We show that the e¤ects of taxes on labor supply are shaped by interactions between adjustment costs for workers and hours constraints set by rms. We develop a model in which rms post job o¤ers characterized by an hours requirement and workers pay search costs to nd jobs. We present evidence supporting three predictions of this model by analyzing bunching at kinks using Danish tax records. First, larger kinks generate larger taxable income elasticities. Second, kinks that apply to a larger group of workers generate larger elasticities. Third, the distribution of job o¤ers is tailored to match workers aggregate tax preferences in equilibrium. Our results suggest that macro elasticities may be substantially larger than the estimates obtained using stan- dard microeconometric methods.
In many situations data are available at the group
level but one wishes to estimate the individual-level association
between a response and an explanatory variable. Unfortunately this
endeavor is fraught with difficulties because of the ecological level
of the data. The only reliable solution to such ecological inference
problems is to supplement the ecological data with individual-level
data. In this paper we illustrate the benefits of gathering
individual-level data in the context of a Poisson modeling
framework. Additionally, we derive optimal designs that allow the
individual samples to be chosen so that information is maximized. The
methods are illustrated using Robinson's classic data on illiteracy rates. We show that the optimal design produces accurate
inference with respect to estimation of relative risks, with
ecological bias removed.
This article considers associations among childhood family structure, childhood religious service attendance, and the probability of having a nonmarital first birth before age 30 for non-Hispanic White women born 1944 to 1964 using data from the 1988 and 1995 waves of the National Survey of Family Growth (NSFG) (N = 5995). We found that attending religious services weekly during childhood and growing up in a two-biological parent family were associated with lower odds of having had a nonmarital first birth. These associations were quite stable across cohorts, although religious attendance was less associated with nonmarital fertility for the youngest cohort. We estimate that changes in these childhood experiences account for 22% of the increase in nonmarital first births across these cohorts.
A behavioral competitive equilibrium restricts households ability to tailor their consumption to the state of the economy. Compared to standard competitive equilibrium, a behavioral competitive equilibrium yields more consumption risk and extreme price volatility when the realized output is near its maximum or minimum.
Belief disagreements have been suggested as a major contributing factor to the recent financial crisis. This paper theoretically evaluates this hypothesis. I assume that optimists have limited wealth and take on leverage in order to take positions in line with their beliefs. To have a significant effect on asset prices, they need to borrow from traders with pessimistic beliefs using loans collateralized by the asset itself. Since pessimists do not value the collateral as much as optimists do, they are reluctant to lend, which provides an endogenous constraint on optimists’ ability to borrow and to influence asset prices. I demonstrate that the tightness of this constraint depends on the nature of belief disagreements. Optimism concerning the probability of downside states has no or little effect on asset prices because these types of optimism are disciplined by this constraint. Instead, optimism concerning the relative probability of upside states could have significant effects on asset prices. This asymmetric disciplining effect is robust to allowing for short selling because pessimists that borrow the asset face a similar endogenous constraint. These results emphasize that what investors disagree about matters for asset prices, to a greater extent than the level of disagreements. When richer contracts are available, insurance contracts (similar to credit default swaps) endogenously emerge to facilitate betting. Richer contracts moderate the effect of belief disagreements on asset prices
because the medium of betting shifts from buying (or shorting) the asset to trading alternative
contracts.
Since the 1980s, governments in developing countries have been adopting laws and regulations intended to foster more attractive investment climates for foreign firms. Such adoptions have stirred a form of competition among LDC governments to create environments more conducive to foreign businesses. In fact, some economists have argued that governments may have gone too far in that MNEs could even receive better treatment than their domestic counterparts. In this paper, we examine this claim by focusing on a particular policy incentive for FDI– the Bilateral Investment Treaty (BIT). BITs are agreements between two governments that protect foreign investments in the partner country. We assess the effects of BITs on the value of comparable foreign and domestic investments. Our paper employs a more robust causal inference methodology than previous studies and overcomes empirical difficulties of small sample size and a small number of clusters of earlier work on the topic. We employ a large dataset on real investment in the international petroleum industry.
