We study whether the Coase conjecture holds for bargaining during war. Two players, A and B, contest a divisible resource until one side collapses or agreement is reached. If player B is militarily strong, then he insists on getting a large share. However, player A only concedes this large share if player B credibly signals his strength by fighting a sufficiently long war. Thus, the Coase conjecture fails, and asymmetric information about military strength explains why long wars may be inevitable. Using a mechanism design approach, we derive a lower bound on the expected duration of war. (JEL C78, D74, D82, F51)
Using an evolutionary approach, we address the prominent tension in the literature that updating of ambiguity and nonexpected-utility preferences cannot, in general, be both dynamically consistent and consequentialist. Perhaps not surprisingly, evolutionary optimality requires dynamic consistency. The more subtle insight is the evolutionary optimality of systematic violations of consequentialism. We base our investigation on the model of adaptive preferences (Sadowski and Sarver 2024), which generalizes the model of Robson (1996) and nests variants of many well-known models in the literature.
We study how information disclosure shapes social learning about a potentially harmful product. Increased transparency helps early agents avoid harm, which may undermine learning by later agents. Despite this conflict of interest, we show that full transparency is uniquely optimal for all agents when they learn only by observing neighbors’ harm. We investigate whether full transparency about harm continues to benefit all agents when they also learn from additional, imperfect signals. (JEL D18, D82, D83, L15)
We estimate the impact of unionization on the wage distribution of Canadian university faculty using longitudinal administrative data on salaries and exploiting the staggered rollout of unionization across institutions. We find that unionization compressed salaries: Wages at the bottom of the unconditional distribution increased by roughly 10 percent, while wages at the top were unaffected. Our evidence suggests that these distributional impacts were driven by the introduction of contractual salary floors. We also estimate little impact of unionization on faculty employment. Instead, our results suggest that the increase in universities’ wage bills was financed by an increase in student enrollment. (JEL I23, J31, J45, J51)
Using a regression discontinuity design, we find that eligible household heads surveyed just after an unconditional cash transfer in Indonesia report a 0.4 standard deviation improvement in sleep quality compared to those surveyed just before, and they perform better on cognitive tasks sensitive to sleep deprivation. The cash transfer appears to alleviate financial concerns for household heads—typically the breadwinners—improving their sleep. Postdisbursement, eligible households increase savings and reduce debts, and household heads feel less worried, frustrated, and tired. These effects are not observed in ineligible household heads or other members of eligible households. (JEL D12, D91, G51, I38, O12, O16)
We introduce an information provision experiment into a standard dynamic rational inattention model. We derive analytical results about how the treatment effect varies with characteristics of the environment and the individual. We use these results to discuss findings in the empirical literature on information provision experiments that can be explained by rational inattention of survey respondents and what this interpretation implies about behavior outside the survey. (JEL C90, D83, D91)
We show that existing "production approaches" to markdown estimation do not separately identify factor price markdowns from factor-augmenting productivity levels. We propose a method to overcome this challenge and apply it to study the effects of ownership liberalization in Chinese nonferrous metal industries. We find that private firms have much higher labor-augmenting productivity levels than state-owned enterprises (SOEs). However, we also find that private firms exert higher monopsony power over their workers than SOEs, although this only holds for domestically owned firms. This suggests that privatization policies imply a trade-off between increased productivity and monopsony power.
Central bankers argue that programmable digital currencies may compromise the uniformity or singleness of money. We explore this view in a stylized model where programmable money arises endog-enously, and differently programmed monies have varying liquid-ity. Programmability provides private value by easing commitment frictions but imposes social costs under informational frictions. Preserving uniformity is not necessarily socially beneficial. Banning programmable money lowers welfare when informational frictions are mild but improves it when commitment frictions are low. These insights suggest that programmable money could be more beneficial on permissionless blockchains, where it is difficult to commit but trades are publicly observable.
This paper compares inflation in true price indices to inflation in fixed-weight price indices. We construct model-based inflation measures in time-dependent pricing models that are analogous to measures of inflation in the data, e.g., the Consumer Price Index. In the standard new Keynesian model, when inflation rises rapidly, the differences between inflation in those indices and true price indices are increasing in the degree of price stickiness and the elasticity of substitution across goods. For commonly used parameter values, those differences are large and persistent for increases in inflation of the size seen after 2020 in the U.S.
We use administrative records on the universe of Danish households to characterize survivors’ mental health following their spouse’s death. We provide visually clear evidence for the immediate, large, and lingering adverse impacts and focus on studying the role of income security in driving the immediate effects. We find that, for both males and females, a large share of the spike in the take-up of mental health medication upon spousal death can be explained by the income loss imposed by the shock. Our results imply that safety net policies can improve survivors’ mental health via the immediate liquidity they provide. (JEL D12, D91, G51, H55, I12, I38, J16)
We document strong behavioral responses to an asset test for an old-age support program in Denmark using comprehensive administrative data. We show that the density distribution of the liquid assets targeted by the test exhibits large but diffuse excess mass below the threshold for the treated group relative to control groups of comparable but ineligible individuals. A cohort analysis exploiting the panel structure suggests that the program reduces liquid assets by 20 percent around the threshold. Analyzing high-frequency bank data on assets and cash withdrawals shows that the excess mass around the threshold largely reflects permanent rather than temporary responses. (JEL D91, G51, H24, H55, I32, J14)
The charter school movement encompasses many school models. In Massachusetts in the 2010s, the site of our study, urban charter schools primarily used “No Excuses” practices, whereas nonurban charters had greater model variety. Using randomized admissions lotteries, we estimate the impact of charter schools by locality on college preparation, enrollment, and graduation. Urban charter schools boost all of these outcomes. Nonurban charter schools raise college enrollment and graduation despite reducing state test scores and AP enrollment. Notably, the nonurban charter college graduation edge is more than twice as large as that from urban charter attendance. (JEL H75, I21, I23, I28)
Decision-makers can exhibit biases when they overemphasize particularly salient features under limited attention. We exploit a sudden salience shock involving individuals of Moroccan descent to examine biases within the Dutch criminal justice system. The salience shock concerned the assassination of a defense attorney by organized crime and thus specifically targeted the justice system. Leveraging high-quality data covering arrest through appeal, we find no impact on police or prosecutor decisions but uncover a 71 percent increase in sentence lengths imposed by judges on salient individuals. Heterogeneity analyses suggest that judge experience with minority suspects can mitigate bias in more discretionary decisions. (JEL D91, J15, K42)
We provide the first evidence from a large population census on earnings disparities experienced by nonbinary people-individuals who do not exclusively identify as men or women-and transgender people-individuals whose gender differs from their sex assigned at birth-relative to cisgender people. Using restricted-access 2021 Canadian census data linked to tax records, we find that nonbinary individuals assigned male at birth, transgender men, transgender women, and cisgender women all earn significantly less than comparable cisgender men. Nonbinary individuals assigned female at birth experience an additional earnings penalty. Differences in job sorting explain some of these disparities. (JEL J16, J31, J71)
There has been a dramatic rise in disability employment since the pandemic, while work from home (WFH) has risen fourfold. This paper asks whether the two are causally related. Controlling for compositional changes and labor market tightness, a 1 percentage point increase in WFH increases full-time employment by 1.0 percent for individuals with a physical disability. The postpandemic increase in working from home explains 68-85 percent of the rise in full-time employment. Wage data suggest that WFH increased the supply of workers with a physical disability, likely by reducing commuting costs and enabling better control of working conditions.
We systematically review studies of how unemployment benefits affect unemployment duration. Statistically significant findings are eight times more likely to be published. Correcting for publication bias cuts the average elasticity by a third. Meta-analysis is a data-driven way to aggregate estimates across policy contexts and generalize sufficient statistics methods to compute the global optimal policy. Although existing consumption drop-based approaches typically imply an optimal replacement rate near zero, our corrected estimates imply an optimal replacement rate of 28 percent in the United States. We are unable to reject the hypothesis that the "micro" elasticity is equal to the "macro" elasticity. (JEL E24, J64, J65)
How individuals respond to coinsurance rates is fundamental for insurance market design, but most existing estimates speak only to short-run responses. We exploit a unique policy experiment that increased the coinsurance rate some elderly individuals face when they are aged 70–74 but not before or after. Higher coinsurance rates have an immediate and persistent effect on health care expenditure, and a sizable share of this effect persists after age 75. We find no evidence that higher coinsurance rates affect health. These results suggest that health care utilization depends on dynamic factors other than health stock, such as habits. (JEL D12, G22, H51, I11, I12, I13, J14)
The growth of electric vehicles (EVs) raises new challenges for electricity systems. We implement a field experiment to assess the effect of time-of-use (TOU) pricing and managed charging on EV charging behavior. We find that while TOU pricing is effective at shifting EV charging into off-peak hours, it unintentionally induces new and larger “shadow peaks” of simultaneous charging. These shadow peaks lead to greater exceedance of local capacity constraints and advance the need for distribution network upgrades. In contrast, centrally managed charging solves the coordination problem, reducing transformer capacity requirements, and is well tolerated by consumers in our setting. (JEL C93, D91, L62, L94, Q42)
Many committees—juries, political task forces, etc.—spend time gathering costly information before reaching a decision. We report results from lab experiments focused on such dynamic information-collection processes, as in sequential hypothesis testing. We consider decisions governed by individuals and groups and compare how voting rules affect outcomes. Several insights emerge. First, average decision accuracies approximate those predicted theoretically, but these accuracies decline over time: Participants display nonstationary behavior. Second, groups generate markedly different outcomes than individuals, with majority rule yielding faster and less accurate decisions. In particular, welfare is higher when sequential information is collected in groups using unanimity. (JEL C83, D71, D72, D83)
We study the impact of web search personalization on ideological segregation in search results. We deploy 150 synthetic internet users with randomized partisan browsing preferences across 25 US cities. These users are active during the US 2020 election and its aftermath. Daily experiments in which the users enter identical election-related queries provide strong evidence for ideological segregation in search results across locations with different partisan leanings but only limited evidence for ideological segregation within location across users with different partisan browsing habits. We discuss the important role of the national and local (online) media landscape for understanding these results. (JEL D72, D83, L82, L86)
