Econometrica最新文献

We explore the deliberate infusion of ambiguity into the design of contracts. We show that when the agent is ambiguity-averse and hence chooses an action that maximizes their minimum utility, the principal can strictly gain from using an ambiguous contract, and this gain can be arbitrarily high. We characterize the structure of optimal ambiguous contracts, showing that ambiguity drives optimal contracts toward simplicity. We also provide a characterization of ambiguity-proof classes of contracts, where the principal cannot gain by infusing ambiguity. Finally, we show that when the agent can engage in mixed actions, the advantages of ambiguous contracts disappear.

This paper studies how social media affects the dynamics of protests and strikes in China during 2009–2017. Based on 13.2 billion microblog posts, we use tweets and retweets to measure social media communication across cities and exploit its rapid expansion for identification. We find that, despite strict government censorship, Chinese social media has a sizeable effect on the geographical spread of protests and strikes. Furthermore, social media communication considerably expands the scope of protests by spreading events across different causes (e.g., from anticorruption protests to environmental protests) and dramatically increases the probability of far-reaching protest waves with simultaneous events occurring in many cities. These effects arise even though Chinese social media barely circulates content that explicitly helps organize protests.

We document significant gaps in wealth across health status over the life cycle in Germany—a country with a universal healthcare system and negligible out-of-pocket medical expenses. To investigate the underlying sources of these wealth-health gaps, we build a heterogeneous-agent life-cycle model in which health and wealth evolve endogenously. In the model, agents exert efforts to lead a healthy lifestyle, which helps maintain good health status in the future. Effort choices, or lifestyle behaviors, are subject to adjustment costs to capture their habitual nature in the data. We find that our estimated model generates the great majority of the empirical wealth gaps by health and quantify the role of earnings and savings channels through which health affects these gaps. We show that variations in individual health efforts account for around a quarter of the model-generated wealth gaps by health, illustrating their role as an amplification mechanism behind the gaps.

This paper develops a model of private bilateral contracting, in which an exogenous network determines the pairs of players who can communicate and contract with each other. After contracting, the players interact in an underlying game with globally verifiable productive actions and externally enforced transfers. The paper investigates whether such decentralized contracting can internalize externalities that arise due to parties being unable to contract directly with others whose productive actions affect their payoffs. The contract-formation protocol, called the “contracting institution,” is treated as a design element. The main result is positive: There is a contracting institution that supports efficient equilibria for any underlying game and connected network. A critical property is that the institution allows for sequential contract formation or revision. The equilibrium construction features assurance contracts and cancellation penalties.

Central banks wish to avoid self-fulfilling fluctuations. Interest rate rules with a unit response to real rates achieve this under the weakest possible assumptions about the behavior of households and firms. They are robust to household heterogeneity, hand-to-mouth consumers, non-rational household or firm expectations, active fiscal policy, and to any form of intertemporal or nominal-real links. They are easy to employ in practice, using inflation-protected bonds to infer real rates. With a time-varying short-term inflation target, they can implement an arbitrary inflation path, including optimal policy. This provides a way to translate policy makers' desired path for inflation into one for nominal rates. U.S. Federal Reserve behavior is remarkably close to that predicted by a real rate rule, given the desired inflation path of U.S. monetary policy makers. Real rate rules work thanks to the key role played by the Fisher equation in monetary transmission.

We study the design of optimal mechanisms when the designer is uncertain both about the form of information held by the agents and also about which equilibrium will be played. The guarantee of a mechanism is its worst performance across all information structures and equilibria. The potential of an information structure is its best performance across all mechanisms and equilibria. We formulate a pair of linear programs, one of which is a lower bound on the maximum guarantee across all mechanisms, and the other of which is an upper bound on the minimum potential across all information structures. In applications to public expenditure, bilateral trade, and optimal auctions, we use the bounding programs to characterize guarantee-maximizing mechanisms and potential-minimizing information structures and show that the max guarantee is equal to the min potential.

We exploit a natural experiment involving a randomization of votes across parties within coalitions in all local elections in Italy for over a decade. A lottery on the position of party symbols in the ballot papers allows estimating the causal effect of increasing votes to parties for coalition policies. A non-marginal random boost of votes shifts budgetary spending towards the treated party's platform, but only for issues that are salient in that party's political manifesto. We study the chains of mechanisms mapping votes into policies and link it to an increase in bargaining power within legislative majorities. Parties leverage their higher electoral support to gain the appointment of politically affiliated cabinet members. Empowering different parties also leads to the selection of cabinets with different socio-demographic characteristics. The unintentional experiment helps shed new light on mechanisms mapping votes to parties into coalition policies.

This paper studies the role of fiscal capacity in European state consolidation. Our analysis is organized around novel data on the territories and cities of the Holy Roman Empire in the early modern period. Territories implementing an early fiscal reform were more likely to survive, increased in size, and achieved a more compact extent. We provide evidence for the causal interpretation of these results and show key mechanisms: revenues, military investments, and marriage success. The imposition of Imperial taxes, quasi-random in timing and size, increased the benefits of an efficient tax administration on the side of rulers, driving the implementation of fiscal centralization. Within territories, Chambers became the dominant administrative institution, tilting the consolidating states toward absolutism.