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    Shleifer, Andrei. 2015. “Matthew Gentzkow, Winner of the 2014 Clark Medal.” Journal of Economic Perspectives 29 (1): 181-192. Publisher's Version Abstract

    The 2014 John Bates Clark Medal of the American Economic Association was awarded to Matthew Gentzkow of the University of Chicago Booth School of Business. The citation recognized Matt’s “fundamental contributions to our understanding of the economic forces driving the creation of media products, the changing nature and role of media in the digital environment, and the effect of media on education and civic engagement.” In addition to his work on the media, Matt has made a number of significant contributions to empirical industrial organization more broadly, as well as to applied economic theory. In this essay, I highlight some of these contributions, which are listed on Table 1. I will be referring to these papers by their number on this list.

    Matt earned both his AB in 1997, and, after a brief career in the theatre, his PhD in 2004 from Harvard, where he began to work on the media. At Harvard he also met Jesse Shapiro, his close friend and collaborator. I was one of Matt’s (as well as Jesse’s) thesis advisors. From Harvard, both Matt and Jesse moved to Chicago Booth School, where their research truly thrived and they contributed to a fantastic group of applied economists.

    Bordalo, Pedro, Nicola Gennaioli, and Andrei Shleifer. 2015. “Salience Theory of Judicial Decisions.” Journal of Legal Studies 44 (S1): S7-S33. Publisher's Version Abstract

    We present a model of judicial decision making in which the judge overweights the salient facts of the case. The context of the judicial decision, which is comparative by nature, shapes which aspects of the case stand out and draw the judge's attention. By focusing judicial attention on such salient aspects of the case, legally irrelevant information can aect judicial decisions. Our model accounts for a range of recent experimental evidence bearing on the psychology of judicial decisions, including anchoring eects in the setting of damages, decoy eects in choice of legal remedies, and framing eects in the decision to litigate. The model also oers a new approach to positive analysis of damage awards in torts.

    Barberis, Nicholas, Robin Greenwood, Lawrence Jin, and Andrei Shleifer. 2015. “X-CAPM: An Extrapolative Capital Asset Pricing Model.” Journal of Financial Economics 115 (1): 1-24. Publisher's Version Abstract

    Survey evidence suggests that many investors form beliefs about future stock market returns by extrapolating past returns. Such beliefs are hard to reconcile with existing models of the aggregate stock market. We study a consumption-based asset pricing model in which some investors form beliefs about future price changes in the stock market by extrapolating past price changes, while other investors hold fully rational beliefs. We find that the model captures many features of actual prices and returns; importantly, however, it is also consistent with the survey evidence on investor expectations.

    Glaeser, Edward L, and Andrei Shleifer. 2014. “Gary Becker (1930–2014).” Science 344 (6189): 1233. Publisher's Version Abstract

    Gary Becker, who died on 3 May 2014 at the age of 83, redefined economics both in its methodology and scope. He radically expanded the sphere of economic analysis. As the range of issues and especially data in economics increased over the last half century, Becker's approach became more and more relevant and modern. He was awarded the 1992 Nobel Prize in Economics for “having extended the domain of microeconomic analysis to a wide range of human behavior and interaction, including nonmarket behavior.”

    LaPorta, Rafael, and Andrei Shleifer. 2014. “Informality and Development.” Journal of Economic Perspectives 28 (3): 109-126. Publisher's Version Abstract

    We establish five facts about the informal economy in developing countries.  First, it is huge, reaching about half of the total in the poorest countries.   Second, it has extremely low productivity compared to the formal economy: informal firms are typically small, inefficient, and run by poorly educated entrepreneurs.   Third, although avoidance of taxes and regulations is an important reason for informality, the productivity of informal firms is too low for them to thrive in the formal sector.   Lowering registration costs neither brings many informal firms into the formal sector, nor unleashes economic growth.  Fourth, the informal economy is largely disconnected from the formal economy.   Informal firms rarely transition to formality, and continue their existence, often for years or even decades, without much growth or improvement.   Fifth, as countries grow and develop, the informal economy eventually shrinks, and the formal economy comes to dominate economic life.  These five facts are most consistent with dual models of informality and economic development. 

    Greenwood, Robin, and Andrei Shleifer. 2014. “Expectations of Returns and Expected Returns.” Review of Financial Studies 27 (3): 714-746. Abstract

    We analyze time series of investor expectations of future stock market returns from six data sources between 1963 and 2011. The six measures of expectations are highly positively correlated with each other, as well as with past stock returns and with the level of the stock market. However, investor expectations are strongly negatively correlated with model-based expected returns. The evidence is not consistent with rational expectations representative investor models of returns.

    Gennaioli, Nicola, Andrei Shleifer, and Robert Vishny. 2014. “Finance and the Preservation of Wealth.” Quarterly Journal of Economics 129 (3): 1221-1254. Publisher's Version Abstract

    We introduce the model of asset management developed in Gennaioli, Shleifer, and Vishny (GSV, 2014) into a Solow-style neoclassical growth model with diminishing returns to capital. Savers rely on trusted intermediaries to manage their wealth (claims on capital stock), who can charge fees above costs to trusting investors. In this model, the ratio of financial income to GDP increases with the ratio of aggregate wealth to GDP. Both rise along the convergence path to steady state growth. We examine several further implications of the model for management fees, unit costs of finance, and the consequences of shocks to trust and to the capital stock.

    Gennaioli, Nicola, Rafael LaPorta, Florencio Lopez-de-Silanes, and Andrei Shleifer. 2014. “Growth in Regions.” Journal of Economic Growth 19 (3): 259-309. Publisher's Version Abstract

    We use a newly assembled sample of 1,528 regions from 83 countries to compare the speed of per capita income convergence within and across countries.  Regional growth is shaped by similar factors as national growth, such as geography and human capital.  Regional convergence rate is about 2% per year, comparable to that between countries.   Regional convergence is faster in richer countries, and countries with better capital markets.  A calibration of a neoclassical growth model suggests that significant barriers to factor mobility within countries are needed to account for the evidence. 

    Chong, Alberto, Rafael LaPorta, Florencio Lopez-de-Silanes, and Andrei Shleifer. 2014. “Letter Grading Government Efficiency.” Journal of European Economic Association 12 (2): 277-299. Abstract

    We mailed letters to non-existent business addresses in 159 countries (10 per country), and measured whether they come back to the return address in the US and how long it takes. About 60% of the letters were returned, taking over 6 months, on average. The results provide new objective indicators of government efficiency across countries, based on a simple and universal service, and allow us to shed light on its determinants. The evidence suggests that both technology and management quality influence government efficiency, just as they do that of the private sector.

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