Publisher:
Wiley
Publication date:
2021-02-01
ISBN:
0020-6598

Latest documents

  • REDISTRIBUTION AND FISCAL UNCERTAINTY SHOCKS

    This article studies the impact of fiscal uncertainty shocks. In micro data, noncapital holders reduce consumption persistently in response to an increase in fiscal uncertainty whereas capital holders do not. Motivated by this evidence, I introduce limited capital market participation and show that it magnifies the fall in economic activity due to a fiscal uncertainty shock and induces macroeconomic comovement. This is because the limited participation model captures individual uncertainty about redistribution. When agents are ambiguity averse, this uncertainty about redistribution has first‐order effects. As a result, the model successfully matches the empirical responses of macro and household variables.

  • DECENTRALIZED ONE‐TO‐MANY BARGAINING

    We study a one‐to‐many bargaining model in which one active player bargains with every passive player on how to share the surplus of a joint project. The order of bargaining is not fixed and the active player decides whom to bargain with in each period. Our model admits a rich set of equilibria and we identify the upper and lower bounds of equilibrium payoffs. We also examine whether two natural ordering protocols often assumed in existing studies can sustain endogenously. Although the queuing protocol may indeed arise in an equilibrium, the rotating protocol is in general not self‐enforcing.

  • ADVERSE SELECTION WITH HETEROGENEOUSLY INFORMED AGENTS

    A model of over‐the‐counter markets is proposed. Some asset buyers are informed in that they can identify high‐quality assets. Sellers with private information choose what type of buyers they want to trade with. When the measure of informed buyers is low, a unique equilibrium exists, and interestingly, price, trading volume and welfare typically decrease with more informed buyers. When the measure of informed buyers is intermediate, multiple equilibria arise. A switch from one equilibrium to another can lead to large drops in liquidity, price, trading volume, and welfare, like a financial crisis. Implications of an endogenous measure of informed buyers are also studied.

  • EXISTENCE OF STATIONARY EQUILIBRIUM IN AN INCOMPLETE‐MARKET MODEL WITH ENDOGENOUS LABOR SUPPLY

    In this article, I first study an income fluctuation problem with endogenous labor supply. Let β be the agent's time discount factor and R>0 be the constant gross rate of return on assets. For βR=1, I show that the agent's wealth either approaches infinity almost surely or converges to a finite level almost surely. For βR

  • BUFFER‐STOCK SAVING AND HOUSEHOLDS' RESPONSE TO INCOME SHOCKS

    We exploit information on the joint dynamics of household labor income, consumption, and wealth in the Italian Survey of Household Income and Wealth to structurally estimate a buffer‐stock saving model. We compare the degree of consumption smoothing implied by the model to the corresponding empirical estimates based on the same data set. We estimate that Italian households smooth 12% of permanent income shocks in the data that is comparable to the model counterpart of 11% . This result contrasts with existing evidence, and our own findings in this article, of substantially more consumption smoothing in U.S. data.

  • THE PROPAGATION OF UNCERTAINTY SHOCKS: ROTEMBERG VERSUS CALVO

    This article studies the effects of uncertainty shocks on economic activity, focusing on inflation. Using a vector autoregression, I show that increased uncertainty has negative demand effects, reducing GDP and prices. I then consider standard New Keynesian models with Rotemberg‐type and Calvo‐type price rigidities. Despite the belief that the two schemes are equivalent, I show that they generate different dynamics in response to uncertainty shocks. In the Rotemberg model, uncertainty shocks decrease output and inflation, in line with the empirical results. By contrast, in the Calvo model, uncertainty shocks decrease output but raise inflation because of firms' precautionary pricing motive.

  • THE HIDDEN COST OF BARGAINING: EVIDENCE FROM A CHEATING‐PRONE MARKETPLACE

    It is widely believed that successful bargaining helps consumers increase their surplus. We present evidence from a field experiment showing that bargaining over price reduces buyer surplus in a marketplace where sellers cheat on the weight whose value may more than offset the price discount. Our results show that bargaining entails hidden costs since sellers cheat significantly more when buyers bargain than not and they cheat significantly more when bargaining succeeds than fails. Overall bargaining reduces buyer surplus than not bargaining. Our result is relevant for credence goods markets where bargaining over prices may induce sellers to “undertreat” more.

  • Corrections to “Positively responsive collective choice rules and majority rule: a generalization of May's theorem to many alternatives” (International Economic Review 60 (2019), 1489–1504)
  • PLATFORM COMPETITION WITH ENDOGENOUS HOMING

    We consider two‐sided markets in which consumers and firms endogenously determine whether they single‐home, multi‐home, or exit the market. We find that the competitive bottleneck allocation in which consumers single‐home and firms multi‐home is always an equilibrium. In addition, we find equilibria with multi‐homing and single‐homing on each side of the market. However, unlike the standard pricing result where the side that multi‐homes faces higher prices, we find that lower prices coincide with multi‐homing: agents find multi‐homing more attractive when faced with lower prices. We also show that endogenous homing can induce straddle pricing which deters price undercutting between platforms.

  • EXTREMIST PLATFORMS: POLITICAL CONSEQUENCES OF PROFIT‐SEEKING MEDIA

    We analyze how information about candidate quality affects the choice of electoral platforms made by an office‐motivated political challenger. The incumbent is of known quality and located at the ideal policy of the voter. The voter cares for both policy and the candidates' quality and can learn about the challenger's quality by buying information. A high‐quality challenger then has an incentive to signal her quality by choosing a policy that induces the voter to buy information. We first study the benchmark case in which the information is supplied exogenously, and its quality is independent of the challenger's platform; this yields multiple equilibria and indeterminacy of equilibrium platforms. By contrast, when the information is supplied by a profit‐maximizing media outlet, its quality depends on the challenger's platform and we obtain a unique equilibrium platform. In particular, when the incumbent's quality is relatively low, the media coverage rises and the challenger's platform diverges further from the voter's ideal policy as the voter's preference for quality increases.

Featured documents

  • ENDOGENOUS SOURCES OF VOLATILITY IN HOUSING MARKETS: THE JOINT BUYER–SELLER PROBLEM

    This article presents new empirical evidence that internal movement—selling one home and buying another—by existing homeowners within a metropolitan housing market is especially volatile and a substantial driver of fluctuations in transaction volume over the housing market cycle. We develop a...

  • EXTREMIST PLATFORMS: POLITICAL CONSEQUENCES OF PROFIT‐SEEKING MEDIA

    We analyze how information about candidate quality affects the choice of electoral platforms made by an office‐motivated political challenger. The incumbent is of known quality and located at the ideal policy of the voter. The voter cares for both policy and the candidates' quality and can learn...

  • ENTREPRENEURSHIP OVER THE LIFE CYCLE: WHERE ARE THE YOUNG ENTREPRENEURS?

    Most individuals do not start a business and, if they do, they start well into their 30s. To explain these stylized facts, I estimate a dynamic Roy model with experience accumulation, risk aversion, and imperfect information about ability using the Panel Study of Income Dynamics. Information...

  • GIRLS' SCHOOLING CHOICES AND HOME PRODUCTION: EVIDENCE FROM PAKISTAN

    The article develops and estimates a dynamic structural model of girls' school‐going decisions and mother's labor market participation. It seeks to determine the causes of low school participation and to evaluate alternative public policies. The model incorporates mother's education, school...

  • GENUINE SAVING AND POSITIONAL EXTERNALITIES

    Much evidence suggests that people are concerned with their relative consumption. Yet, positional externalities have so far been ignored in savings‐based indicators of sustainable development. This article examines the implications of relative consumption concerns for measures of sustainable...

  • COMPETITION IN PUBLIC SCHOOL DISTRICTS: CHARTER SCHOOL ENTRY, STUDENT SORTING, AND SCHOOL INPUT DETERMINATION

    This article develops and estimates an equilibrium model of charter school entry, school input choices, and student school choices. The structural model renders a comprehensive and internally consistent picture of treatment effects when there may be general equilibrium effects of school competition....

  • THE EQUITABLE TOP TRADING CYCLES MECHANISM FOR SCHOOL CHOICE

    A particular adaptation of Gale's top trading cycles (TTC) procedure applied to school choice, the so‐called TTC mechanism, has attracted much attention both in theory and practice due to its superior efficiency and incentive features. We discuss and introduce alternative adaptations of Gale's...

  • MARRIAGE, MARKETS, AND MONEY: A COASIAN THEORY OF HOUSEHOLD FORMATION

    This article integrates search‐based models of marriage and money. We think about households as organizations, the way Coase thinks about firms, as alternatives to markets that become more attractive when transactions costs increase. In the model, individuals consume market‐ and home‐produced goods,...

  • EVOLUTION OF GENDER DIFFERENCES IN POST‐SECONDARY HUMAN CAPITAL INVESTMENTS: COLLEGE MAJORS

    Although women in the United States now complete more college degrees than men, the distribution of college majors among college graduates remains unequal, with women about two‐thirds as likely as men to major in business or science. We develop and estimate a dynamic, overlapping generations model...

  • ON FISCAL MULTIPLIERS: ESTIMATES FROM A MEDIUM SCALE DSGE MODEL

    This article contributes to the debate on fiscal multipliers, in the context of an estimated dynamic stochastic general equilibrium model, featuring a rich fiscal policy block and a transmission mechanism for government spending shocks. I find the multiplier for government spending to be 1.07,...