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Sufficient Statistics for Nonlinear Tax Systems with General Across-Income Heterogeneity

By Antoine Ferey, Benjamin B. Lockwood, and Dmitry Taubinsky

òòò½Íø Review, October 2024

This paper provides empirically implementable sufficient statistics formulas for optimal nonlinear tax systems in the presence of across-income heterogeneity in preferences, inheritances, income-shifting capabilities, and other sources. We characterize op...

Rising Top, Falling Bottom: Industries and Rising Wage Inequality

By John Haltiwanger, Henry R. Hyatt, and James R. Spletzer

òòò½Íø Review, October 2024

Most of the rise in overall earnings inequality from 1996 to 2018 is accounted for by rising between-industry dispersion. The contribution of industries is right-skewed with the top 10 percent of four-digit NAICS industries dominating. The top 10 percent ...

Dynamic Outside Options and Optimal Negotiation Strategies

By Andrew McClellan

òòò½Íø Review, October 2024

We study the design of negotiation strategies when a principal and agent must decide how to split a pie while the agent's outside option changes over time. The principal's optimal strategy under commitment demonstrates a new, but intuitive, set of negotia...

The Social Costs of Keystone Species Collapse: Evidence from the Decline of Vultures in India

By Eyal Frank and Anant Sudarshan

òòò½Íø Review, October 2024

Scientific evidence has documented we are undergoing a mass extinction of species, caused by human activity. However, allocating conservation resources is difficult due to scarce evidence on damages from losing individual species. This paper studies the c...

The Price of Power: Costs of Political Corruption in Indian Electricity

By Meera Mahadevan

òòò½Íø Review, October 2024

Politicians may target public goods to benefit their constituents, at the expense of others. I study corruption in the context of Indian electricity and estimate the welfare consequences. Using new administrative billing data and close-election regression...

Women Left Behind: Gender Disparities in Utilization of Government Health Insurance in India

By Pascaline Dupas and Radhika Jain

òòò½Íø Review, October 2024

We document large gender disparities within a government program that entitles 46 million poor individuals to free hospital care. We show that care is not free in practice and higher costs are associated with larger disparities. Lowering care costs increa...

Front Matter

òòò½Íø Journal: Macroeconomics, October 2024

A Simple Explanation of Countercyclical Uncertainty

By Joshua Bernstein, Michael Plante, Alexander W. Richter, and Nathaniel A. Throckmorton

òòò½Íø Journal: Macroeconomics, October 2024

This paper documents that labor search and matching frictions generate countercyclical uncertainty because the inherent nonlinearity in the flow of new matches makes employment uncertainty increasing in the number of people searching for work. Quantitativ...

The Optimal Quantity of CBDC in a Bank-Based Economy

By Lorenzo Burlon, Manuel A. ²Ñ³Üñ´Ç³ú, and Frank Smets

òòò½Íø Journal: Macroeconomics, October 2024

We show that the estimated effect of digital euro news on bank stock valuations and lending depends on the bank's deposit reliance and the central bank digital currency (CBDC) design features. Using a quantitative DSGE model calibrated to the euro area ec...

Automation, Bargaining Power, and Labor Market Fluctuations

By Sylvain Leduc and Zheng Liu

òòò½Íø Journal: Macroeconomics, October 2024

We argue that the threat of automation weakens workers' bargaining power in wage negotiations, dampening wage adjustments and amplifying unemployment fluctuations. We make this argument based on a business cycle model with labor market search frictions, g...

The Elasticity of Aggregate Output with Respect to Capital and Labor

By Dietrich Vollrath

òòò½Íø Journal: Macroeconomics, October 2024

It is often assumed that the elasticity of GDP with respect to capital is one-third, but this assumes zero markups and an aggregate production function. I estimate the elasticity allowing markups to vary by industry and with a rich input-output structure....

International Friends and Enemies

By Benny Kleinman, Ernest Liu, and Stephen J. Redding

òòò½Íø Journal: Macroeconomics, October 2024

We examine whether, as countries become more economically dependent on a trade partner, they realign politically toward that trade partner. We use network measures of economic exposure to foreign productivity growth derived from the class of trade models ...

Fiscal and Monetary Policy Interactions in a Model with Low Interest Rates

By Jianjun Miao and Dongling Su

òòò½Íø Journal: Macroeconomics, October 2024

We provide a new Keynesian model where entrepreneurs face uninsurable idiosyncratic investment risk and credit constraints. Government bonds provide liquidity services. Multiple steady states with positive values of public debt can be supported for a give...

Entrepôt: Hubs, Scale, and Trade Costs

By Sharat Ganapati, Woan Foong Wong, and Oren Ziv

òòò½Íø Journal: Macroeconomics, October 2024

We study the global trade network and quantify its trade and welfare impact. We document that the trade network is a hub-and-spoke system where 80 percent of trade is shipped indirectly and largely via entrepôts—major hubs that facilitate trade between...

Is There a Stable Relationship between Unemployment and Future Inflation?

By Terry Fitzgerald, Callum Jones, Mariano Kulish, and Juan Pablo Nicolini

òòò½Íø Journal: Macroeconomics, October 2024

Evaluating the stability of the Phillips curve using aggregate data is challenging due to the bias that endogenous monetary policy imparts on estimated Phillips curve coefficients. We argue that regional data can be used to identify the structural relatio...

Population, Productivity, and Sustainable Consumption

By Robert S. Pindyck

òòò½Íø Journal: Macroeconomics, October 2024

How does sustainable consumption depend on productivity growth, the size and growth rate of the population, and uncertainty over these growth rates? I address these questions using a model in which productivity and population growth are stochastic and hum...

Labor Substitutability among Schooling Groups

By Mark Bils, µþ²¹°ù¾±ÅŸ Kaymak, and Kai-Jie Wu

òòò½Íø Journal: Macroeconomics, October 2024

Given worldwide trends in education, wage premium for schooling, and real GDP, we derive a lower bound for the long-run elasticity of labor substitution across schooling groups of around 4, which is far higher than values commonly used in the literature. ...

New Facts on Consumer Price Rigidity in the Euro Area

By Erwan Gautier, Cristina Conflitti, Riemer P. Faber, Brian Fabo, Ludmila Fadejeva, Valentin Jouvanceau, Jan-Oliver Menz, Teresa Messner, Pavlos Petroulas, Pau Roldan-Blanco, Fabio Rumler, Sergio Santoro, Elisabeth Wieland, and ±áé±ôè²Ô±ð Zimmer

òòò½Íø Journal: Macroeconomics, October 2024

Using CPI micro data for 11 euro area countries over 2010–2019, we document new findings on consumer price rigidity in the euro area: (i) the average frequency of price changes is 12 percent; (ii) the distribution of price changes is highly dispersed, w...

Idiosyncratic Income Risk and Aggregate Fluctuations

By Davide Debortoli and Jordi ³Ò²¹±ôí

òòò½Íø Journal: Macroeconomics, October 2024

We study how the presence of idiosyncratic income risk affects aggregate fluctuations in the absence of binding borrowing constraints and/or cyclical income risk. Its impact is shown to be captured by the response of a consumption-weighted average of indi...

When Interest Rates Go Low, Should Public Debt Go High?

By Johannes Brumm, Xiangyu Feng, Laurence Kotlikoff, and Felix Kubler

òòò½Íø Journal: Macroeconomics, October 2024

Is deficit finance free when real borrowing rates are routinely lower than growth rates? Specifically, can the government make all generations better off by perpetually taking from the young and giving to the old? We study this in stochastic closed- and o...