International Economic Review最新文献

This article evaluates the insurance value of the Social Security Disability Insurance (SSDI) program among married households when wives face a trade-off between market hours and spousal care following their husbands' disability. Event study analyses show that wives' labor supply responses to their husbands' disability are small, and instead, a considerable amount of time is spent in spousal care. Using a dynamic structural model, I find that incorporating time loss due to spousal care increases the insurance value of SSDI relative to its costs. Finally, budget-neutral policy reforms that subsidize the cost of care can improve social welfare.

We argue that traditional voting models fail to fully explain the frequency of very close mass elections with high turnout. Instead, we model elections as a competition between incentive schemes to mobilize voters. We elucidate conditions under which parties might prefer close elections, as the potential to be pivotal motivates voters instead of exclusively costly incentives as in nonclose elections. We show that, under those conditions, better voter targeting results in tighter races and increased turnout. Furthermore, the smaller party often has a strong incentive to commit to strategies that ensure a close election.

This article builds a two-country model of gross capital flows where agents share tradable output risk using two bonds, subject to stochastic collateral constraints. Equilibrium portfolios are short in domestic bonds and long in foreign bonds because the endogenous movements of the real exchange rate provide a hedge against domestic output shocks. Under negative domestic shocks, these external positions transfer wealth from home to abroad. During the Great Recession, the model shows that such wealth transfer from the United States mitigated the consumption drop abroad. Quantitatively, financial frictions account for about half of the collapse in U.S. gross flows in 2008.

We study intertemporal choice through a novel and flexible framework that accounts for savoring of future consumption and memories of past consumption. The model uses standard intertemporal budget constraints but enriches preference structures with utility from anticipation, remembering, and experience. We also present an internal commitment mechanism that ensures dynamic consistency. We provide a revealed preference characterization of this model and apply it to quarterly consumption data from Spanish households. Utility from anticipation is important—and time inconsistency not strictly needed—to rationalize consumption patterns in the data.

We explore the implications of unawareness for tort law. We study cases where injurers and victims initially are unaware that some acts can yield harmful consequences, or that some acts or harmful consequences are even possible, but later become aware. We model unawareness by Reverse Bayesianism. We compare the two basic liability rules of Anglo-American tort law, negligence and strict liability, and argue that negligence has an important advantage over strict liability in a world with unawareness—negligence, through the stipulation of due care standards, spreads awareness about the updated probability of harm.

This article presents a new perspective on the nature of market power through the lens of firm prominence. We build a model of oligopolistic price competition with sequential consumer search, showing that a larger firm sets a higher price than its smaller competitors. Consumers are more likely to encounter sellers from a larger firm both immediately and in future interactions, resulting in less-elastic demand for that firm. Small firms can free-ride on the prominent firm's market power to raise their prices and earn higher profits. The Herfindahl–Hirschman Index provides a useful guide for welfare evaluation.

This article investigates the relationship between international trade and asymmetrical labor income risk. Using the case study of Brazil, we inspect how an increase in import penetration following the China shock impacted the distribution of idiosyncratic earnings changes across the country's local labor markets. We find that an increase in import penetration leads to a more dispersed and negatively skewed distribution. These effects can be explained by an increase in the volatility of hours worked following job and industry transitions, particularly from involuntary job separations.

A competition authority (CA) has an objective, which specifies what output profile firms need to produce as a function of production costs. These costs change over time and are only known by the firms. The objective is repeatedly implementable if the firms cannot collude and deceive the CA in equilibrium. We identify necessary and sufficient conditions for repeated implementation when firms can only announce prices and quantities. We use these conditions to study when the competitive output is implementable. We extend the analysis to the case when the firms can also supply hard evidence.

We examine how the effects of government spending shocks depend on the balance sheet position of households. Employing U.S. household survey data, we find a large, positive consumption response for households with mortgage debt, smaller response for renters, and an insignificant response for outright homeowners, in response to a positive government spending shock. We consider a model with three types of households and show that it can successfully account for these findings. Liquidity constraints and wealth effects play a crucial role in shock propagation. Our findings suggest the importance of household mortgage debt position in the transmission mechanism of fiscal policy.