Publications

Governments use their countries' economic strength from financial and trade relationships to achieve geopolitical and economic goals. We provide a model of the sources of geoeconomic power and how it is wielded. The source of this power is the ability of a hegemonic country to coordinate threats across disparate economic relationships as a means of enforcement on foreign entities. The hegemon wields this power to demand costly actions out of the targeted entities, including mark-ups, import restrictions, tariffs, and political concessions. The hegemon uses its power to change targeted entities' activities to manipulate the global equilibrium in its favor and increase its power. A sector is strategic either in helping the hegemon form threats or in manipulating the world equilibrium via input-output amplification. The hegemon acts a global enforcer, thus adding value to the world economy, but destroys value by distorting the equilibrium in its favor.

Private information on car quality means the sale price reflects the average quality of cars sold, which can be lower than the average quality in the population. This difference is the lemons penalty imposed on holders of high-quality cars. The authors estimate the evolution of the lemons penalty through an equilibrium model of car ownership with private information using Danish linked registry data on car ownership, income, and wealth. They examine the aggregate implications and distributional consequences of these penalties, finding that the penalty is largest early in ownership, declines with ownership duration, reduces transaction volumes and car turnover, and weakens the self-insurance role of cars, though the market does not collapse because income shocks induce sales.

This paper reviews recent developments in the economics of human development, focusing on the early years of life as a critical period for shaping long-term outcomes. Early childhood development is inherently multidimensional: cognitive and socioemotional skills evolve dynamically and interact with health, nutrition, and environmental influences. Economists have contributed to this field by providing a conceptual unifying framework that highlights how key drivers of development reflect the choices of individuals operating under incentives and constraints. Within this framework, the paper emphasizes two central challenges: understanding the interactions among multiple dimensions of development and identifying causal links—particularly the effects of different inputs at different ages. Measurement issues are a recurring theme, given the difficulty of assessing young children and the need for comparability across contexts. The paper also stresses these issues’ policy relevance for poverty reduction and social mobility by discussing early childhood interventions in both developed and developing countries.

We study identification and inference in first-price auctions with risk-averse bidders and selective entry, building on a flexible framework we call the Affiliated Signal with Risk Aversion (AS-RA) model. Assuming exogenous variation in either the number of potential bidders (N) or a continuous instrument (z) shifting opportunity costs of entry, we provide a sharp characterization of the nonparametric restrictions implied by equilibrium bidding. This characterization implies that risk neutrality is nonparametrically testable. In addition, with sufficient variation in both N and z, the AS-RA model primitives are nonparametrically identified (up to a bounded constant) on their equilibrium domains. Finally, we explore new methods for inference in set-identified auction models based on Chen et al. (2018, Econometrica, vol. 86, 1965–2018), as well as novel and fast computational strategies using Mathematical Programming with Equilibrium Constraints. Simulation studies reveal the good finite-sample performance of our inference methods, which can readily be adapted to other set-identified flexible equilibrium models with parameter-dependent support.

Purely affective interaction allows the welfare of an individual to depend only the individual’s own action and on the profile of welfare levels of others. Under an assumption on the structure of mutual affection that we interpret as non-reinforcing mutual affection, we show that equilibria of affective interaction are Pareto optimal. Moreover, if purely affective interaction induces a standard game, then an equilibrium profile of actions is a Nash equilibrium of the induced game, and this Nash equilibrium and Pareto optimal profile of strategies is locally dominant.

This paper proposes a framework for the global optimization of possibly multimodal continuous functions on bounded domains. The authors show that global optimization is equivalent to optimal strategy formation in a two-armed decision model with known distributions, based on a strategic law of large numbers. They establish asymptotically optimal strategies and introduce a class of Strategic Monte Carlo Optimization (SMCO) algorithms that rely on sign-based decisions rather than gradient magnitudes. Theoretical results provide local and global convergence guarantees, and extensive numerical experiments demonstrate strong performance of the proposed algorithms in high-dimensional and challenging optimization settings.

Human capital is central to efforts to promote growth, convergence, and the elimination of poverty. Drawing on seminal macroeconomic frameworks by Nelson-Phelps, Lucas, and subsequent developments, alongside macro and microeconomic evidence, the chapter examines the role of human capital in driving innovation and growth, emphasizing how different types of human capital matter at different stages of development, and discussing obstacles to accumulation and evidence from policy interventions.

During adolescence, peer interactions become increasingly central to children’s development, whereas the direct influence of parents wanes. Nevertheless, parents can continue to exert leverage by shaping their children’s peer groups. We construct and estimate a model of parenting with peer and neighborhood effects where parents intervene in peer formation and show that the model captures empirical patterns of skill accumulation, parenting style, and peer characteristics among US high school students. We find that interventions that move children to better neighborhoods lose impact when they are scaled up, because parents’ equilibrium responses push against successful integration with the new peer group.

Many seemingly different economic problems share a common mathematical structure: they involve the maximization of a functional over sets of monotonic functions that are either majorized by, or majorize, a given function. This paper presents new, simpler proofs for the main characterization results of the extreme points of sets defined by monotonicity and majorization constraints obtained by Kleiner, Moldovanu, and Strack (2021). It demonstrates how these characterizations can be applied to a broad range of economic applications, including auction and information design, contest design, optimal delegation, optimal stopping, and decision problems under risk. The paper concludes with an overview of recent related work extending these characterizations to settings with additional constraints, multidimensional state spaces, and alternative stochastic orders.

This paper provides the first nationwide U.S. evidence on the effects of electric vehicle (EV) adoption on air quality and child health. Using county-level data from 2010–2021, we link EV registrations to air pollution, birth outcomes, and emergency department visits. Endogenous adoption is addressed using two-way fixed effects and an instrumental variables strategy exploiting the rollout of federally designated Alternative Fuel Corridors. Greater EV adoption significantly lowers nitrogen dioxide and improves infant and child health, reducing very low birth weight, prematurity, and asthma-related emergency visits. The largest health gains occur in high-pollution areas and exceed $1.2–$4.0 billion annually.

Signaling is wasteful. But how wasteful? We study the fraction of surplus dissipated in a separating equilibrium. For isoelastic environments, this waste ratio has a simple formula: β/(β + σ), where β is the benefit elasticity (reward to higher perception) and σ is the elasticity of higher types’ relative cost advantage. The ratio is constant across types and independent of other parameters, including convexity of cost in the signal. A constant waste ratio characterizes the isoelastic class. In winner-take-all signaling tournaments with N candidates, exactly (N − 1)/N of the surplus dissipates—the same as in Tullock contests.

Many mental health disorders start in adolescence, and appropriate initial treatment may improve trajectories. But what is appropriate treatment? We use a large national database of insurance claims to examine the impact of initial mental health treatment on the outcomes of adolescent children over the next 2 years, where treatment is either consistent with US Food and Drug Administration guidelines, consistent with looser guidelines published by professional societies (gray area prescribing), or inconsistent with any guidelines (red-flag prescribing). We find that red-flag prescribing increases self-harm, use of emergency rooms, and health care costs, suggesting that treatment guidelines effectively scale up good treatment in practice.

High-dosage tutoring has the potential to substantially raise adolescent academic achievement, but schools may lack the resources to deliver small-group tutoring frequently at scale. This paper studies the relative importance of tutoring group size (quality) versus tutoring frequency (quantity) using a randomized controlled trial in a Midwestern U.S. charter middle school. Students were randomized to a control group, tutoring twice a week in 2-student groups, or tutoring three times a week in 3-student groups, with equal total cost per student across the two treatment arms. The results show that tutoring in 2-student groups led to a statistically significant improvement in math skills of 0.23 standard deviations, while the more frequent 3-student group tutoring did not produce significant gains. The findings suggest that, under budget constraints, smaller group size may be more effective than higher frequency.

We examine the impact of firearm violence on newborn health in the U.S. using two approaches. First, we analyze the "beltway sniper" attacks in 2002, leveraging both temporal and spatial variation to compare birth outcomes of exposed children to those unexposed. Second, we investigate in-utero exposure to mass shootings using national data. We find that exposure to these incidents during pregnancy increases the likelihood of very low-birthweight and very premature birth. These events carry a significant economic burden, with the beltway sniper attacks costing at least $155 million and mass shootings resulting in annual costs exceeding $75 million.

This chapter, prepared for the Handbook of Development Economics (Vol. 6), reviews recent microeconomic evidence on the causes of resource misallocation in developing countries. It distinguishes between “technological” and “distortionary” wedges, develops a unified theoretical framework linking market power, taxes, financial frictions, and firm dynamics, and summarizes empirical findings from the “direct approach” to misallocation. The authors emphasize how wedges vary by firm size and discuss policy implications for improving allocative efficiency.