I propose a portfolio allocation model that combines a data-based approach with macroeconomic considerations of the business cycle. It accounts for the two key features of business cycles, namely co-movement among macroeconomic variables and asymmetric development of the cycles. The joint treatment of these characteristics improves the ability of the model to time market turns, consequently enhancing portfolio gains.
This paper shows that local economic shocks spill over to distant regions through firms' internal networks, and that such spillovers matter economically by affecting aggregate employment in those regions. Using confidential micro data from the U.S. Census Bureau, we find that establishment-level employment responds strongly to shocks in other regions in which the firm is operating. Consistent with theory, the elasticity of establishment-level employment with respect to shocks in other regions increases with firms' financial constraints.
We show that the design and decentralized scoring of New York's high school exit exams - the Regents Examinations - led to systematic manipulation of test scores just below important profi ciency cutoffs. Exploiting a series of reforms that eliminated score manipulation, we fi nd heterogeneous effects of test score manipulation on longer-run outcomes. While inflating a score increases the probability of a student graduating from high school by about 22 percentage points, the probability of taking advanced coursework declines by roughly 15 percentage points.
Using data from North Carolina, Jesse Rothstein (2017) presents a comprehensive replication of Chetty, Friedman, and Rockoff's [CFR] (2014a,b) results on teachers' impacts. In addition, Rothstein presents new evidence that he argues raises concerns about three aspects of CFR's methods and identi cation assumptions: their treatment of missing data, the validity of their quasi-experimental design, and their method of controlling for observables when estimating teachers' long-term effects.
What are the sources of the returns to education? We study the allocation of higher education graduates from public institutions in Ohio across firms. We present three results. First, we confirm findings in the earlier literature of large pay differences across degrees. Second, we show that up to one quarter of pay premiums for higher degrees are explained by between-firm pay differences. Third, higher education degrees are associated with greater representation at the best-paying firms.
Principals often operate on misspecified models of their agents' preferences. When preferences are such that non-local incentive constraints may bind in the optimum, even slight misspecification of the preferences can lead to large and non-vanishing losses. Instead, we propose a two-step scheme whereby the principal: (1) identifies the model-optimal menu; and (2) modifies prices by offering to share with the agent a fixed proportion of the profit she would receive if an item were sold at the model-optimal price.
I model an economy inhabited by heterogeneous individuals that form teams and choose an appropriate production technology. The model characterizes how the technological environment shapes the equilibrium assignment of individuals into teams. I apply the theoretical insights to study cross-country differences in the allocation of talent and technology.
This paper studies a quantitative general equilibrium model of housing. The model has two key elements not previously considered in existing quantitative macro studies of housing finance: aggregate business cycle risk, and a realistic wealth distribution driven in the model by bequest heterogeneity in preferences. These features of the model play a crucial role in the following results. First, a relaxation of financing constraints leads to a large boom in house prices. Second, the boom in house prices is entirely the result of a decline in the housing risk premium.
We consider the implications for optimal fiscal policy when taxes are non-distortionary and households are heterogeneous and borrowing constrained. The main result is that optimal policy keeps some households borrowing constrained in order to reduce interest rates on government debt.