Microeconomic Insights

Fraud is a major problem for Medicare. For example, in 2024, over 7% of overall Medicare spending was classified as improper payments (CMS, 2024). The case of ambulance rides provides an ideal setting to understand the challenges and opportunities for dealing with such fraud.  While Medicare pays for ambulance rides only when a patient is […] The post Ambulance Taxis: The Impact of Regulation and…

Mothers’ labor force participation and earnings decline sharply following the birth of a first child, resulting in gender gaps between parents that are large and highly persistent (Cortés and Pan, 2023; Kleven et al., 2019; Kleven et al., 2025). This divergence, the so-called child penalty, has been identified as the central driver behind remaining gender […] The post Do Mothers Respond to Inform…

These debates reflect a fundamental tension: high-skilled migration can both enrich and disrupt economies. For origin countries, the loss of talent raises fears of “brain drain,” yet emigrants can also serve as conduits for knowledge transfer back home. For destination countries, migrants boost innovation and expand the talent pool, but may also compete with and […] The post What happens when inv…

Why do some countries remain significantly poorer than others? Research shows that a key factor is how efficiently they use their resources, including capital—the physical assets, such as plants and machinery, used in production. Misallocation occurs when investments don’t flow to the businesses that could use them most productively. Reallocating capital to more productive uses […] The post Forei…

Military necessity has been the mother of innovation since antiquity. During the Roman attack on Syracuse in 214 BC, Archimedes invented the “Iron Hand”, a crane to drag enemy ships out of the sea. More recently, U.S. Department of Defense (DoD) investments have been responsible for nuclear power, microwave heating, GPS and the Internet. However, […] The post How to get Better Innovation by Openi…

To elicit the views of workers, we carried out an innovative survey of new unemployment insurance (UI) recipients. Most UI recipients express a willingness to accept wage cuts of 5-10 percent to stay on their job for another 12 months. Remarkably, one third would accept a 25 percent cut in pay. Yet we also find […] The post Pay cuts versus layoffs: what do workers think? appeared first on Microec…

The desirability of wealth taxation depends on the extent to which it distorts savings decisions. However, economic theory does not provide firm guidance on the magnitude or even the sign of this effect. In fact, it is theoretically ambiguous whether wealth taxation causes households to save more or less. This ambiguity is due to two […] The post Wealth Taxation and Household Saving: Evidence fro…

State and local governments regularly offer large discretionary subsidies to attract firms, and the accompanying jobs, to their jurisdictions. In fact, this deployment of subsidies is estimated to be one of the largest economic development tools used in the United States (Bartik 2017). The incentives can be staggering—for example, in 2006 Honda received a package […] The post Bidding for Firms: S…

By the year 2050, around 2.5 billion more people will be living in urban areas than there are now (United Nations, 2018). Around 90% of these new city dwellers will be in Africa and South Asia, expanding already populous cities like Dar es Salaam and Dhaka. Policymakers in developing nations therefore often discuss whether to […] The post Welfare Effects of Subsidizing Seasonal Migration appeared…

Economists have long advocated for alternative financial contracts to mitigate the risks of investing in education (Barr et al. 2017; Chapman 2006; Palacios 2004; Zingales 2012). Most famously, Friedman (1955) writes: “[Human capital] investment necessarily involves much risk. The device adopted to meet the corresponding problem for other risky investments is equity investment… The counterpart [……

Yet because few countries levy wealth taxes, relatively little is known about the actual responses of wealthy individuals when governments tax their assets – especially in countries outside Europe. The research summarized here provides new evidence for Colombia, a middle-income country with one of the most ambitious and long-standing wealth tax regimes in the world. […] The post Taxing wealth: So…

Casual observation and historical evidence suggest this picture is incomplete: as employment in previously labor-intensive sectors such as agriculture, textiles, mining, and manufacturing has eroded, new varieties of labor-demanding activities have emerged, including in medicine, software, electronics, healthcare, finance, entertainment, recreation, and personal care. These new forms of work requ…

In March 2016, the Federal Communications Commission launched one such auction, the most complex spectrum auction it had ever conducted.  The agency was seeking to solve a bedeviling problem. The rapid growth in data and video usage by smartphone users had significantly increased the demand for mobile broadband spectrum. Much of that spectrum, however, was […] The post Ownership concentration and…

The unchecked accumulation of greenhouse gas emissions is one of the starkest examples of market failure worldwide. Despite the high costs they impose on society through climate change, these externalities remain largely unpriced in economic decision-making. In theory, market-based regulatory instruments—such as carbon pricing—have the potential to mitigate climate change at the lowest cost to [……

Occupational licensing regulations are common across many service sectors, including health, education, transportation, and legal services. These regulations affect up to 20-30% of workers in both the U.S. and Europe, with considerable variation across states and countries; see for example Kleiner and Krueger (2010, 2013) and Koumenta and Pagliero (2019). General education and training requiremen…

When making these decisions, the typical expert will begin by assessing the likely effects of their options based on the specific case at hand. For instance, physicians aim to diagnose a patient’s underlying condition and evaluate potential treatment outcomes, and judges work to determine the facts of a crime and the likelihood of recidivism. The […] The post The role of diagnostic skill: How and…

Effective and economical expansion of renewable energy is one of the most urgent challenges for addressing climate change. Along with the transport sector, the electricity sector generates one of the largest shares of global greenhouse gas emissions. In addition, a significant part of the transport sector is expected to be electrified in the near future. […] The post Expanding renewable energy: l…

Firms differ substantially in the wages they pay to similar workers. Standard models of the labor market assume that workers have accurate beliefs about the differences in wages across firms, including in bargaining models and wage posting models with search. While this fundamental assumption remains untested, its violation—in the form of worker misperceptions about the […] The post Worker Belief…

Francis Bacon coined the famous phrase “knowledge is power.” This simple idea is used to champion pay transparency to empower women and minority workers. Advocates argue that workers don’t know what their employer is willing to pay, and more information about coworker pay allows for renegotiations, which raise up and equalize wages, especially those of […] The post Equilibrium Effects of Pay Tran…

Project uncertainty can be costly to the contractors that do the work – a lot of their business is often centered on public works – and to the government. The extent to which contractors are exposed to risk depends not only on the project design, but also on how contracts are allocated. Contracts with […] The post The case for scaling auctions when spending on infrastructure appeared first on Mic…