Knowledge that Transforms

This paper develops and estimates a New Keynesian (NK) model with endogenous technology. It shows that introducing endogenous technology can solve three important puzzles that conventional NK models face: the inflation persistence, disinflationary news shock, and zero lower bound (ZLB) supply shock. First, the observed persistence in inflation is explained without relying on the conventional NK models' additional assumptions (e.g., backward price indexation). Second, it explains the observed disinflationary effect of a news shock. Third, the model avoids the conventional NK models' paradoxical, empirically inconsistent prediction that a negative supply shock is expansionary at the ZLB on interest rates.

This paper analyzes crime as a function of the interaction between offenders and victims. I study robbery of bus drivers, a crime that remains common in cities throughout the world. Exploiting the timing of a Chilean public transportation reform and detailed administrative data, I show how victims' propensity to resist an attack can alter the level and nature of criminal activity. I also find a large decline in crime after the implementation of a technological innovation that eliminated cash transactions on buses. My results suggest a strong relationship between victim incentives, cash, and crime.

This paper estimates the effect on innovation of increased market access facilitated by trade liberalization. We use a novel empirical design that exploits tariff cuts during the 1990s, along with detailed data on innovation among firms from 65 countries. Our results reveal a large effect of tariff cuts on innovation as measured by patent data, suggesting that multilateral liberalization has promoted innovation and growth. These effects are not driven by the deterioration of innovation quality, and the results are robust to controlling for changes in the patent system and to industry-wide trends in innovation.

This paper evaluates the effects of encouraging the selection of local politicians in India via community consensus, as opposed to a secret ballot election. Using village-level data on candidates, elected politicians, government budgets, and workfare employment, I show that incentives for consensus elections lead to politicians who are more educated but less likely to be drawn from historically marginalized castes and increase how regressively workfare employment is targeted. These results are supported by qualitative evidence that shows that consensus elections are prone to capture by the local elite, which may reduce the need for clientelistic transfers to the non-elite.

This paper shows the causal relationship between mutual religious association and the formation of social ties. We analyze dyadic relationships and show that joint attendance at a religious institution (RI) increases the probability of sharing information with and trusting a peer. We use a novel spatial instrumental variable strategy that combines insights from homestead inheritance institutions with triangular distances between peers and RI locations within villages in Kenya. We find that shared attendance at an RI increases the likelihood of receiving advice from a peer by 30 percentage points, demonstrating the strong impact of weak ties formed through social spaces.

Sectoral heterogeneity matters for monetary policy. Using CPI microdata, we estimate for 227 products a time-varying menu-cost model to investigate the quantitative relevance of this heterogeneity. We find a substantial degree of cross-sectoral heterogeneity in all structural parameters. Heterogeneity in the Calvo component of the pricing friction is, however, the main source of heterogeneity in price rigidity. Cross-sectoral heterogeneity amplifies the output effect of a monetary shock by a factor of about 2.5, compared to a single-sector model estimated with mean moments. Heterogeneity in the Calvo parameter plays a key role in this amplification.

Lump-sum job displacement policies (e.g., severance pay) are often presented as a better alternative to contingent policies (e.g., unemployment insurance) in the context of developing countries, under the rationale that the former are less harmful to formal employment as they do not incentivize substitution from formal to informal jobs. First, this paper provides original evidence on the employment effects of lump-sum income in the context of a developing country with high labor informality. A regression discontinuity (RD) design, using Brazilian data, shows that a transfer equivalent to fifteen days of earnings (a) increases the duration out of a formal job by 1.9 weeks, (b) reduces monthly earnings in the next job by 1.6%, and (c) reduces total earnings in the formal labor market by 3.6% over a three-year period. Second, the paper studies the impact of a one-month extension in unemployment insurance (UI) on a comparable sample of displaced workers. UI is shown to have a stronger impact on the duration out of a formal job compared with a lump-sum transfer. In addition, a novel exercise matching administrative and survey data shows that 57% of the decrease in formal employment caused by UI is compensated by an increase in the incidence of informal employment. However, workers receiving the UI extension partially recover the initial employment loss over time in such a way that the adverse impact on employment over a three-year period is similar compared with the lump-sum transfer. Moreover, UI is found to be less harmful to reemployment wages, possibly because it improves workers' bargaining power as it offers insurance against the duration of joblessness. Overall, the UI extension is less detrimental to total earnings in the formal labor market over a three-year period. Hence, although these findings indicate that contingent job insurance policies have a stronger impact on the initial duration out of a formal job and indeed incentivize informal employment, they do not support the notion that lump-sum policies are less harmful to formal employment and earnings in the medium term.

We present evidence consistent with time-varying risk preferences among automobile drivers. Exploiting a unique data set of agents' high-frequency driving behavior collected by a mobile phone application, we show that drivers drive more conservatively following near-miss accidents. In a preferred specification, a near-miss triggers a reduction in driving distance of 12.98 kilometers, in-car cell phone use by more than 100%, and highway use by 43.24%. Structural estimation results indicate that such changes in behavior are consistent with an increase in risk aversion of 10.54% to 43.77% and a reduction in annual insurance cost amounting to 2.04% to 3.31% of the average car insurance premium.

Most criminal defendants cannot afford to hire an attorney. To provide constitutionally mandated legal services, states commonly use either private court-appointed attorneys or a public defender organization. This paper investigates the relative efficacy of these two modes of indigent defense by comparing outcomes of codefendants assigned to different types of attorneys within the same case. Using data from San Francisco, I show that in multiple defendant cases, public defender assignment is plausibly as good as random. I find that public defenders reduce the probability of any prison sentence by 22% and the length of prison sentences by 10%.

We identify earnings impacts of exposure to an infant health intervention in Sweden, using individual-linked administrative data to trace potential mechanisms. Leveraging quasi-random variation in eligibility, we estimate that exposure was associated with higher test scores in primary school for boys and girls. However, only girls were more likely to score in the top quintile. Subsequent gains, in secondary schooling, employment, and earnings, are restricted to girls. We show that the differential gains for women accrued from both skills and opportunities.