We assess the consequences of substantially increasing the marginal tax rate on U.S. top earners using a human capital model. We nd that (1) the peak of the model Laer curve occurs at a 52 percent top tax rate, (2) if human capital were exogenous, then the top of the Laer curve would occur at a...

This paper empirically investigates high-tech firms’ decisions to relocate manufacturing plants to low-cost countries. Computers and electronics have undergone sector-wide offshoring and typically feature an oligopolistic market structure, in which firms’ profits depend on their...

We empirically analyze the nature of returns to scale in active mutual fund management. We find strong evidence of decreasing returns at the industry level: As the size of the active mutual fund industry increases, a fund’s ability to out- perform passive benchmarks declines. At the fund...

We develop a theory of financial intermediary leverage cycles in the context of a dynamic model of the macroeconomy. The interaction between a production sector, a financial intermediation sector, and a household sector gives rise to amplification of fundamental shocks that affect real economic...

We provide a new characterization of implementability of reduced form mechanisms in terms of straightforward second-order stochastic dominance. In addition, we present a simple proof of Matthews’ (1984) conjecture, proved by Border (1991), on implementability.

The U.S. economy hit bottom in June 2009. Thirty months later, output growth remains sluggish and unemployment still hovers above 8%. A critical question is why. One view attributes the weak recovery, at least in part, to high levels of uncertainty about economic policy. This view entails two...

This paper builds on Barreca et al.’s (2013) finding that over the course of the 20th century the proliferation of residential air conditioning led to a remarkable decline in mortality due to extreme temperature days in the United States. Using panel data on monthly mortality rates of...

We empirically analyze the pricing of political uncertainty, guided by a theo- retical model of government policy choice. After deriving the model’s predictions for option prices, we test those predictions in an international sample of national elections and global summits. We find that...

We provide several generalizations of the various equilibrium existence results in Reny (1999), Barelli and Meneghel (2013), and McLennan, Monteiro, and Tourky (2011). We also provide an example demonstrating that a natural additional generalization is not possible. All of the theorems yielding...

This paper develops and applies a Bayesian approach to Exploratory Factor Analysis that improves on ad hoc classical approaches. Our framework relies on dedicated factor models and simultaneously determines the number of factors, the allocation of each measurement to a unique factor, and the...