The Benjamin H. Griswold III, Class of 1933, Center for Economic Policy Studies funds policy-related research projects within Princeton’s Department of Economics. During the academic year, the Griswold Center for Economic Policy Studies (GCEPS) supports the economic policy-related research of a number of faculty members.
Alan Blinder‘s main project has been working on a lengthy scholarly tome on the history of monetary and fiscal policy, tentatively titled, A Monetary and Fiscal History of the United States, 1961-2021. The manuscript is nearly complete. His paper, “BPEA and Monetary Policy over 50 Years,” was presented at the Brookings Panel on Economic Activity conference in March 4, 2021, and is awaiting publication. His paper, “What does Jerome Powell know that William McChesney Martin didn’t—and what role did academic research play in that?” is published in a special issue of The Manchester School, August 2020. He delivered the keynote address at the National Bank of Ukraine-National Bank of Poland Research Conference in Kyiv in June 2021 (virtually), and will deliver the keynote address in September at a Bank of Finland-CEPR conference in Helsinki( also virtually).
Sylvain Chassang is an applied theorist whose recent interests include industrial organization, mechanism design, and experiment design. In work forthcoming at Econometrica, “Robust Screens for Non-Competitive Bidding in Procurement Auctions” (with Kei Kawai, Jun Nakabayashi, and Juan Ortner), Chassang and co-authors develop general tests of collusive behavior and apply them to procurement auction taking place in Japan. In ongoing work with Lucia Del Carpio, and Samuel Kapon, “Making the Most of Limited Government Capacity: Theory and Experiment,” Chassang has been studying whether data-driven divide-and-conquer strategies can be used to improve tax compliance in environments with limited government capacity. Insights from this analysis are currently being evaluated in a randomized controlled trial involving 16,000 tax payers.
William Dudley‘s recent research has focused on the lessons of the Great Financial Crisis and the Covid-19 pandemic with respect to market function, financial stability, and regulation. What changes made post GFC were effective? What lessons does the experience of the pandemic teach us about what more there is to do? Looking forward over the next two years, areas of interest include Treasury market and repo market function and US monetary policy. With respect to the US Treasury market, what should be done to mitigate the type of “dash for cash” behavior that we saw in March 2020? How can we avoid the stress we saw in the Treasury repo market in September 2019? With respect to US monetary policy, the focus will be on assessing the shift in the Federal Reserve’s long-term monetary policy framework and how that shift has been operationalized. What are the benefits of the new regime? What are the costs?
Ilyana Kuziemko‘s research focuses on economic inequality (and how it is mediated by race and gender) and redistribution. Recent work includes the effect of the Civil Rights movement on political realignment in the US South, how parenthood shapes gender norms, and how individuals form preferences over tax policy. “Unions and Inequality over the Twentieth Century: New Evidence from Survey Data” (with Henry Farber, Daniel Herbst, and Suresh Naid) examines the role of the labor movement in shaping US income distribution.
Adrien Matray‘s research explores the causes and consequences of misallocation of capital in developed and developing countries. Using French credit registry data, he established that formally independent private banks change their supply of credit to the corporate sector for the constituencies of contested political incumbents in order to improve their reelection prospects. In return, politicians grant such banks access to the profitable market for loans to local public entities among their constituencies. On developing countries (India), he showed that foreign capital liberalization reduces capital misallocation and increases aggregate productivity by roughly 6% over the period 1995-2010. The simple liberalization of access to foreign capital for Indian firms can therefore accounts for a third of the overall increase in the country productivity during the period. Matray continues to explore the effect of financial frictions in India and in particular provides an in-depth analysis of the redistributive effects across places and workers and financial liberalization. He also studies the consequences of a government intervention in Brazil that led to a sharp decrease in the number of unbanked households in poor cities. Preliminary results show a sharp increase in employment and wages for skilled workers, suggesting that limited access to banking services is an important hurdle for development and that it cannot be left to the private sector only. Follow up on this research plans to explore what frictions are preventing private banks to serve these markets initially and why government intervention was needed to initiate the “push.”
Stephen Redding‘s research interests include international trade, economic geography, and productivity growth. Recent work has been concerned with heterogeneous firms, multi-product firms, the distributional consequences of globalization, agglomeration forces, and transport infrastructure improvements. In the paper “Measuring Aggregate Price Indexes with Taste Shocks: Theory and Evidence for CES Preferences” (joint with David Weinstein and published in the Quarterly Journal of Economics 2020), we develop an approach to measuring the cost of living for CES preferences that treats demand shocks as taste shocks that are equivalent to price shocks. The paper “The Making of the Modern Metropolis: Evidence from London” (joint with Stephan Heblich and Daniel Sturm and published in the Quarterly Journal of Economics 2020) uses the revolution in transport technology from the invention of steam railways, newly-constructed spatially disaggregated data for London from 1801-1921, and a quantitative urban model to provide evidence on the role of the separation of workplace and residence in supporting dense concentrations of economic activity in metropolitan areas. Steam railways dramatically reduced travel times and permitted the first large-scale separation of workplace and residence.
Christopher Sims‘s research is on macroeconomic theory and policy, and monetary-fiscal coordination. His recent paper, “Optimal Fiscal and Monetary Policy with Distorting Taxes,” discusses government debt finance when interest rates are low. It shows that there can be a substantial fiscal cost from expanding debt, even when the rate of growth of the economy exceeds the interest rate. The cost comes through the likelihood that debt expansion will raise rates. Even if this leaves the interest rate below the growth rate, the increased interest expense can be burdensome. A second strand of his research examines the relation among aggregate private debt, spreads of risky over less risky interest rates, and economic activity. He explored this, with three co-authors, in the paper “Feedbacks: Financial Markets and Economic Activity,” which is appearing in the June 2021 issue of the American Economic Review. Disturbances originating in the financial sector are an important source of business cycle variation, but they seem to be characterized initially by rises in spreads. Credit aggregates react passively to these disturbances, rather than generating them. A current project explores whether historical US data on inflation and fiscal variables in the US can shed light on the possible consequences of current very large fiscal deficits for future inflation.
Leeat Yariv’s research focuses on political economy, market design, social and economic networks, and experimental economics. One of her recent papers, “Top of the Batch: Interviews and the Match” (with Federico Echenique, Ruy González, and Alistair Wilson), shows that decentralized interactions preceding the match—namely, interviews—may dramatically impact ultimate outcomes. Interactions outside of a matching clearinghouse may be at least as important as the matching protocol prescribed by the clearinghouse itself. The National Resident Matching Program (NRMP; or “The Match”) has matched millions of doctors to residency programs. In 2019 alone, there were over 38,000 active applicants matched to over 35,000 positions. In 2019, 47.1% of applicants were matched to their first-ranked choice, and 72.5% were matched to one of their three top-ranked choices.
Owen Zidar‘s work focuses on tax policy and inequality. One strand of his recent research uses full-population US Treasury tax return data to study the role of firms in generating inequality. Nearly half of the rise of reported income of the top 1 percent since 1980 and the decline in the aggregate labor share results from business profit growth of closely-held private firms. The prominence of these private firm-owners at the top of the income distribution motivated further exploration of the nature of top incomes and top wealth. Another strand of his recent work has focused on evaluating state and local tax policies and how they affect the location and scale of economic activity in the United States. Zidar continues working on topics related to capital taxation and state and local economic policy. In one project with Raj Chetty, John van Reenen, and Eric Zwick, Zidar is investigating the links between entrepreneurship and opportunity using U.S. Treasury data. In another project with Eric Zwick and Amy Finkelstein, Zidar is quantifying the effect of rising health costs on inequality. Additionally, Danny Yagan, Eric Zwick and Zidar have been awarded a contract with the IRS to evaluate the tax cuts and jobs act as well as prior tax reforms. Their goal is to research the efficiency and equity impacts of different proposals to try to inform policymakers about the design of the US tax system.