Recessions appear to be times when the marginal rate of substitution between goods and workers’ time falls below the marginal product of labor. If so, the allocation of workers’ time is inefficient. I develop a model of households and production that reconciles cyclical movements in the marginal value of time and the marginal product. The model embodies the findings of research that the Frisch elasticity of labor supply is less than one. It treats unemployment in a search‐and‐matching setup. Recessions do not result in private inefficiency in the allocation of labor, but the unemployment rate may be socially inefficiently high.

The Federal Reserve Act divided Mississippi between the 6th (Atlanta) and 8th (St. Louis) Districts. During the Great Depression, these districts’ policies differed. Atlanta championed monetary activism and the extension of aid to ailing banks. St. Louis eschewed expansionary initiatives. During a banking crisis in 1930, Atlanta expedited lending to banks in need. St. Louis did not. Outcomes differed across districts. In Atlanta, banks survived at higher rates, lending continued at higher levels, commerce contracted less, and recovery began earlier. These patterns indicate that central bank intervention influenced bank health, credit availability, and business activity.

This paper studies a recent British reform that allowed public high schools to opt out of local authority control and become autonomous schools funded directly by the central government. Schools seeking autonomy had only to propose and win a majority vote among current parents. Almost one in three high schools voted on autonomy between 1988 and 1997, and using a version of the regression discontinuity design, I find large achievement gains at schools in which the vote barely won compared to schools in which it barely lost. Despite other reforms that ensured that the British education system was, by international standards, highly competitive, a comparison of schools in the geographic neighborhoods of narrow vote winners and narrow vote losers suggests that these gains did not spill over

We study costs and benefits of differences of opinion between an adviser and a decision maker. Even when they share the same underlying preferences over decisions, a difference of opinion about payoff‐relevant information leads to strategic information acquisition and transmission. A decision maker faces a fundamental trade‐off: a greater difference of opinion increases an adviser's incentives to acquire information but exacerbates the strategic disclosure of any information that is acquired. Nevertheless, when choosing from a rich pool of opinion types, it is optimal for a decision maker to select an adviser with some difference of opinion. Centralization of authority is essential to harness these incentive gains since delegation to the adviser can discourage effort.

The classical Heckscher‐Ohlin‐Mundell paradigm states that trade and capital mobility are substitutes in the sense that trade integration reduces the incentives for capital to flow to capital‐scarce countries. In this paper we show that in a world with heterogeneous financial development, a very different conclusion emerges. In particular, in less financially developed economies (South), trade and capital mobility are complements in the sense that trade integration increases the return to capital and thus the incentives for capital to flow to South. This interaction implies that deepening trade integration in South raises net capital inflows (or reduces net capital outflows). It also implies that, at the global level, protectionism may backfire if the goal is to rebalance capital flows

The Collective Clemency Bill passed by the Italian Parliament in July 2006 represents a natural experiment to analyze the behavioral response of individuals to an exogenous manipulation of prison sentences. On the basis of a unique data set on the postrelease behavior of former inmates, we find that 1 month less time served in prison commuted into 1 month more in expected sentence for future crimes reduces the probability of recidivism by 0.16 percentage points. From this result we estimate an elasticity of average recidivism with respect to the expected punishment equal to −0.74 for a 7‐month period.

In the United States, workers in cities offering above‐average wages—cities with high productivity, low quality of life, or inefficient housing sectors—pay 27 percent more in federal taxes than otherwise identical workers in cities offering below‐average wages. According to simulation results, taxes lower long‐run employment levels in high‐wage areas by 13 percent and land and housing prices by 21 and 5 percent, causing locational inefficiencies costing 0.23 percent of income, or $28 billion in 2008. Employment is shifted from north to south and from urban to rural areas. Tax deductions index taxes partially to local cost of living, improving locational efficiency.