A general equilibrium model of optimal employment contracts is developed where firms have better information about labor's marginal product than workers. It is optimal for the wage to be tied to the level of employment, to prevent the firm from falsely stating that the marginal product is low and cutting the wage. It is shown that an observed aggregate shock that leads to an interindustry shift in labor demand and that would have no effect on total employment under symmetric information leads to a reduction in employment when firms and workers have asymmetric information.

We provide a new framework for using text as data in empirical models. The framework identifies salient information in unstructured text that can control for multidimensional heterogeneity among assets. We demonstrate the efficacy of the framework by reexamining principal-agent problems in residential real estate markets. We show that the agent-owned premiums reported in the extant literature dissipate when the salient textual information is included. The results suggest the previously reported agent-owned premiums suffer from an omitted variable bias, which prior studies incorrectly ascribed to market distortions associated with asymmetric information.

Certain extremum estimators have asymptotic distributions that are non‐Gaussian, yet characterizable as the distribution of the arg max of a Gaussian process. This paper presents high‐level sufficient conditions under which such asymptotic distributions admit a continuous distribution function. The plausibility of the sufficient conditions is demonstrated by verifying them in three examples, namely, maximum score estimation, empirical risk minimization, and threshold regression estimation. In turn, the continuity result buttresses several recently proposed inference procedures whose validity seems to require a result of the kind established herein. A notable feature of the high‐level assumptions is that one of them is designed to enable us to employ the Cameron–Martin theorem. In a leading special case, the assumption in question is demonstrably weak and appears to be close to minimal.

Regressions of private-sector macroeconomic forecast revisions on monetary policy surprises often produce coefficients with signs opposite to standard macroeconomic models. The “Fed information effect” argues these puzzling results are due to monetary policy surprises revealing Fed private information. We show they are also consistent with a “Fed response to news” channel, where both the Fed and professional forecasters respond to incoming economic news. We present new evidence challenging the Fed information effect and supporting the Fed response to news channel, including: regressions that control for economic news, our own survey of professional forecasters, and financial market responses to FOMC announcements.

Economic theory suggests that energy subsidies can lead to excessive consumption and environmental degradation. However, the precise impact of energy subsidies is not well understood. We analyze a large energy subsidy: the California Alternate Rates for Energy (CARE). CARE provides a price reduction for low-income consumers of natural gas and electricity. Using a natural field experiment, we estimate the price elasticity of demand for natural gas to be about −0.35 for CARE customers. An economic model of this subsidy yields three results. First, the natural gas subsidy appears to reduce welfare. Second, the economic impact of various policies, such as cap-and-trade, depends on whether prices for various customers move closer to the marginal social cost. Third, benefits to CARE customers need to increase by 6 percent to offset the costs of the program.

We provide new evidence on the growth in pay at the very top of the wage distribution in the United Kingdom. Sectoral decompositions show that workers in the financial sector have accounted for the majority of the gains at the top over the last decade. New results are also presented on the pay of CEOs in the United Kingdom. We show how improved measurement of pay points to a stronger pay-performance link than previously estimated. This link is stronger, and more symmetric, for those firms in which institutional investors play a larger role.

In 1990, the US had the sixth highest female labor participation rate among 22 OECD countries. By 2010 its rank had fallen to seventeenth. We find that the expansion of “family-friendly” policies, including parental leave and part-time work entitlements in other OECD countries, explains 29 percent of the decrease in US women's labor force participation relative to these other countries. However, these policies also appear to encourage part-time work and employment in lower level positions: US women are more likely than women in other countries to have full time jobs and to work as managers or professionals.

Gaps in educational performance between whites and racial minorities are not present at early ages but do emerge early in the schooling years and increase over time (Roland Fryer and Steve Levitt 2006, forthcoming). James Heckman (2007) assembles evidence from both the bio logical and social sciences which highlights the dynamic complementarity of the learning pro cess?the notion that early learning is vital for learning later on. A recent literature in econom ics finds evidence that the returns to early invest ments in children yield high returns to society (Heckman and Dimitriy Masterov 2007). That educational gaps exist and worsen over time is troubling as educational attainment is associated with a host of socioeconomic outcomes such as health, earnings, and wealth (David Cutler and Adriana Lleras-Muney 2008). At the same time, gaps in educational performance and outcomes are but one dimension of racial inequality. One area of research has been with respect to racial health disparities, which unlike educational dis parities appear at very early ages and increase over time (Linda Dynan (2009) provides a lit erature review). Little work, however, directly analyzes how health disparities in children may impact other outcomes.1 The fact that health out comes may lead to socioeconomic differences which themselves may lead to further health and

The Future of the IMF and World Bank: Panel Discussion by Stanley Fischer, Allan H. Meltzer, Jeffrey D. Sachs and Nicholas Stern. Published in volume 93, issue 2, pages 45-50 of American Economic Review, May 2003