panel', 'nontradable sector employment', 'tradable sector employment', 'business cycle']"
Shorting in Speculative Markets,10.1111/jofi.12871,"In models of trading with heterogeneous beliefs following Harrison‐Kreps, short selling is prohibited and agents face constant marginal costs‐of‐carry. The resale option guarantees that prices exceed buy‐and‐hold prices and the difference is identified as a bubble. We propose a model where risk‐neutral agents face asymmetric increasing marginal costs on long and short positions. Here, agents also value an option to delay, and a Hamilton‐Jacobi‐Bellman equation quantifies the influence of costs on prices. An unexpected decrease in shorting costs may deflate a bubble, linking financial innovations that facilitated shorting of mortgage‐backed securities to the collapse of prices.",JoF,2020,96,685,"['Financial Markets', 'Risk Management', 'Credit Markets', 'Housing Market Trends', 'Innovation']","['trading', 'heterogeneous beliefs', 'short selling', 'constant marginal costs', 'bubble', 'risk-neutral agents', 'asymmetric', 'Hamilton-Jacobi-Bellman equation', 'shorting costs', 'financial innovations']"
"Securitization, Ratings, and Credit Supply",10.1111/jofi.12866,"We develop a framework to explore the effect of credit ratings on loan origination. We show that ratings endogenously shift the economy from a<jats:italic>signaling</jats:italic>equilibrium, in which banks inefficiently retain loans to signal quality, toward an<jats:italic>originate‐to‐distribute</jats:italic>equilibrium with zero retention and inefficiently low lending standards. Ratings increase overall efficiency, provided that the reduction in costly retention more than compensates for the origination of some negative net present value loans. We study how banks' ability to screen loans affects these predictions and use the model to analyze commonly proposed policies such as mandatory “skin in the game.”",JoF,2020,94,716,"['Credit Markets', 'Banking Systems', 'Financial Markets', 'Regulatory Frameworks', 'Monetary Policy']","['credit ratings', 'loan origination', 'signaling equilibrium', 'originate-to-distribute equilibrium', 'retention', 'lending standards', 'efficiency', 'screening loans', 'policies', 'skin in the game']"
Glued to the TV: Distracted Noise Traders and Stock Market Liquidity,10.1111/jofi.12863,"In this paper, we study the impact of noise traders’ limited attention on financial markets. Specifically, we exploit episodes of sensational news (exogenous to the market) that distract noise traders. We find that on “distraction days,” trading activity, liquidity, and volatility decrease, and prices reverse less among stocks owned predominantly by noise traders. These outcomes contrast sharply with those due to the inattention of informed speculators and market makers, and are consistent with noise traders mitigating adverse selection risk. We discuss the evolution of these outcomes over time and the role of technological changes.",JoF,2020,94,640,"['Financial Markets', 'Risk Management', 'Behavioral Economics', 'Market Transparency', 'Technological Adoption']","['noise traders', 'limited attention', 'financial markets', 'sensational news', 'distraction days', 'trading activity', 'liquidity', 'volatility', 'adverse selection risk', 'technological changes']"
Informed Trading and Intertemporal Substitution,10.1111/jofi.12857,"I examine the possibility of information‐based trading in a multiperiod consumption setting. I develop a necessary and sufficient condition for trade to occur. Intertemporal substitution introduces a desire to correlate current consumption with future aggregate shocks. When agents have heterogeneous time‐inseparable preferences, information differentially affects relative preferences for current and future consumption, making information‐based trading mutually acceptable. The no‐trade result continues to hold if there is no aggregate shock, or if agents have either homogeneous or time‐separable preferences.",JoF,2020,78,614,"['Financial Markets', 'Trade and Globalization', 'Consumer Behavior', 'Information-Based Trading', 'Intertemporal Substitution']","['information-based trading', 'multiperiod consumption', 'intertemporal substitution', 'heterogeneous preferences', 'relative preferences', 'aggregate shocks', 'trade', 'no-trade result', 'time-separable preferences', 'mutual acceptance']"
Corporate Control around the World,10.1111/jofi.12889,"We study corporate control tracing controlling shareholders for thousands of listed firms from 127 countries over 2004 to 2012. Government and family control is pervasive in civil‐law countries. Blocks are commonplace, but less so in common‐law countries. These patterns apply to large, medium, and small firms. In contrast, the development‐control nexus is heterogeneous; strong for large but absent for small firms. Control correlates strongly with shareholder protection, the stringency of employment contracts and unions power. Conversely, the correlations with creditor rights, legal formalism, and entry regulation appear weak. These patterns support both legal origin and political theories of financial development.",JoF,2020,100,723,"['Corporate Governance', 'Financial Markets', 'Economic Development', 'Labor Market Dynamics', 'Regulatory Frameworks']","['corporate control', 'controlling shareholders', 'listed firms', 'countries', 'government control', 'family control', 'civil-law countries', 'common-law countries', 'shareholder protection', 'financial development']"
Can Unemployment Insurance Spur Entrepreneurial Activity? Evidence from France,10.1111/jofi.12880,"We evaluate the effect of downside insurance on self‐employment. We exploit a large‐scale reform of French unemployment benefits that insured unemployed workers starting businesses. The reform significantly increased firm creation without decreasing the quality of new entrants. Firms started postreform were initially smaller, but their employment growth, productivity, and survival rates are similar to those prereform. New entrepreneurs' characteristics and expectations are also similar. Finally, jobs created by new entrants crowd out employment in incumbent firms almost one‐for‐one, but have a higher productivity than incumbents. These results highlight the benefits of encouraging experimentation by lowering barriers to entry.",JoF,2020,98,736,"['Entrepreneurship', 'Labor Market Dynamics', 'Economic Growth', 'Public Policy', 'Innovation']","['downside insurance', 'self-employment', 'French unemployment benefits', 'firm creation', 'new entrants', 'employment growth', 'productivity', 'survival rates', 'entrepreneurs', 'barriers to entry']"
Drilling and Debt,10.1111/jofi.12884,"This paper documents a previously unrecognized debt‐related investment distortion. Using detailed project‐level data for 69 firms in the oil and gas industry, we find that highly levered firms pull forward investment, completing projects early at the expense of long‐run project returns and project value. This behavior is particularly pronounced prior to debt renegotiations. We test several channels that could explain this behavior and find evidence consistent with equity holders sacrificing long‐run project returns to enhance collateral values and, by extension, mitigate lending frictions at debt renegotiations.",JoF,2020,86,619,"['Debt Management', 'Investment Strategies', 'Financial Markets', 'Risk Management', 'Corporate Governance']","['debt-related', 'investment distortion', 'oil and gas industry', 'levered firms', 'project returns', 'project value', 'debt renegotiations', 'equity holders', 'collateral values', 'lending frictions']"
Taming the Factor Zoo: A Test of New Factors,10.1111/jofi.12883,"We propose a model selection method to systematically evaluate the contribution to asset pricing of any new factor, above and beyond what a high‐dimensional set of existing factors explains. Our methodology accounts for <jats:italic>model selection mistakes</jats:italic> that produce a bias due to omitted variables, unlike standard approaches that assume perfect variable selection. We apply our procedure to a set of factors recently discovered in the literature. While most of these new factors are shown to be redundant relative to the existing factors, a few have statistically significant explanatory power beyond the hundreds of factors proposed in the past.",JoF,2020,98,666,"['Financial Markets', 'Risk Management', 'Investment Strategies', 'Economic Development', 'Market Transparency']","['model selection', 'asset pricing', 'methodology', 'omitted variables', 'bias', 'existing factors', 'redundant', 'statistically significant', 'explanatory power', 'new factors']"
Lazy Prices,10.1111/jofi.12885,"Using the complete history of regular quarterly and annual filings by U.S. corporations, we show that changes to the language and construction of financial reports have strong implications for firms’ future returns and operations. A portfolio that shorts “changers” and buys “nonchangers” earns up to 188 basis points per month in alpha (over 22% per year) in the future. Moreover, changes to 10‐Ks predict future earnings, profitability, future news announcements, and even future firm‐level bankruptcies. Unlike typical underreaction patterns, we find no announcement effect, suggesting that investors are inattentive to these simple changes across the universe of public firms.",JoF,2020,99,680,"['Financial Markets', 'Corporate Governance', 'Investment Strategies', 'Economic Development', 'Market Transparency']","['changes', 'language', 'construction', 'financial reports', 'future returns', 'operations', 'earnings', 'profitability', 'bankruptcies', 'investors']"
What Drives Anomaly Returns?,10.1111/jofi.12876,"We decompose the returns of five well‐known anomalies into cash flow and discount rate news. Common patterns emerge across the five factor portfolios and their mean‐variance efficient (MVE) combination. Whereas discount rate news predominates in market returns, systematic cash flow news drives the returns of anomaly portfolios and their MVE combination with the market portfolio. Anomaly cash flow and discount rate shocks are largely uncorrelated with market cash flow and discount rate shocks and with business cycle fluctuations. These rich empirical patterns restrict the joint dynamics of firm cash flows and the pricing kernel, thereby informing models of stocks' expected returns.",JoF,2020,101,689,"['Financial Markets', 'Risk Management', 'Economic Growth', 'Investment Strategies', 'Monetary Policy']","['returns', 'anomalies', 'cash flow', 'discount rate', 'news', 'factor portfolios', 'mean-variance efficient', 'MVE combination', 'market portfolio', 'pricing kernel']"
Necessary and Sufficient Conditions for Existence and Uniqueness of Recursive Utilities,10.1111/jofi.12877,"We obtain exact necessary and sufficient conditions for existence and uniqueness of solutions of a class of homothetic recursive utility models postulated by Epstein and Zin. The conditions center on a single test value with a natural economic interpretation. The test sheds light on the relationship between valuation of cash flows, impatience, risk adjustment, and intertemporal substitution of consumption. We propose two methods to compute the test value when an analytical solution is not available. We further provide several applications.",JoF,2020,80,545,"['Financial Markets', 'Risk Management', 'Consumer Behavior', 'Investment Strategies', 'Economic Development']","['existence', 'uniqueness', 'solutions', 'homothetic', 'recursive utility models', 'Epstein', 'Zin', 'valuation', 'impatience', 'risk adjustment']"
High‐Frequency Trading and Market Performance,10.1111/jofi.12882,"We study the consequences of, and potential policy responses to, high‐frequency trading (HFT) via the tradeoff between liquidity and information production. Faster speeds facilitate HFT, with consequences for this tradeoff: Information production decreases because informed traders have less time to trade before HFTs react, but liquidity (measured by the bid‐ask spread) improves because informational asymmetries decline. HFT also pushes outcomes inside the frontier of this tradeoff. However, outcomes can be restored to the frontier by replacing the limit order book with one of two alternative mechanisms: delaying all orders except cancellations or implementing frequent batch auctions.",JoF,2020,96,692,"['Financial Markets', 'High-Frequency Trading', 'Liquidity', 'Information Production', 'Market Mechanisms']","['high‐frequency trading', 'liquidity', 'information production', 'bid‐ask spread', 'informed traders', 'informational asymmetries', 'limit order book', 'delay orders', 'cancellations', 'batch auctions']"
Venturing beyond the IPO: Financing of Newly Public Firms by Venture Capitalists,10.1111/jofi.12879,"Contrary to conventional wisdom, we document that approximately 15% of venture capitalist (VC)‐backed firms raise additional capital from VCs in the five years after going public. We propose two explanations for why firms revert to VC financing post‐IPO (initial public offering). First, we hypothesize that VC participation in post‐IPO financing represents an efficient solution to informational problems that would otherwise constrain firms’ abilities to exploit value‐increasing investments. Analyses of firm and VC characteristics, together with the finding that these investments are value‐increasing for both VCs and the underlying companies, support this hypothesis. We find no support for the alternative that agency conflicts motivate these investments.",JoF,2020,105,762,"['Venture Capital', 'Corporate Governance', 'Financial Markets', 'Investment Strategies', 'Entrepreneurship']","['venture capitalist', 'firms', 'capital', 'financing', 'IPO', 'investments', 'VCs', 'value-increasing', 'agency conflicts', 'informational problems']"
Insider Investment Horizon,10.1111/jofi.12878,"We examine the relation between insiders’ investment horizon and the information content of their trades with respect to future stock returns. We conjecture that an insider's investment horizon establishes a benchmark for expected patterns of continued trading behavior and thus helps identify unexpected insider trades, which should be more informative in efficient markets. Consistent with this conjecture, the trades of short‐horizon insiders are both more unexpected and more informed, on average, than those of long‐horizon insiders. Short‐horizon insiders and their firms also tend to display characteristics that are associated with a greater focus on short‐termism.",JoF,2020,95,673,"['Financial Markets', 'Corporate Governance', 'Investment Strategies', 'Short-Termism', 'Insider Trading']","['insiders', 'investment horizon', 'information content', 'trades', 'stock returns', 'insider trades', 'efficient markets', 'short-horizon insiders', 'long-horizon insiders', 'short-termism']"
How Skilled Are Security Analysts?,10.1111/jofi.12890,"The majority of security analysts are identified as skilled when the cross‐section of analyst performance is modeled as a mixture of multiple skill distributions. Analysts exhibit heterogeneous skill—some are high‐type, and some are low‐type. On average, the recommendation revisions of both types exhibit positive abnormal returns. The heterogeneity stems from differential ability to produce new information; all analysts can profitably process news. Top analysts outperform because more of their recommendations are influential (i.e., associated with statistically significant returns) and both their influential and noninfluential recommendations are more informative. A majority of research firms are also identified as skilled.",JoF,2020,98,733,"['Financial Markets', 'Investment Strategies', 'Corporate Governance', 'Analyst Performance', 'Research Firms']","['security analysts', 'skill distributions', 'heterogeneous skill', 'recommendation revisions', 'abnormal returns', 'new information', 'profitably process news', 'influential recommendations', 'noninfluential recommendations', 'research firms']"
Consumption Fluctuations and Expected Returns,10.1111/jofi.12870,"This paper introduces a novel consumption‐based variable, cyclical consumption, and examines its predictive properties for stock returns. Future expected stock returns are high (low) when aggregate consumption falls (rises) relative to its trend and marginal utility from current consumption is high (low). We show that the empirical evidence ties consumption decisions of agents to time variation in returns in a manner consistent with asset pricing models based on external habit formation. The predictive power of cyclical consumption is not confined to bad times and subsumes the predictability of many popular forecasting variables.",JoF,2020,92,637,"['Financial Markets', 'Consumer Behavior', 'Asset Pricing Models', 'Forecasting Variables', 'Consumption-Based Variable']","['cyclical consumption', 'stock returns', 'predictive properties', 'aggregate consumption', 'marginal utility', 'asset pricing models', 'external habit formation', 'empirical evidence', 'time variation', 'forecasting variables']"
Star Ratings and the Incentives of Mutual Funds,10.1111/jofi.12888,"We propose a theory of reputation to explain how investors rationally respond to mutual fund star ratings. A fund's performance is determined by its information advantage, which can be acquired but decays stochastically. Investors form beliefs about whether the fund is informed based on its past performance. We refer to such beliefs as fund reputation, which determines fund flows. As performance changes continuously, equilibrium fund reputation may take discrete values only and thus can be labeled with stars. Star upgrades thus imply reputation jumps, leading to discrete increases in flows and expected performance, although stars do not provide new information.",JoF,2020,100,669,"['Financial Markets', 'Investment Strategies', 'Behavioral Economics', 'Market Transparency', 'Consumer Behavior']","['reputation', 'investors', 'mutual fund', 'star ratings', 'performance', 'information advantage', 'beliefs', 'fund flows', 'equilibrium', 'stars']"
Presidential Address: Social Transmission Bias in Economics and Finance,10.1111/jofi.12906,"I discuss a new intellectual paradigm, <jats:italic>social economics and finance</jats:italic>—the study of the social processes that shape economic thinking and behavior. This emerging field recognizes that people observe and talk to each other. A key, underexploited building block of social economics and finance is <jats:italic>social transmission bias</jats:italic>: systematic directional shift in signals or ideas induced by social transactions. I use five “fables” (models) to illustrate the novelty and scope of the transmission bias approach, and offer several emergent themes. For example, social transmission bias compounds recursively, which can help explain booms, bubbles, return anomalies, and swings in economic sentiment.",JoF,2020,99,739,"['Social Economics', 'Financial Markets', 'Behavioral Economics', 'Economic Sentiment', 'Market Bubbles']","['social economics', 'finance', 'social processes', 'economic thinking', 'behavior', 'social transmission bias', 'signals', 'ideas', 'fables', 'models']"
Political Connections and the Informativeness of Insider Trades,10.1111/jofi.12899,"We analyze the trading of corporate insiders at leading financial institutions during the 2007 to 2009 financial crisis. We find strong evidence of a relation between political connections and informed trading during the period in which Troubled Asset Relief Program (TARP) funds were disbursed, and that the relation is most pronounced among corporate insiders with recent direct connections. Notably, we find evidence of abnormal trading by politically connected insiders 30 days in advance of TARP infusions, and that these trades anticipate the market reaction to the infusion. Our results suggest that political connections can facilitate opportunistic behavior by corporate insiders.",JoF,2020,100,689,"['Financial Markets', 'Corporate Governance', 'Public Policy', 'Banking Systems', 'Market Transparency']","['trading', 'corporate insiders', 'financial institutions', 'financial crisis', 'political connections', 'informed trading', 'Troubled Asset Relief Program', 'TARP funds', 'abnormal trading', 'market reaction']"
Do CEOs Matter? Evidence from Hospitalization Events,10.1111/jofi.12897,"Using variation in firms’ exposure to their CEOs resulting from hospitalization, we estimate the effect of chief executive officers (CEOs) on firm policies, holding firm‐CEO matches constant. We document three main findings. First, CEOs have a significant effect on profitability and investment. Second, CEO effects are larger for younger CEOs, in growing and family‐controlled firms, and in human‐capital‐intensive industries. Third, CEOs are unique: the hospitalization of other senior executives does not have similar effects on the performance. Overall, our findings demonstrate that CEOs are a key driver of firm performance, which suggests that CEO contingency plans are valuable.",JoF,2020,98,686,"['Corporate Governance', 'Economic Development', 'Healthcare Systems', 'Investment Strategies', 'Organizational Behavior']","['CEOs', 'firm policies', 'profitability', 'investment', 'younger CEOs', 'growing firms', 'family-controlled firms', 'human-capital-intensive industries', 'senior executives', 'firm performance']"
Is Bitcoin Really Untethered?,10.1111/jofi.12903,"This paper investigates whether Tether, a digital currency pegged to the U.S. dollar, influenced Bitcoin and other cryptocurrency prices during the 2017 boom. Using algorithms to analyze blockchain data, we find that purchases with Tether are timed following market downturns and result in sizable increases in Bitcoin prices. The flow is attributable to one entity, clusters below round prices, induces asymmetric autocorrelations in Bitcoin, and suggests insufficient Tether reserves before month‐ends. Rather than demand from cash investors, these patterns are most consistent with the supply‐based hypothesis of unbacked digital money inflating cryptocurrency prices.",JoF,2020,93,671,"['Financial Markets', 'Cryptocurrency', 'Monetary Policy', 'Digital Transformation', 'Market Transparency']","['Tether', 'digital currency', 'Bitcoin', 'cryptocurrency prices', 'blockchain data', 'market downturns', 'purchases', 'entity', 'autocorrelations', 'Tether reserves']"
What Matters to Individual Investors? Evidence from the Horse's Mouth,10.1111/jofi.12895,"We survey a representative sample of U.S. individuals about how well leading academic theories describe their financial beliefs and decisions. We find substantial support for many factors hypothesized to affect portfolio equity share, particularly background risk, investment horizon, rare disasters, transactional factors, and fixed costs of stock market participation. Individuals tend to believe that past mutual fund performance is a good signal of stock‐picking skill, actively managed funds do not suffer from diseconomies of scale, value stocks are safer and do not have higher expected returns, and high‐momentum stocks are riskier and do have higher expected returns.",JoF,2020,97,676,"['Financial Markets', 'Investment Strategies', 'Behavioral Economics', 'Market Transparency', 'Consumer Finance']","['academic theories', 'financial beliefs', 'decisions', 'portfolio equity share', 'background risk', 'investment horizon', 'rare disasters', 'transactional factors', 'fixed costs', 'stock market participation']"
The Value of Central Clearing,10.1111/jofi.12902,"I study a contracting innovation that suddenly insulated traders of hedging contracts against counterparty risk: central clearing counterparties (CCPs) for derivatives. The first CCP was created in Le Havre (France) in 1882, in the coffee futures market. Using triple difference‐in‐differences estimation, I show that central clearing changed the geography of trade flows Europe‐wide, to the benefit of Le Havre. Inspecting the mechanism using trader‐level data, I find that the CCP solved both a “missing market” problem and adverse selection issues. Central clearing also facilitated entry of new traders in the market. The successful contracting innovation quickly spread to other exchanges.",JoF,2020,100,694,"['Innovation', 'Financial Markets', 'Trade and Globalization', 'Risk Management', 'Economic Development']","['contracting innovation', 'central clearing counterparties', 'CCPs', 'derivatives', 'Le Havre', 'trade flows', 'Europe', 'trader-level data', 'missing market', 'adverse selection.']"
Informational Frictions and the Credit Crunch,10.1111/jofi.12900,"In this paper, I estimate the magnitude of an informational friction limiting credit reallocation to firms during the 2007 to 2009 financial crisis. Because lenders rely on private information when deciding which relationship to end, borrowers looking for a new lender are adversely selected. I show how to separately identify private information from information common to all lenders but unobservable to the econometrician by using bank shocks within a discrete choice model of relationships. Quantitatively, these informational frictions appear to be too small to explain the credit crunch in the U.S. syndicated corporate loan market.",JoF,2020,95,638,"['Financial Markets', 'Credit Markets', 'Banking Systems', 'Economic Development', 'Monetary Policy']","['informational friction', 'credit reallocation', 'financial crisis', 'lenders', 'private information', 'borrowers', 'relationship', 'econometrician', 'bank shocks', 'credit crunch']"
Debt Contracting on Management,10.1111/jofi.12893,"Change of management restrictions (CMRs) in loan contracts give lenders explicit ex ante control rights over managerial retention and selection. This paper shows that lenders use CMRs to mitigate risks arising from CEO turnover, especially those related to the loss of human capital and replacement uncertainty, thereby providing evidence that human capital risk affects debt contracting. With a CMR in place, the likelihood of CEO turnover decreases by more than half, and future firm performance improves when retention frictions are important, suggesting that lenders can influence managerial turnover, even outside of default states, and help the borrower retain talent.",JoF,2020,99,674,"['Corporate Governance', 'Risk Management', 'Financial Markets', 'Debt Management', 'Labor Market Dynamics']","['management restrictions', 'loan contracts', 'lenders', 'CEO turnover', 'human capital', 'replacement uncertainty', 'debt contracting', 'retention frictions', 'firm performance', 'talent']"
"Bank Quality, Judicial Efficiency, and Loan Repayment Delays in Italy",10.1111/jofi.12896,"Italian firms delay payment to banks weakened by past loan losses. Exploiting Credit Register data, we fully absorb borrower fundamentals with firm‐quarter effects. Identification therefore reflects firm choices to delay payment to some banks, depending on their health. This selective delay occurs more where legal enforcement of collateral recovery is slow. Poor enforcement encourages borrowers not to pay when the value of their bank relationship comes into doubt. Selective delays occur even by firms able to pay all lenders. Credit losses in Italy have thus been worsened by the combination of weak banks and weak legal enforcement.",JoF,2020,97,638,"['Credit Markets', 'Banking Systems', 'Regulatory Frameworks', 'Debt Management', 'Economic Development']","['Italian firms', 'payment delay', 'banks', 'loan losses', 'Credit Register data', 'borrower fundamentals', 'firm choices', 'legal enforcement', 'collateral recovery', 'credit losses.']"
Understanding Systematic Risk: A High‐Frequency Approach,10.1111/jofi.12898,"Based on a novel high‐frequency data set for a large number of firms, I estimate the time‐varying latent continuous and jump factors that explain individual stock returns. The factors are estimated using principal component analysis applied to a local volatility and jump covariance matrix. I find four stable continuous systematic factors, which can be well approximated by a market, oil, finance, and electricity portfolio, while there is only one stable jump market factor. The exposure of stocks to these risk factors and their explained variation is time‐varying. The four continuous factors carry an intraday risk premium that reverses overnight.",JoF,2020,99,652,"['Financial Markets', 'Risk Management', 'Investment Strategies', 'Market Transparency', 'Monetary Policy']","['high-frequency data', 'firms', 'stock returns', 'principal component analysis', 'local volatility', 'jump covariance matrix', 'systematic factors', 'risk factors', 'intraday risk premium', 'overnight']"
Cash Flow News and Stock Price Dynamics,10.1111/jofi.12901,"We develop a new approach to modeling dynamics in cash flows extracted from daily firm‐level dividend announcements. We decompose daily cash flow news into a persistent component, jumps, and temporary shocks. Empirically, we find that the persistent cash flow component is a highly significant predictor of future growth in dividends and consumption. Using a log‐linearized present value model, we show that news about the persistent dividend growth component predicts stock returns consistent with asset pricing constraints implied by this model. News about the daily dividend growth process also helps explain concurrent return volatility and the probability of jumps in stock returns.",JoF,2020,101,687,"['Financial Markets', 'Investment Strategies', 'Corporate Governance', 'Stock Returns', 'Asset Pricing']","['modeling', 'dynamics', 'cash flows', 'dividend announcements', 'persistent component', 'jumps', 'temporary shocks', 'stock returns', 'asset pricing', 'return volatility']"
Option Profit and Loss Attribution and Pricing: A New Framework,10.1111/jofi.12894,"This paper develops a new top‐down valuation framework that links the pricing of an option investment to its daily profit and loss attribution. The framework uses the Black‐Merton‐Scholes option pricing formula to attribute the short‐term option investment risk to variation in the underlying security price and the option's implied volatility. Taking risk‐neutral expectation and demanding no dynamic arbitrage result in a pricing relation that links an option's fair implied volatility level to the underlying volatility level with corrections for the implied volatility's own expected direction of movement, its variance, and its covariance with the underlying security return.",JoF,2020,97,680,"['Financial Markets', 'Risk Management', 'Investment Strategies', 'Monetary Policy', 'Economic Development']","['valuation', 'framework', 'option', 'investment', 'pricing', 'profit and loss attribution', 'Black-Merton-Scholes', 'implied volatility', 'risk', 'underlying security']"
"No Job, No Money, No Refi: Frictions to Refinancing in a Recession",10.1111/jofi.12952,"We study how employment documentation requirements and out‐of‐pocket closing costs constrain mortgage refinancing. These frictions, which bind most severely during recessions, may significantly inhibit monetary policy pass‐through. To study their effects on refinancing, we exploit a Federal Housing Administration policy change that excluded unemployed borrowers from refinancing and increased others' out‐of‐pocket costs substantially. These changes dramatically reduced refinancing rates, particularly among the likely unemployed and those facing new out‐of‐pocket costs. Our results imply that unemployed and liquidity‐constrained borrowers have a high latent demand for refinancing. Cyclical variation in these factors may therefore affect both the aggregate and distributional consequences of monetary policy.",JoF,2020,102,815,"['Monetary Policy', 'Labor Market Dynamics', 'Housing Market Trends', 'Economic Development', 'Financial Markets']","['employment documentation', 'requirements', 'out-of-pocket closing costs', 'mortgage refinancing', 'frictions', 'recessions', 'monetary policy', 'Federal Housing Administration', 'unemployed borrowers', 'liquidity-constrained borrowers']"
"Bad Credit, No Problem? Credit and Labor Market Consequences of Bad Credit Reports",10.1111/jofi.12954,"We study the financial and labor market impacts of bad credit reports. Using difference‐in‐differences variation from the staggered removal of bankruptcy flags, we show that bankruptcy flag removal leads to economically large increases in credit limits and borrowing. Using administrative tax records linked to personal bankruptcy records, we estimate economically small effects of flag removal on employment and earnings outcomes. We rationalize these contrasting results by showing that, conditional on basic observables, “hidden” bankruptcy flags are strongly correlated with adverse credit market outcomes but have no predictive power for measures of job performance.",JoF,2020,93,671,"['Credit Markets', 'Labor Market Dynamics', 'Financial Markets', 'Economic Development', 'Public Policy']","['financial', 'labor market', 'bad credit reports', 'bankruptcy flags', 'credit limits', 'borrowing', 'employment', 'earnings outcomes', 'credit market', 'job performance.']"
Declining Labor and Capital Shares,10.1111/jofi.12909,"This paper presents direct measures of capital costs, equal to the product of the required rate of return on capital and the value of the capital stock. The capital share, equal to the ratio of capital costs and gross value added, does not offset the decline in the labor share. Instead, a large increase in the share of pure profits offsets declines in the shares of both labor and capital. Industry data show that increases in concentration are associated with declines in the labor share.",JoF,2020,85,491,"['Capital Allocation', 'Labor Market Dynamics', 'Income Inequality', 'Economic Growth', 'Trade and Globalization']","['capital costs', 'required rate of return', 'capital stock', 'capital share', 'gross value added', 'labor share', 'pure profits', 'concentration', 'industry data', 'decline']"
The Banking View of Bond Risk Premia,10.1111/jofi.12949,"
Banks' balance sheet exposure to fluctuations in interest rates strongly forecasts excess Treasury bond returns. This result is consistent with optimal risk management, a banking counterpart to the household Euler equation. In equilibrium, the bond risk premium compensates banks for bearing fluctuations in interest rates. When banks' exposure to interest rate risk increases, the price of this risk simultaneously rises. We present a collection of empirical observations that support this view, but also discuss several challenges to this interpretation.",JoF,2020,79,557,"['Financial Markets', 'Risk Management', 'Banking Systems', 'Monetary Policy', 'Economic Development']","['interest rates', 'banks', 'balance sheet', 'Treasury bond returns', 'risk management', 'bond risk premium', 'equilibrium', 'price risk', 'empirical observations', 'challenges.']"
False (and Missed) Discoveries in Financial Economics,10.1111/jofi.12951,"Multiple testing plagues many important questions in finance such as fund and factor selection. We propose a new way to calibrate both Type I and Type II errors. Next, using a double‐bootstrap method, we establish a <jats:italic>t</jats:italic>‐statistic hurdle that is associated with a specific false discovery rate (e.g., 5%). We also establish a hurdle that is associated with a certain acceptable ratio of misses to false discoveries (Type II error scaled by Type I error), which effectively allows for differential costs of the two types of mistakes. Evaluating current methods, we find that they lack power to detect outperforming managers.",JoF,2020,100,647,"['Financial Markets', 'Risk Management', 'Investment Strategies', 'Data Privacy', 'Market Transparency']","['finance', 'multiple testing', 'fund selection', 'factor selection', 'Type I error', 'Type II error', 'double-bootstrap method', 't-statistic hurdle', 'false discovery rate', 'outperforming managers']"
The Mismatch Between Mutual Fund Scale and Skill,10.1111/jofi.12950,I demonstrate that skill and scale are mismatched among actively managed equity mutual funds. Many mutual fund investors confuse the effects of fund exposures to common systematic factors with managerial skill when allocating capital among funds. Active mutual funds with positive factor‐related past returns thus accumulate assets to the point that they significantly underperform. I also show that the negative aggregate benchmark‐adjusted performance of active equity mutual funds is driven mainly by these oversized funds.,JoF,2020,75,526,"['Financial Markets', 'Capital Allocation', 'Investment Strategies', 'Market Transparency', 'Banking Systems']","['skill', 'scale', 'actively managed', 'equity mutual funds', 'exposures', 'systematic factors', 'managerial skill', 'capital allocation', 'benchmark-adjusted performance', 'oversized funds']"
Price and Probability: Decomposing the Takeover Effects of Anti‐Takeover Provisions,10.1111/jofi.12908,"We study the effects of anti‐takeover provisions (ATPs) on the takeover probability, the takeover premium, and target selection. Voting to remove an ATP increases both the takeover probability and the takeover premium, that is, there is no evidence of a trade‐off between premiums and takeover probabilities. We provide causal estimates based on shareholder proposals to remove ATPs and address the endogenous selection of targets through bounding techniques. The positive premium effect in less protected firms is driven by better bidder‐target matching and merger synergies.",JoF,2020,84,576,"['Corporate Governance', 'Financial Markets', 'Mergers and Acquisitions', 'Shareholder Activism', 'Market Premiums']","['anti-takeover provisions', 'ATPs', 'takeover probability', 'takeover premium', 'target selection', 'shareholder proposals', 'endogenous selection', 'merger synergies', 'bidder-target matching', 'less protected firms']"
The Causal Effect of Limits to Arbitrage on Asset Pricing Anomalies,10.1111/jofi.12947,"We examine the causal effect of limits to arbitrage on 11 well‐known asset pricing anomalies using the pilot program of Regulation SHO, which relaxed short‐sale constraints for a quasi‐random set of pilot stocks, as a natural experiment. We find that the anomalies became weaker on portfolios constructed with pilot stocks during the pilot period. The pilot program reduced the combined anomaly long–short portfolio returns by 72 basis points per month, a difference that survives risk adjustment with standard factor models. The effect comes only from the short legs of the anomaly portfolios.",JoF,2020,92,594,"['Financial Markets', 'Regulatory Frameworks', 'Investment Strategies', 'Risk Management', 'Capital Allocation']","['limits to arbitrage', 'asset pricing anomalies', 'Regulation SHO', 'short-sale constraints', 'natural experiment', 'pilot program', 'long-short portfolio returns', 'risk adjustment', 'factor models', 'anomaly portfolios']"
Low‐Risk Anomalies?,10.1111/jofi.12910,"This paper shows that low‐risk anomalies in the capital asset pricing model and in traditional factor models arise when investors require compensation for coskewness risk. Empirically, we find that option‐implied ex ante skewness is strongly related to ex post residual coskewness, which allows us to construct coskewness factor‐mimicking portfolios. Controlling for skewness renders the alphas of betting‐against‐beta and betting‐against‐volatility insignificant. We also show that the returns of beta‐ and volatility‐sorted portfolios are driven largely by a single principal component, which in turn is explained largely by skewness.",JoF,2020,87,636,"['Financial Markets', 'Risk Management', 'Investment Strategies', 'Capital Allocation', 'Economic Development']","['risk anomalies', 'capital asset pricing model', 'factor models', 'coskewness risk', 'option-implied skewness', 'residual coskewness', 'factor-mimicking portfolios', 'skewness', 'betting-against-beta', 'betting-against-volatility']"
Market Structure and Transaction Costs of Index CDSs,10.1111/jofi.12953,"Despite regulatory efforts to promote all‐to‐all trading, the post–Dodd‐Frank index credit default swap market remains two‐tiered. Transaction costs are higher for dealer‐to‐client than interdealer trades, but the difference is explained by the higher, largely permanent, price impact of client trades. Most interdealer trades are liquidity motivated and executed via low‐cost, low‐immediacy trading protocols. Dealer‐to‐client trades are nonanonymous; they almost always improve upon contemporaneous executable interdealer quotes, and dealers appear to price discriminate based on the perceived price impact of trades. Our results suggest that the market structure is a consequence of the characteristics of client trades: relatively infrequent, large, and differentially informed.",JoF,2020,102,782,"['Financial Markets', 'Credit Markets', 'Market Transparency', 'Regulatory Frameworks', 'Corporate Governance']","['regulatory efforts', 'all-to-all trading', 'index credit default swap market', 'transaction costs', 'dealer-to-client trades', 'interdealer trades', 'price impact', 'liquidity motivated', 'price discrimination', 'market structure']"
The Impact of Supervision on Bank Performance,10.1111/jofi.12964,"We explore the impact of supervision on the riskiness, profitability, and growth of U.S. banks. Using data on supervisors' time use, we demonstrate that the top‐ranked banks by size within a supervisory district receive more attention from supervisors, even after controlling for size, complexity, risk, and other characteristics. Using a matched sample approach, we find that these top‐ranked banks that receive more supervisory attention hold less risky loan portfolios, are less volatile, and are less sensitive to industry downturns, but do not have lower growth or profitability. Our results underscore the distinct role of supervision in mitigating banking sector risk.",JoF,2020,100,675,"['Banking Systems', 'Risk Management', 'Financial Markets', 'Regulatory Frameworks', 'Economic Development']","['supervision', 'riskiness', 'profitability', 'growth', 'U.S. banks', 'supervisors', 'time use', 'size', 'attention', 'loan portfolios']"
A Macrofinance View of U.S. Sovereign CDS Premiums,10.1111/jofi.12948,"Premiums on U.S. sovereign credit default swaps (CDS) have risen to persistently elevated levels since the financial crisis. We examine whether these premiums reflect the probability of a fiscal default—a state in which a balanced budget can no longer be restored by raising taxes or eroding the real value of debt by increasing inflation. We develop an equilibrium macrofinance model in which the fiscal and monetary policy stances jointly endogenously determine nominal debt, taxes, inflation, and growth. We show that the CDS premiums reflect the endogenous risk‐adjusted probabilities of fiscal default. The calibrated model is consistent with elevated levels of CDS premiums but leaves dynamic implications quantitatively unresolved.",JoF,2020,108,738,"['Fiscal Policy', 'Credit Markets', 'Monetary Policy', 'Debt Management', 'Financial Markets']","['U.S. sovereign', 'credit default swaps', 'CDS premiums', 'fiscal default', 'balanced budget', 'taxes', 'inflation', 'debt', 'growth', 'macrofinance model']"
Local Crowding‐Out in China,10.1111/jofi.12966,"In China, between 2006 and 2013, local public debt crowded out the investment of private firms by tightening their funding constraints while leaving state‐owned firms' investment unaffected. We establish this result using a purpose‐built data set for Chinese local public debt. Private firms invest less in cities with more public debt, with the reduction in investment larger for firms located farther from banks in other cities or more dependent on external funding. Moreover, in cities where public debt is high, private firms' investment is more sensitive to internal cash flow.",JoF,2020,90,582,"['Debt Management', 'Investment Strategies', 'Financial Markets', 'Banking Systems', 'Economic Development']","['local public debt', 'investment', 'private firms', 'state-owned firms', 'funding constraints', 'China', 'data set', 'cities', 'external funding', 'internal cash flow']"
"Every Cloud Has a Silver Lining: Fast Trading, Microwave Connectivity, and Trading Costs",10.1111/jofi.12969,"Modern markets are characterized by speed differentials, with some traders being fractions of a second faster than others. Theoretical models suggest that such differentials may have both positive and negative effects on liquidity and gains from trade. We examine these effects by studying a series of exogenous weather episodes that temporarily remove the speed advantages of the fastest traders by disrupting their microwave networks. The disruptions are associated with lower adverse selection and lower trading costs. In additional analysis, we show that the long‐term removal of speed differentials results in similar effects and also increases gains from trade.",JoF,2020,98,667,"['Financial Markets', 'Trading and Globalization', 'Market Transparency', 'Risk Management', 'Economic Development']","['speed differentials', 'traders', 'liquidity', 'gains from trade', 'exogenous weather episodes', 'microwave networks', 'adverse selection', 'trading costs', 'long-term', 'effects']"
Credit Rating Inflation and Firms' Investments,10.1111/jofi.12961,"We analyze credit rating effects on firm investments in a rational bond financing game that features a feedback loop. The credit rating agency (CRA) inflates the rating, providing a biased but informative signal to creditors. Creditors' response to the rating affects the firm's investment decision and thus its credit quality, which is reflected in the rating. The CRA might reduce ex ante economic efficiency, which results solely from its strategic effect: the CRA assigns more firms high ratings and allows them to gamble for resurrection. We derive empirical predictions on the determinants of rating standards and inflation and discuss policy implications.",JoF,2020,101,662,"['Credit Markets', 'Financial Markets', 'Investment Strategies', 'Regulatory Frameworks', 'Economic Policy Evaluation']","['credit rating', 'firm investments', 'bond financing game', 'credit rating agency', 'creditors', 'investment decision', 'credit quality', 'economic efficiency', 'strategic effect', 'empirical predictions']"
Safety Transformation and the Structure of the Financial System,10.1111/jofi.12967,"This paper studies how a financial system that is organized to efficiently create safe assets responds to macroeconomic shocks. Financial intermediaries face a cost of bearing risk, so they choose the least risky portfolio that backs their issuance of riskless deposits: a diversified pool of nonfinancial firms' debt. Nonfinancial firms choose their capital structure to exploit the resulting segmentation between debt and equity markets. Increased safe asset demand yields larger and riskier intermediaries and more levered firms. Quantitative easing reduces the size and riskiness of intermediaries and can decrease firm leverage, despite reducing borrowing costs at the zero lower bound.",JoF,2020,100,691,"['Financial Markets', 'Risk Management', 'Monetary Policy', 'Credit Markets', 'Debt Management']","['financial system', 'safe assets', 'macroeconomic shocks', 'risk', 'diversified pool', 'debt', 'capital structure', 'safe asset demand', 'quantitative easing', 'leverage']"
The Forced Safety Effect: How Higher Capital Requirements Can Increase Bank Lending,10.1111/jofi.12958,"Government guarantees generate an implicit subsidy for banks. A capital requirement reduces this subsidy, through a simple liability composition effect. However, the guarantees also make a bank undervalue loans that generates surplus in states of the world in which it defaults. Raising the capital requirement makes the bank safer, which alleviates this problem. We refer to this mechanism, which we argue is empirically relevant, as the <jats:italic>forced safety effect</jats:italic>.",JoF,2020,69,487,"['Banking Systems', 'Financial Markets', 'Risk Management', 'Capital Allocation', 'Public Policy']","['Government guarantees', 'implicit subsidy', 'banks', 'capital requirement', 'liability composition effect', 'undervalue loans', 'surplus', 'default', 'forced safety effect', 'empirical relevance.']"
Monetary Policy and Global Banking,10.1111/jofi.12959,"When central banks adjust interest rates, the opportunity cost of lending in local currency changes, but—absent frictions—there is no spillover effect to lending in other currencies. However, when equity capital is limited, global banks must benchmark domestic and foreign lending opportunities. We show that, in equilibrium, the marginal return on foreign lending is affected by the interest rate differential, with lower domestic rates leading to an increase in local lending, at the expense of a reduction in foreign lending. We test our prediction in the context of changes in interest rates in six major currency areas.",JoF,2020,96,624,"['Monetary Policy', 'Financial Markets', 'Banking Systems', 'Interest Rates', 'Economic Development']","['interest rates', 'central banks', 'lending', 'currency', 'equity capital', 'global banks', 'foreign lending', 'domestic rates', 'spillover effect', 'marginal return']"
"Sovereign Debt Portfolios, Bond Risks, and the Credibility of Monetary Policy",10.1111/jofi.12965,"We document that governments whose local currency debt provides them with greater hedging benefits actually borrow more in foreign currency. We introduce two features into a government's debt portfolio choice problem to explain this finding: risk‐averse lenders and lack of monetary policy commitment. A government without commitment chooses excessively countercyclical inflation ex post, which leads risk‐averse lenders to require a risk premium ex ante. This makes local currency debt too expensive from the government's perspective and thereby discourages the government from borrowing in its own currency.",JoF,2020,86,609,"['Monetary Policy', 'Risk Management', 'Debt Management', 'Public Finance', 'Fiscal Policy']","['governments', 'local currency debt', 'foreign currency', 'hedging benefits', 'risk-averse lenders', 'monetary policy commitment', 'inflation', 'risk premium', 'debt portfolio choice', 'borrowing']"
The Employment Effects of Faster Payment: Evidence from the Federal Quickpay Reform,10.1111/jofi.12955,"We study the impact of <jats:italic>Quickpay</jats:italic>, a reform that permanently accelerated payments to small business contractors of the U.S. government. We find a strong direct effect of the reform on employment growth at the firm level. However, we document substantial crowding out of nontreated firms' employment within local labor markets. While the overall net employment effect is positive, it is close to zero in tight labor markets. Our results highlight an important channel for alleviating financing constraints in small firms, but emphasize the general‐equilibrium effects of large‐scale interventions, which can lead to lower aggregate outcomes depending on labor market conditions.",JoF,2020,100,702,"['Labor Market Dynamics', 'Public Policy', 'Economic Development', 'Financing Constraints', 'Aggregate Outcomes']","['Quickpay', 'reform', 'payments', 'small business contractors', 'U.S. government', 'employment growth', 'crowding out', 'financing constraints', 'labor markets', 'firm level']"
Stock Market Returns and Consumption,10.1111/jofi.12968,This paper employs Swedish data on households' stock holdings to investigate how consumption responds to changes in stock market returns. We instrument the actual capital gains and dividend payments with past portfolio weights. Unrealized capital gains lead to a marginal propensity to consume of 23% for the bottom 50% of the wealth distribution and about 3% for the top 30% of the wealth distribution. Household consumption is significantly more responsive to dividend payouts across all parts of the wealth distribution. Our findings are consistent with households treating capital gains and dividends as separate sources of income.,JoF,2020,96,635,"['Financial Markets', 'Wealth Distribution', 'Consumer Behavior', 'Income Inequality', 'Household Consumption']","['households', 'stock holdings', 'consumption', 'stock market returns', 'capital gains', 'dividend payments', 'wealth distribution', 'propensity to consume', 'dividend payouts', 'income']"
Measuring Mutual Fund Flow Pressure as Shock to Stock Returns,10.1111/jofi.12962,"A large and rapidly growing literature examines the impact of misvaluation on firm policies by using mutual fund outflow‐induced price pressure to isolate nonfundamental price variation. I demonstrate that the standard approach to computing outflow‐induced price pressure produces a measure that is inadvertently a direct function of a stock's actual realized return during the outflow quarter, raising doubts about its orthogonality to fundamentals. After removing these direct measurements of return, outflows generate a fairly negligible quarterly decline in returns, with no subsequent reversal, and many established results in this literature no longer hold. I provide suggestions for future analysis.",JoF,2020,99,706,"['Financial Markets', 'Investment Strategies', 'Market Transparency', 'Behavioral Economics', 'Economic Policy Evaluation']","['misvaluation', 'firm policies', 'mutual fund outflow', 'price pressure', 'nonfundamental price variation', 'outflow-induced', 'realized return', 'orthogonality', 'quarterly decline', 'future analysis']"
The Limits of Limited Liability: Evidence from Industrial Pollution,10.1111/jofi.12978,"We study how parent liability for subsidiaries' environmental cleanup costs affects industrial pollution and production. Our empirical setting exploits a Supreme Court decision that strengthened parent limited liability protection for some subsidiaries. Using a difference‐in‐differences framework, we find that stronger liability protection for parents leads to a 5% to 9% increase in toxic emissions by subsidiaries. Evidence suggests the increase in pollution is driven by lower investment in abatement technologies rather than increased production. Cross‐sectional tests suggest convexities associated with insolvency and executive compensation drive heterogeneous effects. Overall, our findings highlight the moral hazard problem associated with limited liability.",JoF,2021,99,769,"['Environmental Sustainability', 'Corporate Governance', 'Risk Management', 'Climate Change Economics', 'Economic Development']","['parent liability', 'subsidiaries', 'environmental cleanup costs', 'industrial pollution', 'production', 'limited liability protection', 'toxic emissions', 'abatement technologies', 'insolvency', 'executive compensation']"
Do Household Wealth Shocks Affect Productivity? Evidence from Innovative Workers During the Great Recession,10.1111/jofi.12976,"We investigate how the deterioration of household balance sheets affects worker productivity, and in turn economic downturns. Specifically, we compare the output of innovative workers who experienced differential declines in housing wealth during the financial crisis but were employed at the same firm and lived in the same metropolitan area. We find that, following a negative wealth shock, innovative workers become less productive and generate lower economic value for their firms. The reduction in innovative output is not driven by workers switching to less innovative firms or positions. These effects are more pronounced among workers at greater risk of financial distress.",JoF,2021,101,681,"['Productivity', 'Innovation', 'Financial Markets', 'Risk Management', 'Economic Growth']","['deterioration', 'household balance sheets', 'worker productivity', 'economic downturns', 'housing wealth', 'financial crisis', 'innovative workers', 'wealth shock', 'innovative output', 'financial distress']"
Mortgage Design in an Equilibrium Model of the Housing Market,10.1111/jofi.12963,"How can mortgages be redesigned to reduce macrovolatility and default? We address this question using a quantitative equilibrium life‐cycle model. Designs with countercyclical payments outperform fixed payments. Among those, designs that front‐load payment reductions in recessions outperform those that spread relief over the full term. Front‐loading alleviates liquidity constraints when they bind most, reducing default and stimulating housing demand. To illustrate, a fixed‐rate mortgage (FRM) with an option to convert to adjustable‐rate mortgage, which front‐loads payment reductions relative to an FRM with an option to refinance underwater, reduces price and consumption declines six times as much and default three times as much.",JoF,2021,102,738,"['Housing Market Trends', 'Credit Markets', 'Financial Markets', 'Debt Management', 'Monetary Policy']","['mortgages', 'redesign', 'macrovolatility', 'default', 'quantitative equilibrium', 'life-cycle model', 'countercyclical payments', 'front-load', 'liquidity constraints', 'adjustable-rate mortgage']"
The Capitalization of Consumer Financing into Durable Goods Prices,10.1111/jofi.12977,"Using loan‐level data on millions of used‐car transactions across hundreds of lenders, we study the consumer response to exogenous variation in credit terms. Borrowers offered shorter maturity decrease expenditures enough to offset 60% to 90% of the monthly payment increase. Most of this is driven by shifting toward lower‐quality cars, but affected borrowers offset 20% to 30% of a monthly payment shock by negotiating lower prices for equivalent cars. Our results suggest that durable goods prices adjust to reflect credit terms even at the individual level, with one year of additional loan maturity increasing a car's price by 2.8%.",JoF,2021,99,637,"['Consumer Behavior', 'Credit Markets', 'Financial Markets', 'Economic Development', 'Monetary Policy']","['consumer response', 'credit terms', 'used-car transactions', 'lenders', 'maturity', 'expenditures', 'durable goods prices', 'loan maturity', 'monthly payment', 'negotiation']"
"Inalienable Customer Capital, Corporate Liquidity, and Stock Returns",10.1111/jofi.12960,"We develop a model in which customer capital depends on key talents' contribution and pure brand recognition. Customer capital guarantees stable demand but is fragile to financial constraints risk if retained mainly by talents, who tend to quit financially constrained firms, damaging customer capital. Using a proprietary, granular brand‐perception survey, we construct a firm‐level measure of the inalienability of customer capital (ICC) that captures the degree to which customer capital depends on talents. Firms with higher ICC have higher average returns, higher talent turnover, and more precautionary financial policies. The ICC‐sorted long‐short portfolio's spread comoves with financial constraints factor.",JoF,2021,99,716,"['Financial Markets', 'Risk Management', 'Corporate Governance', 'Labor Market Dynamics', 'Investment Strategies']","['customer capital', 'key talents', 'brand recognition', 'financial constraints', 'firm-level measure', 'inalienability', 'talent turnover', 'financial policies', 'long-short portfolio', 'spread']"
A Dynamic Model of Optimal Creditor Dispersion,10.1111/jofi.12974,"Borrowing from multiple creditors exposes firms to rollover risk due to coordination problems among creditors, but it also improves firms' repayment incentives, thereby increasing pledgeability. Based on this trade‐off, I develop a dynamic debt rollover model to analyze the evolution of creditor dispersion. Consistent with empirical evidence, I find that firms optimally increase creditor dispersion after poor performance. In contrast, cross‐sectionally higher‐growth firms can support more dispersed creditors. Frequent debt renegotiation limits firms' ability to increase pledgeability by having more creditors. Finally, holding a cash balance while borrowing from multiple creditors improves firms' repayment incentives uniformly across all future states.",JoF,2021,100,761,"['Debt Management', 'Credit Markets', 'Financial Markets', 'Risk Management', 'Corporate Governance']","['creditors', 'rollover risk', 'repayment incentives', 'pledgeability', 'debt rollover model', 'creditor dispersion', 'performance', 'growth firms', 'debt renegotiation', 'cash balance']"
A Unified Model of Firm Dynamics with Limited Commitment and Assortative Matching,10.1111/jofi.12980,"We develop a unified theory of dynamic contracting and assortative matching to explain firm dynamics. In our model, neither firms nor managers can commit to arrangements that yield lower payoffs than their outside options, which are microfounded by the equilibrium conditions in a matching market. The model endogenously generates power laws in firm size and CEO compensation, and explains differences in their right tails. We also show that our model quantitatively accounts for many salient features of the time‐series dynamics and the cross‐sectional distribution of firm investment, dividend payout, and CEO compensation.",JoF,2021,92,625,"['Corporate Governance', 'Firm Dynamics', 'CEO Compensation', 'Firm Investment', 'Economic Dynamics']","['unified theory', 'dynamic contracting', 'assortative matching', 'firm dynamics', 'power laws', 'CEO compensation', 'matching market', 'time-series dynamics', 'firm investment', 'dividend payout']"
Information Consumption and Asset Pricing,10.1111/jofi.12975,"We study whether firm and macroeconomic announcements that convey systematic information generate a return premium for firms that experience information spillovers. We use information consumption to proxy for investor learning during these announcements and construct ex ante measures of expected information consumption (EIC) to calibrate whether learning is priced. On days when there are information spillovers, affected stocks earn a significant return premium (5% annualized) and the capital asset pricing model performs better. The positive effect of the Federal Reserve Open Market Committee announcements on the risk premia of individual stocks appears to be modulated by EIC. Our findings are most consistent with a risk‐based explanation.",JoF,2021,106,748,"['Financial Markets', 'Monetary Policy', 'Risk Management', 'Capital Allocation', 'Economic Development']","['firm', 'macroeconomic announcements', 'return premium', 'information spillovers', 'information consumption', 'investor learning', 'expected information consumption', 'capital asset pricing model', 'Federal Reserve Open Market Committee announcements', 'risk premia']"
Learning From Disagreement in the U.S. Treasury Bond Market,10.1111/jofi.12971,"We study risk premiums in the U.S. Treasury bond market from the perspective of a Bayesian econometrician who learns in real time from disagreement among investors about future bond yields. Notably, disagreement has substantial predictive power for yields, and 's risk premiums are less volatile than those in the analogous model without learning. 's forecasts are substantially more accurate than the consensus forecasts of market professionals, particularly following U.S. recessions. The predictive power of disagreement is distinct from the (much weaker) one of inflation and output growth. Rather, it appears to reflect uncertainty about future fiscal policy.",JoF,2021,97,664,"['Financial Markets', 'Risk Management', 'Fiscal Policy', 'Economic Growth', 'Monetary Policy']","['risk premiums', 'U.S. Treasury bond market', 'Bayesian econometrician', 'disagreement', 'investors', 'bond yields', 'forecasting', 'U.S. recessions', 'inflation', 'fiscal policy']"
Information Inertia,10.1111/jofi.12979,"We show that aversion to risk and ambiguity leads to information inertia when investors process public news about assets. Optimal portfolios do not always depend on news that is worse than expected; hence, the equilibrium stock price does not reflect this bad news. This informational inefficiency is more severe when there is more risk and ambiguity but disappears when investors are risk‐neutral or the news is about idiosyncratic risk. Information inertia leads to news momentum (e.g., after earnings announcements) and is consistent with low household trading activity. An ambiguity premium helps explain the macro and earnings announcement premium.",JoF,2021,98,653,"['Financial Markets', 'Risk Management', 'Behavioral Economics', 'Investment Strategies', 'Market Transparency']","['risk', 'ambiguity', 'information inertia', 'optimal portfolios', 'equilibrium stock price', 'informational inefficiency', 'news momentum', 'household trading activity', 'ambiguity premium', 'earnings announcement']"
The Private Production of Safe Assets,10.1111/jofi.12997,"Using high‐frequency, granular panel data on short‐term debt securities issued in Europe, we study the existence, empirical boundaries, and fragility of private assets' safety. We show that only securities with the shortest maturities, issued by banks (certificates of deposit, or CDs), benefit from a safety premium. The supply of such CDs responds positively to excess safety demand. During periods of stress, this relation vanishes for all issuers of private securities, even though their aggregate volumes do not collapse. Other dimensions of heterogeneity, including issuers' balance sheets or their domicile countries' fiscal capacity, are less relevant for private safety.",JoF,2021,98,679,"['Financial Markets', 'Credit Markets', 'Banking Systems', 'Monetary Policy', 'Risk Management']","['short-term debt securities', 'Europe', 'private assets', 'safety premium', 'certificates of deposit', 'banks', 'excess safety demand', 'stress', 'issuers', 'heterogeneity']"
"Mutual Fund Holdings of Credit Default Swaps: Liquidity, Yield, and Risk",10.1111/jofi.12996,"This study analyzes the motivations for and consequences of funds' credit default swap (CDS) investments using mutual funds' quarterly holdings from pre‐ to postfinancial crisis. Funds invest in CDS when facing unpredictable liquidity needs. Funds sell more in reference entities when the CDS is liquid relative to the underlying bonds and buy more when the CDS‐bond basis is more negative. To enhance yield, funds engage in negative basis trading and sell CDS with the highest spreads within rating categories, and with spreads higher than those of their bond portfolios. Funds with superior portfolio returns also demonstrate more skill in CDS trading.",JoF,2021,101,654,"['Financial Markets', 'Risk Management', 'Credit Markets', 'Investment Strategies', 'Monetary Policy']","['credit default swap', 'CDS', 'mutual funds', 'liquidity', 'basis trading', 'spread', 'portfolio returns', 'investments', 'financial crisis', 'reference entities']"
The Misguided Beliefs of Financial Advisors,10.1111/jofi.12995,"A common view of retail finance is that conflicts of interest contribute to the high cost of advice. Within a large sample of Canadian financial advisors and their clients, however, we show that advisors typically invest personally just as they advise their clients. Advisors trade frequently, chase returns, prefer expensive and actively managed funds, and underdiversify. Advisors' net returns of −3% per year are similar to their clients' net returns. Advisors do not strategically hold expensive portfolios only to convince clients to do the same; they continue to do so after they leave the industry.",JoF,2021,95,605,"['Financial Markets', 'Investment Strategies', 'Consumer Behavior', 'Consumer Finance', 'Market Transparency']","['conflicts of interest', 'retail finance', 'financial advisors', 'Canadian', 'clients', 'invest', 'trade', 'actively managed funds', 'underdiversify', 'net returns']"
The Impact of Repossession Risk on Mortgage Default,10.1111/jofi.12990,"I study the effect of removing repossession risk on a mortgagor's decision to default. Reducing default costs may result in strategic default, particularly during crises when homeowners can be substantially underwater. I analyze difference‐in‐differences variation in repossession risk generated by an unexpected legal ruling in Ireland that prohibited collateral enforcement on delinquent residential mortgages originated before a particular date. I estimate that borrowers defaulted by 0.3 percentage points more each quarter after the ruling, a relative increase of approximately one‐half. High loan‐to‐value ratios and low liquidity are associated with a larger treatment effect, suggesting both equity and consumption‐based motivations.",JoF,2021,99,741,"['Credit Markets', 'Housing Market Trends', 'Debt Management', 'Consumer Behavior', 'Risk Management']","['repossession risk', 'default', 'mortgagor', 'strategic default', 'underwater', 'difference-in-differences', 'legal ruling', 'collateral enforcement', 'loan-to-value ratios', 'liquidity']"
Financial Fragility with SAM?,10.1111/jofi.12992,"Shared appreciation mortgages (SAMs) feature mortgage payments that adjust with house prices. They are designed to stave off borrower default by providing payment relief when house prices fall. Some argue that SAMs may help prevent the next foreclosure crisis. However, home owners' gains from payment relief are mortgage lenders' losses. A general equilibrium model in which financial intermediaries channel savings from saver to borrower households shows that indexation of mortgage payments to aggregate house prices increases financial fragility, reduces risk‐sharing, and leads to expensive financial sector bailouts. In contrast, indexation to local house prices reduces financial fragility and improves risk‐sharing.",JoF,2021,100,723,"['Financial Markets', 'Risk Management', 'Housing Market Trends', 'Economic Development', 'Banking Systems']","['SAMs', 'mortgage payments', 'house prices', 'borrower default', 'foreclosure crisis', 'financial intermediaries', 'indexation', 'aggregate house prices', 'financial fragility', 'risk-sharing']"
Anonymous Trading in Equities,10.1111/jofi.12988,"In this paper, I explore a reform at the Oslo Stock Exchange to assess the causal effect of posttrade trader anonymity on stock liquidity and trading volume. Using a regression discontinuity approach, I find that anonymity leads to a reduction in bid‐ask spreads of 40% and an increase in trading volume of more than 50%. The increase in trading volume is accounted for largely by increased trading activity by institutional investors, while retail investors do not adjust their trading behavior in response to anonymity. The results suggest that posttrade anonymity positively affects standard measures of market quality.",JoF,2021,97,622,"['Financial Markets', 'Market Transparency', 'Investment Strategies', 'Corporate Governance', 'Regulatory Frameworks']","['Oslo Stock Exchange', 'posttrade trader anonymity', 'stock liquidity', 'trading volume', 'bid-ask spreads', 'regression discontinuity', 'institutional investors', 'retail investors', 'trading behavior', 'market quality']"
Liquidity Supply in the Corporate Bond Market,10.1111/jofi.12991,"This paper examines dealer inventory capacity, or liquidity supply, as a driver of liquidity and expected returns in the corporate bond market. We identify shocks to aggregate liquidity supply using data on corporate bond yields and dealer positions. Liquidity supply shocks lead to persistent changes in market liquidity, are correlated with proxies for dealer financial constraints, and have significant explanatory power for cross‐sectional and time‐series variation in expected returns, beyond standard risk factors. Our findings point to liquidity supply by financially constrained intermediaries as a main driver of market liquidity and asset prices.",JoF,2021,93,656,"['Financial Markets', 'Risk Management', 'Credit Markets', 'Monetary Policy', 'Banking Systems']","['liquidity', 'supply', 'dealer', 'corporate bond market', 'expected returns', 'shocks', 'financial constraints', 'market liquidity', 'asset prices', 'intermediaries']"
"The Perception of Dependence, Investment Decisions, and Stock Prices",10.1111/jofi.12993,"How do investors perceive dependence between stock returns; and how does their perception of dependence affect investments and stock prices? We show experimentally that investors understand differences in dependence, but not in terms of correlation. Participants invest as if applying a simple counting heuristic for the frequency of comovement. They diversify more when the frequency of comovement is lower even if correlation is higher due to dependence in the tails. Building on our experimental findings, we empirically analyze U.S. stock returns. We identify a robust return premium for stocks with high frequencies of comovement with the market return.",JoF,2021,98,658,"['Financial Markets', 'Investment Strategies', 'Risk Management', 'Behavioral Economics', 'Economic Development']","['investors', 'perception', 'dependence', 'stock returns', 'investments', 'stock prices', 'correlation', 'diversify', 'comovement', 'return premium']"
"Public Thrift, Private Perks: Signaling Board Independence with Executive Pay",10.1111/jofi.12989,"We analyze how boards' reputational concerns influence executive compensation and the use of hidden pay. Independent boards reduce disclosed pay to signal their independence, but are more likely than manager‐friendly boards to use hidden pay or to distort incentive contracts. Stronger reputational pressures lead to lower disclosed pay, weaker managerial incentives, and higher hidden pay, whereas greater transparency of executive compensation has the opposite effects. Although reputational concerns can induce boards to choose compensation contracts more favorable to shareholders, we show that there is a threshold beyond which stronger reputational concerns harm shareholders. Similarly, excessive pay transparency can harm shareholders.",JoF,2021,100,743,"['Corporate Governance', 'Executive Compensation', 'Financial Markets', 'Market Transparency', 'Shareholders']","['boards', 'reputational concerns', 'executive compensation', 'hidden pay', 'independent', 'managerial incentives', 'transparency', 'compensation contracts', 'shareholders', 'pay transparency']"
Limited Risk Sharing and International Equity Returns,10.1111/jofi.12994,"Limited stock market participation can potentially explain the disconnect between international asset prices and macro quantities. An incomplete markets model in which risk sharing for stockholders is high generates highly correlated equity returns and relatively smooth exchange rates. Risk sharing for nonstockholders is limited because of their nonparticipation in stock markets and borrowing constraints, reducing the aggregate consumption correlation and the correlation between aggregate consumption differentials and exchange rates. Financial integration widens the disconnect by benefiting stockholders but hurting nonstockholders. Survey data indicate that international risk sharing for stockholders is better than that for nonstockholders, consistent with the predictions.",JoF,2021,99,783,"['Financial Markets', 'Risk Management', 'International Risk Sharing', 'Stock Market Participation', 'Financial Integration']","['limited stock market participation', 'international asset prices', 'macro quantities', 'incomplete markets model', 'risk sharing', 'stockholders', 'exchange rates', 'nonstockholders', 'borrowing constraints', 'financial integration']"
Model‐Free International Stochastic Discount Factors,10.1111/jofi.12970,"We provide a theoretical framework to uncover in a model‐free way the relationships among international stochastic discount factors (SDFs), stochastic wedges, and financial market structures. Exchange rates are in general different from the ratio of international SDFs in incomplete markets, as captured by a stochastic wedge. We show theoretically that this wedge can be zero in incomplete and integrated markets. Market segmentation breaks the strong link between exchange rates and international SDFs, which helps address salient features of international asset returns while keeping the volatility and cross‐country correlation of SDFs at moderate levels.",JoF,2021,93,659,"['Financial Markets', 'International Asset Returns', 'Exchange Rates', 'Market Segmentation', 'Stochastic Discount Factors']","['international stochastic discount factors', 'SDFs', 'stochastic wedges', 'financial market structures', 'exchange rates', 'incomplete markets', 'market segmentation', 'integrated markets', 'international asset returns', 'cross-country correlation']"
Equilibrium Asset Pricing with Leverage and Default,10.1111/jofi.12987,"We develop a general equilibrium model linking the pricing of stocks and corporate bonds to endogenous movements in corporate leverage and aggregate volatility. The model features heterogeneous firms making optimal investment and financing decisions and connects fluctuations in macroeconomic quantities and asset prices to movements in the cross section of firms. Empirically plausible movements in leverage produce realistic asset return dynamics. Countercyclical leverage drives predictable variation in risk premia, and debt‐financed growth generates a high value premium. Endogenous default produces countercyclical aggregate volatility and credit spread movements that are propagated to the real economy through their effects on investment and output.",JoF,2021,101,757,"['Financial Markets', 'Corporate Governance', 'Credit Markets', 'Economic Growth', 'Monetary Policy']","['general equilibrium model', 'corporate bonds', 'corporate leverage', 'aggregate volatility', 'asset prices', 'risk premia', 'debt-financed growth', 'default', 'credit spread movements', 'investment']"
Foreign Safe Asset Demand and the Dollar Exchange Rate,10.1111/jofi.13003,"We develop a theory that links the U.S. dollar's valuation in FX markets to the convenience yield that foreign investors derive from holding U.S. safe assets. We show that this convenience yield can be inferred from the Treasury basis, the yield gap between U.S. government and currency‐hedged foreign government bonds. Consistent with the theory, a widening of the basis coincides with an immediate appreciation and a subsequent depreciation of the dollar. Our results lend empirical support to models that impute a special role to the United States as the world's provider of safe assets and the dollar as the world's reserve currency.",JoF,2021,102,637,"['Financial Markets', 'Monetary Policy', 'Economic Development', 'Trade and Globalization', 'Banking Systems']","['U.S. dollar', 'FX markets', 'valuation', 'convenience yield', 'Treasury basis', 'yield gap', 'government bonds', 'appreciation', 'depreciation', 'reserve currency']"
Banking on Deposits: Maturity Transformation without Interest Rate Risk,10.1111/jofi.13013,"We show that maturity transformation does not expose banks to interest rate risk—it hedges it. The reason is the deposit franchise, which allows banks to pay deposit rates that are low and insensitive to market interest rates. Hedging the deposit franchise requires banks to earn income that is also insensitive, that is, to lend long term at fixed rates. As predicted by this theory, we show that banks closely match the interest rate sensitivities of their interest income and expense, and that this insulates their equity from interest rate shocks. Our results explain why banks supply long‐term credit.",JoF,2021,98,606,"['Banking Systems', 'Financial Markets', 'Risk Management', 'Credit Markets', 'Monetary Policy']","['maturity transformation', 'interest rate risk', 'deposit franchise', 'deposit rates', 'market interest rates', 'hedging', 'interest income', 'interest expense', 'equity', 'long-term credit']"
Monetary Policy and Reaching for Income,10.1111/jofi.13004,"Using data on individual portfolio holdings and on mutual fund flows, we find that low interest rates lead to significantly higher demand for income‐generating assets such as high‐dividend stocks and high‐yield bonds. We argue that this “reaching‐for‐income” phenomenon is driven by investors who follow the “living off income” rule‐of‐thumb. Our empirical analysis shows that this preference for current income affects both household portfolio choices and the prices of income‐generating assets. In addition, we explore the implications of reaching for income for capital allocation and the effectiveness of monetary policy.",JoF,2021,89,625,"['Financial Markets', 'Monetary Policy', 'Capital Allocation', 'Income Inequality', 'Investment Strategies']","['interest rates', 'income-generating assets', 'high-dividend stocks', 'high-yield bonds', 'reaching-for-income', 'living off income', 'portfolio choices', 'household', 'prices', 'monetary policy']"
Leverage Dynamics without Commitment,10.1111/jofi.13001,"We characterize equilibrium leverage dynamics in a trade‐off model in which the firm can continuously adjust leverage and cannot commit to a policy ex ante. While the leverage ratchet effect leads shareholders to issue debt gradually over time, asset growth and debt maturity cause leverage to mean‐revert slowly toward a target. Investors anticipate future debt issuance and raise credit spreads, fully offsetting the tax benefits of new debt. Shareholders are therefore indifferent toward the debt maturity structure, even though their choice significantly affects credit spreads, leverage levels, the speed of adjustment, future investment, and growth.",JoF,2021,95,655,"['Financial Markets', 'Debt Management', 'Credit Markets', 'Investment Strategies', 'Corporate Governance']","['equilibrium leverage dynamics', 'trade-off model', 'leverage ratchet effect', 'asset growth', 'debt maturity', 'mean-revert', 'target', 'credit spreads', 'tax benefits', 'debt issuance']"
Fire‐Sale Spillovers and Systemic Risk,10.1111/jofi.13010,"We identify and track over time the factors that make the financial system vulnerable to fire sales by constructing an index of aggregate vulnerability. The index starts increasing quickly in 2004, before most other major systemic risk measures, and triples by 2008. The fire‐sale‐specific factors of delevering speed and concentration of illiquid assets account for the majority of this increase. Individual banks' contributions to aggregate vulnerability predict other firm‐specific measures of systemic risk, including SRISK and CoVaR. The balance‐sheet‐based measures we propose are therefore useful early indicators of when and where vulnerabilities are building up.",JoF,2021,95,671,"['Financial Markets', 'Risk Management', 'Banking Systems', 'Capital Allocation', 'Monetary Policy']","['financial system', 'vulnerability', 'fire sales', 'index', 'systemic risk', 'delevering speed', 'concentration', 'illiquid assets', 'aggregate vulnerability', 'balance-sheet-based measures']"
Leveraged Funds and the Shadow Cost of Leverage Constraints,10.1111/jofi.13012,"Using the most comprehensive data set of leveraged funds known to the literature, we measure the market‐wide shadow cost of leverage constraints and examine its pricing implications. The shadow cost averages 0.53% per annum from 2006 to 2016, spikes upon quarter‐ends when banks face tighter capital requirements, positively predicts future betting‐against‐beta (BAB) returns, and negatively correlates with contemporaneous BAB returns. Stocks that experience lower returns when the shadow cost increases earn 0.85% more per month. Overall, our shadow cost measure fits the predictions of leverage‐constraint‐based theories better than the widely used TED spread.",JoF,2021,93,663,"['Financial Markets', 'Risk Management', 'Banking Systems', 'Investment Strategies', 'Monetary Policy']","['leveraged funds', 'shadow cost', 'leverage constraints', 'pricing implications', 'betting-against-beta', 'BAB returns', 'capital requirements', 'leverage-constraint-based theories', 'TED spread', 'stock returns']"
Subjective Cash Flow and Discount Rate Expectations,10.1111/jofi.13016,"Why do stock prices vary? Using survey forecasts, we find that cash flow growth expectations explain most movements in the S&amp;P 500 price‐dividend and price‐earnings ratios, accounting for at least 93% and 63% of their variation. These expectations comove strongly with price ratios, even when price ratios do not predict future cash flow growth. In comparison, return expectations have low volatility and small comovement with price ratios. Short‐term, rather than long‐term, expectations account for most price ratio variation. We propose an asset pricing model with beliefs about earnings growth reversal that accurately replicates these cash flow growth expectations and dynamics.",JoF,2021,100,687,"['Financial Markets', 'Economic Growth', 'Investment Strategies', 'Asset Pricing', 'Monetary Policy']","['stock prices', 'survey forecasts', 'cash flow growth', 'S&P 500', 'price-dividend ratio', 'price-earnings ratio', 'return expectations', 'asset pricing model', 'earnings growth', 'volatility']"
Who Wears the Pants? Gender Identity Norms and Intrahousehold Financial Decision‐Making,10.1111/jofi.13002,"Using microdata from U.S. household surveys, I document that families with a financially sophisticated husband are more likely to participate in the stock market than those with a wife of equal financial sophistication. This pattern is best explained by gender identity norms, which constrain women's influence over intrahousehold financial decision‐making. A randomized controlled experiment reveals that female identity hinders idea contribution by the wife. These findings underscore the roles of intrahousehold bargaining and traditional norms in shaping household financial decisions.",JoF,2021,80,589,"['Gender Equality', 'Behavioral Economics', 'Household Financial Decisions', 'Intra-household Bargaining', 'Social Norms']","['financially sophisticated', 'stock market', 'gender identity norms', 'intrahousehold', 'decision-making', 'randomized controlled experiment', 'female identity', 'idea contribution', 'intrahousehold bargaining', 'traditional norms']"
The Economics of Hedge Fund Startups: Theory and Empirical Evidence,10.1111/jofi.13009,"This paper examines how market frictions influence the managerial incentives and organizational structure of new hedge funds. We develop a stylized model in which new managers search for accredited investors and have stronger incentives to acquire managerial skill when encountering low investor demand. Fund families endogenously arise to mitigate frictions and weaken the performance incentives of affiliated new funds. Empirically, based on a TASS‐HFR‐BarclayHedge merged database, we find that ex ante identified cold inceptions facing low investor demand outperform existing hedge funds and hot inceptions facing high demand and that cold stand‐alone inceptions outperform all types of family‐affiliated inceptions.",JoF,2021,99,720,"['Financial Markets', 'Hedge Funds', 'Investment Strategies', 'Market Frictions', 'Empirical Analysis']","['market frictions', 'managerial incentives', 'organizational structure', 'hedge funds', 'accredited investors', 'managerial skill', 'fund families', 'performance incentives', 'cold inceptions', 'investor demand']"
Trading Costs and Informational Efficiency,10.1111/jofi.13008,"We study the effect of trading costs on information aggregation and acquisition in financial markets. For a given precision of investors' private information, an irrelevance result emerges when investors are ex ante identical: price informativeness is independent of the level of trading costs. When investors are ex ante heterogeneous, a change in trading costs can increase or decrease price informativeness, depending on the source of heterogeneity. Our results are valid under quadratic, linear, and fixed costs. Through a reduction in information acquisition, trading costs reduce price informativeness. We discuss how our results inform the policy debate on financial transaction taxes/Tobin taxes.",JoF,2021,101,704,"['Financial Markets', 'Public Policy', 'Taxation', 'Market Transparency', 'Economic Development']","['trading costs', 'information aggregation', 'financial markets', 'private information', 'price informativeness', 'investors', 'heterogeneity', 'information acquisition', 'financial transaction taxes', 'Tobin taxes']"
"For Richer, for Poorer: Bankers' Liability and Bank Risk in New England, 1867 to 1880",10.1111/jofi.13011,"We study whether banks are riskier if managers have less liability. We focus on New England between 1867 and 1880 and consider the introduction of marital property laws that limited liability for newly wedded bankers. We find that banks with managers who married after a law had higher leverage, delayed loss recognition, made more risky and fraudulent loans, and lost more capital and deposits in the Long Depression of 1873 to 1878. These effects were most pronounced for bankers with the largest reduction in liability. We find no evidence that limiting liability increased firm investment at the county level.",JoF,2021,99,613,"['Banking Systems', 'Risk Management', 'Financial Markets', 'Economic Development', 'Capital Allocation']","['banks', 'risk', 'managers', 'liability', 'New England', 'marital property laws', 'leverage', 'loss recognition', 'fraudulent loans', 'Long Depression']"
Presidential Address: How Much “Rationality” Is There in Bond‐Market Risk Premiums?,10.1111/jofi.13062,"Beliefs of professional forecasters are benchmarked against those of a Bayesian econometrician  who is learning about the unknown dynamics of the bond risk factors. Consistent with rational Bayesian learning, the forecast errors of individual professionals and  are comparably predictable over the business cycle. The secular and cyclical patterns of professionals' forecasts relative to those of  are explored in depth. Inconsistent with many models with belief dispersion, the relationship between professionals' yield disagreement and their <jats:italic>matched</jats:italic> disagreements about macroeconomic fundamentals is very weak.",JoF,2021,82,639,"['Financial Markets', 'Risk Management', 'Economic Growth', 'Monetary Policy', 'Behavioral Economics']","['professional forecasters', 'Bayesian econometrician', 'bond risk factors', 'forecast errors', 'business cycle', 'secular patterns', 'cyclical patterns', 'yield disagreement', 'macroeconomic fundamentals', 'belief dispersion']"
What Explains Differences in Finance Research Productivity during the Pandemic?,10.1111/jofi.13028,"Based on a survey of American Finance Association members, we analyze how demographics, time allocation, production mechanisms, and institutional factors affect research production during the pandemic. Consistent with the literature, research productivity falls more for women and faculty with young children. Independently, and novel, extra time spent on teaching (much more likely for women) negatively affects research productivity. Also novel, concerns about feedback, isolation, and health have large negative research effects, which disproportionately affect junior faculty and PhD students. Finally, faculty who express greater concerns about employers’ finances report larger negative research effects and more concerns about feedback, isolation, and health.",JoF,2021,101,766,"['Gender Equality', 'Labor Market Dynamics', 'Educational Equity', 'Mental Health Economics', 'Economic Development']","['demographics', 'time allocation', 'production mechanisms', 'institutional factors', 'research production', 'pandemic', 'research productivity', 'women', 'faculty', 'teaching']"
Don't Take Their Word for It: The Misclassification of Bond Mutual Funds,10.1111/jofi.13023,"We provide evidence that bond fund managers misclassify their holdings, and that these misclassifications have a real and significant impact on investor capital flows. The problem is widespread, resulting in up to 31.4% of funds being misclassified with safer profiles, compared to their true, publicly reported holdings. “Misclassified funds”—those that hold risky bonds but claim to hold safer bonds—appear to on‐average outperform lower risk funds in their peer groups. Within category groups, misclassified funds receive more Morningstar stars and higher investor flows. However, when we correctly classify them based on actual risk, these funds are mediocre performers.",JoF,2021,97,674,"['Financial Markets', 'Risk Management', 'Investment Strategies', 'Market Transparency', 'Corporate Governance']","['bond fund managers', 'misclassification', 'holdings', 'impact', 'investor capital flows', 'misclassified funds', 'risky bonds', 'safer bonds', 'performance', 'Morningstar stars']"
Weathering Cash Flow Shocks,10.1111/jofi.13024,"Unexpectedly severe winter weather, which is arguably exogenous to firm and bank fundamentals, represents a significant cash flow shock for bank‐borrowing firms. Firms respond to these shocks by drawing on and increasing the size of their credit lines. Banks charge borrowers for this liquidity via increased interest rates and less borrower‐friendly loan provisions. Credit line adjustments occur within one calendar quarter of the shock and persist for at least nine months. Overall, we provide evidence that bank credit lines are an important tool for managing the nonfundamental component of cash flow volatility, especially for solvent, small bank borrowers.",JoF,2021,98,663,"['Banking Systems', 'Credit Markets', 'Risk Management', 'Monetary Policy', 'Financial Markets']","['winter weather', 'cash flow shock', 'credit lines', 'interest rates', 'loan provisions', 'liquidity', 'calendar quarter', 'bank borrowers', 'credit line adjustments', 'cash flow volatility']"
Are CEOs Different?,10.1111/jofi.13019,"Using 2,603 executive assessments, we study how CEO candidates differ from candidates for other top management positions, particularly CFOs. More than half of the variation in the 30 assessed characteristics is explained by four factors that we interpret as general ability, execution (vs. interpersonal), charisma (vs. analytical), and strategic (vs. managerial). CEO candidates have more extreme factor scores that differ significantly from those of CFO candidates. Conditional on being considered, candidates with greater general ability and interpersonal skills are more likely to be hired. These and our previous results on CEO success suggest that boards overweight interpersonal skills in hiring CEOs.",JoF,2021,101,708,"['Corporate Governance', 'Executive Hiring', 'Organizational Behavior', 'CEO Success', 'Interpersonal Skills']","['CEO candidates', 'CFO candidates', 'executive assessments', 'top management positions', 'general ability', 'execution', 'charisma', 'strategic', 'managerial', 'interpersonal skills']"
A Theory of Zombie Lending,10.1111/jofi.13022,"An entrepreneur borrows from a relationship bank or the market. The bank has a higher cost of capital but produces private information over time. While the entrepreneur accumulates reputation as the lending relationship continues, asymmetric information is also developed between the bank/entrepreneur and the market. In this setting, zombie lending is inevitable: Once the entrepreneur becomes sufficiently reputable, the bank will roll over loans even after learning bad news, for the prospect of future market financing. Zombie lending is mitigated when the entrepreneur faces financial constraints. Finally, the bank stops producing information too early if information production is costly.",JoF,2021,99,695,"['Entrepreneurship', 'Credit Markets', 'Banking Systems', 'Financial Markets', 'Risk Management']","['entrepreneur', 'relationship bank', 'market', 'cost of capital', 'private information', 'reputation', 'asymmetric information', 'zombie lending', 'financial constraints', 'information production']"
Rent Extraction with Securities Plus Cash,10.1111/jofi.13018,"In our target‐initiated theory of takeovers, a target approaches potential acquirers that privately know their standalone values and merger synergies, where higher synergy acquirers tend to have larger standalone values. Despite their information disadvantage, targets can extract all surplus when synergies and standalone values are concavely related by offering payment choices that are combinations of cash and equity. Targets exploit the reluctance of high‐valuation acquirers to cede equity claims, inducing them to bid more cash. When synergies and standalone values are not concavely related, sellers can gain by combining cash with securities that are more information sensitive than equities.",JoF,2021,99,701,"['Mergers and Acquisitions', 'Corporate Finance', 'Financial Markets', 'Information Asymmetry', 'Payment Choices']","['theory', 'takeovers', 'target', 'acquirers', 'synergies', 'standalone values', 'payment choices', 'cash', 'equity', 'securities']"
How Debit Cards Enable the Poor to Save More,10.1111/jofi.13021,"We study an at‐scale natural experiment in which debit cards were given to cash transfer recipients who already had a bank account. Using administrative account data and household surveys, we find that beneficiaries accumulated a savings stock equal to 2% of annual income after two years with the card. The increase in formal savings represents an increase in overall savings, financed by a reduction in current consumption. There are two mechanisms. First, debit cards reduce transaction costs of accessing money. Second, they reduce monitoring costs, which led beneficiaries to check their account balances frequently and build trust in the bank.",JoF,2021,100,649,"['Financial Markets', 'Consumer Behavior', 'Banking Systems', 'Economic Development', 'Behavioral Economics']","['debit cards', 'cash transfer recipients', 'bank account', 'savings', 'formal savings', 'transaction costs', 'monitoring costs', 'account balances', 'trust', 'at-scale experiment']"
Time Variation of the Equity Term Structure,10.1111/jofi.13020,"I study the term structure of one‐period expected returns on dividend claims with different maturity. I find that the slope of the term structure is countercyclical. The countercyclical variation is consistent with theories of long‐run risk and habit, but these theories cannot explain the average downward slope. At the same time, the cyclical variation is inconsistent with recent models constructed to match the average downward slope. More generally, the average and cyclicality of the slope are hard to reconcile with models with a single risk factor. I introduce a model with two priced factors to solve the puzzle.",JoF,2021,98,621,"['Financial Markets', 'Risk Management', 'Economic Development', 'Monetary Policy', 'Investment Strategies']","['term structure', 'expected returns', 'dividend claims', 'maturity', 'countercyclical', 'long-run risk', 'habit', 'downward slope', 'cyclical variation', 'two priced factors']"
Sentiment Trading and Hedge Fund Returns,10.1111/jofi.13025,"In the presence of sentiment fluctuations, arbitrageurs may engage in different strategies leading to dispersed sentiment exposures. We find that hedge funds in the top decile ranked by sentiment beta outperform those in the bottom decile by 0.59% per month on a risk‐adjusted basis, with the spread being larger among skilled funds. We also find that about 10% of hedge funds have sentiment timing skill that positively correlates with fund sentiment beta and contributes to fund performance. Our findings show that skilled hedge funds can earn high returns by predicting and exploiting sentiment changes rather than betting against mispricing.",JoF,2021,99,645,"['Financial Markets', 'Hedge Funds', 'Investment Strategies', 'Sentiment Analysis', 'Predictive Modeling']","['sentiment', 'hedge funds', 'arbitrageurs', 'strategies', 'sentiment beta', 'performance', 'skilled', 'timing skill', 'returns', 'mispricing']"
Asset Managers: Institutional Performance and Factor Exposures,10.1111/jofi.13026,"Using data on $18 trillion of assets under management, we show that actively managed institutional accounts outperformed strategy benchmarks by 75 (31) bps on a gross (net) basis during the period 2000 to 2012. Estimates from a Sharpe model imply that asset managers' outperformance came from factor exposures. If institutions had instead implemented mean‐variance efficient portfolios using index and institutional mutual funds available during the sample period, they would not have earned higher Sharpe ratios. Our results are consistent with the average asset manager having skill, managers competing for institutional capital, and institutions engaging in costly search to identify skilled managers.",JoF,2021,101,704,"['Financial Markets', 'Investment Strategies', 'Asset Management', 'Risk Management', 'Capital Allocation']","['assets under management', 'actively managed', 'institutional accounts', 'benchmarks', 'gross basis', 'net basis', 'Sharpe model', 'factor exposures', 'mean-variance efficient portfolios', 'asset managers']"
Diagnostic Expectations and Credit Cycles,10.1111/jofi.12586,"We present a model of credit cycles arising from diagnostic expectations—a belief formation mechanism based on Kahneman and Tversky's representativeness heuristic. Diagnostic expectations overweight future outcomes that become more likely in light of incoming data. The expectations formation rule is forward looking and depends on the underlying stochastic process, and thus is immune to the Lucas critique. Diagnostic expectations reconcile extrapolation and neglect of risk in a unified framework. In our model, credit spreads are excessively volatile, overreact to news, and are subject to predictable reversals. These dynamics can account for several features of credit cycles and macroeconomic volatility.",JoF,2021,99,711,"['Credit Markets', 'Financial Markets', 'Economic Development', 'Monetary Policy', 'Risk Management']","['credit cycles', 'diagnostic expectations', 'representativeness heuristic', 'Kahneman', 'Tversky', 'stochastic process', 'Lucas critique', 'credit spreads', 'macroeconomic volatility', 'risk.']"
The Cross Section of MBS Returns,10.1111/jofi.13055,"We present a simple, linear asset pricing model of the cross section of Mortgage‐Backed Security (MBS) returns. MBS earn risk premia as compensation for their exposure to prepayment risk. We measure prepayment risk and estimate risk loadings using prepayment forecasts versus realizations. Estimated loadings on prepayment risk decrease monotonically in securities' coupons relative to the par coupon, consistent with the predicted effect of prepayment on bond value. Prepayment risk appears to be priced by specialized MBS investors. The price of prepayment risk changes sign over time with the sign of a representative MBS investor's exposure to prepayment shocks.",JoF,2021,98,666,"['Financial Markets', 'Risk Management', 'Housing Market Trends', 'Investment Strategies', 'Mortgage Markets']","['asset pricing model', 'Mortgage-Backed Security', 'MBS returns', 'risk premia', 'prepayment risk', 'prepayment forecasts', 'risk loadings', 'bond value', 'specialized investors', 'prepayment shocks']"
Reinvestment Risk and the Equity Term Structure,10.1111/jofi.13035,"The equity term structure is downward sloping at long maturities. I estimate an Intertemporal Capital Asset Pricing Model (ICAPM) to show that the trade‐off between market and reinvestment risk explains this pattern. Intuitively, while long‐term dividend claims are highly exposed to market risk, they are good hedges for reinvestment risk because dividend prices rise as expected returns decline, and longer‐term claims are more sensitive to discount rates. In the estimated ICAPM, reinvestment risk dominates at long maturities, inducing relatively low risk premia on long‐term dividend claims. The model is also consistent with the equity term structure cyclicality and the upward‐sloping bond term structure.",JoF,2021,103,712,"['Financial Markets', 'Risk Management', 'Capital Allocation', 'Investment Strategies', 'Monetary Policy']","['equity term structure', 'Intertemporal Capital Asset Pricing Model', 'ICAPM', 'market risk', 'reinvestment risk', 'dividend claims', 'risk premia', 'discount rates', 'bond term structure', 'cyclicality']"
"Inventory Management, Dealers' Connections, and Prices in Over‐the‐Counter Markets",10.1111/jofi.13034,"We propose a new model of trading in over‐the‐counter markets. Dealers accumulate inventories by trading with end‐investors and trade among each other to reduce their inventory holding costs. Core dealers use a more efficient trading technology than peripheral dealers, who are heterogeneously connected to core dealers and trade with each other bilaterally. Connectedness affects prices and allocations if and only if the peripheral dealers' aggregate inventory position differs from zero. Price dispersion increases in the size of this position. The model generates new predictions about the effects of dealers' connectedness and dealers' aggregate inventories on prices.",JoF,2021,96,673,"['Financial Markets', 'Trade and Globalization', 'Market Transparency', 'Investment Strategies', 'Pricing Trends']","['trading', 'over-the-counter markets', 'dealers', 'inventories', 'end-investors', 'technology', 'connectedness', 'prices', 'allocations', 'price dispersion']"
Tracking Retail Investor Activity,10.1111/jofi.13033,"We provide an easy method to identify marketable retail purchases and sales using recent, publicly available U.S. equity transactions data. Individual stocks with net buying by retail investors outperform stocks with negative imbalances by approximately 10 bps over the following week. Less than half of the predictive power of marketable retail order imbalance is attributable to order flow persistence, while the rest cannot be explained by contrarian trading (proxy for liquidity provision) or public news sentiment. There is suggestive, but only suggestive, evidence that retail marketable orders might contain firm‐level information that is not yet incorporated into prices.",JoF,2021,98,679,"['Financial Markets', 'Investment Strategies', 'Market Transparency', 'Consumer Behavior', 'Information Economics']","['marketable', 'retail purchases', 'sales', 'U.S. equity transactions', 'stocks', 'retail investors', 'order imbalance', 'order flow persistence', 'contrarian trading', 'firm-level information']"
Can the Market Multiply and Divide? Non‐Proportional Thinking in Financial Markets,10.1111/jofi.13059,"We hypothesize that investors partially think about stock price changes in dollar rather than percentage units, leading to more extreme return responses to news for lower‐priced stocks. Consistent with such non‐proportional thinking, we find a doubling in price is associated with a 20% to 30% decline in volatility and beta (controlling for size/liquidity). To identify a causal price effect, we show that volatility jumps following stock splits and drops following reverse splits. Lower‐priced stocks also respond more strongly to firm‐specific news. Non‐proportional thinking helps explain asset pricing patterns such as the size‐volatility/beta relation, the leverage effect puzzle, and return drift and reversals.",JoF,2021,102,718,"['Financial Markets', 'Asset Pricing', 'Stock Splits', 'Behavioral Economics', 'Market Volatility']","['investors', 'stock price changes', 'dollar', 'percentage units', 'return responses', 'news', 'lower-priced stocks', 'volatility', 'beta', 'non-proportional thinking']"
The Misallocation of Finance,10.1111/jofi.13031,"We estimate real losses arising from the cross‐sectional misallocation of financial liabilities. Extending a production‐based framework of misallocation measurement to the liabilities side of the balance sheet and using manufacturing firm data from the United States and China, we find significant misallocation of debt and equity in China but not the United States. Reallocating liabilities of firms in China to mimic U.S. efficiency would produce gains of 51% to 69% in real value‐added, with only 17% to 21% stemming from inefficient debt‐equity combinations. For Chinese firms that are large or in developed cities, we estimate lower distortionary financing costs.",JoF,2021,99,668,"['Financial Markets', 'Debt Management', 'Economic Development', 'Corporate Governance', 'Capital Allocation']","['misallocation', 'financial liabilities', 'production-based framework', 'balance sheet', 'manufacturing firm data', 'United States', 'China', 'debt', 'equity', 'real value-added']"
Property Rights to Client Relationships and Financial Advisor Incentives,10.1111/jofi.13058,"We study the effect of a change in property rights on employee behavior in the financial advice industry. Our identification comes from staggered firm‐level entry into the <jats:italic>Protocol for Broker Recruiting</jats:italic>, which waived nonsolicitation clauses for advisor transitions among member firms, effectively transferring ownership of client relationships from the firm to the advisor. After the shock, advisors appear to tend to client relationships more by investing in client‐facing industry licenses, shifting to fee‐based advising, and reducing customer complaints. Our findings support property rights based investment theories of the firm and document offsetting costs to restricting labor mobility.",JoF,2021,97,721,"['Labor Market Dynamics', 'Financial Markets', 'Corporate Governance', 'Investment Strategies', 'Consumer Behavior']","['property rights', 'employee behavior', 'financial advice industry', 'Protocol for Broker Recruiting', 'advisor transitions', 'client relationships', 'industry licenses', 'fee-based advising', 'customer complaints', 'labor mobility']"
The Limits of <i>p</i>‐Hacking: Some Thought Experiments,10.1111/jofi.13036,"Suppose that the 300+ published asset pricing factors are all spurious. How much <jats:italic>p</jats:italic>‐hacking is required to produce these factors? If 10,000 researchers generate eight factors every day, it takes hundreds of years. This is because dozens of published <jats:italic>t</jats:italic>‐statistics exceed 6.0, while the corresponding <jats:italic>p</jats:italic>‐value is infinitesimal, implying an astronomical amount of <jats:italic>p</jats:italic>‐hacking in a general model. More structure implies that <jats:italic>p</jats:italic>‐hacking cannot address 100 published <jats:italic>t</jats:italic>‐statistics that exceed 4.0, as they require an implausibly nonlinear preference for <jats:italic>t</jats:italic>‐statistics or even more <jats:italic>p</jats:italic>‐hacking. These results imply that mispricing, risk, and/or frictions have a key role in stock returns.",JoF,2021,99,888,"['Financial Markets', 'Risk Management', 'Stock Returns', 'Mispricing', 'Asset Pricing']","['asset pricing factors', 'spurious', 'p-hacking', 'researchers', 't-statistics', 'p-value', 'structure', 'mispricing', 'risk', 'frictions']"
Do Physiological and Spiritual Factors Affect Economic Decisions?,10.1111/jofi.13032,"We examine the effects of physiology and spiritual sentiment on economic decision‐making in the context of Ramadan, an entire lunar month of daily fasting and increased spiritual reflection in the Muslim faith. Using an administrative data set of bank loans originated in Turkey during 2003 to 2013, we find that small business loans originated during Ramadan are 15% more likely to default within two years of origination. Loans originated in hot Ramadans, when adverse physiological effects of fasting are greatest, and those approved by the busiest bank branches perform worse. Despite their worse performance, Ramadan loans have lower credit spreads.",JoF,2021,100,654,"['Credit Markets', 'Banking Systems', 'Economic Development', 'Risk Management', 'Financial Markets']","['physiology', 'spiritual sentiment', 'economic decision-making', 'Ramadan', 'fasting', 'Muslim faith', 'bank loans', 'default', 'credit spreads', 'Turkey']"
Structuring Mortgages for Macroeconomic Stability,10.1111/jofi.13056,"We study mortgage design features aimed at stabilizing the macroeconomy. We model overlapping generations of borrowers and an infinitely lived risk‐averse representative lender. Mortgages are priced using an equilibrium pricing kernel derived from the lender's endogenous consumption. We consider an adjustable‐rate mortgage with an option that during recessions allows borrowers to pay only interest on their loan and extend its maturity. The option stabilizes consumption growth over the business cycle, shifts defaults to expansions, and enhances welfare. The cyclical properties of the contract are attractive to a risk‐averse lender so that the mortgage can be provided at a relatively low cost.",JoF,2021,101,700,"['Credit Markets', 'Financial Markets', 'Risk Management', 'Housing Market Trends', 'Monetary Policy']","['mortgage', 'design', 'macroeconomy', 'borrowers', 'lender', 'adjustable-rate', 'recession', 'consumption', 'defaults', 'welfare']"
Out‐of‐Town Home Buyers and City Welfare,10.1111/jofi.13057,"Many cities have attracted a flurry of out‐of‐town (OOT) home buyers. Such capital inflows affect house prices, rents, construction, labor income, wealth, and ultimately welfare. We develop an equilibrium model to quantify the welfare effects of OOT home buyers for the typical U.S. metropolitan area. When OOT investors buy 10% of the housing in the city center and 5% in the suburbs, welfare among residents falls by 0.61% in consumption‐equivalent units. House prices and rents rise substantially, resulting in welfare gains for owners and losses for renters. Policies that tax OOT buyers or mandate renting out vacant property mitigate welfare losses.",JoF,2021,101,655,"['Housing Market Trends', 'Public Policy', 'Urban Development', 'Taxation', 'Welfare Distribution']","['home buyers', 'capital inflows', 'house prices', 'rents', 'construction', 'labor income', 'wealth', 'welfare', 'equilibrium model', 'metropolitan area']"
Prospect Theory and Stock Market Anomalies,10.1111/jofi.13061,"We present a new model of asset prices in which investors evaluate risk according to prospect theory and examine its ability to explain 23 prominent stock market anomalies. The model incorporates all of the elements of prospect theory, accounts for investors' prior gains and losses, and makes quantitative predictions about an asset's average return based on empirical estimates of the asset's return volatility, return skewness, and past capital gain. We find that the model can help explain a majority of the 23 anomalies.",JoF,2021,83,525,"['Financial Markets', 'Risk Management', 'Investment Strategies', 'Behavioral Economics', 'Market Transparency']","['model', 'asset prices', 'investors', 'prospect theory', 'stock market anomalies', 'risk', 'empirical estimates', 'return volatility', 'return skewness', 'capital gain.']"
Risk Management in Financial Institutions: A Replication,10.1111/jofi.13063,"Rampini, Viswanathan, and Vuillemey (RVV) show empirically that net worth drives hedging. I identify discrepancies to which RVV's key findings are not robust: the positive correlation between net worth and hedging is not independent of institution size, house price decline shocks to net worth (which RVV use for identification) have mixed effects on hedging that are not robust across alternative specifications, and the treatment effects on net worth and hedging are not increasing in real estate exposure, inconsistent with a causal explanation. Overall, my analysis does not support the conclusion of RVV that higher net worth causes more hedging.",JoF,2021,99,651,"['Financial Markets', 'Risk Management', 'Housing Market Trends', 'Economic Development', 'Investment Strategies']","['net worth', 'hedging', 'discrepancies', 'robust', 'institution size', 'house price decline shocks', 'identification', 'alternative specifications', 'treatment effects', 'real estate exposure']"
Do Intermediaries Matter for Aggregate Asset Prices?,10.1111/jofi.13086,"Poor financial health of intermediaries coincides with low asset prices and high risk premiums. Is this because intermediaries matter for asset prices, or because their health correlates with economy‐wide risk aversion? In the first case, return predictability should be more pronounced for asset classes in which households are less active. We provide evidence supporting this prediction, suggesting that a quantitatively sizable fraction of risk premium variation in several large asset classes such as credit or mortgage‐backed securities (MBS) is due to intermediaries. Movements in economy‐wide risk aversion create the opposite pattern, and we find this channel also matters.",JoF,2021,98,681,"['Financial Markets', 'Risk Management', 'Credit Markets', 'Banking Systems', 'Monetary Policy']","['intermediaries', 'asset prices', 'risk premiums', 'return predictability', 'households', 'risk premium variation', 'credit', 'mortgage-backed securities', 'economy-wide risk aversion', 'evidence']"
Currency Mispricing and Dealer Balance Sheets,10.1111/jofi.13079,"We find dealer‐level evidence that recent regulation on the leverage ratio requirement causes deviations from covered interest parity. Our analysis uses a unique data set of currency derivatives with disclosed counterparty identities together with exogenous variation introduced by the U.K. leverage ratio framework. Dealers who are affected by the regulatory shock charge an additional premium of about 20 basis points per annum for synthetic dollar funding relative to unaffected dealers. This finding holds even after controlling for changes in clients' demand. Also, some clients increase their trading activity with unaffected dealers with whom they already had a preexisting relationship.",JoF,2021,99,694,"['Financial Markets', 'Regulatory Frameworks', 'Risk Management', 'Banking Systems', 'Monetary Policy']","['leverage ratio requirement', 'covered interest parity', 'currency derivatives', 'counterparty identities', 'regulatory shock', 'premium', 'synthetic dollar funding', 'dealers', 'trading activity', 'clients.']"
Partisan Professionals: Evidence from Credit Rating Analysts,10.1111/jofi.13083,"Partisan perception affects the actions of professionals in the financial sector. Linking credit rating analysts to party affiliations from voter records, we show that analysts not affiliated with the U.S. president's party downward‐adjust corporate credit ratings more frequently. Since we compare analysts with different party affiliations covering the same firm in the same quarter, differences in firm fundamentals cannot explain the results. We also find a sharp divergence in the rating actions of Democratic and Republican analysts around the 2016 presidential election. Our results show that analysts' partisan perception has price effects and may influence firms' investment policies.",JoF,2021,98,693,"['Financial Markets', 'Credit Markets', 'Public Policy', 'Corporate Governance', 'Investment Strategies']","['partisan perception', 'financial sector', 'credit rating analysts', 'party affiliations', 'U.S. president', 'corporate credit ratings', 'firm fundamentals', 'Democratic', 'Republican', 'investment policies']"
"Inequality Aversion, Populism, and the Backlash against Globalization",10.1111/jofi.13081,"Motivated by the recent rise of populism in Western democracies, we develop a tractable equilibrium model in which a populist backlash emerges endogenously in a strong economy. In the model, voters dislike inequality, especially the high consumption of “elites.” Economic growth exacerbates inequality due to heterogeneity in preferences , which leads to heterogeneity in returns on capital. In response to rising inequality, voters optimally elect a populist promising to end globalization. Equality is a luxury good. Countries with more inequality, higher financial development, and trade deficits are more vulnerable to populism, both in the model and in the data.",JoF,2021,99,667,"['Income Inequality', 'Economic Growth', 'Trade and Globalization', 'Financial Markets', 'Public Policy']","['populism', 'equilibrium model', 'inequality', 'economic growth', 'globalization', 'voters', 'elites', 'inequality', 'financial development', 'trade deficits']"
Talent in Distressed Firms: Investigating the Labor Costs of Financial Distress,10.1111/jofi.13077,"The importance of skilled labor and the inalienability of human capital expose firms to the risk of losing talent at critical times. Using Swedish microdata, we document that firms lose workers with the highest cognitive and noncognitive skills as they approach bankruptcy. In a quasi‐experiment, we confirm that financial distress drives these results: following a negative export shock caused by exogenous currency movements, talent abandons the firm, but only if the exporter is highly leveraged. Consistent with talent dependence being associated with higher labor costs of financial distress, firms that rely more on talent have more conservative capital structures.",JoF,2021,99,671,"['Labor Market Dynamics', 'Risk Management', 'Financial Markets', 'Corporate Governance', 'Economic Development']","['skilled labor', 'human capital', 'firms', 'talent', 'cognitive skills', 'noncognitive skills', 'financial distress', 'export shock', 'leveraged', 'capital structures']"
Negative Home Equity and Household Labor Supply,10.1111/jofi.13070,"Using U.S. household‐level data and plausibly exogenous variation in the location‐timing of home purchases with a single lender, I find that negative home equity causes a 2% to 6% reduction in household labor supply. Supporting causality, households are observationally equivalent at origination and equally sensitive to local housing shocks that do not cause negative equity. Results also hold comparing purchases within the same year‐metropolitan statistical area that differ by only a few months. Though multiple channels are likely at work, evidence of nonlinear effects is broadly consistent with costs associated with housing lock and financial distress.",JoF,2021,96,660,"['Labor Market Dynamics', 'Housing Market Trends', 'Financial Markets', 'Economic Development', 'Consumer Behavior']","['home equity', 'household labor supply', 'lender', 'housing shocks', 'metropolitan statistical area', 'financial distress', 'nonlinear effects', 'housing lock', 'plausibly exogenous', 'causality']"
Leverage Regulation and Market Structure: A Structural Model of the U.K. Mortgage Market,10.1111/jofi.13072,"I develop a structural model of mortgage demand and lender competition to study how leverage regulation affects the U.K. mortgage market. Using variation in risk‐weighted capital requirements across lenders and mortgages with different loan‐to‐values (LTVs), I show that a 1‐percentage‐point increase in risk‐weighted capital requirements increases lenders' marginal cost of originating mortgages by about 26 basis points (11%) on average. I use the estimated model to study proposed leverage regulations. Counterfactual analyses show that large lenders exploit a regulatory cost advantage, which increases concentration by about 20%, and suggest that banning high‐LTV mortgages may reduce large lenders' equity buffer.",JoF,2021,99,719,"['Financial Markets', 'Credit Markets', 'Regulatory Frameworks', 'Banking Systems', 'Housing Market Trends']","['structural model', 'mortgage demand', 'lender competition', 'leverage regulation', 'U.K. mortgage market', 'risk-weighted capital requirements', 'loan-to-value', 'marginal cost', 'concentration', 'high-LTV mortgages']"
Fire‐Sale Spillovers in Debt Markets,10.1111/jofi.13078,"Fire sales induced by investor redemptions have powerful spillover effects among funds that hold the same assets, hurting peer funds' performance and flows, and leading to further asset sales with negative bond price impact. A one‐standard‐deviation increase in our fire‐sale spillover measure leads to a 45 (90) bp decrease in peer fund returns (flows) and a two percentage point increase in the likelihood of a large bond price drop. The results hold in a regression‐discontinuity design addressing identification concerns. Timing, heterogeneity, instrumental‐variable, and placebo tests further support the price‐impact mechanism. Model‐based counterfactual and stress‐test analyses quantify the financial stability implications.",JoF,2021,100,732,"['Financial Markets', 'Risk Management', 'Credit Markets', 'Monetary Policy', 'Debt Management']","['fire sales', 'spillover effects', 'peer funds', 'bond price impact', 'regression-discontinuity design', 'identification concerns', 'price-impact mechanism', 'financial stability', 'stress-test analyses', 'asset sales']"
Intermediation Variety,10.1111/jofi.13084,"We explain why banks and nonbank intermediaries coexist in a model based only on differences in their funding costs. Banks enjoy a low cost of capital due to safety nets and money‐like liabilities. We show that this can actually be a disadvantage: it generates a soft‐budget‐constraint problem that makes it difficult for banks to credibly threaten to withhold additional funding to failed projects. Nonbanks emerge to solve this problem. Their high cost of capital is an advantage: it allows them to commit to terminate funding. Still, nonbanks never take over the entire market, but other coexist with banks in equilibrium.",JoF,2021,100,625,"['Banking Systems', 'Monetary Policy', 'Financial Markets', 'Capital Allocation', 'Credit Markets']","['banks', 'nonbank intermediaries', 'funding costs', 'capital', 'safety nets', 'soft-budget-constraint problem', 'funding', 'projects', 'nonbanks', 'equilibrium']"
Asset Pricing and Sports Betting,10.1111/jofi.13082,"Sports betting markets offer a novel laboratory to test theories of cross‐sectional asset pricing anomalies. Two features of this market—no systematic risk and terminal values exogenous to betting activity—evade the joint hypothesis problem, allowing mispricing to be detected. Examining a large and diverse set of liquid betting contracts, I find strong evidence of momentum, consistent with delayed overreaction and inconsistent with underreaction and rational pricing. Returns are a fraction of those in financial markets and fail to overcome transactions costs, preventing arbitrage from eliminating them. An insight from betting also predicts value and momentum returns in U.S. equities.",JoF,2021,98,692,"['Financial Markets', 'Risk Management', 'Investment Strategies', 'Behavioral Economics', 'Economic Development']","['sports betting', 'asset pricing anomalies', 'systematic risk', 'terminal values', 'mispricing', 'momentum', 'delayed overreaction', 'underreaction', 'rational pricing', 'arbitrage']"
"Volatility, Valuation Ratios, and Bubbles: An Empirical Measure of Market Sentiment",10.1111/jofi.13068,"We define a sentiment indicator based on option prices, valuation ratios, and interest rates. The indicator can be interpreted as a lower bound on the expected growth in fundamentals that a rational investor would have to perceive to be happy to hold the market. The bound was unusually high in the late 1990s, reflecting dividend growth expectations that in our view were unreasonably optimistic. Our approach exploits two key ingredients. First, we derive a new valuation ratio decomposition that is related to the Campbell–Shiller loglinearization but that resembles the Gordon growth model more closely and has certain other advantages. Second, we introduce a volatility index that provides a lower bound on the market's expected log return.",JoF,2021,116,745,"['Financial Markets', 'Economic Growth', 'Risk Management', 'Investment Strategies', 'Market Transparency']","['sentiment indicator', 'option prices', 'valuation ratios', 'interest rates', 'expected growth', 'fundamentals', 'rational investor', 'dividend growth expectations', 'valuation ratio decomposition', 'volatility index']"
Valuing Private Equity Investments Strip by Strip,10.1111/jofi.13073,"We propose a new valuation method for private equity (PE) investments. It constructs a replicating portfolio using cash flows on listed equity and fixed‐income instruments (strips). It then values the strips using an asset pricing model that captures the risk in the cross‐section of bonds and equity factors. The method delivers a risk‐adjusted profit on each PE investment and a time series for the expected return on each fund category. We find negative risk‐adjusted profits for the average PE fund, with substantial heterogeneity and some persistence in the performance. Expected returns and risk‐adjusted profit decline in the later part of the sample.",JoF,2021,102,658,"['Financial Markets', 'Risk Management', 'Investment Strategies', 'Private Equity', 'Asset Pricing Model']","['valuation method', 'private equity investments', 'replicating portfolio', 'cash flows', 'fixed-income instruments', 'asset pricing model', 'risk', 'equity factors', 'profit', 'expected return']"
Real Estate Shocks and Financial Advisor Misconduct,10.1111/jofi.13067,"We test whether personal real estate shocks affect professional misconduct by financial advisors. We use a panel of advisors' home addresses and examine within‐advisor variation relative to other advisors who work at the same firm and live in the same ZIP code. We find a negative relation between housing returns and misconduct. We show that advisors' housing returns explain misconduct against out‐of‐state customers, breaking the link between customer and advisor housing shocks. Furthermore, the results are stronger for advisors with lower career risk from committing misconduct, and for advisors with greater borrowing constraints.",JoF,2021,93,637,"['Financial Markets', 'Risk Management', 'Housing Market Trends', 'Consumer Behavior', 'Regulatory Frameworks']","['personal', 'real estate shocks', 'professional misconduct', 'financial advisors', 'panel', 'home addresses', 'housing returns', 'out-of-state customers', 'career risk', 'borrowing constraints']"
Economic Stimulus at the Expense of Routine‐Task Jobs,10.1111/jofi.13080,"Do investment tax incentives improve job prospects for workers? We explore states' adoption of a major federal tax incentive that accelerates the depreciation of equipment investments for eligible firms but not for ineligible ones. Analyzing massive establishment‐level data sets on occupational employment and computer investment, we find that when states expand investment incentives, eligible firms immediately increase their equipment and skilled employees; whereas they reduce routine‐task employees after a delay of up to two years. These opposing effects constitute an overall insignificant effect on the firms' total employment and shed light on the nuances of job creation through investment incentives.",JoF,2021,100,712,"['Taxation', 'Labor Market Dynamics', 'Economic Development', 'Investment Strategies', 'Public Policy']","['investment tax incentives', 'job prospects', 'workers', 'federal tax incentive', 'depreciation', 'equipment investments', 'eligible firms', 'occupational employment', 'skilled employees', 'routine-task employees']"
"Information Asymmetry, Mispricing, and Security Issuance",10.1111/jofi.13066,"I examine the effects of information asymmetry–driven mispricing on security issuance. Using predisclosure changes in purchase obligations as a proxy for information asymmetry–driven mispricing, I find that managers avoid (prefer) issuing securities when they perceive their firms to be undervalued (overvalued). The effects of information asymmetry–driven mispricing are stronger on equity issuance than debt issuance. Consequently, undervaluation (overvaluation) causes an increase (decrease) in leverage. These effects are more pronounced for firms, periods, and securities associated with greater information asymmetry. The stock‐trading patterns that managers follow suggest that their perceived mispricing is an important factor in both private and firm‐level decisions.",JoF,2021,100,776,"['Financial Markets', 'Capital Allocation', 'Corporate Governance', 'Debt Management', 'Investment Strategies']","['information asymmetry', 'mispricing', 'security issuance', 'purchase obligations', 'managers', 'undervalued', 'overvalued', 'equity issuance', 'debt issuance', 'leverage']"
Predictably Unequal? The Effects of Machine Learning on Credit Markets,10.1111/jofi.13090,"Innovations in statistical technology in functions including credit‐screening have raised concerns about distributional impacts across categories such as race. Theoretically, distributional effects of better statistical technology can come from greater flexibility to uncover structural relationships or from triangulation of otherwise excluded characteristics. Using data on U.S. mortgages, we predict default using traditional and machine learning models. We find that Black and Hispanic borrowers are disproportionately less likely to gain from the introduction of machine learning. In a simple equilibrium credit market model, machine learning increases disparity in rates between and within groups, with these changes attributable primarily to greater flexibility.",JoF,2022,100,769,"['Machine Learning Applications', 'Credit Markets', 'Income Inequality', 'Financial Markets', 'Public Policy']","['statistical technology', 'credit-screening', 'distributional impacts', 'race', 'structural relationships', 'machine learning models', 'U.S. mortgages', 'default prediction', 'Black borrowers', 'Hispanic borrowers.']"
Forced Entrepreneurs,10.1111/jofi.13097,"Conventional wisdom suggests that labor market distress drives workers into temporary self‐employment, lowering entrepreneurial quality. Analyzing employment histories for 640,000 U.S. workers, we document that graduating college during a period of high unemployment does increase entry to entrepreneurship. However, compared to voluntary entrepreneurs, firms founded by <jats:italic>forced</jats:italic> entrepreneurs are more likely to survive, innovate, and receive venture backing. Explaining these results, we confirm that labor shocks disproportionately impact high earners, with these workers starting more successful firms. Overall, we document untapped entrepreneurial potential across the top of the income distribution and the role of recessions in reversing this missing entrepreneurship.",JoF,2022,100,800,"['Entrepreneurship', 'Labor Market Dynamics', 'Economic Growth', 'Venture Capital', 'Income Inequality']","['labor market distress', 'temporary self-employment', 'entrepreneurial quality', 'college graduates', 'high unemployment', 'forced entrepreneurs', 'survival', 'innovation', 'venture backing', 'recessions']"
The Loan Covenant Channel: How Bank Health Transmits to the Real Economy,10.1111/jofi.13074,"We document the importance of covenant violations in transmitting bank health to nonfinancial firms. Roughly one‐third of loans in our supervisory data breach a covenant during the 2008 to 2009 period, allowing lenders to force a renegotiation of loan terms or to accelerate repayment of otherwise long‐term credit. Lenders in worse health are more likely to force a reduction in the loan commitment following a violation. The reduction in credit to borrowers who violate a covenant can account for the majority of the cross‐sectional variation in credit supply during the 2008 to 2009 crisis.",JoF,2022,94,593,"['Credit Markets', 'Banking Systems', 'Financial Markets', 'Risk Management', 'Economic Development']","['covenant violations', 'bank health', 'nonfinancial firms', 'loans', 'supervisory data', 'lenders', 'credit supply', '2008-2009 period', 'renegotiation', 'loan terms']"
Monetary Policy Spillovers through Invoicing Currencies,10.1111/jofi.13071,"This paper explores the role of trade invoicing currencies in the international spillover of monetary policy. Using high‐frequency measures of Federal Reserve monetary policy shocks, I show that exchange rates, interest rates, and equity returns in countries with a larger share of dollar‐invoiced imports systematically respond more to U.S. monetary policy. I document similar transmission effects from European Central Bank (ECB) monetary policy shocks to countries with euro‐invoiced imports. I rationalize these findings within a New Keynesian framework. As a result of these spillovers, domestic monetary policy should be less effective in countries with traded goods invoiced in foreign currencies.",JoF,2022,100,704,"['Trade and Globalization', 'Monetary Policy', 'Economic Development', 'International Trade', 'Exchange Rates']","['trade invoicing', 'currencies', 'international spillover', 'monetary policy', 'Federal Reserve', 'exchange rates', 'interest rates', 'equity returns', 'European Central Bank', 'New Keynesian framework']"
Cultural Biases in Equity Analysis,10.1111/jofi.13095,"A more positive cultural trust bias by an equity analyst's country of origin toward a firm's headquarter country is associated with significantly more positive stock recommendations. The cultural bias effect is stronger for eponymous firms whose names mention their home country and varies over time, increasing with negative sentiment. I find evidence of a negative North‐South bias during the European debt crisis and United Kingdom‐Europe divergence amid Brexit. Share price reactions to recommendations by more biased analysts are weaker, and more biased recommendations are worse predictors of monthly stock returns. More positively biased analysts also assign higher target prices.",JoF,2022,99,687,"['Financial Markets', 'Corporate Governance', 'Economic Development', 'Trade Policies', 'Market Transparency']","['cultural trust bias', 'equity analyst', 'stock recommendations', 'eponymous firms', 'home country', 'negative sentiment', 'North-South bias', 'European debt crisis', 'United Kingdom', 'Brexit']"
Institutional Investors and Corporate Governance: The Incentive to Be Engaged,10.1111/jofi.13085,"This paper studies institutional investors’ incentives to be engaged shareholders. In 2017, the average institution gains an extra $129,000 in annual management fees if a stockholding increases 1% in value, considering both the direct effect on assets under management and the indirect effect on subsequent fund flows. The estimates range from $19,600 for investments in small firms to $307,600 for investments in large firms. Institutional shareholders in one firm often gain when the firm's competitors do well, by virtue of institutions’ holdings in those firms, but the impact of common ownership is modest in the most concentrated industries.",JoF,2022,98,647,"['Financial Markets', 'Investment Strategies', 'Corporate Governance', 'Capital Allocation', 'Market Transparency']","['institutional investors', 'engaged shareholders', 'management fees', 'stockholding', 'assets under management', 'fund flows', 'investments', 'small firms', 'large firms', 'common ownership.']"
"Non‐Deal Roadshows, Informed Trading, and Analyst Conflicts of Interest",10.1111/jofi.13089,"Non‐deal roadshows (NDRs) are private meetings between management and institutional investors, typically organized by sell‐side analysts. We find that around NDRs, local institutional investors trade heavily and profitably, while retail trading is significantly less informed. Analysts who sponsor NDRs issue significantly more optimistic recommendations and target prices, together with more “beatable” earnings forecasts, consistent with analysts issuing strategically biased forecasts to win NDR business. Our results suggest that NDRs result in a substantial information advantage for institutional investors and create significant conflicts of interests for the analysts who organize them.",JoF,2022,90,694,"['Financial Markets', 'Investment Strategies', 'Corporate Governance', 'Analyst Ethics', 'Market Transparency']","['NDRs', 'roadshows', 'institutional investors', 'analysts', 'trading', 'profitability', 'recommendations', 'target prices', 'earnings forecasts', 'conflicts of interests']"
Female Representation in the Academic Finance Profession,10.1111/jofi.13094,"We present new data on female representation in the academic finance profession. In our sample of finance faculty at top‐100 U.S. business schools during 2009 to 2017, only 16.0% are women. The gender imbalance manifests in several ways. First, after controlling for research productivity, women hold positions at lower ranked institutions and are less likely to be full professors. Results also suggest that they are paid less. Second, women publish fewer papers. This gender gap exists in research quantity, not quality. Third, women have more female coauthors, suggesting smaller publication networks. Time‐series data suggest shrinking gender gaps in recent years.",JoF,2022,100,668,"['Gender Equality', 'Labor Market Dynamics', 'Research Productivity', 'Income Inequality', 'Academic Finance profession']","['female representation', 'academic finance profession', 'finance faculty', 'U.S. business schools', 'gender imbalance', 'research productivity', 'full professors', 'research quantity', 'publication networks', 'gender gaps']"
Increasing Enrollment in Income‐Driven Student Loan Repayment Plans: Evidence from the Navient Field Experiment,10.1111/jofi.13088,"We report evidence from a randomized field experiment conducted by a major student loan servicer, Navient, in which student loan borrowers received prepopulated applications for income‐driven repayment (IDR) plans. Treatment increased IDR enrollment by 34 percentage points relative to the control group. Using the random treatment assignment as an instrument for IDR enrollment, we furthermore provide local average treatment effect (LATE) estimates of the effects of IDR enrollment on new delinquencies, monthly student loan payments, and consumer spending. Our study is the first field‐experimental evaluation of a U.S. government program designed to address the soaring debt burdens of U.S. households.",JoF,2022,100,706,"['Debt Management', 'Consumer Behavior', 'Public Policy', 'Financial Markets', 'Economic Development']","['randomized field experiment', 'student loan servicer', 'Navient', 'income-driven repayment', 'IDR', 'enrollment', 'treatment assignment', 'local average treatment effect', 'delinquencies', 'consumer spending']"
Borrowing to Save? The Impact of Automatic Enrollment on Debt,10.1111/jofi.13069,"Does automatic enrollment into a retirement plan increase financial distress due to increased borrowing outside the plan? We study a natural experiment created when the U.S. Army began automatically enrolling newly hired civilian employees into the Thrift Savings Plan. Four years after hire, automatic enrollmentincreases cumulative contributions to the plan by 4.1% of annual salary, but we find little evidence ofincreased financial distress. Automatic enrollment causes no significant change in credit scores, debt balances excluding auto debt and first mortgages, or adverse credit outcomes, with the possible exception of increasedfirst‐mortgage balances in foreclosure.",JoF,2022,93,676,"['Retirement Plans', 'Financial Markets', 'Consumer Behavior', 'Credit Markets', 'Housing Market Trends']","['automatic enrollment', 'retirement plan', 'financial distress', 'borrowing', 'U.S. Army', 'civilian employees', 'Thrift Savings Plan', 'credit scores', 'debt balances', 'first mortgages']"
How Do Financial Constraints Affect Product Pricing? Evidence from Weather and Life Insurance Premiums,10.1111/jofi.13093,"I identify the effects of financial constraints on firms' product pricing decisions, using insurance groups containing both life and property &amp; casualty (P&amp;C) divisions. Following P&amp;C divisions' losses, life divisions change prices in a manner that can generate more immediate financial resources: premiums fall (rise) for life policies that immediately increase (decrease) insurers' financial resources. Premiums change more in groups that are more constrained. Life divisions increase transfers to P&amp;C divisions, suggesting P&amp;C divisions' shocks are transmitted to life divisions. Results hold when instrumenting for P&amp;C divisions' losses with exposure to unusual weather damages, implying that the effects are causal.",JoF,2022,100,744,"['Financial Markets', 'Risk Management', 'Corporate Governance', 'Climate Change Economics', 'Insurance Systems']","['financial constraints', 'firms', 'product pricing decisions', 'insurance groups', 'life divisions', 'property & casualty divisions', 'premiums', 'transfers', 'shocks', 'causal.']"
Clients' Connections: Measuring the Role of Private Information in Decentralized Markets,10.1111/jofi.13087,"We propose a new measure of private information in decentralized markets—connections—which exploits the time variation in the number of dealers with whom a client trades in a time period. Using trade‐level data for the U.K. government bond market, we show that clients perform better when having more connections as their trades predict future price movements. Time variation in market‐wide connections also helps explain yield dynamics. Given our novel measure, we present two applications suggesting that (i) dealers pass on information, acquired from their informed clients, to their affiliates, and (ii) informed clients better predict the orderflow intermediated by their dealers.",JoF,2022,100,685,"['Financial Markets', 'Market Transparency', 'Information asymmetry', 'Trade and Globalization', 'Investment Strategies']","['private information', 'decentralized markets', 'connections', 'dealers', 'trade-level data', 'U.K. government bond market', 'price movements', 'yield dynamics', 'orderflow', 'affiliates']"
Stock Market and No‐Dividend Stocks,10.1111/jofi.13098,"We develop a stationary model of the aggregate stock market featuring both dividend‐paying and no‐dividend stocks within a familiar, parsimonious consumption‐based equilibrium framework. We find that such a simple feature leads to profound implications supporting several stock market empirical regularities that leading consumption‐based asset pricing models have difficulty reconciling. Namely, the presence of no‐dividend stocks in the stock market leads to a lower correlation between stock market returns and the aggregate consumption growth rate, a nonmonotonic and even negative relation between the stock market risk premium and its volatility, and a downward‐sloping term structure of equity risk premia.",JoF,2022,98,713,"['Financial Markets', 'Asset Pricing', 'Stock Market', 'Equity Risk Premium', 'Consumption-Based Models']","['aggregate stock market', 'dividend-paying stocks', 'no-dividend stocks', 'consumption-based equilibrium framework', 'stock market returns', 'consumption growth rate', 'stock market risk premium', 'volatility', 'term structure', 'equity risk premia']"
"Skill, Scale, and Value Creation in the Mutual Fund Industry",10.1111/jofi.13096,"We develop a flexible and bias‐adjusted approach to jointly examine skill, scalability, and value‐added across individual funds. We find that skill and scalability (i) vary substantially across funds, and (ii) are strongly related, as great investment ideas are difficult to scale up. The combination of skill and scalability produces a value‐added that (i) is positive for the majority of funds, and (ii) approaches its optimal level after an adjustment period (possibly due to investor learning). These results are consistent with theoretical models in which funds are skilled and able to extract economic rents from capital markets.",JoF,2022,96,635,"['Financial Markets', 'Investment Strategies', 'Capital Allocation', 'Economic Development', 'Market Transparency']","['flexible', 'bias-adjusted', 'skill', 'scalability', 'value-added', 'funds', 'investment', 'optimal level', 'adjustment period', 'economic rents']"
Anomalies and the Expected Market Return,10.1111/jofi.13099,"We provide the first systematic evidence on the link between long‐short anomaly portfolio returns—a cornerstone of the cross‐sectional literature—and the time‐series predictability of the aggregate market excess return. Using 100 representative anomalies from the literature, we employ a variety of shrinkage techniques (including machine learning, forecast combination, and dimension reduction) to efficiently extract predictive signals in a high‐dimensional setting. We find that long‐short anomaly portfolio returns evince statistically and economically significant out‐of‐sample predictive ability for the market excess return. The predictive ability of anomaly portfolio returns appears to stem from asymmetric limits of arbitrage and overpricing correction persistence.",JoF,2022,98,775,"['Financial Markets', 'Market Transparency', 'Machine Learning Applications', 'Economic Development', 'Risk Management']","['long-short anomaly', 'portfolio returns', 'cross-sectional literature', 'time-series predictability', 'aggregate market excess return', 'shrinkage techniques', 'machine learning', 'forecast combination', 'dimension reduction', 'predictive ability']"
The Fragility of Market Risk Insurance,10.1111/jofi.13118,"Variable annuities, which package mutual funds with minimum return guarantees over long horizons, accounted for $1.5 trillion or 35% of U.S. life insurer liabilities in 2015. Sales decreased and fees increased during the global financial crisis, and insurers made guarantees less generous or stopped offering guarantees to reduce risk exposure. These effects persist in the low‐interest rate environment after the global financial crisis, and variable annuity insurers suffered large equity drawdowns during the COVID‐19 crisis. We develop and estimate a model of insurance markets in which financial frictions and market power determine pricing, contract characteristics, and the degree of market completeness.",JoF,2022,101,711,"['Financial Markets', 'Risk Management', 'Insurance', 'Economic Development', 'Financial Policy']","['variable annuities', 'mutual funds', 'minimum return guarantees', 'life insurer liabilities', 'global financial crisis', 'fees', 'risk exposure', 'low-interest rate environment', 'equity drawdowns', 'insurance markets']"
Predictable Financial Crises,10.1111/jofi.13105,"Using historical data on postwar financial crises around the world, we show that the combination of rapid credit and asset price growth over the prior three years, whether in the nonfinancial business or the household sector, is associated with a 40% probability of entering a financial crisis within the next three years. This compares with a roughly 7% probability in normal times, when neither credit nor asset price growth is elevated. Our evidence challenges the view that financial crises are unpredictable “bolts from the sky” and supports the Kindleberger‐Minsky view that crises are the byproduct of predictable, boom‐bust credit cycles. This predictability favors policies that lean against incipient credit‐market booms.",JoF,2022,110,731,"['Financial Markets', 'Credit Markets', 'Monetary Policy', 'Economic Development', 'Regulatory Frameworks']","['financial crises', 'historical data', 'rapid credit growth', 'asset price growth', 'nonfinancial business', 'household sector', 'probability', 'predictable', 'boom-bust credit cycles', 'policies']"
Late to Recessions: Stocks and the Business Cycle,10.1111/jofi.13100,"I find that returns are predictably negative for several months after the onset of recessions, becoming high only thereafter. I identify business cycle turning points by estimating a state‐space model using macroeconomic data. Conditioning on the business cycle further reveals that returns exhibit momentum in recessions, whereas in expansions they display the mild reversals expected from discount rate changes. A strategy exploiting this pattern produces positive alphas. Using analyst forecast data, I show that my findings are consistent with investors' slow reaction to recessions. When expected returns are negative, analysts are too optimistic and their downward expectation revisions are exceptionally high.",JoF,2022,101,716,"['Financial Markets', 'Investment Strategies', 'Economic Development', 'Monetary Policy', 'Behavioral Economics']","['returns', 'recessions', 'business cycle', 'momentum', 'expansions', 'discount rate changes', 'alphas', 'analyst forecast data', 'investors', 'expectation revisions']"
Monetary Policy and Asset Valuation,10.1111/jofi.13107,"We document large, longer term, joint regime shifts in asset valuations and the real federal funds rate‐ spread. To interpret these findings, we estimate a novel macrofinance model of monetary transmission and find that the documented regimes coincide with shifts in the parameters of a policy rule, with long‐term consequences for the real interest rate. Estimates imply that two‐thirds of the decline in the real interest rate since the early 1980s is attributable to regime changes in monetary policy. The model explains how infrequent changes in the stance of monetary policy can generate persistent changes in asset valuations and the equity premium.",JoF,2022,102,655,"['Monetary Policy', 'Financial Markets', 'Economic Growth', 'Investment Strategies', 'Asset Valuations']","['regime shifts', 'asset valuations', 'real federal funds rate', 'macrofinance model', 'monetary transmission', 'policy rule', 'real interest rate', 'monetary policy', 'equity premium', 'asset prices']"
Payment System Externalities,10.1111/jofi.13110,"We examine how the payment processing role of banks affects their lending activity. In our model, banks operate in separate zones, and issue claims to entrepreneurs who purchase some inputs outside their own zone. Settling bank claims across zones incurs a cost. In equilibrium, a liquidity externality arises when zones are sufficiently different in their outsourcing propensities—a bank may restrict its own lending because it needs to hold liquidity against claims issued by another bank. Our work highlights that the disparate motives for interbank borrowing (investing in productive projects and managing liquidity) can have different effects on efficiency.",JoF,2022,98,662,"['Banking Systems', 'Credit Markets', 'Monetary Policy', 'Financial Markets', 'Risk Management']","['payment processing', 'banks', 'lending activity', 'zones', 'claims', 'entrepreneurs', 'liquidity externality', 'interbank borrowing', 'productive projects', 'efficiency']"
Volatility Expectations and Returns,10.1111/jofi.13120,"We provide evidence that agents have slow‐moving beliefs about stock market volatility that lead to initial underreaction to volatility shocks followed by delayed overreaction. These dynamics are mirrored in the VIX and variance risk premiums, which reflect investor expectations about volatility, and are also supported in both surveys and firm‐level option prices. We embed these expectations into an asset pricing model and find that the model can account for a number of stylized facts about market returns and return volatility that are difficult to reconcile, including a weak or even negative risk‐return trade‐off.",JoF,2022,93,622,"['Financial Markets', 'Risk Management', 'Investment Strategies', 'Market Transparency', 'Behavioral Economics']","['agents', 'beliefs', 'stock market volatility', 'underreaction', 'overreaction', 'VIX', 'variance risk premiums', 'investor expectations', 'asset pricing model', 'market returns']"
Dissecting Conglomerate Valuations,10.1111/jofi.13117,"We develop a new method to estimate Tobin's Qs of conglomerate divisions without relying on standalone firms. Divisional Qs differ considerably from those of standalone firms across industries, over time, and in their sensitivity to economic shocks. The differences are explained by intraconglomerate covariance structures and access to internal capital markets that mitigate external financing frictions. Consequently, the Qs capture variation in the allocation of assets in the economy: within firms through internal capital markets and across focused and diversified firms through diversifying acquisitions. Overall, our method provides opportunities to study the economic mechanisms that explain corporate diversification.",JoF,2022,98,726,"['Capital Allocation', 'Corporate Governance', 'Economic Development', 'Financial Markets', 'Investment Strategies']","[""Tobin's Q"", 'conglomerate divisions', 'standalone firms', 'industries', 'economic shocks', 'intraconglomerate covariance structures', 'internal capital markets', 'external financing frictions', 'allocation of assets', 'corporate diversification.']"
Common Risk Factors in Cryptocurrency,10.1111/jofi.13119,"We find that three factors—cryptocurrency market, size, and momentum—capture the cross‐sectional expected cryptocurrency returns. We consider a comprehensive list of price‐ and market‐related return predictors in the stock market and construct their cryptocurrency counterparts. Ten cryptocurrency characteristics form successful long‐short strategies that generate sizable and statistically significant excess returns, and we show that all of these strategies are accounted for by the cryptocurrency three‐factor model. Lastly, we examine potential underlying mechanisms of the cryptocurrency size and momentum effects.",JoF,2022,78,620,"['Financial Markets', 'Investment Strategies', 'Cryptocurrency', 'Risk Management', 'Market Transparency']","['cryptocurrency', 'market', 'size', 'momentum', 'returns', 'predictors', 'strategies', 'excess returns', 'three-factor model', 'underlying mechanisms']"
Do Market Prices Improve <b>the Accuracy of Court Valuations in Chapter 11?</b>,10.1111/jofi.13111,"The average difference between the court value and postemergence market value of newly issued stocks in Chapter 11 reorganizations exceeds 50%. We show that public dissemination of transactions in defaulted bonds reduces this difference by 23% and largely eliminates interclaimant wealth transfers. The effects of dissemination are only significant when the bonds are sufficiently traded around the court valuation date and when they receive significant amounts of postemergence equity, indicating that the bond's value is sensitive to the size and allocation of the pie. These findings imply that security prices have real effects: they improve the valuations of bankruptcy participants.",JoF,2022,100,688,"['Financial Markets', 'Risk Management', 'Corporate Governance', 'Credit Markets', 'Market Transparency']","['court value', 'postemergence market value', 'Chapter 11 reorganizations', 'public dissemination', 'transactions', 'defaulted bonds', 'interclaimant wealth transfers', 'postemergence equity', 'security prices', 'bankruptcy participants']"
Regulation of Charlatans in High‐Skill Professions,10.1111/jofi.13112,"We model a market for a skill in short supply and high demand, where the presence of charlatans (professionals who sell a service they do not deliver on) is an equilibrium outcome. In the model, reducing the number of charlatans through regulation lowers consumer surplus because of the resulting reduction in competition among producers. Producers can benefit from this reduction, potentially explaining the regulation we observe. The effect on total surplus depends on the type of regulation. We derive the factors that drive the cross‐sectional variation in charlatans (regulation) across professions.",JoF,2022,91,604,"['Regulatory Frameworks', 'Labor Market Dynamics', 'Economic Development', 'Public Policy', 'Market Transparency']","['market', 'skill', 'charlatans', 'regulation', 'consumer surplus', 'competition', 'producers', 'total surplus', 'professions', 'cross-sectional.']"
Going the Extra Mile: Distant Lending and Credit Cycles,10.1111/jofi.13114,"The average distance of U.S. banks from their small corporate borrowers increased before the global financial crisis, especially for banks in competitive counties. Small distant loans are harder to make, so loan quality deteriorated. Surprisingly, such lending intensified as the Fed raised interest rates from 2004. Why? We show that banks' responses to higher rates led bank deposits to shift into competitive counties. Short‐horizon bank management recycled these inflows into risky loans to distant uncompetitive counties. Thus, rate hikes, competition, and managerial short‐termism explain why inflows “burned a hole” in banks' pockets and, more generally, increased risky lending.",JoF,2022,98,686,"['Banking Systems', 'Monetary Policy', 'Risk Management', 'Financial Markets', 'Capital Allocation']","['distance', 'U.S. banks', 'small corporate borrowers', 'global financial crisis', 'competitive counties', 'loan quality', 'Fed', 'interest rates', 'bank deposits', 'risky loans']"
Liquidity Fluctuations in Over‐the‐Counter Markets,10.1111/jofi.13106,"This paper proposes a theory of excess price fluctuations in over‐the‐counter secondary markets. When heterogeneous assets trade under asymmetric information, a quality effect emerges: high liquidity lowers the quality of the pool of sellers and decreases future liquidity. Cyclical equilibria can arise even without fundamental shocks. In a cycle, investors speculate by bidding up the price of low‐quality assets, anticipating a high resale price at the peak. When this resale effect is strong, cycles disappear and multiple steady states coexist with different levels of liquidity. The model rationalizes empirical patterns for corporate bonds and housing in particular.",JoF,2022,97,673,"['Financial Markets', 'Corporate Bonds', 'Housing Market Trends', 'Market Transparency', 'Economic Development']","['excess price fluctuations', 'over-the-counter secondary markets', 'asymmetric information', 'quality effect', 'liquidity', 'cyclical equilibria', 'investors', 'speculation', 'resale effect', 'multiple steady states.']"
Do Equity Markets Care <b>about Income Inequality? Evidence from Pay Ratio Disclosure</b>,10.1111/jofi.13113,"We examine equity markets’ reaction to the first‐time disclosure of the CEO‐worker pay ratio by U.S. public companies in 2018. We find that firms disclosing higher pay ratios experience significantly lower abnormal announcement returns. Firms whose shareholders are more inequality‐averse experience a more negative market response to high pay ratios. Furthermore, during 2018 more inequality‐averse investors rebalance their portfolios away from stocks with a high pay ratio relative to other investors. Our results suggest that equity markets are concerned about high within‐firm pay dispersion, and investors’ inequality aversion is a channel through which high pay ratios negatively affect firm value.",JoF,2022,100,705,"['Financial Markets', 'Income Inequality', 'Corporate Governance', 'Labor Market Dynamics', 'Investment Strategies']","['CEO-worker pay ratio', 'equity markets', 'abnormal announcement returns', 'inequality-averse', 'market response', 'investors', 'portfolios', 'pay dispersion', 'firm value']"
"Barbarians at the Store? Private Equity, Products, and Consumers",10.1111/jofi.13134,"We investigate the effects of private equity firms on product markets using price and sales data for an extensive number of consumer products. Following a private equity deal, target firms increase retail sales of their products 50% more than matched control firms. Price increases—roughly 1% on existing products—do not drive this growth; the launch of new products and geographic expansion do. Competitors reduce their product offerings and marginally raise prices. Cross‐sectional results on target firms, private equity firms, the economic environment, and product categories suggest that private equity generates growth by easing financial constraints and providing managerial expertise.",JoF,2022,98,692,"['Private Equity', 'Corporate Governance', 'Financial Markets', 'Economic Growth', 'Entrepreneurship']","['private equity firms', 'product markets', 'retail sales', 'price increases', 'new products', 'geographic expansion', 'competitors', 'financial constraints', 'managerial expertise', 'economic environment']"
The Wisdom of the Robinhood Crowd,10.1111/jofi.13128,"Robinhood investors increased their holdings in the March 2020 COVID bear market, indicating an absence of collective panic and margin calls. This steadfastness was rewarded in the subsequent bull market. Despite unusual interest in some “experience” stocks (e.g., cannabis stocks), they tilted primarily toward stocks with high past share volume and dollar‐trading volume (themselves mostly big stocks). From mid‐2018 to mid‐2020, an aggregated crowd consensus portfolio (a proxy for the household‐equal‐weighted portfolio) had both good timing and good alpha.",JoF,2022,79,561,"['Financial Markets', 'Investment Strategies', 'Consumer Behavior', 'Market Transparency', 'Economic Development']","['Robinhood investors', 'holdings', 'March 2020', 'COVID bear market', 'collective panic', 'margin calls', 'bull market', 'experience stocks', 'share volume', 'crowd consensus portfolio']"
Fully Closed: Individual Responses to Realized Gains and Losses,10.1111/jofi.13122,We analyze how individuals reinvest realized capital gains and losses exploiting plausibly exogenous sales due to mutual fund liquidations. Individuals reinvest 83% if a forced sale results in a gain relative to the initial investment; but reinvest only 40% in the event of a loss. This difference is statistically significant for more than six months and arises because many individuals forced to realize a loss choose not to reinvest anything and some even exit the stock market altogether. Individuals treat realized losses differently from paper losses and are discouraged from investing more and participating in the stock market.,JoF,2022,98,635,"['Financial Markets', 'Investment Strategies', 'Consumer Behavior', 'Behavioral Economics', 'Stock Market']","['individuals', 'capital gains', 'losses', 'reinvest', 'forced sale', 'mutual fund liquidations', 'stock market', 'paper losses', 'investment', 'gain']"
Long‐Run Risk: Is It There?,10.1111/jofi.13126,"This paper documents the existence of a persistent component in consumption growth. We take a novel approach using news coverage to capture investor concern about economic growth prospects. We provide evidence that consumption growth is highly predictable over long horizons—our measure explains between 23% and 38% of cumulative future consumption growth at the five‐year horizon and beyond. Furthermore, we show a strong connection between this predictability and asset prices. Innovations to our measure price 51 standard portfolios in the cross section and our one‐factor model outperforms many benchmark macro‐ and return‐based multifactor models.",JoF,2022,93,652,"['Financial Markets', 'Economic Growth', 'Asset Prices', 'Investment Strategies', 'Monetary Policy']","['persistent component', 'consumption growth', 'news coverage', 'investor concern', 'economic growth prospects', 'predictability', 'asset prices', 'standard portfolios', 'one-factor model', 'benchmark macro']"
The Limits of Model‐Based Regulation,10.1111/jofi.13124,"Using loan‐level data from Germany, we investigate how the introduction of model‐based capital regulation affected banks' ability to absorb shocks. The objective of this regulation was to enhance financial stability by making capital requirements responsive to asset risk. Our evidence suggests that banks “optimized” model‐based regulation to lower their capital requirements. Banks systematically underreported risk, with underreporting more pronounced for banks with higher gains from it. Moreover, large banks benefitted from the regulation at the expense of smaller banks. Overall, our results suggest that sophisticated rules may have undesired effects if strategic misbehavior is difficult to detect.",JoF,2022,97,707,"['Banking Systems', 'Financial Markets', 'Risk Management', 'Regulatory Frameworks', 'Capital Allocation']","['model-based capital regulation', 'banks', 'shocks', 'financial stability', 'capital requirements', 'risk', 'underreported risk', 'large banks', 'smaller banks', 'strategic misbehavior']"
Resource Allocation in Bank Supervision: Trade‐Offs and Outcomes,10.1111/jofi.13127,"We estimate a structural model of resource allocation on work hours of Federal Reserve bank supervisors to disentangle how supervisory technology, preferences, and resource constraints impact bank outcomes. We find a significant effect of supervision on bank risk and large technological scale economies with respect to bank size. Consistent with macroprudential objectives, revealed supervisory preferences disproportionately weight larger banks, especially post‐2008 when a resource reallocation to larger banks increased risk on average across all banks. Shadow cost estimates show tight resources around the financial crisis and counterfactuals indicate that binding constraints have large effects on the distribution of bank outcomes.",JoF,2022,100,739,"['Risk Management', 'Banking Systems', 'Monetary Policy', 'Financial Markets', 'Regulatory Frameworks']","['supervisory technology', 'resource allocation', 'Federal Reserve bank', 'bank supervisors', 'bank outcomes', 'bank risk', 'technological scale economies', 'macroprudential objectives', 'financial crisis', 'binding constraints']"
Learning by Owning in a Lemons Market,10.1111/jofi.13125,"We study market dynamics when an owner learns about the quality of her asset over time. Since this information is private, the owner sells strategically to a less informed buyer following sufficient negative information. In response, market prices feature a “U‐shape” and trading probabilities a “hump‐shape” with respect to the time to sale. As the owner initially acquires greater information, buyers suffer greater adverse selection, and prices fall accordingly. Eventually, the probability of an informed sale shrinks, and prices rebound. We provide evidence consistent with our model in markets for residential real estate, venture capital investments, and construction equipment.",JoF,2022,99,685,"['Financial Markets', 'Venture Capital', 'Housing Market Trends', 'Market Transparency', 'Economic Development']","['market dynamics', 'owner', 'quality', 'asset', 'private information', 'trading probabilities', 'market prices', 'adverse selection', 'residential real estate', 'venture capital investments']"
Is There a Risk Premium in the Stock Lending Market? Evidence from Equity Options,10.1111/jofi.13129,"Recent research argues that uncertainty about future stock borrowing fees hinders short‐selling, and this risk explains the performance of short strategies. One possible mechanism is that borrowing fee risk carries a risk premium. Since the present value of the uncertain borrowing fee is reflected in options prices, the difference between option‐implied and realized fees estimates this premium. We find that the risk premium is small. Moreover, if the risk premium is substantial, it should be reflected in the returns to short‐selling stock after adjusting for stock borrowing fees. However, borrowing fee risk does not predict fee‐adjusted returns.",JoF,2022,97,653,"['Financial Markets', 'Risk Management', 'Investment Strategies', 'Market Transparency', 'Banking Systems']","['uncertainty', 'stock borrowing fees', 'short-selling', 'risk premium', 'options prices', 'option-implied', 'realized fees', 'returns', 'borrowing fee risk', 'fee-adjusted.']"
Are Analyst Short‐Term Trade Ideas Valuable?,10.1111/jofi.13130,"Short‐term trade ideas are a component of analyst research highly valued by institutional investors. Using a novel and comprehensive database, we find that trade ideas have a stock price impact at least as large as recommendation and target price changes. Trade ideas based on expectations of future events are more informative than those identifying incomplete incorporation of past information in stock prices. Analysts with better access to a firm's management produce better trade ideas. Institutional investors trade in the direction of trade ideas. Investors following trade ideas can earn significant abnormal returns, consistent with analysts possessing valuable short‐term stock‐picking skills.",JoF,2022,100,703,"['Financial Markets', 'Investment Strategies', 'Economic Development', 'Corporate Governance', 'Trade and Globalization']","['trade ideas', 'analyst research', 'institutional investors', 'stock price impact', 'recommendation', 'target price changes', 'future events', 'stock prices', 'firm management', 'abnormal returns']"
Factor Momentum and the Momentum Factor,10.1111/jofi.13131,Momentum in individual stock returns relates to momentum in factor returns. Most factors are positively autocorrelated: the average factor earns a monthly return of six basis points following a year of losses and 51 basis points following a positive year. We find that factor momentum concentrates in factors that explain more of the cross section of returns and that it is not incidental to individual stock momentum: momentum‐neutral factors display more momentum. Momentum found in high‐eigenvalue principal component factors subsumes most forms of individual stock momentum. Our results suggest that momentum is not a distinct risk factor—it times other factors.,JoF,2022,100,666,"['Financial Markets', 'Risk Management', 'Investment Strategies', 'Monetary Policy', 'Economic Development']","['momentum', 'individual stock returns', 'factor returns', 'factors', 'autocorrelated', 'basis points', 'cross section', 'high‐eigenvalue', 'principal component', 'risk factor']"
Luck versus Skill in the Cross Section of Mutual Fund Returns: Reexamining the Evidence,10.1111/jofi.13123,"While Kosowski et al. (2006, <jats:italic>Journal of Finance</jats:italic> 61, 2551–2595) and Fama and French (2010, <jats:italic>Journal of Finance</jats:italic> 65, 1915–1947) both evaluate whether mutual funds outperform, their conclusions are very different. We reconcile their findings. We show that the Fama‐French method suffers from an undersampling problem that leads to a failure to reject the null hypothesis of zero alpha, even when some funds generate economically large risk‐adjusted returns. In contrast, Kosowski et al. substantially overreject the null hypothesis, even when all funds have a zero alpha. We present a novel bootstrapping approach that should be useful to future researchers choosing between the two approaches.",JoF,2022,104,743,"['Financial Markets', 'Investment Strategies', 'Risk Management', 'Data Privacy', 'Research Methodology']","['Kosowski', 'Fama and French', 'mutual funds', 'outperform', 'conclusions', 'reconcile', 'undersampling problem', 'null hypothesis', 'risk-adjusted returns', 'bootstrapping approach']"
Presidential Address: Corporate Finance and Reality,10.1111/jofi.13161,"This paper uses surveys to document CFO perspectives on corporate planning, investment, capital structure, payout, and shareholder versus stakeholder focus. Comparing policy decisions today to those 20 years ago, I find that companies employ decision rules that are conservative, sticky, and geared to time the market; rely on internal forecasts that are miscalibrated and considered reliable only two years ahead; and emphasize corporate objectives that focus increasingly on stakeholders and revenues. These practice of corporate finance themes can discipline academic models toward better explaining outcomes. Models of satisficing decision‐making or costly managerial biases align with many of the themes.",JoF,2022,99,709,"['Corporate Governance', 'Financial Markets', 'Risk Management', 'Behavioral Economics', 'Economic Development']","['CFO', 'corporate planning', 'investment', 'capital structure', 'payout', 'shareholder', 'stakeholder', 'decision rules', 'internal forecasts', 'corporate finance.']"
Do Firms Respond to Gender Pay Gap Transparency?,10.1111/jofi.13136,"We examine the effect of pay transparency on the gender pay gap and firm outcomes. Using a 2006 legislation change in Denmark that requires firms to provide gender‐disaggregated wage statistics, detailed employee‐employer administrative data, and difference‐in‐differences and difference‐in‐discontinuities designs, we find that the law reduces the gender pay gap, primarily by slowing wage growth for male employees. The gender pay gap declines by 2 percentage points, or 13% relative to the prelegislation mean. Despite the reduction of the overall wage bill, the wage transparency mandate does not affect firm profitability, likely because of the offsetting effect of reduced firm productivity.",JoF,2022,100,697,"['Gender Equality', 'Labor Market Dynamics', 'Public Policy', 'Market Transparency', 'Corporate Governance']","['pay transparency', 'gender pay gap', 'firm outcomes', 'Denmark', 'legislation change', 'wage statistics', 'employee-employer data', 'difference-in-differences', 'wage growth', 'firm profitability']"
Bank Market Power and Monetary Policy Transmission: Evidence from a Structural Estimation,10.1111/jofi.13159,"We quantify the impact of bank market power on monetary policy transmission through banks to borrowers. We estimate a dynamic banking model in which monetary policy affects imperfectly competitive banks' funding costs. Banks optimize the pass‐through of these costs to borrowers and depositors, while facing capital and reserve regulation. We find that bank market power explains much of the transmission of monetary policy to borrowers, with an effect comparable to that of bank capital regulation. When the federal funds rate falls below 0.9%, market power interacts with bank capital regulation to produce a reversal of the effect of monetary policy.",JoF,2022,100,653,"['Banking Systems', 'Monetary Policy', 'Market Power', 'Capital Regulation', 'Financial Markets']","['bank market power', 'monetary policy transmission', 'borrowers', 'dynamic banking model', 'funding costs', 'pass-through', 'capital regulation', 'reserve regulation', 'federal funds rate', 'effect.']"
Quantifying Reduced‐Form Evidence on Collateral Constraints,10.1111/jofi.13158,"This paper quantifies the aggregate effects of financing constraints. We start from a standard dynamic investment model with collateral constraints. In contrast to the existing quantitative literature, our estimation does not target the mean leverage ratio to identify the scope of financing frictions. Instead, we use a reduced‐form coefficient from the recent corporate finance literature that connects exogenous debt capacity shocks to corporate investment. Relative to a frictionless benchmark, collateral constraints induce losses of 7.1% for output and 1.4% for total factor productivity (TFP) (misallocation). We show these estimated losses tend to be more robust to misspecification than estimates obtained by targeting leverage.",JoF,2022,103,737,"['Financial Markets', 'Corporate Finance', 'Investment Strategies', 'Economic Growth', 'Productivity']","['financing constraints', 'dynamic investment model', 'collateral constraints', 'leverage ratio', 'corporate finance literature', 'debt capacity shocks', 'corporate investment', 'output', 'total factor productivity', 'misallocation']"
A New Test of Risk Factor Relevance,10.1111/jofi.13135,"Textbook models assume that investors try to insure against bad states of the world associated with specific risk factors when investing. This is a testable assumption and we develop a survey framework for doing so. Our framework can be applied to any risk factor. We demonstrate the approach using consumption growth, which makes our results applicable to most modern asset‐pricing models. Participants respond to changes in the mean and volatility of stock returns consistent with textbook models, but we find no evidence that they view an asset's correlation with consumption growth as relevant to investment decisions.",JoF,2022,96,622,"['Financial Markets', 'Risk Management', 'Investment Strategies', 'Behavioral Economics', 'Asset Pricing.']","['investors', 'risk factors', 'survey framework', 'risk factor', 'consumption growth', 'asset-pricing models', 'stock returns', 'correlation', 'investment decisions', 'evidence']"
Testing Disagreement Models,10.1111/jofi.13137,"We provide plausibly identified evidence for the role of investor disagreement in asset pricing. Our natural experiment exploits the staggered implementation of the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system, which induces a reduction in investor disagreement. Consistent with models of investor disagreement, EDGAR inclusion helps resolve disagreement around information events, leading to stock price corrections. The reduction in disagreement following EDGAR inclusion also reduces stock price crash risk, especially among stocks with binding short‐sale constraints and high investor optimism.",JoF,2022,81,619,"['Financial Markets', 'Risk Management', 'Investor Behavior', 'Stock Price Dynamics', 'Capital Constraints']","['investor disagreement', 'asset pricing', 'Electronic Data Gathering Analysis and Retrieval', 'EDGAR system', 'information events', 'stock price corrections', 'stock price crash risk', 'short-sale constraints', 'investor optimism', 'natural experiment']"
Debt Refinancing and Equity Returns,10.1111/jofi.13162,"This paper presents empirical evidence that the maturity structure of financial leverage affects the cross‐section of equity returns. We find that short‐term leverage is associated with a positive premium, whereas long‐term leverage is not. The premium for short‐term compared to long‐term leverage reflects higher exposure of equity to systematic risk. To rationalize our findings, we show that the same patterns emerge in a model of debt rollover risk with endogenous leverage and debt maturity choice. Our results suggest that analyses of leverage effects in asset prices and corporate financial applications should account for the maturity structure of debt.",JoF,2022,98,662,"['Financial Markets', 'Risk Management', 'Debt Management', 'Investment Strategies', 'Corporate Governance']","['maturity structure', 'financial leverage', 'equity returns', 'premium', 'systematic risk', 'debt rollover risk', 'debt maturity', 'leverage', 'debt', 'asset prices']"
Risk‐Sharing and the Term Structure of Interest Rates,10.1111/jofi.13139,I propose a general equilibrium model with heterogeneous investors to explain the key properties of the U.S. real and nominal term structure of interest rates. I find that differences in investors' elasticities of intertemporal substitution are critical in accounting for the dynamics of nominal and real yields. The nominal term structure is driven primarily by real shocks so that it can be upward sloping regardless of the correlation between nominal and real shocks.,JoF,2022,73,470,"['Financial Markets', 'Monetary Policy', 'Interest Rates', 'Economic Development', 'Macroeconomics']","['general equilibrium model', 'heterogeneous investors', 'U.S.', 'real term structure', 'nominal term structure', 'interest rates', 'intertemporal substitution', 'dynamics', 'real yields', 'real shocks']"
Stock Market's Assessment of Monetary Policy Transmission: The Cash Flow Effect,10.1111/jofi.13163,"We show that firm liability structure and associated cash flows matter for firm behavior and that financial market participants price stocks accordingly. Stock price reactions to monetary policy announcements depend on the type and maturity of debt issued by the firms and the forward guidance provided by the Fed, both at and away from the zero lower bound. Further, the marginal stock market participant knows the current liability structures of firms and does not rely on rules of thumb. The cash flow exposure at the time of monetary policy actions predicts future investment, assets, and net worth, clearly violating the Modigliani‐Miller theorem.",JoF,2022,102,652,"['Financial Markets', 'Monetary Policy', 'Debt Management', 'Investment Strategies', 'Corporate Governance']","['firm liability structure', 'cash flows', 'financial market participants', 'stock price reactions', 'monetary policy announcements', 'type of debt', 'maturity of debt', 'forward guidance', 'zero lower bound', 'Modigliani-Miller theorem']"
The Economics of Deferral and Clawback Requirements,10.1111/jofi.13160,"We analyze the effects of regulatory interference in compensation contracts, focusing on recent mandatory deferral and clawback requirements restricting incentive compensation of material risk‐takers in the financial sector. Moderate deferral requirements have a robustly positive effect on risk‐management effort only if the bank manager's outside option is sufficiently high; otherwise, their effectiveness depends on the dynamics of information arrival. Stringent deferral requirements unambiguously backfire. Our normative analysis characterizes whether and how deferral and clawback requirements should supplement capital regulation as part of the optimal policy mix.",JoF,2022,86,672,"['Risk Management', 'Financial Markets', 'Regulatory Frameworks', 'Banking Systems', 'Capital Regulation']","['regulatory interference', 'compensation contracts', 'mandatory deferral', 'clawback requirements', 'incentive compensation', 'risk‐management effort', 'bank manager', 'information arrival', 'capital regulation', 'policy mix']"
"Financial Crisis, Creditor‐Debtor Conflict, and Populism",10.1111/jofi.13138,"We study the impact of debtor distress on support for a populist far‐right political party during a financial crisis. Our empirical approach exploits variation in exposure to foreign currency household loans during a currency crisis in Hungary. Foreign currency debt exposure leads to a large, persistent increase in support for the populist far right. We document that the far right advocated for foreign currency debtors' interests by proposing aggressive debt relief and was rewarded with support from these voters. Our findings are consistent with theories emphasizing that conflict between creditors and debtors can shape political outcomes after financial crises.",JoF,2022,99,669,"['Political Risk', 'Credit Markets', 'Debt Management', 'Financial Markets', 'Public Policy']","['debtor distress', 'support', 'populist far-right political party', 'financial crisis', 'foreign currency loans', 'Hungary', 'debt relief', 'creditors', 'political outcomes', 'financial crises']"
The Anatomy of the Transmission of Macroprudential Policies,10.1111/jofi.13170,"We analyze how regulatory constraints on household leverage—in the form of loan‐to‐income and loan‐to‐value limits—affect residential mortgage credit and house prices as well as other asset classes not directly targeted by the limits. Loan‐level data suggest that mortgage credit is reallocated from low‐ to high‐income borrowers and from urban to rural counties. This reallocation weakens the feedback between credit and house prices and slows house price growth in “hot” housing markets. Banks whose lending to households is more affected by the regulatory constraint drive this reallocation, but also substitute their risk‐taking into holdings of securities and corporate credit.",JoF,2022,98,682,"['Credit Markets', 'Banking Systems', 'Regulatory Frameworks', 'Housing Market Trends', 'Financial Markets']","['regulatory constraints', 'household leverage', 'loan-to-income limits', 'loan-to-value limits', 'residential mortgage credit', 'house prices', 'asset classes', 'loan-level data', 'urban counties', 'rural counties']"
The Cost of Capital for Banks: Evidence from Analyst Earnings Forecasts,10.1111/jofi.13168,"We extract cost of capital measures for banks using analyst earnings forecasts, which we show are unbiased. We find that the cost of equity and the cost of debt decrease in the Tier 1 ratio, whereas total cost of capital is uncorrelated with the Tier 1 ratio. These findings suggest that investors adjust their return expectations for banks in accordance with the Modigliani–Miller conservation‐of‐risk principle. Hence, increased capital requirements are<jats:italic>not</jats:italic>made socially costly based on a notion that market pricing violates risk conservation. Equity can nevertheless still be privately costly for banks because of reduced subsidies.",JoF,2022,95,661,"['Banking Systems', 'Capital Allocation', 'Financial Markets', 'Risk Management', 'Monetary Policy']","['cost of capital', 'banks', 'analyst earnings forecasts', 'unbiased', 'cost of equity', 'cost of debt', 'Tier 1 ratio', 'Modigliani-Miller', 'conservation of risk principle', 'capital requirements']"
Commodity Financialization and Information Transmission,10.1111/jofi.13165,"We provide a model to understand the effects of commodity futures financialization on various market variables. We distinguish between financial speculators and financial hedgers and study their separate and combined effects on the informativeness of futures prices, the futures price bias, the comovement of futures prices with other markets, and the predictiveness of financial trading. We capture the interactions between commodity futures financialization and the real economy through spot prices and production decisions. A dynamic extension illustrates how key variables change over time in a period of acute financialization in a way that is consistent with observed empirical patterns.",JoF,2022,99,693,"['Financial Markets', 'Risk Management', 'Economic Growth', 'Market Transparency', 'Economic Development']","['commodity futures', 'financialization', 'market variables', 'financial speculators', 'financial hedgers', 'futures prices', 'price bias', 'comovement', 'predictiveness', 'spot prices']"
When Should Bankruptcy Law Be Creditor‐ or Debtor‐Friendly? Theory and Evidence,10.1111/jofi.13171,"We examine how creditor protection affects firms with different levels of owners' and managers' personal costs of bankruptcy (PCB). Theoretically, we show that firms with high PCB borrow and invest more under a more debtor‐friendly management stay system, whereas firms with low PCB borrow and invest more under a more creditor‐friendly receivership system. Intuitively, stronger creditor protection relaxes financial constraints but reduces credit demand. Which effect dominates depends on owners' and managers' PCB. Empirically, we find support for these predictions using a Korean bankruptcy reform that replaced receivership with management stay.",JoF,2022,91,650,"['Financial Markets', 'Debt Management', 'Corporate Governance', 'Credit Markets', 'Economic Development']","['creditor protection', 'firms', 'owners', 'managers', 'personal costs of bankruptcy', 'debtor-friendly', 'management stay system', 'creditor-friendly', 'receivership system', 'Korean bankruptcy reform']"
"Rare Disasters, Financial Development, and Sovereign Debt",10.1111/jofi.13175,"We propose a model of sovereign debt in which countries vary in their level of financial development, defined as the extent to which they can issue debt denominated in domestic currency in international capital markets. We show that low levels of financial development generate the “debt intolerance” phenomenon that plagues emerging markets: it reduces overall debt capacity, increases credit spreads, and limits the country's ability to smooth consumption.",JoF,2022,68,458,"['Debt Management', 'Financial Markets', 'Economic Development', 'Credit Markets', 'Public Policy']","['sovereign debt', 'financial development', 'debt denominated', 'international capital markets', 'debt intolerance', 'emerging markets', 'overall debt capacity', 'credit spreads', 'consumption', 'countries']"
Common Ownership Does Not Have Anticompetitive Effects in the Airline Industry,10.1111/jofi.13176,"Institutions often own equity in multiple firms that compete in the same product market. Prior research has shown that these institutional “common owners” induce anticompetitive pricing behavior in the airline industry. This paper reevaluates this evidence and shows that the documented positive correlation between common ownership and airline ticket prices stems from the market share component of the common ownership measure, and not the ownership and control components. We further show that the results are sensitive to measures of investor control and to assumptions about equity holders' ownership and control during bankruptcy.",JoF,2022,92,636,"['Corporate Governance', 'Financial Markets', 'Regulatory Frameworks', 'Economic Development', 'Market Transparency']","['common owners', 'institutional', 'equity', 'firms', 'product market', 'anticompetitive pricing behavior', 'airline industry', 'market share', 'ownership', 'control']"
"Rising Intangible Capital, Shrinking Debt Capacity, and the U.S. Corporate Savings Glut",10.1111/jofi.13174,"This paper explores the connection between rising intangible capital and the secular upward trend in U.S. corporate cash holdings. We calibrate a dynamic model with two productive assets—tangible and intangible capital—in which only tangible capital can serve as collateral. We highlight the following points: (i) a shift toward intangible capital shrinks firms' debt capacity and leads them to hold more cash, (ii) the effect accounts for three‐quarters of the observed trend in average cash ratios, and (iii) it also accounts for the upward trend of cash ratios in the cross‐section of small and large firms and in the aggregate.",JoF,2022,99,631,"['Corporate Governance', 'Financial Markets', 'Investment Strategies', 'Debt Management', 'Economic Development']","['intangible capital', 'U.S.', 'corporate cash holdings', 'dynamic model', 'productive assets', 'collateral', 'debt capacity', 'cash ratios', 'small firms', 'large firms']"
A Theory of Equivalent Expectation Measures for Contingent Claim Returns,10.1111/jofi.13172,"This paper introduces a dynamic change of measure approach for computing analytical solutions of expected future prices (and therefore, expected returns) of contingent claims over a finite horizon. The new approach constructs hybrid probability measures called equivalent expectation measures (EEMs) that provide the physical expectation of the claim's future price before the horizon date, and serve as pricing measures on or after the horizon date. The EEM theory can be used for empirical investigations of both the cross‐section and the term structure of returns of contingent claims, such as Treasury bonds, corporate bonds, and financial derivatives.",JoF,2022,96,656,"['Financial Markets', 'Risk Management', 'Corporate Governance', 'Investment Strategies', 'Economic Development']","['dynamic change of measure', 'analytical solutions', 'expected future prices', 'expected returns', 'contingent claims', 'finite horizon', 'equivalent expectation measures', 'EEM theory', 'empirical investigations', 'term structure']"
The Golden Mean: The Risk‐Mitigating Effect of Combining Tournament Rewards with High‐Powered Incentives,10.1111/jofi.13169,"The rewards received by financial managers depend on both relative performance (e.g., fund inflows based on fund rankings, promotions based on peer comparisons) and absolute performance (e.g., bonus payments for meeting accounting targets, hedge‐fund incentive fees). Both relative and absolute performance rewards engender risk‐taking. In this paper, we show that these two sources of risk‐taking, relative and absolute performance rewards, mitigate the risk‐taking incentives produced by the other. This mutual incentive‐reduction effect generates a number of novel predictions about the relationship of managerial risk‐taking with the structure of relative and absolute performance rewards.",JoF,2022,93,693,"['Financial Markets', 'Risk Management', 'Corporate Governance', 'Incentive Systems', 'Economic Development.']","['performance', 'rewards', 'financial managers', 'risk-taking', 'fund inflows', 'promotions', 'peer comparisons', 'accounting targets', 'hedge-fund', 'incentive fees']"
CEO Political Leanings and Store‐Level Economic Activity during the COVID‐19 Crisis: Effects on Shareholder Value and Public Health,10.1111/jofi.13173,"Maintaining economic output during the COVID‐19 pandemic results in benefits for firm shareholders but comes at a potential cost to public health. Using store‐level data, we examine how a CEO's political leaning impacts this trade‐off. We document that firms with a Republican‐leaning CEO experience a relative increase in store visits compared to firms with a Democratic‐leaning CEO. The increase in store visits is associated with higher sales and positive abnormal stock returns. However, we also document higher COVID‐19 transmission rates and more employee safety complaints in communities where establishments with higher store traffic are managed by a Republican‐leaning CEO.",JoF,2022,99,682,"['Public Health Policy', 'Corporate Governance', 'Financial Markets', 'Labor Market Dynamics', 'Economic Development']","['COVID-19 pandemic', 'economic output', 'firm shareholders', 'public health', 'CEO', 'political leaning', 'store-level data', 'store visits', 'sales', 'stock returns']"
"Withdrawal: Xu, Qiping, Zwick, E. “Tax Policy and Abnormal Investment Behavior.” The Journal of Finance. 30 May 2022",10.1111/jofi.13164,"The Accepted Article version of the above article from <jats:italic>The Journal of Finance</jats:italic>, published online on 30 May 2022 in Wiley Online Library (""http://www.w3.org/1999/xlink"" xlink:href=""https://wileyonlinelibrary.com"">wileyonlinelibrary.com), has been withdrawn by agreement between the journal's editors and Wiley Periodicals LLC on behalf of the American Finance Association. The withdrawal has been agreed after an additional review of the article revealed that the authors did not properly characterize the relationship of their work to the earlier literature.",JoF,2022,74,584,"['Financial Markets', 'Corporate Governance', 'Regulatory Frameworks', 'Economic Development', 'Market Transparency']","['article', 'Journal of Finance', 'Wiley Online Library', 'withdrawal', 'agreement', 'editors', 'authors', 'relationship', 'literature', 'review']"
Loan Terms and Collateral: Evidence from the Bilateral Repo Market,10.1111/jofi.13184,"We study secured lending contracts using a proprietary, loan‐level database of bilateral repurchase agreements containing groups of simultaneous loans backed by multiple tranches within a securitization. We show that lower‐quality loans (i.e., loans backed by lower‐rated collateral) have higher margins and spreads. We calibrate a model using collateral asset prices and find that lower‐quality loans are riskier despite the higher margins, yet cheaper for the borrower. This finding is consistent with a combination of lender optimism and reaching for yield. We also show that lower‐quality loans have longer maturity, consistent with models of rollover concerns with asymmetric information.",JoF,2022,98,693,"['Financial Markets', 'Risk Management', 'Credit Markets', 'Banking Systems', 'Monetary Policy']","['secured lending', 'contracts', 'loan-level database', 'bilateral repurchase agreements', 'tranches', 'securitization', 'collateral', 'margins', 'spreads', 'borrower']"
Import Competition and Household Debt,10.1111/jofi.13185,We analyze the effect of import competition on household balance sheets using individual data on consumer finances. We exploit variation in local industry exposure to foreign competition to study households' response to the income shock triggered by China's accession to the World Trade Organization. We show that household debt increases significantly in regions where manufacturing industries are more exposed to import competition. The effects are driven by home equity extraction and are concentrated in areas with strong house price growth. Our results highlight the role played by mortgage markets in absorbing displacement shocks triggered by globalization.,JoF,2022,96,664,"['Trade and Globalization', 'Consumer Finance', 'Housing Market Trends', 'Debt Management', 'Economic Development']","['import competition', 'household balance sheets', 'individual data', 'consumer finances', 'local industry exposure', 'foreign competition', 'income shock', ""China's accession"", 'household debt', 'mortgage markets']"
The Two‐Pillar Policy for the RMB,10.1111/jofi.13178,"This paper studies China's recent exchange rate policy for the renminbi (RMB). We demonstrate empirically that a two‐pillar policy is in place, aiming to balance exchange rate flexibility and RMB index stability via <jats:italic>market</jats:italic> and <jats:italic>basket</jats:italic> pillars. We further extend and validate the formulation that incorporates the so‐called countercyclical factor. Theoretically, we develop a flexible‐price monetary model for the RMB in which the two‐pillar policy arises endogenously as an optimal response of the government. We estimate the model by generalized method of moments and quantitatively assess various policy trade‐offs.",JoF,2022,89,670,"['Monetary Policy', 'Economic Development', 'Financial Markets', 'Trade and Globalization', 'Fiscal Policy']","['exchange rate policy', 'renminbi', 'RMB', 'two-pillar policy', 'market', 'basket', 'countercyclical factor', 'monetary model', 'government', 'trade-offs']"
Attention‐Induced Trading and Returns: Evidence from Robinhood Users,10.1111/jofi.13183,"We study the influence of financial innovation by fintech brokerages on individual investors’ trading and stock prices. Using data from Robinhood, we find that Robinhood investors engage in more attention‐induced trading than other retail investors. For example, Robinhood outages disproportionately reduce trading in high‐attention stocks. While this evidence is consistent with Robinhood attracting relatively inexperienced investors, we show that it is also driven in part by the app's unique features. Consistent with models of attention‐induced trading, intense buying by Robinhood users forecasts negative returns. Average 20‐day abnormal returns are −4.7% for the top stocks purchased each day.",JoF,2022,97,701,"['Financial Markets', 'Consumer Behavior', 'Investment Strategies', 'Market Transparency', 'Behavioral Economics']","['financial innovation', 'fintech brokerages', 'individual investors', 'trading', 'stock prices', 'Robinhood', 'attention-induced trading', 'retail investors', 'Robinhood outages', 'inexperienced investors']"
Belief Disagreement and Portfolio Choice,10.1111/jofi.13179,"Using proprietary financial data on millions of households, we show that likely‐Republicans increased the equity share and market beta of their portfolios following the 2016 presidential election, while likely‐Democrats rebalanced into safe assets. We provide evidence that this behavior was driven by investors interpreting public information based on different models of the world. We use detailed controls to rule out the main nonbelief‐based channels such as income hedging needs, preferences, and local economic exposures. These findings are driven by a small share of investors making big changes, and are stronger among investors who trade more ex ante.",JoF,2022,97,660,"['Financial Markets', 'Investment Strategies', 'Behavioral Economics', 'Political Risk', 'Wealth Distribution']","['financial data', 'households', 'portfolios', 'presidential election', 'safe assets', 'public information', 'models', 'controls', 'investors', 'trading']"
Asset Pricing with Cohort‐Based Trading in MBS Markets,10.1111/jofi.13180,"Agency mortgage‐backed securities (MBSs) with diverse characteristics are traded in parallel through individualized specified pool (SP) contracts and standardized to‐be‐announced (TBA) contracts with delivery flexibility. This parallel trading environment generates distinctive effects on MBS pricing and trading: (i) Although cheapest‐to‐deliver (CTD) issues are present in TBA trading and absent from SP trading by design, MBS heterogeneity associated with CTD discounts affects SP yields positively, with the effect stronger for lower‐value SPs; (ii) high selling pressure amplifies the effects of MBS heterogeneity on SP yields; and (iii) greater MBS heterogeneity dampens SP and TBA trading activities but increases their ratio.",JoF,2022,99,733,"['Financial Markets', 'Risk Management', 'Housing Market Trends', 'Credit Markets', 'Monetary Policy']","['Agency mortgage-backed securities', 'MBS', 'specified pool contracts', 'TBA contracts', 'cheapest-to-deliver', 'CTD discounts', 'MBS pricing', 'trading activities', 'selling pressure', 'MBS heterogeneity']"
The Price of Higher Order Catastrophe Insurance: The Case of VIX Options,10.1111/jofi.13182,"We develop a tractable equilibrium pricing model to explain observed characteristics in equity returns, VIX futures, S&amp;P 500 options, and VIX options data based on affine jump‐diffusive state dynamics and representative agents endowed with Duffie‐Epstein recursive preferences. Our calibrated model replicates consumption, dividends, and asset market data, including VIX futures returns, the average implied volatilities in SPX and VIX options, and first‐ and higher‐order moments of VIX options returns. We document a time variation in the shape of VIX‐option‐implied volatility and a time‐varying hedging relationship between VIX and SPX options that our model both captures.",JoF,2022,95,681,"['Financial Markets', 'Risk Management', 'Investment Strategies', 'Monetary Policy', 'Market Transparency']","['equilibrium pricing model', 'equity returns', 'VIX futures', 'S&P 500 options', 'VIX options', 'affine jump-diffusive state dynamics', 'Duffie-Epstein recursive preferences', 'calibrated model', 'implied volatilities', 'hedging relationship']"
Financial Crises and Political Radicalization: How Failing Banks Paved Hitler's Path to Power,10.1111/jofi.13166,"Do financial crises radicalize voters? We study Germany's 1931 banking crisis, collecting new data on bank branches and firm‐bank connections. Exploiting cross‐sectional variation in precrisis exposure to the bank at the center of the crisis, we show that Nazi votes surged in locations more affected by its failure. Radicalization in response to the shock was exacerbated in cities with a history of anti‐Semitism. After the Nazis seized power, both pogroms and deportations were more frequent in places affected by the banking crisis. Our results suggest an important synergy between financial distress and cultural predispositions, with far‐reaching consequences.",JoF,2022,97,666,"['Financial Markets', 'Social Policy', 'Political Risk', 'Economic Development', 'Public Policy']","['financial crises', 'radicalize', 'voters', 'Germany', '1931', 'banking crisis', 'Nazi votes', 'anti-Semitism', 'pogroms', 'deportations']"
Stock Market Spillovers via the Global Production Network: Transmission of U.S. Monetary Policy,10.1111/jofi.13181,"We quantify the role of global production linkages in explaining spillovers of U.S. monetary policy shocks on country‐sector stock returns. We estimate a structural spatial autoregression (SAR) model that is consistent with an open‐economy production network framework. Using the SAR model, we decompose the total impact of U.S. monetary policy on global stock returns into direct and network effects. Nearly 70% of the total impact is due to the network effect of global production linkages. Empirical counterfactuals show that shutting down global production linkages halves the total impact of U.S. monetary policy shocks.",JoF,2022,93,625,"['Monetary Policy', 'Global Production Linkages', 'Stock Returns', 'Financial Markets', 'Trade and Globalization']","['global production linkages', 'U.S. monetary policy shocks', 'stock returns', 'spatial autoregression model', 'open-economy', 'network effect', 'structural model', 'empirical analysis', 'counterfactuals']"
Optimal Financial Transaction Taxes,10.1111/jofi.13188,"This paper characterizes the optimal transaction tax in an equilibrium model of financial markets. If investors hold heterogeneous beliefs unrelated to their fundamental trading motives and the planner calculates welfare using any single belief, a positive tax is optimal, regardless of the magnitude of fundamental trading. Under some conditions, the optimal tax is independent of the planner's belief. The optimal tax can be implemented by adjusting its value until total volume equals fundamental volume. Knowledge of (i) the share of nonfundamental trading volume and (ii) the semielasticity of trading volume to tax changes is sufficient to quantify the optimal tax.",JoF,2023,100,671,"['Financial Markets', 'Taxation', 'Economic Growth', 'Public Policy', 'Regulatory Frameworks']","['transaction tax', 'equilibrium model', 'financial markets', 'heterogeneous beliefs', 'fundamental trading', 'welfare', 'optimal tax', 'total volume', 'nonfundamental trading volume', 'semielasticity']"
"Less Mainstream Credit, More Payday Borrowing? Evidence from Debt Collection Restrictions",10.1111/jofi.13189,"Governments regulate debt collectors to protect consumers from predatory practices. These restrictions may lower repayment, reducing the supply of mainstream credit and increasing demand for alternative credit. Using individual credit record data and a difference‐in‐differences design comparing consumers in states that tighten restrictions on debt collection to those in neighboring states that do not, I find that restricting collections reduces access to mainstream credit and increases payday borrowing. These findings provide new evidence of substitution between alternative and mainstream credit and point to a trade‐off between shielding consumers from certain collection practices and pushing them into higher cost payday lending markets.",JoF,2023,101,747,"['Debt Management', 'Credit Markets', 'Consumer Finance', 'Public Policy', 'Financial Markets']","['debt collectors', 'regulations', 'consumers', 'mainstream credit', 'alternative credit', 'payday borrowing', 'credit record data', 'difference-in-differences design', 'restrictions', 'collection practices']"
Disruption and Credit Markets,10.1111/jofi.13187,"We show that over the past half‐century, innovative disruptions were central to understanding corporate defaults. In a given year, industries experiencing abnormally high venture capital or initial public offering activity subsequently see higher default rates, higher segment exits by conglomerates, and higher yields on bonds issued by the firms in these industries. Overall, we find that disruption is a broad phenomenon, negatively affecting incumbent firms across the spectrum of age, valuation, and levers, with the exception of very large and low‐leverage firms, in line with our central hypothesis.",JoF,2023,88,606,"['Innovation', 'Venture Capital', 'Financial Markets', 'Risk Management', 'Corporate Governance']","['innovative disruptions', 'corporate defaults', 'venture capital', 'initial public offering', 'default rates', 'segment exits', 'conglomerates', 'yields', 'disruption', 'incumbent firms']"
How Risky Are U.S. Corporate Assets?,10.1111/jofi.13196,"We use market data on corporate bonds and equities to measure the value of U.S. corporate assets and their payouts to investors. In contrast to equity dividends, total corporate payouts are highly volatile, turn negative when corporations raise capital, and are acyclical. At the same time, corporate asset returns are similar to returns on equity, and both are exposed to fluctuations in economic growth. To reconcile this evidence, we argue that acyclical but volatile net repurchases mask the exposure of total payouts' cash components to economic growth risks. We develop an asset pricing framework to quantitatively illustrate this economic channel.",JoF,2023,100,654,"['Financial Markets', 'Economic Growth', 'Risk Management', 'Investment Strategies', 'Corporate Governance']","['market data', 'corporate bonds', 'equities', 'U.S. corporate assets', 'payouts', 'investors', 'equity dividends', 'corporate payouts', 'economic growth', 'asset pricing framework']"
International Yield Curves and Currency Puzzles,10.1111/jofi.13191,"The currency depreciation rate is often computed as the ratio of foreign to domestic pricing kernels. Using bond prices alone to estimate these kernels leads to currency puzzles: the inability of models to match violations of uncovered interest parity and the volatility of exchange rates. This happens because of the <jats:italic>FX bond disconnect</jats:italic>, the inability of bonds to span exchange rates. Incorporating innovations to the pricing kernel that affect exchange rates but not bonds helps resolve the puzzles. This approach also allows one to relate news about cross‐country differences between international yields to news about currency risk premiums.",JoF,2023,98,671,"['Financial Markets', 'Currency Risk Premiums', 'Monetary Policy', 'Bond Prices', 'Exchange Rates']","['currency depreciation rate', 'pricing kernels', 'bond prices', 'currency puzzles', 'uncovered interest parity', 'exchange rates', 'FX bond disconnect', 'pricing kernel innovations', 'cross-country differences', 'currency risk premiums']"
Decentralization through Tokenization,10.1111/jofi.13192,"We examine decentralization of digital platforms through tokenization as an innovation to resolve the conflict between platforms and users. By delegating control to users, tokenization through utility tokens acts as a commitment device that prevents a platform from exploiting users. This commitment comes at the cost of not having an owner with an equity stake who, in conventional platforms, would subsidize participation to maximize the platform's network effect. This trade‐off makes utility tokens a more appealing funding scheme than equity for platforms with weak fundamentals. The conflict reappears when nonusers, such as token investors and validators, participate on the platform.",JoF,2023,100,691,"['Innovation', 'Digital Transformation', 'Financial Markets', 'Economic Development', 'Corporate Governance']","['decentralization', 'digital platforms', 'tokenization', 'innovation', 'conflict', 'users', 'utility tokens', 'commitment device', 'platform', 'equity stake']"
Beyond Basis Basics: Liquidity Demand and Deviations from the Law of One Price,10.1111/jofi.13198,"Deviations from the law of one price between futures and spot prices—the futures‐cash basis—capture information about liquidity demand for equity market exposure in global markets. We show that the basis comoves with dealer and investor futures positions, is contemporaneously positively correlated with futures and spot market returns, and negatively predicts futures and spot returns. These findings are consistent with the futures‐cash basis reflecting liquidity demand that is common to futures and cash equity markets. We find persistent supply‐demand imbalances for equity index exposure reflected in the basis, giving rise to an annual premium of 5% to 6%.",JoF,2023,97,663,"['Financial Markets', 'Risk Management', 'Economic Growth', 'Investment Strategies', 'Market Transparency']","['law of one price', 'futures', 'spot prices', 'liquidity demand', 'equity market', 'basis', 'dealer', 'investor', 'returns', 'supply-demand imbalances']"
Principal Portfolios,10.1111/jofi.13199,"We propose a new asset pricing framework in which all securities' signals predict each individual return. While the literature focuses on securities' own‐signal predictability, assuming equal strength across securities, our framework includes cross‐predictability—leading to three main results. First, we derive the optimal strategy in closed form. It consists of eigenvectors of a “prediction matrix,” which we call “principal portfolios.” Second, we decompose the problem into alpha and beta, yielding optimal strategies with, respectively, zero and positive factor exposure. Third, we provide a new test of asset pricing models. Empirically, principal portfolios deliver significant out‐of‐sample alphas to standard factors in several data sets.",JoF,2023,102,748,"['Financial Markets', 'Investment Strategies', 'Asset Pricing Models', 'Empirical Analysis', 'Factor Exposure']","['asset pricing', 'framework', 'securities', 'signals', 'predictability', 'principal portfolios', 'alpha', 'beta', 'factor exposure', 'out-of-sample alphas']"
Small Business Equity Returns: Empirical Evidence from the Business Credit Card Securitization Market,10.1111/jofi.13200,We present a new approach for estimating small business equity returns. This approach applies the Merton (1974) credit model to the returns on entrepreneurial business credit card debt securitizations and solves for the implied equity returns for the small businesses owned by the cardholders. The estimated small business equity premium is 10.74%. The standard deviation of small business equity returns is 56.37%. We validate the methodology by applying it to investment‐grade corporate bonds and recovering a public equity premium of 6.17%.,JoF,2023,81,543,"['Financial Markets', 'Credit Markets', 'Investment Strategies', 'Entrepreneurship', 'Risk Management']","['small business', 'equity returns', 'Merton model', 'credit model', 'entrepreneurial business', 'credit card debt', 'securitizations', 'implied equity returns', 'equity premium', 'standard deviation']"
Beliefs Aggregation and Return Predictability,10.1111/jofi.13195,"We study return predictability using a model of speculative trading among competitive traders who agree to disagree about the precision of private information. Although traders apply Bayes' Law consistently, returns are predictable. In addition to trading on long‐term fundamental value, traders also trade on perceived short‐term opportunities arising from foreseen future disagreement, as in a Keynesian beauty contest. Contradicting conventional wisdom, this short‐term speculation dampens price fluctuations and generates time‐series momentum. Model calibration shows quantitatively realistic patterns of return dynamics. Consistent with empirical evidence, our model predicts more pronounced momentum for stocks with higher trading volume.",JoF,2023,96,744,"['Financial Markets', 'Behavioral Economics', 'Market Transparency', 'Investment Strategies', 'Economic Development']","['return predictability', 'speculative trading', 'competitive traders', 'private information', ""Bayes' Law"", 'fundamental value', 'short-term opportunities', 'Keynesian beauty contest', 'price fluctuations', 'time-series momentum']"
Bayesian Solutions for the Factor Zoo: We Just Ran Two Quadrillion Models,10.1111/jofi.13197,"We propose a novel framework for analyzing linear asset pricing models: simple, robust, and applicable to high‐dimensional problems. For a (potentially misspecified) stand‐alone model, it provides reliable price of risk estimates for both tradable and nontradable factors, and detects those weakly identified. For competing factors and (possibly nonnested) models, the method automatically selects the best specification—<jats:italic>if</jats:italic> a dominant one exists—or provides a Bayesian model averaging–stochastic discount factor (BMA‐SDF), if there is no clear winner. We analyze 2.25 quadrillion models generated by a large set of factors and find that the BMA‐SDF outperforms existing models in‐ and out‐of‐sample.",JoF,2023,97,726,"['Financial Markets', 'Asset Pricing Models', 'Bayesian Model Averaging', 'Factor Analysis', 'Model Selection']","['framework', 'linear asset pricing models', 'high-dimensional problems', 'price of risk estimates', 'tradable factors', 'nontradable factors', 'weakly identified', 'competing factors', 'Bayesian model averaging', 'stochastic discount factor']"
Pricing Currency Risks,10.1111/jofi.13190,"The currency market features a small cross‐section, and conditional expected returns can be characterized by few signals: interest differential, trend, and mean reversion. We exploit these properties to construct the ex ante mean‐variance efficient portfolio of individual currencies. The portfolio is updated in real time and prices all prominent currency trading strategies, conditionally and unconditionally. The fraction of risk in these assets that does not affect their risk premiums is at least 85%. Extant explanations of carry strategies based on intermediary capital or global volatility are related to these unpriced components, while consumption growth is related to the priced component of returns.",JoF,2023,102,711,"['Financial Markets', 'Risk Management', 'Investment Strategies', 'Monetary Policy', 'Banking Systems']","['currency market', 'expected returns', 'signals', 'interest differential', 'trend', 'mean reversion', 'efficient portfolio', 'risk premiums', 'carry strategies', 'consumption growth']"
A Model of Systemic Bank Runs,10.1111/jofi.13213,"We develop a tractable model of systemic bank runs. The market‐based banking system features a two‐layer structure: banks with heterogeneous fundamentals face potential runs by their creditors while they trade short‐term funding in the asset (interbank) market in response to creditor withdrawals. The possibility of a run on a particular bank depends on its assets' interim liquidation value, and this value depends endogenously in turn on the status of other banks in the asset market. The within‐bank coordination problem among creditors and the cross‐bank price externality feed into each other. A small shock can be amplified into a systemic crisis.",JoF,2023,100,654,"['Banking Systems', 'Financial Markets', 'Risk Management', 'Monetary Policy', 'Systemic Risk']","['systemic bank runs', 'market-based banking system', 'two-layer structure', 'heterogeneous fundamentals', 'creditor withdrawals', 'interim liquidation value', 'asset market', 'coordination problem', 'price externality', 'systemic crisis']"
Biased Auctioneers,10.1111/jofi.13203,"We construct a neural network algorithm that generates price predictions for art at auction, relying on both visual and nonvisual object characteristics. We find that higher automated valuations relative to auction house presale estimates are associated with substantially higher price‐to‐estimate ratios and lower buy‐in rates, pointing to estimates' informational inefficiency. The relative contribution of machine learning is higher for artists with less dispersed and lower average prices. Furthermore, we show that auctioneers' prediction errors are persistent both at the artist and at the auction house level, and hence directly predictable themselves using information on past errors.",JoF,2023,96,692,"['Machine Learning Applications', 'Financial Markets', 'Art Market Trends', 'Data Privacy', 'Auction House Operations']","['neural network', 'algorithm', 'price predictions', 'art auction', 'automated valuations', 'machine learning', 'artists', 'auction house', 'prediction errors', 'information efficiency']"
Discount‐Rate Risk in Private Equity: Evidence from Secondary Market Transactions,10.1111/jofi.13202,"Measures of private equity (PE) performance based on cash flows do not account for a discount‐rate risk premium that is a component of the capital asset pricing model (CAPM) alpha. We create secondary market PE indices and find that PE discount rates vary considerably. Net asset values are too smooth because they fail to reflect variation in discount rates. Although the CAPM alpha for our index is zero, the generalized public market equivalent based on cash flows is large and positive. We obtain similar results for a set of synthetic funds that invest in small cap stocks. Ignoring variation in PE discount rates can lead to a misallocation of capital.",JoF,2023,110,658,"['Financial Markets', 'Risk Management', 'Capital Allocation', 'Investment Strategies', 'Private Equity.']","['private equity', 'performance', 'cash flows', 'discount rate', 'risk premium', 'capital asset pricing model', 'alpha', 'secondary market', 'net asset values', 'misallocation']"
Do Municipal Bond Dealers Give Their Customers “Fair and Reasonable” Pricing?,10.1111/jofi.13214,"Municipal bonds exhibit considerable retail pricing variation, even for same‐size trades of the same bond on the same day, and even from the same dealer. Markups vary widely across dealers. Trading strongly clusters on eighth price increments, and clustered trades exhibit higher markups. Yields are often lowered to just above salient numbers. Machine learning estimates exploiting the richness of the data show that dealers that use strategic pricing have systematically higher markups. Recent Municipal Securities Rulemaking Board rules have had only a limited impact on markups. While a subset of dealers focus on best execution, many dealers appear focused on opportunistic pricing.",JoF,2023,102,687,"['Financial Markets', 'Market Transparency', 'Regulatory Frameworks', 'Machine Learning Applications', 'Public Policy']","['municipal bonds', 'pricing', 'variation', 'markups', 'dealers', 'trading', 'yields', 'machine learning', 'strategic pricing', 'best execution.']"
Information Aggregation via Contracting,10.1111/jofi.13205,"When a group of investors with dispersed private information jointly invest in a risky project, how should they divide the project's profit? We show that a simple contract dividing profits in proportion to investors' risk tolerances may facilitate information aggregation by altering investors' risk‐taking incentives when they decide on how investment strategies respond to private information. Our results provide a contracting‐based approach for information aggregation, which is an alternative to learning from endogenous market variables (e.g., prices) via contingent schedules as seen in well‐known rational expectations equilibrium models.",JoF,2023,88,646,"['Risk Management', 'Investment Strategies', 'Financial Markets', 'Information Aggregation', 'Contracting-Based Approach']","['investors', 'private information', 'risky project', 'profit', 'contract', 'risk tolerance', 'information aggregation', 'risk-taking incentives', 'investment strategies', 'contracting-based approach']"
Equilibrium Bitcoin Pricing,10.1111/jofi.13206,"We offer a general equilibrium analysis of cryptocurrency pricing. The fundamental value of the cryptocurrency is its stream of net transactional benefits, which depend on its future prices. This implies that, in addition to fundamentals, equilibrium prices reflect sunspots. This in turn implies multiple equilibria and extrinsic volatility, that is, cryptocurrency prices fluctuate even when fundamentals are constant. To match our model to the data, we construct indices measuring the net transactional benefits of Bitcoin. In our calibration, part of the variations in Bitcoin returns reflects changes in net transactional benefits, but a larger share reflects extrinsic volatility.",JoF,2023,98,686,"['Financial Markets', 'Cryptocurrency', 'Digital Transformation', 'Investment Strategies', 'Market Transparency']","['cryptocurrency', 'pricing', 'equilibrium analysis', 'fundamental value', 'net transactional benefits', 'future prices', 'sunspots', 'multiple equilibria', 'extrinsic volatility', 'Bitcoin']"
"Local Experiences, Search, and Spillovers in the Housing Market",10.1111/jofi.13208,"Recent local price growth explains differences in search behavior across prospective homebuyers. Those experiencing higher growth in their postcode of residence search more broadly across locations and house characteristics, without changing attention devoted to individual sales listings, and have shorter search duration. Effects are stronger for homeowners, in particular those living in less wealthy areas and looking for a new primary residence. We use reduced‐form analysis and a quantitative equilibrium model to show that the expansion of search breadth translates into widespread spillovers onto house sales prices and inventories of listings across postcodes within a metropolitan area.",JoF,2023,97,696,"['Housing Market Trends', 'Economic Development', 'Urban Development', 'Consumer Behavior', 'Monetary Policy']","['local price growth', 'search behavior', 'prospective homebuyers', 'postcode', 'house characteristics', 'search duration', 'homeowners', 'less wealthy areas', 'primary residence', 'spillovers']"
Model Secrecy and Stress Tests,10.1111/jofi.13207,"Should regulators reveal the models they use to stress‐test banks? In our setting, revealing leads to gaming, but secrecy can induce banks to underinvest in socially desirable assets for fear of failing the test. We show that although the regulator can solve this underinvestment problem by making the test easier, some disclosure may still be optimal (e.g., if banks have high appetite for risk or if capital shortfalls are not very costly). Cutoff rules are optimal within monotone disclosure rules, but more generally optimal disclosure is single‐peaked. We discuss policy implications and offer applications beyond stress tests.",JoF,2023,97,632,"['Banking Systems', 'Financial Markets', 'Regulatory Frameworks', 'Risk Management', 'Public Policy']","['regulators', 'models', 'stress-test', 'banks', 'disclosure', 'underinvestment', 'assets', 'risk', 'capital shortfalls', 'policy implications']"
The Gender Gap in Housing Returns,10.1111/jofi.13212,"Using detailed transactions data across the United States, we find that single women earn 1.5 percentage points lower annualized returns on housing relative to single men. Forty‐five percent of the gap is explained by transaction timing and location. The remaining gap arises from a 2% gender difference in execution prices at purchase and sale. Consistent with a negotiation channel, women list for less and experience worse negotiated discounts. The gender gap shrinks in tight markets, where negotiation is replaced by quasi‐auctions. Overall, gender differences in housing explain 30% of the gender gap in wealth accumulation for the median household.",JoF,2023,99,655,"['Gender Equality', 'Housing Market Trends', 'Income Inequality', 'Wealth Distribution', 'Labor Market Dynamics']","['single women', 'annualized returns', 'housing', 'transaction timing', 'location', 'execution prices', 'negotiation', 'tight markets', 'wealth accumulation', 'gender gap']"
Monetary Stimulus amidst the Infrastructure Investment Spree: Evidence from China's Loan‐Level Data,10.1111/jofi.13204,"We study how a fiscal expansion via infrastructure investment influences the dynamic impacts of monetary stimulus on credit allocation. We develop a two‐stage approach and apply it to the Chinese economy with a confidential loan‐level data set that covers all sectors. We find that infrastructure investment significantly weakened monetary policy's transmission to credit allocated to private firms, while reinforcing the monetary effects on loans to state‐owned firms. This fiscal‐monetary interaction channel is key to understanding the preferential credit access enjoyed by state‐owned firms during the stimulus period. Consequently, monetary stimulus crowded out private investment and decreased capital allocation efficiency.",JoF,2023,99,730,"['Fiscal Policy', 'Monetary Policy', 'Capital Allocation', 'Credit Markets', 'Economic Development']","['fiscal expansion', 'infrastructure investment', 'monetary stimulus', 'credit allocation', 'Chinese economy', 'loan-level data', 'private firms', 'state-owned firms', 'preferential credit access', 'investment efficiency']"
CLO Performance,10.1111/jofi.13224,"We study the performance of collateralized loan obligations (CLOs) to understand the market imperfections giving rise to these vehicles and their corresponding economic costs. CLO equity tranches earn positive abnormal returns from the risk‐adjusted price differential between leveraged loans and CLO debt tranches. Debt tranches offer higher returns than similarly rated corporate bonds, making them attractive to banks and insurers that face risk‐based capital requirements. Temporal variation in equity performance highlights the resilience of CLOs to market volatility due to their closed‐end structure, long‐term funding, and embedded options to reinvest principal proceeds.",JoF,2023,92,679,"['Financial Markets', 'Risk Management', 'Banking Systems', 'Debt Management', 'Investment Strategies']","['CLOs', 'collateralized loan obligations', 'market imperfections', 'economic costs', 'equity tranches', 'debt tranches', 'leveraged loans', 'corporate bonds', 'risk-based capital requirements', 'market volatility']"
Pockets of Predictability,10.1111/jofi.13229,"For many benchmark predictor variables, short‐horizon return predictability in the U.S. stock market is local in time as short periods with significant predictability (“pockets”) are interspersed with long periods with no return predictability. We document this result empirically using a flexible time‐varying parameter model that estimates predictive coefficients as a nonparametric function of time and explore possible explanations of this finding, including time‐varying risk premia for which we find limited support. Conversely, pockets of return predictability are consistent with a sticky expectations model in which investors slowly update their beliefs about a persistent component in the cash flow process.",JoF,2023,99,717,"['Financial Markets', 'Risk Management', 'Behavioral Economics', 'Economic Development', 'Market Transparency']","['predictor variables', 'short-horizon return', 'predictability', 'U.S. stock market', 'time-varying parameter model', 'nonparametric function', 'time-varying risk premia', 'sticky expectations model', 'investors', 'cash flow process']"
The Pollution Premium,10.1111/jofi.13217,"This paper studies the asset pricing implications of industrial pollution. A long‐short portfolio constructed from firms with high versus low toxic emission intensity within an industry generates an average annual return of 4.42%, which remains significant after controlling for risk factors. This pollution premium cannot be explained by existing systematic risks, investor preferences, market sentiment, political connections, or corporate governance. We propose and model a new systematic risk related to environmental policy uncertainty. We use the growth in environmental litigation penalties to measure regime change risk and find that it helps price the cross section of emission portfolios' returns.",JoF,2023,99,707,"['Financial Markets', 'Environmental Sustainability', 'Risk Management', 'Corporate Governance', 'Climate Change Economics']","['asset pricing', 'industrial pollution', 'toxic emission intensity', 'long-short portfolio', 'systematic risk', 'environmental policy uncertainty', 'regime change risk', 'environmental litigation penalties', 'emission portfolios', 'returns']"
Duration‐Driven Returns,10.1111/jofi.13216,"We propose a duration‐based explanation for the premia on major equity factors, including value, profitability, investment, low‐risk, and payout factors. These factors invest in firms that earn most of their cash flows in the near future and could therefore be driven by a premium on near‐future cash flows. We test this hypothesis using a novel data set of single‐stock dividend futures, which are claims on dividends of individual firms. Consistent with our hypothesis, the expected Capital Asset Pricing Model alpha on individual cash flows decreases in maturity within a firm, and the alpha is not related to the above characteristics when controlling for maturity.",JoF,2023,104,669,"['Financial Markets', 'Investment Strategies', 'Capital Allocation', 'Risk Management', 'Monetary Policy']","['duration', 'explanation', 'premia', 'equity factors', 'value', 'profitability', 'investment', 'low-risk', 'payout factors', 'cash flows']"
Firm‐Level Climate Change Exposure,10.1111/jofi.13219,"We develop a method that identifies the attention paid by earnings call participants to firms' climate change exposures. The method adapts a machine learning keyword discovery algorithm and captures exposures related to opportunity, physical, and regulatory shocks associated with climate change. The measures are available for more than 10,000 firms from 34 countries between 2002 and 2020. We show that the measures are useful in predicting important real outcomes related to the net‐zero transition, in particular, job creation in disruptive green technologies and green patenting, and that they contain information that is priced in options and equity markets.",JoF,2023,98,664,"['Climate Change Economics', 'Environmental Sustainability', 'Energy Transition', 'Investment Strategies', 'Financial Markets']","['climate change', 'earnings call', 'machine learning', 'keyword discovery algorithm', 'opportunity', 'physical shocks', 'regulatory shocks', 'firms', 'job creation', 'green patenting']"
Macroeconomic News in Asset Pricing and Reality,10.1111/jofi.13218,"Revisions in successive Greenbook forecasts of quarterly real GDP growth proxy for news of current and expected future economic growth. In the sample 1975 through 2015, news of future growth is slightly negatively related to contemporaneous changes in Treasury bond yields, while news of current growth is strongly positively related to changes in these yields. Both results are difficult to reconcile with a representative agent's bondholding first‐order condition. A continuous‐time dynamic model of output attributes almost all of the covariation with yields to martingale innovations in log output and a minimal amount to innovations in the conditional drift of log output.",JoF,2023,101,677,"['Economic Growth', 'Financial Markets', 'Monetary Policy', 'Risk Management', 'Capital Allocation']","['Greenbook forecasts', 'real GDP growth', 'news', 'economic growth', 'Treasury bond yields', 'representative agent', 'continuous-time dynamic model', 'output', 'covariation', 'martingale innovations.']"
Who Owns What? A Factor Model for Direct Stockholding,10.1111/jofi.13220,"We build a cross‐sectional factor model for investors' direct stockholdings and estimate it using data from almost 10 million retail accounts in the Indian stock market. Our model identifies strong investor clienteles for stock characteristics, most notably firm age and share price, and for particular clusters of stock characteristics. These clienteles are intuitively associated with investor attributes such as account age, size, and diversification. Coheld stocks tend to have higher return covariance, inconsistent with simple models of diversification but suggestive that clientele demands influence stock returns.",JoF,2023,86,621,"['Financial Markets', 'Investor Behavior', 'Stock Market', 'Risk Management', 'Investment Strategies']","['investors', 'stockholdings', 'factor model', 'retail accounts', 'Indian stock market', 'clienteles', 'firm age', 'share price', 'account age', 'diversification']"
Integrating Factor Models,10.1111/jofi.13226,"This paper develops a comprehensive framework to address uncertainty about the correct factor model. Asset pricing inferences draw on a composite model that integrates over competing factor models weighted by posterior probabilities. Evidence shows that unconditional models record near‐zero probabilities, while postearnings announcement drift, quality‐minus‐junk, and intermediary capital are potent factors in conditional asset pricing. Out‐of‐sample, the integrated model performs well, tilting away from subsequently underperforming factors. Model uncertainty makes equities appear <jats:italic>considerably</jats:italic> riskier, while model disagreement about expected returns spikes during crash episodes. Disagreement spans all return components involving mispricing, factor loadings, and risk premia.",JoF,2023,96,810,"['Financial Markets', 'Asset Pricing', 'Risk Management', 'Equity', 'Market Disagreement']","['uncertainty', 'factor model', 'asset pricing', 'composite model', 'posterior probabilities', 'postearnings announcement drift', 'quality-minus-junk', 'intermediary capital', 'equities', 'riskier']"
Visibility Bias in the Transmission of Consumption Beliefs and Undersaving,10.1111/jofi.13223,"We model visibility bias in the social transmission of consumption behavior. When consumption is more salient than nonconsumption, people perceive that others are consuming heavily, and infer that future prospects are favorable. This increases aggregate consumption in a positive feedback loop. A distinctive implication is that disclosure policy interventions can ameliorate undersaving. In contrast with wealth‐signaling models, information asymmetry about wealth <jats:italic>reduces</jats:italic> overconsumption. The model predicts that saving is influenced by social connectedness, observation biases, and demographic structure, and provides new insight into savings rates. These predictions are distinct from other common models of consumption distortions.",JoF,2023,96,763,"['Consumer Behavior', 'Social Policy', 'Financial Markets', 'Behavioral Economics', 'Savings']","['visibility bias', 'social transmission', 'consumption behavior', 'disclosure policy', 'undersaving', 'wealth-signaling models', 'overconsumption', 'saving', 'social connectedness', 'observation biases']"
Naïve <i>Buying</i> Diversification and Narrow Framing by Individual Investors,10.1111/jofi.13222,"We provide the first tests to distinguish whether individual investors equally balance their overall portfolios (naïve portfolio diversification, NPD) or, in contrast, equally balance the values of same‐day purchases of multiple assets (naïve <jats:italic>buying</jats:italic> diversification, NBD). We find NBD in purchases of multiple stocks, and in mixed purchases of individual stocks and funds. In contrast, there is little evidence of NPD. Evidence suggests that NBD arises due to stock picking behavior and neglect of diversification. These findings suggest that behavioral finance theory should incorporate transaction, as well as portfolio, framing.",JoF,2023,90,658,"['Behavioral Economics', 'Financial Markets', 'Investment Strategies', 'Corporate Governance', 'Risk Management']","['individual investors', 'portfolios', 'diversification', 'purchases', 'assets', 'stocks', 'funds', 'stock picking behavior', 'neglect', 'behavioral finance theory']"
Model Comparison with Transaction Costs,10.1111/jofi.13225,"Failing to account for transaction costs materially impacts inferences drawn when evaluating asset pricing models, biasing tests in favor of those employing high‐cost factors. Ignoring transaction costs, Hou, Xue, and Zhang (2015, <jats:italic>Review of Financial Studies</jats:italic>, 28, 650–705) <jats:italic>q</jats:italic>‐factor model and Barillas and Shanken (2018, <jats:italic>The</jats:italic> <jats:italic>Journal of Finance</jats:italic>, 73, 715–754) six‐factor models have high maximum squared Sharpe ratios and small alphas across 205 anomalies. They do not, however, come close to spanning the <jats:italic>achievable</jats:italic> mean‐variance efficient frontier. Accounting for transaction costs, the Fama and French (2015, <jats:italic>Journal of Financial Economics</jats:italic>, 116, 1–22; 2018, <jats:italic>Journal of Financial Economics</jats:italic>, 128, 234–252) five‐factor model has a significantly higher squared Sharpe ratio than either of these alternative models, while variations employing cash profitability perform better still.",JoF,2023,123,1067,"['Financial Markets', 'Asset Pricing Models', 'Transaction Costs', 'Investment Strategies', 'Market Efficiency']","['transaction costs', 'asset pricing models', 'q-factor model', 'six-factor models', 'anomalies', 'Sharpe ratios', 'alphas', 'mean-variance efficient frontier', 'Fama and French', 'five-factor model']"
Did FinTech Lenders Facilitate PPP Fraud?,10.1111/jofi.13209,"In the $793 billion Paycheck Protection Program, we examine metrics related to potential misreporting including nonregistered businesses, multiple businesses at residential addresses, abnormally high implied compensation per employee, and large inconsistencies with jobs reported in another government program. These measures consistently concentrate in certain FinTech lenders and are cross‐verified by seven additional measures. FinTech market share increased significantly over time, and suspicious lending by FinTechs in 2021 is four times the level at the start of the program. Suspicious loans are being overwhelmingly forgiven at rates similar to other loans.",JoF,2023,90,666,"['Financial Markets', 'FinTech', 'Public Policy', 'Banking Systems', 'Economic Development']","['Paycheck Protection Program', 'misreporting', 'nonregistered businesses', 'multiple businesses', 'residential addresses', 'implied compensation', 'FinTech lenders', 'government program', 'suspicious lending', 'forgiven loans']"
Presidential Address: Sustainable Finance and ESG Issues—<i>Value</i>versus<i>Values</i>,10.1111/jofi.13255,"In this address, I discuss differences across investor and manager motivations for considering sustainable finance—<jats:italic>value</jats:italic>versus<jats:italic>values</jats:italic>motivations—and how these differences contribute to misunderstandings about environmental, social, and governance investment approaches. The finance research community has the ability and responsibility to help clear up these misunderstandings through additional research, which I suggest.",JoF,2023,49,475,"['Environmental Sustainability', 'Financial Markets', 'Corporate Governance', 'Investment Strategies', 'Climate Change Economics']","['sustainable finance', 'investor', 'manager', 'motivations', 'value', 'values', 'environmental', 'social', 'governance', 'investment']"
Rents and Intangible Capital: A Q+ Framework,10.1111/jofi.13231,"In recent years, U.S. investment has been lackluster, despite rising valuations. Key explanations include growing rents and growing intangibles. We propose and estimate a framework to quantify their roles. The gap between valuations—reflected in average <jats:italic>Q</jats:italic>—and investment—reflected in marginal <jats:italic>q</jats:italic>—can be decomposed into three terms: the value of installed intangibles; rents generated by physical capital; and an interaction term, measuring rents generated by intangibles. The intangible related terms contribute significantly to the gap, particularly in fast‐growing sectors. Our findings suggest care in a pure‐rents interpretation, given the rising role of intangibles.",JoF,2023,91,724,"['Investment Strategies', 'Intangible Assets', 'Corporate Governance', 'Economic Growth', 'Financial Markets']","['investment', 'valuations', 'rents', 'intangibles', 'framework', 'quantification', 'valuations', 'marginal q', 'intangible', 'physical capital']"
Can Security Design Foster Household Risk‐Taking?,10.1111/jofi.13232,This paper shows that securities with nonlinear payoff designs can foster household risk‐taking. We demonstrate this effect by exploiting the introduction of capital guarantee products in Sweden between 2002 and 2007. Their fast and broad adoption is associated with an increase in expected financial portfolio returns. The effect is especially strong for households with low‐risk appetite ex ante. These empirical facts are consistent with a life‐cycle model in which households have pessimistic beliefs or preferences combining loss aversion and narrow framing. Our results illustrate how security design can mitigate behavioral biases to increase mean household portfolio returns.,JoF,2023,97,683,"['Financial Markets', 'Risk Management', 'Behavioral Economics', 'Investment Strategies', 'Household Risk-Taking']","['securities', 'nonlinear payoff designs', 'household risk-taking', 'capital guarantee products', 'Sweden', 'financial portfolio returns', 'risk appetite', 'life-cycle model', 'behavioral biases', 'household portfolio returns']"
Modeling Corporate Bond Returns,10.1111/jofi.13233,"We propose a conditional factor model for corporate bond returns with five factors and time‐varying factor loadings. We have three main empirical findings. First, our factor model excels in describing the risks and returns of corporate bonds, improving over previously proposed models in the literature by a large margin. Second, our model recommends a systematic bond investment portfolio whose high out‐of‐sample Sharpe ratio suggests that the credit risk premium is notably larger than previously estimated. Third, we find closer integration between debt and equity markets than found in prior literature.",JoF,2023,90,608,"['Financial Markets', 'Investment Strategies', 'Credit Markets', 'Corporate Governance', 'Market Transparency']","['conditional factor model', 'corporate bond returns', 'factors', 'time-varying factor loadings', 'risks', 'returns', 'bond investment portfolio', 'Sharpe ratio', 'credit risk premium', 'debt and equity markets']"
Barter Credit: Warehouses as a Contracting Technology,10.1111/jofi.13252,"A large Brazilian agribusiness lender introduces a new contracting technology: grain warehouses. Using runner‐up warehouse locations as a control group, I find that construction of these warehouses permits a new debt contract, namely, barter credit repayable in grain. This contract increases borrowers' debt capacity and reduces borrowing costs. The effects are stronger when grain price risk is higher, for municipalities with weaker courts, and for financially constrained borrowers. These findings are consistent with barter credit reducing financial market imperfections by mitigating borrowers' output price risk.",JoF,2023,85,619,"['Credit Markets', 'Risk Management', 'Financial Markets', 'Economic Development', 'Debt Management']","['Brazilian', 'agribusiness', 'lender', 'contracting technology', 'grain warehouses', 'debt contract', 'barter credit', 'borrowing costs', 'financial market imperfections', 'output price risk.']"
Specialization in Bank Lending: Evidence from Exporting Firms,10.1111/jofi.13254,"We develop a novel approach for measuring bank specialization using granular data on borrower activities and apply it to Peruvian exporters and their banks. We find that borrowers seek credit from banks that specialize in their export destinations, both when expanding exports and when exporting to new countries. Firms experiencing country‐specific export demand shocks adjust borrowing disproportionately from specialized banks. Specialized bank credit supply shocks affect exports disproportionately to countries of specialization. Our results demonstrate that firm credit demand is bank‐ and activity‐specific, which reduces banking competition and affects the transmission and amplification of shocks through the banking sector.",JoF,2023,99,733,"['Banking Systems', 'Credit Markets', 'Trade and Globalization', 'Financial Markets', 'Economic Development']","['bank specialization', 'granular data', 'borrower activities', 'Peruvian exporters', 'credit', 'export destinations', 'export demand shocks', 'specialized banks', 'credit supply shocks', 'banking competition']"
Employee Costs of Corporate Bankruptcy,10.1111/jofi.13251,"An employee's annual earnings fall by 13% in the first full calendar year after her firm's bankruptcy, and the present value of lost earnings from bankruptcy to six years following bankruptcy is 87% of pre‐bankruptcy annual earnings. More worker earnings are lost in thin labor markets and among small firms. Ex ante compensating wage differentials for this “bankruptcy risk” are up to 2% of firm value for a firm whose credit rating falls from AA to BBB, comparable in magnitude to debt tax benefits. Thus, wage premia for expected costs of bankruptcy are sufficiently large to be an important consideration in capital structure decisions.",JoF,2023,104,640,"['Risk Management', 'Labor Market Dynamics', 'Corporate Governance', 'Capital Allocation', 'Financial Markets']","['earnings', 'bankruptcy', 'firm', 'value', 'labor markets', 'compensating wage differentials', 'credit rating', 'debt tax benefits', 'wage premia', 'capital structure decisions']"
Optimal Sequential Selling Mechanism and Deal Protections in Mergers and Acquisitions,10.1111/jofi.13235,"We study the dynamic profit‐maximizing selling mechanism in a merger and acquisitions (M&amp;A) environment with costly bidder entry and without entry fees. Depending on the parameters, the optimal mechanism is implemented by a standard auction or by a two‐stage procedure with exclusive offers to one bidder followed by an auction potentially favoring that bidder. The optimal mechanism may involve common deal protections like termination fees, asset lockups, or stock option lockups. Our proposed procedures resemble sales of targets filing Chapter 11 bankruptcy or M&amp;A involving public targets, and they shed light on how to use deal protections in practice.",JoF,2023,99,666,"['Mergers and Acquisitions', 'Auctions', 'Deal Protections', 'Corporate Governance', 'Financial Markets']","['dynamic', 'profit-maximizing', 'selling mechanism', 'merger and acquisitions', 'bidder entry', 'entry fees', 'auction', 'two-stage procedure', 'deal protections', 'Chapter 11 bankruptcy']"
"Liquidity, Volume, and Order Imbalance Volatility",10.1111/jofi.13248,"We examine the dynamics of liquidity using a comprehensive sample of U.S. stocks in the post‐decimalization period. Motivated by a continuous‐time inventory model, we compute a high‐frequency measure of order imbalance volatility to proxy for the inventory risk faced by liquidity providers. We show that high‐frequency order imbalance volatility is an important driver of liquidity and explains the often positive time‐series relation between spread and volume for large stocks, which seems to run counter to most theoretical models. Furthermore, order imbalance volatility is priced in the cross‐section of stock returns.",JoF,2023,90,623,"['Financial Markets', 'Risk Management', 'Stock Returns', 'Liquidity', 'Pricing']","['liquidity', 'U.S. stocks', 'post-decimalization period', 'inventory model', 'high-frequency measure', 'order imbalance volatility', 'inventory risk', 'liquidity providers', 'spread', 'volume']"
Is COVID Revealing a Virus in CMBS 2.0?,10.1111/jofi.13228,"Commercial loan valuations crucially depend on accurate loan income, but underwritten income on commercial mortgage‐backed securities (CMBS) loans is commonly overstated relative to actual property income. Consistent with these differences being originator‐specific, income overstatement in CMBS 2.0 deals varies widely and persistently across originators, is priced by originators, is related across property types within an originator, is predictable ex ante, and is accompanied by inflation of past financials. Risk retention and associated regulation had no discernible effect on income overstatement. Originator income overstatement is highly predictive of pre‐ and COVID‐period loan distress. Overall, recent market stresses reveal large systemic differences in underwriting standards across originators.",JoF,2023,105,810,"['Credit Markets', 'Banking Systems', 'Risk Management', 'Financial Markets', 'Regulatory Frameworks']","['commercial loan', 'valuations', 'loan income', 'commercial mortgage-backed securities', 'CMBS', 'income overstatement', 'originators', 'property types', 'loan distress', 'underwriting standards']"
Competition and Misconduct,10.1111/jofi.13227,"Misconduct is widespread. Practices such as misselling, pump and dump, and money laundering cause harm while raising profits. This paper presents a mechanism that can determine what sorts of misconduct can be sustained in competitive equilibrium in concentrated markets, oligopoly settings, and markets with many small competing firms. The model studied allows general demand and distinguishes types of ethical dilemma using current psychological understanding. The paper shows, for example, that markets with many small competing firms are not vulnerable to misconduct if firms respond to entry with niche strategies or if the ethical dilemma draws an emotional response.",JoF,2023,98,672,"['Corporate Governance', 'Market Transparency', 'Economic Development', 'Behavioral Economics', 'Regulatory Frameworks']","['misconduct', 'practices', 'misselling', 'pump and dump', 'money laundering', 'mechanism', 'competitive equilibrium', 'concentrated markets', 'oligopoly settings', 'small competing firms']"
Reusing Natural Experiments,10.1111/jofi.13250,"After a natural experiment is first used, other researchers often reuse the setting, examining different outcome variables. We use simulations based on real data to illustrate the multiple hypothesis testing problem that arises when researchers reuse natural experiments. We then provide guidance for future inference based on popular empirical settings including difference‐in‐differences, instrumental variables, and regression discontinuity designs. When we apply our guidance to two extensively studied natural experiments, business combination laws and the Regulation SHO pilot, we find that many results that were statistically significant using single hypothesis testing do not survive corrections for multiple hypothesis testing.",JoF,2023,98,737,"['Economic Growth', 'Public Policy', 'Financial Markets', 'Regulatory Frameworks', 'Statistical Analysis']","['natural experiment', 'researchers', 'reuse', 'multiple hypothesis testing', 'simulations', 'real data', 'empirical settings', 'difference-in-differences', 'instrumental variables', 'regression discontinuity designs']"
Retail Derivatives and Sentiment: A Sentiment Measure Constructed from Issuances of Retail Structured Equity Products,10.1111/jofi.13253,"We use retail structured equity product (SEP) issuances to construct a new sentiment measure for large capitalization stocks. The SEP sentiment measure predicts negative abnormal returns on the SEP reference stocks based on a variety of factor models, and also predicts returns in Fama‐MacBeth regressions that include a wide range of covariates. Consistent with our interpretation that SEP issuances reflect investor sentiment, aggregate SEP issuances are highly correlated with the Baker‐Wurgler sentiment index. Tobit regressions reveal that proxies for attention and sentiment predict SEP issuance volumes, providing additional evidence consistent with the hypothesis that SEP issuances reflect sentiment.",JoF,2023,98,709,"['Financial Markets', 'Sentiment Analysis', 'Investor Sentiment', 'Behavioral Economics', 'Corporate Finance']","['retail structured equity product', 'SEP issuances', 'sentiment measure', 'abnormal returns', 'factor models', 'Fama-MacBeth regressions', 'investor sentiment', 'Baker-Wurgler sentiment index', 'Tobit regressions', 'attention']"
Moral Hazard versus Liquidity in Household Bankruptcy,10.1111/jofi.13263,"This paper studies the role of moral hazard and liquidity in driving household bankruptcy. First, I estimate that increases in potential debt forgiveness have a positive, but small, effect on filing using a regression kink design. Second, exploiting quasi‐experimental variation in mortgage payment reductions, I estimate that filing is five times more responsive to cash‐on‐hand than relief generosity. Using a sufficient statistic, I show the estimates imply large consumption‐smoothing benefits of bankruptcy for the marginal filer. Finally, I conclude that 83% of the filing response to dischargeable debt comes from liquidity effects rather than a moral hazard response to financial incentives.",JoF,2023,101,699,"['Banking Systems', 'Debt Management', 'Consumer Behavior', 'Financial Markets', 'Economic Development']","['moral hazard', 'liquidity', 'household bankruptcy', 'debt forgiveness', 'regression kink design', 'cash-on-hand', 'consumption-smoothing', 'dischargeable debt', 'financial incentives', 'filing response']"
Is There a Replication Crisis in Finance?,10.1111/jofi.13249,"Several papers argue that financial economics faces a replication crisis because the majority of studies cannot be replicated or are the result of multiple testing of too many factors. We develop and estimate a Bayesian model of factor replication that leads to different conclusions. The majority of asset pricing factors (i) can be replicated; (ii) can be clustered into 13 themes, the majority of which are significant parts of the tangency portfolio; (iii) work out‐of‐sample in a new large data set covering 93 countries; and (iv) have evidence that is strengthened (not weakened) by the large number of observed factors.",JoF,2023,100,626,"['Financial Markets', 'Risk Management', 'Economic Development', 'Investment Strategies', 'Trade and Globalization']","['replication crisis', 'financial economics', 'Bayesian model', 'factor replication', 'asset pricing factors', 'tangency portfolio', 'out-of-sample', 'large data set', 'countries', 'observed factors']"
Complex Asset Markets,10.1111/jofi.13264,"Investors' individual arbitrage models introduce idiosyncratic risk into complex asset strategies, driving up average returns and Sharpe ratios. However, despite the attractive risk‐return trade‐off, participation is limited. This is because effective Sharpe ratios in complex asset markets vary with investors' expertise. Investors with higher expertise, better models, and lower resulting idiosyncratic risk exposures realize higher Sharpe ratios. Their demand deters entry by less sophisticated investors. As predicted by our model, market dislocations are characterized by an increase in idiosyncratic risk, investor exit, and persistently elevated alphas and Sharpe ratios. The selection effect from higher expertise agents' more favorable Sharpe ratios is unique to our model and key to our main results.",JoF,2023,111,810,"['Financial Markets', 'Risk Management', 'Investment Strategies', 'Market Transparency', 'Financial Inclusion']","['arbitrage', 'models', 'risk', 'returns', 'Sharpe ratios', 'expertise', 'idiosyncratic risk', 'asset markets', 'market dislocations', 'alphas']"
Pledgeability and Asset Prices: Evidence from the Chinese Corporate Bond Markets,10.1111/jofi.13266,"We provide causal evidence on the value of asset pledgeability by exploiting a unique feature of Chinese corporate bond markets: bonds with identical fundamentals are traded on two segmented markets with different rules for repo transactions. Using a policy shock that rendered AA+ and AA bonds ineligible for repo on one market only, we compare how bond prices changed across markets and rating classes around this event. When the haircut increases from 0% to 100%, bond yields increase by 39 bps to 85 bps. These estimates help us infer the magnitude of the shadow cost of capital in China.",JoF,2023,99,592,"['Financial Markets', 'Credit Markets', 'Monetary Policy', 'Economic Development', 'China']","['value', 'asset pledgeability', 'Chinese corporate bond markets', 'repo transactions', 'policy shock', 'bond prices', 'rating classes', 'haircut', 'bond yields', 'shadow cost of capital']"
Investor Tax Credits and Entrepreneurship: Evidence from U.S. States,10.1111/jofi.13267,"Angel investor tax credits are used globally to spur high‐growth entrepreneurship. Exploiting their staggered implementation in 31 U.S. states, we find that they increase angel investment yet have no significant impact on entrepreneurial activity. Two mechanisms explain these results: crowding out of alternative financing and low sensitivity of professional investors to tax credits. With a large‐scale survey and a stylized model, we show that low responsiveness among professional angels may reflect the fat‐tailed return distributions that characterize high‐growth startups. The results contrast with evidence that direct subsidies to firms have positive effects, raising concerns about promoting entrepreneurship with investor subsidies.",JoF,2023,100,743,"['Entrepreneurship', 'Venture Capital', 'Tax Policy Reforms', 'Economic Development', 'Financial Markets']","['angel investor tax credits', 'high-growth entrepreneurship', 'staggered implementation', 'U.S. states', 'angel investment', 'entrepreneurial activity', 'alternative financing', 'professional investors', 'survey', 'high-growth startups']"
Retail Financial Innovation and Stock Market Dynamics: The Case of Target Date Funds,10.1111/jofi.13258,"Target date funds (TDFs) are designed to provide unsophisticated or inattentive investors with age‐appropriate exposures to different asset classes like stocks and bonds. The rise of TDFs has moved a significant share of retirement investors into macrocontrarian strategies that sell stocks after relatively good stock market performance. This rebalancing drives contrarian flows across equity mutual funds held by TDFs, stabilizing their funding, and reduces stock returns for stocks disproportionately held by these funds when stock market returns are relatively high. Continued growth in TDFs and similar investment products may dampen stock market volatility and increase the transmission of shocks across asset classes.",JoF,2023,102,724,"['Financial Markets', 'Investment Strategies', 'Retirement Investors', 'Stock Market Volatility', 'Asset Classes']","['TDFs', 'investors', 'asset classes', 'stocks', 'bonds', 'retirement', 'rebalancing', 'equity mutual funds', 'stock returns', 'stock market volatility']"
Contracting in Peer Networks,10.1111/jofi.13260,"We consider multiagent multifirm contracting when agents benchmark their wages to those of their peers, using weights that vary within and across firms. When a single principal commits to a public contract, optimal contracts hedge relative wage risk without sacrificing efficiency. But compensation benchmarking undoes performance benchmarking, causing wages to load positively on peer output, and asymmetries in peer effects can be exploited to enhance profits. With multiple principals, a “rat race” emerges: agents are more productive, with effort that can exceed the first best, but higher wages reduce profits and undermine efficiency. Wage transparency and disclosure requirements exacerbate these effects.",JoF,2023,101,712,"['Labor Market Dynamics', 'Financial Markets', 'Risk Management', 'Corporate Governance', 'Public Policy']","['multiagent', 'multifirm contracting', 'benchmarking', 'wages', 'peers', 'optimal contracts', 'relative wage risk', 'asymmetries', 'profits', 'efficiency']"
"Dynamic Contracting with Intermediation: Operational, Governance, and Financial Engineering",10.1111/jofi.13265,"Private equity funds intermediate investment and affect portfolio firm performance by actively engaging in operational, governance, and financial engineering. We study this type of intermediation in a dynamic agency model in which an active intermediary raises funds from outside investors and invests in a firm run by an agent. Optimal contracting addresses moral hazard at the intermediary and firm levels. The intermediary's incentives to affect firm performance are strongest after poor performance, while the agent's incentives are strongest after good performance. We also show how financial engineering, that is, financial contracting with outside investors, interacts with operational and governance engineering.",JoF,2023,100,720,"['Private Equity', 'Corporate Governance', 'Financial Engineering', 'Investment Strategies', 'Venture Capital']","['private equity funds', 'investment', 'portfolio firm performance', 'operational', 'governance', 'financial engineering', 'dynamic agency model', 'optimal contracting', 'moral hazard', 'financial engineering']"
Stealth Acquisitions and Product Market Competition,10.1111/jofi.13256,"We examine whether and how firms structure their merger and acquisition deals to avoid antitrust scrutiny. There are approximately 40% more mergers and acquisitions (M&amp;As) than expected just below deal value thresholds that trigger antitrust review. These “stealth acquisitions” tend to involve financial and governance contract terms that afford greater scope for negotiating and assigning lower deal values. We also show that the equity values, gross margins, and product prices of acquiring firms and their competitors increase following such acquisitions. Our results suggest that acquirers manipulate M&amp;As to avoid antitrust scrutiny, thereby benefiting their own shareholders but potentially harming other corporate stakeholders.",JoF,2023,102,743,"['Mergers and Acquisitions', 'Corporate Governance', 'Financial Markets', 'Antitrust Scrutiny', 'Risk Management']","['merger', 'acquisition', 'antitrust', 'scrutiny', 'stealth acquisitions', 'financial', 'governance', 'deal values', 'equity values', 'competitors']"
Do Credit Markets Respond to Macroeconomic Shocks? The Case for Reverse Causality,10.1111/jofi.13261,"The response of corporate bond credit spreads to three exogenous macro shocks—oil supply, investment‐specific technology, and government spending—is large, significant, and a mirror image of macroeconomic activity. This countercyclicality is driven largely by credit risk premia and translates into significant return predictability. Equity risk premia exhibit similar responses, providing external validity. Information rigidities and leverage play a key role in the transmission of the shocks. Since causal evidence linking macro shocks to credit markets is scarce and recent work highlights the real effects of credit fluctuations, our findings contribute to understanding the joint dynamics of credit markets and the macroeconomy.",JoF,2023,100,734,"['Credit Markets', 'Monetary Policy', 'Financial Markets', 'Economic Development', 'Risk Management']","['macro shocks', 'corporate bond credit spreads', 'credit risk premia', 'return predictability', 'equity risk premia', 'information rigidities', 'leverage', 'transmission', 'credit markets', 'macroeconomy']"
Monetary Policy and Inequality,10.1111/jofi.13262,"We analyze the distributional effects of monetary policy on income, wealth, and consumption. We use administrative household‐level data covering the entire population in Denmark over the period 1987 to 2014 and exploit a long‐standing currency peg as a source of exogenous variation in monetary policy. We find that gains from softer monetary policy in terms of income, wealth, and consumption are monotonically increasing in ex ante income. The distributional effects reflect systematic differences in exposure to the various channels of monetary policy, especially nonlabor channels (e.g., leverage and risky assets). Our estimates imply that softer monetary policy increases income inequality.",JoF,2023,100,696,"['Monetary Policy', 'Income Inequality', 'Financial Markets', 'Wealth Distribution', 'Labor Market Dynamics']","['monetary policy', 'income', 'wealth', 'consumption', 'Denmark', 'currency peg', 'exogenous variation', 'distributional effects', 'leverage', 'risky assets']"
(Why) Do Central Banks Care about Their Profits?,10.1111/jofi.13257,"We document that central banks are discontinuously more likely to report slightly positive profits than slightly negative profits, especially when political pressure is greater, the public is more receptive to extreme political views, and central bank governors are eligible for reappointment. The propensity to report small profits over small losses is correlated with higher inflation and lower interest rates. We conclude that there are agency problems at central banks, which give rise to discontinuous profit incentives that correlate with central banks’ policy choices and outcomes. These findings inform the debate about the political economy of central banking and central bank design.",JoF,2023,101,693,"['Monetary Policy', 'Public Policy', 'Central Banking', 'Economic Development', 'Corporate Governance']","['central banks', 'profits', 'political pressure', 'extreme political views', 'reappointment', 'inflation', 'interest rates', 'agency problems', 'policy choices', 'outcomes']"
Selling Fast and Buying Slow: Heuristics and Trading Performance of Institutional Investors,10.1111/jofi.13271,"Are market experts prone to heuristics, and do these heuristics transfer across buying and selling domains? We investigate this question using a unique data set of institutional investors with portfolios averaging $573 million. A striking finding emerges: While there is evidence of skill in buying, selling decisions underperform substantially, even relative to random‐selling strategies. This holds despite the similarity between the two decisions in frequency, substance, and consequences for performance. Evidence suggests an asymmetric allocation of cognitive resources such as attention can explain the discrepancy: We document a systematic, costly heuristic process for selling but not for buying.",JoF,2023,98,704,"['Financial Markets', 'Investment Strategies', 'Behavioral Economics', 'Market Transparency', 'Cognitive Resources']","['market experts', 'heuristics', 'buying', 'selling', 'institutional investors', 'portfolios', 'cognitive resources', 'attention', 'performance', 'decision-making.']"
Informational Black Holes in Financial Markets,10.1111/jofi.13270,"We show that information aggregation in primary financial markets fails precisely when investors hold socially useful information for screening projects. Being wary of the Winner's Curse, less optimistic investors refrain from making financing offers, since their offers would be accepted only when a project is unviable. Their information is therefore lost. The Winner's Curse and associated information loss grow with the number of informed market participants, so that larger markets can lead to worse financing decisions and higher cost of capital for firms seeking financing. Precommitment to ration fundraising allocations, collusive club bidding, and shorting markets can mitigate the inefficiency.",JoF,2023,100,705,"['Financial Markets', 'Risk Management', 'Capital Allocation', 'Market Transparency', 'Investment Strategies']","['information aggregation', 'primary financial markets', 'socially useful information', ""Winner's Curse"", 'financing offers', 'project viability', 'informed market participants', 'cost of capital', 'fundraising allocations', 'inefficiency']"
Option Momentum,10.1111/jofi.13279,"This paper investigates the performance of option investments across different stocks by computing monthly returns on at‐the‐money straddles on individual equities. We find that options with high historical returns continue to significantly outperform options with low historical returns over horizons ranging from 6 to 36 months. This phenomenon is robust to including out‐of‐the‐money options or delta‐hedging the returns. Unlike stock momentum, option return continuation is not followed by long‐run reversal. Significant returns remain after factor risk adjustment and after controlling for implied volatility and other characteristics. Across stocks, trading costs are unrelated to the magnitude of momentum profits.",JoF,2023,98,721,"['Financial Markets', 'Investment Strategies', 'Risk Management', 'Market Transparency', 'Behavioral Economics']","['option investments', 'stocks', 'monthly returns', 'at-the-money straddles', 'equities', 'historical returns', 'outperform', 'horizons', 'stock momentum', 'trading costs']"
(Re‐)Imag(in)ing Price Trends,10.1111/jofi.13268,"We reconsider trend‐based predictability by employing flexible learning methods to identify price patterns that are highly predictive of returns, as opposed to testing predefined patterns like momentum or reversal. Our predictor data are stock‐level price charts, allowing us to extract the most predictive price patterns using machine learning image analysis techniques. These patterns differ significantly from commonly analyzed trend signals, yield more accurate return predictions, enable more profitable investment strategies, and demonstrate robustness across specifications. Remarkably, they exhibit context independence, as short‐term patterns perform well on longer time scales, and patterns learned from U.S. stocks prove effective in international markets.",JoF,2023,100,767,"['Financial Markets', 'Investment Strategies', 'Machine Learning Applications', 'International Markets', 'Stock Market']","['trend-based predictability', 'flexible learning methods', 'price patterns', 'predictive', 'returns', 'stock-level price charts', 'machine learning', 'image analysis techniques', 'investment strategies', 'context independence']"
Household Liquidity Constraints and Labor Market Outcomes: Evidence from a Danish Mortgage Reform,10.1111/jofi.13277,"We study the causal effect of liquidity constraints on individual labor market outcomes by exploiting the 1992 mortgage reform in Denmark, which for the first time allowed homeowners to borrow against housing equity for nonhousing purposes. Following the reform, liquidity‐constrained homeowners increased debt levels and had higher earnings growth and lower employment rates. The option to borrow against housing equity enabled liquidity‐constrained individuals to move to high‐wage jobs and invest in valuable human and physical capital. The results imply that relaxing household liquidity constraints during recessions can create better job matches, potentially increasing earnings and output in the longer run.",JoF,2023,100,714,"['Labor Market Dynamics', 'Financial Markets', 'Economic Growth', 'Monetary Policy', 'Housing Market Trends']","['liquidity constraints', 'labor market outcomes', 'mortgage reform', 'Denmark', 'homeowners', 'debt levels', 'earnings growth', 'employment rates', 'housing equity', 'job matches']"
"Booms, Busts, and Common Risk Exposures",10.1111/jofi.13283,"I present a dynamic general equilibrium model in which commonality in bank assets endogenously changes over the business cycle and shapes systemic risk. To reduce individual risks, banks diversify, increasing portfolio overlap and hence the similarity of their exposures to fundamental shocks. Systemic financial crises burst at the end of credit booms when productive investment opportunities are exhausted, banks' diversification incentives are strong, and their portfolios are highly correlated. A calibrated model is able to match key moments related to frequency, severity, and the economy's behavior around systemic crises.",JoF,2023,89,629,"['Financial Markets', 'Risk Management', 'Banking Systems', 'Economic Growth', 'Credit Markets']","['dynamic general equilibrium model', 'commonality', 'bank assets', 'systemic risk', 'diversification', 'portfolio overlap', 'fundamental shocks', 'financial crises', 'calibrated model', 'systemic crises.']"
Entrepreneurial Wealth and Employment: Tracing Out the Effects of a Stock Market Crash,10.1111/jofi.13280,"Using the dispersion in stock returns during the financial crisis as a source of exogenous variation in the wealth of Norwegian entrepreneurs who held listed stocks, I show that adverse shocks to the wealth of business owners had large effects on their firms' financing, employment, and investment. The effects on investment and employment are driven by young firms, that obtain differentially less bank financing following an owner wealth shock. The effects on employment operate primarily through reduced hiring. My findings highlight that equity‐financing frictions and the procyclicality of entrepreneurial wealth are important channels that can amplify economic shocks.",JoF,2023,98,674,"['Entrepreneurship', 'Financial Markets', 'Investment Strategies', 'Credit Markets', 'Economic Development']","['dispersion', 'stock returns', 'financial crisis', 'Norwegian entrepreneurs', 'listed stocks', 'wealth', 'business owners', 'firms financing', 'employment', 'investment']"
Operating Hedge and Gross Profitability Premium,10.1111/jofi.13275,"We show theoretically that variable production costs reduce systematic risk of firms' cash flows if capital and variable inputs are complementary in firms' production and input prices are procyclical. In our dynamic model, this operating hedge effect is weaker for more profitable firms, giving rise to a gross profitability premium. Moreover, gross profitability and value factors are distinct and negatively correlated, and their premia are not captured by the capital asset pricing model (CAPM). We estimate the model by simulated method of moments, and find that its main implications for stock returns and cash flow dynamics are quantitatively consistent with the data.",JoF,2023,102,674,"['Financial Markets', 'Risk Management', 'Capital Allocation', 'Economic Development', 'Investment Strategies']","['variable production costs', 'systematic risk', 'cash flows', 'production', 'input prices', 'procyclical', 'operating hedge effect', 'profitability premium', 'value factors', 'stock returns']"
The Legal Origins of Financial Development: Evidence from the Shanghai Concessions,10.1111/jofi.13284,"The primary challenge to assessing the legal origins view of comparative financial development is identifying exogenous changes in legal systems. We assemble new data on Shanghai's British and French concessions between 1845 and 1936. Two regime changes altered British and French legal jurisdiction over their respective concessions. By examining the changing application of different legal traditions to adjacent neighborhoods within the same city and controlling for military, economic, and political characteristics, we offer new evidence consistent with the legal origins view: the financial development advantage in the British concession widened after Western legal jurisdiction intensified and narrowed after it abated.",JoF,2023,100,727,"['Financial Markets', 'Legal Origins', 'Economic Growth', 'Regulatory Frameworks', 'Urban Development']","['legal origins', 'comparative financial development', 'legal systems', 'Shanghai', 'British concession', 'French concession', 'regime changes', 'legal jurisdiction', 'financial development advantage', 'Western legal jurisdiction']"
Retail Trading in Options and the Rise of the Big Three Wholesalers,10.1111/jofi.13285,"We document a rapid increase in retail trading in options in the United States. Facilitated by payment for order flow (PFOF) from wholesalers executing retail orders, retail trading recently reached over 60% of total market volume. Nearly 90% of PFOF comes from three wholesalers. Exploiting new flags in transaction‐level data, we isolate wholesaler trades and build a novel measure of retail options trading. Our measure comoves with equity‐based retail activity proxies and drops significantly during U.S. brokerage platform outages and trading restrictions. Retail investors prefer cheaper, weekly options with average bid‐ask spread of 12.6%, and lose money on average.",JoF,2023,99,674,"['Financial Markets', 'Retail Trading', 'Market Transparency', 'Consumer Behavior', 'Investment Strategies']","['retail trading', 'options', 'United States', 'payment for order flow', 'wholesalers', 'market volume', 'transaction-level data', 'equity-based', 'bid-ask spread', 'retail investors']"
Attention Spillover in Asset Pricing,10.1111/jofi.13281,"Exploiting a screen display feature whereby the order of stock display is determined by the stock's listing code, we lever a novel identification strategy and study how the interaction between overconfidence and limited attention affect asset pricing. We find that stocks displayed next to those with higher returns in the past two weeks are associated with higher returns in the future week, which are reverted in the long run. This is consistent with our conjectures that investors tend to trade more after positive investment experience and are more likely to pay attention to neighboring stocks, both confirmed using trading data.",JoF,2023,100,634,"['Financial Markets', 'Behavioral Economics', 'Investment Strategies', 'Market Transparency', 'Data Privacy']","['screen display', 'stock', 'listing code', 'identification strategy', 'overconfidence', 'limited attention', 'asset pricing', 'returns', 'trading data', 'investment experience']"
"Discount Rates, Debt Maturity, and the Fiscal Theory",10.1111/jofi.13282,"This paper examines how the transmission of government portfolio risk arising from maturity operations depends on the stance of monetary/fiscal policy. Accounting for risk premia in the fiscal theory allows the government portfolio to affect expected inflation, even in a frictionless economy. The effects of maturity rebalancing on expected inflation in the fiscal theory depend directly on the conditional nominal term premium, giving rise to an optimal debt‐maturity policy that is state‐dependent. In a calibrated macrofinance model, we demonstrate that maturity operations have sizable effects on expected inflation and output through our novel risk transmission mechanism.",JoF,2023,96,678,"['Monetary Policy', 'Fiscal Policy', 'Risk Management', 'Financial Markets', 'Debt Management']","['government', 'portfolio risk', 'maturity operations', 'monetary policy', 'fiscal policy', 'risk premia', 'fiscal theory', 'inflation', 'debt maturity policy', 'macrofinance model']"
Optimal Forbearance of Bank Resolution,10.1111/jofi.13273,"This paper analyzes a regulator's optimal strategic delay of resolving banks when the regulator's announcement of the intervention delay endogenously affects the depositors' run propensity. Given intervention, the regulator either liquidates the remaining illiquid assets (“prompt corrective action”) or continues managing the assets at a reduced skill level (“resolution under receivership”). In either case, I show that if the regulator tolerates fewer withdrawals until intervention, the depositors may react by preempting the regulator: they run on the bank more often ex ante. A policy of never intervening can leave the bank more stable than a conservative intervention policy.",JoF,2023,98,683,"['Banking Systems', 'Financial Markets', 'Regulatory Frameworks', 'Monetary Policy', 'Risk Management']","['regulator', 'delay', 'resolving banks', 'intervention', 'liquidates', 'assets', 'depositors', 'run', 'preempting', 'stable']"
Global Pricing of Carbon‐Transition Risk,10.1111/jofi.13272,"The energy transition away from fossil fuels exposes companies to carbon‐transition risk. Estimating the market‐based premium associated with carbon‐transition risk in a cross section of 14,400 firms in 77 countries, we find higher stock returns associated with higher levels and growth rates of carbon emissions in all sectors and most countries. Carbon premia related to emissions growth are greater for firms located in countries with lower economic development, larger energy sectors, and less inclusive political systems. Premia related to emission levels are higher in countries with stricter domestic climate policies. The latter have increased with investor awareness about climate change risk.",JoF,2023,101,702,"['Financial Markets', 'Risk Management', 'Economic Development', 'Climate Change Economics', 'Public Policy']","['carbon-transition risk', 'firms', 'stock returns', 'carbon emissions', 'sectors', 'countries', 'economic development', 'energy sectors', 'political systems', 'climate policies']"
Front‐Page News: The Effect of News Positioning on Financial Markets,10.1111/jofi.13287,"This paper estimates the effect of news positioning on the speed of price discovery, using exogenous variation in prominent (“front‐page”) positioning of news articles on the Bloomberg terminal. Front‐page articles see 240% higher trading volume and 176% larger absolute excess returns during the first 10 minutes after publication than equally important non‐front‐page articles. Overall, the information in front‐page articles is fully incorporated into prices within an hour of publication. The response to non‐front‐page information of similar importance eventually converges but takes more than two days to be fully reflected in prices.",JoF,2024,91,640,"['Financial Markets', 'Market Transparency', 'Investment Strategies', 'Monetary Policy', 'Data Privacy']","['effect', 'news positioning', 'speed', 'price discovery', 'Bloomberg terminal', 'trading volume', 'excess returns', 'publication', 'prices', 'information']"
The Decline of Secured Debt,10.1111/jofi.13308,"The share of secured debt issued (as a fraction of total corporate debt) declined steadily in the United States over the twentieth century. This stems partly from financial development giving creditors greater confidence that high‐quality borrowers will respect their claims even if creditors do not obtain security upfront. Consequently, such borrowers prefer retaining financial flexibility by not giving security up front. Instead, security is given contingently—when a firm approaches distress. This also explains why, superimposed on the secular decline, the share of secured debt issued is countercyclical.",JoF,2024,87,612,"['Debt Management', 'Credit Markets', 'Financial Markets', 'Economic Growth', 'Risk Management']","['secured debt', 'corporate debt', 'United States', 'financial development', 'creditors', 'borrowers', 'financial flexibility', 'security', 'distress', 'countercyclical']"
Liquidation Value and Loan Pricing,10.1111/jofi.13291,"This paper shows that the liquidation value of collateral depends on the interdependency between borrower and collateral risk. Using transaction‐level data on short‐term repurchase agreements (repo), we show that borrowers pay a premium of 1.1 to 2.6 basis points when their default risk is positively correlated with the risk of the collateral that they pledge. Moreover, we show that borrowers internalize this premium when making their collateral choices. Loan‐level credit registry data suggest that the results extend to the corporate loan market as well.",JoF,2024,84,560,"['Financial Markets', 'Risk Management', 'Credit Markets', 'Banking Systems', 'Economic Development']","['liquidation value', 'collateral', 'borrower', 'risk', 'interdependency', 'premium', 'basis points', 'default risk', 'collateral choices', 'credit registry.']"
Neglected Risks in the Communication of Residential Mortgage‐Backed Securities Offerings,10.1111/jofi.13278,"Examining the contractual disclosures during the sale of private‐label residential mortgage‐backed securities before the 2008 financial crisis, we find that textual contents in the risk‐factor section predict subsequent losses and yet were not reflected in pricing. Insurance companies, especially life insurers and insurers with low regulatory capital ratios, are more exposed to textual risks. Consistent with issuers hedging litigation risks with disclosure, we find that textual contents are associated with second‐lien underreporting and preissuance written communications. Overall, we find that investors neglected risks in the purportedly safe assets before the crisis.",JoF,2024,91,676,"['Financial Markets', 'Risk Management', 'Credit Markets', 'Housing Market Trends', 'Investment Strategies']","['contractual disclosures', 'private-label residential mortgage-backed securities', '2008 financial crisis', 'risk-factor section', 'pricing', 'insurance companies', 'life insurers', 'regulatory capital ratios', 'litigation risks', 'investors']"
Interest Rate Skewness and Biased Beliefs,10.1111/jofi.13276,"Conditional skewness of Treasury yields is an important indicator of the risks to the macroeconomic outlook. Positive skewness signals upside risk to interest rates during periods of accommodative monetary policy and an upward‐sloping yield curve, and vice versa. Skewness has substantial predictive power for future bond excess returns, high‐frequency interest rate changes around Federal Open Market Committee announcements, and survey forecast errors for interest rates. The estimated expectational errors, or biases in beliefs, are quantitatively important for statistical bond risk premia. These findings are consistent with a heterogeneous‐beliefs model in which one of the agents is wrong about consumption growth.",JoF,2024,100,721,"['Financial Markets', 'Monetary Policy', 'Risk Management', 'Bond Markets', 'Economic Growth']","['skewness', 'Treasury yields', 'risks', 'macroeconomic outlook', 'interest rates', 'monetary policy', 'yield curve', 'bond excess returns', 'interest rate changes', 'Federal Open Market Committee']"
Financing the Gig Economy,10.1111/jofi.13292,"Unlike traditional firm production, gig economy workers provide their own physical capital. As a consequence, the low‐income households for whom gig economy opportunities are most valuable often borrow to participate. In the context of ride share, difference‐in‐difference analysis reveals increased vehicle purchases, borrowing, utilization, and employment around entry, but financially constrained individuals cannot participate. To assess the equilibrium importance of financing, I build and estimate a structural model of the gig economy. Access to finance proves critical for the gig economy's growth: without finance, equilibrium quantities would be 40% lower and prices 90% higher, and only higher‐income households could participate as drivers.",JoF,2024,102,752,"['Financial Markets', 'Credit Markets', 'Labor Market Dynamics', 'Economic Growth', 'Income Inequality']","['gig economy', 'low-income households', 'borrowing', 'ride share', 'difference-in-difference analysis', 'vehicle purchases', 'utilization', 'employment', 'financing', 'structural model']"
Trading and Shareholder Democracy,10.1111/jofi.13289,"We study shareholder voting in a model in which trading affects the composition of the shareholder base. Trading and voting are complementary, which gives rise to self‐fulfilling expectations about proposal acceptance and multiple equilibria. Prices and shareholder welfare can move in opposite directions, so the former may be an invalid proxy for the latter. Relaxing trading frictions can reduce welfare because it allows extreme shareholders to gain more weight in voting. Delegating decision‐making to the board can help overcome collective action problems at the voting stage. We also analyze the role of index investors and social concerns of shareholders.",JoF,2024,99,663,"['Corporate Governance', 'Financial Markets', 'Shareholder Welfare', 'Regulatory Frameworks', 'Social Concerns']","['shareholder voting', 'trading', 'shareholder base', 'proposal acceptance', 'equilibria', 'prices', 'shareholder welfare', 'trading frictions', 'decision-making', 'index investors']"
Legal Risk and Insider Trading,10.1111/jofi.13299,"Do illegal insiders internalize legal risk? We address this question with hand‐collected data from 530 SEC (the U.S. Securities and Exchange Commission) investigations. Using two plausibly exogenous shocks to expected penalties, we show that insiders trade less aggressively and earlier and concentrate on tips of greater value when facing a higher risk. The results match the predictions of a model where an insider internalizes the impact of trades on prices and the likelihood of prosecution and anticipates penalties in proportion to trade profits. Our findings lend support to the effectiveness of U.S. regulations' deterrence and the long‐standing hypothesis that insider trading enforcement can hamper price informativeness.",JoF,2024,106,731,"['Financial Markets', 'Regulatory Frameworks', 'Corporate Governance', 'Insider Trading', 'Market Transparency']","['insiders', 'legal risk', 'SEC investigations', 'penalties', 'trade', 'value', 'model', 'prices', 'prosecution', 'enforcement']"
Intervention with Screening in Panic‐Based Runs,10.1111/jofi.13295,"Policymakers frequently use guarantees to mitigate panic‐based runs in the financial system. We analyze a binary‐action coordination game under the global games framework and propose a novel intervention program that screens investors based on their heterogeneous beliefs about the system's stability. The program only attracts investors who are at the margin of running, and their participation boosts all investors' confidence in the financial system. Compared with government guarantee programs, our proposed program is as effective at mitigating runs but features two advantages: it costs less to implement and it is robust to moral hazard.",JoF,2024,94,644,"['Financial Markets', 'Risk Management', 'Public Policy', 'Banking Systems', 'Regulatory Frameworks']","['guarantees', 'panic-based runs', 'financial system', 'binary-action', 'coordination game', 'global games framework', 'intervention program', 'investors', 'stability', 'government guarantee programs']"
The Global Impact of Brexit Uncertainty,10.1111/jofi.13293,"We propose a text‐based method for measuring the cross‐border propagation of large shocks at the firm level. We apply this method to estimate the expected costs, benefits, and risks of Brexit and find widespread reverberations in listed firms in 81 countries. International (i.e., non‐U.K.) firms most exposed to Brexit <jats:italic>uncertainty</jats:italic> (the second moment) lost significant market value and reduced hiring and investment. International firms also overwhelmingly expected negative first‐moment impacts from the U.K.'s decision to leave the European Union (EU), particularly related to regulation, asset prices, and labor market impacts of Brexit.",JoF,2024,92,667,"['Brexit', 'Financial Markets', 'Risk Management', 'Labor Market Dynamics', 'Trade and Globalization']","['Brexit', 'firms', 'cross-border propagation', 'shocks', 'costs', 'benefits', 'risks', 'uncertainty', 'market value', 'investment']"
The Virtue of Complexity in Return Prediction,10.1111/jofi.13298,"Much of the extant literature predicts market returns with “simple” models that use only a few parameters. Contrary to conventional wisdom, we theoretically prove that simple models severely understate return predictability compared to “complex” models in which the number of parameters exceeds the number of observations. We empirically document the virtue of complexity in U.S. equity market return prediction. Our findings establish the rationale for modeling expected returns through machine learning.",JoF,2024,71,505,"['Financial Markets', 'Machine Learning Applications', 'Investment Strategies', 'Market Transparency', 'Economic Development']","['market returns', 'simple models', 'parameters', 'return predictability', 'complex models', 'observations', 'U.S. equity market', 'prediction', 'machine learning', 'expected returns']"
"Prestige, Promotion, and Pay",10.1111/jofi.13301,"We develop a theory in which financial (and other professional services) firms design career structures to “sell” prestigious jobs to qualified candidates. Firms create less prestigious entry‐level jobs, which serve as currency for employees to pay for the right to compete for the more prestigious jobs. In optimal career structures, entry‐level employees (“associates”) compete for better‐paid and more prestigious positions (“managing directors” or “partners”). The model provides new implications relating job prestige to compensation, employment, competition, and the size of the financial sector.",JoF,2024,83,602,"['Labor Market Dynamics', 'Financial Markets', 'Compensation', 'Employment', 'Competition']","['financial services', 'career structures', 'prestigious jobs', 'entry-level jobs', 'currency', 'employees', 'managing directors', 'partners', 'job prestige', 'compensation']"
Foreign Exchange Fixings and Returns around the Clock,10.1111/jofi.13306,"The U.S. dollar appreciates in the run‐up to foreign exchange (FX) fixes and depreciates thereafter, tracing a <jats:italic>W</jats:italic>‐shaped return pattern around the clock. Return reversals for the top nine traded currencies over a 21‐year period are pervasive and highly statistically significant, and they imply daily swings of more than one billion U.S. dollars based on spot volumes. Using natural experiments, we document the existence of a published reference rate determines the timing of intraday return reversals. We present evidence consistent with an inventory risk explanation whereby FX dealers intermediate unconditional demand for U.S. dollars at the fixes.",JoF,2024,97,679,"['Financial Markets', 'Foreign Exchange', 'Risk Management', 'Monetary Policy', 'Market Transparency']","['U.S. dollar', 'foreign exchange', 'FX fixes', 'return pattern', 'currencies', 'natural experiments', 'reference rate', 'intraday', 'inventory risk', 'FX dealers']"
Information Cascades and Threshold Implementation: Theory and an Application to Crowdfunding,10.1111/jofi.13294,"Economic interactions often involve sequential actions, observational learning, and contingent project implementation. We incorporate all‐or‐nothing thresholds in a canonical model of information cascades. Early supporters effectively delegate their decisions to a “gatekeeper,” resulting in unidirectional cascades without herding on rejections. Project proposers can consequently charge higher prices. Proposal feasibility, project selection, and information aggregation all improve, even when agents can wait. Equilibrium outcomes depend on crowd size, and project implementation and information aggregation achieve efficiency in the large‐crowd limit. Our key insights hold under thresholds in dollar amounts and alternative equilibrium selection, among other model extensions.",JoF,2024,96,781,"['Financial Markets', 'Information Aggregation', 'Economic Development', 'Decision Making', 'Equilibrium Analysis']","['information cascades', 'project implementation', 'observational learning', 'economic interactions', 'all-or-nothing thresholds', 'delegation', 'decision-making', 'project selection', 'equilibrium outcomes', 'efficiency']"
"Artificial Intelligence, Education, and Entrepreneurship",10.1111/jofi.13302,"We document an unprecedented brain drain of Artificial Intelligence (AI) professors from universities from 2004 to 2018. We find that students from the affected universities establish fewer AI startups and raise less funding. The brain‐drain effect is significant for tenured professors, professors from top universities, and deep‐learning professors. Additional evidence suggests that unobserved city‐ and university‐level shocks are unlikely to drive our results. We consider several economic channels for the findings. The most consistent explanation is that professors' departures reduce startup founders' AI knowledge, which we find is an important factor for successful startup formation and fundraising.",JoF,2024,97,710,"['Artificial Intelligence', 'Startups and Innovation', 'Venture Capital', 'Entrepreneurship', 'Economic Development']","['brain drain', 'Artificial Intelligence', 'professors', 'universities', 'startups', 'funding', 'tenured professors', 'deep-learning', 'city-level shocks', 'successful startup formation']"
Political Polarization Affects Households' Financial Decisions: Evidence from Home Sales,10.1111/jofi.13315,"Political identity and partisanship are salient features of today's society. Using deeds records and voter rolls, we show that current residents are more likely to sell their homes when opposite‐party neighbors move in nearby than when unaffiliated or same‐party neighbors do. This is especially true when the new neighbors are politically active, consistent with an animosity between parties mechanism. We conclude that affective polarization is not limited to purely political settings and affects one of the household's most important financial decisions, their home transactions.",JoF,2024,84,583,"['Political Risk', 'Housing Market Trends', 'Consumer Behavior', 'Economic Policy Evaluation', 'Behavioral Economics']","['Political identity', 'partisanship', 'deeds records', 'voter rolls', 'residents', 'homes', 'opposite-party neighbors', 'politically active', 'affective polarization', 'home transactions']"
Measuring “Dark Matter” in Asset Pricing Models,10.1111/jofi.13317,"We formalize the concept of “dark matter” in asset pricing models by quantifying the additional informativeness of cross‐equation restrictions about fundamental dynamics. The dark‐matter measure captures the degree of fragility for models that are potentially misspecified and unstable: a large dark‐matter measure indicates that the model lacks internal refutability (weak power of optimal specification tests) and external validity (high overfitting tendency and poor out‐of‐sample fit). The measure can be computed at low cost even for complex dynamic structural models. To illustrate its applications, we provide quantitative examples applying the measure to (time‐varying) rare‐disaster risk and long‐run risk models.",JoF,2024,98,722,"['Risk Management', 'Financial Markets', 'Asset Pricing Models', 'Rare-Disaster Risk', 'Long-Run Risk Models']","['dark matter', 'asset pricing models', 'informativeness', 'cross-equation restrictions', 'fundamental dynamics', 'fragility', 'misspecified', 'unstable', 'refutability', 'out-of-sample fit']"
Informed Trading Intensity,10.1111/jofi.13320,"We train a machine learning method on a class of informed trades to develop a new measure of informed trading, informed trading intensity (ITI). ITI increases before earnings, mergers and acquisitions, and news announcements, and has implications for return reversal and asset pricing. ITI is effective because it captures nonlinearities and interactions between informed trading, volume, and volatility. This data‐driven approach can shed light on the economics of informed trading, including impatient informed trading, commonality in informed trading, and models of informed trading. Overall, learning from informed trading data can generate an effective informed trading measure.",JoF,2024,96,683,"['Financial Markets', 'Asset Pricing', 'Informed Trading', 'Machine Learning Applications', 'Behavioral Economics']","['machine learning', 'informed trading', 'informed trading intensity', 'earnings', 'mergers and acquisitions', 'news announcements', 'return reversal', 'asset pricing', 'volume', 'volatility']"
How Integrated are Credit and Equity Markets? Evidence from Index Options,10.1111/jofi.13300,"We study the extent to which credit index (CDX) options are priced consistent with S&amp;P 500 (SPX) equity index options. We derive analytical expressions for CDX and SPX options within a structural credit‐risk model with stochastic volatility and jumps using new results for pricing compound options via multivariate affine transform analysis. The model captures many aspects of the joint dynamics of CDX and SPX options. However, it cannot reconcile the relative levels of option prices, suggesting that credit and equity markets are not fully integrated. A strategy of selling CDX volatility yields significantly higher excess returns than selling SPX volatility.",JoF,2024,100,667,"['Financial Markets', 'Risk Management', 'Credit Markets', 'Investment Strategies', 'Market Transparency']","['credit index', 'CDX options', 'S&P 500', 'SPX equity index options', 'structural credit-risk model', 'stochastic volatility', 'jumps', 'pricing', 'compound options', 'multivariate affine transform analysis']"
Dissecting the Long‐Term Performance of the Chinese Stock Market,10.1111/jofi.13312,"Domestically listed Chinese (A‐share) firms have lower stock returns than externally listed Chinese, developed, and emerging country firms during 2000 to 2018. They also have lower net cash flows than matched unlisted Chinese firms. The underperformance of both stock and accounting returns is more pronounced for large A‐share firms, while small firms show no underperformance along either dimension. Investor sentiment explains low stock returns in the cross‐country and within‐A‐share samples. Institutional deficiencies in listing and delisting processes and weak corporate governance in terms of shareholder value creation are consistent with the underperformance in stock returns and net cash flows.",JoF,2024,99,705,"['Financial Markets', 'Corporate Governance', 'Stock Returns', 'Accounting Returns', 'Institutional Deficiencies.']","['A-share', 'Chinese firms', 'stock returns', 'net cash flows', 'investor sentiment', 'institutional deficiencies', 'listing', 'delisting processes', 'corporate governance', 'shareholder value creation']"
The Narrow Channel of Quantitative Easing: Evidence from YCC Down Under,10.1111/jofi.13307,"We study the recent Australian experience with yield curve control (YCC) as perhaps the best evidence of how this policy might work in other developed economies. YCC seemingly worked well in 2020, when the market expected short rates to stay at zero for a long period of time. As the global recovery and inflation gained momentum in 2021, liftoff expectations moved up, the Reserve Bank of Australia purchased most of the targeted government bond outstanding, and the target bond's yield dislocated from other financial market instruments. The evidence suggests that central bank bond purchase programs can operate more narrowly than previously considered.",JoF,2024,102,656,"['Monetary Policy', 'Financial Markets', 'Central Bank Bond Purchase Programs', 'Government Bond Market', 'Inflation']","['Australian', 'yield curve control', 'YCC', 'developed economies', 'short rates', 'global recovery', 'inflation', 'Reserve Bank of Australia', 'government bond', 'central bank bond purchase programs.']"
Overconfidence and Preferences for Competition,10.1111/jofi.13314,"We study when preferences for competition are a positive economic trait among high earners and the extent to which this trait can explain the gender gap in income among a master's degree in business administration (MBAs). Consistent with the experimental evidence, preferences for competition are a positive economic trait only for individuals who are not overconfident. Preferences for competition correlate with income only at graduation when bonuses are guaranteed and not a function of performance. Overconfident competition‐loving MBAs observe lower compensation and income growth, and experience greater exit from high‐reward industries and more frequent job interruptions. Preferences for competition do not explain the gender pay gap among MBAs.",JoF,2024,108,753,"['Labor Market Dynamics', 'Gender Equality', 'Income Inequality', 'Corporate Governance', 'Educational Equity']","['competition', 'preferences', 'economic trait', 'gender gap', 'income', ""master's degree"", 'business administration', 'overconfident', 'compensation', 'gender pay gap']"
Disclosing a Random Walk,10.1111/jofi.13290,"We examine a dynamic disclosure model in which the value of a firm follows a random walk. Every period, with some probability, the manager learns the firm's value and decides whether to disclose it. The manager maximizes the market perception of the firm's value, which is based on disclosed information. In equilibrium, the manager follows a threshold strategy with thresholds below current prices. He sometimes reveals pessimistic information that reduces the market perception of the firm's value. He does so to reduce future market uncertainty, which is valuable even under risk‐neutrality.",JoF,2024,91,594,"['Financial Markets', 'Risk Management', 'Corporate Governance', 'Market Transparency', 'Behavioral Economics']","['dynamic disclosure model', 'firm value', 'random walk', 'manager', 'disclosure', 'market perception', 'equilibrium', 'threshold strategy', 'information', 'market uncertainty']"
A q$q$ Theory of Internal Capital Markets,10.1111/jofi.13318,"We propose a tractable model of dynamic investment, spinoffs, financing, and risk management for a multidivision firm facing costly external finance. Our analysis formalizes the following insights: (i) Within‐firm resource allocation is based not only on divisions' productivity, as in winner‐picking models, but also their risk; (ii) firms may voluntarily spin off productive divisions to increase liquidity; (iii) diversification can reduce firm value in low‐liquidity states, as it increases the spinoff cost and hampers liquidity management; (iv) corporate socialism makes liquidity less valuable; and (v) division investment is determined by the ratio between marginal  and marginal value of cash.",JoF,2024,99,702,"['Risk Management', 'Corporate Governance', 'Investment Strategies', 'Liquidity Management', 'Corporate Social Responsibility']","['investment', 'spinoffs', 'financing', 'risk management', 'multidivision firm', 'resource allocation', 'liquidity', 'diversification', 'corporate socialism', 'division investment']"
Fee Variation in Private Equity,10.1111/jofi.13319,"We study how investment fees vary within private equity funds. Net‐of‐fee return clustering suggests that most funds have two tiers of fees, and we decompose differences across tiers into both management‐ and performance‐based fees. Managers of venture capital funds and those in high demand are less likely to use multiple fee schedules. Some investors consistently pay lower fees relative to others within their funds. Investor size, experience, and past performance explain some but not all of this effect, suggesting that unobserved traits like negotiation skill or bargaining power materially impact the fees that investors pay to access private markets.",JoF,2024,99,659,"['Investment Strategies', 'Venture Capital', 'Financial Markets', 'Private Finance', 'Corporate Governance']","['investment fees', 'private equity funds', 'net-of-fee return', 'clustering', 'tiers', 'management-based fees', 'performance-based fees', 'venture capital funds', 'multiple fee schedules', 'investor size']"
Aversion to Student Debt? Evidence from Low‐Wage Workers,10.1111/jofi.13297,"We combine state minimum wage changes with individual‐level income and credit data to estimate the effect of wage gains on the debt of low‐wage workers. In the three years following a $0.88 minimum wage increase, low‐wage workers experience a $2,712 income increase and a $856 decrease in debt. The entire decline in debt comes from less student loan borrowing among enrolled college students. Credit constraints, buffer‐stock behavior, and other rational channels cannot explain the reduction in student debt. Our results are consistent with students perceiving a utility cost of borrowing student debt arising from mental accounting.",JoF,2024,96,635,"['Labor Market Dynamics', 'Credit Markets', 'Debt Management', 'Consumer Behavior', 'Educational Equity']","['minimum wage changes', 'income', 'credit data', 'debt', 'low-wage workers', 'student loan borrowing', 'college students', 'credit constraints', 'utility cost', 'mental accounting']"
The Equilibrium Size and Value‐Added of Venture Capital,10.1111/jofi.13313,"I model positive sorting of entrepreneurs across the high and low value‐added segments of the venture capital market. Aiming to attract high‐quality entrepreneurs, inefficiently many venture capitalists (VCs) commit to provide high value‐added by forming small portfolios. This draws the marginal entrepreneur away from the low value‐added segment, reducing match quality in the high value‐added segment too. There is underinvestment. Multiple equilibria may emerge, and they differ in aggregate investment. The model rationalizes evidence on VC returns and value‐added along fundraising “waves” and when the cost of entrepreneurship falls, and generates untested predictions on the size and value‐added of venture capital.",JoF,2024,101,723,"['Entrepreneurship', 'Venture Capital', 'Economic Development', 'Investment Strategies', 'Financial Markets.']","['entrepreneurs', 'venture capital', 'value-added', 'segments', 'venture capitalists', 'portfolios', 'underinvestment', 'equilibria', 'investment', 'returns']"
Auctions with Endogenous Initiation,10.1111/jofi.13288,"We study initiation of takeover auctions by potential buyers and the seller. A bidder's indication of interest reveals that she is optimistic about the target. If bidders' values have a substantial common component, as in takeover battles between financial bidders, this effect disincentivizes bidders from indicating interest, and auctions are seller‐initiated. Conversely, in private‐value auctions, such as battles between strategic bidders, equilibria can feature both seller‐ and bidder‐initiated auctions, with the likelihood of the latter decreasing in commonality of values and the probability of a forced sale by the seller. We also relate initiation to bids and auction outcomes.",JoF,2024,99,689,"['Financial Markets', 'Corporate Governance', 'Auctions', 'Bids', 'Economic Development']","['takeover auctions', 'potential buyers', 'seller', ""bidder's indication of interest"", 'common component', 'financial bidders', 'private-value auctions', 'strategic bidders', 'equilibria', 'auction outcomes']"
The Dark Side of Circuit Breakers,10.1111/jofi.13310,"Market‐wide circuit breakers are trading halts aimed at stabilizing the market during dramatic price declines. Using an intertemporal equilibrium model, we show that a circuit breaker significantly alters market dynamics and affects investor welfare. As the market approaches the circuit breaker, price volatility rises drastically, accelerating the chance of triggering the circuit breaker—the so‐called “magnet effect,” returns exhibit increasing negative skewness, and trading activity spikes up. Our empirical analysis supports the model's predictions. Circuit breakers can affect overall welfare negatively or positively, depending on the relative significance of investors' trading motives for risk sharing versus irrational speculation.",JoF,2024,97,743,"['Financial Markets', 'Risk Management', 'Economic Development', 'Investment Strategies', 'Behavioral Economics']","['circuit breaker', 'market dynamics', 'price volatility', 'investor welfare', 'equilibrium model', 'trading activity', 'risk sharing', 'speculation', 'magnet effect', 'empirical analysis']"
Lender Automation and Racial Disparities in Credit Access,10.1111/jofi.13303,"Process automation reduces racial disparities in credit access by enabling smaller loans, broadening banks' geographic reach, and removing human biases from decision making. We document these findings in the context of the Paycheck Protection Program (PPP), where private lenders faced no credit risk but decided which firms to serve. Black‐owned firms obtained PPP loans primarily from automated fintech lenders, especially in areas with high racial animus. After traditional banks automated their loan processing procedures, their PPP lending to Black‐owned firms increased. Our findings cannot be fully explained by racial differences in loan application behaviors, preexisting banking relationships, firm performance, or fraud rates.",JoF,2024,102,737,"['Credit Markets', 'Financial Markets', 'Public Policy', 'Economic Development', 'Banking Systems']","['process automation', 'racial disparities', 'credit access', 'loans', 'banks', 'geographic reach', 'human biases', 'decision making', 'Paycheck Protection Program (PPP)', 'fintech lenders']"
Disclosing to Informed Traders,10.1111/jofi.13296,"We develop a model in which a firm's manager can voluntarily disclose to privately informed investors. In equilibrium, the manager only discloses sufficiently favorable news. If the manager is known to be informed but disclosure is costly, the probability of disclosure increases with market liquidity and the stock trades at a discount relative to expected cash flows. However, when investors are uncertain about whether the manager is informed, disclosure can decrease with market liquidity and the stock can trade at a premium relative to expected cash flows. Moreover, contrary to common intuition, public information can <jats:italic>crowd in</jats:italic> more voluntary disclosure.",JoF,2024,100,688,"['Financial Markets', 'Corporate Governance', 'Market Transparency', 'Information Disclosure', 'Behavioral Economics']","['firm', 'manager', 'disclosure', 'investors', 'market liquidity', 'stock', 'cash flows', 'uncertainty', 'public information', 'voluntary disclosure']"
Leverage Is a Double‐Edged Sword,10.1111/jofi.13316,"We use proprietary data on intraday transactions at a futures brokerage to analyze how implied leverage influences trading performance. Across all investors, leverage is negatively related to performance, due partly to increased trading costs and partly to forced liquidations resulting from margin calls. Defining skill out‐of‐sample, we find that relative performance differentials across unskilled and skilled investors persist. Unskilled investors' leverage amplifies losses from lottery preferences and the disposition effect. Leverage stimulates liquidity provision by skilled investors, and enhances returns. Although regulatory increases in required margins decrease skilled investors' returns, they enhance overall returns, and attenuate return volatility.",JoF,2024,98,765,"['Financial Markets', 'Risk Management', 'Investment Strategies', 'Regulatory Frameworks', 'Banking Systems']","['implied leverage', 'trading performance', 'investors', 'trading costs', 'margin calls', 'skill', 'losses', 'liquidity provision', 'returns', 'required margins']"
Choosing to Disagree: Endogenous Dismissiveness and Overconfidence in Financial Markets,10.1111/jofi.13311,"The psychology literature documents that individuals derive current utility from their beliefs about future events. We show that, as a result, investors in financial markets choose to disagree about both private information and price information. When objective price informativeness is low, each investor dismisses the private signals of others and ignores price information. In contrast, when prices are sufficiently informative, heterogeneous interpretations arise endogenously: most investors ignore prices, while the rest condition on it. Our analysis demonstrates how observed deviations from rational expectations (e.g., dismissiveness, overconfidence) arise endogenously, interact with each other, and vary with economic conditions.",JoF,2024,97,740,"['Financial Markets', 'Behavioral Economics', 'Investment Strategies', 'Market Transparency', 'Economic Conditions']","['investors', 'beliefs', 'future events', 'financial markets', 'private information', 'price information', 'rational expectations', 'dismissiveness', 'overconfidence', 'economic conditions']"
Monetary Policy and Asset Price Overshooting: A Rationale for the Wall/Main Street Disconnect,10.1111/jofi.13343,"We analyze <jats:italic>optimal</jats:italic> monetary policy and its implications for asset prices when aggregate demand has inertia. If there is a negative output gap, the central bank optimally overshoots aggregate asset prices (above their steady‐state levels consistent with current potential output). Overshooting leads to a temporary disconnect between the performance of financial markets and the real economy, but accelerates the recovery. When there is a lower bound constraint on the discount rate, good macroeconomic news is better news for asset prices when the output gap is more negative. Finally, we document that during the COVID‐19 recovery, the policy‐induced overshooting was large.",JoF,2024,100,702,"['Monetary Policy', 'Financial Markets', 'Economic Growth', 'COVID-19 Recovery', 'Asset Prices']","['monetary policy', 'asset prices', 'aggregate demand', 'overshooting', 'output gap', 'central bank', 'financial markets', 'real economy', 'lower bound constraint', 'COVID-19']"
Countercyclical Income Risk and Portfolio Choices: Evidence from Sweden,10.1111/jofi.13341,"Using Swedish administrative panel data, we document that workers facing higher left‐tail income risk when equity markets perform poorly have lower portfolio equity share. In line with theory, the relationship between cyclical skewness and stock holdings increases with the share of human capital in a worker's total wealth and vanishes as workers get closer to retirement. Cyclical skewness also predicts portfolio differences within pairs of identical twins. Our findings show that households hedge against correlated tail risks, an important mechanism in asset pricing and portfolio choice models.",JoF,2024,87,600,"['Financial Markets', 'Risk Management', 'Labor Market Dynamics', 'Wealth Distribution', 'Asset Pricing']","['workers', 'income risk', 'equity markets', 'portfolio equity share', 'cyclical skewness', 'human capital', 'total wealth', 'retirement', 'identical twins', 'asset pricing.']"
Tracing the International Transmission of a Crisis through Multinational Firms,10.1111/jofi.13338,"We show that multinational firms transmit shocks across countries through their internal capital markets. We study a credit supply shock to parent firms in Germany. International affiliates outside Germany supported their parents through internal lending, became financially constrained themselves, and experienced lower real growth. We find that managers were “Darwinist” with respect to international affiliates but “Socialist” in the home country, that internal capital markets transmitted the credit shock more strongly than a nonfinancial shock, and that access to developed credit markets attenuated the real effects. The total real impact of shock transmission through multinationals on foreign economies was large.",JoF,2024,100,722,"['Financial Markets', 'Credit Markets', 'Economic Growth', 'Corporate Governance', 'International Trade']","['multinational firms', 'shocks', 'internal capital markets', 'credit supply shock', 'international affiliates', 'financial constraint', 'real growth', 'managers', 'developed credit markets', 'shock transmission']"
A Horizon‐Based Decomposition of Mutual Fund Value Added Using Transactions,10.1111/jofi.13331,"We decompose mutual fund value added by the length of funds' holdings using transaction‐level data. We motivate our decomposition with a model featuring horizon‐specific investment ideas, where short‐term ideas are less scalable because the associated trades cannot be spread over time. Fund turnover correlates negatively with the horizon over which value is added and positively with price impact costs. As predicted, holdings of high‐turnover funds add a substantial amount of value in the first two weeks, of which more than 80% is earned on Federal Open Market Committee (FOMC) and earnings announcement days. Holdings of low‐turnover funds add value only over longer horizons.",JoF,2024,103,682,"['Financial Markets', 'Investment Strategies', 'Monetary Policy', 'Market Transparency', 'Venture Capital']","['mutual fund', 'value added', 'holdings', 'transaction-level data', 'investment ideas', 'turnover', 'price impact costs', 'Federal Open Market Committee (FOMC)', 'earnings announcement days', 'long horizons']"
Zombie Credit and (Dis‐)Inflation: Evidence from Europe,10.1111/jofi.13342,"We show that “zombie credit”—subsidized credit to nonviable firms—has a disinflationary effect. By keeping these firms afloat, zombie credit creates excess aggregate supply, thereby putting downward pressure on prices. Granular European data on inflation, firms, and banks confirm this mechanism. Markets affected by a rise in zombie credit experience lower firm entry and exit, capacity utilization, markups, and inflation, as well as a misallocation of capital and labor, which results in lower productivity, investment, and value added. If weakly capitalized banks were recapitalized in 2009, inflation in Europe would have been up to 0.21 percentage points higher post‐2012.",JoF,2024,98,678,"['Credit Markets', 'Monetary Policy', 'Banking Systems', 'Inflation Trends', 'Economic Development']","['zombie credit', 'disinflationary effect', 'firms', 'banks', 'inflation', 'capacity utilization', 'markups', 'misallocation', 'recapitalized', 'productivity']"
Goal Setting and Saving in the FinTech Era,10.1111/jofi.13339,"We study the effectiveness of saving goals in increasing individuals' savings using data from a Fintech app. Using a difference‐in‐differences identification strategy that randomly assigns users into a group of beta testers who can set goals and a group of users who cannot, we find that setting goals increases individuals' savings rate. The increased savings within the app do not reduce savings outside the app. Moreover, goal setting helps those individuals previously identified as having the lowest propensity to save. Matching App user survey responses to their behavior highlights the relative merits of monitoring and concreteness channels in explaining our findings.",JoF,2024,101,676,"['Consumer Behavior', 'Financial Markets', 'Behavioral Economics', 'Consumer Finance', 'Digital Transformation']","['saving goals', 'effectiveness', 'individuals', 'savings', 'Fintech app', 'difference-in-differences', 'beta testers', 'savings rate', 'propensity to save', 'monitoring channels']"
Rent or Buy? Inflation Experiences and Homeownership within and across Countries,10.1111/jofi.13332,"We show that past inflation experiences strongly predict homeownership within and across countries. First, we collect novel survey data, which reveal inflation protection to be a key motivation for homeownership, especially after high inflation experiences. Second, using household data from 22 European countries, we find that higher exposure to historical inflation predicts higher homeownership rates. We estimate similar associations among immigrants to the United States who experienced different past inflation in their home countries but face the same U.S. housing market. Consistent with the experience effects model, the relationship is strongest in countries with predominantly fixed‐rate mortgages.",JoF,2024,97,709,"['Housing Market Trends', 'Monetary Policy', 'Immigration and Labor', 'Inflation Trends', 'Financial Markets']","['inflation', 'homeownership', 'survey data', 'historical inflation', 'household data', 'European countries', 'immigrants', 'United States', 'housing market', 'mortgages']"
A Portfolio Approach to Global Imbalances,10.1111/jofi.13333,"We use a portfolio‐based framework to understand what drives the decline of the U.S. net foreign asset (NFA) position and the reversal in returns earned on the U.S. NFA (exorbitant privilege). We show that global savings gluts and monetary policies widened the U.S. NFA position, while investor demand shifts partially offset this widening. Moreover, U.S. privilege declined after 2010, in line with increasing foreign demand for U.S. equity. We also highlight a quantity dimension of the U.S. privilege: The U.S. can issue substantially more debt than other countries for a given yield increase. ",JoF,2024,93,597,"['Monetary Policy', 'Financial Markets', 'Debt Management', 'Trade and Globalization', 'Investment Strategies']","['portfolio-based framework', 'U.S. net foreign asset', 'exorbitant privilege', 'global savings gluts', 'monetary policies', 'investor demand shifts', 'foreign demand', 'U.S. equity', 'U.S. privilege', 'debt issuance']"
The Term Structure of Covered Interest Rate Parity Violations,10.1111/jofi.13336,"We quantify the impact of risk‐based and nonrisk‐based intermediary constraints (IC) on the term structure of covered interest rate parity (CIP) violations. Using a stochastic discount factor (SDF) inferred from interest rate swaps, we value currency derivatives. The wedge between model‐implied and observed derivative prices reflects the impact of nonrisk‐based IC because our SDF incorporates risk‐based IC. There is no wedge at short horizons, while the wedge accounts for 40% of long‐term CIP violations. Consistent with IC theory, the wedge correlates with the shadow cost of intermediary capital, and the SDF‐implied interest rate is a weighted average of collateralized and uncollateralized interest rates.",JoF,2024,103,714,"['Financial Markets', 'Risk Management', 'Monetary Policy', 'Capital Allocation', 'Credit Markets']","['risk-based', 'nonrisk-based', 'intermediary constraints', 'term structure', 'covered interest rate parity', 'violations', 'stochastic discount factor', 'interest rate swaps', 'derivative prices', 'shadow cost']"
Due Diligence,10.1111/jofi.13322,"We propose a model of due diligence and analyze its effect on prices, payoffs, and deal completion. In our model, if the seller accepts an offer, the winning bidder (or “acquirer”) can gather information and chooses when to complete the transaction. In equilibrium, the acquirer engages in “too much” due diligence. Our quantitative results suggest that the magnitude of the distortion is economically significant. Nevertheless, allowing for due diligence can improve both total surplus and the seller's payoff compared to a setting without due diligence. We use our framework to explore the timing of due diligence, bidder heterogeneity, and breakup fees.",JoF,2024,101,656,"['Corporate Governance', 'Financial Markets', 'Economic Development', 'Investment Strategies', 'Regulatory Frameworks']","['due diligence', 'model', 'prices', 'payoffs', 'deal completion', 'equilibrium', 'distortion', 'total surplus', ""seller's payoff"", 'bidder heterogeneity']"
Broadband Internet and the Stock Market Investments of Individual Investors,10.1111/jofi.13335,"We study the effects of broadband internet use on the investment decisions of individual investors. A public program in Norway provides plausibly exogenous variation in internet use. Our instrumental variables estimates show that internet use causes a substantial increase in stock market participation, driven primarily by increased fund ownership. Existing investors tilt their portfolios toward funds, thereby obtaining more diversified portfolios and higher Sharpe ratios, and do not increase their trading activity in stocks. Overall, access to high‐speed internet spurs a “democratization of finance,” with individuals making investment decisions that are more in line with the advice from portfolio theory.",JoF,2024,100,713,"['Financial Markets', 'Investment Strategies', 'Digital Transformation', 'Economic Development', 'Public Policy']","['broadband internet', 'investment decisions', 'individual investors', 'Norway', 'internet use', 'stock market participation', 'fund ownership', 'diversified portfolios', 'Sharpe ratios', 'democratization of finance']"
"Mergers, Product Prices, and Innovation: Evidence from the Pharmaceutical Industry",10.1111/jofi.13321,"Using novel data from the pharmaceutical industry, we study product prices and innovation around mergers. Exploiting within‐deal variation in product market consolidation, we show that prices increase more for drugs in consolidating markets than for matched control drugs. Estimates indicate a 2% average price effect that persists for about one year. Price increases expand with acquirer‐target product similarity and are more pronounced within less competitive product markets with fewer players and no generic competition. Examination of trade‐offs reveals these deals generate significant shareholder value. They also spur labeling and other manufacturing‐related innovation, but not the development of new drugs.",JoF,2024,99,717,"['Innovation', 'Financial Markets', 'Healthcare Systems', 'Corporate Governance', 'Trade and Globalization']","['pharmaceutical industry', 'product prices', 'innovation', 'mergers', 'product market consolidation', 'drug prices', 'acquirer-target product similarity', 'competitive product markets', 'shareholder value', 'manufacturing-related innovation']"
Does Alternative Data Improve Financial Forecasting? The Horizon Effect,10.1111/jofi.13323,"Existing research suggests that alternative data are mainly informative about short‐term future outcomes. We show theoretically that the availability of short‐term‐oriented data can induce forecasters to optimally shift their attention from the long term to the short term because it reduces the cost of obtaining short‐term information. Consequently, the informativeness of their long‐term forecasts decreases, even though the informativeness of their short‐term forecasts increases. We test and confirm this prediction by considering how the informativeness of equity analysts' forecasts at various horizons varies over the long run and with their exposure to social media data.",JoF,2024,95,680,"['Financial Markets', 'Social Policy', 'Data Privacy', 'Investment Strategies', 'Market Transparency']","['alternative data', 'short-term future outcomes', 'forecasters', 'attention', 'long term', 'short term', 'informativeness', 'equity analysts', 'forecasts', 'social media data']"
Modeling Conditional Factor Risk Premia Implied by Index Option Returns,10.1111/jofi.13324,"We propose a novel factor model for option returns. Option exposures are estimated nonparametrically, and factor risk premia can vary nonlinearly with states. The model is estimated using regressions with minimal assumptions on factor and option return dynamics. We estimate the model using index options to characterize the conditional risk premia for factors of interest, such as the market return, market variance, tail and intermediary risk factors, higher moments, and the VIX term structure slope. Together, market return and variance explain more than 90% of option return variation. Unconditionally, the magnitude of the variance risk premium is plausible. It displays pronounced time variation, spikes during crises, and always has the expected sign.",JoF,2024,112,759,"['Financial Markets', 'Risk Management', 'Market Transparency', 'Investment Strategies', 'Monetary Policy']","['option returns', 'factor model', 'risk premia', 'nonparametric', 'states', 'regressions', 'index options', 'conditional risk premia', 'variance risk premium', 'time variation']"
Nonstandard Errors,10.1111/jofi.13337,"In statistics, samples are drawn from a population in a data‐generating process (DGP). Standard errors measure the uncertainty in estimates of population parameters. In science, evidence is generated to test hypotheses in an evidence‐generating process (EGP). We claim that EGP variation across researchers adds uncertainty—nonstandard errors (NSEs). We study NSEs by letting 164 teams test the same hypotheses on the same data. NSEs turn out to be sizable, but smaller for more reproducible or higher rated research. Adding peer‐review stages reduces NSEs. We further find that this type of uncertainty is underestimated by participants.",JoF,2024,94,638,"['Research Methods', 'Peer Review', 'Reproducibility', 'Uncertainty', 'Scientific Evidence']","['samples', 'population', 'standard errors', 'estimates', 'evidence', 'hypotheses', 'researchers', 'reproducible', 'peer-review', 'uncertainty']"
A (Sub)penny for Your Thoughts: Tracking Retail Investor Activity in TAQ,10.1111/jofi.13334,"We placed 85,000 retail trades in six retail brokerage accounts from December 2021 to June 2022 to validate the Boehmer et al. algorithm, which uses subpenny trade prices to identify and sign retail trades. The algorithm identifies 35% of our trades as retail, incorrectly signs 28% of identified trades, and yields uninformative order imbalance measures for 30% of stocks. We modify the algorithm by signing trades using the quoted spread midpoints. The quote midpoint method does not affect identification rates but reduces the signing error rates to 5% and provides informative order imbalance measures for all stocks.",JoF,2024,97,621,"['Financial Markets', 'Trade and Globalization', 'Market Transparency', 'Technological Adoption', 'Investment Strategies']","['retail trades', 'Boehmer et al. algorithm', 'subpenny trade prices', 'retail brokerage accounts', 'signing error rates', 'quoted spread midpoints', 'order imbalance measures', 'identification rates', 'stocks', 'algorithm modification']"
Spending Less after (Seemingly) Bad News,10.1111/jofi.13325,"Using high‐frequency spending data, we show that household consumption displays excess sensitivity to salient macroeconomic news, even when the news is not real. When the announced local unemployment rate reaches a 12‐month maximum, local news coverage of unemployment increases and local consumers reduce their discretionary spending by 1.5% relative to consumers in areas with the same macroeconomic conditions. Low‐income households display greater excess sensitivity to salience. The decrease in spending is not later reversed. Households in treated areas act as if they are more financially constrained than those in untreated areas with the same fundamentals.",JoF,2024,95,665,"['Consumer Behavior', 'Labor Market Dynamics', 'Economic Development', 'Financial Markets', 'Income Inequality']","['household consumption', 'high-frequency spending data', 'excess sensitivity', 'salient macroeconomic news', 'local unemployment rate', 'discretionary spending', 'low-income households', 'financial constraint', 'local news coverage', 'macroeconomic conditions']"
Insensitive Investors,10.1111/jofi.13362,"We experimentally study the transmission of subjective expectations into actions. Subjects in our experiment report valuations that are far too insensitive to their expectations, relative to the prediction from a frictionless model. We propose that the insensitivity is driven by a noisy cognitive process that prevents subjects from precisely computing asset valuations. The empirical link between subjective expectations and actions becomes stronger as subjective expectations approach rational expectations. Our results highlight the importance of incorporating weak transmission into belief‐based asset pricing models. Finally, we discuss how cognitive noise can provide a microfoundation for inelastic demand in the stock market.",JoF,2024,99,734,"['Behavioral Economics', 'Asset Pricing Models', 'Stock Market', 'Cognitive Noise', 'Inelastic Demand']","['transmission', 'subjective expectations', 'actions', 'valuation', 'cognitive process', 'asset pricing models', 'empirical', 'rational expectations', 'cognitive noise', 'inelastic demand']"
Money and Banking with Reserves and CBDC,10.1111/jofi.13357,"We analyze the role of retail central bank digital currency (CBDC) and reserves when banks exert deposit market power and liquidity transformation entails externalities. Optimal monetary architecture minimizes the social costs of liquidity provision, and optimal monetary policy follows modified Friedman rules. Interest rates on reserves and CBDC should differ. Calibrations robustly suggest that CBDC provides liquidity more efficiently than deposits unless the central bank must refinance banks and this is very costly. Accordingly, the optimal share of CBDC in payments tends to exceed that of deposits.",JoF,2024,87,607,"['Monetary Policy', 'Banking Systems', 'Digital Payments', 'Financial Markets', 'Economic Development']","['retail central bank digital currency', 'CBDC', 'reserves', 'banks', 'deposit market power', 'liquidity transformation', 'optimal monetary architecture', 'monetary policy', 'interest rates', 'liquidity provision']"
The Time‐Varying Price of Financial Intermediation in the Mortgage Market,10.1111/jofi.13358,"We introduce a new measure of the price charged by financial intermediaries for connecting mortgage borrowers with capital market investors. Based on administrative lender pricing data, we document that the price of intermediation reacts strongly to variation in demand, reflecting capacity constraints of mortgage originators. This positive comovement of price with quantity reduced the pass‐through of quantitative easing. We also find a notable upward trend in this price between 2008 and 2014, likely due to increased legal and regulatory burden in the mortgage market. The trend led to an implicit cost to borrowers of nearly $100 billion over this period.",JoF,2024,100,661,"['Financial Markets', 'Credit Markets', 'Regulatory Frameworks', 'Housing Market Trends', 'Monetary Policy']","['price', 'financial intermediaries', 'mortgage borrowers', 'capital market investors', 'capacity constraints', 'quantitative easing', 'legal and regulatory burden', 'mortgage market', 'implicit cost', '$100 billion']"
What Drives Variation in the U.S. Debt‐to‐Output Ratio? The Dogs that Did not Bark,10.1111/jofi.13363,"A higher U.S. government debt‐to‐output (D‐O) ratio does not forecast higher surpluses or lower returns on Treasurys in the future. Neither future cash flows nor discount rates account for the variation in the current D‐O ratio. The market valuation of Treasurys is surprisingly insensitive to macro fundamentals. Instead, the future D‐O ratio accounts for most of the variation because the D‐O ratio is highly persistent. Systematic surplus forecast errors may help account for these findings. Since the start of the Global Financial Crisis, surplus projections have anticipated a large fiscal correction that failed to materialize.",JoF,2024,95,633,"['Debt Management', 'Fiscal Policy', 'Financial Markets', 'Economic Development', 'Public Finance']","['government debt', 'output ratio', 'surpluses', 'returns', 'Treasurys', 'cash flows', 'discount rates', 'market valuation', 'macro fundamentals', 'Global Financial Crisis']"
Inside and Outside Information,10.1111/jofi.13360,"We study an economy with financial frictions in which a regulator designs a test that reveals outside information about a firm's quality to investors. The firm can also disclose verifiable inside information about its quality. We show that the regulator optimally aims for “public speech and private silence,” which is achieved with tests that give insiders an incentive to stay quiet. We fully characterize optimal tests by developing tools for Bayesian persuasion with incentive constraints, and use these results to derive novel guidance for the design of bank stress tests, as well as benchmarks for socially optimal corporate credit ratings.",JoF,2024,100,646,"['Financial Markets', 'Regulatory Frameworks', 'Credit Markets', 'Banking Systems', 'Economic Development']","['economy', 'financial frictions', 'regulator', 'test', 'outside information', 'firm quality', 'inside information', 'Bayesian persuasion', 'bank stress tests', 'corporate credit ratings']"
Information Aggregation with Asymmetric Asset Payoffs,10.1111/jofi.13361,"We study noisy aggregation of dispersed information in financial markets without imposing parametric restrictions on preferences, information, and return distributions. We provide a general characterization of asset returns by means of a risk‐neutral probability measure that features excess weight on tail risks. Moreover, we link excess weight on tail risks to observable moments such as forecast dispersion and accuracy, and argue that it provides a unified explanation for several prominent cross‐sectional return anomalies. Simple calibrations suggest the model can account for a significant fraction of empirical returns to skewness, returns to disagreement, and interaction effects between the two.",JoF,2024,98,705,"['Financial Markets', 'Risk Management', 'Asset Returns', 'Cross-Sectional Return Anomalies', 'Investment Strategies']","['noisy aggregation', 'dispersed information', 'financial markets', 'preferences', 'information', 'return distributions', 'risk-neutral probability measure', 'tail risks', 'forecast dispersion', 'return anomalies']"
Half Banked: The Economic Impact of Cash Management in the Marijuana Industry,10.1111/jofi.13364,"We investigate the economic value of cash management. In the legal marijuana industry, where only half of businesses have access to cash management services from a financial institution, we examine dispensary profitability using administrative and survey data. Our results show that businesses with cash management charge higher retail prices (8.3%), pay lower wholesale prices (7.3%), and have higher sales volume (19%). Together, these advantages create a 40% increase in profitability. These results support our model in which reputational capital and administrative costs drive profitability regardless of whether national banks, credit unions, or fintech provide the cash management functions.",JoF,2024,98,698,"['Financial Markets', 'Banking Systems', 'Economic Development', 'Venture Capital', 'Business Strategy']","['cash management', 'legal marijuana industry', 'dispensary profitability', 'retail prices', 'wholesale prices', 'sales volume', 'profitability', 'reputational capital', 'administrative costs', 'financial institution']"
Treasury Richness,10.1111/jofi.13371,"We provide estimates of Treasury convenience premia across the entire term structure of Treasury bills, notes, and bonds over more than a quarter of a century and document a variety of key stylized facts about their time‐series and cross‐sectional patterns. These results raise concerns about the evolving nature of Treasury markets and suggest that investors may now place less weight on the traditional role of Treasury securities as liquid trading vehicles. These stylized facts provide empirical benchmarks that could help guide future theoretical and empirical work about the economics of safe assets in financial markets.",JoF,2024,95,627,"['Financial Markets', 'Monetary Policy', 'Investment Strategies', 'Economic Development', 'Market Transparency']","['Treasury convenience premia', 'term structure', 'Treasury bills', 'notes', 'bonds', 'stylized facts', 'time-series', 'cross-sectional patterns', 'Treasury markets', 'safe assets']"
Meeting Targets in Competitive Product Markets,10.1111/jofi.13369,"We show that public banks face negative stock return jumps after missing their earnings per share (EPS) targets, and theoretically and quantitatively link these jumps to bunching behavior in the EPS surprise distribution. Bunching banks cut deposit rates to meet their targets, but do so at the expense of deposit outflows and franchise value losses. Local competitors, including private banks unexposed to capital market pressure, increase deposit rates, compensating depositors for switching. Our results provide new evidence that performance targeting incentives can affect consumer product prices, and suggest that competition may provide a check on public firms' targeting efforts.",JoF,2024,99,686,"['Financial Markets', 'Banking Systems', 'Consumer Behavior', 'Competition', 'Public Policy']","['public banks', 'stock return', 'earnings per share', 'EPS targets', 'bunching behavior', 'deposit rates', 'franchise value', 'private banks', 'depositors', 'competition']"
Is Long‐Run Risk Really Priced? Revisiting Liu and Matthies (2022),10.1111/jofi.13340,"The claim by Liu and Matthies (LM) that their macro news risk factor (NI) prices 51 portfolios (associated with four different portfolio groups) is not appropriate. In fact, their single‐factor model is successful only in explaining the momentum deciles, while producing strongly negative performance for the remaining groups. The pricing performance is more doubtful in the case of the alternative news factor (HNI), as the respective risk price is not identified. LM's conclusions stem from a combination of questionable empirical choices and misinterpretation of their results. Moreover, the NI model cannot explain prominent capital asset pricing model anomalies not considered in their study.",JoF,2024,103,697,"['Financial Markets', 'Risk Management', 'Capital Allocation', 'Economic Development', 'Monetary Policy']","['macro news risk factor', 'portfolios', 'single-factor model', 'momentum deciles', 'pricing performance', 'alternative news factor', 'risk price', 'empirical choices', 'misinterpretation', 'capital asset pricing model anomalies']"
Did Banks Pay Fair Returns to Taxpayers on TARP?,10.1111/jofi.13367,"Financial institutions received investments under the Troubled Asset Relief Program in a bad state of the world but repaid them in a relatively good state. We show that the recipients paid considerably lower returns to taxpayers compared to private‐market securities with similar risk over the same investment horizon, resulting in a subsidy of over $50 billion on the preferred equity investment by the government. Ex‐post renegotiation of contract terms limited the upside gains received by taxpayers in good times and contributed to the subsidy. These findings have important implications for the design and implementation of future bailouts. Our simple methodology for calculating the subsidy can be applied to evaluate the financial costs of other bailouts.",JoF,2024,115,762,"['Financial Markets', 'Risk Management', 'Public Policy', 'Banking Systems', 'Fiscal Policy']","['financial institutions', 'Troubled Asset Relief Program', 'investments', 'taxpayers', 'private-market securities', 'subsidy', 'preferred equity investment', 'government', 'renegotiation', 'bailouts']"
"Liquidity, Liquidity Everywhere, Not a Drop to Use: Why Flooding Banks with Central Bank Reserves May Not Expand Liquidity",10.1111/jofi.13370,"Central bank balance sheet expansion, through actions like quantitative easing, is run through commercial banks. While this increases liquid central bank reserves held on commercial bank balance sheets, demandable uninsured deposits issued to finance the reserves also increase. Subsequent shrinkage in the central bank balance sheet may entail shrinkage in bank‐held reserves without a commensurate reduction in deposit claims. Furthermore, during episodes of liquidity stress, when many claims on liquidity are called, surplus banks may hoard reserves. As a result, central bank balance sheet expansion may create less additional liquidity than typically thought, and indeed, may increase the probability and severity of episodes of liquidity stress.",JoF,2024,106,752,"['Monetary Policy', 'Banking Systems', 'Financial Markets', 'Risk Management', 'Liquidity Stress']","['central bank', 'balance sheet expansion', 'quantitative easing', 'commercial banks', 'reserves', 'deposits', 'shrinkage', 'liquidity stress', 'surplus banks', 'hoard reserves']"
Bailout Stigma,10.1111/jofi.13386,"We develop a model of bailout stigma in which accepting a bailout signals a firm's balance‐sheet weakness and reduces its funding prospects. To avoid stigma, high‐quality firms withdraw from subsequent financing after receiving bailouts or refuse bailouts altogether to send a favorable signal. The former leads to a short‐lived stimulation followed by a market freeze even worse than if there were no bailout. The latter revives the funding market, albeit with delay, to the level achievable without any stigma and implements a constrained optimal outcome. A menu of multiple bailout programs compounds bailout stigma and exacerbates the market freeze.",JoF,2024,99,653,"['Financial Markets', 'Risk Management', 'Public Policy', 'Credit Markets', 'Banking Systems']","['bailout stigma', 'firm', 'balance-sheet', 'funding prospects', 'high-quality', 'financing', 'market freeze', 'funding market', 'optimal outcome', 'bailout programs']"
The SOE Premium and Government Support in China's Credit Market,10.1111/jofi.13380,"Studying China's credit market using a structural default model that integrates credit risk, liquidity, and bailout, we document improved price discovery and a deepening divide between state‐owned enterprises (SOEs) and non‐SOEs. Amidst liquidity deterioration, the presence of government bailout helps alleviate the heightened liquidity‐driven default, making SOE bonds more valuable and widening the SOE premium. Meanwhile, the increased importance of government support makes SOEs more sensitive to bailout, while the heightened default risk increases non‐SOEs' sensitivity to credit quality. Examining the real impact, we find severe performance deteriorations of non‐SOEs relative to SOEs, reversing the long‐standing trend of non‐SOEs outperforming SOEs.",JoF,2024,101,760,"['Credit Markets', 'Financial Markets', 'Risk Management', 'Corporate Governance', 'Economic Development']","['China', 'credit market', 'structural default model', 'credit risk', 'liquidity', 'bailout', 'state-owned enterprises', 'SOEs', 'government support', 'default risk.']"
Business News and Business Cycles,10.1111/jofi.13377,"We propose an approach to measuring the state of the economy via textual analysis of business news. From the full text of 800,000 <jats:italic>Wall Street Journal</jats:italic> articles for 1984 to 2017, we estimate a topic model that summarizes business news into interpretable topical themes and quantifies the proportion of news attention allocated to each theme over time. News attention closely tracks a wide range of economic activities and can forecast aggregate stock market returns. A text‐augmented vector autoregression demonstrates the large incremental role of news text in forecasting macroeconomic dynamics. We retrieve the narratives that underlie these improvements in market and business cycle forecasts.",JoF,2024,104,722,"['Financial Markets', 'Economic Growth', 'Monetary Policy', 'Market Transparency', 'Business Strategy']","['economy', 'textual analysis', 'business news', 'Wall Street Journal', 'topic model', 'news attention', 'economic activities', 'stock market returns', 'vector autoregression', 'macroeconomic dynamics']"
The Mortgage‐Cash Premium Puzzle,10.1111/jofi.13373,"All‐cash homebuyers account for one‐third of U.S. home purchases between 1980 and 2017. We use multiple data sets and research designs to robustly estimate that mortgaged buyers pay an 11% premium over all‐cash buyers to compensate home sellers for mortgage transaction frictions. A dynamic, representative‐seller model implies only a 3% premium, which would suggest an 8% puzzle. Accounting for heterogeneity in selling conditions explains half of this difference, but a puzzle holds in conditions with high transaction risk. An experimental survey of U.S. homeowners replicates these patterns and suggests that belief distortions can explain the puzzle in these high‐risk states.",JoF,2024,100,681,"['Housing Market Trends', 'Risk Management', 'Behavioral Economics', 'Consumer Behavior', 'Economic Development']","['all-cash buyers', 'mortgaged buyers', 'premium', 'transaction frictions', 'selling conditions', 'transaction risk', 'experimental survey', 'U.S. homeowners', 'belief distortions', 'puzzle']"
Unobserved Performance of Hedge Funds,10.1111/jofi.13368,"We investigate hedge fund firms’ unobserved performance (UP), measured as the risk‐adjusted return difference between a firm's reported gross return and its portfolio return inferred from its disclosed long‐equity holdings. Firms with high UP outperform those with low UP by 6.36% per annum on a risk‐adjusted basis. UP is negatively associated with a firm's trading costs and positively associated with intraquarter trading in equity positions, derivatives usage, short selling, and confidential holdings. We show that limited investor attention can delay investors’ response to UP and lead to longer lived predictability of fund firm performance.",JoF,2024,94,648,"['Financial Markets', 'Risk Management', 'Investment Strategies', 'Market Transparency', 'Behavioral Economics']","['hedge fund', 'unobserved performance', 'risk-adjusted return', 'gross return', 'portfolio return', 'long-equity holdings', 'trading costs', 'intraquarter trading', 'derivatives usage', 'short selling']"
Do Women Receive Worse Financial Advice?,10.1111/jofi.13366,"We arranged for trained undercover men and women to pose as potential clients and visit all 65 local financial advisory firms in Hong Kong. At financial planning firms, but not at securities firms, women were more likely than men to receive advice to buy only individual or only local securities. Female clients who signaled high confidence, high risk tolerance, or a domestic outlook were especially likely to receive this suboptimal advice. Our theoretical model explains these patterns as a result of statistical discrimination interacting with advisors’ incentives. Taste‐based discrimination is unlikely to explain the results.",JoF,2024,95,632,"['Financial Markets', 'Gender Equality', 'Consumer Behavior', 'Behavioral Economics', 'Gender Equality']","['undercover', 'financial advisory firms', 'Hong Kong', 'financial planning', 'securities', 'women', 'advice', 'risk tolerance', 'statistical discrimination', 'advisors']"
FinTech Credit and Entrepreneurial Growth,10.1111/jofi.13384,"Based on automated credit lines to vendors trading on Alibaba's online retail platform and a discontinuity in the credit decision algorithm, we document that a vendor's access to FinTech credit boosts its sales growth, transaction growth, and the level of customer satisfaction gauged by product, service, and consignment ratings. These effects are more pronounced for vendors characterized by greater information asymmetry about their credit risk and less collateral, which reveals the information advantage of FinTech credit over traditional credit technology.",JoF,2024,80,562,"['Credit Markets', 'Financial Markets', 'Technological Adoption', 'Consumer Behavior', 'Economic Development']","['automated credit lines', 'vendors', 'Alibaba', 'online retail platform', 'credit decision algorithm', 'FinTech credit', 'sales growth', 'transaction growth', 'customer satisfaction', 'information asymmetry']"
Founder‐CEO Compensation and Selection into Venture Capital‐Backed Entrepreneurship,10.1111/jofi.13383,"We show theoretically that a critical determinant of the attractiveness of venture capital (VC)‐backed entrepreneurship for high‐earning potential founders is the expected time to develop a startup's initial product. This is because founder‐CEOs' cash compensation increases substantially after product development, alleviating the nondiversifiable risk that founders face at startup birth. Consistent with the model's predictions of where the supply of entrepreneurial talent is likely to be most constrained, we find that technological shocks differentially altering the expected time to product across industries can explain changes in both the rate of entry and characteristics of individuals selecting into VC‐backed entrepreneurship.",JoF,2024,99,739,"['Entrepreneurship', 'Venture Capital', 'Risk Management', 'Technological Adoption', 'Economic Development']","['venture capital', 'entrepreneurship', 'founder-CEOs', 'product development', 'cash compensation', 'risk', 'entrepreneurial talent', 'technological shocks', 'industries', 'rate of entry']"
Capital Commitment,10.1111/jofi.13382,"Twelve trillion dollars are allocated to private market funds that require outside investors to commit to transferring capital on demand. We show within a novel dynamic portfolio allocation model that ex‐ante commitment has large effects on investors' portfolios and welfare, and we quantify those effects. Investors are underallocated to private market funds and are willing to pay a larger premium to adjust the quantity committed than to eliminate other frictions, like timing uncertainty and limited tradability. Perhaps counterintuitively, commitment risk premiums increase with secondary market liquidity, and they do not disappear when investments are spread over many funds.",JoF,2024,98,682,"['Financial Markets', 'Capital Allocation', 'Investment Strategies', 'Risk Management', 'Public Policy']","['private market funds', 'investors', 'portfolio allocation', 'commitment', 'capital', 'dynamic', 'welfare', 'premium', 'secondary market liquidity', 'investments']"
The Portfolio‐Driven Disposition Effect,10.1111/jofi.13378,"The disposition effect for a stock significantly weakens if the portfolio is at a gain, but is large when it is at a loss. We find this portfolio‐driven disposition effect (PDDE) in four independent settings: U.S. and Chinese archival data, as well as U.S. and Chinese experiments. The PDDE is robust to a variety of controls in regression specifications and is not explained by extreme returns, portfolio rebalancing, tax considerations, or investor heterogeneity. Our evidence suggests that investors form mental frames at both the stock and the portfolio levels and that these frames combine to generate the PDDE.",JoF,2024,98,616,"['Financial Markets', 'Behavioral Economics', 'Investment Strategies', 'Investor Behavior', 'Portfolio Management']","['disposition effect', 'stock', 'portfolio', 'gain', 'loss', 'U.S.', 'Chinese', 'archival data', 'experiments', 'mental frames']"
Firm Performance Pay as Insurance against Promotion Risk,10.1111/jofi.13379,"The prevalence of pay based on risky firm outcomes for nonexecutive workers presents a puzzling departure from conventional contract theory, which predicts insurance provision by the firm. When workers at the same firm compete against each other for promotions, the optimal contract features pay based on firm outcomes as insurance against promotion risk. The model's predictions are consistent with many observed phenomena, such as performance‐based vesting and overvaluation of equity pay by nonexecutive workers. It also generates novel predictions linking a firm's hierarchy to its workers' pay structure.",JoF,2024,88,609,"['Labor Market Dynamics', 'Corporate Governance', 'Financial Markets', 'Risk Management', 'Economic Development']","['prevalence', 'pay', 'risky firm outcomes', 'nonexecutive workers', 'contract theory', 'insurance provision', 'promotions', 'optimal contract', 'performance-based vesting', 'equity pay']"
Anomaly Time,10.1111/jofi.13372,"We examine the timing of returns around the publication of anomaly trading signals. Using a database that captures when information is first publicly released, we show that anomaly returns are concentrated in the first month after information release dates, and these returns decay soon thereafter. We also show that the academic convention of forming portfolios in June underestimates predictability because it uses stale information, which makes some anomalies appear insignificant. In contrast, we show many anomalies do predict returns if portfolios are formed immediately after information releases. Finally, we develop guidance on forming portfolios without using stale information.",JoF,2024,98,688,"['Financial Markets', 'Investment Strategies', 'Data Privacy', 'Market Transparency', 'Business Strategy']","['timing', 'returns', 'anomaly', 'trading signals', 'information release', 'predictability', 'portfolios', 'stale information', 'academic convention', 'guidance']"
Very Noisy Option Prices and Inference Regarding the Volatility Risk Premium,10.1111/jofi.13365,"The stylized fact that volatility is not priced in individual equity options does not withstand scrutiny. First, we show that the average return of heavily traded deep out‐of‐the‐money call options on stocks is −116 basis points per day. Second, Fama‐MacBeth estimates of the volatility risk premium in stock options are similar to those in S&amp;P 500 Index call options. Third, the mean return of heavily traded delta‐hedged at‐the‐money calls (puts) is −23 (−30) basis points. Fourth, the variance risk premium in stock options is negative. Our analysis highlights the importance of microstructure biases and robustness in empirical work with options.",JoF,2024,100,654,"['Financial Markets', 'Risk Management', 'Investment Strategies', 'Market Transparency', 'Behavioral Economics']","['volatility', 'equity options', 'return', 'call options', 'stock', 'Fama-MacBeth estimates', 'S&P 500 Index', 'delta-hedged', 'variance risk premium', 'microstructure biases']"
On the Magnification of Small Biases in Hiring,10.1111/jofi.13374,"We analyze a setting in which a board must hire a chief executive officer (CEO) after exerting effort to learn about the quality of each candidate. Optimal effort is asymmetric, implying asymmetric likelihoods of each candidate being chosen. If the board has an infinitesimal bias in favor of one candidate, it allocates effort to maximize the likelihood of that candidate being chosen. Even when the board's prior is that its preferred candidate is inferior, she may still be chosen most often. A glass ceiling can also arise whereby the tendency to hire favored candidates increases as the importance of the position increases.",JoF,2024,102,629,"['Corporate Governance', 'Labor Market Dynamics', 'Organizational Behavior', 'Gender Equality', 'Economic Policy Evaluation']","['board', 'chief executive officer', 'CEO', 'effort', 'candidate', 'bias', 'likelihood', 'glass ceiling', 'hire', 'position']"
The Politics of M&amp;A Antitrust,10.1111/1475-679X.12291,"Antitrust regulators play a critical role in protecting market competition. We examine whether the political process affects antitrust reviews of merger transactions. We find that acquirers and targets located in the political districts of powerful U.S. congressional members who serve on committees with antitrust regulatory oversight receive relatively favorable antitrust review outcomes. To establish causality, we use plausibly exogenous shocks to firm–politician links and a falsification test. Additional findings suggest congressional members’ incentives to influence antitrust reviews are affected by three channels: special interests, voter and constituent interests, and ideology. In aggregate, our findings suggest that the political process adversely interferes with the ability of antitrust regulators to provide independent recommendations about anticompetitive mergers.",JAR,2020,114,885,"['Public Policy', 'Regulatory Frameworks', 'Corporate Governance', 'Political Risk', 'Antitrust']","['antitrust', 'regulators', 'market competition', 'merger transactions', 'political process', 'congressional members', 'antitrust review outcomes', 'causality', 'firm-politician links', 'independent recommendations']"
Disclosure Regulation and Corporate Acquisitions,10.1111/1475-679X.12298,"This paper examines the effect of disclosure regulation on the takeover market. We study the implementation of a recent European regulation that imposes tighter disclosure requirements regarding the financial and ownership information on public firms. We find a substantial drop in the number of control acquisitions after the implementation of the regulation, a decrease that is concentrated in countries with more dynamic takeover markets. Consistent with the idea that the disclosure requirements increased acquisition costs, we also observe that, under the new disclosure regime, target (acquirer) stock returns around the acquisition announcement are higher (lower), and toeholds are substantially smaller. Overall, our evidence suggests that tighter disclosure requirements can impose significant acquisition costs on bidders and thus slow down takeover activity.",JAR,2020,121,869,"['Financial Markets', 'Corporate Governance', 'Public Policy', 'Market Transparency', 'Regulatory Frameworks']","['disclosure regulation', 'takeover market', 'European regulation', 'financial information', 'ownership information', 'control acquisitions', 'dynamic takeover markets', 'acquisition costs', 'acquisition announcement', 'toeholds']"
Transparency and Tax Evasion: Evidence from the Foreign Account Tax Compliance Act (FATCA),10.1111/1475-679X.12293,"We examine how U.S. individuals respond to regulation intended to reduce offshore tax evasion. The Foreign Account Tax Compliance Act (FATCA) requires foreign financial institutions to report information to the U.S. government regarding U.S. account holders. We first document an average $7.8 billion to $15.3 billion decrease in equity foreign portfolio investment to the United States from tax‐haven countries after FATCA implementation, consistent with a decrease in “round‐tripping” investments attributable to U.S. investors’ offshore tax evasion. When testing total worldwide investment out of financial accounts in tax havens post‐FATCA, we find an average decline of $56.6 billion to $78.0 billion. We next provide evidence of other important consequences of this regulation, including increased expatriations of U.S. citizens and greater investment in alternative assets not subject to FATCA reporting, such as residential real estate and artwork. Our study contributes to both the academic literature and policy analysis on regulation, tax evasion, and crime.",JAR,2020,152,1069,"['Taxation', 'Financial Markets', 'Investment Strategies', 'Regulatory Frameworks', 'Economic Development']","['regulation', 'offshore tax evasion', 'Foreign Account Tax Compliance Act (FATCA)', 'foreign financial institutions', 'equity foreign portfolio investment', 'tax-haven countries', 'round-tripping investments', 'worldwide investment', 'expatriations', 'alternative assets']"
The Dog that Did Not Bark: Limited Price Efficiency and Strategic Nondisclosure,10.1111/1475-679X.12296,"Theory posits that investors can rationally infer the implications of strategic nondisclosure for firm value, pressuring managers to disclose information voluntarily. This study documents that the lack of an earnings guidance predicts an abnormal return of −41 basis points around the subsequent quarterly earnings announcement, suggesting that investors do not fully incorporate the implications of nonguidance. Further analyses demonstrate that limitations in price efficiency, driven by investors' limited attention and short‐selling constraints, explain the mispricing of nonguidance and are associated with less guidance issuance. Our results collectively highlight limited price efficiency as another friction when studying managers' strategic disclosure decisions.",JAR,2020,100,771,"['Financial Markets', 'Corporate Governance', 'Market Transparency', 'Behavioral Economics', 'Investment Strategies']","['investors', 'strategic nondisclosure', 'firm value', 'earnings guidance', 'abnormal return', 'price efficiency', 'limited attention', 'short-selling constraints', 'mispricing', 'strategic disclosure decisions']"
Detecting Accounting Fraud in Publicly Traded U.S. Firms Using a Machine Learning Approach,10.1111/1475-679X.12292,"We develop a state‐of‐the‐art fraud prediction model using a machine learning approach. We demonstrate the value of combining domain knowledge and machine learning methods in model building. We select our model input based on existing accounting theories, but we differ from prior accounting research by using raw accounting numbers rather than financial ratios. We employ one of the most powerful machine learning methods, ensemble learning, rather than the commonly used method of logistic regression. To assess the performance of fraud prediction models, we introduce a new performance evaluation metric commonly used in ranking problems that is more appropriate for the fraud prediction task. Starting with an identical set of theory‐motivated raw accounting numbers, we show that our new fraud prediction model outperforms two benchmark models by a large margin: the Dechow et al. logistic regression model based on financial ratios, and the Cecchini et al. support‐vector‐machine model with a financial kernel that maps raw accounting numbers into a broader set of ratios.",JAR,2020,162,1078,"['Machine Learning Applications', 'Financial Markets', 'Risk Management', 'Corporate Governance', 'Accounting Fraud']","['fraud prediction', 'machine learning', 'domain knowledge', 'accounting theories', 'raw accounting numbers', 'ensemble learning', 'logistic regression', 'performance evaluation metric', 'benchmark models', 'support-vector-machine.']"
What Are You Saying? Using <i>topic</i> to Detect Financial Misreporting,10.1111/1475-679X.12294,"We use a machine learning technique to assess whether the thematic content of financial statement disclosures (labeled <jats:italic>topic</jats:italic>) is incrementally informative in predicting intentional misreporting. Using a Bayesian topic modeling algorithm, we determine and empirically quantify the topic content of a large collection of 10‐K narratives spanning 1994 to 2012. We find that the algorithm produces a valid set of semantically meaningful topics that predict financial misreporting, based on samples of Securities and Exchange Commission (SEC) enforcement actions (Accounting and Auditing Enforcement Releases [AAERs]) and irregularities identified from financial restatements and 10‐K filing amendments. Our out‐of‐sample tests indicate that <jats:italic>topic</jats:italic> significantly improves the detection of financial misreporting by as much as 59% when added to models based on commonly used financial and textual style variables. Furthermore, models that incorporate <jats:italic>topic</jats:italic> significantly outperform traditional models when detecting serious revenue recognition and core expense errors. Taken together, our results suggest that the topics discussed in annual report filings and the attention devoted to each topic are useful signals in detecting financial misreporting.",JAR,2020,170,1325,"['Financial Markets', 'Corporate Governance', 'Machine Learning Applications', 'Regulatory Frameworks', 'Accounting']","['machine learning', 'financial statement disclosures', 'thematic content', 'intentional misreporting', 'Bayesian topic modeling', 'Securities and Exchange Commission', 'financial restatements', 'SEC enforcement actions', 'revenue recognition', 'core expense errors']"
Corporate Disclosure as a Tacit Coordination Mechanism: Evidence from Cartel Enforcement Regulations,10.1111/1475-679X.12301,"We empirically study how collusion in product markets affects firms' financial disclosure strategies. We find that after a rise in cartel enforcement, U.S. firms start sharing more detailed information in their financial disclosure about their customers, contracts, and products. This new information potentially benefits peers by helping to tacitly coordinate actions in product markets. Indeed, changes in disclosure are associated with higher future profitability. Our results highlight the potential conflict between securities and antitrust regulations.",JAR,2020,75,558,"['Financial Markets', 'Corporate Governance', 'Regulatory Frameworks', 'Business Strategy', 'Market Transparency']","['collusion', 'product markets', 'financial disclosure strategies', 'cartel enforcement', 'U.S. firms', 'detailed information', 'customers', 'contracts', 'products', 'profitability']"
Does Private Country-by-Country Reporting Deter Tax Avoidance and Income Shifting? Evidence from BEPS Action Item 13,10.1111/1475-679X.12304,"To combat tax avoidance by multinational corporations, the Organisation for Economic Co‐operation and Development introduced country‐by‐country reporting (CbCr), requiring firms to provide tax authorities with a geographic breakdown of their profitability and activities. Treating the introduction of CbCr in the European Union as a shock to private disclosure requirements, this study examines the effect on corporate tax outcomes. Exploiting the €750 million revenue threshold for disclosure and employing regression‐discontinuity and difference‐in‐differences designs, I document a 1–2 percentage point increase in consolidated GAAP effective tax rates among affected firms. I also find evidence consistent with a decline in tax‐motivated income shifting, starting in 2018. These results suggest that, although private geographic disclosures can deter corporate tax avoidance, so far, the regulations have had a limited effect on tax‐motivated income shifting. My findings have policy implications for the global implementation of private CbCr and extend the debate on public versus private disclosure of tax information.",JAR,2020,153,1124,"['Taxation', 'Public Policy', 'Corporate Governance', 'Economic Development', 'Regulatory Frameworks']","['tax avoidance', 'multinational corporations', 'Organisation for Economic Co-operation and Development', 'country-by-country reporting', 'corporate tax outcomes', 'income shifting', 'effective tax rates', 'European Union', 'private disclosure', 'policy implications']"
Contracts Between Firms and Shareholders,10.1111/1475-679X.12297,"Theory predicts the existence of explicit bilateral contracts between firms and expert shareholders. I assemble and analyze a large‐scale data set of these contracts. Using block investments from 1996 to 2018, I find that these contracts involve mainly corporate owners and activist owners, and often specify covenants pertaining to financing, trading, directorships, dividends, joint ventures, corporate investment, financial reporting, and information access. I also find that some of the contract covenants are stated in terms of accounting information, and that the prevalence of these contracts is significantly positively associated with measures of information asymmetry between managers and shareholders. Overall, this study provides some of the first systematic evidence on explicit bilateral contracts between firms and shareholders.",JAR,2020,116,843,"['Corporate Governance', 'Financial Markets', 'Information Asymmetry', 'Accounting Information', 'Shareholders']","['contracts', 'shareholders', 'covenants', 'financing', 'trading', 'directorships', 'dividends', 'joint ventures', 'information asymmetry', 'accounting information']"
Paper Versus Practice: A Field Investigation of Integrity Hotlines,10.1111/1475-679X.12302,"In an effort to motivate firms to more rapidly detect potential misconduct, legislators, regulators, and enforcement agencies incentivize firms to have integrity or “whistleblowing” hotlines. These hotlines provide individuals an opportunity to report alleged misconduct and seek guidance about how to appropriately respond. Beyond some isolated examples, little is known about the responsiveness of hotlines to actual claims of alleged misconduct. I undertake a field study to investigate how hotlines function in practice by making four different inquiries involving alleged misconduct to nearly 250 firms. I find that one‐fifth of firms have impediments (e.g., phone line disconnected, email bounce back, direct to incorrect website) that hinder reporting and approximately 10% of firms do not respond in a timely manner. Overall, this investigation illuminates several differences between integrity hotlines “on paper” and how they actually perform in practice.",JAR,2020,137,965,"['Corporate Governance', 'Regulatory Frameworks', 'Organizational Behavior', 'Business Strategy', 'Market Transparency']","['firms', 'misconduct', 'whistleblowing', 'hotlines', 'allegations', 'responsiveness', 'field study', 'impediments', 'timely manner', 'investigation']"
Evidence on the Use and Efficacy of Internal Whistleblowing Systems,10.1111/1475-679X.12303,"Using a proprietary data set from a provider of internal whistleblowing (WB) systems, we analyze nearly two million internal WB reports submitted to over 1,000 publicly traded U.S. firms. We provide descriptive statistics, over time and across report types, on the amount and summary details of information provided, how extensively management reviews reports, the amount of time until reviews were completed, and the outcome of these reviews. Further, we examine the characteristics of firms with more actively used systems (i.e., a higher volume of reports, more information provided in reports, and reports that are more frequently reviewed by management). Finally, we show that internal WB report volume is associated with fewer and lower amounts of government fines and material lawsuits.",JAR,2020,120,793,"['Corporate Governance', 'Financial Markets', 'Regulatory Frameworks', 'Public Policy', 'Risk Management']","['whistleblowing systems', 'internal reports', 'management reviews', 'report types', 'descriptive statistics', 'internal whistleblowing', 'firms', 'volume', 'information provided', 'government fines']"
Reproducibility in Accounting Research: Views of the Research Community,10.1111/1475-679X.12305,"We have little knowledge about the prevalence of irreproducibility in the accounting literature. To narrow this gap, we conducted a survey among the participants of the 2019 JAR Conference on their perceptions of the frequency, causes, and consequences of irreproducible research published in accounting journals. A majority of respondents believe that irreproducibility is common in the literature, constitutes a major problem, and receives too little attention. Most have encountered irreproducibility in the work of others (although not in their own work) but chose not to pursue their failed reproduction attempts to publication. Respondents believe irreproducibility results chiefly from career or publication incentives as well as from selective reporting of results. They also believe that practices like sharing code and data combined with stronger incentives to replicate the work of others would enhance reproducibility. The views of accounting researchers are remarkably similar to those expressed in a survey by the scientific journal <jats:italic>Nature</jats:italic>. We conclude by discussing the implications of our findings and provide several potential paths forward for the accounting research community.",JAR,2020,172,1223,"['Research Reproducibility', 'Publication Incentives', 'Data Sharing', 'Replication', 'Accounting Research']","['prevalence', 'irreproducibility', 'accounting literature', 'survey', 'perceptions', 'consequences', 'research', 'journals', 'reproducibility', 'replication']"
The Silent Majority: Private U.S. Firms and Financial Reporting Choices,10.1111/1475-679X.12306,"This study uses a comprehensive panel of tax returns to examine the financial reporting choices of medium‐to‐large private U.S. firms, a setting that controls over $9 trillion in capital, vastly outnumbers public U.S. firms across all industries, yet has no financial reporting mandates. We find that nearly two‐thirds of these firms do not produce audited GAAP financial statements. Guided by an agency theory framework, we find that size, ownership dispersion, external debt, and trade credit are positively associated with the choice to produce audited GAAP financial statements, while asset tangibility, age, and internal debt are generally negatively related to this choice. Our findings reveal that (1) equity capital and trade credit exhibit significant explanatory power, suggesting that the primary focus in the literature on debt is too narrow; (2) firm youth, growth, and R&amp;D are positively associated with audited GAAP reporting, reflecting important monitoring roles of financial reporting; and (3) many firms violate standard explanations for financial reporting choices and substantial unexplained heterogeneity in financial reporting remains. We conclude by identifying opportunities for future research.",JAR,2020,175,1224,"['Financial Markets', 'Corporate Governance', 'Taxation', 'Debt Management', 'Investment Strategies']","['tax returns', 'financial reporting', 'private firms', 'GAAP', 'agency theory', 'ownership dispersion', 'external debt', 'trade credit', 'equity capital', 'R&D']"
Why Do Politicians Intervene in Accounting Regulation? The Role of Ideology and Special Interests,10.1111/1475-679X.12300,"Politicians frequently intervene in the regulation of financial accounting. Evidence from the accounting literature shows that regulatory capture by special interests helps explain these interventions. However, many accounting rules have broad economic or social consequences, such as their effects on income distribution or private sector subsidies. The perception of these consequences varies with a politician's ideology. Therefore, if accounting rules produce those consequences, ideology plausibly spills over and explains a politician's stance on the technical accounting issue, beyond special interest pressure. We use two prominent U.S. political debates about fair value accounting and the expensing of employee stock options to disentangle the role of ideology from special interest pressure. In both debates, ideology explains politicians’ involvement at exactly those points when the debate focuses on the economic consequences of accounting regulation (i.e., bank bailouts and top management compensation). Once the debates focus on more technical issues, connections to special interests remain the dominant force.",JAR,2020,154,1128,"['Public Policy', 'Regulatory Frameworks', 'Corporate Governance', 'Financial Markets', 'Income Inequality']","['politicians', 'financial accounting', 'regulatory capture', 'special interests', 'accounting rules', 'income distribution', 'private sector subsidies', 'ideology', 'fair value accounting', 'employee stock options']"
Strategic Subsidiary Disclosure,10.1111/1475-679X.12308,"Although subsidiary disclosures in firms’ filings with the Securities and Exchanges Commission (SEC; Exhibit 21) represent the most granular required public disclosure of a firm's geographic footprint, little is understood about the quality of the disclosure, and anecdotal evidence suggests firms may not fully comply with the disclosure requirements. We use data provided by multinational firms to the Internal Revenue Service regarding their foreign subsidiary locations to explore the accuracy of public subsidiary disclosures on Exhibit 21 of Form 10‐K per SEC rules. The overall incidence of nondisclosure is low, suggesting that most firms comply with Exhibit 21 disclosure rules, and that for most applications, Exhibit 21 disclosures provide a reasonable proxy for locations of significant subsidiaries. Nevertheless, there is some evidence of nondisclosure, particularly when subsidiaries are in tax havens, when the firm is more highly scrutinized in the media, or when the firm has other characteristics consistent with low‐quality disclosures such as SEC comment letters.",JAR,2020,157,1084,"['Financial Markets', 'Corporate Governance', 'Taxation', 'Regulatory Frameworks', 'Economic Development']","['subisidiary disclosures', 'SEC', 'geographic footprint', 'quality', 'compliance', 'accuracy', 'multinational firms', 'Internal Revenue Service', 'nondisclosure', 'tax havens']"
The Effect of Credit Ratings on Disclosure: Evidence from the Recalibration of Moody's Municipal Ratings,10.1111/1475-679X.12307,"This paper examines how credit rating levels affect municipal debt issuers’ disclosure decisions. Using exogenous upgrades in credit rating levels caused by the recalibration of Moody's municipal ratings scale in 2010, we find that upgraded municipalities significantly reduce their disclosure of required continuing financial information, relative to unaffected municipalities. Consistent with a reduction in debtholders’ demand for information driving these results, the reduction in disclosure is greater when municipal bonds are held by investors who relied more on disclosure ex ante. However, we also find that the reduction in disclosure does not manifest when issuers are monitored by underwriters with greater issuer‐specific expertise and when issuers are subject to direct regulatory enforcement through the receipt of federal funding. Overall, our results suggest that higher credit rating levels lower investor demand for disclosure in the municipal market, and highlight the role of underwriters and direct regulatory enforcement in maintaining disclosure levels when investor demand is low.",JAR,2020,155,1105,"['Financial Markets', 'Credit Markets', 'Regulatory Frameworks', 'Public Finance', 'Investor Behavior']","['credit rating levels', 'municipal debt issuers', 'disclosure decisions', ""Moody's"", 'municipal ratings scale', 'financial information', 'debtholders', 'investors', 'underwriters', 'regulatory enforcement']"
How Does Using a Mobile Device Change Investors’ Reactions to Firm Disclosures?,10.1111/1475-679X.12299,"I examine how characteristics of investors’ information access tools change investors’ reactions to firm disclosures. I examine my research question in the context of information choice (i.e., allowing investors to choose the order of information and sections to read within a disclosure) and spatial layout (i.e., how information is displayed when viewing the disclosure). Results of an experiment are consistent with information choice improving investors’ judgments if the disclosure is viewed on a computer screen. Conversely, and consistent with cognitive overload, information choice harms investors’ judgments if the disclosure is viewed on a smaller screen, such as that of a mobile device. Follow‐up experiments show that changing the disclosure presentation to reduce the need to scroll is one way to improve investors’ judgments on a smaller (or mobile) screen. My findings caution firms and regulators about expanding information choice within disclosures without considering the screen size used to access the disclosure.",JAR,2020,151,1034,"['Corporate Governance', 'Consumer Behavior', 'Financial Markets', 'Digital Transformation', 'Information Choice']","['investors', 'information access tools', 'firm disclosures', 'information choice', 'spatial layout', 'computer screen', 'cognitive overload', 'mobile device', 'disclosure presentation', 'screen size']"
Public Attention and Auditor Behavior: The Case of <i>Hurun Rich List</i> in China,10.1111/1475-679X.12309,"Adverse client publicity can entail regulatory scrutiny over audited financial statements and impose political costs on auditors. We use the changes in client publicity caused by their controlling owners’ presence on the<jats:italic>Hurun Rich List</jats:italic>(the rich listing) in China to test the hypothesis that auditor conservatism increases with client publicity. Our evidence indicates auditors issue more adverse audit opinions to clients and charge higher fees following the rich listing events. Moreover, we observe that auditors strategically respond to clients with different attributes—for clients whose owners accumulated wealth in a more questionable manner, auditors choose more stringent audit reporting to better defend themselves from regulatory scrutiny; for clients without such attributes, auditors primarily rely on increasing audit fees to cope with any post‐listing increase in audit risks. Our analyses also suggest the impacts of rich listings tend to be concentrated among large audit firms with stronger reputation concerns or among engagement auditors with more conservative reporting styles. By showing how auditors manage political risks associated with heightened public scrutiny, we contribute to both the auditing and political cost literature.",JAR,2020,177,1281,"['Audit Risk Management', 'Political Risk', 'Corporate Governance', 'Regulatory Frameworks', 'Financial Markets']","['client publicity', 'regulatory scrutiny', 'audited financial statements', 'political costs', 'auditor conservatism', 'rich list', 'audit opinions', 'audit fees', 'audit risks', 'reputation concerns']"
Screening Talent for Task Assignment: Absolute or Percentile Thresholds?,10.1111/1475-679X.12327,"Matching talents to tasks is an important part of job design. Organizations routinely use performance thresholds to group agents by talent. We see thresholds defined both in terms of an individual's own performance (absolute value) and in terms of peer performance (percentile). Intuition suggests a preference for percentile thresholds because the resulting rank‐order statistic is sufficient to assess relative talent. Yet, in the context of a task assignment problem in which the objective is to match talent with task type (using two agents and two task types), we show that absolute thresholds can dominate percentile thresholds under either of two conditions. First, flexibility in task assignment tilts the balance toward absolute thresholds. Second, performance manipulation can adversely affect the inherent advantage of percentile thresholds because they motivate agents to invest relatively more in personally costly influence activities to cast their performance in a favorable light. We examine how these results hold up when there are countably large number of agents and discuss empirical implications.",JAR,2020,164,1117,"['Labor Market Dynamics', 'Organizational Behavior', 'Behavioral Economics', 'Incentive Systems', 'Economic Policy Evaluation']","['talents', 'tasks', 'job design', 'performance thresholds', 'agents', 'task assignment', 'absolute thresholds', 'percentile thresholds', 'task type', 'performance manipulation']"
Tick Size and Financial Reporting Quality in Small-Cap Firms: Evidence from a Natural Experiment,10.1111/1475-679X.12331,"Using a natural experiment (the SEC's 2016 Tick Size Pilot Program), we investigate the effects of an increase in tick size on financial reporting quality. The tick size pilot program reduces algorithmic trading (AT) and increases fundamental investors’ information acquisition and trading activities. This in turn increases the scrutiny of managers’ financial reporting choices and reduces their incentives to engage in misreporting. Using a difference‐in‐differences research design, we find a significant decrease in the magnitude of discretionary accruals, a significant reduction in the likelihood of just meeting or beating analysts’ forecasts, and a marginally significant decrease in restatements for the treated firms in the pilot program. Furthermore, we find that the change in financial reporting quality is concentrated in treated firms experiencing decreases in AT and increases in information acquisition activities. We also find that the mispricing of accruals is significantly lower for treated firms. Taken together, our results suggest that an increase in tick size has a causal effect on firms’ financial reporting quality.",JAR,2020,165,1143,"['Financial Markets', 'Corporate Governance', 'Economic Development', 'Market Transparency', 'Regulatory Frameworks']","['tick size', 'financial reporting quality', 'SEC', 'algorithmic trading', 'fundamental investors', 'discretionary accruals', ""analysts' forecasts"", 'restatements', 'misreporting', 'mispricing']"
Politically Connected Governments,10.1111/1475-679X.12325,"This paper examines the consequences of powerful political connections for local governments. We find that governments located within the constituencies of, and thus connected to, powerful congressional members reduce their stewardship over public resources. Using plausibly exogenous declines in the power of congressional representation, we show that the effect is causal. To better understand why connected local governments can reduce stewardship, we study electoral characteristics. Our findings suggest that the increased resources that come with powerful congressional representation allow local‐government officials to reduce stewardship without material adverse effects on their reelection prospects. In sum, we provide evidence of a cost of political connections: they weaken local governments' incentives to act in a socially optimal manner.",JAR,2020,115,852,"['Public Policy', 'Political Risk', 'Economic Development', 'Financial Markets', 'Government Governance']","['political connections', 'local governments', 'congressional members', 'stewardship', 'public resources', 'electoral characteristics', 'reelection prospects', 'cost', 'incentives', 'socially optimal manner']"
"Foreign Exchange Risk, Hedging, and Tax-Motivated Outbound Income Shifting",10.1111/1475-679X.12326,"Although outbound income shifting to low‐tax jurisdictions provides tax savings, it is often accompanied by nontax costs. In this study, I examine whether foreign exchange (FX) risk constrains tax‐motivated outbound income shifting by U.S. multinational corporations. My findings indicate that exposure to greater currency volatility is associated with less outbound income shifting, and this effect is stronger for firms with foreign affiliates using foreign functional currencies. I also investigate whether hedging facilitates outbound income shifting. Consistent with hedging lowering costs associated with exchange rate volatility, I find that U.S. firms that use more currency derivatives tend to shift more income to low‐tax foreign jurisdictions. Overall, these findings suggest that FX risk is an important cost of outbound income shifting.",JAR,2020,119,849,"['Risk Management', 'Taxation', 'Financial Markets', 'Corporate Governance', 'Foreign Exchange']","['outbound income shifting', 'low‐tax jurisdictions', 'nontax costs', 'foreign exchange risk', 'FX risk', 'U.S. multinational corporations', 'currency volatility', 'foreign affiliates', 'hedging', 'currency derivatives.']"
Asymmetric Cost Behavior and Dividend Policy,10.1111/1475-679X.12328,"Costs are sticky on average, that is, they fall less for sales decreases than they rise for equivalent sales increases. We examine the effect of this asymmetric cost behavior on a firm's dividend policy. Given investors’ aversion to dividend cuts, we predict that firms with higher resource adjustment costs and stickier costs pay lower dividends than their peers because they are less able to sustain any higher level of dividend payouts in the future. We find evidence consistent with this prediction. Further, using a regression discontinuity design that exploits variation in labor adjustment costs generated by close‐call union elections, we provide evidence suggesting that the negative relation between cost stickiness and dividend payouts is driven by resource adjustment costs. Our paper sheds new light on the determinants of dividend policy and demonstrates the role of cost behavior in corporate decisions.",JAR,2020,140,918,"['Corporate Governance', 'Financial Markets', 'Labor Market Dynamics', 'Economic Development', 'Fiscal Policy']","['cost stickiness', 'dividend policy', 'resource adjustment costs', 'dividend payouts', 'labor adjustment costs', 'corporate decisions', 'asymmetric cost behavior', ""investors' aversion"", 'sales increases', 'sales decreases']"
Disclosing Physician Ratings: Performance Effects and the Difficulty of Altering Ratings Consensus,10.1111/1475-679X.12330,"I examine effects of a health care system's policy to publicly disclose patient ratings of its physicians. I find evidence that this policy leads to performance improvement by the disclosed, subjective ratings and also by undisclosed, objective measures of quality. These effects are consistent with multitasking theory, in that physicians respond to the disclosure by providing more of a shared input—time with patients—that benefits performance by ratings and underlying quality. I also find, as predicted by information cascade theory, that the ratings become jammed to some degree near initially disclosed values. Specifically, raters observe the pattern of initial ratings and follow suit by providing similar ratings. Finally, I find evidence that physicians anticipate rating jamming and so concentrate their effort on earlier performance in order to set a pattern of high ratings that later ratings follow. These results demonstrate that the disclosure of subjective ratings can benefit performance broadly but can also shift effort toward earlier performance.",JAR,2020,157,1068,"['Healthcare Systems', 'Public Policy', 'Consumer Behavior', 'Economic Development', 'Behavioral Economics']","['health care system', 'policy', 'patient ratings', 'physicians', 'performance improvement', 'multitasking theory', 'information cascade theory', 'rating jamming', 'subjective ratings', 'objective measures']"
The Effect of Mandatory Extraction Payment Disclosures on Corporate Payment and Investment Policies Abroad,10.1111/1475-679X.12332,"I examine how mandatory extraction payment disclosures (EPD)—a policy solution intended to discourage corporate payment avoidance in the oil, gas, and mining industries—affect fiscal revenue contributions and investments by multinational firms in foreign host countries. Using the staggered adoption of EPD across firms headquartered in Europe and Canada, I find that disclosing companies increase their payments to host governments, decrease investments, and obtain fewer extraction licenses relative to non‐disclosing competitors. These effects are stronger for firms that face a high risk of public shaming, operate in corrupt host countries, and have a high exposure to bribery‐prone payments, suggesting that EPD increases the reputational cost of corporate behavior that could be perceived as exploitative. The resulting reallocation of investments from disclosing to non‐disclosing firms reduces drilling productivity and resource production in host countries, consistent with uneven disclosure regulation distorting capital allocation.",JAR,2020,140,1043,"['Corporate Governance', 'Economic Development', 'Capital Allocation', 'Taxation', 'Energy Transition']","['mandatory extraction payment disclosures', 'EPD', 'fiscal revenue contributions', 'investments', 'multinational firms', 'host countries', 'public shaming', 'corrupt host countries', 'bribery‐prone payments', 'capital allocation.']"
Corporate Tax Enforcement Externalities and the Banking Sector,10.1111/1475-679X.12334,"We explore whether corporate tax enforcement can affect bank lending. Specifically, we hypothesize that tax enforcement efforts aimed at small and midsized enterprises (SME) can improve their information environments, which in turn could lead to increased bank commercial lending. Exploiting the regional structure employed by the IRS until 1999, we find that the corporate tax return audit probability for SMEs is associated with greater commercial lending growth for regionally focused banks. We find similar evidence when exploiting the IRS reorganization from a regional to federal system in 2000. Further results show that tax enforcement's impact on SME informational environments is at least partially responsible for this association: The impact of tax auditing on bank lending is stronger for banks facing greater informational disadvantages and in areas where SMEs face greater hold‐up problems. Finally, we find that the tax audit rate is positively associated with loan portfolio quality, suggesting that tax enforcement can lead to better loan decisions. Our findings are consistent with the tax authority's mandate having important externalities on bank lending and SME access to capital, suggesting that the benefits to tax enforcement go beyond improving tax collection.",JAR,2020,189,1286,"['Taxation', 'Banking Systems', 'Economic Development', 'Financial Markets', 'Corporate Governance']","['corporate tax enforcement', 'bank lending', 'small and midsized enterprises', 'IRS', 'commercial lending', 'informational environments', 'tax auditing', 'loan portfolio quality', 'SME access', 'capital']"
The Effect of Managerial Litigation Risk on Earnings Warnings: Evidence from a Natural Experiment,10.1111/1475-679X.12336,"We examine the causal effect of managerial litigation risk on managers’ disclosure of earnings warnings in the face of large earnings shortfalls. Exploring the staggered adoption of universal demand (UD) laws as an exogenous decrease in litigation risk, we find that the adoption leads to a decrease in managers’ issuance of earnings warnings, especially among firms facing a higher litigation risk prior to the adoption. In contrast, we find no change in managers’ tendency to alert investors of impending large positive earnings surprises. Collectively, our results provide causal evidence that higher litigation risk incentivizes managers to issue more earnings warnings. Our results differ from Bourveau et al.’s finding of an increase in the frequency of management earnings forecasts after the adoption of UD laws. We reconcile our findings with theirs by demonstrating that the effect of adopting UD laws on management earnings forecasts depends critically on forecast horizon: The adoption increases long‐horizon forecasts, but decreases short‐horizon forecasts.",JAR,2020,157,1070,"['Risk Management', 'Financial Markets', 'Corporate Governance', 'Economic Development', 'Public Policy']","['managerial litigation risk', 'managers', 'disclosure', 'earnings warnings', 'universal demand laws', 'adoption', 'earnings shortfalls', 'earnings surprises', 'earnings forecasts', 'forecast horizon']"
Resolving Information Asymmetry Through Contractual Risk Sharing: The Case of Private Firm Acquisitions,10.1111/1475-679X.12335,"When private firms are acquired, buyers commonly rely on seller financing and earnouts. Using a novel database of private acquisitions, I find that seller financing and earnouts become more common as information asymmetry increases between the acquirer and the target. Financial statement audits of the targets attenuate these results, which suggests that audits decrease information asymmetry in firm acquisitions. Seller‐financed acquisitions also close faster and at higher prices, reducing the private firm discount. These findings suggest that these contract structures are an important channel through which privately held firms mitigate adverse selection that arises from information asymmetry.",JAR,2020,97,701,"['Corporate Governance', 'Financial Markets', 'Investment Strategies', 'Economic Development', 'Trade and Globalization']","['seller financing', 'earnouts', 'private acquisitions', 'information asymmetry', 'financial statement audits', 'firm acquisitions', 'private firm discount', 'adverse selection', 'contract structures', 'privately held firms']"
Do Firms Strategically Internalize Disclosure Spillovers? Evidence from Cash-Financed M&amp;As,10.1111/1475-679X.12337,"We investigate whether managers internalize the spillover effects of their disclosure on the stock price of related firms and strategically alter their disclosure decisions when doing so is beneficial. Using data on firm‐initiated disclosures during all‐cash acquisitions, we find evidence consistent with acquirers strategically generating news that they expect will depress the target's stock price. Our results suggest the disclosure strategy leads to lower target returns during the negotiation period when the takeover price is being determined and results in a lower target premium. These findings are robust to a battery of specifications and falsification tests. Our results are consistent with expected spillovers influencing the timing and content of firms’ disclosures in M&amp;A transactions.",JAR,2020,114,804,"['Financial Markets', 'Corporate Governance', 'M&A Transactions', 'Stock Price', 'Disclosure Strategy']","['managers', 'disclosure', 'spillover effects', 'stock price', 'related firms', 'all-cash acquisitions', 'target returns', 'negotiation period', 'takeover price', 'M&A transactions']"
Opening Up the “Black Box” of Audit Firms: The Effects of Audit Partner Ownership on Audit Adjustments,10.1111/1475-679X.12333,"Audit firms need to provide high‐quality audits but they also need to please their clients. We argue that these conflicting incentives become manifest when comparing the incentive effects of equity ownership on engagement quality (EQ) reviewers and audit engagement partners. We predict that EQ reviewers monitor audit quality more closely when they hold greater ownership. In contrast, we expect that equity ownership has conflicting effects on the incentives of engagement partners because they need to please their clients as well as provide high‐quality audits. Consistent with these predictions, we find that the associations between audit adjustments and partner equity ownership are (1) significantly positive for EQ reviewers, (2) significantly negative or insignificant for audit engagement partners, and (3) significantly more positive for EQ reviewers than engagement partners. Our findings suggest that larger ownership stakes motivate EQ reviewers to monitor audit quality more closely, whereas larger ownership stakes do not motivate engagement partners to deliver higher quality audits.",JAR,2020,157,1101,"['Corporate Governance', 'Audit Firms', 'Financial Markets', 'Equity Ownership', 'Incentives']","['audit firms', 'high‐quality audits', 'conflicting incentives', 'equity ownership', 'engagement quality', 'reviewers', 'audit engagement partners', 'audit quality', 'ownership stakes', 'monitor']"
The Effectiveness of White-Collar Crime Enforcement: Evidence from the War on Terror,10.1111/1475-679X.12343,"This paper analyzes the impact of changes in regulatory priorities and resource allocation on criminal enforcement of white‐collar criminal activities. Using the 9/11 terrorist attacks as a shock to the FBI's priorities and allocation of investigative resources, as well as variation in the Muslim population in the United States, I examine whether prioritization of counterterrorism investigations after 9/11 is associated with weaker enforcement of laws targeting white‐collar crime. I then use a difference‐in‐differences estimation to study the magnitude of any increase in white‐collar crime resulting from reduced oversight. I find a significantly greater reduction in white‐collar criminal cases referred by FBI field offices that shifted more of their investigative focus away from white‐collar crime to counterterrorism. Further, geographic areas in the jurisdictions of FBI field offices with greater shifts in attention from white‐collar crime to counterterrorism experienced greater increases in wire fraud, illegal insider‐trading activities, and fraud within financial institutions.",JAR,2021,150,1096,"['Public Policy', 'Financial Markets', 'Regulatory Frameworks', 'Banking Systems', 'White-Collar Crime.']","['regulatory priorities', 'resource allocation', 'criminal enforcement', 'white-collar crime', '9/11 terrorist attacks', 'FBI', 'counterterrorism', 'investigations', 'difference-in-differences estimation', 'wire fraud']"
How Does Financial-Reporting Regulation Affect Industry-Wide Resource Allocation?,10.1111/1475-679X.12345,"This paper examines the impact of mandatory reporting and auditing of firms’ financial statements on industry‐wide resource allocation. Using threshold‐induced variation in the share of mandated firms in a given industry, I document that reporting mandates facilitate ownership dispersion in capital markets and spur competition in product markets. I, however, do not find that reporting mandates unambiguously improve the efficiency of industry‐wide resource allocation. With respect to auditing mandates, I find only that they impose a fixed cost on firms, deterring smaller entrants.",JAR,2021,83,586,"['Financial Markets', 'Corporate Governance', 'Capital Allocation', 'Regulatory Frameworks', 'Debt Management']","['mandatory reporting', 'auditing', 'financial statements', 'industry-wide resource allocation', 'ownership dispersion', 'capital markets', 'competition', 'product markets', 'efficiency', 'fixed cost']"
Labor Market Effects of Spatial Licensing Requirements: Evidence from CPA Mobility,10.1111/1475-679X.12342,"We exploit the staggered introduction of CPA Mobility provisions in the United States to study the effects of spatial licensing requirements on the labor market for accounting professionals. Specifically, we examine whether the removal of licensing‐induced geographic barriers affects CPA wages and employment levels, as well as the pricing and quality of professional services. We find that, subsequent to the adoption of CPA Mobility provisions, wages of accounting professionals decrease, whereas employment levels are unaffected. The documented wage effect stems from smaller CPA firms, is more pronounced for CPAs holding senior positions, and persists over time. We also find that service prices decline and that this effect is concentrated in local CPA firms. Moreover, we document that the increased wage and price pressure is not associated with deteriorating service quality. Collectively, our results suggest that the removal of occupational licensing barriers has sizable effects on labor supply and service prices. Our findings inform the current regulatory debate on occupational licensing.",JAR,2021,160,1104,"['Labor Market Dynamics', 'Regulatory Frameworks', 'Occupational Licensing', 'Economic Development', 'Public Policy']","['CPA Mobility', 'spatial licensing requirements', 'labor market', 'accounting professionals', 'wages', 'employment levels', 'professional services', 'service prices', 'regulatory debate', 'occupational licensing barriers']"
Disclosure Prominence and the Quality of Non-GAAP Earnings,10.1111/1475-679X.12344,"The SEC prohibits the presentation of non‐GAAP measures before corresponding GAAP measures; however, a large proportion of non‐GAAP reporters present non‐GAAP EPS before GAAP EPS in their earnings announcements. This noncompliance raises questions about whether firms use prominence to highlight higher or lower quality non‐GAAP information. For firms reporting non‐GAAP EPS between 2003 and 2016, prominent non‐GAAP EPS is associated with higher quality non‐GAAP reporting. Further tests reveal that nonregulatory incentives, rather than regulatory costs, explain this relation. Specifically, prominence is associated with higher quality non‐GAAP reporting in settings where prominence is not regulated, investors ignore prominence when non‐GAAP reporting quality is lower, and the minority of firms using prominence to mislead exhibit characteristics associated with weaker investor monitoring. Overall, we provide evidence that regulatory noncompliance can reflect an intent to inform, and that most firms use prominence to highlight higher quality non‐GAAP information despite prohibitive regulation.",JAR,2021,147,1104,"['Financial Markets', 'Regulatory Frameworks', 'Corporate Governance', 'Public Policy', 'Investment Strategies']","['SEC', 'non-GAAP measures', 'GAAP', 'EPS', 'earnings announcements', 'noncompliance', 'prominence', 'quality', 'regulatory', 'investor.']"
From Implicit to Explicit: The Impact of Disclosure Requirements on Hidden Transaction Costs,10.1111/1475-679X.12340,"This paper provides evidence that disclosing corporate bond investors' transaction costs (markups) affects the size of the markups. Until recently, markups were embedded in the reported transaction price and not explicitly disclosed. Without explicit disclosure, investors can estimate their markups using executed transaction prices. However, estimating markups imposes information processing costs on investors, potentially creating information asymmetry between unsophisticated investors and bond‐market professionals. We explore changes in markups after bond‐market professionals were required to explicitly disclose the markup on certain retail trade confirmations. We find that markups decline for trades that are subject to the disclosure requirement relative to those that are not. The findings are pronounced when constraints on investors' information processing capacity limit their ability to be informed about their markups without explicit disclosure.",JAR,2021,126,964,"['Financial Markets', 'Market Transparency', 'Corporate Governance', 'Investment Strategies', 'Information Asymmetry']","['disclosing', 'corporate bond', 'transaction costs', 'markups', 'investors', 'disclosure', 'information processing costs', 'information asymmetry', 'bond-market professionals', 'explicit disclosure']"
Implied Equity Duration: A Measure of Pandemic Shutdown Risk,10.1111/1475-679X.12348,"Implied equity duration was originally developed to analyze the sensitivity of equity prices to discount rate changes. We demonstrate that implied equity duration is also useful for analyzing the sensitivity of equity prices to pandemic shutdowns. Pandemic shutdowns primarily impact short‐term cash flows, thus they have a greater impact on low‐duration equities. We show that implied equity duration has a strong positive relation to U.S. equity returns and analyst forecast revisions during the onset of the 2020 COVID‐19 shutdown. Our analysis also demonstrates that the underperformance of “value” stocks during this period is a rational response to their lower durations.",JAR,2021,100,677,"['Financial Markets', 'Risk Management', 'Economic Development', 'Investment Strategies', 'Corporate Governance']","['implied equity duration', 'equity prices', 'pandemic shutdowns', 'short-term cash flows', 'low-duration equities', 'U.S. equity returns', 'analyst forecast revisions', 'COVID-19 shutdown', 'value stocks', 'underperformance']"
Do Risk Disclosures Matter When It Counts? Evidence from the Swiss Franc Shock,10.1111/1475-679X.12338,"We examine the relation between disclosure quality and information asymmetry among market participants following an exogenous shock to macroeconomic risk. In 2015, the Swiss National Bank abruptly announced that it would abandon the longstanding minimum euro‐Swiss franc exchange rate. We find evidence suggesting that firms with more transparent disclosures regarding their foreign exchange risk exposure <jats:italic>ex ante</jats:italic> exhibit significantly lower information asymmetry <jats:italic>ex post</jats:italic>. The information gap in bid‐ask spreads appears within 30 minutes of the announcement and persists for two weeks, during which new information gradually substitutes for past disclosures. We validate the information dynamics of past risk disclosures with three field surveys: (1) Sell‐side analysts emphasize the importance of existing (risk) disclosures in evaluating the translational and transactional effects of the currency shock. (2) Lending banks’ credit officers rely on past disclosures as the primary information source available for smaller (unlisted) firms in the immediate aftermath of the shock. (3) Investor‐relations managers use existing financial filings as a key resource when communicating with external stakeholders. The results suggest that historical disclosures help investors attenuate information asymmetry in light of unexpected news.",JAR,2021,183,1386,"['Financial Markets', 'Risk Management', 'Information Asymmetry', 'Corporate Governance', 'Monetary Policy']","['disclosure quality', 'information assymetry', 'macroeconomic risk', 'Swiss National Bank', 'exchange rate', 'foreign exchange risk exposure', 'bid-ask spreads', 'information dynamics', 'risk disclosures', 'field surveys']"
Do PCAOB Inspections Improve the Accuracy of Accounting Estimates?,10.1111/1475-679X.12339,"Despite issuing extensive guidance related to the evaluation of accounting estimates, the PCAOB continues to identify deficiencies related to the audit of estimates through their inspections process. We examine whether PCAOB inspections lead to more accurate audited accounting estimates, defined as those that more closely match economic reality, by examining a significant estimate within the banking industry. We find that in contrast with the PCAOB's goal of more accurate and unbiased estimates, allowance for loan losses (ALL) estimates become <jats:italic>less</jats:italic> accurate and more conservative with higher levels of ALL‐related inspection findings for public company audits. We find no evidence of auditor response to PCAOB inspection findings for private‐company audits, which are <jats:italic>not</jats:italic> subject to PCAOB inspection. Overall, our findings cast doubt on the efficacy of PCAOB inspections in improving estimate accuracy and suggest that firms are managing inspection risk to the potential detriment of audit quality.",JAR,2021,146,1058,"['Financial Markets', 'Banking Systems', 'Regulatory Frameworks', 'Audit Quality', 'Risk Management']","['PCAOB', 'inspections', 'accounting estimates', 'audit', 'economic reality', 'banking industry', 'allowance for loan losses (ALL)', 'public company audits', 'private-company audits', 'audit quality']"
The Role of Academic Research in SEC Rulemaking: Evidence from <i>Business Roundtable v. SEC</i>,10.1111/1475-679X.12358,"To shed light on the role that academic research plays in Securities and Exchange Commission (SEC) rulemaking, this paper examines the SEC's patterns of consumption of academic research from 2007 through 2017. We show how the <jats:italic>Business Roundtable v. SEC</jats:italic> ruling in 2011 increased consideration given to academic research during SEC rulemaking. We find that after the ruling, the SEC cites more papers in its proposed rules and, in particular, more papers that illustrate the costs of regulation. This change in academic citations results in fewer negative comment letters on proposed SEC regulations. We survey academics whose research was cited by the SEC, and the majority respond that the SEC's description of their work is completely or mostly accurate. When we survey general academics, their average rating of the SEC's accuracy is lower, although the rating improves regarding specific SEC quotes citing academic research. Although there is still room for a more substantive discussion of research, having a higher standard of cost‐benefit analysis leads to a more balanced discussion of academic research.",JAR,2021,172,1138,"['Public Policy', 'Financial Markets', 'Regulatory Frameworks', 'Economic Development', 'Research.']","['academic research', 'Securities and Exchange Commission', 'SEC rulemaking', 'Business Roundtable v. SEC', 'regulation costs', 'comment letters', 'accuracy', 'cost-benefit analysis', 'citation', 'discussion']"
Aggressive Boards and CEO Turnover,10.1111/1475-679X.12350,"This study investigates a communication game between a CEO and a board of directors where the CEO's career concerns can potentially impede value‐increasing informative communication. By adopting a policy of aggressive boards (excessive replacement), shareholders can facilitate communication between the CEO and the board. The results are in contrast to the multitude of models which generally find that management‐friendly boards improve communication, and help to explain empirical results concerning CEO turnover. The results also provide the following novel predictions concerning variation in CEO turnover: (1) there is greater CEO turnover in firms or industries where CEO performance is relatively more difficult to assess; (2) the board is more aggressive in their replacement of the CEO in industries or firms where the board's advisory role is more salient; and (3) there is comparatively less CEO turnover in firms or industries where the variance of CEO talent is high.",JAR,2021,147,981,"['Corporate Governance', 'Financial Markets', 'Labor Market Dynamics', 'Economic Development', 'Business Strategy']","['CEO', 'board of directors', 'communication', 'value-increasing', 'informative communication', 'aggressive boards', 'shareholders', 'management-friendly boards', 'CEO turnover', 'CEO performance.']"
"Responding to Activist Short Sellers: Allegations, Firm Responses, and Outcomes",10.1111/1475-679X.12356,"This study provides descriptive evidence on how firms respond to activist short seller reports and how these responses are associated with outcomes for the targeted firms. We show that the frequency of these reports has grown substantially in recent years. Although we find that firms respond only 31% of the time, this rate increases substantially when the report is accompanied by significantly negative abnormal returns and when the report contains new evidence. Not responding is associated with a less negative stock price response at report release and fewer adverse outcomes. Firms that launch internal investigations following the report release have significantly higher subsequent rates of stock exchange delisting and SEC enforcement actions, and lower rates of being acquired. Overall, our results highlight the impact of activist short sellers on target firms and that firm responses are associated with material outcomes.",JAR,2021,140,935,"['Financial Markets', 'Corporate Governance', 'Risk Management', 'Stock Exchange Delisting', 'SEC Enforcement Actions']","['activist short seller reports', 'firms', 'responses', 'outcomes', 'frequency', 'abnormal returns', 'internal investigations', 'stock exchange delisting', 'SEC enforcement actions', 'acquired']"
The Information Externality of Public Firms’ Financial Information in the State-Bond Secondary Market,10.1111/1475-679X.12361,"This study provides evidence on the role of public firms’ financial reports in the state‐bond secondary market. I investigate the informational role of corporate earnings announcements and find that public firms’ monthly earnings signals aggregated to the state level are positively associated with contemporaneous state‐bond returns. Further analyses reveal that public firms’ earnings announcements predict traditional economic indicators and contain incremental information that is independent of the traditional economic indicators. In cross‐sectional analyses, I show that the earnings–returns relation is especially pronounced when bondholders face longer investment horizons and higher credit risks. Taken together, the evidence indicates a positive externality of corporate financial reports in alleviating the opacity in the municipal bond secondary market.",JAR,2021,114,866,"['Financial Markets', 'Risk Management', 'Credit Markets', 'Investment Strategies', 'Market Transparency']","['financial reports', 'public firms', 'corporate earnings announcements', 'state-bond secondary market', 'earnings signals', 'state-bond returns', 'economic indicators', 'investment horizons', 'credit risks', 'municipal bond market']"
Anonymous Equity Research,10.1111/1475-679X.12359,"Crowdsourced financial information platforms often allow content contributors to publish equity research anonymously. This study examines whether investors value or discount information in anonymous equity research. In the short window around research releases, we find that investors’ stock price reaction to anonymous research is muted in comparison to nonanonymous research. Consistent with credibility concerns influencing investor response, we document that this discount to anonymous research dissipates as the monitoring of content contributors intensifies and as authors develop a reputation for high‐quality reporting. In addition, we perform a content analysis on the research reports and find that the muted market reaction to anonymous equity research is robust to controlling for textual attributes of information content, further supporting our inference that investors’ are concerned about the credibility of anonymous equity research.",JAR,2021,129,950,"['Financial Markets', 'Corporate Governance', 'Market Transparency', 'Investment Strategies', 'Text Policy Reforms']","['financial information', 'platforms', 'equity research', 'anonymous', 'investors', 'stock price reaction', 'credibility', 'content contributors', 'market reaction', 'textual attributes']"
Show Me the Money! Dividend Policy in Countries with Weak Institutions,10.1111/1475-679X.12363,"We hypothesize that, in weak‐institution countries, firms adjust the ‘timing’ of dividend payments by committing to distribute a percentage of current earnings as dividends, revealing the extent of firm‐level agency conflicts to future investors and facilitating the raising of external capital. Consistent with this hypothesis, we find that, on average, firms in weak‐institution countries have a higher speed of adjustment (<jats:italic>SOA</jats:italic>) to their target payout ratio, pay dividends earlier in the life cycle, and are more likely to disclose a dividend policy committing to pay a minimum percentage of earnings. Within‐country tests show that, in weak‐institution countries, the firms with the highest <jats:italic>SOA</jats:italic> dividend policies have fewer agency problems and an increased ability to raise external capital. Finally, returns tests around earnings announcements show that high‐<jats:italic>SOA</jats:italic> dividend policies are associated with larger market reactions to earnings in weak‐institution countries. Collectively, our findings suggest that dividend policy helps to alleviate agency conflicts in weak‐institution countries between firms and (future) investors.",JAR,2021,159,1212,"['Corporate Governance', 'Financial Markets', 'Risk Management', 'Capital Allocation', 'Investment Strategies']","['dividend payments', 'firm-level agency conflicts', 'weak-institution countries', 'timing', 'earnings', 'external capital', 'payout ratio', 'agency problems', 'market reactions', 'dividend policy']"
"Less Information, More Comparison, and Better Performance: Evidence from a Field Experiment",10.1111/1475-679X.12362,"We use a field experiment in professional sports to compare effects of providing absolute, relative, or both absolute <jats:italic>and</jats:italic> relative measures in performance reports for employees. Although studies have documented that the provision of these types of measures can benefit performance, theory from economic and accounting literature suggests that it may be optimal for firms to direct employees’ attention to some types of measures by omitting others. In line with this theory, we find that relative performance information alone yields the best performance effects in our setting—that is, that a subset of information (relative performance information) dominates the full information set (absolute and relative performance information together) in boosting performance. In cross‐sectional and survey‐data analyses, we do not find that restricting the number of measures shown per se benefits performance. Rather, we find that restricting the type of measures shown to convey only relative information increases involvement in peer‐performance comparison, benefitting performance. Our findings extend research on weighting of and responses to measures in performance reports.",JAR,2021,166,1198,"['Corporate Governance', 'Behavioral Economics', 'Organizational Behavior', 'Economic Development', 'Performance Management']","['field experiment', 'professional sports', 'performance reports', 'absolute measures', 'relative measures', 'theory', 'economic literature', 'accounting literature', 'peer-performance comparison', 'performance effects']"
The Firm Next Door: Using Satellite Images to Study Local Information Advantage,10.1111/1475-679X.12360,"We use novel satellite data that track the number of cars in the parking lots of 92,668 stores for 71 publicly listed U.S. retailers to study the local information advantage of institutional investors. We establish car counts as a timely measure of store‐level performance and find that institutional investors adjust their holdings in response to the performance of local stores, and that these trades are profitable on average. These results suggest that local investors have an advantage when processing information about nearby operations. However, some institutional investors do not adjust for the <jats:italic>quality</jats:italic> of their local information and continue to rely on local signals even when they are poor predictors of firm performance and returns. This overreliance on poor local information is reduced for institutional investors with greater industry expertise and those with greater incentives to maximize short‐term trading profits.",JAR,2021,140,960,"['Financial Markets', 'Investment Strategies', 'Market Transparency', 'Corporate Governance', 'Behavioral Economics']","['satellite data', 'parking lots', 'stores', 'institutional investors', 'local information advantage', 'car counts', 'store-level performance', 'firm performance', 'returns', 'industry expertise']"
Switching from Incurred to Expected Loan Loss Provisioning: Early Evidence,10.1111/1475-679X.12354,"This paper provides early evidence on the effect of global regulation mandating a switch from loan loss provisioning (LLP) based on <jats:italic>incurred</jats:italic> credit losses (ICLs) to LLP based on <jats:italic>expected</jats:italic> credit losses (ECLs). Using a sample of systemically important banks from 74 countries, we find that ECL provisions are more predictive of future bank risk than ICL provisions. Corroborating that the switch to ECL provisioning results in more information to assess bank risk, we also observe that the announcement of a larger first‐time impact of the accounting change elicits lower stock returns and higher changes in credit default swap spreads. Critically, these patterns are most pronounced when credit conditions deteriorate. Additional analyses show that the higher information content of the ECL model stems from the provisions for nondefaulted loans, which did not exist under ICL. Our study contributes to the debate on the effect of the ECL model on procyclicality, an especially pressing issue in the context of the current pandemic.",JAR,2021,161,1085,"['Financial Markets', 'Risk Management', 'Banking Systems', 'Credit Markets', 'Regulatory Frameworks']","['effect', 'global regulation', 'loan loss provisioning', 'incurred credit losses', 'expected credit losses', 'bank risk', 'ECL provisioning', 'information', 'stock returns', 'credit default swap spreads']"
Unrecognized Expected Credit Losses and Bank Share Prices,10.1111/1475-679X.12353,"Accounting for credit losses under U.S. GAAP is transitioning from an incurred to an expected loss model. The model change was motivated by concerns that reporting only incurred losses does not provide investors with sufficient and timely information about banks’ credit risk. In this paper, I develop a measure of lifetime expected credit losses using vintage analysis to examine whether stock prices reflect information about unrecognized expected credit losses in an incurred loss regime. Consistent with investors being able to obtain information about expected losses that are not recognized in the financial statements, I find that unrecognized expected credit losses are negatively associated with bank stock prices. The pricing of these losses is stronger for larger banks, consistent with lower costs of obtaining this information for banks with better information environments. I also find that recorded allowances were less than estimated expected losses, on average, consistent with concerns that implementing the expected loss model will adversely impact regulatory capital adequacy.",JAR,2021,160,1096,"['Banking Systems', 'Financial Markets', 'Risk Management', 'Credit Markets', 'Regulatory Frameworks']","['credit losses', 'U.S. GAAP', 'expected loss model', 'investors', 'banks', 'stock prices', 'financial statements', 'vintage analysis', 'regulatory capital adequacy', 'unrecognized expected credit losses.']"
The Asymmetric Effect of Reporting Flexibility on Priced Risk,10.1111/1475-679X.12346,"Most firms covary more positively with downmarkets than upmarkets—a phenomenon I refer to as “risk asymmetry.” I predict and find that risk asymmetry is caused, at least in part, by a firm's ability to selectively obfuscate poor performance. Risk asymmetry decreases significantly when firms are required to adhere to the more stringent auditing standards mandated under Section 404 of the Sarbanes‐Oxley Act, however this decrease is more muted for firms with weak internal controls. Consistent with my predictions, these patterns are stronger for more market‐sensitive firms and weaker for firms that include relative performance evaluation in their CEOs' pay packages. Taken together with prior literature (which documents that risk asymmetry is priced), my results suggest that a firm can lower its cost of capital by credibly reducing its ability to obfuscate value‐relevant information.",JAR,2021,133,892,"['Financial Markets', 'Risk Management', 'Corporate Governance', 'Regulatory Frameworks', 'Capital Allocation']","['risk asymmetry', 'firm', 'downmarkets', 'upmarkets', 'auditing standards', 'Section 404', 'Sarbanes-Oxley Act', 'internal controls', 'market-sensitive firms', 'cost of capital']"
"Short-Term Institutions, Analyst Recommendations, and Mispricing: The Role of Higher Order Beliefs",10.1111/1475-679X.12352,"We document that stocks that have optimistic (pessimistic) consensus recommendations and are currently held by many short‐term institutions exhibit large stock‐return reversals: Their large past outperformance (underperformance) is followed by large negative (positive) future alphas. The predictable return reversals originate from overreaction to past recommendation releases and the correction of these overreactions around future releases. Results are stronger when earnings news is released and at firms with higher fundamental uncertainty. Further, firms with more short‐term institutions show stronger announcement returns and price drift after recommendation changes. Our results are consistent with models of higher order beliefs where short‐term institutions coordinate trading around public signals.",JAR,2021,104,810,"['Financial Markets', 'Corporate Governance', 'Investment Strategies', 'Market Transparency', 'Behavioral Economics']","['stocks', 'consensus recommendations', 'short-term institutions', 'stock-return reversals', 'overreaction', 'earnings news', 'fundamental uncertainty', 'announcement returns', 'price drift', 'higher order beliefs']"
How Is the Audit Market Affected by Characteristics of the Nonaudit Services Market?,10.1111/1475-679X.12347,"How can features of the markets for audit and nonaudit services (NAS) affect an audit firm's incentives to invest in audit quality, average audit quality, and social welfare? We address these questions in a model focusing on competition in both audit and NAS markets. We show that, when audit and NAS demand are positively correlated, prohibiting auditors from providing NAS to audit clients leads to higher investments in audit quality, but can decrease average audit quality if marginal clients switch to lower quality auditors. The effect on social welfare can be positive or negative, depending on the distribution of clients' service demands. General bans on auditor provision of NAS can, via similar channels, increase or decrease audit quality and social welfare. Overall, our findings suggest a more nuanced view of how regulating an auditor's provision of NAS might affect audit quality and social welfare, and are driven by the effects of multimarket competition on the auditor's incentives to invest in audit quality, rather than previously identified auditor independence or knowledge spillover channels.",JAR,2021,172,1116,"['Corporate Governance', 'Regulatory Frameworks', 'Economic Development', 'Market Transparency', 'Public Policy']","['markets', 'audit services', 'nonaudit services', 'audit quality', 'social welfare', 'competition', 'auditor provision', 'NAS', 'clients', 'incentives']"
The Information Role of the Media in Earnings News,10.1111/1475-679X.12349,"I reexamine whether media articles with substantive editorial content inform the market's reaction to firms' earnings news. Using variation in earnings announcement coverage because of restructuring at <jats:italic>The Wall Street Journal</jats:italic> (WSJ), my analyses suggest that WSJ earnings articles improve price discovery and increase trading volume at S&amp;P 500 earnings announcements. Additionally, textual analysis suggests media articles that differ more from the firm's earnings release increase trading volume, and that the differences speed up (slow down) price discovery when they corroborate (contradict) the tone of the firm's news. Such high difference articles are slightly longer, are more readable and specific, include more references to the industry and economy, repeat less “stale” news published in previous WSJ articles, and quote more investor and expert sources. Overall, my paper contributes to research on the role of the media in earnings news by providing evidence that journalists' editorial content helps investors understand firms' earnings, instead of simply entertaining or increasing awareness.",JAR,2021,158,1136,"['Financial Markets', 'Media Articles', 'Market Reaction', 'Price Discovery', 'Trading Volume']","['media articles', 'editorial content', 'market reaction', 'earnings news', 'price discovery', 'trading volume', 'textual analysis', ""firm's news"", 'investor sources', 'expert sources']"
Voice of the Customers: Local Trust Culture and Consumer Complaints to the CFPB,10.1111/1475-679X.12364,"We use complaints filed with the Consumer Financial Protection Bureau (CFPB) to study the interplay between social norms and the effectiveness of consumer protection laws. We find that a higher level of trust in a given location is associated with a lower number of complaints filed against financial institutions in that location. Employing a difference‐in‐differences approach, we further find that, after the establishment of the CFPB, banks in low‐trust areas reduce fees charged to consumers more compared to banks in high‐trust areas. Our results suggest that the threat of consumer complaints to a government agency affects how banks treat their customers, and they shed light on the interaction between informal culture and formal institutions, as well as on stakeholders’ influence in corporate policies.",JAR,2021,123,813,"['Consumer Behavior', 'Banking Systems', 'Public Policy', 'Corporate Governance', 'Financial Markets']","['complaints', 'Consumer Financial Protection Bureau', 'social norms', 'consumer protection laws', 'trust', 'financial institutions', 'difference-in-differences', 'fees', 'government agency', 'corporate policies']"
Regulation of Compensation and Systemic Risk: Evidence from the UK,10.1111/1475-679X.12355,"This paper studies the consequences of regulating executive compensation at financial institutions by examining the introduction of the UK Remuneration Code in 2010, which aimed to change the decision‐making horizon and risk‐taking incentives of bank executives. We find that, although both banks and nonbanks show increased contribution and sensitivity to systemic risk in the United Kingdom post‐2010, this increase is lower for UK banks, in line with the intent of the regulation. However, UK banks also experience higher unforced CEO turnover when compared to other UK firms. Therefore, while the regulation may have had the desired effect on systemic risk, it may also have given rise to some unintended consequences.",JAR,2021,110,722,"['Financial Markets', 'Risk Management', 'Banking Systems', 'Corporate Governance', 'Public Policy']","['executive compensation', 'financial institutions', 'UK Remuneration Code', 'decision-making horizon', 'risk-taking incentives', 'bank executives', 'systemic risk', 'regulation', 'unforced CEO turnover', 'unintended consequences']"
Accrual Accounting and Resource Allocation: A General Equilibrium Analysis,10.1111/1475-679X.12365,"This paper evaluates the role of accrual accounting in improving firms' production decisions and resource allocation across firms. I introduce two imperfect firm‐performance measures, cash flows and accounting earnings, into a general equilibrium model with heterogeneous firms under imperfect information. The model demonstrates that improvements in measurement systems lead to more informed decisions on the part of firms and ultimately to allocation of greater resources to high‐productivity firms via the product and input markets. Estimated parameter values are consistent with accrual accounting improving managers' information about current productivity by providing a better measure of historical firm performance. Quantitative analysis suggests that introducing accrual‐accounting information on top of cash‐accounting information leads to a 0.5% increase in aggregate U.S. productivity and a 0.7% increase in aggregate U.S. output via improved resource allocation. The corresponding estimates for China and India, as benchmarks for developing countries, are larger: a 1.5% to 2.3% increase in aggregate productivity and a 2.3% to 3.4% increase in aggregate output. I conclude that accrual accounting plays a significant role in determining aggregate productivity via improved resource allocation.",JAR,2021,178,1306,"['Productivity', 'Economic Growth', 'Financial Markets', 'Capital Allocation', 'Accounting Systems']","['accrual accounting', 'firm performance', 'resource allocation', 'productivity', 'measurement systems', 'information', 'cash flows', 'earnings', 'general equilibrium model', 'quantitative analysis']"
Debiasing the Measurement of Conditional Conservatism,10.1111/1475-679X.12366,"Basu's [“The Conservatism Principle and the Asymmetric Timeliness of Earnings.” <jats:italic>Journal of Accounting and Economics</jats:italic> 24 (1997): 3–37] measurement of conditional conservatism as the asymmetric timeliness of earnings underlies hundreds of studies. However, many subsequent studies cast doubt on the extent to which Basu's measure captures conditional conservatism versus statistical biases or alternative constructs (collectively, “biases”), thereby questioning the validity of the inferences that empirical researchers draw from analyses using the measure. We modify Basu's measure in four simple ways to remove these biases. Our key modification is the inclusion of interactive controls for return variance, a volatility proxy that captures Patatoukas and Thomas’ [“More Evidence of Bias in Differential Timeliness Estimates of Conditional Conservatism.” <jats:italic>The Accounting Review</jats:italic> 86 (2011): 1765–1794] return variance effect and various sources of economic optionality and adjustment costs. This inclusion captures volatility‐related effects on both the <jats:italic>level</jats:italic> of earnings and the <jats:italic>sensitivity</jats:italic> of earnings to returns, and it allows the magnitudes of these effects to vary with the sign of returns. We conduct validation analyses using placebo‐dependent variables, synthetic returns, and nonconditionally conservative earnings components that show our modified Basu measure is largely free of known biases. We further show that our measure is associated with contracting and other economic variables as predicted by theory. Our findings suggest that researchers can rely on our modified Basu measure to identify the determinants and effects of conditional conservatism.",JAR,2021,231,1770,"['Financial Markets', 'Risk Management', 'Corporate Governance', 'Economic Development', 'Regulatory Frameworks']","['Basu', 'conditional conservatism', 'asymmetric timeliness of earnings', 'biases', 'measurement', 'return variance', 'volatility', 'earnings', 'sensitivity', 'determinants']"
Copycat Skills and Disclosure Costs: Evidence from Peer Companies’ Digital Footprints,10.1111/1475-679X.12369,"We examine whether firms that imitate peer companies’ strategies (copycats) profit from such behavior and how their success may cause competitive harm to disclosing companies. We identify copycat companies by tracking the digital footprints of investment companies that view disclosures on the SEC EDGAR Web site. We find that copycat companies are able to identify profitable trades that outperform other trades disclosed by the copycatted companies by 5.5% annually. Such stock‐screening skills are related to investment sophistication and research intensity. Furthermore, copycats inflict greater damage on the performance of disclosing companies when they possess superior copycat skills, when disclosed trading strategies take longer to complete, and when disclosed stock holdings are characterized by high information asymmetry.",JAR,2021,116,834,"['Financial Markets', 'Investment Strategies', 'Market Transparency', 'Corporate Governance', 'Information Asymmetry']","['copycat companies', 'strategies', 'profit', 'competitive harm', 'SEC EDGAR', 'stock-screening', 'investment sophistication', 'research intensity', 'trading strategies', 'information asymmetry']"
Strategic Director Appointments,10.1111/1475-679X.12351,"Recent corporate governance scandals have been attributed to a lack of board independence because of the influence CEOs have over their boards. However, CEOs can also affect board efficacy without compromising its independence by strategically choosing directors. We offer a theoretical framework to examine how CEOs can strategically choose director characteristics (such as expertise and skill set) to influence the inner workings of the board. We examine how director expertise affects the board's equilibrium voting strategies and show that some “passivity” on the part of directors can in fact be desirable equilibrium behavior. More importantly, we show that managers can strategically appoint independent outside directors to influence board voting in their favor. Surprisingly, contrary to what we might expect, we find that opportunistic (principled) managers may not always appoint the least (most) able directors to the board. We also examine whether CEOs would prefer a “captured” board (i.e., an insider‐dominated board) and show that the value of director input (i.e., the board's advising role) and the financial markets can discourage CEOs from pursuing such appointments.",JAR,2021,175,1188,"['Corporate Governance', 'Financial Markets', 'Board Efficacy', 'Director Characteristics', 'Managerial Strategies']","['corporate governance', 'scandals', 'board independence', 'CEOs', 'directors', 'expertise', 'skill set', 'voting strategies', 'outside directors', 'insider-dominated board']"
Non-Answers During Conference Calls,10.1111/1475-679X.12371,"We construct a novel measure of disclosure choice by firms. Our measure is computed using linguistic analysis of conference calls to identify whether a manager's response to an analyst question is a “non‐answer.” Using our measure, about 11% of analyst questions elicit non‐answers from managers, a rate that is stable over time and similar across industries. A useful feature of our measure is that it enables an examination of disclosure choice <jats:italic>within</jats:italic> a call. Analyst questions with a negative tone, greater uncertainty, greater complexity, or requests for greater detail are more likely to trigger non‐answers. We find performance‐related questions tend to be associated with non‐answers, and this association is weaker when performance news is favorable. We also find analyst questions about proprietary information are associated with non‐answers, and this association is stronger when firm competition is more intense.",JAR,2021,138,951,"['Financial Markets', 'Corporate Governance', 'Consumer Behavior', 'Data Privacy', 'Market Transparency']","['disclosure choice', 'measure', 'non-answer', 'analyst questions', 'linguistic analysis', 'conference calls', 'negative tone', 'uncertainty', 'complexity', 'performance-related questions']"
Do Majority-of-Minority Shareholder Voting Rights Reduce Expropriation? Evidence from Related Party Transactions,10.1111/1475-679X.12357,"In the presence of business groups, the expropriation through related party transactions (RPTs) is common and costly to minority shareholders. Using the setting of India's RPT voting rule, I find that a majority‐of‐minority shareholder voting mechanism helps mitigate expropriation. Minority shareholders actively raise their voice against RPT resolutions. A difference‐in‐differences analysis reveals that shareholder voting has a significant deterrence effect on RPT volume. I also find that stock markets react positively to the voting rule's passage, and that the rule makes Indian firms more attractive to foreign institutional investors.",JAR,2021,89,643,"['Corporate Governance', 'Financial Markets', 'Investment Strategies', 'Foreign Institutional Investors', 'Regulatory Frameworks']","['business groups', 'expropriation', 'related party transactions', 'RPT', 'minority shareholders', 'voting mechanism', 'difference-in-differences analysis', 'shareholder voting', 'stock markets', 'foreign institutional investors']"
Analyst Coverage Overlaps and Interfirm Information Spillovers,10.1111/1475-679X.12391,"We offer a novel perspective on the role of sell‐side analysts as information intermediaries in capital markets by documenting a flow of information in a new direction, namely, from analysts to the firms they cover. We use analyst coverage overlaps and patent citations to examine analyst‐induced information spillovers about technology and industry trends. Consistent with analyst coverage–related information flows, firms are more likely to cite another firm's patent if that firm is covered by the same analyst. The effect varies with analysts' specialization, experience, and level of activity. Firms with more analyst‐based connections to peers also show greater corporate innovation. Collectively, our evidence indicates that financial analysts not only reduce information asymmetries between firms and capital market participants but also facilitate the production of business intelligence through feedback and interfirm information spillovers.",JAR,2021,132,951,"['Financial Markets', 'Innovation', 'Corporate Governance', 'Technological Adoption', 'Economic Development']","['analysts', 'information intermediaries', 'capital markets', 'analyst coverage', 'patent citations', 'technology trends', 'industry trends', 'information spillovers', 'corporate innovation', 'information asymmetries']"
Economic Downturns and the Informativeness of Management Earnings Forecasts,10.1111/1475-679X.12367,"Economic downturns create uncertainty about a firm's operations and make it disproportionately harder for outside market participants to assess the firm's prospects. We posit that in this environment, management earnings forecasts will be more informative to investors and analysts. Consistent with this prediction, we find larger stock price reactions and analyst forecast revisions to news in management forecasts during downturns. Holding the amount of news in forecasts constant, stock price reactions to management forecasts are also greater than those to analyst forecasts. We also find that relative to analyst forecasts, management forecast accuracy increases during downturns, suggesting that investors justifiably assess management forecasts as more informative. Overall, we document that macroeconomic conditions create time‐series variation in the informativeness of different sources of information to outside market participants.",JAR,2021,127,943,"['Financial Markets', 'Corporate Governance', 'Economic Development', 'Investment Strategies', 'Market Transparency']","['economic downturns', 'uncertainty', ""firm's operations"", 'management earnings forecasts', 'investors', 'analysts', 'stock price reactions', 'analyst forecast revisions', 'forecast accuracy', 'macroeconomic conditions']"
Strategic Withholding and Imprecision in Asset Measurement,10.1111/1475-679X.12390,"Does managing the production of information add value in economic environments where a manager may claim to be uninformed and withhold unfavorable news? We examine this question by nesting an optimal persuasion mechanism, controlling how evidence is organized, within a voluntary disclosure framework. Information has productive consequences because the firm uses it to make a continuous operating decision. The optimal reporting strategy features coarse information at the most unfavorable reported event if and only if the firm bears penalties for nondisclosure or positive disclosure costs. The model demonstrates the optimality of imprecise information over bad news in a voluntary disclosure environment, and that such imprecision increases the quality of public signals after considering strategic disclosure effects.",JAR,2021,116,823,"['Financial Markets', 'Risk Management', 'Corporate Governance', 'Public Policy', 'Economic Development']","['production of information', 'economic environments', 'manager', 'uninformed', 'news', 'persuasion mechanism', 'voluntary disclosure', 'firm', 'optimal reporting strategy', 'public signals']"
Forced Rating Systems from Employee and Supervisor Perspectives,10.1111/1475-679X.12388,"Many firms use forced rating systems in which supervisors must evaluate employees according to a predefined distribution. We develop new theory suggesting that forced ratings are less likely to enhance performance when supervisors assess subjective dimensions of employee performance (e.g., creativity), but can have some harmful side effects. In a laboratory experiment, employees work on a creative task, and supervisors rate their performance. We do not find any difference in the employees’ performance or effort in a creative task setting between forced and free ratings. We do, however, find that forced ratings create higher stress for employees (ex post stress scales and biomarkers). Higher stress in turn mitigates the positive effect of effort on creativity. Furthermore, we find that actual creativity explains less of supervisors’ ratings of employees’ performance under forced ratings. Instead, factors that are unrelated to actual creativity, such as eloquent writing and strategic gaming behavior, matter more. Results of an additional online experiment confirm that forced ratings work differently in tasks where performance needs to be evaluated subjectively compared to tasks where objective measures are available.",JAR,2021,179,1234,"['Organizational Behavior', 'Labor Market Dynamics', 'Employee Performance', 'Creativity', 'Workforce Automation']","['forced ratings', 'supervisors', 'employee performance', 'creativity', 'performance evaluation', 'laboratory experiment', 'stress', 'effort', 'creativity', 'subjective evaluation']"
"Talk Less, Learn More: Strategic Disclosure in Response to Managerial Learning from the Options Market",10.1111/1475-679X.12368,"We examine how options trading affects voluntary corporate disclosure, so that we can shed light on whether managers’ potential learning from the options market induces them to withhold disclosure. We find that options trading reduces the likelihood and frequency of management earnings forecasts, suggesting that firms that have active options trading on their stock make fewer voluntary disclosures. This finding is in accordance with the theoretical prediction that managers strategically reduce disclosure to avoid crowding out informed trading, which can give them informative feedback for their decision making. In support of the managerial learning channel, we document a real effect of reduced disclosure: When managers disclose less, options trading has a stronger positive effect on firm investment efficiency. The more pronounced effect of options trading on management earnings forecasts when the need for managerial learning is higher further supports the learning channel.",JAR,2021,142,986,"['Financial Markets', 'Corporate Governance', 'Investment Strategies', 'Managerial Learning', 'Market Transparency']","['options trading', 'voluntary corporate disclosure', 'management earnings forecasts', 'firms', 'voluntary disclosures', 'informed trading', 'crowding out', 'managerial learning', 'firm investment efficiency', 'positive effect']"
Multimarket Contact and Mutual Forbearance in Audit Markets,10.1111/1475-679X.12406,"Competition in audit markets is an important topic but direct tests of market competition have been limited. In this paper, we examine how audit firms behave when they are confronted with competition from another firm in a wide range of industry segments in a local market. Sharing a large number of market segments can lead to mutual forbearance among audit rivals. Such mutual forbearance is likely to manifest as higher audit fees in a market because rivals are hesitant to aggressively compete in the face of potential competitive retaliation. Using a sample of 25,662 observations from 2004 to 2015, we find evidence that supports this argument as proxied by the extent that audit firms compete in the same industries in the same locations. This result persists after controlling for several tight fixed‐effects specifications based on time, location, industry, and market segments. In supplementary tests, we also find that the likelihood of client switching is negatively associated with the multi‐industry contact of the incumbent, but clients that do switch are more likely to choose an alternative audit firm that confronts the predecessor auditor in fewer market segments. Our evidence is consistent with mutual forbearance among rival audit firms when confronted with the same competitor in different market segments.",JAR,2021,207,1329,"['Competition in audit markets', 'Corporate Governance', 'Market Transparency', 'Business Strategy', 'Regulatory Frameworks']","['competition', 'audit firms', 'market segments', 'mutual forbearance', 'audit fees', 'industry', 'locations', 'client switching', 'multi-industry contact', 'rival audit firms']"
Cash-for-Information Whistleblower Programs: Effects on Whistleblowing and Consequences for Whistleblowers,10.1111/1475-679X.12370,"We study the effect of financial incentives on whistleblowing and the consequences for whistleblowers under the cash‐for‐information program of the False Claims Act (FCA). Exploiting appeals‐court decisions that increase financial incentives for whistleblowing, we find that greater incentives increase the number of lawsuits filed with the regulator, the regulator's investigation length, the percentage of intervened lawsuits, and the percentage of settled lawsuits. Using information from lawsuits, a professional networking site, and background checks for up to 1,168 whistleblowers, we find that whistleblowers’ long‐term annual income decreases by approximately 8.6% or $6,500 but do not find evidence of social costs. In comparison, whistleblowers can expect to receive approximately $140,000 for blowing the whistle. Overall, our results suggest that the FCA cash‐for‐information program helps expose corporate misconduct and helps compensate whistleblowers for their income loss.",JAR,2021,133,988,"['Whistleblowing', 'Financial Markets', 'Corporate Governance', 'Income Inequality', 'Public Policy']","['financial incentives', 'whistleblowing', 'False Claims Act', 'lawsuits', 'regulator', 'investigation', 'intervened', 'settled', 'income loss', 'corporate misconduct']"
Do Investors Care Who Did the Audit? Evidence from Form AP,10.1111/1475-679X.12392,"In early 2017, the Public Company Accounting Oversight Board (PCAOB) mandated the disclosure of audit participants, including the lead audit partner and other audit firms participating in the audit (“component auditors”). In this study, we examine whether investors use these disclosures in a way that influences their investment decisions, a primary goal of the PCAOB. Using trading volume, absolute abnormal returns, and bid–ask spreads, we find little evidence of a significant investor response following the disclosure of partner identity or component auditor participation in the first three years of the requirement. We also examine instances where these disclosures are most likely to be informative (e.g., partners associated with restatements or component auditors with PCAOB deficiencies) and find no significant investor response. Taken together, we find little evidence that capital markets respond to partner and component auditor identity in the United States.",JAR,2021,141,975,"['Financial Markets', 'Regulatory Frameworks', 'Capital Markets', 'Investment Strategies', 'Public Policy']","['PCAOB', 'audit participants', 'lead audit partner', 'audit firms', 'disclosure', 'investors', 'investment decisions', 'trading volume', 'abnormal returns', 'bid-ask spreads']"
The Disciplinary Effect of Social Media: Evidence from Firms' Responses to Glassdoor Reviews,10.1111/1475-679X.12393,"We examine how firms respond to the increased workplace transparency due to the coverage on Glassdoor.com, which collects and disseminates reviews on employee satisfaction. Leveraging the staggered timing of first‐time reviews on Glassdoor, we use a difference‐in‐differences design and find that after being reviewed on Glassdoor, firms improve their workplace practices, measured by corporate social responsibility scores on employee relations and diversity. Consistent with firms improving their workplace practices to remain competitive in the labor market, we find that such improvement concentrates in firms with negative initial reviews and with high labor intensity. We also find firms increase disclosures about workplace practices after being reviewed and the increase concentrates in firms with high institutional ownership, consistent with firms providing more disclosures to appease investors. Overall, our findings suggest that the increased workplace transparency through social media has a disciplinary effect on corporate policies.",JAR,2021,143,1048,"['Corporate Social Responsibility', 'Labor Market Dynamics', 'Market Transparency', 'Corporate Governance', 'Financial Markets']","['firms', 'workplace transparency', 'Glassdoor.com', 'reviews', 'employee satisfaction', 'corporate social responsibility', 'labor market', 'workplace practices', 'institutional ownership', 'social media']"
Truncating Optimism,10.1111/1475-679X.12397,"Consensus estimates, formed by taking an average of analyst forecasts, play an important role in capital markets (e.g., provide investors with a proxy for earnings expectations). We show I/B/E/S, a prominent information intermediary, removes 6% of one‐quarter‐ahead earnings forecasts before calculating the consensus, and among the 23% of firm‐quarters with at least one forecast removed, this figure rises to 16%. We provide evidence suggesting that I/B/E/S subjectively applies policies that govern its removal decisions and accepts feedback from firms that contributes to this subjectivity. Specifically, we find optimistic forecasts are removed more frequently than pessimistic forecasts, and such asymmetry increases further when removals allow firms to meet or beat the consensus. Furthermore, we find that these effects are more pronounced when managers’ incentives to just meet or beat the consensus are stronger (i.e., higher subsequent insider sales or higher compensation delta), or managers have greater ability to influence I/B/E/S. Lastly, we demonstrate that these subjective removals benefit I/B/E/S by improving consensus accuracy, explaining why I/B/E/S is willing to be influenced by firms.",JAR,2021,172,1210,"['Financial Markets', 'Corporate Governance', 'Investor Behavior', 'Insider Trading', 'Forecasting Accuracy']","['Consensus estimates', 'analyst forecasts', 'capital markets', 'earnings expectations', 'I/B/E/S', 'information intermediary', 'forecasts', 'removal decisions', 'optimistic forecasts', 'pessimistic forecasts']"
Occupational Licensing and Accountant Quality: Evidence from the 150-Hour Rule,10.1111/1475-679X.12408,"I examine the effects of occupational licensing on the quality of certified public accountants (CPAs). I exploit the staggered adoption of the 150‐hour rule, which increases the educational requirements for a CPA license. The analysis shows that the rule decreases the number of entrants into the profession, reducing both low‐ and high‐quality candidates. Labor market proxies for quality find no difference between 150‐hour rule CPAs and the rest. Moreover, rule CPAs exit public accounting at similar rates and have comparable writing quality to their nonrule counterparts. Overall, these findings are consistent with the theoretical argument that increases in licensing requirements restrict the supply of entrants and do little to improve quality in the labor market.",JAR,2022,115,772,"['Labor Market Dynamics', 'Occupational Licensing', 'Public Policy', 'Economic Development', 'Supply Chain Resilience']","['occupational licensing', 'certified public accountants', 'CPA', '150-hour rule', 'educational requirements', 'labor market', 'quality', 'entrants', 'public accounting', 'licensing requirements']"
The Innovation and Reporting Consequences of Financial Regulation for Young Life-Cycle Firms,10.1111/1475-679X.12398,"Firm life‐cycle stage reflects a firm's current strategic direction toward exploration independent of age or size. We provide evidence that young life‐cycle firms are particularly vulnerable to negative innovation consequences from financial regulation but do not appear to experience any compensating financial reporting quality (FRQ) benefits. Using a generalized difference‐in‐differences design around Sarbanes Oxley Act of 2002 (SOX), we document a significant reduction in both research and development (R&amp;D) spending and innovation outputs for young life‐cycle stage firms after regulation. Declines in innovation manifest both from the diversion of scarce resources and from the imposition of an organizational culture mismatched to the pursuit of explorative innovation, resulting in a less generalizable and less diversified patent portfolio. However, we find no evidence that improvements to FRQ materialize to offset these costs. Event study analyses suggest that this negative impact was expected by market participants, and postregulation returns confirm this expectation.",JAR,2022,149,1090,"['Innovation', 'Financial Markets', 'Regulatory Frameworks', 'Business Strategy', 'Venture Capital']","['firm life-cycle stage', 'exploration', 'financial regulation', 'innovation', 'young firms', 'Sarbanes Oxley Act', 'research and development', 'R&D spending', 'patent portfolio', 'market participants']"
"Personal Financial Distress, Limited Attention",10.1111/1475-679X.12409,"By linking sell‐side equity analysts to their deed records and LinkedIn profiles, I show that analysts with higher exposure to negative wealth shocks issue more pessimistic and less accurate forecasts. The effects are stronger when analysts have higher leverage in their homes and face career concerns. I also find that stocks recommended by exposed analysts underperform those of nonexposed counterparts, by an amount that is significant and economically large in magnitude. The results remain robust to unobserved skill differences, the potential endogeneity of housing prices, the self‐selection of analysts into neighborhoods with certain traits, and placebo tests where housing wealth shocks are randomized across analysts. Collectively, this study provides new evidence on if and how personal wealth shocks impact analysts' work productivity and forecast behavior.",JAR,2022,125,870,"['Financial Markets', 'Risk Management', 'Economic Development', 'Housing Market Trends', 'Wealth Distribution']","['sell-side equity analysts', 'wealth shocks', 'pessimistic forecasts', 'accurate forecasts', 'leverage', 'career concerns', 'stock recommendations', 'underperform', 'housing wealth shocks', 'work productivity']"
The Role of Disclosure and Information Intermediaries in an Unregulated Capital Market: Evidence from Initial Coin Offerings,10.1111/1475-679X.12404,"Using an international sample of 2,113 initial coin offerings (ICOs), we explore the role of disclosure and information intermediaries in the unregulated crypto‐tokens market. First, we document substantial cross‐sectional variation in the voluntary disclosure practices of ventures seeking to raise capital through ICOs, such as the extent of information released in a prospectus‐type document called a white paper; releasing the technical source code; and communicating through social media platforms. Second, we find that, even with limited disclosure verifiability, ventures with higher levels of disclosure have a greater ability to raise capital. Finally, we find that this association is stronger in the presence of mechanisms that lend credibility to ventures’ voluntary disclosures, such as internal governance practices or external scrutiny from information intermediaries. Overall, our results suggest that voluntary disclosure and information intermediaries facilitate the functioning of ICOs as an alternative capital market.",JAR,2022,142,1038,"['Initial Coin Offerings', 'Financial Markets', 'Corporate Governance', 'Venture Capital', 'Regulatory Frameworks']","['ICOs', 'disclosure', 'information intermediaries', 'crypto-tokens market', 'white paper', 'source code', 'social media platforms', 'capital raising', 'verifiability', 'governance practices']"
Man Versus Machine: Complex Estimates and Auditor Reliance on Artificial Intelligence,10.1111/1475-679X.12407,"Audit firms are investing billions of dollars to develop artificial intelligence (AI) systems that will help auditors execute challenging tasks (e.g., evaluating complex estimates). Although firms assume AI will enhance audit quality, a growing body of research documents that individuals often exhibit “algorithm aversion”—the tendency to discount computer‐based advice more heavily than human advice, although the advice is identical otherwise. Therefore, we conduct an experiment to examine how algorithm aversion manifests in auditor judgments. Consistent with theory, we find that auditors receiving contradictory evidence from their firm's AI system (instead of a human specialist) propose smaller adjustments to management's complex estimates, particularly when management develops their estimates using relatively objective (vs. subjective) inputs. Our findings suggest auditor susceptibility to algorithm aversion could prove costly for the profession and financial statements users.",JAR,2022,131,992,"['Artificial Intelligence', 'Audit Firms', 'Financial Markets', 'Risk Management', 'Behavioral Economics']","['audit firms', 'artificial intelligence', 'AI systems', 'auditors', 'algorithm aversion', 'experiment', 'auditor judgments', 'contradictory evidence', 'complex estimates', 'financial statements users']"
Competitive Externalities of Tax Cuts,10.1111/1475-679X.12403,"We examine how tax cuts that benefit some firms are related to the economic performance of their direct competitors. Consistent with tax cuts decreasing the cost of initiating competitive strategies, we find that a decrease in the tax burden for only a specific group of firms in the U.S. economy (i.e., “rivals”) has a negative economic effect on the performance of its direct competitors not directly exposed to the same tax cut (i.e., “competitors”). This negative externality is stronger when the relatively higher taxed competitors (1) are financially constrained, (2) operate in more competitive markets, (3) have similar products to their lower taxed rivals, (4) face rivals that retain more of their cash tax savings due to lower dividends and share repurchases, and (5) face lower taxed, but financially constrained, rivals. We also find that shareholders and lenders price the negative externality manifested in these competitors’ economic performance.",JAR,2022,148,962,"['Taxation', 'Financial Markets', 'Corporate Governance', 'Economic Development', 'Fiscal Policy']","['tax cuts', 'firms', 'economic performance', 'competitors', 'rivals', 'negative externality', 'financial constraints', 'competitive markets', 'products', 'shareholders']"
How is Earnings News Transmitted to Stock Prices?,10.1111/1475-679X.12394,"We examine the speed and mechanism of the price discovery process following earnings announcements in the after‐hours market, a very illiquid trading environment. Prices reflect earnings surprises mostly through changes in quotes rather than through trades. Following positive announcement surprises, ask prices adjust quickly while bid prices are slower to adjust, and vice versa for negative surprises. Returns computed from trade prices underestimate the speed and magnitude of price reactions following announcements relative to returns computed from quotes. These findings emphasize the importance of using quotes and not trade prices when examining intraday price discovery. Because firm announcements such as earnings generally occur in the after‐hours market, using quotes is crucial as trading is sparse. We further illustrate the importance of quotes when examining the price discovery process around analyst recommendation revisions.",JAR,2022,132,944,"['Financial Markets', 'Market Transparency', 'Corporate Governance', 'Investment Strategies', 'Trade and Globalization']","['price discovery', 'earnings announcements', 'after-hours market', 'quotes', 'trades', 'surprises', 'returns', 'intraday', 'trading', 'analyst recommendation revisions']"
Do Managers Issue More Voluntary Disclosure When GAAP Limits Their Reporting Discretion in Financial Statements?,10.1111/1475-679X.12401,"We examine whether managers provide more voluntary disclosure when GAAP limits their reporting discretion in financial statements. We find managers are more likely to disclose non‐GAAP earnings, issue more management forecasts, and provide longer yet more readable management discussion and analysis (MD&amp;A) disclosures when GAAP limits their discretion. These effects are stronger when there is greater demand for information and better monitoring. In contrast, these effects are weaker when managers have incentives to manage earnings. Difference‐in‐differences analyses around standard changes provide further evidence that managers make more non‐GAAP adjustments and are more likely to discuss the standard and its underlying transaction in the MD&amp;A when a new standard limits their discretion more than its predecessor. Collectively, our results suggest managers use voluntary disclosure channels to convey information when GAAP limits their ability to recognize such information in financial statements.",JAR,2022,139,1016,"['Financial Markets', 'Corporate Governance', 'Regulatory Frameworks', 'Accounting Standards', 'Information Disclosure']","['managers', 'voluntary disclosure', 'GAAP', 'non-GAAP earnings', 'management forecasts', 'MD&A disclosures', 'reporting discretion', 'financial statements', 'incentives', 'difference-in-differences']"
Managerial Optimism and Debt Covenants,10.1111/1475-679X.12402,"This paper studies the effects of managerial optimism on the optimal design of debt covenants. We find that managers who are more optimistic about the future success of their investment ideas provide lenders with greater control rights via tighter covenants. This is optimal for optimistic managers even though they understand that tighter covenants increase the probability of covenant violations and lead to excessive lender intervention. The broad reason for this result is that optimists wish to write contracts that repay lenders more frequently in bad states rather than in good states, and the only way to achieve this is by granting lenders more control rights. Our model generates new predictions and offers a novel explanation for the empirical evidence that covenants in debt contracts are set very tightly and are often violated.",JAR,2022,132,841,"['Financial Markets', 'Risk Management', 'Debt Management', 'Investment Strategies', 'Corporate Governance']","['managerial optimism', 'debt covenants', 'lenders', 'control rights', 'covenant violations', 'lender intervention', 'contracts', 'bad states', 'good states', 'empirical evidence']"
Measuring Risk Information,10.1111/1475-679X.12413,"We develop a measure of how information events impact investors' expectations of risk. The measure is broadly applicable and simple to implement. We derive it from an option‐pricing model, where investors anticipate an announcement that simultaneously conveys information on the announcer's expected future cash flows and risk profile. We empirically implement the measure using firms' earnings announcements, showing that it closely aligns with our model's predictions and offers strong forecasting power for firms' risk profiles, costs of capital, and future investments. We further highlight pitfalls of using simple changes in option‐implied volatilities to study information gleaned from earnings announcements. Finally, we apply our measure to study disclosure regulation, the efficacy of text‐based proxies, and market‐wide events, which we use to illustrate our measure's uses, and illuminate its potential limitations.",JAR,2022,129,927,"['Financial Markets', 'Risk Management', 'Corporate Governance', 'Investment Strategies', 'Regulatory Frameworks']","['information events', ""investors' expectations"", 'risk', 'option-pricing model', 'earnings announcements', 'forecasting power', ""firms' risk profiles"", 'costs of capital', 'investments', 'disclosure regulation']"
Coins for Bombs: The Predictive Ability of On-Chain Transfers for Terrorist Attacks,10.1111/1475-679X.12430,"This study examines whether we can learn from the behavior of blockchain‐based transfers to predict the financing of terrorist attacks. We exploit blockchain transaction transparency to map millions of transfers for hundreds of large on‐chain service providers. The mapped data set permits us to empirically conduct several analyses. First, we analyze abnormal transfer volume in the vicinity of large‐scale highly visible terrorist attacks. We document evidence consistent with heightened activity in coin wallets belonging to unregulated exchanges and mixer services—central to laundering funds between terrorist groups and operatives on the ground. Next, we use forensic accounting techniques to follow the trails of funds associated with the Sri Lanka Easter bombing. Insights from this event corroborate our findings and aid in our construction of a blockchain‐based predictive model. Finally, using machine‐learning algorithms, we demonstrate that fund trails have predictive power in out‐of‐sample analysis. Our study is informative to researchers, regulators, and market players in providing methods for detecting the flow of terrorist funds on blockchain‐based systems using accounting knowledge and techniques.",JAR,2022,170,1220,"['Blockchain Applications', 'Financial Markets', 'Risk Management', 'Terrorism Financing', 'Machine Learning Applications']","['blockchain', 'transfers', 'terrorist attacks', 'financing', 'transaction transparency', 'on-chain service providers', 'forensic accounting', 'Sri Lanka Easter bombing', 'predictive model', 'machine-learning algorithms']"
Predicting Future Earnings Changes Using Machine Learning and Detailed Financial Data,10.1111/1475-679X.12429,"We use machine learning methods and high‐dimensional detailed financial data to predict the direction of one‐year‐ahead earnings changes. Our models show significant out‐of‐sample predictive power: the area under the receiver operating characteristics curve ranges from 67.52% to 68.66%, significantly higher than the 50% of a random guess. The annual size‐adjusted returns to hedge portfolios formed based on the prediction of our models range from 5.02% to 9.74%. Our models outperform two conventional models that use logistic regressions and small sets of accounting variables, and professional analysts’ forecasts. Analyses suggest that the outperformance relative to the conventional models stems from both nonlinear predictor interactions missed by regressions and the use of more detailed financial data by machine learning.",JAR,2022,117,832,"['Machine Learning Applications', 'Financial Markets', 'Investment Strategies', 'Economic Development', 'Corporate Governance']","['machine learning', 'financial data', 'earnings changes', 'predictive power', 'hedge portfolios', 'logistic regressions', 'accounting variables', 'professional analysts', 'nonlinear predictor interactions', 'outperformance']"
"Managers’ Body Expansiveness, Investor Perceptions, and Firm Forecast Errors and Valuation",10.1111/1475-679X.12426,"We examine the relation between a measure of managers’ physical display—body expansiveness—and favorable reporting practices (in firm forecasts and valuation information) and performance (survival and funding success). We videotape 154 entrepreneurs pitching their business ideas, and use computer vision software to obtain information about speakers’ movements. We show that physical expansiveness correlates with higher forecast errors and proposed firm valuations and lower survival rates yet higher likelihood of funding success. We argue that investors may incorrectly interpret nonverbal communication in their assessments of entrepreneurs and propose a behavioral explanation. We further corroborate the proposed mechanism by studying investor perceptions of entrepreneurs’ personal characteristics. Overall, we shed light on an overlooked source of information—nonverbal behavior—and relate it to firm forecasting, valuation, survival, and financing success, which are important factors in the assessment of investment opportunities, deal structure, and monitoring.",JAR,2022,138,1073,"['Entrepreneurship', 'Behavioral Economics', 'Venture Capital', 'Corporate Governance', 'Investment Strategies']","['managers', 'physical display', 'body expansiveness', 'reporting practices', 'firm forecasts', 'valuation information', 'performance', 'survival', 'funding success', 'nonverbal behavior']"
Leveraging Big Data to Study Information Dissemination of Material Firm Events,10.1111/1475-679X.12419,"Could real‐time big data help unravel material firm events? How would it compare with firm disclosure and traditional media in terms of timeliness and completeness? Could big data provide incremental value‐relevant information for investors? With these questions in mind, we use a novel data set of cell phone “pings” (i.e., geolocation signals from mobile devices) to track production disruptions (outages)––material events for U.S. oil refineries. We first validate the construct by examining the effects of outages on local gas prices and firms’ accounting performance. Our main analyses show that (1) refining firms do not voluntarily disclose refinery outages identified by cell phone pings; (2) traditional media cover only a small portion of ping‐based outages; (3) the stock market finds ping‐based outages to be value relevant but incorporates the information with delay. Further analysis suggests that given the incomplete media coverage and lack of firm disclosure, investors appear to learn the financial impact of such outages through subsequent earnings announcements. Our evidence has implications for regulators such as the U.S. Energy Information Administration and the Securities and Exchange Commission as they continue to evaluate both the compliance and usefulness of disclosures for material firm events such as production disruptions.",JAR,2022,198,1357,"['Financial Markets', 'Energy Transition', 'Corporate Governance', 'Regulatory Frameworks', 'Market Transparency']","['real-time big data', 'material firm events', 'firm disclosure', 'traditional media', 'timeliness', 'completeness', 'incremental value-relevant information', 'investors', 'cell phone pings', 'production disruptions']"
Assessing Human Information Processing in Lending Decisions: A Machine Learning Approach,10.1111/1475-679X.12427,"Effective financial reporting requires efficient information processing. This paper studies factors that determine efficient information processing. I exploit a unique small business lending setting where I am able to observe the entire codified demographic and accounting information set that loan officers use to make decisions. I decompose the loan officers’ decisions into a part driven by codified hard information and a part driven by uncodified soft information. I show that a machine learning model substantially outperforms loan officers in processing hard information. Loan officers can only process a sparse set of useful hard information identified by the machine learning model and focus their attention on salient signals such as large jumps in cash flows. However, the loan officers use salient hard information as “red flags” to highlight where to acquire more soft information. This result suggests that salient information is an attention allocation device: It guides humans to allocate their limited cognitive resources to acquire soft information, a task in which humans have an advantage over machines.",JAR,2022,167,1123,"['Machine Learning Applications', 'Credit Markets', 'Financial Markets', 'Banking Systems', 'Behavioral Economics']","['financial reporting', 'information processing', 'small business lending', 'loan officers', 'codified information', 'accounting information', 'machine learning model', 'hard information', 'soft information', 'cognitive resources']"
"Face Value: Trait Impressions, Performance Characteristics, and Market Outcomes for Financial Analysts",10.1111/1475-679X.12428,"Using machine learning–based algorithms, we measure key impressions about sell‐side analysts using their LinkedIn photos. We find that impressions of analysts’ trustworthiness (<jats:italic>TRUST</jats:italic>) and dominance (<jats:italic>DOM</jats:italic>) are positively associated with forecast accuracy, especially after recent in‐person meetings between analysts and firm managers. High <jats:italic>TRUST</jats:italic> also enhances stock return sensitivity to forecast revisions, especially for stocks with high institutional ownership. In contrast, the impression of analysts’ attractiveness (<jats:italic>ATTRACT</jats:italic>) is only positively associated with accuracy for new analysts or when a firm has a new CEO or CFO. Furthermore, while high <jats:italic>DOM</jats:italic> helps male analysts’ chances of attaining All‐Star status, it reduces female analysts’ accuracy and the likelihood of winning the All‐Star award. In addition, the relation between <jats:italic>TRUST</jats:italic> and accuracy is modulated by the disclosure environment and is attenuated by Regulation Fair Disclosure. Our results suggest that face impressions influence analysts’ access to information and the perceived credibility of their reports.",JAR,2022,150,1239,"['Financial Markets', 'Machine Learning Applications', 'Corporate Governance', 'Gender Equality', 'Market Transparency']","['machine learning', 'algorithms', 'sell-side analysts', 'LinkedIn photos', 'trustworthiness', 'dominance', 'forecast accuracy', 'stock return sensitivity', 'attractiveness', 'All-Star status']"
Delays in Banks’ Loan Loss Provisioning and Economic Downturns: Evidence from the U.S. Housing Market,10.1111/1475-679X.12415,"I study whether banks’ loan loss provisioning contributes to economic downturns, by examining the U.S. housing market. Specifically, I examine the aggregate effects of banks’ delayed loan loss recognition (DLR) on house prices during the Great Recession and the channels through which these potential effects arose. I construct ZIP‐code‐level exposure to banks’ DLR before the crisis and compare high‐ and low‐exposure ZIP codes during the crisis to examine the aggregate effects of banks’ DLR on the housing market. I find that high‐exposure ZIP codes experienced larger decreases in mortgage supply, larger increases in distressed sales, and larger decreases in house prices during the crisis. In addition, I conduct individual bank‐level analyses and find that high‐DLR banks reduced their mortgage supply more than low‐DLR banks, and mortgages issued by high‐DLR banks were more likely to become distressed during the crisis. Taken together, these findings suggest that banks’ DLR was associated with nontrivial effects on the housing market during the Great Recession, and the effects of DLR on house prices were likely driven by both the credit‐crunch and distressed‐sales channels.",JAR,2022,178,1188,"['Banking Systems', 'Credit Markets', 'Housing Market Trends', 'Monetary Policy', 'Financial Markets']","['banks', 'loan loss provisioning', 'economic downturns', 'U.S. housing market', 'delayed loan loss recognition', 'Great Recession', 'house prices', 'mortgage supply', 'distressed sales', 'ZIP-code-level exposure']"
Do Mandatory Disclosure Requirements for Private Firms Increase the Propensity of Going Public?,10.1111/1475-679X.12396,"This paper investigates the effect of mandatory disclosure requirements for private firms on their decision to go public. Using detailed project‐level data for biopharmaceutical firms, we explore the effects of a legal reform that exogenously required firms to publicly disclose information regarding clinical trials. Exploiting cross‐sectional heterogeneity in firms' exposure to the regulation based on their internal development portfolios, we find that affected firms are significantly more likely to transition to public equity markets following the reform. Moreover, firms that go public because of the increased disclosure requirements subsequently reduce the size of their project portfolios while shifting to safer investments acquired externally. We provide additional evidence for the main hypothesis using a second setting: a 2006 German reform which enhanced the enforcement of mandatory disclosure requirements for private firms. The results suggest that private firms' general information environment and disclosure requirements influence the propensity of going public.",JAR,2022,148,1085,"['Financial Markets', 'Public Policy', 'Regulatory Frameworks', 'Corporate Governance', 'Healthcare Innovation']","['mandatory disclosure requirements', 'private firms', 'public equity markets', 'biopharmaceutical firms', 'legal reform', 'clinical trials', 'project portfolios', 'safer investments', 'external acquisitions', 'information environment']"
Do U.S. Investors Value Foreign Component Auditors?,10.1111/1475-679X.12412,"We examine whether investors consider foreign component auditors when assessing the value of U.S. multinational corporations (MNCs) using two sets of Public Company Accounting Oversight Board (PCAOB) international regulatory events. We find investors react negatively when the PCAOB is denied access to inspect foreign component auditors in jurisdictions where a U.S. MNC has significant operations and positively when those countries later allow inspection. For foreign component auditors that are inspected, we find investors react positively when they receive clean inspection reports and negatively when they fail to remediate quality control deficiencies. Consistent with PCAOB international oversight providing additional assurance about foreign component auditor quality, our collective results indicate investors consider foreign component auditors when valuing U.S. MNCs.",JAR,2022,117,880,"['Financial Markets', 'Corporate Governance', 'Regulatory Frameworks', 'Investment Strategies', 'Risk Management']","['investors', 'foreign component auditors', 'U.S. multinational corporations', 'PCAOB', 'international regulatory events', 'inspection', 'jurisdictions', 'operations', 'quality control deficiencies', 'valuation']"
Auditors Under Fire: The Association Between Audit Errors and the Career Setbacks of Individual Auditors,10.1111/1475-679X.12399,"This paper examines whether and how individual auditors are disciplined for audit errors. Taking advantage of the long history of auditor identity data from China, we find that signing auditors with client restatements are likely to lose the privilege of signing the audit reports of public clients. However, auditors can avoid this consequence by issuing a modified audit opinion to warn of the potential misstatement. We show that auditors are more likely to be disciplined when their firms operate in less concentrated audit markets. Finally, we find positive outcomes from the disciplinary action of the audit firms. Firms that discipline their auditors for restatements have a larger decrease in the rate of client restatements and a larger increase in market share, compared to nondisciplining firms. Their clients have a higher earnings response coefficient after the disciplinary action. In summary, our results suggest that individual auditors in China can face career setbacks when they produce poor quality audits.",JAR,2022,157,1025,"['Corporate Governance', 'Financial Markets', 'Audit Markets', 'Economic Development', 'Market Share']","['auditors', 'discipline', 'audit errors', 'China', 'restatements', 'modified audit opinion', 'audit market concentration', 'disciplinary action', 'audit firms', 'earnings response coefficient']"
It's a Small World: The Importance of Social Connections with Auditors to Mutual Fund Managers’ Portfolio Decisions,10.1111/1475-679X.12395,"We find that mutual funds whose managers are socially connected with firm auditors hold more shares of these firms and generate superior portfolio returns. Cross‐sectional results reveal that the relation between social connections and mutual fund stockholdings is more pronounced: when the social connections are stronger, when the auditor is in a better position or has stronger incentives to acquire private information, when the fund manager exercises more power, for small audit firms, for auditors in areas with poor investor protection, and for public firms with greater business opacity or private information. Other results are consistent with fund managers electing to schedule their corporate site visits to coincide with the fieldwork of their connected auditors, as would be expected if fund managers time their visits to meet with these auditors to facilitate information transfer. Additionally, we observe associations between fund trading prior to earnings surprises and audit opinions, and the presence of social connections between fund managers and firm auditors. Finally, we show that mutual funds and firms in which they invest tend to appoint connected auditors and pay them higher fees. Collectively, we document empirical patterns that would arise if socially connected auditors and mutual fund managers share information.",JAR,2022,200,1346,"['Financial Markets', 'Corporate Governance', 'Investment Strategies', 'Market Transparency', 'Business Strategy']","['mutual funds', 'managers', 'social connections', 'auditors', 'portfolio returns', 'private information', 'audit firms', 'investor protection', 'public firms', 'information transfer']"
How Do Firms Respond to Corporate Taxes?,10.1111/1475-679X.12405,"Using a novel empirical approach and newly available administrative data on U.S. tax filings, we estimate the corporate elasticity of taxable income, decompose the elasticity into economic responses versus other tax‐motivated “accounting” transactions, and determine how responsiveness varies depending on accounting method, firm size, and interest rate. In response to a 10% increase in the expected marginal tax rate, private U.S. firms decrease taxable income by 9.1%, which indicates a discernibly more elastic response than prevailing estimates. This response reflects a decrease in taxable income of 3.0% arising from real economic responses to a firm's scale of operations and 6.1% arising from accounting transactions via (for example) revenue and expense timing. Responsiveness to the corporate tax rate is more elastic if a firm uses cash (9.9%) rather than accrual accounting (7.4%), if the firm is small (9.9%) rather than large (8.6%), and if the firm discounts future cash flows at a lower rate.",JAR,2022,153,1009,"['Taxation', 'Corporate Governance', 'Fiscal Policy', 'Economic Development', 'Financial Markets']","['novel empirical approach', 'administrative data', 'U.S. tax filings', 'corporate elasticity', 'taxable income', 'economic responses', 'accounting transactions', 'firm size', 'interest rate', 'marginal tax rate']"
The Long-Term Consequences of Short-Term Incentives,10.1111/1475-679X.12410,"This paper studies the long‐term consequences of actions induced by vesting equity, a measure of short‐term incentives. Vesting equity is positively associated with the probability of a firm repurchasing shares, the amount of shares repurchased, and the probability of the firm announcing a merger and acquisition (M&amp;A). However, it is also associated with more negative long‐term returns over two to three years following repurchases and four years following M&amp;A, as well as future M&amp;A goodwill impairment. These results are inconsistent with CEOs buying underpriced stock or companies to maximize long‐run shareholder value, but consistent with these actions being used to boost the short‐term stock price and thus equity sale proceeds. CEOs sell their own stock shortly after using company money to buy the firm's stock, also inconsistent with repurchases being motivated by undervaluation.",JAR,2022,133,905,"['Financial Markets', 'Corporate Governance', 'Economic Development', 'Investment Strategies', 'Stock Markets']","['vesting equity', 'short-term incentives', 'repurchasing shares', 'merger and acquisition', 'long-term returns', 'shareholder value', 'stock price', 'CEOs', 'undervaluation', 'stock sale proceeds']"
The Joint Influence of Information Push and Value Relevance on Investor Judgments and Market Efficiency,10.1111/1475-679X.12400,"We use experimental markets to examine how pushing investment information and the value relevance of that information interact to influence investors’ value estimate accuracy and market price efficiency. Developments in technology allow information to be pushed to investors anytime and anywhere. However, in addition to value‐relevant information, pushed information often includes information that is irrelevant for assessing firm value. Drawing on psychology theory, we find that pushing information has divergent effects depending on the value relevance of the information. Pushing only value‐relevant information increases investors’ processing of the information and leads to more accurate value estimates and market prices than when not pushed. In contrast, pushing a mix of value‐relevant and value‐irrelevant information reduces investors’ processing of <jats:italic>value‐relevant</jats:italic> information, leading to less accurate value estimates and market prices due to poorer acquisition and integration of information than when not pushed or when only value‐relevant information is pushed. Collectively, our results reveal a dark side to push technologies, particularly with the growing presence of value‐irrelevant information.",JAR,2022,165,1244,"['Financial Markets', 'Investment Strategies', 'Information Technology', 'Behavioral Economics', 'Market Transparency']","['experimental markets', 'investment information', 'value relevance', 'investors', 'accuracy', 'market price efficiency', 'technology', 'value estimates', 'value-irrelevant information', 'push technologies']"
"Public Firm Presence, Financial Reporting, and the Decline of U.S. Manufacturing",10.1111/1475-679X.12411,"We examine the relation between public firm presence and import competition. The information created by public firm presence may provide importers with insights they can use for competing with domestic firms. Consistent with this possibility, we document a positive relation between public firm presence and import competition. We find similar results when using differences in the expected costs of the Sarbanes‐Oxley Act as a source of plausibly exogenous variation in public firm presence after the act. We use differences in the proportion of German firms reporting publicly around a major enforcement reform as a natural mechanism experiment, and find evidence that financial reporting is a channel through which public firm presence relates to import competition. Additional mechanism tests and a falsification test estimated in the United Kingdom, where public and most private firms report publicly, further support this inference. In total, our evidence is consistent with foreign competitors using the information created by public firm presence, including what public firms disclose in financial reports, to compete with domestic firms. Consequently, our results provide evidence of competitors using the proprietary information disclosed in financial reports to compete with the disclosing firms and of information frictions affecting trade.",JAR,2022,196,1353,"['Trade and Globalization', 'Corporate Governance', 'Financial Markets', 'Regulatory Frameworks', 'Economic Development']","['public firm presence', 'import competition', 'financial reporting', 'Sarbanes-Oxley Act', 'German firms', 'enforcement reform', 'mechanism tests', 'falsification test', 'proprietary information', 'information frictions']"
Asset-Level Transparency and the (E)valuation of Asset-Backed Securities,10.1111/1475-679X.12389,"As of November 2016, SEC Regulation (“Reg”) AB II requires issuers of certain types of asset‐backed securities (“ABS”) to disclose the credit‐risk attributes of each asset in the underlying pool, a substantial expansion of prior disclosure requirements. We examine how ABS issuers’ asset‐level disclosures under Reg AB II affect the (e)valuation of ABS by investors and credit rating agencies. Using difference‐in‐differences models that compare affected and unaffected types of ABS, we find that these disclosures improve the ability of initial ABS yields and credit ratings to predict the performance of the underlying assets. These results are concentrated in deals with above‐median risk layering in the underlying assets and complexity in the tranching of credit risk. We further find that asset‐level disclosures are associated with lower yields. Lastly, we provide evidence that most prospective ABS investors download asset‐level information during the price formation period prior to ABS issuance.",JAR,2022,147,1006,"['Credit Markets', 'Financial Markets', 'Regulatory Frameworks', 'Investment Strategies', 'Market Transparency']","['SEC Regulation AB II', 'asset-backed securities', 'ABS', 'credit risk', 'disclosure', 'investors', 'credit rating agencies', 'yields', 'asset-level disclosures', 'price formation period.']"
Was Sarbanes–Oxley Costly? Evidence from Optimal Contracting on CEO Compensation,10.1111/1475-679X.12436,"This paper investigates the effects of regulatory interventions on contracting relationships within firms by examining the impacts of the Sarbanes–Oxley (SOX) Act on CEO compensation. Using panel data of the S&amp;P 1500 firms, it quantifies welfare gains from a principal–agent model with hidden information and hidden actions. It finds that SOX: (1) reduced the conflict of interest between shareholders and their CEOs, mainly by reducing shareholder loss from CEOs deviating from their goal of expected value maximization; (2) increased the cost of agency, or the risk premium CEOs are paid to align their interests with those of shareholders; (3) increased administrative costs in the primary sector (which includes utilities and energy) but the effect in the other two broadly defined sectors, services and consumer goods, was more nuanced; and (4) had no effect on the attitude of CEOs toward risk.",JAR,2022,140,904,"['Corporate Governance', 'Risk Management', 'Financial Markets', 'Regulatory Frameworks', 'Executive Compensation']","['regulatory interventions', 'contracting relationships', 'firms', 'Sarbanes-Oxley Act', 'CEO compensation', 'panel data', 'principal-agent model', 'shareholder', 'conflict of interest', 'risk premium']"
Did the Siebel Systems Case Limit the SEC's Ability to Enforce Regulation Fair Disclosure?,10.1111/1475-679X.12423,"We examine whether a shock to the enforceability of Regulation Fair Disclosure (Reg FD) limited its ability to restrict the flow of private information between managers and investors. Although prior work provides evidence that Reg FD reduced managers’ selective disclosure of material information immediately following its promulgation, we posit that private information flows returned as a result of the Securities and Exchange Commission's (SEC's) public enforcement failure in<jats:italic>SEC v. Siebel Systems, Inc</jats:italic>. Using multiple settings, we find consistent evidence suggesting that<jats:italic>Siebel</jats:italic>changed the cost–benefit tradeoff for Reg FD compliance and effectively reversed the initial effects of the regulation. We also find that<jats:italic>Siebel</jats:italic>disrupted the equilibrium of selective disclosure activity, resulting in an<jats:italic>unleveling</jats:italic>effect among investors with respect to private information advantages. Finally, we find that<jats:italic>Siebel</jats:italic>also had real effects by altering managers’ capital structure decisions. Our findings run counter to the prevailing “mosaic theory” and gradual learning explanations for private information advantages in the extended post–Reg FD period and highlight the importance of enforcement in achieving intended regulatory outcomes.",JAR,2022,165,1364,"['Financial Markets', 'Regulatory Frameworks', 'Corporate Governance', 'Capital Allocation', 'Enforcement']","['enforceability', 'Regulation Fair Disclosure', 'Reg FD', 'private information', 'managers', 'investors', 'Securities and Exchange Commission', 'SEC v. Siebel Systems Inc', 'selective disclosure', 'enforcement']"
Boards of a Feather: Homophily in Foreign Director Appointments Around the World,10.1111/1475-679X.12416,"We examine how <jats:italic>similarity</jats:italic> in institutional, legal, and social characteristics between a firm's and its directors’ home countries, that is, country‐pair homophily, affects foreign director appointments. We estimate a gravity model that includes economic and geographic proximity and find that country‐pair homophily is a significant determinant of foreign director appointments to corporate boards. We also find that country‐pair homophily limits the appointments of foreign directors from high‐quality governance countries to firms located in low‐quality governance countries, which may reduce the role of board internationalization in promoting the global convergence of governance practices. We analyze changes in foreign director appointments around the international adoption of IFRS and Norway's gender‐quota rule and find a higher appointment likelihood for directors originating from countries that are institutionally and culturally similar to that of the firm. Our findings point to the critical role that country‐pair homophily plays in matching director to boards with implications for the diffusion of governance practices globally.",JAR,2022,156,1171,"['Corporate Governance', 'Globalization', 'Economic Development', 'Gender Equality', 'Regulatory Frameworks']","['similarity', 'institutional', 'legal', 'social characteristics', 'country-pair homophily', 'foreign director appointments', 'gravity model', 'governance', 'internationalization', 'IFRS']"
Did the Dodd–Frank Whistleblower Provision Deter Accounting Fraud?,10.1111/1475-679X.12421,"We examine the deterrence effect of the Dodd–Frank whistleblower provision on accounting fraud. To facilitate causal inference, we use state False Claims Acts (FCAs), under which whistleblowing about accounting fraud at a firm invested in by a state's pension fund can result in monetary rewards from that state's government. We divide our sample into firms exposed and not exposed to whistleblowing risk from a state FCA during the 2008–2010 period that preceded the 2011 SEC implementation of the Dodd–Frank whistleblowing provision. We hypothesize that firms already exposed to a state FCA whistleblower law are less affected by the Dodd–Frank whistleblower provision. Using the companies exposed to a state FCA as control firms in our Dodd–Frank tests, the remaining firms constitute the treatment sample. We find that exposure to Dodd–Frank reduces the likelihood of accounting fraud of treatment firms by 12%–22% relative to control firms, but do not find that it affects audit fees.",JAR,2022,153,989,"['Corporate Governance', 'Financial Markets', 'Public Policy', 'Regulatory Frameworks', 'Accounting Fraud']","['Dodd-Frank', 'whistleblower', 'accounting fraud', 'False Claims Acts', 'causal inference', 'monetary rewards', 'pension fund', 'SEC', 'audit fees', 'treatment sample.']"
The Information Content of Corporate Earnings: Evidence from the Securities Exchange Act of 1934,10.1111/1475-679X.12425,"We examine whether the Securities Exchange Act of 1934 increased the information content of corporate earnings disclosures. Prior research questions whether the Act improved disclosure quality but generally relies on long‐window tests and yields mixed results. We focus on whether the Act increased earnings informativeness, improving upon prior designs by focusing on short earnings announcement windows and employing a difference‐in‐differences design to control for potential contemporaneous structural changes. We document an increase in earnings informativeness following the Act, which is larger for treatment firms (which withheld disclosure before the Act) than for control firms. The increase in informativeness is more pronounced for firms that are subject to stronger enforcement.",JAR,2022,109,791,"['Financial Markets', 'Corporate Governance', 'Regulatory Frameworks', 'Economic Development', 'Enforcement']","['Securities Exchange Act of 1934', 'corporate earnings disclosures', 'disclosure quality', 'earnings informativeness', 'difference-in-differences design', 'treatment firms', 'control firms', 'enforcement', 'information content', 'structural changes']"
"Involvement of Component Auditors in Multinational Group Audits: Determinants, Audit Quality, and Audit Fees",10.1111/1475-679X.12418,"We study what determines the involvement of component auditors in multinational enterprise (MNE) group audits and the association with audit quality and audit fees. Using unique Australian disclosures of group audit fees paid to the principal and component auditors, we first document that MNE complexity, MNE internationalization, and auditor characteristics are associated with component auditor involvement, and extent and type of component auditor involvement. Next, we find that involvement of component auditors benefits audit quality as long as the principal auditor conducts a substantial amount of work. Once the involvement of component auditors exceeds a certain level, audit quality decreases. We also document that audit fees are higher in the presence of a component auditor and increase with the extent of involvement, irrespective of component auditor type. Our results contribute to the emerging literature on group audits and provide empirical evidence on regulatory concerns about group audit quality.",JAR,2022,148,1020,"['Audit Quality', 'Audit Fees', 'Corporate Governance', 'Regulatory Frameworks', 'Financial Markets']","['involvement', 'component auditors', 'multinational enterprise', 'MNE', 'group audits', 'audit quality', 'audit fees', 'Australian disclosures', 'auditor characteristics', 'audit fees']"
The Economic Consequences of Financial Audit Regulation in the Charitable Sector,10.1111/1475-679X.12417,"I provide evidence on the effects of financial audit mandates in the charitable sector, in particular their influence on donor behavior. My empirical strategy relies on variation in size‐based exemption thresholds across states and differences in size driven by the nature of charities’ activities. Consistent with audit mandates reducing donors’ reliance on charity reputation, I find audit mandates are associated with a lower concentration of donations on the largest, most well‐known charities. I show this reallocation of resources allows the charitable sector to serve more diverse geographic areas and social needs. In terms of the effect on willingness to give, I document that audit mandates are associated with a higher proportion of taxpayers who donate. However, I only observe a sizable impact on total contributions in dollars for charities with high inherent information asymmetry. Collectively, these results suggest financial audit regulation reduces information frictions and thereby affects resource allocation in the market for charitable giving.",JAR,2022,155,1066,"['Financial Markets', 'Corporate Governance', 'Consumer Behavior', 'Public Policy', 'Economic Development']","['financial audit mandates', 'charitable sector', 'donor behavior', 'empirical strategy', 'exemption thresholds', 'charity reputation', 'resource allocation', 'geographic areas', 'social needs', 'information frictions']"
Real Effects of a Widespread CSR Reporting Mandate: Evidence from the European Union's CSR Directive,10.1111/1475-679X.12424,"We investigate real effects of a widespread corporate social responsibility (CSR) reporting mandate. In 2014, the European Union (EU) passed Directive 2014/95 (hereafter, “CSR Directive”), mandating large listed EU firms to prepare annual nonfinancial reports beginning from fiscal year 2017 onward. We document that firms within the scope of the directive respond by increasing their CSR activities and that they start doing so before the entry‐into‐force of the directive. These real effects are concentrated in firms that are plausibly more strongly affected by the directive, that is, those with previously low levels of both CSR reporting and CSR activities. Using various alternative outcome variables (e.g., new CSR initiatives, improvements in CSR infrastructure, or firm performance), we show that these real effects reflect meaningful increases in CSR beyond firms’ potential attempts to “greenwash” CSR performance. Finally, we conduct tests that increase our confidence that the documented real effects are attributable to the CSR Directive and not general EU trends in CSR.",JAR,2022,160,1086,"['Corporate Social Responsibility', 'Regulatory Frameworks', 'Environmental Sustainability', 'Financial Markets', 'Economic Development']","['CSR', 'corporate social responsibility', 'reporting mandate', 'EU', 'Directive 2014/95', 'nonfinancial reports', 'firms', 'activities', 'greenwash', 'infrastructure']"
"Intangible Investments, Scaling, and the Trend in the Accrual–Cash Flow Association",10.1111/1475-679X.12414,"We provide evidence that the documented weakening of the accrual–cash flow association results not from a loss of accrual accounting usefulness per se, but from the deviation from accrual accounting as it relates to intangible investments. More specifically, the weakening of the negative association is driven by the combined effects of (1) increasing intangible investments, (2) the practice of expensing rather than capitalizing intangible investments, and (3) scaling accruals and cash flows by book value of assets, which are understated for intangible‐intensive firms. Treating intangible expenditures as capitalized investments and scaling accruals and cash flows by market value of equity, which reflects the value of intangible investments, (1) substantially strengthens the negative association between accruals and cash flows and (2) practically eliminates the apparent weakening trend in the association.",JAR,2022,129,916,"['Financial Markets', 'Corporate Governance', 'Investment Strategies', 'Accounting', 'Intangible Investments']","['intangible investments', 'accrual accounting', 'cash flow', 'expensing', 'capitalizing', 'book value', 'assets', 'intangible‐intensive firms', 'market value', 'equity']"
Observing Enforcement: Evidence from Banking,10.1111/1475-679X.12422,"This paper finds that the disclosure of supervisory actions by bank regulators is associated with changes in their enforcement behavior. Using a novel sample of enforcement decisions and orders (EDOs) and a change in the disclosure regime, we find that regulators issue more EDOs, intervene sooner, and rely more on publicly observable signals following the regime change. EDO documents become longer, more complex, and contain more boilerplate language. Our results also indicate that intervention happens sooner and more frequently in counties with higher news circulation, which suggests that regulators take into account the public perception of their actions. We evaluate potentially confounding factors, including the savings and loan (S&amp;L) crisis and competition from thrifts, and find robust results. We also study bank outcomes and document that uninsured deposits decline at EDO banks in the disclosure regime, especially for those covered in the news. Finally, we observe that bank failure accelerates despite improvements in capital ratios and asset quality. Overall, our research provides new insights on the disclosure of regulatory actions.",JAR,2022,170,1159,"['Banking Systems', 'Financial Markets', 'Regulatory Frameworks', 'Public Policy', 'Economic Development']","['disclosure', 'supervisory actions', 'bank regulators', 'enforcement behavior', 'enforcement decisions and orders (EDOs)', 'intervention', 'news circulation', 'savings and loan crisis', 'thrifts', 'bank failure']"
Facilitating Tacit Collusion Through Voluntary Disclosure: Evidence from Common Ownership,10.1111/1475-679X.12452,"We examine whether voluntary disclosure is associated with incentives for firms to collude. Public disclosure can facilitate collusion by aiding with coordination and monitoring for defections. Using common ownership (investors holding stock in competing firms) to identify reduced incentives to compete, we find a positive association between public disclosure and these incentives. We also find that common ownership is positively associated with measures of disclosure that are likely to facilitate tacit collusion and that this association is stronger in industries where collusion is easier. Our study expands the literature on disclosure and competition among firms by showing that public disclosure is positively associated with incentives for tacit collusion. This finding is consistent with managers facilitating anticompetitive outcomes using voluntary disclosure.",JAR,2022,120,874,"['Corporate Governance', 'Market Transparency', 'Trade and Globalization', 'Competition', 'Disclosure']","['voluntary disclosure', 'collusion', 'public disclosure', 'common ownership', 'incentives', 'competition', 'tacit collusion', 'anticompetitive outcomes', 'firms', 'industries']"
"The Roles of Data Providers and Analysts in the Production, Dissemination, and Pricing of Street Earnings",10.1111/1475-679X.12457,"In September 2009, Thomson Reuters (TR) discontinued its practice of relying on analysts to determine the treatment of unexpected charges and gains in favor of their immediate exclusion from GAAP earnings. Adopting a difference‐in‐differences approach, we show that this plausibly exogenous change in TR's methodology resulted in street earnings that are more predictive of future performance; and timelier, more accurate, and less dispersed analyst forecasts of future earnings, consistent with TR enhancing the properties of street earnings and analyst forecasts. Finally, using path analysis we show that a significant portion of TR's effect on price discovery is through its effect on analysts; and that the change in TR's treatment of unexpected items increased (decreased) the relative influence of TR (analysts) on the pricing of street earnings. We conclude that forecast data providers like TR are more than a conduit of information from analysts to investors.",JAR,2022,145,969,"['Financial Markets', 'Corporate Governance', 'Investment Strategies', 'Market Transparency', 'Economic Policy Evaluation']","['Thomson Reuters', 'analysts', 'GAAP earnings', 'difference-in-differences', 'street earnings', 'future performance', 'analyst forecasts', 'price discovery', 'unexpected items', 'forecast data providers.']"
Do Borrowers Intentionally Avoid Covenant Violations? A Reexamination of the Debt Covenant Hypothesis,10.1111/1475-679X.12456,"In this study, we replicate and extend the Dichev and Skinner [DS: 2002] study on the debt covenant hypothesis (DCH). We start by replicating DS and find results consistent with theirs. We then extend their work by changing three aspects of the research design: histogram bin width, calculation of slack, and statistical test of discontinuity. We find that the inference from DS is generally robust to varying these choices, although sensitive to different bin widths, during their sample period. We extend our analysis to the period 2000–2019 and find that support for DCH remains robust. We do, however, find a lack of support for DCH when examining the most common financial covenant, debt‐to‐EBITDA. These findings suggest a more nuanced perspective on DCH, whereby different types of financial covenants provide different incentives and abilities to avoid technical default.",JAR,2022,137,879,"['Corporate Governance', 'Debt Management', 'Financial Markets', 'Economic Development', 'Credit Markets']","['Dichev and Skinner', 'debt covenant hypothesis', 'replication', 'extension', 'histogram bin width', 'slack', 'statistical test', 'financial covenant', 'debt-to-EBITDA', 'technical default.']"
How Do Disclosure Repetition and Interactivity Influence Investors’ Judgments?,10.1111/1475-679X.12420,"Recent regulatory amendments aimed at modernizing disclosures and enhancing their usefulness focus on repetition and interactivity within firms’ disclosure filings. We use two experiments to provide evidence on the effects of disclosure repetition (repeating of information in the filing) and disclosure interactivity (user involvement in directing the form or content of the information displayed) on investors’ information processing and investment judgments. Results show that repetition increases investors’ processing of repeated information, consistent with the informational role of repetition documented in prior research. In contrast, repetition reduces investors’ processing of other, <jats:italic>nonrepeated</jats:italic> information when the filing is less interactive. This evidence corroborates concerns that repetition can obscure value‐relevant information from investors. However, we find that more interactive disclosures mitigate this harmful effect of repetition on investors’ processing of nonrepeated information. Further, more interactive disclosures lead to deeper overall processing of both repeated and nonrepeated information, rather than more interactive disclosures redirecting investors’ attention and processing away from repeated information. Thus, our evidence suggests that disclosure interactivity is an important disclosure attribute that counteracts the potentially harmful effects of repetition on investors' processing of nonrepeated information, while preserving repetition's informational role.",JAR,2022,189,1536,"['Financial Markets', 'Corporate Governance', 'Investment Strategies', 'Disclosure', 'Information Processing']","['disclosures', 'repetition', 'interactivity', 'investors', 'information processing', 'investment judgments', 'value-relevant information', 'interactive disclosures', 'nonrepeated information', 'disclosure attribute']"
The Costs of Waiving Audit Adjustments,10.1111/1475-679X.12453,"We analyze the disposition of auditor‐proposed adjustments to financial statements. Our analyses address concerns, expressed by regulators and others, that auditors and their clients fixate on quantitative thresholds and overlook qualitative factors in assessing the materiality of discovered misstatements. Using a large sample of Public Company Accounting Oversight Board (PCAOB)‐inspected audits, we examine the frequency with which management records versus waives auditor‐proposed adjustments and whether waiving‐proposed adjustments ha consequences for reporting reliability and the audit process. We find waived adjustments are linked to lower financial reporting quality measured by material misstatements, to incentives to meet/beat earnings targets, and to the audit process, as measured by higher next‐period audit effort and fees and higher next‐period proposed adjustments. These effects on the audit process are consistent with auditors responding to the increased risk associated with waived adjustments. In an exploratory analysis, we find that controlling for the amount of proposed adjustments, auditor resignations are negatively associated with waived adjustments.",JAR,2022,157,1184,"['Corporate Governance', 'Financial Markets', 'Risk Management', 'Audit Process', 'Financial Reporting Quality']","['auditor-proposed adjustments', 'financial statements', 'materiality', 'misstatements', 'PCAOB', 'audits', 'reporting reliability', 'earnings targets', 'audit process', 'auditor resignations']"
Relative Performance Evaluation and Competitive Aggressiveness,10.1111/1475-679X.12431,"We examine the relation between incentive plans based on relative performance and competitive aggressiveness. Using data on executive incentive‐compensation contracts in large U.S. firms, we find a positive association between competitive aggressiveness and peer group overlap—that is, the extent to which two firms select each other as peers in these incentive plans. Our findings indicate that managers of such firms take more frequent as well as more complex competitive actions, relative to managers evaluated on relative performance without peer group overlap. Moreover, we show that these competitive tactics are more pronounced when managers compete against: (1) peers with similar grant sizes, (2) peers on similar performance metrics, and (3) peers in the same industry. Collectively, our findings provide evidence on how widely used incentive‐compensation practices relate to strategic firm decisions.",JAR,2022,130,911,"['Business Strategy', 'Corporate Governance', 'Incentive Plans', 'Competitive Aggressiveness', 'Executive Compensation']","['incentive plans', 'relative performance', 'competitive aggressiveness', 'peer group overlap', 'executive incentive-compensation contracts', 'managers', 'competitive actions', 'grant sizes', 'performance metrics', 'industry']"
The Relationship Between Non-GAAP Earnings and Aggressive Estimates in Reported GAAP Numbers,10.1111/1475-679X.12434,"This study uses a controlled experiment to examine the trade‐off between managers’ use of non‐GAAP and GAAP earnings to satisfy market expectations and how this relationship can be moderated by both formal and informal regulatory attention to non‐GAAP earnings. Our key takeaway is that allowing financial reporting discretion in an alternative disclosure channel, that is, non‐GAAP earnings, can reduce firms’ opportunistic GAAP reporting. However, statements by regulators about increased attention to non‐GAAP earnings constrain this channel, and this can result in more aggressive GAAP earnings management and reduced GAAP earnings quality. We triangulate these findings with a survey and archival analyses and find results that are consistent with this primary message. Our study provides evidence relevant to standard setters and regulators that non‐GAAP measures may serve an important role even if they can be used opportunistically.",JAR,2022,136,941,"['Financial Markets', 'Corporate Governance', 'Regulatory Frameworks', 'Accounting Standards', 'Market Transparency']","['controlled experiment', 'managers', 'non-GAAP earnings', 'GAAP earnings', 'market expectations', 'regulatory attention', 'financial reporting discretion', 'opportunistic reporting', 'earnings management', 'earnings quality']"
Audit Implications of Non-GAAP Reporting,10.1111/1475-679X.12433,"We investigate whether non‐GAAP reporting affects the audit process and thereby the quality of the related financial statements. First, we provide evidence that auditors in numerous countries, including the United States and the United Kingdom, rely to varying degrees on non‐GAAP profit before tax as a benchmark for determining quantitative materiality. Then, using Premium Listed companies on the London Stock Exchange, we document that U.K. auditor reliance on non‐GAAP materiality benchmarks often results in a higher quantitative materiality amount and can lower audit quality. Although U.K. auditors appear skeptical of managers’ more aggressive non‐GAAP adjustments, auditors adopt more of management's low‐quality adjustments when auditor independence is weaker. In sum, our results suggest that non‐GAAP reporting can indirectly affect investors by reducing the rigor of the financial statement audit.",JAR,2022,128,911,"['Financial Markets', 'Corporate Governance', 'Audit Quality', 'Regulatory Frameworks', 'Accounting Standards']","['non-GAAP reporting', 'audit process', 'financial statements', 'materiality', 'London Stock Exchange', 'auditor reliance', 'audit quality', 'auditor independence', 'adjustments', 'investors']"
Limited Attention: Implications for Financial Reporting,10.1111/1475-679X.12432,"I develop a theory to study the consequences of providing more detailed information to rationally inattentive investors. I first consider a simple data‐provision problem and show that adding more data or detail in financial statements can make it more difficult for investors to extract information. Consequently, investors who have limited information‐processing capacity may prefer less detailed information. I also show that when investors' decisions are complements, providing details in addition to a summary may reduce investors' welfare. More specifically, because of increased disclosure of details, a coordination failure could occur in investors' attention‐allocation decisions. By showing that adding more detail in financial statements can lead to an information overload problem for investors, this study yields valuable insights for accounting standard setters.",JAR,2022,121,875,"['Financial Markets', 'Investment Strategies', 'Corporate Governance', 'Accounting Standard Setters', 'Information Overload']","['information', 'investors', 'detailed', 'data', 'financial statements', 'capacity', 'disclosure', 'welfare', 'attention-allocation', 'accounting standard setters']"
CECL: Timely Loan Loss Provisioning and Bank Regulation,10.1111/1475-679X.12463,"We investigate how provisioning models interact with bank regulation to affect banks' risk‐taking behavior. We study an accuracy versus timeliness trade‐off between an incurred loss model (IL) and an expected loss model (EL) such as current expected credit loss model or International Financial Reporting Standards 9. Relative to IL, even though EL improves efficiency by prompting earlier corrective action in bad times, it induces banks to originate either safer or riskier loans. Trading off ex post benefits versus ex ante real effects, we show that more timely information under EL enhances efficiency either when banks are insufficiently capitalized or when regulatory intervention is likely to be effective. Conversely, when banks are moderately capitalized and regulatory intervention is sufficiently costly, switching to EL impairs efficiency. From a policy perspective, our analysis highlights the roles that regulatory capital and the effectiveness of regulatory intervention play in determining the economic consequences of provisioning models. EL spurs credit supply and improves financial stability in economies where intervening in banks' operations is relatively frictionless and/or regulators can tailor regulatory capital to incorporate information about credit losses.",JAR,2023,181,1287,"['Banking Systems', 'Risk Management', 'Financial Markets', 'Regulatory Frameworks', 'Monetary Policy']","['provisioning models', 'bank regulation', 'risk-taking behavior', 'expected loss model', 'incurred loss model', 'efficiency', 'corrective action', 'regulatory capital', 'regulatory intervention', 'credit losses']"
Creativity Contests: An Experimental Investigation of Eliciting Employee Creativity,10.1111/1475-679X.12466,"Running a contest can help managers elicit creative ideas from employees by providing employees with incentives to develop and share ideas that will help the firm. Little is known, however, about how contest design affects the outcomes of subjectively evaluated creativity‐based contests. We conduct an experiment to investigate the impact of two contest design choices, the job role of the contest's evaluator, and the number of prizes that participants compete for, on employee participation behavior. We also examine how these contest design choices impact the creativity of the submitted ideas. We find that using a peer of the employees as an evaluator increases the number of ideas shared, but it does not impact the number of unique participants who enter the contest. In addition, we find that using peer evaluators leads to an increase in the creativity of the ideas. We find that awarding more prizes to participants does not increase overall participation, but it does increase the number of ideas shared by employees from underrepresented demographics. Awarding more prizes, however, reduces the creativity of the ideas. Together, these results show that contest design choices have an important impact on employee creative idea‐sharing and that managers should carefully consider how to tailor contests to fit their firms' needs.",JAR,2023,208,1342,"['Innovation', 'Corporate Governance', 'Entrepreneurship', 'Workforce Automation', 'Organizational Behavior']","['contest design', 'creativity', 'ideas', 'incentives', 'participants', 'employees', 'prizes', 'evaluator', 'behavior', 'impact']"
Boosting Foreign Investment: The Role of Certification of Corporate Governance,10.1111/1475-679X.12468,"This paper studies the economic consequences of certification of corporate governance practices. For identification, we exploit a recent cross‐country initiative by a coalition of key institutions in Southeast Asia; the periodic publication of a “Top List” of companies in the region selected based on an independent assessment of corporate governance practices. Our results suggest that being included in the list induces an increase in foreign investment and changes in corporate governance practices. The announcement of the Top List elicits a positive stock market response among constituents and is followed by higher accounting performance. Overall, the evidence suggests that the certification of governance practices is a meaningful tool to boost foreign investment.",JAR,2023,111,774,"['Corporate Governance', 'Financial Markets', 'Investment Strategies', 'Economic Development', 'Foreign Investment']","['certification', 'corporate governance', 'economic consequences', 'Southeast Asia', 'Top List', 'foreign investment', 'stock market response', 'accounting performance', 'institutions', 'initiative']"
The Complementarity Between Signal Informativeness and Monitoring,10.1111/1475-679X.12459,"A firm that must decide whether to retain or terminate a manager can rely on several sources of information to assess managerial ability. When it relies on a performance signal and monitoring, we show that a more informative signal can surprisingly increase the value of monitoring. Then, signal precision and monitoring are complements. This happens if a more precise information system makes some signals more negative indicators of managerial ability that still do not trigger termination. When the turnover cost is high enough and the manager is more entrenched after a positive performance, an increase in signal precision increases expected monitoring. In firms with a high turnover cost, a less informative signal is compounded by worse monitoring after a disappointing performance. This “bad corporate governance trap” makes it hard for these firms to eventually improve performance.",JAR,2023,136,891,"['Corporate Governance', 'Financial Markets', 'Risk Management', 'Monitoring', 'Turnover Cost']","['managerial ability', 'performance signal', 'monitoring', 'signal precision', 'turnover cost', 'entrenched', 'corporate governance', 'firm', 'informative signal', 'performance.']"
Does Sensationalism Affect Executive Compensation? Evidence from Pay Ratio Disclosure Reform,10.1111/1475-679X.12458,"Beginning in 2018, U.S. public firms were required to report the ratio of the chief executive officer's (CEO) compensation to their median employee's compensation in the annual proxy statement. Exploiting the staggered reporting of pay ratios, we find little evidence that total CEO compensation changes in response to pay ratio disclosure reform. However, we do find that boards significantly adjust the mix of compensation awarded by reducing the sensitivity of CEO pay to equity price changes, particularly when the CEO is likely to garner media scrutiny, and by reducing reliance on stock‐based and other compensation components that are most susceptible to media coverage surrounding the pay ratio disclosure. Firms ultimately disclosing higher pay ratios garner more media coverage around the filing of their proxy statement, and more negative‐toned coverage in the subsequent month. Finally, we find evidence that greater pay disparity is associated with greater selling activity by retail investors and more negative say‐on‐pay votes following pay ratio reform, consistent with a broad set of investors responding to public scrutiny resulting from pay ratio disclosures.",JAR,2023,175,1178,"['Corporate Governance', 'Financial Markets', 'Income Inequality', 'Public Policy', 'Labor Market Dynamics']","['CEO compensation', 'pay ratio', 'proxy statement', 'boards', 'equity price', 'media scrutiny', 'stock-based compensation', 'pay disparity', 'selling activity', 'say-on-pay votes']"
"Anti-Mafia Police Actions, Criminal Firms, and Peer Firm Tax Avoidance",10.1111/1475-679X.12455,"Mafia firms introduce distortions in the markets in which they operate, increasing the cost of doing business for peer firms. We investigate whether peers respond by increasing their tax avoidance and thus increasing funds available to compete with the Mafia firms. Using a sample of Italian anti‐Mafia police actions that resulted in the removal of Mafia firms and a difference‐in‐differences approach, we find that peers reduce their tax avoidance following these actions. We further show that, following anti‐Mafia police actions, peer firms improve their performance and increase capital investment while enjoying a reduction in the cost of raw materials. Overall, our results highlight the microlevel channels through which Mafia can affect firm outcomes and local economies.",JAR,2023,116,780,"['Taxation', 'Economic Development', 'Financial Markets', 'Corporate Governance', 'Market Transparency']","['Mafia firms', 'markets', 'cost of doing business', 'tax avoidance', 'Italian anti-Mafia police actions', 'peers', 'performance', 'capital investment', 'raw materials', 'local economies']"
Renewable Governance: Good for the Environment?,10.1111/1475-679X.12462,"We conjecture that board renewal mechanisms—those substantive enough to renew the thinking of the board—are required before investors can address the mismatch between their preferences regarding environmental sustainability and what insiders at firms are actually doing. We identify the adoption of majority voting for directors and the introduction of a female director as two corporate governance mechanisms potentially strong enough to renew a board's thinking on sustainability. Using a sample of 3,293 firms from 41 countries, along with quasi‐exogenous shocks to board renewal mechanisms in Canada and France, we find that both board renewal mechanisms are associated with significantly higher future environmental performance. Further tests provide suggestive evidence that board renewal is more strongly associated with environmental performance in settings with better institutions and more motivated institutional investors. These results suggest the importance of board renewal for alignment of firm policies with investor preferences around the world.",JAR,2023,147,1063,"['Corporate Governance', 'Environmental Sustainability', 'Financial Markets', 'Regulatory Frameworks', 'Climate Change Economics']","['board renewal mechanisms', 'investors', 'environmental sustainability', 'corporate governance', 'majority voting', 'female director', 'firms', 'countries', 'institutional investors', 'environmental performance']"
Relative Valuation with Machine Learning,10.1111/1475-679X.12464,"We use machine learning for relative valuation and peer firm selection. In out‐of‐sample tests, our machine learning models substantially outperform traditional models in valuation accuracy. This outperformance persists over time and holds across different types of firms. The valuations produced by machine learning models behave like fundamental values. Overvalued stocks decrease in price and undervalued stocks increase in price in the following month. Determinants of valuation multiples identified by machine learning models are consistent with theoretical predictions derived from a discounted cash flow approach. Profitability ratios, growth measures, and efficiency ratios are the most important value drivers throughout our sample period. We derive a novel method to express valuation multiples predicted by our machine learning models as weighted averages of peer firm multiples. These weights are a measure of peer–firm comparability and can be used for selecting peer‐groups.",JAR,2023,138,988,"['Machine Learning Applications', 'Financial Markets', 'Corporate Governance', 'Investment Strategies', 'Data Privacy']","['machine learning', 'valuation', 'peer firm selection', 'out-of-sample tests', 'traditional models', 'accuracy', 'fundamental values', 'overvalued stocks', 'undervalued stocks', 'valuation multiples']"
The Value of Mandatory Certification: A Real Effects Perspective,10.1111/1475-679X.12460,"We study the real effects of certification to demonstrate the value of mandatory certification over and above mandatory disclosure in enhancing investment efficiency. In our model, a firm's manager selects a project to maximize the firm's short‐term stock price, which is a function of her certification and disclosure decisions about the outcome of the project. Although the manager might be either forthcoming or strategic with regard to the disclosure of her private information, she can strategically choose whether to incur a cost or not to certify her disclosure, unless mandated. The manager always selects the first‐best project when both certification and disclosure are mandatory. However, when certification is voluntary, project selection is inefficient. In addition, mandating disclosure without mandating certification can lead to lower investment efficiency than mandating neither. In justifying why mandatory certification is beneficial for public firms, our results offer a note of caution regarding the contemplated regulatory moves for increased disclosures by public firms without corresponding certification requirements, for example, the recent SEC proposal requiring extensive climate‐related disclosure.",JAR,2023,171,1227,"['Corporate Governance', 'Financial Markets', 'Regulatory Frameworks', 'Climate Change Economics', 'Public Policy']","['certification', 'mandatory', 'disclosure', 'investment efficiency', 'firm', 'manager', 'project', 'stock price', 'voluntary', 'regulatory']"
Does a Government Mandate Crowd Out Voluntary Corporate Social Responsibility? Evidence from India,10.1111/1475-679X.12461,"This study investigates the implementation of a Government of India mandate that requires firms to spend at least 2% of their profits on corporate social responsibility (CSR). The results show that qualifying firms that voluntarily engaged in CSR before the mandate reduce their CSR spending afterward. Despite increasing advertisement expenditure likely to offset the lost signaling value of voluntary CSR, stock prices and operating performance of former voluntary CSR spenders who qualify under the law decline. Our results suggest that regulatory intervention in CSR can both diminish its signaling value and lead to a reduction in voluntary CSR spending.",JAR,2023,99,659,"['Corporate Social Responsibility', 'Financial Markets', 'Regulatory Frameworks', 'Stock Prices', 'Operating Performance.']","['implementation', 'Government of India', 'mandate', 'firms', 'profits', 'corporate social responsibility', 'CSR spending', 'advertisement expenditure', 'stock prices', 'operating performance']"
Greenhouse Gas Disclosure and Emissions Benchmarking,10.1111/1475-679X.12473,"I examine the effects of the U.S. Greenhouse Gas (GHG) Reporting Program, which requires thousands of industrial facilities to measure and report their GHG emissions. I show that facilities reduce their GHG emissions by 7.9% following the disclosure of emissions data. The evidence indicates that benchmarking—whereby facilities use the disclosures of their peers to assess their own relative GHG performance—spurs emission reductions. Firms' concerns about future legislation appear to motivate this behavior and measurement alone (without disclosure) seems not to reduce emissions. My study highlights how mandatory GHG disclosure can create real effects for peers.",JAR,2023,95,667,"['Climate Change Economics', 'Environmental Sustainability', 'Corporate Governance', 'Public Policy', 'Energy Transition']","['U.S.', 'Greenhouse Gas Reporting Program', 'GHG emissions', 'facilities', 'benchmarking', 'peers', 'legislation', 'measurement', 'disclosure', 'reduction']"
Promote Internally or Hire Externally? The Role of Gift Exchange and Performance Measurement Precision,10.1111/1475-679X.12475,"Managers often face the choice between promoting an internal employee and hiring an external candidate. Using an interactive experiment, we examine the drivers of managers’ promote/hire decisions and internal employees’ behavior before and after those decisions. Consistent with gift exchange theory, we find that employees exert costly effort to increase the chance of being promoted, and they raise their effort level as the promote/hire decision becomes imminent. Managers respond by promoting those who exert high effort, despite employees’ inferior ability compared to external candidates. Results suggest that managers view employees’ past effort as both a gift to reciprocate and a signal of their future effort. Moreover, we find that managers are more likely to promote internally rather than hire externally under a less precise performance measurement system, and this result is driven by managers who observe low employee output. Finally, we find that total effort is significantly higher when managers promote internally versus hire externally.",JAR,2023,155,1057,"['Labor Market Dynamics', 'Organizational Behavior', 'Employee Promotion', 'Corporate Governance', 'Managerial Decision-making']","['managers', 'internal employee', 'external candidate', 'promote', 'hire', 'experiment', 'gift exchange theory', 'effort', 'performance measurement system', 'output']"
Standard Error Biases When Using Generated Regressors in Accounting Research,10.1111/1475-679X.12470,"We analyze the standard error bias associated with the use of generated regressors—independent variables generated from first‐step regressions—in accounting research settings. Under general conditions, generated regressors do not affect the consistency of coefficient estimates. However, commonly used generated regressors can cause standard errors to be understated. Problematic generated regressors include predicted values, coefficient estimates, and measures derived from these estimates. Widely used generated regressors in accounting include measures of earnings persistence, normal accruals, litigation risk, and conditional conservatism. Using simple regression models and simulation, we demonstrate how generated regressors can produce understated standard errors in accounting research settings. We also demonstrate how the magnitude of the standard error bias is inversely related to the precision of the generated regressor. Finally, we discuss bootstrapping as a correction for the bias and demonstrate the pairs cluster bootstrap as a tool to improve inferences in common accounting settings involving generated regressors.",JAR,2023,148,1137,"['Accounting Research', 'Standard Error Bias', 'Regression Models', 'Simulation', 'Accounting Settings']","['generated regressors', 'standard error bias', 'accounting research', 'coefficient estimates', 'predicted values', 'earnings persistence', 'normal accruals', 'litigation risk', 'conditional conservatism', 'bootstrapping']"
Financial Reporting and Employee Job Search,10.1111/1475-679X.12469,"We investigate the effects of financial reporting on current employee job search, that is, whether firms' public financial reports cause their employees to reevaluate their jobs and consider leaving. We develop theory for why current employees use earnings announcements (EAs) to inform job search decisions, and empirically investigate job search based on employees' activity on a popular job market website. We find that job search by current employees increases significantly during EA weeks, especially when employees are more mobile and when their information frictions are greater. We also find that employees use EAs to update their expectations about their employers' economic prospects, consistent with learning, and some evidence that positive announcements elicit less search. Our paper contributes to the burgeoning labor and accounting literature by providing among the first evidence closely linking financial reports to employee learning and job search.",JAR,2023,140,968,"['Labor Market Dynamics', 'Financial Markets', 'Corporate Governance', 'Economic Development', 'Accounting']","['financial reporting', 'employee job search', 'earnings announcements', 'job market website', 'job search decisions', 'information frictions', 'economic prospects', 'learning', 'labor literature', 'accounting literature']"
Balanced Scorecards: A Relational Contract Approach,10.1111/1475-679X.12465,"Reward systems based on balanced scorecards often connect pay to an index, that is, a weighted sum of multiple performance measures. We show that such an index contract may indeed be optimal if performance measures are nonverifiable so that the contracting parties must rely on self‐enforcement. Under commonly invoked assumptions (including normally distributed measurements), we show that the weights in the index reflect a tradeoff between distortion and precision for the measures. The efficiency of the contract improves with higher precision of the index measure, because this strengthens incentives, and correlations between measurements may for this reason be beneficial. There is a caveat, however, because the index contract is not necessarily optimal for very precise measurements, although it is shown to be asymptotically optimal. We also consider hybrid measurements, and show that the principal may want to include verifiable performance measures in the relational index contract in order to improve incentives, and that this has noteworthy implications for the formal contract.",JAR,2023,161,1093,"['Corporate Governance', 'Incentives', 'Performance Measurement', 'Contract Theory', 'Principal-Agent Theory']","['balanced scorecards', 'reward systems', 'index contract', 'performance measures', 'verifiable', 'self-enforcement', 'precision', 'incentives', 'measurements', 'optimal']"
The (Un)Controllability Principle: The Benefits of Holding Employees Accountable for Uncontrollable Factors,10.1111/1475-679X.12467,"The controllability principle suggests that employees should not be held accountable for factors outside their control. This study develops novel theory to challenge that thinking. According to the theory, holding employees accountable for uncontrollable factors like peer performance can lead to improved decision‐making by increasing how much employees learn from those uncontrollable factors. I expect this effect to occur because goal‐focused employees only consider information that seems goal‐relevant, and uncontrollable factors only seem goal relevant when employees are held accountable for them. Results from a decision‐making experiment support the theory. In particular, paying participants based on uncontrollable factors improves their decision‐making despite providing them with weaker economic incentives. This positive effect is more pronounced when the uncontrollable factors are more informative and when individuals are more goal‐focused. These findings reveal a previously unexplored benefit of disregarding the controllability principle that can help explain why broad, uncontrollable metrics are so prevalent and successful in practice.",JAR,2023,154,1159,"['Decision-making', 'Economic Incentives', 'Employee Accountability', 'Goal-Focused Behavior', 'Controllability Principle']","['controllability principle', 'employees', 'accountability', 'decision-making', 'uncontrollable factors', 'peer performance', 'goal-focused', 'information', 'experiment', 'economic incentives']"
Do Jobseekers Value Diversity Information? Evidence from a Field Experiment and Human Capital Disclosures,10.1111/1475-679X.12474,"We examine how information about the diversity of a potential employer's workforce affects individuals’ job‐seeking behavior. We embed a field experiment in job recommendation emails from a leading career advice agency in the United States. The experimental treatment involves highlighting a diversity metric to jobseekers. Our results indicate that disclosing diversity scores in job postings leads jobseekers to click on firms with higher diversity scores, with such effects varying across jobseeker demographics. A follow‐up survey provides evidence on potential explanations for why jobseekers value diversity information. We then examine how jobseekers’ preferences for diversity relate to disclosure choices under the U.S. SEC Human Capital Disclosure requirement. We find that firms in industries characterized by higher jobseeker responsiveness to diversity information tend to voluntarily disclose diversity metrics in their 10‐Ks under these new disclosure requirements.",JAR,2023,134,980,"['Labor Market Dynamics', 'Corporate Governance', 'Economic Development', 'Diversity and Inclusion', 'Regulatory Frameworks']","['workforce diversity', 'jobseeking behavior', 'field experiment', 'job recommendation', 'diversity metric', 'job postings', 'jobseeker demographics', 'follow-up survey', 'preferences for diversity', 'Human Capital Disclosure']"
Racial Diversity Exposure and Firm Responses Following the Murder of George Floyd,10.1111/1475-679X.12484,"George Floyd's murder caused many firms to reveal how exposed they are to racial diversity issues. We examine investor and firm behaviors after this socially significant event to provide evidence on the valuation effects of the exposure and ensuing corporate responses. We develop a text‐based measure of a firm's exposure to racial diversity issues from conference call transcripts and find that, after the murder of George Floyd, firms with diversity exposure experience a stock price decrease of approximately 0.7% around the date of the conference call. We provide evidence that this effect is attributable to race‐related exposure and not gender‐related exposure. Initiatives taken by firms mitigate the negative market reaction. We document that firms with racial diversity exposure respond by appointing Black directors. The stock market views appointments of Black directors more favorably after George Floyd's murder, except when they are perceived as symbolic. We also find that firms with greater exposure to racial diversity are more likely to establish diversity, equity, and inclusion (DEI) departments, appoint DEI leaders, specify diversity goals, increase supply chain diversity, and donate to racial justice causes. Our paper provides evidence that exposure to racial diversity issues adversely affects firm value, and companies address the exposure by taking actions.",JAR,2023,204,1386,"['Race-related exposure', 'Corporate Governance', 'Financial Markets', 'Social Policy', 'Diversity and Inclusion.']","['George Floyd', 'murder', 'firms', 'racial diversity', 'exposure', 'stock price', 'market reaction', 'Black directors', 'diversity initiatives', 'firm value']"
Executive Compensation Tied to ESG Performance: International Evidence,10.1111/1475-679X.12481,"Using a wide sample of international publicly traded firms, this paper studies the rapidly increasing practice of incorporating Environmental, Social, and Governance (ESG) metrics in executive compensation contracts. Our evidence suggests that this compensation practice varies at the country, industry, and firm levels in ways that are consistent with efficient incentive contracting. We also observe that reliance on ESG metrics in executive compensation arrangements is associated with engagement, voting, and trading by institutional investors, which suggests that firms could be adopting this practice to align their management's objectives with the preferences of certain shareholder groups. Finally, we find that the adoption of ESG Pay is accompanied by improvements in key ESG outcomes, but not by improvements in financial performance.",JAR,2023,119,845,"['Corporate Governance', 'Environmental Sustainability', 'Financial Markets', 'Investment Strategies', 'Corporate Social Responsibility']","['ESG metrics', 'executive compensation', 'international firms', 'incentive contracting', 'institutional investors', 'shareholder groups', 'engagement', 'voting', 'trading', 'key ESG outcomes']"
Assessing the Social Impact of Corporations: Evidence from Management Control Interventions in the Supply Chain to Increase Worker Wages,10.1111/1475-679X.12472,"This study examines an initiative by a large multinational garment retailer (H&amp;M Group) to increase wages at its supplier factories by intervening in their wage‐related management practices. Difference‐in‐differences estimates based on eight years of data from over 1,800 factories show that the interventions were associated with an average real wage increase of approximately 5% by the third year of implementation. Our estimates suggest that the intervention‐associated wage increase was many times greater than if the retailer's cost for the program was instead paid directly to affected workers. We find that the wage effects were driven by factories with relatively poorer supplier ratings and do not find significantly different wage effects depending on the presence of trade unions. We also examine several nonwage outcomes such as factory orders, supplier price competitiveness, overtime pay, and total employment to probe the mechanisms underlying the wage increases. These findings offer new evidence on corporate social impact in global supply chains.",JAR,2023,156,1068,"['Global Supply Chains', 'Corporate Social Responsibility', 'Labor Market Dynamics', 'Trade and Globalization', 'Economic Development']","['wages', 'multinational retailer', 'supplier factories', 'intervention', 'difference-in-differences', 'real wage increase', 'supplier ratings', 'trade unions', 'nonwage outcomes', 'global supply chains']"
The Effect of Firms' Information Exposure on Safeguarding Employee Health: Evidence from COVID-19,10.1111/1475-679X.12471,"We show that information exposure through international business networks enables firms to take proactive measures that benefit employees and potentially the local community. Specifically, in the early days of COVID‐19, firms that have business networks with China and Italy are more likely to be aware of the severity of the disease, and proactively implement work‐from‐home (“WFH”) policies that can protect their employees. Using Safegraph foot traffic data, we find a higher stay‐at‐home ratio before local governments impose lockdowns in zip codes where firms have a larger information exposure. These areas are also associated with a lower spread of COVID‐19. Our main findings are more pronounced when local governments face constraints in quickly responding to COVID‐19 and when firms have a higher WFH capability or have more investors with socially responsible preferences. Collectively, we present evidence on the role of private corporations in mitigating the negative effects of a public health crisis before government intervention.",JAR,2023,154,1046,"['Global Supply Chains', 'Public Policy', 'Corporate Social Responsibility', 'Labor Market Dynamics', 'Healthcare Innovation']","['international business networks', 'proactive measures', 'employees', 'local community', 'COVID-19', 'work-from-home (WFH) policies', 'Safegraph foot traffic data', 'stay-at-home ratio', 'spread of COVID-19', 'private corporations']"
Transmission Effects of ESG Disclosure Regulations Through Bank Lending Networks,10.1111/1475-679X.12478,"This paper studies whether and how environmental, social, and governance (ESG) disclosure regulations imposed on banks generate transmission effects along the lending channel. I use a setting of U.S. firms borrowing from non‐U.S. banks and exploit the staggered adoption of ESG disclosure regulations in banks’ home countries. I find that exposed borrowers of affected banks improve their environmental and social (E&amp;S) performance following the disclosure mandate. Consistent with banks enhancing both their engagement and selection activities, affected banks impose more environmental action covenants in loan contracts, and they are more likely to terminate a borrower with bad E&amp;S records following the regulation. Further evidence shows that the transmission effects are stronger when a disclosure regulation is well‐enforced (as indicated by a greater increase in banks’ disclosure) and among borrowers with greater switching costs. Collectively, the findings document the role of lending relationships in transmitting the real effect of ESG disclosure regulations from banks to borrowing firms.",JAR,2023,156,1109,"['Banking Systems', 'Environmental Sustainability', 'Corporate Governance', 'Regulatory Frameworks', 'Credit Markets']","['ESG disclosure regulations', 'banks', 'lending channel', 'U.S. firms', 'environmental performance', 'social performance', 'loan contracts', 'engagement activities', 'selection activities', 'borrowing firms']"
Beyond Performance: Does Assessed Potential Matter to Employees’ Voluntary Departure Decisions?,10.1111/1475-679X.12476,"Firms are increasingly implementing performance–potential assessment systems, whereby supervisors evaluate employees’ current performance and future‐oriented potential (i.e., promotion prospects). Whether retention is greatest for high performance–high potential (HiPo) employees under such a system is an empirical question—while the “promise” of a promotion may aid retention, these employees likely face attractive outside options. Using data from a multinational firm, I find that HiPos generally depart at a lower rate than <jats:italic>lower performing</jats:italic> non‐HiPos. Among shorter tenured employees, I find the strongest evidence that potential matters to departures, above and beyond performance. In several instances, the rate of departure is lower when assessed potential is higher, holding performance constant. This is the case both among higher performers, where high potential leads to HiPo status, and among lower performers where high potential affords no such status. My findings suggest that HiPo status and potential ratings may help in facilitating employees’ early sorting decisions.",JAR,2023,150,1114,"['Labor Market Dynamics', 'Organizational Behavior', 'Corporate Governance', 'Workforce Automation', 'Employee Performance']","['assessment systems', 'performance', 'potential', 'retention', 'promotion prospects', 'employees', 'departure', 'tenure', 'departures', 'sorting decisions']"
How Do Firms Respond to Political Uncertainty? Evidence from U.S. Gubernatorial Elections,10.1111/1475-679X.12482,"We examine the joint response to political uncertainty along two margins: changes in real activity and voluntary disclosure. We focus on within‐firm variation in exposure to ex ante competitive U.S. gubernatorial elections using data on preelection poll margins and firms’ state exposures. Despite real activity falling in the years leading up to a close election, we find that voluntary disclosure increases both in frequency and content, including mentions of risk in filings that reference states holding elections. Our tests use a decomposition of 8‐K filings into real activity and voluntary disclosure to address the endogenous complementarity between these two responses. These results hold when using alternative ex ante measures of political uncertainty based on term‐limited incumbents, historically competitive offices, or state legislature gridlock. Both effects of political uncertainty are stronger for firms in highly regulated industries and weaker for those least exposed to the local market, linking the real activity and disclosure responses to uncertainty.",JAR,2023,155,1076,"['Political Risk', 'Risk Management', 'Corporate Governance', 'Regulatory Frameworks', 'Financial Markets']","['political uncertainty', 'real activity', 'voluntary disclosure', 'competitive elections', 'preelection poll margins', 'firms', 'risk', 'filings', '8-K filings', 'regulated industries']"
Flu Fallout: Information Production Constraints and Corporate Disclosure,10.1111/1475-679X.12486,"Using influenza epidemic data, we examine how constraints on corporate information production affect disclosure policies. We find that firms in areas with higher flu activity are less likely to issue short‐run earnings forecasts and more likely to issue long‐run earnings forecasts. These results are more pronounced when the information production process is more complex, when managers face a greater reputational loss for issuing low‐quality short‐run forecasts, and when firms’ costs of switching the forecast horizon are lower. Further analysis implies that the effect of flu activity on these forecast issuance decisions is not driven by firm performance or information uncertainty. Our results suggest that managers do not simply avoid issuing forecasts in response to information production constraints. Instead, they shift the forecast horizon from short‐run to long‐run, appearing to balance the costs of issuing low‐quality forecasts with those of not issuing forecasts at all.",JAR,2023,144,988,"['Corporate Governance', 'Financial Markets', 'Risk Management', 'Information Uncertainty', 'Forecast Issuance.']","['influenza epidemic', 'corporate information production', 'disclosure policies', 'flu activity', 'earnings forecasts', 'information production process', 'reputational loss', 'forecast horizon', 'firm performance', 'information uncertainty']"
Financial Reporting Quality and Wage Differentials: Evidence from Worker-Level Data,10.1111/1475-679X.12477,"We examine whether financial reporting quality affects worker wages using employer‐employee matched data in the United States. We find that low financial reporting quality is associated with a compensating wage differential—that is, a risk premium—using three distinct approaches while controlling for worker characteristics by (1) regressing wages on firm‐year–level and firm‐level reporting quality, (2) documenting wage changes when workers switch firms, and (3) estimating a structural approach that separates reporting quality from performance‐related volatility. We find evidence consistent with two channels: performance pay and turnover risk, where workers bear risks from noise in performance measurement and unemployment, respectively. To mitigate endogeneity concerns, we show that—after the accounting scandals in 2002 and after the announcements of an internal control weakness (ICW)—former Arthur Andersen clients and ICW firms pay wage premiums to employees, with magnitudes between 0.9% and 2.8% of annual wages.",JAR,2023,140,1028,"['Financial Markets', 'Labor Market Dynamics', 'Corporate Governance', 'Risk Management', 'Economic Development']","['financial reporting quality', 'worker wages', 'risk premium', 'compensating wage differential', 'performance pay', 'turnover risk', 'accounting scandals', 'internal control weakness', 'wage premiums', 'employee']"
The Impact of Open Data on Public Procurement,10.1111/1475-679X.12479,"We examine how open procurement data affect the competitiveness of award procedures and the execution of government contracts. The European Union recently made its historical procurement notices available for bulk download in a cohesive and user‐friendly database. Comparing government contracts above and below EU procurement size thresholds, we find that, after the open data initiative, procurement officials are more likely to award treated contracts through open bidding. In cross‐sectional analyses, we document variation in the open bidding effect consistent with two underlying mechanisms: (1) increased scrutiny by NGOs and investigative journalists and (2) learning by national procurement regulators. However, treated contracts are also more likely to experience costly modifications because the shift to open bidding introduces rigidity that limits officials’ discretion in selecting suppliers based on private information. Overall, our evidence indicates that open procurement data promote competitive bidding but lead to contracts with weaker execution performance. These inferences also hold in an alternative open data setting.",JAR,2023,157,1143,"['Public Policy', 'Government Contracts', 'Regulatory Frameworks', 'Financial Markets', 'Data Privacy']","['open procurement data', 'competitiveness', 'award procedures', 'government contracts', 'European Union', 'historical procurement notices', 'bulk download', 'open bidding', 'scrutiny', 'competitive bidding']"
Gaming the IRS’ Third-Party Reporting System: Evidence from Pari-Mutuel Wagering,10.1111/1475-679X.12483,"This study examines whether taxpayers intentionally avoid Internal Revenue Service (IRS) third‐party reports. In 2017 an IRS amendment created a quasi‐exogenous shock that reduced third‐party tax reporting of pari‐mutuel gambling winnings from certain types of wagers. I consider the effect that this rule change had on taxpayer behavior. Using a difference‐in‐differences research design comparing thoroughbred racing in the United States to Canada, I find a 27% increase in gambler's investment into wager‐types that became less likely to trigger third‐party reports. Further, I provide evidence that this effect was because of third‐party reporting, not withholding, and was stronger in more informed gambling populations. These findings suggest that taxpayers knowingly avoid third‐party reports, enabling underreporting of income to the IRS. This has important policy implications because underreported individual income is the largest driver of the $496 billion annual gap between legal tax liability and actual tax collections in the United States.",JAR,2023,149,1055,"['Taxation', 'Income Inequality', 'Public Policy', 'Behavioral Economics', 'Economic Development']","['taxpayers', 'Internal Revenue Service', 'third-party reports', 'IRS', 'tax reporting', 'gambling winnings', 'wager-types', 'underreporting', 'income', 'policy implications']"
Does Public Firms’ Mandatory IFRS Reporting Crowd Out Private Firms’ Capital Investment?,10.1111/1475-679X.12494,"We investigate how the mandatory adoption of International Financial Reporting Standards (IFRS) by publicly listed firms in the European Union affects peer private firms. We find that private firms’ capital investment decreases significantly after the IFRS mandate, relative to public firms. Private firms also display decreased investment when benchmarked against firms relatively insulated from the impact of the IFRS mandate, but the magnitude of the effect is smaller in this case. These results are consistent with the hypothesis that mandatory IFRS reporting (combined with other reforms), while increasing public firms’ financing and investment, crowds out funding for private firms. The effect is more pronounced for larger private firms and in industries where public peers have greater external financing needs. Our evidence suggests that financial reporting regulations cause shifts in resource allocation in an economy.",JAR,2023,134,931,"['Financial Markets', 'Capital Allocation', 'Regulatory Frameworks', 'Investment Strategies', 'Corporate Governance']","['mandatory adoption', 'International Financial Reporting Standards', 'IFRS', 'publicly listed firms', 'European Union', 'peer private firms', 'capital investment', 'financing', 'investment', 'financial reporting regulations']"
Private Equity and Local Public Finances,10.1111/1475-679X.12487,"We study the economic impact of private equity (PE) investments on local governments, which are important corporate stakeholders. Examining over 11,000 deals and private firm data in Europe, we document that target firms' effective tax rates and total tax expenses decrease by 15% and 13% after PE deals. At the same time, target firms expand their capital expenditures and firm boundaries, but do not increase employment. Using administrative data on the public finances of German municipalities and exploiting the geographical and time‐series variation in PE deals, we document that PE activity is negatively associated with local governments' tax revenues and spending. This result is likely driven by reduced tax payments of PE portfolio firms, accompanied by only modest positive spillovers of PE investments on regional economic growth. Collectively, our findings suggest that corporate tax efficiency serves as a cost‐cutting channel in the PE sector and constrains the finances of local governments.",JAR,2023,151,1007,"['Taxation', 'Economic Growth', 'Public Finance', 'Corporate Governance', 'Fiscal Policy']","['private equity', 'investments', 'local governments', 'tax rates', 'tax expenses', 'capital expenditures', 'firm boundaries', 'German municipalities', 'tax revenues', 'economic growth']"
Auditors’ Use of In-House Specialists,10.1111/1475-679X.12485,"Using Public Company Accounting Oversight Board (PCAOB) inspection data from 2006 to 2018, we examine the use of auditor‐employed specialists in audit engagements. First, we find that the use of specialists is increasingly prevalent and related to clients’ size and complex accounting estimates. Second, the use of specialists is positively associated with the incidence of audit process deficiencies (identified by PCAOB inspections) but is not associated with output‐based audit‐quality proxies (restatements or absolute discretionary accruals). Hence, although process deficiencies are more likely to occur in engagements with higher use of specialists, financial reporting quality is not negatively impacted. Third, the use of specialists is positively associated with the likelihood of goodwill impairments and negatively associated with engagement profitability. Finally, cross‐sectional tests suggest that board accounting expertise is a salient condition for more effective use of specialists. Collectively, our findings align with concerns noted by the PCAOB and prior experimental and survey studies. Although specialists assist auditors with the audit of complex estimates, engagements with comparatively high specialist use entail an incremental risk of audit process deficiencies.",JAR,2023,176,1293,"['Audit process deficiencies', 'Corporate Governance', 'Financial Markets', 'Risk Management', 'Accounting expertise']","['Public Company Accounting Oversight Board', 'PCAOB', 'audit engagements', 'auditor-employed specialists', 'accounting estimates', 'process deficiencies', 'audit quality', 'financial reporting quality', 'goodwill impairments', 'engagement profitability']"
Reciprocity in Corporate Tax Compliance—Evidence from Ozone Pollution,10.1111/1475-679X.12500,"In a tax—public goods reciprocity framework between citizens and the state, managers view taxes as a payment to the government in exchange for public goods, and hence they adjust their willingness to pay taxes as public good quality changes. We show that corporate tax planning intensity increases with ground‐level ozone pollution. Revisions in ozone pollution regulations cause counties that failed the revised and more stringent standards to reduce ozone pollution. Consequently, firms headquartered in these counties reduced corporate tax planning intensity relative to firms in other counties. The ozone‐tax link varies in the predicted directions with public attention to pollution, potential welfare loss due to ozone, managers’ stakeholder orientation, taxpayers’ polluting status, political preferences, and civic norms. We also find consistent results for Superfund cleanups of hazardous waste sites. Our research sheds light on reciprocity as a potential mechanism influencing corporate tax compliance.",JAR,2023,143,1013,"['Taxation', 'Environmental Sustainability', 'Corporate Governance', 'Public Policy', 'Climate Change Economics']","['tax', 'public goods', 'reciprocity', 'corporate tax planning', 'ozone pollution', 'regulations', 'Superfund cleanups', 'compliance', 'public attention', 'stakeholders']"
Did the FASB Codification Reduce the Complexity of Applying U.S. GAAP?,10.1111/1475-679X.12480,"We examine whether the Financial Accounting Standards Board (FASB) Codification made it easier for preparers and auditors to locate relevant accounting guidance. We find that areas of U.S. GAAP with more dispersed and voluminous guidance before the Codification experience a larger post‐Codification reduction in restatements. We find a similar decline in SEC comment letter questions referencing areas of U.S. GAAP with more dispersed and voluminous pre‐Codification guidance. Our results suggest that before the Codification, preparers and auditors had difficulty in locating the appropriate accounting guidance and that the Codification mitigated this difficulty.",JAR,2023,92,666,"['Financial Markets', 'Regulatory Frameworks', 'Accounting Standards', 'Corporate Governance', 'SEC Regulations']","['Financial Accounting Standards Board', 'FASB', 'Codification', 'preparers', 'auditors', 'U.S. GAAP', 'restatements', 'SEC', 'guidance', 'accounting']"
Externalities of Financial Statement Fraud on the Incoming Accounting Labor Force,10.1111/1475-679X.12501,"Financial statement fraud generates many negative effects, including reducing people's willingness to participate in the stock market. If it also stigmatizes accounting, it may similarly adversely affect the quantity and quality of workers willing to become accountants, thereby potentially creating negative effects for years to come. We examine the impact of fraud on the labor force entering the accounting profession, which is a key input into the production of accounting information (i.e., the output). Using data describing millions of college students across the United States, we find incoming students are actually more likely to major in accounting when local frauds occur during their formative years. These students are also more likely to have attributes desired by the accounting profession (e.g., high academic aptitude) and are more likely to subsequently serve in public accounting and become Certified Public Accountants. In the context of other fields (i.e., all college majors), we find that fraud similarly spurs interest in other business disciplines, but not in majors outside of business schools. Those attracted to other business disciplines, however, generally possess different traits. Specifically, students entering accounting are distinctively more likely to exhibit values espoused by the accounting profession, including a predisposition to public service and less commercial orientation. Thus, nonpecuniary motives appear to uniquely drive accounting student enrollment following fraud. Collectively, our findings suggest that, while fraud is unmistakably bad, it appears to have the positive unintended consequence of attracting labor into business disciplines and, in accounting, increasing the prevalence of desirable traits among entrants.",JAR,2023,251,1777,"['Labor Market Dynamics', 'Accounting', 'Financial Markets', 'Educational Equity', 'Economic Development']","['financial statement fraud', 'stock market', 'accounting', 'labor force', 'college students', 'fraud impact', 'business disciplines', 'accounting profession', 'Certified Public Accountants', 'nonpecuniary motives']"
Ethnic Minority Analysts’ Participation in Public Earnings Conference Calls,10.1111/1475-679X.12504,"We investigate ethnic minority and nonminority sell‐side analysts’ participation in public earnings conference calls. We find that minority analysts are underrepresented in conference call Q&amp;A sessions, and minority analysts who do participate on the calls experience lower levels of prioritization than do nonminority analysts. Minority analysts’ lower participation rates are partially but not fully mediated by characteristics such as experience, work environment, and stock rating favorability. Additionally, firm and conference call fixed effects mediate approximately half the magnitude of lower minority participation rates. Extroverted minority analysts participate at higher rates, but the negative association between minority status and conference call participation is exacerbated when calls are more time constrained, when executive teams are less diverse, and when analysts are from less prestigious brokerage houses. Overall, we document the underrepresentation of minority analysts on earnings conference calls and provide evidence suggesting both analysts’ and managers’ choices influence minority analysts’ participation rates.",JAR,2023,150,1149,"['Labor Market Dynamics', 'Diversity and Inclusion', 'Corporate Governance', 'Financial Markets', 'Social Policy']","['minority analysts', 'nonminority analysts', 'public earnings conference calls', 'participation rates', 'underrepresentation', 'Q&A sessions', 'characteristics', 'experience', 'work environment', 'stock rating']"
"Out of Site, Out of Mind? The Role of the Government-Appointed Corporate Monitor",10.1111/1475-679X.12502,"We study the role of a relatively new type of external firm monitor, an on‐site government‐appointed Corporate Monitor, and assess whether such appointments reduce firms' propensity to violate laws. Using a sample of deferred and nonprosecution agreements, we first document the determinants of Monitor appointment. We find firms that voluntarily disclose wrongdoing and have more independent directors are less likely to have Corporate Monitors, whereas those with more severe infractions, mandated board changes, and increased cooperation requirements are more likely to have Monitors. We find such appointments are associated with an 18%–25% reduction in violations while the Monitor is on site, however, the effect does not persist after the Monitorship ends. Using a semisupervised machine learning method to measure changes in firms' ethics and compliance norms, we find that the reduction in violations is associated with changes in ethics and compliance that also do not persist. Finally, we document that firms under Monitorship experience a persistent reduction in innovation, highlighting a previously unexplored cost of these interventions. Overall, our results suggest that, although Corporate Monitors on site are associated with fewer violations, firms revert to previous levels of violations following Monitors' departure.",JAR,2023,192,1338,"['Corporate Governance', 'Regulatory Frameworks', 'Innovation', 'Economic Development', 'Machine Learning Applications']","['Corporate Monitor', 'violations', 'firm', 'government-appointed', 'ethics', 'compliance', 'innovation', 'deferred prosecution agreements', 'independent directors', 'board changes']"
The Real Effects of Modern Information Technologies: Evidence from the EDGAR Implementation,10.1111/1475-679X.12496,"Using the implementation of the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system from 1993 to 1996 as a shock to information dissemination technologies, we examine how a significant reduction in disclosure processing costs affects the real economy. We find that the EDGAR implementation leads to an increase in corporate investment and that this effect is concentrated in value firms. We provide evidence that improved equity financing and enhanced managerial incentives are likely the underlying mechanisms. Specifically, the EDGAR implementation leads to an increase in a firm's stock liquidity, a decrease in the cost of equity capital, and an increase in the level of equity financing. Consistent with the monitoring effect of broad information dissemination, the EDGAR implementation leads to an increase in a firm's operating performance. Our findings suggest that it is important to consider information dissemination beyond information production when examining the real effects of corporate disclosures.",JAR,2023,149,1029,"['Financial Markets', 'Corporate Governance', 'Investment Strategies', 'Economic Development', 'Information Dissemination.']","['Electronic Data Gathering', 'Analysis', 'and Retrieval (EDGAR)', 'information dissemination technologies', 'disclosure processing costs', 'corporate investment', 'value firms', 'equity financing', 'managerial incentives', 'stock liquidity']"
Do Governments Hide Resources from Unions? The Influence of Public Sector Unions on Reported Discretionary Fund Balance Ratios,10.1111/1475-679X.12497,"We explore whether municipalities with public sector unions exploit aspects of governmental (or “fund”) accounting to obscure the availability of discretionary resources in fund balance accounts, relative to municipalities without public sector unions. We first investigate whether governments with unions report higher proportions of discretionary resources <jats:italic>outside</jats:italic> of the general fund, a primary measure of financial health, and instead within less prominent fund types. Second, we explore whether governments with unions report lower ratios within accessible general fund balance account categories – that is, report lower proportions of unreserved fund balance. Primary findings are consistent with both hypotheses. Although somewhat mixed, cross‐sectional analyses reveal that effects are magnified when unions have more bargaining power, as proxied by the ability to strike or the absence of state right‐to‐work laws. Further analysis corroborates cross‐sectional findings by examining difference‐in‐differences specifications surrounding the quasi‐exogenous shock of Wisconsin's 2011 weakening of state public sector union laws and Ohio's time‐varying union contract negotiations. Overall, the evidence suggests that governments with unions shelter resources to avoid the appearance of large discretionary amounts available.",JAR,2023,176,1358,"['Labor Market Dynamics', 'Public Finance', 'Fiscal Policy', 'Government Policy', 'Financial Markets']","['public sector unions', 'fund accounting', 'discretionary resources', 'fund balance', 'financial health', 'general fund', 'unreserved fund balance', 'bargaining power', 'strike', 'state right-to-work laws']"
The Effect of Client Industry Agglomerations on Auditor Industry Specialization,10.1111/1475-679X.12503,"Prior research on auditor industry specialization documents fee premiums for local audit offices that are industry specialists. This research assumes that the effects of specialization are uniform across markets. We examine industry specialization based on the economic theory of industry agglomeration (geographic areas with high industry concentration). Agglomeration economies can facilitate access to knowledge for auditors serving a specific industry in those locations. We find that industry specialists in agglomerations earn a fee premium in excess of specialists in other markets. We find that nonspecialist offices in agglomerations also earn fee premiums in that industry when compared to nonspecialists in other markets even when controlling for these groups’ absolute share of the national market. We also address whether or not this expertise can be shared among offices in an agglomeration specialist's firm. We find that audit offices that have easy connections to a within‐firm office in an agglomerated market can earn a fee premium relative to more distant offices, suggesting a benefit from knowledge transfer. This fee premium accrues to offices that would not be considered a specialist using traditional market share measures in a given industry. These findings indicate that the benefit of industry specialization depends on more than local market share.",JAR,2023,203,1378,"['Audit', 'Economic Theory', 'Knowledge Transfer', 'Industry Agglomeration', 'Fee Premium']","['auditor', 'industry specialization', 'fee premiums', 'agglomeration', 'geographic areas', 'industry concentration', 'agglomeration economies', 'knowledge transfer', 'market share', 'audit offices']"
Economic Consequences of Transparency Regulation: Evidence from Bank Mortgage Lending,10.1111/1475-679X.12498,"We examine the economic consequences of a rule designed to improve consumers' understanding of mortgage information. The 2015 TILA‐RESPA Integrated Disclosures rule (TRID) simplifies the mortgage disclosures provided to consumers. As a consequence, TRID‐affected mortgages become a less attractive investment opportunity to banks. Our main results document that mortgage applications affected by TRID are less likely to be approved following the rule's effective date. We find evidence consistent with both a decrease in consumers' information processing costs and an increase in banks' secondary market frictions, providing insight into the potential channels through which this reduction in mortgage credit operates. We also find that banks partially compensate for reduced mortgage lending by increasing small business lending, and that fintechs absorb mortgage demand in areas with reduced mortgage lending by banks. Our study documents real actions that firms take in response to disclosure transparency regulation and contributes to the literature on the economic consequences of such regulation.",JAR,2023,155,1102,"['Financial Markets', 'Banking Systems', 'Credit Markets', 'Regulatory Frameworks', 'Consumer Finance']","['economic consequences', 'mortgage information', 'TILA-RESPA Integrated Disclosures rule', 'TRID', 'mortgage applications', 'consumers', 'banks', 'secondary market frictions', 'small business lending', 'fintechs']"
By What Criteria Do We Evaluate Accounting? Some Thoughts on Economic Welfare and the Archival Literature,10.1111/1475-679X.12507,"The economic role of an accounting regime is to increase welfare through its effects—in conjunction with complementary institutions—on firm and household behavior. I review three major streams of the archival literature (real effects; price effects, including value relevance; and costly contracting), in terms of what they can and cannot reveal as proxies for welfare effects. One conclusion is that the partial correlations and average effects that predominate in this literature have provided valuable insights into the role of accounting in the economy, but provide limited and misleading proxies for welfare effects. A major concern is that teachers, students, and researchers—indeed, regulators and standard setters—raised on this literature could lose sight of, and underestimate, the fundamental contribution of accounting to aggregate welfare.",JAR,2024,121,852,"['Financial Markets', 'Corporate Governance', 'Public Policy', 'Economic Growth', 'Accounting']","['accounting regime', 'welfare', 'firm behavior', 'household behavior', 'archival literature', 'real effects', 'price effects', 'value relevance', 'costly contracting', 'aggregate welfare']"
Information Complementarities and the Dynamics of Transparency Shock Spillovers,10.1111/1475-679X.12510,"We show that information complementarities play an important role in the spillover of transparency shocks. We exploit the revelation of financial misconduct by S&amp;P 500 firms, and in a “Stacked Difference‐in‐Differences” design, find that the implied cost of capital increases for “close” industry peers of the fraudulent firms relative to “distant” industry peers. The spillover effect is particularly strong when the close peers and the fraudulent firm share common analyst coverage and common institutional ownership, which have been shown to be powerful proxies for fundamental linkages and information complementarities. We provide evidence that increase in the cost of capital of peer firms is due, at least in part, to “beta shocks.” Disclosure by close peers—especially those with co‐coverage and co‐ownership links—also increases following fraud revelation. Although disclosure remains high in the following years, the cost of equity starts to decrease.",JAR,2024,140,965,"['Financial Markets', 'Corporate Governance', 'Market Transparency', 'Investment Strategies', 'Risk Management']","['information complementarities', 'transparency shocks', 'financial misconduct', 'S&P 500 firms', 'cost of capital', 'industry peers', 'analyst coverage', 'institutional ownership', 'beta shocks', 'disclosure']"
How Does Carbon Footprint Information Affect Consumer Choice? A Field Experiment,10.1111/1475-679X.12505,"This paper reports the results of a field experiment investigating how attributes of carbon footprint information affect consumer choice in a large dining facility. Our hypotheses and research methods were preregistered via the <jats:italic>Journal of Accounting Research</jats:italic>’s registration‐based editorial process. Manipulating the measurement units and visualizations of carbon footprint information on food labels, we quantify effects on consumers’ food choices. Treated consumers choose less carbon‐intensive dishes, reducing their food‐related carbon footprint by up to 9.2%, depending on the treatment. Effects are strongest for carbon footprint information expressed in monetary units (“environmental costs”) and color‐coded in the familiar traffic‐light scheme. A postexperimental survey shows that these effects obtain although few respondents self‐report concern for the environmental footprint of their meal choices. Our study contributes to the accounting literature by using an information‐processing framework to shed light on the information usage and decision‐making processes of an increasingly important user group of accounting information: consumers.",JAR,2024,152,1180,"['Consumer Behavior', 'Climate Change Economics', 'Environmental Sustainability', 'Accounting Literature', 'Information Usage']","['carbon footprint', 'consumer choice', 'dining facility', 'food labels', 'measurement units', 'visualizations', 'environmental costs', 'traffic-light scheme', 'information processing', 'decision-making processes']"
Price Rigidities and the Value of Public Information,10.1111/1475-679X.12495,"Firms' inflexibility in adjusting output prices to economic shocks exacerbates information asymmetry with respect to firms' profits, but public information on firms' cost structure mitigates this problem. We construct a novel form of public information from economic statistics disclosed by the government and find that such public information significantly reduces inflexible‐price firms' bid–ask spreads, the probability of informed trading, and analyst forecast dispersions, but these results do not hold for flexible‐price firms. Security analysts seek more cost‐related information during conference calls about inflexible‐price firms, but such a phenomenon is observed less frequently if a firm's input cost is more publicly observable. In addition, stock markets react more strongly to earning news announced by inflexible‐price firms, consistent with our intuition.",JAR,2024,119,873,"['Financial Markets', 'Market Transparency', 'Corporate Governance', 'Economic Development', 'Information Asymmetry.']","['inflexibility', 'output prices', 'economic shocks', 'information asymmetry', 'public information', 'cost structure', 'bid-ask spreads', 'informed trading', 'analyst forecasts', 'security analysts']"
Cultural Origin and Minority Shareholder Expropriation: Historical Evidence,10.1111/1475-679X.12517,"Can culture explain regional differences in minority shareholder expropriation? Examining regional variation in China, we document that the influence of historical Confucian values persists, despite decades of political movements clamping down on these values, and that these values reduce minority shareholder expropriation in local public firms. The effect on minority shareholder expropriation, in part, operates through the establishment of oversight mechanisms (i.e., greater financial reporting quality and dividend payouts) that constrain expropriation. The findings have important implications for understanding the origins of enduring regional differences in minority shareholder expropriation and capital market development.",JAR,2024,93,734,"['Corporate Governance', 'Financial Markets', 'Capital Allocation', 'Economic Development', 'Regulatory Frameworks']","['culture', 'regional differences', 'minority shareholder expropriation', 'China', 'Confucian values', 'oversight mechanisms', 'financial reporting quality', 'dividend payouts', 'capital market development', 'political movements']"
Regulatory Transparency and Regulators’ Effort: Evidence from Public Release of the SEC's Review Work,10.1111/1475-679X.12513,"Using the public release of comment letters on EDGAR to capture a regime shift toward regulatory transparency, we examine whether an increase in transparency affects regulators’ effort and work performance. We find that the SEC staff reviews more filings and more documents per filing following the disclosure regime shift. These effects are incrementally stronger for firms with comment letters that are expected to attract greater investor or public monitoring. Furthermore, under the new regime, reviews are more timely. Upon the regime switch, the likelihood of a restatement (receiving a comment letter) decreases (increases) for filings that are reviewed. After receiving a comment letter, a firm with signs of potential fraud is more likely to be investigated, and this effect becomes more pronounced under the new regime. Altogether, our findings suggest that publicly disclosing regulators’ work output can mitigate moral hazard (i.e., increase regulators’ work input), improving their work performance.",JAR,2024,149,1012,"['Regulatory Frameworks', 'Financial Markets', 'Public Policy', 'Corporate Governance', 'Market Transparency']","['regulatory transparency', 'comment letters', 'EDGAR', 'SEC staff', 'filings', 'documents', 'investor monitoring', 'public monitoring', 'restatement', 'fraud']"
Audit Partners’ Role in Material Misstatement Resolution: Survey and Interview Evidence,10.1111/1475-679X.12506,"Auditors are expected to identify and resolve material misstatements (MMs) in management's financial statements. However, beyond the audit opinion, the audit process is opaque. To address this, we independently survey 462 audit partners and interview 24 audit partners, CFOs, and audit committee members on how partners assess and address MM risk, resolve MMs, and the consequences of MMs. Partners identify MMs in approximately 9% (15%) of public (private) engagements and use qualitative factors to waive apparent MMs. Loan covenant and going‐concern issues increase MM risk more than earnings benchmark issues. Partners point to a variety of both auditor and client factors as threats to audit effectiveness. Partners often rely on rapport with management and involve the national office and audit committee in resolving MMs. Partner incentives around restatements are context specific. Our results provide new insights into the auditor's role in financial reporting that are relevant to academics, practitioners, and regulators.",JAR,2024,151,1032,"['Risk Management', 'Corporate Governance', 'Financial Markets', 'Audit Partners', 'Regulatory Frameworks']","['auditors', 'material misstatements', 'audit partners', 'financial statements', 'audit process', 'MM risk', 'loan covenant', 'going-concern issues', 'audit effectiveness', 'restatements']"
Corporate R&amp;D Investments Following Competitors’ Voluntary Disclosures: Evidence from the Drug Development Process,10.1111/1475-679X.12509,"This paper examines the role of peer firm disclosures in shaping corporate research and development (R&amp;D) investments. Drawing on models of two‐stage R&amp;D races, I hypothesize that a firm could be either deterred or encouraged by peer disclosure of interim R&amp;D success, depending on peer firms’ R&amp;D strength in the race. Using granular, project‐level data on clinical trials in the drug development process, I find that a firm's R&amp;D investments in a specific therapeutic area are deterred by disclosures of early‐phase trial initiation from strong rivals in the same area but encouraged by disclosures from weak rivals. Cross‐sectional analyses show that focal firm strength and disclosure relevance moderate the effects of peer firm disclosure. Overall, my evidence suggests that peer firms’ R&amp;D disclosures can have both proprietary costs and deterrence benefits.",JAR,2024,131,888,"['R&D Investments', 'Corporate Governance', 'Healthcare Systems', 'Innovation', 'Competition']","['peer firm disclosures', 'corporate research and development', 'R&D investments', 'two-stage R&D races', 'interim R&D success', 'peer firms', 'drug development process', 'clinical trials', 'therapeutic area', 'deterrence benefits']"
Target Setting in Hierarchies: The Role of Middle Managers,10.1111/1475-679X.12508,"We explore how a supervisor's hierarchical rank affects the extent to which employees’ targets reflect their past performance. Literature documents that supervisors do not fully ratchet targets for past performance, arguably because the commitment not to penalize successful employees with more difficult targets alleviates the severity of the ratchet effect. We argue that commitment is less credible in organizational hierarchies where a middle manager sets employees’ targets. Using data from an organization comprised of three hierarchical layers, we consistently find that a middle manager's exposure to performance pressure is positively associated with the ratcheting of the employees’ targets. Moreover, we show that management at headquarters reduces a middle manager's performance pressure when most of her employees missed their targets in the previous period. Overall, the results imply that the hierarchical rank is an important determinant of the credibility of a supervisor's commitment to deemphasize past performance in target setting.",JAR,2024,149,1052,"['Organizational Behavior', 'Performance Pressure', 'Target Setting', 'Hierarchical Rank', 'Commitment.']","['supervisor', 'hierarchical rank', 'employees', 'targets', 'past performance', 'commitment', 'ratchet effect', 'middle manager', 'performance pressure', 'organizational hierarchy']"
Transparency in Hierarchies,10.1111/1475-679X.12516,"We use an agency model to address the benefits and costs of transparency in a hierarchical organization in which the principal employs a manager entrusted with contracting authority and several workers, all under conditions of moral hazard. We define the principal's transparency choices as a decision to allow workers to observe their coworkers’ performances (<jats:italic>observability</jats:italic>) and as an investment in monitoring worker performance (<jats:italic>precision</jats:italic>). We find that whereas precision alleviates agency conflicts as expected, observability can exacerbate agency conflicts, especially if the manager's interests are misaligned sufficiently with those of the principal. Our results suggest several testable hypotheses including predictions that opaque performance measurement practices are well suited for small organizational units at lower hierarchical ranks, and in settings where the sensitivity‐precision of the available measures is low, workers’ performances are correlated positively, and managerial productivity is modest.",JAR,2024,138,1072,"['Corporate Governance', 'Organizational Behavior', 'Market Transparency', 'Economic Development', 'Performance Measurement.']","['observability', 'precision', 'transparency', 'agency model', 'hierarchical organization', 'moral hazard', 'monitoring', 'performance', 'agency conflicts', 'performance measurement practices']"
Occupational Licensing and Minority Participation in Professional Labor Markets,10.1111/1475-679X.12518,"We examine the staggered adoption of additional educational requirements (“150‐hour rule”) for Certified Public Accountants (“CPAs”) to understand the effects of occupational licensing on minority participation in professional labor markets. The 150‐hour rule increased the educational requirement for CPAs from 120 to 150 credit hours, effectively adding a fifth year of study. We find a 13% greater entry decline following the requirement's enactment for minority than nonminority CPA candidates. Our analyses of parental income and financial aid availability point to a socioeconomic status channel explaining the differential entry declines. Studying exam passing patterns, professional misconduct, and job postings we find a deterioration, or at best, no change in CPA quality following enactment.",JAR,2024,112,802,"['Labor Market Dynamics', 'Educational Equity', 'Income Inequality', 'Social Policy', 'Economic Development']","['150-hour rule', 'Certified Public Accountants', 'CPAs', 'minority participation', 'professional labor markets', 'educational requirement', 'entry decline', 'parental income', 'financial aid availability', 'socioeconomic status.']"
Bank Supervision and Organizational Capital: The Case of Minority Lending,10.1111/1475-679X.12529,"We investigate whether improvements in banks' organizational capital and control systems facilitate increased loan origination to minority borrowers. We focus on bank supervisors' enforcement decisions and orders (EDOs) against banks and hypothesize that EDO‐imposed improvements in loan policies, internal governance, and employee training mitigate deficiencies in credit assessments and lending decisions that previously disadvantaged minority borrowers. We find that mortgage origination to minority borrowers increases following the resolution of EDOs, and more so for banks with stricter supervisors or more severe EDOs. Using a semisupervised machine learning method to analyze the text of EDOs, we find that such increases are higher for EDOs specifying revisions of loan policies, implementation of formal internal governance procedures, or more employee training. Overall, we find that EDO‐driven improvements in organizational capital generate unintended, positive social externalities that enhance access to credit for minority borrowers.",JAR,2024,140,1049,"['Banking Systems', 'Credit Markets', 'Financial Markets', 'Social Policy', 'Economic Development']","['improvements', 'banks', 'organizational capital', 'control systems', 'loan origination', 'minority borrowers', 'bank supervisors', 'EDOs', 'credit assessments', 'lending decisions']"
The Real Effects of Supply Chain Transparency Regulation: Evidence from Section 1502 of the Dodd–Frank Act,10.1111/1475-679X.12530,"Section 1502 of the Dodd–Frank Act requires SEC‐registered issuers to conduct supply chain due diligence and submit conflict minerals disclosures (CMDs) that indicate whether their products contain tantalum, tin, tungsten, or gold (3TG) sourced from the Democratic Republic of the Congo (DRC) or its neighboring countries (“covered countries”). Consistent with the reputational cost hypothesis, we find that heightened public attention to CMDs increases responsible sourcing. After Section 1502 takes effect, we find higher demand for 3TG products processed in certified smelters, decreased conflicts in covered countries’ mining regions relative to other regions, and reduced sensitivity of conflict risk to conflict minerals’ price spikes. Finally, we find that conflicts decrease in Eastern DRC territories with prevalent 3T (tantalum, tin, and tungsten) mines but increase in territories with prevalent gold mines. Overall, our findings highlight the real effects of enhanced supply chain transparency regulation.",JAR,2024,142,1017,"['Supply Chain Resilience', 'Regulatory Frameworks', 'Conflict Minerals', 'Corporate Social Responsibility', 'Economic Development']","['Dodd-Frank Act', 'SEC', 'conflict minerals', 'supply chain', 'due diligence', 'tantalum', 'tin', 'tungsten', 'gold', 'Democratic Republic of the Congo (DRC)']"
The Impact of Credit Market Development on Auditor Choice: Evidence from Banking Deregulation,10.1111/1475-679X.12519,"We exploit the staggered state‐level adoption of the Riegle‐Neal Interstate Banking and Branching Efficiency Act (IBBEA) to examine how banking deregulation and the resulting increase in bank competition affect firms’ auditor choices. We find that an exogenous increase in the degree of interstate branch banking deregulation leads to a reduction in firms’ propensity to engage a Big N or industry expert auditor. This main result, when combined with our cross‐sectional analyses, offers evidence suggesting that deregulation leads to less demand for higher quality auditors because (1) firms have increased access to credit, which reduces the benefits of higher audit quality; (2) entering banks’ lending expertise substitutes for higher quality financial statements; (3) incumbent banks with less lending expertise seek to protect their rents by preferring that borrowers provide lower quality financial statement information; and (4) external stakeholders delegate their monitoring to banks to a greater degree, resulting in less demand for higher quality financial statements. As such, our study sheds light on how the U.S. credit market's infrastructure shapes firms’ auditor choice decisions.",JAR,2024,173,1198,"['Banking Systems', 'Credit Markets', 'Financial Markets', 'Corporate Governance', 'Economic Development']","['banking deregulation', 'auditor choices', 'interstate branch banking', 'Riegle-Neal Interstate Banking and Branching Efficiency Act', 'Big N auditor', 'industry expert auditor', 'credit market', 'financial statements', 'lending expertise', 'external stakeholders']"
Payment Practices Transparency and Customer-Supplier Dynamics,10.1111/1475-679X.12521,"We exploit
the introduction of the Payment Practices Disclosure Regulation in the United Kingdom (UK) to examine the effects of mandating disclosure of customer‐supplier payment practices. We find that nondisclosing small and medium‐sized enterprises (SMEs) experience a reduction in their accounts receivable by 8.3%, consistent with an acceleration of their trade credit collections. Further, SMEs exhibit fewer financial constraints after the regulation. We survey managers from large firms and SMEs to understand the underlying mechanisms. The required disclosures raise large firms’ reputational concerns and shift the bargaining power between large firms and SMEs. Additionally, the new disclosures compel executives at large firms to scrutinize their own firms’ payment practices, leading to increased accountability and a stronger focus on timely payment among senior managers.",JAR,2024,123,885,"['Corporate Governance', 'Financial Markets', 'Credit Markets', 'Regulatory Frameworks', 'Business Strategy']","['Payment Practices Disclosure Regulation', 'United Kingdom', 'small and medium-sized enterprises', 'accounts receivable', 'trade credit collections', 'financial constraints', 'large firms', 'SMEs', 'reputational concerns', 'bargaining power']"
How Does Management Voluntary Disclosure Behavior Influence Auditors’ Judgments?,10.1111/1475-679X.12531,"Forward‐looking information, often used by auditors to evaluate complex estimates and form conclusions about going‐concern audit report modifications, is commonly disclosed voluntarily by U.S. public companies. We experimentally examine how this disclosure behavior affects auditors’ skepticism toward such information. Prior research has shown that investors and analysts frequently interpret voluntarily disclosed forward‐looking information as credible. We demonstrate that auditors, in contrast, exhibit greater skepticism toward forecasted information that has been voluntarily disclosed (vs. mandatorily disclosed or held privately) because of their reduced trust in management, even when the forecasts align with prior year trends (vs. being more optimistic). Our results suggest that a manager's decision to disclose, rather than the disclosure content itself, leads to increased auditor skepticism. Our findings have implications not only for audit outcomes, but also for manager disclosure behavior, as increased auditor scrutiny could discourage future voluntary disclosure.",JAR,2024,142,1085,"['Corporate Governance', 'Financial Markets', 'Audit Outcomes', 'Manager Disclosure Behavior', 'Regulatory Frameworks']","['auditors', 'forward-looking information', 'disclosure behavior', 'skepticism', 'voluntary disclosure', 'U.S. public companies', 'going-concern audit report', 'investors', 'analysts', 'management']"
Earnings News and Over-the-Counter Markets,10.1111/1475-679X.12522,"We document significant increases in bond market liquidity around earnings announcements. These increases are attributed to decreased search and bargaining costs, which arise from the over‐the‐counter (OTC) nature of bond markets and outweigh increases in information asymmetry during these periods. Our evidence traces reductions in search and bargaining costs to two sources around earnings announcements: (1) improved access to dealers and (2) increased participation from institutional investors, who can more easily transact with multiple dealers. Overall, our findings highlight a novel channel through which firm‐specific information affects asset prices.",JAR,2024,89,662,"['Financial Markets', 'Market Transparency', 'Investment Strategies', 'Corporate Governance', 'Information Asymmetry']","['bond market liquidity', 'earnings announcements', 'search costs', 'bargaining costs', 'over-the-counter', 'information asymmetry', 'dealers', 'institutional investors', 'firm-specific information', 'asset prices']"
"Wrong Kind of Transparency? Mutual Funds’ Higher Reporting Frequency, Window Dressing, and Performance",10.1111/1475-679X.12527,"This study examines whether mandatory increase in reporting frequency exacerbates agency problems. Utilizing the setting of the 2004 SEC mandate on increased reporting frequency of mutual fund holdings, we show that increased reporting frequency elevates window dressing (buying winners or selling losers shortly before the end of the reporting period). This effect is driven by low‐skill fund managers’ incentives to generate mixed signals. Funds managed by low‐skill managers experience lower returns, more outflows, and a higher collapse rate when their window dressing is elevated after the 2004 rule change. These results suggest that, although higher reporting frequency on agents’ actions can exacerbate signal manipulations, the related manipulation costs improve sorting among agents in the longer term.",JAR,2024,116,812,"['Financial Markets', 'Corporate Governance', 'Investment Strategies', 'Market Transparency', 'Regulatory Frameworks']","['mandatory', 'reporting frequency', 'agency problems', 'SEC mandate', 'mutual fund holdings', 'window dressing', 'low-skill fund managers', 'incentives', 'signal manipulations', 'manipulation costs']"
Treatment of Accounting Changes and Covenant Violation Errors,10.1111/1475-679X.12515,"GAAP provisions in loan contracts specify how to address the effect of accounting changes on financial covenants. I document a pronounced upward trend in and the dominance of frozen‐on‐request (FOR) GAAP provisions, which incorporate accounting changes unless either the borrower or the lender requests a freeze. FOR GAAP streamlines the process of incorporating accounting changes into covenant calculations by obviating the need for renegotiations and prevents opportunistic GAAP freezes by requiring good faith renegotiations. Therefore, FOR GAAP is more likely to incorporate accounting changes beneficial to covenant informativeness, leading to lower false positives (i.e., Type I errors of financial covenant violations) and false negatives (i.e., Type II errors of financial covenant violations). Based on a large sample of loan contracts, I find that FOR GAAP decreases false positives and false negatives after controlling for self‐selection bias and that the decrease is more pronounced when accounting changes relevant to financial covenants are more significant. My study provides new evidence of the role accounting standards and GAAP provisions play in debt contracting efficiency.",JAR,2024,171,1195,"['Financial Markets', 'Debt Management', 'Regulatory Frameworks', 'Banking Systems', 'Accounting Standards']","['GAAP', 'loan contracts', 'accounting changes', 'financial covenants', 'frozen-on-request', 'covenant calculations', 'renegotiations', 'opportunistic freezes', 'false positives', 'false negatives']"
Fraud Power Laws,10.1111/1475-679X.12520,"Using misstatement data, we find that the distribution of detected fraud features a heavy tail. We propose a theoretical mechanism that explains such a relatively high frequency of extreme frauds. In our dynamic model, a manager manipulates earnings for personal gain. A monitor of uncertain quality can detect fraud and punish the manager. As the monitor fails to detect fraud, the manager's posterior belief about the monitor's effectiveness decreases. Over time, the manager's learning leads to a slippery slope, in which the size of frauds grows steeply, and to a power law for detected fraud. Empirical analyses corroborate the slippery slope and the learning channel. As a policy implication, we establish that a higher detection intensity can increase fraud by enabling the manager to identify an ineffective monitor more quickly. Further, nondetection of frauds below a materiality threshold, paired with a sufficiently steep punishment scheme, can prevent large frauds.",JAR,2024,149,978,"['Corporate Governance', 'Financial Markets', 'Risk Management', 'Behavioral Economics', 'Public Policy']","['misstatement data', 'fraud', 'manager', 'monitor', 'earnings manipulation', 'learning', 'slippery slope', 'power law', 'detection intensity', 'punishment scheme']"
Relative Performance Evaluation and Strategic Peer-Harming Disclosures,10.1111/1475-679X.12543,"Many firms use relative stock performance to evaluate and incentivize their CEOs. We document that such firms routinely disclose information that harms their peers' stock prices, and sometimes explicitly mention the harmed peers, by name, in these disclosures. Consistent with deliberate sabotage, peer‐harming disclosures appear to be aimed at peers whose stock price depressions are most likely to benefit the disclosing firms' CEOs. The pricing effect of these disclosures does not reverse, suggesting that the disclosures contain legitimate information regarding peers' prospects. In sum, our results suggest that relative performance evaluation in CEO pay motivates CEOs to internalize the externalities of their disclosures, and strategically disclose information that harms peers' stock prices, in order to improve their firms' relative standing within their peer group.",JAR,2024,124,877,"['Corporate Governance', 'Financial Markets', 'Risk Management', 'Market Transparency', 'Business Strategy.']","['CEO', 'stock performance', 'disclosure', 'sabotage', 'peers', 'stock price', 'information', 'relative performance evaluation', 'externalities', 'strategic disclosure.']"
Innovation and Financial Disclosure,10.1111/1475-679X.12546,"We examine how financial disclosure policy affects a firm manager's strategy to innovate within a two‐period bandit problem featuring two production methods: an old method with a known probability of success, and a new method with an unknown probability. Exploring the new method in the first period provides the manager with decision‐useful information for the second period, thus creating a real option that is unavailable under exploiting the old known production method. Voluntary disclosure of the firm's financial performance provides the manager with another option to potentially conceal initial failure from the market. The interaction of these two options determines the manager's incentive to explore. In equilibrium, a myopic manager who cares about the interim market price may over‐ or under‐explore compared to the optimal exploration strategy that maximizes firm value. Our analysis shows that firms operating in an environment with voluntary disclosure early in the trial stage and mandated requirement later are most motivated to explore, while firms subject to early mandated disclosure and late voluntary disclosure are least likely to do so. We also provide empirical predictions about the link between the disclosure environment and the intensity and efficiency of corporate innovation.",JAR,2024,194,1308,"['Innovation', 'Financial Markets', 'Corporate Governance', 'Economic Development', 'Venture Capital']","['financial disclosure policy', 'firm manager', 'innovation strategy', 'bandit problem', 'production methods', 'real option', 'voluntary disclosure', 'market price', 'exploration strategy', 'corporate innovation']"
What Role Do Boards Play in Companies with Visionary CEOs?,10.1111/1475-679X.12514,"Visionary CEOs have strong beliefs about the right course of action for their firms. How should a board of directors that does not necessarily share the visionary CEO's confidence advise and monitor the CEO? We consider a model in which the board can acquire costly information about the firm's optimal strategic direction. The board not only advises the CEO on strategy, but also must approve it, and the CEO exerts effort to implement the strategy. We find that the board gathers less information when the CEO believes more strongly in his vision. Further, depending on the strength of the CEO's belief bias, the board either plays an advisory role, a monitoring role, or a rubberstamping role. The model predicts that in firms that are led by highly visionary CEOs, boards are passive in that they acquire little information and rubberstamp the visionary's proposal. Nevertheless, shareholders prefer the visionary over an unbiased manager in industries in which obtaining information about the correct course of action is difficult and costly.",JAR,2024,168,1047,"['Corporate Governance', 'Business Strategy', 'Financial Markets', 'Risk Management', 'Economic Development']","['visionary CEOs', 'board of directors', 'beliefs', 'strategic direction', 'information', 'advisory role', 'monitoring role', 'rubberstamping role', 'shareholders', 'industries']"
Economics of Information Search and Financial Misreporting,10.1111/1475-679X.12528,"I examine how investors’ search for different types of information affects managers’ reporting decisions. I distinguish investors’ search for information about firm fundamentals (“fundamental search”) from their search for information about managers’ incentives (“incentive search”). Based on a parsimonious model of misreporting, I predict that fundamental search reduces the earnings response coefficient, which reduces managers’ benefits from misreporting, resulting in less misreporting. In contrast, incentive search increases the earnings response coefficient, which increases the benefits from misreporting, resulting in more misreporting. I test these predictions using an empirical technique that classifies EDGAR downloads as fundamental search or incentive search. Consistent with my theoretical predictions, I find that fundamental (incentive) search is negatively (positively) related to the earnings response coefficients and intentional restatements. I confirm my findings in two distinct empirical settings where the costs of information search exogenously changed: the adoption of XBRL and the electronic filing mandate of Form 4s. Collectively, the results show that investors’ information demand can shape managers’ reporting decisions, and its effects can vary depending on the type of information investors search for.",JAR,2024,178,1339,"['Financial Markets', 'Corporate Governance', 'Information Demand', 'Empirical Analysis', 'Reporting Decisions']","['investors', 'managers', 'reporting decisions', 'information search', 'earnings response coefficient', 'misreporting', 'fundamental search', 'incentive search', 'EDGAR downloads', 'empirical settings']"
The Impact of Information Frictions Within Regulators: Evidence from Workplace Safety Violations,10.1111/1475-679X.12541,"The Occupational Safety and Health Administration (OSHA) is decentralized, wherein field offices coordinated at the state level undertake inspections. We study whether this structure can lead to interstate frictions in sharing information and how this impacts firms’ compliance with workplace safety laws. We find that firms caught violating in one state subsequently violate less in that state but violate more in other states. Despite this pattern, and in keeping with information frictions, violations in one state do not trigger proactive OSHA inspections in other states. Moreover, firms face lower monetary penalties when subsequent violations occur across state lines, likely due to the lack of documentation necessary to assess severe penalties. Finally, firms are more likely to shift violating behavior into states with greater information frictions. Our findings suggest that internal information within regulators impacts the likelihood and location of corporate misconduct.",JAR,2024,141,986,"['Public Policy', 'Regulatory Frameworks', 'Labor Market Dynamics', 'Corporate Governance', 'Economic Development']","['Occupational Safety and Health Administration', 'OSHA', 'interstate frictions', 'workplace safety laws', 'violations', 'inspections', 'monetary penalties', 'corporate misconduct', 'regulators', 'information frictions']"
Bridging Theory and Empirical Research in Accounting,10.1111/1475-679X.12545,"Formal theory and empirical research are complementary in building and advancing the body of knowledge in accounting in order to understand real‐world phenomena. We offer thoughts on opportunities for empiricists and theorists to collaborate, build on each other's work, and iterate over models and data to make progress. For empiricists, we see room for more descriptive work, more experimental work on testing formal theories, and more work on quantifying theoretical parameters. For theorists, we see room for theories explicitly tied to descriptive evidence, new theories on individuals' decision making in a data‐rich world, theories focused on accounting institutions and measurement issues, and richer theories for guiding empirical work and providing practical insights. We also encourage explicitly combining formal theory and empirical models by having both in one paper and by structural estimation.",JAR,2024,132,910,"['Financial Markets', 'Corporate Governance', 'Economic Development', 'Accounting Institutions', 'Empirical Research']","['empirical research', 'formal theory', 'accounting', 'collaboration', 'models', 'data', 'decision making', 'institutions', 'measurement issues', 'structural estimation']"
News Bias in Financial Journalists’ Social Networks,10.1111/1475-679X.12560,"Connected financial journalists—those with working relationships, common school ties, or social media connections to company management—introduce a marked media slant into their news coverage. Using a comprehensive set of newspaper articles covering mergers and acquisition (M&amp;A) transactions from 1997 to 2016, I find that connected journalists use significantly fewer negative words in their coverage of connected acquirers. These journalists are also more likely to quote connected executives and include less accurate language in their reporting. Moreover, they tend to portray other firms in the same network in a less negative light. Journalists’ favoritism bias has implications for both capital market outcomes and their careers. I find that acquirers whose M&amp;As are covered by connected journalists receive significantly higher stock returns on the news article publication date. However, these acquirers’ stock prices reverse in the long term, suggesting market overreaction to news covered by connected journalists. Around M&amp;A transactions, connected articles are correlated with increased bid competition and deal premiums. In terms of future career development, connected journalists are more likely to leave journalism and join their associated industries in the long run. Taken together, the evidence suggests that financial journalists’ personal networks promote news bias that potentially hinders the efficient dissemination of information.",JAR,2024,203,1469,"['Financial Markets', 'Corporate Governance', 'Market Transparency', 'Business Strategy', 'Media Bias']","['financial journalists', 'connected journalists', 'media bias', 'mergers and acquisitions', 'news coverage', 'stock returns', 'bid competition', 'deal premiums', 'personal networks', 'information dissemination']"
Using and Interpreting Fixed Effects Models,10.1111/1475-679X.12559,"Fixed effects (FE) have emerged as a ubiquitous and powerful tool for eliminating unwanted variation in observational accounting studies. Unwanted variation is plentiful in accounting research because we often use rich data to test precise hypotheses derived from abstract theories. By eliminating unwanted variation, FE reduce concerns that omitted variables bias our estimates or weaken test power. FE are not costless, though, so their use should be carefully justified by theoretical and institutional considerations. FE also transform samples and variables in ways that are not immediately apparent, and in doing so affect how we should interpret regression results. This primer explains the mechanics of FE and provides practical guidance for the informed use, transparent reporting, and careful interpretation of FE models.",JAR,2024,121,830,"['Fixed Effects', 'Accounting Research', 'Regression Results', 'Transparent Reporting', 'Institutional Considerations']","['Fixed effects', 'unwanted variation', 'accounting studies', 'observational', 'rich data', 'omitted variables', 'bias', 'test power', 'theoretical considerations', 'regression results']"
Equity Incentive Plans and Board of Director Discretion over Equity Grants,10.1111/1475-679X.12532,"Equity compensation is granted out of an equity incentive plan that must be approved by shareholders and cedes discretion over equity grants to boards of directors. We predict and find that equity plan proposals give boards more discretion over grants when the firm faces greater labor market forces and more volatile stock returns. When examining votes, we find that shareholders are less likely to support plans with abnormal discretion. We also find that boards with more discretion grant more equity in response to stock price declines. Lastly, we find that boards request additional shares when their ability to grant equity is more constrained by a smaller pool of available shares, and when they plan to increase equity grants. Overall our findings illuminate how firms balance needs to respond to labor market pressure and volatile operating environments against shareholder governance and oversight of equity compensation.",JAR,2024,144,931,"['Corporate Governance', 'Labor Market Dynamics', 'Financial Markets', 'Shareholder Governance', 'Equity Compensation']","['equity compensation', 'equity incentive plan', 'shareholders', 'boards of directors', 'labor market forces', 'stock returns', 'votes', 'discretion', 'stock price declines', 'governance']"
When Employees Go to Court: Employee Lawsuits and Talent Acquisition in Audit Offices,10.1111/1475-679X.12534,"I examine whether employee‐initiated lawsuits against an audit office adversely affect its ability to attract high‐quality talent and deliver quality audits. I posit that employee lawsuits erode prospective employees’ perceptions of an office, diminishing their willingness to join. Using a comprehensive data set of individual auditor profiles, I find a decline in the quality of newly hired auditors following an employee lawsuit. Cross‐sectionally, the adverse effect of employee lawsuits on talent acquisition is more pronounced when an office is undergoing higher growth and when a case receives greater media attention. Conversely, this adverse effect is less pronounced when an audit office is larger or offers more competitive wages within the local area. When an audit office is unable to recruit high‐quality talent, its audit quality is likely to suffer. Consistent with this, I find a deterioration in audit quality provided by an office following an employee lawsuit. Overall, this study underscores the importance of human capital management and employer reputation for audit offices that operate in competitive labor markets.",JAR,2024,169,1140,"['Labor Market Dynamics', 'Corporate Governance', 'Audit Quality', 'Talent Acquisition', 'Human Capital Management']","['employee lawsuits', 'audit office', 'high-quality talent', 'quality audits', 'auditor profiles', 'talent acquisition', 'growth', 'media attention', 'competitive wages', 'audit quality']"
Social Comparison on Multiple Tasks: Sacrificing Overall Performance for Local Excellence?,10.1111/1475-679X.12535,"This field experiment investigates how different levels of aggregation in relative performance information (RPI) impact employee performance in environments with multiple tasks. We randomly assign store employees of a retail chain to three groups: RPI on overall performance (control group), RPI on separate tasks, and RPI on both overall performance and separate tasks. We do not find evidence that providing separate task RPI instead of overall RPI affects performance or effort allocation. However, providing RPI on both overall performance and separate tasks seems to reduce performance, especially in the low‐return task. This suggests that detailed RPI directs employees’ attention to the smaller benefits of low‐return tasks. We further find that only 30.5% of the employees accessed their performance reports, highlighting a distinction between providing RPI in the field and the laboratory. This study is based on a registered report accepted by the <jats:italic>Journal of Accounting Research</jats:italic>.",JAR,2024,146,1017,"['Labor Market Dynamics', 'Behavioral Economics', 'Organizational Behavior', 'Employee Performance', 'Consumer Behavior']","['experiment', 'aggregation', 'relative performance information', 'employee performance', 'tasks', 'store employees', 'overall performance', 'effort allocation', 'low-return task', 'performance reports']"
Home Sweet Home: CEOs Acquiring Firms in Their Birth Countries,10.1111/1475-679X.12533,"We find that foreign‐born CEOs are more inclined than domestic‐born ones to acquire across borders, and that this inclination is explained by their preference for targets in their birth country. This preference is motivated by foreign‐born CEOs’ information advantage in their birth country and by these CEOs’ desire to give back to the birth country. CEOs’ desire to help their birth country also influences target location, increasing the likelihood of a target in countries that colonized the CEO birth country. The motives that drive acquisitions in acquirer CEOs’ birth countries measurably affect the returns of acquirers’ shareholders, target premium, and acquisition synergy. Both acquirers’ returns and synergy but not target premium are abnormally positive when the motive for an acquisition is a CEO's information advantage in the birth country. Targets premiums but not acquirers’ returns and synergy are abnormally positive when the motive for an acquisition is the desire to give back to the CEO's birth country.",JAR,2024,157,1026,"['Cross-Border Trade', 'Corporate Governance', 'Economic Development', 'Venture Capital', 'Corporate Social Responsibility']","['foreign-born CEOs', 'acquire', 'borders', 'targets', 'birth country', 'information advantage', 'give back', 'shareholders', 'target premium', 'acquisition synergy']"
Show Your Hand: The Impacts of Fair Pricing Requirements in Procurement Contracting,10.1111/1475-679X.12561,"This paper studies how a federal procurement regulation, known as the Truth in Negotiations Act (TINA), affects the competitiveness and execution of government contracts. TINA stipulates how contracting officials (COs) can ensure reasonable prices. Following TINA, for contracts above a certain size threshold, COs can no longer rely solely on their own judgment that a price is reasonable. Instead, they must either require suppliers to provide accounting data supporting their proposed prices or expect multiple bids. Using a regression discontinuity design, I find that above‐threshold contracts experience greater competition (i.e., more bids), improved performance (i.e., less frequent renegotiations and cost overruns), and reduced use of the harder‐to‐monitor cost‐plus pricing, compared to below‐threshold contracts. These findings suggest that TINA's requirements enhance competition and oversight for above‐threshold contracts.",JAR,2024,126,937,"['Public Policy', 'Government Contracts', 'Competition', 'Contracting', 'Regulatory Frameworks']","['federal procurement', 'Truth in Negotiations Act', 'TINA', 'government contracts', 'contracting officials', 'competition', 'performance', 'cost overruns', 'regression discontinuity design', 'cost-plus pricing']"
Government Subsidies and Corporate Misconduct,10.1111/1475-679X.12553,"I study whether firms that receive targeted U.S. state‐level subsidies are more likely to subsequently engage in corporate misconduct. I find that firms are more likely to engage in misconduct in subsidizing states, but not in other states that they operate in, after receiving state subsidies. Using data on both federal and state enforcement actions, and exploiting the legal principle of dual sovereignty for identification, I show that this finding reflects an increase in the underlying rate of misconduct and that this increase is attributable to lenient state‐level misconduct enforcement. Collectively, my findings present evidence of an important consequence of targeted firm‐specific subsidies: nonfinancial misconduct that potentially could impact the very stakeholders subsidies are ostensibly intended to benefit.",JAR,2024,118,826,"['Corporate Governance', 'Public Policy', 'Financial Markets', 'Economic Development', 'Regulatory Frameworks']","['firms', 'state-level subsidies', 'corporate misconduct', 'federal enforcement actions', 'state enforcement actions', 'dual sovereignty', 'misconduct enforcement', 'firm-specific subsidies', 'stakeholders', 'nonfinancial misconduct']"
The Capital Market Effects of Centralizing Regulated Financial Information,10.1111/1475-679X.12544,"We study the capital market effects of information centralization by exploiting the staggered implementation of digital storage and access platforms for regulated financial information (Officially Appointed Mechanisms, or OAMs) in the European Union. We find that the implementation of OAMs results in significant improvements in capital market liquidity, consistent with the notion that OAMs lower investors' processing costs. The findings are more pronounced when processing costs are high to begin with, that is, when firms (1) are small and receive low business press coverage and (2) have high levels of retail ownership. We then identify a mechanism through which centralization facilitates capital market effects: information spillovers. First, we find that liquidity improvements are larger when OAMs have features that easily allow investors to search for peer firm information. Second, liquidity improvements are larger for firms with a high share of industry peers operating on the same OAM and for firms with a high share of small, low‐coverage peers on that OAM. Third, around the annual report release dates of peer firms, focal‐firm liquidity improves and focal‐peer stock return synchronicity increases. Overall, our evidence suggests that, even in a modern information age, information centralization improves capital market liquidity and facilitates the acquisition and use of peer firm information.",JAR,2024,207,1417,"['Financial Markets', 'Capital Allocation', 'Information Centralization', 'Market Transparency', 'Corporate Governance']","['capital market effects', 'information centralization', 'digital storage', 'access platforms', 'OAMs', 'liquidity', 'processing costs', 'retail ownership', 'information spillovers', 'peer firm information']"
Algorithmic Trading and Forward-Looking MD&amp;A Disclosures,10.1111/1475-679X.12540,"This study examines how algorithmic trading (AT) affects forward‐looking disclosures in Management Discussion and Analysis (MD&amp;A) of annual reports. We predict and find evidence that AT relates negatively to modifications in year‐over‐year forward‐looking MD&amp;A disclosures. This evidence is consistent with AT reducing investors’ demand for fundamental information, which reduces managers’ incentives to supply costly forward‐looking disclosures. Cross‐sectional tests provide additional evidence that this negative relation is more pronounced for firms with larger earnings surprises and those with losses. We further validate our conclusion by demonstrating that investors’ fundamental information searches are a channel through which AT affects forward‐looking disclosures. The conclusion is robust to using the SEC's Tick Size Pilot Program as an exogenous shock to AT and to using alternative disclosure measures (e.g., tone revisions and number of sentences in forward‐looking MD&amp;A disclosures). Overall, our study demonstrates that AT is a contributing factor to regulators’ concerns over the diminishing usefulness of forward‐looking information in MD&amp;A disclosures.",JAR,2024,157,1190,"['Financial Markets', 'Corporate Governance', 'Investment Strategies', 'Market Transparency', 'Regulatory Frameworks']","['algorithmic trading', 'forward-looking disclosures', 'Management Discussion and Analysis', 'annual reports', 'investors', 'fundamental information', 'earnings surprises', 'losses', 'SEC', 'Tick Size Pilot Program']"