Journal Cover
Review of Economic Studies
Journal Prestige (SJR): 9.589
Citation Impact (citeScore): 4
Number of Followers: 172  
  Hybrid Journal Hybrid journal (It can contain Open Access articles)
ISSN (Print) 0034-6527 - ISSN (Online) 1467-937X
Published by Oxford University Press Homepage  [409 journals]
  • Behavioural Characterizations of Naivete for Time-Inconsistent Preferences
    • Authors: Ahn D; Iijima R, Le Yaouanq Y, et al.
      Pages: 2319 - 2355
      Abstract: We propose non-parametric definitions of absolute and comparative naivete. These definitions leverage ex ante choice of menu to identify predictions of future behaviour and ex post (random) choices from menus to identify actual behaviour. The main advantage of our definitions is their independence from any assumed functional form for the utility function representing behaviour. An individual is sophisticated if she is indifferent ex ante between retaining the option to choose from a menu ex post or committing to her actual distribution of choices from that menu. She is naive if she prefers the flexibility in the menu, reflecting a mistaken belief that she will act more virtuously than she actually will. We propose two definitions of comparative naivete and explore the restrictions implied by our definitions for several prominent models of time inconsistency.
      PubDate: Mon, 07 Jan 2019 00:00:00 GMT
      DOI: 10.1093/restud/rdy076
      Issue No: Vol. 86, No. 6 (2019)
  • International Shocks, Variable Markups, and Domestic Prices
    • Authors: Amiti M; Itskhoki O, Konings J.
      Pages: 2356 - 2402
      Abstract: How strong are strategic complementarities in price setting across firms' In this article, we provide a direct empirical estimate of firms’ price responses to changes in competitor prices. We develop a general theoretical framework and an empirical identification strategy, taking advantage of a new micro-level dataset for the Belgian manufacturing sector. We find strong evidence of strategic complementarities, with a typical firm adjusting its price with an elasticity of 0.4 in response to its competitors’ price changes and with an elasticity of 0.6 in response to its own cost shocks. Furthermore, we find evidence of substantial heterogeneity in these elasticities across firms. Small firms exhibit no strategic complementarities in price setting and complete cost pass-through. In contrast, large firms exhibit strong strategic complementarities, responding to both competitor price changes and their own cost shocks with roughly equal elasticities of around 0.5. We show that this pattern of heterogeneity in markup variability across firms is important for explaining the aggregate markup response to international shocks and the observed low exchange rate pass-through into domestic prices.
      PubDate: Sat, 02 Feb 2019 00:00:00 GMT
      DOI: 10.1093/restud/rdz005
      Issue No: Vol. 86, No. 6 (2019)
  • Using Gossips to Spread Information: Theory and Evidence from Two
           Randomized Controlled Trials
    • Authors: Banerjee A; Chandrasekhar A, Duflo E, et al.
      Pages: 2453 - 2490
      Abstract: Can we identify highly central individuals in a network without collecting network data, simply by asking community members' Can seeding information via such nominated individuals lead to significantly wider diffusion than via randomly chosen people, or even respected ones' In two separate large field experiments in India, we answer both questions in the affirmative. In particular, in 521 villages in Haryana, we provided information on monthly immunization camps to either randomly selected individuals (in some villages) or to individuals nominated by villagers as people who would be good at transmitting information (in other villages). We find that the number of children vaccinated every month is 22% higher in villages in which nominees received the information. We show that people’s knowledge of who are highly central individuals and good seeds can be explained by a model in which community members simply track how often they hear gossip about others. Indeed, we find in a third data set that nominated seeds are central in a network sense, and are not just those with many friends or in powerful positions.
      PubDate: Wed, 20 Feb 2019 00:00:00 GMT
      DOI: 10.1093/restud/rdz008
      Issue No: Vol. 86, No. 6 (2019)
  • What Are the Headwaters of Formal Savings' Experimental Evidence from
           Sri Lanka
    • Authors: Callen M; de Mel S, McIntosh C, et al.
      Pages: 2491 - 2529
      Abstract: The world’s poor are seeing a rapid expansion in access to formal savings accounts. What is the source of savings when households are connected to a formal account' We combine a high-frequency panel survey spanning two and a half years with an experiment in which a Sri Lankan bank used mobile Point-of-Service (POS) terminals to collect deposits directly from households each week. We find that the headwaters of formal savings lie in sacrificed leisure time: households work more, and improved savings options generate an increase in labour effort in both self-employment and in the wage market. The results suggest that the labour allocation channel is an important mechanism linking savings opportunities to income.
      PubDate: Tue, 26 Mar 2019 00:00:00 GMT
      DOI: 10.1093/restud/rdz020
      Issue No: Vol. 86, No. 6 (2019)
  • The Impact of Consumer Credit Access on Unemployment
    • Authors: Herkenhoff K.
      Pages: 2605 - 2642
      Abstract: Unemployed households’ access to unsecured revolving credit more than tripled over the last three decades. This article analyses how both cyclical fluctuations and trend increases in credit access impact the business cycle. The main quantitative result is that credit expansions and contractions have contributed to moderately deeper and more protracted recessions over the last 40 years. As more individuals obtained credit from 1977 to 2010, cyclical credit fluctuations affected a larger share of the population and became more important determinants of employment dynamics. Even though business cycles are more volatile, newborns strictly prefer to live in the economy with growing, but fluctuating, access to credit markets.
      PubDate: Thu, 07 Feb 2019 00:00:00 GMT
      DOI: 10.1093/restud/rdz006
      Issue No: Vol. 86, No. 6 (2019)
  • Discrete Actions in Information-Constrained Decision Problems
    • Authors: Jung J; Kim J, Matějka F, et al.
      Pages: 2643 - 2667
      Abstract: Individuals are constantly processing external information and translating it into actions. This draws on limited resources of attention and requires economizing on attention devoted to signals related to economic behaviour. A natural measure of such costs is based on Shannon’s “channel capacity”. Modelling economic agents as constrained by Shannon capacity as they process freely available information turns out to imply that discretely distributed actions, and thus actions that persist across repetitions of the same decision problem, are very likely to emerge in settings that without information costs would imply continuously distributed behaviour. We show how these results apply to the behaviour of an investor choosing portfolio allocations, as well as to some mathematically simpler “tracking” problems that illustrate the mechanism. Trying to use costs of adjustment to explain “stickiness” of actions when interpreting the behaviour in our economic examples would lead to mistaken conclusions.
      PubDate: Mon, 04 Mar 2019 00:00:00 GMT
      DOI: 10.1093/restud/rdz011
      Issue No: Vol. 86, No. 6 (2019)
  • Extended Gravity
    • Authors: Morales E; Sheu G, Zahler A.
      Pages: 2668 - 2712
      Abstract: Exporting firms often enter foreign markets that are similar to their previous export destinations. We develop a dynamic model in which a firm’s exports in a market may depend on how similar the market is to the firm’s home country (gravity) and to its previous export destinations (extended gravity). Given the large number of export paths from which forward-looking firms may choose, we use a moment inequality approach to estimate our model. Our estimates indicate that sharing similarities with a prior export destination in terms of geographic location, language, and income per capita jointly reduces the cost of foreign market entry by 69–90%. Reductions due to geographic location (25–38%) and language (29–36%) have the largest effect. Extended gravity thus has a large impact on export entry costs.
      PubDate: Wed, 13 Feb 2019 00:00:00 GMT
      DOI: 10.1093/restud/rdz007
      Issue No: Vol. 86, No. 6 (2019)
  • Corrigendum
    • Pages: 2745 - 2745
      Abstract: V BHASKAR and CAROLINE THOMAS. (2018), “Community Enforcement of Trust with Bounded Memory” Review of Economic Studies, doi:10.1093/restud/rdy048.
      PubDate: Mon, 01 Apr 2019 00:00:00 GMT
      DOI: 10.1093/restud/rdz014
      Issue No: Vol. 86, No. 6 (2019)
  • The Effect of Product Misperception on Economic Outcomes: Evidence from
           the Extended Warranty Market
    • Authors: Abito J; Salant Y.
      Pages: 2285 - 2318
      Abstract: Panel and experimental data are used to analyse the economic outcomes in the extended warranty market. We establish that the strong demand and high profits in this market are driven by consumers distorting the failure probability of the insured product, rather than standard risk aversion or sellers’ market power. Providing information to consumers about failure probabilities significantly reduces their willingness to pay for warranties, indicating the important role of information, or lack of, in driving consumers’ purchase behaviour. Such information provision is shown to be more effective in enhancing consumer welfare than additional market competition.
      PubDate: Tue, 04 Sep 2018 00:00:00 GMT
      DOI: 10.1093/restud/rdy045
      Issue No: Vol. 86, No. 6 (2018)
  • House Price Beliefs And Mortgage Leverage Choice
    • Authors: Bailey M; Dávila E, Kuchler T, et al.
      Pages: 2403 - 2452
      Abstract: We study the relationship between homebuyers’ beliefs about future house price changes and their mortgage leverage choices. Whether more pessimistic homebuyers choose higher or lower leverage depends on their willingness and ability to reduce the size of their housing market investments. When households primarily maximize the levered return of their property investments, more pessimistic homebuyers reduce their leverage to purchase smaller houses. On the other hand, when considerations such as family size pin down the desired property size, pessimistic homebuyers reduce their financial exposure to the housing market by making smaller downpayments to buy similarly-sized homes. To determine which scenario better describes the data, we investigate the cross-sectional relationship between house price beliefs and mortgage leverage choices in the U.S. housing market. We use plausibly exogenous variation in house price beliefs to show that more pessimistic homebuyers make smaller downpayments and choose higher leverage, in particular in states where default costs are relatively low, as well as during periods when house prices are expected to fall on average. Our results highlight the important role of heterogeneous beliefs in explaining households’ financial decisions.
      PubDate: Wed, 21 Nov 2018 00:00:00 GMT
      DOI: 10.1093/restud/rdy068
      Issue No: Vol. 86, No. 6 (2018)
  • Crime, Intimidation, and Whistleblowing: A Theory of Inference from
           Unverifiable Reports
    • Authors: Chassang S; Miquel G.
      Pages: 2530 - 2553
      Abstract: We consider a game between a principal, an agent, and a monitor in which the principal would like to rely on messages by the monitor (the potential whistleblower) to target intervention against a misbehaving agent. The difficulty is that the agent can credibly threaten to retaliate against the monitor in the event of an intervention. In this setting, intervention policies that are responsive to the monitor’s message provide informative signals to the agent, which can be used to target threats efficiently. Principals that are too responsive to information shut down communication channels. Successful intervention policies must therefore garble the information provided by monitors and cannot be fully responsive. We show that policy evaluation on the basis of non-verifiable whistleblower messages is feasible under arbitrary incomplete information provided policy design takes into account that messages are endogenous.
      PubDate: Fri, 28 Dec 2018 00:00:00 GMT
      DOI: 10.1093/restud/rdy075
      Issue No: Vol. 86, No. 6 (2018)
  • Government Debt Management: The Long and the Short of It
    • Authors: Faraglia E; Marcet A, Oikonomou R, et al.
      Pages: 2554 - 2604
      Abstract: Standard optimal Debt Management (DM) models prescribe a dominant role for long bonds and advocate against issuing short bonds. They require very large positions in order to complete markets and assume each period that governments repurchase all outstanding bonds and reissue (r/r) new ones. These features of DM are inconsistent with U.S. data. We introduce incomplete markets via small transaction costs which serves to make optimal DM more closely resemble the data : r/r are negligible, short bond issuance substantial and persistent and short and long bonds positively co-vary. Intuitively, long bonds help smooth taxes over states and short bonds over time. Solving incomplete market models with multiple assets is challenging so a further contribution of this article is introducing a novel computational method to find global solutions.
      PubDate: Wed, 17 Oct 2018 00:00:00 GMT
      DOI: 10.1093/restud/rdy061
      Issue No: Vol. 86, No. 6 (2018)
  • Deforestation in the Amazon: A Unified Framework for Estimation and Policy
    • Authors: Souza-Rodrigues E.
      Pages: 2713 - 2744
      Abstract: Deforestation is a matter of pressing global concern, yet surprisingly little is known about the relative efficacy of various policies designed to combat it. This article sets out a framework for measuring the cost effectiveness of alternative policies—both command-and-control and incentive-based—in the Brazilian Amazon. First, I estimate the demand for deforestation on private properties, exploiting regional variation in transportation costs as a means to recover farmers’ responses to permanent policies. Here, rescaling transportation costs using local yields allows me to express changes in farmers’ valuations in dollars per hectare. I then use the estimated demand to infer farmers’ willingness to deforest under different counterfactual policies, such as payments to avoid deforestation and taxes on land use, along with the corresponding potential farmers’ lost surpluses. The results indicate that payment programmes and land use taxes on agricultural land can be highly effective in preserving the rainforest and also be substantially less expensive than command-and-control policies (approximately 8 times less costly). A carbon tax equal to the social cost of carbon could virtually eliminate all agricultural land in the Amazon, given the low agricultural returns there.
      PubDate: Thu, 06 Dec 2018 00:00:00 GMT
      DOI: 10.1093/restud/rdy070
      Issue No: Vol. 86, No. 6 (2018)
School of Mathematical and Computer Sciences
Heriot-Watt University
Edinburgh, EH14 4AS, UK
Tel: +00 44 (0)131 4513762
Fax: +00 44 (0)131 4513327
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