Knowledge that Transforms

Monetary policy is neutral even with fixed prices if free entry determines product variety optimally, as in Dixit and Stiglitz (1977). Entry substitutes for price flexibility in the welfare-based price index when individual prices are sticky. In response to aggregate demand expansions, the intensive (quantity produced of each good) and ex tensive (number of goods being produced) margins move in offsetting ways, leaving aggregate production unchanged. Price stickiness thus generates deviations from monetary neutrality only in conjunction with entry frictions: when variety is not optimally determined (preferences are not Dixit-Stiglitz) or when entry is subject to sunk costs and lags. Wage stickiness instead implies nonneutrality even in the frictionless-entry benchmark.

We investigate whether improvements in street-food safety can be achieved by providing information to vendors in the form of a training. Among randomly assigned vendors in Kolkata, India, we find large improvements in knowledge and awareness but little change in observed behavior. We provide two main explanations for these findings. First, information acquisition by itself does not make it significantly easier for vendors to provide customers with safer food options. Second, although consumers have a positive willingness to pay for perceived hygiene, they struggle to distinguish between safe and contaminated food. We recommend policies targeting supply-side constraints and consumers' awareness.

This study investigates the relationship between credit availability and household consumption using a novel approach to separate credit demand and supply. We find that a deterioration in local-bank health reduces household consumption, with the strongest effects occurring for households that are more likely to need credit—especially those experiencing a negative income shock and having limited liquid assets. The main contributions of the study are the use of an arguably exogenous measure of local-bank health and multifaceted indicators of constrained households. Our findings contribute to the discussion of the linkages between the financial sector and real economic activity.

This paper shows that formalizing private property rights has a positive effect on the propensity to respect the property of others. We study a recent large-scale land tenure reform in West Africa that was the first of its kind to be implemented as a randomized control trial. Results of a modified dictator game show that the formalization of private property rights reduced an individual's willingness to take from others' endowment. We used additional experimental measures and postexperimental survey data to rule out alternative explanations for the observed behavior that do not imply a change in preferences.

This paper finds that capital and labor incomes in the United States have become more closely associated since the 1980s. This has contributed to the well-known increase in the top 1% share of total income, exacerbating rising inequality in capital incomes and earnings. We show that the trend in the association is U-shaped as the recent increase contrasts with a tendency toward a weakening association until the 1980s. The paper, using data derived from tax records, studies the asymmetries in the association and tests for robustness to alternative income definitions, including the role of income from closely held businesses at the top.

We estimate the effects of political accountability on the selection of politicians when accountability mechanisms are prone to political capture. We compare the characteristics of candidates running in municipalities where the previous incumbent was ousted from office through a recall referendum with those who run where the recall referendum failed by a small margin. Having a recalled incumbent in the previous term causes a negative selection of candidates in terms of their education and previous experience. They are also less representative of indigenous groups. The results are driven by localities where the accountability institution is likely used for political purposes.

Nonprofit colleges and universities have merged across the United States citing economies of scale and scope. Yet whether these mergers raise prices has not been empirically assessed. Using a retrospective merger evaluation approach, I estimate that the average merger between 2000 and 2015 increased tuition and fees by 5% to 7% relative to nonmerging institutions in the same state and sector (public or nonprofit). Effects on net prices are estimated imprecisely, but the results are suggestive that nonprofit colleges use mergers to increase price discrimination.

Behind many production function estimators lies a crucial assumption that the firm's choice of intermediate inputs depends only on observed choices of other inputs and on unobserved productivity. This assumption fails when market frictions distort the firm's input choices. I derive a test for the assumption, which is rejected in several industries. Using weak identification asymptotics, I show that when the assumption fails, a simplified dynamic panel estimator can be used instead of choice-based methods because it requires choices to be distorted. I propose criteria for choosing between estimators, which in simulations yield lower error than either estimator alone.

Governments around the world use short-term reelection strategies. This is problematic if governments can maximize their reelection chances by prioritizing short-term spending before an election over long-term reforms. This paper tests whether longer program exposure has a causal effect on election outcomes in the context of a large antipoverty program in India. Using a regression-discontinuity framework, the results show that length of program exposure lowers electoral support for the government. The paper discusses a couple of potential explanations, finding that the most plausible mechanism is that voters hold the government accountable for the program's implementation quality.

Tax enforcement is especially costly when market participants are difficult to observe. The benefits of enforcement depend crucially on pre-enforcement compliance. We de rive an upper bound on pre-enforcement compliance from the pass-through of newly enforced taxes. Using data on Airbnb listings and the platform's voluntary collection agreements, we find that taxes are paid on, at most, 24% of Airbnb transactions prior to enforcement. We also find that demand for Airbnb listings is inelastic, driving three key insights: the tax burden falls disproportionately on renters, the excess burden is small, and tax enforcement is relatively ineffective at reducing local Airbnb activity.