The Economic Journal

Abstract A century of wildfire suppression policies has led to the build-up of combustible fuel loads in forests, increasing the size, severity, and costs of wildfires. This study explores whether fuel-reduction treatments reduce wildfire suppression costs. Focusing on wildfires igniting on U.S. Forest Service lands in the Pacific Northwest, we leverage exogenous variation in protections for the …

Abstract We study optimal liability for AI-powered products. Like human users, artificial intelligence (AI) can cause product failures that harm third parties. Additionally, it may introduce extreme risks of large-scale harm that renders full liability impractical. Raising AI liability for ordinary loss above actual harm can decrease excessive autonomy and increase social welfare, even when it ne…

Abstract In the last two decades European policy makers have sought to increase the use of market mechanisms in the delivery of healthcare. These reforms introduce competition and choice into previously heavily constrained environments. This leads to a set of interesting economic issues that have been addressed in a range of papers, both theoretical and empirical. This paper examines whether this…

Abstract Despite broad acceptance among economists, carbon taxes face persistent public resistance. We measure the sources and distribution of welfare losses from unexpected European carbon price changes by estimating their impact on consumer prices, labor income, financial wealth, and government transfers. A 1% carbon-policy-induced increase in energy prices leads to an average welfare loss of a…

Abstract We ask how globalization affects governments’ incentives to set labour standards for workers. In a stylized global value chain model, globalization by reducing trade costs or adding countries with complementary skills improves working conditions, whether set by employers or governments. Addition of countries with similar skills has the opposite effect. Equilibrium labour standards are ac…

Abstract We model conflict as a prisoner’s dilemma between two groups represented by leaders: two group leaders who share group preferences and a common leader concerned with overall welfare. Leaders make recommendations and promises, and face penalties for unfulfilled commitments. A common leader who can be punished adequately and moves last induces cooperation. When the common leader does not m…

Abstract To combat global warming, climate policies like carbon taxes, renewable subsidies, and carbon tariffs must be implemented to phase out fossil fuel consumption and lower emissions. Who are the winners and losers of such policies? Through a simple Integrated Assessment Model with heterogeneous countries and international trade in goods and energy, we study both the costs of implementing th…

Abstract We propose a new fiscal transmission channel based on countercyclical monopsony power in the labour market. We develop a New Keynesian model incorporating a time-varying degree of monopsony power, with workers valuing various job aspects and firms having wage-setting power, inversely related to the elasticity of labour supply to individual firms. As government spending increases, labour …

Abstract When useful information is distressing, it may deliberately be ignored. In this paper, we examine both theoretically and experimentally whether increasing perceived efficacy — the belief that one’s actions can influence an outcome — reduces such strategic ignorance. Participants in India are given the choice to receive or avoid information about the average loss in life expectancy due to…

Abstract One of the exciting developments in the stated preference literature is the use of probabilistic stated preference experiments to estimate semi-parametric population distributions of ex ante returns and willingness-to-pay (WTP) for a choice attribute. This relies on eliciting several choices per individual and estimating separate demand functions at the cost of possibly long survey instr…

Abstract Taxpayer audits are key instruments to combat tax evasion. Whether they deter tax non-compliance beyond audited taxpayers is largely unclear, however. Drawing on rich tax administrative data for South Africa, we show that business tax audits enhance the tax reporting compliance of unaudited firms in the same neighborhood and tax preparer network as the targeted business. On average, firm…

Abstract The emergence of markets for on-demand online physician consultations —direct-to-consumer telemedicine (DCT) — is currently transforming many healthcare settings. DCT may be a cost-effective substitute for in-person consultations, but the convenience of seeking DCT may increase the demand for the service and consequently also the costs for health insurers. To causally assess the degree t…

Abstract We investigate whether AI systems outperform humans in creative tasks that vary in their degree of “openness.” To this end, we generated creative responses using three versions of ChatGPT and recruited 738 participants to blindly evaluate six creative answers randomly drawn from three pools—comprising 160 responses each—generated by both humans and AI. This process yielded 4,428 individu…

Abstract We characterise the cyclical dispersion of firm-level (physical) productivity and demand shocks using Swedish microdata. Demand shock dispersion increases by more than productivity shock dispersion in recessions and explains most of the variation in sales growth dispersion. Productivity shocks pass through incompletely to prices and hence have a limited effect on sales dispersion. We dir…

Abstract In this paper, we experimentally investigate the effect of public consumer ratings on market outcomes in credence goods markets. Contrary to search or experience goods, consumers cannot evaluate all dimensions of trade for credence goods, which may inhibit the information and reputation-building value of public rating systems. We implement a market in which experts have an informational …

Abstract We develop an equilibrium search model of the coexistence of regular and flexible work arrangements, calibrated to evaluate the U.K.’s zero-hours contract (ZHC). Our findings reveal mixed equilibrium and welfare effects. ZHCs stimulate job creation among firms facing highly volatile business conditions, increasing total employment but potentially reducing regular jobs. Simultaneously, ZH…

Abstract How do independent media affect the support of the regime in an autocracy? We carried out two complementary field experiments in Russia at the city and individual levels, randomising access to the country’s only independent TV channel before the 2016 parliamentary elections. In both experiments, we find that independent media foster polarisation. They increase turnout and pro-government …

Abstract We document that business cycle dynamics change systematically over the course of development. In countries with large but shrinking agricultural sectors, aggregate employment is uncorrelated with GDP, and agricultural employment falls during booms, even as agricultural labour productivity rises. We develop a unified theory of business cycles and structural change that captures these pat…

Abstract We study optimal fiscal policy to address climate change and inequality. We theoretically characterise optimal carbon and income taxes and quantify them for the US economy with a climate model calibrated to DICE. In contrast to the representative-agent setting, we find that (i) tax distortions have a negligible effect on the optimal carbon tax; (ii) inequality only slightly reduces it; (…

Abstract We study a search platform ranking firms’ products across sponsored and organic positions, accounting for the incentives of both firms and consumers. To characterize an optimal ranking when the number of firms is large, we formulate a Mixing Principle for Consumer Search, adapting tools from the social learning literature. The platform assigns the products it deems best to sponsored posi…