This paper shows that CEOâs trust enhances innovation within firms, providing a novel micro-foundation for the well-known trust-growth relationship. I build a new matched CEO-firm-patent dataset covering 5,753 CEOs in 3,598 US public firms and 700,000 patents during 2000â2011. I exploit variations in generalized trust across CEOsâ ethnic origins, inferred from their last names using de-anonymized historical censuses. Following CEO turnovers, a one standard deviation increase in CEOâs generalized trust is associated with 6% more future patents and 4â6% higher average patent quality, driven entirely by higher-quality patents. Text analysis of employee reviews shows that CEOâs trust enhances a firmâs trust culture. These results are consistent with insights from qualitative interviews suggesting that CEOâs trust and firmâs trust culture encourage researchers to undertake high-risk explorative R&D. In addition, changes in CEOâs bilateral trust toward inventors in different countries have comparable effects on inventorsâ patenting, controlling for CEO and other fixed effects.
Empirical studies find that the pass-through of input cost changes to prices is incomplete: a 10 percent increase in costs causes downstream prices to rise less than 10 percent, even at long horizons. Using microdata from gas stations, food products, and manufacturing industries, we find that incomplete pass-through in percentages often disguises complete pass-through in levels: a $1/unit increase in input costs leads to $1/unit higher downstream prices. Pass-through appears incomplete in percentages due to a gap between prices and costs. Complete pass-through in levels contrasts with workhorse macroeconomic models that feature homothetic demand systems. We identify an alternative class of demand systems that yields pass-through in levels and highlight four implications. First, measuring pass-through in percentages can lead to spurious evidence of asymmetry and size-dependence. Second, pass-through in levels leads to systematic fluctuations in relative price and markup dispersion that are not associated with changes in allocative efficiency. Third, pass-through in levels can explain dynamics of industry gross margins, operating profits, and entry in the data that are at odds with workhorse models. Finally, incorporating pass-through in levels into an input-output model of the U.S. economy better matches the volatility of consumer price inflation and the response of inflation to identified shocks.
Monetary Policy and Sovereign Risk in Emerging Economies (NK-Default)
This paper develops a New Keynesian model with sovereign default risk. Inflation is set by forward-looking firms, monetary policy is an interest rate rule, and the fiscal government borrows externally, long-term, with an option to default. In this framework, default risk creates inflation pressures through an expectations channel, and tight monetary policy disincentivizes fiscal overborrowing. The model sheds light on temporary inflation events in emerging-market data: short-lived spikes in inflation, spreads, and domestic policy rates. As spreads rise, firms increase their prices in expectation of higher future inflation and low consumption during default. Monetary policy tightens, which reduces inflation and helps bring spreads down by disciplining government borrowing. These monetary-fiscal interactions imply that delivering the flexible prices allocation may not be optimal for monetary policy.
This paper describes a process for generating academic papers using large language models (LLMs) and demonstrates this processâs efficacy by producing hundreds of complete papers on stock return predictability, a topic well-suited for our illustration. After mining over 30,000 potential return predictors from accounting data, we generate template reports for 95 signals passing rigorous criteria from the Novy-Marx and Velikov (2024) Assaying Anomalies protocol. These templates detail signal performance predicting returns using a wide array of tests and benchmark performance against more than 200 documented anomalies. Finally, for each template we use state-of-the-art LLMs to generate multiple complete versions of academic papers with distinct theoretical justifications for the observed return predictability, incorporating citations to literature supporting their respective claims. This experiment illustrates the potential of artificial intelligence (AI) for enhancing financial research efficiency, but also serves as a cautionary tale, illustrating how it can be abused to industrialize hypothesizing after results are known (HARKing). ( JEL C12, C45, G12, G17)
Yueran Ma of University of Chicago, Booth School of Business, and NBER reviews âThe Making of Modern Corporate Finance: A History of the Ideas and How They Help Build the Wealth of Nationsâ by Donald H. Chew Jr. The Econlit abstract of this book begins: âExplores the significant potential of the corporate finance function to increase the efficiency and value of organizations, from publicly traded companies to nonprofit institutions and state-owned enterprises, promoting the argument that US private-sector productivity is the fundamental source of US economic and social wealth.â
Volckart, Oliver. The Silver Empire: How Germany Created Its First Common Currency
William Roberds of Federal Reserve Bank of Atlanta reviews âThe Silver Empire: How Germany Created Its First Common Currencyâ by Oliver Volckart. The Econlit abstract of this book begins: âExamines the creation of Germany's first common currency, focusing on insights from recently discovered primary sources that help explain the purpose of the currency and the importance of the uneven availability of precious metals.â
The categories listed below are used to classify books, book reviews, journal articles, and dissertations indexed in JEL and EconLit. New changes to the classification system appear as soon as possible on www.econlit.org . The JEL classification system may be used freely for scholarly purposes. We suggest the following format: âJEL: A10, B10, etc.â
W. E. B. Du Bois is widely considered one of the most prominent American intellectuals of the twentieth century. While Du Bois has been praised for his contributions to sister disciplines, his contributions to economics have been underappreciated. Drawing upon published and unpublished sources documenting his academic training, his involvement in the economics profession, and his overall scholarship, this article shows that Du Bois made enduring contributions to economic science. We trace his intellectual formation as a student of the German Historical School of economics, analyzing his pioneering use of empirical methods to document the plight of Black Americans. Du Bois emphasized the role of power and institutions in structuring distributional outcomes and the importance of economic and social uplift. One implication is that by conducting intra- and intergroup analyses of racial, health, occupational, income, and wealth disparities, Du Bois anticipated the empirical and theoretical aims of stratification economics. (JEL B13, B25, B31, B55, I00, J15, Z13)
Doctors often treat similar patients differently, which affects health outcomes and medical spending. We assess the recent literature on doctor decision-making through the lens of a model that incorporates diagnostic and procedural skills, beliefs, incentives, and differences in patient pools. Decision-making is affected by beliefs, training, experience, peer effects, financial incentives, and time constraints. Interventions to improve decision-making include providing information, guidelines, and technologies like electronic medical records and algorithmic decision tools. Economists have made progress in understanding doctor decision-making, but applications of that knowledge to improving health care are still limited. (JEL D83, D91, G51, I11, I14, J24, J44)
Innovation-Driven Entrepreneurship
Tristan L. Botelho, Daniel C. Fehder, Yael V. Hochberg
Innovation-driven entrepreneurship (IDE) is viewed as a key driver of economic growth. This review provides a structured guide to the key themes of the growing literature on the economics of IDE, which differs substantially in its nature from other types of entrepreneurship. We describe the key themes of the growing literature, speaking to the central economic questions raised by IDE, including who enters into IDE activity, the nature of its founding teams and organization, its financing, the strategic choices faced by IDE founders, and policy and programs to support IDE activity. The tendency of much of the empirical economics literature to date to confound IDE with other types of entrepreneurial ventures offers a significant opportunity for research focused specifically on the IDE phenomenon. ( JEL G24, G32, J23, J24, L26, M13, O31)
The Economic Impacts of Artificial Intelligence: A Multidisciplinary, Multi-book Review
This essay reviews seven books from the past dozen years by social scientists examining the economic impact of artificial intelligence (AI). These works offer valuable insightsâAI as cheap prediction, architectural barriers to adoption, data as an economic asset, implementation challenges. However, they offer little guidance when it comes to the transformative scenarios considered plausible by many AI researchers. Economists have made great progress in explaining how to use AI within existing production functions, who benefits, and why; what remains needed is rigorous advice to policymakers concerned about rapid increases in labor churn, scientific development, laborâcapital shifts, or existential risk. (JEL C45, C80, D83, O31, O36)
No Taxation without Administration: Bringing the State Back into the Public Finance of Developing Countries
The empirical economics literature on taxation in developing countries has centered on the importance of third-party information for enforcement. Yet, while surely a long-run objective, leveraging such information remains out of reach in many developing countries due to largely informal economies and low state capacity. This article examines an emerging complementary literature focused on strengthening the âsinewsâ of state capacity: tax administration. We argue that reforms to the organizational structure, personnel management, and task management of tax authorities have potential to raise tax capacity in developing countries. We also argue that efforts to improve the stateâs legitimacyâpopular acceptance of its right to taxâcan increase capacity and may complement investments in tax administration. Our approach bridges a long-standing divide between how scholars in public finance and political economy approach tax capacity building in developing countries. (JEL D63, D73, H20, H50, K34, M50, O17)
Ogilvie, Sheilagh. Controlling Contagion: Epidemics and Institutions from the Black Death to Covid
Vellore Arthi of University of California, Irvine, reviews âControlling Contagion: Epidemics and Institutions from the Black Death to Covidâ by Sheilagh Ogilvie. The Econlit abstract of this book begins: âExplores the past seven centuries of history to investigate how human societies dealt with epidemic disease, highlighting the features that have made institutional frameworks better at coordinating responses to epidemics and better at devising innovations to improve societal learning.â
Editor's Note Our policy is to annotate all English-language books on economics and related subjects that are sent to us. A very small number of foreign-language books are called to our attention and annotated by our consulting editors or others. Our staff does not monitor and order books published; therefore, if an annotation of a book does not appear six months after the publication date, please write to us or the publisher concerning the book.
Bach, Maria. Relocating Development Economics: The First Generation of Modern Indian Economists
Alex M. Thomas of School of Arts and Sciences, Azim Premji University reviews âRelocating Development Economics: The First Generation of Modern Indian Economistsâ by Maria Bach. The Econlit abstract of this book begins: âExplores the work of the Early Nationalists, the first generation of modern economists in India in the mid- to late-nineteenth century, focusing on how they produced forward-thinking knowledge on economic development.â
Goldstein, Jorge. Patenting Life: Tales from the Front Lines of Intellectual Property and the New Biology
Josh Lerner of Harvard University and NBER reviews âPatenting Life: Tales from the Front Lines of Intellectual Property and the New Biologyâ by Jorge Goldstein. The Econlit abstract of this book begins: âExplores the legal, commercial, and social debates surrounding the patenting of biological materials, whether living single cells, whole plants or animals, or the inert molecules that they produce or from which they are made.â
Palladino, Lenore. Good Company: Economic Policy after Shareholder Primacy
Ryan Bubb of University of Southern California reviews âGood Company: Economic Policy after Shareholder Primacyâ by Lenore Palladino. The Econlit abstract of this book begins: âExplores how ending shareholder primacy and reorienting corporate decision-making toward productivity would work in practice, focusing on how board members, employees, managers, shareholders, customers, and the broader public would understand their rights and responsibilities if they were operating together in pursuit of economic innovation.â
How Do Central Banks Control Inflation? A Guide for the Perplexed
Central banks have a primary goal of price stability. They pursue it using tools that include the interest they pay on reserves, the size and the composition of their balance sheet, and the dividends they distribute to the fiscal authority. We describe the economic theories that justify the central bankâs ability to control inflation and discuss their relative effectiveness in light of the historical record. We present alternative approaches as consistent with each other, as opposed to conflicting ideological camps. While interest-rate setting may often be superior, having both a monetarist pillar and fiscal support is essential, and at times pegging the exchange rate or monetizing the debt is inevitable. (JEL E31, E43, E52, E58, E62, F31, G21)
Journal of Economic Literature , March 2026, Volume LXIV, Number 1
Marshall Steinbaum of University of Utah reviews âMonopsony in Labor Markets: Theory, Evidence, and Public Policyâ by Brianna L. Alderman and Roger D. Blair. The Econlit abstract of this book begins: âExplores the law and economics of wage-fixing agreements, no-poaching agreements, noncompete terms in labor contracts, unions and collective bargaining, mergers that affect labor markets, and wage discrimination.â
Allensworth, Rebecca Haw. The Licensing Racket: How We Decide Who Is Allowed to Work, and Why It Goes Wrong
Gabriel Scheffler of University of Miami School of Law reviews âThe Licensing Racket: How We Decide Who Is Allowed to Work, and Why It Goes Wrongâ by Rebecca Haw Allensworth. The Econlit abstract of this book begins: âExplores the function of the professional licensing system, its effects on equality, public health, and the economy, and its role in the American Dream, emphasizing the need for a coherent, defensible theory for when licensing is required.â
Review of Economic Studies
Selection in Surveys: Using Randomized Incentives to Detect and Account for Nonresponse Bias
Deniz Dutz, Ingrid Huitfeldt, Santiago Lacouture, Magne Mogstad, Alexander Torgovitsky, Winnie van Dijk
We show how to use randomized participation incentives to test and account for nonresponse bias in surveys. We first use data from a survey about labour market conditions, linked to full-population administrative data, to provide evidence of large differences in labour market outcomes between survey participants and nonparticipants, differences which would not be observable to an analyst who only has access to the survey data. These differences persist even after correcting for observable characteristics. We then use the randomized incentives in our survey to directly test for nonresponse bias and find evidence of substantial bias. Next, we apply a range of existing methods that account for nonresponse bias and find they produce bounds (or point estimates) that are either wide or far from the ground truth. We investigate the failure of these methods by taking a closer look at the determinants of participation, finding that the composition of participants changes in opposite directions in response to incentives and reminder emails. We develop a model of participation that allows for two dimensions of unobserved heterogeneity in the participation decision. Applying the model to our data produces bounds (or point estimates) that are narrower and closer to the ground truth than the other methods. Our results highlight the benefits of including randomized participation incentives in surveys. Both the testing procedure and the methods for bias adjustment may be attractive tools for researchers who are able to embed randomized incentives into their survey.
Do The Effects of Nudges Persist? Theory and Evidence from 38 Natural Field Experiments
Alec Brandon, Paul J Ferraro, John A List, Robert D Metcalfe, Michael K Price, Florian Rundhammer
We formalize a research design to uncover the mechanisms underlying long-term reductions in energy consumption caused by a widely implemented nudge. We consider two channels: technology adoption and habit formation. Using data from 38 natural field experiments, we isolate the role of technology adoption by comparing treatment and control homes after the initial resident moves, which discontinues the treatment for a home. We find that fully half of energy reductions persist in the home after treatment ends and show this persistence is consonant with a technology adoption channel. The role of technology in creating persistent behaviour change has important implications for designing behavioural interventions and evaluating their long-term social impacts.
We show that existing âproduction approachesâ 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. (JEL D24, F23, J42, L33, L61, L72, P31)
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)
Rational Inattention during a Randomized Controlled Trial
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)
Nonbinary and Transgender Identities and Earnings: Evidence from a National Census
Christopher S. Carpenter, Donn Feir, Krishna Pendakur, Casey Warman
We provide the first evidence from a large population census on earnings disparities experienced by nonbinary peopleâindividuals who do not exclusively identify as men or womenâand transgender peopleâindividuals whose gender differs from their sex assigned at birthârelative 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)
On the Programmability and Uniformity of Digital Currencies
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 endogenously, and differently programmed monies have varying liquidity. 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. (JEL D83, E42, E52, E58)
Breadwinnerâs Burden: The Effect of Financial Concerns on Sleeplessness
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 headsâtypically the breadwinnersâimproving 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)
Disemployment Effects of Unemployment Insurance: A Meta-analysis
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 âmicroâ elasticity is equal to the âmacroâ elasticity. (JEL E24, J64, J65)
Substitution Bias and Fixed-Weight Price Indices in Time-Dependent Pricing Models
Lawrence J. Christiano, Martin Eichenbaum, Benjamin K. Johannsen
This paper compares measured inflation in true and fixed-weight price indices. We construct model-based inflation measures in time-dependent pricing models that are analogous to measures of inflation in the dataâfor example, 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 United States. (JEL E12, E31)
Journal of Econometrics
The informativeness of combined experimental and observational data under dynamic selection
We study the dynamics of income and wealth inequality using a heterogeneous-agent model that combines endogenous portfolio choice, a granular representation of the tax-and-transfer system, and a reduced-form mechanism linking markups to top incomes through entrepreneurial risk. Driven by changes in taxation, markups, and asset prices, the model accounts for the observed trends in income and wealth inequality in France since 1984, up to the top 1% income and wealth shares. We combine counterfactual simulations with a simple accounting decomposition of wealth accumulation to assess the contributions of these driving forces to inequality dynamics and to identify the channels through which they operate. We identify rising markups as the primary driver of income inequality, while all three forces â taxation, markups, and asset prices â contribute significantly to wealth inequality. Our findings highlight both the mechanical impact of differential asset price movements and the central role of endogenous saving responses in shaping wealth inequality over time.
Leveraging Social Comparisons: The Role of Peer Assignment Policies for Productivity and Stress
Using a large-scale real effort experiment, we explore whether and how different peer assignment mechanisms affect worker performance and stress. Letting individuals choose whom to compare to increases productivity to the same extent as a targeted exogenous matching policy designed to maximize motivational spillovers. These effects are significantly larger than those obtained through random assignment and their magnitude is comparable to the impact of an increase in pay of about 10 percent. A downside of targeted peer assignment is that, unlike endogenous peer selection, it leads to a large increase in stress. The key advantage of letting workers choose whom to compare to is that it allows those workers who want to be motivated to compare to a motivating peer while also permitting those for whom social comparisons have little benefits or are too stressful to avoid them. Finally, we show that social comparisons yield stronger motivational effects than comparable non-social goals.
Identifying Rent-Sharing using Firmsâ Energy Input Mix
Matthias Merten, Steffen Mueller, Georg Neuschaeffer
We present causal evidence on the rent-sharing elasticity of German manufacturing firms. We develop a new firm-level Bartik instrument for firm rents that combines the firmsâ predetermined energy input mix with national energy carrier price changes. Instrumental variable estimation yields a rent-sharing elasticity of approximately 0.20 implying that a 10% change in rents leads to a 2% change in wages. Rent-sharing induced by energy price variation is asymmetric and driven by energy price increases, such that, on average, workers do not benefit from energy price reductions but are harmed by price increases. Reduced-form evidence shows that a 10% increase in firm-level energy prices depresses firm-level wage growth by 0.34%.
Journal of Labor Economics
Educational Ambition, Marital Sorting, and Inequality.
Frederik Almar, Benjamin Friedrich, Ana Reynoso, Bastian Schulz, Rune Vejlin
We complement previous partial global identification results for the non-Gaussian SVAR model by showing that in the absence of co-skewness among the strucural shocks, the skewed shocks are identified and in the absence of excess co-kurtosis, the shocks with nonzero excess kurtosis are identified. The former case has the advantage that dependent conditional heteroskedasticity is allowed for. In each case, the remaining shocks are set identified, and these results can be combined to identify both skewed and non-mesokurtic shocks. To capture the non-Gaussian features of the data, versatile error distributions must be specified. We discuss the Bayesian implementation of an SVAR model with skewed t-distributed errors that exhibit dependent stochastic volatility, including the assessment of identification and checking the validity of exogenous instruments potentially used for identification. The methods are illustrated in an empirical application to U.S. monetary policy.
Economic Journal
The Winners and Losers of Climate Policies: A Sufficient Statistics Approach
To combat global warming, climate policies like carbon taxes, renewable subsidies, and carbon tariffs must be implemented to phase out fossil fuel consumption and lower emissions. Who are the winners and losers of such policies? Through a simple Integrated Assessment Model with heterogeneous countries and international trade in goods and energy, we study both the costs of implementing these policies unilaterally, and the local costs and global gains of international policy cooperation. To do so, we express and decompose welfare changes under different policy regimes to the first order as a function of sufficient statistics that depend on observables and identifiable elasticities like nationsâ energy mix, energy rents, trade shares, energy supply and demand elasticities, and damage parameters. We show that climate change has non-trivial reallocation effects through international trade in goods and energy. Pursuing unilateral policies generates strong leakage effects, primarily through energy trade. Global climate policy cooperation mitigates leakage, but not all countries have an incentive to participate. Regional climate clubs operate differently: an EU-wide club reduces global emissions but creates internal winners and losers, while an ASEAN climate club achieves smaller global gains but delivers welfare increases for member nations.