Economic Network


American Economic Review

Vol. 106, Issue 3 — March 2016

 


Rebecca Diamond
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University Differences in the Graduation of Minorities in STEM Fields: Evidence from California (#3)
Peter Arcidiacono, Esteban M. Aucejo and V. Joseph Hotz
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Search Design and Broad Matching (#4)
Kfir Eliaz and Ran Spiegler
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How Do Electricity Shortages Affect Industry? Evidence from India (#5)
Hunt Allcott, Allan Collard-Wexler and Stephen D. O’Connell
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Firm Dynamics, Job Turnover, and Wage Distributions in an Open Economy (#6)
A. Kerem Coşar, Nezih Guner and James Tybout
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Parameter Learning in General Equilibrium: The Asset Pricing Implications (#7)
Pierre Collin-Dufresne, Michael Johannes and Lars A. Lochstoer
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Liquidity Trap and Excessive Leverage (#8)
Anton Korinek and Alp Simsek
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The Effect of Unemployment Benefits and Nonemployment Durations on Wages (#9)
Johannes F. Schmieder, Till von Wachter and Stefan Bender
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Shorter Papers


The Value of Postsecondary Credentials in the Labor Market: An Experimental Study (#10)
David J. Deming, Noam Yuchtman, Amira Abulafi, Claudia Goldin and Lawrence F. Katz
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Taxpayer Confusion: Evidence from the Child Tax Credit (#11)
Naomi E. Feldman, Peter Katu_čák and Laura Kawano
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Dictating the Risk: Experimental Evidence on Giving in Risky Environments: Comment (#12)
Michal Krawczyk and Fabrice Le Lec
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Dictating the Risk: Experimental Evidence on Giving in Risky Environments: Reply (#13)
J. Michelle Brock, Andreas Lange and Erkut Y. Ozbay
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A Balls-and-Bins Model of Trade: Comment (#14)
Bernardo S. Blum, Sebastian Claro and Ignatius J. Horstmann
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A Balls-and-Bins Model of Trade: Reply (#15)
Roc Armenter and Miklós Koren
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(1) Front Matter
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(2) The Determinants and Welfare Implications of US Workers‘ Diverging Location Choices by Skill: 1980-2000
Rebecca Diamond
From 1980 to 2000, the rise in the US college/high school graduate wage gap coincided with increased geographic sorting as college graduates concentrated in high wage, high rent cities. This paper estimates a structural spatial equilibrium model to determine causes and welfare consequences of this increased skill sorting. While local labor demand changes fundamentally caused the increased skill sorting, it was further fueled by endogenous increases in amenities within higher skill cities. Changes in cities‘ wages, rents, and endogenous amenities increased inequality between high school and college graduates by more than suggested by the increase in the college wage gap alone. (JEL D31, I26, J24, J31, J61, R23)
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(3) University Differences in the Graduation of Minorities in STEM Fields: Evidence from California
Peter Arcidiacono, Esteban M. Aucejo and V. Joseph Hotz
We examine differences in minority science graduation rates among University of California campuses when racial preferences were in place. Less prepared minorities at higher ranked campuses had lower persistence rates in science and took longer to graduate. We estimate a model of students‘ college major choice where net returns of a science major differ across campuses and student preparation. We find less prepared minority students at top ranked campuses would have higher science graduation rates had they attended lower ranked campuses. Better matching of science students to universities by preparation and providing information about students‘ prospects in different major-university combinations could increase minority science graduation. (JEL D14, E23, E32, E43, E52, E61, E62)
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(4) Search Design and Broad Matching
Kfir Eliaz and Ran Spiegler
We study decentralized mechanisms for allocating firms into search pools. The pools are created in response to noisy preference signals provided by consumers, who then browse the pools via costly random sequential search. Surplus-maximizing search pools are implementable in symmetric Nash equilibrium. Full extraction of the maximal surplus is implementable if and only if the distribution of consumer types satisfies a set of simple inequalities, which involve the relative fractions of consumers who like different products and the Bhattacharyya coefficient of similarity between their conditional signal distributions. The optimal mechanism can be simulated by a keyword auction with broad matching. (JEL C78, D44, D82)
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(5) How Do Electricity Shortages Affect Industry? Evidence from India
Hunt Allcott, Allan Collard-Wexler and Stephen D. O’Connell
We estimate the effects of electricity shortages on Indian manufacturers, instrumenting with supply shifts from hydroelectric power availability. We estimate that India’s average reported level of shortages reduces the average plant’s revenues and producer surplus by 5 to 10 percent, but average productivity losses are significantly smaller because most inputs can be stored during outages. Shortages distort the plant size distribution, as there are significant economies of scale in generator costs and shortages more severely affect plants without generators. Simulations show that offering interruptible retail electricity contracts could substantially reduce the impacts of shortages. (JEL D24, L60, L94, O13, O14, Q41)
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(6) Firm Dynamics, Job Turnover, and Wage Distributions in an Open Economy
A. Kerem Coşar, Nezih Guner and James Tybout
This paper explores the combined effects of reductions in trade frictions, tariffs, and firing costs on firm dynamics, job turnover, and wage distributions. It uses establishment-level data from Colombia to estimate an open economy dynamic model that links trade to job flows and wages. Counterfactual experiments imply that Colombia’s integration with global product markets increased its national income at the expense of higher unemployment, greater wage inequality, and increased firm-level volatility. In contrast, contemporaneous labor market reforms dampened the increase in unemployment and aggregate job turnover. The results speak more generally to the effects of globalization on labor markets. (JEL F13, F16, F66, J31, J63, O15, O19)
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(7) Parameter Learning in General Equilibrium: The Asset Pricing Implications
Pierre Collin-Dufresne, Michael Johannes and Lars A. Lochstoer
Parameter learning strongly amplifies the impact of macroeconomic shocks on marginal utility when the representative agent has a preference for early resolution of uncertainty. This occurs as rational belief updating generates subjective long-run consumption risks. We consider general equilibrium models with unknown parameters governing either long-run economic growth, rare events, or model selection. Overall, parameter learning generates long-lasting, quantitatively significant additional macroeconomic risks that help explain standard asset pricing puzzles. (JEL C52, D83, E13, E32, G12)
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(8) Liquidity Trap and Excessive Leverage
Anton Korinek and Alp Simsek
We investigate the role of macroprudential policies in mitigating liquidity traps. When constrained households engage in deleveraging, the interest rate needs to fall to induce unconstrained households to pick up the decline in aggregate demand. If the fall in the interest rate is limited by the zero lower bound, aggregate demand is insufficient and the economy enters a liquidity trap. In this environment, households‘ ex ante leverage and insurance decisions are associated with aggregate demand externalities. Welfare can be improved with macroprudential policies targeted toward reducing leverage. Interest rate policy is inferior to macroprudential policies in dealing with excessive leverage. (JEL D14, E23, E32, E43, E52, E61, E62)
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(9) The Effect of Unemployment Benefits and Nonemployment Durations on Wages
Johannes F. Schmieder, Till von Wachter and Stefan Bender
We estimate that unemployment insurance (UI ) extensions reduce reemployment wages using sharp age discontinuities in UI eligibility in Germany. We show this effect combines two key policy parameters: the effect of UI on reservation wages and the effect of nonemployment durations on wage offers. Our framework implies if UI extensions do not affect wages conditional on duration, then reservation wages do not bind. We derive resulting instrumental variable estimates for the effect of nonemployment durations on wage offers and bounds for reservation wage effects. The effect of UI on wages we find arises mainly from substantial negative nonemployment duration effects. (JEL J31, J64, J65)
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(10) The Value of Postsecondary Credentials in the Labor Market: An Experimental Study
David J. Deming, Noam Yuchtman, Amira Abulafi, Claudia Goldin and Lawrence F. Katz
We study employers‘ perceptions of the value of postsecondary degrees using a field experiment. We randomly assign the sector and selectivity of institutions to fictitious resumes and apply to real vacancy postings for business and health jobs on a large online job board. We find that a business bachelor’s degree from a for-profit online institution is 22 percent less likely to receive a callback than one from a nonselective public institution. In applications to health jobs, we find that for-profit credentials receive fewer callbacks unless the job requires an external quality indicator such as an occupational license. (JEL I23, I26, J24, J44, J63, M51)
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(11) Taxpayer Confusion: Evidence from the Child Tax Credit
Naomi E. Feldman, Peter Katu�čák and Laura Kawano
We develop an empirical test for whether households understand or misperceive their marginal tax rate. Our identifying variation comes from the loss of the Child Tax Credit when a child turns 17. Using this age discontinuity, we find that despite this tax liability increase being lump-sum and predictable, households reduce their reported wage income upon discovering they have lost the credit. This finding suggests that households misinterpret at least part of this tax liability change as an increase in their marginal tax rate. This evidence supports the hypothesis that tax complexity can cause confusion and leads to unintended behavioral responses. (JEL D12, D14, H24, H31)
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(12) Dictating the Risk: Experimental Evidence on Giving in Risky Environments: Comment
Michal Krawczyk and Fabrice Le Lec
Based on experimental dictator games with probabilistic prospects, Brock, Lange, and Ozbay (2013) conclude that neither ex post nor ex ante comparisons can fully account for observed behavior. We argue that their conclusion that ex ante comparisons cannot explain the data is at best weakly supported by their results, and do so on three grounds: (i ) the absence of significant differences between the most relevant treatments, (ii ) the implicit assumption of subjects‘ risk neutrality, and (iii ) the asymmetry of treatments regarding the disclosure of dictators‘ choice. (JEL C72, D63, D64, D81)
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(13) Dictating the Risk: Experimental Evidence on Giving in Risky Environments: Reply
J. Michelle Brock, Andreas Lange and Erkut Y. Ozbay
In Brock, Lange, and Ozbay (2013), we experimentally investigate social preferences under risk. One of our conclusions is that a social preference model incorporating both ex ante and ex post fairness concerns may best describe behavior. Krawczyk and Le Lec (2016 ) argue that ex ante comparisons alone may account for our data. We address their points in this reply. (JEL C72, D63, D64, D81)
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(14) A Balls-and-Bins Model of Trade: Comment
Bernardo S. Blum, Sebastian Claro and Ignatius J. Horstmann
We show that the Armenter and Koren model’s firm-product-country results rely on the assumption that export shipment size is independent of firm size, and this assumption is contradicted by the data. When actual shipment sizes are used in the balls-and-bins model, it cannot reproduce the data on single product/single country exporters. Beyond just showing that the shipment size assumption matters to balls-and-bins outcomes, our results highlight the important fact that shipment size is an economic decision, co-determined with other export choices. For this reason, we argue that a balls-and-bins model cannot be a purely statistical benchmark model. (JEL F11, F14, O13, O19, Q37)
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(15) A Balls-and-Bins Model of Trade: Reply
Roc Armenter and Miklós Koren
Blum, Claro, and Horstmann (2016) make two statements about the balls-and-bins model of Armenter and Koren (2014). First, that using firm-level shipment data changes some of our results. Second, that the balls-and-bins model is not an appropriate statistical method. We respond to the first statement and argue that the second statement is unfounded and unrelated to the first. Indeed, the work of Blum, Claro, and Horstmann (2016) is a perfect example of how to use balls-and-bins in a rich dataset to spot interesting data patterns. (JEL F11, F14)
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