A growing body of evidence shows that businesses in developing economies are systematically smaller, grow more slowly, and exhibit lower turnover than those in advanced economies. These patterns are driven in part by nonemployer and micro businesses, which absorb the bulk of workers in low-income settings. This article reviews macro development research that extends the standard Lucas–Hopenhayn framework to account for the smaller size and more limited dynamism of businesses in poorer economies. Distortions that disproportionately affect high-productivity firms, together with lagging technologies, emerge as central explanatory forces, though they often fall short of replicating the empirical size-to-GDP elasticity. Incorporating nonemployers appears to improve the model's ability to match several dimensions of the data. Identifying actionable sources of distortions and technology gaps and combining firm-level data with individual-level sources are highlighted as additional promising avenues to improve the profession's understanding of sources of the development problem.
International labor migration from developing to developed countries generates income gains for migrants that dwarf those from any known development intervention, with workers routinely experiencing 4–5-fold wage increases upon migration. These individual gains translate into massive remittance flows to developing countries that far exceed foreign aid flows. This review synthesizes the rapidly growing literature on migration's impacts on origin countries, emphasizing studies with credible causal identification. The evidence progresses from individual and household effects, where migrants and their families experience substantial gains in income, education investments, and consumption smoothing, to broader impacts on the origin area, including regional economic development and widespread human capital formation. Contrary to concerns about so-called brain drain, recent research reveals brain gain effects whereby migration opportunities increase educational investments and skill formation. Migration also has additional positive effects through trade and investment linkages, knowledge transfers, and changing social norms. This review also discusses policies for enhancing migration's development impacts and key areas for future research.
This article reviews recent evidence on how credit availability shapes exports. Advances in empirical strategies and the increasing availability of detailed firm- and transaction-level data shed light on mechanisms linking firms’ financial conditions to their entry, survival, and growth in export markets. Emerging work on the interaction between bank and trade credit highlights additional channels affecting export contracts. We conclude by outlining open questions and directions for future research.
This article uses inflation expectations to investigate the mechanisms that linked supply and demand shocks to inflation outcomes during 2021–2024. It describes several theoretical mechanisms through which shocks led to inflation, highlighting the role of expectations in this process. It uses multiple sources of expectations data for the United States, Euro area, and United Kingdom to evaluate each of these channels. Finally, it surveys the literature that has used expectations data to make sense of the 2021–2024 inflation surge. The article applies the results from this investigation to assess how well-anchored inflation expectations were during the surge and at the end of it.
Gender-based violence (GBV) and harassment remain widespread, with far-reaching consequences. This review synthesizes the emerging economics literature on GBV, highlighting its methodological challenges, economic impacts, and policy responses. We first examine the difficulties of measuring GBV, including underreporting, definitional variation, and the limits of administrative versus survey data. We then survey evidence on the economic costs of GBV, which span reduced employment, earnings, and educational attainment for survivors as well as broader harms to families, peers, firms, and societies. Finally, we review evidence on prevention and mitigation strategies, including deterrence through sanctions, shifts in workplace and social norms, and survivor support programs. The literature shows that the economic costs of GBV are large, persistent, and measurable, underscoring the urgency of rigorous policy interventions and continued research.
This article reviews economic research on religion undertaken in recent decades. Adam Smith wrote extensively on the behavior of religious organizations in The Wealth of Nations , but the subject was thereafter absent from economic research until the late twentieth century. Contemporary research now recognizes that religious people not only espouse doctrines and beliefs but also undertake important resource-consuming and resource-producing activities. I begin with a section on the nature of religious movements, outlining the canonical club good model of Laurence Iannaccone. I then draw on recent platform-economics models to reinterpret religious movements as platforms: organizations that facilitate and govern relationships—most notably communities—and appropriate a share of the value generated by these interactions. I address the demand for religion and the determinants and consequences of religious values and beliefs. Finally, I review research on the links between religion and politics.
We survey a growing literature on correlated learning—that is, how information from one choice changes beliefs about others when outcomes are correlated. The core modeling innovation is to represent the unknown mapping from choices to outcomes as the realized path of a stochastic process, most commonly the Brownian motion. We show how the framework has been applied to four canonical economic problems in which correlated learning is key but understudied: ( a ) search and experimentation, ( b ) communication, ( c ) innovation and market competition, and ( d ) attribute problems. We review emerging empirical and experimental evidence on correlated learning and outline new theoretical and methodological directions.
I discuss recent works that evaluate the effects of technology and knowledge transfers in the twentieth century. Less developed economies cyclically rely on such transfers to promote industrialization and close the gap with the most advanced countries. I focus on embodied technology transfers through capital goods; disembodied transfers via patents, licensing, and worker mobility; the diffusion of managerial know-how; and industrial policy interventions. The analysis highlights the central role of absorptive capacity—human capital, institutional quality, and organizational capability—in determining whether transfers yield lasting productivity gains.
There is a large shortage of solid organs for transplants. This survey reviews the allocation of organs (particularly kidneys), with an emphasis on how deceased donor organs are obtained and allocated in the United States but with pointers to related issues involving living donors and transplantation around the world. We review some of the key institutional details and theoretical and empirical studies and describe some open questions that we hope will continue to attract attention from researchers interested in the economic and operational aspects of organ allocation.
Modernization is a multidimensional process that enhances human welfare. The relative modernity levels of geographic units can be inferred from global migration patterns, which favor destinations offering opportunities deemed superior. On this basis, we introduce a migration-based modernity index and show that the Muslim World currently lags behind major recipient countries. The gap does not indicate stagnation. The Muslim World has been modernizing, though unevenly across time, regions, and sectors. Although existing research documents these variations, systematic analyses of differing paces and patterns of selective convergence remain scarce. This article fills that gap by distinguishing among continuous, punctuated, and latent modernization trajectories and organizing the literature around four leading explanations for persistent developmental lags: collectivist attitudes, Islamic religious tenets, Islamic legal institutions, and colonial institutional legacies. The resulting framework highlights various sectoral contrasts, such as rapid progress in health and basic education alongside persistent deficits in political and religious liberties.
We provide an overview of the explanations for the relative lack of state formation historically in Africa. In doing so, we systematically document for the first time the extent to which Africa was politically decentralized, calculating that in 1880 there were probably 45,000 independent polities that were rarely organized on ethnic lines. At most 2% of these could be classified as states. We advance a new argument for this extreme political decentralization positing that African societies were deliberately organized to prevent centralization from emerging. In this they were successful. We point out some key aspects of African societies that helped them to manage this equilibrium. We also emphasize how the organization of the economy was subservient to these political goals.
We study the role of expertise in new work—novel occupational roles that emerge as technological and economic conditions evolve—using newly available 1940 and 1950 Census Complete Count files and confidential American Community Survey data from 2011 to 2023. We show that new work is systematically distinct from simply more work in existing occupations in four respects. First, it attracts workers with distinct characteristics: New work is disproportionately performed by younger and more educated workers, even within detailed occupation-industry cells. Second, new work commands economically significant wage premiums that persist beyond workers’ initial entry into new work, consistent with returns to scarce, specialized expertise rather than temporary market disequilibrium. Third, these premiums decline across vintages as expertise diffuses, with “newer” new work commanding larger premiums than older new work. Fourth, the emergence of new work can be traced to specific demand shocks in particular locations and time periods, suggesting that expertise formation responds systematically to economic opportunities. These findings suggest that new work serves as a countervailing force to automation-driven job displacement not merely by creating additional employment but also by generating new domains of human expertise that command market premiums. This expertise-based mechanism helps explain both the expanding variety of work activities across decades and the historical resilience of the labor share.
Large language models (LLMs) enable researchers to analyze text at unprecedented scale and minimal cost. Researchers can now revisit old questions and tackle novel ones with rich data. We provide an econometric framework for realizing this potential in two empirical uses. For prediction problems – forecasting outcomes from text – valid conclusions require “no training leakage” between the LLM's training data and the researcher's sample, which can be enforced through careful model choice and research design. For estimation problems – automating the measurement of economic concepts for downstream analysis – valid downstream inference requires combining LLM outputs with a small validation sample to deliver consistent and precise estimates. Absent a validation sample, researchers cannot assess possible errors in LLM outputs, and consequently seemingly innocuous choices (which model, which prompt) can produce dramatically different parameter estimates. When used appropriately, LLMs are powerful tools that can expand the frontier of empirical economics.
This paper surveys the relevant existing literature that can help researchers and policymakers understand the drivers of competition in markets that constitute the provision of artificial intelligence products. The focus is on three broad markets: training data, input data, and AI predictions. It is shown that a key factor in determining the emergence and persistence of market power will be the operation of markets for data that would allow for trading data across firm boundaries.
Recent advances in artificial intelligence may herald the near arrival of systems that can automate essentially all work. We review the macroeconomic implications of this scenario in a framework that synthesizes several strands of the relevant literature. Robustly, fully automating production alone (so that machines can self-replicate) would dramatically raise the growth rate and lower the labor share, breaking the Kaldor Facts that have long characterized frontier growth. Automating research and development (so that machines can self-improve) would accelerate the transformation but may not produce it in isolation. Wages—the product of exploding output and a plummeting labor share—may rise or fall, depending on the returns to scale, the importance of natural resources, tastes, and the direction of technical change.
We review the literature on geoeconomics, defined as the field of study that links economics and geopolitics (in particular, in terms of power rivalry). We describe what geoeconomics is and which questions it addresses, focusing on five main subfields: (a) the use of geoeconomic policy tools such as sanctions and embargoes; (b) the geopolitics of international trade, especially work on coercion and fragmentation; (c) the geopolitics of international finance, which focuses on currency dominance and state-directed capital flows; (d)the literature on geopolitical risk and its spillovers to the domestic economy, for example, on investments, credit, and inflation; and (e) the economics of war, in particular research on trade and war and on military production. As geopolitical tensions grow, we expect the field to grow substantially in the coming years.
This article reviews homothetic non-CES (constant elasticity of substitution) demand systems and their implications when applied to monopolistic competition, to offer guidance to those looking for flexible and yet tractable ways of departing from CES. Under general homothetic symmetric non-CES, two measures, substitutability and love-for-variety, are introduced to identify the condition under which the equilibrium product variety is excessive or insufficient. Because homotheticity and symmetry alone impose little restriction to make further progress, we turn to the homothetic single aggregator (HSA) class. HSA is more flexible than CES and translog, which are its special cases, and yet equally analytically tractable, because all cross-variety interactions are summarized by the single aggregator. Under HSA, substitutability is increasing in product variety if and only if Marshall's second law holds, which is a sufficient condition for love-for-variety to be diminishing in product variety and for the equilibrium product variety to be excessive. Monopolistic competition under HSA remains tractable even under various forms of firm heterogeneity and in multi-market settings.
In recent years, a vibrant literature has emerged that studies the first states in history, both as substantive topic of interest and as an important input into understanding modern government. This survey article presents, structures, and discusses recent advances in the theoretical and empirical study in the economics of the origins of government and the state. The core hypotheses in this literature view the nature of government as extractive or cooperative. I discuss how this fundamental dichotomy in the view of the state has influenced its study and review empirical contributions. The fundamental dichotomy is not resolved, leaving room for further research.
I summarize the current state of economists’ contributions to the economic history of Indigenous Peoples in North America. After briefly providing some context, I describe the current state of the literature, which is dominated by studies focusing on the period post-1800, over 300 years after contact. With a few exceptions, the literature largely paints a story of dispossession and decline after a golden era of economic interdependence in the fur trade. While valuable, I suggest this story is just a glimpse of something substantively more significant and fundamental to the economic history of North America. Understanding the centrality of Indigenous Peoples in North American economic history broadly and of Indigenous Peoples’ continued existence as economic actors offers yet unseen opportunities to revise our understanding of North American economic development. Beyond this, studying Indigenous North American history offers new opportunities to understand and reimagine how nations and economic systems rise, fall, interact with changing ecological systems, and persist in the face of dramatic change.
