We develop a test for instrument strength based on the bias of two-stage least squares (2SLS) that (1) generalizes Stock and Yogo’s and Sanderson and Windmeijer’s tests to be robust to heteroskedasticity and autocorrelation, and (2) extends Montiel Olea and Pflueger’s robust test for models with a single endogenous regressor to multiple endogenous regressors. Our test can be based either on an absolute bias criterion or on the 2SLS bias relative to a worst-case benchmark. We also develop extensions to test whether weak instruments cause bias in individual 2SLS coefficients. In simulations, our test controls size and is powerful, and we provide efficient code packages for its practical implementation. We demonstrate our testing procedures in the context of the estimation of state-dependent fiscal multipliers, following recent leading estimates.

How does competition from online platforms affect the organization, performance, and editorial choices of newspapers? What are the implications of these changes for the information voters are exposed to and for their political choices? We study these questions using the staggered introduction of Craigslist (CL)—the world’s largest online platform for classified advertising—across U.S. counties between 1995 and 2009. This setting allows us to separate the effect of competition for classified advertising from other changes brought about by the Internet, and to compare newspapers that relied more or less heavily on classified ads ex ante. We find that, following the entry of CL, local newspapers reliant on classified ads experienced a significant decline in the number of management and newsroom staff, including in the number of editors covering politics. These organizational changes led to a reduction in news coverage of politics and resulted in a decline in newspaper readership, particularly among readers with high political interest. Finally, we document that reduced exposure to local political news was associated with an increase in partisan voting and increased entry and success of ideologically extreme candidates in congressional elections. Taken together, our findings shed light on the determinants of the decline of print media and on its broader implications for democratic politics.

Evidence across disciplines suggests that talk therapy is more curative than antidepressants for mild-to-moderate depression and anxiety. Yet, few patients use it. We develop a dynamic choice model to analyse patient demand for the treatment of depression and anxiety. The model incorporates myriad potential impediments to therapy use along with links between mental health improvements and earnings. The estimated model reveals that mental health improvements are valuable, directly through utility and indirectly through earnings. However, patient reluctance to use therapy is nearly impervious to reasonable counterfactual policies (e.g. lowering prices or removing other costs). Patient behaviour might reflect stigma, biases in beliefs about the effectiveness of therapy, or a distaste for discussing personal or painful issues with a stranger. More broadly, the benefits of therapy estimated in randomized trials tell only half the story. If patients do not use treatments outside of an experimental setting—and we fail to understand why or how to get them to—estimated treatment effects cannot be leveraged.

This study presents a new economic perspective on state-building based on a case study in the Democratic Republic of the Congo’s hinterland. We explore the implications for the state of considering rebels as stationary bandits. When the state, through a military operation, made it impossible for rebels to levy taxes, it inadvertently encouraged them to plunder the assets of the very citizens they previously preferred to tax. When it negotiated with rebels instead, this effect was absent, but negotiating compromised the state’s legitimacy and prompted the emergence of new rebels. The findings suggest that attempting to increase taxation by a weak state in the hinterland could come at the expense of safety in the medium term and of the integrity of the state in the long term.

In theory, market-based regulatory instruments correct market failures at least cost. However, evidence on their efficacy remains scarce. Using administrative data, we estimate that, on average, the European Union Emissions Trading System (EU ETS)—the world’s first and largest market-based climate policy—induced regulated manufacturing firms to reduce carbon dioxide emissions by 14–16% with no detectable contractions in economic activity. We find no evidence of outsourcing to unregulated firms or markets; instead, firms made targeted investments, reducing the emissions intensity of production. These results indicate that the EU ETS induced global emissions reductions, a necessary and sufficient condition for mitigating climate change. We show that the absence of any negative economic effects can be rationalized in a model where pricing the externality induces firms to make fixed-cost investments in energy-saving capital that reduce marginal variable costs.