The Review of Economic Studies is one of the core journals in economics. It is essential reading for economists, consistently ranking among the top five journals.

Manager pay has increased considerably since 1980, and so has inequality in manager pay. Over the same period, there has been a sharp rise in market power. We start from the premise that the role of managers is to increase firm productivity. When markets are imperfectly competitive, productivity not only helps firm grow in size, productivity also affects market power.

This paper develops the uniform asymptotic theory for local projection (LP) regression when the true lag order of the model is unknown and potentially infinite. The theory allows for varying degrees of persistence in the data, growing response horizons, and general conditionally heteroskedastic martingale-difference shocks. Based on the theory, we make two main contributions.

When employers face a trade-off between being large and paying low wages—and in this sense have monopsony power—some productive employers decide against building large business networks, forgo sales, and remain small. These decisions have adverse consequences for aggregate labor productivity.

We show that the financial sector’s asset supply elasticities are sufficient statistics summarizing its macroeconomic effects for a large class of financial frictions. These elasticities are crucial for a wide range of policy questions, ranging from the size of fiscal multipliers to the relative effectiveness of asset purchases targeting the financial sector versus tax cuts targeting households.

We study the effect of risk on how firms organize their supply chains. We use transaction-level data on U.S. manufacturing imports to construct a novel measure of input sourcing risk based on the historical volatility of ocean shipping times. Our measure isolates the unexpected component of shipping times that is induced by weather conditions along more than 331,000 maritime routes.

Linear instrumental variable estimators, such as two-stage least squares (TSLS), are commonly interpreted as estimating non-negatively weighted averages of causal effects, referred to as local average treatment effects (LATEs). We examine whether the LATE interpretation actually applies to the types of TSLS specifications that are used in practice. We show that if the specification includes covariates—which most empirical work does—then the LATE interpretation does not apply in general.