Knowledge that Transforms

US federal transfers to individuals are large, countercyclical, vary geographically, and are often credited with helping to stabilize regional economies. This paper estimates the short-run effects of these transfers using plausibly exogenous regional variation in temporary stimulus payments and permanent Social Security benefit increases. States that received larger transfers tended to grow faster contemporaneously, with a multiplier of around 1.5 for permanent transfers and 1/3 for temporary transfers. Results are broadly consistent with an open-economy New Keynesian model. At business cycle frequencies, cross-region transfer multipliers are not large, suggesting only modest gains in regional stabilization from US federal automatic stabilizers. (JEL E12, E32, E62, H23, H55, R12)

Does the consumption of ideologically congruent news on social media exacerbate polarization? I estimate the effects of social media news exposure by conducting a large field experiment randomly offering participants subscriptions to conservative or liberal news outlets on Facebook. I collect data on the causal chain of media effects: subscriptions to outlets, exposure to news on Facebook, visits to online news sites, and sharing of posts, as well as changes in political opinions and attitudes. Four main findings emerge. First, random variation in exposure to news on social media substantially affects the slant of news sites that individuals visit. Second, exposure to counter-attitudinal news decreases negative attitudes toward the opposing political party. Third, in contrast to the effect on attitudes, I find no evidence that the political leanings of news outlets affect political opinions. Fourth, Facebook’s algorithm is less likely to supply individuals with posts from counter-attitudinal outlets, conditional on individuals subscribing to them. Together, the results suggest that social media algorithms may limit exposure to counter-attitudinal news and thus increase polarization. (JEL C93, D72, L82)

School policies that cause a large demand shift between public and private schooling may cause some private schools to enter or exit the market. We study how the policy effects differ under a fixed versus changing market structure in the context of a public school funding reform in New York City. We find evidence of a reduction in private schools in response to the reform. Using a model of demand for and supply of private schooling, we estimate that 20 percent of the reform’s effect on school enrollments came from increased private school exit and reduced private school entry. (JEL H75, I21, I22, I28)

Can targeting information to network-central farmers induce more adoption of a new agricultural technology? By combining social network data and a field experiment in 200 villages in Malawi, we find that targeting central farmers is important to spur the diffusion process. We also provide evidence of one explanation for why centrality matters: a diffusion process governed by complex contagion. Our results are consistent with a model in which many farmers need to learn from multiple people before they adopt themselves. This means that without proper targeting of information, the diffusion process can stall and technology adoption remains perpetually low. (JEL O13, O18, O33, Q12, Q16)

I study the aggregate implications of micro-level lumpy investment in a model consistent with the empirical dynamics of the real interest rate. The elasticity of aggregate investment with respect to shocks is procyclical because more firms are likely to make an extensive margin investment in expansions than in recessions. Matching the dynamics of the real interest rate is key to generating this result because it disciplines the interest-elasticity of investment and avoids counterfactual behavior of the model that would otherwise eliminate most of the procyclical responsiveness. Therefore, data on interest rates place important discipline in aggregating micro-level investment behavior. (JEL D25, E13, E22, E23, E43, G31, H25)

About one-half of all startups fail within five years, and those that survive grow at vastly different speeds. Using Census microdata, we estimate that most of these differences are determined by ex ante heterogeneity rather than persistent ex post shocks. Embedding such heterogeneity in a firm dynamics model shows that the presence of ex ante heterogeneity (i) is a key determinant of the firm size distribution and firm dynamics, (ii) can strongly affect the macroeconomic effects of firm-level frictions, and (iii) helps understand the recently documented decline in business dynamism by showing a disappearance of high-growth startups (“gazelles”) since the mid-1980s. (JEL D22, D24, E24, J23, L11, M13)

School choice systems aspire to delink residential location and school assignments by allowing children to apply to schools outside of their neighborhood. However, choice programs also affect incentives to live in certain neighborhoods, and this feedback may undermine the goals of choice. We investigate this possibility by developing a model of public school and residential choice. School choice narrows the range between the highest and lowest quality schools compared to neighborhood assignment rules, and these changes in school quality are capitalized into equilibrium housing prices. This compressed distribution generates an ends-against-the-middle trade-off with school choice compared to neighborhood assignment. Paradoxically, even when choice results in improvement in the lowest-performing schools, the lowest type residents need not benefit. (JEL H75, I21, I28, R23, R31)

We estimate the degree to which individual police officers practice racial discrimination. Using a bunching estimation design and data from the Florida Highway Patrol, we show that minorities are less likely to receive a discount on their speeding tickets than White drivers. Disaggregating this difference to the individual police officer, we estimate that 42 percent of officers practice discrimination. We then apply our officer- level discrimination measures to various policy-relevant questions in the literature. In particular, reassigning officers across locations based on their lenience can effectively reduce the aggregate disparity in treatment (JEL H76, J15, K42)

We develop an equivalence between the equilibrium effects of incomplete information and those of two behavioral distortions: myopia, or extra discounting of the future; and anchoring of current behavior to past behavior, as in models with habit persistence or adjustment costs. We show how these distortions depend on higher-order beliefs and GE mechanisms, and how they can be disciplined by evidence on expectations. We finally illustrate the use of our toolbox with a quantitative application in the context of inflation, a bridge to the HANK literature, and an extension to networks. (JEL C53, D83, D85, E12, E31, E37)

Between 1921 and 1956, French colonial governments organized medical campaigns to treat and prevent sleeping sickness. Villagers were forcibly examined and injected with medications with severe, sometimes fatal, side effects. We digitized 30 years of archival records to document the locations of campaign visits at a granular geographic level for five central African countries. We find that greater campaign exposure reduces vaccination rates and trust in medicine, as measured by willingness to consent to a blood test. We examine relevance for present-day health initiatives; World Bank projects in the health sector are less successful in areas with greater exposure. (JEL F54, I12, I15, I18, N37, N47, Z13)