Business cycle models often abstract from persistent household heterogeneity, despite its potentially significant implications for macroeconomic fluctuations and policy. We show empirically that the likelihood of being persistently financially constrained decreases with cognitive skills and...

In this paper we study the neoclassical growth model with idiosyncratic income risk and aggregate risk in which risk sharing is endogenously constrained by one-sided limited commitment. Households can trade a full set of contingent claims that pay off depending on both idiosyncratic and...

Financial integration generates macroeconomic spillovers that may require international monetary policy coordination. We show that individual central banks may set nominal interest rates too low or too high relative to the cooperative outcome. We identify three sufficient statistics that...

We study sources and implications of undiversified portfolios in a production-based asset pricing model with financial frictions. Households take concentrated positions in a single firm exposed to idiosyncratic shocks because managerial effort requires equity stakes, and because investors gain...

We estimate the unconditional distribution of the marginal propensity to consume (MPC) using clustering regression applied to the 2008 economic stimulus payments. By deviating from the standard approach of estimating MPC heterogeneity using interactions with observables, we can recover the full...

When is a wealth tax preferable to a capital income tax? When is the opposite true? More generally, can capital taxation be structured to improve productivity, incentivize innovation, and ultimately increase welfare? We study these questions theoretically in an infinite-horizon model with...

We document two new facts about the distributions of answers in famous statistical problems: they are i) multi-modal and ii) unstable with respect to irrelevant changes in the problem. We offer a model in which, when solving a problem, people represent each hypothesis by attending "bottom up" to...

Coal heating in residential homes is an important source of indoor air pollution, leading to detrimental health effects. We conduct a randomized field experiment in northern China using three types of SMS campaigns targeting three potential biases that may hinder the adoption of electric...

Given police abolitionism's new visibility after the 2020 racial justice protests, we assess stakeholder beliefs on the protests' stock impacts on police-affiliated firms. Experts generally underestimate the firms' stock gains, except situated experts like community organizers and police...

What causes adverse policing outcomes, such as excessive uses of force and unnecessary arrests? Prevailing explanations focus on problematic officers or deficient regulations and oversight. Here, we introduce a new, overlooked perspective. We suggest that the cognitive demands inherent in...