I will be cleaning up the page as well.

Thank you.

wayne

But I will return!

Happy summer to all.

wayne

Contact Information
T: 773-834-2177
gentzkow(at)chicagogsb.edu

Short Biography

Matthew Gentzkow studies empirical industrial organization, with a specific focus on media industries. “Media has always been a great interest of mine. I think it’s an area that has been understudied by economists and is just beginning to grow into an active area of research,” he explains.

Gentzkow’s work has been published in the Journal of Political Economy, the Quarterly Journal of Economics, and the American Economic Review. He also has written a chapter in Corruption and Reform: Lessons from America’s History, which was published by the National Bureau of Economic Research in 2006. His research has been covered in major national media, including the New York Times, the Wall Street Journal, the Financial Times, Forbes, the Chicago Tribune, and Slate.

Gentzkow has been awarded a National Science Foundation grant for research on media bias, and recently received a Faculty Excellence Award for teaching. He hopes his students learn to “ask more questions, think critically, and to realize that many arguments that sound good aren’t.”

Gentzkow referees for numerous academic journals.

He was educated at Harvard University, where he earned a bachelor’s degree in 1997, a master’s degree in 2002, and a PhD in 2004 in economics. He joined the Chicago Booth faculty in 2004.

Press Coverage

What Newspapers Do, Have Done and Will Do New York Times, February 14, 2009

A Biased Market The Economist, October 30, 2008

TV Can Be Good For You Chicago Tribune, October 22, 2008

A New View on TV: Economists Probe the Data in Television Watching and Find It’s Not All Bad The Wall Street Journal, September 6, 2008

Economists Look at How TV Affects Time Use The Wall Street Journal, September 6, 2008

TV might not be melting your child’s mind after all The Times Colonist, February 23, 2008

Measuring media slant ViewsWire Executive Briefing, February 5, 2008

Undercover Economist: Did you pay to read this? Financial Times, October 20, 2007 Slate, October 27, 2007

When it comes to slant, newspaper readers rule The Vancouver Sun, August 11, 2007

Better a Murdoch… The New York Sun, July 24, 2007

Murdoch Overwhelmed by Rival for Control of News: Amity Shlaes Bloomberg, July 5, 2007

Courting the Rupert Factor The Canberra Times, April 24, 2007

Economist Probes Newspapers Editor & Publisher, March 22, 2007

Study: Market Forces, Not Ideology Determine Presentation of News New York Sun , February 14, 2007

Newspapers Cater to Readers’ Politics NPR, December 13, 2006

Lean Left? Lean Right? News Media May Take Their Cues From Customers The New York Times, December 7, 2006

It’s Not Me, It’s You CBS News, December 7, 2006

How To Speak Republican… Slate, December 6, 2006

Managing for Success: Do Papers Slant to Audience? Investor’s Business Daily, October 27, 2006

Use Your Noggin: Let the Kids Watch Cartoons The Wall Street Journal, July 14, 2006

Jury still out on ill-effects of TV for kids The Australian, April 22, 2006

Long Live the Boob Tube: Television Makes Kids Smarter. D’oh! Forbes, April 10, 2006

Just sit right back and you’ll hear a tale Star Telegram, April 8, 2006

Behind the Lines: Weighing in on media bias Jerusalem Post, April 6, 2006

A Fresh Take On Media Bias CBS News, April 4, 2006

I Agree With You, Completely Slate, April 3, 2006

Dear Economist Financial Times, March 25, 2006

Impact of TV deserves more study Wilmington Advocate , March 9, 2006

Kids’ problems may not be due to too much TV Chicago Tribune, March 8, 2006

Go Ahead, Turn That Thing On The New York Times, March 5, 2006

The BOOB tube won’t make your kid a boob: Watching a lot of TV, a new University of Chicago study says, doesn’t seem to do any harm Chicago Sun-Times, March 5, 2006

The ‘ idiot box’ may not be The Jersey Journal, March 4, 2006

Does television harm kids?: Historical records show it may have a small positive effect Ottawa Citizen, March 4, 2006

Study Finds Test Scores Not Lowered by Television The New York Times, February 27, 2006

The Benefits of Bozo Slate, February 16, 2006

Casey Mulligan

Contact Information

c-mulligan(at)uchicago.edu

Market Responses to the Panic of 2008

• the financial crisis,
• the housing crash,
• and market adjustments to these events

Currently available papers and articles are:

• Housing Boom and Bust: Structures have a Leveraged Claim on Housing Output (manuscript, 02/04/2008)
• What Caused the Recession of 2008? Hints from Labor Productivity (NBER wp, 02/05/09)
• Fundamental Causes of the Housing Boom and Bust (Cato Unbound, 12/05/08)
• Don’t Forgive that Way! (Chicago Tribune, 12/05/08)
• A Depressing Scenario: Mortgage Debt Becomes Unemployment Insurance (NBER wp, 11/19/08)
• Is the Treasury Impotent? (Economists’ Voice, 11/12/08)
• Market Responses to the Panic of 2008 (NBER wp with Luke Threinen, 10/23/08)
• An Economy You Can Bank On. (New York Times 10/10/08)
• Shorter daily blog entries on http://www.panic2008.net/
• Longer weekly blog entries on http://economix.blogs.nytimes.com/

Based on these analyses, I have made a number of predictions including, but not limited to:

Banking Sector

• Treasury purchases of banks’ preferred equity will crowd out private capital, for example, by facilitating acquisitions of one bank by another
• Funds will be available for starting new investment projects – if not from banks, from other institutions. Whether people want to borrow is another story
• Banks will begin to forgive collateralized loans. The amount of forgiveness will decline with borrower income.

Residential Sector

• Housing prices will continue to fall after the summer of 2008, by 10s of percentage points
• Housing construction will resume in the summer of 2009

Nonresidential Nonfinancial Business

• Nonresidential investment goods are cheap, and this increases nonresidential investment, especially in structures
• Cheap investment goods = cheap stock market
• U.S. GDP will not fall below $11 trillion (chained 2000 $)
• Income and spending will start growing again before employment does

Labor Market

• U.S. employment will not fall below 134 million.
• Baby boomers will delay retirement
• Loan forgiveness programs, such as the FDIC’s Loan Modification Program, will dramatically reduce the incentive of affected borrowers to earn income

Research Papers

The Panic of 2008

• What Caused the Recession of 2008? Evidence from Labor Productivity.
• A Depressing Scenario: Mortgage Debt Becomes Unemployment Insurance.
• Market Responses to the Panic of 2008 (with Luke Threinen).

Government in Theory and Practice

Social Security and Retirement

• Social Security and Democracy (with Ricard Gil and Xavier Sala-i-Martin).
• Internationally Common Features of Public Old-Age Pensions, and Their Implications for Models of the Public Sector (with Xavier Sala-i-Martin).
• Political and Economic Forces Sustaining Social Security (with Xavier Sala-i-Martin).
• Labor Market Search and Optimal Retirement Policy (with Joydeep Bhattacharya and Robert R. Reed III).
• Induced Retirement, Social Security, and the Pyramid Mirage.
• Retirement-Inducing Policy Wears Many Disguises (with Xavier Sala-i-Martin).
• Can Monopoly Unionism Explain Publicly Induced Retirement?
• Gerontocracy, Retirement, and Social Security (with Xavier Sala-i-Martin).

Causes and Consequences of Policy Distortions

• Causes and Consequences of Political Competitiveness (with Kevin Tsui)
• Population and Regulation (with Andrei Shleifer)
• Conscription as Regulation (with Andrei Shleifer)
• Public Policies as Specification Errors
• Political and Economic Perspectives on Taxes’ Excess Burdens
• What do Aggregate Consumption Euler Equations Say about the Capital Income Tax Burden?
• Capital Tax Incidence: Fisherian Impressions from the Time Series
• Capital Tax Incidence: First Impressions from the Time Series
• Capital, Interest, and Aggregate Intertemporal Substitution
• A Century of Labor-Leisure Distortions
• A Dual Method of Empirically Evaluating Dynamic Competitive Equilibrium Models with Market Distortions, with Applications to The Great Depression and World War II
• Economic Limits on Rational Democratic Redistribution
• Comment on “Average Marginal Tax Rates Revisited” (with Justin G. Marion).
• Paternalism and Government Intervention – Public Finance in Reverse (with Tomas Philipson).
• The 100% Tax in Theory and Practice.
• Accounting for the Growth of Government (with Gary S. Becker).
• Deadweight Costs and the Size of Government (with Gary S. Becker).

Voting and Public Policy

• Political Entry, Public Policies, and the Economy (with Kevin Tsui)
• Causes and Consequences of Political Competitiveness (with Kevin Tsui)
• Do Democracies Have Different Public Policies than Nondemocracies? (with Ricard Gil and Xavier Sala-i-Martin).
• Social Security and Democracy (with Ricard Gil and Xavier Sala-i-Martin).
• Economic Limits on Rational Democratic Redistribution
• The Empirical Frequency of a Pivotal Vote (with Chip Hunter).
• Is Voting Rational or Instrumental? (with Gary S. Becker).

Monetary Policy

• Inflation and the Size of Government (with Song Han).
• The Optimum Quantity of Money: Theory and Evidence (with Xavier X. Sala-i-Martin).

Intertemporal Choice

• Parental Priorities and Economic Inequality
• Robust Aggregate Implications of Stochastic Discount Factor Volatility
• What do Aggregate Consumption Euler Equations Say about the Capital Income Tax Burden?
• Capital Tax Incidence: Fisherian Impressions from the Time Series
• Economic Interpretations of Intergenerational Correlations (with Nathan Grawe)
• Capital, Interest, and Aggregate Intertemporal Substitution
• Substitution over Time: Another Look at Life Cycle Labor Supply
• Intergenerational Substitution
• A Logical Economist’s Argument Against Hyperbolic Discounting
• Human Capital, Heterogeneity, and Estimated Degrees of Intergenerational Mobility (with Song Han).
• Galton vs. the Human Capital Approach to Inheritance: Some Evidence
• The Intertemporal Substitution of Work: What Does the Evidence Say?
• The Endogenous Determination of Time Preference (with Gary S. Becker).

Labor Supply

• Selection, Investment, and Women’s Relative Wages over Time (with Yona Rubinstein)
• The Closing Gender Gap as a Roy Model Illusion (with Yona Rubinstein)
• Specialization, Inequality, and the Labor Market for Married Women (with Yona Rubinstein)
• Household vs. Personal Accounts of the Labor Market, 1967-97 (with Yona Rubinstein)
• A Century of Labor-Leisure Distortions
• Aggregate Implications of Indivisible Labor
• Time Use and Population Representation in the Sloan Study of Adolescents
• Substitution over Time: Another Look at Life Cycle Labor Supply
• Microfoundations and Macro Implications of Indivisible Labor
• Work Ethic & Family Background: Some Evidence
• The Intertemporal Substitution of Work: What Does the Evidence Say?
• Pecuniary and Nonpecuniary Incentives to Work in the U.S. during World War II. (Click here for a nice graphic)

Human Capital and Economic Growth

• The Value of Life in General Equilibrium (with Anupam Jena, Tomas J. Philipson, and Eric Sun)
• Selection, Investment, and Women’s Relative Wages over Time (with Yona Rubinstein)
• Measuring Aggregate Human Capital (with Xavier Sala-i-Martin).
• A Labor-Income-Based Measure of the Value of Human Capital: An Application to the States of the United States (with Xavier Sala-i-Martin).
• Transitional Dynamics in Two-Sector Models of Endogenous Growth (with Xavier Sala-i-Martin).
• Computing Transitional Dynamics in Recursive Growth Models: The Method of Progressive Paths.
• A Note on the Time Elimination Method for Solving Recursive Growth Models.

Demand for Money, and Financial Markets

• Insurance Market Participation under Symmetric Information (with Tomas Philipson).
• The Optimum Quantity of Money: Theory and Evidence (with Xavier X. Sala-i-Martin).
• Scale Economies, the Value of Time, and the Demand for Money: Longitudinal Evidence from Firms.
• The Demand for Money by Firms: Some Additional Empirical Results.
• A Dynamic General Equilibrium Model of MX Adoption.
• Extensive Margins and the Demand for Money at Low Interest Rates (with Xavier X. Sala-i-Martin).
• A Structural Analysis of Money Demand: Cross-Sectional Evidence from Japan (with Hiroshi Fujiki).
• Production, Financial Sophistication, and the Demand for Money (with Hiroshi Fujiki).
• U.S. Money Demand: Surprising Cross-Sectional Estimates (with Xavier Sala-i-Martin).

Before dismiss any empirical results as “counterintuitive”, take a look at Andrew Greeley’s “In Defense of Surveys”

Brief Policy Discussions

• Vote Republican if You Want Equal Pay
• Trust or Antitrust the AMA? (with Tomas J. Philipson)
• Let’s Revamp the Tax Code – But How? (with Gary S. Becker)
• With the Flat Tax, Common Sense is Better than an Economist
• 1995′s Top Ten Taxdollar Travesties
• Daley, Bears Sack U.S. Treasury.
• Pornography, Profits, and the Internet.

Reviews of Policy-Oriented Books

• Review of Robert E. Hall and Alvin Rabushka’s The Flat Tax, 2nd edition. (published in the The Money Review. November 1996: 22-24.)
• Review of Laurence S. Seidman’s Funding Social Security. (published in the Journal of Economic Literature. 38(3), September 2000:
• 659-60.)

A Dictionary of Enigmatic-Economic Jargon

A Picture of Chicago PhD students on Casey’s website which can be found here. Also you can see the future Mulligan Superstars here. Nice.

Chicago PhDs from Casey Mulligan

Paola Sapienza

We choose Paola Sapienza as the Economist of the Day. Paola is considered on the top 15 young economist according to IDEAS/RePEc which can be found here. Paola is an Associate Professor of Finance at the Kellogg School of Management, Northwestern University.

Contact Information

Paola-Sapienza(at)kellogg.northwestern.edu

Short Biography

Paola Sapienza is an Associate Professor in the Finance Department. Prior to joining Kellogg Professor Sapienza worked as an economist in the research department of Bank of Italy.

She is interested in corporate finance. She has written articles on banking, on state-ownership, on social capital and on financial development.

Professor Sapienza is a Zell Center Faculty Fellow, a research affiliate of the Center for Economic Policy Research (CEPR), and a Faculty Research Fellow in the National Bureau of Economic Research’s (NBER) program on Corporate Finance. Trained in economics, she holds a B.A. from Bocconi University (Milan), and an M.A. and Ph.D in Economics from Harvard University.

You can find Paola complete vita here.

Working Papers

1. Gender, Testosterone, Risk Aversion, and Career Choices, (with Dario Maestripieri and Luigi Zingales), Working Paper, August 2008.

2. Long Term Persistence , (with Luigi Guiso and Luigi Zingales), Working Paper, August 2008. This paper previously circulated with the title “Was Putnam Right?”

ABSTRACT: Is social capital long lasting? Does it affect long term economic performance? To answer these questions we test Putnam’s conjecture that today marked differences in social capital between the North and South of Italy were due to the culture of independence fostered by the free city-states experience in the North of Italy at the turn of the first millennium. We show that the medieval experience of independence has an impact on social capital within the North, even when we instrument for the probability of becoming a city-state with historical factors (such as the Etruscan origin of the city and the presence of a bishop in year 1,000). More importantly, we show that the difference in social capital among towns that in the Middle Ages had the characteristics to become independent and towns that did not exists only in the North (where most of these towns became independent) and not in the South (where the power of the Norman kingdom prevented them from doing so). Our difference in difference estimates suggest that at least 50% of the North-South gap in social capital is due to the lack of a free city-state experience in the South.

3. Understanding Trust , (with Anna Toldrà and Luigi Zingales), Working Paper, August 2008.

ABSTRACT: Several papers study the effect of trust by using the answer to the World Values Survey (WVS) question “Generally speaking, would you say that most people can be trusted or that you can’t be too careful in dealing with people?” to measure the level of trust. Glaeser et al. (2000) question the validity of this measure by showing that it is not correlated with senders’ behavior in the standard trust game, but only with his trustworthiness. By using a large sample of German households, Fehr et al. (2003) find the opposite result: WVS-like measures of trust are correlated with the sender’s behavior, but not with its trustworthiness. In this paper we resolve this puzzle by recognizing that trust has two components: a belief-based one and a preference based one. While the sender behavior’s reflects both, we show that WVS-like measures capture mostly the belief-based component, while questions on past trusting behavior are better at capturing the preference component of trust.

4. Time Discounting for Primary and Monetary Rewards , (with Ernesto Reuben and Luigi Zingales), Working Paper, July 2008.

ABSTRACT: This paper shows that there is a positive and statistically significant correlation between the short-term discount rate over a monetary reward and the short-term discount rate over a primary reward (chocolate). This correlation, however, is absent among subjects who do not like chocolate and are not hungry. This suggests that monetary rewards are suitable for the study of intertemporal choice. In fact, given the problems associated with the use of primary rewards (differing tastes for the good, hunger, and possible satiation), we argue that measurement with monetary rewards is more reliable.

5. Procrastination and Impatience , (with Ernesto Reuben and Luigi Zingales), Working Paper, July 2008.

ABSTRACT: There is a large body of literature documenting both a preference for immediacy and a tendency to procrastinate. O’Donoghue and Rabin (1999a,b, 2001) and Carroll et al. (2007) model these behaviors as two facets of the same phenomenon. In this paper, we use a combination of lab and field evidence to study whether these two types of behavior are indeed linked. To measure immediacy we had subjects choose between a series of smaller-sooner and larger-later rewards. Both rewards were paid by check to control for transaction costs. To measure procrastination we record how fast subjects cash their checks and complete other tasks. Our results lend support to the hypothesis that subjects who have a preference for immediacy are more likely to procras- tinate. We also find evidence that subjects differ in the degree with which they anticipate their own procrastination, that is, in their degree of “sophistication” in the O’Donoghue and Rabin (1999a) terminology.

6. Is Mistrust Self-Fulfilling? , (with Ernesto Reuben and Luigi Zingales), Working Paper, June 2008.

ABSTRACT: We study experimentally the effect of expectations on trustworthiness. Most subjects respond with untrustworthy behavior if they find out that little is expected from them. This suggests that guilt aversion plays an important role in inducing trustworthiness.

7. Between- and within-sex variation in hormonal responses to economic decision making tests in a large sample of MBA students, (with Dario Maestripieri, Nicole Baran, and Luigi Zingales), Working Paper, April 2008.

8. The Cost of Banking Regulation [Abstract], (with Luigi Guiso and Luigi Zingales), Working Paper, February 2007.

Publications

Paola Sapienza

9. Cultural Biases in Economic Exchange? [Supporting Online Materials], (with Luigi Guiso and Luigi Zingales), forthcoming in The Quarterly Journal of Economics, 124(3), August 2009.

ABSTRACT: How much do cultural biases affect economic exchange? We try to answer this question by using data on bilateral trust between European countries. We document that this trust is affected not only by the characteristics of the country being trusted, but also by cultural aspects of the match between trusting country and trusted country, such as religion, history of conflicts, and genetic and somatic similarities. We then find that lower bilateral trust leads to less trade between two countries, less portfolio investment, and less direct investment, even after controlling for the characteristics of the two countries. This effect is stronger for goodsthat are more trust intensive. Our results suggest that perceptions rooted in culture are important (and generally omitted) determinants of economic exchange.

10. A Lobbying Approach to Evaluating the Sarbanes-Oxley Act of 2002 [, (with Yael Hochberg and Annette Vissing-Jørgensen), forthcoming, Journal of Accounting Research. Last revision: December, 2008.

ABSTRACT: We evaluate the net benefits of the Sarbanes-Oxley Act (SOX) for shareholders by studying the lobbying behavior of investors and corporate insiders to affect the final implemented rules under the Act. Investors lobbied overwhelmingly in favor of strict implementation of SOX, while corporate insiders and business groups lobbied against strict implementation. We identify the firms most affected by the law as those whose insiders lobbied against strict implementation. Lobbying firms appear likely to be characterized by agency problems, rather than primarily motivated by concerns over high compliance costs. We compare the returns of lobbying firms to the returns of less affected firms. Cumulative returns during the five and a half months leading up to passage of SOX were approximately 7 percent higher for corporations whose insiders lobbied against one or more of the SOX disclosure-related provisions than for similar non-lobbying firms. Analysis of returns in the post-passage implementation period indicates that investors' positive expectations with regards to the effects of these provisions of the law were warranted.

11. What Do Independent Directors Know? Evidence from Their Trading], (with Enrichetta Ravina), forthcoming in The Review of Financial Studies. Last revision: September 2008.

ABSTRACT: We compare the trading performance of independent directors and other officers of the firm. We find that independent directors earn positive and substantial abnormal returns when they purchase their company stock, and that the difference with the same firm’s officers is relatively small at most horizons. The results are robust to controlling for firm-fixed effects and to using a variety of alternative specifications. Executive officers and independent directors make higher returns in firms with the weakest governance and the gap between these two groups widens in such firms. Independent directors who sit on the audit committee earn higher returns than other independent directors at the same firm. Finally, independent directors earn significantly higher returns than the market when they sell the company stock in a window before bad news and around earnings restatements.

12. Culture, Math, and Gender, [Supporting Online Materials] (with Luigi Guiso, Ferdinando Monte and Luigi Zingales), Science, May 30, 2008, 320(5880): 1164-1165

ABSTRACT: Analysis of PISA results suggests that the gender gap in math scores disappears in countries with a more gender-equal culture.

13. Alfred Marshall Lecture — Social Capital as Good Culture [], (with Luigi Guiso and Luigi Zingales), The Journal of the European Economic Association, April-May 2008, 6(2-3): 295-320 (Published paper available online through Science Direct).

ABSTRACT: To explain the extremely long-term persistence (more than 500 years) of positive historical experiences of cooperation (Putnam 1993), we model the intergenerational transmission of priors about the trustworthiness of others. We show that this transmission tends to be biased toward excessively conservative priors. As a result, societies can be trapped in a low-trust equilibrium. In this context, a temporary shock to the return to trusting can have a permanent effect on the level of trust. We validate the model by testing its predictions on the World Values Survey data and the German Socio Economic Panel. We also present some anecdotal evidence that these priors are reflected in novels that originate in different parts of the country.

14. Trusting the Stock Market , (with Luigi Guiso and Luigi Zingales), The Journal of Finance, December 2008, Volume 63, Issue 6 (p 2557-2600).

ABSTRACT: We study the effect that a general lack of trust can have on stock market participation. In deciding whether to buy stocks, investors factor in the risk of being cheated. The perception of this risk is a function not only of the objective characteristics of the stocks, but also of the subjective characteristics of the investor. Less trusting individuals are less likely to buy stock and, conditional on buying stock, they will buy less. We find evidence consistent with these propositions in Dutch and Italian micro data, as well as in cross country data. All the evidence suggests that lack of trust could be an important factor in explaining the limited participation puzzle, especially among more wealthy investors.

15. The Stock Market and Corporate Investment: a Test of Catering Theory, (with Christopher Polk), Review of Financial Studies, January 2009, 22(1): 187-217. This paper previously circulated with the title “The Real Effects of Investor Sentiment.”

ABSTRACT: We test a catering theory describing how stock market mispricing might influence individual firms’ investment decisions. We use discretionary accruals as our proxy for mispricing. We find a positive relation between abnormal investment and discretionary accruals; that abnormal investment is more sensitive to discretionary accruals for firms with higher R&D intensity (opaque firms) or share turnover (firms with shorter shareholder horizons); that firms with high abnormal investment subsequently have low stock returns; and that the larger the relative price premium, the stronger the abnormal return predictability. We show that patterns in abnormal returns are stronger for firms with higher R&D intensity or share turnover.

16.Does Culture Affect Economic Outcomes? , (with Luigi Guiso and Luigi Zingales), The Journal of Economic Perspectives, Spring 2006, 20(2): 23-48. (Published paper available online through the American Economic Association.)

ABSTRACT: Economists have been reluctant to rely on culture as a possible determinant of economic phenomena. The notion of culture is so broad and the channels through which it can enter the economic discourse so vague that it is difficult to design testable hypotheses. In this paper we show this does need to be the case. We introduce a narrower definition of culture that allows for a simple methodology to develop and test cultural-based explanations. We also present several applications of this methodology: from the choice to become entrepreneur to that of how much to save, to end with the political decision on income redistribution.

17. Does Local Financial Development Matter? (with Luigi Guiso and Luigi Zingales), Quarterly Journal of Economics, 2004, 119 (3): 929-969 (Published paper available online through MIT Press.)

ABSTRACT: We study the effects of differences in local financial development within an integrated financial market. To do so, we construct a new indicator of financial development by estimating a regional effect on the probability that, ceteris paribus, a household is shut off from the credit market. By using this indicator we find that financial development enhances the probability an individual starts his own business, favors entry, increases competition, and promotes growth of firms. As predicted by theory, these effects are weaker for larger firms, which can more easily raise funds outside of the local area. Overall, the results suggest local financial development is an important determinant of the economic success of an area even in an environment where there are no frictions to capital movements.

18.The Role of Social Capital in Financial Development (with Luigi Guiso and Luigi Zingales), American Economic Review, June 2004, 94(3): 526-556 (Published paper available online through the American Economic Association.)

ABSTRACT: To identify the effect of social capital on financial development, we exploit the well-known differences in social capital (Banfield (1958), Putnam (1993)) across different parts of Italy. In areas of the country with high levels of social capital, households invest less in cash and more in stock, use more checks, have higher access to institutional credit, and make less use of informal credit. The effect of social capital is stronger where legal enforcement is weaker and among less-educated people. These results are not driven by omitted environmental variables, since we show that the behavior of movers is still affected by the level of social capital present in the province where they were born.

19. The Effects of Government Ownership on Bank Lending , Journal of Financial Economics, May 2004, 72(2): 357-384. Reprinted in Stijn Claessens and Luc Laeven (editors), A Reader in International Corporate Finance. Washington, DC: World Bank Publications, 2006, pp. 259-286. (Published paper available online through Science Direct).
This paper previously circulated with the title “What do State-owned Firms Maximize? Evidence from the Italian Banks” and “Lending Incentives of State Owned Firms.”

ABSTRACT: This paper uses information on individual loan contracts to study the effects of government ownership on bank lending behavior. State-owned banks charge lower interest rates than do privately owned banks to similar or identical firms, even if firms are able to borrow more from privately owned banks. State-owned banks mostly favor large firms and firms located in depressed areas. The lending behavior of state-owned banks is affected by the electoral results of the party affiliated with the bank: the stronger the political party in the area where the firm is borrowing, the lower the interest rates charged.

20. People’s Opium? Religion and Economic Attitudes , (with Luigi Guiso and Luigi Zingales), Journal of Monetary Economics, January 2003, 50(1): 225-282 (Published paper available online through Science Direct).

ABSTRACT: Since Max Weber, there has been an active debate on the impact of religion on people’s economic attitudes. Much of the existing evidence, however, is based on cross-country studies in which this impact is confounded by differences in other institutional factors. We use the World Values Surveys to identify the relationship between intensity of religious beliefs and economic attitudes, controlling for country fixed effects. We study several economic attitudes toward cooperation, the government, working women, legal rules, thriftiness, and the market economy. We also distinguish across religious denominations, differentiating on whether a religion is dominant in a country. We find that on average, religious beliefs are associated with “good” economic attitudes, where “good” is defined as conducive to higher per capita income and growth. Yet religious people tend to be more racist and less favorable with respect to working women. These effects differ across religious denominations. Overall, we find that Christian religions are more positively associated with attitudes conducive to economic growth.

21. The Effects of Banking Mergers on Loan Contracts , Journal of Finance, February 2002, 57(1): 329-368 (Published paper available online through Ingenta).

ABSTRACT: This paper studies the effects of banking mergers on individual loan borrowers. Using information on individual loan contracts between banks and companies, I analyze the consequences of banking consolidation on banks’ credit policies. I find that (i) in-market mergers are beneficial to borrowers if these mergers involve the acquisition of banks with small market shares. In these cases, interest rates charged by the consolidated banks decrease, consistently with the view that horizontal mergers generate efficiency gains. However, as the local market share of the acquired bank increases, the efficiency effect is offset by market power; (ii) mergers have different distributional effects across borrowers of different sizes; (iii) small borrowers of target banks are less likely to borrow in the future from the consolidated bank than borrowers of similar banks not involved in mergers. The decision to deny credit to small borrowers does not seem to be based on the quality of the borrower, confirming potential adverse welfare effects of the banking consolidation on the availability of credit to small businesses.

Other writings

22.A Description of the Templeton-Chicago MBAs Longitudinal Studywith Ernesto Reuben and Luigi Zingales (January 2008)

ABSTRACT: This document describes the data analyzed in the Templeton-Chicago MBAs longitudinal study. The study is based on the entire 2008 generation of MBA students from Chicago University’s Graduate School of Business. The data described in this document are obtained from three different sources: surveys, laboratory experiments, and the GSB’s admission department. We give a brief overview of each data source, in addition to a detailed description of the data-collection procedures.

23.Discussion of “The Bright Side of Internal Capital Markets” by Naveen Khanna and Sheri Tice, Journal of Finance, August 2001, 56(4): 1528-1531. (Published version available online through Ingenta.)

24.Comments on “Lessons from Case Studies on Large Insolvencies” in Douglas D. Evanoff and George G. Kaufman (eds.), Systemic Financial Crises: Resolving Large Bank Insolvencies, pp. 391-394. New Jersey: World Scientific, 2005.

Datasets

Dataset for paper “The Role of Social Capital in Financial Development,” American Economic Review, 94(3): 526-556 (data download)

Betsey Stevenson

Contact Information

T: (215) 898-3019
betseys(at)wharton.upenn.edu

Current Projects

Subjective well-being and economic growth, sports participation and labor market outcomes, Internet job search and worker flows, the interaction of households and the labor market, gender issues and public policy

You can read Betsey’s complete vita here.

What’s new with Betsey

• New York Times, Room for Debate: Unlucky in Labor, Unlucky in Love
• Data: Calculate your cohort’s divorce probability
• Research Paper: Women’s Education and Family Behavior
• Research Paper: Economic Growth and Subjective Well-being: Reassessing the Easterlin Paradox
• Boston Globe Interview: It turns out money really does buy happiness. Uh-oh.
• Research Paper: Happiness Inequality in the United States
• Research Summary: NBER Digest: Happiness is More Evenly Distributed Among Americans
• Economist Debates: America failing at happiness?

Teaching

• MBA BPUB 621 (Core class)
  The Government and Legal Environment of Business

The business environment has market and nonmarket components. The market component is characterized by the economics of an industry and a firm’s position in it. The “non-market” component is the broader political, legal, and civil context in which companies function. This course addresses how businesses manage their interactions with political and regulatory institutions, the law, and the public.

• BPUB 201: The Political Economy of Social Policy This course uses microeconomics to evaluate public policy. The course has two aims. The first aim is to provide a microeconomic toolkit that we will use to identify failures of the competitive market; the circumstances in which government intervention can improve economic efficiency; and alternatives to government intervention. The second aim of the course is to apply this toolkit to current policy issues, including environmental regulation, tax policy, health care reform and the problem of the uninsured; education policy; social security reform and the costs and benefits of private accounts; antitrust policy, and policy to promote research and development.

• BPUB 203: Business in the Global Political Environment
  This course focuses on business issues that are mediated through the public sector. Specific governmental policies towards markets will be examined, including antitrust policy, economic regulation and deregulation, social regulation, and market infrastructure (intellectual property, fraud and securities regulation). The course includes discussion of corporate responsibility and ethical issues in international business. Lectures and case studies focus on currently pending actions worldwide, including Internet related issues. The course applies theoretical principles of strategic thinking, industrial organization, and political science to studying the interactions between multinational firms and political institutions.

• Economics of Marriage and Divorce
  Sophomore Tutoral, Harvard University
  Designed and taught class, 1999-2000 and 2000-2001.

This course explores a new and burgeoning literature that applies the tools of economics in order to gain insight into marriage, divorce and the family. We will start by evaluating what we mean by the “economic approach” to the family. The standard economic assumption of self-interested maximization will be contrasted with insights from sociology, philosophy and feminist theory. We will then look at what motivates people to form a family and, once formed, how families make decisions. Further, we will examine models in which differences in opinion may be resolved through bargaining, threats, or cooperation. Finally, theories of the family will be applied to one of the most contentious social policy issues of our time: the decline in traditional family structures. We will ask why divorce rates are rising so rapidly, and what the main effects of this may be. Our aim is to develop your skills as an economist, as a social policy analyst, and as a multi-disciplinary scholar. Because this research agenda is still in its infancy, we will come fairly quickly to the frontiers of economic knowledge, which holds the prospect that your final paper can make an innovative contribution.

Selected Publications

Law and Economics (back to top)

• Beyond the Classroom: Using Title IX to Measure the Return to High School Sports (back to top)
  Review of Economics and Statistics, Forthcoming

Abstract: Cross-sectional evidence suggests that high school athletes experience better outcomes than non-athletes, including higher educational attainment, more employment, and higher wages. Students self-select into athletics, however, so these may be selection effects rather than causal effects. This paper uses credibly exogenous variation in athletic participation caused by Title IX, federal legislation that led to dramatic increases in the number of American girls participating in high school sports. Between 1972 and 1978 U.S. high schools rapidly increased their female athletic participation rates (to approximately the same level as their male athletic participation rates) in order to comply with Title IX. This paper uses variation in the level of boys’ athletic participation across states before Title IX as an instrument for the change in girls’ athletic participation over the 1970s. Analyzing 25-34 year olds in the 1980 & 2000 censuses, I find that a 10-percentage point rise in the opportunity to play sports at the state-level generates an increase of 1 to 2 percentage points in college attendance and a 1 to 2 percentage point rise in female labor force participation. Furthermore, greater opportunities to play sports leads to greater female participation in previously male-dominated occupations, particularly for high-skill occupations.

• Title IX and the Evolution of High School Sports (back to top)
  Contemporary Economic Policy, 25(4), October 2007. [Lead Article]

Abstract: The passage of Title IX, the 1972 Education Amendments to the Civil Rights Act, expanded high school athletic opportunities to include girls, revolutionizing mass sports participation in the United States. This paper analyzes high school athletic participation in the United States and how sports offerings for boys and girls changed subsequent to the passage of this legislation. Girls’ sports participation rose dramatically both following the enactment of Title IX and subsequent to enhancements to its enforcement. Approximately half of all girls currently participate in sports during high school, however, there remains a substantial gap between girls and boys participation in many states. States’ average education level and social attitudes regarding Title IX and women’s rights are correlated with this remaining gender gap. Examining individual high school students, sports participation is seen more frequently among those with a privileged background: white students with married, wealthy, educated parents are more likely to play sports. This finding points to an overlooked fact—while Title IX benefited girls by increasing the opportunity to play sports, these benefits were disproportionately reaped by those at the top of the income distribution.

• Bargaining in the Shadow of the Law: Divorce Laws and Family Distress^* (back to top)
  Joint with Justin Wolfers
  Quarterly Journal of Economics, 121(1) February 2006

  Abstract: This paper exploits the variation occurring from the different timing of divorce law reforms across the United States to evaluate how unilateral divorce changed family violence and whether the option provided by unilateral divorce reduced suicide and spousal homicide. Unilateral divorce both potentially increases the likelihood that a domestic violence relationship ends and acts to transfer bargaining power toward the abused, thereby potentially stopping the abuse in extant relationships. In states that introduced unilateral divorce we find a 8-16% decline in female suicide, roughly a 30% decline in domestic violence for both men and women, and a 10% decline in females murdered by their partners.

  ^*Previously circulated as ‘Til Death Do Us Part: Effects of Divorce Laws on Suicide, Domestic Violence and Intimate Homicide.
  Click here to access the NBER Working paper: NBER Working Paper 10175

Press Reaction:

US: The New York Times, Slate.com (book excerpt), Washington Post, Washington Times
Canada: The National Post
Australia: Canberra Times

• The Impact of Divorce Laws on Marriage-Specific Capital (back to top)
  Journal of Labor Economics 25(1) January 2007

Abstract: This paper considers how divorce law alters the incentives for couples to invest in their marriage, focusing on the impact of unilateral divorce laws on investments in new marriages. Differences across states between 1970 and 1980 provide useful quasi-experimental variation with which to consider incentives to invest in several types of marriage-specific capital: spouse’s education, children, household specialization, and home ownership. I find that adoption of unilateral divorce—regardless of the prevailing property-division laws—reduces investment in all types of marriage-specific capital considered except home ownership. In contrast, results for home ownership depend on the underlying property division laws.

Press Reaction:

US: Slate.com (book excerpt), Regional Economist, Financial Times (blog)

• Divorce Law and Women’s Labor Supply (back to top)
  Journal of Empirical Legal Studies, Forthcoming

Abstract: Divorce law changes made in the 1970s affected marital formation, dissolution, and bargaining within marriage. By altering the terms of the marital contract these legal changes impacted the incentives for women to enter and remain in the labor force. Whereas earlier work had suggested that the impact of unilateral divorce on female employment depended critically on laws governing property division, I show that these results are not robust to alternative specifications and controls. I find instead that unilateral divorce led to an increase in both married and unmarried female labor force participation, regardless of the underlying property laws.

Marriage and Divorce: Changes and their Driving Forces (back to top)
Joint with Justin Wolfers
Journal of Economic Perspectives, 21(2) Spring 2007.

Abstract: We document marriage and divorce behavior, comparing trends through the past 150 years and outcomes across demographic groups and countries. While divorce rates have risen over the past 150 years, they have been falling for the past quarter century. Marriage rates have also been falling, but more strikingly, the importance of marriage at different points in the life cycle has changed, reflecting rising age at first marriage, rising divorce followed by high remarriage rates, and a combination of increased longevity with a declining age gap between husbands and wives. Cohabitation has also become increasingly important, emerging as a widely used step on the path to marriage. Out-of-wedlock fertility has also risen, consistent with declining “shotgun marriages”. Compared with other countries, marriage maintains a central role in American life. We then turn to documenting some of the driving forces causing these changes in the marriage market: the rise of the pill and women’s control over their own fertility; sharp changes in wage structure, including a rise in inequality and partial closing of the gender wage gap; dramatic changes in home production technologies; and the emergence of the internet as a new matching technology. Finally, we discuss how these facts should inform family policy debates.

Press Reaction:

US: The New York Times, The Washington Post, Santa Cruz Sentinel, Kansas City Star,
Slate.com (book excerpt), CBS News Transcript,
Jet, Anchorage Daily News

India: Business Line

UK: Telegraph

• The Paradox of Declining Female Happiness (back to top)
  Joint with Justin Wolfers
  American Economic Journal: Economic Policy, Forthcoming

  Abstract: By most objective measures the lives of women in the United States have improved over the past 35 years, yet we show that measures of subjective well-being indicate that women’s happiness has declined both absolutely and relative to male happiness. The paradox of women’s declining relative well-being is found examining multiple countries, datasets, and measures of subjective well-being, and is pervasive across demographic groups. Relative declines in female happiness have eroded a gender gap in happiness in which women in the 1970s typically reported higher subjective well-being than did men. These declines have continued and a new gender gap is emerging—one with higher subjective well-being for men. Our findings raise provocative questions about the contribution of the women’s movement to women’s welfare and about the legitimacy of using subjective well-being to assess broad social changes.

Press Reaction:

US: The New York Times: (1) (2), Philadelphia Inquirer, ABC News (1) (2), Detroit News, Morning Call, The Daily Pennsylvanian, San Francisco Chronicle, Self (Magazine)

Australia: Sydney Morning Herald, MX (Australia)

Canada: Times Colonist, MacLean’s Magazine

Germany: Frankfurter Allgemeine Zeitung (in German)

UK: Financial Times (1), (2) The Daily Mail (1) (2) (3), IC (Wales)

Video: ABC News (.avi) (Transcript)

Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox (back to top)
Brookings Papers on Economic Activity, Forthcoming
Joint with Justin Wolfers

The “Easterlin Paradox” suggests that there is no link between the level of economic development of a society and average levels of happiness. We return to Easterlin‘s question: “Will raising the incomes of all increase the happiness of all?” and analyze multiple rich datasets spanning recent decades and a broader array of countries. We establish a clear positive link between GDP and average levels of subjective well-being across countries with no evidence of a satiation point beyond which wealthier countries have no further increases in subjective well-being. Moreover, we show that this relationship is consistent with the relationship between income and happiness within countries, suggesting a minimal role for relative income comparisons as drivers of happiness. Finally, we examine the relationship between changes in subjective well-being and income over time within countries, finding a powerful role for economic growth in raising happiness.

Stata 9 dataset, code, and figures (.zip file ~106 MB)

Press Reaction:

Television: Nightline, (YouTube), Fox Biz (YouTube), CNBC Street Signs (YouTube)

Radio: BBC, WHYY Philadelpiha (NPR)

US: Wall Street Journal, The New York Times, Las Vegas Sun, ABC News, Portfolio.com,
WebMD, Science & Spirit, Boston Globe

Australia: Gold Coast Bulletin, The Australian

Dubai: Gulf News

France: Agence France-Presse, Les Echos (in French)

India: Hindustan Times, The Statesman

Ireland: The Irish Times

Israel: The Jerusalem Post

Italy: Il Mondo

Philippines: Philippine Daily Inquirer

Sweden: Dagens Nyheter (in Swedish)

Thailand: : Bangkok Post

UK: The Times (London), The Mail on Sunday, Financial Times (1) (2) (3), Telegraph

• Happiness Inequality in the United States (back to top)
  Journal of Legal Studies, Forthcoming
  Joint with Justin Wolfers

  Abstract: This paper examines how the level and dispersion of self-reported happiness has evolved over the period 1972-2006. While there has been no increase in aggregate happiness, inequality in happiness has fallen substantially since the 1970s. There have been large changes in the level of happiness across groups: Two-thirds of the black-white happiness gap has been eroded, and the gender happiness gap has disappeared entirely. Paralleling changes in the income distribution, differences in happiness by education have widened substantially. We develop an integrated approach to measuring inequality and decomposing changes in the distribution of happiness, finding a pervasive decline in within-group inequality during the 1970s and 1980s that was experienced by even narrowly-defined demographic groups. Around one-third of this decline has subsequently been unwound. Juxtaposing these changes with large rises in income inequality suggests an important role for non-pecuniary factors in shaping the well-being distribution.

  Stata 10 dataset, code, and figures (.zip file ~19.3 MB)

  Press Reaction:

  US: The New York Times (and IHT), NBER Digest, Chicago Tribune, San Diego Union-Tribune
  France: International Herald Tribune

• Trends in Marital Stability (back to top)
  Joint with Justin Wolfers
  Under Review

  Abstract: Recent reports about the stability of marriages appear to yield conflicting conclusions. We reconcile these estimates, showing that data from several sources uniformly point to increasing marital stability among those married since the mid-late 1970s.

  Press Reaction:

  TV: CBS Early Show (.avi)
  US: The New York Times (op-ed), Star Ledger, Kansas City Star, Newsweek

• The Evolution of the American Family: An Economic Interpretation (back to top)
  American Journal of Family Law, 22(3) Fall 2008

The last few decades have seen enormous changes in family forms. The institution of the family has been influenced by an array of socio-economic, regulatory, and even technological forces. Families involving same-sex marriage, divorce, remarriage, and planned childbirth or semi-permanent cohabitation in the absence of marriage have gained social acceptability if not legal rights. Additionally, the institutions of marriage and family have by no means come to rest. The debate among policymakers and the public continues over the effect of divorce on children, whether unilateral divorce or abortion laws need to be revised or overturned, and whether long-term cohabitants or same-sex partners have a right to employment or death benefits. As these debates become disputes and find their way to the legal system, the family lawyer can play a vital role in shaping the future of the family.

• Women’s Education and Family Behavior: Trends in Marriage, Divorce and Fertility (back to top)
  Joint with Adam Isen

  The production efficiencies of household specialization have declined with the development of technologies simplifying household production. Additionally, the opportunity cost of having a household specialist has risen as barriers to women in the workplace have been eroded. These developments, which have made way for an increase in the relative importance of the consumption benefits from marriage, have not impacted all families similarly. This paper examines how marital and fertility patterns have changed along racial and educational lines for men and women. Marriage and remarriage rates have risen for women with a college degree relative to women with fewer years of education, eroding a long-standing gap caused by greater marriage propensities among less educated women. In contrast, there has been little change in marital patterns by education for men. Divorce has been falling for all groups, but fell earlier and more sharply among college graduates. Fertility has historically declined with women’s educational attainment and that pattern continues, with the total number of births having changed little by women’s educational attainment, despite the large increases in educational attainment for women. However, there has been a rise in the age of educated mothers, with little change in fertility timing for those with less education.Press Reaction:

  The New York Times

Labor and Technology (back to top)

• The Impact of the Internet on Worker Flows (back to top)Abstract: The Internet represents a large shock to information flows and the nature of market transactions. This paper focuses on how this shock translates into changes in job search. It is likely that the Internet has both reduced search costs, and altered relativities, such as the returns to different types of search, and the ease with which one can search outside the local labor market. I find that in states that adopted the Internet rapidly, the unemployed have expanded their search activities and reallocated their effort across types of job search. The employed also appear to be searching more (or more successfully), with job-to-job flows increasing. Moreover, the Internet has changed the scope of job searches, as information now flows more freely across regional economies, stimulating greater migration across states. While it can be difficult to disentangle whether changes in state labor markets reflect Internet usage or drive Internet adoption, I find a useful instrument that isolates the causal mechanism: the Internet has diffused in much the same way as past innovations, and hence average state ownership rates of household appliances in 1960 describe Internet adoption patterns over the past decade. Disaggregating my main results, I find that the Internet has had the largest effects on the search behavior and mobility of the young and those with at least some college. Estimates on “placebos”, such as low-skill workers, show little effect.

• The Internet and Job Search
  Labor Market Intermediation forthcoming University of Chicago Press

  Abstract: This paper examines how the Internet has impacted job search behavior. Examining those who use the Internet for job seeking purposes, I show that the vast majority are currently employed. These employed job seekers are more likely to leave their current employer and are more likely to make an employment-to-employment transition. Examining the unemployed, I find that over the past ten years the variety of job search methods used by the unemployed has increased and job search behavior has become more extensive. Furthermore, the Internet has led to reallocation of effort among various job search activities.

  Press Reaction:Companies Give “Web Search” a New Meaning (CFO.com), Bloomberg.com

Health/Public Economics (back to top)

• Health Insurance Coverage of People in the Ten Years before Medicare Eligibility (back to top)
  Joint with Katherine Swartz
  Published, Ensuring Health and Income Security for an Aging Workforce
  Peter Budetti, Janice Gregory, Richard Burkhauser and Allan Hunt (eds)National Academy of Social Insurance (2001).

  Abstract: This paper examines the current 55 to 64-year-old cohort’s economic status and financial preparation for their upcoming retirement. The age group in question has been of particular concern to policy makers as they are the first group of the baby-boom generation to become eligible for Medicare and Social Security. This paper evaluates relevant policy issues and potential solutions through a thorough examination of this group’s current financial characteristics.

Policy Papers (back to top)

• America failing at happiness? (back to top)

Proposition: “America is failing at the pursuit of happiness”
The Economist Debates, November 10, 2007

• How Should We Think About the Taxpayer Consequences of Divorce? (back to top)

Joint with Justin Wolfers
Council on Contemporary Families, April 15, 2008

• Marriage and the Market (back to top)
  Joint with Justin Wolfers
  Cato Unbound, January 18, 2008

Press Reaction: The American

• Divorce and Children: What Do We Know? (back to top)
  Joint with Justin Wolfers
  Cato Unbound, January 27, 2008

• (De-)Regulating the Family (back to top)
  Joint with Justin Wolfers
  Cato Unbound, January 30, 2008

Michael Weisbach

Contact Information

T: (614) 292-3264
weisbach_2(at)fisher.osu.edu

Short Biography

Dr Michael S. Weisbach is the Ralph W. Kurtz Chair in Finance, as well as a Research Associate of the National Bureau of Economic Research. He has previously taught at the University of Illinois, the University of Chicago, the University of Rochester, and the University of Arizona. Dr. Weisbach is an editor of The Review of Financial Studies, one of the leading academic journals in finance, and has been an associate editor of five other academic journals. He is a senior advisor of The Brattle Group, a Cambridge, Massachusetts business-economics and litigation-support consulting firm. Dr. Weisbach has broad-ranging research and teaching interests in finance and economics, with specialties in corporate finance, corporate governance, and private equity. He has 31 publications on these and related topics, which together have been cited over 1500 times.

You can find Mike’s complete resume here. Also, you can find more picture of Mike and his family here.

Working Papers

“Market Conditions and the Structure of Securities ” (with Isil Erel, Brandon Julio and Woojin Kim).

Leverage and Pricing in Buyouts: An Empirical Analysis” (with Tim Jenkinson, Per Strömberg and Ulf Axelson).

“Information and Disclosure and Corporate Governance”(with Benjamin E. Hermalin), under revision for Journal of Finance.

“What Determines the Structure of Corporate Debt Issues?” (with Brandon Julio and Woojin Kim).

Published Papers

Michael Weisbach with family

“The Role of Boards of Directors in Corporate Governance: A Conceptual Framework & Survey” (with Renée Adams and Benjamin E. Hermalin), Journal of Economic Literature, forthcoming.

“Corporate Financial and Investment Policies when Future Financing is not Frictionless,” (with Heitor Almeida and Murillo Campello), Journal of
Corporate Finance, forthcoming.

“ Why are Buyouts Levered? The Financial Structure of Private Equity Firms (with Ulf Axelson and Per Strömberg ), The Journal of Finance, forthcoming.

“ Motivations for Public Equity Offers: An International Perspective ” (with Woojin Kim), Journal of Financial Economics, Vol. 87, (February 2008), pp. 281-307.

“Optimal Executive Compensation vs. Managerial Power:A Review of Lucian Bebchuk and Jesse Fried’s Pay without Performance: The Unfulfilled Promise of Executive Compensation ”, Journal of Economic Literature, Vol. XLV (June 2007), pp. 420-429.

“ World Markets for Raising New Capital” (with Brian J. Henderson and Narasimhan Jegadeesh), Journal of Financial Economics, Vol. 82, (October 2006) pp. 63-101.

“ Horses and Rabbits? Trade-Off Theory and Optimal Capital Structure ” (with Nengjiu Ju, Robert Parrino and Allen M. Poteshman), Journal of Financial and Quantitative Analysis, Vol. 40, (June 2005), pp. 259-281. Web-only Appendices: Appendix A . Appendix B. Appendix C.

“ Measuring Investment Distortions When Risk-Averse Managers Decide Whether to Undertake Risky Projects ” (with Robert Parrino and Allen M. Poteshman), Financial Management, Vol. 34, Issue 1 (Spring 2005) pp. 21-60.

“ Governance, Performance Objectives and Organizational Form: Evidence from Hospitals ” ( with Leslie Eldenburg, Benjamin E. Hermalin, and Marta Wosinska), Journal of Corporate Finance, Vol. 10, (September 2004) pp. 527-548.

“ The Cash Flow Sensitivity of Cash” (with Heitor Almeida and Murillo Campello), The Journal of Finance, Vol. 59, (August 2004), pp. 1777-1804. Brattle Prize nominee for 2004

“ Private Benefits and Cross-Listings in the United States” (with Evangelos Benos), Emerging Markets Review, Vol. 5 (June 2004), pp. 217-240.

“ The Economics of Has-Beens” (with Glenn MacDonald), Journal of Political Economy, Vol. 112, (February 2004), pp. S289-S310.

“ Boards of Directors as an Endogenously Determined Institution: A Survey of the Economic Literature” (with Benjamin E. Hermalin), Economic Policy Review, Vol. 9, Number 1,(April 2003) pp. 7-26. Reprinted in IJMR, The Icfaian Journal of Management Research, Vol. 3, Number 5 (May 2004) pp. 39-68.

“Protection of Minority Shareholder Interests, Cross-Listings in the United States, and Subsequent Equity Offerings” (with William A. Reese, Jr.), Journal of Financial Economics, Vol. 66 (October, 2002), pp. 65-104. Reprinted in Governance: An International Perspective, edited by Diane Denis and John McConnell, Edward Elgar publishing, 2005.

“Financial Flexibility and The Choice Between Dividends and Stock Repurchases” (with Murali Jagannathan and Clifford P. Stephens), Journal of Financial Economics, Vol. 57 (September 2000), pp. 355-384. Reprinted in Recent Developments in Corporate Finance, edited by Jay Ritter, Edward Elgar publishing, 2005.

“Discussion of Gompers and Lerner’s ‘Corporate Venture Capital, Complementarities, and Success’,” in Concentrated Ownership, edited by Randall Morck, University of Chicago Press: Chicago, IL, 2000.

“Measuring Investment Distortions Arising from Stockholder-Bondholder Conflicts,” (with Robert Parrino), Journal of Financial Economics, Vol. 53 (July, 1999), pp. 3-42.

“The Influence of Institutions on Corporate Governance through Private Negotiations: Evidence from TIAA-CREF” (with Willard T. Carleton and James M. Nelson), The Journal of Finance, Vol. 53 (August, 1998), pp. 1335-1362. Featured in The Economist, June 21, 1997.

“Open-End Mutual Funds and Capital Gains Taxes” (with Michael J. Barclay and Neil D. Pearson), Journal of Financial Economics, Vol. 49 (July, 1998), pp. 3-43.

“ Endogenously Chosen Boards of Directors and Their Monitoring of the CEO ” (with Benjamin E. Hermalin), American Economic Review, Vol. 88 (March, 1998), pp. 96-118. Reprinted in Governance, Directors and Boards, edited by Mahmoud Ezzamel, Edward Elgar Publishing: United Kingdom, 2005.

“Actual Share Reacquisitions in Open-Market Repurchase Programs” (with Clifford P. Stephens), The Journal of Finance, Vol. 53 (February, 1998), pp. 313-334. Featured in Bloomberg Business News, June 26, 1996 and Forbes, April 21, 1997.

“Securities Fraud Lawsuits: A Descriptive Study” (with Willard T. Carleton and Elliott J. Weiss), Arizona Law Review, Vol. 38 (Summer, 1996), pp. 491-511.

“Institutional Investors and the Governance of Canadian Corporations: An American Perspective,” in Corporate Decision Making in Canada, ed. by R. Daniels and R. Morck, University of Calgary Press: Calgary, Alberta, 1995.

“CEO Turnover and the Firm’s Investment Decisions,” Journal of Financial Economics, Vol. 37 (February, 1995) pp. 159-188. Featured in The Wall Street Journal, April 20, 1993 and Dec. 2, 1993.

“Accounting Information and Internal Performance Evaluation: Evidence from Texas Banks” (with David W. Blackwell and James A. Brickley), Journal of Accounting and Economics, Vol. 17 (May, 1994), pp. 331-358.

“Corporate Governance and Hostile Takeovers,” Journal of Accounting and Economics, Vol. 16 (January/April/July, 1993), pp. 199-208.

“The Success of Acquisitions: Evidence from Divestitures” (with Steven N. Kaplan), The Journal of Finance, Vol. 47 (March, 1992), pp. 107-138: Smith-Breeden prize nominee for 1992.

“The Effects of Board Composition and Direct Incentives on Firm Performance” (with Benjamin E. Hermalin), Financial Management, Vol. 20, No. 4 (Winter, 1991), pp. 101-112.

“The Economic Effects of Franchise Termination Laws” (with James A. Brickley and Frederick H. Dark), The Journal of Law and Economics, Vol. 34 (April, 1991), pp. 101-132. Reprinted in Franchise Contracting and Organization, edited by Francine Lafontaine, Edward Elgar Publishing, 2005.

“An Agency Perspective on Franchising” (with James A. Brickley and Frederick H. Dark), Financial Management, Vol. 20, No. 1 (Spring, 1991), pp. 27-35.

“Reversions of Excess Pension Assets After Takeovers” (with Jeffrey Pontiff and Andrei Shleifer), The RAND Journal of Economics, Vol. 21, No. 4 (Winter, 1990), pp. 600-613.

“The Determinants of Board Composition” (with Benjamin E. Hermalin), The RAND Journal of Economics, Vol. 19, No. 4 (Winter, 1988), pp. 589-606. Reprinted in Corporate Governance in the New Global Economy, edited by Kevin Keasey, Steve Thompson and Mike Wright, Edward Elgar Publishing, 2005.

“Outside Directors and CEO Turnover” Journal of Financial Economics, Vol. 20, Nos. 1/2 (January/March, 1988), pp. 431-460. Reprinted in The Economics of Executive Compensation, edited by K. Hallock and K. Murphy, Edward Elgar Publishing, 1999, pp. 347-376.

Ricardo Reis

Contact Information

T: 212-851-4007
rreis(at)columbia.edu

Teaching

G6220. Advanced Macroeconomic Analysis I: Expectations in Macroeconomic Analysis
G6215. Macroeconomic Analysis I
W3213. Intermediate Macroeconomics
Colloquia. Monetary Economics
Workshop. Macroeconomics

Selected Publications

Unpublished

• Relative Goods’ Prices, Pure Inflation and the Phillips Correlation, with Mark W. Watson.
  This version: January 2009.

• A Dynamic Measure of Inflation
  This version: April 2009.

• Correlated Disturbances and U.S. Business Cycles
  This version: April 2009.

Published or forthcoming

• Optimal Monetary Policy Rules in an Estimated Sticky-Information Model American Economic Journal: Macroeconomics, forthcoming.

• A Sticky-Information General-Equilibrium Model for Policy Analysis. In: Monetary Policy under Uncertainty and Learning, edited by K. Schmidt-Heubel and C. Walsh, Central Bank of Chile: forthcoming.

• The Time-Series Properties of Aggregate Consumption: Implications for the Costs of Fluctuations Journal of the European Economic Association, 7 (4), xxx-xxx, 2009.

• The Brevity and Violence of Contractions and Expansions, with Alisdair McKay. Journal of Monetary Economics, 55 (4), 738-751, 2008.

• Using VARs to Identify Models of Fiscal Policy: A Comment on Perotti. NBER Macroeconomics Annual 2007, 22, 227-236, 2008.

• Sticky Information in General Equilibrium, with N. Gregory Mankiw. Journal of the European Economic Association, 5 (2-3), 603-613, 2007.

• The Persistence of Inflation in the United States, with Frederic Pivetta. Journal of Economic Dynamics and Control, 31 (4), 1326-1358, 2007.

• The Analytics of Monetary Non-Neutrality in the Sidrauski Model. Economics Letters, 94 (1), 129-135, 2007.

• Inattentive Consumers. Journal of Monetary Economics, 53 (8), 1761-1800, 2006.

• Inattentive Producers. Review of Economic Studies, 73 (3), 793-821, 2006.

• Pervasive Stickiness, with N. Gregory Mankiw. American Economic Review, 96 (2), 164-169, 2006.

• Understanding the Greenspan Standard, with Alan S. Blinder. In: The Greenspan Era: Lessons for the Future, Jackson Hole: Federal Reserve Bank of Kansas City, 11-96 2005.

• Monetary Policy for Inattentive Economies, with Laurence Ball and N. Gregory Mankiw. Journal of Monetary Economics, 52 (4), 703-725, 2005.

• Disagreement about Inflation Expectations, with N. Gregory Mankiw and Justin Wolfers. NBER Macroeconomics Annual 2003, 18, 209-248, 2004.

• What Measure of Inflation Should a Central Bank Target? with N. Gregory Mankiw. Journal of the European Economic Association, 1 (5), 1058-1086, 2003.

• Where Is the Natural Rate? Rational Policy Mistakes and Persistent Deviations of Inflation from Target. Advances in Macroeconomics, 3 (1), article 1, 2003. – Winner of the Kenneth Arrow Prize for Junior Faculty for the best economics paper published in the B.E. Press in 2003.

• Sticky Information: A Model of Monetary Non-neutrality and Structural Slumps , with N. Gregory Mankiw. In: Knowledge, Information, and Expectations in Modern Macroeconomics: In Honor of Edmund S. Phelps, edited by P. Aghion, R. Frydman, J. Stiglitz and M. Woodford, Princeton: Princeton University Press, 64-86, 2003.

• Sticky Information Versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve, with N. Gregory Mankiw. Quarterly Journal of Economics, 117 (4), 1295-1328, 2002.

• Costs of banking system instability: some empirical evidence, with Glenn Hoggarth and Victoria Saporta. Journal of Banking and Finance, 26 (5), 825-855, 2002.

Older working papers, not intended for publication

• Measuring Changes in the Value of the Numeraire, with Mark W. Watson. May 2007.

Data and Programs

Ricardo Reis

(Disclaimer: I do not provide technical support for any of the files in this page. Use at your own risk. Also note that some of the data and the programs in this page took a *lot* of work to produce, often on the part of my co-authors. Please cite the respective paper if you use them.)

Programs to solve and estimate SIGE models.
Files:These are revised and updated programs from the ones used in four papers [1], [2], [3], [4].

Programs to solve SIGE models.
Programs to Bayesian estimate SIGE models.
Programs to study optimal policy in SIGE models.

Replication files.
Optimal Monetary Policy Rules in an Estimated Sticky-Information Model.
Files: Replication files.

A Sticky-Information General-Equilibrium Model for Policy Analysis.
Files: Replication files.

Relative Goods’ Prices and Pure Inflation, with Mark W. Watson
Files: Replication files. Time-series of pure inflation and relative-price factors.

The Brevity and Violence of Contractions and Expansions, with Alisdair McKay
Files: Replication files.

Using VARs to Identify Models of Fiscal Policy: A Comment on Perotti
Files: Replication files.

Sticky Information in General Equilibrium, with N. Gregory Mankiw
Files: Replication files.

A Dynamic Measure of Inflation
Files: DPI series in Excel format.

Inattentive Producers.
Files: Matlab files and data that replicate all the tables and figures.

Disagreement about Inflation Expectations, with N. Gregory Mankiw and Justin Wolfers.
Files: Disagreement series. Full dataset of inflation expectations in Stata 8 format .

Monetary Policy for Inattentive Economies, with Laurence Ball and N. Gregory Mankiw.
Files: Mathematica file that produces all the figures.

Sticky Information Versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve, with N. Gregory Mankiw.
Files: Excel file that produces all the figures.

What Measure of Inflation Should a Central Bank Target? with N. Gregory Mankiw.
Files: Mathematica file that produces all the figures.

I participate in the Dataverse network to make replication programs and data widely available. My Dataverse page is here, where you can find all that is above.

Other links provided by Ricardo

Articles in the press
My writings for the Portuguese press

Working papers
NBER working papers
CEPR discussion papers
Social Science Research Network (SSRN)
IDEAS
EconPapers
Harvard Institute for Economic Research (HIER)
WWS discussion papers in economics
Google Scholar

Affiliations
Columbia University, Department of Economics
National Bureau of Economic Research (NBER)
Centre for Economic Policy Research (CEPR)

Co-authors
Laurence Ball
Alan Blinder
Vasco Curdia
N. Gregory Mankiw
Alisdair McKay
Mark W. Watson
Justin Wolfers

Students, past and present
Carlos Carvalho
Vasco Curdia
Ryo Jinnai
Jae Won Lee
Alisdair McKay
Jordi Mondria
Fernanda Nechio
Roman Romero
Brad Strum
Antonella Tutino
Thomas Wu
Nicola Zaniboni

Additional detail on publications (Abstracts, etc.)

(Disclaimer: Published papers included in this page are for personal use only. They cannot be sold or reproduced for financial purposes. Copyrights belong with the appropriate publishers and definite versions are available on their websites.)

Correlated Disturbances and U.S. Business Cycles
Abstract: The dynamic stochastic general equilibrium (DSGE) models used to study business cycles typically assume that exogenous disturbances are independent with a simple structure for serial correlation. This paper relaxes this tight restriction, by allowing for disturbances that have a rich contemporaneous and dynamic correlation structure. Our first contribution is a new Bayesian econometric method that uses conjugate conditionals to make the estimation of DSGE models with correlated disturbances feasible and quick. Our second contribution is a re-examination of the sources of U.S. business cycles, using two canonical models, one real and the other monetary. We find that when we allow for correlated disturbances, the estimates of crucial parameters are more in line with other evidence, the impulse responses are closer to the results from vector autoregressions, and government spending and technology disturbances play a larger role in the business cycle, while changes in markups are unimportant. Paper: Local file.

A Dynamic Measure of Inflation
Abstract: This paper shows that conventional measures of cost-of-living in.ation, based on static models of consumption, su¤er from two problems. The first is an intertemporal substitution bias, as these measures neglect the ability of consumers to borrow and lend in response to price changes. The second problem is the omission of intertemporal prices, which capture relevant relative prices for a consumer who lives for many periods. The paper proposes a dynamic price index (DPI) that solves these problems. Theoretically, it shows that the DPI is forward-looking, responds by more to persistent shocks, includes assets prices, and distinguishes between durable and non-durable goods’ prices. A constructed DPI for the United States from 1970 to 2008 differs markedly from the CPI, it is close to serially uncorrelated, it is mostly driven by the prices of houses and bonds, and is twice as high as the CPI in 2008.
Paper: Local file. Older version: Circulated under title “A Cost-of-Living Dynamic Price Index, with an Application to Indexing Retirement Accounts, NBER Working paper 11746, CEPR Working paper 5394. Media coverage: The Economist (13th October 2005).

Optimal Monetary Policy Rules in an Estimated Sticky-Information Model .
Abstract:This paper uses a dynamic stochastic general-equilibrium (DSGE) model with sticky information as a laboratory to study monetary policy. It characterizes the model’s predictions for macro-dynamics and optimal policy at prior parameters, and then uses data on five U.S. macroeconomic series to update the parameters and provide an estimated model that can be used for policy analysis. The model answers a few policy questions: How does sticky information affect optimal monetary policy? What is the optimal interest-rate rule? What is the optimal elastic price-level targeting rule? How does parameter uncertainty affect optimal policy? Are the conclusions for the Euro-area different? Paper: Final version.

Relative Goods’ Prices, Pure Inflation and the Phillips Correlation, with Mark W. Watson.
Abstract:This paper uses a dynamic factor model for the quarterly changes in consumption goods’ prices to separate them into three independent components: idiosyncratic relative-price changes, a low-dimensional index of aggregate relative-price changes, and an index of equiproportional changes in all inflation rates, that we label “pure” inflation. The paper estimates the model on U.S. data since 1959, and it presents a simple structural model that relates the three components of price changes to fundamental economic shocks. We use the estimates of the pure inflation and aggregate relative-price components to answer two questions. First, what share of the variability of inflation is associated with each component, and how are they related to conventional measures of monetary policy and relative-price shocks? We find that pure inflation accounts for 15-20% of the variability in inflation while our aggregate relative-price index accounts most of the rest. Conventional measures of relative prices are strongly but far from perfectly correlated with our relative-price index; pure inflation is only weakly correlated with money growth rates, but more strongly correlated with nominal interest rates. Second, what drives the Phillips correlation between inflation and measures of real activity? We find that the Phillips correlation essentially disappears once we control for goods’ relative-price changes. This supports modern theories of inflation dynamics based on price rigidities and many consumption goods.
Paper: Local file. Older version: Circulated under title “Relative Goods’ Prices and Pure Inflation,” as, NBER Working paper 13615, CEPR discussion paper 6593.

A Sticky-Information General-Equilibrium Model for Policy Analysis.
Abstract: This paper presents a dynamic stochastic general-equilibrium model with a single friction in all markets: sticky information. In this economy, agents are inattentive because of costs of acquiring, absorbing and processing information, so that the actions of consumers, workers and firms are slow to incorporate news. This paper presents the details of how an economy with pervasive inattentiveness functions, and develops a set of algorithms that solve the model quickly. It then applies these to estimate the model using data for the United States post-1986 and for the Euro-area post-1993, and to conduct counterfactual policy experiments. The end result is a laboratory that is rich enough to account for the dynamics of at least five macroeconomic series (inflation, output, hours, interest rates, and wages), and which can be used to inform applied monetary policy. Paper: Final version.

Measuring Changes in the Value of the Numeraire, with Mark W. Watson.
Abstract: This paper estimates a common component in many price series that has an equiproportional effect on all prices. Changes in this component can be interpreted as changes in the value of the numeraire since, by definition, they leave all relative prices unchanged. The first aim of the paper is to measure these changes. The paper provides a framework for identifying this component, suggests an estimator for the component based on a dynamic factor model, and assesses its performance relative to alternative estimators. Using 187 U.S. time-series on prices, we estimate changes in the value of the numeraire from 1960 to 2006, and further decompose these changes into a part that is related to relative price movements and a residual ‘exogenous’ part. The second aim of the paper is to use these estimates to investigate two economic questions. First, we show that the size of exogenous changes in the value of the numeraire helps distinguish between different theories of pricing, and that the U.S. evidence argues against several strict theories of nominal rigidities. Second, we find that changes in the value of the numeraire are significantly related to changes in real quantities, and discuss interpretations of this apparent non-neutrality. Paper: Local file.

Using VARs to Identify Models of Fiscal Policy: A Comment on Perotti
Abstract: This note comments on Perotti’s (2008) estimates of the impact of a government spending shock on the economy. In the process, it makes two points. First, it notes that with enough freedom to pick the dynamics of policy variables, the neoclassical model can generate any set of observations for the non-policy variables. Second, it proposes a method to identify the policy dynamics in theoretical models by using the estimated impulse responses of the policy variables from VARs, and in this way generate testable predictions of the model for the non-policy variables. Paper: Final version. See also the longer working paper here or as WWS discussion paper 234.

Sticky Information in General Equilibrium, with N. Gregory Mankiw.
Abstract: This paper develops and analyzes a general-equilibrium model with sticky information. The only rigidity in goods, labor, and financial markets is that agents are inattentive, sporadically updating their information sets, when setting prices, wages, and consumption. After presenting the ingredients of such a model, the paper develops an algorithm to solve this class of models and uses it to study the model’s dynamic properties. It then estimates the parameters of the model using U.S. data on five key macroeconomic time series. It finds that information stickiness is present in all markets, and is especially pronounced for consumers and workers. Variance decompositions show that monetary policy and aggregate demand shocks account for most of the variance of inflation, output, and hours.
Paper: Final version, journal article. See also the longer working paper version here or as NBER Working paper 12605.

The Brevity and Violence of Contractions and Expansions, with Alisdair McKay.
Abstract: Early studies of business cycles argued that contractions in economic activity were briefer (shorter) and more violent (rapid) than expansions. This paper systematically investigates this claim and in the process discovers a robust new business cycle fact: contractions in employment are briefer and more violent than expansions but we cannot reject the null of equal brevity and violence for expansions and contractions in output. The difference arises because employment typically lags output around peaks but they coincide in their troughs. We discuss the performance of existing business cycle models in accounting for this fact, and conclude that none can fully account for it. We then show that a business cycle model with asymmetric adjustment costs on employment and a choice of when to scrap old technologies can account for the business cycle fact both qualitatively and quantitatively. Paper: Final version, journal article. See also the (unpublished) appendix.

The Analytics of Monetary Non-Neutrality in the Sidrauski Model.
Abstract: This note analytically characterizes the equilibrium dynamics of the Sidrauski model and reaches three conclusions regarding monetary policy: (i) it is typically not neutral, (ii) in some cases, it is not neutral even in the steady state, and (iii) a policy that has the nominal interest rate falling over time may sustain higher output and consumption forever. Paper: Final version, journal article.

Pervasive Stickiness, with N. Gregory Mankiw.
Abstract: This paper explores a macroeconomic model of the business cycle in which stickiness of information is pervasive. We start from a familiar benchmark classical model and add to it the assumption that there is sticky information on the part of consumers, workers, and firms. We evaluate the model against three key facts that describe short-run fluctuations: the acceleration phenomenon, the smoothness of real wages, and the gradual response of real variables to shocks. We find that pervasive stickiness is required to fit the facts. We conclude that models based on stickiness of information offer the promise of fitting the facts on business cycles while adding only one new plausible ingredient to the classical benchmark. Paper: Final version, journal article. See also the (unpublished) appendix, or the longer working paper versions here, or as NBER Working paper 12024, or as CEPR Working paper 5521, or as HIER discussion paper 2111.

Understanding the Greenspan Standard, with Alan S. Blinder. Paper: Final version, online book.

The Time-Series Properties of Aggregate Consumption: Implications for the Costs of Fluctuations
Abstract: The properties of the stochastic process followed by aggregate consumption affect the estimates of the costs of fluctuations. This paper pursues two approaches to modelling consumption dynamics and measuring how much society dislikes fluctuations, one statistical and one economic. The statistical approach estimates the properties of consumption and calculates the costs of having consumption fluctuating around its mean growth. The paper finds that persistence is a crucial determinant of the costs and that the high persistence in the data severely distorts conventional measures. It shows how to compute valid estimates and confidence intervals. The economic approach uses a calibrated model of optimal consumption and measures the costs of eliminating income shocks. This uncovers a further cost of uncertainty, through its impact on precautionary savings and investment. The two approaches lead to costs of fluctuations that are higher than the common wisdom, between 0.5% and 5% of per capita consumption. Paper: Final version.

Inattentive Consumers.
Abstract: This paper studies the consumption decisions of agents who face costs of acquiring, absorbing and processing information. These consumers rationally choose to only sporadically update their information and re-compute their optimal consumption plans. In between updating dates, they remain inattentive. This behavior implies that news disperses slowly throughout the population, so events have a gradual and delayed effect on aggregate consumption. The model predicts that aggregate consumption adjusts slowly to shocks, and is able to explain the excess sensitivity and excess smoothness puzzles. In addition, individual consumption is sensitive to ordinary and unexpected past news, but it is not sensitive to extraordinary or predictable events. The model further predicts that some people rationally choose to not plan, live hand-to-mouth, and save less, while other people sporadically update their plans. The longer are these plans, the more they save. Evidence using U.S. aggregate and microeconomic data generally supports these predictions. Paper: Local file, journal article. The longer and older working paper version can be found as NBER Working Paper 10883, or as CEPR Working paper 5053, or as WWS Discussion Paper 232.

Inattentive Producers.
Abstract: I present and solve the problem of a producer who faces costs of acquiring, absorbing, and processing information. I establish a series of theoretical results describing the producer’s behavior. First, I find the conditions under hich she prefers to set a plan for the price she charges, or instead prefers to set a plan for the quantity she sells. Second, I show that the agent rationally chooses to be inattentive to news, only sporadically updating her information. I solve for the optimal length of inattentiveness and characterize its determinants. Third, I explicitly aggregate the behavior of many such producers. I apply these results to a model of inflation. I find that the model can fit the quantitative facts on post-war inflation remarkably well, that it is a good forecaster of future inflation, and that it survives the Lucas critique by fitting also the pre-war facts on inflation moderately well. Paper: Published version, journal article.

(You might also want to see Jinnai (2007). He approximates the solution of the model around a different point, and finds that the predicted length of inattentiveness is even more in line with the micro evidence than Table 2 in my paper suggested.)

Disagreement about Inflation Expectations, with N. Gregory Mankiw and Justin Wolfers.
Abstract: Analyzing 50 years of inflation expectations data from several sources, we document substantial disagreement among both consumers and professional economists about expected future inflation. Moreover, this disagreement shows substantial variation through time, moving with inflation, the absolute value of the change in inflation, and relative price variability. We argue that a satisfactory model of economic dynamics must speak to these important business cycle moments. Noting that most macroeconomic models do not endogenously generate disagreement, we show that a simple “sticky-information” model broadly matches many of these facts. Moreover, the sticky-information model is consistent with other observed departures of inflation expectations from full rationality, including autocorrelated forecast errors and insufficient sensitivity to recent macroeconomic news. Paper: Published version.

Monetary Policy for Inattentive Economies,with Laurence Ball and N. Gregory Mankiw.
Abstract: This paper is a contribution to the analysis of optimal monetary policy. It begins with a critical assessment of the existing literature, arguing that most work is based on implausible models of inflation-output dynamics. It then suggests that this problem may be solved with some recent behavioral models, which assume that price setters are slow to incorporate macroeconomic information into the prices they set. A specific such model is developed and used to derive optimal policy. In response to shocks to productivity and aggregate demand, optimal policy is price level targeting. Base drift in the price level, which is implicit in the inflation targeting regimes currently used in many central banks, is not desirable in this model. When shocks to desired markups are added, optimal policy is flexible targeting of the price level. That is, the central bank should allow the price level to deviate from its target for a while in response to these supply shocks, but it should eventually return the price level to its target path. Optimal policy can also be described as an elastic price standard: the central bank allows for the price level to deviate from its target when output is expected to deviate from its natural rate. Paper: Published version, journal article. See also the longer working paper version as NBER discussion paper 9491, or as HIER discussion paper 1997 for the proofs.

Sticky Information: A Model of Monetary Non-neutrality and Structural Slumps, with N. Gregory Mankiw.
Abstract: This paper explores a model of wage adjustment based on the assumption that information disseminates slowly throughout the population of wage setters. This informational frictional yields interesting and plausible dynamics for employment and inflation in response to exogenous movements in monetary policy and productivity. In this model, disinflations and productivity slowdowns have a parallel effect: They both cause the path of employment to fall below the level that would prevail under full information. The model implies that, in the face of productivity change, a policy of targeting either nominal income or the nominal wage leads to more stable employment than does a policy of targeting the price of goods and services. Finally, we examine U.S. time series and find that, as the model predicts, unemployment fluctuations are associated with both inflation and productivity surprises. Paper: Published version.

Sticky Information Versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve , with N. Gregory Mankiw.
Abstract: This paper examines a model of dynamic price adjustment based on the assumption that information disseminates slowly throughout the population. Compared to the commonly used sticky-price model, this sticky-information model displays three, related properties that are more consistent with accepted views about the effects of monetary policy. First, disinflations are always contractionary (although announced disinflations are less contractionary than surprise ones). Second, monetary policy shocks have their maximum impact on inflation with a substantial delay. Third, the change in inflation is positively correlated with the level of economic activity. Paper: Published version, link to journal.

Costs of banking system instability: some empirical evidence, with Glenn Hoggarth and Victoria Sapporta.
Abstract: This paper assesses the cross-country ‘stylised facts’ on empirical measures of the losses incurred during periods of banking crises. Firstly, the direct resolution costs to the government are considered, and then the broader costs to the welfare of the economy (proxied by losses in GDP). The cumulative output losses incurred during crisis periods are found to be large, roughly 15%-20% of annual GDP, on average. In contrast to previous research, it is also found that output losses incurred during crises in developed countries are as high, or higher, on average, than those in emerging market economies. Moreover, output losses during crisis periods in developed countries also appear to be significantly larger — 10%-15% — than in neighbouring countries that did not at the time experience severe banking problems. In emerging market economies, by contrast, banking crises appear to be costly only when accompanied by a currency crisis. These results seem robust to allowing for macroeconomic conditions at the outset of crisis — in particular low and declining output growth — that have also contributed to future output losses during episodes. Paper: Published version, link to journal.

What Measure of Inflation Should a Central Bank Target? with N. Gregory Mankiw.
Abstract: This paper assumes that a central bank commits itself to maintaining an inflation target and then asks what measure of the inflation rate the central bank should use if it wants to maximize economic stability. The paper first formalizes this problem and examines its microeconomic foundations. It then shows how the weight of a sector in the stability price index depends on the sector’s characteristics, including size, cyclical sensitivity, sluggishness of price adjustment, and magnitude of sectoral shocks. When a numerical illustration of the problem is calibrated to U.S. data, one tentative conclusion is that a central bank that wants to achieve maximum stability of economic activity should use a price index that gives substantial weight to the level of nominal wages. Paper: Published version, link to journal.

Where Is the Natural Rate? Rational Policy Mistakes and Persistent Deviations of Inflation from Target.
Abstract: Empirical research has shown that there is large uncertainty concerning the value of the natural rate of unemployment at any point in time. I incorporate this feature in a model of monetary policy where the policymaker targets an inflation rate and the natural rate of unemployment and solve for the optimal policy. Two interesting new results emerge. First, under a realistic shock profile, the model generates long-lasting deviations of inflation from target, providing an alternative (but also a complement) to the popular Barro-Gordon framework. Second, the economy exhibits large inflation persistence and can have very rich inflation dynamics. The model is able to account for approximately one third of the increase in inflation in the United States in the late 1970s, and suggests an explanation for the low inflation of the late 1990s. Moreover, I present empirical evidence for the US and other countries that support the model including a new empirical finding: across countries there is a positive statistical relation between the persistence of unemployment and inflation. Paper: Published version. Erratum.

The Persistence of Inflation in the United States, with Frederic Pivetta.
Abstract: Has the persistence of inflation in the U.S. changed since 1965? We estimate the persistence of inflation over time, using different measures and estimation procedures, and produce confidence intervals for our estimates and formal tests of unchanged persistence. We find that inflation persistence has been high and approximately unchanged in the U.S. over our sample period. Furthermore, we reconcile our results with other studies that reached different conclusions. Paper: Published version, link to journal.

Raj Chetty

Contact Information

T: (510) 643-0708
chetty @ econ.berkeley.edu

Short Biography

Raj Chetty received his PhD from Harvard University in 2003. He joined the Berkeley faculty in 2003 as an Assistant Professor and is currently a full Professor. He is Editor of the Journal of Public Economics and Co-Director of the Public Economics Program at the National Bureau of Economic Research. Professor Chetty’s recent honors include the American Young Economist Award, a Sloan Research fellowship, and a CAREER grant from the National Science Foundation.

You can Raj’s summary of his research here and his complete vita here.

Selected Research Publications

Raj Chetty

Working Papers

Bounds on Elasticities with Optimization Frictions: An Application to Taxation and Labor Supply, April 2009.

Sufficient Statistics for Welfare Analysis: A Bridge Between Structural and Reduced-Form Methods, forthcoming Annual Review of Economics.  Slides

Teaching the Tax Code: Earnings Responses to an Experiment with EITC Recipients (with Emmanuel Saez), March 2009.

Optimal Taxation and Social Insurance with Endogenous Private Insurance (with Emmanuel Saez), revised October 2008

An Agency Theory of Dividend Taxation (with Emmanuel Saez), NBER wp 13538, October 2007

Do Consumption Commitments Affect Risk Preferences? Evidence from Portfolio Choice (with Adam Szeidl), November 2007

Consumption Commitments: Neoclassical Foundations for Habit Formation (with Adam Szeidl), October 2005

Published Papers

Salience and Taxation: Theory and Evidence (with Adam Looney and Kory Kroft), forthcoming American Economic Review. Web Appendix.   Slides. [Data and code here][Older version (NBER wp 13330) with bounded rationality model here]

Is the Taxable Income Elasticity Sufficient to Calculate Deadweight Loss? The Implications of Evasion and Avoidance, forthcoming American Economic Journal – Economic Policy

Moral Hazard vs. Liquidity and Optimal Unemployment Insurance, Journal of Political Economy 116(2): 173-234, 2008. Slides.  Erratum. [Data, stata code, and unemployment benefit calculator here] [Search model simulation code here]

Cash-on-Hand and Competing Models of Intertemporal Behavior: New Evidence from the Labor Market (with David Card and Andrea Weber), Quarterly Journal of Economics 122(4): 1511-1560, 2007    Slides. [NBER wp with additional results here]

Interest Rates, Irreversibility, and Backward-Bending Investment, Review of Economic Studies 74(1): 67-91, 2007

Consumption Commitments and Risk Preferences (with Adam Szeidl), Quarterly Journal of Economics, 122(2): 831-877, 2007

A New Method of Estimating Risk Aversion, American Economic Review 96(5): 1821-1834, December 2006

Dividend Taxes and Corporate Behavior: Evidence from the 2003 Dividend Tax Cut (with Emmanuel Saez), Quarterly Journal of Economics 120(3): 791-833, 2005  Slides. [Stata code and hand-collected institutional and executive ownership data here] [NBER wp with additional results here] [results updated to 2006Q2 here]

A General Formula for the Optimal Level of Social Insurance, Journal of Public Economics 90: 1879-1901, 2006. Slides.

Consumption Smoothing and the Welfare Consequences of Social Insurance in Developing Economies (with Adam Looney), Journal of Public Economics 90: 2351-2356, 2006.  Slides.

The Spike at Benefit Exhaustion: Leaving the Unemployment System or Starting a New Job? (with David Card and Andrea Weber), American Economic Review Papers and Proceedings 97:113-118, 2007  Slides. [NBER wp with additional results here]

The Effects of the 2003 Dividend Tax Cut on Corporate Behavior: Interpreting the Evidence (with Emmanuel Saez), American Economic Review Papers and Proceedings 96: 124-129, 2006

The Effects of Taxes on Market Responses to Dividend Announcements and Payments: What Can We Learn from the 2003 Dividend Tax Cut? (with Joseph Rosenberg and Emmanuel Saez), in eds. A. Auerbach, J. Hines, and J. Slemrod, Taxing Corporate Income in the 21st Century, Cambridge: Cambridge University Press, 1-33, 2007.

Income Risk and the Benefits of Social Insurance: Evidence from Indonesia and the United States (with Adam Looney), in eds. T. Ito and A. Rose, Fiscal Policy and Management in East Asia: NBER East Asia Seminar on Economics 16, Chicago: University of Chicago Press, 2007.

Older Manuscripts:

Consumption Commitments, Unemployment Durations, and Local Risk Aversion, NBER wp 10211, December 2003

Optimal Unemployment Insurance When Income Effects are Large, NBER wp 10500, May 2004

Countercyclical Policies and Economic Stability, September 2001

Atif Mian

Contact Information

T: (773) 834-8266
amian(at)ChicagoBooth.edu

Short Biography

Atif R. Mian studies links between financial markets and the macro economy. He seeks a better understanding of how financial institutions intermediate economic activity, and how the nature of financial intermediation in turn shapes the macro economy. Professor Mian’s work has emphasized the role played by political, governance, and organizational constraints in shaping the effectiveness and scope of financial markets in emerging markets. He has also explored how global financial shocks propagate through the banking system in underdeveloped markets. His recent work focuses on the underlying causes of the recent financial crisis in the U.S., and seeks to understand the broader connection between asset prices, consumer credit and the real economy.

Professor Mian’s research has appeared in top Economics and Finance journals, including American Economic Review, Quarterly Journal of Economics, Journal of Finance, Review of Financial Studies and Journal of Financial Economics. His work has been cited by international media outlets including The Economist, The Wall Street Journal, and U.S. News and World Report. He is currently the co-recipient of a three year National Science Foundation Research Award (2008-2011) for studying the relationship between asset prices, household borrowing, and consumption in the U.S.

Mian grew up in Pakistan, and moved to the U.S. for his undergraduate and graduate studies. He completed his bachelor’s degree in mathematics with computer science in 1996, and his PhD in economics in 2001, both from the Massachusetts Institute of Technology. He has been a faculty member at the University of Chicago Booth School of Business since 2001.

Teaching

Corporate Finance (MBA)
Finance and Entrepreneurship in Emerging Markets (MBA)

Working Papers

House Prices, Home Equity-Based Borrowing, and the U.S. Household Leverage Crisis [with Amir Sufi] *** NEW *** The Politics of Mortgage Credit Expansion [with Amir Sufi and Francesco Trebbi]

Papers Under Review

The Political Economy of the U.S. Mortgage Default Crisis [with Amir Sufi and Francesco Trebbi] [Online Appendix] Revise and Resubmit, American Economic Review.

Dollars Dollars Everywhere, Not a Dime to Lend: Credit Limit Constraints on Financial Sector Absorptive Capacity [with Asim Ijaz Khwaja and Bilal Zia] Revise and Resubmit, Review of Financial Studies.

The Value of Business Networks [with Asim Ijaz Khwaja and Abid Qamar]

Selected Publications

The Consequences of Mortgage Credit Expansion: Evidence from the U.S. Mortgage Default Crisis [with Amir Sufi] Online Appendix Quarterly Journal of Economics, forthcoming.

Collateral Spread and Financial Development [with Jose Liberti] Journal of Finance, forthcoming.

Tracing The Impact of Bank Liquidity Shocks [with Asim Ijaz Khwaja] American Economic Review, September 2008.

The Big March: Migratory Flows After The Partition of India [with Prashant Bharadwaj and Asim Ijaz Khwaja] Economic & Political Weekly, August 30, 2008.

Estimating the Effect of Hierarchies on Information Use [with Jose Liberti] Review of Financial Studies, forthcoming.

Do Lenders Favor Politically Connected Firms? Rent Provision in an Emerging Financial Market [with Asim Ijaz Khwaja] Quarterly Journal of Economics, Vol. 120, Issue 4, November 2005.

Distance Constraints: The Limits of Foreign Lending in Poor Economies Journal of Finance, Volume 61, Number 3, June 2006, pp 1465-1505(41).

Unchecked Intermediaries: Price Manipulation in an Emerging Stock Market [with Asim Ijaz Khwaja] [Stata Program – Do File] [Sample Data] Journal of Financial Economics, Vol. 78, Issue1, October 2005.

Incentives in Markets, Firms, and Governments [with Daron Acemoglu and Michael Kremer] Journal of Law, Economics, and Organization, Vol. 24, No. 2, Fall 2008.

Other Work

Foreign, Private Domestic, and Government Banks: New Evidence From Emerging Markets

The Partition of India: Demographic Consequences [with Prashant Bharadwaj and Asim Ijaz Khwaja]