Knowledge that Transforms

For an incompatible patient–donor pair, kidney exchanges often forbid receipt-before-donation (the patient receives a kidney before the donor donates) and donation-before-receipt, causing a double-coincidence-of-wants problem. We study an algorithm, the Unpaired kidney exchange algorithm, which eliminates this problem. In a dynamic matching model, we show that the waiting time of patients under Unpaired is close to optimal and substantially shorter than under widely used algorithms. Using a rich administrative dataset from France, we show that Unpaired achieves a match rate of 63% and an average waiting time of 176 days for transplanted patients. The (infeasible) optimal algorithm is only slightly better (64% and 144 days); widely used algorithms deliver less than 40% match rate and at least 232 days waiting times. We discuss a range of solutions that can address the potential practical incentive challenges of Unpaired. In particular, we extend our analysis to an environment where a deceased donor waitlist can be integrated to improve the performance of algorithms. We show that our theoretical and empirical comparisons continue to hold. Finally, based on these analyses, we propose a practical version of the Unpaired algorithm.

We construct a novel panel dataset for interwar Soviet Union to study the causes of Ukrainian famine mortality (Holodomor) during 1932–3 and document several facts: (1) Ukraine produced enough food in 1932 to avoid famine in Ukraine; (2) 1933 mortality in the Soviet Union was increasing in the pre-famine ethnic Ukrainian population share and (3) was unrelated to food productivity across regions; (4) this pattern exists even outside of Ukraine; (5) migration restrictions exacerbated mortality; (6) actual and planned grain procurement were increasing and actual and planned grain retention (production minus procurement) were decreasing in the ethnic Ukrainian population share across regions. The results imply that anti-Ukrainian bias in Soviet policy contributed to high Ukrainian famine mortality, and that this bias systematically targeted ethnic Ukrainians across the Soviet Union.

Inflation expectations are key determinants of economic activity and are central to the current policy debate about whether inflation expectations will remain anchored in the face of recent pandemic-related increases in inflation. This article explores evidence of inattention by constructing two novel and direct measures of consumers’ inattention, and documents greater attention when inflation is high. This relationship can explain a substantial portion of the flattening of the Phillips curve and also suggests the possibility of upward attention-price spirals.

This paper investigates the construction of moment conditions in discrete choice panel data with individual-specific fixed effects. We describe how to systematically explore the existence of moment conditions that do not depend on the fixed effects, and we demonstrate how to construct them when they exist. Our approach is closely related to the numerical “functional differencing” construction introduced in a seminal paper by Bonhomme, but our emphasis is to find explicit analytic expressions for the moment functions. We first explain the construction and give examples of such moment conditions in various models. Then, we focus on the dynamic binary choice logit model and explore the implications of the moment conditions for the identification and estimation of the model parameters that are common to all individuals.

Public interventions in the apprenticeship market often aim to increase demand or returns. We set up a double-sided experiment with youth and firms to analyse a subsidized dual apprenticeship program. This intervention seeks to relax financial constraints for youth by offering a wage subsidy and to make apprenticeship more attractive by providing vocational training in technical skills that complements on-the-job training. We document a large increase in youth participation in apprenticeship, yet the inflow of apprentices induces little crowding out of traditional apprentices in firms. The intervention leads to an increase in youth demand for apprenticeship, enabling firms to fill open apprenticeship positions. The subsidy compensates apprentices for low wages but does not alleviate financial constraints. Consistent with the dual training component contributing to an increase in youth demand for apprenticeship, youth perform more complex tasks and have higher earnings 4 years after the start of the experiment.

Authorities’ support policies shape the location and continuation of industrial and banking activity on their soil. Firms’ locus of activity depends on their prospect of receiving financial assistance in distress and therefore on factors such as countries’ relative resilience. We predict that global firms are global in life and national in death; and that they become less global when competition is more intense, times are turbulent, and international risk sharing (say, through swap lines) weak. We analyse the competitive benefits of industrial and banking policies as well as their limitations, such as currency appreciation.

How do innovation and education policy affect individual career choices and aggregate productivity? This paper analyses the effect of R&D subsidies and higher education policy on productivity growth through the supply of innovative talent. We put scarce talent, higher education attainment, and career choice at the centre of a new endogenous growth framework with individual-level heterogeneity in talent, financial resources, and preferences. We link the model to micro-level data from Denmark on the backgrounds of who obtains a PhD and becomes an inventor and the outcomes of a set of policy interventions. We find that R&D subsidies can be strengthened when combined with higher education subsidies, which enable talented but poor youth to pursue a career in research. Education and innovation policies not only alleviate different frictions, but also impact innovation at different time horizons. Education policy is more effective in societies with higher income inequality.

What sows the seeds of financial crises, and what policies can help avoid them? I model the interaction between the ex-ante production of assets and ex-post adverse selection in financial markets. Positive shocks that increase market prices exacerbate the production of low-quality assets and can increase the likelihood of a financial market collapse. The interest rate and the liquidity premium are endogenous and depend on the functioning of financial markets as well as the total supply of assets (private and public). Optimal policy balances the economy’s liquidity needs ex-post with the production incentives ex-ante, and it can be implemented with three instruments: government bonds, asset purchase programs, and transaction taxes. Public liquidity improves incentives but implies a higher deadweight loss than private market interventions. Optimal policy does not rule out private market collapses but mitigates the fluctuations in total liquidity.

We study the long-term effects of a randomized intervention targeting children's socio-emotional skills. The classroom-based intervention for primary school children has positive impacts that persist for over a decade. Treated children become more likely to complete academic high school and enrol in university. Two mechanisms drive these results. Treated children show fewer attention deficit/hyperactivity disorder symptoms: they are less impulsive and less disruptive. They also attain higher grades, but they do not score higher on standardized tests. The long-term effects on educational attainment thus appear to be driven by changes in socio-emotional skills rather than cognitive skills.

How does gang competition affect extortion? Using detailed data on individual extortion payments to gangs and sales from a leading wholesale distributor of consumer goods and pharmaceuticals in El Salvador, we document evidence on the determinants of extortion payments and the effects of extortion on firms and consumers. We exploit a 2016 non-aggression pact between gangs to examine how collusion affects extortion in areas where gangs previously competed. While the pact led to a large reduction in competition and violence, we find that it increased the amount paid in extortion by approximately 20%. Much of this increase was passed through to retailers and consumers: retailers experienced an increase in delivery fees, leading to an increase in consumer prices. In particular, we find an increase in prices for pharmaceutical drugs and a corresponding increase in hospital visits for chronic illnesses. The results point to an unintended consequence of policies that reduce competition between criminal organisations.