Economic Inquiry最新文献

We provide evidence from advanced and emerging economies on the supply-side effects of monetary policy, that is, the cost channel. We employ sign restrictions to identify demand-driven and supply-driven components of inflation and loan rates to test for the cost channel. A monetary policy tightening, by reducing banks' loan supply, increases the supply loan rate and the borrowing costs faced by firms. The subsequent contraction in aggregate supply raises supply inflation. We find this effect is larger in emerging economies. In a stylized New Keynesian model both reactions are related to the pass-through of firms' costs to prices and banks' costs to rates.

When employees are employed in a temporary capacity, employers should be less willing to invest in their human capital relative to permanent employees. This study uses the context of injury management by Major League Baseball teams to test for differential investment in the protection of player human capital. Injury management is inherently uncertain as medical professionals can give differing opinions, so teams may be able to influence recovery times. Using a panel dataset and estimating player fixed-effects regressions, players are found to miss significantly fewer games to injury when employed on a temporary basis.

This paper replicates studies on alumni visits and email interventions in Economics Principles courses to address diversity among students majoring in economics. Using a new, racially diverse sample reflecting national demographics, we find that two 15-min visits from female alumnae, mostly African American, or an encouraging email can increase enrollment in upper-level economics courses, but combining these interventions is potentially less effective. Alumnae visits increased upper-level economics course completion among Black and Latinx students by almost 12 percentage points more than they increased completion among white students. Our results suggest that alumni visits can increase racial diversity at a relatively low cost.

We employ Chinese firm-level data to examine the interconnections among firm ownership, environmental regulation, and non-environmental economic policies. We find that there are substantial differences between state-owned enterprises (SOEs) and privately-owned enterprises (POEs) in their responses to government anti-pollution mandates. SOEs reduced emissions more than POEs, with the former relying mainly on abatement investment and the latter on reducing outputs. An average POE's marginal abatement cost is more than nine times that of an average SOE, suggesting significant inefficiencies in policy implementation. Policies liberalizing financial markets could affect POEs' abatement costs and improve the cost-effectiveness of environmental policies.

This article concerns the optimal choice of flat taxes on labor and capital income, and on consumption, in a tractable economic model in which agents are subject to idiosyncratic investment risk. We identify the tax rates which maximize welfare in stationary equilibrium while preserving tax revenue, finding that an increase in welfare equivalent to a permanent increase in consumption of nearly 7% can be achieved by only taxing capital income and consumption. The Domar-Musgrave effect explains cases where it is optimal to tax capital income. We characterize the dynamic response to the substitution of consumption taxation for labor income taxation.

This paper explores how international trade recovers after war, emphasizing the role of dispute resolution mechanisms (DRMs). Wars typically prolong negative trade impacts due to heightened tensions, but DRMs—such as General Agreement on Tariffs and Trade/World Trade Organization and diplomatic exchanges—can reduce these tensions, lower policy uncertainty, and ease economic frictions, facilitating recovery. Using the gravity model, the study analyzes trade flows between countries with a history of conflict to test if DRM membership brings additional trade benefits. Results indicate that DRM membership is linked to positive trade effects for countries affected by war, likely accelerating recovery from disruptions caused by conflict.

Customer switching and firm entry are central to market performance, yet the linkages between these market characteristics has not been empirically examined. This study seeks to rectify this lacuna by examining the customer switching-firm entry relationship using direct observations on both. We do so in the context of the Maryland retail electricity industry, which began to allow both entry and customer switching in the late 1990s. Our empirical analysis provides support for the interplay between these market characteristics, as well as the important role that legislative and regulatory market design mechanisms have on both consumer switching and entry.

This article contributes to the debate about the potential of pricing algorithms to collude and earn supra-competitive profits without explicit communication. By simulating competition among seven algorithms, we demonstrate that: (1) algorithms can reach supra-competitive prices in a reasonably short time, taking less than $��1�/�1�,�00�0^{\text{th}}�$ the time taken by algorithms in recent studies; and (2) tacit collusion among the algorithms is robust to the choice of different algorithms by competing firms. These results address the main criticisms concerning the practical relevance of recent studies that demonstrate algorithmic collusion. The top-performing algorithms possess properties of niceness, forgiveness, provocability, and flexibility.

With unprecedented access to volumes and prices of state-contingent claims by a major bookmaker, second-by-second in-play football betting markets, we study what happens after major breaking news. We focus on what might look like a shift in momentum to a bettor: equalizing goals. Immediately after this news breaks, the volume of claims sold on the match outcomes increases and is substantially biased toward the equalizing team. But there is no evidence that the prices or values of these claims are functions of whichever team scored last. These findings illustrate the value of integrating high-frequency price and quantity data to evaluate the efficiency and profitability of betting markets.