The 10 most-cited articles in American Economic Review, 2022

We present a news-based measure of adverse geopolitical events and associated risks. The geopolitical risk (GPR) index spikes around the two world wars, at the beginning of the Korean War, during the Cuban Missile Crisis, and after 9/11. Higher geopolitical risk foreshadows lower investment and employment and is associated with higher disaster probability and larger downside risks. The adverse consequences of the GPR index are driven by both the threat and the realization of adverse geopolitical events. We complement our aggregate measures with industry- and firm-level indicators of geopolitical risk. Investment drops more in industries that are exposed to aggregate geopolitical risk. Higher firm-level geopolitical risk is associated with lower firm-level investment. (JEL C43, E32, F51, F52, G31, H56, N40)

We provide quasi-experimental estimates of the impact of social media on mental health by leveraging a unique natural experiment: the staggered introduction of Facebook across US colleges. Our analysis couples data on student mental health around the years of Facebook’s expansion with a generalized difference-in-differences empirical strategy. We find that the rollout of Facebook at a college had a negative impact on student mental health. It also increased the likelihood with which students reported experiencing impairments to academic performance due to poor mental health. Additional evidence on mechanisms suggests the results are due to Facebook fostering unfavorable social comparisons. (JEL D91, I12, I23, L82)

Motivated by the effects of the COVID-19 pandemic, we present a theory of Keynesian supply shocks: shocks that reduce potential output in a sector of the economy, but that, by reducing demand in other sectors, ultimately push aggregate activity below potential. A Keynesian supply shock is more likely when the elasticity of substitution between sectors is relatively low, the intertemporal elasticity of substitution is relatively high, and markets are incomplete. Fiscal policy can display a smaller multiplier, but the insurance benefit of fiscal transfers can be enhanced. Firm exits and job destruction can amplify and propagate the shock. (JEL D52, E23, E24, E32, E62, I12, I18)

In the single-IV model, researchers commonly rely on t-ratio-based inference, even though the literature has quantified its potentially severe large-sample distortions. Building on Stock and Yogo (2005), we introduce the tF critical value function, leading to a standard error adjustment that is a smooth function of the first-stage F-statistic. For one-quarter of specifications in 61 AER papers, corrected standard errors are at least 49 and 136 percent larger than conventional 2SLS standard errors at the 5 percent and 1 percent significance levels, respectively. tF confidence intervals have shorter expected length than those of Anderson and Rubin (1949), whenever both are bounded. (JEL C13, C26)

This paper shows that racial composition shocks during the Great Migration (1940–1970) reduced the gains from growing up in the northern United States for Black families and can explain 27 percent of the region’s racial upward mobility gap today. I identify northern Black share increases by interacting pre-1940 Black migrants’ location choices with predicted southern county out-migration. Locational changes, not negative selection of families, explain lower upward mobility, with persistent segregation and increased crime and policing as plausible mechanisms. The case of the Great Migration provides a more nuanced view of moving to opportunity when destination reactions are taken into account. (JEL H75, H76, J15, J62, K42, N32, R23)

To measure labor market power in the US economy, we develop a tractable quantitative, general equilibrium, oligopsony model of the labor market.We estimate key model parameters by matching the firm-level relationship between labor market share and employment size and wage responses to state corporate tax changes.The model quantitatively replicates quasi-experimental evidence on (i) imperfect productivity-wage pass-through, (ii) strategic behavior of dominant employers, and (iii) the local labor market impact of mergers.We then measure welfare losses relative to the efficient allocation.Accounting for transition dynamics, we quantify welfare losses from labor market power relative to the efficient allocation as roughly 6 percent of lifetime consumption.An analytical decomposition attributes equal parts to dead-weight losses and misallocation.Lastly, we find that declining local concentration added 4 ppt to labor's share of income between 1977 and 2013.

This paper evaluates an intervention in India that engaged adolescent girls and boys in classroom discussions about gender equality for two years, aiming to reduce their support for societal norms that restrict women's and girls' opportunities. Using a randomized controlled trial, we find that the program made attitudes more supportive of gender equality by 0.18 standard deviations, or, equivalently, converted 16 percent of regressive attitudes. When we resurveyed study participants two years after the intervention had ended, the effects had persisted. The program also led to more gender-equal self-reported behavior, and we find weak evidence that it affected two revealed-preference measures. (JEL D63, D91, I21, J13, J16, 012)

We study supply and demand shocks in a disaggregated model with multiple sectors, multiple factors, input-output linkages, downward nominal wage rigidities, credit-constraints, and a zero lower bound. We use the model to understand how the COVID-19 crisis, an omnibus supply and demand shock, affects output, unemployment, and inflation, and leads to the coexistence of tight and slack labor markets. We show that negative sectoral supply shocks are stagflationary, whereas negative demand shocks are deflationary, even though both can cause Keynesian unemployment. Furthermore, complementarities in production amplify Keynesian spillovers from supply shocks but mitigate them for demand shocks. This means that complementarities reduce the effectiveness of aggregate demand stimulus. In a stylized quantitative model of the United States, we find supply and demand shocks each explain about one-half of the reduction in real GDP from February to May 2020. Although there was as much as 6 percent Keynesian unemployment, this was concentrated in certain markets. Hence, aggregate demand stimulus is…

Many have argued that digital technologies such as smartphones and social media are addictive. We develop an economic model of digital addiction and estimate it using a randomized experiment. Temporary incentives to reduce social media use have persistent effects, suggesting social media are habit forming. Allowing people to set limits on their future screen time substantially reduces use, suggesting self-control problems. Additional evidence suggests people are inattentive to habit formation and partially unaware of self-control problems. Looking at these facts through the lens of our model suggests that self-control problems cause 31 percent of social media use. (JEL D12, D61, D90, D91, I31, L86, O33)

This paper quantifies employer market power in US manufacturing and how it has changed over time. Using administrative data, we estimate plant-level markdowns—the ratio between a plant’s marginal revenue product of labor and its wage. We find most manufacturing plants operate in a monopsonistic environment, with an average markdown of 1.53, implying a worker earning only 65 cents on the marginal dollar generated. To investigate long-term trends for the entire sector, we propose a novel, theoretically grounded measure for the aggregate markdown. We find that it decreased between the late 1970s and the early 2000s, but has been sharply increasing since. (JEL J24, J31, J38, J42, L13, L60)