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Keywords Tax evasion; Socio-economic networks; Game theory Abstract This paper builds on recent insights from network theory and on the rich dataset made available by the Panama Papers in order to investigate the micro-economic dynamics of tax-evasion. We model offshore financial entities documented in the Panama Papers as links between jurisdictions in the global network of tax evasion. A quantitative analysis shows that the resulting network, far from being a random collection of bilateral links, has key features of complex networks such as a core-periphery structure and a fat-tail degree distribution. We argue that these structural features imply that policy must adopt a systemic perspective to mitigate tax evasion. We offer three sets of insights from this perspective. First, we identify through centrality measures tax havens that ought to be priority policy targets. Second, we show that efficient tax treaties must contain exchange information clauses and link tax-havens to non-haven jurisdictions. Third, we show that the optimal deterrence strategies for a social-planner facing a strategic tax-evader in a Stackelberg competition can be characterized using the notion of Bonacich centrality. Author Affiliation: (a) Ca Foscari University of Venice and Paris 1 Pantheon-Sorbonne, France (b) Paris School of Economics and Paris 1 Pantheon-Sorbonne, France * Corresponding author. Article History: Received 3 November 2020; Revised 10 January 2022; Accepted 26 March 2022 (footnote)[white star] This project has received funding from the ITN ExSIDE European Union's Horizon 2020 research and innovation programme under the Marie Sklodowska-Curie grant agreement No 721846 and from the ITN EPOC European Union's Horizon 2020 research and innovation programme under the Marie Sklodowska-Curie grant agreement No 956107. Byline: Garcia Alvarado Fernando [fernando.garcia@unive.it] (a), Mandel Antoine [antoine.mandel@univ-paris1.fr] (*,b)

This paper proposes a novel approach to evaluate location decisions for public facilities. The approach addresses, not only the standard distance-minimizing problem, but also the endogenous location decisions of individuals. The paper develops a quantifiable general equilibrium model with endogenous (residential and commercial) densities, housing prices, commutes to work, as well as to public/private facilities. The framework is applied to the case of secondary schools in Paris' greater region at a 1km.sup.2 geographical scale. The analysis reveals that the observed location decisions made between 2001 and 2015 underestimate the endogenous reaction of individuals. A more decentralized strategy is predicted to increase welfare growth by 10 percent, reduce density in Paris' center, and shorten commuting times to school globally. Author Affiliation: ETH Zürich, Department of Management, Technology, and Economics, Leonhardstrasse 21, Zurich 8092, Switzerland * Corresponding author. Article History: Received 10 February 2021; Revised 23 January 2023; Accepted 1 February 2023 (footnote)# I am grateful to the editor, Donald R. Davis, and three anonymous referees for many helpful and productive suggestions. I am grateful to seminar and conference participants in Barcelona, Aix-en-Provence, Munich, Tampere, Cologne, Paris and Amsterdam. In particular, I thank Gabriel Ahlfeldt, Peter Egger, Marko Koethenbuerger, Matthias Krapf, Etienne Lehmann, Nicole Loumeau, Mohammed Mardan, Yasusada Murata, Dávid Nagy, Ariell Reshef, Frédéric Robert-Nicoud, Laurent Simula, and Nora Strecker for helpful comments and suggestions; and Juliette Caillaudeau from the 'Direction de l'Evaluation, de la Prospective et de la Performance' (DEPP) for great help in accessing the data. Byline: Gabriel Loumeau [loumeau@ethz.ch] (*,#)

Keywords Household finance; Individual investor; Financial advice; Inducements; Consumer financial protection Highlights * German brokerage introduces a flat-fee alongside a commission-based scheme. * Comparison of switchers to the flat-fee to matched commission-based clients. * Adopters seek and follow (unchanged) financial advice more. * Adopters increase portfolio values and trade more. * Adopters improve portfolio efficiency through higher fund shares. Abstract Using a field study at a German brokerage, we investigate advised individual investors' behavior and outcomes after self-selecting into a flat-fee scheme (percentage of portfolio value) for mutual funds. In a difference-in-differences setting, we compare 699 switchers to propensity-score-matched advisory clients who remained in the commission-based scheme. Switchers increase their portfolio values, improve portfolio diversification, and increase their portfolio performance. They also demand more financial advice and follow more advisor recommendations. We argue that switchers attribute a higher quality to the unchanged advisory services. Author Affiliation: (a) Aarhus University, Fuglesangs Allé 4, DK-8210 Aarhus V, Denmark (b) University of New South Wales, UNSW Business School, Sydney, High St, Kensington NSW 2052, Australia (c) Goethe University Frankfurt, Theodor-W.-Adorno Platz 3, 60323 Frankfurt am Main, Germany * Corresponding author. Article History: Received 24 January 2022; Revised 14 March 2023; Accepted 16 March 2023 (footnote)â° This research could never have been accomplished without the collaboration and support of a German bank. We are grateful to the bank for providing the data. We would like to acknowledge the contributions of the bank and its employees who helped us. Financial support from the Think Forward Initiative research grant and the Danish Finance Institute (DFI) is also gratefully acknowledged. For useful comments and discussions, we thank Sascha Baghestanian, Holger Kraft, Roman Inderst, Martin Weber, Laura Lindsey, Alessandro Previtero, and Mikael Paaso. Conference and seminar comments at the AFA meetings in San Diego, AEA meetings in San Francisco, the 1st CEPR Household Finance workshop in London, the FIRS meetings in Lissabon, the DGF meetings in Leipzig, Goethe University Frankfurt, Leibniz University Hanover, University of Mannheim, and University of Tübingen significantly improved the paper. Please note that the paper previously circulated under the title 'fee-only advice' Byline: Steffen Meyer [steffen.meyer@econ.au.dk] (a,*), Charline Uhr (a), Benjamin Loos (b), Andreas Hackethal (c)

Keywords Relative performance information; Relative performance evaluation; Rank feedback; Social incentives; Social and self-image; Knowledge-sharing; On-the-job help; Collaboration; Experiment Abstract Social comparisons are known to increase individual work morale, but because they could foster competition, they may also negatively impact how well co-workers work together. This paper uses a novel experiment to explore this potential tradeoff. The experiment varies whether members of a reference group receive relative performance information on a knowledge task and measures how this affects the willingness to subsequently help the productivity of others by sharing knowledge with them. The findings reveal that relative performance information spurs competition between members of a reference group when compared to the baseline with no such information. Yet, there is no evidence that relative performance information substantially lowers group morale, that is, the willingness to help the productivity of others in the group. These findings advance our understanding of how relative performance concerns among co-workers affect the way they work together. Author Affiliation: Department of Economics, Ludwig-Maximilians-Universität München, Kaulbachstraße 45, 80539 München Article History: Received 15 July 2022; Revised 2 March 2023; Accepted 7 March 2023 (footnote)â° I am grateful to Roberto Weber and Ernst Fehr for their guidance and support in the development of this project. I thank Björn Bartling, Yves Breitmoser, Dirk Engelmann, Yiming Liu, Eva Ranehill, Ernesto Reuben, Karl Schlag, Florian Schneider, Anja Schöttner, Julien Senn, Vanessa Valero, Georg Weizsäcker, Florian Zimmermann and two anonymous referees for their comments. This paper also benefited from discussions with the audience in numerous conference and seminar presentations. Financial support from the Excellence Foundation Zurich, the Zurich Graduate School of Economics through their Director's Grant program and by Deutsche Forschungsgemeinschaft through CRC TRR 190 (project number 280092119) is gratefully acknowledged. All remaining errors are my own. Byline: Lea Heursen [lea.heursen@econ.lmu.de]

Keywords contest; all-pay auction; stochastic abilities; bid cap; disclosure Abstract In this paper, we study the optimal disclosure of bidders' types in a two-bidder all-pay auction in the presence of a common and exogenously given bid cap. We focus on the set of disclosure policies that are contingent on realizations of bidders' types and fully characterize the unique symmetric equilibrium under each of them. We find that, allowing only for full disclosure and full concealment, the ex ante expected revenue is higher under full disclosure only for intermediate levels of the bid cap. Allowing also for partial disclosure policies: (i) the ex ante expected revenue under full disclosure is higher than under partial disclosure to low-type bidders but lower than under partial disclosure to high-type bidders, regardless of the bid cap; (ii) full concealment could rank from the highest to the third highest, depending on the bid cap, the prior type distribution, and the type values. These results are due to the different sensitivities of bidders' bids across bidders' types and disclosure policies. Author Affiliation: (a) School of Economics, Shenzhen University, China (b) Department of Economics, Shenzhen MSU-BIT University, China (c) Max Planck Institute for Tax Law and Public Finance, Germany * Corresponding author. Article History: Received 3 December 2020; Revised 23 September 2022; Accepted 2 October 2022 (footnote)[white star] We thank Bo Chen, Jingfeng Lu, Kai Konrad, Dmitriy Knyazev, Tsz-Ning Wong, and Lily Yang for comments and discussions. This work was supported by the National Natural Science Foundation of China [No. 72203148 and No. 71973040] and the Department of Education of Guangdong Province [No. 2021WQNCX085]. The authors have equal contribution to the paper. Byline: Bo Chen [bochenbonn@gmail.com] (a,b,*), Marco Serena [marco.serena85@gmail.com] (c)

Keywords Cheating; Dishonesty; Misreporting in teams; Real effort Highlights * We analyze the impact of information and communication on misreporting of performance in teams of two. * Both team members get the same payoff but report independently. * Informing players 2 about the reports of players 1 reduces misreporting. * Letting players 1 send messages to players 2 reduces misreporting by players 2. * Information transmission and communication thus reduce misreporting. Abstract We extend the experimental analysis of misreporting performance in real effort tasks (cheating) to situations where two members of a team perform the task sequentially and decide independently on their potentially inflated reports. We vary three factors in our experiment: whether no players, only players 2, or both players can misreport; whether players 2 learn the report of players 1; and whether players 1 can send a message to players 2 requesting honest or dishonest behavior. Our data yield two main insights. First, higher reports by players 1 lead to higher reports by players 2, i.e. misreporting is reinforcing. Second, allowing players 1 to send a message suggesting that players 2 either report honestly or a minimum number of correct solutions reduces misreporting by players 2. There are two channels for this. First, most players 1 request an honest report. Second, players 2 misreport far less when they receive the honest message, but, compared to the treatments without messages, hardly change their reports when they are asked to report a minimum number of correct solutions. We find a similar, though less pronounced, asymmetric response when players 2 learn the reports of players 1. These findings suggest that communication and information transmission can reduce cheating, and that there are notable spillover effects of honesty even in anonymous environments. Author Affiliation: (a) Victoria University of Wellington, Pipitea Campus, Lambton Quay, Wellington, New Zealand (b) Trier University, Universitätsring 15, Trier, D-54296, Germany (c) Graduate School of Business, HSE University, Shabolovka Ulitsa 26--28, Moscow, Russia * Corresponding author. Article History: Received 26 April 2022; Revised 20 March 2023; Accepted 26 March 2023 (footnote)[white star] Paper presented at the University of Auckland, the University of Bern, Victoria University of Wellington, Otto Beisheim School of Management, and European Business School. We are grateful to Frauke von Bieberstein, Steffen Lippert, Gerd Muehlheusser, and Ronald Peeters for helpful comments. We are very grateful to two anonymous referees and the Associate Editor, whose comments improved the paper very much. This study was supported by grants of the Russian Science Foundation (Project No. 20-78-00023) and Wellington School of Business and Government (Project No. FSRG 225754). Byline: Eberhard Feess [eberhard.feess@vuw.ac.nz] (a), Thomas Schilling [dudek@uni-trier.de] (b), Yuriy Timofeyev [y.timofeyev@hse.ru] (*,c)

Keywords Occasionally binding constraints; Global nonlinearities; Financial frictions; Liquidity; Business cycles Abstract What drives nonlinearities in modern macroeconomic models? Building on global methods, the present paper isolates the effects associated with an occasionally binding constraint in a widely discussed macro-finance framework. Only the proper computational treatment provides a holistic understanding of the (hidden) economics in tail events, and the full reflection of large and consecutive shocks in economic forecasts. An improper treatment provides an overestimation of asset pricing dynamics and a misleading association between high levels of capital and liquidity and high levels of investment. Author Affiliation: Universität Zürich, Chair of Quantitative Business Administration, Plattenstrasse 14, CH - 8032 Zurich, Switzerland Article History: Received 18 February 2021; Revised 13 December 2022; Accepted 1 February 2023 (footnote)[white star] This paper is a revised version of the first chapter of our dissertation, written at the University of Zurich. It was selected for the student presentations of the Macro Financial Modeling Summer Session for Young Scholars 2017, held by the Becker Friedman Institute in Bretton Woods, NH (U.S.A.). We are grateful to two anonymous referees and the editor, Juan Francisco Rubio-Ramírez, for careful reviews of an earlier version of this paper. We are grateful to Johannes Brumm, Wouter den Haan, Martin Ellison, Andrea Eisfeldt, Lars Hansen, Felix Kübler, Alexander Ludwig, Walter Pohl, Pontus Rendahl, Andreas Schabert, Karl Schmedders, Andrés Schneider, Frank Schorfheide, Ctirad Slavík, and Sevin Yeltekin for helpful discussions. Finally, we thank Dave Brooks for excellent editorial support on earlier versions. A former version of this paper circulated under the preliminary title 'Occasionally Binding Liquidity Constraints and the Volatility of Consumption and Investment', under which it was also presented at the CEF 2013 in Vancouver and at the European Macro Workshop 2013 in London. Byline: Maximilian Werner [maximilian.werner@business.uzh.ch]

Keywords Early childhood; Pretrial detention; Judicial bias; Communal violence Abstract We estimate the causal effects of judges' exposure to communal violence during early childhood on pretrial detention rates by exploiting novel administrative data on judgments and detailed resumes of judicial officers born during 1955--1991. Our key result is that judges exposed to communal violence between ages 0 and 6 years are 16% more prone to deny bail than the average judge, with the impact being stronger for the experience of riots between ages 3 and 6 years. The observed judicial stringency is driven by childhood exposure to riots with a higher duration of state-imposed lockdowns and low riot casualties. Author Affiliation: (a) Paris School of Economics and University of Namur, France (b) Research School of Economics, Australian National University, Australia * Corresponding author at: Postdoc Associate at New York, Univerisity-Abu Dhabi. Article History: Received 14 March 2022; Revised 8 January 2023; Accepted 16 February 2023 (footnote)[white star] We would like to thank Guilhem Cassan, Yan Chen, Mathieu Couttenier, Oliver Vanden Eynde, James Fenske, Kareem Haggag, Namrata Kala, John List, Ameet Morjaria, Thomas Piketty, Herakles Polemarchakis, Dominic Rohner, Marc Sangnier, and Rabee Tourky for their comments and support. We would like to thank participants of the Young Economist Symposium (Princeton), 100 years of Economic Development Conference (Cornell University), Applied Econometrics Conference (Hitotsubashi University), KVS (Leiden University), and seminar participants at the Paris School of Economics and the University of Namur for suggestions and comments. We gratefully acknowledge Sudhir Gupta, Rahil Vora, and Yucheng Lu for their research assistance. We thank Lakshmi Iyer for providing us the dataset from their paper . We are very thankful to John Mitchell Poverty Lab for providing financial support to this project. This paper was written during the time Sutanuka Roy visited the Department of Economics at the University of Chicago. The author thanks the hosts for their support. This work was also supported by the Fonds Wetenschappelijk Onderzoek - Vlaanderen (FWO) and the Fonds de la Recherche Scientifique - FNRS under EOS project O020918F (EOS ID 30784531) Byline: Nitin Kumar Bharti [nitin-kumar.bharti@psemail.eu] (a,*), Sutanuka Roy [sutanuka.roy@anu.edu.au] (b)

Keywords Pension reform; Early retirement age; Savings; Pension wealth; Consumption expenditure Highlights * In this paper, we examine how households adjust their savings and consumption expenditure in response to an anticipated increase in the early retirement age. * We explore the abolishment of women's pension in 1999 in Germany and an Regression Discontinuity Difference-in-Differences (RD-DD) framework using the German Income and Consumption Survey. * We find a negative impact on private savings of 0.6 percentage points that is driven by married households. * Furthermore, we find that the treated households increase their leisure spending while maintaining an unchanged level of disposable income. * Our findings suggest that the treated households absorb the pension wealth shock without increasing their savings. Abstract This paper examines how households adjust their savings and consumption expenditure in response to an anticipated increase in the early retirement age (ERA). We examine the 1999 pension reform in Germany, which increased the ERA for women born after 1951 by at least three years. First, we present suggestive evidence that women update their retirement planning in response to the reform. Using the German Income and Consumption Survey, we find a negative impact on private savings of 0.6 percentage points that is driven by households with married women. We show that households consisting of highly educated women and homeowners are more likely to reduce their savings rates. Furthermore, we find that the treated households increase their leisure spending while maintaining an unchanged level of disposable income. Our findings suggest that the households anticipate experiencing a lifetime income increase and reduce their savings rate to smooth consumption. Author Affiliation: (a) DIW Berlin, Germany (b) ZEW Mannheim, Germany (c) University of Mannheim, IZA, ZEW, Germany * Corresponding authors. Article History: Received 18 December 2020; Revised 13 February 2023; Accepted 16 February 2023 (footnote)[white star] We would like to thank the editor and three anonymous referees for their comments, which greatly improved the paper. We are grateful to Christian Dustmann, Johannes Geyer, Hans-Martin von Gaudecker, Peter Haan, Eckhard Janeba, Michèle Tertilt, Nicolas Ziebarth and participants at seminars in DIW Berlin, University of Mannheim, CReAM, EPSE 2019, EALE 2019 and University of South Florida for their helpful insights and suggestions. The views expressed here are solely those of the authors. The authors acknowledge funding from the Forschungsnetzwerk Alterssicherung of the German Statutory Pension Scheme and the German Federal Ministry of Labor and Social Affairs within the BMAS-FIS network 'InterdisciplinarySocial Policy Research'. Funding by the German Research Foundation (DFG) through CRC TR 224 (Project C01) is also gratefully acknowledged. All errors are our own. Byline: Stefan Etgeton (a), Björn Fischer [bjoern.fischer@zew.de] (b,*), Han Ye [han.ye@uni-mannheim.de] (c,*)

Keywords Rent control; Apartment lottery; Labor income; Employment Highlights * Receiving a rent-controlled contract have negative effects on the labor supply. * Receiving a rent-controlled contract reduces the labor income. * Receiving a rent-controlled contract have negative effects on employment. Abstract Using a unique randomized rental apartment lottery in Stockholm metropolitan statistical area, this paper analyses behavioral effects on individuals receiving a rent-controlled contract in the Swedish rent control program. The result shows that receiving a rent-controlled contract reduces the annual labor income by 13 to 20 percent and employment by 8 to 13 percent. To some extent, these effects can be explained by an increased propensity to enter higher education. Author Affiliation: (a) Institute for Housing and Urban Research, Uppsala University, Uppsala, Sweden (b) Department of Statistics, Uppsala University, Uppsala, Sweden (c) YMSC, Tsinghua University, Beijing, China * Corresponding author. Article History: Received 18 November 2020; Revised 23 February 2023; Accepted 4 March 2023 (footnote)[white star] We thank seminar participants at Uppsala University and at the SNS. Enström Öst acknowledges support from the Swedish Research Council for Health, Working Life and Welfare (grant 2014--00034). The authors declare that they have no relevant or material financial interests that relate to the research in this paper. Byline: Cecilia Enström Öst [cecilia.enstrom_ost@ibf.uu.se] (a,*), Per Johansson [per.johansson@statistics.uu.se] (b,c)

Keywords COVID-19; Social distancing policy; Mobility; Vaccination; Republic of Korea; Structural VAR; Threshold VAR Abstract This paper investigates the dynamic impact of social distancing policy on coronavirus disease (COVID-19) infection control, mobility of people, and consumption expenditures in the Republic of Korea. We employ structural and threshold vector autoregressive (VAR) models using big-data-driven mobility data, credit card expenditure, and a social distancing index. We find that the social distancing policy significantly reduces the spread of COVID-19, but there exists a significant, growing trade-off between infection control and economic activity over time. When the level of stringency in social distancing is already high, its marginal effect on mobility is estimated to be smaller than when social distancing stringency is low. The effect of social distancing also becomes secondary after vaccination. Increased vaccination is found to significantly reduce the critical cases while it increases visitors and consumption expenditures. The results also show that the effect of social distancing policy on mobility reduction is strongest among the population of age under 20 and the weakest among the population of age over 60. Author Affiliation: (a) Economic Research and Regional Cooperation Department at the Asian Development Bank (ADB), Philippines (b) Department of Economics, Seoul National University, Republic of Korea (c) Future Strategy Development Department, Korea Development Bank, Republic of Korea (d) Economic Research and Regional Cooperation Department, ADB, Philippines * Corresponding author. Article History: Received 10 October 2022; Revised 26 January 2023; Accepted 17 March 2023 (footnote) Note: In this paper, 'Korea' has been used to refer to the Republic of Korea. Byline: Kijin Kim (a), Soyoung Kim [soyoungkim@snu.ac.kr] (b,*), Donghyun Lee (c), Cyn-Young Park (d)

Keywords Consumption externalities; Competitive equilibrium à la Nash; Decentralization; Social redistribution Abstract We consider a pure exchange economy with consumption externalities in preferences. We use the notion of competitive equilibrium à la Nash. We provide the Social Redistribution assumption to restore the Second Welfare Theorem. We then introduce the differentiable characterizations of Social and Strong Redistribution. We show that all these conditions are weaker than other relevant assumptions studied in the literature. Our conditions entail interesting results on the decentralized implementation of Pareto optima, that link together the competitive supporting price and the shadow price of the utilitarian social planner. Finally, we provide a specific condition for Bergson-Samuelson utility functions, which has a nice interpretation in terms of positive or negative externalities. Author Affiliation: (a) Paris School of Economics -- Université Paris 1 Panthéon-Sorbonne, Centre d'Economie de la Sorbonne, 106-112 Boulevard de l'Hôpital, 75647 Paris Cedex 13, France (b) Centre d'Economie de la Sorbonne, Université Paris 1 Panthéon-Sorbonne, 106-112 Boulevard de l'Hôpital, 75647 Paris Cedex 13, France * Corresponding author. Article History: Received 9 July 2021; Revised 27 February 2023; Accepted 1 March 2023 (footnote)[white star] Earlier drafts of this paper circulated as 'Sufficient conditions for a 'simple' Second Welfare Theorem with other-regarding preferences'. The decentralization addressed in this paper is 'simple' because it can be done through competitive prices, while in other classical papers the decentralization requires Lindahl equilibria and personalized prices, see , , and . We wish to thank Paolo Siconolfi and Jean-Marc Bonnisseau for much encouragement and advice. We are also grateful to Federica Ceron for attentively reading a previous version of this paper. We are grateful to the anonymous Reviewers and the Editor of this journal for their valuable comments and suggestions. Byline: Elena L. del Mercato [Elena.delMercato@univ-paris1.fr] (a,*), Van-Quy Nguyen [Van-Quy.Nguyen@univ-paris1.fr] (b)

Keywords Continuous implementation; Full implementation; Incentive compatibility; Robustness; Transfers Abstract The literature on robust mechanism design assumes players' knowledge about a fixed payoff environment and investigates global robustness of optimal mechanisms to large changes in the information structure. Acknowledging global robustness as a demanding requirement, we propose continuous implementation as a notion of local robustness. Keeping the assumption of payoff knowledge, we say that an SCF is continuously implementable if there exists a mechanism which yields the outcome close to the desired one for all types close to the planner's initial model. We show that when a generic correlation condition is imposed on the class of interdependent-value environments, any (interim) incentive compatible SCF is continuously implementable with arbitrarily small transfers imposed on and off the equilibrium. This stands in stark contrast to , who show that their global robustness amounts to ex post incentive compatibility, as well as to , who show that continuous implementation without payoff knowledge generates a substantial restriction on the SCF, tightly connected to full implementation in rationalizable strategies. Author Affiliation: (a) Department of Economics and Risk Management Institute, National University of Singapore, Singapore (b) School of Economics, Singapore Management University, Singapore (c) School of International Trade and Economics, University of International Business and Economics, China * Corresponding author. Article History: Received 10 October 2019; Revised 26 November 2022; Accepted 12 February 2023 (footnote)[white star] This paper was formerly titled 'Continuous Implementation with Small Transfers.' We thank the editor and two anonymous referees for stimulating comments that have substantially improved the paper. We thank Atsushi Kajii, Michihiro Kandori, Hitoshi Matsushima, Rene Saran, Roberto Serrano, Satoru Takahashi, Olivier Tercieux, Rajiv Vohra, Takuma Wakayama and audiences at various seminar/conference presentations for helpful comments. Part of this paper was written while the three authors were visiting Academia Sinica, and we would like to thank the institution for its hospitality and support. We also gratefully acknowledge the financial support from the Singapore Ministry of Education Academic Research Fund Tier 1 (R-122-000-328-115), Tier 2 (MOE-T2EP402A20-0007), and the National Natural Science Foundation of China (NSFC72273029). All errors remaining are our own. Byline: Yi-Chun Chen [ecsycc@nus.edu.sg] (a), Takashi Kunimoto [tkunimoto@smu.edu.sg] (b), Yifei Sun [sunyifei@uibe.edu.cn] (c,*)

Keywords Random utility; Quasi-linear utility; Tie-breaking; Finite datasets; ARSP; Block-Marschak polynomials Abstract We propose a random quasi-linear utility model (RQUM) where quasi-linear utility functions are drawn randomly via some probability distribution [pi], and utility ties are broken by a convenient lexicographic rule. We characterize RQUM and identify [pi] uniquely in terms of stochastic choice data. McFadden's (1973) additive random utility model is obtained as a special case where utility ties have a zero probability in all menus. Another distinct case of RQUM captures finite populations and derives [pi] with a finite support. Our main axioms are testable. They prohibit context and reference dependence, and also modify the non-negativity of Block-Marschack polynomials for monetary cost variations. We also characterize RQUM through a stronger version of McFadden and Richter's (1990) axiom of revealed stochastic preferences (ARSP). This approach extends to incomplete datasets. Author Affiliation: (a) Business School, Sun Yat-sen University, 518107 Shenzhen, China (b) Department of Economics, University of California, Irvine, United States of America * Corresponding author. Article History: Received 8 April 2022; Revised 20 March 2023; Accepted 27 March 2023 (footnote)1 We thank Mira Frick, Ryota Iijima, Asen Kochov, Stergios Skaperdas, Michael McBride, Jay Lu, Andrew Ellis, Christopher Turansick, David Brownstone, Miguel Zerecero, and Jiawei Chen for their helpful suggestions on this paper. We are grateful to the editor Faruk Gul and two anonymous referees; their insightful comments helped significantly in improving this paper. We would also like to thank participants at seminars at UCI, Rochester, Yale, Sun Yat-sen, and SWUFE Universities. Byline: Erya Yang [yangery@mail.sysu.edu.cn] (a,*,1), Igor Kopylov [ikopylov@uci.edu] (b,1)

Keywords Deformed likelihood; Dynamic systems; Judgment; Repeated games; Robust filtering Abstract We answer positively to this question by using Maximum Lq-Likelihood (or Deformed Likelihood) estimator. This is based on a parameter which measures the aggregate quote of judgment in the forecasting (game-based) system formed by three players--Forecaster, Policy Maker and Reality. For the first time in econometric literature, we apply this estimator to a dynamic system and derive a robust version of the Kalman Filter--the Deformed Kalman Filter (DKF). The evidence from U.S. data suggests that the judgmental dynamics exists and is correlated (but not coincident) with the phases of the Business Cycle. Furthermore its knowledge improves in-sample as well as out-of-sample estimation. Author Affiliation: University of Bergamo, Department of Economics, Via dei Caniana, 2 - 24127, Bergamo, Italy Article History: Received 20 August 2022; Revised 21 December 2022; Accepted 3 March 2023 (footnote)1 The Author is particularly grateful to Giovanni Urga and Salvatore Piccolo for their support. He also thanks Barbara Annicchiarico, Marcelle Chauvet, Raffaella Giacomini, Ana Maria Herrera, Alessandra Luati, Giuseppe Ragusa, Francesco Ravazzolo and Tom Stark for their feedback, as all the participants to the 2nd Ventotene Workshop in Macoreconomics, the 41st International Symposium on Forecasting 2021, the internal Seminar Series in Mathematics and Statistics of the University of Bergamo, the IWEEE2022 in Rimini and the IAAE2022 in London. In some of that occasion the paper had been presented with the title 'Measuring Unobserved Strategic Judgment'. The co-editor, Juan Francisco Rubio-Ramirez, and a referee are grateful for their contributions to the paper's readability and scientific correctness. Finally, the Author is in debt with doctors, nurses and workers of Policlinico 'S. Matteo' of Pavia, without whose uncompensated cares this paper would not have been written. Byline: Emilio Zanetti Chini [emilio.zanettichini@unibg.it] (1)

Keywords Quantitative easing; Global financial cycle; Domestic credit; Exchange rate interventions; Capital controls; Macroprudential policy Abstract Large international capital movements tend to be associated with strong fluctuations in asset prices and credit, contributing to domestic financial cycles and posing challenges for stabilization policies, especially in emerging market economies. In this paper we argue that these challenges are particularly severe if the global financial cycle is driven by quantitative easing (QE) in the US, and when the local banking sector has large holdings of government bonds, like in many Latin American (LA) countries. We first investigate empirically the impact of a typical round of QE by the US Fed on LA economies, finding a persistent expansion in credit to households and house prices, as well as a significant loss of price competitiveness. We next develop a quantitative macroeconomic model of a small open economy with segmented asset markets and banks, which accounts for these observations. In this framework, foreign QE creates tensions between macroeconomic and financial stability as a contractionary impact of exchange rate appreciation is accompanied by booming credit and house prices. As a consequence, conventional monetary policy accommodation aimed at stabilizing output and inflation would further exacerbate domestic financial cycle. We show that an effective way of resolving this trade-off is to impose measures that directly reduce the inflow of capital. Combining foreign exchange interventions with tightening of local credit policies can also restore macroeconomic and financial stability, but at the expense of a large redistribution of wealth between borrowers and savers. Author Affiliation: (a) SGH Warsaw School of Economics and International Monetary Fund. Al. Niepodleglosci 162, Warszawa 02-554, Poland (b) University of Warsaw * Corresponding author. Article History: Received 3 June 2022; Revised 1 March 2023; Accepted 3 March 2023 (footnote)[white star] This paper benefited from discussions with M.Brzoza-Brzezina, M.Gradzewicz, J.Lindé, B.Mackowiak, I.Presno, R.Priftis, R.Reis, H.Rey, S.Schmitt-Grohe, and P.Zabczyk. The authors also acknowledge useful comments from two anonymous referees, as well as from participants at the IAAE Annual Meeting in Rotterdam, CEF Conference in Tokyo, 3rd Warsaw Money-Macro-Finance Conference, CBMMW in Santiago de Chile, Warsaw Economic Seminar (all held virtually), and 10th Summer Workshop in Macroeconomics and Finance in Warsaw. The views expressed herein are those of the authors and not of the institutions they are affiliated with. Declarations of interest: none. Byline: Marcin Kolasa [mkolas@sgh.waw.pl] (*,a), Grzegorz Wesolowski (b)

Keywords Intervivos transfers; Bequests; Coresidency; Parental altruism Abstract This paper uses 1996--2014 longitudinal HRS data to establish the relative importance of intervivos transfers, bequests and coresidency in the United States. We find that when computing the relative importance of intervivos transfers versus bequests, the aggregate perspective that pools all data into a single cross-section is very different than the parent-level longitudinal perspective, highlighting the special value of panel data. This difference reflects the fact that large bequests are highly concentrated and play an influential role at the aggregate level, while at the micro parent-level, intervivos transfers constitute the main form of financial support for most parents. Regarding coresidency, we find that although older children and parents tend to coreside when the child is helping the parent, coresidency tends to be more prevalent among poorer, younger parents and their children. Children who ever coreside with parents also receive larger total intervivos transfers. Author Affiliation: (a) Center for Transnationals' Studies & Laboratory for Economic Behaviors and Policy Simulation, Nankai University, Tianjin, China (b) Department of Economics, University of Pittsburgh, United States * Corresponding author. Article History: Received 27 July 2021; Revised 31 December 2022; Accepted 6 February 2023 (footnote)1 A previous version of this paper circulated under the title 'The Patterns of Intervivos Transfers to Adult Children.' We thank the editor and two anonymous referees for insightful comments. Siqiang Yang acknowledges financial support from Tianjin Philosophy and Social Science Planning Foundations (TJYJQN22-003) and the Fundamental Research Funds for the Central Universities (No. 63202020). Byline: Siqiang Yang [siy10@nankai.edu.cn] (a), Marla Ripoll [ripoll@pitt.edu] (*,1,b)

Keywords Optimal currency denominations; Cash transactions; Burden of exchanging cash; Penny elimination Highlights * We describe a model of optimal consumer-merchant exchange of cash payments. * Diary data are used to quantify the burden of exchanging currency notes and coins. * The model and data are used to analyze the effects of eliminating the one-penny coin. * Penny elimination would reduce the burden of exchanging cash. * Penny elimination would result in little or no inflationary consequences. * Elimination of the penny and the nickel would not reduce this burden relative to penny elimination only. Abstract This article quantifies the burden of exchanging currency notes and coins using a model of optimal consumer-merchant exchange of cash payments and consumer payment choice diary data. The model is then applied to analyze a policy debate whether to eliminate the penny coin from circulation. We find that penny elimination would reduce the burden of exchanging cash and will not have any significant inflationary consequences caused by price rounding. Surprisingly, a removal of both the penny and nickel coins from circulation would slightly increase (not decrease) the burden relative to penny elimination only. Author Affiliation: (a) Department of Economics, Washington University in St. Louis. 1 Brookings Dr, St. Louis, MO, 63130, United States (b) Research Department, Federal Reserve Bank of Atlanta. 1000 Peachtree St. NE, Atlanta, GA, 30309, United States * Corresponding author. Article History: Received 15 February 2022; Revised 25 January 2023; Accepted 27 January 2023 (footnote)[white star] We thank Marcin Hitczenko and two anonymous reviewers for most helpful comments and suggestions. This paper was formerly circulated as 'The Burden of Cash and the Penny Policy Debate.' Part of the work on this paper was conducted while Brian Prescott was at the research department of the Federal Reserve Bank of Atlanta. The views expressed here are the authors' and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Byline: Brian C. Prescott [b.prescott@wustl.edu] (a), Oz Shy [oz.shy@atl.frb.org] (*,b)

Keywords Dominant minority; Indirect governance; Loyalty; Economic history; China Highlights * Manchusused a cross-ethnic strategy to rule China where Han elites were appointed to handle daily tasks andManchu superiors were assigned for oversight. * Higher governance complexityled to a higher likelihoodof cross-ethnic arrangements. * Cross-ethnic assignments were more frequent in regions where Han elitesaccumulatedmore discretionary power. * Cross-ethnic assignments wereassociated with better local economic development, more efficient policy execution, and enhanced recognition of imperialauthority. Abstract This paper examines how a million Manchus, as a dominant minority, partly relied on a cross-ethnic personnel strategy to rule over 100 million Han Chinese for 267 years. Under this strategy, Han elites were appointed to handle daily administrative issues, on top of whom Manchu superiors were assigned for oversight. We find that more frequent local extreme weather -- a proxy for governance complexity -- led to higher likelihood of such cross-ethnic arrangements. This link is stronger in regions where Han elites accumulated more discretionary power. Moreover, the cross-ethnic strategy was associated with better local economic development, more efficient policy execution, and enhanced recognition of imperial authority. Author Affiliation: (a) School of Economics, Fudan University, Shanghai 200433, China (b) Cheung Kong Graduate School of Business, Beijing, China (c) Cheung Kong Graduate School of Business, Beijing, China (d) World Bank, 1818 H Street, NW, Washington, DC 20433, United States * Corresponding author. Article History: Received 30 September 2021; Revised 20 January 2023; Accepted 10 February 2023 (footnote)[white star] The views of this paper are the authors' own, and do not implicate the World Bank and its member countries. We thank the coeditor, Maria Petrova, and three anonymous referees for valuable comments and guidance. Helpful and much appreciated suggestions were provided by Shiyu Bo, Cong Liu, and Tianyang Xi. We thank Yantong Fang, Zhichen Huang, Yongtao Li, Yaohui Peng, Xuanyi Wang, Lixi Xu, and Qin Yao for their excellent research assistance. The project has benefited from World Bank RSB support. Chen would like to acknowledge the support from the National Natural Science Foundation of China (71933002; 72121002), Zhuoyue Talent Project, Theoretical Economics Peak Program and Legendary Project on Humanities and Social Sciences (XM04221238) at Fudan University. All remaining errors are our own. Byline: Shuo Chen [cs@fudan.edu.cn] (a), Xinyu Fan [xyfan@ckgsb.edu.cn] (b,*), L. Colin Xu [lixinxu@ckgsb.edu.cn] (c), Xun Yan [xyan@worldbank.org] (d)

Keywords Tax evasion; Value-added tax; Income tax credit; Third-party reporting Highlights * Tax credit incentivizes consumers to ask for invoices that complete the VAT paper trail. * Empirical analysis uses VAT tax returns of the universe of VAT payers in Germany. * Counterfactuals are based on non-eligible industries with high levels of noncompliance. * Two thirds of revenue losses in the income tax are recovered by increase in VAT revenue. * Between a quarter and half of the VAT revenue gain is associated to the VAT evasion margin. Abstract This paper analyzes the effects of an income tax credit for hard-to-tax consumer services on evasion of the value-added-tax (VAT). Based on the individual tax files of the universe of VAT payers in Germany, our analysis shows that harnessing incentives for consumers through tax credits fosters firms' compliance with VAT by bringing in an element of third-party reporting at the last VAT stage. Our results point at strong stimulating effects of the introduction of the tax credit on reported sales as well as on the ratio of reported sales to inputs and we find limited price effects. While two thirds of the revenue losses in the income tax are recovered by an increase in VAT revenues, at least a quarter and up to a half of the revenue gain is associated with a response at the VAT evasion margin. The policy thus fosters considerable formalization effects. Author Affiliation: (a) Friedrich-Alexander-Universität Erlangen-Nürnberg, Lange Gasse 20, 90403 Nürnberg, Germany (b) CESifo, Germany * Corresponding author. Article History: Received 8 August 2021; Revised 28 January 2023; Accepted 1 February 2023 (footnote)[white star] The authors gratefully acknowledge the financial support of the German Science Foundation under grant project 'BU-1254/6'. For helpful comments and suggestions, we are grateful to Albrecht Bohne, Lars Feld, Frank Hechtner, Duccio Gamannossi degl'Innocenti, Christos Kotsogiannis, Sarah Necker, Sandip Sukhtankar, three anonymous referees, and the participants of various seminars and conferences including the ZEW Public Finance Conference (2019), the Annual Meeting of the Verein fuer Socialpolitik in Leipzig (2019), the Workshop 'Enforcing Tax Compliance at the Limits of Third Reporting' at Walter Eucken Institut (2019), the TARC Annual Conference (2020), the 7th Conference on 'Shadow economy, tax behaviour and institutions' (2021), and the Economics Research Seminar at the University of Tübingen (2023). For data support, we thank the DESTATIS team of Melanie Heiliger, Anette Erbe, and especially Hannes Fauser. Byline: Thiess Buettner [thiess.buettner@fau.de] (a,b,*), Boryana Madzharova [boryana.madzharova@fau.de] (a,b), Orlando Zaddach [orlando.zaddach@posteo.de] (a)

Keywords Board of directors; Gender; Diversity; Investment efficiency; Capital investment Abstract This paper investigates the effect of board gender diversity on a firm's investment inefficiency and finds that a firm with at least one female director on its board has significantly less investment inefficiency than firms without one. The fraction of female directors on the board has a significantly negative association with investment inefficiency. The instrumental variable approach and propensity score matching show that this relation is robust after addressing endogeneity concerns. Furthermore, the effect of board gender diversity on investment inefficiency is more pronounced for overinvestment than underinvestment. Consistently, the effect is more substantial for firms that tend to overinvest ex-ante. It also indicates that board independence is a channel for board gender diversity to reduce investment inefficiency. Author Affiliation: (a) School of Economics and Finance, Victoria University of Wellington, Wellington 6140, New Zealand Article History: Received 31 January 2022; Revised 8 December 2022; Accepted 12 December 2022 (footnote)[white star] I thank Professor Hai Lin for his support and comments on this paper. I appreciate the comments and suggestions on this paper. from the participants in the 2021 Financial Market and Corporate Governance (FMCG) Conference. I also thank Dr. Griffin Geng, Dr. Peter Huang, and Prof. Alfred Yawson for their comments on this paper in the examiner's report of my Ph.D. thesis. Byline: Chang Yu [chang.yu@vuw.ac.nz] (a)

Keywords Grossman-Stiglitz-style and kyle-style models; Dampening effect; Price informativeness and short-term return reversals; Contrarian trading; Aggregate risk Abstract The way informed traders use their privileged information affects the properties of asset prices. This paper analyzes the differences in market efficiency between the two most widely adopted informed trading paradigms (Grossman-Stiglitz-style and Kyle-style) in a unified three-period framework. The aggregate risk--the product of fundamental risk, liquidity trading risk, and traders' risk aversion coefficient--uniquely determines three measures of market efficiencies, including price informativeness, return autocorrelations, and the unconditional expected utilities of uninformed market makers. In the Kyle-style model, a self-reinforcing dampening effect arises from informed traders' trading on fundamental information and non-fundamental information about their prior positions, leading to less efficient markets, contrarian trading by informed traders, and a return reversal between the two trading periods. Our study proposes to estimate price informativeness using information from short-term return reversals. Author Affiliation: ShanghaiTech University, Shanghai 201210, China * Corresponding author. Article History: Received 28 August 2022; Revised 11 January 2023; Accepted 14 January 2023 (footnote)1 I am very grateful to two anonymous referees; an anonymous associate editor, and Tony He (Editor) for their invaluable comments and suggestions. I am also very grateful to Wen Chen (discussant at CICF), Hanming Fang, Pete Kyle, Lionel Huntley Henderson, Alan Tucker, and seminar participants at the China International Finance Conference, Central University of Finance and Economics, Jiangxi University of Finance and Economics, Shanghai Jiaotong University, ShanghaiTech University, Southwestern University of Finance and Economics, Wellington finance summit, and University of Frankfurt for helpful discussions. I am solely responsible for any errors. This paper is supported by National Natural Science Foundation of China (No. 71773077). Byline: Mng Guo [guoming@shanghaitech.edu.cn] (*,1)

Keywords Preference; Decision-making autonomy; Willingness-to-pay Highlights * Spouses in low-income societies engage in division of labor. * Improved cookstoves benefit women more than men. * Women are willing to pay more for improved cookstoves than men. * Men dominate household decision-making. Abstract We use a field experiment to identify how differences in preferences and spousal influence result in low willingness to pay (WTP) for technologies that can benefit all household members. We create income-earning opportunities to empower households and conduct an actual stove purchase experiment to elicit their WTP for fuel, time, and indoor air pollution-reducing improved cookstoves. The decision to buy the stove was randomly assigned to either wives, husbands, or couples using either individually or jointly earned income. Experimental results suggest that wives, who often are responsible for cooking and collecting fuelwood, are willing to pay 57% more than husbands and 39% more than couples. Wives who made the stove purchase decision alone using the income they earned alone are willing to pay 67% more than husbands who made the purchase decision alone. We also find that couples' WTP is similar to that of husbands, implying that husbands dominate joint decisions. A follow-up survey conducted 15 months after the stove purchase shows that the treatments do not affect stove use. Our findings highlight the importance of considering the division of labor, preference difference, and spousal influence within the household when promoting the adoption of new household technologies. Improving access to cash for poor women would likely enable them to make decisions consistent with their preferences. Author Affiliation: (a) University of Gothenburg, Vasagatan 1, Box 600 405 30, Gothenburg, Sweden (b) ECRC, Vasagatan 1, Box 600 405 30, Gothenburg, Sweden * Corresponding author. Article History: Received 19 March 2021; Revised 16 January 2023; Accepted 24 January 2023 (footnote)[white star] Yonas Alem (Lead Author) is a Senior Research Fellow and Director of Academic Programs at the Environment for Development (EfD), School of Business, Economics and Law, University of Gothenburg; his email address is yonas.alem@gu.se. Sied Hassen is a post-doctoral researcher at the Environment and Climate Research Center of the Policy Studies Institute (PSI), Addis Ababa, Ethiopia; his email address is seidy2004@gmail.com. Gunnar Köhlin is Director of EfD at the School of Business, Economics, and Law at the University of Gothenburg; his email address is gunnar.kohlin@gu.se. We thank the editor (Laura Schechter), an anonymous associate editor, and two anonymous reviewers for helpful inputs, which significantly improved the paper. We also extend our gratitude to Cyndi Berck, the late Peter Berck, Randall Bluffstone, Fredrik Carlsson, Haileselassie Medhin, Alemu Mekonnen, Subhrendu Pattanayak, Dale Whittington, Thomas Sterner, Simon Schürz, Måns Söderbom, Roberto Weber, seminar participants at the Department of Economics, University of Gothenburg (Gothenburg, Sweden), participants in the Economic Sciences Association annual conference (Bergen, Norway), and participants at the Nordic Conference in Development Economics (Copenhagen, Denmark) for helpful comments on earlier versions of the paper. Financial support from the Swedish International Development Cooperation Agency (Sida) through the Environment for Development (EfD) is gratefully acknowledged. All correspondence to Yonas Alem, yonas.alem@gu.se. All errors and omissions are ours. Byline: Yonas Alem [yonas.alem@economics.gu.se] (*,a), Sied Hassen (b), Gunnar Köhlin (a)

Keywords Cooperation; Social identity; Noisy identity; Pure altruism; Prisoners' Dilemma Highlights * This paper studies a model where players want to cooperate only with ingroups due to pure altruism. * Identity is noisy, so players may end up benetting an outgroup or hurting an ingroup. * When players interact at least twice, there is more cooperation with more noise than without, even if cost is high. * With noisy identity, repetition unlocks welfare gains that are not pos- sible without noise. * Making outgroups easier to recognize can make interactions more unso- ciable. Abstract When meeting a random stranger, it can be difficult to recognize who is like you (ingroup) and who is not (outgroup). I construct a model to explore how noise in detecting whether the other player is an ingroup or an outgroup impacts overall cooperation in strategic interactions. When the game is repeated, noisy identity can generate welfare gains that are not possible with perfect recognition by encouraging players to cooperate in all periods except the last one, regardless of how they identified the opponent. Importantly, noisy identity can sustain additional cooperation even when the potential cost of doing so is high. This result is largely driven by the level of noise in detecting who is an outgroup, whereas the role in recognizing an ingroup is less prominent. Author Affiliation: Department of Economics, University of Memphis, 427 Fogelman Admin Building, Memphis, Tennessee 38152, United States * Corresponding author. Article History: Received 29 April 2022; Revised 2 January 2023; Accepted 8 January 2023 (footnote)1 The author has benefited from insightful comments from John Nachbar, David Levine, Yuri Khoroshilov and three anonymous referees. This research did not receive any specific grant from funding agencies in the public, commercial or not-for-profit sectors. The current version of this work stems from an earlier presented working paper entitled Kin Targeted Altruism with Noise. All errors are my own. Byline: Carmen Astorne [cmstrnfg@memphis.edu] (*,1)

This paper studies market segmentation that arises from the introduction of rent control. When a part of the market remains unregulated, theory predicts an increase of free-market rents due to the misallocation of households to dwellings. To document this mechanism empirically, we study a large-scale policy intervention in the German housing market. We isolate the misallocation mechanism by exploiting temporal variation in treatment dates in an event study design. We find a robust positive spillover effect of rent control on free-market rents. Moreover, mobility of renters living in rent-controlled units decreased. [91 words] Author Affiliation: (a) Institute for Employment Research Nürnberg (IAB Nürnberg), Regensburger Str. 104, 90478 Nürnberg, Germany (b) German Institute for Economic Research (DIW Berlin), Germany, Leuphana University Lueneburg, Germany (c) London School of Economics, Department of Geography and Environment * Corresponding author. Article History: Received 12 November 2021; Revised 3 November 2022; Accepted 5 November 2022 (footnote)[white star] We thank the anonymous reviewers for their careful reading of the manuscript and their comments and suggestions. We further thank seminar participants at the Spatial Dimensions of Inequality Workshop at ZEW Mannheim, the Economic Geography Workshop at the University of Jena, the V Workshop on Urban Economics at IEB, the SERC workshop at LSE, the annual meetings of Verein für Socialpolitik 2017, Urban Economics Association 2017, Royal Economic Society 2018, European Urban Economics Association 2018, AEA at ASSA 2019, the ESCP-TAU-UCLA Housing Conference Madrid 2019, and the Affordable Housing Workshop at Bank of Spain 2019. We are grateful for valuable comments and suggestions from Gabriel Ahlfeldt, Guillaume Chapelle, Jeffrey Cohen, Paul Cheshire, Richard Green, Christian Hilber, Mathias Hoffmann, Tim McQuade, Henry Overman, Christopher Palmer, Gary Painter, Johannes Rincke, Andrés Rodríguez-Pose, Tuukka Saarimaa, Kurt Schmidheiny, Olmo Silva, Nitzan Tzur, and Matthias Wrede. Part of this research was conducted while Andreas Mense was a Visiting Fellow at LSE. Andreas Mense thanks the London School of Economics for its hospitality. An earlier version of this paper circulated under the name Empirics on the Causal Effects of Rent Control in Germany. Byline: Andreas Mense [andreas.mense@iab.de] (a,c), Claus Michelsen [cmichelsen@diw.de] (b,*), Konstantin A. Kholodilin [kkholodilin@diw.de] (b)

Keywords Gun violence; Cost of crime; House prices; Offender registry; Revealed preferences; Willingness to pay Abstract This paper estimates the effects of crime risk on housing values. To estimate the causal effects, we rely on the introduction of the gun offender registry in Baltimore City, Maryland, that discloses the residences of ex-gun offenders to the public. Specifically, we exploit the changes in perceived crime risk after ex-gun offenders move into the neighborhoods. Our most conservative estimates indicate that houses within 0.1 miles from ex-gun offenders' residences experience an 8.0% decline in value ($12,632) after these ex-gun offenders move in. Additional results suggest that homeowners are responding out of fear of victimization as we do not observe significant increases in crimes following the relocation of ex-gun offenders into the neighborhoods. Author Affiliation: (a) Nanyang Technological University, Singapore (b) Georgia State University, Georgia * Corresponding author. Article History: Received 13 January 2021; Revised 25 November 2022; (footnote)[white star] We would like to thank the editor, Stuart Rosenthal, and the two anonymous referees for their useful comments to improve the paper. We would also like to express our gratitude to Baltimore Police Department for allowing access to the Baltimore gun offender registry. This paper is previously circulated as 'The cost of gun crime: evidence from Gun Offender Registry on housing values'. Byline: Cheng Keat Tang [c.k.tang@ntu.edu.sg] (*,a), Thao Le [tle116@gsu.edu] (b)

Keywords Storms; India; Firms; Capital Abstract The number and strength of climate-change-related disasters is increasing, and developing countries are bearing most of the brunt. In this paper we study how firms react to tropical cyclones in India. Using a panel of manufacturing firms between 1995 and 2006 and cyclone data from the National Oceanic and Atmospheric Administration, we find that the average cyclone destroys 2.2% of a firm's fixed assets and decreases its sales by 3.1%. The impacts of the average cyclone are temporary and disappear after one year. Focusing on the heterogeneity of these results by firm and industry quality, we also find that capital and sales reallocate toward better-performing industries. Within industry, firm quality only matters for the response of sales. Author Affiliation: (a) Department of Economics, Université de Sherbrooke, 2500 Blvd de l'Université, Sherbrooke, Q.C., Canada (b) CIREQ, CIRANO, and GREDI, Canada (c) Department of Economics, University of Bern, Schanzeneckstrasse 1, Bern 3001, Switzerland (d) Department of Economics, Ryerson University, 350 Victoria Street, Toronto, ON M5B 2K3, Canada (e) European Department, International Monetary Fund, 1900 Pennsylvania Ave NW, Washington, DC, United States * Corresponding author at: Department of Economics, Université de Sherbrooke, 2500 Blvd de l'Université, Sherbrooke, Q.C., Canada. Article History: Received 24 November 2021; Revised 18 November 2022; (footnote)[white star] We owe a big debt of gratitude to two anonymous referees for their valuable feedback, and especially the Editor, Edward Glaeser for his guidance and comments that significantly improved the paper. We are grateful to the Social Sciences and Humanities Institutional Grant at Ryerson University, the Groupe de Recherche en Economie et Développement International (GREDI), the Social Sciences and Humanities Research Council (SSHRC, grant number 039367), and the Swiss National Foundation (SNF, grant number 100018_192553) for their financial support. We thank, without implicating them, Sylvie Berthelot, Antoine Gervais, Julien Martin, Brandon Schaufele, Eric Strobl, and seminar participants at the World Bank, South Asian University, Université du Québec à Montréal, Université de Rennes 1, the 15th Annual Conference on Economic Growth and Development (New Delhi), the European Economic Association Meeting 2020, and the Meeting of the Association of Environmental and Resource Economists (AERE) 2021 for helpful comments and suggestions. Angélique Bernabe, Yira Constantin Dembélé, Boubacar Diop, and Moise Nken provided outstanding research assistance. The views expressed in this paper do not necessarily represent the views of the IMF, its executive board, or IMF management. Byline: Martino Pelli [Martino.Pelli@USherbrooke.ca] (a,b,*), Jeanne Tschopp [jeanne.tschopp@unibe.ch] (c), Natalia Bezmaternykh [natalia.bezmaternykh@ryerson.ca] (d), Kodjovi M. Eklou [keklou@imf.org] (e)

Keywords Tax enforcement; Tax evasion; Local taxes; Tax progressivity Highlights * I study the impact of stricter tax enforcement on local taxes set by Italian municipalities. * I take advantage of cross-municipality variation in stricter tax enforcement generated by the Ghost Buildings Program. * Stricter tax enforcement raises statutory tax progressivity on both income and property tax rates. * Larger tax collections increase public spending. Abstract In contexts with weak enforcement, the threat of tax evasion may constrain policy makers' power to set tax policies optimally. This paper studies whether stricter tax enforcement affects the tax schedule set by local governments. I take advantage of an Italian policy that generated cross-municipality variation in the scope for tackling income and property tax evasion through stricter tax enforcement. Combining an event-study design with municipality-level panel data on statutory tax rates, I show that stricter tax enforcement tips the balance in favor of higher marginal tax rates for middle and top incomes, while the poor benefit of a lower marginal tax rate. The tax hike is larger in places with higher pre-program inequality and where intrinsic tax compliance attitudes are weaker. As a result of higher tax revenue, municipalities hire more workers and raise public spending. These results suggest that tax enforcement policies have not only the power to foster tax capacity, but also to enhance the ability to pursue redistributive policies. Author Affiliation: University of Lausanne, Department of Economics and Business, Switzerland Article History: Received 22 April 2022; Revised 23 January 2023; Accepted 23 January 2023 (footnote)[white star] I would like to thank the editor, Ricardo Perez-Truglia, for his guidance and three anonymous reviewers for their helpful comments. The paper also benefited from discussions and comments from Mike Brewer, Marius Brülhart, Ben Meiselman, Andreas Mueller, Alari Paulus, Morten Ravn, Emmanuel Saez, Ugo Troiano and participants at TARC Conference (University of Exeter, April 2019), Shadow Economy Conference (University of Trento, July 2019), NTA Conference (Tampa, November 2019), University of Essex (February 2020), IIPF virtual Conference (August 2020), EEA virtual Congress (August 2020), SIEP Conference (September 2021) for providing constructive comments. Thanks also to Franco Maggio and Giovanni Reina from the Internal Revenue Agency (Agenzia delle Entrate) and Pasquale Recano from the Ministry of Interior (Ministero dell' Interno) for data assistance. All errors are mine. Byline: Enrico Rubolino [enrico.rubolino@unil.ch]

Keywords Measuring sentiment; Machine learning; Earnings calls; 10-Ks; WSJ Abstract Our paper relies on stock price reactions to colour words, in order to provide new dictionaries of positive and negative words in a finance context. We extend the machine learning algorithm of Taddy (2013), adding a cross-validation layer to avoid over-fitting. In head-to-head comparisons, our dictionaries outperform the standard bag-of-words approach (Loughran and McDonald, 2011) when predicting stock price movements out-of-sample. By comparing their composition, word-by-word, our method refines and expands the sentiment dictionaries in the literature. The breadth of our dictionaries and their ability to disambiguate words using bigrams both help to colour finance discourse better. Author Affiliation: (a) University of Colorado Boulder, United States (b) Southern Methodist University, United States (c) Norwegian School of Economics, Norway * Corresponding author. Article History: Received 9 December 2021; Revised 15 November 2022; Accepted 17 November 2022 (footnote)[white star] Dimitris Papanikolaou was the editor for this paper. We thank Simona Abis (discussant), Will Cong, Tony Cookson, Gerard Hoberg (discussant), Byoung-Hyoun Hwang (discussant), Jim Martin, David Stolin (discussant), Chenhao Tan, and Brian Waters for comments on an early draft, as well as seminar participants at Indiana University, INSEAD, the CU Boulder CS-NLP lab, the CU Boulder Finance division, the FutFinInfo webinar, NHH Finance brown bag, the 2021 FMA conference, the 2021 SFS Cavalcade, The Third Toronto Fintech Conference, the 2020 European Finance Association meetings, and the Michigan State University Fall 2019 conference. This work utilized the RMACC Summit supercomputer, which is supported by the National Science Foundation (Awards ACI-1532235 and ACI-1532236), the University of Colorado Boulder, and Colorado State University. The Summit supercomputer is a joint effort of the University of Colorado Boulder and Colorado State University. Byline: Diego García [http://leeds-faculty.colorado.edu/garcia/] (*,a), Xiaowen Hu [https://www.smu.edu/cox/Our-People-and-Community/Faculty/Xiaowen-Hu] (b), Maximilian Rohrer [https://www.maxrohrer.com] (c)

Keywords Unique equilibrium; Constant relative risk aversion; Higher-order price effect; Quasi-convex demand; Law of demand Highlights * This paper investigates the uniqueness of equilibrium in the economy with heterogenous CRRA preferences. * Individual demand has a unique inflection point at which the income effect maximally dominates the substitution effect. * Equilibrium prices exist in the price range determined by individuals' autarkic economies and two representative-agent economies. * Equilibrium uniquely exists if each individual demand is locally convex at the upper bound of the equilibrium price range. * Aggregate demand may have multiple inflection points, which can lead to multiple equilibria. Abstract This paper investigates the uniqueness of equilibrium in the economy where agents have preferences with possibly distinct levels of relative risk aversion. Equilibrium prices exist in a price range determined by micro and macroeconomic information. Macroeconomic information is inferred from two representative-agent economies, which provide lower and upper bounds on aggregate demand, respectively. Analysis of the first and second-order price effects shows that individual demand has a unique inflection point at which the income effect maximally dominates the substitution effect. In contrast, aggregate demand may have multiple inflection points, which creates multiple equilibria. Sufficient conditions for the uniqueness of equilibrium are characterized by the local behavior of individual demand at the inflection point. They require that aggregate demand must have no more than two inflection points in the equilibrium price range. The result of this paper sheds light on the Sonnenschein-Mantel-Debreu theory that has negative implications for the uniqueness of equilibrium. Author Affiliation: School of Business, Ajou University, 206 World cup-ro, Yeongtong-gu, Suwon 16499, South Korea Article History: Received 6 January 2021; Revised 24 December 2022; Accepted 4 January 2023 Byline: Dong Chul Won [dcwon@ajou.ac.kr]

Keywords Dominant strategy mechanism design; Contingent delegation; Adaptation; Coordination Abstract This paper investigates a two-agent mechanism design problem without transfers, where the principal must decide one action for each agent. In our framework, agents only care about their own adaptation, and any deterministic dominant incentive compatible decision rule is equivalent to contingent delegation: the delegation set offered to one agent depends on the other's report. By contrast, the principal cares about both adaptation and coordination. We provide sufficient conditions under which contingent interval delegation is optimal and solve the optimal contingent interval delegation under fairly general conditions. Remarkably, the optimal interval delegation is completely determined by combining and modifying the solutions to a class of simple single-agent problems, where the other agent is assumed to report truthfully and choose his most preferred action. Author Affiliation: (a) Department of Economics, Yale University, United States of America (b) China Center for Economic Research, National School of Development, Peking University, China (c) Guanghua School of Management, Peking University, China * Corresponding author. Article History: Received 15 June 2021; Revised 5 October 2022; Accepted 24 December 2022 (footnote)[white star] We thank the editor, Tilman Börgers, an associate editor, and three anonymous referees for their insightful comments and suggestions, which have greatly improved the paper. We are very grateful for helpful comments from Dirk Bergemann, Marina Halac, Johannes Hörner, Matthew Knudson, Heng Liu, and Shuo Liu. We also thank the seminar participants at Peking University, Yale, YES at Columbia, CCER Summer Institute, and the 2022 Conference on Mechanism and Institution Design for helpful comments. Ju Hu and Xi Weng acknowledge the financial support of the NSFC (Grant Nos. 72273007, 71973002, 72192843 and 72225001). This work was also supported by Ant Group. The authors are listed in alphabetical order and contribute equally to the article. All remaining errors are ours. Byline: Tan Gan [tan.gan@yale.edu] (a,*), Ju Hu [juhu@nsd.pku.edu.cn] (b), Xi Weng [wengxi125@gsm.pku.edu.cn] (c)

Keywords Rational inattention; Spectral analysis; Foresight Abstract This paper solves a dynamic rational inattention problem by formulating it in the frequency domain. The main result is a rational inattention version of the classical Wiener-Kolmogorov filter. This filter permits an infinite-dimensional state vector, provides a new line of attack for obtaining closed-form solutions, and can be implemented numerically using a simple iterative algorithm. The frequency-domain approach also sheds new light on why rational inattention produces forward-looking behavior: inattentive agents are willing to accept more uncertainty about the timing of disturbances in exchange for less uncertainty about fluctuations at the most important frequencies. Author Affiliation: Department of Economics, Duke University, 419 Chapel Drive, Durham, NC 27708, United States of America Article History: Received 30 December 2021; Revised 23 December 2022; Accepted 30 December 2022 (footnote)[white star] I would like to thank Hassan Afrouzi, Anna Bykhovskaya, Ryan Chahrour, Victoria Kostina, Andrea Lanteri, Andrew Patton, Galen Reeves, and Mirko Wiederholt for helpful comments, Ian Lee for research assistance, and the Pinetops Foundation for financial support during part of the time this paper was being written. Byline: Kyle Jurado [kyle.jurado@duke.edu]

Keywords Rational inattention; Information acquisition; DDM models Abstract Decisions take time, and the time taken to reach a decision is likely to be informative about the cost of more precise judgments. We formalize this insight using a dynamic model of optimal evidence accumulation. We provide conditions under which the resulting belief dynamics resemble either diffusion processes or processes with large jumps. We then consider the in which discounting effects are small relative to the opportunity cost of time, and show that the state-contingent choice probabilities predicted by our model are identical to those predicted by a static rational inattention model, providing a micro-foundation for such models. In the diffusion case, our model provides a normative foundation for a variant of the drift-diffusion model from mathematical psychology. Author Affiliation: (a) Stanford University, United States of America (b) Columbia University, United States of America * Corresponding author. Article History: Received 25 March 2020; Revised 13 January 2023; Accepted 16 January 2023 (footnote)[white star] The authors would like to thank Mark Dean, Sebastian Di Tella, Mira Frick, Xavier Gabaix, Matthew Gentzkow, Mike Harrison, Emir Kamenica, Divya Kirti, Jacob Leshno, Stephen Morris, José Scheinkman, Ilya Segal, Ran Shorrer, Joel Sobel, Miguel Villas-Boas, Ming Yang, and participants at the Cowles Theory conference, 16th SAET Conference, Barcelona GSE Summer Conference on Stochastic Choice, Stanford GSB research lunch, 2018 ASSA meetings, UC Berkeley theory seminar, and UC San Diego theory seminar for helpful discussions on this topic, Tianhao Liu and Oliver Xie for excellent research assistance, and the NSF (grant no. 1426168) for research support. We would particularly like to thank Philipp Strack and Doron Ravid for discussing an earlier versions, and Simon Kelly for sharing data from . We would also like to thank the editor (Pietro Ortoleva), associate editor, and six anonymous referees for their constructive feedback. Portions of this paper circulated previously as the working papers 'Rational Inattention with Sequential Information Sampling,' 'Rational Inattention in Continuous Time,' and 'Information Costs and Sequential Information Sampling,' and appeared in Benjamin Hébert's Ph.D. dissertation. All remaining errors are our own. Byline: Benjamin Hébert [bhebert@stanford.edu] (a,*), Michael Woodford [mw2230@columbia.edu] (b)

Keywords Shadow economy; Business cycles; DGE models; Institutions Abstract We use a two-sector dynamic deterministic general equilibrium model that specifically accounts for trends among time-series variables to estimate the size of the shadow economy for the 50 U.S. states from 1999 to 2019, following Solis-Garcia and Xie (2018, 2022). This paper improves on existing measures of the state-level shadow economy (such as the multiple indicators, multiple causes (MIMIC) methodology by Wiseman (2013a)). In particular, this new measure is based on theoretical foundations, extends the previous measure to include the Great Recession, includes dollar value estimates of the shadow economy, and produces considerably more variation over time and across states. Furthermore, we explore determinants of this new shadow economy measure using a panel vector autoregressive model and find that, on average, states with higher levels of economic freedom, lower regulatory barriers, and larger real GDP have smaller shadow economies. States with bigger governments, on average, have larger shadow economies, and the effect of corruption on shadow economic activity is non-linear, with a positive initial and subsequent negative impact. Author Affiliation: (a) Dickinson College, United States of America (b) Eastern Michigan University, United States of America (c) Macalester College, United States of America * Corresponding author. Article History: Received 2 September 2022; Revised 14 December 2022; Accepted 15 December 2022 (footnote)1 Contributed equally to the paper. Byline: Emily C. Marshall (a,1), James Saunoris [jsaunori@emich.edu] (b,*,1), Mario Solis-Garcia (c,1), Trang Do (a)

Keywords Swiss franc peg; Exchange rate regime; Exchange market pressure; Central bank solvency; Central bank capital Highlights * We model a central bank implementing a peg to prevent its currency from appreciating * We show how negative equity concerns can make a central bank exit such a peg early * We build an exchange market pressure model fitting to the Swiss central bank reality * We estimate counterfactuals on the SNB financial loss had it broken its peg later * The ECB QE policy would have made a later regime shift result in a negative equity Abstract We analyze how financial constraints can weigh on a central bank's decision to exit a temporary currency peg, such as the one put in place in Switzerland between 2011 and 2015. We show that negative equity or insolvency concerns can force a central bank to exit such a peg earlier than it would have done absent such concerns. We detail under which conditions such reasoning can apply for a traditional inflation-averse central bank. We then build an exchange market pressure model fitting with current peg reality to forecast both the central bank future bond holdings under a peg as well as its future losses. Applying our model to the Swiss franc peg, we show that negative equity concerns could have motivated the Swiss central bank early and puzzling peg exit in 2015, thereby providing a potential explanation for the 'Frankenshock'. ECB QE policy appears as a potential key driver of this decision. Author Affiliation: (a) University of Minho, NIPE, Portugal (b) Université de Poitiers, CRIEF, Department of Economics, France * Corresponding author. Article History: Received 24 November 2022; Revised 8 December 2022; Accepted 16 December 2022 (footnote)[white star] We thank Ricardo Reis for useful comments and for having motivated this paper, Peter Stella for fruitful interactions on the topic addressed in this paper, Christian Bordes, Franc Klaassen and Olivier Blanchard for helpful discussions on the EMP model built in this paper, Christiaan Van der Kwaak (who contributed to the beginning of this paper), Quentin Vandeweyer, Anne-Gaël Vaubourg, Miklos Vari, Matthieu Picault, Sophie Brana, Jean-Bernard Chatelain and Thomas Renault, as well as Rolf Poulsen and his co-authors for providing us with their data. We thanks the participants to AFSE 2016, INFER 2017, and Crief conferences for useful comments and suggestions. This paper is financed by National Funds of the FCT -- Portuguese Foundation for Science and Technology within the project UIDB/03182/2020. Byline: Julien Pinter [julien.pinter@gmail.com] (a,*), Marc Pourroy [marc.pourroy@univ-poitiers.fr] (b)

Keywords Bailout; Contagion; Financial regulation; Monetary policy Abstract This paper uses a theoretical model to analyze the optimal combination of monetary response (lowering of interest rates) and fiscal bailouts in preventing bank failures and financial contagion. I show that the optimal way of rescuing failing banks is to combine the two. This is because lower interest rates reduce the size of the bailout required to rescue failing banks as they reduce the cost for banks to raise and retain deposits. The main result of the paper is that banks are willing to monitor their investments more closely when they anticipate a monetary response in addition to bailouts in case of a banking crisis. Additionally, capital requirements such as the Basel Accords do not always incentivize banks to monitor their investments if there is a potential contagion from unhealthy to healthy banks. Author Affiliation: Department of Economics and Finance, Eastern Connecticut State University, 227E Communications Building, Eastern Connecticut State University, Willimantic, CT 06226, United States Article History: Received 8 March 2022; Revised 25 December 2022; Accepted 28 December 2022 (footnote)1 I would like to thank Karl Shell, Yu Zhang, Brendan Cunningham, and my colleagues at Eastern Connecticut State University for their helpful comments and suggestions. I would also like to acknowledge the funding and support from the Department of Economics and Finance at Eastern Connecticut State University . Byline: Khai Zhi Sim [simk@easternct.edu] (1)

Keywords Endogenous economic policy; Political economy; Institutions; Interest groups; Economic development Abstract This paper uses a political economy perspective to study the endogenous formation of economic policies and its interplay with political institutions. This paper provides a novel view that both the institutions and economic development status are essential factors in endogenously determining economic policies. The model aims to explain both the differences in the degree of adopting industrial policies as well as the differences in the types of industrial policies being implemented. Using a concise framework with two country-specific characteristics, the baseline model can capture three main types of industrial policy platforms of interest. In a country where voters' political awareness is positively skewed and press freedom is relatively low, pro-heavy industry policies would be present most of the time; South Korea is representative of this type of countries. In a country where voters' political awareness is positively skewed and press freedom is relatively high, there is usually an active industrial policy, though the target of the policy changes over time. Specifically, the policy is favoring the industry of which the industry-specific TFP is relatively high; Japan is representative of this type of countries. In a country where voters' political awareness is negatively skewed and press freedom is relatively high, there is usually no active industrial policy; the U.S. is representative of this type of countries. Author Affiliation: Institute of Economics, Academia Sinica, 128 Academia Road, Section 2, Nangang, Taipei 115, Taiwan Article History: Received 6 September 2022; Revised 27 December 2022; Accepted 28 December 2022 (footnote)[white star] I thank Jang-Ting Guo, Chien-Chiang Wang, Ping Wang, and audiences at Academia Sinica and the CEANA annual conference for comments. Errors are my own. Financial support from Ministry of Science and Technology in Taiwan (MOST 106-2410-H-001-104-MY2) is gratefully acknowledged. Byline: Wan-Jung Cheng [wjcheng@econ.sinica.edu.tw]

Keywords Wealth inequality; Monetary policy; State dependence Abstract We provide evidence that higher wealth inequality between households is associated with stronger real effects of monetary policy. First, we use state-dependent local projections to show that the US and the UK exhibited stronger real effects of monetary policy in times of higher wealth inequality. Second, we measure wealth inequality within US states and document that economic activity responds more strongly to interest rate changes in states where wealth is distributed more unequally. Third, we show that ECB monetary policy has stronger real effects in Euro Area countries with higher wealth inequality. Author Affiliation: (a) University of Konstanz, Department of Economics, Germany (b) Deutsche Bundesbank, Germany * Corresponding author. Article History: Received 8 June 2022; Revised 21 October 2022; Accepted 3 November 2022 (footnote)[white star] We thank Klaus Adam, Matthias Gnewuch, Tom Krebs, Matthias Meier, Daniel Runge and participants at the Mannheim Macro Seminar, the EEA Annual Congress 2018, and the International Congress CEF 2018 for useful comments and discussions. The views expressed in this paper are those of the authors. They do not necessarily coincide with the views of the Deutsche Bundesbank or the Eurosystem. This paper uses data from the Eurosystem Household Finance and Consumption Survey. The results published and the related observations and analysis may not correspond to results or analysis of the data producers. This paper is based on Chapter 2 of A. Matusche's dissertation 'Essays on Macroeconomic Policy' and on Chapter 2 of J. Wacks' dissertation 'Essays on Macroeconomics and Inequality', both written at the University of Mannheim. J. Wacks gratefully acknowledges funding by the foundation 'Geld und Währung, Germany'. Both authors gratefully acknowledge funding by the Graduate School of Economic and Social Sciences at the University of Mannheim . Byline: Alexander Matusche [alexander.matusche@uni-konstanz.de] (a), Johannes Wacks [johannes.wacks@bundesbank.de] (b,*)

Keywords Divisia aggregates; Flexible functional forms; Normalized quadratic system Abstract This paper uses neoclassical demand theory to calculate the welfare costs of inflation. It considers the demand interactions between money, consumption goods, and leisure, relaxes the assumption of fixed consumer preferences, and addresses the inter-related problems of estimation of money demand functions, instability of money demand relations, and monetary aggregation. It makes full use of the relevant economic theory and econometrics and generates inference in terms of long-run welfare costs of inflation that is internally consistent with the data and models used. Author Affiliation: (a) Department of Economics, University of Calgary, Calgary, Alberta T2N 1N4, Canada (b) Department of Economics, Lakehead University, Thunder Bay, Ontario P7B 5E1, Canada * Corresponding author. Article History: Received 22 May 2022; Revised 31 October 2022; Accepted 13 December 2022 (footnote)[white star] We would like to thank the Editor, William Lastrapes, and an anonymous referee for comments that greatly improved the paper. Byline: Apostolos Serletis [Serletis@ucalgary.ca] (a,*), Libo Xu (b)

Keywords DSGE model; Yield curve; Housing; Regime switching; Nominal rigidities; Adjustment costs Abstract The slope of the yield curve has long been found to be a useful predictor of future economic activities, but the relationship is unstable. One change we have identified in this paper is that, between the early 1990s and the collapse of the housing market in 2007, movements at the long end of the yield curve have an increase in predictive power. We use a medium-scale DSGE model with a housing sector and a yield curve as a guide to find out the sources of such change. The model implies that an increase in the short-term interest rate and a decrease in the long-term interest rate have different impacts on the economy, and to use the slope as a predictor one needs to distinguish movements at the two ends of the yield curve. Based on simulated data from the model, we find that nominal wage rigidities and the capital adjustment costs are closely related to the predictive power of the yield curve. This result is further confirmed with actual data. Author Affiliation: (a) Department of Economics and Finance, University of Texas at El Paso, United States of America (b) Department of Economics, Virginia Tech, United States of America * Corresponding author. Article History: Received 17 December 2021; Revised 28 July 2022; Accepted 14 November 2022 (footnote)[white star] The authors would like to thank Dr. Marco Del Negro for his valuable comments on an earlier version of this paper. We are also grateful for the insightful comments and suggestions made by the Editor, Dr. David VanHoose, and three anonymous referees. Byline: Xiaojin Sun [xsun3@utep.edu] (a), Kwok Ping Tsang [byront@vt.edu] (b,*)

Keywords Long-term uncertainty; Prediction interval; Unobserved components; State-space models Abstract We propose a practical approach to measuring the uncertainty of long-term economic projections. The presented method quantifies the uncertainty of economic variables by using simulations from a multivariate unobserved components model in which variables are formulated as sums of stationary and nonstationary components. The method captures the correlations between both the stationary and nonstationary components of the variables and offers a seamless analysis of short- and long-term uncertainty. Experiments on artificial data demonstrate that, despite its simplicity, the method performs fairly well compared with alternative methods in terms of long-term predictive accuracy and coverage. Author Affiliation: (a) Congressional Budget Office, Washington, DC 20515, United States of America (b) International Monetary Fund, Washington, DC 20431, United States of America * Corresponding author. Article History: Received 14 October 2022; Revised 24 December 2022; Accepted 28 December 2022 (footnote)[white star] The views expressed here should not be interpreted as CBO's. The views expressed in this paper are those of the authors and do not necessarily represent the views of the IMF, its Executive Board, or IMF management. We are grateful to Bruce E. Hansen of the University of Wisconsin, Lars Hansen of the University of Chicago, Ulrich Müller of Princeton University, James Stock of Harvard University, and David Wilcox of the Peterson Institute for International Economics for valuable comments. We also benefited greatly from comments by William Lastrapes, Molly Dahl, Mark Doms, Wendy Edelberg, John Kitchen, Jeffrey Kling, Rebecca Lanning, Julie Topoleski, Jeffrey Werling, and members of CBO's staff. An earlier working paper version was circulated under the title 'Quantifying the Uncertainty of Long-Term Economic Projections' (CBO Working Paper, 2022-07). Byline: Ufuk Devrim Demirel [devrimd@cbo.gov] (a,*), James Otterson [jotterson@imf.org] (b)

Keywords COVID-19; Public health measures; Face masks; Regression discontinuity Abstract We quantify the effect of statewide mask mandates in the United States in 2020. Our regression discontinuity design exploits county-level variation in COVID-19 outcomes across the border between states with and without mandates. State mask mandates reduced new weekly COVID-19 cases, hospital admissions, and deaths by 55, 11, and 0.7 per 100,000 inhabitants on average. The effect depends on political leaning with larger effects in Democratic-leaning counties. Our results imply that statewide mandates saved 87,000 lives through December 19, 2020, while a nationwide mandate could have saved 57,000 additional lives. This suggests that mask mandates can help counter pandemics, particularly if widely accepted. Author Affiliation: International Monetary Fund. 700 19th St NW, Washington, DC 20431, United States * Corresponding author. Article History: Received 1 December 2021; Revised 14 October 2022; Accepted 22 December 2022 (footnote)[white star] The views expressed in this working paper are those of the authors and do not necessarily represent those of the IMF or IMF policy. The paper has benefited from very helpful discussions with John Bluedorn, Oya Celasun, Francesco Grigoli, Deniz Igan, Hans Henrik Sievertsen, and Yunhui Zhao. We are also grateful for useful suggestions from Ruchir Agarwal, Marcella Alsan, Philip Barrett, Michael Boerman, Petya Koeva Brooks, Kyle Butts, Francesca Caselli, Nigel Chalk, Paul Elger, Marta Giagheddu, Gita Gopinath, Divya Kirti, Rasmus Bisgaard Larsen, Koshy Mathai, Paolo Mauro, Mico Mrkaic, Christoph Rosenberg, Ippei Shibata, Antonio Spilimbergo, Rui Xu, participants in IMF seminars, and several anonymous referees. (footnote)1 Rui C. Mano and Niels-Jakob H. Hansen contributed equally to all aspects of this paper. Byline: Niels-Jakob H. Hansen [nhansen@imf.org] (*,1), Rui C. Mano [rmano@imf.org] (1)

Keywords Marijuana; Cannabis; Marijuana legalization; Opioid deaths; Medical marijuana; Recreational marijuana Abstract Many states have legalized marijuana over the last two decades, initially for medical purposes and more recently for recreational consumption. Despite prior research, it remains unclear how these policies are related to rates of opioid-involved overdose deaths, which have trended rapidly upwards over time. We examine this question in two ways. First, we replicate and extend previous investigations to show that the prior empirical results are frequently fragile to the choice of specifications and time periods, and probably provide an overly optimistic assessment of the effects of marijuana legalization on opioid deaths. Second, we present new estimates suggesting that legal medical marijuana, particularly when available through retail dispensaries, is associated with higher opioid mortality. The results for recreational marijuana, while less reliable, also indicate that retail sales may be correlated with greater death rates relative to the counterfactual of no legal cannabis. A likely mechanism for these effects is the emergence of illicit fentanyl, which has increased the riskiness of even small positive effects of cannabis legalization on the consumption of opioids. Author Affiliation: (a) Department of Economics, University of Virginia, United States (b) Frank Batten School of Leadership & Public Policy, University of Virginia and National Bureau of Economic Research, 235 McCormick Road, Charlottesville, VA 22903-4893, United States * Corresponding author. Article History: Received 13 September 2022; Revised 2 January 2023; Accepted 4 January 2023 (footnote)[white star] We thank Arnold Ventures for financial support, the authors of some papers we replicate for providing us with data, Ashley Bradford, David Bradford and Rosalie Pacula for advice and guidance on marijuana legalization policies, and Bradley Katcher for research assistance. We also thank participants of the 5th Annual Caribbean Health Economics Symposium, the 2022 American Economic Association annual meeting, and workshop participants at George Mason University, Monash University, the University of Sydney, and the University of Wisconsin for helpful comments on earlier versions of this paper. Ruhm has served as a plaintiff's consultant and Mathur has provided support to defendants in ongoing opioid litigation. Neither role was related to any aspect of this study. The views expressed herein are those of the authors only. Byline: Neil K. Mathur (a), Christopher J. Ruhm [ruhm@virginia.edu] (b,*)

Keywords Covid-19; Public investment; Growth; Debt; Fiscal policy; Human capital; Labor markets; Welfare Abstract We analyze the medium-term macroeconomic impact of the Covid-19 pandemic and associated lock-down measures on low-income countries. We focus on the impact of the degradation of health and human capital caused by the pandemic and its aftermath, exploring the trade-offs between rebuilding human capital and the recovery of livelihoods and macroeconomic sustainability. A dynamic general equilibrium model is calibrated to reflect the structural characteristics of vulnerable low-income countries and to replicate key dimensions of the Covid-19 shock. We show that absent significant and sustained external financing, the persistence of loss-of-learning effects on labor productivity is likely to make the post-Covid recovery more attenuated and more expensive than many contemporary analysis suggests. Author Affiliation: (a) Department of Economics, Indiana University, United States of America (b) Department of International Development, University of Oxford, United Kingdom (c) Institute for Capacity Development, International Monetary Fund, United States of America (d) Strategy, Policy, and Review Department, International Monetary Fund, United States of America; FERDI, France * Corresponding author. Article History: Received 12 June 2022; Revised 10 December 2022; Accepted 16 December 2022 (footnote)[white star] We thank Mariya Brussevich, Cedric Okou, Roberto Perrelli, Yuan Xiao and colleagues in the Research and Fiscal Affairs departments of the IMF for useful comments. We are also grateful to the Editor and two anonymous referees for their thoughtful comments. The research underpinning this paper was supported by the IMF-FCDO Macroeconomic Research in Low-Income Countries project (Project ID: 60925). The views expressed in this paper are those of the authors and do not necessarily represent the views or policy of the IMF or the UK FCDO. Byline: Edward F. Buffie [ebuffie@indiana.edu] (a), Christopher Adam [christopher.adam@qeh.ox.ac.uk] (b), Luis-Felipe Zanna [fzanna@imf.org] (c), Kangni Kpodar [kkpodar@imf.org] (d,*)

Keywords Yield curve; Government bonds; Country equity indexes; Interest rates; International stock markets; Asset pricing; Return predictability; The cross-section of stock returns Abstract Interest rate changes typically affect equity values. However, if investors react slowly, the repricing may stretch over time. Using a century of data from sixty countries, we demonstrate that past interest rate changes predict the cross-section of equity returns worldwide. The quintile of stock markets with the highest change in government bond yields underperforms the countries with the lowest change by 0.76% per month. The phenomenon is distinctly robust and cannot be explained by known risk factors. Furthermore, the low correlation with other return patterns paves the way for effective country allocation strategies. Author Affiliation: (a) Montpellier Business School, 2300, avenue des Moulins Cedex 4, Montpellier 34185, France (b) Department of Investment and Capital Markets, Institute of Finance, Poznan University of Economics and Business, Al. Niepodleglosci 10, Poznan 61-875, Poland (c) Nusret Cakici, Gabelli School of Business, Fordham University, 45 Columbus Avenue, Room 510, New York, NY 10023, USA (d) Robert Bianchi, Griffith Business School, Griffith University, 170 Kessels Road, Nathan, QLD 4111, Australia (e) Huaigang Long, School of Finance, Zhejiang University of Finance and Economics, 18 Xueyuan Street, Hangzhou, Zhejiang 310018, China * Corresponding author at: Montpellier Business School, 2300, avenue des Moulins Cedex 4, Montpellier 34185, France. Article History: Received 23 June 2022; Revised 3 November 2022; Accepted 5 January 2023 (footnote)* The authors are grateful to David Y. Aharon, Claudiu Albulescu, Nick Baltas, Demir Bektic, Debojyoti Das, Ender Demir, John Fan, Allaudeen Hameed, Fabian Hollstein, Wenjin Kang, Andreas Karathanasopoulos, Renatas Kizys, Frank Weikai Li, Gilbert Nartea, Isaac Otchere, Peter Pope, Krishna Reddy, Wael Rouatbi, Panagiotis Tzouvanas, Zaghum Umar, Mehmet Umutlu, Tingxi Zhang, and Yifeng Zhu whose constructive comments and suggestions have significantly improved the quality of the paper. Furthermore, we thank participants at the 31st EBES Conference, the 27th Annual Conference of the Multinational Finance Society, and the 2020 World Finance Conference for valuable feedback on the earlier versions of the paper. All remaining errors (if any) are the responsibilities of the authors. Adam Zaremba acknowledges the support of the National Science Center of Poland [grant no. 2019/33/B/HS4/01021]. Byline: Adam Zaremba [a.zaremba@montpellier-bs.com] (a,b,*), Nusret Cakici (c), Robert J. Bianchi (d), Huaigang Long (e)

Keywords artificial intelligence; big data; Cyber-Communism; economic calculation; Ludwig von Mises Abstract In his 1920 essay 'Economic Calculation in the Socialist Commonwealth,' Ludwig von Mises argued that economic calculation is impossible in a socialist system absent private property and exchange in the means of production. Without the social appraisement process by which the actions of consumers and entrepreneurs produce a money price structure, the commensurate cardinal numbers necessary to engage in capital accounting are not available. We argue that any claims regarding how advances in computer technology can solve the problem of economic calculation are based on an insufficient understanding of Mises' original argument. We restate Mises' argument in consideration of recent developments in big data and artificial intelligence and argue that Mises' original argument concerning the impossibility of economic calculation absent the institutional prerequisites of private property and monetary exchange in goods of all orders remains unrefuted. Author Affiliation: (a) George Mason University (b) Montreat College * Corresponding author: Article History: Received 13 July 2022; Revised 8 December 2022; Accepted 13 December 2022 (footnote) The authors would like to thank participants of the February 2022 Modern Computing and Economic Calculation Online Papers Workshop, generously hosted by the Institute for Humane Studies, as well as two anonymous referees for valuable feedback. Karras would also like to thank Daniel B. Klein, Erik W. Matson, and participants of the spring 2022 George Mason University Adam Smith Program Research Workshop for their helpful comments on an earlier version of this paper. Byline: Karras J. Lambert [klamber7@gmu.edu] (a,*), Tate Fegley [tate.fegley@montreat.edu] (b)

Keywords Inequality; Socioeconomic status; Conspicuous consumption; Veblen goods; Access to credit Abstract The quest for status is a powerful motivator, but does it affect inequality? This paper presents a novel lab experiment that was designed and conducted to identify the relationship between conspicuous consumption, access to credit, and inequality. We report four main findings: First, consumption increases when it is 'conspicuous' (i.e., is both observable and signaling ability). Second, costly borrowing increases when consumption is conspicuous. Third, the increase in costly borrowing is driven by those at lower income levels. Finally, in the presence of conspicuous consumption, access to credit exacerbates inequality. Author Affiliation: (a) University of East Anglia, UK (b) International Monetary Fund, USA * Corresponding author. Article History: Received 10 March 2022; Revised 22 October 2022; Accepted 5 December 2022 (footnote)1 We are extremely grateful for support from Katarina Dankova, Phoebe Melvin, and James Merewood. This research is funded by the World Bank's Strategic Research Programs (TF0A1139). We thank Rabah Arezki, Leonardo Bursztyn, Bob Cull, Laura Harvey, Steffen Huck, Philip Keefer, Martin Kanz, Boon Han Koh, Erzo Luttmer, Vijayendra Rao, Roman Sheremeta, Editor Daniel Houser, an Associate Editor, two anonymous reviewers, and participants at the Center for Behavioral and Experimental Social Science seminar series at the University of East Anglia, the EasternArc Experimental Workshop at the University of Essex, and the Applied Development Economics seminar series at the Lahore School of Economics for thoughtful comments and suggestions. The views expressed in this paper are those of the authors and do not necessarily represent the views of the IMF, its Executive Board, or IMF Management. Byline: Sheheryar Banuri [s.banuri@uea.ac.uk] (a,*), Ha Nguyen (b,1)

Keywords Taxation; Subsidies and revenue; Tax evasion and avoidance; Micro-based behavioral economics; Fiscal policies and behavior of firms Highlights * We sent messages to 56,310 firms that paid $700 million in corporate income taxes. * Messages increase salience of prison sentences and of public disclosure of evasion. * Messages increased tax revenue by $184 million (0.22% of Dominican Republic's GDP). * We intervene with firms of all sizes including the largest firms in the economy. * Nearly $150 million of the $184 million raised come from the largest firms. Abstract This paper uses a natural field experiment to examine the effectiveness of deterrence messages on tax compliance in the Dominican Republic. In collaboration with the tax authority, we sent messages to 56,310 firms that collectively paid $700 million in the year before the experiment. Our field experiment complements a tax enforcement reform in the Dominican Republic a year before our intervention. Sharing information about prison sentences or the public disclosure of evasion arising from the tax enforcement reform increases tax revenue by $184 million (0.22% of GDP). Using a unique sample that covers the entire firm size distribution, we show that the largest firms, that pay 84% of all corporate income taxes and typically have been excluded from this type of intervention, are highly responsive to our information treatments. Author Affiliation: (a) University of Chicago, Chicago, USA (b) University of Chicago Department of Economics, USA (c) University of Texas at Dallas Jindal School of Management, USA (d) Direccion General de Impuestos Internos, Santo Domingo, Dominican Republic (e) Inter-American Development Bank, Washington, USA * Corresponding author at: Associate Professor of Managerial Economics. Jindal School of Management. The University of Texas at Dallas, 800 West Campbell Road, Richardson, TX 75080. Article History: Received 10 January 2022; Revised 31 October 2022; Accepted 2 November 2022 (footnote)[white star] The experiment reported in this paper are registered at the AEA's Social Science Registry under AEARCTR-0004096. A previous version of this paper also included analysis of a separate experiment registered under AEARCTR-0004064 (). (footnote)[white star][white star] We would like to thank Luis Andres, Marcelo Bérgolo, Chris Blattman, Alec Brandon, Fiona Burlig, Leonardo Bursztyn, Miguel Coronado Hunter, Guillermo Cruces, Josh Dean, Dhammika Dharmapala, Steven Durlauf, Julio Elias, Chang-Tai Hsieh, Clement Imbert, Dmitri Koustas, Michael Kremer, Maximiliano Lauletta, Luis Martinez, David Novgorodsky, Nicole Holz, Ricardo Perez-Truglia, Carola Pessino, Marta Ruiz Arranz, Julia Seither, Sid Sharma, Cass Sunstein, Dick Thaler, Rebecca Wolfe, Karen Ye as well as seminar participants at Instituto OMG Republica Dominicana, The University of Texas at Dallas, University of Chicago Harris, University of Chicago Experiments, Universidad del CEMA, the Advances in Field Experiments conference, RIDGE, Behavioral Insights Global, CESifo Workshop on Political Economy, Behavioral Science Summit, MWIEDC, and ZEW Public Finance Conference. The findings, interpretations, and conclusions in this paper are entirely those of the authors and do not represent the views of the Dominican Republic DGII or Inter-American Development Bank. Byline: Justin E. Holz [justinholz@uchicago.edu] (a), John A. List (b), Alejandro Zentner [azentner@utdallas.edu] (c,*), Marvin Cardoza (d), Joaquin E. Zentner [joaquinz@iadb.org] (e)

Keywords Retirement Savings; Private Pensions; Social Security; Unemployment Insurance Abstract In response to unemployment shocks, older workers deplete their 401(k)s, particularly after the waiving of the early withdrawal penalty on unemployment-motivated withdrawals at age 55. This paper shows that unemployment insurance keeps older workers from depleting their 401(k) assets following job losses. Unemployment insurance also incentivizes older unemployed workers to delay claiming their Social Security benefits beyond the earliest age of eligibility, 62. Overall, unemployment insurance enhances the retirement income of the individuals having a history of late-career layoffs by helping them preserve their 401(k) assets, maintain the return on these assets and opt for a higher stream of Social Security benefits. Author Affiliation: Georgia State University, United States Article History: Received 1 September 2020; Revised 3 September 2022; Accepted 7 September 2022 (footnote)[white star] I am profoundly grateful to Thomas A. Mroz for his guidance and unwavering support and to Stephen Shore for his time and patience. I thank Olivia Mitchell, Daniel Prinz, David Sjoquist and Jonathan Smith for their in-depth review. This work also benefited from constructive feedback from Itzik Fadlon, Kris Gerardi, Tal Gross, Damon Jones, Todd Jones, David Love, Nathaniel Pattison, James Poterba and conference participants at the 2021 Conference of the Society of Labor Economists, the 2021 ZEW Conference on Ageing and Financial Markets, the 2021 meeting of the Cherry Blossom Financial Education Institute at the George Washington University, the 2019 Presidential Session of the meetings of the Southern Economic Association and Georgia State Consumer Finance Seminar. All remaining errors are my own. This paper is part of my dissertation research that I conducted at Georgia State University. I acknowledge the influential support of the Alfred P. Sloan Foundation, through the National Bureau of Economic Research (NBER) Pre-Doctoral Fellowship on the Economics of an Aging Workforce. I thank the NBER staff, particularly Elisa Pepe, for the administrative support and flexibility. Byline: Samir Elsadek Mahmoudi [sam.elsadek@gmail.com]

Keywords Opportunity Zones; Place-Based Policies; Tax Incentives; Employment; Poverty Abstract The Opportunity Zone program, created by the Tax Cuts and Jobs Act in 2017, was designed to encourage investment in distressed communities across the U.S. We examine the early impacts (up to one-and-a-half years after enactment) of the Opportunity Zone program on residents of targeted areas. We leverage restricted-access microdata from the American Community Survey and employ a matching approach to estimate causal effects of Opportunity Zone designation. Our results point to little or no evidence of positive effects of the Opportunity Zone program on the employment, earnings, or poverty of zone residents. Author Affiliation: University of California, Irvine * Corresponding author. Article History: Received 11 March 2021; Revised 14 October 2021; (footnote) We are grateful for helpful comments from Stuart Rosenthal and two anonymous referees. We also thank Timothy Bartik, Aaron Hedlund, Rebecca Lester, Shawn Rohlin, Brett Theodos, and participants at the Brookings Institution conference 'Opportunity Zones: The Early Evidence' for comments on earlier versions on this paper. This paper uses restricted-access data from the U.S. Census Bureau. Any views expressed are those of the authors and not those of the U.S. Census Bureau. The Census Bureau's Disclosure Review Board and Disclosure Avoidance Officers have reviewed this information product for unauthorized disclosure of confidential information and have approved the disclosure avoidance practices applied to this release. This research was performed at the UC Irvine Federal Statistical Research Data Center under FSRDC Project Number 2146 (CBDRB-FY21-P2146-R8858, CBDRB-FY21-P2146-R9150, CBDRB-FY21-P2146-R9197). Byline: Matthew Freedman [matthew.freedman@uci.edu], Shantanu Khanna [shantanu@uci.edu], David Neumark [dneumark@uci.edu] (*)