Informality, Consumption Taxes, and Redistribution

Rich countries achieve significant redistribution via broad-based income taxes, but the income tax base covers only a fraction of the income distribution in developing countries, due in part to enforceability constraints (Jensen, 2022). Instead, developing countries rely primarily on indirect consumption taxes to collect revenue, such as the value-added tax (VAT), which are perceived as […]

Read More

Connecting to power: How political connections can reduce innovation

Recently, researchers and policymakers have become concerned about the growing dominance of large firms, declining business dynamism, and slower productivity growth in the US and other OECD member countries (Decker et al. 2016; De Loecker and Eeckhout 2018). At the same time, political “rent-seeking” has increased (Zingales 2012; Bessen 2016). In the research we summarize […]

Read More

Reshaping Global Trade: The Immediate and the Long-Term Effects of Bank Failures

International trade patterns are highly stable and understood to be shaped by slow-moving forces of comparative advantage such as differences in technologies, endowments, and institutions. In most trade frameworks, transient shocks like financial crises can only have temporary effects. Yet models with multiple equilibria stress that large shocks can dislodge the economy from a given […]

Read More

Auctions versus negotiations in the real world

Asset owners often need to identify and choose between potential contracting partners to monetize their asset’s value. For example, companies that are acquisition targets may have multiple potential acquirers, and research institutions looking to commercialize intellectual property often decide among several interested parties. Many land transactions also look like this. How should an owner go […]

Read More

Criminal capital and a life of crime

What follows will outline how the coca economy might be one specific and persistent factor that leads people towards a criminal life path, and explain how a recent study establishes this for rural Peru. Children are put on a criminal life path when they invest in criminal human capital rather than formal schooling, when the […]

Read More

Liberation Technology: Mobile Phones and Political Mobilization in Africa

Can digital information and communication technology (ICT) foster mass political mobilization? In our 2020 Econometrica piece (Manacorda and Tesei, 2020), we use a variety of georeferenced data for the whole of Africa covering a 15-year span to investigate this question and explore channels of impact. The spread of digital ICT has fed a wave of […]

Read More

Achieving Scale Collectively

Most firms in developing countries employ only a few workers, if any (Hsieh and Olken, 2014). A key policy concern is that their small size may prevent firms from adopting technology: technology is often embodied in large machines, and small firms might not have the scale to justify the investment. As a result, firms may […]

Read More

Fighting brands, competition, and consumers

Understanding fighting brand strategies Johnson and Myatt (2003) developed a model of competition where firms can offer products that vary in quality. They showed that an incumbent monopoly active in a high-quality segment may have an incentive to launch a product in a low-quality segment only after new entry in that segment, and not before. […]

Read More

The Long-Run Impact of Immigration on Local and Aggregate Productivity

Can increases in the size of the population raise productivity? There are ample theoretical reasons to believe that the answer to this question ought to be yes. Most theories of growth predict a positive relationship between innovation incentives and market size, and many models of international trade or development economics highlight the importance of agglomeration […]

Read More

Hospital Network Competition and Adverse Selection: Evidence from the Massachusetts Health Insurance Exchange

The Affordable Care Act is one of the most significant health reforms in a generation. In addition to covering 15 million uninsured Americans, substantially expanding government health spending, and setting off a fierce political debate, the ACA is notable for an underappreciated reason: it is a major expansion of market-based health insurance. Traditionally, health insurance […]

Read More