Annual Review of Economics

Atkinson, Anthony Barnes; Stern, Nicholas

2017 Annual Review of Economics

doi: 10.1146/annurev-economics-110216-100949

We are very sad to report that Professor Sir Tony Atkinson died on the first of January, 2017, at the age of 72. Tony Atkinson was an extraordinarily distinguished academic whose works changed our understanding of poverty, inequality, mobility, public policy, and economic growth. His publications, from his first book in 1969 to his last in 2015, showed how he approached his work throughout his career: define the issues, examine the facts, analyze what forces shaped the outcomes, and ask what we can or should do in the way of policy. His longtime friend, Professor Lord Nicholas Stern, interviewed Sir Tony about his life and work on August 17, 2016, in Oxford.

Redding, Stephen J.; Rossi-Hansberg, Esteban

2017 Annual Review of Economics

doi: 10.1146/annurev-economics-063016-103713

The observed uneven distribution of economic activity across space is influenced by variation in exogenous geographical characteristics and endogenous interactions between agents in goods and factor markets. Until the past decade, the theoretical literature on economic geography had focused on stylized settings that could not easily be taken to the data. This article reviews more recent research that has developed quantitative models of economic geography. These models are rich enough to speak to first-order features of the data, such as many heterogeneous locations and gravity equation relationships for trade and commuting. At the same time, these models are sufficiently tractable to undertake realistic counterfactual exercises to study the effect of changes in amenities, productivity, and public policy interventions such as transport infrastructure investments. We provide an extensive taxonomy of the different building blocks of these quantitative spatial models and discuss their main properties and quantification.

Cherniwchan, Jevan; Copeland, Brian R.; Taylor, M. Scott

2017 Annual Review of Economics

doi: 10.1146/annurev-economics-063016-103756

We review recent research linking international trade to the environment, with a focus on new results and methods. The review is given structure by a novel decomposition linking changes in emissions to changes in productive activity at the plant, firm, industry, and national levels. Although some new results have emerged from the application of a Melitz-style approach to trade and the environment, the full potential of this approach has not yet been realized. We discuss existing empirical and theoretical work, introduce three new hypotheses, and suggest paths for future researchers to follow.

Sorensen, Alan T.

2017 Annual Review of Economics

doi: 10.1146/annurev-economics-080614-115708

Innovations in information technology have increased the prevalence of markets with large numbers of products. Each week, for example, an average of over 800 books are published, and an average of over 1,100 iOS apps are released in Apple's App Store. This review summarizes existing research about how consumers learn about new products in such markets, focusing on mechanisms like bestseller lists and user-generated product reviews. In addition to reviewing research findings about how these mechanisms directly influence sales, this article also discusses how these mechanisms affect broader market outcomes, such as the shape of the success distribution and the likelihood that good products are discovered.

Bontemps, Christian; Magnac, Thierry

2017 Annual Review of Economics

doi: 10.1146/annurev-economics-063016-103658

For the past 10 years, the topic of set identification has been much studied in the econometric literature. Classical inference methods have been generalized to the case in which moment inequalities and equalities define a set instead of a point. We review several instances of partial identification by focusing on examples in which the underlying economic restrictions are expressed as linear moments. This setting illustrates the fact that convex analysis helps not only for characterizing the identified set but also for inference. From this perspective, we review inference methods using convex analysis or inversion of tests and detail how geometric characterizations can be useful.

Bursztyn, Leonardo; Jensen, Robert

2017 Annual Review of Economics

doi: 10.1146/annurev-economics-063016-103625

Many people care about how they are perceived by those around them. Several recent field experiments in economics have found that such social image concerns can have powerful effects on a range of behaviors. In this article, we first review this recent literature aimed at identifying social image concerns or social pressure. We then highlight and discuss two important areas that have been comparatively less well explored in this literature: understanding social pressure, including the underlying mechanisms, and whether such pressure can be shaped or influenced.

Koenker, Roger

2017 Annual Review of Economics

doi: 10.1146/annurev-economics-063016-103651

Since Quetelet's work in the nineteenth century, social science has iconified the average man, that hypothetical man without qualities who is comfortable with his head in the oven and his feet in a bucket of ice. Conventional statistical methods since Quetelet have sought to estimate the effects of policy treatments for this average man. However, such effects are often quite heterogeneous: Medical treatments may improve life expectancy but also impose serious short-term risks; reducing class sizes may improve the performance of good students but not help weaker ones, or vice versa. Quantile regression methods can help to explore these heterogeneous effects. Some recent developments in quantile regression methods are surveyed in this review.

McLaren, John

2017 Annual Review of Economics

doi: 10.1146/annurev-economics-063016-103720

Historically, the trade research field has usually ignored dynamic adjustment of workers, but a recent wave of work has developed a rich set of theoretical and empirical tools to analyze this factor. Empirical approaches have ranged from reduced-form regressions to the structural estimation of underlying parameters, which is necessary to understand welfare effects. A major distinction is that between models that do and those that do not allow for unobserved heterogeneity across workers; these models are useful for different purposes. Consistent findings across methods and countries indicate that costs of switching sectors and occupations are high and that both switching costs and option value are crucial in computing the welfare effects of globalization for workers.

Kerr, Sari Pekkala; Kerr, William; zden, alar; Parsons, Christopher

2017 Annual Review of Economics

doi: 10.1146/annurev-economics-063016-103705

This article reviews recent research regarding high-skilled migration. We adopt a data-driven perspective, bringing together and describing several ongoing research streams that range from the construction of global migration databases, to the legal codification of national policies regarding high-skilled migration, to the analysis of patent data regarding cross-border inventor movements. A common theme throughout this research is the importance of agglomeration economies for explaining high-skilled migration. We highlight some key recent findings and outline major gaps in the literature that we hope will be tackled in the near future.

Cole, Shawn A.; Xiong, Wentao

2017 Annual Review of Economics

doi: 10.1146/annurev-economics-080315-015225

This article provides a review of recent research on agricultural insurance (AI) in developing countries. Agricultural producers face a variety of significant risks; historically, only government-subsidized products have achieved widespread adoption. A recent contractual innovation, which links insurance payouts to realized weather rather than farmer indemnity, has spurred substantial research in the past decade. This review begins by describing the experience in developed economies and then turns to developing countries, covering the following topics: farmers' adoption of AI, how AI affects their decision to invest in risky assets, and the extent to which AI helps farmers smooth income and consumption. We conclude with suggestions for future research and practice related to AI in developing countries.