Pub Date : 2026-03-01Epub Date: 2026-01-29DOI: 10.1016/j.jpubeco.2026.105572
Xinming Du , Andrew J. Wilson
Railway operation is known to be affected by the weather, but the magnitude of these effects has not been estimated at scale. We investigate the effect of weather on U.S. railways using accident and performance data spanning 1997–2022. We find that exposure to temperatures over 86 F (under 5 F) leads to a 9.5% (46%) increase in accidents and a 57% (222%) increase in deaths. Railroads are also adapted to their local climate (with warmer places exhibiting lower sensitivity to heat), learn from prior accidents, and change train speed and throughput in response to weather. Due to the fixed, network nature of railways, we discover that local responses to weather result in a negative externality of propagating delays. Our findings suggest that public funding for rail upgrades may improve both safety and performance.
{"title":"Weather and U.S. railways: risk, adaptation, and congestion","authors":"Xinming Du , Andrew J. Wilson","doi":"10.1016/j.jpubeco.2026.105572","DOIUrl":"10.1016/j.jpubeco.2026.105572","url":null,"abstract":"<div><div>Railway operation is known to be affected by the weather, but the magnitude of these effects has not been estimated at scale. We investigate the effect of weather on U.S. railways using accident and performance data spanning 1997–2022. We find that exposure to temperatures over 86 <span><math><msup><mspace></mspace><mrow><mo>∘</mo></mrow></msup></math></span>F (under 5 <span><math><msup><mspace></mspace><mo>∘</mo></msup></math></span>F) leads to a 9.5% (46%) increase in accidents and a 57% (222%) increase in deaths. Railroads are also adapted to their local climate (with warmer places exhibiting lower sensitivity to heat), learn from prior accidents, and change train speed and throughput in response to weather. Due to the fixed, network nature of railways, we discover that local responses to weather result in a negative externality of propagating delays. Our findings suggest that public funding for rail upgrades may improve both safety and performance.</div></div>","PeriodicalId":48436,"journal":{"name":"Journal of Public Economics","volume":"255 ","pages":"Article 105572"},"PeriodicalIF":3.4,"publicationDate":"2026-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146081485","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-03-01Epub Date: 2026-02-03DOI: 10.1016/j.jpubeco.2026.105581
Yu Liu , Xiaoxue Zhao
This paper examines developing countries’ low administrative capacity to enforce uniform tax rates across space as a driver of capital allocation and a cause of low productivity. We rely on the Golden Tax Project, an information technology reform in China that eliminates the need for local tax-enforcing agencies to verify firm sales and purchases through onsite inspections, as a natural experiment to study the effects of fiscal capacity on firms’ location and capital allocation decisions. Exploiting the heterogeneous shocks that the reform exerts on the fiscal capacity of Chinese counties with different geographic ruggedness, we find that the Golden Tax Project significantly leveled effective tax rates across Chinese counties, which caused capital to relocate out of counties that experienced a bigger fiscal capacity boost after the reform. Such cross-county capital reallocation significantly equalized the marginal product of capital across firms and caused a rightward shift in productivities among them.
{"title":"Fiscal capacity and capital misallocation: the economic costs of tax evasion","authors":"Yu Liu , Xiaoxue Zhao","doi":"10.1016/j.jpubeco.2026.105581","DOIUrl":"10.1016/j.jpubeco.2026.105581","url":null,"abstract":"<div><div>This paper examines developing countries’ low administrative capacity to enforce uniform tax rates across space as a driver of capital allocation and a cause of low productivity. We rely on the Golden Tax Project, an information technology reform in China that eliminates the need for local tax-enforcing agencies to verify firm sales and purchases through onsite inspections, as a natural experiment to study the effects of fiscal capacity on firms’ location and capital allocation decisions. Exploiting the heterogeneous shocks that the reform exerts on the fiscal capacity of Chinese counties with different geographic ruggedness, we find that the Golden Tax Project significantly leveled effective tax rates across Chinese counties, which caused capital to relocate out of counties that experienced a bigger fiscal capacity boost after the reform. Such cross-county capital reallocation significantly equalized the marginal product of capital across firms and caused a rightward shift in productivities among them.</div></div>","PeriodicalId":48436,"journal":{"name":"Journal of Public Economics","volume":"255 ","pages":"Article 105581"},"PeriodicalIF":3.4,"publicationDate":"2026-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146190852","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-03-01Epub Date: 2026-02-06DOI: 10.1016/j.jpubeco.2026.105577
Bruce D. Meyer , Angela Wyse , Douglas Williams
Data from the Department of Housing and Urban Development (HUD) show an unprecedented 43 percent increase in the number of people residing in homeless shelters in the United States between 2022 and 2024, reversing the gradual decline of the preceding sixteen years. Three-quarters of this rise occurred in four localities – New York City, Chicago, Massachusetts, and Denver – where large inflows of new immigrants, many lawfully paroled into the U.S. while seeking asylum, were housed in the homeless shelter system. Using direct estimates from local government sources and indirect methods based on demographic changes, we estimate that new migrant inflows were the primary driver of this dramatic rise, explaining about 59–62 percent of the two-year increase in sheltered homelessness. These estimates challenge narratives that attribute the increase primarily to local economic and housing market conditions and underscore the need to carefully consider population shifts, shelter capacity, and measurement practices when interpreting changes in official homeless counts over time.
{"title":"Asylum seekers and the rise in homelessness","authors":"Bruce D. Meyer , Angela Wyse , Douglas Williams","doi":"10.1016/j.jpubeco.2026.105577","DOIUrl":"10.1016/j.jpubeco.2026.105577","url":null,"abstract":"<div><div>Data from the Department of Housing and Urban Development (HUD) show an unprecedented 43 percent increase in the number of people residing in homeless shelters in the United States between 2022 and 2024, reversing the gradual decline of the preceding sixteen years. Three-quarters of this rise occurred in four localities – New York City, Chicago, Massachusetts, and Denver – where large inflows of new immigrants, many lawfully paroled into the U.S. while seeking asylum, were housed in the homeless shelter system. Using direct estimates from local government sources and indirect methods based on demographic changes, we estimate that new migrant inflows were the primary driver of this dramatic rise, explaining about 59–62 percent of the two-year increase in sheltered homelessness. These estimates challenge narratives that attribute the increase primarily to local economic and housing market conditions and underscore the need to carefully consider population shifts, shelter capacity, and measurement practices when interpreting changes in official homeless counts over time.</div></div>","PeriodicalId":48436,"journal":{"name":"Journal of Public Economics","volume":"255 ","pages":"Article 105577"},"PeriodicalIF":3.4,"publicationDate":"2026-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146190940","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-03-01Epub Date: 2026-02-03DOI: 10.1016/j.jpubeco.2026.105582
Leila Gautham , Nancy Folbre
We study how unpaid household production shapes trends in inequality in material living standards in the U.S. in the last five decades. We construct extended income and consumption measures that add the imputed value of household production to standard market concepts. Extended income and consumption are consistently more equal than their market counterparts. The imputed value of time devoted to household production has fallen considerably, with proportionately larger impacts on money-poor households. Inequality in extended measures has therefore risen more than for market income and consumption. In other words, the degree to which household production buffers inequality in market resources has fallen over time. This analysis applies a lower-bound replacement cost value to hours of time reported in household production and is robust to the use of different valuation and equivalence scales.
{"title":"Household production time and inequality in material living standards in the U.S., 1965–2018","authors":"Leila Gautham , Nancy Folbre","doi":"10.1016/j.jpubeco.2026.105582","DOIUrl":"10.1016/j.jpubeco.2026.105582","url":null,"abstract":"<div><div>We study how unpaid household production shapes trends in inequality in material living standards in the U.S. in the last five decades. We construct extended income and consumption measures that add the imputed value of household production to standard market concepts. Extended income and consumption are consistently more equal than their market counterparts. The imputed value of time devoted to household production has fallen considerably, with proportionately larger impacts on money-poor households. Inequality in extended measures has therefore risen more than for market income and consumption. In other words, the degree to which household production buffers inequality in market resources has fallen over time. This analysis applies a lower-bound replacement cost value to hours of time reported in household production and is robust to the use of different valuation and equivalence scales.</div></div>","PeriodicalId":48436,"journal":{"name":"Journal of Public Economics","volume":"255 ","pages":"Article 105582"},"PeriodicalIF":3.4,"publicationDate":"2026-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146190851","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-03-01Epub Date: 2026-02-10DOI: 10.1016/j.jpubeco.2025.105555
Jesper Akesson , Robert W. Hahn , Robert D. Metcalfe , Itzhak Rasooly
Scholars have suggested that White American support for welfare is influenced by their beliefs about the racial composition of welfare recipients. In this paper, we test this hypothesis using two experiments () that induce random variation in participants’ beliefs about the racial distribution of welfare recipients. In both experiments, we obtain evidence that exogenously increasing beliefs about the share of welfare recipients who are Black reduces support for welfare. We also use our experiments to study the effect of ‘priming’ participants to think about race, the accuracy of beliefs about the racial distribution of welfare recipients, and the mechanisms that underpin our results.
{"title":"Race and redistribution in the United States: An experimental analysis","authors":"Jesper Akesson , Robert W. Hahn , Robert D. Metcalfe , Itzhak Rasooly","doi":"10.1016/j.jpubeco.2025.105555","DOIUrl":"10.1016/j.jpubeco.2025.105555","url":null,"abstract":"<div><div>Scholars have suggested that White American support for welfare is influenced by their beliefs about the racial composition of welfare recipients. In this paper, we test this hypothesis using two experiments (<span><math><mi>n</mi><mo>=</mo><mn>9</mn><mo>,</mo><mn>775</mn></math></span>) that induce random variation in participants’ beliefs about the racial distribution of welfare recipients. In both experiments, we obtain evidence that exogenously increasing beliefs about the share of welfare recipients who are Black reduces support for welfare. We also use our experiments to study the effect of ‘priming’ participants to think about race, the accuracy of beliefs about the racial distribution of welfare recipients, and the mechanisms that underpin our results.</div></div>","PeriodicalId":48436,"journal":{"name":"Journal of Public Economics","volume":"255 ","pages":"Article 105555"},"PeriodicalIF":3.4,"publicationDate":"2026-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146190854","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-03-01Epub Date: 2026-02-12DOI: 10.1016/j.jpubeco.2026.105593
Sareh Vosooghi , Maria Arvaniti , Frederick van der Ploeg
We study the formation of international climate coalitions among sophisticated policymakers. They strategically predict the consequences of their membership decisions in climate negotiations and use an integrated assessment model of the economy and the climate in their decision-making. We analytically characterise the equilibrium number of coalitions and their number of signatories with certain types of heterogeneity. The special structure of our model drastically reduces the computational complexity of coalition formation with heterogeneous countries. We also numerically investigate possible coalition outcomes for a calibrated model with an exhaustible and an inexhaustible energy sector. In contrast to earlier approaches to coalition formation based on internal and external stability, much larger coalitions can be sustained in equilibrium alongside smaller ones. Sophisticated policymakers thus lead to greater mitigation of global warming.
{"title":"Climate coalitions with sophisticated policy makers","authors":"Sareh Vosooghi , Maria Arvaniti , Frederick van der Ploeg","doi":"10.1016/j.jpubeco.2026.105593","DOIUrl":"10.1016/j.jpubeco.2026.105593","url":null,"abstract":"<div><div>We study the formation of international climate coalitions among sophisticated policymakers. They <em>strategically</em> predict the consequences of their membership decisions in climate negotiations and use an integrated assessment model of the economy and the climate in their decision-making. We analytically characterise the equilibrium number of coalitions and their number of signatories with certain types of heterogeneity. The special structure of our model drastically reduces the computational complexity of coalition formation with heterogeneous countries. We also numerically investigate possible coalition outcomes for a calibrated model with an exhaustible and an inexhaustible energy sector. In contrast to earlier approaches to coalition formation based on internal and external stability, much larger coalitions can be sustained in equilibrium alongside smaller ones. Sophisticated policymakers thus lead to greater mitigation of global warming.</div></div>","PeriodicalId":48436,"journal":{"name":"Journal of Public Economics","volume":"255 ","pages":"Article 105593"},"PeriodicalIF":3.4,"publicationDate":"2026-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146190937","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We examine the impact of involuntary job displacement on workers’ commuting behavior and its implications for the overall welfare cost of job loss. Using geo-referenced employee-employer data from Germany (2000–2017), we track workers’ door-to-door commuting and relocation patterns between home and work. After displacement, workers commute 23.1% (3.38 kilometers) farther to new jobs, and the effect diminishes over time due to job changes rather than home relocation. The simultaneous wage and commuting effects suggest that wage differentials across jobs fail to compensate for commuting costs. An on-the-job search model with heterogeneous firm productivity and commuting distance rationalizes the findings, and structural estimates reveal that an average German worker’s commuting costs equal 20.2 euros per day. Hence, longer commutes exacerbate the total cost of job displacement by one-fifth of the wage losses.
{"title":"Beyond lost earnings: Job displacement and the cost of commuting","authors":"Yige Duan , Oskar Jost , Ramona Jost , Holger Seibert","doi":"10.1016/j.jpubeco.2026.105579","DOIUrl":"10.1016/j.jpubeco.2026.105579","url":null,"abstract":"<div><div>We examine the impact of involuntary job displacement on workers’ commuting behavior and its implications for the overall welfare cost of job loss. Using geo-referenced employee-employer data from Germany (2000–2017), we track workers’ door-to-door commuting and relocation patterns between home and work. After displacement, workers commute 23.1% (3.38 kilometers) farther to new jobs, and the effect diminishes over time due to job changes rather than home relocation. The simultaneous wage and commuting effects suggest that wage differentials across jobs fail to compensate for commuting costs. An on-the-job search model with heterogeneous firm productivity and commuting distance rationalizes the findings, and structural estimates reveal that an average German worker’s commuting costs equal 20.2 euros per day. Hence, longer commutes exacerbate the total cost of job displacement by one-fifth of the wage losses.</div></div>","PeriodicalId":48436,"journal":{"name":"Journal of Public Economics","volume":"255 ","pages":"Article 105579"},"PeriodicalIF":3.4,"publicationDate":"2026-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146057586","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-03-01Epub Date: 2026-02-03DOI: 10.1016/j.jpubeco.2026.105578
Nitin Bharti , Amory Gethin , Thanasak Mark Jenmana , Zhexun Mo , Thomas Piketty , Li Yang
This paper constructs a new database on public expenditure and revenue and their components, particularly education and health expenditure, covering all world regions over the 1800–2025 period. Human capital expenditure has grown substantially, but with large and persistent inequalities. Public education expenditure per school-age individual in Sub-Saharan Africa is about 3% of the level observed in Europe and North America in 2025 at purchasing power parity, compared to 6% in 1980 and 4% in 1950. Human capital expenditure strongly correlates with productivity growth, especially for public education and in poor countries. Estimated returns from our macro-historical database are around 10%, in line with micro studies. Finally, we present simulations based on illustrative human capital expenditure trajectories over the 2025–2100 period. In particular, we analyze the conditions under which convergence in human capital expenditure could lead to global productivity convergence by 2100.
{"title":"Human capital, unequal opportunities and productivity convergence: A global historical perspective, 1800–2100","authors":"Nitin Bharti , Amory Gethin , Thanasak Mark Jenmana , Zhexun Mo , Thomas Piketty , Li Yang","doi":"10.1016/j.jpubeco.2026.105578","DOIUrl":"10.1016/j.jpubeco.2026.105578","url":null,"abstract":"<div><div>This paper constructs a new database on public expenditure and revenue and their components, particularly education and health expenditure, covering all world regions over the 1800–2025 period. Human capital expenditure has grown substantially, but with large and persistent inequalities. Public education expenditure per school-age individual in Sub-Saharan Africa is about 3% of the level observed in Europe and North America in 2025 at purchasing power parity, compared to 6% in 1980 and 4% in 1950. Human capital expenditure strongly correlates with productivity growth, especially for public education and in poor countries. Estimated returns from our macro-historical database are around 10%, in line with micro studies. Finally, we present simulations based on illustrative human capital expenditure trajectories over the 2025–2100 period. In particular, we analyze the conditions under which convergence in human capital expenditure could lead to global productivity convergence by 2100.</div></div>","PeriodicalId":48436,"journal":{"name":"Journal of Public Economics","volume":"255 ","pages":"Article 105578"},"PeriodicalIF":3.4,"publicationDate":"2026-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146190853","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-03-01Epub Date: 2026-01-29DOI: 10.1016/j.jpubeco.2025.105562
Ana Figueiredo , Olivier Marie , Agnieszka Markiewicz
Segmented labor markets, where stable jobs coexist with insecure, high-turnover positions, make job security key to workers’ long-term outcomes. Using Dutch administrative data, we study the impact of displacement on job security and the role of cash-on-hand. One year after displacement, permanent employment falls by about one-fifth and remains lower five years later, amplifying wage losses: displaced workers who lose job security experience losses 21 % larger than those retaining a permanent contract. Exploiting a policy granting lump-sum transfers only to some displaced workers, we find that eligibility attenuates job security losses and, as a result, wage losses. Effects are larger among liquidity-constrained workers, consistent with binding liquidity constraints. Our findings highlight job security as a key channel through which cash-on-hand reduces the long-run costs of job loss, with implications for the design of unemployment insurance.
{"title":"The unequal job security scars of displacement","authors":"Ana Figueiredo , Olivier Marie , Agnieszka Markiewicz","doi":"10.1016/j.jpubeco.2025.105562","DOIUrl":"10.1016/j.jpubeco.2025.105562","url":null,"abstract":"<div><div>Segmented labor markets, where stable jobs coexist with insecure, high-turnover positions, make job security key to workers’ long-term outcomes. Using Dutch administrative data, we study the impact of displacement on job security and the role of cash-on-hand. One year after displacement, permanent employment falls by about one-fifth and remains lower five years later, amplifying wage losses: displaced workers who lose job security experience losses 21 % larger than those retaining a permanent contract. Exploiting a policy granting lump-sum transfers only to some displaced workers, we find that eligibility attenuates job security losses and, as a result, wage losses. Effects are larger among liquidity-constrained workers, consistent with binding liquidity constraints. Our findings highlight job security as a key channel through which cash-on-hand reduces the long-run costs of job loss, with implications for the design of unemployment insurance.</div></div>","PeriodicalId":48436,"journal":{"name":"Journal of Public Economics","volume":"255 ","pages":"Article 105562"},"PeriodicalIF":3.4,"publicationDate":"2026-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146081486","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-03-01Epub Date: 2026-02-13DOI: 10.1016/j.jpubeco.2026.105589
Fabrizio Germano , Vicenç Gómez , Francesco Sobbrio
Social media are at the center of countless debates on polarization, misinformation, and even the state of democracy in various parts of the world. An essential feature of social media is their recommendation algorithm that determines the ranking of content presented to the users. This paper investigates the dynamic feedback loop between recommendation algorithms and user behavior, and develops a theoretical framework to assess the impact of popularity-based parameters on platform engagement, misinformation, and polarization. The model uncovers a fundamental trade-off: assigning greater weight to online social interactions—such as likes and shares—increases user engagement but also increases misinformation (crowding-out the truth) and polarization. Building on this insight, the analysis considers how a simple “engagement tax” on social interactions can mitigate these negative externalities by altering platform incentives in the design of profit-maximizing algorithms. The framework is extended to include personalized rankings, demonstrating that personalization further amplifies polarization. Finally, empirical evidence from survey data in Italy and the United States indicates that Facebook’s 2018 “Meaningful Social Interactions” update—which increased the emphasis on certain engagement metrics—contributed to increased ideological extremism and affective polarization.
{"title":"Ranking for engagement: How social media algorithms fuel misinformation and polarization","authors":"Fabrizio Germano , Vicenç Gómez , Francesco Sobbrio","doi":"10.1016/j.jpubeco.2026.105589","DOIUrl":"10.1016/j.jpubeco.2026.105589","url":null,"abstract":"<div><div>Social media are at the center of countless debates on polarization, misinformation, and even the state of democracy in various parts of the world. An essential feature of social media is their recommendation algorithm that determines the ranking of content presented to the users. This paper investigates the dynamic feedback loop between recommendation algorithms and user behavior, and develops a theoretical framework to assess the impact of popularity-based parameters on platform engagement, misinformation, and polarization. The model uncovers a fundamental trade-off: assigning greater weight to online social interactions—such as likes and shares—increases user engagement but also increases misinformation (<em>crowding-out the truth</em>) and polarization. Building on this insight, the analysis considers how a simple “engagement tax” on social interactions can mitigate these negative externalities by altering platform incentives in the design of profit-maximizing algorithms. The framework is extended to include personalized rankings, demonstrating that personalization further amplifies polarization. Finally, empirical evidence from survey data in Italy and the United States indicates that Facebook’s 2018 “Meaningful Social Interactions” update—which increased the emphasis on certain engagement metrics—contributed to increased ideological extremism and affective polarization.</div></div>","PeriodicalId":48436,"journal":{"name":"Journal of Public Economics","volume":"255 ","pages":"Article 105589"},"PeriodicalIF":3.4,"publicationDate":"2026-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146190936","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"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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