Knowledge that Transforms

Despite rising inequality in rich countries, many developing economies have experienced a decline in inequality in recent decades. Brazil is a notable example. From 1995 to 2015, its Gini index decreased from 58 to 48 points. An extensive body of research has investigated a diverse set of explanations for this reduction. This article reviews this literature, using Brazil as a privileged case study to understand the broader phenomenon of inequality decline in many parts of the developing world. We present stylized facts about inequality during this period, focusing on the results of decomposition methods. We then examine research that employs quasi-experiments and structural models to assess mechanisms related to labor supply and demand, trade, technological changes, and institutional factors such as the minimum wage and race and gender discrimination. We end by discussing some unanswered questions. (JEL D31, D63, J22, J23, J31, O15)

Since the 2000s, economists across fields have increasingly used consumer credit reporting data for research. We introduce readers to the economics and institutional details of these data. Using examples from the literature, we provide practical guidance on how to use these data to construct economic measures of borrowing, consumption, credit access, financial distress, and geographic mobility. We explain what credit scores measure and why. We highlight how researchers can access credit reporting data via existing datasets or by creating new datasets, including by linking credit reporting data with surveys and external datasets. ( JEL D10, D40, D82, E21, G21, G28, G51)

Residential segregation is a central factor in explaining socioeconomic gaps across race and ethnicity in the United States. Place of residence directly impacts access to schools, jobs, and health care. There is an ever-evolving literature across the social sciences disciplines documenting the general patterns in residential segregation as well as the causes and consequences of those patterns. This article reviews key parts of that literature. We provide an overview of the measurement of segregation and the general evolution of segregation patterns over time and at different scales. We then review the literatures on both segregation’s determinants and its impact on a range of socioeconomic outcomes. We highlight the potential for new insights to be gained from new approaches to quantifying segregation and new frameworks such as stratification for understanding its complex roots. (JEL D72, I24, I32, J15, R23, R28)

Deep learning provides powerful methods to impute structured information from large-scale, unstructured text and image datasets. For example, economists might wish to detect the presence of economic activity in satellite images or measure the topics or entities mentioned in social media, the congressional record, or firm filings. This review introduces deep neural networks, covering methods such as classifiers, regression models, generative artificial intelligence (AI), and embedding models. Applications include classification, document digitization, record linkage, and methods for data exploration in massive-scale text and image corpora. When suitable methods are used, deep learning models can be cheap to tune and can scale affordably to problems involving millions or billions of data points. The review is accompanied by a regularly updated companion website, EconDL ( https://econdl.github.io/ ), with user-friendly demo notebooks, software resources, and a knowledge base that provides technical details and additional applications. (JEL C38, C45, C88, D83)

Environmental degradation and economic inequality are two of the defining challenges of the twenty-first century. We synthesize conceptual mechanisms that underpin inequality–environment linkages and take stock of the relevant empirical evidence. We propose three channels of interaction. We first describe how environmental benefits vary with household income. Second, we discuss how the cost of environmental policy is distributed across households. Third, we consider how income inequality and redistribution shape environmental outcomes. The three channels determine how both environmental quality and economic inequality matter for policy appraisal. We argue that it is crucial to consider inequality–environment linkages in economic research and policy design, as neither issue can be fully understood in isolation. We close by highlighting future research needs. (JEL D31, D63, H23, Q54, Q56, Q58)

A growing body of work highlights how aggregate shocks shape preferences and beliefs. This review synthesizes findings from sociology, social psychology, and economics to explore the significance of these shocks, how the period in which they are experienced matters, and their lasting effects. It examines economic shocks such as recessions, inflation, and trade shocks, alongside noneconomic shocks like migrations, wars, terrorist attacks, pandemics, and natural disasters. Key conclusions emerge: aggregate shocks influence political preferences, risk attitudes, and institutional trust; experiences during young adulthood have stronger, enduring impacts; and economic shocks generally shift preferences toward the political right, while noneconomic yield more varied outcomes depending on the context. The review also evaluates empirical methodologies, their limitations, and mechanisms underlying these effects. By analyzing how shocks alter societal values and behaviors across generations, this work provides insights into the long-term consequences of major disruptions on individual and collective decision-making. (JEL D72, D81, D83, D91, E32, H23, Z13)

This article provides a comprehensive assessment of the theoretical and empirical literature on structural reforms in advanced economies. Structural reforms matter because they entail profound and systematic changes that affect economic welfare, productivity, growth, unemployment, macroeconomic stability, and income inequality. Here we focus on structural reforms in product, labor, and financial markets. After putting forward a set of stylized facts, we take stock of the literature on each of these three key structural reforms, and then assess their business cycle and political economy implications. We underscore various gaps in the literature and articulate a future research agenda that highlights four main areas: measurement, interactions among reforms, political economy considerations, and the timing of the implementation of reforms. (JEL D40, E23, E24, E25, E32, E44, P11)

This article provides empirical researchers with an introduction and guide to research designs based on variation in judge and examiner tendencies to administer treatments or other interventions. We review the basic theory behind this research design, outline the assumptions under which the design identifies causal effects, describe empirical tests of the conditions for identification, and discuss trade-offs associated with choices researchers must make for estimation. We demonstrate concepts and best practices in an empirical case study that uses an examiner tendency research design to study the effects of pretrial detention. (JEL C21, C26, K14, K41)

Attention is an important resource in the modern economy and plays an increasingly prominent role in economic analysis. We summarize research on attention from both psychology and economics with a particular emphasis on its capacity to explain documented violations of classical economic theory. We also identify promising new directions for research, including attention-based utility, the recent proliferation of attentional externalities introduced by digital technology, the potential impact of artificial intelligence on the economics of attention, and the significant role that boredom, curiosity, and other motivational states play in determining how people allocate attention. (JEL C45, D83, D91, I20)

We review the vast literature on social preferences by assessing what is known about their fundamental properties, their distribution in the broader population, and their consequences for important economic and political behaviors. We provide, in particular, an overview of the empirical characteristics of distributional preferences and how they are affected by merit, luck, and concerns for equality of opportunity. In addition, we discuss the evidence for reciprocity and guilt aversion and assess the empirical relevance of self-image and social image concerns in prosocial behaviors. The overall evidence indicates that a large majority of individuals have some sort of social preferences, while purely self-interested subjects are a minority. We also document converging insights from the lab and the field on the impact of wage inequality on work morale, employees’ resistance to wage cuts, and the role of social preferences for cooperation and collective action, distributive politics, and individuals’ selection into different occupations. (JEL D63, D71, D72, D86, H23, J53)