NBER Mondays - The Latest Research Economics

NBER Mondays - The Latest Research
Unfulfilled promises: Amazon fulfillment centers do not generate broad-based employment growth
The effects of 137 minimum wage hikes, in one chart
Why the UK won't get a better trade deal with China outside the EU
Fed: On the Economics of Digital Currencies
A decade after recession, a jump in U.S. states with wage gains
Measuring Economic Freedom: Better Without Size of Government
CEPS: Income Convergence in the EU: Within-country regional patterns (PDF)
Fed: Measuring Geopolitical Risk
Fed: Screening on Loan Terms: Evidence from Maturity Choice in Consumer Credit
Fed: Declining Labor Turnover and Turbulence
Economics at its best – the story of the ‘Iowa car crop’ (credit to David Friedman via Steven Landsburg)
Bruegel: Economies of States, Economies of Cities
Australia green bond market muzzled by policy uncertainty
ECB: Time-consistent monetary policy, terms of trade manipulation and welfare in open economies (PDF)
ECB: Tight money - tight credit: coordination failure in the conduct of monetary and financial policies (PDF)

Posted: 05 Feb 2018 07:29 AM PST

Hey everyone! We're going to be starting a new weekly sticky where we post NBER's recently released research. We hope that there will be some meaningful conversation on the hottest topics in Economics.

If you are not on an approved Wifi network, you may have trouble viewing these papers. If you would like to read any of the following papers and are not able to get access, Google the title and you will likely find a copy from the author's institution.

International Capital Flow Pressures

Linda S. Goldberg, Signe Krogstrup

This paper presents a new measure of capital flow pressures in the form of a recast Exchange Market Pressure index. The measure captures pressures that materialize in actual international capital flows as well as pressures that result in exchange rate adjustments. The formulation is theory-based, relying on balance of payments equilibrium conditions and international asset portfolio considerations. Based on the modified exchange market pressure index, the paper also proposes the Global Risk Response Index, which reflects the country-specific sensitivity of capital flow pressures to measures of global risk aversion. For a large sample of countries over time, we demonstrate time variation in the effects of global risk on exchange market pressures, the evolving importance of the global factor across types of countries, and the changing risk-on or risk-off status of currencies.

How Artificial Intelligence and Machine Learning Can Impact Market Design

Paul R. Milgrom, Steven Tadelis

In complex environments, it is challenging to learn enough about the underlying characteristics of transactions so as to design the best institutions to efficiently generate gains from trade. In recent years, Artificial Intelligence has emerged as an important tool that allows market designers to uncover important market fundamentals, and to better predict fluctuations that can cause friction in markets. This paper offers some recent examples of how Artificial Intelligence helps market designers improve the operations of markets, and outlines directions in which it will continue to shape and influence market design.

Israel's Immigration Story: Winners and Losers

Assaf Razin

The exodus of Soviet Jews to Israel in the 1990s was a unique event. The immigration wave was distinctive for its large high skilled cohort, and its quick integration into the domestic labor market. Immigration also changed the entire economic landscape: it raised productivity, underpinned by the information technological surge, and had significant impact on income inequality. The extraordinary experience of Israel, which has received three quarter million migrants from the Former Soviet Union within a short time, is also relevant for the current debate about winners and losers from immigration. This paper provides a rigorous explanation for a possible link between the immigration wave and the changed level of redistribution in Israel's welfare state.

Notice failure revisited: Evidence on the use of virtual patent marking

Gaétan de Rassenfosse

One source of uncertainty in the patent system relates to the difficulty in identifying products that are protected with a patent. This paper studies the adoption by U.S. patentees of "virtual patent marking," namely the online provision of constructive notice to the public that an article is patented. It proposes a simple model of the decision to adopt patent marking and empirically examines factors that affect adoption. Data suggest that about 12 percent of patent holders overall provide virtual marking information (and perhaps about 25 percent of commercially active assignees). Econometric analysis suggests that the most discriminant factor of the adoption of virtual marking is the size of the patent portfolio. The likelihood of adoption increases with portfolio size, consistent with evidence that firms with a larger patent portfolio are more likely to be infringed.

Does E-Cigarette Advertising Encourage Adult Smokers to Quit?

Dhaval M. Dave, Daniel Dench, Michael Grossman, Donald S. Kenkel, Henry Saffer

Only recently introduced into the U.S. market, e-cigarettes have been aggressively promoted, and use is increasing rapidly among both adults and youths. At the heart of the regulatory debate are fundamental questions regarding whether e-cigarettes will draw cigarette smokers away from a dangerous habit or lure new initiates into tobacco use. We provide some of the first causal evidence on whether e-cigarette advertising on television and in magazines (which comprise about 90% of total media spending on e-cigarettes) encourage adult smokers to quit. We find that the answer to this question is a tentative yes for TV advertising but no for magazine advertising. Our results indicate that a policy to ban TV advertising of e-cigarettes would have reduced the number of smokers who quit in the recent past by approximately 3%, resulting in roughly 105,000 fewer quitters in that period. On the other hand, if the FDA were not considering regulations and mandates that would likely eliminate many e-cigarette producers during our sample period, e-cigarette ads might have reached the number of nicotine replacement therapy TV ads during that period. That would have increased the number of smokers who quit by around 10%, resulting in an additional 350,000 quitters.

The Right Type of Legislator: A Theory of Taxation and Representation

Andrea Mattozzi, Erik Snowberg

We develop a theory of taxation and the distribution of government spending in a citizen-candidate model of legislatures. Individuals are heterogeneous in two dimensions: productive ability in the private sector and negotiating ability in politics. When these are positively correlated, rich voters always prefer a rich legislator, but poor voters face a trade-off. A rich legislator will secure more pork for the district, but will also prefer lower taxation than the poor voter. Our theory organizes a number of stylized facts across countries about taxation and redistribution, parties, and class representation in legislatures. We demonstrate that spending does not necessarily increase when the number of legislators increases, as the standard common-pool intuition suggests, and that many policies aimed at increasing descriptive representation may have the opposite effect.

The Effects of Computers and Acquired Skills on Earnings, Employment and College Enrollment: Evidence from a Field Experiment and California UI Earnings Records

Robert W. Fairlie, Peter Riley Bahr

This paper provides the first evidence on the earnings, employment and college enrollment effects of computers and acquired skills from a randomized controlled trial providing computers to entering college students. We matched confidential administrative data from California Employment Development Department (EDD)/Unemployment Insurance (UI) system earnings records, the California Community College system, and the National Student Clearinghouse to all study participants for seven years after the random provision of computers. The experiment does not provide evidence that computer skills have short- or medium-run effects on earnings. These null effects are found along both the extensive and intensive margins of earnings (although the estimates are not precise). We also do not find evidence of positive or negative effects on college enrollment. A non-experimental analysis of CPS data reveals large, positive and statistically significant relationships between home computers, and earnings, employment and college enrollment, raising concerns about selection bias in non-experimental studies.

New Evidence on Cyclical Variation in Labor Costs in the U.S.

Grace Weishi Gu, Eswar Prasad

Employer-provided nonwage benefit expenditures now account for one-third of U.S. firms' labor costs. We show that a broad measure of real labor costs including such benefit expenditures has become countercyclical during 1982-2014, contrary to the conventional view that labor costs are procyclical. Using BLS establishment-job data, we find that even real wages, the main focus of prior literature, have become countercyclical. Benefit expenditures are less rigid than nominal wages, although both components of labor costs have become more rigid. These rigidities, along with the rising relative importance of aggregate demand shocks (including the financial crisis), help explain countercyclical labor costs.

Unpacking a Multi-Faceted Program to Build Sustainable Income for the Very Poor

Abhijit Banerjee, Dean Karlan, Robert Darko Osei, Hannah Trachtman, Christopher Udry

A multi-faceted program comprising a grant of productive assets, training, coaching, and savings has been found to build sustainable income for those in extreme poverty. We focus on two important questions: whether a mere grant of productive assets would generate similar impacts (it does not), and whether access to a savings account and a deposit collection service would generate similar impacts (it does not).

Human Judgment and AI Pricing

Ajay K. Agrawal, Joshua S. Gans, Avi Goldfarb

Recent artificial intelligence advances can be seen as improvements in prediction. We examine how such predictions should be priced. We model two inputs into decisions: a prediction of the state and the payoff or utility from different actions in that state. The payoff is unknown, and can only be learned through experiencing a state. It is possible to learn that there is a dominant action across all states, in which case the prediction has little value. Therefore, if predictions cannot be credibly contracted upfront, the seller cannot extract the full value, and instead charges the same price to all buyers.

Targeted Price Controls on Supermarket Products

Diego Aparicio, Alberto Cavallo

We study the impact of targeted price controls for supermarket products in Argentina from 2007 to 2015. Using web-scraping, we collected daily prices for controlled and non-controlled goods and measured the differential effects on inflation, product availability, and price dispersion. We first show that, although price controls are imposed on goods with significant CPI weight, they have a temporary effect on aggregate inflation and no downward effect on other goods. Second, contrary to common beliefs, we find that controlled goods are consistently available for sale. Third, firms compensate for price controls by introducing new product varieties at higher prices. This behavior, which increases price dispersion within narrow categories, is consistent with a standard vertical differentiation model in the presence of price controls.

Shift-Share Instruments and the Impact of Immigration

David A. Jaeger, Joakim Ruist, Jan Stuhler

A large literature exploits geographic variation in the concentration of immigrants to identify their impact on a variety of outcomes. To address the endogeneity of immigrants' location choices, the most commonly-used instrument interacts national inflows by country of origin with immigrants' past geographic distribution. We present evidence that estimates based on this "shift-share" instrument conflate the short- and long-run responses to immigration shocks. If the spatial distribution of immigrant inflows is stable over time, the instrument is likely to be correlated with ongoing responses to previous supply shocks. Estimates based on the conventional shift-share instrument are therefore unlikely to identify the short-run causal effect. We propose a "multiple instrumentation" procedure that isolates the spatial variation arising from changes in the country-of-origin composition at the national level and permits us to estimate separately the short- and long-run effects. Our results are a cautionary tale for a large body of empirical work, not just on immigration, that rely on shift-share instruments for causal inference.

Social Transmission Bias and Investor Behavior

Bing Han, David Hirshleifer, Johan Walden

We offer a new social approach to investment decision-making and asset prices. In our model, senders' propensity to discuss their strategies' returns, and receivers' propensity to be converted, are increasing in sender return. A distinctive implication is that the rate of conversion of investors to active investing is convex in sender return. Unconditionally, active strategies (high variance, skewness, and personal involvement) dominate the population unless the return penalty to active investing is too large. Thus, the model can explain overvaluation of `active' asset characteristics even when investors have no inherent preference over them. It also has strong predictions for how adoption of active strategies depends on features of the investor social network. In contrast with nonsocial approaches, sociability and other features of the sending and receiving processes are determinants of the popularity of active investing and the pricing of active strategies.

Debt Traps? Market Vendors and Moneylender Debt in India and the Philippines

Dean Karlan, Sendhil Mullainathan, Benjamin N. Roth

A debt trap occurs when someone takes on a high-interest rate loan and is barely able to pay back the interest, and thus perpetually finds themselves in debt (often by re-financing). Studying such practices is important for understanding financial decision-making of households in dire circumstances, and also for setting appropriate consumer protection policies. We conduct a simple experiment in three sites in which we paid off high-interest moneylender debt of individuals. Most borrowers returned to debt within six weeks. One to two years after intervention, treatment individuals were borrowing at the same rate as control households.

The "End of Men" and Rise of Women in the High-Skilled Labor Market

Guido Matias Cortes, Nir Jaimovich, Henry E. Siu

We document a new finding regarding changes in labor market outcomes for men and women in the US. Since 1980, conditional on being a college-educated man, the probability of working in a cognitive/high-wage occupation has fallen. This contrasts starkly with the experience for college-educated women: their probability of working in these occupations rose, despite a much larger increase in the supply of educated women relative to men. We consider these facts in light of a general neoclassical model of the labor market. One key channel capable of rationalizing these findings is a greater increase in the demand for female-oriented skills in cognitive/high-wage occupations relative to other occupations. Using occupation-level data, we find evidence that this relative increase in the demand for female skills is due to an increasing importance of social skills within such occupations. Evidence from both male and female wages is also indicative of an increase in the demand for social skills.

Quantitative Analysis of Multi-Party Tariff Negotiations

Kyle Bagwell, Robert W. Staiger, Ali Yurukoglu'

This paper develops a model of international tariff negotiations to study the design of the institutional rules of the GATT/WTO. We embed a multi-sector model of trade between multiple countries into a model of inter-connected bilateral negotiations over tariffs. Using 1990 trade flows and tariff outcomes from the Uruguay Round of GATT/WTO negotiations, we estimate country-sector productivity levels, sector-level productivity dispersion, iceberg trade costs, and country-pair bargaining parameters. We use the estimated model to simulate an alternative institutional setting for multilateral tariff negotiations in which the most-favored-nation requirement is abandoned. We find that abandonment of the most-favored-nation requirement would result in inefficient over-liberalization of tariffs and a deterioration in world-wide welfare relative to the negotiated outcomes in the presence of the most-favored-nation requirement.

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Unfulfilled promises: Amazon fulfillment centers do not generate broad-based employment growth

Posted: 05 Feb 2018 07:34 AM PST

submitted by /u/iknowitsboringreadit
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The effects of 137 minimum wage hikes, in one chart

Posted: 05 Feb 2018 12:06 PM PST

submitted by /u/kludgeocracy
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Why the UK won't get a better trade deal with China outside the EU

Posted: 05 Feb 2018 02:18 AM PST

submitted by /u/envatted_love
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Fed: On the Economics of Digital Currencies

Posted: 05 Feb 2018 07:44 AM PST