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In any multiperiod panel, a two-way fixed effects (TWFE) regression is numerically equivalent to a first-difference (FD) regression that pools all possible between-period gaps. Building on this observation, this paper develops numerical and causal interpretations of the TWFE coefficient. At the sample level, the TWFE coefficient is a weighted average of FD coefficients with different between-period gaps. This decomposition is useful for assessing the source of identifying variation for the TWFE coefficient. At the population level, a causal interpretation of the TWFE coefficient requires a common trends assumption for any between-period gap, and the assumption has to be conditional on changes in time-varying covariates. I propose a natural generalization of the TWFE estimator that can relax these requirements. I illustrate the practical importance of these insights by examining the TWFE estimates of the minimum wage effect on employment outcomes in the U.S. state–year panel.

Uncertainty faced by individual firms appears to be heterogeneous. In this paper, I construct a new set of empirical measures of firm-level uncertainty using data such as the IBES and Compustat. The panel data that I construct reveals persistent differences in the degree of uncertainty facing individual firms not reflected by existing measures. Consistent with existing measures, I find that the average level of uncertainty across firms is countercyclical, and that it rose sharply at the start of the Great Recession. I next develop a heterogeneous firm model in a setting wherein each firm gradually learns about its own productivity, and each occasionally experiences a shock forcing it to start learning afresh. Uncertainty is gradually resolved as firms operate longer and get better informed. When calibrated to reproduce the level and cyclicality of the cross-sectional dispersion of sales growth, I show that an uncertainty shock can explain 18 percent of the observed output volatility and 29 percent of the investment volatility in the data. ​

Identifying parents’ willingness to pay for school quality is a significant issue. To estimate the magnitude, we focus on the setting of Japanese public elementary schools, which are highly uniform in terms of school inputs and operate under a distinctive disclosure policy. Although the disclosure of test scores at the school level had been strictly prohibited in Japan, the central government implemented a reform in 2014 that allows for the publication of results by school. Employing a boundary discontinuity design close to school district boundaries combined with a difference-in-differences model before and after publication, we find heterogeneous results by market that an increase of one standard deviation in total test score leads to increased sale prices of apartments by 2.0%–2.7% but to increases in rents of only 0.4%–0.6% after publication. Our extended analysis suggests that the effects are slightly larger for math and applied content test scores than for Japanese and basic content scores.

This study reveals that the interaction between tax competition and the political overrepresentation of the rich can collectively impede redistribution in response to rising inequality. We develop a capital tax competition model between countries, each comprising two distinct classes: rich and poor. An income bias in political attention creates an overrepresentation of the rich in each country. First, we show that tax competition diminishes the political attention of the poor, amplifying the rich’s political influence. Hence, tax competition reduces capital taxation not only through conventional economic channels but also by altering political power in favor of the rich. Remarkably, from a global perspective, the attention of the poor is underprovided for their benefit. Second, rising inequality encourages the poor to pay attention to politics, thereby increasing capital taxation. However, we show that tax competition weakens this mechanism; thus, increasing inequality in tax competition is more likely to lead to reduced capital taxation than in a closed economy.

In this article, I propose a macroeconomic approach to measure cross-country cultural differences. This method is applied to explain the drastic decline in the Turkish female employment rate over a half-century. I construct a quantitative general equilibrium model of worker allocation by industry and gender. A cross-country simulation finds that Turkish families' social stigma due to female employment is 39% higher than that of families in the United States. Its magnitude is comparable to that in Egypt but is significantly higher than in Greece. I also find consistent microeconometric evidence in the European Social Survey and the Demographic and Health Survey.

What are the consequences of the preference for wealth for the accumulation of capital and for the dynamics of wealth inequality? Assuming that wealth per se is a luxury good, inequality tends to rise whenever the interest rate is larger than the economic growth rate. This induces the economy to converge towards an equilibrium with extreme wealth inequality, where the capital stock is equal to the golden rule level. Far from immiseration, this equilibrium results in high wages and in the golden rule level consumption for ordinary households. We then introduce shocks to the preference for wealth and show that progressive wealth taxation prevents wealth from being held by people with high saving rates. This permanently reduces the capital stock, which is detrimental to the welfare of future generation of workers. This also raises the interest rate, to the benefit of the property-owning upper-middle class. By contrast, a progressive consumption tax successfully and persistently redistributes welfare from the very rich to the poor.

This paper examines the factors driving the co-movement between the five international currencies (USD, EUR, CNY, GBP, and JPY) and other currencies, with a particular focus on the impact of the Brexit, the Covid-19 and the Russia-Ukraine war on international currency co-movements. Using data covering 25 countries from 2015 to 2024, the study finds a substitutive relationship between the USD and RMB. Peaks(Troughs) of the Dollar(RMB) zone are synchronous with the recent turbulent events. Each event plays a role in amplifying or dampening the impact of trade linkage on USD/EUR/RMB weights. Brexit can enhance the USD’s weight through trade linkages, while Covid-19 dampens the RMB’s weight through the same channel. In non-euro European countries, the Russia-Ukraine War has amplifying effect on EUR’s weight. Through bilateral trade relationship, the international currency’s global role as an anchor currency is significantly influenced by the crisis events in the last decade.

A pressing issue facing many advanced countries, including Japan, is finding ways to increase its fertility rates. How do family policies affect household decisions on fertility, labor supply, and welfare? To examine and compare the macroeconomic and welfare effects of expanding cash and in-kind childcare benefits, I develop a general equilibrium overlapping generations model with endogenous fertility for the Japanese economy. The model includes single and married households and assumes that married couples face two trade-offs: child quantity vs. child quality and childcare time vs. working time. Simulation results indicate that both childcare reforms lead to higher fertility rates. The demographic change offers welfare gains for all future households owing to the reduction in social security taxes. These positive effects are expected to be larger in the case of in-kind benefits, as these benefits would also increase the female labor supply. Particularly, in-kind benefits induce highly educated couples with high opportunity costs of having children to increase fertility and welfare by reducing the required time for childcare.

We examine how reviewer–applicant social ties (department and university affiliation, co-author/co-applicant relationships, research field similarity) influence reviewer evaluations, based on Japanese research grant application data (2005–2016). All relationships between social ties and scores are positively correlated, even after accounting for unobservable applicant characteristics and proposal quality. Regarding bias and information advantage effects, upward deviation from department match negatively correlates with applicants' future research outputs, implying bias. Upward deviation from research field similarity or university match positively correlates with future productivity, indicating that information advantage predicts applicants' future productivity. Information advantage through social ties is stronger for younger applicants.

This paper assesses the welfare effects of nonlinear electricity pricing in the presence of consumer misperceptions regarding the pricing schedule. Our analysis focuses on a unique electricity subsidy program in Bhutan, wherein electricity is provided free of charge up to a consumption of 100 kWh per month in rural regions. Utilizing administrative billing data from the entire population of retail customers, we observe a notable bunching of electricity consumption at 100 kWh following the introduction of the program. In order to explain this observation and deduce the welfare implications of the policy, we develop and estimate a model of electricity demand that accounts for the heterogeneous (mis)perceptions of consumers regarding the pricing schedule. By leveraging the differential behavior at the threshold and variation of the tariff schedule, we identify and estimate the types of perceived pricing schedules and underlying electricity demand. We conduct a simulation analysis to evaluate the free electricity policy, which demonstrates that the current subsidy scheme primarily benefits households with higher electricity consumption. We explore the optimal tariff schedule and its welfare and distributional implications.

This study investigates the effects of employment protection legislation (EPL) on en- trepreneurship, firm dynamics, and economic growth in a general equilibrium model that incorporates endogenous Schumpeterian growth. The model implies that more stringent EPL encourages households to accumulate more firm-specific human capital, which raises the opportunity cost to start a business. Using Japanese firm- and household-level microdata to calibrate parameter values, the quantitative exercise reveals that EPL reform aimed at its elimination could stimulate entrepreneurship in the household sector, thus boosting economic growth through more creative destruction in the firm sector. A partial equilibrium model that disregards the general equilibrium effects can overestimate or underestimate the policy effects of the EPL reform on entrepreneurship and economic growth. Policies that directly support firm entries or incumbents’ research and development investment have limited impacts on economic growth as long as stringent EPL exists.

How should monetary policy respond to supply shocks in terms of inflation and employment stabilization? We introduce labor force entry and exit in an otherwise standard model with staggered price- and wage-setting to include employment in the model. A welfare-maximizing policy features wage growth stabilization with variation in the employment gap and inflation. Under staggered price- and wage-setting, the real wage adjustments to shocks entail a welfare cost, and variation in the employment gap contributes to reducing the welfare cost. Therefore, leaning against the employment gap induces substantial welfare losses for supply shocks compared to the welfare-maximizing policy.

This study explores the perceived trade-offs between career development and family formation among university students in Japan, focusing on the impact of human capital investment on future earnings, marriage, spousal earnings, and fertility. We collected data from around 600 students from leading Japanese universities, scrutinizing expected life scenarios at the ages of 30 and 45. The results highlight a widespread belief that higher education is associated with elevated earnings and reduced fertility. Additionally, the research explores the potential effects of early marriage on long-term outcomes. The conclusions drawn from this study can assist in shaping policies and strategies for educational institutions and policymakers, taking into account individual aspirations and constraints.