Knowledge that Transforms

Item-level transactions data yield cost-of-living indices that can account for quality change and consumer substitution. Transactions data require confronting the rapid turnover of items because prices of new and existing products are interrelated in equilibrium. This paper evaluates multiple approaches to measuring quality change at scale. It shows that a hedonic superlative approach—using econometrics or machine learning for hedonic estimation combined with index formulas that require simultaneous observation of item-level price and expenditure—yields improved measures of the cost of living. Accounting for ubiquitous quality change and for consumer substitution yields lower measures of inflation than traditional, official methods. (JEL C43, C45, E31, L15, L81)

We study social preferences in settings where someone who chooses on behalf of others knows how those individuals rank the available options but may lack cardinal information concerning those comparisons. Contrary to majoritarian principles, most people place more weight on preventing least preferred outcomes for others than on enabling most preferred outcomes. Ranks matter both intrinsically and because they provide a basis for inferring cardinal utility. Ordinal aggregation principles are stable across domains and countries with divergent political traditions. Designing attractive social choice mechanisms is challenging in practice partly because aggregation principles that make manipulation difficult yield outcomes people consider normatively unappealing. (JEL C91, D71, D72)

We use Danish administrative data to examine the effects of parental death on labor market outcomes. Leveraging the timing of sudden, first parental deaths and a matched-control difference-in-differences strategy, we find that men’s earnings decline by 2 percent, while women’s earnings decline by 3 percent following a parental death. Both women and men experience mental health deterioration, leading to increased use of psychological assistance and prescriptions for mental health conditions and opioids. Women with young children experience a comparatively larger earnings decline (around 4 percent) likely due to the loss of informal childcare. (JEL D91, I12, J13, J16, J31)

A common interpretation of Pareto-efficient policies is that, for some cardinal utility representations of preferences, they maximize utilitarian welfare. We show in the context of income taxation that such cardinalizations are often extreme, requiring unbounded curvature of utility with respect to consumption. Taxes can be justified as utilitarian without these extreme cardinalizations if and only if revenues are decreasing and concave in a class of narrowly targeted tax cuts. We reformulate this condition as a sufficient-statistics test. The test fails whenever elasticities of taxable income are too heterogeneous within some income level, as we argue is empirically likely. (JEL D81, H21, H23, H24, J22, J31)

We study how international migrant income prospects affect long-run development in origin areas. We leverage the 1997 Asian Financial Crisis exchange rate shocks in a shift-share identification strategy across Philippine provinces. Initial migrant income shocks are magnified six-fold over time, increasing domestic income, education levels, migrant skills, and high-skilled migration. Remarkably, 74.9 percent of long-run income gains come from domestic rather than migrant income. Trade driven impacts of exchange rate shocks are orthogonal to effects via migrant income. A structural model reveals that 19.7 percent of long-run income gains stem from educational investments. International migration fosters broad economic development in origin communities. (JEL F22, F31, G01, J24, J82, O15, O16)

Digitization reforms have been hailed as an effective way of strengthening state capacity. However, digitization can also fundamentally reshape the organization of bureaucracies. Using a unique administrative dataset on agricultural taxation and surveys of local bureaucrats from Punjab, Pakistan, we show that digitization reforms can have unintended consequences for state capacity. We exploit the staggered rollout of the digitization of land records in Punjab to show that digitization had a negative effect on tax collection. The fall in taxes was not due to a decrease in the tax base. Instead, digitization affected the bureaucrats’ capacity to collect taxes. (JEL D73, H11, H71, O12, O17)

We explore how traders’ equity capitalization influences asset prices in a framework that accounts for market power. In our model, traders with capital constraints engage in transactions in an imperfectly competitive market. We demonstrate that looser capital constraints elevate both asset prices and price impact, the latter diminishing market liquidity. Using Canadian Treasury auction data, we illustrate how to apply our model to quantify these effects. We estimate the shadow costs of capital constraints by leveraging a temporary policy exemption during 2020–2021. We show that while these constraints are only infrequently binding, their relative impact when activated can be sizable. (JEL E63, G12, G14, G23, G41, L13)

We study a canonical collective action game with incomplete information. Individuals attempt to coordinate to achieve a shared goal, while also facing a temptation to free-ride. More similar information can help them coordinate, but it can also exacerbate free-riding. Our main result shows that more similar information facilitates (impedes) achieving the common goal when it is sufficiently challenging (easy). We apply this insight to show why less powerful authoritarian governments may face larger protests if they restrict press freedom, when committee diversity is beneficial in costly voting, and when a more diverse community contributes more to public good provision. (JEL C71, D71, D72, D81, D82, D83, H41)

We develop a simple multilayer network model in which agents allocate effort across layers with heterogeneous structures, subject to an aggregate effort constraint. Incentives are shaped by agents’ network positions within each layer, and equilibrium behavior reflects both within- and cross-layer interactions. We analyze how shocks propagate through the network and characterize optimal targeting interventions. Our results show that effective policy design must account for effort allocation across layers. We also demonstrate that predictions from monolayer models can diverge sharply from those of multilayer models, underscoring the importance of accounting for network complexity in both empirical and policy analyses. (JEL C70, D78, D82, D85, H41, Z13)