The 2026 AEJ Best Paper Awards have been announced. The papers selected are highlighted below.
Do Carbon Offsets Offset Carbon? — AEJ: Applied Economics
Raphael Calel, Jonathan Colmer, Antoine Dechezleprêtre, and Matthieu Glachant study India’s wind farms under the Clean Development Mechanism, the world’s largest carbon offset program. The program allows polluters to increase emissions by subsidizing equivalent reductions elsewhere. However, the authors find that at least 52 percent of approved offsets went to projects that would have been built regardless of the subsidy, enabling as much as 28 million additional tonnes of CO₂ emissions. Extrapolated globally, carbon offset programs may permit 6.1 billion extra tonnes of emissions—undermining their core environmental rationale. (AEJ: Applied Economics, Vol. 17, No. 1, January 2025)
Employed in a SNAP? The Impact of Work Requirements on Program Participation and Labor Supply — AEJ: Economic Policy
Colin Gray, Adam Leive, Elena Prager, Kelsey Pukelis, and Mary Zaki estimate the effects of SNAP work requirements on program participation and labor supply. Using Virginia administrative data and a sharp eligibility cutoff at age 50, they find that work requirements reduce overall SNAP participation by 53 percent, twice the estimated size of previous studies. Unlike the large effects on program participation, the authors find no statistically significant effects on employment and rule out increases exceeding 3.5 percentage points. (AEJ: Economic Policy, Vol. 15, No. 1, February 2023)
Optimal Fiscal and Monetary Policy with Distorting Taxes — AEJ: Macroeconomics
Christopher A. Sims has been posthumously awarded the best paper award for his article examining optimal fiscal and monetary policy when government debt pays a lower return than private assets and only distorting taxes are available for revenue. Sims shows that a fully committed, benevolent government optimally runs initial deficits, generates high early inflation, and increases tax rates significantly in the distant future. However, this strategy is extremely time-inconsistent, with deviations growing increasingly tempting over time. The paper helps to reconcile diverging conclusions in the literature on optimal fiscal and monetary policy. (AEJ: Macroeconomics, Vol. 17, No. 2, April 2025)
The Fake News Effect: Experimentally Identifying Motivated Reasoning Using Trust in News — AEJ: Microeconomics
Michael Thaler conducts a novel experiment to distinguish motivated reasoning—the tendency to distort information processing toward desired beliefs—from Bayesian updating, a method of optimal belief formation. Subjects assessed the credibility of news sources delivering politically charged messages about immigration, crime, and climate change. The messages were constructed so that Bayesian updaters would treat them as uninformative. Yet subjects rated politically congenial news as significantly more credible. The findings help demonstrate that motivated reasoning drives belief polarization, excess trust in misinformation, and overconfidence, particularly among partisan individuals. (AEJ: Microeconomics, Vol. 16, No. 2, May 2024)