Economics

Nearly the entire world's population breathes air exceeding WHO pollution guidelines, but the extent to which that exposure impairs the accumulation of human capital is not well understood. We study this using longitudinal PSAT data on nearly 10 million U.S. high school students, comparing the same student's scores across attempts preceded by differing air quality and instrumenting for local PM2.5 with smoke from distant wildfires. A year of observed pollution exposure reduces learning by 0.04-0.06 standard deviations, or 14-19% of typical annual score growth. The damage comes almost entirely from moderate pollution days (8–12 μg/m3), below the EPA's historical standard, and from exposure..

The Affordable Care Act, the largest US welfare reform since 1965, banned health insurance underwriting and rejections based on pre-existing conditions and introduced large premium subsidies for low- to middle-income individuals. Yet how many people the ban made better off, and how its effects varied by health risk, remain unknown—because data on who was rejected before the reform have been lacking. Using a proprietary dataset of pre-ACA insurance applications and underwriting decisions, we document, model, and estimate the reform's heterogeneous effects by age, income, and health risk. We find its benefits were concentrated among low-income, high-risk, or over-50 individuals.

Public pension systems are long-term social contracts operating under persistent economic, demographic, and political uncertainty. Periods of turbulence, marked by financial shocks, changes in longevity, and shifting labour markets, test the capacity of pension institutions to adapt while maintaining adequacy, equity, and legitimacy. Building on earlier joint work on pension economics and reform with Nicholas Barr, this chapter analyses the role of automatic and semi-automatic adjustment mechanisms in public pension design. Drawing on comparative experience from Sweden, Canada, and the United States, we examine mechanisms for maintaining financial balance, the incorporation of life expectanc..

Economic decisions are often shaped by comparison points such as reference points, goals, expectations and peers. A long-standing puzzle is that decisions sometimes increase in these comparators (assimilation) and sometimes decrease in them (contrast). We develop a simple taxonomy that predicts the sign. The idea is that when absolute evaluations—translating a decision input into an output—are difficult, people use comparison points as information about how to navigate tradeoffs. This logic predicts that decisions decrease in input comparators—those tied to exogenous decision inputs (e.g., a typical hourly wage)—and increase in output comparators—those tied to endogenous decisions ..

Human actions can alter the climate via land use. We analyze the 1930s Great Plains Shelterbelt, a large-scale forestation program across the US Midwest. The program increased precipitation and decreased temperatures for decades. We measure these changes in downwind counties where no trees were planted, isolating the effects of climate from those of afforestation and enabling us to study adaptation. Improved growing conditions allowed farmers to expand corn acreage and adopt water-intensive practices. In a period of farm consolidation, this altered the structure of the agricultural sector, contributing to the survival of small farms but less farm machine usage. The findings demonstrate the e..

Loan rates are usually viewed as prices that shape borrower incentives, but they can also serve another role in a principal-agent problem by determining how informative repayment is about unobservable effort inside the bank. I study how the two roles interact: because loan rates move repayment probabilities differently for different borrowers, the bank designs its wage contract and its loan rate menu jointly. I show that the cost-minimizing wage contract is non-monotone, including pay after default, and that the bank tilts loan rates toward levels that make rewarded outcomes most diagnostic of correct assignment. When failure pay is restricted, the bank instead re-prices some loans toward th..

We ask whether online job postings capture U.S. job vacancies, matching near-universal Burning Glass (BG) postings to the representative Job Openings and Labor Turnover Survey (JOLTS). BG converged toward JOLTS over 2007–2022, and its representativeness varies across establishment characteristics. We reweight BG to align postings with JOLTS openings along observables, and assess impacts on prior BG findings. Because large establishments account for most openings and are well represented, the level and cyclicality of skill demand survive our adjustment. But BG overstates labor market concentration (the Herfindahl-Hirschman Index) nearly threefold, because small and mid-sized establishments ..

Government transfers vary along two design dimensions that standard models predict should not matter: whether benefits are paid in cash or kind, and whether they arrive as one-time or recurring payments. We test how these design choices affect household spending using sharp changes in four pandemic-era transfers to low-income families with children: one-time food vouchers, monthly food benefits, one-time cash payments, and monthly cash payments. Linking variation in benefit timing and amount to high-frequency household scanner data, we estimate spending responses in a harmonized difference-in-differences and event-study framework. Households spend more out of in-kind benefits than out of cas..

Regression discontinuity designs have become one of the most popular research designs in empirical economics. We argue, however, that the widely used approaches to building confidence intervals in regression discontinuity designs often exhibit suboptimal behavior in practice. We propose a new estimator, the partially linear regression discontinuity (PLRD) estimator that, in set of a simulation studies carefully calibrated to twelve high-profile applications of regression discontinuity designs, has substantially lower estimation error than available comparison methods. Throughout our experiments, the confidence intervals built using PLRD are both valid and short. We also provide large-sample ..

Many empirical investigations of long-run relations are based on cross-section regressions in averaged or long differenced data that effectively have the time dimension of a T × N panel compressed. We analyze a class of time-compressed I(1) data and show that they have magnified variability stemming from the fact that the cross-section variance of a non-stationary panel ‘fans out’ with time. Cross-section regressions in time compressed data can potentially yield estimates that are super-consistent and asymptotically normal, whether the regressors are stationary, non-stationary, or highly persistent. The fastest convergence rate of √NT requires a compression scheme that not only magnif..

Professionals routinely make consequential decisions for others without systematically observing how those decisions turn out. Whether such decisions reflect accurate forecasting or systematically distorted beliefs has important implications for equality of opportunity. We study this question in the context of teachers' recommendations for high school tracks by combining nationwide administrative data, randomized vignette experiments, belief elicitation, and a field experiment. Holding students' academic performance and interests constant, teachers are significantly less likely to recommend demanding academic tracks when students come from disadvantaged socioeconomic backgrounds. This differ..

How does prior information affect discrete choice? In the seminal rational inattention model of Matějka and McKay (2015), multinomial logit arises from the discrete choice of agents who are uncertain about choice payoffs and who have access to a flexible information acquisition technology (RI-logit). A key limitation of this powerful framework is the lack of known solutions that allow the decision maker's prior information to vary across choices: obtaining such solutions has remained an open problem in this literature. In this paper, I solve the RI-logit model analytically for two related families of priors known respectively as Positive Stable and Tempered Stable distributions. In my solut..

We study the effects of vast increases in U.S. small business program eligibility standards, which expanded larger firms' access to support for small businesses. Exploiting quasi-random variation in the timing of these expansions and using administrative Census data, we show that revenues decline for the smallest firms, particularly those that are younger, more productive, and financially constrained. Government procurement contracts also are reallocated to larger firms. Consequently, firm exits increase, wages decline, and patenting falls. These findings highlight the economic consequences of expanding eligibility: by crowding out the smallest firms, resources shift away from high-potential..

Why is war so economically costly? Our answer is that modern war lowers output not only by destroying productive factors, but also by making the surviving economy work less efficiently. Using uniquely comprehensive firm-level data collected during Russia’s full-scale invasion of Ukraine in 2022, we document a dramatic collapse in allocative productivity in Ukraine. To sharpen identification and explore key mechanisms (including the role of war intensity, internal displacement, reallocation, and macroeconomic instability), we exploit spatial heterogeneity across Ukrainian districts and comparisons with Russian aggression in 2014 and the 2008 Global Financial Crisis. Our key policy implicati..

Automatic stabilizers can respond to a recession without a new policy decision, but their effects on aggregate demand may still only arrive with delay. We study the transmission lag for unemployment insurance extensions in a heterogeneous-agent New Keynesian model that closely matches the incidence of unemployment risk and the response of household spending to job loss and UI extensions. More generous UI stimulates demand largely by relaxing precautionary saving, so households must anticipate future unemployment risk and benefit duration. To quantify this channel, we work directly with survey expectations, using a measured history of forecast errors and revisions, rather than committing to a..

Why do we have so many meetings? Few workplace features are so scorned, yet seemingly so necessary. This paper provides the first large-scale economic evidence on workplace meetings using an original survey of more than 9,000 workers linked to matched employer–employee administrative data from Norway. We show that meetings are both common and costly, consuming an average of 12 percent of work hours and 14 percent of firm wage bills. Planning, problem solving, information sharing, and project coordination account for the majority of meeting activity. High-paying and high-revenue firms devote more resources to meetings despite facing a substantially higher opportunity cost of employee time. ..

We present a new dynamic model of corporate investment in imperfectly competitive product markets that extends the neoclassical (Q) theory of capital to accommodate heterogeneous, multi-product firms and a rich hedonic demand system. Our model endogenizes firms' markups and generalizes Tobin's Q to a matrix (or network) of product market spillovers, which captures how each firm's investment affects that of its rivals. We provide equilibrium existence and uniqueness results along with global analytical solutions for the firms' investment policies. We then take our model to the data for the universe of US public companies and obtain four novel insights: 1) product market competition is a key d..

This paper provides evidence of how the beliefs of investors who step out of the market, or “non-marginal” investors, influence asset prices. Using more than two decades of respondent-level investor surveys, we construct wedge measures that quantify the distance between subjective investor beliefs and option-implied benchmarks. We use self-identified proxies for market participation to document that these wedges correspond with the beliefs of non-marginal investors. Non-marginal investors are generally more pessimistic in their market return forecasts and perceive greater crash risks than the pricing population. Subjective crash beliefs are a key determinant of participation, even when c..

We study age discrimination in a labor market with a job ladder, where worker productivity is revealed over time. Using data from a large Chinese recruitment platform that links job postings, applications, and employer responses, we document sharp declines in applications and callbacks at posted age cutoffs. Discrimination operates in both directions: older applicants are disadvantaged in entry-level jobs, while younger applicants are less likely to be hired into managerial roles. A model of statistical discrimination with imperfect signal screening explains these patterns. Consistent with the model, older applicants to entry-level jobs are negatively selected relative to their peers.

Ultra-poor graduation programs (UPG) reliably reduce extreme poverty among adult recipients, yet their intergenerational effects on children remain largely undocumented. We study a child-focused UPG in rural Malawi that augments the standard graduation bundle with early childhood development (ECD) training, targeting mothers with young children in a population that is both severely stunted and approximately 1 SD behind international benchmarks on cognitive and non-cognitive development. In an RCT of 1,872 households, we show that the intervention raises child development by 0.16 to 0.26 SD within one year but has no significant effects on anthropometrics. Behind the impacts is a broad shift ..

We show that investor patience shapes venture-capital (VC) investment strategies and outcomes. Through a randomized experiment with Chinese fund managers, we demonstrate that managers explicitly tailor fund duration and project holding periods to the perceived horizons of their limited partner (LP) base. We find consistent evidence in the field, exploiting a 2014 Chinese reform that opened RMB-denominated VC funds to insurers. We compare treated RMB funds to unaffected USD-denominated funds run by the same general partners (GPs), both investing in Chinese startups. Insurer entry reshaped the LP base by displacing shorter-horizon investors such as individuals. Consequently, treated funds shif..

We compare verifiable and unverifiable communication in a sender–receiver setting with partially aligned preferences, where the sender knows more than what her evidence can prove. We identify a credibility–flexibility tradeoff: tying the sender’s claims to her evidence enhances her credibility, but limits how flexibly she can communicate when her evidence does not accurately reflect her private information. This tradeoff changes the economics of verifiable disclosure. When preferences are sufficiently aligned, full evidence disclosure is neither sustainable in equilibrium nor efficient. We show that verifiability facilitates communication when preferences are sufficiently misaligned, b..

Transportation is a major source of greenhouse gas and air pollution emissions worldwide, with most automobile pollution coming from vehicles older than 10 years. Yet, many policies discourage the removal of older vehicles from the fleet, with potential consequences for pollution and public health. This paper examines an equity-motivated anti-scrappage policy in Brazil using a border-pair design that exploits state variation in the age thresholds for vehicle ownership tax exemptions. Using municipality-level vehicle registration data from 2013-2020, we find that lower exemption age thresholds increase the average fleet age by up to one year, as they encourage owners to retain vehicles until ..

The cognitive noise hypothesis is an increasingly popular explanation for a wide range of puzzling regularities in human behavior. Using simple, familiar tools and minimal assumptions drawn from neuroscience, cognitive noise models provide a parsimonious, unified explanation for a number of the most important anomalies documented in behavioral economics. The hypothesis proposes that limited cognitive resources force the brain to represent information imprecisely, generating coarser decisions, stochastic behavior and subjective uncertainty. Because brains deal with this kind of imprecision in a broadly Bayesian manner, imprecision leads to a number of well-known behavioral biases that may in ..

Since the 1980s, the United States has experienced a pronounced saving glut of the rich, a large accumulation of assets among the top 1% of earners. We argue that this development partly reflects a shift in the financing of redistributive policies, from inflationary finance in the 1960s and 1970s to debt finance backed by future taxation beginning in the early 1980s. The central insight is that, in the presence of a progressive tax system, a switch from inflationary to debt financing leads to debt accumulation by top earners. We develop a New Keynesian model with borrowers and savers in which redistributive transfers can be either funded or unfunded. Unfunded transfers generate fiscal inflat..