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Articles 211 - 240 of 3476
Full-Text Articles in Economics
Speculative Bubbles In The Recent Ai Boom: Nasdaq And The Magnificent Seven, Rerotlhe B. Basele, Peter C.B. Phillips, Shuping Shi
Speculative Bubbles In The Recent Ai Boom: Nasdaq And The Magnificent Seven, Rerotlhe B. Basele, Peter C.B. Phillips, Shuping Shi
Cowles Foundation Discussion Papers
The recent artificial intelligence (AI) boom covers a period of rapid innovation and wide adoption of AI intelligence technologies across diverse industries. These developments have fueled an unprecedented frenzy in the Nasdaq, with AI-focused companies experiencing soaring stock prices that raise concerns about speculative bubbles and real-economy consequences. Against this background the present study investigates the formation of speculative bubbles in the Nasdaq stock market with a specific focus on the so-called ‘Magnificent Seven’ (Mag-7) individual stocks during the AI boom, spanning the period January 2017 to January 2025. We apply the real time PSY bubble detection methodology of Phillips …
Bidding With Budgets: Algorithmic And Data-Driven Bids In Digital Advertising, Dirk Bergemann, Alessandro Bonatti, Nicholas Wu
Bidding With Budgets: Algorithmic And Data-Driven Bids In Digital Advertising, Dirk Bergemann, Alessandro Bonatti, Nicholas Wu
Cowles Foundation Discussion Papers
In digital advertising, the allocation of sponsored search, sponsored product, or display advertisements is mediated by auctions. The generation of bids in these auctions for attention is increasingly supported by auto-bidding algorithms and platform-provided data. We analyze the equilibrium properties of a sequence of increasingly sophisticated auto-bidding algorithms. First, we consider the equilibrium bidding behavior of an individual advertiser who controls the auto-bidding algorithm through the choice of their budget. Second, we examine the interaction when all bidders use budget-controlled bidding algorithms. Finally, we derive the bidding algorithm that maximizes the platform’s revenue while ensuring all advertisers continue to participate.
Conviction, Incarceration, And Recidivism: Understanding The Revolving Door, John Eric Humphries, Aurélie Ouss, Kamelia Stavreva, Megan Stevenson, Winnie Van Dijk
Conviction, Incarceration, And Recidivism: Understanding The Revolving Door, John Eric Humphries, Aurélie Ouss, Kamelia Stavreva, Megan Stevenson, Winnie Van Dijk
Cowles Foundation Discussion Papers
Noncarceral conviction is a common outcome of criminal court cases: for every individual incarcerated, there are approximately three who were recently convicted but not sentenced to prison or jail. We extend the binary-treatment judge IV framework to settings with multiple treatments and use it to study the consequences of noncarceral conviction. We outline assumptions under which widely-used 2SLS regressions recover margin-specific treatment effects, relate these assumptions to models of judge decision-making, and derive an expression that provides intuition about the direction and magnitude of asymptotic bias when a key assumption on judge decision-making is not met. We find that noncarceral …
Multidimensional Monotonicity And Economic Applications, Frank Yang, Kai Hao Yang
Multidimensional Monotonicity And Economic Applications, Frank Yang, Kai Hao Yang
Cowles Foundation Discussion Papers
We characterize the extreme points of multidimensional monotone functions from [0,1]^n to [0,1], as well as the extreme points of the set of one-dimensional marginals of these functions. These characterizations lead to new results in various mechanism design and information design problems, including public good provision with interdependent values; interim efficient bilateral trade mechanisms; asymmetric reduced form auctions; and optimal private private information structure. As another application, we also present a mechanism anti-equivalence theorem for two-agent, two-alternative social choice problems: A mechanism is payoff-equivalent to a deterministic DIC mechanism if and only if they are ex-post equivalent.
The Effect Of Education Policy On Crime: An Intergenerational Perspective, Ulrika Ahrsjö, Costas Meghir, Mårten Palme, Marieke Schnabel
The Effect Of Education Policy On Crime: An Intergenerational Perspective, Ulrika Ahrsjö, Costas Meghir, Mårten Palme, Marieke Schnabel
Cowles Foundation Discussion Papers
We study the intergenerational effect of education policy on crime. We use Swedish administrative data that links outcomes across generations with crime records, and we show that the comprehensive school reform, gradually implemented between 1949 and 1962, reduced conviction rates both for the generation directly affected by the reform and for their sons. The reduction in conviction rates occurred in many types of crime. The key mediators of this reduction in child generation are an increase in education and household income and a decrease in crime among their fathers.
Digital Ecosystems And Data Regulation, Andrew Rhodes, Jidong Zhou, Junjie Zhou
Digital Ecosystems And Data Regulation, Andrew Rhodes, Jidong Zhou, Junjie Zhou
Cowles Foundation Discussion Papers
This paper provides a framework in which a multiproduct ecosystem competes with many single-product firms in both price and innovation. The ecosystem is able to use data collected on one product to improve the quality of its other products. We study the impact of data regulation which either restricts the ecosystem's cross-product data usage, or which requires it to share data with small firms. Each policy induces small firms to innovate more and set higher prices; it also dampens data spillovers within the ecosystem, reduces the ecosystem's incentive to collect data and innovate, and potentially increases its prices. As a …
Supply Chain Disruptions, Supplier Capital, And Financial Constraints, Ernest Liu, Yukun Liu, Vladimir Smirnyagin, Aleh Tsyvinski
Supply Chain Disruptions, Supplier Capital, And Financial Constraints, Ernest Liu, Yukun Liu, Vladimir Smirnyagin, Aleh Tsyvinski
Cowles Foundation Discussion Papers
We study the impact of supply chain disruptions on U.S. firms based on the universe of seaborne shipment-level import transactions from 2013 to 2023. The granularity of the data allows us to build an index of firm-level disruptions of international suppliers and introduce a comprehensive set of stylized facts for supply chain relationships in the cross-section of firms. We build a general equilibrium heterogeneous firms model with two types of capital stocks—physical and international supplier capitals. Accumulation of supplier capital is an important endogenous margin of adjustment, and limiting this ability substantially delays recovery, especially in financially constrained firms.
The Economics Of Large Language Models: Token Allocation, Fine-Tuning, And Optimal Pricing, Dirk Bergemann, Alessandro Bonatti, Alex Smolin
The Economics Of Large Language Models: Token Allocation, Fine-Tuning, And Optimal Pricing, Dirk Bergemann, Alessandro Bonatti, Alex Smolin
Cowles Foundation Discussion Papers
We develop an economic framework to analyze the optimal pricing and product design of Large Language Models (LLM). Our framework captures several key features of LLMs: variable operational costs of processing input and output tokens; the ability to customize models through fine-tuning; and high-dimensional user heterogeneity in terms of task requirements and error sensitivity. In our model, a monopolistic seller offers multiple versions of LLMs through a menu of products. The optimal pricing structure depends on whether token allocation across tasks is contractible and whether users face scale constraints. Users with similar aggregate value-scale characteristics choose similar levels of fine-tuning …
Optimal Pricing Of Cloud Services: Committed Spend Under Demand Uncertainty, Dirk Bergemann, Michael C. Wang
Optimal Pricing Of Cloud Services: Committed Spend Under Demand Uncertainty, Dirk Bergemann, Michael C. Wang
Cowles Foundation Discussion Papers
We consider a seller who offers services to a buyer with multi-unit demand. Prior to the realization of demand, the buyer receives a noisy signal of their future demand, and the seller can design contracts based on the reported value of this signal. Thus, the buyer can contract with the service provider for an unknown level of future consumption, such as in the market for cloud computing resources or software services. We characterize the optimal dynamic contract, extending the classic sequential screening framework to a nonlinear and multi-unit setting. The optimal mechanism gives discounts to buyers who report higher signals, …
Robust Pricing For Cloud Computing, Dirk Bergemann, Rahul Deb
Robust Pricing For Cloud Computing, Dirk Bergemann, Rahul Deb
Cowles Foundation Discussion Papers
We study the robust sequential screening problem of a monopolist seller of multiple cloud computing services facing a buyer who has private information about his demand distribution for these services. At the time of contracting, the buyer knows the distribution of his demand of various services and the seller simply knows the mean of the buyer’s total demand. We show that a simple “committed spend mechanism” is robustly optimal: it provides the seller with the highest profit guarantee against all demand distributions that have the known total mean demand. This mechanism requires the buyer to commit to a minimum total …
U.S. Infrastructure: 1929-2023, Ray C. Fair
U.S. Infrastructure: 1929-2023, Ray C. Fair
Cowles Foundation Discussion Papers
This paper examines the history of U.S. infrastructure since 1929 and in the process reports an interesting fact about the U.S. economy. Infrastructure stock as a percent of GDP began a steady decline around 1970, and the government budget deficit became positive and large at roughly the same time. The infrastructure pattern in other countries does not mirror that in the United States, so the United States appears to be a special case. The overall results suggest that the United States became less future oriented beginning around 1970, an increase in the social discount rate. This change has persisted. This …
Intra-Household Welfare Inequality And Household Public Goods, Pierre-André Chiappori, Costas Meghir, Yoko Okuyama
Intra-Household Welfare Inequality And Household Public Goods, Pierre-André Chiappori, Costas Meghir, Yoko Okuyama
Cowles Foundation Discussion Papers
In this paper we develop a novel approach to measuring individual welfare within households, recognizing that individuals may have both different preferences (particularly regarding public consumption) and differential access to resources. We construct a money metric measure of welfare that accounts for public goods (by using personalized prices) and the allocation of time. We then use our conceptual framework to analyse intrahousehold inequality in Japan, allowing for the presence of two public goods: expenditures on children and other public goods including housing. We show empirically that women have much stronger preferences for both public goods and this has critical implications …
Intergenerational Welfare Assessments, Sergi Barcons, Eduardo Dávila, Andreas Schaab
Intergenerational Welfare Assessments, Sergi Barcons, Eduardo Dávila, Andreas Schaab
Cowles Foundation Discussion Papers
This paper studies welfare assessments in economies with rich demographic structures. First, we show that perpetual consumption is the only unit that enables interpersonal comparisons in demographically disconnected economies, in which there is no date in which all individuals are concurrently alive. Second, we show that there exist feasible perturbations of Pareto efficient allocations in demographically disconnected economies that feature positive Kaldor-Hicks efficiency gains. Third, we show how welfare gains from reallocating consumption can be separately attributed to an incomplete markets and a demographic component. We use our results to derive new insights in three workhorse intergenerational models: i) Samuelson …
Consumer-Optimal Segmentation In Multi-Product Markets, Dirk Bergemann, Tibor Heumann, Michael C. Wang
Consumer-Optimal Segmentation In Multi-Product Markets, Dirk Bergemann, Tibor Heumann, Michael C. Wang
Cowles Foundation Discussion Papers
We analyze how market segmentation affects consumer welfare when a monopolist can engage in both second-degree price discrimination (through product differentiation) and third-degree price discrimination (through market segmentation). We characterize the consumer-optimal market segmentation and show that it has several striking properties: (1) the market segmentation displays monotonicity—higher-value customers always receive higher quality product than lower-value regardless of their segment and across any segment; and (2) when aggregate demand elasticity exceeds a threshold determined by marginal costs, no segmentation maximizes consumer surplus. Our results demonstrate that strategic market segmentation can benefit consumers even when it enables price discrimination, but these …
Data-Driven Mechanism Design: Jointly Eliciting Preferences And Information, Dirk Bergemann, Marek Bojko, Paul Dütting, Renato Paes Leme, Haifeng Xu, Song Zuo
Data-Driven Mechanism Design: Jointly Eliciting Preferences And Information, Dirk Bergemann, Marek Bojko, Paul Dütting, Renato Paes Leme, Haifeng Xu, Song Zuo
Cowles Foundation Discussion Papers
We study mechanism design when agents hold private information about both their preferences and a common payoff-relevant state. We show that standard message-driven mechanisms cannot implement socially efficient allocations when agents have multidimensional types, even under favorable conditions. To overcome this limitation, we propose data-driven mechanisms that leverage additional post-allocation information, modeled as an estimator of the pay-off relevant state. Our data-driven mechanisms extend the classic Vickrey-Clarke-Groves class. We show that they achieve exact implementation in posterior equilibrium when the state is either fully revealed or the utility is linear in an unbiased estimator. We also show that they achieve …
Community Networks, Entrepreneurship And The Process Of Economic Development, Ruochen Dai, Dilip Mookherjee, Kaivan Munshi, Xiaobo Zhang
Community Networks, Entrepreneurship And The Process Of Economic Development, Ruochen Dai, Dilip Mookherjee, Kaivan Munshi, Xiaobo Zhang
Cowles Foundation Discussion Papers
This research examines the determinants of entrepreneurship in China’s transition from agriculture to domestic production in the 1990’s and the subsequent transition to exporting in the 2000’s. The model that we develop and test to describe these transitions incorporates a productivity enhancing role for community (birth county) networks, which emerge in response to weak market institutions at early stages of economic development. Using administrative data covering the universe of registered firms over the 1994-2012 period and the universe of exporters over the 2002-2012 period, we provide causal evidence that these networks of firms were active and effective in increasing the …
Social Status, Economic Development And Female Labor Force (Non) Participation, Kaivan Munshi, Swapnil Singh
Social Status, Economic Development And Female Labor Force (Non) Participation, Kaivan Munshi, Swapnil Singh
Cowles Foundation Discussion Papers
This research provides a status-based explanation for the high rates of female labor force nonparticipation (FLFNP) and the sustained increase in these rates over time that have been documented in many developing economies. This explanation is based on the idea that households or ethnic groups can signal their wealth, and thereby increase their social status, by withdrawing women from the labor force. If the value of social status or the willingness to bear the signaling cost is increasing with economic development, then this would explain the persistent increase in FLFNP. To provide empirical support for this argument, we utilize two …
Lessons Learned: Karl-Philipp Wojick, Maryann Haggerty
Lessons Learned: Karl-Philipp Wojick, Maryann Haggerty
Journal of Financial Crises
Karl-Philipp Wojcik is the general counsel of the European Union’s Single Resolution Board (SRB), the central resolution authority within the European Commission (EC) banking union. The banking union, which as of January 1, 2023, encompasses the 20 eurozone countries, along with Bulgaria, was established as part of the financial system reforms stemming from the Global Financial Crisis and the ensuing European sovereign debt crisis. The SRB’s stated mission is to ensure orderly resolution of failing banks, protect taxpayers from state bailouts, and promote financial stability. Wojcik became SRB general counsel in November 2020. Previously, he was a member of the …
Lessons Learned: Subba Rao Duvvuri, Salil Gupta
Lessons Learned: Subba Rao Duvvuri, Salil Gupta
Journal of Financial Crises
Subba Rao Duvvuri served as governor of the Reserve Bank of India (RBI) for five years (2008–13). Before that, he was finance secretary to the government of India (2007–08), and secretary to the prime minister’s Economic Advisory Council (2005–07). With a career spanning 35 years in the Indian Administrative Services, Duvvuri has held various positions at the state level in the government of Andhra Pradesh, and at the central government of India. Duvvuri was previously lead economist at the World Bank (1999–2004) and, after 2013, served as a visiting fellow at the National University of Singapore and the University of …
Lessons Learned: Calvin Mitchell Iii, Mercedes Cardona
Lessons Learned: Calvin Mitchell Iii, Mercedes Cardona
Journal of Financial Crises
Calvin Mitchell III served as executive vice president of the communications group within the executive office of the Federal Reserve Bank of New York (FRBNY) during the Global Financial Crisis. In 2008, Mitchell was tapped by Timothy Geithner, who was then FRBNY president, to head a new group charged with expanding the communications and community affairs functions. Mitchell left the FRBNY in 2009 for the private sector and returned to government in 2021 as assistant secretary for public affairs in the US Treasury Department.
International Monetary Fund: Special Drawing Rights Allocations, 2009, Ikbal S. Ahluwalia, Owen Heaphy, Rosalind Z. Wiggins
International Monetary Fund: Special Drawing Rights Allocations, 2009, Ikbal S. Ahluwalia, Owen Heaphy, Rosalind Z. Wiggins
Journal of Financial Crises
Despite efforts by the world’s major economies to address stresses in the global financial system, by early 2009, the Global Financial Crisis caused developing and lower-income countries to experience shortages of the major reserve currencies. In August 2009, the International Monetary Fund (IMF) distributed a general allocation of Special Drawing Rights (SDR) of unprecedented size—totaling USD 250 billion (SDR 161.3 billion)—to all member countries in an effort to address these issues and provide liquidity to the world’s economies. In September 2009, it also distributed a special “catch-up” allocation of USD 33 billion in SDRs (SDR 21.5 billion) to eligible members …
Lessons Learned: Jason Cave, Vincient Arnold, Greg Feldberg
Lessons Learned: Jason Cave, Vincient Arnold, Greg Feldberg
Journal of Financial Crises
Jason Cave was the senior adviser to the chairman of the Federal Deposit Insurance Corporation (FDIC) from 2008 to 2011 and the deputy director of the Division of Complex Financial Institutions at the FDIC from 2011 to 2013. This Lessons Learned summary is based on an interview with Cave held on April 8, 2024. During the interview, Cave discussed the so-called ring-fencing arrangements planned, considered, or executed between various agencies of the US government—the Federal Reserve, Department of the Treasury, and FDIC—and three banks: Wachovia, Citigroup, and Bank of America. These arrangements, sometimes referred to as wraps or risk shields, …
International Monetary Fund: Short-Term Liquidity Line, 2020, Carey K. Mott, Léo Brougher
International Monetary Fund: Short-Term Liquidity Line, 2020, Carey K. Mott, Léo Brougher
Journal of Financial Crises
As the COVID-19 pandemic spread in March 2020, global financial conditions tightened considerably. In response, global reserve currency-issuing countries extended bilateral swap lines to select countries. Strong demand for US dollar liquidity among emerging markets led the International Monetary Fund (IMF) to introduce the Short-Term Liquidity Line (SLL) on April 15, 2020. The SLL functioned as a swap lending facility. Unlike other IMF liquidity tools, the SLL was a revolving credit line that allowed countries to repeatedly draw funds and make repayments, with each repayment restoring access up to the approved limit across SLL arrangements. Its purpose was to enable …
International Monetary Fund: Foreign Exchange Liquidity Through The Special Drawing Rights Allocation, 2021, Vincient Arnold
International Monetary Fund: Foreign Exchange Liquidity Through The Special Drawing Rights Allocation, 2021, Vincient Arnold
Journal of Financial Crises
The official response to the COVID-19 pandemic was costly for governments, particularly those in developing economies with significant existing external debt. On August 2, 2021, the International Monetary Fund (IMF) announced in a press release the allocation of SDR 456 billion (USD 650 billion) in Special Drawing Rights (SDRs) to “address the long-term global need for reserves, build confidence, and foster the resilience and stability of the global economy.” The COVID-19 allocation was a form of unconditional (or “concessional”) liquidity to IMF member nations, similar to a capital injection or grant. It was the fourth-ever general allocation and the largest …
From Rural Fields To Urban Kitchens: Structural Change And The Decline Of Women's Work In India, Michael Peters, Pamela Torola, Lindsey Uniat, Fabrizio Zilibotti
From Rural Fields To Urban Kitchens: Structural Change And The Decline Of Women's Work In India, Michael Peters, Pamela Torola, Lindsey Uniat, Fabrizio Zilibotti
Discussion Papers
India’s GDP per capita grew threefold between 1987 and 2019, coinciding with rapid urbanization. During this period, female labor force participation (FLFP) declined significantly. Consistent with this observation, we document a pronounced urban-rural participation gap, where FLFP is higher in poorer, rural labor markets. Using time-use data, we show that this is primarily driven by an extensive margin: in rural districts, women often engage in part-time activities, typically related to agriculture and informal family businesses. These activities are less common in urban areas, where some women take formal jobs, but a larger share withdraws from the labor market to focus …
Entropy-Regularized Optimal Transport In Information Design, Jorge Justiniano, Andreas Kleiner, Benny Moldovanu, Martin Rumpf, Philipp Strack
Entropy-Regularized Optimal Transport In Information Design, Jorge Justiniano, Andreas Kleiner, Benny Moldovanu, Martin Rumpf, Philipp Strack
Cowles Foundation Discussion Papers
In this paper, we explore a scenario where a sender provides an information policy and a receiver, upon observing a realization of this policy, decides whether to take a particular action, such as making a purchase. The sender’s objective is to maximize her utility derived from the receiver’s action, and she achieves this by careful selection of the information policy. Building on the work of Kleiner et al., our focus lies specifically on information policies that are associated with power diagram partitions of the underlying domain. To address this problem, we employ entropy-regularized optimal transport, which enables us to develop …
Inference For Regression With Variables Generated By Ai Or Machine Learning, Laura Battaglia, Timothy Christensen, Stephen Hansen, Szymon Sacher
Inference For Regression With Variables Generated By Ai Or Machine Learning, Laura Battaglia, Timothy Christensen, Stephen Hansen, Szymon Sacher
Cowles Foundation Discussion Papers
It has become common practice for researchers to use AI-powered information retrieval algorithms or other machine learning methods to estimate variables of economic interest, then use these estimates as covariates in a regression model. We show both theoretically and empirically that naively treating AI- and ML-generated variables as “data” leads to biased estimates and invalid inference. We propose two methods to correct bias and perform valid inference: (i) an explicit bias correction with bias-corrected confidence intervals, and (ii) joint maximum likelihood estimation of the regression model and the variables of interest. Through several applications, we demonstrate that the common approach …
Distributional Impacts Of The Changing Retail Landscape, Yue Cao, Judith A. Chevalier, Jessie Handbury, Hayden Parsley, Kevin R. Williams
Distributional Impacts Of The Changing Retail Landscape, Yue Cao, Judith A. Chevalier, Jessie Handbury, Hayden Parsley, Kevin R. Williams
Cowles Foundation Discussion Papers
A common tactic to estimate willingness-to-travel exploits variation in the relative proximity of consumers to supplier locations. The validity of these estimates relies on the exogeneity of that consumer-supplier distance. We argue that distance to suppliers is endogenous because suppliers strategically choose locations to target consumers; we introduce a novel instrument to address this form of endogeneity. Using geolocation data from millions of smartphones, we estimate consumer preferences for specific retail chains across income groups and regions. We show that accounting for distance endogeneity significantly alters willingness-to-travel measures. Contrary to the prevailing “retail apocalypse” narrative, we find that consumer surplus …
Optimal Unilateral Carbon Policy, Samuel Kortum, David A. Weisbach
Optimal Unilateral Carbon Policy, Samuel Kortum, David A. Weisbach
Cowles Foundation Discussion Papers
Climate policy by a coalition of countries can shift activities—extraction, production, and consumption—to regions outside the coalition. We build a stylized general-equilibrium model of trade and carbon externalities to derive a coalition’s optimal Pareto-improving policy in such an environment. It can be implemented through: (i) a tax on fossil-fuel extraction at a rate equal to the global marginal harm from carbon emissions, (ii) a tax on imports of energy and goods, and a rebate of the tax on exports of energy but not goods, all at a lower rate per unit of carbon than the extraction tax rate, and (iii) …
Changes In Marital Sorting: Theory And Evidence From The Us, Pierre-André Chiappori, Monica Costa Dias, Costas Meghir, Hanzhe Zhang
Changes In Marital Sorting: Theory And Evidence From The Us, Pierre-André Chiappori, Monica Costa Dias, Costas Meghir, Hanzhe Zhang
Cowles Foundation Discussion Papers
Positive assortative matching refers to the tendency of individuals with similar characteristics to form partnerships. Measuring the extent to which assortative matching differs between two economies is challenging when the marginal distributions of the characteristic along which sorting takes place (e.g., education) change for either or both sexes. We show how the use of different measures can generate different conclusions. We provide axiomatic characterization for measures such as the odds ratio, normalized trace, and likelihood ratio, and provide a structural economic interpretation of the odds ratio. We then use our approach to consider how marital sorting by education changed between …