Manage Research Papers

Latika Chaudhary, Yannick Dupraz, and James Fenske

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.

Ludovica Gazze, Tanu Gupta, Allen (Weiyi) Huang, Valentina Londono, Santiago Saavedra and Mattie Toma

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.

Michelle Escobar Carias, Victoria Baranov, Joanna Maselko, Pietro Biroli and Sonia Bhalotra

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.

See-Yu Chan, Stephan Hobler & Thijs van Rens

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.

Subhasish Dey, Mahima Kapoor & Anirban Mukherjee

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.

Victor Lavy, Genia Rachkovski & Omry Yoresh

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.

Carolina Kansikas, Anandi Mani, Paul Niehaus

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.

Carolina Kansikas and Manuel Bagues

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.

Sonia Bhalotra, N. Meltem Daysal & Mircea Trandafir

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.

Francis Bloch, Bhaskar Dutta and Marcin Dziubinski

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.

Ivan Balbuzanov, Jared Gars, Mateusz Stalinski & Emilia Tjernström

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.

Manuel Bagues & Natalia Zinovyeva

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.

Peter J Hammond

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.

Ablam Estel Apeti, Samuel Obeng, Abrams Tagem, and Maureen Were

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.

Felipe Benguria and Dennis Novy

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.

Lea Nassal

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%.

Sonia Bhalotra, Damian Clarke & Angelina Nazarova

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.

Natalie Chen, Dennis Novy & Diego Solórzano

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.

Lory Barile, Benjamin Guin & Eleni Sandi

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.

Yating Yuan

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.

Daniel AC Barbosa, Thiemo Fetzer, Caterina Soto-Vieira & Pedro CL Souza

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.

Dan Bernhardt, Ilwoo Hwang & Stefan Krasa

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.

Peter J Hammond

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.

James Fenske, Bishnupriya Gupta, and Anwesh Mukhopadhyay

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.

Andreas Markoulakis & Eleanya Nduka

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.

Eleonora Granziera, Vegard H. Larsen, Greta Meggiorini & Leonardo Melosi

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.

Omer Moav, Luigi Pascali & Ady Pauzner

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.

Dan Bernhardt & Alex Boulatov

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.

Dan Bernhardt & Shaoting Pi

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.

Jonas D. M. Fisher, Leonardo Melosi & Sebastian Rast

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.

Sascha O. Becker, Amma Panin, Steven Pfaff, and Jared Rubin

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

Arun Advani, Elliott Ash, Anton Boltachka, David Cai & Imran Rasul

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

Arun Advani, Elliott Ash, Anton Boltachka, David Cai & Imran Rasul

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.

Stephen Broadberry & Mark Harrison

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

Peter Hammond

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.

Rajesh Ramachandran, Devesh Rustagi & Emilia Soldani

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.

George Beknazar-Yuzbashev, Sota Ichiba & Mateusz Stalinski

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.

George Beknazar-Yuzbashev, Rafael Jiménez-Durán, Jesse McCrosky & Mateusz Stalinski

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.

Christopher Burnitt, Jared Gars & Mateusz Stalinski

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.

Sascha O. Becker, P. David Boll & Hans-Joachim Voth

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.

Cholwoo Kim

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.

Cholwoo Kim

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.

Cholwoo Kim

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.

Philippe Andrade, Filippo Ferroni & Leonardo Melosi

We introduce a method that exploits some non-gaussian features of structural shocks to identify structural vector autoregressive models. More specifically, we propose to combine inequality restrictions on the higher-order moments of the structural shocks of interest with other set-identifying constraints, typically sign restrictions. We illustrate how, both in large or small sample settings, higher-moment restrictions considerably narrows the identification of monetary policy shocks compared to what is obtained with minimal sign restrictions typically used in the SVAR literature. The proposed methodology also delivers new insights on the macroeconomic effects of sovereign risk in the Euro Area, and on the transmission of geopolitical risk to the US economy.

Saman Darougheh, Renato Faccini, Leonardo Melosi & Alessandro T. Villa

We develop a Heterogeneous Agents New Keynesian (HANK) model with a job ladder and endogenous on-the-job search (OJS) that challenges the traditional view of a negative relationship between unemployment and inflation. On the one hand, OJS is inflationary, sparking wage competition among firms to attract or retain workers. On the other hand, OJS strengthens workers’ bargaining power, reducing firms’ incentives to post vacancies and thereby increasing unemployment. The model explains the effects of the 2012 Danish tax reform, which influenced OJS differentially across the income distribution, on the employment transitions and wage growth observed in the microdata.

Devesh Rustagi & Matthias Schief

Does anticipation of discrimination, beliefs individuals have about the discriminatory behavior of others toward them, undermine trust and cooperation? We develop a new design to isolate the role of anticipation of discrimination in cooperation dilemmas using a trust game. We capture the effect of anticipation on trust as the double difference between the amount transferred by trustors to outgroup vs. ingroup trustees when their own identity is revealed vs. concealed. We apply our design in the context of a effective polarization in the UK using a large representative sample. We find that anticipation of discrimination undermines inter-partisan trust and cooperation by the same magnitude as the combined effect of taste-based and statistical discrimination. However, this anticipation is misperceived because trustees rarely discriminate along partisan lines, resulting in cooperation failure. Our design can be used to study anticipation of discrimination across different societal divisions including gender, ethnicity, religion, and caste.

Hugo Molina & Ao Wang

We develop an empirical framework to analyze vertical relationships with manufacturer-retailer bargaining. Our key innovation is the introduction of a novel Nash-in-Nash bargaining model that incorporates uncertainty in retailers’ pricing responses to wholesale prices. This model extends existing Nash-in-Nash frameworks by relaxing assumptions about the timing of wholesale and retail price setting. We show that our model can be microfounded by a two-stage noncooperative game with delegated negotiations. We propose a two-step strategy that separably identifies bargaining and responsiveness parameters and implies a Generalized Method of Moments estimation procedure.

Ozan E. Akbas & Ao Wang

Investors evaluate their entire portfolio, not individual assets, striving to balance returns and risks through effective diversification. This paper introduces a flexible demand system accommodating heterogeneous substitution, cross-asset complementarities, and diverse investment strategies. By relaxing multinomial logit assumptions, our model better captures portfolio allocation decisions, linking portfolio weights to both individual asset and portfolio-wide characteristics. We propose a demandinverse approach for the identification of structural parameters. This approach implies a Generalized Method of Moments estimation procedure with novel instruments addressing cross-asset dependencies. Monte Carlo simulations validate the model, demonstrating improved finite-sample properties over standard multinomial logit frameworks.

Margot Belguise, Nora Yuqian Chen, Yuchen Huang & Zhexun Mo

China has experienced a remarkable rise in living standards over four decades of economic reforms, alongside a tremendous increase in inequalities. In this context, do Chinese people support redistribution of wealth gained through reform windfalls? To answer this question, we conducted an online survey experiment with a nationally representative sample from China (N = 2, 000). The treatment group was shown examples of wealth acquired through typical reform-era pathways requiring minimal ability or effort. This exposure led to a 0.1 standard deviation decrease in their support for redistribution. We propose a “reform windfall as redistribution” mechanism to explain this reduction : the treated group perceives the reform era as inherently redistributive, providing opportunities to escape systemic inequalities tied to the political system, thereby reducing the perceived need for formal redistribution. This decline in support is not driven by changes in fairness perceptions, as respondents do not attribute the wealth acquisition scenarios to ability or effort, nor do they view them as distinctly fair or unfair. Furthermore, we find limited evidence of heterogeneity, with one exception: individuals reporting higher economic pressure show an even greater reduction in redistributive support when exposed to the treatment. We hypothesize that this occurs because unmet expectations for upward mobility exacerbate their reactions to the treatment scenarios.

Andrea De Polis, Leonardo Melosi & Ivan Petrella

We document that inflation risk in the U.S. varies significantly over time and is often asymmetric. To analyze the first-order macroeconomic effects of these asymmetric risks within a tractable framework, we construct the beliefs representation of a general equilibrium model with skewed distribution of markup shocks. Optimal policy requires shifting agents’ expectations counter to the direction of inflation risks. We perform counterfactual analyses using a quantitative general equilibrium model to evaluate the implications of incorporating real-time estimates of the balance of inflation risks into monetary policy communications and decisions.

Martin Mugnier & Ao Wang

We study a class of two-way fixed effects index function models with a nonparametric link function and individual- (or time-) specific slopes. Our model alleviates potential misspecification errors due to the common practice of specifying a known link function such as Gaussian and its tail behavior. It also enables to incorporate richer unobserved heterogeneity in the marginal effects of covariates via heterogeneous slopes across individuals. We show the identification of the link function as well as the slopes and fixed effects parameters when both individual and time dimensions are large. We propose a nonparametric consistency result for the fixed effects sieve maximum likelihood estimators. Finally, we apply our method to the study of establishing exportation and illustrate the consequences of imposing Gaussian link function and homogeneity on the slope of distance.

Manuel Bagues & Carmen Villa

Over the past decades, many European countries have raised the minimum legal drinking age (MLDA) from 16 to 18 years. This study provides novel evidence of the impact of this policy on educational outcomes by exploiting the staggered timing of MLDA changes across Spanish regions. Raising the MLDA decreased alcohol consumption among adolescents aged 14–17 by 8 to 18% and improved their exam performance by 4% of a standard deviation. This effect appears driven by alcohol’s direct impact on cognitive ability, as we find no significant changes in potential mediators like use of other substances or time spent on leisure activities, including socialising, sports, gaming, or internet use. We also observe a decrease in tranquilliser and sleeping pill use, suggesting improved mental health. Our findings indicate that reducing teenage alcohol consumption represents a significant opportunity to improve educational outcomes in Europe, where youth drinking rates remain notably high.

Thiemo Fetzer, Peter John Lambert, Bennet Feld & Prashant Garg

This paper leverages generative AI to build a network structure over 5,000 product nodes, where directed edges represent input-output relationships in production. We layout a two-step ‘build-prune’ approach using an ensemble of prompt-tuned generative AI classifications. The ’build’ step provides an initial distribution of edge predictions, the ‘prune’ step then re-evaluates all edges. With our AI-generated Production Network (AIPNET) in toe, we document a host of shifts in the network position of products and countries during the 21st century. Finally, we study production network spillovers using the natural experiment presented by the 2017 blockade of Qatar. We find strong evidence of such spill-overs, suggestive of on-shoring of critical production. This descriptive and causal evidence demonstrates some of the many research possibilities opened up by our granular measurement of product linkages, including studies of on-shoring, industrial policy, and other recent shifts in global trade.

Rong Nie, Jinbo Song & Juliana Carneiro

This study examines the impact of emissions data disclosure on alleviating NIMBYism (Not In My Backyard) concerns surrounding Waste-to-Energy (WtE) incineration plants. Leveraging China’s 2017 “Installing, Erecting, and Networking” (IEN) policy as a quasi-natural experiment, we employ a difference-in-differences (DID) approach to analyze over 35,000 housing transactions near 13 plants. Results indicate that the IEN policy attenuates the housing price gradient by 30.43%, equivalent to 38% of an urban Chinese resident’s annual disposable income. This robust evidence highlights how transparency policies can enhance public trust and thus promote more sustainable urban development.

Yang Xun

Talent is a key input in the delivery of public services, yet less is known about what affects the supply of talent for the public sector. This paper studies the role of political corruption in shifting talent allocation across public and private sector careers. I exploit a randomized anti-corruption audit program in Brazil together with comprehensive micro-data on educational and labor market outcomes of college students. Using a generalized difference-in- difference research design, I find that high-ability students in audited municipalities are less likely to choose majors tailored toward public sector careers, such as business administration and law. Moreover, tracking students to the labor market demonstrates that audits also lead to a lower share of high-ability students working as civil servants. Finally, I provide suggestive evidence that the effects of audits on talent allocation can be driven by the perception of lower rent-seeking returns and higher reputation costs. Taken together, these findings highlight an understudied negative consequence of corruption on the economy: the distortion of talent allocation toward rent-seeking in the public sector.

Alex Zhou & Ruchi Mahadeshwar

Despite its recognized inefficiency, the persistence of income hiding between spouses remains largely unaddressed in the literature. Our study suggests that one cause of persistency is that this behavior may provide strategic benefits, particularly by affecting labor supply decisions and overall household income. Using a field experiment involving low-income workers in Southeast Asia, we estimate the effects of randomly disclosing spousal income on productivity in a standardized work task. Our findings indicate that income disclosure significantly affects labor productivity compared to a nondisclosure scenario, in which spouses can conceal any income generated. The effects exhibit notable gender differences: when income is disclosed to their spouses, women decrease productivity, while men increase productivity. We introduce a two-stage game model and further empirical tests to demonstrate that these gender differences arise from disparities in bargaining power, with men holding significantly more bargaining power than women. Overall, this study sheds light on the unintended consequences of financial inclusion or pay transparency policies on both productivity and household inequality.

Peter J Hammond

This paper has been significantly revised & replaced with WERP 1568

Victor Ajayi, Andrew Burlinson, Monica Giulietti & and Michael Waterson

In April 2022, consumers in Great Britain (GB) witnessed a 54% increase in the energy price cap, as a result of Russia’s invasion of Ukraine on February 24th, which sent wholesale gas prices spiralling across Europe. We leverage high-frequency data collected by the Smart Energy Research Lab, a representative panel containing daily gas and electricity data for around 13,000 households in Great Britain between January 2021 and December 2023 to investigate the implications. We exploit several datasets linked to the panel data which include time-varying and cross-sectional information. We rely on two price shocks : 1) in October 2021 a wave of energy retail suppliers leaving the industry. At this time over two million consumers on fixed contracts were forced to join a new supplier and pay a variable tariff, and 2) these consumers were exposed to a second price shock caused by the Ukraine-Russia conflict which fed through April 2022’s energy price cap. Exploiting this pseudo-natural experiment, we use a difference-in-difference framework to estimate average treatment effects on this group of consumers and find that they would have consumed an additional 10 percentage points more electricity and 16 percentage points more gas had their prices remained fixed. These estimates are robust to a battery of robustness checks and point towards a significant loss in welfare for consumers on variable tariffs in the early stages of the energy price crisis

Alex Ferreira, Rory Mullen, Giovanni Ricco, Ganesh Viswanath-Natraj & Zijie Wang

We study the impact of foreign exchange interventions during periods of tight credit constraints. Expanding on the Gabaix and Maggiori (2015) model, we predict that long-lived spot interventions have larger effects on exchange rates than short lived swaps, unanticipated interventions are more impactful, and tighter credit constraints amplify effects. Using high-frequency data on Brazilian Central Bank interventions from 1999 to 2023, we find that unanticipated spot sales of USD reserves lead to significant domestic currency appreciation and reduced covered interest parity deviations. Spot interventions outperform swaps, especially when global intermediaries are constrained, and enhance market efficiency by lowering USD borrowing costs.

Mirko Draca, Max Nathan, Viet Nguyen-Tien, Juliana Oliveira-Cunha, Anna Rosso & Anna Valero

Which types of human capital influence the adoption of advanced technologies? We study the skill-biased adoption of information and communication technologies (ICT) across two waves in the UK. Specifically, we compare the new wave of cloud and machine learning / AI technologies during the 2010s - pre-LLM - with the previous wave of personal computer adoption in the 1990s and early 2000s. At the area-level we see the emergence of a distinct STEM-biased adoption effect for the second wave of cloud and machine learning / AI technologies (ML/AI), alongside a general skill-biased effect. A one-standard deviation increase in the baseline share of STEM workers in areas is associated with around 0.3 of a standard deviation higher adoption of cloud and ML/AI. We find similar effects at the firm level where we are able to test for the influence of a wide range of skills. In turn, this STEM-biased adoption pattern has encouraged the concentration of these technologies, leading to more acute differences between high-tech and low-tech areas and firms. In contrast with classical technology diffusion, recent cloud and ML/AI adoption in the UK seems more likely to widen inequalities than reduce them

Francesco Squintani

I study strategic transmission of verifiable information through intermediaries, and find that equilibrium full disclosure requires that all players are biased in the same direction relative to the decision maker. By embedding this strategic disclosure game into networks, I explore the intersection of information transmission in networks and strategic communication—two major economic theory research strands. When each networked player may hold information useful for any other’s decision, I find that the unique ex-ante optimal network is a line where players are ordered by their bliss points. This is also the unique network immune to coalitional deviations.

Aatishya Mohanty, Nattavudh Powdthavee, CK Tang & Andrew J. Oswald

This paper studies natural disasters and the psychological costs of climate change. It presents what we believe to be the first evidence that higher temperature variability and not a higher level of temperature is what predicts natural disasters. This conclusion holds whether or not we control for the (incorrectly signed) impact of temperature. The analysis draws upon long differences regression equations using GDIS data from 1960-2018 for 176 countries and the contiguous states of the USA. Results are checked on FEMA data. Wellbeing impact losses are calculated. To our knowledge, the paper’s results are unknown to natural and social scientists.

Cory Smith & Amrita Kulka

We study the process of long-run urban growth using a unique setting of close elections that determined “county seats” (capitals) in the frontier United States. Employing a regression discontinuity design, we show that winning towns rapidly became the economic and population centers of their counties as new migrants coordinated on them as destinations. This coordination was largest in the early years of a county’s history, but limited in later decades. Using generalized random forests, we show that the economic changes were not zero sum locally: specific choices of county seat could increase long- run county population and income. As county administration was limited in this era, the public sector did not play a substantial role in this growth. Instead, these results illustrate how a political process can select spatial equilibria through a shock that is neither related to locational fundamentals nor confers direct productivity advantages on the location.

Thiemo Fetzer, Christina Palmou & Jakob Schneebacher

We study how businesses adjust to significant rises in energy costs. This matters for both the current energy crisis and the longer-term shift towards Net Zero. Using firm-level real-time survey and administrative data backed by a pre-registered analysis plan, we examine how firms respond to the energy price shock triggered by Russia’s invasion of Ukraine along output, price, input, process and survival margins. We find that, on average, firms pass on some cost increases, build up cash reserves, and face higher debt, but do not yet see layoffs or bankruptcies. However, effects are highly heterogeneous by size and industry: for instance, small firms tend to increase cash reserves and prices, while large firms invest more in capital. We estimate separate elasticities for many small industry cells and subsequently use k-means clustering techniques on the estimated effects to identify high- dimensional firm-adaptation archetypes. These estimates can help tailor firm support in the energy transition both in the short and the long term. More generally, the machinery developed in this paper enables policymakers to evaluate and adjust economic policy in near-real time.

Tingjun Liu & Dan Bernhardt

We consider a classical auction setting in which an asset/project is sold to buyers who privately receive signals about expected payoffs, and payoffs are more sensitive to the signal of the bidder who controls the asset. We show that a seller can increase revenues by sometimes allocating cash-flow rights and control to different bidders, e.g., with the highest bidder receiving cash flows and the second-highest receiving control. Separation reduces a bidder’s information rent, which depends on the importance of his private information for the value of his awarded cash flows. As project payoffs are most sensitive to the information of the bidder who controls the project, allocating cash flow to another bidder lowers bidders’ informational advantage. As a result, when signals are close, the seller can increase revenues by splitting rights between the top two bidders.

Eleanya Nduka & Modupe Jimoh

This study utilizes novel data to investigate the impact of cooking energy sources and indoor air pollution on the happiness, life satisfaction, physical, and mental health of women in Nigeria. The existing body of literature relies on ambient air pollution data, which can be limiting in resource-constrained settings. To address this gap, we employ a direct approach, measuring Carbon Monoxide (CO) levels in participants’ blood using the Rad-57 CO-oximeter. Our analysis reveals strong positive correlations between the utilization of clean cooking energy and women’s reported happiness and life satisfaction. Additionally, the study finds that clean cooking energy usage is associated with a significant reduction in mental health problems among women. These findings highlight a substantial disparity in wellbeing based on access to clean cooking energy sources. Furthermore, exposure to carbon monoxide, as measured in this study, demonstrates a detrimental effect on women’s health and overall well-being. Consequently, policymakers and stakeholders should prioritize initiatives that promote household energy access and facilitate the transition to clean cooking practices, especially in rural areas where the use of polluting fuels and exposure to indoor air pollution remain prevalent concerns.

Thiemo Fetzer, Benjamin Guin & Felipe Netto

This paper uncovers if and how insurance companies react to shocks to collateral in their portfolio of securitized assets. We address this question in the context of commercial real estate cash flow shocks, which are informationally opaque to holders of commercial mortgage-backed securities (CMBS). Using detailed micro data, we show that cash flow shocks during the COVID-19 pandemic predict CRE mortgage delinquency, especially those stemming from lease expiration of offices, reflecting lower demand for these properties. Insurers react to such cash flow shocks by selling more exposed CMBS—mirrored by a surge in small banks holding CMBS—and the composition of their CMBS portfolio affects their trading behavior in other assets. Our results indicate that institutional investors actively monitor underlying asset risk, and even gain an informational advantage over some banks.

Matilde Casamonti & Natalia Zinovyeva

We analyze the impact of evaluator and candidate gender on the language used in academic evaluations using data on 295,000 evaluation reports for applicants seeking professorial promotion across all academic fields in Italy. In this context, candidates are assessed by a national-level committee composed of five randomly selected evaluators from the corresponding field. We observe that the language used in evaluation reports varies significantly with applicants’ productivity and professional ties to evaluators, but we find no indication that the language of the assessments depends on the gender of either the candidates or the evaluators.

Leonardo Melosi, Hiroshi Morita, Anna Rogantini Picco and Francesco Zanetti

Announcing a large fiscal stimulus may signal the government’s pessimism about the severity of a recession to the private sector, impairing the stabilizing effects of the policy. Using a theoretical model, we show that these signaling effects occur when the stimulus exceeds expectations and are more noticeable during periods of high economic uncertainty. Analysis of a new dataset of daily stock prices and fiscal news in Japan supports these predictions. We introduce a method to identify fiscal news with different degrees of signaling effects and find that such effects weaken or, in extreme cases, even completely undermine the stabilizing impact of fiscal policy.

Nicolas Bottan & Dan Bernhardt

This paper studies the impact of relative assessment on performance using a quasiexperiment: club-level swimming competitions in the US. By exploiting the age group structure, where swimmers are assessed against peers within their age group and experience a significant shift in relative standing upon aging up, we identify the causal effects of being assessed against better-performing peers. Using a regression discontinuity design, we find that swimmers, on average, swim significantly slower after aging up. This effect is similar across genders and is most pronounced among swimmers in the middle and top of the ability distribution, while those in the bottom third show no significant change. Our findings highlight the importance of considering the psychological impacts of relative assessment in competitive environments.

Devesh Rustagi

Does self-governance, a hallmark of democratic societies, foster norms of generalized cooperation? Does this effect persist, and if so, why? I investigate these questions using a natural experiment in Switzerland. In the middle-ages, the absence of an heir resulted in the extinction of a prominent noble dynasty. As a result, some Swiss municipalities became self-governing, whereas the others remained under feudalism for another 600 years. Evidence from a behavioral experiment, World Values Survey, and Swiss Household Panel consistently shows that individuals from historically self-governing municipalities exhibit stronger norms of cooperation today. Referenda data on voter-turnout allow me to trace these effects on individually costly and socially beneficial actions for over 150 years. Furthermore, norms of cooperation map into prosocial behaviors like charitable giving and environmental protection. Uniquely, Switzerland tracks every family’s place of origin in registration data, which I use to demonstrate persistence from cultural transmission in a context of historically low migration.

Arthur Blouin, Anandi Mani, Sharun W. Mukand and Daniel Sgroi

Can inequality in rewards result in an erosion in broad-based support for meritocratic norms? We hypothesize that unequal rewards between the successful and the rest, drives a cognitive gap in their meritocratic beliefs, and hence their social preferences for redistribution. Two separate experiments (one in the UK and the other in the USA) show that the elite develop and maintain “meritocratic bias” in the redistributive taxes they propose, even when not applied to their own income: lower taxes on the rich and fewer transfers to the poor, including those who failed despite high effort. These social preferences at least partially reflect a self-serving meritocratic illusion that their own high income was deserved. A Wason Card task confirms that individuals maintain their illusion of being meritocratic, by not expending cognitive effort to process information that may undermine their self-image even when incentivized to do otherwise.

Thiemo Fetzer, Jacob Edenhofer and Prashant Garg

Support for right-wing populist parties is characterised by considerable regional heterogeneity and especially concentrated in regions that have experienced economic decline. It remains unclear, however, whether the spatial externalities of local decline, including homelessness and crime, boost support for populist parties, even among those not directly affected by such decline. In this paper, we contribute to filling this gap in two ways. First, we gather novel data on a particularly visible form of local decline, high-street vacancies, that comprise 83,000 premises in England and Wales. Second, we investigate the influence of local decline on support for the right-wing populist UK Independence Party (UKIP) between 2009 and 2019. We find a significant positive association between high-street vacancy rates and UKIP support. These results enhance our understanding of how changes in the lived environment shape political preferences and behaviour, particularly in relation to right-wing populism.

Hyungmin Park & Francesco Squintani

We study the choice of multiple advisors, balancing political alignment, competence, and diverse perspectives. An imperfectly informed leader can consult one or two advisors. One has views closely aligned with the leader’s, but his information is imprecise or correlated with the leaders own. The other is more biased but has independent or more precise information. We identify a trade-off between consulting the more aligned or the better informed expert, even when this entails small costs. Subtle comparative statics emerge : When the leader consults both advisors, increasing the bias of the more biased expert may result in the dismissal of the other advisor. The leader may opt to delegate consulting and decision-making, but only to the advisor who collects superior information in equilibrium. We then study the uncertain trade-off case where the most informed advisor is not necessarily also more biased. We find that reducing the probability that the better-informed expert is more biased may lead to hiring also the other advisor. The leader may delegate to the advisor with uncertain bias, although he is more biased in expectation, because he more easily aggregates information in equilibrium.

Sonia R. Bhalotra, David J. Deming, Farah Said, Joseph Vecci, Ben Weidmann, Achyuta Adhvaryu Anant Nyshadham & Jorge Tamayo

This paper introduces and validates a novel approach to measuring management skills. In a large pre-registered lab experiment we causally identify managerial contributions by randomly assigning managers to multiple teams and controlling for differences in individual skill. We find that manager contributions matter greatly for team success, and that people who want to be in charge perform worse than randomly assigned managers. Managerial performance is strongly predicted by economic decision-making skill, but not by demographic characteristics. LinkedIn data show that participants who succeed in the lab are substantially more likely to receive real-world promotions. We also measure the skills of store managers in a large retail firm and find that they predict store sales and other correlates of productivity, which aligns with our experimental results. A one standard deviation increase in manager quality increases annual per-store sales by $4.1 million USD (25% increase). Selecting managers on skills rather than demographic characteristics or the desire to lead could substantially improve organizational performance.

Adam Di Lizia

How does social influence affect consumer ratings? Using a dataset from the popular Steam gaming platform I investigate how quality judgements depend on pre-existing consumer assessments. In 2019, Steam introduced a new review system which decreased the exposure of users to previous ratings. Firstly, I find that user ratings are dependent on average ratings. A 10 percent increase in average rating increases the probability a review is positive by 5.4% before the policy change, but only by 2.8% after. The result is not due to selection, and is robust to a wide range of alternative specifications. Secondly, the effect is heavily asymmetric: individual reviewers are more negative when exposed to a lower average rating, but do not respond to a higher one. This negativity compounds and inflates the gap between lower rated and higher rated games. Overall, these social influence effects are driven by less experienced users on the platform. Finally, using estimates of owner data, I run a structural model of game choice. A 1% increase in rating is equivalent to a 2.5 dollar price reduction. This suggests social influence has large implications for buyers and sellers.

Gabriele Guaitoli & Roberto Pancrazi

The widening income gap between older and younger individuals is a key topic in political and academic discussions. Research often focuses on labor earnings, neglecting other income sources and cross-country comparisons. This paper fills these gaps by analyzing disposable income trends in 2004-2018 across 32 countries using the Luxembourg Income Study Database. Key findings: (1) The age-income gap has increased in richer countries but decreased in poorer ones; (2) Higher employment rates among older individuals drive this disparity in richer countries; (3) Increased female labor market participation mildly affected the employment margin, while rising education and later retirement did not.

Amira Elasra

This paper investigates the association between sets of inputs and the educational outcomes of English adolescents. By linking the Longitudinal Study of Young People in England and Ofsted data, the paper employs the Context-Input-Process-Outcome model to compare the correlation of students and school inputs with their cognitive and non-cognitive outcomes. Using Nonlinear Canonical Correlation Analysis, the paper compares the characteristics of the high achievers to those of the low achievers revealing consistency with current findings in the literature. The results reveal that student inputs exert a greater influence than school inputs in revealing these characteristics. Specifically, unlike low achievers high achievers tend to exhibit positive attitudes toward school, benefit from supportive home learning environments, express greater eagerness to pursue university education, and belong to higher socio-economic backgrounds.

Dan Bernhardt & Shaoting Pi

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.

Devesh Rustagi

Does markets exposure foster or erode civic values and rules necessary to constrain opportunistic behavior? Using a natural experiment on market location from Ethiopia, I compare individuals who are from the same clan and attend the same market but vary in their exposure to that market. I find a positive effect of market exposure on civic values and rule formation. This result arises because individuals trade primarily in livestock, which is prone to cooperation problem from asymmetric information and weak state capacity. I use vignette studies to show that societies develop different types of exchange structures to mitigate this problem, which then shapes civic values and rules. In societies far from markets, there is no need for civic values and rules, as individuals rarely attend markets and sell livestock eponymously within their social network. In societies near markets, ephemeral and impersonal nature of market exchange creates a demand for civic values and community sanctioning as lubricants to conclude exchange, otherwise individuals end up losing gains from trade. Exposure to markets without asymmetric information has no effect on civic values and rules, suggesting that prosperity and contact hypothesis are not the channels.

Thiemo Fetzer Oliver Vanden Eynde Austin L Wright

Managing military operations across and between teams of partner nations remains a first-order challenge to security and development during conflict. NATO, under the umbrella of the International Security Assistance Force (ISAF), brought together troops from 28 countries to help enhance security provision in Afghanistan. ISAF units were given responsibility for specific operational units. The assignment of responsibilities to different national armed forces could lead to coordination problems. We explore whether the provision of security is affected by horizontal frictions (when different countries are responsible for different sides of borders) or vertical frictions (when different countries control different levels of the operational hierarchy). We find that both horizontal frictions and vertical frictions reduce military support activities, including aid projects. They are also associated with higher levels of insurgent violence. These findings indicate that misalignment between units within military organizations can undermine the effectiveness of security and development interventions during war, with broader implications for managing complex teams under risk.

Hanno Kase, Leonardo Melosi & Matthias Rottner

We leverage recent advancements in machine learning to develop an integrated method to solve globally and estimate models featuring agent heterogeneity, nonlinear constraints, and aggregate uncertainty. Using simulated data, we show that the proposed method accurately estimates the parameters of a nonlinear Heterogeneous Agent New Keynesian (HANK) model with a zero lower bound (ZLB) constraint. We further apply our method to estimate this HANK model using U.S. data. In the estimated model, the interaction between the ZLB constraint and idiosyncratic income risks emerges as a key source of aggregate output volatility.

Michael Waterson & Olga Wojciechowska

We examine bidders’ behaviour in auction sales of the iPhone4 on eBay in the context of a significant shortage of the product at listed price, leading to achieved prices significantly above the posted price, on average. We examine the behaviour of sellers then test the direct prediction of the successive auctions model that bidders increase their bids over successive auctions and are influenced by the effects of information gained from previous auctions, finding that bidders indeed react both to their direct experience and to experience gained from studying previous auctions. In addition, the results are suggestive of bidders being reluctant to reveal their true valuation of the product initially but that they do so only over time. Our results are novel in being able to track individual bidders’ behaviour rather than simply auction outcomes.

Marcus Miller

As the world experiences a fourth industrial revolution - in Information Technology - we look back at how things turned out in the first Industrial Revolution, which began when Adam Smith was writing The Wealth of Nations. For the historical record, we draw on the recent study of Power and Progress by Daron Acemoglu and Simon Johnson, who describe how the benefits of innovation were – or were not - spread across society in Britain at that time. This paper focuses on the case of India under colonial rule, however, where two themes emerge. First, how the transfer of technology under the control of a private company – based in London and granted monopoly powers by the British government - was enough to stymie the ‘virtuous spiral of Smithian growth’ for a century or more. Second, how two centuries of colonial control also deprived the indigenous population of what Amartya Sen has claimed is the key insurance against famine - namely democratic accountability. The paper end with brief remarks on how industrial policy in India of today could help spread the benefits of the current IT revolution.

See-Yu Chan

What contributed to the decline in employment-to-employment (EE) transition rate in the UK in recent decades? This paper empirically examines potential channels that caused the sluggish EE mobility from 2000-2019. First, I break down the observed fall in EE mobility relative to unemployed-to-employment (UE) transition into changes in relative search intensity and worker’s acceptance rate. I find the vast majority of the persistent decline after 2010 was due to fall in job acceptance. Second, I estimate a dynamic job ladder model using UK survey data to examine the relative importance of changes in employment and job offer distribution in reducing job acceptance. Results reveal that the falling job acceptance in the 2000s was attributed to workers moving up the job ladder; while acceptance remained low in the 2010s as a result of deterioration in offer qualities. Counterfactual exercise shows that if the attractiveness of poaching offers did not deteriorate after 2010, the EE mobility would have returned to levels in early 2000s. Finally, I test the contribution of composition changes to the fall in EE rate by implementing a between-within decomposition using a structural framework, which accounts for both worker heterogeneity and sectoral compositions. Results rule out demographic changes or structural transformation as main drivers of the fall in EE rates.

Immanuel Feld & Thiemo Fetzer

Climate action requires significant public- and private sector investment to achieve meaningful reductions in carbon emissions. This paper documents that large-scale austerity, coupled with barriers to flows of data and a lack of (digital) skills in (local) government, may have been a significant barrier to delivering climate action in the form of retrofitting. Decomposing heterogeneity in estimated treatment effects of a large-scale energy efficiency savings program that was rolled out through a regression discontinuity design in the early 2010s, we find that both the extent of austerity-induced local budget cuts and poor digital connectivity – may be responsible for up to 30% fewer retrofit installations that counterfactually would have taken place had it not been for austerity

Eleonora Alabrese & Thiemo Fetzer

Do opinion polls sway turnout and shape political competition in majoritarian systems? Can they strengthen the persistence of safe seats? Analysing national opinion polls during UK general elections and the perceived safeness of constituencies, we find that pre-election polls significantly affect voter turnout. Non-competitive elections predicted by national polls suppress turnout, especially in areas with low perceived electoral competition. This reinforces the advantage of trailing parties in their strongholds, potentially fuelling party demand for safe seats that may give rise to demands for gerrymandering. This can exacerbate spatial polarization of the electoral landscape, with implications for governance regarding opinion polling.

Carlo Perroni, Kimberley Scharf, Sarah Smith, Oleksandr Talavera & Linh Vi

Combining longitudinal postcode-level data on charitable donations made through a UK giving portal with publicly available data on local crime and neighborhood characteristics, we study the relationship between local crime and local residents’ charitable giving and we investigate the possible mechanisms underlying this relationship. An increase in local crime corresponds to a sizeable increase in the overall size of unscheduled charitable donations. This effect is mainly driven by the responses of female and gender unclassified donors. Donation responses also reflect postcode variation in socio-economic characteristics, levels of mental health, and political leanings, but mainly so for female and gender-unidentified donors.

Margot Belguise

Politicians often use red herrings to distract voters from scandals. When do such red herrings succeed? I develop a model in which an incumbent runs for re-election and potentially faces a scandal. Some incumbents enjoy telling “tales” (attention-grabbing stories) while others use tales to distract voters from the scandal. Multiple equilibria can arise: one with a norm of tale-telling in which red herrings succeed and another with a norm against tale-telling in which they fail. Increased media attention to tales has a nonmonotonic effect, facilitating red herrings at low attention levels, but serving a disciplinary function at high levels.

Mark Dincecco, James Fenske, Bishnupriya Gupta & Anil Menon

We study the relationship between exposure to historical conflict involving heavy weaponry and male-favoring gender norms. We argue that the physical nature of such conflict produced cultural norms favoring males and male offspring. We focus on spatial variation in gender norms across India, a dynamic developing economy in which gender inequality persists. We show robust evidence that areas with high exposure to pre-colonial conflict are significantly more likely to exhibit male favoring gender norms as measured by male-biased sex ratios and crimes against women. We document how conflict-related gender norms have been transmitted over time via male-favoring folkloric traditions, the gender identity of temple gods, and male-biased marriage practices, and have been transmitted across space by migrants originally from areas with high conflict exposure.

Lory Barile & Michalis Drouvelis

A substantial body of literature has shown that women shy away from competition against men, which has been put forward as an explanation for the significant gender differences observed in career promotions and salary negotiations. It is therefore of crucial importance to understand the conditions under which the gender gap in competitiveness can be reduced. In this study, we explore the role of priming. Our findings replicate previous work showing that, in the absence of primes, women compete less than men. By contrast, introducing a priming task can eliminate gender disparities in competitiveness, ceteris paribus; however, the effects are stronger when neutral primes are used. We perform sentiment analysis and attribute this to the more negative emotions triggered in the neutral priming condition, making women more competitive. Overall, our results indicate that costless and simple tools such as priming can be adopted by organisations aiming at reducing gender inequalities in the workplace.

Dan Bernhardt, Stefan Krasa & Francesco Squintani

We develop a model of strategic voting in a spatial setting with multiple candidates when voters have both expressive and instrumental concerns. The model endogenizes the strategic coordination of voters, yet is flexible enough to allow the analysis of political platform competition by policy-motivated candidates. We characterize all strategic voting equilibria in a three-candidate setting. Highlighting the utility of our approach, we analyze a setting with two mainstream and a spoiler candidate, showing that the spoiler can gain from entering, even though she has no chance of winning the election and reduces the winning probability of her preferred mainstream candidate

Juliana Carneiro, Martin Foureaux Koppensteiner & Lıvia Menezes

In this paper, we estimate the causal effect of transitory individual-level health shocks on schooling outcomes in Brazil. We focus on dengue fever, which, despite putting half of the world’s population at risk, has received relatively little attention, possibly due to its low mortality. We link individual register data on dengue infections with detailed individual records from the Brazilian school census and use a fixed effects estimation strategy to estimate the effect of dengue infections on grade retention and dropout. We find that dengue infections during the school year have a substantial negative effect on measures of student success, with an increase in grade retention of 3.5 percent and an increase in dropout of 4.6 percent. Using information on monthly attendance from the monitoring system of conditionalities of the Brazilian cash transfer Bolsa Famılia, we provide evidence that infections reduce school attendance.

Thiemo Fetzer, Callum Shaw & Jacob Edenhofer

Formal conceptions of state capacity have mostly focused on indirect measures of state capacity – by, for instance, using the state’s fiscal or extractive capacity as a proxy for its overall capacity. Yet, this input or extractive view of state capacity falls short, especially since cross-country empirical evidence suggests that similar levels of fiscal capacity, measured by tax revenues as a percentage of GDP, can produce starkly different outputs – both in classic economic terms and in broader terms that citizens would recognize as desirable outcomes, including quality of life, health, security, equality of opportunity, and intergenerational mobility. This paper argues that a central step towards addressing these shortcomings of the conventional view is to account for a crucial and largely ignored boundary of the state or dimension of state capacity: its capacity to gather, process, and deploy information in its conduct of fiscal policy. Specifically, we study how the presence or lack of such informational capacity constrains governments in responding to crises, such as the recent energy price shock. Our framework provides the analytical toolkit to examine how the informational boundary of the state shapes the incentives for policymakers to resort to untargeted and/or distortionary policy instruments, as opposed to targeted and non-distortionary ones, in responding to crises. The policy response to the energy crisis following the invasion of Ukraine provides the empirical context upon which we bring this theoretical framework to bear on data, though the latter can be straightforwardly extended to other recent crises.

Jonathan Cave & Stephen Gibson

Impact assessments (IAs) of government regulatory policy proposals set out their expected costs, benefits and risks and who is likely to face those impacts. In the UK, primary legislation can confer powers on Government ministers and other bodies to enact Statutory Instruments (SIs) and other secondary legislation. Because SIs have the same effect as Acts of Parliament, but face significantly less scrutiny, there has been a trend to increase the use of this mechanism and to use them for areas of policy or principle, rather than purely administrative procedures. However, the different timing and treatment of primary and secondary legislation has important implications for the assessment of the impacts of the proposed measures in IAs. This paper outlines the rationale for a compound (primary and secondary) approach to introducing legislation, identifies different types of subordination and considers the implications for estimating their expected impacts in an IA - particularly when the assessment of the secondary measure happens after some of the uncertainty related to the possible outcomes of the primary measure has been resolved and this can be taken into account in the secondary decision(s). It points out the limitations of the conventional NPV-based approach to assessing the impacts of compound measures and proposes the use of a real options approach to IAs to address this concern. In particular it suggests that the real options approach should be used in cases where there are; uncertain outcomes, different possible timings, irreversible policy decisions and distortions due to the use of standard discount rates. Primary legislation creates the opportunity but not the obligation to pursue secondary measures and should be assessed taking these future options into account.

Hyungmin Park

I investigate the motives behind economic growth under a dictatorship, exploring the tradeoff between pursuing higher future gains, which come with growing threats from the demand for democracy from the emerging middle class, and accepting lower gains for a relatively more stable regime. I propose a model where a dictator invests and acquires a rent, citizens educate their children for skilled jobs, and these children adopt democratic values through education. I find that a dictator invests in an underdeveloped economy for future gains. As the economy matures, investment decreases because more citizens get democratic values from higher education. Democracy follows an opposite investment trend: little investment is made when the economy is underdeveloped, but more investment is made as it develops. The analysis is generalised to cases where the dictator is legitimised by higher economic growth than in democracies, and where the dictator oppresses the middle class through high taxation.

Natalie Chen, Dennis Novy, Carlo Perroni, and Horng Chern Wong

Using firm-level data from France, we document that the shift of economic activity from manufacturing to services over the last few decades has been urban-biased : structural change has been more pronounced in areas with higher population density. This bias can be accounted for by the location choices of large services firms that sort into big cities and large manufacturing firms that increasingly locate in suburban and rural areas. Motivated by these findings, we estimate a structural model of city formation with heterogeneous firms and international trade. We find that agglomeration economies have strengthened for services but weakened for manufacturing. This divergence is a key driver of the urban bias but it dampens aggregate structural change. Rising manufacturing productivity and falling international trade costs further contribute to the growth of large services firms in the densest urban areas, boosting services productivity and services exports, but also land prices.

Timothy Besley, Thiemo Fetzer & Hannes Mueller

This paper estimates the size of the media multiplier, an easily generalizable model-based measure of how far media coverage magnifies the economic response to shocks. We combine monthly aggregated and anonymized credit card activity data from 114 card issuing countries in 5 destination countries with a large corpus of news coverage in issuing countries reporting on violent events in the destinations. To define and quantify the media multiplier we estimate a model in which latent beliefs, shaped by either events or news coverage, drive card activity. According to the model, media coverage can more than triple the economic impact of an event. We document, through our model, that this effect is highly heterogenous and depends on the broader media representation of countries in each others news. We speculate about the role of the media in driving international travel patterns an.

Thiemo Fetzer, Pedro CL Souza, Oliver Vanden Eynde, Austin L. Wright

How domestic constituents respond to signals of weakness in foreign wars remains an important question in international relations. In this paper, we study the impact of battlefield casualties and media coverage on public demand for war termination. To identify the effect of troop fatalities, we leverage the otherwise exogenous timing of survey collection across 26,776 respondents from nine members of the International Security Assistance Force (ISAF) in Afghanistan. Quasi-experimental evidence demonstrates that battlefield casualties increase coverage of the Afghan conflict and public demand for withdrawal, with heterogeneous effects consistent with an original theoretical argument. Evidence from a survey experiment replicates the main results. To shed light on the media mechanism, we leverage a news pressure design and find that major sporting matches occurring around the time of battlefield casualties drive down subsequent coverage, and significantly weaken the effect of casualties on support for war termination. These results highlight the crucial role that media play in shaping public support for foreign military interventions.

Michael Waterson

This paper analyses the consumer impacts of arbitrage focusing on the significant role of internet platforms as monopolistic arbitrageurs between essentially competitive sub-markets that have not been previously linked. As arbitrageurs, there is the potential for them to create consumer benefit, but for a series of reasons, we show that consumer welfare may not be enhanced and that particular sections of the community may be disadvantaged by their actions.