Knowledge that Transforms

A principal decides which party deserves a prize. Only the parties observe the state that determines who is deserving. The principal gives each party a text describing the conditions under which that party deserves the prize and asks each to report the state. The parties are nonstrategic. Each activates a known cheating procedure whose outcome depends on the state and on the text. Implementation is achieved if, whenever the parties disagree, the liar is identified by the “one-way cheating principle”: The truthful party is the unique party who could not have produced his story had the rival's story been true.

We analyze consumer surplus when a monopolist can adjust both prices and product qualities across segments, engaging in secondand third-degree price discrimination simultaneously. We characterize the consumer-optimal segmentation and show that it has a striking structure: Consumers with the same value receive the same quality in every segment, though prices differ. Under mild conditions, any segmentation harms consumers if and only if demand is sufficiently more elastic than supply. Hence, potential benefits for consumers depend critically on demand and supply elasticities. These findings have implications for regulatory policy regarding price discrimination and market segmentation.

Americans rarely marry outside their race or class group, a pattern with well-documented implications for inequality and intergenerational mobility. Limited exposure may partly explain these low intergroup marriage rates. We instrument for exposure using variation in childhood neighborhoods based on whether other race and class groups had more opposite-sex children of similar age. Exposure increases interclass (high- and low-parent income) marriage but has no detectable effect on interracial (White and Black) marriage. A spatial marriage model predicts that residential segregation—one of many forms of exposure—accounts for more than one-third of marital sorting by class but less than 5 percent by race.

Using administrative data from Scandinavian countries, we provide evidence on international migration responses to wealth taxes and evaluate their aggregate economic implications. We find significant migration responses among the wealthy: A 1 percentage point increase in the top wealth tax rate decreases the stock of wealthy taxpayers by about 2 percent. A large fraction of the wealthy are business owners, and their businesses are negatively affected by owner out-migration. The aggregate effects are nevertheless modest: The migration responses to a 1 percentage point increase in the top wealth tax rate reduce employment by 0.02 percent, investments by 0.07 percent, and value added by 0.10 percent.

This paper develops a dynamic model of the attention economy featuring two interlinked markets: a product market, where consumers have limited awareness of firms, and an attention market, where platforms attract attention by investing in free services (e.g., social media, streaming, podcasts) and sell targeted ads using data on consumer preferences. The model provides a tractable framework in which platform investment, ad-driven discovery, product demand, and ad revenue are jointly determined. The effects of data and interoperability policies can reverse over time, platform quality may be inefficiently high or low, and the rise of data-rich digital advertising can coincide with a declining ad revenue-to-GDP ratio.

We establish a link between labor scarcity and the adoption of laborsaving technology in industrializing England. During the Napoleonic Wars, more than 10 percent of the male population served in the armed forces. Where recruitment was heavy, more machines economizing on labor were adopted. Naval recruitment, instrumented by warships' coastal access, provides exogenous variation in labor scarcity and suggests that the link between labor shortages and adoption is causal. Where mechanical skills were abundant, the impact of labor scarcity on adoption appears to be larger.

What are the implications of unequal access to innovation careers for the direction of innovation and inequality? Leveraging novel linked datasets in the United States and Finland, we document that innovators create products more likely to be purchased by consumers like them in terms of gender, socioeconomic status, and age. Homophily exists both within narrow product categories and across industries and has been stable in recent decades. Incorporating this “social push” channel into a growth model, we estimate that unequal access to innovation careers has a large effect on cost of living inequality and long-run growth.

We study racial disparities in promotions in a setting in which promotions are formulaic: the US patent office. Using detailed administrative data that allow us to observe who is eligible for promotion when, we document that Black patent examiners experience delays in promotions they are entitled to, slowing their climb to the top of the career ladder by a year and reducing career earnings by 2.5 percent. Institutional features rule out statistical discrimination with accurate priors. Slow promotions even under Black supervisors argue against taste-based animus. Instead, the patterns fit models of belief-based discrimination.

Exposure to better peers in the workplace can influence career trajectories through two opposing channels: positively, via knowledge spillovers, and negatively, through competition for advancement. We disentangle these effects by studying untrained labor market entrants and distinguishing between coworkers in the same occupation with whom they are likely to compete versus those with whom they are unlikely to compete. We find robust evidence of persistent knowledge spillovers but also identify countervailing competition effects of comparable magnitude. Both effects are more pronounced for men than for women.

We study the relationship between corporate income taxation and carbon dioxide (CO 2 ) emissions in the United States. We show CO 2 -intensive firms benefit more from the tax advantage of debt and pay lower income taxes on their capital income. Building on these new facts, we provide evidence that a cut in the corporate income tax rate leads to a larger expansion of clean firms. We develop a multisector general equilibrium model that accounts for our evidence and quantify the impact of corporate tax reforms on aggregate emissions. A policy that eliminates the tax advantage of debt could reduce aggregate emissions without affecting GDP.