Journal of Political Economy2021129(1), 1-80open access
Standard measures of productivity display enormous dispersion across farms in Africa. Crop yields and input intensities appear to vary greatly, seemingly in conflict with a model of efficient allocation across farms. In this paper, we present a theoretical framework for distinguishing between measurement error, unobserved heterogeneity, and potential misallocation. Using rich panel data from farms in Tanzania and Uganda, we estimate our model using a flexible specification in which we allow for several kinds of measurement error and heterogeneity. We find that measurement error and heterogeneity together account for a large fraction of the dispersion in measured productivity
Consumers rely on the price changes of goods in their grocery bundles when forming expectations about aggregate inflation. We use micro data that uniquely match individual expectations, detailed information about consumption bundles, and item-level prices. The weights consumers assign to price changes depend on the frequency of purchase, rather than expenditure share, and positive price changes loom larger than negative price changes. Prices of goods offered in the same store but not purchased do not affect inflation expectations, nor do other dimensions. Our results provide empirical guidance for models of expectations formation with heterogeneous consumers.
Journal of Political Economy2021129(7), 2157-2180open access
Privacy is a feature inherent to the use of cash. With steadily increasing market shares of digital payment platforms, privacy in payments may no longer be attainable in the future. We explore the potential welfare impacts of reductions in privacy in payments. In our framework, firms may use data collected through payments to price discriminate future consumers. A public good aspect arises because individuals do not internalize the full cost of failing to protect their privacy and reduce social welfare by suboptimally choosing not to protect their privacy in payments. We discuss potential remedies, including the issuance of electronic cash.
Journal of Political Economy2021129(10), 2817-2860
Environmental markets are widely prescribed as an alternative to open access regimes for natural resources. We develop a model of dynamic groundwater extraction to demonstrate how a spatial regression discontinuity design that exploits a spatially incomplete market for groundwater rights recovers a lower bound on the market’s net benefit. We apply this estimator to a major aquifer in water-scarce southern California and find that a groundwater market generated substantial net benefits, as capitalized in land values. Heterogeneity analyses point to gains arising in part from rights trading, enabling more efficient water use across sectors. Additional findings suggest that the market increased groundwater levels.
Journal of Political Economy2021129(5), 1361-1424open access
We conducted a survey of high-ability college students and elicited beliefs about how their choice of major, and of whether to complete their degree, would affect an array of future events: earnings, employment, marriage prospects, potential spousal characteristics, and fertility. We find that students perceive large “returns” to human capital not only in their own future earnings but also in other dimensions (e.g., potential spouse’s earnings and fertility). We find evidence of students sorting into majors on the basis of these perceived returns. Family expectations are particularly important for female students’ major choices. In a follow-up survey conducted 6 years after the initial data collection, we find a close connection between expectations and current realizations.