We compare the strategy and direct-response methods in a one-shot trust game with hidden action. In our experiment, the decision elicitation method affects neither participants' behavior nor their beliefs about this behavior. We conclude that the direct-response method does not, by itself, induce guilt aversion.JEL Classification: A13, C91, D03

The issue of climate change is often framed as one in which contemporary actions, often with affixed costs, are necessary in order to prevent even greater costs being paid during a period in the future. Under such a framework it is thus necessary to calculate the rate in which future benefits are discounted to reflect current values. In this paper we examine how individual level discount rates affect their support for a policy tool that incurs contemporary costs in an effort to prevent future environmental damages. We find that individuals with higher discount rates are significantly less likely to support the imposition of a carbon tax in comparison with individuals that have lower discount rates. Even when controlling for other individual level attributes such as party affiliation a person’s rate for discounting the future is shown to be a strong predictor of their support for a carbon tax.

From 1960From -2009, the U.S. current account balance has tended to decline during expansions and improve in recessions. We argue that trend shocks to productivity can help explain the countercyclical U.S. current account. Our framework is a two-country, two-good real business cycle (RBC) model in which cross-border asset trade is limited to an international bond. We identify trend and transitory shocks to U.S. productivity using generalized method of moments (GMM) estimation. The specification that best matches the data assigns a large role to trend shocks. The estimated model generates a countercyclical current account without excessive consumption volatility.JEL Classification: E21, E32, F32, F41

Why are aggregate equity payouts and debt issued positively correlated over the business cycle in U.S. data? Standard real business cycle (RBC) models have few predictions about capital structure, because they assume that financial markets are frictionless. On the other hand, the tradeoff theory of capital structure argues that financial frictions determine firms' optimal mix of debt and equity financing. I develop an RBC model with financial frictions and use it to explain some stylized facts about aggregate U.S. debt and equity flows. I document that debt issued and equity payouts are (i) positively correlated with output, (ii) positively correlated with investment, and (iii) positively correlated with each other. The model can account for these stylized facts. I also calibrate the model to the periods 1952 -1983 and 1984 -2007 in order to explain the finding that real variables have become less volatile in the later subperiod, while financial variables have become more volatile. By varying both the scale of technology shocks and the degree of financial frictions, the model can account for both results.JEL Classification: E32, G32, G35

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