Pub Date : 2023-09-13DOI: 10.1146/annurev-economics-051520-021124
Brendan Kline, Elie Tamer
Identification strategies concern what can be learned about the value of a parameter based on the data and the model assumptions. The literature on partial identification is motivated by the fact that it is not possible to learn the exact value of the parameter for many empirically relevant cases. A typical result in the literature on partial identification is a statement about characterizing the identified set, which summarizes what can be learned about the parameter of interest given the data and model assumptions. For instance, this may mean that the value of the parameter can be learned to be necessarily within some set of values. First, the review surveys the general frameworks that have been developed for conducting a partial identification analysis. Second, the review surveys some of the more recent results on partial identification.
{"title":"Recent Developments in Partial Identification","authors":"Brendan Kline, Elie Tamer","doi":"10.1146/annurev-economics-051520-021124","DOIUrl":"https://doi.org/10.1146/annurev-economics-051520-021124","url":null,"abstract":"Identification strategies concern what can be learned about the value of a parameter based on the data and the model assumptions. The literature on partial identification is motivated by the fact that it is not possible to learn the exact value of the parameter for many empirically relevant cases. A typical result in the literature on partial identification is a statement about characterizing the identified set, which summarizes what can be learned about the parameter of interest given the data and model assumptions. For instance, this may mean that the value of the parameter can be learned to be necessarily within some set of values. First, the review surveys the general frameworks that have been developed for conducting a partial identification analysis. Second, the review surveys some of the more recent results on partial identification.","PeriodicalId":47891,"journal":{"name":"Annual Review of Economics","volume":"16 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-09-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135691365","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-09-13DOI: 10.1146/annurev-economics-082222-074901
Anusha Chari
Over the last two decades, the unprecedented increase in non-bank financial intermediation, particularly the rise of open-end mutual funds and exchange-traded funds, accounts for nearly half of the external financing flows to emerging markets, exceeding cross-border lending by global banks. Evidence suggests that investment fund flows enhance risk sharing across borders and provide emerging markets access to more diverse forms of financing. However, a growing body of evidence also indicates that investment funds are inherently more vulnerable to liquidity and redemption risks during periods of global financial market stress, increasing the volatility of capital flows to emerging markets. Benchmark-driven investments, namely passive funds, appear particularly sensitive to global risk shocks, such as tightening US dollar funding conditions, compared to their active fund counterparts. The procyclicality of investment fund flows to emerging markets during times of global stress poses financial stability concerns, with implications for the role of macroprudential policy.
{"title":"Global Risk, Non-Bank Financial Intermediation, and Emerging Market Vulnerabilities","authors":"Anusha Chari","doi":"10.1146/annurev-economics-082222-074901","DOIUrl":"https://doi.org/10.1146/annurev-economics-082222-074901","url":null,"abstract":"Over the last two decades, the unprecedented increase in non-bank financial intermediation, particularly the rise of open-end mutual funds and exchange-traded funds, accounts for nearly half of the external financing flows to emerging markets, exceeding cross-border lending by global banks. Evidence suggests that investment fund flows enhance risk sharing across borders and provide emerging markets access to more diverse forms of financing. However, a growing body of evidence also indicates that investment funds are inherently more vulnerable to liquidity and redemption risks during periods of global financial market stress, increasing the volatility of capital flows to emerging markets. Benchmark-driven investments, namely passive funds, appear particularly sensitive to global risk shocks, such as tightening US dollar funding conditions, compared to their active fund counterparts. The procyclicality of investment fund flows to emerging markets during times of global stress poses financial stability concerns, with implications for the role of macroprudential policy.","PeriodicalId":47891,"journal":{"name":"Annual Review of Economics","volume":"35 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-09-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134989496","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-09-13DOI: 10.1146/annurev-economics-082322-012833
David Baqaee, Elisa Rubbo
This article reviews a framework for studying the aggregation and propagation of microeconomic shocks in general equilibrium. We discuss the determinants of aggregate measures of real economic activity, like real GDP, real domestic absorption, and aggregate productivity in both efficient and inefficient environments. We also discuss how shocks from one set of producers are transmitted to other producers through prices and quantities. The framework we provide is amenable to generalization and can be used to study any collection of producers ranging from one isolated producer to an industry consisting of heterogeneous producers to an entire economy. We conclude with a brief survey of some of the applied questions that can be addressed using the analytical tools presented in this review and avenues for future work.
{"title":"Micro Propagation and Macro Aggregation","authors":"David Baqaee, Elisa Rubbo","doi":"10.1146/annurev-economics-082322-012833","DOIUrl":"https://doi.org/10.1146/annurev-economics-082322-012833","url":null,"abstract":"This article reviews a framework for studying the aggregation and propagation of microeconomic shocks in general equilibrium. We discuss the determinants of aggregate measures of real economic activity, like real GDP, real domestic absorption, and aggregate productivity in both efficient and inefficient environments. We also discuss how shocks from one set of producers are transmitted to other producers through prices and quantities. The framework we provide is amenable to generalization and can be used to study any collection of producers ranging from one isolated producer to an industry consisting of heterogeneous producers to an entire economy. We conclude with a brief survey of some of the applied questions that can be addressed using the analytical tools presented in this review and avenues for future work.","PeriodicalId":47891,"journal":{"name":"Annual Review of Economics","volume":"15 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-09-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134989781","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-09-13DOI: 10.1146/annurev-economics-082222-082019
Lorenzo Caliendo, Fernando Parro
We review theoretical and empirical work on the economic effects of the United States and China trade relations during the past 20 years. We first discuss the origins of the China shock and its measurement and present methods used to study its economic effects on different outcomes. We then focus on the recent US–China trade war. We review methods used to evaluate its effects, describe its economic effects, and analyze whether this increase in trade protectionism reverted the effects of the China shock. The main lessons learned in this review are that ( a) the aggregate gains from US–China trade created winners and losers; ( b) China's trade expansion seems not to be the main cause of the decline in US manufacturing employment during the same period; and ( c) the recent trade war generated welfare losses, had small employment effects, and was ineffective in reversing the distributional effects due to the China shock.
{"title":"Lessons from US–China Trade Relations","authors":"Lorenzo Caliendo, Fernando Parro","doi":"10.1146/annurev-economics-082222-082019","DOIUrl":"https://doi.org/10.1146/annurev-economics-082222-082019","url":null,"abstract":"We review theoretical and empirical work on the economic effects of the United States and China trade relations during the past 20 years. We first discuss the origins of the China shock and its measurement and present methods used to study its economic effects on different outcomes. We then focus on the recent US–China trade war. We review methods used to evaluate its effects, describe its economic effects, and analyze whether this increase in trade protectionism reverted the effects of the China shock. The main lessons learned in this review are that ( a) the aggregate gains from US–China trade created winners and losers; ( b) China's trade expansion seems not to be the main cause of the decline in US manufacturing employment during the same period; and ( c) the recent trade war generated welfare losses, had small employment effects, and was ineffective in reversing the distributional effects due to the China shock.","PeriodicalId":47891,"journal":{"name":"Annual Review of Economics","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-09-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134989495","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-09-13DOI: 10.1146/annurev-economics-091622-124733
Muriel Niederle, Emanuel Vespa
In recent years, experiments have documented a new mechanism that leads to failures of profit maximization: the failure of contingent thinking (FCT). This article summarizes key experimental findings, clarifies what constitutes an FCT, and outlines how FCTs can be tested in other environments. Subsequently, we relate FCTs to recent theoretical work on cognitive limitations in behavioral economics. Finally, we connect FCTs to suboptimal behavior documented in applied environments.
{"title":"Cognitive Limitations: Failures of Contingent Thinking","authors":"Muriel Niederle, Emanuel Vespa","doi":"10.1146/annurev-economics-091622-124733","DOIUrl":"https://doi.org/10.1146/annurev-economics-091622-124733","url":null,"abstract":"In recent years, experiments have documented a new mechanism that leads to failures of profit maximization: the failure of contingent thinking (FCT). This article summarizes key experimental findings, clarifies what constitutes an FCT, and outlines how FCTs can be tested in other environments. Subsequently, we relate FCTs to recent theoretical work on cognitive limitations in behavioral economics. Finally, we connect FCTs to suboptimal behavior documented in applied environments.","PeriodicalId":47891,"journal":{"name":"Annual Review of Economics","volume":"15 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-09-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134990409","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-09-13DOI: 10.1146/annurev-economics-082322-013910
Kiminori Matsuyama
The constant-elasticity-of-substitution (CES) aggregator and its demand system are ubiquitous in business cycles theory, macroeconomic growth and development, international trade and other general equilibrium fields; this is because the CES aggregator has many knife-edge properties that help to keep the analysis tractable in the presence of many goods and factors. However, this also makes it hard to tell which properties of CES are responsible for certain results. Furthermore, it is necessary to relax some of those properties for certain applications. In this article, I review several classes of non-CES aggregators, each of which removes some properties of CES and keeps the rest to introduce some flexibility while retaining the tractability of CES as much as possible. These classes are named after the properties of CES they keep. I explain how these classes are related to each other and discuss their relative strengths and weaknesses to indicate which classes are suited for which applications.
{"title":"Non-CES Aggregators: A Guided Tour","authors":"Kiminori Matsuyama","doi":"10.1146/annurev-economics-082322-013910","DOIUrl":"https://doi.org/10.1146/annurev-economics-082322-013910","url":null,"abstract":"The constant-elasticity-of-substitution (CES) aggregator and its demand system are ubiquitous in business cycles theory, macroeconomic growth and development, international trade and other general equilibrium fields; this is because the CES aggregator has many knife-edge properties that help to keep the analysis tractable in the presence of many goods and factors. However, this also makes it hard to tell which properties of CES are responsible for certain results. Furthermore, it is necessary to relax some of those properties for certain applications. In this article, I review several classes of non-CES aggregators, each of which removes some properties of CES and keeps the rest to introduce some flexibility while retaining the tractability of CES as much as possible. These classes are named after the properties of CES they keep. I explain how these classes are related to each other and discuss their relative strengths and weaknesses to indicate which classes are suited for which applications.","PeriodicalId":47891,"journal":{"name":"Annual Review of Economics","volume":"37 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-09-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135734536","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-09-13DOI: 10.1146/annurev-economics-090622-100258
Alberto Bisin, Thierry Verdier
In this article we survey recent advances in the economic theory of cultural transmission. We highlight three main themes on which the literature has made great progress in the last 10 years: the domain of traits subject to cultural transmission; the microfoundations for the technology of transmission; and feedback effects between culture, institutions, and various socioeconomic environments. We conclude by suggesting interesting areas for future research.
{"title":"Advances in the Economic Theory of Cultural Transmission","authors":"Alberto Bisin, Thierry Verdier","doi":"10.1146/annurev-economics-090622-100258","DOIUrl":"https://doi.org/10.1146/annurev-economics-090622-100258","url":null,"abstract":"In this article we survey recent advances in the economic theory of cultural transmission. We highlight three main themes on which the literature has made great progress in the last 10 years: the domain of traits subject to cultural transmission; the microfoundations for the technology of transmission; and feedback effects between culture, institutions, and various socioeconomic environments. We conclude by suggesting interesting areas for future research.","PeriodicalId":47891,"journal":{"name":"Annual Review of Economics","volume":"360 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-09-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134990406","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-09-13DOI: 10.1146/annurev-economics-082222-065323
Sören Blomquist, Jerry A. Hausman, Whitney K. Newey
This article surveys the development of nonparametric models and methods for estimation of choice models with nonlinear budget sets. The discussion focuses on the budget set regression, that is, the conditional expectation of a choice variable given the budget set. Utility maximization in a nonparametric model with general heterogeneity reduces the curse of dimensionality in this regression. Empirical results using this regression are different from maximum likelihood and give informative inference. The article also considers the information provided by kink probabilities for nonparametric utility with general heterogeneity. Instrumental variable estimation and the evidence it provides of heterogeneity in preferences are also discussed.
{"title":"The Econometrics of Nonlinear Budget Sets","authors":"Sören Blomquist, Jerry A. Hausman, Whitney K. Newey","doi":"10.1146/annurev-economics-082222-065323","DOIUrl":"https://doi.org/10.1146/annurev-economics-082222-065323","url":null,"abstract":"This article surveys the development of nonparametric models and methods for estimation of choice models with nonlinear budget sets. The discussion focuses on the budget set regression, that is, the conditional expectation of a choice variable given the budget set. Utility maximization in a nonparametric model with general heterogeneity reduces the curse of dimensionality in this regression. Empirical results using this regression are different from maximum likelihood and give informative inference. The article also considers the information provided by kink probabilities for nonparametric utility with general heterogeneity. Instrumental variable estimation and the evidence it provides of heterogeneity in preferences are also discussed.","PeriodicalId":47891,"journal":{"name":"Annual Review of Economics","volume":"58 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-09-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134989491","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article documents a rapid shift toward services (tertiarization) of the Chinese economy since 2005, as evidenced by the significant increase in both employment and value-added shares of the service sector. Notably, our analysis reveals that a variety of measures of productivity growth have been greater in the service sector than in the manufacturing sector. Firm-level measures of dynamism corroborate this ongoing tertiarization trend, which is not limited to services used as inputs to industrial production but extends also to consumer services. These findings are robust across different growth accounting methodologies, including a recently proposed method by Fan et al. (2023) that addresses challenges associated with the measurement of quality improvements in service industries.
{"title":"Tertiarization Like China","authors":"Xilu Chen, Guangyu Pei, Zheng Song, Fabrizio Zilibotti","doi":"10.1146/annurev-economics-071122-030026","DOIUrl":"https://doi.org/10.1146/annurev-economics-071122-030026","url":null,"abstract":"This article documents a rapid shift toward services (tertiarization) of the Chinese economy since 2005, as evidenced by the significant increase in both employment and value-added shares of the service sector. Notably, our analysis reveals that a variety of measures of productivity growth have been greater in the service sector than in the manufacturing sector. Firm-level measures of dynamism corroborate this ongoing tertiarization trend, which is not limited to services used as inputs to industrial production but extends also to consumer services. These findings are robust across different growth accounting methodologies, including a recently proposed method by Fan et al. (2023) that addresses challenges associated with the measurement of quality improvements in service industries.","PeriodicalId":47891,"journal":{"name":"Annual Review of Economics","volume":"36 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-09-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134990124","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-09-13DOI: 10.1146/annurev-economics-051520-015113
Olivier Blanchard, Christian Gollier, Jean Tirole
Climate change poses an existential threat. Theoretical and empirical research suggest that carbon pricing and green R&D support are the right tools, but their implementation can be improved. Other policies, such as standards, bans, and targeted subsidies, also all have a role to play, but they have often been incoherent, and their implementation is delicate.
{"title":"The Portfolio of Economic Policies Needed to Fight Climate Change","authors":"Olivier Blanchard, Christian Gollier, Jean Tirole","doi":"10.1146/annurev-economics-051520-015113","DOIUrl":"https://doi.org/10.1146/annurev-economics-051520-015113","url":null,"abstract":"Climate change poses an existential threat. Theoretical and empirical research suggest that carbon pricing and green R&D support are the right tools, but their implementation can be improved. Other policies, such as standards, bans, and targeted subsidies, also all have a role to play, but they have often been incoherent, and their implementation is delicate.","PeriodicalId":47891,"journal":{"name":"Annual Review of Economics","volume":"3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-09-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134990246","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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