Pre-production Papers
The following papers, listed alphabetically by the first author's last name, have been accepted for publication in JEEA, and can be downloaded in in the EEA membership log in area.
Consumer Credit with Over-Optimistic Borrowers
Do cognitive biases call for regulation to limit the use of credit? We incorporate over-optimistic and rational borrowers into an incomplete markets model with consumer bankruptcy. Over-optimists face worse income risk but incorrectly believe they are rational. Thus, both types behave identically. Lenders price loans forming beliefs—type scores—about borrower types.
Export-Led Decay: The Trade Channel in the Gold Standard Era
Flexible exchange rates can facilitate price adjustments that buffer macroeco- nomic shocks. We test this hypothesis using adjustments to the gold standard during the Great Depression. Using novel monthly data on city-level economic activity, sectoral employment, and export data, we show that American exporting cities were significantly affected by changes in bilateral exchange rates.
How to Discipline Financial Markets: Reputation is not Enough
Historically, shocks originating in the financial sector often spilled over into the real sector with dramatic consequences. We study in the lab how interventions targeting disclosure and capital requirements of financial intermediaries can reduce insolvencies or prevent their negative effects from propagating to the broader economy. In our two-sector economy, consumers and producers can fund financial intermediaries, who in turn provide them with liquidity to settle trades.
Risk Gravity
We consider the canonical trade model with heterogeneous firms, love for variety and trade costs, and integrate it in the consumption CAPM model. This yields a structural gravity equation that includes an additional factor related to risk premia. Empirical evidence based on firm-level data confirms the importance of cross-sectional heterogeneity in risk and time-varying risk premia to shape bilateral trade flows.
The (Un)Importance of Inheritance
Transfers from parents—either in the form of gifts or inheritances—have received much attention as a source of inequality. This paper uses administrative data for the population of Norway to examine the share of the Total Inflows (defined as the capitalized sum of net labor income, government transfers, and gifts and inheritances received over the period) accounted for by capitalized gifts and inheritances.