Knowledge that Transforms

I study the role of firms' balance sheet liquidity in the transmission of monetary policy to investment. I develop a heterogeneous firm macroeconomic model with financial constraints, debt issuance costs, and differential returns on firms' cash and borrowing. The model matches key novel moments from U.S. firm-level data on liquid asset holdings, debt issuance activity, and investment responses to identified monetary shocks. Counterfactual analysis shows that the rise in U.S. firms' liquid asset holdings over recent decades has significantly increased the relevance of balance sheet liquidity and the behavior of liquid asset returns in monetary transmission.

Deforestation for cattle ranching in the Brazilian Amazon emits carbon, and reforestation absorbs carbon. The social productivities for these alternative activities vary across locations. We analyze a spatial/dynamic model of efficient land allocation to establish a benchmark for policies. We treat cattle prices as stochastic and location-specific productivities as uncertain when assessing the consequences of imposing alternative prices of carbon emissions. Modest carbon price increases would incentivize Brazil to choose policies that capture a significant amount of greenhouse gases in the next 30 years. Our analysis pinpoints tropical forest management as an important contributor to climate change mitigation.

We study social learning using experiments where two people independently learn relevant information and can share it to make accurate private decisions. Across three experiments, people are substantially less sensitive to information others discover than to equally-relevant information they discovered themselves. This holds when they must learn information from others through discussion; when the experimenter perfectly communicates the information; and even when participants observe others’ information with their own eyes. Our results therefore stem not from a failure to elicit information from others but a systematic tendency to underweight it relative to one’s own information. Our findings illustrate a powerful barrier to social learning that might underlie many documented cases of failure to learn from others.

This paper studies whether common leadership, defined as two firms sharing executives or board directors, contributes to collusion. Using an explicit measure of labor market collusion from unsealed court evidence, we find that the probability of collusion between two firms increases by 11 percentage points after the onset of common leadership, a ninefold increase over the baseline rate. These results are not driven by closeness of product or labor market competition. Our findings are consistent with the increasing attention toward common leadership under Clayton Act Section 8. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Two office-motivated politicians compete for power by making promises to citizens. Unlike in voting models, a citizens' political activity is observable and subject to retaliation if the citizen happens to back the wrong politician. In equilibrium, a citizen supports the politician that is expected to win the political contest, not the one who promises her the most. Consequently, the incentives for politicians to redistribute resources and provide public goods are different from those in voting models. Citizens who are better able to coordinate with others receive more resources in equilibrium. Transition to democracy is not voluntary in this model.

The current polarization of elites in the U.S., particularly in Congress, is frequently ascribed to the emergence of cohorts of ideologically extreme legislators replacing moderate ones. Politicians, however, do not operate as isolated agents, driven solely by their preferences. They act within organized parties, whose leaders exert control over the rank-and-file, directing support for and against policies. This paper shows that the omission of party discipline as a driver of political polarization is consequential for our understanding of this phenomenon. We present a multi-dimensional voting model and identification strategy designed to decouple the ideological preferences of lawmakers from the control exerted by their party leadership. Applying this structural framework to the U.S. Congress between 1927-2018, we find that the influence of leaders over their rank-and-file has been a growing driver of polarization in voting, particularly since the 1970s. In 2018, party discipline accounts for around 65% of the polarization in roll call voting. Our findings qualify the interpretation of -and in two important cases subvert -a number of empirical claims in the literature that measures polarization with models that lack a formal role for parties.

Changes in transport costs can affect mobility in ways that differ across the population, affecting the impacts of transport policies. We randomly assign large price reductions on Uber in Egypt over a 3-month period and collect comprehensive data on participant mobility using Google Timeline. A 50% price reduction quadruples Uber usage and induces a 42% increase in total travel. Effects and welfare gains are larger for women, who are less mobile at baseline and perceive public transit as unsafe. The price elasticity of private vehicle kilometers traveled (-1.28) implies that mobility and external costs increase substantially when ride-hailing prices fall.