Knowledge that Transforms

We study decisions that involve choosing between different numbers of options under time pressure using eye-tracking to monitor the search process of the subjects. We find that subjects are quite adept at optimizing within the set of items that they see, that the initial search process is random in value, that subjects use a stopping rule to terminate the search process that combines features of optimal search and satisficing, and that subjects search more often in certain focal regions of the display, which leads to choice biases.

A variety of identification strategies have a common cell structure, in which the observed heterogeneity of the regression defines a partition of the sample into cells. Typically in the presence of exogenous covariates that define the cell structure, identification assumptions are imposed conditional on each value of the covariate, or cell by cell. Treatment effects across cells are typically heterogeneous. Researchers might be interested in unconditional parameters which are the averaged treatment effects across the cells. Alternatively, treatment effects can be estimated more efficiently if researchers are willing to impose additional parametric and semiparametric structures on the heterogeneous treatment effects across cells.

We study the long-run relation between money (inflation or interest rates) and unemployment. We document positive relationships between these variables at low frequencies. We develop a framework where money and unemployment are modeled using explicit microfoundations, providing a unified theory to analyze labor and goods markets. We calibrate the model and ask how monetary factors account for labor market behavior. We can account for a sizable fraction of the increase in unemployment rates during the 1970s. We show how it matters whether one uses monetary theory based on the search-and-bargaining approach or on an ad hoc cash-in-advance constraint.

Workplace sexual harassment is illegal, but many workers report that they have been sexually harassed. Exposure to the risk of sexual harassment may decrease productivity, which would reduce wages. Alternatively, workers may receive a compensating differential for exposure to sexual harassment, which would increase wages. Data on claims of sexual harassment filed with the Equal Employment Opportunity Commission are used to calculate the first measures of sexual harassment risks by industry, age group, and sex. Female workers face far higher sexual harassment risks. On balance, workers receive a compensating wage differential for exposure to the risk of sexual harassment.

This paper documents and decomposes the test score gap between Roma and non-Roma 8th graders in Hungary in 2006. Our data connect national standardized test scores to an individual panel survey with detailed data on ethnicity and family background. The test score gap is approximately one standard deviation for both reading and mathematics, which is similar to the gap between African-American and White students of the same age group in the US in the 1980s. After accounting for on health, parenting, school fixed effects and family background, the gap disappears in reading and drops to 0.15 standard deviation in mathematics.

Credit constraints linking debt to market-determined prices embody a systemic credit externality that drives a wedge between competitive and constrained socially optimal equilibria, inducing private agents to overborrow. This externality arises because private agents fail to internalize the financial amplification effects of carrying a large amount of debt when credit constraints bind. We conduct a quantitative analysis of this externality in a two-sector dynamic stochastic general equilibrium (DSGE) model of a small open economy calibrated to emerging markets. Raising the cost of borrowing during tranquil times restores constrained efficiency and significantly reduces the incidence and severity of financial crises. JEL: E13, E32, E44, F41, G01

This paper examines the central hypothesis of the influential Malthusian theory, according to which improvements in the technological environment during the pre-industrial era had generated only temporary gains in income per capita, eventually leading to a larger, but not significantly richer, population. Exploiting exogenous sources of cross-country variations in land productivity and the level of technological advancement the analysis demonstrates that, in accordance with the theory, technological superiority and higher land productivity had significant positive effects on population density but insignificant effects on the standard of living, during the time period 1-1500 CE.

We present new estimates of home ownership for black and white households from 1870 to 2007. Black ownership increased by 46 percentage points, whereas white ownership increased by 20 points. Remarkably, 25 of the 26 point narrowing occurred between 1870 and 1910. Part of this early convergence is accounted for by falling white ownership due to movement out of agriculture, but most is accounted for by post-emancipation gains among blacks. After 1910, white and black households increased ownership, but the racial gap barely changed. We discuss the influence of residential segregation, public policy, and permanent income on the ownership gap.

Because wines are aged for several years before they are released, newly hired winemakers arrive as wines made by their predecessors enter the market. An analysis of winemaker hiring events reveals that wines released right after a new winemaker's arrival from a prominent competitor are priced significantly higher than corresponding wines released in the preceding year. However, the wines released before and after the hiring event are indistinguishable in terms of quality. These findings isolate a “purely symbolic” effect of employee mobility, which affirm sociological accounts of markets—under conditions of uncertainty, inter-organizational affiliations condition producers' returns to quality demonstrations.

A common view is that cross-border vertical linkages played a key role in the 2008–2009 collapse of global trade. This paper presents two accounting results from a global input-output framework that shed light on this channel. We feed in observed changes in final demand and find that trade in final goods fell by twice as much as trade in intermediate goods. Nevertheless, intermediate goods account for more than two-fifths of the trade collapse. We also find that vertical specialization trade fell 13 percent, while value-added trade fell by 10 percent, because declines in demand were largest in highly vertically-specialized sectors.