2025 Working Papers

We assess the welfare impact of the introduction of universal daycare services in Quebec in 1997. Unlike the standard suffcient-statistic metric, which assumes marginal changes in fiscal policy, our approach accounts for the non-marginal nature of the program and quantifies nonpecuniary benefits. Through a structural model of childcare demand, we estimate substantial welfare gains from the policy, yielding a Marginal Value of Public Funds (MVPF) above 3.5. Using the suffcient-statistic approach underestimates welfare gains by half. Counterfactual simulations and a difference-in-differences analysis suggest that increasing availability, rather than solely improving affordability, is crucial for the effective design of universal programs.

We investigate how different facets of energy security, e.g., energy vulnerability (domestic energy supply, import dependency, technology development on energy sources), energy affordability (higher prices) and energy reliability (power cuts frequency) impact the support for different sources of renewable energy — offshore and onshore wind power, biomass energy and solar power. Our results show that there is a common pattern for energy vulnerability since as concerns decline, the probability of support for each renewable source also declines, but the rate of decline is larger for biomass and onshore wind. Energy imports dependency and affordability reveal a distinction between the wind power sources and the other sources since both offshore and onshore wind power are affected less by energy imports concerns or affordability concerns. Energy reliability is the only facet that leads to a rise in the probability of support for offshore wind. The above results are critical for policy appraisal purposes to inform policymakers on the differences between energy security facets and renewable energy sources when designing future energy policies towards net zero strategies.

We study a leader’s choice of advisors, balancing political alignment, informational competence, and diversity of views. The leader can consult one or two advisors : one is politically aligned but less informed or shares potentially redundant information; the other is better informed but more biased. The leader’s optimal strategy can exhibit reversals. If both advisors are initially consulted, increasing the bias of the more biased advisor may cause the leader to exclude the aligned advisor to preserve truthfulness from the informed one. As bias rises further, the leader ultimately replaces the informed advisor if his bias becomes too large. When the leader is uncertain about the bias of the more informed advisor, increasing the chance of alignment can justify consulting both advisors.

While artificial intelligence (AI) has become increasingly prevalent, empirical evidence on its impact on firm value is limited. This inaugural UK market study uses event study methodology to assess stock market reactions to AI investment announcements by FTSE 100 companies from 2019-2023. Analysing 138 announcements from 53 companies, the research reveals that AI investments have a marginally positive, but statistically insignificant impact of 0.114% on the announcement day, affirmed by both parametric and non-parametric tests. Further subsample analysis shows that high credit rating firms and early adopters experience significantly negative impacts on firm value, indicating investor risk-aversion and tentative evidence of a second-mover advantage. Cross sectional analysis demonstrates that industry and the type of AI investment critically influence returns, and confirms the size effect with larger firms experiencing more negative returns than smaller ones. Earnings before interest, taxes and amortization (EBITDA) margins and cyber risk ratings, however, do not significantly impact returns. This study advances AI literature by examining market dynamics associated with AI investments, providing a foundation for future research, and providing practical insights for investors and corporate managers aiming to maximize risk-adjusted returns and firm value

Combining detailed data on language and migration across colonial Indian districts in 1901 with a gravity model, we find origin and destination districts separated by more dissimilar languages saw less migration. We control for the physical distance between origin-destination pairs, several measures of dissimilarity in geographic characteristics, as well as origin and destination fixed effects. The results are robust to a regression discontinuity design that exploits spatial boundaries across language groups. We also find linguistic differences predict lower migration in 2001. Cultural channels are a small part of the link from linguistic diversity to lower migration. Rather, the evidence suggests communication and information channels are more important.

here is limited evidence on the non-health impacts of air pollution, including productivity in the workplace and behavior. We examine the effect of air pollution on participation, collaboration, and feedback provision in a workplace setting. Our experiment randomly assigns air purifiers to rooms at three large academic conferences to investigate the causal impact of air pollution on participants’ engagement behavior. We construct a participant engagement index based on 12 presentation-level behavioral outcomes directly measured by conference observers through an online form and weigh each behavioral outcome using weights elicited from an expert survey. Conference rooms treated with air purifiers exhibit 48% less PM2.5 concentration compared to control rooms. However, we do not find a statistically significant change in engagement. Communication in the workplace might not be a large driver of the empirical relationship between air quality and productivity, albeit more research is needed across workplaces and measures of communication.

The COVID-19 pandemic was a health and economic shock with devastating effects, especially for low- and middle-income countries (LMICs), where a larger fraction of the population lives in precarious health and economic conditions. In addition to the increase in morbidity and mortality stemming from the disease, COVID-19 lockdowns prompted extensive earnings losses and economic uncertainty about the future. Together, illness, death, job loss and increasing economic uncertainty likely contributed to the widespread deterioration in mental health observed during the pandemic (Adams-Prassl et al. 2020; Biroli et al. 2021; Giuntella et al. 2021; Witteveen and Velthorst 2020; Bau et al. 2022; Baranov et al. 2022). Most of the current literature investigating the impacts of COVID-19 has focused on the impacts of experienced negative shocks. Yet, the anticipation of future shocks, has been shown to predict poor mental health outcomes in adults (Baranov, Bennett, and Kohler 2015), and the psychiatry literature suggests a strong link between economic uncertainty and mental health by increasing anxiety and depression symptoms, rates of PTSD, and reports of general distress (Di Quirico, 2023; Massazza et al., 2022). In this paper, we document how different dimensions of the COVID-19 pandemic impinged on women’s mental health in rural Pakistan. We consider four COVID-related stressors capturing both direct effects of experienced health and economic shocks as well as effects through the anticipation of future risks. Specifically, we investigate the association between a battery of mental health measures and (i) experienced morbidity and mortality due to COVID-19, (ii) worry about the disease risk, (iii) experienced economic shocks, and (iv) economic uncertainty about 2 the future induced by the pandemic. We find that an environment of heightened economic uncertainty might impact mental health, above and beyond the effects of realized shocks.

The large spike at zero in the distribution of year-to-year nominal wage changes in household surveys is often seen as evidence of nominal wage rigidity. But measurement error—especially from workers rounding their reported wages—can exaggerate this spike. Using U.S. Current Population Survey data, we adjust for potential rounding behavior and find that the zero-change spike falls from 15–20 percent to 7–12 percent, aligning closely with recent estimates from administrative data.

n this paper, we examine if in the UK labour market, for a given job, immigrants are more educated than the natives. The answer to this question has critical policy implications as such skill mismatch signals misallocation of resources. Our theoretical framework explains why we might observe such a mismatch in a full information setup. In our framework, both hard skills (captured by years of education) and soft skills (based on local culture) are critical for productive activities. We further assume that natives have a comparative advantage in soft skills, while immigrants have a comparative advantage in hard skills. Therefore, in equilibrium, immigrants over-invest in hard skills, making them overeducated for a job. Moreover, between first and second-generation immigrants, the degree of overeducation is higher among the first-generation immigrants. We test our theoretical results using a nationally representative survey data from the UK and find support for our theoretical predictions.

Literature has shown that air pollution can have short- and long-term adverse effects on physiological and cognitive performance. In this study, we estimate the effect of increased pollution levels on the likelihood of accidents in construction sites, a significant factor related to productivity losses in the labor market. Using data from all construction sites and pollution monitoring stations in Israel, we find a strong and significant causal effect of nitrogen dioxide (NO2), one of the primary air pollutants, on construction site accidents. We find that a 10-ppb increase in NO2 levels increases the likelihood of an accident by as much as 25 percent. Importantly, our findings suggest that these effects are non-linear. While moderate pollution levels, according to EPA standards, compared to clean air levels, increase the likelihood of accidents by 138 percent, unhealthy levels increase it by 377 percent. We present a mechanism where the effect of pollution is exacerbated in conditions with high cognitive strain or reduced awareness. Finally, we perform a cost-benefit analysis, supported by a nonparametric estimation calculating the implied number of accidents due to NO2 exposure, and examining a potential welfare-improving policy to subsidize the closure of construction sites on highly polluted days.

We examine the preferences of low-income households in Kenya over the structure of unconditional cash transfers. Most preferred lumpy transfers, and some preferred deferred receipt—in contrast to the typical structures of safety-net programs, but consistent with evidence on the financial challenges of poverty. Turning to consequences, receiving transfers later in the year raised income 1.5 years later— but willingness to defer receipt was sensitive to small changes in cash flow around the time of decision-making. Taken together, these results illustrate how adapting cash transfer design to the decision-making environment of those in poverty could improve financial choices and outcomes.

We study whether term limits can accelerate women’s access to top political positions by analyzing two reforms in Italian local elections that extended mayoral term limits from two to three five-year terms. In a period marked by rapid growth in women’s political participation, the first reform affected municipalities with fewer than 3,000 inhabitants in 2014, and the second those below 5,000 in 2022. Using a difference-in-discontinuities design, we find that longer term limits restrict opportunities for early-career politicians, with substantial effects for female representation: the share of female mayors would be 8 percentage points higher without the term limit extensions. The impact is larger in municipalities with more women in lower political positions and where gender quotas for council members are present, suggesting that entry-level quotas can be more effective when paired with policies promoting turnover in top positions.

Mental health disorders tend to emerge in childhood, with half starting by age 14. This makes early intervention important, but treatment rates are low, and antidepressant treatment for children remains controversial since an FDA warning in 2004 that highlighted adverse effects. Linking individuals across Danish administrative registers, we provide some of the first evidence of impacts of antidepressant treatment in childhood on objectively measured mental health indicators and economic outcomes over time, and the first attempt to investigate under- vs overtreatment. Leveraging conditional random assignment of patients to psychiatrists with different prescribing tendencies, we find that treatment during ages 8-15 improves test scores at age 16, particularly in Math, increases enrollment in post-compulsory education at age 18, and that it leads to higher employment and earnings and lower welfare dependence at ages 25–30. We demonstrate, on average, a reduction in suicide attempts, self-harm, and hospital visits following AD initiation. The gains to treatment are, in general, larger for low SES children, but they are less likely to be treated. Using a marginal treatment effects framework and Math scores as the focal outcome, we show positive returns to treatment among the untreated. Policy simulations confirm that expanding treatment among low SES children (and boys) generates substantial net benefits, consistent with under-treatment in these groups. Our findings underscore the potential of early mental health treatment to improve longer term economic outcomes and reducing inequality.

A planner wants to select one agent out of n agents on the basis of a binary characteristic that is commonly known to all agents but is not observed by the planner. Any pair of agents can either be friends or enemies or impartials of each other. An individual's most preferred outcome is that she be selected. If she is not selected, then she would prefer that a friend be selected, and if neither she herself or a friend is selected, then she would prefer that an impartial agent be selected. Finally, her least preferred outcome is that an enemy be selected. The planner wants to design a dominant strategy incentive compatible mechanism in order to be able choose a desirable agent. We derive sufficient conditions for existence of efficient and DSIC mechanisms when the planner knows the bilateral relationships between agents. We also show that if the planner does not know the network these relationships, then there is no efficient and DSIC mechanism and we compare the relative efficiency of two second-best DSIC mechanisms. Finally, we obtain sharp characterization results when the network of friends and enemies satisfies structural balance.

Digital platforms increasingly compensate content creators based on engagement metrics, yet the effects of these incentives remain poorly understood. We conducted a field experiment with a Kenyan news outlet to study how high-intensity performance incentives affect content production, quality, and journalist well-being in digital media. We randomly assigned writers to either pay-per-click (PPC) or piece-rate contracts. The PPC contract tripled per-article pageviews and increased daily pageviews by 107%, but reduced the number of published articles by 74%. While PPC writers earned more per article, their overall earnings fell, lowering the firm’s wage bill and increasing profits. However, these gains came at a cost : PPC writers shifted content production away from local news and towards attention-grabbing political stories. PPC writers also used less positive language in both headlines and article bodies. Our results show that engagement-based pay boosts reader traffic but caution that this may come at the cost of compromised coverage diversity, local news provision, and journalist well-being.

Gender segregation in higher education persists across developed countries and is paradoxically stronger in wealthier, more gender-equal societies. Using data from over 500,000 children across 37 Western countries, we show that this segregation has roots in childhood. We document a strong correlation at the country level between segregation in higher education and in childhood friendships. Longitudinal data from 10,000 British households further shows that children with fewer opposite-sex friends at age 7 are significantly more likely to select gender-dominated educational subjects a decade later. The stronger segregation observed in richer countries seems to reflect economic prosperity rather than backlash against gender equality: while children from wealthier households report fewer cross-gender friendships, those whose parents hold more gender-egalitarian views have more opposite-sex friends. We identify two mechanisms explaining this income gradient : affluent families’ structured activities that emphasize children’s self-expression foster gender-segregated environments, and higher-income children’s personality traits reduce demand for cross-gender friendships.

In normative models a decision-maker is usually assumed to be Bayesian rational, and so to maximize subjective expected utility, within a complete and correctly specified decision model. Following the discussion in Hammond (2007) of Schumpeter's (1911, 1934) concept of entrepreneurship, as well as Shackle's (1953) concept of potential surprise, we consider enlivened decision trees whose growth over time cannot be accurately modelled in full detail. An enlivened decision tree involves more severe limitations than a mis-specified model, unforeseen contingencies, or unawareness, all of which are typically modelled with reference to a universal state space large enough to encompass any decision model that an agent may consider. We consider three motivating examples based on: (i) Homer's classic tale of Odysseus and the Sirens; (ii) a two-period linear-quadratic model of portfolio choice; (iii) the game of Chess. Though our novel framework transcends standard notions of risk or uncertainty, for finite decision trees that may be truncated because of bounded rationality, an extended form of Bayesian rationality is still possible, with real-valued subjective evaluations instead of consequences attached to some terminal nodes. Moreover, these subjective evaluations underlie, for example, the kind of Monte Carlo tree search algorithm used by recent chess-playing software packages.

Public debt has increased steadily over the years, leaving many countries at risk of debt distress and even pushing some to default. This paper analyses the impact of sovereign default on post-default debt-to-GDP ratios in 144 countries from 1980 to 2019. Applying the entropy balancing method, we provide robust evidence that sovereign defaults are associated with higher debt-to-GDP ratios. Furthermore, we find that the effect of default on debt is robust to alternative scenarios, empirical methods, and dynamic effects. We also provide evidence on the channels that underpin these findings and show that the impact of default on debt is through economic contraction (decreased economic growth) and reduced access to international financial markets. Finally, the findings show that both the presence of fiscal rules (and its constituent parts) and the strength of fiscal rules (that is, the credibility of the fiscal rules) are important in reducing the impact of default on debt. These findings underscore the importance of public debt management and domestic reforms to improve the long-term sustainability of debt. The findings also emphasize the importance of strong fiscal institutions and fiscal policy credibility in managing the complexities of debt accumulation.

How can a currency achieve more widespread international use? We study the internationalization of the Chinese renminbi (RMB) through the lens of a unique policy experiment in Argentina. In 2023, amid a severe dollar shortage, Argentina expanded a currency swap line with the People’s Bank of China. Within the next few months, the share of imports from China invoiced in RMB surged rapidly to nearly 50% – displacing the US dollar, which had previously accounted for virtually all invoicing. Following the presidential election of late 2023, as macroeconomic policies changed and the dollar shortage eased, invoicing in RMB declined. We explore the mechanisms behind this aggregate pattern, using rich firm-level data on imports, bank-firm loan relationships, and bank balance sheets. Our results indicate that banks played a key role, in line with the dollar shortage narrative. First, firms with pre-existing relationships to banks with limited US dollar loans were more likely to switch to RMB. Second, firms borrowing from a Chinese state-owned bank were significantly more likely to use RMB. We also document firm-level spillovers, with RMB use for imports from China increasing the likelihood of RMB use for imports from other countries. Finally, we observe an effect on trade volumes. Firms switching to RMB saw increased total imports.

This paper provides the first evidence of the long-term effects of job loss on age at retirement, pension benefits and lifetime income. Exploiting plant closures and using German administrative data, I compare displaced workers with similar non-displaced workers. I show that displaced workers delay their retirement in response to the shock and ineligibility for early pension claims is the main driver of this response. Despite adjustments in retirement behavior, displaced workers face significant losses in pension benefits and lifetime income. Compared to similar non-displaced workers, displaced workers experience losses in the present discounted value of their lifetime income of 25%.

Looking at the earnings profiles of men and women after their first child is born, a number of studies establish that women suffer a larger penalty in earnings than men—a child penalty. Leveraging randomness in the sex of the first birth, we show that the child penalty in the UK is larger when the first born child is a girl. We label this the daughter penalty. Exploiting rich longitudinal survey data, we examine behavioural responses to the birth of a daughter vs. a son to illuminate the underpinnings of the daughter penalty. We find that the birth of a daughter triggers more household specialisation than the birth of a son, with mothers taking on a larger share of household chores and childcare. Mothers suffer a daughter penalty in mental health, while fathers report more satisfaction with their relationship. Our findings imply that girls and boys in the UK are, on average, growing up in different home environments, with girls growing up in households that, by multiple markers, are more gender-regressive. This is potentially a mechanism for the inter-generational transmission of gendered norms.

In 2018 and 2019, the US administration increased tariffs on imports from China. Did these tariffs lead to more US imports from other countries such as Mexico? Using highly disaggregated data on the universe of Mexican firm-level exports, we find evidence of trade diversion from China to Mexico. We then combine the export data with detailed longitudinal employer-employee data to investigate the impact of trade diversion on labor market outcomes for workers employed by Mexican exporters. We find that trade diversion increased the labor demand of exporters exposed to US tariffs against China, resulting in more employment and higher wages, especially for low-wage workers such as female, unskilled, younger, and non-permanently insured employees. The effects were concentrated in technology and skill-intensive manufacturing industries.

Environmental policies can inadvertently increase transition risks, negatively impacting property prices. The Minimum Energy Effciency Standard (MEES), designed to enhance energy effciency in rental properties, may devalue sub-standard properties and can affect neighboring above-standard ones. Our study documents this spatial externality using a dataset that combines property transaction variables with energy effciency data at the postcode level. We construct a concentration measure for sub-standard properties and apply it to both aggregate and property- level analyses using a difference-in-differences approach. Our findings indicate that MEES comes with spatial externality on properties unaffected by the policy, with a 3.2% price decline in neighborhoods with higher concentrations of sub-standard housing.

A principal incentivizes a team of agents to work on a joint project. Building on Winter (2004), this paper explores a simple mechanism where agents choose between two public messages, collaborate and ‘monopolize’, and the message profile decides their bonus upon team success. The principal minimizes the total payment while ensuring full effort in outcomes that survive Iterative Elimination of Weakly Dominated Strategies. The optimal mechanism reaches the first-best payment, leaving no rent for strategic uncertainty. Unlike previous results (Winter, 2004; Halac et al., 2021; Cavounidis and Ghosh, 2021), the optimal bonus allocation is neither discriminatory nor private. Thus, efficiency need not come at the cost of fairness or transparency.

We provide experimental evidence that using body-worn cameras (BWCs) for police monitoring improves police-citizen interactions. Dispatches with BWCs show a 61.2% decrease in police use of force and a 47.0% reduction in negative interactions, including handcuff use and arrests. The use of BWCs also improves the quality of officers’ record from the dispatches. The rate of incomplete reports dropped by 5.9%, which is accompanied by a 69% increase in the notification of domestic violence. We explore various mechanisms that explain why BWCs work and show that the results are consistent with the police changing their behavior in the presence of cameras. Our results stand in contrast with previous experimental literature which used coarser designs and indicated muted or null body-worn camera effects on use of force. Replicating those designs, our data also finds attenuated effects. Overall, our results show that the use of BWCs de-escalates conflicts.

We modify a canonical two-agent bargaining game with investments in a joint project, by allowing agents to also invest in outside options that improve their bargaining positions. Absent outside options, it is well known that equal bargaining power maximizes output. However, this is no longer true when investment in outside options is possible and the joint-project technology exhibits stronger substitutability than Cobb-Douglas. When this is so, equal bargaining power minimizes project output while maximizing total investment in unused outside options. Paradoxically, when inputs are suffciently strong substitutes, starting at equal bargaining power, each agent would gain from reductions in their own bargaining power.

Given a quantum state in the finite-dimensional Hilbert space Cn, the range of possible values of a quantum observable is usually identified with the discrete spectrum of eigenvalues of a corresponding Hermitian matrix. Here any such observable is identified with: (i) an "ortho-measurable" function defined on the Boolean "ortho-algebra" generated by the eigenspaces that form an orthogonal decomposition of Cn; (ii) a "numerically identified" orthogonal decomposition of Cn . The latter means that each subspace of the orthogonal decomposition can be uniquely identified by its own attached real number, just as each eigenspace of a Hermitian matrix can be uniquely identified by the corresponding eigenvalue. Furthermore, any density matrix on Cn is identified with a Bayesian prior "ortho-probability" measure de ned on the linear subspaces that make up the Boolean ortho-algebra induced by its eigenspaces. Then any pure quantum state is identified with a degenerate density matrix, and any mixed state with a probability measure on a set of orthogonal pure states. Finally, given any quantum observable, the relevant Bayesian posterior probabilities of measured outcomes can be found by the usual trace formula that extends Born's rule.

We review the present-day impacts of colonial rule on former colonies. Persistence exists because of multiple equilibria, path dependence, institutions, culture, knowledge, and technology. Empirical work in this literature primarily uses tools from applied econometrics, though best practices are needed to overcome the limitations of these tools. Colonial interventions relating to institutions, infrastructure, land, forced labour, the slave trade, and human capital all have measurable impacts in the present. And yet many colonial interventions have failed to persist or have led to reversals. These cases are informative about why colonial rule still matters, as are cases where precolonial influences have had persistent impacts despite, or even because of, colonial rule.

Using UK household data, we examine empirically how different facets of energy security, energy vulnerability, affordability, reliability and imports dependency impact the support for three different energy sources: renewables, nuclear and shale gas extraction. Our approach utilises an ordered logistic econometric model and controls for various socio-demographic variables. We find that each facet can have a differential impact in the probability of support for each energy source and in general, as energy security concerns decline, households are becoming less likely to support each energy source, however, the effects are larger for nuclear and shale gas compared to renewables. Our findings are robust to potential endogeneity concerns which are addressed by using instrumental variables. The above results can be useful for policy appraisal purposes to inform policy makers on the differential impact of energy security facets when designing future energy policies towards the net zero targets.

We investigate how speeches by Federal Open Market Committee (FOMC) members and regional Federal Reserve presidents influence private sector expectations. Speeches highlighting upcoming inflationary pressures lead both households and professional forecasters to raise their inflation expectations, suggesting the presence of Delphic effects. While professional forecasters adjust their expectations in response to Odyssean communications—i.e., statements about the central bank’s reaction to the announced inflationary pressures—households do not, leaving Delphic effects dominant. A novel general equilibrium model, in which agents differ in their ability to interpret Odyssean signals, accounts for these differential patterns.

Cooperation in joint ventures is widespread, despite its vulnerability to defection. It can emerge when the interaction is repeated and agents are patient enough to prefer the benefits of future cooperation over the short-term gains from defection. Thus, if a large fraction of the population consists of impatient exploiters who always defect and agents are randomly paired to play a repeated prisoner dilemma game, patient agents defect as well, and society is in a no-cooperation trap. We show that the existence of an outside option can break this trap even if the fraction of patient agents is arbitrarily small. Impatient agents self-select out of the game, allowing patient agents to cooperate. Patience thus has an evolutionary advantage, leading to widespread cooperation.

We analyze speculation by an informed trader who can commit to her trading strategy in a Kyle-style dealership market. Market makers observe the exact parametric form of the speculator’s trading strategy but not her private information and then price competitively given the net (informed plus noise trade) order flow. We derive necessary and sufficient conditions for the speculator not to profit from commitment. This imposes conditions on model primitives satisfied by Normally-distributed uncertainty that give rise to linear equilibria, but are generically not satisfied. With commitment the speculator may trade less aggressively after some signals, but more aggressively after others.

Hedge fund activists often aim to convince other shareholders to vote for a particular corporate policy, while majority shareholders recognize that activist recommendations serve their own interests, not necessarily maximizing firm value. We show how an activist can increase the likelihood of a favorable vote by delegating the tasks of acquiring information and making recommendations to another activist. This choice balances motivating the delegated activist to acquire costly information against ensuring shareholders trust the recommendation. We characterize how the hedge fund activist’s bias affects the delegation bias, information acquisition, recommendation and shareholder voting decisions, and firm value.

Professional forecasters’ long-run inflation expectations overreact to news and exhibit persistent, predictable biases in forecast errors. A model incorporating overconfidence in private information and a persistent expectations bias—which generates persistent forecast errors across most forecasters—accounts for these two features of the data, offering a valuable tool for studying long-run inflation expectations. Our analysis highlights substantial, time varying heterogeneity in forecasters’ responses to public information, with sensitivity declining across all forecasters when monetary policy is constrained by the effective lower bound. The model provides a framework to evaluate whether policymakers’ communicated inflation paths are consistent with anchored long-run expectations.

This chapter examines the role of religion in economic development, both historically and today. Religion's influence varies globally, with high religiosity in countries like Pakistan and low rates in China. Despite declines in some Western countries, religion remains influential worldwide, with projected growth in Muslim populations due to higher fertility rates. Religion continues to shape societal norms and institutions, such as education and politics, even after its direct influence fades. The chapter explores how religious institutions and norms have impacted economic outcomes, focusing on both persistence and decline. It also examines cultural transmission, institutional entrenchment, networks, and religious competition as mechanisms sustaining religion's influence. We explore the relationship between religion and secularization, showing that economic development does not always reduce religiosity. Lastly, the chapter highlights gaps in the literature and suggests future research areas on the evolving role of religion in economic development

An established literature has studied potential biases in the economics publication process based on traits of authors. We complement such work by studying whether the subject matter of study relates to publication outcomes. We do so in the context of race-related research : work that studies economic well-being across racial/ethnic groups. We investigate the implicit career incentives economists have to work on such topics by examining paths to publication for a corpus of 22,056 NBER working papers (WPs) posted from 1974 to 2015. We use an algorithm to classify whether a given WP studies race-related issues. We then construct paths to publication from WPs to data on published articles, and compare paths for race-related WPs to various counterfactual sets of WPs. We document that unconditionally, race-related NBER WPs are less likely to be published in any journal, in an economics journal, and more likely to publish in lower tier economics journals. Once we condition on observable characteristics including field and author affiliations, differences in paths to publication largely disappear, and such work is actually slightly more likely to publish in top-tier economics journals. Consistent with unconditional differences in paths to publication being salient to researchers, we find evidence of ex ante selection into WPs studying race related issues in that they are of higher readability than other WPs. To understand the interplay with selection of researchers, we compare results to paths to publications for 10,306 CEPR WPs posted from 1984 to 2015. We conclude by discussing implications for economists’ incentives to contribute to debates on race and ethnicity in the economy

Issues of racial justice and economic inequalities between racial and ethnic groups have risen to the top of public debate. Economists ability to contribute to these debates is based on the body of race-related research. We study the volume and content of race-related research in economics. We base our analysis on a corpus of 225 000 economics publications from 1960 to 2020 to which we apply an algorithmic approach to classify race-related work. We present three new facts. First, since 1960 less than 2% of economics publications have been race-related. There is an uptick in such work in the mid 1990s. Among the top-5 journals this is driven by the American Economic Review, Quarterly Journal of Economics and the Journal of Political Economy. Econometrica and the Review of Economic Studies have each cumulatively published fewer than 15 race-related articles since 1960. Second, on content, while over 50% of race-related publications in the 1970s focused on Black individuals, by the 2010s this had fallen to 20%. There has been a steady decline in the share of race-related research on discrimination since the 1980s, with a rise in the share of studies on identity. Finally, we apply our algorithm to NBER and CEPR working papers posted over the last four decades, to study an earlier stage of the research process. We document a balkanization of race-related research into a few fields, and its continued absence from many others – a result that holds even within the subset of research examining issues of inequality or diversity. We discuss implications of our findings for economists’ ability to contribute to debates on race and ethnicity in the economy.

We draw lessons from three centuries of economic warfare and sanctions. Establishing cause and effect is difficult because much else was typically changing during periods of conflict. Unintended consequences were everywhere. Impact was followed (and sometimes preceded) by adaptation so that countermeasures blunted the effectiveness of economic warfare measures and sanctions. This does not mean that the original measures were unimportant, because countermeasures were costly to the target country. Civilian lives and interests were collateral damage. Economic warfare and sanctions worked most effectively when complemented by fighting power either engaged in conventional warfare or credibly threatening war as a deterrent, and they were ineffective in its absence

Quantum randomness evidently transcends the classical framework of random variables defined on a single comprehensive Kolmogorov probability space. One prominent example is the quantum double-slit experiment due to Feynman (1951, 1966). A related non-quantum example, inspired by Boole (1862) and Vorobev (1962), has three two-valued random variables X, Y and Z, where the pairs X; Y and X ; Z are perfectly correlated, yet Y ; Z are perfectly anti-correlated. Such examples can be accommodated using a "multi-measurable" space with several different algebras of measurable events. This concept due to Vorobev (1962) allows construction of : 1) a measurable metaspace whose elements combine a point in the original sample space with a variable "contextual" Boolean algebra ; 2) a parametric family of probability metaspaces, each of which is a Kolmogorov probability space that represents a two-stage stochastic process where a random choice from the original sample space is preceded by the random choice of a contextual Boolean algebra in the multi-measurable space. Subsequent work will explore how quantum experimental results can be described using a quantum measurement tree with one or more preparation nodes where an experimental configuration is determined that governs the probability distribution of relevant quantum observables.

We investigate whether teachers discriminate against students from marginalized groups, what attitudes and beliefs underlie this discrimination, and whether empathy can mitigate it. A correspondence study with 1,700 teachers from India shows teachers assign lower grades to answers with lower caste surname. Many teachers have pessimistic views over ability, perseverance, occupational prospects, and ritual cleanliness of people from lower castes. Teachers with more pessimistic views discriminate more. An intervention to activate empathy eliminates discrimination, especially among teachers with higher baseline empathy. These results offer a proof-of-concept on mental processes that can serve as inputs in designing programs to reduce discrimination.

Despite being often discussed both in practice and academic circles, the sunk cost effect remains empirically elusive. Our model based on reference point dependence suggests that the traditional way of testing it—by assigning discounts—may not produce the desired effect. Motivated by this, we evaluate it across the gain-loss divide in two preregistered experiments. In an online study, we randomize the price (low, medium, or high) of a ticket to enter a real-effort task and observe its effect on play time. Despite varying the sunk cost by $2 for a 14-minute task and the sample size of N=1,806, we detect only a small effect (0.09 SD or 1.1 minutes). We further explore the economic applications of the effect in a field experiment on YouTube with N=11,328 videos in which we randomize whether the time until a pre-video ad becomes skippable is shortened (0 s), default (5 s), or extended (10 s). The intervention has an overall insignificant effect on video engagement. This is driven by a sizable negative effect on the extensive margin, a channel which is not present in the online study. Specifically, more users leave before the video starts in the extended treatment (5.2 pp. or 28% more relative to the shortened treatment). Taking the results of both studies together, we offer a cautionary tale that applying even the most intuitive behavioral effects in policy settings can prove challenging.

Most social media users have encountered harassment online, but there is scarce evidence of how this type of toxic content impacts engagement. In a pre-registered browser extension field experiment, we randomly hid toxic content for six weeks on Facebook, Twitter, and YouTube. Lowering exposure to toxicity reduced advertising impressions, time spent, and other measures of engagement, and reduced the toxicity of user-generated content. A survey experiment provides evidence that toxicity triggers curiosity and that engagement and welfare are not necessarily aligned. Taken together, our results suggest that platforms face a trade-off between curbing toxicity and increasing engagement.

Addressing rising political polarization has become a focal point for policy makers. Yet, there is little evidence of its economic impacts, especially in contexts where partisanship cannot be easily hidden. To fill this gap, we study a novel channel: the perception of out-group partisan oversight of independent civil service reduces trust in regulation, affecting key markets (e.g., food and medicine). First, we motivate it by demonstrating the salience of the association between the president and expert regulators in US media reporting. Second, in a pre-registered experiment with 5,566 individuals, we test the channel by exploiting an alignment in the way that the EPA under Trump and Biden defended the safety of spraying citrus crops with antibiotics. This enabled us to randomize the partisanship of the administration, holding the scientific arguments constant. Despite the EPA’s independence, out-group administration reduces support for the spraying by 26%, lowers trust in the EPA’s evaluation, and increases donations to an NGO opposing the spraying by 15%. We find no overall effect on the willingness to pay for citrus products, measured in an obfuscated follow-up survey. However, we document significant differences in effects for elastic vs. inelastic consumers. Taken together, polarization has the potential to affect economic decisions. However, a reduction in trust might not translate into lower demand, especially for inelastic consumers.

Spatial unit roots can lead to spurious regression results. We present a brief overview of the methods developed in Muller and Watson (2024) to test for and correct for spatial unit roots. We also introduce a suite of Stata commands (-spur-) implementing these techniques. Our commands exactly replicate results in Muller and Watson (2024) using the same Chetty et al. (2014) data. We present a brief practitioner’s guide for applied researchers.

This paper introduces search frictions in labor and goods markets to explore which condition leads to deviation from LOP, and how asymmetric shocks have an impact on deviation of LOP in an open economy. First, we show that the LOP gap only depends on the ratio of marginal utility of aggregate search across countries. Then, we express the LOP gap in terms of consumption gap across countries and show that asymmetric productivity shocks between countries entail deviations from LOP. This is because asymmetric productivity shocks affect markups via the matching probability, and in turn, induce firms to move across markets. Finally, we also examine responses of macroeconomic variables with respect to country-specific productivity and preference shocks.

This paper examines Ramsey-type optimal monetary policy in an open economy with a two-country dynamic general equilibrium model where search and matching frictions exist in labor markets along with the limited participation in the financial markets. Monetary policy affects the decision of firms in labor markets because firms finance their wage bills with loans from domestic financial intermediaries in advance. There are two main results associated with optimal monetary policy. The long-term optimal nominal interest rate could be zero suggesting negative optimal inflation rate in the long run because the terms of trade effect on consumption could be weaken by search frictions. As a result of Ramsey optimal monetary policy, dynamics of business cycles in both countries show similar patterns in response to a productivity shock and, in turn, higher cross-country correlations of real variables.

The paper addresses the international co-movement of employment by introducing labor market search frictions along with real wage rigidity into a two- country economy. I show that search and matching frictions in the labor market, combined with wage rigidity account for the positive cross-country correlation of employment as well as labor market activity within a country. With search and matching frictions in the labor market, higher productivity in the home country leads home and foreign employment to rise even at the initial period before productivity shocks spill over. When demand for foreign goods is predicted to rise, foreign firms have an incentive to hire workers in advance in response to the higher expected payoff to a job because hiring takes time and costs.