Knowledge that Transforms

Invariably, across a cross-section of countries and time periods, wealth distributions are skewed to the right displaying thick upper tails, that is, large and slowly declining top wealth shares. In this survey, we categorize the theoretical studies on the distribution of wealth in terms of the underlying economic mechanisms generating skewness and thick tails. Further, we show how these mechanisms can be micro-founded by the consumption–savings decisions of rational agents in specific economic and demographic environments. Finally we map the large empirical work on the wealth distribution to its theoretical underpinnings.

This paper argues for a careful (re)consideration of the expectations formation process and a more systematic inclusion of real-time expectations through survey data in macroeconomic analyses. While the rational expectations revolution has allowed for great leaps in macroeconomic modeling, the surveyed empirical microevidence appears increasingly at odds with the full-information rational expectation assumption. We explore models of expectation formation that can potentially explain why and how survey data deviate from full-information rational expectations. Using the New Keynesian Phillips curve as an extensive case study, we demonstrate how incorporating survey data on inflation expectations can address a number of otherwise puzzling shortcomings that arise under the assumption of full-information rational expectations.

There is growing interest in enhancing research transparency and reproducibility in economics and other scientific fields. We survey existing work on these topics within economics and discuss the evidence suggesting that publication bias, inability to replicate, and specification searching remain widespread in the discipline. We next discuss recent progress in this area, including through improved research design, study registration and pre-analysis plans, disclosure standards, and open sharing of data and materials, drawing on experiences in both economics and other social sciences. We discuss areas where consensus is emerging on new practices, as well as approaches that remain controversial, and speculate about the most effective ways to make economics research more credible in the future.

Understanding whether labor market discrimination explains inferior labor market outcomes for many groups has drawn the attention of labor economists for decades— at least since the publication of Gary Becker’s The Economics of Discrimination in 1957. The decades of research on discrimination in labor markets began with a regression-based “decomposition” approach, asking whether raw wage or earnings differences between groups—which might constitute prima facie evidence of discrimination—were in fact attributable to other productivity-related factors. Subsequent research—responding in large part to limitations of the regression-based approach—moved on to other approaches, such as using firm-level data to estimate both marginal productivity and wage differentials. In recent years, however, there has been substantial growth in experimental research on labor market discrimination—although the earliest experiments were done decades ago. Some experimental research on labor market discrimination takes place in the lab. But far more of it is done in the field, which makes this particular area of experimental research unique relative to the explosion of experimental economic research more generally. This paper surveys the full range of experimental literature on labor market discrimination, places it in the context of the broader research literature on labor market discrimination, discusses the experimental literature from many different perspectives (empirical, theoretical, and policy), and reviews both what this literature has taught us thus far, and what remains to be done.

That prenatal events can have life-long consequences is now well established. Nevertheless, research on the fetal origins hypothesis is flourishing and has expanded to include the early childhood (postnatal) environment. Why does this literature have a “second act?” We summarize the major themes and contributions driving the empirical literature since our 2011 reviews, and try to interpret the literature in light of an overarching conceptual framework about how human capital is produced early in life. One major finding is that relatively mild shocks in early life can have substantial negative impacts, but that the effects are often heterogeneous reflecting differences in child endowments, budget constraints, and production technologies. Moreover, shocks, investments, and interventions can interact in complex ways that are only beginning to be understood. Many advances in our knowledge are due to increasing accessibility of comprehensive administrative data that allow events in early life to be linked to long-term outcomes. Yet, we still know relatively little about the interval between, and thus about whether it would be feasible to identify and intervene with affected individuals at some point between early life and adulthood. We do know enough, however, to be able to identify some interventions that hold promise for improving child outcomes in early life and throughout the life course.