Can government policies that increase the monopoly power of firms and the militancy of unions increase output? This paper shows that the answer is yes under certain “emergency” conditions. These emergency conditions—zero interest rates and deflation—were satisfied during the Great Depression in the United States. The New Deal, which facilitated monopolies and union militancy, was therefore expansionary in the model presented. This conclusion is contrary to a large previous literature. The main reason for this divergence is that this paper incorporates rigid prices and the zero bound on the short-term interest rate. JEL: E23, E32, E52, E62, J51, N12, N42

The article develops a new theory of pricing to market driven by dynamic frictions of building market shares. Our key innovation is a capital theoretic model of marketing in which relations with customers are valuable. We discipline the introduced friction using data on differences between short-run and long-run price elasticity of international trade flows. We show that the model accounts for several pricing “puzzles” of international macroeconomics.

Innovations to consumer confidence convey incremental information about economic activity far into the future. Does this reflect a causal effect of animal spirits on economic activity, or news about exogenous future productivity received by consumers? Using indirect inference, we study the impulse responses to confidence innovations in conjunction with an appropriately augmented New Keynesian model. While news, animal spirits, and pure noise all contribute to confidence innovations, the relationship between confidence and subsequent activity is almost entirely reflective of the news component. Confidence innovations are well characterized as noisy measures of changes in expected productivity growth over a relatively long horizon.

This paper provides new evidence on the time use and emotional well-being of unemployed individuals in the weeks before and after starting a new job. The major findings are: (1) time spent on home production drops sharply at the time of re-employment, even when controlling for individual fixed effects; (2) time spent on leisure-related activities, which the unemployed find less enjoyable, drops on re-employment, but less so when controlling for individual fixed effects; (3) the unemployed report higher levels of sadness during specific episodes of the day than the employed; and (4) sadness decreases abruptly at the time of re-employment.

It is often suggested that currency unions unduly inhibit the efficient adjustment of real exchange rates. Recently, this has been seen as a key failure of the Eurozone. This paper presents evidence that throws doubt on this conclusion. Our evidence suggests that real exchange rate movement within the Eurozone was at least as compatible with efficient adjustment as the behavior of real exchange rates for the floating rate countries outside the Eurozone. This interpretation is consistent with a model in which nominal exchange rate movements give rise to persistent deviations from the law of one price in traded goods.

Using an instrumental variables strategy, we estimate the causal effect of income on children's math and reading achievement. Our identification derives from the large, nonlinear changes in the Earned Income Tax Credit. The largest of these changes increased family income by as much as 20 percent, or approximately $2,100, between 1993 and 1997. Our baseline estimates imply that a $1,000 increase in income raises combined math and reading test scores by 6 percent of a standard deviation in the short run. Test gains are larger for children from disadvantaged families and robust to a variety of alternative specifications.

Organ donations from deceased donors provide the majority of transplanted organs in the United States, and one deceased donor can save numerous lives by providing multiple organs. Nevertheless, most Americans are not registered organ donors despite the relative ease of becoming one. We study in the laboratory an experimental game modeled on the decision to register as an organ donor and investigate how changes in the management of organ waiting lists might impact donations. We find that an organ allocation policy giving priority on waiting lists to those who previously registered as donors has a significant positive impact on registration.

We implement an empirical test for selection into health insurance using changes in coverage induced by the introduction of mandated health insurance in Massachusetts. Our test examines changes in the cost of the newly insured relative to those who were insured prior to the reform. We find that counties with larger increases in insurance coverage over the reform period face the smallest increase in average hospital costs for the insured population, consistent with adverse selection into insurance before the reform. Additional results, incorporating cross-state variation and data on health measures, provide further evidence for adverse selection.