This article develops the uniform asymptotic theory for local projection (LP) regression when the true lag order of the model is unknown and potentially infinite. The theory allows for varying degrees of persistence in the data, growing response horizons, and general conditionally heteroskedastic martingale-difference shocks. Based on the theory, we make two main contributions. First, we show that LPs can achieve semiparametric efficiency at a given horizon under classical assumptions on the data, provided that the controlled lag order diverges. Thus, the commonly perceived efficiency loss of LPs can become asymptotically negligible with many controls. Second, we propose LP-based inference procedures for (level and cumulated) impulse responses that possess robustness properties not shared by existing methods. Inference methods using two distinct standard errors are considered. The uniform validity for the first method depends on a zero fourth-order cumulant condition on shocks, while that of the second holds more generally for conditionally heteroskedastic martingale-difference shocks. We propose a bootstrap procedure that improves finite-sample performance and extend the standard error construction to structural responses.

A salient trend in crisis intervention has emerged in recent decades: government and central banks have offered funding directly to nonfinancial firms, bypassing banks and other credit intermediaries. We analyse the long-term consequences of such policies by focussing on firm quality dynamics. In a laissez-faire economy, firms with high productivity are more likely to survive crises than those with low productivity. The government funding support saves more firms but cannot be customized based on firm productivity, dampening the cleansing effect of crises. The policy distortion is self-perpetuating: a downward bias in the firm quality distribution necessitates larger interventions in future crises. Our mechanism is quantitatively important: we show that if policymakers ignore such distortionary effects on firm quality dynamics, the resultant credit intervention would almost double the optimal amount.

This article views hiring as a contextual bandit problem: to find the best workers over time, firms must balance “exploitation” (selecting from groups with proven track records) with “exploration” (selecting from under-represented groups to learn about quality). Yet modern hiring algorithms, based on supervised learning approaches, are designed solely for exploitation. Instead, we build a resume screening algorithm that values exploration by evaluating candidates according to their statistical upside potential. Using data from professional services recruiting within a Fortune 500 firm, we show that this approach improves the quality (as measured by eventual hiring rates) of candidates selected for an interview, while also increasing demographic diversity, relative to the firm’s existing practices. The same is not true for traditional supervised learning-based algorithms, which improve hiring rates but select far fewer Black and Hispanic applicants. Together, our results highlight the importance of incorporating exploration in developing decision-making algorithms that are potentially both more efficient and equitable.

We study the role of public risk-sharing in markets where firms face substantial cost uncertainty, focusing on public reinsurance in health insurance. We develop a model where insurers internalize cost uncertainty through risk charges that raise effective marginal costs and create a role for reinsurance. Public reinsurance lowers both expected costs and cost volatility, particularly for smaller insurers, reducing prices and enhancing competition. Using an event study of staggered state-level reinsurance programs, we show that public reinsurance leads insurers to lower prices and private reinsurance purchases, benefiting financially constrained insurers the most. Structural estimates indicate that risk charges account for a substantial share of the premium-cost wedge and highlight public reinsurance’s comparative advantage over premium subsidies by providing risk protection and enhancing competition. Our results underscore the importance of accounting for firms’ risk exposure in policy design and provide a general framework for understanding public risk-sharing policies.

Economists often favour market-based mechanisms over non-market based mechanisms to allocate scarce public resources on grounds of economic efficiency and revenue generation. When the usage of the resources in question generates type-dependent negative externalities, the welfare comparison can become ambiguous. Both types of allocation mechanisms are being implemented in China's major cities to distribute limited vehicle licences as a measure to combat worsening traffic congestion and air pollution. While Beijing employs non-transferable lotteries, Shanghai uses an auction system. This article empirically quantifies the welfare consequences of the two mechanisms by taking into account both allocation efficiency and automobile externalities post-allocation. Our analysis shows that different allocation mechanisms lead to dramatic differences in social welfare. Although Beijing's lottery system has a large advantage in reducing automobile externalities over auction, the advantage is offset by the significant allocative cost from misallocation. The lottery system in Beijing resulted in a social welfare loss of 30 billion Yuan (nearly $5 billion) in 2012 alone. A uniform-price auction would have generated nearly 20 billion Yuan to Beijing municipal government, more than covering all its subsidies to the local public transit system.

Experts often collect and report information over time. What reporting protocol elicits the most information? Here, a principal receives reports sequentially from an agent with privately known ability, who observes two signals about the state of the world. The signals differ in initial quality and, unlike previous work, differ in quality improvement. The paper finds that “mind changes” (inconsistent reports) can signal talent if a smart agent improves faster. Also, sequential reports dominate when the principal's decision is very sensitive to information; a single report dominates if the mediocre agent's signals improve faster or the agent is likely mediocre.

Firms are allowed to use aggregate data on market salaries to set pay, a practice known as salary benchmarking. Using national payroll data, we study firms that gain access to a tool that reveals market benchmarks for each job title. Using a difference-in-differences design, we find that the benchmark information reduces salary dispersion by 25%. Thus, salary dispersion must stem partly from aggregate uncertainty about the salaries offered by other firms. Our model formalizes how salary dispersion can arise even in competitive labour markets for identical workers when such uncertainty exists, and we discuss implications for an ongoing policy debate.

Journal Article A Note on Professor Hicks' Value and Capital Get access Choh-Ming Li Choh-Ming Li Chunking Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 9, Issue 1, November 1941, Pages 74–75, https://doi.org/10.2307/2967639 Published: 01 November 1941

This paper studies the long-term effects of technology and know-how transfers on structural transformations. In the 1950s, the Soviet Union supported the construction of the 156 Projects, which were large-scale, capital-intensive industrial clusters in China. These projects included a technology transfer, consisting of state-of-the-art Soviet machinery and equipment, and a know-how transfer, via the training of Chinese engineers, production supervisors, and high-skilled technicians by Soviet experts. We use newly assembled data that follow steel plants for over four decades, and we exploit natural variation in the transfers they eventually received. We find that, while production advantages stemming from Soviet technology faded away if not complemented with training, the know-how transfer had a long-lasting impact on plant performance, stimulated technology upgrade when China was a closed economy, and increased exports to the Western world when China engaged in international trade. The know-how transfer also generated productivity and technology spillovers onto complementary establishments.

We explore subjective performance reviews in long-term employment relationships. We show that firms benefit from separating the task of evaluating the worker from the task of paying him. The separation allows the reviewer to better manage the review process, and can, therefore, reward the worker for his good performance with not only a good review contemporaneously, but also a promise of better review in the future. Such reviews spread the reward for the worker’s good performance across time and lower the firm’s maximal temptation to renege on the reward. The manner in which information is managed exhibits patterns consistent with a number of well-documented biases in performance reviews.