International Economic Review最新文献

Using an equilibrium sorting model and microdata from China, we evaluate the impacts of dual constraints on mobility and housing supply on workers’ sorting behavior, quantifying the welfare and distributional consequences. Counterfactual simulations show that lowering migration costs associated with institutional restrictions and migrant-specific amenities would increase welfare and reduce inequality by moving workers from inland to coastal regions in China. These impacts depend on the housing supply elasticity in coastal regions. Similarly, the impacts of relaxing housing supply restrictions depend on mobility constraints. Results highlight the policy complementarities between reducing the two kinds of frictions.

We study endogenous intermediation activity, the implied transaction pattern—direct trade, indirect trade, or both—and implications for efficiency. Related papers have agents exchanging indivisible goods or assets, capturing only extensive margins (trade frequency). To capture intensive margins, we incorporate divisibility representing quantity or quality. We characterize equilibrium, show how it depends on bargaining powers and costs, and how intensive margins matter—for example, middlemen with high bargaining power may charge more but offer higher quantity/quality, thus improving welfare. A tax-subsidy policy is designed to achieve efficiency. A monetary version lets us compare money and middlemen and further discuss policy.

Using retailer scanner data, we investigate how a sharp and abrupt depreciation of the exchange rate affects consumers' cost of living. We find that the marginal cost of imported goods increased, whereas their retail markups decreased compared to domestic products. There was also a surge in the entry and exit of both foreign and local product varieties post-depreciation. Wealthier consumers, who spend more on imports, are hit harder by higher marginal costs but benefit from reduced markups and increased product diversity, unlike their less affluent counterparts.

This article investigates the impact and transmission of uncertainty regarding the future path of government finances on economic activity. Employing a data-rich approach, I introduce a novel proxy that captures uncertainty surrounding public finances, which I refer to as sovereign uncertainty. In an application to Spain, sovereign uncertainty shocks persistently dampen the economy in the medium run, whereas macro-financial uncertainty shocks originating in the private sector induce a negative short-lived response in real activity. In addition, a New Keynesian model rationalizes the empirical results, emphasizing the role of financial frictions and monetary policy decisions in transmitting the effects of sovereign uncertainty shocks.

Add ons are features or services that can enhance the functionality or quality of base goods. They are pervasive. Yet we know little about the behavior of add-on prices over the business cycle. We use 10 years of data from a nationwide Canadian retailer to investigate the local cyclicality of extended warranty prices, a classic add on. We find base prices are acyclical. Warranty prices are procyclical because local stores use warranties to make demand for durable goods less price-elastic. We show add ons amplify responses to national business cycles and study the implications for inflation rate bias.

This article documents a robust pattern from diverse sequential bargaining settings: agents favor offers that split the difference between the previous two offers. Our empirical settings include used cars, insurance claims, home sale, trade tariffs, a TV game show, eBay, and auto-rickshaws. These even-split offers are more likely to be accepted, less likely to spur exit by the opponent, and more likely to be followed by subsequent split-the-difference offers if bargaining continues. We propose several theoretical frameworks to explain this behavior, including an inference argument under which split-the-difference offers can be viewed as an equal split of the potential surplus.