Knowledge that Transforms

We extend BLP's aggregate discrete-choice model of product differentiation to create more flexibility in the price functional form. We apply a Box-Cox specification, which relaxes the typical unit demand assumption and creates flexibility on demand curvature. The model provides a unifying framework for mixed logit and mixed CES models, while remaining computationally tractable. We provide an illustrative application to the ready-to-eat cereals market. This shows that the cross-sectional relation between price elasticities and average prices per product is more in line with descriptive elasticity patterns, and that substitution between product pairs may be affected to some extent.

Applying a media market boundary approach to individual survey data, I show that political advertising on television increases the probability that viewers who identify with a party will espouse its positions, prefer its candidates, and turn out to vote. This is true no matter which party sponsored the ad, suggesting that an ad consolidates and motivates the sponsor's partisans while simultaneously engendering a countervailing consolidation and mobilization among supporters of the other party. My results are consistent with agents who judge a source's quality by their priors and highlight the importance of targeting supporters.

We examine the mechanisms driving the aggregate and distributional impacts of Universal Basic Income (UBI) through model analysis of various UBI programs and financing schemes. The main adverse effect is the distortionary tax increase to fund UBI, reducing labor force participation. Secondary channels are a decline in demand for self-insurance, depressing aggregate capital, and a positive income effect that further deters labor force participation. Due to these channels, introducing UBI alongside existing social programs reduces output and average welfare. Partially substituting existing programs with UBI mitigates the adverse effects, increases average welfare, but does not deliver a Pareto improvement.

The paper studies nonstationary high-dimensional vector autoregressions of order k, VAR(k). Additional deterministic terms such as trend or seasonality are allowed. The number of time periods, T, and the number of coordinates, N, are assumed to be large and of the same order. Under this regime the first-order asymptotics of the Johansen likelihood ratio (LR), Pillai–Bartlett, and Hotelling–Lawley tests for cointegration are derived: the test statistics converge to nonrandom integrals. For more refined analysis, the paper proposes and analyzes a modification of the Johansen test. The new test for the absence of cointegration converges to the partial sum of the Airy1 point process. Supporting Monte Carlo simulations indicate that the same behavior persists universally in many situations beyond those considered in our theorems. The paper presents empirical implementations of the approach for the analysis of S&P100 stocks and of cryptocurrencies. The latter example has a strong presence of multiple cointegrating relationships, while the results for the former are consistent with the null of no cointegration.

Standard extreme value theory implies that the distribution of the largest observations of a large cross section is well approximated by a parametric model, governed by a location, scale and shape parameter. The extremes of a panel of independent cross sections are all governed by the same parameters as long as the underlying distribution as well as the size of the cross sections are time invariant. We derive inference about these parameters, and tests of the null hypothesis of time invariance, under asymptotics that do not require the number of extremes or the number of time periods to increase. We further apply Hamiltonian Monte Carlo techniques to estimate the path of time-varying parameters. We illustrate the approach in four examples of U.S. data: damages from weather-related disasters, financial returns, city sizes and firm sizes.

We develop a general equilibrium model of international trade that incorporates imperfect factor mobility, product entry, and external returns to scale into a unified framework. The effects from these microeconomic channels can be summarized by two composite elasticities that govern supply and aggregation. We structurally derive export supply and import demand curves, develop a heteroskedastic estimator, and estimate supply, aggregation, and demand elasticities across international product markets. Employing our estimated model, we evaluate the impact of recent US protectionist policies and highlight the importance of our estimates and general equilibrium effects for tariff passthrough rates and cross-industry employment reallocations.

We present new findings about the relationship between marriage and socioeconomic background in the United States in the late 19th and early 20th centuries. Imputing socioeconomic status of family of origin from first names, we document a socioeconomic gradient for women in the probability of marriage and the socioeconomic status of husbands, which widens over this period. Regional divergence in occupational structure explains half of the divergence in the probability of marriage, and most of the increase in marital sorting. Urbanization and the associated improvement in women's labor market opportunities drive most of these differences.

In an individual decision-making experiment, we investigate the impact of Tax Deferred Accounts (TDAs). We design six treatments to study various channels through which TDAs may affect decisions. Across both student and Mturk samples, we consistently find that TDAs significantly increase retirement wealth compared to environments with only one non-tax advantaged, liquid saving account. This increase is primarily explained by the requirement of making retirement savings decisions precede consumption decisions. Educating participants by providing a tax calculator has minimal effects. Our results highlight the effectiveness of TDAs in enhancing retirement preparedness and the significance of the order of consumption/savings decisions.

Using a staggered installation of sanitary pad vending machines across schools in the Indian state of Kerala, we study the impacts of free monthly access to sanitary pads on girls' educational outcomes. We find that the number of dropouts among female students in the 7th-grade decrease by 24 percentage points and the attendance rate increases by 23 percentage points after the treatment. Our results are mainly driven by girls in backward-caste, rural schools, and public schools, supporting the idea that free distribution of sanitary pads alleviates cost of obtaining sanitary pads.

We investigate the fake divorce activities associated with the home-buying restriction policy in China. We find that the policy increased divorce rate (marriage restoration rate) in the treated cities by 0.436 (0.195) permillage point relative to the control cities. This explains a 19.9% increase in the overall national divorce rate, of which at least 45% can be interpreted as fake divorces. Moreover, we find that the main responders to this policy are people who are older, childless, less-educated, and wealthier. Finally, we show that the fraudulent behavior has significant implications for market efficiency, intra- and inter-household wealth inequality, and other consequences.