Review of Economic Studies (Rev Econ Stud )

Publisher: Economic Study Society; Society for Economic Analysis Ltd, Blackwell Publishing


A Leader in its Field Founded in 1933 by a group of young British and American economists The Review of Economic Studies aims to encourage research in theoretical and applied economics especially by young economists. Today it is one of the core economics journals ranking consistently among the top half dozen titles. The Review of Economic Studies is essential reading. It includes articles from well-established specialists and young research scholars as well as having a reputation for publishing path-breaking papers in theoretical and applied economics. Click here for more information on The Review of Economic Studies Back issues are available electronically from JSTOR.

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    Review of Economic Studies, The website
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Blackwell Publishing

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Publications in this journal

  • Review of Economic Studies 01/2013;
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    ABSTRACT: We propose a computationally feasible way of deriving the identified features of models with multiple equilibria in pure or mixed strategies. It is shown that in the case of Shapley regular normal form games, the identified set is characterized by the inclusion of the true data distribution within the core of a Choquet capacity, which is interpreted as the generalized likelihood of the model. In turn, this inclusion is characterized by a finite set of inequalities and efficient and easily implementable combinatorial methods are described to check them. In all normal form games, the identified set is characterized in terms of the value of a submodular or convex optimization program. Efficient algorithms are then given and compared to check inclusion of a parameter in this identified set. The latter are illustrated with family bargaining games and oligopoly entry games. Copyright , Oxford University Press.
    Review of Economic Studies 02/2011; 78(4):1264-1298.
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    ABSTRACT: I present a sticky-wage model of exchange rate pass-through with heterogeneous producers and endogenous markups. The model shows that low levels of exchange rate pass-through to firm- and aggregate-level import prices coexist with large movements in trade flows. After an exchange rate shock, aggregate import prices are subject to a composition bias due to changes in the extensive margin of trade (the number of goods traded between countries). At the firm level, each producer adjusts its markups depending on its own productivity and the change in the competitive environment generated by the exchange rate movement. Firm-level price responses are asymmetric--different for appreciations and depreciations--and adjustments in the intensive margin of trade (firm-level exports) are substantial. In general equilibrium, the model shows that firm reallocations increase the persistence of exogenous shocks. Copyright 2011, Oxford University Press.
    Review of Economic Studies 01/2011; 78(3):1135-1177.
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    ABSTRACT: The consumption literature uses adult equivalence scales to measure individual-level inequality. This practice imposes the assumption that there is no within-household inequality. In this paper, we show that ignoring consumption inequality within households produces misleading estimates of inequality along two dimensions. To illustrate this point, we use a collective model of household behaviour to estimate consumption inequality in the U.K. from 1968 to 2001. First, the use of adult equivalence scales underestimates the initial level of cross-sectional consumption inequality by 50%, as large differences in the earnings of husbands and wives translate into large differences in consumption allocations within households. Second, we estimate the rise in between-household inequality has been accompanied by an offsetting reduction in within-household inequality. Our findings also indicate that increases in marital sorting on wages and hours worked can simultaneously explain two-thirds of the decline in within household inequality and between a quarter and one-half of the rise in between-household inequality for one and two adult households.
    Review of Economic Studies 01/2011; 78:328–355.
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    ABSTRACT: I examine a model of a uniform price auction of a perfectly divisible good with private information in which the bidders submit discrete bidpoints rather than continuous downward sloping demand functions. I characterize necessary conditions for equilibrium bidding. The characterization reveals a close relationship between bidding in multiunit auctions and oligopolistic behaviour. I demonstrate that a recently proposed indirect approach to the revenue comparisons of discriminatory and uniform price auctions is not valid if bid functions have steps. In particular, bidders may bid above their marginal valuation in a uniform price auction. In order to demonstrate that discrete bidding can have important consequences for empirical analysis I use my model to examine a data set consisting of individual bids in uniform price treasury auctions of the Czech government. I propose an alternative method for evaluating the performance of the employed mechanism. My results suggest that the uniform price auction performs well, both in terms of efficiency of the allocation and in terms of revenue maximization. I estimate that the employed mechanism failed to extract at most 3 basis points in terms of the annual yield of T-bills worth of expected surplus while implementing an allocation resulting in almost all the efficient surplus. Failing to account for discreteness of bids would in my application result in overestimating the unextracted revenue by more than 50%. Copyright 2011, Oxford University Press.
    Review of Economic Studies 01/2011; 78(3):974-1014.
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    ABSTRACT: In many procurement auctions, the bidders' unobserved costs depend both on a common shock and on idiosyncratic private information. Assuming a multiplicative structure, I derive sufficient conditions under which the model is identified and propose a non-parametric estimation procedure that results in uniformly consistent estimators of the cost components' distributions. The estimation procedure is applied to data from Michigan highway procurement auctions. Private information is estimated to account for 34% of the variation in bidders' costs. It is shown that accounting for unobserved auction heterogeneity has important implications for the evaluation of the distribution of rents, efficiency, and optimal auction design. Copyright 2011, Oxford University Press.
    Review of Economic Studies 01/2011; 78(1):293-327.
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    ABSTRACT: Informational asymmetries between a firm and investors may lead to adverse selection in capital markets. This paper demonstrates that when the market obtains noisy information about a firm over time, this adverse selection problem can be costlessly solved by issuing callable convertible bonds with restrictive call provisions. Such securities can be designed to make the payoff to new claimholders independent of the private information of the manager. This eliminates the possibility of any dilution of equity or underinvestment and implements the symmetric information outcome in either a pooling or a separating equilibrium. The same first-best efficient outcome can also be implemented by issuing floating-price and mandatory convertibles. Copyright 2011, Oxford University Press.
    Review of Economic Studies 01/2011; 78(1):148-175.
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    ABSTRACT: To analyse the role that the World Trade Organization (WTO) plays in enforcing international trade agreements, this paper first explores what countries can achieve alone by characterizing optimal private trigger strategies (PTS) under which each country triggers a punishment phase by imposing an explicit tariff based on privately observed imperfect signals of the other country's concealed trade barriers. It identifies the condition under which countries can restrain the use of concealed barriers based on PTS and establishes that countries will not reduce the cooperative protection level to its minimum attainable level under the optimal PTS. This paper then considers third-party trigger strategies (TTS) under which the WTO allows each country to initiate a punishment phase based on the WTO's judgement about potential violations. By comparing the optimal PTS and optimal TTS, it demonstrates that the WTO facilitates a better cooperative equilibrium by changing the nature of punishment-triggering signals from private to public, which in turn enables countries to use a more efficient punishment, such as an asymmetric and a minimum punishment. Copyright 2011, Oxford University Press.
    Review of Economic Studies 01/2011; 78(3):1102-1134.
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    ABSTRACT: In this paper, I investigate the impact of a programme in Tel-Aviv, Israel, that terminated an existing inter-district busing integration programme and allowed students free choice among public schools. The identification is based on difference-in-differences and regression discontinuity designs that yield various alternative comparison groups drawn from untreated tangent neighbourhoods and adjacent cities. Across identification methods and comparison groups, the results consistently suggest that choice significantly reduces the drop-out rate and increases the cognitive achievements of high-school students. It also improves behavioural outcomes such as teacher-student relationships and students' social acclimation and satisfaction at school, and reduces the level of violence and classroom disruption. Copyright © 2009 The Review of Economic Studies Limited.
    Review of Economic Studies 05/2010; 77(3):1164-1191.
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    ABSTRACT: We study a novel dynamic principal--agent setting with moral hazard and adverse selection (persistent as well as repeated). In the model, an agent whose skills are his private information faces a finite sequence of tasks, one after the other. Upon arrival of each task, the agent learns its level of difficulty and then chooses whether to accept or refuse each task in turn and how much effort to exert. Although his decision to accept or refuse a task is publicly known, the agent's effort level is his private information. We characterize optimal contracts and show that the per-period utility of the agent approaches his per-period utility when his skills are publicly known, as the discount factor and the time horizon increase. Copyright 2012, Oxford University Press.
    Review of Economic Studies 02/2010; 79(1):268-306.
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    ABSTRACT: This paper studies optimal monetary policy in a model where aggregate fluctuations are driven by the private sector's uncertainty about the economy's fundamentals. Information on aggregate productivity is dispersed across agents and there are two aggregate shocks: a standard productivity shock and a "noise shock" affecting public beliefs about aggregate productivity. Neither the central bank nor individual agents can distinguish the two shocks when they are realized. Despite the lack of superior information, monetary policy can affect the economy's relative response to the two shocks. As time passes, better information on past fundamentals becomes available. The central bank can then adopt a backward-looking policy rule, based on more precise information about past shocks. By announcing its response to future information, the central bank can influence the expected real interest rate faced by forward-looking consumers with different beliefs and thus affect the equilibrium allocation. If the announced future response is sufficiently aggressive, the central bank can completely eliminate the effect of noise shocks. However, this policy is typically suboptimal, as it leads to an excessively compressed distribution of relative prices. The optimal monetary policy balances the benefits of aggregate stabilization with the costs in terms of cross-sectional efficiency. Copyright © 2009 The Review of Economic Studies Limited.
    Review of Economic Studies 01/2010; 77(1):305-338.
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    ABSTRACT: In this paper, we establish sharp bounds on the joint distribution of potential outcomes and the distribution of treatment effects in parametric switching regime models with normal mean-variance mixture errors and in the semi-parametric switching regime models of Heckman (1990). Our results for parametric switching regime models with normal mean-variance mixture errors extend some existing results for the Gaussian switching regime model and our results for semi-parametric switching regime models supplement the point identification results of Heckman (1990). Compared with the corresponding sharp bounds when selection is random, we observe that self-selection tightens the bounds on the joint distribution of the potential outcomes and the distribution of treatment effects. These bounds depend on the identified model parameters only and can be easily estimated once the identified model parameters are estimated. The important issue of inference is briefly discussed. Copyright © 2009 The Review of Economic Studies Limited.
    Review of Economic Studies 01/2010; 77(3):1002-1041.
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    ABSTRACT: The standard analysis of the efficient management of income taxes and debt assumes a benevolent government and ignores potential distortions arising from rent-seeking politicians. This paper departs from this framework by assuming that a rent-seeking politician chooses policies. If the politician chooses extractive policies, citizens throw him out of power. We analyse the efficient sustainable equilibrium. Unlike in the standard economy, temporary economic shocks generate volatile and persistent changes in taxes along the equilibrium path. This serves to optimally limit rent-seeking by the politician and to optimally generate support for the politician from the citizens. Taxes resembling those of the benevolent government are very costly since the government over-saves and resources are wasted on rents. Political distortions thus cause the complete debt market to behave as if it were incomplete. However, in contrast to an incomplete market economy, in the long run, taxes do not converge to zero, and under some conditions, they resemble taxes under a benevolent government. Copyright © 2009 The Review of Economic Studies Limited.
    Review of Economic Studies 01/2010; 77(2):806-840.
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    ABSTRACT: This paper introduces a model of preferences, in which, given beliefs about uncertain outcomes, an individual evaluates an action by a quantile of the induced distribution. The choice rule of Quantile Maximization unifies maxmin and maxmax as maximizing the lowest and the highest quantiles of beliefs distributions, respectively, and offers a family of less extreme preferences. Taking preferences over acts as a primitive, we axiomatize Quantile Maximization in a Savage setting. Our axiomatization also provides a novel derivation of subjective beliefs, which demonstrates that neither the monotonicity nor the continuity conditions assumed in the literature are essential for probabilistic sophistication. We characterize preferences of quantile maximizers towards downside risk. We discuss how the distinct properties of the model, robustness and ordinality, can be useful in studying choice behaviour for categorical variables and in economic policy design. We also offer applications to poll design and insurance problems. Copyright © 2009 The Review of Economic Studies Limited.
    Review of Economic Studies 01/2010; 77(1):339-371.

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