Inflation Expectations and Misallocation of Resources: Evidence from Italy - Ropele, Tiziano; Gorodnichenko, Yuriy; Coibion, Olivier (National Bureau of Economic Research Working Paper Series, 2023)
Using Italian data that includes both inflation forecasts of firms and external information on their balance sheets, we study the causal effect of changes in the dispersion of beliefs about future inflation on the misallocation of resources. We find that as disagreement increases, so does misallocation. In times of low inflation, the aggregate TFP loss of the dispersed expectations-induced misallocation is low, but we argue that it likely becomes quite significant in times of high inflation.
Author contact info: Tiziano Ropele Bank of Italy Economic Outlook and Monetary Policy Department Via Nazione, 91 00184 Roma Italy E-Mail: tiziano.ropele@bancaditalia.it Yuriy Gorodnichenko Department of Economics 530 Evans Hall #3880 University of California, Berkeley Berkeley, CA 94720-3880 Tel: 510/643-0720 Fax: 510/642-6615 E-Mail: ygorodni@econ.berkeley.edu Olivier Coibion Department of Economics University of Texas at Austin 2225 Speedway Austin, TX 78712 E-Mail: ocoibion@gmail.com

Building the Prototype Census Environmental Impacts Frame - Voorheis, John L; Colmer, Jonathan M; Houghton, Kendall A; Lyubich, Eva; Munro, Mary; Scalera, Cameron; Withrow, Jennifer R (National Bureau of Economic Research Working Paper Series, 2023)
The natural environment is central to all aspects of life, but efforts to quantify its influence have been hindered by data availability and measurement constraints. To mitigate some of these challenges, we introduce a new prototype of a microdata infrastructure: the Census Environmental Impacts Frame (EIF). The EIF provides detailed individual-level information on demographics, economic characteristics, and address-level histories – linked to spatially and temporally resolved estimates of environmental conditions for each individual – for almost every resident in the United States over the past two decades. This linked microdata infrastructure provides a unique platform for advancing our understanding about the distribution of environmental amenities and hazards, when, how, and why exposures have evolved over time, and the consequences of environmental inequality and changing environmental conditions. We describe the construction of the EIF, explore issues of coverage and data quality, document patterns and trends in individual exposure to two correlated but distinct air pollutants as an application of the EIF, and discuss implications and opportunities for future research.
Author contact info: John L. Voorheis E-Mail: john.l.voorheis@census.gov Jonathan M. Colmer E-Mail: j.colmer@virginia.edu Kendall A. Houghton E-Mail: kendall.a.houghton@census.gov Eva Lyubich E-Mail: eva.lyubich@census.gov Mary Munro 202 Burlington Rd Bedford, MA 01730 United States Tel: 6175997615 E-Mail: mmunro@mitre.org Cameron Scalera US Census Bureau E-Mail: cameron.j.scalera@census.gov Jennifer R. Withrow US Census Bureau E-Mail: jennifer.withrow@census.gov

The Path of Student Learning Delay During the COVID-19 Pandemic: Evidence from Michigan - Strunk, Katharine O; Hopkins, Bryant G; Kilbride, Tara; Imberman, Scott A; Yu, Dongming (National Bureau of Economic Research Working Paper Series, 2023)
Educators and policymakers have been concerned that the COVID-19 pandemic has led to substantial delays in learning due to disruptions, anxiety, and remote schooling. We study student achievement patterns over the pandemic using a combination of state summative and higher frequency benchmark assessments for middle school students in Michigan. Comparing pre-pandemic to post-pandemic cohorts we find that math and ELA achievement growth dropped by 0.22, and 0.03 standard deviations more than expected, respectively, between 2019 and 2022. These drops were larger for Black, Latino, and economically disadvantaged students, as well as students in districts that were at least partially remote in 2021-22. Benchmark assessment results are consistent with summative assessments and show sharp drops in 2020-21 followed by a partial recovery and potential stall-out in 2021-22.
Author contact info: Katharine O. Strunk College of Education Michigan State University 238 Erickson Hall 620 Farm Lane East Lansing, MI 48824 E-Mail: kstrunk@msu.edu Bryant G. Hopkins Education Policy Innovation Collaborative Michigan State University 236 Erickson Hall 620 Farm Lane East Lansing, MI 48824 E-Mail: hopki213@msu.edu Tara Kilbride Education Policy Innovation Collaborative Michigan State University 236 Erickson Hall 620 Farm Lane East Lansing, MI 48824 E-Mail: kilbrid9@msu.edu Scott A. Imberman Michigan State University 486 W. Circle Drive 110 Marshall-Adams Hall East Lansing, MI 48824-1038 E-Mail: imberman@msu.edu Dongming Yu 408 W Circle Dr 110 Marshall-Adams Hall 48824 East Lansing, Mich 48824 United States E-Mail: yudongmi@msu.edu

Why Did Putin Invade Ukraine? A Theory of Degenerate Autocracy - Egorov, Georgy; Sonin, Konstantin (National Bureau of Economic Research Working Paper Series, 2023)
Many, if not most, personalistic dictatorships end up with a disastrous decision such as Hitler’s attack on the Soviet Union, Hirohito’s government launching a war against the United States, or Putin’s invasion of Ukraine in February 2022. Even if the decision is not ultimately fatal for the regime, such as Mao’s Big Leap Forward or the Pol Pot’s collectivization drive, they typically involve both a monumental miscalculation and an institutional environment in which better-informed subordinates have no chance to prevent the decision from being implemented. We offer a dynamic model of non-democratic politics, in which repression and bad decision-making are self-reinforcing. Repressions reduce the threat, yet raise the stakes for the incumbent; with higher stakes, the incumbent puts more emphasis on loyalty than competence. Our theory sheds light on the mechanism of disastrous individual decisions in highly institutionalized authoritarian regimes.
Author contact info: Georgy Egorov Kellogg School of Management Northwestern University 2211 Campus Drive Evanston, IL 60208 Tel: 847/467-2154 Fax: 847/467-1220 E-Mail: g-egorov@kellogg.northwestern.edu Konstantin Sonin Harris School of Public Policy University of Chicago 1307 E. 60th Street Chicago, IL 60637 E-Mail: ksonin@uchicago.edu

Where Do STEM Graduates Stem From? The Intergenerational Transmission of Comparative Skill Advantages - Hanushek, Eric A; Jacobs, Babs; Schwerdt, Guido; van der Velden, Rolf; Vermeulen, Stan; Wiederhold, Simon (National Bureau of Economic Research Working Paper Series, 2023)
The standard economic model of occupational choice following a basic Roy model emphasizes individual selection and comparative advantage, but the sources of comparative advantage are not well understood. We employ a unique combination of Dutch survey and registry data that links math and language skills across generations and permits analysis of the intergenerational transmission of comparative skill advantages. Exploiting within-family between-subject variation in skills, we show that comparative advantages in math of parents are significantly linked to those of their children. A causal interpretation follows from a novel IV estimation that isolates variation in parent skill advantages due to their teacher and classroom peer quality. Finally, we show the strong influence of family skill transmission on children’s choices of STEM fields.
Author contact info: Eric A. Hanushek Hoover Institution Stanford University Stanford, CA 94305-6010 Tel: 650/736-0942 Fax: 650/723-1687 E-Mail: hanushek@stanford.edu Babs Jacobs Research Centre for Education and the Labour Market (ROA) Maastricht University Maastricht Netherlands E-Mail: bpja.jacobs@maastrichtuniversity.nl Guido Schwerdt Department of Economics University of Konstanz Box 133 78457 Konstanz Germany E-Mail: guido.schwerdt@uni-konstanz.de Rolf van der Velden Research Centre for Education and the Labour Market (ROA) Maastricht University Maastricht Netherlands E-Mail: r.vandervelden@maastrichtuniversity.nl Stan Vermeulen Research Centre for Education and the Labour Market (ROA) Maastricht University Maastricht Netherlands E-Mail: c.vermeulen@maastrichtuniversity.nl Simon Wiederhold Halle Institute for Economic Research (IWH) Kleine Maerkerstrasse 8 Halle (Saale) 06108 Germany E-Mail: simon.wiederhold@iwh-halle.de

Can Deficits Finance Themselves? - Angeletos, George-Marios; Lian, Chen; Wolf, Christian K (National Bureau of Economic Research Working Paper Series, 2023)
We ask how fiscal deficits are financed in environments with two key features: (i) nominal rigidity, and (ii) a violation of Ricardian equivalence due to finite lives or liquidity constraints. In such environments, deficits can contribute to their own financing through two channels: a boom in real economic activity, which expands the tax base; and a surge in inflation, which erodes the real value of nominal government debt. Our main theoretical result establishes that this mechanism becomes more potent as fiscal adjustment is delayed, leading to full self-financing in the limit. In this scenario, the government can run a deficit today, refrain from tax hikes or spending cuts in the future, and still see its debt converge back to its initial level. We further demonstrate that a significant degree of self-financing is achievable when the theory is disciplined by empirical evidence on marginal propensities to consume, nominal rigidities, and the speed of fiscal adjustment.
Author contact info: George-Marios Angeletos Department of Economics, E52-530 MIT 77 Massachusetts Avenue Cambridge, MA 02139 Tel: 617/452-3859 Fax: 617/253-1330 E-Mail: angeletos@northwestern.edu Chen Lian Department of Economics University of California, Berkeley Evans Hall Berkeley, CA 94720 E-Mail: chen_lian@berkeley.edu Christian K. Wolf MIT Department of Economics The Morris and Sophie Chang Building 50 Memorial Drive Cambridge, MA 02139 E-Mail: ckwolf@mit.edu

A Local Projections Approach to Difference-in-Differences Event Studies - Dube, Arindrajit; Girardi, Daniele; Jordà, Òscar; Taylor, Alan M (National Bureau of Economic Research Working Paper Series, 2023)
We propose a local projection (LP) based difference-in-differences approach that subsumes many of the recent solutions proposed in the literature to address possible biases arising from negative weighting. We combine LPs with a flexible ‘clean control’ condition to define appropriate sets of treated and control units. Our proposed LP-DiD estimator can be implemented with various weighting and normalization schemes for different target estimands, accommodates controls for pre-treatment values of the outcome and of other time-varying covariates, and is simple and fast to implement. Simulations and two empirical applications demonstrate that the LP-DiD estimator performs well in common applied settings.
Author contact info: Arindrajit Dube Department of Economics University of Massachusetts Crotty Hall 412 N. Pleasant Street Amherst, MA 01002 Tel: 413/545-2012 E-Mail: adube@econs.umass.edu Daniele Girardi E-Mail: dgirardi@umass.edu Òscar Jordà Economic Research, MS 1130 Federal Reserve Bank of San Francisco San Francisco, CA 94105 E-Mail: oscar.jorda@gmail.com Alan M. Taylor Columbia University 1313 International Affairs 420 West 118th Street New York, NY 10027 E-Mail: amt2314@columbia.edu

From Carry Trades to Trade Credit: Financial Intermediation by Non-Financial Corporations - Hardy, Bryan; Saffie, Felipe (National Bureau of Economic Research Working Paper Series, 2023)
We use unique firm-level data from Mexico to document that non-financial corporations engage in carry trades by borrowing in foreign currency (FX) and lending in domestic currency, largely in the form of trade credit, accumulating currency risk in the process. We show at a quarterly frequency that the practice of borrowing in FX and extending trade credit is more prevalent when foreign currency borrowing is relatively cheaper than local currency borrowing, and it is associated with expansions in both gross trade credit and sales. Firms that were more active in carry-trades, accumulating currency risk, experienced larger reductions in investment and profits following a large depreciation event. Nevertheless, their extension of trade credit remained stable, insulating their trading partners from the shock. A firm-level panel for 20 emerging countries provide external validity for the link between carry trades and trade credit.
Author contact info: Bryan Hardy Bank for International Settlements Centralbahnplatz 2 4051 Basel Switzerland E-Mail: bryan.hardy@bis.org Felipe Saffie Darden School of Business University of Virginia 100 Darden Blvd Charlottesville, VA 22903 E-Mail: SaffieF@darden.virginia.edu

Minimum Wages and Poverty: New Evidence from Dynamic Difference-in-Differences Estimates - Burkhauser, Richard V; McNichols, Drew; Sabia, Joseph J (National Bureau of Economic Research Working Paper Series, 2023)
Advocates of minimum wage increases have long touted their potential to reduce poverty. This study assesses this claim. Using data spanning nearly four decades from the March Current Population Survey, and a dynamic difference-in-differences approach, we find that a 10 percent increase in the minimum wage is associated with a (statistically insignificant) 0.17 percent increase in the probability of longer-run poverty among all persons. With 95% confidence, we can rule out long-run poverty elasticities with respect to the minimum wage of less than -0.129, which includes central poverty elasticities reported by Dube (2019). Prior evidence suggesting large poverty-reducing effects of the minimum wage are (i) highly sensitive to researcher’s choice of macroeconomic controls, and (ii) driven by specifications that limit counterfactuals to geographically proximate states (“close controls”), which poorly match treatment states’ pre-treatment poverty trends. Moreover, an examination of the post-Great Recession era — which saw frequent, large increases in state minimum wages — failed to uncover poverty-reducing effects of the minimum wage across a wide set of specifications. Finally, we find that less than 10 percent of workers who would be affected by a newly proposed $15 federal minimum wage live in poor families.
Author contact info: Richard V. Burkhauser Cornell University Department of Policy Analysis & Management Ithaca, NY 14853-4401 E-Mail: rvb1@cornell.edu Drew McNichols 16656 Marine View Dr SW Burien, WA 98166 United States E-Mail: drewmcnichols@gmail.com Joseph J. Sabia San Diego State University Department of Economics Center for Health Economics & Policy Studies 5500 Campanile Drive San Diego, CA 92182 E-Mail: jsabia@sdsu.edu

Incorporating Theory-Consistent Endogenous Markups into Applied General-Equilibrium Models - Markusen, James R (National Bureau of Economic Research Working Paper Series, 2023)
The incorporation of increasing returns and imperfect competition into applied general-equilibrium (AGE) models, beginning with Harris (1984), led to much larger welfare effects from changes such as trade liberalization. But the imperfect competition side of these IO developments has often failed to incorporate meaningful strategic behavior, largely ruling out firm-level productivity and scale effects. I show here that the incorporation of theory-based endogenous markups into AGE models is not difficult in spite of the added simultaneity of the system. I first derive the optimal markup equations for Nash Cournot and Nash Bertrand competition in a CES environment with free entry and exit. Then I code a simple numerical model using non-linear complementarity. Three alternatives are considered: large-group monopolistic competition (LGMC), small-group Cournot (SGC) and small-group Bertrand (SGB). Growth in the economy is the experiment used to compare these specifications. While the overall effects of growth on welfare are qualitatively similar, the gains to initially small economies are much larger under either small-group assumption relative to LGMC, but diminish relative to LGMC as economies grow large. Secondly I show how the contributions of variety (entry), firm scale (productivity), and markups (distortions) to welfare changes differ substantially among the three alternatives.
Author contact info: James R. Markusen Department of Economics University of Colorado Boulder, CO 80309-0256 E-Mail: james.markusen@colorado.edu

The Secular Decrease in UK Safe Asset Market Power - Choi, Jason; Dang, Duong Q; Kirpalani, Rishabh; Perez, Diego J (National Bureau of Economic Research Working Paper Series, 2023)
We document the decline in market power of the U.K. in safe assets and quantify the resulting losses. We estimate an increasing elasticity of demand for U.K. public debt during the latter half of the 20th century. This is in sharp contrast to the U.S., which displays the opposite pattern with decreasing elasticities of demand during this time. We argue that the decline in market power of the U.K. in safe assets resulted in a sizable decline in seigniorage revenues.
Author contact info: Jason Choi 212 Max Gluskin House 150 St. George Street Toronto, Onta Canada E-Mail: jasonhj.choi@utoronto.ca Duong Q. Dang E-Mail: dqdang@wisc.edu Rishabh Kirpalani Department of Economics University of Wisconsin-Madison Madison, WI 53706 E-Mail: rishabh.kirpalani@wisc.edu Diego J. Perez Department of Economics New York University 19 West 4th Street New York, NY 10012 Tel: 650/766-5042 E-Mail: diego.perez@nyu.edu

Supply Chain Constraints and Inflation - Comin, Diego A; Johnson, Robert C; Jones, Callum J (National Bureau of Economic Research Working Paper Series, 2023)
We develop a multisector, open economy, New Keynesian framework to evaluate how potentially binding capacity constraints, and shocks to them, shape inflation. We show that binding constraints for domestic and foreign producers shift domestic and import price Phillips Curves up, similar to reduced-form markup shocks. Further, data on prices and quantities together identify whether constraints bind due to increased demand or reductions in capacity. Applying the model to interpret recent US data, we find that binding constraints explain half of the increase in inflation during 2021-2022. In particular, tight capacity served to amplify the impact of loose monetary policy in 2021, fueling the inflation takeoff.
Author contact info: Diego A. Comin Dartmouth College Economics Department 6106 Rockefeller Hall, Room 327 Hanover, NH 03755 Tel: (603) 646-2531 E-Mail: diego.comin@dartmouth.edu Robert C. Johnson University of Notre Dame Department of Economics 3060 Jenkins Nanovic Hall Notre Dame, IN 46556 Tel: 574-631-2785 E-Mail: rjohns24@nd.edu Callum J. Jones Constitution Ave NW & 20th St NW Washington, DC 20551 USA E-Mail: jonescallum@gmail.com

Mild Government Failure - Wei, Shang-Jin; Xu, Jianhuan; Yin, Ge; Zhang, Xiaobo (National Bureau of Economic Research Working Paper Series, 2023)
A relatively mild form of government failure - for example, bureaucrats can count but do not differentiate quality - can significantly affect the efficacy of industrial policy. We investigate this idea in the context of China's largest pro-innovation industrial policy using a structural model. We find that the return to the subsidy program is -19.7% (but would be 7.8% if the mild government failure can be removed). Furthermore, the welfare loss is exacerbated by patent trade.
Author contact info: Shang-Jin Wei Columbia Business School Columbia University Kravis Building Room 552 665 West 130th Street New York, New 10027 E-Mail: shangjin.wei@columbia.edu Jianhuan Xu 90 Stamford Road Singapore Management University 90 Stamford Road, Singapore Singapore, Sing 178903 Singapore Tel: 68280085 E-Mail: jhxu@smu.edu.sg Ge Yin Institute of International Economy University of International Business and Economics 10 Huixin East Street Beijing China E-Mail: yinge@uibe.edu.cn Xiaobo Zhang Guanghua School of Management Peking University and International Food Policy Research Institute 2033 K Street, NW Washington, DC 20006 Tel: 202-862-8149 Fax: 202-467-4439 E-Mail: x.zhang@gsm.pku.edu.cn

Parental and Student Time Use Around the Academic Year - Cowan, Benjamin W; Jones, Todd R; Swigert, Jeffrey M (National Bureau of Economic Research Working Paper Series, 2023)
We demonstrate how mothers, fathers, and 15–17-year-old students alter their schedules around the K-12 academic year. Using regression discontinuity (RDD) methods, combined with dates on school year start and end dates by locality, we document several notable results. First, mothers are substantially more affected by the school year than are fathers. When school is in session, mothers sleep less, spend more time caring for family members and driving them around, and spend less time on eating, free time and exercise. Fathers see changes that are generally similar in sign but smaller in magnitude compared to mothers. 15–17-year-olds naturally reduce time spent in educational pursuits when school is out (a decrease of about 5.5 hours per day on weekdays), and most of that time is substituted toward free time (an additional 2+ hours per day) and sleep (1+ hours per day). Our results provide a holistic picture of how families build their days around the K-12 school calendar and have implications for policies targeted toward women’s and teenage children’s health and well-being.
Author contact info: Benjamin W. Cowan School of Economic Sciences Washington State University 103E Hulbert Hall Pullman, WA 99164 Tel: 509/335-2184 E-Mail: ben.cowan@wsu.edu Todd R. Jones 312D McCool Hall Department of Finance and Economics Mississippi State University Mississippi State, MS 39762 United States E-Mail: trj234@msstate.edu Jeffrey M. Swigert Southern Utah University Health Education Action Lab E-Mail: jms858@cornell.edu

Traditional Institutions in Modern Times: Dowries as Pensions When Sons Migrate - Bau, Natalie; Khanna, Gaurav; Low, Corinne; Voena, Alessandra (National Bureau of Economic Research Working Paper Series, 2023)
This paper examines whether an important cultural institution in India - dowry - can enable male migration by increasing the liquidity available to young men after marriage. We hypothesize that one cost of migration is the disruption of traditional elderly support structures, where sons live near their parents and care for them in their old age. Dowry can attenuate this cost by providing sons and parents with a liquid transfer that eases constraints on income sharing. To test this hypothesis, we collect two novel datasets on property rights over dowry among migrants and among families of migrants. Net transfers of dowry to a man's parents are common but far from universal. Consistent with using dowry for income sharing, transfers occur more when sons migrate, especially when they work in higher-earning occupations. Nationally representative data confirms that migration rates are higher in areas with stronger historical dowry traditions. Finally, exploiting a large-scale highway construction program, we show that men from areas with stronger dowry traditions have a higher migration response to reduced migration costs. Despite its potentially adverse consequences, dowry may play a role in facilitating migration and therefore, economic development.
Author contact info: Natalie Bau Department of Economics University of California at Los Angeles Bunche Hall 8283 315 Portola Plaza Los Angeles, CA 90095 E-Mail: nbau@g.ucla.edu Gaurav Khanna School of Global Policy and Strategy University of California, San Diego 9500 Gilman Drive La Jolla, Cali 92093 United States Tel: 2025278521 E-Mail: gakhanna@ucsd.edu Corinne Low The Wharton School University of Pennsylvania 318 Vance Hall Philadelphia, PA 19104 Tel: 215/898-0928 E-Mail: corlow@wharton.upenn.edu Alessandra Voena Stanford University Landau Economics Building 579 Jane Stanford Way Stanford, CA 94305 Tel: 650/498-1096 E-Mail: avoena@stanford.edu

Why Do Older Scholars Slow Down? - Hamermesh, Daniel S; Kosnik, Lea-Rachel (National Bureau of Economic Research Working Paper Series, 2023)
Using data describing all “Top 5” economics journal publications from 1969-2018, we examine what determines which authors produce less as they age and which retire earlier. Sub-field has no impact on the rate of production, but interacts with it to alter retirement probabilities. A positive, tentative, and contemporary writing style increases persistence in publishing. Authors whose previous work was more heavily cited produce slightly more. Those better-cited with more top-flight publications retire later than others. Declining publication with age arises mostly from habit—there is a very significant increasing positive autocorrelation of publication across the decades of a career.
Author contact info: Daniel S. Hamermesh 333 West 57th Street, Apt. 706 New York, NY 10019 E-Mail: hamermes@eco.utexas.edu Lea-Rachel Kosnik 408 SSB Bldg - Econ Dept - UMSL 8001 Natural Bridge Road Saint Louis, MO 63121 USA Tel: 3147803725 E-Mail: kosnikl@umsl.edu

Search Theory of Imperfect Competition with Decreasing Returns to Scale - Menzio, Guido (National Bureau of Economic Research Working Paper Series, 2023)
I study a version of the search-theoretic model of imperfect competition by Burdett and Judd (1983) in which sellers face a strictly increasing rather than a constant marginal cost of production. The equilibrium exists and is unique, and its structure depends on the extent of search frictions. If search frictions are large enough, the price distribution is non-degenerate and atomless. If search frictions are neither too large nor too small, the price distribution is non-degenerate with an atom at the lowest price. If search frictions are small enough, the price distribution is degenerate. The equilibrium is efficient if and only if the price distribution is degenerate and, hence, if and only if search frictions are small enough. In contrast, in Burdett and Judd (1983), the equilibrium price distribution is always non-degenerate and atomless and the equilibrium is always efficient. As in Burdett and Judd (1983), the equilibrium goes from monopolistic to competitive as search frictions decline.
Author contact info: Guido Menzio Department of Economics New York University 19 West 4th Street, New York, NY 10012 E-Mail: gm1310@nyu.edu

Inflation Surge and Sovereign Borrowing: The Role of Policy Practices in Strengthening Sovereign Resilience - Aizenman, Joshua; Zheng, Huanhuan (National Bureau of Economic Research Working Paper Series, 2023)
Sovereign borrowing during inflation surges is a litmus test of a government’s ability to withstand and navigate macroeconomic shocks. Based on transaction-level bond issuance data, we explore how sovereign financing strategies differ between surging and stable inflations and how policy practices affect their ability to weather inflation shocks. We find that governments lean more towards external borrowing in foreign currency during periods of high inflation, in part to reduce borrowing costs. This pattern is particularly prevalent in emerging markets (EMs), especially when the inflation surge is prolonged and severe. We further show that good practices of fiscal discipline and credibly pegged exchange rate regime alleviate external borrowing in foreign currency amid inflation surges.
Author contact info: Joshua Aizenman Economics and SIR University of Southern California University Park Los Angeles, CA 90089-0043 Tel: 213-740-4066 E-Mail: aizenman@usc.edu Huanhuan Zheng Lee Kuan Yew School of Public Policy National University of Singapore Singapore E-Mail: arwenzh@gmail.com

Applications or Approvals: What Drives Racial Disparities in the Paycheck Protection Program? - Chernenko, Sergey; Kaplan, Nathan; Sarkar, Asani; Scharfstein, David S (National Bureau of Economic Research Working Paper Series, 2023)
We use the 2020 Small Business Credit Survey to study the sources of racial disparities in use of the Paycheck Protection Program (PPP). Black-owned firms are 8.9 percentage points less likely than observably similar white-owned firms to receive PPP loans. About 55% of this take-up disparity is attributable to a disparity in application propensity, while the remainder is attributable to a disparity in approval rates. The finding in prior research that Black-owned PPP recipients are less likely than white-owned recipients to borrow from banks and more likely to borrow from fintech lenders is driven entirely by application behavior. Conditional on applying for a PPP loan, Black-owned firms are 9.9 percentage points less likely than white-owned firms to apply to banks and 7.8 percentage points more likely to apply to fintechs. However, they face similar average approval disparities at banks (7.4 percentage points) and fintechs (8.4 percentage points). Sorting by Black-owned firms away from banks and towards fintechs is significantly stronger in more racially biased counties, and the bank approval disparity is also larger in more racially biased counties. We conclude that insofar as automation by fintechs reduces racial disparities in PPP take-up, it does so by mitigating disparities in loan application rates, not loan approval rates.
Author contact info: Sergey Chernenko Mitch E. Daniels, Jr. School of Business Purdue University 403 W. State Street West Lafayette, IN 47907 Tel: 7654944133 E-Mail: schernen@purdue.edu Nathan Kaplan Federal Reserve Bank of New York Research Department 33 Liberty Street New York, NY 10045 USA E-Mail: nathan.kaplan@ny.frb.org Asani Sarkar Federal Reserve Bank of New York Research Department 33 Liberty Street New York, NY 10045 Tel: 212-720-8943 E-Mail: asani.sarkar@ny.frb.org David S. Scharfstein Harvard Business School Baker Library 363 Soldiers Field Boston, MA 02163 Tel: 617/496-5067 Fax: 617/496-8443 E-Mail: dscharfstein@hbs.edu

The 2014 Russia Shock and Its Effects on Italian Firms and Banks - Federico, Stefano; Marinelli, Giuseppe; Palazzo, Francesco (National Bureau of Economic Research Working Paper Series, 2023)
We study how a demand shock in an export market propagates to the exporting country’s banking system. Using the dual shocks of sanctions and falling oil prices suffered by Russia in 2014, we investigate the effects on Italian firms and banks more exposed to the Russian market. This event implied a sharp decline in sales for firms with a significant share of sales to Russia, but it did not affect the overall amount of credit available to them. Banks relatively more exposed to Italian exporters to Russia cut their overall credit supply, especially vis-à-vis ex ante risky borrowers, but continued to provide credit towards firms moderately hit by the trade shock, in an attempt to let them cope with the liquidity shortfall. Our results suggest that banks mitigate trade shocks for certain hit firms, while at the same time propagate them to other firms not directly affected by the shock.
Author contact info: Stefano Federico Bank of Italy Via Nazionale 91 00184 Rome Italy E-Mail: Stefano.Federico@bancaditalia.it Giuseppe Marinelli Bank of Italy Via Nazionale 91 00184 Rome Italy E-Mail: giuseppe.marinelli@bancaditalia.it Francesco Palazzo Bank of Italy via Nazionale 91 00184 Rome Italy E-Mail: francesco.palazzo@bancaditalia.it

Does Monetary Policy Matter? The Narrative Approach after 35 Years - Romer, Christina D; Romer, David H (National Bureau of Economic Research Working Paper Series, 2023)
The narrative approach to macroeconomic identification uses qualitative sources, such as newspapers or government records, to provide information that can help establish causal relationships. This paper discusses the requirements for rigorous narrative analysis using fresh research on the impact of monetary policy as the focal application. We read the historical minutes and transcripts of Federal Reserve policymaking meetings to identify significant contractionary and expansionary changes in monetary policy not taken in response to current or prospective developments in real activity for the period 1946 to 2016. We find that such monetary shocks have large and significant effects on unemployment, output, and inflation in the expected directions. Analysis of available policy records suggests that a contractionary monetary shock likely occurred in 2022. Based on the empirical estimates of the effect of previous shocks, one would expect substantial negative impacts on real GDP and inflation in 2023 and 2024.
Author contact info: Christina D. Romer Department of Economics University of California, Berkeley Berkeley, CA 94720-3880 Tel: 510/642-4317 Fax: 510/642-6615 E-Mail: cromer@berkeley.edu David H. Romer Department of Economics University of California, Berkeley Berkeley, CA 94720-3880 E-Mail: dromer@berkeley.edu

Logrolling in Congress - Battaglini, Marco; Leone Sciabolazza, Valerio; Patacchini, Eleonora (National Bureau of Economic Research Working Paper Series, 2023)
We study vote trading among U.S. Congress members. By tracking roll-call votes within bills across five legislatures and politicians' personal connections made during the school years, we document a propensity of connected legislators to vote together that depends on how salient the bill is to the politicians' legislative agenda. Although this activity does not seem to enhance U.S. Congress members' legislative effectiveness, vote trading is a strong predictor of future promotions to position of leadership.
Author contact info: Marco Battaglini Department of Economics Uris Hall Cornell University Ithaca, NY 14850 Tel: 607-255-3052 E-Mail: battaglini@cornell.edu Valerio Leone Sciabolazza Department of Economics and Law Sapienza University of Rome Rome, Italy E-Mail: valerio.leonesciabolazza@uniroma1.it Eleonora Patacchini Department of Economics Cornell University 430 Uris Hall Ithaca, NY 14853 E-Mail: ep454@cornell.edu

International Diversification, Reallocation, and the Labor Share - David, Joel M; Rancière, Romain; Zeke, David (National Bureau of Economic Research Working Paper Series, 2023)
How does growing international financial diversification affect firm-level and aggregate labor shares? We study this question using a novel framework of firm labor choice in the face of aggregate risk. The theory implies a cross-section of labor risk premia and labor shares that appear as markups in firm-level data. International risk sharing leads to a reallocation of labor towards riskier/low labor share firms alongside a rise in within-firm labor shares, matching key micro-level facts. We use cross-country firm-level data to document a number of empirical patterns consistent with the theory, namely: (i) riskier firms have lower labor shares and (ii) international financial diversification is associated with a reallocation towards risky/low labor share firms. Our estimates suggest the reallocation effect has dominated the within effect in recent decades; on net, increased financial integration has reduced the corporate labor share in the US by about 2.5 percentage points, roughly one-third of the total decline since the 1970s.
Author contact info: Joel M. David Federal Reserve Bank of Chicago Economic Research 230 S. LaSalle St. Chicago, IL 60604 E-Mail: jmdavid7@gmail.com Romain Rancière Department of Economics University of Southern California Los Angeles, CA 90097 E-Mail: ranciere@usc.edu David Zeke 20th Street and Constitution Avenue N.W. Washington, DC 20551 USA E-Mail: davidzeke@gmail.com

How Far Goods Travel: Global Transport and Supply Chains from 1965-2020 - Ganapati, Sharat; Wong, Woan Foong (National Bureau of Economic Research Working Paper Series, 2023)
This paper considers the evolution of global transportation usage over the past half century and its implications for supply chains. Transportation usage per unit of real output has more than doubled as costs decreased by a third. Participation of emerging economies in world trade and longer-distance trade between countries contribute to this usage increase, thereby encouraging longer supply chains. We discuss technological advances over this period, and their interactions with endogenous responses from transportation costs and supply chain linkages. Supply chains involving more countries and longer distances are reflective of reliable and efficient transportation, but are also more exposed to disruptions, highlighting the importance of considering the interconnectedness of transportation and supply chains in policymaking and future work.
Author contact info: Sharat Ganapati Georgetown University Edward B. Bunn, S.J. Intercultural Center 37th and O Streets, NW Washington, DC 20057 Tel: 202/687-3047 E-Mail: sg1390@georgetown.edu Woan Foong Wong Economics Department 1285 University Of Oregon Eugene, OR 97403 E-Mail: wongwoanfoong@gmail.com

Do Banks Hedge Using Interest Rate Swaps? - McPhail, Lihong; Schnabl, Philipp; Tuckman, Bruce (National Bureau of Economic Research Working Paper Series, 2023)
We ask whether banks use interest rate swaps to hedge the interest rate risk of their assets, primarily loans and securities. To this end, we use regulatory data on individual swap positions for the largest 250 U.S. banks. We find that the average bank has a large notional amount of $434 billion. But after accounting for the significant extent to which swap positions offset each other, the average bank has essentially no net interest rate risk from swaps: a 100-basis-point increase in rates increases the value of its swaps by 0.1% of equity. There is variation across banks, with some bank swap positions decreasing and some increasing with rates, but aggregating swap positions at the level of the banking system reveals that most swap exposures are offsetting. Therefore, as a description of prevailing practice, we conclude that swap positions are not economically significant in hedging the interest rate risk of bank assets.
Author contact info: Lihong McPhail Commodity Futures Trading Commission 1155 21st Street, NW Washington, DC 20581 E-Mail: lmcphail@cftc.gov Philipp Schnabl Stern School of Business New York University 44 West Fourth Street New York, NY 10012 Tel: 212/998-0356 E-Mail: schnabl@stern.nyu.edu Bruce Tuckman 44 West 4th St New York NY 10012, USA E-Mail: btuckman@stern.nyu.edu

CHOICE – What Can Go Wrong? - McFadden, Daniel (National Bureau of Economic Research Working Paper Series, 2023)
The elegant economic picture of rational consumers achieving Pareto optimality through trade in decentralized self-organized markets is blurred by market imperfections and choices inconsistent with consumer self-interest. Behavioral economics has documented these errors in choice, and considered interventions that can mitigate harm to individuals from bad choices. This essay considers more broadly market distortions that arise when sellers design and market products to exploit consumer errors, and suggests market management policies to mitigate these distortions. I give examples in which consumers’ lack of attention and diligence in collecting, filtering, and processing information has an outsize effect on market outcomes. I discuss identification and estimation of a two-stage model of decision-making, with attention determined in the first stage, and choice among alternatives described in the second stage. The stages in this model are linked by unobservable factors and identified by available information specific to each. I use this model to quantify the effects of inattention in a market for health insurance.
Author contact info: Daniel L. McFadden 41 Southampton Ave Berkeley, CA 94707 United States Tel: 5103340572 E-Mail: mcfadden@econ.berkeley.edu

Collateral Advantage: Exchange Rates, Capital Flows and Global Cycles - Devereux, Michael B; Engel, Charles; Wu, Steve Pak Yeung (National Bureau of Economic Research Working Paper Series, 2023)
We construct a two-country New Keynesian model in which US government debt has an advantage as a superior collateral asset in the balance sheets of banks. The model can account for the observed response of the US dollar and US bond returns to a global downturn, in particular when the downturn is associated with a global financial crisis. In our model, the U.S. enjoys an “exorbitant privilege” as its government bonds are desired by banks both in the U.S. and abroad as superior collateral. In times of global stress, the dollar appreciates and the “convenience yield” earned by U.S. government bonds increases. There is “retrenchment” - each country reduces its holdings of foreign assets - a critical determinant of which is the endogenous response of prices and returns. In addition, the model displays a U.S. real exchange rate appreciation despite that domestic absorption in the US falls relative to the rest of the world during a global downturn, thus addressing the “reserve currency paradox” highlighted by Maggiori (2017).
Author contact info: Michael B. Devereux Department of Economics University of British Columbia 997-1873 East Mall Vancouver, BC V6T 1Z1 Tel: 604/822-2542 Fax: 604/822-5915 E-Mail: mbdevereux@gmail.com Charles Engel Department of Economics University of Wisconsin-Madison 1180 Observatory Drive Madison, WI 53706-1393 Tel: 608/262-3697 Fax: 608/262-2033 E-Mail: cengel@ssc.wisc.edu Steve P.Y. Wu Department of Economics University of California - San Diego 9500 Gilman Drive #0508 La Jolla, CA 92093-0508 United States of America E-Mail: steve.py.wu@gmail.com

Wage Inequality in American Manufacturing, 1820-1940: New Evidence - Atack, Jeremy; Margo, Robert A; Rhode, Paul (National Bureau of Economic Research Working Paper Series, 2023)
The consensus view among economic historians is that wage inequality in American manufacturing followed an inverted-U path from the early nineteenth century until just before World War Two. The previous literature, however, has been unable to fully document this path over time, or fully assess the role of explanatory factors such as changes in firm organization and technology. We provide fresh evidence that allow us to better document the inverted-U and its causes. In the first part of the paper, we use the U.S. Department of Labor’s 1899 “Hand and Machine Labor” study to argue that wage inequality within manufacturing establishments rose over the nineteenth century, primarily because of increasing division of labor In the second part, we use data for Massachusetts from state reports to construct a new time series on wage inequality among production workers, which declined from the early 1890s to the late 1930s, mainly because of compression in the left tail of the distribution. Analysis of industry panel data suggest that electrification was the main factor behind the compression.
Author contact info: Jeremy Atack 6504 Hidden Hollow Trail Brentwood, TN 37027 United States Tel: 6159693366 E-Mail: jeremy.atack@vanderbilt.edu Robert A. Margo Department of Economics Boston University 270 Bay State Road Boston, MA 02215 Tel: 617/353-6819 Fax: 617/343-8495 E-Mail: margora@bu.edu Paul Rhode Economics Department University of Michigan 205 Lorch Hall 611 Tappan St. Ann Arbor, MI 48109-1220 Tel: 734/647-5603 Fax: 734/764-2769 E-Mail: pwrhode@umich.edu

Intergenerational Child Mortality Impacts of Deworming: Experimental Evidence from Two Decades of the Kenya Life Panel Survey - Walker, Michael W; Huang, Alice H; Asman, Suleiman; Baird, Sarah J; Fernald, Lia; Hicks, Joan Hamory; Hoces de la Guardia, Fernando; Koiso, Satoshi; Kremer, Michael; Krupoff, Matthew N; Layvant, Michelle; Ochieng, Eric; et al. (National Bureau of Economic Research Working Paper Series, 2023)
We assess the impacts of a randomized school-based deworming intervention in Kenya on the mortality of recipients’ children using a 23-year longitudinal data set of over 6,500 original participants and their offspring. The under-5 mortality rate fell by 22% (17 deaths per 1000 live births) for children of treatment group individuals. We find that a combination of improved health, education and living standards, increased urban residence, delayed fertility, and greater use of health care in the parent generation contributed to the reduction. The results provide evidence for meaningful intergenerational benefits of child health investments.
Author contact info: Michael W. Walker University of California, Berkeley Center for Effective Global Action 251 Giannini Hall Berkeley, CA 94720 E-Mail: mwwalker@berkeley.edu Alice H. Huang University of California, Berkeley Department of Agricultural and Resource Economics Berkeley, CA 94720 E-Mail: alice_huang@berkeley.edu Suleiman Asman Innovations for Poverty Action, Kenya Nairobi Kenya E-Mail: sasman@poverty-action.org Sarah J. Baird Department of Global Health Milken Institute School of Public Health George Washington University 950 New Hampshire Ave NW 4th Floor Washington, DC 20052 E-Mail: sbaird@gwu.edu Lia Fernald School of Public Health University of California Berkeley, CA 94720 E-Mail: fernald@berkeley.edu Joan Hamory Hicks Department of Economics University of Oklahoma 308 Cate Center Drive Norman, OK 73072 E-Mail: jhamory@ou.edu Fernando Hoces de la Guardia University of California, Berkeley Center for Effective Global Action 251 Giannini Hall Berkeley, CA 94720 E-Mail: fhoces@berkeley.edu Satoshi Koiso E-Mail: satoshi.koiso@berkeley.edu Michael Kremer University of Chicago Department of Economics 1126 E. 59th St. Chicago, IL 60637 Tel: 773/702-6710 Fax: 773/702-8490 E-Mail: kremermr@uchicago.edu Matthew N. Krupoff University of California, Berkeley Center for Effective Global Action 251 Giannini Hall Berkeley, CA 94720 E-Mail: mkrupoff@berkeley.edu Michelle N. Layvant University of California, Berkeley Department of Agricultural and Resource Economics Berkeley, CA 94720 E-Mail: mlayvant@berkeley.edu Eric Ochieng Innovations for Poverty Action, Kenya Nairobi Kenya E-Mail: eochieng@poverty-action.org Pooja Suri School of Public Health University of California, Berkeley Berkeley, CA 94720 E-Mail: pooja_suri@berkeley.edu Edward Miguel Department of Economics University of California, Berkeley 530 Evans Hall #3880 Berkeley, CA 94720 Tel: 510/642-7162 Fax: 510/642-6615 E-Mail: emiguel@econ.berkeley.edu

Generative AI at Work - Brynjolfsson, Erik; Li, Danielle; Raymond, Lindsey R (National Bureau of Economic Research Working Paper Series, 2023)
New AI tools have the potential to change the way workers perform and learn, but little is known about their impacts on the job. In this paper, we study the staggered introduction of a generative AI-based conversational assistant using data from 5,179 customer support agents. Access to the tool increases productivity, as measured by issues resolved per hour, by 14% on average, including a 34% improvement for novice and low-skilled workers but with minimal impact on experienced and highly skilled workers. We provide suggestive evidence that the AI model disseminates the best practices of more able workers and helps newer workers move down the experience curve. In addition, we find that AI assistance improves customer sentiment, increases employee retention, and may lead to worker learning. Our results suggest that access to generative AI can increase productivity, with large heterogeneity in effects across workers.
Author contact info: Erik Brynjolfsson Stanford Digital Economy Laboratory 353 Jane Stanford Way, Office 136 Stanford, CA 94305 E-Mail: erik.brynjolfsson@gmail.com Danielle Li MIT Sloan School of Management 100 Main St, E62-484 Cambridge, MA 02142 E-Mail: d_li@mit.edu Lindsey R. Raymond MIT Sloan School of Management 100 Main Street E62-489 Cambridge, MA 02142 E-Mail: lindsey.r.raymond@gmail.com

Anatomy of a Run: The Terra Luna Crash - Liu, Jiageng; Makarov, Igor; Schoar, Antoinette (National Bureau of Economic Research Working Paper Series, 2023)
Terra, the third largest cryptocurrency ecosystem after Bitcoin and Ethereum, collapsed in three days in May 2022 and wiped out $50 billion in valuation. At the center of the collapse was a run on a blockchain-based borrowing and lending protocol (Anchor) that promised high yields to its stablecoin (UST) depositors. Using detailed data from the Terra blockchain and trading data from exchanges, we show that the run on Terra was a complex phenomenon that happened across multiple chains and assets. It was unlikely due to concentrated market manipulation by a third party but instead was precipitated by growing concerns about the sustainability of the system. Once a few large holders of UST adjusted their positions on May 7th, 2022, other large traders followed. Blockchain technology allowed investors to monitor each other's actions and amplified the speed of the run. Wealthier and more sophisticated investors were the first to run and experienced much smaller losses. Poorer and less sophisticated investors ran later and had larger losses. The complexity of the system made it difficult even for insiders to understand the buildup of risk. Finally, we draw broader lessons about financial fragility in an environment where a regulatory safety net does not exist, pseudonymous transactions are publicly observable, and market participants are incentivized to monitor the financial health of the system.
Author contact info: Jiageng Liu MIT Sloan School of Management 100 Main Street, E62-680 Cambridge, MA 02142 Tel: (858) 771-6886 E-Mail: jiageng@mit.edu Igor Makarov London School of Economics Houghton Street London WC2A 2AE UK Tel: 44-0-20-7000-8265 Fax: 44-0-20-7000-8201 E-Mail: i.makarov@lse.ac.uk Antoinette Schoar MIT Sloan School of Management 100 Main Street, E62-638 Cambridge, MA 02142 Tel: 617/253-3763 Fax: 617/258-6855 E-Mail: aschoar@mit.edu

Foreign Technology Adoption as a Flying Propeller - Hu, Yunfang; Kunieda, Takuma; Nishimura, Kazuo; Wang, Ping (National Bureau of Economic Research Working Paper Series, 2023)
We construct a dynamic general equilibrium model of foreign direct investment (FDI) and foreign technology adoption, incorporating adoption barriers, international technology spillover, and relative price advantages. A higher FDI conversion efficacy, a lower adoption barrier, or a stronger international technology spillover, together with a lower relative price of FDI, can propel an economy to exhibit a flying geese paradigm escaping from a middle-income trap and catching up with the world frontier. We calibrate the model to eight representative Asian economies, including Asian Tigers and less-developed countries. Growth accounting exercises show that total factor productivity, FDI conversion efficacy, and foreign technology spillover drive Asian Tigers’ growth miracle, whereas a reduced adoption barrier and a favorable relative price of FDI are more crucial for the growth of less-developed Asian economies. The counterfactual analysis confirms that technology-embodied FDI serves as a flying propeller, explaining almost two-thirds of their economic growth.
Author contact info: Yunfang Hu Faculty of Economics Kobe University Kobe Japan E-Mail: yhu@econ.kobe-u.ac.jp Takuma Kunieda School of Economics Kwansei Gakuin University Hyogo Japan E-Mail: tkunieda@kwansei.ac.jp Kazuo Nishimura RIEB Kobe University Kobe Japan E-Mail: nishimura@rieb.kobe-u.ac.jp Ping Wang Department of Economics Washington University in St. Louis Campus Box 1208 One Brookings Drive St. Louis, MO 63130-4899 Tel: 314/935-5632 Fax: 314/935-4156 E-Mail: pingwang@wustl.edu

Covid and Cities, Thus Far - Duranton, Gilles; Handbury, Jessie (National Bureau of Economic Research Working Paper Series, 2023)
A key reason for the existence of cities are the externalities created when people cluster together in close proximity. During Covid, such interactions came with health risks and people found other ways to interact. We document how cities changed during Covid and consider how the persistence of new ways of interacting, particularly remote work, will shape the development of cities in the future. We first summarize evidence showing how residential and commercial prices and activity adjusted at different distances from dense city centers during and since the pandemic. We use a textbook monocentric city model to demonstrate that two adjustments associated with remote work—reduced commuting times and increased housing demand—generate the patterns observed in the data. We then consider how these effects might be magnified by changes in urban amenities and agglomeration forces, and what such forces might mean for the future of cities.
Author contact info: Gilles Duranton E-Mail: duranton@wharton.upenn.edu Jessie Handbury The Wharton School University of Pennsylvania 1463 Steinberg-Dietrich Hall Philadelphia, PA 19104 Tel: 215/573-7903 E-Mail: handbury@wharton.upenn.edu

Bound by Ancestors: Immigration, Credit Frictions, and Global Supply Chain Formation - Choi, Jaerim; Hyun, Jay; Park, Ziho (National Bureau of Economic Research Working Paper Series, 2023)
This paper shows that the ancestry composition shaped by century-long immigration to the US can explain the current structure of global supply chain networks. Using an instrumental variable strategy, combined with a novel dataset that links firm-to-firm global supply chain information with a US establishment database and historical migration data, we find that the co-ethnic networks formed by immigration have a positive causal impact on global supply chain relationships between foreign countries and US counties. Such a positive impact not only exists in conventional supplier-customer relationships but also extends to strategic partnerships and trade in services. Examining the causal mechanisms, we find that the positive impact is stronger for counties in which more credit-constrained firms are located and that such a stronger effect becomes even more pronounced for foreign firms located in countries with weak contract enforcement. Collectively, the results suggest that co-ethnic networks serve as social collateral to overcome credit constraints and facilitate global supply chain formation.
Author contact info: Jaerim Choi School of Economics Yonsei University 50 Yonsei-ro Seodaemun-gu Seoul Republic of Korea E-Mail: choijm@hawaii.edu Jay Hyun Department of Applied Economics HEC Montréal 3000, chemin de la Côte-Sainte-Catherine Montréal, Québ H3T 2A7 Canada Tel: +1 4388367546 E-Mail: jungsik.hyun@hec.ca Ziho Park Department of Economics National Taiwan University No. 1, Section 4, Roosevelt Rd Da’an District, Taipei City, 10617 Taiwan E-Mail: zihopark@ntu.edu.tw

“There She Is, Your Ideal” Negative Social Comparisons and Health Behaviors - Carpenter, Christopher S; Churchill, Brandyn F (National Bureau of Economic Research Working Paper Series, 2023)
We provide novel evidence on the role of negative social comparisons in population health behaviors by exploiting variation in Miss America and Miss USA beauty pageant winners. We show that there was more front-page newspaper coverage and more pageant-related internet search behavior following a home-state win. Teen girls and pageant-aged women with home-state winners were more likely to report that they were trying to lose weight, and pregnant women gained less gestational weight. We do not detect meaningful changes for teen boys, young adult men, or older women for whom social comparisons were plausibly less salient.
Author contact info: Christopher S. Carpenter Department of Economics Vanderbilt University VU Station B, Box #351819 2301 Vanderbilt Place Nashville, TN 37235 E-Mail: christopher.s.carpenter@vanderbilt.edu Brandyn F. Churchill Department of Resource Economics University of Massachusetts Amherst Stockbridge Hall 221 80 Campus Center Way Amherst, MA 01003 E-Mail: bfchurchill@umass.edu

Tracing Sustainability in the Long Run: Genuine Savings Estimates 1850 - 2018 - McLaughlin, Eoin; Ducoing, Cristián; Oxley, Les (National Bureau of Economic Research Working Paper Series, 2023)
We introduce a new database of historical Genuine Savings (GS), an indicator of sustainable development promoted by the World Bank and widely used in contemporary economic research. GS derives from the theoretical work on wealth accounting, and addresses shortcomings in conventional metrics of economic development by incorporating broader measures of saving and investment, including human capital (education), and natural resource depletion. Its value as an indicator is determined by its ability to be used to predict future well-being. This article provides consistent historical estimates of GS since 1850 for 25 countries to enhance, complement, and contextualise the work of the World Bank and others.
Author contact info: Eoin McLaughlin Department of Economics Heriot-Watt University Edinburgh United Kingdom E-Mail: E.McLaughlin@hw.ac.uk Cristián Ducoing Department of Economic History Lund University Lund Sweden E-Mail: cristian.ducoing@ekh.lu.se Les Oxley Department of Economics University of Waikato Hamilton, New Zealand E-Mail: loxley@waikato.ac.nz

FinTech Lending with LowTech Pricing - Johnson, Mark J; Ben-David, Itzhak; Lee, Jason; Yao, Vincent (National Bureau of Economic Research Working Paper Series, 2023)
FinTech lending—known for using big data and advanced technologies—promised to break away from the traditional credit scoring and pricing models. Using a comprehensive dataset of FinTech personal loans, our study shows that loan rates continue to rely heavily on conventional credit scores, including 45% higher rates for nonprime borrowers. Other known default predictors are often neglected. Within each segment (prime/nonprime) loan rates are not very responsive to default risk, resulting in realized loan-level returns decreasing with risk. The pricing distortions result in substantial transfers from nonprime to prime borrowers and from low- to high-risk borrowers within segment.
Author contact info: Mark J. Johnson Brigham Young University Department of Finance Provo, UT 84602 E-Mail: markjjohnson@byu.edu Itzhak Ben-David The Ohio State University Fisher College of Business 606A Fisher Hall Columbus, OH 43210-1144 Tel: 773-988-1353 E-Mail: ben-david.1@osu.edu Jason Lee U.S. Securities and Exchange Commission E-Mail: jason.jaehyun.lee@gmail.com Vincent Yao Georgia State University J. Mack Robinson College of Business 35 Broad Street NW Atlanta, GA 30303 E-Mail: wyao2@gsu.edu

Breaks in the Phillips Curve: Evidence from Panel Data - Smith, Simon; Timmermann, Allan; Wright, Jonathan H (National Bureau of Economic Research Working Paper Series, 2023)
We revisit time-variation in the Phillips curve, applying new Bayesian panel methods with breakpoints to US and European Union disaggregate data. Our approach allows us to accurately estimate both the number and timing of breaks in the Phillips curve. It further allows us to determine the existence of clusters of industries, cities, or countries whose Phillips curves display similar patterns of instability and to examine lead-lag patterns in how individual inflation series change. We find evidence of a marked flattening in the Phillips curves for US sectoral data and among EU countries, particularly poorer ones. Conversely, evidence of a flattening is weaker for MSA-level data and for the wage Phillips curve. US regional data and EU data point to a kink in the price Phillips curve which remains relatively steep when the economy is running hot.
Author contact info: Simon Smith E-Mail: simon.c.smith@frb.gov Allan Timmermann Department of Economics University of California La Jolla, CA 92093-0508 E-Mail: atimmermann@ucsd.edu Jonathan H. Wright Department of Economics Johns Hopkins University 3400 N. Charles Street Baltimore, MD 21218 Tel: 410/516-5728 Fax: 410/516-7600 E-Mail: wrightj@jhu.edu

Judging Nudging: Understanding the Welfare Effects of Nudges Versus Taxes - List, John A; Rodemeier, Matthias; Roy, Sutanuka; Sun, Gregory K (National Bureau of Economic Research Working Paper Series, 2023)
While behavioral non-price interventions (“nudges”) have grown from academic curiosity to a bona fide policy tool, their relative economic efficiency remains under-researched. We develop a unified framework to estimate welfare effects of both nudges and taxes, while allowing for normative ambiguity about how nudges map into utility. We showcase our approach by creating a database of more than 300 carefully hand-coded point estimates of non-price and price interventions in the markets for cigarettes, influenza vaccinations, and household energy. While nudges are effective in changing behavior in all three markets, they are not necessarily the most efficient policy. When nudges are debiasing, they are more efficient in the market for cigarettes, while taxes are more efficient in the vaccine and energy market. Interestingly, these conclusions also often hold when nudges are deceptive rather than debiasing. We identify two key factors that govern the difference in results across markets: i) an elasticity-weighted standard deviation of the behavioral bias, and ii) the magnitude of the average externality. Nudges dominate taxes whenever i) exceeds ii). Finally, we consider cases in which nudges cause direct psychic costs or benefits to consumers.
Author contact info: John A. List Department of Economics University of Chicago 1126 East 59th Chicago, IL 60637 Tel: 301/405-1288 Fax: 301/314-9091 E-Mail: jlist@uchicago.edu Matthias Rodemeier Via Roentgen 1 Milan 20136 Italy E-Mail: rodemeier.matthias@gmail.com Sutanuka Roy HW Arndt Building 25A The Australian National University Kingsley Pl Acton ACT 2601 Australia E-Mail: sutanuka.roy5@gmail.com Gregory K. Sun E-Mail: greg.s@wustl.edu

Has China’s Growth Gone From Miracle to Malady? - Prasad, Eswar S (National Bureau of Economic Research Working Paper Series, 2023)
China’s remarkable run of persistently high growth in recent decades is all the more stunning in light of the country’s low levels of financial and institutional development, state-dominated economy, and nondemocratic government. Notwithstanding the inefficient and risky growth model, the government has maneuvered the economy around various stresses without any major financial or economic crash. With a shrinking labor force and declining efficiency of investment, raising productivity growth is key to maintaining reasonable GDP growth. Unbalanced reforms, a schizophrenic approach to the role of the market versus the state, and strains in financial and property markets could result in significant volatility but a financial or economic collapse is not in the cards.
Author contact info: Eswar S. Prasad Dyson School of Applied Economics and Management Cornell University 301A Warren Hall Ithaca, NY 14853 Tel: 607/255-5687 Fax: 607/255-9984 E-Mail: eswar.prasad@cornell.edu

AGING IN STYLE: Seniority and Sentiment in Scholarly Writing - Kosnik, Lea-Rachel; Hamermesh, Daniel S (National Bureau of Economic Research Working Paper Series, 2023)
The scholarly impact of academic research matters for academic promotions, influence, relevance to public policy, and others. Focusing on writing style in top-level professional journals, we examine how it changes with age, and how stylistic differences and age affect impact. As top-level scholars age, their writing style increasingly differs from others’. The impact (measured by citations) of each contribution decreases, due to the direct effect of age and the much smaller indirect effects through style. Non-native English-speakers write in different styles from others, in ways that reduce the impact of their research. Nobel laureates’ scholarly writing evinces less certainty about the conclusions of their research than that of other highly productive scholars.
Author contact info: Lea-Rachel Kosnik 408 SSB Bldg - Econ Dept - UMSL 8001 Natural Bridge Road Saint Louis, MO 63121 USA Tel: 3147803725 E-Mail: kosnikl@umsl.edu Daniel S. Hamermesh 333 West 57th Street, Apt. 706 New York, NY 10019 E-Mail: hamermes@eco.utexas.edu

An Anatomy of Monopsony: Search Frictions, Amenities and Bargaining in Concentrated Markets - Berger, David W; Herkenhoff, Kyle F; Kostøl, Andreas R; Mongey, Simon (National Bureau of Economic Research Working Paper Series, 2023)
We contribute a theory in which three channels interact to determine the degree of monopsony power and therefore the wedge between a worker’s spot wage and her marginal product (henceforth, the wage markdown): (1) heterogeneity in worker-firm-specific preferences (nonwage amenities), (2) firm granularity, and (3) off- and on-the-job search frictions. We use Norwegian data to discipline each channel and then reproduce novel reduced-form empirical relationships between market concentration, job flows, wages and wage inequality. Our main exercise quantifies the contribution of each channel to income inequality and wage markdowns. The markdowns are 21 percent in our baseline estimation. Removing nonwage amenity dispersion narrows them by a third. Giving the next-lowest-ranked competitor a seat at the bargaining table narrows them by half. Removing search frictions narrows them by two-thirds. Each counterfactual shows decreased wage inequality and increased welfare.
Author contact info: David W. Berger Department of Economics Duke University 419 Chapel Drive Social Science Building 231 Durham, NC 27708 Tel: 919/660-1853 E-Mail: david.berger@duke.edu Kyle F. Herkenhoff University of Minnesota Department of Economics 4-101 Hanson Hall 1925 Fourth Street South Minneapolis, MN 55455 Tel: 925/360-7623 E-Mail: kfh@umn.edu Andreas R. Kostøl Department of Economics Arizona State University 501 E Orange St Tempe, AZ 85281 E-Mail: andreas.r.kostol@gmail.com Simon Mongey Federal Reserve Bank of Minneapolis 90 Hennepin Avenue Minneapolis, MN 55401 E-Mail: simonmongey@gmail.com

Should History Change The Way We Think About Populism? - de Bromhead, Alan; O'Rourke, Kevin Hjortshøj (National Bureau of Economic Research Working Paper Series, 2023)
This paper asks whether history should change the way in which economists and economic historians think about populism. We use Müller’s definition, according to which populism is ‘an exclusionary form of identity politics, which is why it poses a threat to democracy’. We make three historical arguments. First, late 19th century US Populists were not populist. Second, there is no necessary relationship between populism and anti-globalization sentiment. Third, economists have sometimes been on the wrong side of important policy debates involving opponents rightly or wrongly described as populist. History encourages us to avoid an overly simplistic view of populism and its correlates.
Author contact info: Alan de Bromhead School of Economics University College Dublin Newman Building Belfield Dublin 4 Ireland E-Mail: alan.debromhead@ucd.ie Kevin Hjortshøj O'Rourke NYU Abu Dhabi, Saadiyat Campus Social Science (A5), 1193 P.O. Box 129188 Abu Dhabi United Arab Emirates Tel: +971 2 628 7674 E-Mail: kevin.orourke@nyu.edu

Merger Guidelines for the Labor Market - Berger, David W; Hasenzagl, Thomas; Herkenhoff, Kyle F; Mongey, Simon; Posner, Eric A (National Bureau of Economic Research Working Paper Series, 2023)
While the labor market implications of mergers have historically been ignored, recent actions by the Department of Justice (DOJ) place buyer market power (i.e., monopsony) at the forefront of antitrust policy. We develop a theory of multi-plant ownership and monopsony to help guide this new policy focus. We estimate the model using U.S. Census data and demonstrate the model’s ability to replicate empirically documented paths of employment and wages following mergers. We then simulate a representative set of U.S. mergers in order to evaluate merger review thresholds. Our main exercise applies the DOJ and FTC’s product market concentration thresholds to local labor markets. Assuming mergers generate efficiency gains of 5 percent, our simulations suggest that workers are harmed, on average, under the enforcement of the more lenient 2010 merger guidelines and unharmed, on average, under enforcement of the more stringent 1982 merger guidelines. We also provide a framework for further research evaluating alternative concentration thresholds based on assumptions about the efficiency effects of mergers and the resource constraints of regulators. Finally, we provide guidance for using the Gross Downward Wage Pressure method for evaluating the impact of mergers on labor markets.
Author contact info: David W. Berger Department of Economics Duke University 419 Chapel Drive Social Science Building 231 Durham, NC 27708 Tel: 919/660-1853 E-Mail: david.berger@duke.edu Thomas Hasenzagl University of Minnesota Department of Economics 4-101 Hanson Hall 1925 Fourth Street South Minneapolis, MN 55455 USA Tel: 6122270344 E-Mail: thomas.hasenzagl@gmail.com Kyle F. Herkenhoff University of Minnesota Department of Economics 4-101 Hanson Hall 1925 Fourth Street South Minneapolis, MN 55455 Tel: 925/360-7623 E-Mail: kfh@umn.edu Simon Mongey Federal Reserve Bank of Minneapolis 90 Hennepin Avenue Minneapolis, MN 55401 E-Mail: simonmongey@gmail.com Eric A. Posner University of Chicago Law School 1111 E. 60th Street Chicago, IL 60637 E-Mail: eposner@uchicago.edu

Empirical Analyses of Selection and Welfare in Insurance Markets: A Self-Indulgent Survey - Einav, Liran; Finkelstein, Amy (National Bureau of Economic Research Working Paper Series, 2023)
This review article, which was solicited by the Geneva Risk and Insurance Review, surveys work that has been done using an empirical framework for analyzing selection in insurance markets developed by Einav, Finkelstein, and Cullen (2010). We briefly review that framework, and then describe a number of empirical applications that researchers have undertaken across an array of settings in both insurance and credit markets. We also discuss some of the useful extensions to the original framework that others have made and applied. The review is intended to be useful for scholars who may want to apply the framework in their own work on insurance, credit, or other selection markets.
Author contact info: Liran Einav Stanford University Department of Economics 579 Jane Stanford Way Stanford, CA 94305-6072 Tel: 650/723-3704 Fax: 650/725-5702 E-Mail: leinav@stanford.edu Amy Finkelstein Department of Economics, E52-442 MIT 77 Massachusetts Avenue Cambridge, MA 02139 Tel: 617/253-4149 Fax: 617/868-2742 E-Mail: afink@mit.edu

The Importance of Financial Literacy: Opening a New Field - Lusardi, Annamaria; Mitchell, Olivia S (National Bureau of Economic Research Working Paper Series, 2023)
We undertake an assessment of our two decades of research on financial literacy, building on our empirical research and theoretical work casting financial knowledge as a form of investment in human capital. We also draw on recent data to determine who is the most – and least – financially savvy in the United States, and we highlight the similarity of our results in other countries. A number of convincing studies is now available, from which we draw conclusions about the effects and consequences of financial illiteracy, and what can be done to fill these gaps. We conclude by offering our thoughts on implications for teaching, financial literacy programs, and future research.
Author contact info: Annamaria Lusardi The George Washington University School of Business 2201 G Street, NW Duques Hall, Suite 450E Washington, DC 20052 Tel: 202-994-8410 E-Mail: alusardi@stanford.edu Olivia S. Mitchell University of Pennsylvania The Wharton School 3620 Locust Walk, St 3000 SH-DH Philadelphia, PA 19104-6302 Tel: 215-898-0424 E-Mail: mitchelo@wharton.upenn.edu

Women's Colleges and Economics Major Choice: Evidence from Wellesley College Applicants - Butcher, Kristin F; McEwan, Patrick; Weerapana, Akila (National Bureau of Economic Research Working Paper Series, 2023)
Many observers argue that diversity in Economics and STEM fields is critical, not simply because of egalitarian goals, but because who is in a field may shape what is studied by it. If increasing the rate of majoring in mathematically-intensive fields among women is a worthy goal, then understanding whether women’s colleges causally affect that choice is important. Among all admitted applicants to Wellesley College, enrollees are 7.2 percentage points (94%) more likely to receive an Economics degree than non-enrollees (a plausible lower bound given negative selection into enrollment on math skills and major preferences). Overall, 3.2 percentage points—or 44% of the difference between enrollees and non-enrollees—is explained by college exposure to female instructors and students, consistent with a wider role for women’s colleges in increasing female participation in Economics.
Author contact info: Kristin F. Butcher Department of Economics Wellesley College 106 Central Street Wellesley, MA 02481 Tel: 781/283-2179 Fax: 781/283-2177 E-Mail: kbutcher@wellesley.edu Patrick McEwan Department of Economics Wellesley College 106 Central St. Wellesley, MA 02481 E-Mail: pmcewan@wellesley.edu Akila Weerapana Dept. of Economics Wellesley College Wellesley, MA 02481 E-Mail: aweerapa@wellesley.edu

Global Risk, Non-Bank Financial Intermediation, and Emerging Market Vulnerabilities - Chari, Anusha (National Bureau of Economic Research Working Paper Series, 2023)
Over the last two decades, the unprecedented increase in non-bank financial intermediation, particularly open-end mutual funds and ETFs, accounts for nearly half of the external financing flows to emerging markets exceeding cross-border lending by global banks. Evidence suggests that investment fund flows enhance risk-sharing across borders and provide emerging markets access to more diverse forms of financing. However, a growing body of evidence also indicates that investment funds are inherently more vulnerable to liquidity and redemption risks during periods of global financial market stress, increasing the volatility of capital flows to emerging markets. Benchmark-driven investments, namely passive funds, appear particularly sensitive to global risk shocks such as tightening US dollar funding conditions relative to their active fund counterparts. The procyclicality of investment fund flows to emerging markets during times of global stress poses financial stability concerns with implications for the role of macroprudential policy.
Author contact info: Anusha Chari Department of Economics, CB #3305 University of North Carolina at Chapel Hill Chapel Hill, NC 27599 Tel: 919/966-5346 E-Mail: achari@unc.edu

Investigating the Complexity of Naloxone Distribution: Which Policies Matter for Pharmacies and Potential Recipients - Smart, Rosanna; Powell, David; Pacula, Rosalie Liccardo; Peet, Evan D; Abouk, Rahi; Davis, Corey S (National Bureau of Economic Research Working Paper Series, 2023)
Despite efforts to address the opioid crisis, opioid-related overdoses remain a significant contributor to mortality. State efforts to reduce overdose deaths by removing barriers to naloxone have recently focused on pharmacy channels, but the specifics of these laws and the contexts in which they are implemented vary widely. In this paper, we use novel methods robust to heterogeneous effects across states and time-varying policy effects to estimate the effects on naloxone pharmacy distribution of two types of laws: laws authorizing non-patient-specific prescription distribution of naloxone and laws granting pharmacists prescriptive authority for naloxone. We find that both types of laws significantly increase the volume of naloxone dispensed through pharmacies. However, relative to laws authorizing non-patient-specific prescription distribution, effects are significantly larger for pharmacist prescriptive authority laws. These larger effects only partially derive from increased naloxone prescribing by pharmacists. We also estimate large, significant increases in pharmacy dispensation of naloxone prescribed by non-pharmacist prescribers, with particularly large increases among family medicine physicians, with particularly large increases among family medicine physicians. The relative benefits of pharmacist prescriptive authority laws versus non-patient-specific distribution are larger among Non-Hispanic Black individuals, suggesting an important role of these policies for reducing disparities in access to naloxone.
Author contact info: Rosanna Smart RAND Corporation 1776 Main Street Santa Monica, CA 90407 Tel: 3103930411 x7792 E-Mail: rsmart@rand.org David Powell RAND Corporation 1776 Main Street P.O. Box 2138 Santa Monica, CA 90407 Tel: 617-230-1592 E-Mail: dpowell@rand.org Rosalie Liccardo Pacula Sol Price School of Public Policy and Schaeffer Center for Health Policy & Economics University of Southern California 635 Downey Way, VPD 514J Los Angeles, CA 90089 Tel: 213/821-8887 E-Mail: rmp_302@usc.edu Evan D. Peet RAND Corporation 4570 Fifth Avenue, Ste 600 Pittsburgh, PA 15213 E-Mail: epeet@rand.org Rahi Abouk William Paterson University Department of Economics, Finance, and Global Business 300 Pompton Road Wayne, NJ 07470 Tel: 4143344670 E-Mail: aboukr@wpunj.edu Corey S. Davis Network For Public Health Law 3701 Wilshire Blvd, Suite #750 Los Angeles, CA 90010 E-Mail: cdavis@networkforphl.org

Partial Outsourcing of Public Programs: Evidence on Determinants of Choice in Medicare - Cabral, Marika; Carey, Colleen; Son, Jinyeong (National Bureau of Economic Research Working Paper Series, 2023)
Many public programs let individuals choose between publicly provided benefits and a subsidized private alternative. We investigate the determinants of health insurance choice in Medicare—a setting with vast geographic variation in the share of individuals selecting the public option versus private alternative. We analyze insurance decisions among individuals who move to quantify the relative importance of individual-specific factors (such as preferences or income) and place-specific factors (such as local health insurance options) on insurance decisions. We find roughly 40% of the geographic variation in the share selecting private coverage is due to place-based factors, while the remainder is explained by individuals. Our findings highlight the importance of individual factors in these decisions and may inform discussions about the use of policy to address geographic disparities.
Author contact info: Marika Cabral Department of Economics University of Texas at Austin 2225 Speedway BRB 1.116, C3100 Austin, TX 78712 Tel: 512/475-8522 E-Mail: marika.cabral@utexas.edu Colleen Carey Department of Economics and Brooks School of Public Policy Cornell University Martha van Rensselaer Hall, Room 298 Ithaca, NY 14853 Tel: 607/255-9627 E-Mail: colleenmariecarey@gmail.com Jinyeong Son Department of Economics University of Texas at Austin 2225 Speedway BRB 1.116, C3100 Austin, TX 78712 Tel: (512) 415-9425 E-Mail: jinyeong.son@utexas.edu

The Optimal Taxation of Couples - Golosov, Mikhail; Krasikov, Ilia (National Bureau of Economic Research Working Paper Series, 2023)
We consider optimal joint nonlinear earnings taxation of couples. We use multi-dimensional mechanism design techniques to study this problem and show that the first-order approach – that restricts attention to only local incentive constraints – is valid for a broad set of primitives. Optimal taxes are characterized by the solution to a certain second-order partial differential equation. Using the Coarea Formula, we solve this equation for various conditional averages of optimal tax rates and identify key forces that determine the optimal tax rates; show how these rates depend on earnings of each spouse, correlation in spousal earnings, and redistributive objectives of the planner; compare optimal rates for primary and secondary earners; identify both the conditions under which simple tax systems are optimal and the sources of welfare gains from more sophisticated taxes when those conditions are not satisfied. Under realistic assumptions, optimal tax rates for married individuals are increasing in correlation of spousal earnings. However, they remain lower than the tax rates for single individuals, and the marginal rates for one spouse increase (decrease) in the earnings of the other if both spouses have low (high) earnings.
Author contact info: Mikhail Golosov Department of Economics University of Chicago 1126 E. 59th Street Chicago, IL 60637 Tel: 773/702-6405 E-Mail: golosov@uchicago.edu Ilia Krasikov Department of Theoretical Economics 11 Pokrovsky Blvd, S1037 Moscow 109028 Russia E-Mail: krasikovis.main@gmail.com

Projected Health Benefits and Health Care Savings from the United States National Hepatitis C Elimination Initiative - Chhatwal, Jagpreet; Aaron, Alec; Zhong, Huaiyang; Sood, Neeraj; Irvin, Risha; Alter, Harvey J; Zhuo, Yueran; Sharfstein, Joshua M; Ward, John W (National Bureau of Economic Research Working Paper Series, 2023)
The national hepatitis C elimination initiative provides an opportunity to dramatically expand access to hepatitis C virus (HCV) treatment and put the US on a path to eliminating hepatitis C. Our objective was to project the health benefits and cost savings of this initiative. A previously developed mathematical model was updated to simulate trends in HCV disease burden and cost of care in the US for the next 20 years under status quo and national hepatitis C elimination initiative. Within five years, the initiative will diagnose 92.5% of all persons with HCV and cure 89.6% of HCV infection. Over 10 years, compared with the status quo, the initiative will avert 20,000 cases of hepatocellular carcinoma, 49,100 cases of diabetes, and 25,000 cases of chronic kidney disease. The initiative will also avert 24,000 deaths adding 220,000 life years. These benefits in improved health will save $18.1 billion in direct healthcare spending, of which $13.3 billion would accrue to the federal government. Over 20 years, the health benefits would increase by more than 2-fold and cost savings by 3-fold. The cost savings would further increase if the HCV incidence rate decreases because of rapid decline in HCV prevalence. In conclusion, the national hepatitis C elimination initiative would substantially reduce HCV-related morbidity and mortality and would reduce healthcare spending at 10 years and beyond.
Author contact info: Jagpreet Chhatwal E-Mail: jagchhatwal@mgh.harvard.edu Alec Aaron E-Mail: adaaron@mgh.harvard.edu Huaiyang Zhong E-Mail: hzhong@vt.edu Neeraj Sood Schaeffer Center for Health Policy and Economics Sol Price School of Public Policy University of Southern California University Park Campus Los Angeles CA 90089 Tel: 310/393-0411 Fax: 310/260-8156 E-Mail: nsood@healthpolicy.usc.edu Risha Irvin E-Mail: rirvin1@jhmi.edu Harvey J. Alter Department of Transfusion Medicine The National Institutes of Health Bethesda, MD E-Mail: halter@cc.nih.gov Yueran Zhuo Mississippi State University College of Business E-Mail: yzhuo@business.msstate.edu Joshua Sharfstein E-Mail: joshua.sharfstein@jhu.edu John Ward Coalition for Global Hepatitis Elimination Task Force for Global Health Decatur, GA E-Mail: jward@taskforce.org

Banking on Uninsured Deposits - Drechsler, Itamar; Savov, Alexi; Schnabl, Philipp; Wang, Olivier (National Bureau of Economic Research Working Paper Series, 2023)
We model the impact of interest rates on the liquidity risk of banks. Banks hedge the interest rate risk of their assets with their deposit franchise: when rates rise the value of their assets falls, but the value of their deposit franchise rises. Yet the deposit franchise is only valuable if deposits remain in the bank. This makes the deposit franchise runnable if deposits are uninsured. We show there is no run equilibrium at low interest rates, but a run equilibrium emerges as rates rise. This is because the value of the deposit franchise rises with rates, making a run more destructive, and hence more likely. To prevent a run, the bank needs to keep the value of its uninsured deposit franchise from exceeding its equity. It can do so by shortening the duration of its assets, so that their value falls less if rates rise. However, this undoes the bank’s interest rate hedge, which can make it insolvent if rates fall. The uninsured deposit franchise therefore poses a risk management dilemma: the bank cannot simultaneously hedge its interest rate and liquidity risk exposures. We show banks can address the dilemma by buying claims with option-like payoffs to interest rates, or by raising additional capital as interest rates rise. These strategies minimize the additional capital needed to prevent a run if rates rise and avoid insolvency if rates fall.
Author contact info: Itamar Drechsler Wharton School University of Pennsylvania 3620 Locust Walk Philadelphia, PA 19104 E-Mail: idrechsl@wharton.upenn.edu Alexi Savov Stern School of Business New York University 44 West Fourth Street, Suite 9-80 New York, NY 10012 Tel: 212/998-0311 E-Mail: asavov@stern.nyu.edu Philipp Schnabl Stern School of Business New York University 44 West Fourth Street New York, NY 10012 Tel: 212/998-0356 E-Mail: schnabl@stern.nyu.edu Olivier Wang New York University Kaufman Management Center 44 West Fourth Street New York, NY 10012 E-Mail: olivier.wang@nyu.edu

Biodiversity Risk - Giglio, Stefano; Kuchler, Theresa; Stroebel, Johannes; Zeng, Xuran (National Bureau of Economic Research Working Paper Series, 2023)
We explore the effects of physical and regulatory risks related to biodiversity loss on economic activity and asset values. We first develop a news-based measure of aggregate biodiversity risk and analyze how it varies over time. We also construct and publicly release several firm-level measures of exposure to biodiversity risk, based on textual analyses of firms’ 10-K statements, a large survey of financial professionals, regulators, and academics, and the holdings of biodiversity-related funds. Exposures to biodiversity risk vary substantially across industries in a way that is economically sensible and distinct from exposures to climate risk. We find evidence that biodiversity risks already affect equity prices: returns of portfolios that are sorted on our measures of biodiversity risk exposure covary positively with innovations in aggregate biodiversity risk. However, our survey indicates that market participants do not perceive the current pricing of biodiversity risks to be adequate.
Author contact info: Stefano Giglio Yale School of Management 165 Whitney Avenue New Haven, CT 06520 Tel: 203/432-3373 E-Mail: stefano.giglio@yale.edu Theresa Kuchler Stern School of Business New York University 44 West 4th Street New York, NY 10012 E-Mail: tkuchler@stern.nyu.edu Johannes Stroebel Stern School of Business New York University 44 West 4th Street New York, NY 10012 Tel: 650/888-3441 E-Mail: johannes.stroebel@nyu.edu Xuran Zeng E-Mail: xz4183@nyu.edu

Beyond Racial Attitudes: The Role of Outside Options in the Dynamics of White Flight - Blair, Peter Q (National Bureau of Economic Research Working Paper Series, 2023)
When the fraction of minorities in a neighborhood exceeds the tipping point white flight accelerates. I develop a revealed-preference method to estimate the tipping points of 38,000 census tracts and the preferences of households for minority neighbors in the 123 Metropolitan Statistical Areas (MSA) covered by these census tracts over 40 years (1970-2010). I find that the average tipping point in an MSA initially covaries more with the racial attitudes of households than the outside options that they face but that this relationship reverses overtime. Ignoring outside options would obscure the declining role that racial attitudes play in understanding segregation.
Author contact info: Peter Q. Blair Harvard University Graduate School of Education 407 Gutman Library Cambridge, MA 02138 Tel: 617-458-6010 E-Mail: peter_blair@gse.harvard.edu

Classroom Competition, Student Effort, and Peer Effects - Rosenzweig, Mark R; Xu, Bing (National Bureau of Economic Research Working Paper Series, 2023)
This paper studies how rewards based on class rank affect student effort and performance using a game-theoretic classroom competition model and data from the resettlement of Southeast Asian refugees in the US. The paper finds that variation in the presence of strong or weak students changes the incentives and test scores of incumbent students depending on their ability group in accord with the competition model, with increases in the number of strong students lowering effort among strong and weak incumbents but raising the test scores of weak incumbents. The results suggest that competition induced by rank-based rewards within homogeneous ability groups lowers overall effort levels, while the presence of strong students directly augments the performance, but not the effort levels, of weak students despite the competition. The paper also rules out a number of alternative explanations for these school composition effects, including disruptions, teacher-initiated changes in curriculum in response to changing class composition, selective incumbent-student school exit, and endogenous responses of refugee location choices to school performance.
Author contact info: Mark Rosenzweig Department of Economics Yale University Box 208269 New Haven, CT 06520 Tel: 203/432-3588 E-Mail: mark.rosenzweig@yale.edu Bing Xu #55 Guanghuacun Street Chengdu, Sich 610074 P.R. China E-Mail: xubing@swufe.edu.cn

Supply Chain Risk: Changes in Supplier Composition and Vertical Integration - Ersahin, Nuri; Giannetti, Mariassunta; Huang, Ruidi (National Bureau of Economic Research Working Paper Series, 2023)
Using textual analysis of earnings conference calls, we quantify firms’ supply chain risk and its sources. Our proxy for supply chain risk exhibits large cross-sectional and time-series variation that aligns with reasonable priors and is unprecedently high during the Covid-19 pandemic. In addition, a firm exhibits high supply chain risk when its suppliers also do so. We find that firms that experience an increase in supply chain risk establish relationships with closer and domestic suppliers and with suppliers that are industry leaders, but also continue to work with suppliers in other continents. In addition, firms that do not face financial constraints become more likely to engage in vertical mergers and acquisitions.
Author contact info: Nuri Ersahin 308 Eppley Center East Lansing, Mich 48824 USA E-Mail: ersahin2@msu.edu Mariassunta Giannetti Department of Finance Stockholm School of Economics Box 6501 SE-113 83 Stockholm Sweden Tel: +4687369607 Fax: +46-8-316422 E-Mail: mariassunta.giannetti@hhs.se Ruidi Huang Southern Methodist University 6212 Bishop Blvd Dallas, TX 75275 Tel: 2147681132 E-Mail: ruidih@smu.edu

Consumption Segregation - Boar, Corina; Giannone, Elisa (National Bureau of Economic Research Working Paper Series, 2023)
This paper introduces consumption segregation, a new margin of residential segregation, and examines its patterns, causes, and discusses its aggregate consequences. We use new longitudinal and highly granular data to measure consumption segregation in the United States and document that it is high but relatively stable over the past 15 years, with substantial regional variation. We find that income segregation plays a more prominent role than other forms of segregation in driving consumption segregation, mainly due to the inability to smooth shocks to income. We illustrate a new mechanism through which, in the presence of social comparisons, consumption segregation can exacerbate wealth inequality.
Author contact info: Corina Boar Department of Economics New York University 19 West 4th Street New York, NY 10003 Tel: 585/775-7686 E-Mail: corina.boar@gmail.com Elisa Giannone Carrer de Ramon Trias Fargas 25-27 Barcelona, Barc 16801 Spain Tel: 697389701 E-Mail: elisa.giannone@gmail.com

Understanding the Impacts of a Natural Disaster: Evidence from the 2004 Indian Ocean Tsunami - Frankenberg, Elizabeth; Sumantri, Cecep; Thomas, Duncan (National Bureau of Economic Research Working Paper Series, 2023)
Measuring impacts of extreme events on population well-being is complicated if data are not representative of the pre-event at-risk population or a representative sample of the population is not followed post-event. The sources and nature of some important biases are documented using data from the Study of the Tsunami Aftermath and Recovery (STAR) which documents the evolution of population well-being before and after a major natural disaster, the 2004 Indian Ocean tsunami. The baseline, collected 10 months before the tsunami, is representative of the at-risk population. Respondents have been followed and re-interviewed multiple times in the fifteen years since the tsunami achieving high follow-up rates. We empirically document the importance of construct samples that represent the pre-event at-risk population, rather than an opportunistic sample of those in the vicinity of the event. Pre-event characteristics condition where and in what circumstances people live post-event. Post-event well-being is associated with post-event living conditions in the short-term, and that over time, the link weakens between short-term living arrangements and post-event well-being. Failure to follow-up all respondents, especially those who move away from the location of the event, yields biased estimates of impacts of the event.
Author contact info: Elizabeth Frankenberg University of North Carolina Chapel Hill Carolina Population Center 123 W Franklin St. Chapel Hill, NC 27599-8120 E-Mail: e.frankenberg@unc.edu Cecep Sumantri SurveyMETER E-Mail: sumantri.2002@gmail.com Duncan Thomas Department of Economics Duke University Box 90097 Durham, NC 27708 Tel: 919/660-1803 Fax: 919/684-8974 E-Mail: d.thomas@duke.edu

What Can Historically Black Colleges and Universities Teach about Improving Higher Education Outcomes for Black Students? - Price, Gregory; Viceisza, Angelino (National Bureau of Economic Research Working Paper Series, 2023)
Author contact info: Gregory Price Department of Economics and Finance University of New Orleans New Orleans., LA 70148 E-Mail: gnprice@uno.edu Angelino Viceisza Spelman CollegeAB - Historically Black colleges and universities are institutions that were established prior to 1964 with the principal mission of educating Black Americans. In this essay, we focus on two main issues. We start by examining how Black College students perform across HBCUs and non-HBCUs by looking at a relatively broad range of outcomes, including college and graduate school completion, job satisfaction, social mobility, civic engagement, and health. HBCUs punch significantly above their weight, especially considering their significant lack of resources. We then turn to the potential causes of these differences and provide a glimpse into the “secret sauce” of HBCUs. We conclude with potential implications for HBCU and non-HBCU policy.

Local and National Concentration Trends in Jobs and Sales: The Role of Structural Transformation - Autor, David; Patterson, Christina; Van Reenen, John (National Bureau of Economic Research Working Paper Series, 2023)
National industrial concentration in the U.S. has risen sharply since the early 1980s, but there remains dispute over whether local geographic concentration has followed a similar trend. Using near population data from the Economic Censuses, we confirm and extend existing evidence on national U.S. industrial concentration while providing novel evidence on local concentration. We document that the Herfindhahl index of local employment concentration, measured at the county-by-NAICS six-digit-industry cell level, fell between 1992 and 2017 even as local sales concentration rose. The divergence between national and local employment concentration trends is attributable to the structural transformation of U.S. economic activity: both sales and employment concentration rose within industry-by-county cells; but reallocation of sales and employment from relatively concentrated Manufacturing industries (e.g., steel mills) towards relatively un-concentrated Service industries (e.g. hair salons) reduced local concentration. A stronger between-sector shift in employment relative to sales drove the net fall in local employment concentration. Holding industry employment shares at their 1992 level, average local employment concentration would have risen by about 9% by 2017. Instead, it fell by 5%. Falling local employment concentration may intensify competition for recent market entrants. Simultaneously, rising within industry-by-geography concentration may weaken competition for incumbent workers who have limited sectoral mobility. To facilitate analysis, we have made data on these trends available for download.
Author contact info: David Autor Department of Economics, E52-438 Massachusetts Institute of Technology 77 Massachusetts Avenue Cambridge, MA 02139 Tel: 617/258-7698 Fax: 617/253-1330 E-Mail: dautor@mit.edu Christina Patterson Booth School of Business University of Chicago 5807 S. Woodlawn Avenue Chicago, IL 60637 E-Mail: christina.patterson@chicagobooth.edu John Van Reenen Department of Economics London School of Economics Houghton Street London, WC2A 2AE United Kingdom E-Mail: j.vanreenen@lse.ac.uk

Disinflation and the Stock Market: Third World Lessons for First World Monetary Policy - Chari, Anusha; Henry, Peter Blair (National Bureau of Economic Research Working Paper Series, 2023)
Author contact info: Anusha Chari Department of Economics, CB #3305 University of North Carolina at Chapel Hill Chapel Hill, NC 27599 Tel: 919/966-5346 E-Mail: achari@unc.edu Peter Blair Henry Stanford UniversityAB - When policymakers implement a disinflation program directed at high inflation, the real dollar value of their country’s stock market index experiences a cumulative abnormal 12-month return of 48 percent in anticipation of the event. In contrast, the average cumulative abnormal 12-month return associated with disinflations directed at moderate inflation is negative 18 percent. The 66-percentage point difference between cumulative abnormal returns, along with descriptive evidence and case studies, suggests that unlike the swift eradication of past high inflations documented by Sargent (1982), the US will not experience a quick, low-cost transition from moderate inflation to the Fed’s two-percent target.

FDI and Superstar Spillovers: Evidence from Firm-to-Firm Transactions - Amiti, Mary; Duprez, Cédric; Konings, Jozef; Van Reenen, John (National Bureau of Economic Research Working Paper Series, 2023)
Using firm-to-firm transactions, we show that starting to supply a ‘superstar’ firm (large domestic firms, exporters and multinationals) boosts productivity by 8% in the medium-run. Placebos on starting relationships with smaller firms and novel identification strategies support a causal interpretation of “superstar spillovers”. Consistent with a model of technology transfer, we find falls in markups and bigger treatment effects from technology-intensive superstars. We also show that the increase in new buyers is particularly strong within the superstar firm's network, a “dating agency” effect. This suggests an important role for raising productivity through superstars' supply chains regardless of their multinational status.
Author contact info: Mary Amiti Research Department Federal Reserve Bank of New York 33 Liberty St New York, NY 10045 E-Mail: mary.amiti@gmail.com Cédric Duprez National Bank of Belgium Boulevard de Berlaimont, 14 1000 Brussels Belgium E-Mail: cedric.duprez@nbb.be Jozef Konings Nazarbayev University Graduate School of Business Qanbanbay Batyr Ave 53 010000 Astana, Kazakhstan E-Mail: Joep.Konings@kuleuven.be John Van Reenen Department of Economics London School of Economics Houghton Street London, WC2A 2AE United Kingdom E-Mail: j.vanreenen@lse.ac.uk

Day Traders, Noise, and Cost of Immediacy - Dalvi, Manoj; Deuskar, Prachi; Glosten, Lawrence R; Jagannathan, Ravi (National Bureau of Economic Research Working Paper Series, 2023)
We identify different roles traders play using data with trader identities for all transactions in SENSEX-index stocks on the Bombay Stock Exchange from January 2005 to December 2011. Individual day traders (IDT) are identified as “noise traders”, who play an important role in the market microstructure literature. We measure the impact of their activity on market liquidity and trading of other market participants. IDT contribute 10% to volume while losing 3.2 bp (73% of the half-spread) on average on trades with others, including proprietary day traders (PDT), the primary intraday-liquidity providers, and longer-term traders. While we find some evidence that supports learning among IDT about their own ability and about how to trade, they continue to participate in the market even after losing for a long period. Instrumental variable regressions show that IDT activity reduces bid ask spread and increases intra-day volatility and total volume traded. The volume traded by PDT and the number of PDT active in the market also increase, but PDT profitability stays unchanged with increased IDT activity. This pattern is consistent with competition among PDT. Our results highlight the importance of IDT’s presence in lubricating financial markets.
Author contact info: Manoj Dalvi Long Island University 720 Northern Blvd. Brookville, NY 11548 E-Mail: manoj.dalvi@liu.edu Prachi Deuskar Indian School of Business Finance Area Office Suite # 8125, AC 8, Level 1 Gachibowli, Hyderabad – 500032 India E-Mail: prachi_deuskar@isb.edu Lawrence Glosten Columbia Business School Uris Hall, Room 422 3022 Broadway New York, NY 10027 Tel: 212-854-2476 E-Mail: lrg2@gsb.columbia.edu Ravi Jagannathan Kellogg Graduate School of Management Northwestern University 2211 Campus Drive Evanston, IL 60208 Tel: 847/491-8338 Fax: 847/491-5719 E-Mail: rjaganna@kellogg.northwestern.edu

M&A and Technological Expansion - Jin, Ginger Zhe; Leccese, Mario; Wagman, Liad (National Bureau of Economic Research Working Paper Series, 2023)
We examine how public firms listed in North American stock exchanges acquire technology companies during 2010-2020. Combining data from S&P, Refinitiv, Compustat, and CRSP, and utilizing a unique S&P taxonomy that classifies tech M&As by tech categories and business verticals, we show that 13.1% of public firms engage in any tech M&A in the S&P data, while only 6.75% of public firms make any (tech or non-tech) M&A in Refinitiv. In both datasets, the acquisitions are widespread across sectors of the economy, but tech acquirers in the S&P data are on average younger, more investment efficient, and more likely to engage in international acquisitions than general acquirers in Refinitiv. Within the S&P data, deals in each M&A-active tech category tend to be led by acquirers from a specific sector; the majority of target companies in tech M&As fall outside the acquirer’s core area of business; and firms are, in part, driven to acquire tech companies because they face increased competition in their core areas.
Author contact info: Ginger Zhe Jin University of Maryland Department of Economics College Park, MD 20742-7211 Tel: 301/405-3484 Fax: 301/405-3542 E-Mail: ginger@umd.edu Mario Leccese University of Maryland - Department of Economics Tydings Hall 7343 Preinkert Dr. College Park, MD 20742 United States E-Mail: leccese@umd.edu Liad Wagman Illinois Institute of Technology 565 W Adams, 4th Floor Chicago, IL 60661 Tel: 7739809883 E-Mail: lwagman@stuart.iit.edu

Modeling Managers As EPS Maximizers - Ben-David, Itzhak; Chinco, Alexander M (National Bureau of Economic Research Working Paper Series, 2023)
Textbook theory assumes that firm managers maximize the net present value of future cash flows. But when you ask them, the people running large public corporations say that they are maximizing something else entirely: earnings per share (EPS). Perhaps this is a mistake. No matter. We take managers at their word and show that EPS maximization provides a single unified explanation for a wide range of corporate policies such as leverage, share issuance and repurchases, M&A payment method, cash accumulation, and capital budgeting.
Author contact info: Itzhak Ben-David The Ohio State University Fisher College of Business 606A Fisher Hall Columbus, OH 43210-1144 Tel: 773-988-1353 E-Mail: ben-david.1@osu.edu Alex Chinco Zicklin School of Business Baruch College, CUNY One Bernard Baruch Way New York, NY 10010 Tel: 916-709-9934 E-Mail: AlexChinco@gmail.com

Are Inflationary Shocks Regressive? A Feasible Set Approach - Del Canto, Felipe N; Grigsby, John R; Qian, Eric; Walsh, Conor (National Bureau of Economic Research Working Paper Series, 2023)
We develop a framework to measure the welfare impact of inflationary shocks throughout the distribution. The first-order impact of a shock is summarized by the induced movements in agents' feasible sets: their budget constraint and borrowing constraints. To measure this impact, we combine estimated impulse response functions with micro-data on household consumption bundles, asset holdings and labor income for different US households. We find that inflationary oil shocks are regressive, but monetary expansions are progressive, and there is substantial heterogeneity throughout the life cycle. In both cases, the dominant channel is the effect of the shock on asset prices, not movements in goods prices or labor income.
Author contact info: Felipe Del Canto Columbia Business School 350 Kravis Hall 665 W 130th St New York, NY 10027 E-Mail: felipe.delcanto@icloud.com John R. Grigsby Department of Economics and School of Public and International Affairs Princeton University Princeton, NJ 08544 Tel: 540/319-1889 E-Mail: jg6005@princeton.edu Eric Qian Department of Economics Julis Romo Rabinowitz Building Princeton, NJ 08544 Tel: 6143256632 E-Mail: ericqian@princeton.edu Conor Walsh Columbia Business School 350 Kravis Hall 665 W 130th St New York, NY 10027 E-Mail: caw2226@columbia.edu

Merger Effects and Antitrust Enforcement: Evidence from US Consumer Packaged Goods - Bhattacharya, Vivek; Illanes, Gastón; Stillerman, David (National Bureau of Economic Research Working Paper Series, 2023)
How stringent is antitrust enforcement in the United States? We address this question by documenting the effects of completed mergers in consumer packaged goods and predicting how they would change under stricter antitrust regimes. We find that mergers raise prices by 1.5% and decrease quantities sold by 2.3%, on average. Importantly, there is substantial heterogeneity in these effects: a quarter of mergers decrease prices by at least 5.1%, while another quarter increase prices by at least 5.8%. We embed these estimates into a model of antitrust enforcement and find that agencies block mergers they expect will raise prices by more than 8–9%. Many anti-competitive mergers proceed at this threshold; pro-competitive ones are rarely blocked. Lowering the threshold reduces the probability of allowing anti-competitive mergers without a substantial increase in the probability of blocking pro-competitive ones. The cost is that the number of cases the agencies must challenge could increase drastically.
Author contact info: Vivek Bhattacharya Department of Economics Northwestern University 2211 Campus Drive Evanston, IL 60208 Tel: 847/491-8213 E-Mail: vivek.bhattacharya@northwestern.edu Gastón Illanes Department of Economics Northwestern University Kellogg Global Hub, Room 3421 2211 Campus Drive Evanston, IL 60208 Tel: 847/491-8227 E-Mail: gaston.illanes@northwestern.edu David Stillerman Kogod School of Business American University 4400 Massachusetts Avenue NW Washington, DC 20016 E-Mail: stillerman@american.edu

Large Language Models as Simulated Economic Agents: What Can We Learn from Homo Silicus? - Horton, John J (National Bureau of Economic Research Working Paper Series, 2023)
Newly-developed large language models (LLM)—because of how they are trained and designed—are implicit computational models of humans—a homo silicus. LLMs can be used like economists use homo economicus: they can be given endowments, information, preferences, and so on, and then their behavior can be explored in scenarios via simulation. Experiments using this approach, derived from Charness and Rabin (2002), Kahneman, Knetsch and Thaler (1986), and Samuelson and Zeckhauser (1988) show qualitatively similar results to the original, but it is also easy to try variations for fresh insights. LLMs could allow researchers to pilot studies via simulation first, searching for novel social science insights to test in the real world.
Author contact info: John J. Horton Massachusetts Institute of Technology Sloan School of Management 100 Main St Cambridge, MA 02142 E-Mail: john.joseph.horton@gmail.com

Asset Pricing with Optimal Under-Diversification - Elenev, Vadim; Landvoigt, Tim (National Bureau of Economic Research Working Paper Series, 2023)
We study sources and implications of undiversified portfolios in a production-based asset pricing model with financial frictions. Households take concentrated positions in a single firm exposed to idiosyncratic shocks because managerial effort requires equity stakes, and because investors gain private benefits from concentrated holdings. Matching data on returns and portfolios, we find that the marginal investor optimally holds 45% of their portfolio in a single firm, incentivizing managerial effort that accounts for 4% of aggregate output. Investors derive control benefits equivalent to 3% points of excess return, rationalizing low observed returns on undiversified holdings in the data. A counterfactual world of full diversification would feature higher risk free rates, lower risk premiums on fully diversified and concentrated assets, less capital accumulation, yet higher consumption and welfare. Exposure to undiversified firm risk can explain approximately 40% of the level and 20% of the volatility of the equity premium. A targeted subsidy that decreases diversification improves welfare by increasing managerial effort and reducing financial frictions.
Author contact info: Vadim Elenev Johns Hopkins University 100 International Drive Suite 1329 Baltimore, MD 21202 E-Mail: velenev@jhu.edu Tim Landvoigt The Wharton School University of Pennsylvania 3620 Locust Walk Philadelphia, PA 19104 Tel: 215/898-9749 E-Mail: timland@wharton.upenn.edu

Skill Depreciation during Unemployment: Evidence from Panel Data - Cohen, Jonathan P; Johnston, Andrew C; Lindner, Attila S (National Bureau of Economic Research Working Paper Series, 2023)
We use a panel of survey responses linked to administrative data in Germany to measure the depreciation of skills while workers are unemployed. Both the reemployment hazard rate and reemployment earnings steadily fall with unemployment duration, and indicators of depression and loneliness rise substantially. Despite this, we find no decline in a wide range of cognitive and noncognitive skills while workers remain unemployed. We find the same pattern in a panel of American workers. The results imply that skill depreciation in general human capital is unlikely to be a major explanation for duration dependence.
Author contact info: Jonathan P. Cohen 77 Massachusetts Ave, Building E52-300 Department of Economics Cambridge, Mass 02139 United States Tel: 9144822719 E-Mail: jonpcohen@gmail.com Andrew C. Johnston Department of Economics University of California, Merced 5200 N Lake Road Merced, CA 95340 Tel: 949/290-1948 E-Mail: acjohnston@ucmerced.edu Attila S. Lindner Department of Economics University College London 30 Gordon Street London WC1H 0AX United Kingdom E-Mail: a.lindner@ucl.ac.uk

Equity Term Structures without Dividend Strips Data - Giglio, Stefano; Kelly, Bryan T; Kozak, Serhiy (National Bureau of Economic Research Working Paper Series, 2023)
We use a large cross-section of equity returns to estimate a rich affine model of equity prices, dividends, returns and their dynamics. Using the model, we price dividend strips of the aggregate market index, as well as any other well-diversified equity portfolio. We do not use any dividend strips data in the estimation of the model; however, model-implied equity yields generated by the model match closely the equity yields from the traded dividend forwards reported in the literature. Our model can be used to extend the data on the term structure of aggregate (market) discount rates over time (back to the 1970s) and across maturities, since we are not limited by the maturities of actually traded dividend claims. Most importantly, the model generates term structures for any portfolio of stocks (e.g., small and value portfolios, high and low investment portfolios, etc). The novel cross-section of term structure data estimated by our model, covering a span of 45 years that includes several recessions, represents a rich set of new empirical moments that can be used to guide and evaluate asset pricing models, beyond the aggregate term structure of dividend strips that has been studied in the literature.
Author contact info: Stefano Giglio Yale School of Management 165 Whitney Avenue New Haven, CT 06520 Tel: 203/432-3373 E-Mail: stefano.giglio@yale.edu Bryan T. Kelly Yale School of Management 165 Whitney Ave. New Haven, CT 06511 Tel: 203-432-2221 E-Mail: bryan.kelly@yale.edu Serhiy Kozak University of Maryland 7621 Mowatt Ln VMH 4453 College Park, MD 20742 E-Mail: sekozak@umd.edu

Derisking Real Estate in China’s Hybrid Economy - Xiong, Wei (National Bureau of Economic Research Working Paper Series, 2023)
This article examines the risks faced by China's real estate sector within its distinct hybrid economy, which combines market mechanisms with comprehensive state planning and government intervention. The real estate sector holds particular importance as land sale revenues are a crucial source of funding for local governments, enabling them to finance infrastructure projects and stimulate economic growth. Banks are highly exposed to debt secured by real estate properties, not only involving real estate firms and households but also extending to local governments and affiliated companies. The hybrid structure gives the government a strong commitment and the ability to delay a real estate crisis. However, China’s real estate risk is ultimately tied to the country’s overall economic growth and remains susceptible to policy-related risks.
Author contact info: Wei Xiong Princeton University Department of Economics Bendheim Center for Finance Princeton, NJ 08450 Tel: 609/258-0282 Fax: 609/258-0771 E-Mail: wxiong@princeton.edu

Dreaming of Leaving the Nest? Immigration Status and the Living Arrangements of DACAmented - Gihleb, Rania; Giuntella, Osea; Lonsky, Jakub (National Bureau of Economic Research Working Paper Series, 2023)
This study investigates the effects of the Deferred Action for Childhood Arrivals (DACA) on the living arrangements and housing behavior of undocumented immigrants in the U.S. Using an event-study approach and difference-in-differences (DID) estimates, we compared immigrants above and below eligibility cutoffs and demonstrated that, after the adoption of the policy in June 2012, DACA-eligible immigrants were less likely to live with their parents or in multigenerational households (-12.5%) and more likely to live independently (+15.5%). We also revealed that DACA-eligible immigrants were less likely to live in the same house (-2%) and more likely to quit ethnic enclaves (+8%). Notably, these patterns are not explained by the known effects of DACA on income and employment outcomes. Lower rental costs (-3%) may have facilitated this transition into adulthood and the observed trends in living arrangements. The DACA also led to a decline in marriage rates among DACA-eligible individuals, although we found no evidence of significant effects on cohabitation, divorce, and intermarriage. We also found no evidence of a clear impact on fertility.
Author contact info: Rania Gihleb Department of Economics University of Pittsburgh 230 South Bouquet Street Pittsburgh, PA 15260 E-Mail: gihleb@pitt.edu Osea Giuntella Department of Economics University of Pittsburgh Posvar Hall Pittsburgh, PA 15260 E-Mail: osea.giuntella@gmail.com Jakub Lonsky E-Mail: Jakub.Lonsky@liverpool.ac.uk

On the Efficiency of Competitive Equilibria with Pandemics - Chari, V. V; Kirpalani, Rishabh; Perez, Luis (National Bureau of Economic Research Working Paper Series, 2023)
The epidemiological literature suggests that virus transmission occurs only when individuals are in relatively close contact. We show that if society can control the extent to which economic agents are exposed to the virus and agents can commit to contracts, virus externalities are local, and competitive equilibria are efficient. The Second Welfare Theorem also holds. These results still apply when infection status is imperfectly observed and when agents are privately informed about their infection status. If society cannot control virus exposure, then virus externalities are global and competitive equilibria are inefficient, but the policy implications are very different from those in the literature. Economic activity in this version of our model can be inefficiently low, in contrast to the conventional wisdom that viruses create global externalities and result in inefficiently high economic activity. If agents cannot commit, competitive equilibria are inefficient because of a novel pecuniary externality.
Author contact info: Varadarajan V. Chari Department of Economics University of Minnesota 1035 Heller Hall 271 - 19th Avenue South Minneapolis, MN 55455 Tel: 612/626-5171 Fax: (612) 624-0209 E-Mail: varadarajanvchari@gmail.com Rishabh Kirpalani Department of Economics University of Wisconsin-Madison Madison, WI 53706 E-Mail: rishabh.kirpalani@wisc.edu Luis Perez E-Mail: perez766@umn.edu

Is the Global Economy Deglobalizing? And if so, why? And what is next? - Goldberg, Pinelopi K; Reed, Tristan (National Bureau of Economic Research Working Paper Series, 2023)
Data on global trade as well as capital and labor flows indicate a slowdown, but not reversal, of globalization post the 2008-09 financial crisis. Yet profound changes in the policy environment and public sentiment in the largest economies over the past five years suggest the beginning of a new era. Increasing anxiety about the labor market effects of import competition from low-wage countries, especially China, laid the groundwork, but was not the catalyst for the reversal in attitudes towards globalization. Similarly, the COVID pandemic provided novel arguments against free trade based on global supply chain resilience, but neither the pandemic nor short run policy response had enduring effects on trade flows. We demonstrate that global trade was remarkably resilient during the pandemic and that supply shortages would likely have been more severe in the absence of international trade. After a temporary decline in 2020, global trade in goods and services increased sharply in 2021. Russia’s invasion of Ukraine raised new concerns about national security and the exposure of supply chains to geopolitical risk. This was followed by demands to diversify away from “non-friendly” countries and to the employment of trade policy, export restrictions in particular, to halt China’s technological development. The future of globalization is highly uncertain at this point, but these new policies will likely slow global growth, innovation, and poverty reduction even if they benefit certain industries in certain countries. Regarding resilience, the main goal of recent trade policy changes, measures of trade volatility or concentration can be helpful, but resilience will be elusive as long as we lack benchmarks against which policy performance can be measured.
Author contact info: Pinelopi K. Goldberg Yale University Department of Economics 87 Trumbull Street P.O. Box 208264 New Haven, CT E-Mail: penny.goldberg@yale.edu Tristan Reed The World Bank Development Research Group 1818 H Street NW Washington, DC 20433 E-Mail: treed@worldbank.org

Four Facts About ESG Beliefs and Investor Portfolios - Giglio, Stefano; Maggiori, Matteo; Stroebel, Johannes; Tan, Zhenhao; Utkus, Stephen; Xu, Xiao (National Bureau of Economic Research Working Paper Series, 2023)
We analyze survey data on ESG beliefs and preferences in a large panel of retail investors linked to administrative data on their investment portfolios. The survey elicits investors’ expectations of long-term ESG equity returns and asks about their motivations, if any, to invest in ESG assets. We document four facts. First, investors generally expected ESG investments to underperform the market. Between mid-2021 and late-2022, the average expected 10-year annualized return of ESG investments relative to the overall stock market was –1.4%. Second, there is substantial heterogeneity across investors in their ESG return expectations and their motives for ESG investing: 45% of survey respondents do not see any reason to invest in ESG, 25% are primarily motivated by ethical considerations, 22% are driven by climate hedging motives, and 7% are motivated by return expectations. Third, there is a link between individuals’ reported ESG investment motives and their actual investment behaviors, with the highest ESG portfolio holdings among individuals who report ethics-driven investment motives. Fourth, financial considerations matter independently of other investment motives: we find meaningful ESG holdings only for investors who expect these investments to outperform the market, even among those investors who reported that their most important ESG investment motives were ethical or hedging reasons.
Author contact info: Stefano Giglio Yale School of Management 165 Whitney Avenue New Haven, CT 06520 Tel: 203/432-3373 E-Mail: stefano.giglio@yale.edu Matteo Maggiori Stanford University Graduate School of Business 655 Knight Way Stanford, CA 94305 E-Mail: maggiori@stanford.edu Johannes Stroebel Stern School of Business New York University 44 West 4th Street New York, NY 10012 Tel: 650/888-3441 E-Mail: johannes.stroebel@nyu.edu Zhenhao Tan E-Mail: zhenhao.tan@yale.edu Stephen Utkus University of Pennsylvania Xiao Xu E-Mail: xiao_xu@vanguard.com

Post COVID-19 Test Score Recovery: Initial Evidence from State Testing Data - Halloran, Clare; Hug, Claire E; Jack, Rebecca; Oster, Emily (National Bureau of Economic Research Working Paper Series, 2023)
Author contact info: Clare Halloran Brown University E-Mail: clare.halloran@gmail.com Claire E. Hug E-Mail: claire_hug@brown.edu Rebecca Jack University of Nebraska-Lincoln 1400 R St Lincoln, NE 68588 E-Mail: bjack2@huskers.unl.edu Emily Oster Brown UniversityAB - The COVID-19 pandemic caused significant disruption in schooling in the U.S., and student test scores showed dramatic declines by the end of the 2020-21 school year. We use state test score data to analyze patterns of test score recovery over the 2021-22 school year. On average, we find that 20% of test score losses are recovered in English language arts (ELA) by 2022, compared to 37% in math. These recovery rates do not significantly vary across demographic characteristics, baseline achievement rates, in-person schooling rates in the pandemic school year, or category-based measures of recovery funding allocations. We observe large state-level variation in recovery rates in ELA – from full recovery to further losses. This evidence suggests state-level factors play an important role in students' academic recovery, but we are unable to isolate particular state factors. Future work should focus on this variation to facilitate a broader recovery effort.

Policies, Projections, and the Social Cost of Carbon: Results from the DICE-2023 Model - Barrage, Lint; Nordhaus, William D (National Bureau of Economic Research Working Paper Series, 2023)
The present study examines the assumptions, modeling structure, and preliminary results of DICE-2023, the revised Dynamic Integrated Model of Climate and the Economy (DICE), updated to 2023. The revision contains major changes in the carbon and climate modules, the treatment of non-industrial greenhouse gases, discount rates, as well as updates on all the major components. The major changes are a significantly lower level of temperature of the cost-benefit optimal policy, a lower cost of reaching the 2° C target, an analysis of the impact of the Paris Accord, and a major increase in the estimated social cost of carbon.
Author contact info: Lint Barrage ETH Zurich D-MTEC Chair of Energy and Climate Economics Zurichbergstrasse 18 8092 Zurich Switzerland E-Mail: lbarrage@ethz.ch William D. Nordhaus Yale University, Department of Economics 87 Trumbull Street Box 208264 New Haven, CT 06520-8264 Tel: 203/432-3598 Fax: 203/432-5779 E-Mail: william.nordhaus@yale.edu

Trade Shocks and Credit Reallocation - Federico, Stefano; Hassan, Fadi; Rappoport, Veronica (National Bureau of Economic Research Working Paper Series, 2023)
This paper identifies a credit-supply contraction that arises endogenously after trade liberalization. Banks with loan portfolios concentrated in sectors exposed to competition from China face an increase in non-performing loans after China’s entry into the World Trade Organization. As a result, they reduce the supply of credit to firms, irrespective of the firm’s sector of operation. This cut in credit translates into lower employment, investment, and output. Through this mechanism, the financial channel amplifies the shock to firms already hit by import competition from China and passes it on to firms in sectors expected to expand upon trade liberalization.
Author contact info: Stefano Federico Bank of Italy Via Nazionale 91 00184 Rome Italy E-Mail: Stefano.Federico@bancaditalia.it Fadi Hassan Via Nazionale 91 Bank of Italy Rome Italy E-Mail: fhassan@mit.edu Veronica Rappoport London School of Economics and Social Science Houghton St. London WC2A 2AE United Kingdom E-Mail: v.e.rappoport@lse.ac.uk

The Short-Term Labor Supply Response to the Expanded Child Tax Credit - Enriquez, Brandon; Jones, Damon; Tedeschi, Ernest V (National Bureau of Economic Research Working Paper Series, 2023)
We estimate the extensive and intensive margin labor supply response to the monthly Child Tax Credit disbursed in 2021 as a part of the American Rescue Plan Act. Using Current Population Survey microdata, we compare labor supply outcomes among households who qualify for varying relative increases in household income, as a result of their income level and household size. We do not find strong evidence of a change in labor supply for families receiving the credit. The results are robust to alternative labor supply models, where households respond mainly to cash on hand or changes in the annual budget set.
Author contact info: Brandon M. Enriquez E-Mail: enriquez@mit.edu Damon Jones Harris School of Public Policy University of Chicago 1307 E 60th Street Chicago, IL 60637 Tel: 650/736-8571 E-Mail: damonjones@uchicago.edu Ernest V. Tedeschi E-Mail: ernie.tedeschi@gmail.com

Nurse Practitioner Scope of Practice and Patient Harm: Evidence from Medical Malpractice Cases and Adverse Action Reports - Markowitz, Sara; Smith, Andrew J.D. (National Bureau of Economic Research Working Paper Series, 2023)
Many states have recently changed their scope of practice laws and granted full practice authority to nurse practitioners, allowing them to practice without oversight from physicians. Physician groups have argued against this change, citing patient safety concerns. In this paper, we use a ratio-in-ratio approach to evaluate whether the transition to full practice authority results in harm to patients as proxied by rates of malpractice payouts and adverse action reports against nurse practitioners. We find no evidence of such harm, and instead find that physicians may benefit from the law change in terms of reduced malpractice payouts against them.
Author contact info: Sara Markowitz Department of Economics Emory University Rich Memorial Building 1602 Fishburne Dr. Atlanta, GA 30322 Tel: (404) 712-8167 E-Mail: sara.markowitz@emory.edu Andrew J.D. Smith Department of Economics Emory University Rich Memorial Building 1602 Fishburne Dr. Atlanta, GA 30322 E-Mail: andrew.james.dearing.smith@emory.edu

Natural Capital Considerations for an Extension of the U.S. Marine Economy Satellite Account - Wielgus, Jeffrey; Grasso, Monica; Colgan, Charles; Zhuang, Jennifer; Siegel, Sarah C; Conran, Joseph; Wodajo, Tadesse (National Bureau of Economic Research Working Paper Series, 2023)
In an effort to measure and track marine-dependent economic activities, the United States National Oceanic and Atmospheric Administration (NOAA) has developed two statistical tools: The Economics: National Ocean Watch (ENOW) and the Marine Economy Satellite Account (MESA). In both efforts, the focus has been on certain activities in selected sectors of the economy. MESA is developed within the framework of the System of National Accounts (SNA) and includes only economic activities that use essential marine inputs, produce goods or services to be used predominantly in the marine environment, take place in the marine environment, or need to be placed in proximity to the coast to take place. In addition, MESA only employs data on the annual flows of market-based values related to the marine activities. As an SNA-based tool, MESA also fails to systematically keep track of the contribution of the environment to the economy by properly accounting for the changes (both additions and reductions) in the environmental capital stock values. This paper proposes an initial extension of MESA to include natural capital considerations by employing key elements of the System of Environmental-Economic Accounts Central Framework (SEEA-CF) adopted as the initial international statistical standard for environmental-economic accounting by the United Nations Statistical Commission in 2012. In addition to reporting the economic activities captured by the SNA structure, the SEEA-CF requires measuring both additions to the environmental capital stocks (due to natural growth or improved resource management) and reductions in these stocks (resulting from depletion from use in the production process or removal of resources from the natural stock). Considering the complexity involved in the measurement of the natural capital foundations of the ocean-related economy, the paper proposes to launch the MESA extension as a pilot project focusing only on selected data rich marine activities defined in MESA, namely, offshore oil and gas, commercial fishing, and beach recreation.
Author contact info: Jeffrey Wielgus 1315 East-West Hwy Silver Spring, MD 20910 USA E-Mail: Jeffrey.Wielgus@noaa.gov Monica Grasso 1315 East West Hwy Silver Spring, MD 20902 USA E-Mail: monica.grasso@noaa.gov Charles Colgan Middlebury Institute of International Studies at Monterey E-Mail: ccolgan@middlebury.edu Jennifer Zhuang 1315 East-West Hwy Silver Spring, MD 20910 USA E-Mail: Jennifer.Zhuang@noaa.gov Sarah C. Siegel E-Mail: sarah.siegel@noaa.gov Joseph Conran 1315 East West Hwy Silver Spring, MD 20910 USA E-Mail: joseph.conran@noaa.gov Tadesse Wodajo National Oceanic and Atmospheric Administration Washington, DC E-Mail: Tadesse.Wodajo@noaa.gov

Business Group Spillovers - Naaraayanan, S. Lakshmi; Wolfenzon, Daniel (National Bureau of Economic Research Working Paper Series, 2023)
We compare the investment of standalone firms across regions after a positive shock to the investment opportunities generated by a large-scale highway development project. We show that the standalones’ investment sensitivity is lower in regions with a higher density of business groups in the local area. We investigate mechanisms driving our results and find support for a financing mechanism whereby banks allocate capital preferentially to group-affiliated firms in responding to the increase in credit demand. Overall, our study documents that business groups have spillover effects on standalone firms.
Author contact info: Lakshmi Naaraayanan Sussex Place Regent's Park United Kingdom E-Mail: lnaaraayanan@london.edu Daniel Wolfenson

Do Entrepreneurs Want Control? And Should They Get What They Want? A Historical and Theoretical Exploration - Lamoreaux, Naomi R; Rosenthal, Jean-Laurent (National Bureau of Economic Research Working Paper Series, 2023)
From Elihu Thomson and Herbert Dow in the late nineteenth century to Steve Jobs a hundred years later, many entrepreneurs have been stymied by their investors. In this paper, we use a simple model to explore how outcomes might have been different if entrepreneurs, instead of the investors, had control of their firms. We also explore the importance of legal rules that enable entrepreneurs to lock in control even when, under one-share-one-vote governance, power would rest with their investors. We find that entrepreneurs take advantage of such rules when the cost of capital is low, as in Britain in the early twentieth century or the US in the early twenty-first century. We also find that firms controlled by entrepreneurs can take on more difficult projects, and thus push the technological frontier out more rapidly, than firms controlled by investors. Such firms are also superior in this way to serial startups.
Author contact info: Naomi R. Lamoreaux 111 N Ashley St Ste 307 Ann Arbor, MI 48104 Tel: 310-913-5777 E-Mail: naomi.lamoreaux@yale.edu Jean-Laurent Rosenthal Division of Humanities and Social Sciences California Institute of Technology 1200 E. California Blvd. MC 228-77 Pasadena, CA 91125 Tel: 626/395-4058 Fax: 626/395-4065 E-Mail: jlr@hss.caltech.edu

China as an International Lender of Last Resort - Horn, Sebastian; Parks, Bradley C; Reinhart, Carmen M; Trebesch, Christoph (National Bureau of Economic Research Working Paper Series, 2023)
This paper shows that China has launched a new global system for cross-border rescue lending to countries in debt distress. We build the first comprehensive dataset on China’s overseas bailouts between 2000 and 2021 and provide new insights into China’s growing role in the global financial system. A key finding is that the global swap line network put in place by the People’s Bank of China is increasingly used as a financial rescue mechanism, with more than USD 170 billion in liquidity support extended to crisis countries, including repeated rollovers of swaps coming due. The swaps bolster gross reserves and are mostly drawn by distressed countries with low liquidity ratios. In addition, we show that Chinese state-owned banks and enterprises have given out an additional USD 70 billion in rescue loans for balance of payments support. Taken together, China’s overseas bailouts correspond to more than 20 percent of total IMF lending over the past decade and bailout amounts are growing fast. However, China’s rescue loans differ from those of established international lenders of last resort in that they (i) are opaque, (ii) carry relatively high interest rates, and (iii) are almost exclusively targeted to debtors of China's Belt and Road Initiative. These findings have implications for the international financial and monetary architecture, which is becoming more multipolar, less institutionalized, and less transparent.
Author contact info: Sebastian Horn World Bank E-Mail: shorn1@worldbank.org Bradley C. Parks AidData, William & Mary E-Mail: bparks@aiddata.wm.edu Carmen M. Reinhart Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617 496 8643 E-Mail: carmen_reinhart@harvard.edu Christoph Trebesch Kiel Institute for the World Economy Research Area on International Finance Kiellinie 66, 24105 Kiel, Germany E-Mail: christoph.trebesch@ifw-kiel.de

Five Myths About Carbon Pricing - Metcalf, Gilbert E (National Bureau of Economic Research Working Paper Series, 2023)
While carbon pricing, in general, and carbon taxes, in particular, are popular with economists, they are subject to considerable misunderstanding among policy makers and the public. In this paper I consider and refute five myths about carbon taxes: 1) that a carbon price will hurt economic growth; 2) that carbon pricing will kill jobs; 3) that a carbon tax and cap and trade program have the same economic impacts; 4) that we can’t achieve carbon reduction targets with a carbon tax; and 5) that carbon pricing is regressive. I then discuss implications for policy making.
Author contact info: Gilbert E. Metcalf MIT Building E19-411 400 Main Street Cambridge, MA 02142 E-Mail: gilbert.metcalf@tufts.edu

Solving Heterogeneous Agent Models with the Master Equation - Bilal, Adrien (National Bureau of Economic Research Working Paper Series, 2023)
This paper proposes an analytic representation of perturbations in heterogeneous agent economies with aggregate shocks up to any order. Treating the underlying distribution as an explicit state variable, the value function defined on an infinite-dimensional state space summarizes the entire economy and satisfies the ‘Master Equation’ introduced in the mathematics mean field games literature. I show that analytic perturbations of the Master Equation deliver dramatic simplifications. The First-order Approximation to the Master Equation (FAME) reduces to a standard Bellman equation for the directional derivatives of the value function with respect to the distribution and aggregate shocks. The FAME has six main advantages: (i) finite dimension; (ii) closed-form mapping to steady-state objects; (iii) applicability when many distributional moments or prices enter individuals' decision such as dynamic trade, urban or job ladder settings; (iv) block-recursivity bypassing further fixed points; (v) characterization of stability and of the stochastic steady-state; (vi) fast implementation using standard numerical methods. I develop the Second-order Approximation to the Master Equation (SAME) and show that it shares these properties, making it suitable to handle nonlinearities, aggregate risk, and asset pricing. I illustrate the FAME and the SAME with two applications. First, I show that the cost of business cycles is several orders of magnitude larger in incomplete market models. Second, I show that dynamic spatial migration models display near linearity at conventional aggregate shocks.
Author contact info: Adrien Bilal Department of Economics Harvard University 1805 Cambridge Street Cambridge, MA 02138 E-Mail: adrienbilal@fas.harvard.edu

Evolution of Risk Aversion over Five Years after a Major Natural Disaster - Ingwersen, Nicholas; Frankenberg, Elizabeth; Thomas, Duncan (National Bureau of Economic Research Working Paper Series, 2023)
The impact of exposure to a major unanticipated natural disaster on the evolution of survivors’ attitudes toward risk is examined, exploiting plausibly exogenous variation in exposure to the 2004 Indian Ocean tsunami in combination with rich population-representative longitudinal survey data spanning the five years after the tsunami. Respondents chose among pairs of hypothetical income streams. Those directly exposed to the tsunami made choices consistent with greater willingness to take on risk relative to those not directly exposed to the tsunami. These differences are short-lived: starting a year later, there is no evidence of differences in willingness to take on risk between the two groups. These conclusions hold for tsunami-related exposures measured at the individual and community level. Apparently, tsunami survivors were inclined to assume greater financial risk in the short-term while rebuilding their lives after the disaster.
Author contact info: Nicholas Ingwersen Carolina Popluation Center University of North Carolina at Chapel Hill 123 W Franklin St. Chapel Hill, NC 27516 E-Mail: ningwersen@unc.edu Elizabeth Frankenberg University of North Carolina Chapel Hill Carolina Population Center 123 W Franklin St. Chapel Hill, NC 27599-8120 E-Mail: e.frankenberg@unc.edu Duncan Thomas Department of Economics Duke University Box 90097 Durham, NC 27708 Tel: 919/660-1803 Fax: 919/684-8974 E-Mail: d.thomas@duke.edu

The Macroeconomics of Intensive Agriculture - Boppart, Timo; Kiernan, Patrick; Krusell, Per; Malmberg, Hannes (National Bureau of Economic Research Working Paper Series, 2023)
Developing countries employ a very large share of their workforce in agriculture, a sector in which their labor productivity is particularly low. We take a macroeconomic approach to analyze the role of agriculture in development. We construct a new database with systematic measures of inputs and outputs of agricultural production around the globe. The data exhibits strong neoclassical features: going from poor to rich countries, capital and intermediate input prices decline dramatically relative to labor prices; concurrently, capital and intermediate input use in agriculture increases by a factor of 300–800 relative to labor. Input intensification accounts for a bit less than two thirds of the agricultural labor productivity gap between the poorest and richest countries. Our observations are well explained by an aggregate agricultural production function with input substitutabilities significantly above unity. On the demand side, standard non-homothetic preferences accurately capture how the expenditure share of agricultural goods varies across the development spectrum. We incorporate our findings into a closed-economy general-equilibrium model with minimal distortions, showing that non-agricultural TFP differences play a much more important role than agricultural TFP differences in explaining income differences.
Author contact info: Timo Boppart Institute for International Economic Studies Stockholm University SE-106 91 Stockholm Sweden Tel: +46 (0)8 16 35 52 E-Mail: timo.boppart@iies.su.se Patrick Kiernan E-Mail: kiern018@umn.edu Per Krusell Institute for International Economic Studies Stockholm University 106 91 STOCKHOLM SWEDEN E-Mail: per.krusell@iies.su.se Hannes Malmberg University of Minnesota E-Mail: pmalmber@umn.edu

No Ground Truth? No Problem: Improving Administrative Data Linking Using Active Learning and a Little Bit of Guile - Tahamont, Sarah; Jelveh, Zubin; McNeill, Melissa; Yan, Shi; Chalfin, Aaron; Hansen, Benjamin (National Bureau of Economic Research Working Paper Series, 2023)
While linking records across large administrative datasets [“big data”] has the potential to revolutionize empirical social science research, many administrative data files do not have common identifiers and are thus not designed to be linked to others. To address this problem, researchers have developed probabilistic record linkage algorithms which use statistical patterns in identifying characteristics to perform linking tasks. Naturally, the accuracy of a candidate linking algorithm can be substantially improved when an algorithm has access to “ground-truth” examples — matches which can be validated using institutional knowledge or auxiliary data. Unfortunately, the cost of obtaining these examples is typically high, often requiring a researcher to manually review pairs of records in order to make an informed judgement about whether they are a match. When a pool of ground-truth information is unavailable, researchers can use “active learning” algorithms for linking, which ask the user to provide ground-truth information for select candidate pairs. In this paper, we investigate the value of providing ground-truth examples via active learning for linking performance. We confirm popular intuition that data linking can be dramatically improved with the availability of ground truth examples. But critically, in many real-world applications, only a relatively small number of tactically-selected ground-truth examples are needed to obtain most of the achievable gains. With a modest investment in ground truth, researchers can approximate the performance of a supervised learning algorithm that has access to a large database of ground truth examples using a readily available off-the-shelf tool.
Author contact info: Sarah Tahamont University of Maryland 2220 Samuel J. LeFrak Hall 7251 Preinkert Drive College Park, MD 20742 USA E-Mail: tahamont@umd.edu Zubin Jelveh 4130 Campus Dr College of Information Studies Dept. of Criminology and Criminal Justice College Park, MD 20742 United States Tel: 6465529775 E-Mail: zjelveh@umd.edu Melissa McNeill 111 Broadway Suite 703 New York, NY 10006 USA E-Mail: mmcneill@uchicago.edu Shi Yan School of Criminology and Criminal Justice Arizona State University 411 N Central Ave Suite 600 Phoenix, AZ 85004 E-Mail: shiyan@asu.edu Aaron Chalfin Department of Criminology University of Pennsylvania 558 McNeil Building 3718 Locust Walk Philadelphia, PA 19104 E-Mail: achalfin@sas.upenn.edu Benjamin Hansen Department of Economics 1285 University of Oregon Eugene, OR 97403 Tel: 541/357-8395 E-Mail: bchansen@uoregon.edu

Inflation is Conflict - Lorenzoni, Guido; Werning, Iván (National Bureau of Economic Research Working Paper Series, 2023)
This paper isolates the role of conflict or disagreement on inflation in two ways. In the first part of the paper, we present a stylized model, kept purposefully away from traditional macro models. Inflation arises despite the complete absence of money, credit, interest rates, production, and employment. Inflation is due to conflict; it cannot be explained by monetary policy or departures from a natural rate of output or employment. In contrast, the second part of the paper develops a flexible framework that nests many traditional macroeconomic models. We include both goods and labor to study the interaction of price and wage inflation. Our main results provide a decomposition of inflation into “adjustment” and “conflict” inflation, highlighting the essential nature of the latter. Conflict should be viewed as the proximate cause of inflation, fed by other root causes. Our framework sits on top of a wide set of particular models that can endogenize conflict.
Author contact info: Guido Lorenzoni University of Chicago Booth School of Business 5807 S. Woodlawn Ave. Chicago, IL 60637 E-Mail: Guido.Lorenzoni@chicagobooth.edu Iván Werning Department of Economics, E52-536 MIT 77 Massachusetts Avenue Cambridge, MA 02139 Tel: 617/452-3662 Fax: 617/253-1330 E-Mail: iwerning@mit.edu

Flow Trading - Budish, Eric; Cramton, Peter; Kyle, Albert S; Lee, Jeongmin; Malec, David (National Bureau of Economic Research Working Paper Series, 2023)
We introduce and analyze a new market design for trading financial assets. The design allows traders to directly trade any user-defined linear combination of assets. Orders for such portfolios are expressed as downward-sloping piecewise-linear demand curves with quantities as flows (shares/second). Batch auctions clear all asset markets jointly in discrete time. Market-clearing prices and quantities are shown to exist, despite the wide variety of preferences that can be expressed. Calculating prices and quantities is shown to be computationally feasible. Microfoundations are provided to show that traders can implement optimal strategies using portfolio orders. We discuss several potential advantages of the new market design, arising from the combination of discrete time and continuous prices and quantities (the most widely used alternative has these reversed) and the novel approach to trading portfolios of assets.
Author contact info: Eric Budish Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-8453 E-Mail: eric.budish@chicagobooth.edu Peter Cramton 901 Highland Ave Del Mar, CA 92014 United States Tel: 530 408 6698 E-Mail: pcramton@gmail.com Albert S. Kyle University of Maryland, College Park Robert H. Smith School of Business 4433 Van Munching Hall College Park, MD 20742 Tel: 9192259696 E-Mail: akyle@rhsmith.umd.edu Jeongmin (Mina) Lee Washington University in St. Louis E-Mail: jngmnl@gmail.com David Malec University of Maryland College Park, MD 20742 United States E-Mail: dlmalec@gmail.com

Climate Stress Testing - Acharya, Viral V; Berner, Richard; Engle, Robert F, III; Jung, Hyeyoon; Stroebel, Johannes; Zeng, Xuran; Zhao, Yihao (National Bureau of Economic Research Working Paper Series, 2023)
We explore the design of climate stress tests to assess and manage macro-prudential risks from climate change in the financial sector. We review the climate stress scenarios currently employed by regulators, highlighting the need to (i) consider many transition risks as dynamic policy choices; (ii) better understand and incorporate feedback loops between climate change and the economy; and (iii) further explore “compound risk” scenarios in which climate risks co-occur with other risks. We discuss how the process of mapping climate stress scenarios into financial firm outcomes can incorporate existing evidence on the effects of various climate-related risks on credit and market outcomes. We argue that more research is required to (i) identify channels through which plausible scenarios can lead to meaningful short-run impact on credit risks given typical bank loan maturities; (ii) incorporate bank-lending responses to climate risks; (iii) assess the adequacy of climate risk pricing in financial markets; and (iv) better understand and incorporate the process of expectations formation around the realizations of climate risks. Finally, we discuss the relative advantages and disadvantages of using market-based climate stress tests that can be conducted using publicly available data to complement existing stress testing frameworks.
Author contact info: Viral V. Acharya Stern School of Business New York University 44 West 4th Street, Suite 9-65 New York, NY 10012 Tel: 212/998-0354 Fax: 212 995 4233 E-Mail: vacharya@stern.nyu.edu Richard Berner Leonard N. Stern School of Business, NYU 44 West 4th St NY, NY 10021 Tel: 212-998-0881 E-Mail: rberner@stern.nyu.edu Robert F. Engle III Department of Finance, Stern School of Business New York University, Salomon Center 44 West 4th Street, Suite 9-160 New York, NY 10012-1126 Tel: 212/998-0710 Fax: 212/995-4220 E-Mail: rengle@stern.nyu.edu Hyeyoon Jung 33 Liberty St New York, NY 10045 United States E-Mail: hyeyoon.jung@ny.frb.org Johannes Stroebel Stern School of Business New York University 44 West 4th Street New York, NY 10012 Tel: 650/888-3441 E-Mail: johannes.stroebel@nyu.edu Xuran Zeng E-Mail: xz4183@nyu.edu Yihao Zhao E-Mail: yz7098@nyu.edu

Inequality and Measured Growth - Oberfield, Ezra (National Bureau of Economic Research Working Paper Series, 2023)
Compared to a half-century ago, inequality in the United states has risen and measured productivity growth has fallen. Concerns about rising inequality have been exacerbated by the observation that prices of goods consumed by the poor have risen faster than prices of goods consumed by the rich. This paper presents an example of an economy that is consistent with these facts but in which the facts can be misleading about improvements in welfare. The two key ingredients are non-homothetic preferences and productivity improvements directed toward goods with larger market size. The model admits balanced growth despite the structural change induced by non-homothetic preferences. Along a BGP in which the distribution of after-tax income is stable, measured inflation among goods consumed by the bottom half of earners is perpetually higher than among goods consumed by the top half, but welfare improves at the same rate for all households. Across BGPs in which the only difference in primitives is the progressivity of the tax schedule, the BGP with a more unequal distribution of after-tax income exhibits lower measured growth of output and productivity. Nevertheless, welfare improves at the same rate along both BGPs. At the root of the deviation between productivity growth and welfare improvements is the fact that the value of cost reductions for a good are transitory if income effects eventually shrink the good's expenditure share. Standard measures of inflation capture the benefits of cost reductions among goods that are consumed contemporaneously, but only partly determine the evolution of price levels relevant for a household, as they do not capture the benefits from cost reductions that occur before the household shifts towards a good.
Author contact info: Ezra Oberfield Department of Economics Princeton University Julis Romo Rabinowitz Building Princeton, NJ 08544 Tel: 609/258-3846 E-Mail: edo@princeton.edu

Beyond Pigou: Externalities and Civil Society in the Supply-Demand Framework - Mulligan, Casey B (National Bureau of Economic Research Working Paper Series, 2023)
The extent of voluntary cooperation in the presence of externalities is shown as an equilibrium outcome in the supply and demand framework. The analysis uses familiar ingredients to provide a new way of understanding the results of the extensive literature beginning with Buchanan, Coase, Ostrom, Shapley, Telser, Tullock, and Williamson showing that a Pigouvian tax is not the only alternative to independently acting individuals who are coordinated merely through distorted market prices. Voluntary cooperation can have a far different incidence than Pigouvian taxes and subsidies while changing the character of the costs resulting from externalities. The paper discusses applications including forest management, volume discounts, residential associations, energy policy, the scope of planning of household activities, and the role of workplaces in preventing infectious disease.
Author contact info: Casey B. Mulligan University of Chicago Department of Economics 1126 East 59th Street Chicago, IL 60637 Tel: 773/702-9017 Fax: 773/702-8490 E-Mail: c-mulligan@uchicago.edu

Analyst Bias and Mispricing - Grinblatt, Mark; Jostova, Gergana; Philipov, Alexander (National Bureau of Economic Research Working Paper Series, 2023)
Cross-sectional forecasts of conservative and optimistic biases in analyst earnings estimates predict a stock's future returns, especially for firms that are hard to value. Trading strategies—whether based on the component of analyst bias that is correlated with major return anomalies or the component that is orthogonal to these anomalies—earn abnormal profits. The prevalence of optimistic analyst earnings estimates and rarity of conservative estimates emerges as a common link between anomaly-generating firm characteristics and subsequent negative alphas. For the vast majority of anomaly strategies, profitability disappears once we control for analyst bias.
Author contact info: Mark Grinblatt Anderson School of Management UCLA 110 Westwood Plaza Los Angeles, CA 90095-1481 Tel: 310/825-1098 Fax: 310/825-9979 E-Mail: mark.grinblatt@anderson.ucla.edu Gergana Jostova George Washington University Department of Finance Washington, DC 20052 Tel: 202-994-7478 E-Mail: jostova@gwu.edu Alexander Philipov 4400 University Drive, Fairfax, VA 22030 USA E-Mail: aphilipo@gmu.edu

The Impact of the Level and Timing of Parental Resources on Child Development and Intergenerational Mobility - Eshaghnia, Sadegh; Heckman, James J; Landersø, Rasmus (National Bureau of Economic Research Working Paper Series, 2023)
This study explores the relationships between parental resource trajectories and child development, and their implications for intergenerational mobility. By modifying child skill formation technology to incorporate new skills emerging during adolescence, we analyze the importance of the timing of family resources on life outcomes, such as educational attainment and participation in crime. Parental financial resources partially offset deficiencies in nonpecuniary inputs to children’s human capital, such as family stability. IGE estimates are less sensitive to parental and child reference ages but are strongly influenced by the choice of lifetime versus snapshot parental income measures.
Author contact info: Sadegh Eshaghnia Center for the Economics of Human Development University of Chicago 1126 East 59th Street Chicago, IL 60637 E-Mail: eshaghnia@uchicago.edu James J. Heckman Center for the Economics of Human Development University of Chicago 1126 East 59th Street Chicago, IL 60637 Tel: 773/702-0634 Fax: 773/702-8490 E-Mail: jjh@uchicago.edu Rasmus Landersø Rockwool Foundation Research Unit Ny Kongensgade 6 Copenhagen 1472 Danmark Tel: 20704429 E-Mail: rl@rff.dk

Banking Crises in Historical Perspective - Frydman, Carola; Xu, Chenzi (National Bureau of Economic Research Working Paper Series, 2023)
This article surveys the recent empirical literature on historical banking crises, defined as events taking place before 1980. Advances in data collection and identification have provided new insights into the causes and consequences of crises both immediately and over the long run. We highlight three overarching threads that emerge from the literature: first, leverage in the financial system is a systematic precursor to crises; second, crises have sizable negative effects on the real economy; and third, government interventions can ameliorate these effects. Contrasting historical episodes reveals that the process of crisis formation and evolution varies significantly across time and space. Thus, we also highlight specific institutions, regulations and historical contexts that give rise to these divergent experiences. We conclude by identifying important gaps in the literature and discussing avenues for future research.
Author contact info: Carola Frydman Kellogg School of Management Northwestern University 2211 Campus Drive Room 4383 Evanston, IL 60208 Tel: 847/467-4457 Fax: 847/491-5719 E-Mail: c-frydman@kellogg.northwestern.edu Chenzi Xu Graduate of Business Stanford University 655 Knight Way Stanford, CA 94305 E-Mail: chenzixu@stanford.edu

The Health Wedge and Labor Market Inequality - Finkelstein, Amy; McQuillan, Casey C; Zidar, Owen M; Zwick, Eric (National Bureau of Economic Research Working Paper Series, 2023)
Over half of the U.S. population receives health insurance through an employer, with employer premium contributions creating a flat "head tax" per worker, independent of their earnings. This paper develops and calibrates a stylized model of the labor market to explore how this uniquely American approach to financing health insurance contributes to labor market inequality. We consider a partial-equilibrium counterfactual in which employer-provided health insurance is instead financed by a statutory payroll tax on firms. We find that, under this counterfactual financing, in 2019 the college wage premium would have been 11 percent lower, non-college annual earnings would have been $1,700 (3 percent) higher, and non-college employment would have been nearly 500,000 higher. These calibrated labor market effects of switching from head-tax to payroll-tax financing are in the same ballpark as estimates of the impact of other leading drivers of labor market inequality, including changes in outsourcing, robot adoption, rising trade, unionization, and the real minimum wage. We also consider a separate partial-equilibrium counterfactual in which the current head-tax financing is maintained, but 2019 U.S. health care spending as a share of GDP is reduced to the Canadian share; here, we estimate that the 2019 college wage premium would have been 5 percent lower and non-college annual earnings would have been 5 percent higher. These findings suggest that health care costs and the financing of health insurance warrant greater attention in both public policy and research on U.S. labor market inequality.
Author contact info: Amy Finkelstein Department of Economics, E52-442 MIT 77 Massachusetts Avenue Cambridge, MA 02139 Tel: 617/253-4149 Fax: 617/868-2742 E-Mail: afink@mit.edu Casey C. McQuillan E-Mail: mcquillan.casey@gmail.com Owen M. Zidar Department of Economics & School of International and Public Affairs Princeton University 237 Julis Romo Rabinowitz Building Princeton, NJ 08544 E-Mail: ozidar@princeton.edu Eric Zwick Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 239/822-8942 E-Mail: ericzwick@gmail.com

On the Law of the Household: The Principles Used by Parents in Disciplining Their Children - Shavell, Steven (National Bureau of Economic Research Working Paper Series, 2023)
In this article I first describe the basic principles that parents employ in disciplining their children. The description is based on a survey of parents, the major results of which are that parental sanctions are premised on wrongdoing—not on the mere causation of harm; that parental sanctions tend to be greater when wrongdoing results in harm than when it does not; that parental sanctions for intentionally harmful conduct exceed those for negligence; and that parental sanctions are not raised when the probability that wrongdoing would be discovered is low. I then develop a theory to explain the principles of discipline as functional for parents. The kernel of the theory is that the rules of discipline maximize the expected utility of parents—assuming that the utility of parents is reduced by the occurrence of harm and also reflects the well–being of their children. After elaborating the theory, I comment on several related issues, including the possible influence of childhood experience on our preferences as adults over legal rules; and I remark on the interpretation of the similarity between the principles of criminal law and those applied by parents in disciplining their children.
Author contact info: Steven Shavell Harvard Law School 1575 Massachusetts Avenue Hauser Hall 508 Cambridge, MA 02138 Tel: 617/495-3668 Fax: 617/496-2256 E-Mail: shavell@law.harvard.edu

Helping Small Businesses become more Data-Driven: A Field Experiment on eBay - Bar-Gill, Sagit; Brynjolfsson, Erik; Hak, Nir (National Bureau of Economic Research Working Paper Series, 2023)
As more and more activities in the economy become digitized, analytics and data-driven decision-making (DDD) are becoming increasingly important. The adoption of analytics and DDD has been slower in small-to-medium enterprises (SMEs) compared to large firms, and reliable causal estimates of the impacts of analytics tools for small businesses have been lacking. We derive experiment-based estimates of the effect of an analytics tool on SME outcomes, analyzing the randomized introduction of eBay’s Seller Hub (SH), a data-rich seller dashboard. We find that SH adoption is associated with increased DDD, and that access to SH increases e-retailers’ revenues by 3.6% on average, as more items are transacted and service quality increases, without increases in average prices. Our results suggest that analytics and DDD help SMEs establish a competitive advantage. Managerial practices play an important role in reaping the benefits from the analytics dashboard, as over a third of the SH impact is driven by active performance monitoring. This suggests that digital platforms could increase revenues by supporting the adoption of analytics tools by SMEs. Furthermore, policies supporting small businesses' transition to the data era could address gaps in analytics and data-driven decision-making (DDD) by providing access to tools such as SH, as well as offering appropriate managerial training.
Author contact info: Sagit Bar-Gill E-Mail: sagitbargill@gmail.com Erik Brynjolfsson Stanford Digital Economy Laboratory 353 Jane Stanford Way, Office 136 Stanford, CA 94305 E-Mail: erik.brynjolfsson@gmail.com Nir Hak E-Mail: nirhak@gmail.com

Signals and Stigmas from Banking Interventions: Lessons from the Bank Holiday in 1933 - Jaremski, Matthew S; Richardson, Gary; Vossmeyer, Angela (National Bureau of Economic Research Working Paper Series, 2023)
A nationwide panic forced President Franklin Roosevelt to declare a banking holiday in March 1933. The government reopened banks sequentially using a process that sent noisy signals about banks’ health. New microdata reveals the public responded to these signals. Deposits at rapidly reopened banks grew quicker than deposits at comparable or stronger banks that reopened even a few days or weeks later. The stigma of late reopening lasted for a decade. This stigma shifted funds from stigmatized to lauded banks and among communities that they served, but the shift in funds across institutions and communities had no measurable impact on the rate at which localities recovered from the Great Depression.
Author contact info: Matthew S. Jaremski Utah State University Department of Economics and Finance 3565 Old Main Hill Logan, UT 84322 E-Mail: matthew.jaremski@usu.edu Gary Richardson Department of Economics University of California, Irvine 3155 Social Sciences Plaza Irvine, CA 92697-5100 Tel: 949/824-3189 Fax: 949/824-2182 E-Mail: garyr@uci.edu Angela Vossmeyer Robert Day School of Economics and Finance Claremont McKenna College 500 E. Ninth Street Claremont, CA 91711 Tel: 909/607-0722 E-Mail: Angela.Vossmeyer@cmc.edu

Identifying Preference for Early Resolution from Asset Prices - Ai, Hengjie; Bansal, Ravi; Guo, Hongye; Yaron, Amir (National Bureau of Economic Research Working Paper Series, 2023)
This paper develops an asset market based test for preference for the timing of resolution of uncertainty. Our main theorem provides a characterization of preference for early resolution of uncertainty in terms of the risk premium of assets realized during the period when the informativeness of macroeconomic announcements is resolved. Empirically, we find support for preference for early resolution of uncertainty based on evidence on the dynamics of the implied volatility of S&P 500 index options before FOMC announcements.
Author contact info: Hengjie Ai Department of Finance Wisconsin School of Business University of Wisconsin Madison, WI 53705 U.S.A. Tel: 919/660-2900 E-Mail: hengjie.ai@wisc.edu Ravi Bansal Fuqua School of Business Duke University 1 Towerview Drive Durham, NC 27708 Tel: 919/660-7758 Fax: 919/660-8038 E-Mail: ravi.bansal@duke.edu Hongye Guo 724 K. K. Leung Building University of Hong Kong E-Mail: silver.hongye.guo@gmail.com Amir Yaron The Wharton School University of Pennsylvania 2256 Steinberg-Dietrich Hall Philadelphia, PA 19104-6367 Tel: 215/898-1241 Fax: 215/898-6200 E-Mail: yaron@wharton.upenn.edu

Measuring the Characteristics and Employment Dynamics of U.S. Inventors - Akcigit, Ufuk; Goldschlag, Nathan (National Bureau of Economic Research Working Paper Series, 2023)
Innovation is a key driver of long run economic growth. Studying innovation requires a clear view of the characteristics and behavior of the individuals that create new ideas. A general lack of rich, large-scale data has constrained such analyses. We address this by introducing a new dataset linking patent inventors to survey, census, and administrative microdata at the U.S. Census Bureau. We use this data to provide a first look at the demographic characteristics, employer characteristics, earnings, and employment dynamics of inventors. These linkages, which will be available to researchers with approved access, dramatically increases the scope of what can be learned about inventors and innovative activity.
Author contact info: Ufuk Akcigit Department of Economics University of Chicago 1126 East 59th Street Saieh Hall, Office 403 Chicago, IL 60637 E-Mail: uakcigit@uchicago.edu Nathan Goldschlag Center for Economic Studies US Census Bureau 4600 Silver Hill Road Washington, DC 20233 E-Mail: Nathan.Goldschlag@census.gov

Where Have All the "Creative Talents" Gone? Employment Dynamics of US Inventors - Akcigit, Ufuk; Goldschlag, Nathan (National Bureau of Economic Research Working Paper Series, 2023)
How are inventors allocated in the US economy and does that allocation affect innovative capacity? To answer these questions, we first build a model of creative destruction where an inventor with a new idea has the possibility to work for an entrant or incumbent firm. If the inventor works for the entrant the innovation is implemented and the entrant displaces the incumbent firm. Strategic considerations encourage the incumbent to hire the inventor, offering higher wages, and then not implement the inventor's idea. To test this prediction, we combine data on the employment history of over 760 thousand U.S. inventors with information on jobs from the Longitudinal Employer-Household Dynamics (LEHD) Program at the U.S. Census Bureau. Our results show that (i) inventors are increasingly concentrated in large incumbents, less likely to work for young firms, and less likely to become entrepreneurs, and (ii) when an inventor is hired by an incumbent, compared to a young firm, their earnings increases by 12.6 percent and their innovative output declines by 6 to 11 percent. We also show that these patterns are robust and not driven by life cycle effects or occupational composition effects.
Author contact info: Ufuk Akcigit Department of Economics University of Chicago 1126 East 59th Street Saieh Hall, Office 403 Chicago, IL 60637 E-Mail: uakcigit@uchicago.edu Nathan Goldschlag Center for Economic Studies US Census Bureau 4600 Silver Hill Road Washington, DC 20233 E-Mail: Nathan.Goldschlag@census.gov

Continuances and Uncertainty in the Course of Adjudication - Shavell, Steven (National Bureau of Economic Research Working Paper Series, 2023)
The myriad uncertainties common to the process of adjudication—concerning evidence that opposing parties will present, legal issues that will become relevant, illness of witnesses, and the like—lead to two social problems. First, when unanticipated events occur, the information that parties will be able to provide courts may be inadequate. And second, preparation effort invested by parties may be wasted: whereas parties will tend to prepare for numerous possible events in adjudication, many will not come to pass and thus much effort will be for nought. Both of these problems are addressed by the granting of continuances. Inability to present evidence for want of time will be directly remedied by the giving of continuances; and wasted preparation effort will be reduced because the ability to obtain continuances when uncertain events occur will lessen the need to prepare for them. But the use of continuances involves various costs of delay, meaning that the decision to grant continuances should be guided by an economic calculus. That calculus is developed in the theory presented in this article and the actual use of continuances is discussed.
Author contact info: Steven Shavell Harvard Law School 1575 Massachusetts Avenue Hauser Hall 508 Cambridge, MA 02138 Tel: 617/495-3668 Fax: 617/496-2256 E-Mail: shavell@law.harvard.edu

Unpacking Social Capital - Durante, Ruben; Mastrorocco, Nicola; Minale, Luigi; Snyder, James M, Jr. (National Bureau of Economic Research Working Paper Series, 2023)
We use novel and unique survey data from Italy to shed light on key questions regarding the measurement of social capital and the use of social capital indicators for empirical work. Our data cover a sample of over 600,000 respondents interviewed between 2000 and 2015. We identify four distinct components of social capital – i) social participation, ii) political participation, iii) trust in others, and iv) trust in institutions – and examine how they relate to each other. We then study how each dimension of social capital relates to various socioeconomic factors both at the individual and the aggregate level, and to various proxies of social capital commonly used in the literature. Finally, building on previous work, we investigate to what extent different dimensions of social capital predict differences in key economic, political, and health outcomes. Our findings support the view that social capital is a multifaceted object with multiple dimensions that, while related, are distinct from each other. Future work should take such multidimensionality into account and carefully consider what measure of social capital to use.
Author contact info: Ruben Durante Department of Economics National University of Singapore Singapore E-Mail: rubendurante@gmail.com Nicola Mastrorocco University of Bologna Department of Economics Piazza Scaravilli 2, 40126 Bologna Italy E-Mail: nicola.mastrorocco@unibo.it Luigi Minale Department of Economics Universidad Carlos III de Madrid Calle Madrid 126 Getafe Spain E-Mail: lminale@eco.uc3m.es James M. Snyder Jr. Harvard University 1737 Cambridge Street, CGIS Knafel Building Room 413 Cambridge, MA 02138 Tel: 617/496-1089 E-Mail: jsnyder@gov.harvard.edu

Capital Controls and Trade Policy - Lloyd, Simon P; Marin, Emile A (National Bureau of Economic Research Working Paper Series, 2023)
How does the conduct of optimal cross-border financial policy change with prevailing trade agreements? We study the joint optimal determination of trade policy and capital- flow management in a two-country, two-good model with trade in goods and assets. While the cooperative optimal allocation is efficient, a country-planner can achieve higher domestic welfare by departing from free trade in addition to levying capital controls, absent retaliation from abroad. However, time variation in the optimal tariff induces households to over- or under-borrow through its effects on the path of the real exchange rate. As a result, optimal capital controls can be larger when used in conjunction with optimal tariffs in specific cases; and in others, the optimal trade tariff partly substitutes for the use of capital controls. Accounting for strategic retaliation, we show that committing to a free-trade agreement can reduce incentives to engage in costly capital-control wars for both countries.
Author contact info: Simon P. Lloyd Bank of England Threadneedle Street London EC2R 8AH United Kingdom E-Mail: simon.lloyd@bankofengland.co.uk Emile A. Marin University of California, Davis Department of Economics One Shields Avenue Davis, CA 95811 Tel: 4158159653 E-Mail: emarin@ucdavis.edu

Model-free and Model-based Learning as Joint Drivers of Investor Behavior - Barberis, Nicholas C; Jin, Lawrence J (National Bureau of Economic Research Working Paper Series, 2023)
Motivated by neural evidence on the brain's computations, cognitive scientists are increasingly adopting a framework that combines two systems, namely “model-free” and “model-based” learning. We import this framework into a financial setting, study its properties, and use it to account for a range of facts about investor behavior. These include extrapolative demand, experience effects, the disconnect between investor allocations and beliefs in the frequency domain and the cross-section, the inertia in investors’ allocations, and stock market non-participation. Our results suggest that model-free learning plays a significant role in the behavior of some investors.
Author contact info: Nicholas C. Barberis Yale School of Management P O Box 208200 New Haven, CT 06520-8200 Tel: 203/436-0777 Fax: 203/432-6970 E-Mail: nick.barberis@yale.edu Lawrence J. Jin Johnson College of Business Cornell University Ithaca, NY 14850 Tel: 607-255-0581 E-Mail: lawrence.jin@cornell.edu

Wealth and Property Taxation in the United States - Dray, Sacha; Landais, Camille; Stantcheva, Stefanie (National Bureau of Economic Research Working Paper Series, 2023)
We study the history and geography of wealth accumulation in the US, using newly collected historical property tax records since the early 1800s. The US General Property Tax was a comprehensive tax on all types of property (real, personal, and financial), making it one of the first “wealth taxes.” Drawing on many historical records, we construct long-run, consistent, high-frequency wealth series at the county, state, and national levels. We first document the long-term evolution of household wealth in the US since the early 1800s. The US experienced extraordinary wealth accumulation after the Civil war and until the Great Depression. Second, we reveal that spatial inequality in the US has been large and highly persistent since the mid-1800s, driven mainly by Southern states, whose long-run divergence from the rest of the US predated the Civil War. Before the Civil war, enslaved people were assessed as personal property of the enslavers, representing almost one-half of total taxable property in Southern states. In addition to the moral and ethical issues involved, this system wrongly counted forced labor income as capital. The regional distribution of wealth and the effects of the Civil war appear very different if enslaved people are not included in the property measure. Third, we investigate the determinants of long-term wealth growth and capital accumulation. Among others, we find that counties with a higher share of enslaved property before the Civil War or higher levels of wealth inequality experienced lower subsequent long-run growth in property.
Author contact info: Sacha Dray The World Bank 1818 H Street N.W. Washington, DC 20433 United States E-Mail: sdray@worldbank.org Camille Landais Department of Economics London School of Economics Houghton Street London WC2A 2AE United Kingdom E-Mail: c.landais@lse.ac.uk Stefanie Stantcheva Department of Economics Littauer Center 232 Harvard University Cambridge, MA 02138 Tel: 617-496-2614 E-Mail: sstantcheva@fas.harvard.edu

Frontier History and Gender Norms in the United States - Bazzi, Samuel; Brodeur, Abel; Fiszbein, Martin; Haddad, Joanne (National Bureau of Economic Research Working Paper Series, 2023)
This paper explores how historical gender roles become entrenched as norms over the long run. In the historical United States, gender roles on the frontier looked starkly different from those in settled areas. Male-biased sex ratios led to higher marriage rates for women and lower for men. Land abundance favored higher fertility. The demands of childcare, compounded with isolation from extended family, markets, and social infrastructure, constrained female opportunities outside the home. Frontier women were less likely to report “gainful employment,” but among those who did, relatively more had high-status occupations. Together, these findings integrate contrasting narratives about frontier women—some emphasizing their entrepreneurial independence, others their prevailing domesticity. The distinctive frontier gender roles, in turn, shaped norms over the long run. Counties with greater historical frontier exposure exhibit lower female labor force participation through the 21st century. Time use data suggests this does not come with additional leisure but rather with more household work. These gender inequalities are accompanied by weaker political participation among women. While the historical frontier may have been empowering for some women, its predominant domesticity reinforced inegalitarian gender norms over the long run.
Author contact info: Samuel Bazzi University of California, San Diego School of Global Policy and Strategy 9500 Gilman Drive, 0519 La Jolla, CA 92093 E-Mail: sbazzi@ucsd.edu Abel Brodeur 120 University, Social Sciences Building (9037) Ottawa, ON, Canada K1N 6N5 Canada E-Mail: abrodeur@uottawa.ca Martin Fiszbein Department of Economics Boston University 270 Bay State Road Boston, MA 02215 Tel: 617/353-4389 E-Mail: fiszbein@bu.edu Joanne Haddad ECARES (European Center for Advanced Research in Economics and Statistics) Université Libre de Bruxelles 50 Av. Roosevelt CP 114/04, office R42.5.202 1050 Bruxelles Belgique E-Mail: haddad@nber.org

Trade Credit and Exchange Rate Risk Pass Through - Hardy, Bryan; Saffie, Felipe E; Simonovska, Ina (National Bureau of Economic Research Working Paper Series, 2023)
We show that trade credit mitigates exchange rate risk pass through along supply chains. We develop a theory of trade credit provision along supply chains that involve large intermediate-good suppliers and small final-good producers, both of which face bank borrowing constraints. Motivated by empirical findings, we assume that large suppliers borrow in foreign currency, while small final-good producers borrow in domestic currency at higher rates. Trade credit loosens borrowing constraints and allows for higher production scale. Additionally, the model predicts that unconstrained suppliers fully absorb increasing costs of borrowing in foreign currency when domestic currency depreciates: specifically, suppliers settle for lower profits but maintain unchanged trade credit lines with their trade partners. We verify the model's predictions using firm-level data for over 11,000 large firms in 19 emerging markets over the 2004-2020 period.
Author contact info: Bryan Hardy Bank for International Settlements Centralbahnplatz 2 4051 Basel Switzerland E-Mail: bryan.hardy@bis.org Felipe Saffie Darden School of Business University of Virginia 100 Darden Blvd Charlottesville, VA 22903 E-Mail: SaffieF@darden.virginia.edu Ina Simonovska Department of Economics University of California, Davis One Shields Avenue Davis, CA 95616 E-Mail: inasimonovska@ucdavis.edu

Specialization in Banking - Blickle, Kristian; Parlatore, Cecilia; Saunders, Anthony (National Bureau of Economic Research Working Paper Series, 2023)
Using supervisory data on the loan portfolios of large US banks, we document that these banks specialize by concentrating their lending disproportionately in a few industries. This specialization is consistent with banks having industry-specific knowledge, reflected in reduced risk of loan defaults, lower aggregate charge-offs, and higher propensity to lend to opaque firms in the preferred industry. Banks attract high-quality borrowers by offering generous loan terms in their specialized industry, especially to borrowers with alternative options. Banks focus on their preferred industry in times of instability and relatively lower tier 1 capital as well as after sudden surges in deposits.
Author contact info: Kristian Blickle Federal Reserve Bank of New York 33 Liberty St New York City, New 10045 E-Mail: kristian.blickle@ny.frb.org Cecilia Parlatore Stern School of Business New York University 44 West 4th Street New York, NY 10012 Tel: 212/998-0171 E-Mail: cps272@stern.nyu.edu Anthony Saunders Stern School of Business New York University 44 West 4th Street, Room 9-91 New York, NY 10012 E-Mail: asaunder@stern.nyu.edu

The Good Wife? Reputation Dynamics and Financial Decision-Making Inside the Household - Buchmann, Nina; Dupas, Pascaline; Ziparo, Roberta (National Bureau of Economic Research Working Paper Series, 2023)
We study the dynamic relationship between women's intra-household reputation and investment decisions. We consider household investments delegated to the wife in settings where wives perceived to be savvy investors by their husbands are entrusted with a larger budget share. We show, first theoretically, then empirically in a series of experiments in Malawi, that a signaling game can result: to maintain control over a larger budget share, wives (a) under-invest in novel goods with unknown but high expected returns; and (b) knowingly over-use low-return goods in order to hide bad purchase decisions---we call this the intra-household sunk cost effect. These dynamics have important implications for women's well-being as well as for the design of poverty alleviation programs.
Author contact info: Nina Buchmann Department of Economics Stanford University Landau Economics Building 579 Jane Stanford Way Stanford, CA 94305 E-Mail: ncb21@stanford.edu Pascaline Dupas Department of Economics Princeton University Julis Romo Rabinowitz Building Princeton, NJ 08544 E-Mail: pdupas@princeton.edu Roberta Ziparo Aix-Marseille Université 5-9 Boulevard Bourdet, CS 50498 13205 Marseille Cedex 1 France E-Mail: roberta.ziparo@univ-amu.fr

Inflation and Real Activity over the Business Cycle - Bianchi, Francesco; Nicolò, Giovanni; Song, Dongho (National Bureau of Economic Research Working Paper Series, 2023)
We study the relation between inflation and real activity over the business cycle. We employ a Trend-Cycle VAR model to control for low-frequency movements in inflation, unemployment, and growth that are pervasive in the post-WWII period. We show that cyclical fluctuations of inflation are related to cyclical movements in real activity and unemployment, in line with what is implied by the New Keynesian framework. We then discuss the reasons for which our results relying on a Trend-Cycle VAR differ from the findings of previous studies based on VAR analysis. We explain empirically and theoretically how to reconcile these differences.
Author contact info: Francesco Bianchi Johns Hopkins University Department of Economics 3400 N. Charles Street 544E Wyman Bldg. Baltimore, Maryland 21218 E-Mail: francesco.bianchi@jhu.edu Giovanni Nicolò Federal Reserve Board 20th St & Constitution Avenue NW Washington, DC 20551 E-Mail: giovanni.nicolo@frb.gov Dongho Song Johns Hopkins University Carey Business School 100 International Drive Baltimore, MD 21202 E-Mail: dongho.song@jhu.edu

Wayfair: A Step Towards the Destination, But Sales Tax Competition Remains - Bruce, Donald; Fox, William F; Shute, Alannah M (National Bureau of Economic Research Working Paper Series, 2023)
The U.S. Supreme Court decision in the landmark 2018 Wayfair case greatly improved state governments’ ability to enforce collection of sales taxes on a destination basis. This has reduced state tax competition with an essentially-untaxed internet, but has brought traditional cross-border shopping, which is often subject to origin taxation, back to prominence among policy makers and researchers. We provide a detailed discussion of state and local sales tax features and the extent to which they have fostered sales tax competition in recent decades. We then explore the extent to which greater destination taxation has influenced the location of (a) consumer purchases and (b) business locations using two different empirical approaches. First, we analyze county-level data for Tennessee and select surrounding states to provide suggestive evidence that sales tax collections have grown more in rural Tennessee counties and less in Tennessee border counties since Wayfair. Additionally, we show that collections have grown more since Wayfair in North Carolina counties along the Tennessee border, where the tax rate differential is on the order of 3.3 percentage points. Second, we examine state-level data to show that business applications have grown at much faster rates after Wayfair in states with the highest sales tax rates. We attribute this to the removal of the significant disincentive to establish sales tax nexus that dominated the pre-Wayfair environment.
Author contact info: Donald Bruce BCBER - 717 Stokely Management Center 916 Volunteer Blvd. University of Tennessee Knoxville, TN 37996 USA Tel: 8659746088 Fax: 8659743100 E-Mail: dbruce@utk.edu William F. Fox 815 Andy Holt Tower University of Tennessee Knoxville, TN 37996 USA E-Mail: billfox@utk.edu Alannah M. Shute E-Mail: alannahshute@gmail.com

The Effects of Comprehensive Educator Evaluation and Pay Reform on Achievement - Hanushek, Eric A; Luo, Jin; Morgan, Andrew J; Nguyen, Minh; Ost, Ben; Rivkin, Steven G; Shakeel, Ayman (National Bureau of Economic Research Working Paper Series, 2023)
A fundamental question for education policy is whether outcomes-based accountability including comprehensive educator evaluations and a closer relationship between effectiveness and compensation improves the quality of instruction and raises achievement. We use synthetic control methods to study the comprehensive teacher and principal evaluation and compensation systems introduced in the Dallas Independent School District (Dallas ISD) in 2013 for principals and 2015 for teachers. Under this far-reaching reform, educator evaluations that are used to support teacher growth and determine salary depend on a combination of supervisor evaluations, student achievement, and student or family survey responses. The reform replaced salary scales based on experience and educational attainment with those based on evaluation scores, a radical departure from decades of rigid salary schedules. The synthetic control estimates reveal positive and significant effects of the reforms on math and reading achievement that increase over time. From 2015 through 2019, the average achievement for the synthetic control district fluctuates narrowly between -0.27 s.d. and -0.3 s.d., while the Dallas ISD average increases steadily from -0.28 s.d. in 2015 to -0.08 s.d. in 2019, the final year of the sample. Though the increase for reading is roughly half as large, it is also highly significant.
Author contact info: Eric A. Hanushek Hoover Institution Stanford University Stanford, CA 94305-6010 Tel: 650/736-0942 Fax: 650/723-1687 E-Mail: hanushek@stanford.edu Jin Luo E-Mail: jin.luo@utdallas.edu Andrew J. Morgan E-Mail: a.j.p.morgan@gmail.com Minh Nguyen Department of Economics Ball State University Muncie, IN 47306 United States E-Mail: mtnguyen@bsu.edu Ben Ost Department of Economics, University of Illinois at Chicago, 601 S. Morgan Street, 718 UH, Chicago, IL 60607 E-Mail: bost@uic.edu Steven G. Rivkin Department of Economics University of Illinois at Chicago 601 South Morgan UH725 M/C144 Chicago, IL 60607 Tel: 312.413.2368 E-Mail: sgrivkin@uic.edu Ayman Shakeel E-Mail: ashake6@uic.edu

The Canary in the Coal Decline: Appalachian Household Finance and the Transition from Fossil Fuels - Blonz, Josh; Roth Tran, Brigitte; Troland, Erin E (National Bureau of Economic Research Working Paper Series, 2023)
The energy transition away from fossil fuels, despite its substantial overall climate benefits, presents significant transition risks for communities historically built around the fossil fuel industry. This paper uses the decline in the Appalachian coal industry between 2011 and 2018 to understand how individuals are harmed by a reduction in local fossil fuel extraction activity. We use individual-level credit data and exogenous variation in coal demand from the electricity sector to identify how the coal mining industry’s decline affected the finances of Appalachian households. We find that the decline in demand for coal caused broad-based negative impacts, decreasing credit scores and increasing credit utilization, delinquencies, amounts in third party collections, bankruptcy rates, and the number of individuals with subprime status. These effects were broad based and cannot be explained solely by individuals who lost coal mining jobs. Individuals with the lowest pre-period credit scores were more likely to end up in financial distress and experienced a greater deterioration in credit scores. Quantile regressions show that the drop in credit scores from the coal decline was most pronounced between the 30th and 50th percentiles of the credit score distribution. Our results provide evidence that people living in fossil fuel extraction regions are likely to experience declines in financial well-being from the energy transition even if they do not directly work in the affected industry.
Author contact info: Josh Blonz 20th Street and Constitution Avenue N.W. Washington, DC 20551 E-Mail: joshua.blonz@frb.gov Brigitte Roth Tran Federal Reserve Bank of San Francisco 101 Market St. Mail Stop 1130 San Francisco, CA 94105 United States E-Mail: Brigitte.RothTran@sf.frb.org Erin Troland E-Mail: erin.e.troland@frb.gov

Environmentally-Inclined Politicians and Local Environmental Performance: Evidence from Publicly Listed Firms in China - Fang, Hanming; Ren, Honglin; Song, Danwen; Xu, Nianhang (National Bureau of Economic Research Working Paper Series, 2023)
We study how environmentally-inclined politicians (EIPs), i.e., politicians with prior environment-related working experience, affect local environmental performance in China. Firms located in cities with EIPs have lower levels of sulfur dioxide (SO2) emissions. The effect is attenuated when the politician is in his/her second term and among firms that are economically important. Firms in cities with EIPs commit less environmental violations, receive more green subsidies from the local government, and choose to establish new polluting subsidiaries in cities without EIPs. Furthermore, these EIPs do not have inferior economic performance and their promotion likelihood is negatively related to local emission levels. The findings overall suggest that local officials strategically leverage their expertise in environment protection to allocate more effort on environmental causes.
Author contact info: Hanming Fang Department of Economics Ronald O. Perelman Center for Political Science and Economics University of Pennsylvania 133 South 36th Street, Suite 150 Philadelphia, PA 19104 Tel: 215-898-7767 Fax: 215-573-2057 E-Mail: hanming.fang@econ.upenn.edu Honglin Ren Department of Finance School of Business Renmin University of China Beijing 10087 China E-Mail: renhonglin@rmbs.ruc.edu.cn Danwen Song Department of Finance School of Business Renmin University of China Beijing 100872 China E-Mail: dwsong123@163.com Nianhang Xu School of Business Renmin University of China Beijing China E-Mail: nhxu@ruc.edu.cn

Fertility in the Heart of the COVID-19 Storm - Dench, Daniel L; Li, Wenhui; Joyce, Theodore J; Minkoff, Howard; Van Wye, Gretchen (National Bureau of Economic Research Working Paper Series, 2023)
We describe how the COVID-19 pandemic affected reproductive choices in New York City, the most acutely impacted area of the United States. We contrast changes in New York City with reproductive outcomes in the rest of the US. We find that births to New York City residents fell 8.4% more between March, 2020 and February 2021 than that would have been expected given trends leading up to the pandemic. Births to US-born residents of New York City fell 5.5% over the same year, triple the observed decline in the rest of the US. Births to foreign-born New York City residents fell 11.4%, twice the decline observed in the rest of the US. Reported induced abortions to New York City residents fell precipitously whereas induced abortions nation-wide rose slightly. The acute downturn and robust recovery in births in New York City maps closely with the spike in mortality and its equally rapid decline three months later. We conclude that the fear and uncertainty in the early months of the pandemic is the best explanation for the sudden, but brief drop in births in New York City.
Author contact info: Daniel L. Dench School of Economics 221 Bobby Dodd Way NW Atlanta, GA 30332 Tel: 404 894-4912 E-Mail: dench@gatech.edu Wenhui Li New York City Department of Health and Mental Hygiene Bureau of Vital Statistics 125 Worth Street, Room 205 New York, New 10013 E-Mail: wli@health.nyc.gov Theodore J. Joyce Baruch College, CUNY and National Bureau of Economic Research 39 Broadway, Suite 1620 New York, NY 10006 E-Mail: theodore.joyce@baruch.cuny.edu Howard Minkoff Department of Obstetrics and Gyncology SUNY Health Science Center at Brooklyn Maimonides Medical Center 4802 10th Ave Brooklyn, New 11219 E-Mail: hminkoff@maimonidesmed.org Gretchen Van Wye New York City Department of Health and Mental Hygiene Bureau of Vital Statistics Division of Epidemiology 125 Worth Street New York, New 10013 E-Mail: gvanwye@health.nyc.gov

Timing Matters: Intra-day Shifts of Economic Activity and Ambient Ozone Concentrations - Adler, David B; Severnini, Edson R (National Bureau of Economic Research Working Paper Series, 2023)
Ground-level ozone has been shown to have significant negative health externalities from short-term exposure, and as such has been regulated by the U.S. Clean Air Act since the 1970s. Ozone is not emitted directly; instead formation occurs due to a complex Leontief-like combination of air pollutants, under sunlight and warm temperatures, that results in high levels mid-day and low levels at night. Despite this known relationship, EPA regulations mostly consider the total emissions of ozone precursors and not when these emissions occur. Using hourly data on ambient ozone from 1980-2017 near the U.S. time zone borders, we provide evidence that the 1-hour time difference on either side of a border leads to a nontrivial change in ozone levels in certain hours of the day. We then examine a cap-and-trade program targeting ozone precursor emissions – the NOx Budget Program – finding that while it reduced ozone overall it did not have an economically significant effect on the timing of those emissions. We conclude by outlining a possible policy approach to account for the time-varying value of reductions in ozone precursor emissions.
Author contact info: David B. Adler E-Mail: david.adler@cbo.gov Edson R. Severnini H. John Heinz III College Carnegie Mellon University 4800 Forbes Ave #2114B Pittsburgh, PA 15213 Tel: 510/860-1808 E-Mail: ersevernini@gmail.com

An Intangibles-Adjusted Profitability Factor - Jagannathan, Ravi; Korajczyk, Robert; Wang, Kai (National Bureau of Economic Research Working Paper Series, 2023)
We treat expenditures that create intangible assets as investments and instead of expensing them, we add them back to earnings when measuring the return on equity of firms while constructing the profitability factor in the Fama and French (2015) five factor model. The profitability factor we construct has significant alpha relative to many extant multi-factor asset-pricing models, including the standard Fama-French five factor model. When the profitability factor in the Fama and French (2015) five factor model is replaced with our intangibles adjusted profitability factor, the model performs better in explaining the cross section of stock returns, and several anomalies documented in the literature. Portfolios that exploit price momentum, earnings momentum, and operating leverage no longer have significant alphas. The improvement is consistent with the dividend discount model for equity valuation. Adjusted earnings constructed by treating expenditures that create intangible assets as investments help forecast the cross section of future cash dividends and operating cash flows on stocks better, especially at longer horizons. Adopting our adjustment when constructing the monthly rebalanced profitability factor in the Hou et al. (2015) four factor model improves its performance as well. Our intangible adjusted profitability factor has smaller left tail risk and co-tail risk with the market when compared to the standard profitability factor.
Author contact info: Ravi Jagannathan Kellogg Graduate School of Management Northwestern University 2211 Campus Drive Evanston, IL 60208 Tel: 847/491-8338 Fax: 847/491-5719 E-Mail: rjaganna@kellogg.northwestern.edu Robert Korajczyk Department of Finance Kellogg School of Management Northwestern University 2211 Campus Drive, Room 4357 Evanston, IL 60208-0898 Tel: 847/491-8336 Fax: 847/491-5719 E-Mail: r-korajczyk@northwestern.edu Kai Wang Kellogg School of Management Northwestern University 2211 Campus Dr Evanston, IL 60208 E-Mail: kai.wang2@kellogg.northwestern.edu

Disasters with Unobservable Duration and Frequency: Intensified Responses and Diminished Preparedness - Acharya, Viral V; Johnson, Timothy; Sundaresan, Suresh; Zheng, Steven (National Bureau of Economic Research Working Paper Series, 2023)
We study an economy subject to recurrent disasters when the frequency and duration of the disasters are unobservable parameters. Imprecise information about transition intensities increases the probability of the current state effectively lasting forever. In a disaster, uncertainty about duration makes disasters subjectively much worse and can make the welfare value of information extremely high. However, in advance of a disaster, uncertainty about the arrival rate can be welfare-increasing. Agents optimally invest less in mitigation than under full information and pay less for insurance against the next disaster.
Author contact info: Viral V. Acharya Stern School of Business New York University 44 West 4th Street, Suite 9-65 New York, NY 10012 Tel: 212/998-0354 Fax: 212 995 4233 E-Mail: vacharya@stern.nyu.edu Timothy Johnson Gies College of Business University of Illinois 343E Wohlers Hall 1206 South Sixth Street Champaign, IL 61820 Tel: 217-333-4089 E-Mail: tcj@illinois.edu Suresh Sundaresan Columbia Business School 3022 Broadway New York, NY 10027 E-Mail: ms122@columbia.edu Steven Zheng University of California, Berkeley 545 Student Services Building Berkeley, CA 94720 E-Mail: steven_zheng@berkeley.edu

Information Technology, Firm Size, and Industrial Concentration - Brynjolfsson, Erik; Jin, Wang; Wang, Xiupeng (National Bureau of Economic Research Working Paper Series, 2023)
Information flows, and thus information technology (IT) are central to the structure of firms and markets. Using data from the U.S. Census Bureau, we provide firm-level evidence that increases in IT intensity are associated with increases in firm size and concentration in both employment and sales. Results from instrumental variables and long-difference models suggest that the effect is likely causal. The effect of IT on size is more pronounced for sales than employment, which leads to a decline in the labor share, consistent with the “scale without mass” theory of digitization. Furthermore, we find that IT provides greater benefits to larger firms by increasing their capability to replicate their operations across establishments, markets, and industries. Our findings provide empirical evidence suggesting that the substantial rise in IT investment is one of the main driving forces for the increase in firm size, decline of labor share, the growth of superstar firms, and increased market concentration in recent years.
Author contact info: Erik Brynjolfsson Stanford Digital Economy Laboratory 353 Jane Stanford Way, Office 136 Stanford, CA 94305 E-Mail: erik.brynjolfsson@gmail.com Wang Jin Stanford Digital Economy Laboratory 353 Jane Stanford Way Stanford, CA 94305 E-Mail: jwangjin@mit.edu Xiupeng Wang Northeastern University and Stanford Digital Economy Laboratory 765 Commonwealth Avenue Boston, MA 02215 E-Mail: xiu.wang@northeastern.edu

The Value of Ratings: Evidence from their Introduction in Securities Markets - Bernstein, Asaf; Frydman, Carola; Hilt, Eric (National Bureau of Economic Research Working Paper Series, 2023)
We study the effects of the first-ever ratings for corporate securities. In 1909, John Moody published a book that partitioned the majority of listed railroad bonds into letter-graded ratings based on his assessments of their credit risk. These ratings had no regulatory implications and were largely explainable using publicly available information. Despite this, we find that lower than market-implied ratings caused a rise in secondary market bond yields. Using an instrumental-variables design, we show that bonds that were rated experienced a substantial decline in their bid-ask spreads, which is consistent with reduced information asymmetries and improved liquidity. Our findings suggest that ratings can improve information transmission, even in settings with the highest monetary stakes, and highlight their potential value for the functioning of financial markets.
Author contact info: Asaf Bernstein Leeds School of Business University of Colorado at Boulder Campus Box 401 Boulder, CO 80309 Tel: 303/492-8854 E-Mail: asaf.bernstein@colorado.edu Carola Frydman Kellogg School of Management Northwestern University 2211 Campus Drive Room 4383 Evanston, IL 60208 Tel: 847/467-4457 Fax: 847/491-5719 E-Mail: c-frydman@kellogg.northwestern.edu Eric Hilt Wellesley College Department of Economics 106 Central Street Wellesley, MA 02481 Tel: 781/283-2986 Fax: 781/283-2177 E-Mail: ehilt@wellesley.edu

Difference-in-Differences with Unequal Baseline Treatment Status - Tazhitdinova, Alisa; Vazquez-Bare, Gonzalo (National Bureau of Economic Research Working Paper Series, 2023)
We study a difference-in-differences (DiD) framework where groups experience unequal treatment statuses in the pre-policy change period. This approach is commonly employed in empirical studies but it contradicts the canonical model's assumptions. We show that in such settings, the standard DiD approach fails to recover the average treatment effect (ATT), unless the treatment effect is immediate and constant over time. Furthermore, the usual parallel trends test is invalid, meaning one may find pre-trends when the parallel trends assumption holds, and vice versa. We discuss two solutions. First, we show that including a linear term trend will recover the ATT if the differences in trends are constant over time (both in unequal baseline and canonical DiD settings) but not otherwise. Second, estimation in reverse also recovers the ATT if the potential outcomes do not depend on past treatments and post-policy statuses are converging.
Author contact info: Alisa Tazhitdinova Department of Economics University of California, Santa Barbara Santa Barbara, CA 93106 E-Mail: tazhitda@ucsb.edu Gonzalo Vazquez-Bare Department of Economics University of California, Santa Barbara Santa Barbara, CA 93106 E-Mail: gvazquez@econ.ucsb.edu

The Characteristics and Geographic Distribution of Robot Hubs in U.S. Manufacturing Establishments - Brynjolfsson, Erik; Buffington, Cathy; Goldschlag, Nathan; Li, J. Frank; Miranda, Javier; Seamans, Robert (National Bureau of Economic Research Working Paper Series, 2023)
We use data from the Annual Survey of Manufactures to study the characteristics and geography of investments in robots across U.S. manufacturing establishments. We find that robotics adoption and robot intensity (the number of robots per employee) is much more strongly related to establishment size than age. We find that establishments that report having robotics have higher capital expenditures, including higher information technology (IT) capital expenditures. Also, establishments are more likely to have robotics if other establishments in the same Core-Based Statistical Area (CBSA) and industry also report having robotics. The distribution of robots is highly skewed across establishments’ locations. Some locations, which we call Robot Hubs, have far more robots than one would expect even after accounting for industry and manufacturing employment. We characterize these Robot Hubs along several industry, demographic, and institutional dimensions. The presence of robot integrators and higher levels of union membership are positively correlated with being a Robot Hub.
Author contact info: Erik Brynjolfsson Stanford Digital Economy Laboratory 353 Jane Stanford Way, Office 136 Stanford, CA 94305 E-Mail: erik.brynjolfsson@gmail.com Cathy Buffington E-Mail: Catherine.D.Buffington@census.gov Nathan Goldschlag Center for Economic Studies US Census Bureau 4600 Silver Hill Road Washington, DC 20233 E-Mail: Nathan.Goldschlag@census.gov J. Frank Li Tel: 7343581363 E-Mail: jfrankliwork@gmail.com Javier Miranda Friedrich-Schiller University Kleine Märkerstraße 806108 Halle (Saale), Saxo D-06108 Germany Tel: +1(202)2551331 E-Mail: Javier.Miranda@iwh-halle.de Robert Seamans NYU Stern School of Business 44 West 4th Street, KMC 7-58 New York, NY 10012 E-Mail: rseamans@stern.nyu.edu

Tracing the International Transmission of a Crisis Through Multinational Firms - Biermann, Marcus; Huber, Kilian (National Bureau of Economic Research Working Paper Series, 2023)
We show that multinational firms transmit shocks across countries through their internal capital markets. We study a credit supply shock to parent firms in Germany. International affiliates outside Germany supported their parents through internal lending, became financially constrained themselves, and experienced lower real growth. We find that managers were "Darwinist" with respect to international affiliates but "Socialist" in the home country, that internal capital markets transmitted the credit shock more strongly than a non-financial shock, and that access to developed credit markets attenuated the real effects. The total real impact of shock transmission through multinationals on foreign economies was large.
Author contact info: Marcus Biermann Department of Business Administration and Economics Bielefeld University Universitätsstraße 25 33615 Bielefeld Germany E-Mail: marcus.biermann@uni-bielefeld.de Kilian Huber Booth School of Business University of Chicago 5807 S. Woodlawn Avenue Chicago, IL 60637 E-Mail: kilianhuber@uchicago.edu

Is Pay Transparency Good? - Cullen, Zoe B (National Bureau of Economic Research Working Paper Series, 2023)
Countries around the world are enacting pay transparency policies to combat pay discrimination. 71% of OECD countries have done so since 2000. Most are enacting transparency horizontally, revealing pay between co-workers of similar seniority within a firm. While these policies have narrowed co-worker wage gaps, they have also lead to counterproductive peer comparisons and caused employers to bargain more aggressively, lowering average wages. Other pay transparency policies, without directly targeting discrimination, have benefited workers by addressing broader information frictions in the labor market. Vertical pay transparency policies reveal to workers pay differences across different levels of seniority. Empirical evidence suggests these policies can lead to more accurate and more optimistic beliefs about earnings potential, increasing employee motivation and productivity. Cross-firm pay transparency policies reveal wage differences across employers. These policies have encouraged workers to seek jobs at higher paying firms, negotiate higher pay, and sharpened wage competition between employers. We discuss the evidence on pay transparency’s effects, and open questions.
Author contact info: Zoe B. Cullen Rock Center 210 Harvard Business School 60 N. Harvard Boston, MA 02163 Tel: 617/495-1867 E-Mail: zcullen@hbs.edu

Capital Gains Realizations - Hines, James R, Jr.; Schaffa, Daniel (National Bureau of Economic Research Working Paper Series, 2023)
Evidence that high tax rates significantly depress capital gains realizations is inconsistent with the implications of neoclassical investment models in unchanging economic environments. Higher tax rates reduce after-tax investment returns, thereby encouraging investors to sell capital assets earlier. For a given investment horizon, higher tax rates need not reward accumulating unrealized gains over long periods – and even if they do, longer accumulations can lead to earlier realizations. Consequently, the sizeable observed effects of capital gains taxes likely reflect investor anticipations of future tax rate changes, rather than the time value of money.
Author contact info: James R. Hines Department of Economics University of Michigan 343 Lorch Hall 611 Tappan Street Ann Arbor, MI 48109-1220 Tel: 734/764-2320 Fax: 734/764-2769 E-Mail: jrhines@umich.edu Daniel Schaffa School of Law University of Richmond Room 218 203 Richmond Way Richmond, VA 23173 USA E-Mail: dschaffa@richmond.edu

Natural Resources and Sovereign Risk in Emerging Economies: A Curse and a Blessing - Hamann, Franz; Mendez-Vizcaino, Juan Camilo; Mendoza, Enrique G; Restrepo-Echavarria, Paulina (National Bureau of Economic Research Working Paper Series, 2023)
Emerging economies that are large oil producers have sizable external debt, their country risk rises when oil prices fall, and several of them have defaulted at least once since 1979. Moreover, while oil and non-oil output reduce country risk on impact and in the long-run, oil reserves reduce it marginally on impact but increase it in the long-run. We propose a model of sovereign default and oil extraction consistent with these observations. The sovereign manages oil reserves strategically to make default less painful by altering the value of autarky, and hence its sustainable debt falls. All else equal, default is less likely in states in which reserves or oil prices are higher, or non-oil GDP is lower, but the equilibrium dynamics of reserves and country risk in response to oil-price shocks switch from negatively correlated on impact to positively correlated for several years.
Author contact info: Franz Hamann Cra 7 # 14-78 Macroeconomic Modeling Department Bank of the Republic, Colombia Bogota Colombia Tel: ++573134428540 E-Mail: franz.hamann@gmail.com Juan Camilo Mendez-Vizcaino Carrera 7 # 14-78 Bogota 110321 Colombia E-Mail: mendezv.jc@gmail.com Enrique G. Mendoza Department of Economics University of Pennsylvania 3718 Locust Walk Philadelphia, PA 19104 Tel: 215-898-7701 E-Mail: egme@sas.upenn.edu Paulina Restrepo-Echavarria 4 E Villa Ave St Louis, MO 63132 E-Mail: paulinares@gmail.com

Dynamic Banking with Non-Maturing Deposits - Jermann, Urban; Xiang, Haotian (National Bureau of Economic Research Working Paper Series, 2023)
The majority of bank liabilities are deposits typically not withdrawn for extended periods. We propose a dynamic model of banks in which depositors forecast banks’ leverage and default decisions, and withdraw optimally by trading off current against future liquidity needs. Endogenous deposit maturity creates a time-varying dilution problem that has major effects on bank dynamics. Interest rate cuts produce delayed increases in bank risk which are stronger in low rate regimes. Deposit insurance can exacerbate the deposit dilution and amplify the increase in bank risk.
Author contact info: Urban Jermann Finance Department The Wharton School of the University of Pennsylvania 3620 Locust Walk Philadelphia, PA 19104 Tel: 215/898-4184 Fax: 215/898-6200 E-Mail: jermann@wharton.upenn.edu Haotian Xiang Peking University No.5 Yiheyuan Road Haidian District Beijing 100871 China E-Mail: xiang@gsm.pku.edu.cn

The Long Run Effects of a Comprehensive Teacher Performance Pay Program on Student Outcomes - Cohodes, Sarah; Eren, Ozkan; Ozturk, Orgul (National Bureau of Economic Research Working Paper Series, 2023)
This paper examines the effects of a comprehensive performance pay program for teachers implemented in high-need schools on students’ longer-run educational, criminal justice, and economic self-sufficiency outcomes. Using linked administrative data from a Southern state, we leverage the quasi-randomness of the timing of program adoption across schools to identify causal effects of the school reform. The program improved educational attainment and reduced both criminal activity and dependence on government assistance in early adulthood. We find little scope for student sorting or changes in the composition of teacher workforce, and that program benefits far exceeded its costs. We propose mechanisms for observed long-run effects and provide evidence consistent with these explanations. Several robustness checks and placebo tests support our findings.
Author contact info: Sarah Cohodes Gerald R. Ford School of Public Policy University of Michigan 735 South State Street Ann Arbor, MI 48109 E-Mail: scohodes@umich.edu Ozkan Eren Department of Economics University of California, Riverside Sproul Hall Riverside, CA 92521 E-Mail: ozkan.eren@ucr.edu Orgul Ozturk 821 Beltline Blvd Columbia SC Columbia, Sout 29208 United States Tel: 8034636168 E-Mail: odozturk@moore.sc.edu

The Offshore World According to FATCA: New Evidence on the Foreign Wealth of U.S. Households - Johannesen, Niels; Reck, Daniel; Risch, Max; Slemrod, Joel; Guyton, John; Langetieg, Patrick (National Bureau of Economic Research Working Paper Series, 2023)
This paper uses account-level information, reported to the IRS by foreign financial institutions under the Foreign Account Tax Compliance Act (FATCA), to produce new evidence on the foreign financial wealth of U.S. households. We find that U.S. taxpayers hold around $4 trillion in foreign accounts, almost half in jurisdictions usually considered tax havens. Combining the FATCA reports with other administrative tax data and tracing account ownership through partnerships, we document a steep income gradient in the propensity to hold assets in foreign financial institutions. Specifically, more than 60% of the individuals in the top 0.01% of the income distribution own foreign accounts, the vast majority in tax havens and more than half through a partnership. We discuss the likely implications of these findings for the overall impact of FATCA on tax compliance and government revenue.
Author contact info: Niels Johannesen University of Copenhagen Department of Economics and CEBI Denmark E-Mail: niels.johannesen@econ.ku.dk Daniel Reck University of Maryland Department of Economics Tydings Hall 7343 Preinkert Dr College Park, MD 20742 E-Mail: dreck@umd.edu Max Risch Tepper School of Business Carnegie Mellon University 4765 Forbes Ave. Pittsburgh, PA 15213 United States Tel: 312-515-8729 E-Mail: mwrisch@andrew.cmu.edu Joel Slemrod University of Michigan 701 Tappan Street Room R5396 Ann Arbor, MI 48109-1234 Tel: 734/936-3914 Fax: 734-615-4323 E-Mail: jslemrod@umich.edu John Guyton Internal Revenue Service Research, Applied Analytics, and Statistics 77 K Street, NE Washington, DC 20002 E-Mail: john.guyton@irs.gov Patrick Langetieg Internal Revenue Service Research, Applied Analytics, and Statistics 77 K Street, NE Washington, DC 20002 E-Mail: Patrick.T.Langetieg@irs.gov

What Purpose Do Corporations Purport? Evidence from Letters to Shareholders - Rajan, Raghuram; Ramella, Pietro; Zingales, Luigi (National Bureau of Economic Research Working Paper Series, 2023)
Using natural language processing, we identify corporate goals stated in the shareholder letters of the 150 largest companies in the United States from 1955 to 2020. Corporate goals have proliferated, from less than one on average in 1955 to more than 7 in 2020. While in 1955, profit maximization, market share growth, and customer service were dominant goals, today almost all companies proclaim social and environmental goals as well. We examine why firms announce goals and when. We find goal announcements are associated with management’s responses to the firm’s (possibly changed) circumstances, with the changing power and preferences of key constituencies, as well as from management’s attempts to deflect scrutiny. While executive compensation is still overwhelmingly based on financial performance, we do observe a rise in bonus payments contingent on meeting social and environmental objectives. Firms that announce environmental and social goals tend to implement programs intended to achieve those goals, although their impact on outcomes is unclear. The evidence is consistent with firms focusing on shareholder interests while incorporating stakeholder interests as interim goals. Goals also do seem to be announced opportunistically to deflect attention and alleviate pressure on management.
Author contact info: Raghuram Rajan Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-4437 Fax: 773/702-0458 E-Mail: raghuram.rajan@ChicagoBooth.edu Pietro Ramella 5807 S. Woodlawn CHICAGO, IL 60637 USA E-Mail: pramell0@chicagobooth.edu Luigi Zingales Booth School of Business The University of Chicago 5807 S. Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-3196 Fax: 773/834-2081 E-Mail: luigi.zingales@ChicagoBooth.edu

Is Income Inequality Linked to Infectious Disease Prevalence? A Hypothesis-Generating Ecological Study Using Tuberculosis - Bhattacharya, Jay; Bhattacharya, Joydeep; Kim, Minkyong (National Bureau of Economic Research Working Paper Series, 2023)
We study the association between infectious disease prevalence and income inequality. We hypothesize that random social mixing in an income-unequal society brings into contact a) susceptible and infected poor and b) the infected-poor and the susceptible-rich, raising infectious disease prevalence. We investigate this association by examining whether countries with elevated levels of income inequality have higher rates of pulmonary Tuberculosis (TB) incidence per capita. We analyzed publicly available country-level panel data for a large cross-section of countries between 1995 and 2013. A “negative control” using anemia (a non-communicable disease, and hence impervious to the hypothesized mechanism) is also applied. We find that elevated levels of income inequality were positively associated with tuberculosis prevalence. All else equal, countries with income-Gini coefficients 10% apart are a statistically significant 4% different in tuberculosis incidence. Income inequality had a null effect on anemia, the negative control. Our cross-country regression results suggest that income inequality may create conditions where TB spreads more easily.
Author contact info: Jay Bhattacharya 117 Encina Commons CHP/PCOR Stanford University Stanford, CA 94305-6019 Tel: 650/736-0404 Fax: 650/723-1919 E-Mail: jay@stanford.edu Joydeep Bhattacharya Department of Economics Iowa State University Ames, IA 50011-1070 Tel: 5154516657 E-Mail: joydeep@iastate.edu Minkyong Kim E-Mail: mkkim0802@gmail.com

Combining Risk Adjustment with Risk Sharing in Health Plan Payment Systems: Private Health Insurance in Australia - Henriquez, Josefa; van Kleef, Richard C; Matthews, Andrew; McGuire, Thomas; Paolucci, Francesco (National Bureau of Economic Research Working Paper Series, 2023)
Health plan payment systems with community-rated premiums typically include risk adjustment, risk sharing or both to compensate insurers for predictable profits (on young and healthy people) and predictable losses (on the elderly and chronically ill). This paper shows how a payment system based only on risk sharing (like in Australia), is improved by combining risk sharing with risk adjustment. Using Australia’s private health insurance market as a case study, we compare and assess the current risk sharing based payment system against alternative systems which combine risk adjustment and risk sharing. Specifically, we develop outcome measures to compare the models in terms of incentives for risk selection and incentives for cost control. We find that a payment system composed of risk adjustment based on simple risk-adjustor variables, supplemented with outlier risk sharing outperforms the current system based solely on risk sharing. Our results show that as more and better data become available, reliance on risk sharing can be reduced whilst the use of risk adjustment can be expanded. In an additional analysis, we show that changes in the payment system affect the redistribution of claims costs across different levels of coverage. We discuss qualitatively additional measures that can be taken to achieve the desired level of redistribution.
Author contact info: Josefa Henriquez University of Newcastle Corner of Hunter Street and Auckland Street Newcastle, NSW 2300 Australia E-Mail: Josefa.henriquez@newcastle.edu.au Richard C. van Kleef Erasmus School of Health Policy and Management Erasmus University Rotterdam PO Box 1738 3000 DR Rotterdam The Netherlands E-Mail: vankleef@eshpm.eur.nl Andrew Matthews Monash University Wellington Road Clayton, VIC 3800 Australia E-Mail: Andrew.Matthews@finity.com.au Thomas McGuire 505 Tremont St. Apt 501 Boston, MA 02116 United States Tel: 617 462 1569 E-Mail: mcguire@hcp.med.harvard.edu Francesco Paolucci University of Newcastle Corner of Hunter Street and Auckland Street Newcastle, NSW 2300 Australia E-Mail: Francesco.paolucci@newcastle.edu.au

Attracting and Retaining Highly Effective Educators in Hard-to-Staff Schools - Morgan, Andrew J; Nguyen, Minh; Hanushek, Eric A; Ost, Ben; Rivkin, Steven G (National Bureau of Economic Research Working Paper Series, 2023)
Efforts to attract and retain effective educators in high poverty public schools have had limited success. Dallas ISD addressed this challenge by using information produced by its evaluation and compensation reforms as the basis for effectiveness-adjusted payments that provided large compensating differentials to attract and retain effective teachers in its lowest achievement schools. The Accelerating Campus Excellence (ACE) program offers salary supplements to educators with records of high performance who are willing to work in the most educationally disadvantaged schools. We document that ACE resulted in immediate and sustained increases in student achievement, providing strong evidence that the multi-measure evaluation system identifies effective educators who foster the development of cognitive skills. The improvements at ACE schools were dramatic, bringing average achievement in the previously lowest performing schools close to the district average. When ACE stipends are largely eliminated, a substantial fraction of highly effective teachers leaves, and test scores fall. This highlights the central importance of the performance-based incentives to attract and retain effective educators in previously low-achievement schools.
Author contact info: Andrew J. Morgan E-Mail: a.j.p.morgan@gmail.com Minh Nguyen Department of Economics Ball State University Muncie, IN 47306 United States E-Mail: mtnguyen@bsu.edu Eric A. Hanushek Hoover Institution Stanford University Stanford, CA 94305-6010 Tel: 650/736-0942 Fax: 650/723-1687 E-Mail: hanushek@stanford.edu Ben Ost Department of Economics, University of Illinois at Chicago, 601 S. Morgan Street, 718 UH, Chicago, IL 60607 E-Mail: bost@uic.edu Steven G. Rivkin Department of Economics University of Illinois at Chicago 601 South Morgan UH725 M/C144 Chicago, IL 60607 Tel: 312.413.2368 E-Mail: sgrivkin@uic.edu

The March 2023 Bank Interventions in Long-Run Context – Silicon Valley Bank and beyond - Metrick, Andrew; Schmelzing, Paul (National Bureau of Economic Research Working Paper Series, 2023)
U.S. and European banking institutions were hit by a wave of distress in March 2023. Policymakers on both sides of the Atlantic reacted with an array of interventions, some targeting individual institutions, others designed to shore up the banking sector as a whole. This paper contextualizes events using a new long-run database on banking-sector policy interventions over the last eight centuries. On that basis, recent actions have already been unusual in their policy mix and size – in the database, the vast majority of events with the same pattern of interventions ultimately evolved into “systemic” bank-distress episodes.
Author contact info: Andrew Metrick Yale School of Management 135 Prospect Street P.O. Box 208200 New Haven, CT 06520 Tel: 203/432-3069 E-Mail: metrick@yale.edu Paul Schmelzing Carroll School of Management 140 Commonwealth Ave Chestnut Hill, MA 02467 USA E-Mail: paul.schmelzing@bc.edu

Liquidity Dependence and the Waxing and Waning of Central Bank Balance Sheets - Acharya, Viral V; Chauhan, Rahul S; Rajan, Raghuram; Steffen, Sascha (National Bureau of Economic Research Working Paper Series, 2023)
When the Federal Reserve (Fed) expands its balance sheet via quantitative easing, commercial banks finance their reserve holdings with demandable deposits, especially uninsured ones, and also issue lines of credit to corporations. These bank-issued claims on liquidity did not shrink when the Fed halted and eventually reversed its balance-sheet expansion in 2014-2019. Consequently, the financial sector, especially banks that increased their liquidity risk exposure more, became vulnerable to shocks. This in turn has necessitated further liquidity provision by the Fed, as witnessed in September 2019, March 2020, and March 2023, suggesting potential tradeoffs between unconventional monetary policy and financial stability.
Author contact info: Viral V. Acharya Stern School of Business New York University 44 West 4th Street, Suite 9-65 New York, NY 10012 Tel: 212/998-0354 Fax: 212 995 4233 E-Mail: vacharya@stern.nyu.edu Rahul S. Chauhan University of Chicago Booth School of Business E-Mail: rksc1997@gmail.com Raghuram Rajan Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-4437 Fax: 773/702-0458 E-Mail: raghuram.rajan@ChicagoBooth.edu Sascha Steffen Frankfurt School of Finance & Management Adickesallee 32-34 60322 Frankfurt Germany Tel: E-Mail: s.steffen@fs.de

How Are Gender Norms Perceived? - Bursztyn, Leonardo; Cappelen, Alexander W; Tungodden, Bertil; Voena, Alessandra; Yanagizawa-Drott, David H (National Bureau of Economic Research Working Paper Series, 2023)
Actual and perceived gender norms are key to understanding gender inequality in society. In this paper, using newly collected nationally representative datasets from 60 countries that cover over 80% of the world population, we study gender norms on two distinct policy issues: 1) basic freedom, allowing women to work outside of the home, and 2) affirmative action, prioritizing women when hiring for leadership positions. We establish that misperceptions of gender norms are pervasive across the world. The nature of the misperception, however, is context-dependent. In less gender-equal countries, people underestimate support for both policies, particularly support among men; in more gender-equal countries, people overestimate support for affirmative action, particularly support among women, and underestimate support for basic freedom. Perceptions of gender norms are highly correlated with actual gender norms across countries but are also systematically distorted. Specifically, using a simple framework we document that false consensus, overweighting of the minority view, and gender stereotyping prevail in our data, with the latter two forces driving the aggregate patterns of misperceptions on both policy issues. Misperceptions of gender norms may obstruct progress toward gender equality but may also contribute to sustaining gender policies that are not necessarily favored by women themselves.
Author contact info: Leonardo Bursztyn Department of Economics University of Chicago 1126 E. 59th Street Chicago, IL 60637 E-Mail: bursztyn@g.uchicago.edu Alexander W. Cappelen The Norwegian School of Economics Helleveien 30 5045 Bergen, Norway E-Mail: alexander.cappelen@nhh.no Bertil Tungodden Norwegian School of Economics Bergen, Norway E-Mail: Bertil.Tungodden@nhh.no Alessandra Voena Stanford University Landau Economics Building 579 Jane Stanford Way Stanford, CA 94305 Tel: 650/498-1096 E-Mail: avoena@stanford.edu David H. Yanagizawa-Drott Department of Economics University of Zurich Schönberggasse 1 Zurich, 8001 Switzerland E-Mail: david.yanagizawa-drott@econ.uzh.ch

Monetary Tightening and U.S. Bank Fragility in 2023: Mark-to-Market Losses and Uninsured Depositor Runs? - Jiang, Erica Xuewei; Matvos, Gregor; Piskorski, Tomasz; Seru, Amit (National Bureau of Economic Research Working Paper Series, 2023)
We develop an empirical methodology and conceptual framework to analyze the effect of rising interest rates on the value of U.S. bank assets and bank stability. We mark-to-market losses on banks’ assets due to interest rate increases from Q1 2022 to Q1 2023. Asset values declined on average by 10%, and the $2.2 trillion aggregate decline was on the order of aggregate bank capital. We present a model of solvency runs, which illustrates that interest rate increases can lead to self-fulfilling solvency bank runs even when banks’ assets are fully liquid. The model identifies banks with asset losses, low capital, and critically, high uninsured leverage as being most fragile. A case study of the recently failed Silicon Valley Bank (SVB) confirms the model insights. 10 percent of banks have larger unrecognized losses and lower capital than SVB. On the other hand, SVB had a disproportional share of uninsured funding: only 1 percent of banks had higher uninsured leverage. Combined, losses and uninsured leverage provided incentives for an SVB uninsured depositor run. We compute new empirical measures of bank fragility for the sample of all U.S. banks. Even if only half of uninsured depositors had decided to withdraw, almost 190 banks with assets of $300 billion are at a potential risk of insolvency, meaning that the mark-to-market value of their remaining assets after these withdrawals would be insufficient to repay all insured deposits. We briefly discuss events and subsequent research following our paper’s release on March 13, 2023. We see these as providing validity to our approach and findings.
Author contact info: Erica Xuewei Jiang Marshall School of Business University of Southern California Los Angeles, CA 90089 E-Mail: erica.jiang@marshall.usc.edu Gregor Matvos Kellogg School of Management Northwestern University 2211 Campus Drive Global Hub 4361 Evanston IL, 60208 E-Mail: gregor.matvos@kellogg.northwestern.edu Tomasz Piskorski Columbia Business School 3022 Broadway Uris Hall 810 New York, NY 10027 Tel: 212/854-4655 E-Mail: tp2252@columbia.edu Amit Seru Stanford Graduate School of Business Stanford University 655 Knight Way Tel: 650/736-0223 E-Mail: aseru@stanford.edu

Complexity and Hyperbolic Discounting - Enke, Benjamin; Graeber, Thomas; Oprea, Ryan (National Bureau of Economic Research Working Paper Series, 2023)
A large literature shows that people discount financial rewards hyperbolically instead of exponentially. While discounting of money has been questioned as a measure of time preferences, it continues to be highly relevant in empirical practice and predicts a wide range of real-world behaviors, creating a need to understand what generates the hyperbolic pattern. We provide evidence that hyperbolic discounting reflects mistakes that are driven by the complexity of evaluating delayed payoffs. In particular, we document that hyperbolicity (i) is strongly associated with choice inconsistency and cognitive uncertainty, (ii) increases in overt complexity manipulations and (iii) arises nearly identically in computationally similar tasks that involve no actual payoff delays. Our results suggest that even if people had exponential discount functions, complexity-driven mistakes would cause them to make hyperbolic choices. We examine which experimental techniques to estimate present bias are (not) confounded by complexity.
Author contact info: Benjamin Enke Department of Economics Harvard University Littauer M008 Cambridge, MA 02138 Tel: 617/496-5895 E-Mail: enke@fas.harvard.edu Thomas Graeber Harvard Business School Harvard University E-Mail: tgraeber@hbs.edu Ryan Oprea UC Santa Barbara Santa Barbara, CA 93106 E-Mail: roprea@gmail.com

Helicopter Drops and Liquidity Traps - Amador, Manuel; Bianchi, Javier (National Bureau of Economic Research Working Paper Series, 2023)
We show that if the central bank operates without commitment and faces constraints on its balance sheet, helicopter drops can be a useful stabilization tool during a liquidity trap. With commitment, even with balance sheet constraints, helicopter drops are, at best, irrelevant.
Author contact info: Manuel Amador Department of Economics University of Minnesota 4-101 Hanson Hall 1925 Fourth Street South Minneapolis, MN 55455 Tel: 650/725-5257 E-Mail: amador.manuel@gmail.com Javier Bianchi Federal Reserve Bank of Minneapolis 90 Hennepin Avenue Minneapolis, MN 55401 E-Mail: javieribianchi@gmail.com

From Syringes to Dishes: Improving Food Security through Vaccination - Aslim, Erkmen G; Fu, Wei; Tekin, Erdal; You, Shijun (National Bureau of Economic Research Working Paper Series, 2023)
This paper examines the impact of COVID-19 vaccination on food insecurity in the United States, using data from the Household Pulse Survey. Our primary research design exploits variation in vaccine eligibility across states over time as an instrumental variable to address the endogeneity of vaccination decision. We find that vaccination had a substantial impact on food hardship by reducing the likelihood of food insecurity by 24%, with even stronger effects among minority and financially disadvantaged populations. Our results are robust to alternative specifications and the use of regression discontinuity as an alternative identification strategy. We also show that vaccine eligibility had a positive spillover impact on food assistance programs, specifically by reducing participation in the Supplemental Nutrition Assistance Program (SNAP), which suggests that vaccination policy can be effective in alleviating the fiscal burden of the pandemic on the government. Furthermore, our analysis indicates that vaccinated individuals exhibit increased financial optimism, as measured by expectations about future loss of employment and income as well as ability to make mortgage and debt payments. Based on the point estimates, the implied elasticity of food insecurity with respect to financial optimism is between -0.57 and -0.86. Our findings suggest that the COVID-19 vaccination program has implications that extend beyond the direct health benefits. Taken together, our results underscore the critical role of medical innovations and health interventions in improving economic optimism and food security, especially among vulnerable populations, during public health crises.
Author contact info: Erkmen G. Aslim Grand Valley State University 3120 L. William Seidman Center 50 Front Avenue SW. Grand Rapids, MI 49504 E-Mail: aslime@gvsu.edu Wei Fu E 485 Gray Street Department of Health Management and Systems Sciences University of Louisville Louisville, KY 40202 US E-Mail: wei.fu@louisville.edu Erdal Tekin School of Public Affairs American University 4400 Massachusetts Avenue NW Washington, DC 20016-8070 Tel: (202) 885-6361 E-Mail: tekin@american.edu Shijun You Department of Economics Lehigh University 621 Taylor Street Bethlehem, PA 18015 E-Mail: shy420@lehigh.edu

Global High-Resolution Estimates of the United Nations Human Development Index Using Satellite Imagery and Machine-learning - Sherman, Luke; Proctor, Jonathan; Druckenmiller, Hannah; Tapia, Heriberto; Hsiang, Solomon M (National Bureau of Economic Research Working Paper Series, 2023)
The United Nations Human Development Index (HDI) is arguably the most widely used alternative to gross domestic product for measuring national development. This is in large part due to its multidimensional nature, as it incorporates not only income, but also education and health. However, the low country-level resolution of the global HDI data released by the Human Development Report Office of the United Nations Development Programme (N=191 countries) has limited its use at the local level. Recent efforts used labor-intensive survey data to produce HDI estimates for first-level administrative units (e.g., states/provinces). Here, we build on recent advances in machine learning and satellite imagery to develop the first global estimates of HDI for second-level administrative units (e.g., municipalities/counties, N = 61,591) and for a global 0.1 × 0.1 degree grid (N=806,361). To accomplish this we develop and validate a generalizable downscaling technique based on satellite imagery that allows for training and prediction with observations of arbitrary shape and size. This enables us to train a model using provincial administrative data and generate HDI estimates at the municipality and grid levels. Our results indicate that more than half of the global population was previously assigned to the incorrect HDI quintile within each country, due to aggregation bias resulting from lower resolution estimates. We also illustrate how these data can improve decision-making. We make these high resolution HDI estimates publicly available in the hope that they increase understanding of human wellbeing globally and improve the effectiveness of policies supporting sustainable development. We also make available the satellite features and software necessary to increase the spatial resolution of any other global-scale administrative data that is detectable via imagery.
Author contact info: Luke Sherman E-Mail: lsherman@berkeley.edu Jonathan Proctor Harvard Center for the Environment 26 Oxford Street, 4th floor Cambridge, MA 02138 E-Mail: jproctor1@fas.harvard.edu Hannah Druckenmiller Division of Humanities and Social Sciences California Institute of Technology Pasadena, CA 91125 E-Mail: hdruck@caltech.edu Heriberto Tapia 304E 45th Street, New York FF-1288 New York, New 10017 E-Mail: heriberto.tapia@undp.org Solomon M. Hsiang Goldman School of Public Policy University of California, Berkeley 2607 Hearst Avenue Berkeley, CA 94720-7320 Tel: 510-643-5751 E-Mail: shsiang@berkeley.edu

The Last Mile of Monetary Policy: Inattention, Reminders, and the Refinancing Channel - Byrne, Shane; Devine, Kenneth; King, Michael; McCarthy, Yvonne; Palmer, Christopher (National Bureau of Economic Research Working Paper Series, 2023)
Under-refinancing limits the transmission of accommodative monetary policy to the household sector and costs mortgage holders in many countries a significant fraction of income annually. We test whether targeted communication can reduce the attention frictions that inhibit transmission by partnering with a large bank to analyze a field experiment testing messages sent to 12,000 Irish households. While we find only small effects of disclosure design improvements, a reminder letter increases refinancing by 76%, from 8.9% to 15.7%. To interpret this reminder effect, we extend and estimate a mixture model of inattentive financial decision-making to allow for disclosure treatment effects on attention. We find that reminders increase the likelihood mortgage holders are attentive by over 60%, from 24% to 39%. A conservative back-of-the-envelope cost-effectiveness calculation implies that the average reminder letter generated €42 of mortgagor consumption (€605 per refinancing household). Our results illustrate that targeted central bank communication such as refinancing reminders could have a larger effect on refinancing than a standard policy rate cut. Reminders could further strengthen the refinancing channel and stimulate local consumption even when policy rates are at the zero-lower bound or set in a monetary union.
Author contact info: Shane Byrne New Wapping Street North Wall Quay Dublin Ireland E-Mail: shane.byrne@centralbank.ie Kenneth Devine New Wapping Street North Wall Quay Dublin Ireland E-Mail: Kenneth.Devine@centralbank.ie Michael King E-Mail: michael.king@tcd.ie Yvonne McCarthy New Wapping Street North Wall Quay Dublin Ireland E-Mail: yvonne.mccarthy@centralbank.ie Christopher Palmer MIT Sloan School of Management 100 Main Street, E62-639 Cambridge, MA 02142 Tel: 617/324-3901 E-Mail: cjpalmer@mit.edu

Pivotal or Popular: The Effects of Social Information and Feeling Pivotal on Civic Actions - Gee, Laura K; Kiyawat, Anoushka; Meer, Jonathan; Schreck, Michael J (National Bureau of Economic Research Working Paper Series, 2023)
We examine the combined effects of popularity and feelings of being important to reaching a goal by testing how people react to situations in which their own behavior is pivotal or not, as well as the popularity of the action. We conduct a laboratory experiment to cleanly fix beliefs about the person's likelihood of being pivotal in reaching a donation threshold that triggers a matching gift, varying both the pivotality and the number of other donors (popularity). The results are striking, with those whose action is pivotal being more than twice as likely to make a donation. We then conduct two field experiments to test these findings in real-world settings. Our results suggest that pivotality is a more important determinant of prosocial behavior.
Author contact info: Laura K. Gee 177 College Ave Tufts University Joyce Cummings Center Medford 02144 United States Tel: 917-774-4464 E-Mail: laura.gee@tufts.edu Anoushka Kiyawat E-Mail: anoushkaskiyawat@gmail.com Jonathan Meer Department of Economics TAMU 4228 College Station, TX 77843 Tel: 979/845-2059 Fax: 979/847-8757 E-Mail: jmeer@econmail.tamu.edu Michael J. Schreck E-Mail: mjschreck@gmail.com

Personality Differences and Investment Decision-Making - Jiang, Zhengyang; Peng, Cameron; Yan, Hongjun (National Bureau of Economic Research Working Paper Series, 2023)
We survey thousands of affluent American investors to examine the relationship between personalities and investment decisions. The Big Five personality traits correlate with investors' beliefs about the stock market and economy, risk preferences, and social interaction tendencies. Two personality traits, Neuroticism and Openness, stand out in their explanatory power for equity investments. Investors with high Neuroticism and those with low Openness tend to allocate less investment to equities. We examine the underlying mechanisms and find evidence for both standard channels of preferences and beliefs and other nonstandard channels. We show consistent out-of-sample evidence in representative panels of Australian and German households.
Author contact info: Zhengyang Jiang Kellogg School of Management Northwestern University 2211 Campus Drive Evanston, IL 60208 Tel: 847/491-2848 E-Mail: zhengyang.jiang@kellogg.northwestern.edu Cameron Peng London School of Economics Houghton Street London WC2A 2AE UK Tel: +44 7391704007 E-Mail: c.peng9@lse.ac.uk Hongjun Yan DePaul University Department of Finance 1 E. Jackson Blvd., Suite 5500 Chicago, IL 60604 Tel: 3123626888 E-Mail: hongjun.yan.2011@gmail.com

A User's Guide to Inference in Models Defined by Moment Inequalities - Canay, Ivan; Illanes, Gastón; Velez, Amilcar (National Bureau of Economic Research Working Paper Series, 2023)
Models defined by moment inequalities have become a standard modeling framework for empirical economists, spreading over a wide range of fields within economics. From the point of view of an empirical researcher, the literature on inference in moment inequality models is large and complex, including multiple survey papers that document the non-standard features these models possess, the main novel concepts behind inference in these models, and the most recent developments that bring advances in accuracy and computational tractability. In this paper we present a guide to empirical practice intended to help applied researchers navigate all the decisions required to frame a model as a moment inequality model and then to construct confidence intervals for the parameters of interest. We divide our template into four main steps: (a) a behavioral decision model, (b) moving from the decision model to a moment inequality model, (c) choosing a test statistic and critical value, and (d) accounting for computational challenges. We split each of these steps into a discussion of the “how” and the “why”, and then illustrate how to take these steps to practice in an empirical application that studies identification of expected sunk costs of offering a product in a market.
Author contact info: Ivan Canay 3423 Kellogg Global Hub Department of Economics Northwestern University 2211 Campus Drive Evanston, IL 60208 Tel: 847.491.2929 E-Mail: iacanay@northwestern.edu Gastón Illanes Department of Economics Northwestern University Kellogg Global Hub, Room 3421 2211 Campus Drive Evanston, IL 60208 Tel: 847/491-8227 E-Mail: gaston.illanes@northwestern.edu Amilcar Velez 3340 Kellogg Global Hub Department of Economics Northwestern University 2211 Campus Drive Evanston, IL 60208 E-Mail: amilcare@u.northwestern.edu

Fortunate Families? The Effects of Wealth on Marriage and Fertility - Cesarini, David; Lindqvist, Erik; Östling, Robert; Terskaya, Anastasia (National Bureau of Economic Research Working Paper Series, 2023)
We estimate the effects of large, positive wealth shocks on marriage and fertility in a sample of Swedish lottery players. For male winners, wealth increases marriage formation and reduces divorce risk, suggesting wealth increases men’s attractiveness as prospective and current partners. Wealth also increases male fertility. The only discernible effect on female winners is that wealth increases their short-run (but not long-run) divorce risk. Our results for divorce are consistent with a model where the wealthier spouse retains most of his/her wealth in divorce. In support of this assumption, we show divorce settlements in Sweden often favor the richer spouse.
Author contact info: David Cesarini Department of Economics New York University 19 West 4th Street, Room 511 New York, NY 10012 Tel: 212/998-3773 E-Mail: dac12@nyu.edu Erik Lindqvist Swedish Institute for Social Research (SOFI) Stockholm University SE-106 91 Stockholm SWEDEN E-Mail: erik.lindqvist@sofi.su.se Robert Östling Department of Economics Stockholm School of Economics P.O. Box 6501 SE-113 83 Stockholm Sweden E-Mail: robert.ostling@hhs.se Anastasia Terskaya Department of Economics and IEB Universidad de Barcelona Carrer de John Maynard Keynes, 1, 11 Barcelona 08034 Spain E-Mail: anastasiaterskaya@gmail.com

Longevity, Health and Housing Risks Management in Retirement - Michaud, Pierre-Carl; St. Amour, Pascal (National Bureau of Economic Research Working Paper Series, 2023)
Annuities, long-term care insurance and reverse mortgages remain unpopular to manage longevity, medical and housing price risks after retirement. We analyze low demand using a life-cycle model structurally estimated with a unique stated-preference survey experiment of Canadian households. Low risk aversion, substitution between housing and consumption and low marginal utility when in poor health explain most of the reduced demand. Bequests motives are found to be a luxury good and play a limited role. The remaining disinterest is explained by information frictions and behavioural status-quo biases. We find evidence of strong spousal co-insurance motives motivating LTCI and of responsiveness to bundling with a near doubling of demand for annuities when reverse mortgages can be used to annuitize, instead of consuming home equity.
Author contact info: Pierre-Carl Michaud HEC Montréal 3000 Côte-Sainte-Catherine Road Montréal QC H3T 2A7 Tel: 514/340-6466 E-Mail: pierre-carl.michaud@hec.ca Pascal St. Amour University of Lausanne Faculty of Business and Economics (HEC) Bat. Internef CH-1015 Lausanne Switzerland E-Mail: Pascal.St-Amour@unil.ch

Exploring European Regional Trade - Santamaría, Marta A; Ventura, Jaume; Yeşilbayraktar, Uğur (National Bureau of Economic Research Working Paper Series, 2023)
We use the new dataset of trade flows across 269 European regions in 24 countries constructed in Santamaría et al. (2020) to systematically explore for the first time trade patterns within and across country borders. We focus on the differences between home trade, country trade and foreign trade. We document the following facts: (i) European regional trade has a strong home and country bias, (ii) geographic distance and national borders are important determinants of regional trade, but cannot explain the strong regional home bias and (iii) the home bias is heterogeneous across regions and seems to be driven by political regional borders.
Author contact info: Marta A. Santamaría University of Warwick Department of Economics Gibbet Hill Road Coventry CV4 7AL United Kingdom E-Mail: marta.santamaria@warwick.ac.uk Jaume Ventura CREI Ramon Trias Fargas, 25-27 08005-Barcelona SPAIN Tel: +34 93 542 1765 E-Mail: jventura@crei.cat Uğur Yeşilbayraktar Universitat Pompeu Fabra Ramon Trias Fargas, 25-27 Barcelona, 08005 Spain E-Mail: ugur.yesilbayraktar@upf.edu

Information Favoritism and Scoring Bias in Contests - Deng, Shanglyu; Fang, Hanming; Fu, Qiang; Wu, Zenan (National Bureau of Economic Research Working Paper Series, 2023)
Two potentially asymmetric players compete for a prize of common value, which is initially unknown, by exerting efforts. A designer has two instruments for contest design. First, she decides whether and how to disclose an informative signal of the prize value to players. Second, she sets the scoring rule of the contest, which varies the relative competitiveness of the players. We show that the optimum depends on the designer’s objective. A bilateral symmetric contest—in which information is symmetrically distributed and the scoring bias is set to offset the initial asymmetry between players—always maximizes the expected total effort. However, the optimal contest may deliberately create bilateral asymmetry—which discloses the signal privately to one player, while favoring the other in terms of the scoring rule—when the designer is concerned about the expected winner’s effort. The two instruments thus exhibit complementarity, in that the optimum can be made asymmetric in both dimensions even if the players are ex ante symmetric. Our results are qualitatively robust to (i) affiliated signals and (ii) endogenous information structure. We show that information favoritism can play a useful role in addressing affirmative action objectives.
Author contact info: Shanglyu Deng Department of Economics University of Macau China E-Mail: shanglyudeng@gmail.com Hanming Fang Department of Economics Ronald O. Perelman Center for Political Science and Economics University of Pennsylvania 133 South 36th Street, Suite 150 Philadelphia, PA 19104 Tel: 215-898-7767 Fax: 215-573-2057 E-Mail: hanming.fang@econ.upenn.edu Qiang Fu Department of Strategy and Policy NUS Business School 15 Kent Ridge Drive Singapore E-Mail: bizfq@nus.edu.sg Zenan Wu School of Economics Peking University Beijing, China E-Mail: zenan@pku.edu.cn

Dying or Lying? For-Profit Hospices and End of Life Care - Gruber, Jonathan; Howard, David H; Leder-Luis, Jetson; Caputi, Theodore L (National Bureau of Economic Research Working Paper Series, 2023)
The Medicare hospice program is intended to provide palliative care to terminal patients, but patients with long stays in hospice are highly profitable, motivating concerns about overuse among the Alzheimer’s and Dementia (ADRD) population in the rapidly growing for-profit sector. We provide the first causal estimates of the effect of for-profit hospice on patient spending using the entry of for-profit hospices over twenty years. We find hospice has saved money for Medicare by offsetting other expensive care among ADRD patients. As a result, policies limiting hospice use including revenue caps and anti-fraud lawsuits are distortionary and deter cost-saving admissions.
Author contact info: Jonathan Gruber Department of Economics, E52-434 MIT 77 Massachusetts Avenue Cambridge, MA 02139 Tel: 617/253-8892 Fax: 617/253-1330 E-Mail: gruberj@mit.edu David H. Howard Department of Health Policy and Management Emory University 1518 Clifton Road NE Atlanta, GA 30322 Tel: 404-727-3907 Fax: 404-727-9198 E-Mail: dhhowar@emory.edu Jetson Leder-Luis Questrom School of Business Boston University 595 Commonwealth Avenue Boston, MA 02215 Tel: 914/844-9457 E-Mail: jetson@bu.edu Theodore L. Caputi E-Mail: tcaputi@mit.edu

Intergenerational Correlations in Longevity - Black, Sandra E; Duzett, Neil; Lleras-Muney, Adriana; Pope, Nolan G; Price, Joseph (National Bureau of Economic Research Working Paper Series, 2023)
While there is substantial research on the intergenerational persistence of economic outcomes such as income and wealth, much less is known about intergenerational persistence in health. We examine the correlation in longevity (an overall measure of health) across generations using a unique dataset containing information about more than 26 million families obtained from the Family Search Family Tree. We find that the intergenerational correlation in longevity is 0.09 and rises to 0.14 if we consider the correlation between children and the average of their parents' longevity. This intergenerational persistence in longevity is much smaller than that of persistence in socio-economic status and lower than existing correlations in health. Moreover, this correlation remained low throughout the 19th and early 20th centuries despite dramatic changes in longevity and its determinants. We also document that the correlations in longevity and in education are largely independent of each other. These patterns are likely explained by the fact that stochastic factors play a large role in the determination of longevity, larger than for other outcomes.
Author contact info: Sandra E. Black Department of Economics and School of International and Public Affairs Columbia University 1022 International Affairs Building 420 West 118th Street New York, NY 10027 E-Mail: sblack@columbia.edu Neil Duzett Texas A&M 1507 Hillside Drive College Station, Texa 77845 E-Mail: neilduzett@gmail.com Adriana Lleras-Muney Department of Economics 9373 Bunche Hall UCLA Los Angeles, CA 90095 Tel: 310/825-3925 Fax: NA E-Mail: allerasmuney@gmail.com Nolan G. Pope University of Maryland 3114 Tydings Hall 7343 Preinkert Dr College Park, MD 20742 E-Mail: npope@umd.edu Joseph Price Department of Economics Brigham Young University 2129 WVB Provo, UT 84602 Tel: 801/422-5296 Fax: 801/422-0194 E-Mail: joseph_price@byu.edu

Information and Disparities in Health Care Quality: Evidence from GP Choice in England - Brown, Zach Y; Hansman, Christopher; Keener, Jordan; Veiga, Andre F (National Bureau of Economic Research Working Paper Series, 2023)
Why do low income patients tend to go to lower quality health care providers, even when they are free? We show that differential information about provider quality is an important determinant of this disparity. Our empirical strategy exploits the temporary presence of a website that publicly displayed summary star ratings of general practitioner (GP) offices in England. Regression discontinuity estimates show that patient demand responds sharply to the information on the website, and that this response is almost entirely driven by residents of low income neighborhoods. The results are consistent with high income patients having better private information about quality. We incorporate our estimates into a structural model of demand that allows for heterogeneity in information, preferences, and consumer inertia. We find that information differences explain 24 percent of the relationship between income and GP quality and reinforce disparities in access to care.
Author contact info: Zach Y. Brown Department of Economics University of Michigan 611 Tappan Ave Ann Arbor, MI 48109 E-Mail: zachb@umich.edu Christopher Hansman 332 Rich Memorial Building Atlanta, GA 30307 E-Mail: c.hansman@emory.edu Jordan Keener University of Michigan Department of Economics E-Mail: jordkeen@umich.edu Andre F. Veiga Department of Economics and Public Policy Imperial College London Business School South Kensington Campus, Exhibition Rd London SW7 2AZ United Kingdom E-Mail: a.veiga@imperial.ac.uk

Weighted Median Inflation Around the World: A Measure of Core Inflation - Ball, Laurence M; Carvalho, Carlos; Evans, Christopher; Ricci, Luca Antonio (National Bureau of Economic Research Working Paper Series, 2023)
The standard measure of core or underlying inflation is the inflation rate excluding food and energy prices. This paper constructs an alternative measure, the weighted median inflation rate, for 38 advanced and emerging economies using subclass level disaggregation of the CPI over 1990-2021, and compares the properties of this measure to those of standard core. For quarterly data, we find that the weighted median is less volatile than standard core, more closely related to economic slack, and more closely related to headline inflation over the next year. The weighted median also has a drawback: in most countries, it has a lower average level than headline inflation. We therefore also consider a measure of core inflation that eliminates this bias, which is based on the percentile of sectoral inflation rates that matches the sample average of headline CPI inflation.
Author contact info: Laurence M. Ball Department of Economics Johns Hopkins University Baltimore, MD 21218 Tel: 410/516-7605 Fax: 410/516-7600 E-Mail: lball@jhu.edu Carlos Carvalho Kapitalo Investimentos and PUC-Rio Department of Economics Rua Marquês de São Vicente, 225 / F210 - Gávea 22451-900, Rio de Janeiro, RJ Brazil E-Mail: cvianac@econ.puc-rio.br Christopher Evans International Monetary Fund Research Department 700 19th Street, N.W. Washington, DC 20431 E-Mail: cevans@imf.org Luca A. Ricci International Monetary Fund Research Department 700 19th Street, N.W. Washington, DC 20431 E-Mail: lricci@imf.org

Sentiment, Productivity, and Economic Growth - Constantinides, George M; Montone, Maurizio; Potì, Valerio; Spilioti, Stella (National Bureau of Economic Research Working Paper Series, 2023)
Previous research finds correlation between sentiment and future economic growth, but disagrees on the channel that explains this result. In this paper, we shed new light on this issue by exploiting cross-country variation in sentiment and market efficiency. We find that sentiment shocks in G7 countries increase economic activity, but only temporarily and without affecting productivity. By contrast, sentiment shocks in non-G7 countries predict prolonged economic growth and a corresponding increase in productivity. The results suggest that sentiment can indeed create economic booms, but only in less advanced economies where noisy asset prices make sentiment and fundamentals harder to disentangle.
Author contact info: George M. Constantinides The University of Chicago Booth School of Business 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-7258 Fax: 773/753-8045 (773) 753-8045 E-Mail: gmc@ChicagoBooth.edu Maurizio Montone Utrecht University Heidelberglaan 8 3584CS Utrecht The Netherlands E-Mail: m.montone@uu.nl Valerio Potì M. Smurfit UCD School of Business Carysfort Avenue, Blackrock, Dublin, Ireland E-Mail: valerio.poti@ucd.ie Stella Spilioti Athens University of Economics and Business Athens Greece E-Mail: spilioti@aueb.gr

Market Size and Trade in Medical Services - Dingel, Jonathan I; Gottlieb, Joshua D; Lozinski, Maya; Mourot, Pauline (National Bureau of Economic Research Working Paper Series, 2023)
We uncover substantial interregional trade in medical services and investigate whether regional increasing returns explain it. In Medicare data, one-fifth of production involves a doctor treating a patient from another region. Larger regions produce greater quantity, quality, and variety of medical services, which they “export” to patients from elsewhere, especially smaller regions. We show that these patterns reflect scale economies: greater demand enables larger regions to improve quality, so they attract patients from elsewhere. Despite concerns about rural access, larger regions have higher marginal returns to spending. We study counterfactual policies that would lower travel costs rather than relocating production.
Author contact info: Jonathan I. Dingel Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-5458 E-Mail: jdingel@chicagobooth.edu Joshua D. Gottlieb University of Chicago Harris School of Public Policy 1307 E. 60th St. Chicago, IL 60637 E-Mail: jgottlieb@uchicago.edu Maya Lozinski University of Chicago 1307 E 60th St Chicago, IL 60637 E-Mail: maya.lozinski@gmail.com Pauline Mourot University of Chicago 5807 S Woodlawn Ave Chicago, IL 60637 E-Mail: pmourot@chicagobooth.edu

Macroeconomic Effects of ‘Free’ Secondary Schooling in the Developing World - Fujimoto, Junichi; Lagakos, David; VanVuren, Mitchell (National Bureau of Economic Research Working Paper Series, 2023)
This paper studies the macroeconomic effects of publicly funded (‘free’) secondary schooling in the developing world. Our analysis is based on an over-lapping generations model of human capital accumulation that we estimate to match experimental evidence on the effects of scholarships for poor but talented students in Ghana. The model predicts that nationwide free secondary schooling increases average education levels but reduces GDP per capita in the long run. The human capital gains from free schooling in the model are offset by lost income during schooling years, negative selection of new students, and reductions in fertility by high-ability households.
Author contact info: Junichi Fujimoto GRIPS Tokyo, Japan E-Mail: j-fujimoto@grips.ac.jp David Lagakos Department of Economics Boston University 270 Bay State Road Boston, MA 02215 E-Mail: lagakos@bu.edu Mitchell VanVuren Yale University 34 Hillhouse Avenue P.O. Box 208206 New Haven, CT 06520-8206 E-Mail: mitchell.vanvuren@yale.edu

The Race Between Education, Technology, and the Minimum Wage - Vogel, Jonathan (National Bureau of Economic Research Working Paper Series, 2023)
What is the impact of the minimum wage on the college wage premium? I develop a theory that implies that the effect should be small on impact—raising only the wages of workers bound by the minimum wage—and grow over time. Guided by my theory, I present evidence that these dynamic effects are present and powerful. Estimated at the national and state levels, I show that minimum wages—together with supply and demand—play a central role in shaping the evolution of the U.S. college premium and that the elasticity of the college premium to the minimum wage is small on impact and grows dramatically over time. To verify my theory’s mechanisms, I additionally document the dynamic impact of the minimum wage over the full wage distribution: on impact, wages rise only for the lowest centiles (consistent with the literature) but over time this effect spills over up the wage distribution (consistent with my theory and my empirical results on the college premium). On the basis of these results, I conclude that the minimum wage plays a central role in shaping the U.S. college premium and its variation across states, in spite of relatively small effects on impact.
Author contact info: Jonathan Vogel Department of Economics University of California at Los Angeles 8283 Bunche Hall Mail Code 147703 Los Angeles, CA 90095 Tel: 310/794-7278 E-Mail: jonathan.e.vogel@gmail.com

Identification in a Binary Choice Panel Data Model with a Predetermined Covariate - Bonhomme, Stéphane; Dano, Kevin; Graham, Bryan S (National Bureau of Economic Research Working Paper Series, 2023)
We study identification in a binary choice panel data model with a single predetermined binary covariate (i.e., a covariate sequentially exogenous conditional on lagged outcomes and covariates). The choice model is indexed by a scalar parameter θ, whereas the distribution of unit-specific heterogeneity, as well as the feedback process that maps lagged outcomes into future covariate realizations, are left unrestricted. We provide a simple condition under which θ is never point-identified, no matter the number of time periods available. This condition is satisfied in most models, including the logit one. We also characterize the identified set of θ and show how to compute it using linear programming techniques. While θ is not generally point-identified, its identified set is informative in the examples we analyze numerically, suggesting that meaningful learning about θ may be possible even in short panels with feedback. As a complement, we report calculations of identified sets for an average partial effect, and find informative sets in this case as well.
Author contact info: Stéphane Bonhomme University of Chicago 1126 East 59th Street Chicago, IL 60637 E-Mail: sbonhomme@uchicago.edu Kevin Dano University of California, Berkeley 530 Evans Hall Berkeley, CA 94720-3880 E-Mail: kdano@berkeley.edu Bryan S. Graham University of California - Berkeley 530 Evans Hall #3880 Berkeley, CA 94720-3880 Tel: (510) 642 4752 E-Mail: bgraham@econ.berkeley.edu

The Macroeconomics of Trade Credit - Bocola, Luigi; Bornstein, Gideon (National Bureau of Economic Research Working Paper Series, 2023)
In most countries, suppliers of intermediate goods and services are also the main providers of short-term financing to firms. This paper studies the macroeconomic implications of these financial links. In our model, trade credit is the outcome of a long-term contract between firms linked in the production process, and it is sustained in equilibrium by reputation forces as customers lose the relationship with their suppliers in case of a default. These financial links give rise to a credit multiplier: suppliers can enforce repayment of these IOUs, and they can discount these bills with banks to obtain liquidity. This process can either dampen or amplify the output effects of financial shocks, depending on the borrowing capacity of suppliers. Using Italian data, we find that the credit multiplier is sizable and show that trade credit amplified the output costs of the Great Recession by 45%.
Author contact info: Luigi Bocola Department of Economics Landau 342 Stanford University 579 Jane Stanford Way Stanford, CA 94305-6072 E-Mail: lbocola@stanford.edu Gideon Bornstein 3620 Locust Walk 2317 Steinberg-Dietrich Hall Philadelphia, PA 19104 United States E-Mail: gideonbo@wharton.upenn.edu

A Major Shock Makes Prices More Flexible and May Result in a Burst of Inflation or Deflation - Hall, Robert E (National Bureau of Economic Research Working Paper Series, 2023)
The US and other advanced countries suffered bursts of severe inflation in 2021 and the first half of 2022, followed by declines of inflation later in 2022, in some countries. In times of high volatility of price determinants—cost and productivity—inflation can jump upward and fall downward at high speed, contrary to the uniformly sticky behavior associated with traditional Phillips curves. This paper establishes that sectors with standard New Keynesian price stickiness are vulnerable to rapid transitions from stickiness to flexibility, as sellers elect to reset their prices and abandon anchoring. The paper shows that the cross-industry volatility of price determinants grew substantially in the inflation episode accompanying the pandemic. Volatility remained elevated even in late 2022. The logic of the New Keynesian model of the Phillips curve links inflation to volatility, because a larger fraction of sellers are pushed out of their regions of inaction when volatility is elevated. The New Keynesian Phillips curve becomes much steeper in volatile times.
Author contact info: Robert E. Hall Hoover Institution Stanford University Stanford, CA 94305-6010 Tel: 650/723-2215 E-Mail: rehall@gmail.com

International Sanctions and Dollar Dominance - Bianchi, Javier; Sosa-Padilla, César (National Bureau of Economic Research Working Paper Series, 2023)
We propose a simple monetary model to investigate the implications of international financial sanctions for the reserve currency status of the US dollar. We show how the anticipation of financial sanctions can reduce the US dollar convenience yield and the holdings of US dollar reserves. We also evaluate the implications for welfare and show that they are generally detrimental for all countries.
Author contact info: Javier Bianchi Federal Reserve Bank of Minneapolis 90 Hennepin Avenue Minneapolis, MN 55401 E-Mail: javieribianchi@gmail.com César Sosa-Padilla Department of Economics University of Notre Dame 3060 Jenkins Nanovic Hall Notre Dame, IN 46556 Tel: 574/631-4784 E-Mail: csosapad@nd.edu

Do Older Adults Accurately Forecast Their Social Security Benefits? - Seiter, Grant M; Slavov, Sita (National Bureau of Economic Research Working Paper Series, 2023)
How accurate are older people’s expectations about their future Social Security benefits? Using panel data from the Health and Retirement Study, we compare respondents’ observed Social Security claiming ages and benefits with subjective expectations provided during their 50s and early 60s. We find that, while older adults generally have accurate expectations about their claiming age, they underestimate their annual Social Security income by approximately $1,896 (11.5 percent) on average. However, both accuracy and precision increase with age, and the forecast error for people in their early 60s is not statistically different from zero. Exploiting plausibly exogenous variation in the mailing of Social Security statements, which contain personalized information about future benefits, we show that information provision reduces the forecast error in annual income by $344 (2.1 percent of the average benefit).
Author contact info: Grant M. Seiter Department of Economics University of Virginia P.O. Box 400182 Charlottesville, VA 22904-4182 E-Mail: seiterecon@gmail.com Sita Slavov Schar School of Policy and Government George Mason University 3351 Fairfax Drive, MS 3B1 Arlington, VA 22201 Tel: 703/993-3171 E-Mail: sslavov@gmu.edu

Biodiversity Finance - Flammer, Caroline; Giroux, Thomas; Heal, Geoffrey (National Bureau of Economic Research Working Paper Series, 2023)
The use of private capital to finance biodiversity conservation and restoration is a new practice in sustainable finance. This study sheds light on this new practice. First, we provide a conceptual framework that lays out how biodiversity can be financed by i) pure private capital and ii) blended financing structures. In the latter, private capital is blended with public or philanthropic capital, whose aim is to de-risk private capital investments. The main element underlying both types of financing is the “monetization” of biodiversity, that is, the extent to which investments in biodiversity can generate a financial return for private investors. Second, we provide empirical evidence using deal-level data from a leading biodiversity finance institution. We find that projects with higher expected returns tend to be financed by pure private capital. Their scale is smaller, however, and so is their expected biodiversity impact. For larger-scale projects with a more ambitious biodiversity impact, blended finance is the more prevalent form of financing. While these projects have lower expected returns, their risk is also lower. This suggests that the blending—and the corresponding de-risking of private capital—is an important tool for improving the risk-return tradeoff of these projects, thereby increasing their appeal to private investors. Finally, we examine a set of projects that did not make it to the portfolio stage. This analysis suggests that, in order to be financed by private capital, biodiversity projects need to meet a certain threshold in terms of both their financial return and biodiversity impact. Accordingly, private capital is unlikely to substitute for the implementation of effective public policies in addressing the biodiversity crisis.
Author contact info: Caroline Flammer School of International and Public Affairs and Columbia Climate School Columbia University 420 West 118th Street, Office 1429 New York, NY 10026 E-Mail: caroline.flammer@columbia.edu Thomas Giroux Center for Research in Economics and Statistics (CREST) ENSAE Paris 5 Avenue Henry Le Chatelier 91764 Palaiseau Cedex France E-Mail: thomas.giroux@ensae.fr Geoffrey Heal Graduate School of Business 582 Kravis Hall Columbia University 665 W 130th St New York, NY 10027 Tel: 212/854-6459 E-Mail: gmh1@gsb.columbia.edu

The Impact of University Patent Ownership on Commercialization - Wang, Jun; Qian, Yi (National Bureau of Economic Research Working Paper Series, 2023)
This paper contributes to the literature on innovation policies on conditions for effective institutional changes. The "three rights" reform of 26 universities and the mixed ownership reform of Southwest Jiaotong University are important explorations made by China in recent years to promote the commercialization of patents in universities. The two reforms have adopted different models in the allocation of university patent ownership. The former completely allocated the patent ownership to universities, while the latter allocated 70% of the patent ownership to the inventors. Based on Chinese patent data and university statistical data, we empirically test the effects of these two university-patent ownership allocation models on the commercialization of patents. We find that the institutional environment caused unexpected effects in both reform models. The "three rights" reform has a significant impact on patent-licensing in 26 universities. The mixed ownership reform has significantly increased the number of patent transfers and patent applications of Southwest Jiaotong University, yet has tilted research and development (R&D) toward experimental research with relatively low creativity. The findings yield broader implications for the organization and commercialization of innovations.
Author contact info: Jun Wang Intellectual Property Research Institute Xiamen University Siming District, Xiamen City Fujian Province P.R.China E-Mail: junwang@xmu.edu.cn Yi Qian Sauder School of Business University of British Columbia 2053 Main Mall Vancouver, BC V6T 1Z2 Tel: 604/827-5154 E-Mail: yi.qian@sauder.ubc.ca

A Trajectories-Based Approach to Measuring Intergenerational Mobility - Chang, Yoosoon; Durlauf, Steven N; Lee, Seunghee; Park, Joon Y (National Bureau of Economic Research Working Paper Series, 2023)
This paper develops an approach to intergenerational mobility in which the trajectories of parental incomes during childhood and adolescence are the conditioning objects for characterizing dependence across generations. We use functional regression methods to produce an intergenerational elasticity curve that measures how marginal changes in income at each age affect expected offspring permanent income. Using the PSID, estimates of this curve exhibit near monotonicity with respect to age, so that parental incomes in middle childhood and adolescence have larger marginal effects than incomes in early childhood. When interactions are allowed to occur between incomes at different ages, we find a complex pattern of substitutability between incomes at ages that are close in time versus complementarity between parental incomes for ages early childhood and adolescence. Qualitatively similar results hold for offspring education while we do not find evidence of age-specific effects for occupation. We conclude that important information about the links between parental incomes and children exists beyond the scalar characterization of parental permanent income.
Author contact info: Yoosoon Chang Department of Economics Indiana University 100 S. Woodlawn Avenue Bloomington, IN 47405-7104 Tel: 812-855-8035 E-Mail: yoosoon@indiana.edu Steven N. Durlauf University of Chicago Harris School of Public Policy 1307 E. 60th Street Chicago, IL 60637 E-Mail: durlauf@gmail.com Seunghee Lee Korea Development Institute 263 Namsejong-ro Sejong-si 30149 Korea E-Mail: shlee@kdi.re.kr Joon Park Department of Economics Indiana University 100 S. Woodlawn Avenue Bloomington, IN 47405-7104 Tel: 1-812-856-0268 E-Mail: joon@indiana.edu

Subjective Earnings Risk - Caplin, Andrew; Gregory, Victoria; Lee, Eungik; Leth-Petersen, Søren; Sæverud, Johan (National Bureau of Economic Research Working Paper Series, 2023)
We introduce a survey instrument to measure earnings risk allowing for the possibility of quitting or being fired from the current job. We find these transitions to be the key drivers of subjective risk. A link with administrative data provides multiple credibility checks for correspondingly aggregated data. Yet it reveals subjective earning risk to be many times smaller than traditional estimates imply even when conditioning richly on demographics and job history. A life-cycle search model calibrated to match data on job transitions and earnings can replicate the distribution of subjective beliefs reported in the survey. Job-match quality, which directly impacts subjective risk but is impossible to identify in administrative data, contributes significantly to earnings risk. This highlights the importance of administratively-linked subjective risk measures.
Author contact info: Andrew Caplin Department of Economics New York University 19 W. 4th Street, 6th Floor New York, NY 10012 Tel: 212/998-8950 Fax: 212/995-3932 E-Mail: andrew.caplin@nyu.edu Victoria Gregory 1 Federal Reserve Bank Plaza St. Louis, MO 63102 E-Mail: vgregory757@gmail.com Eungik Lee Department of Economics New York University 19 W. 4th Street, 6th Floor New York, NY 10012 E-Mail: lee.eungik@gmail.com Søren Leth-Petersen Department of Economics and CEBI University of Copenhagen Oster Farimagsgade 5 Building 26 DK-1353 Copenhagen K Denmark Tel: +45 35323084 E-Mail: Soren.Leth-Petersen@econ.ku.dk Johan Sæverud Department of Economics and CEBI University of Copenhagen Osterfarimagsgade 5 Building 26 Copenhagen DK-1353 Denmark E-Mail: js@econ.ku.dk

The Simple Math of Royalties and Drug Competition During the 180-Day Generic Exclusivity Period - Drake, Keith M; McGuire, Thomas (National Bureau of Economic Research Working Paper Series, 2023)
In agreements settling patent challenges in the drug industry, the plaintiff brand commonly licenses the defendant generic to sell prior to patent expiry. Some agreements require the generic to pay the brand royalties. Despite the superficial flow of profits, royalty terms may function as part of an anticompetitive “reverse payment” made to the generic in exchange for delayed entry. Typically, the brand launches its own authorized generic (AG) during the first-to-file generic’s 180-day exclusivity period so there are two initial generic competitors. A royalty structure that deters the brand’s AG launch reduces the number of entrants to one, conveying net value to the generic and potentially inducing it to delay its entry. Our simple model shows that royalties usually have no place in a brand-generic agreement between rational actors. However, when royalties are conditioned on the brand’s AG launch, a range of royalty rates exists that both conveys net value to the generic and deters the brand from rationally introducing an AG. Declining royalty terms in a brand’s settlement with a first-to-file generic thus raise a red flag that the agreement is a pay-for-delay. Although the numbers are small, empirical analysis based on publicly available materials corroborates this conclusion.
Author contact info: Keith M. Drake Greylock McKinnon Associates 35 S. Main Street Suite 306 Hanover, NH 03755 E-Mail: kdrake@gma-us.com Thomas McGuire 505 Tremont St. Apt 501 Boston, MA 02116 United States Tel: 617 462 1569 E-Mail: mcguire@hcp.med.harvard.edu

Machine Learning as a Tool for Hypothesis Generation - Ludwig, Jens; Mullainathan, Sendhil (National Bureau of Economic Research Working Paper Series, 2023)
While hypothesis testing is a highly formalized activity, hypothesis generation remains largely informal. We propose a systematic procedure to generate novel hypotheses about human behavior, which uses the capacity of machine learning algorithms to notice patterns people might not. We illustrate the procedure with a concrete application: judge decisions about who to jail. We begin with a striking fact: The defendant’s face alone matters greatly for the judge’s jailing decision. In fact, an algorithm given only the pixels in the defendant’s mugshot accounts for up to half of the predictable variation. We develop a procedure that allows human subjects to interact with this black-box algorithm to produce hypotheses about what in the face influences judge decisions. The procedure generates hypotheses that are both interpretable and novel: They are not explained by demographics (e.g. race) or existing psychology research; nor are they already known (even if tacitly) to people or even experts. Though these results are specific, our procedure is general. It provides a way to produce novel, interpretable hypotheses from any high-dimensional dataset (e.g. cell phones, satellites, online behavior, news headlines, corporate filings, and high-frequency time series). A central tenet of our paper is that hypothesis generation is in and of itself a valuable activity, and hope this encourages future work in this largely “pre-scientific” stage of science.
Author contact info: Jens Ludwig Harris School of Public Policy University of Chicago 1307 East 60th Street Chicago, IL 60637 Tel: 773/834-0811 E-Mail: jludwig@uchicago.edu Sendhil Mullainathan Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-2353 E-Mail: sendhil.mullainathan@gmail.com

The Gendered Impacts of Perceived Skin Tone: Evidence from African-American Siblings in 1870–1940 - Abramitzky, Ran; Conway, Jacob; Mill, Roy; Stein, Luke (National Bureau of Economic Research Working Paper Series, 2023)
We study differences in economic outcomes by perceived skin tone among African Americans using full-count U.S. decennial census data from the late-19th and early-20th centuries. Comparing children coded as “Black” or “Mulatto” by census enumerators and linking these children across population censuses, we first document large gaps in educational attainment and income among African Americans with darker and lighter perceived skin tones. To disentangle the drivers of these gaps, we identify all 36,329 families in which enumerators assigned same-gender siblings different Black/Mulatto classifications. Relative to sisters coded as Mulatto, sisters coded as Black had lower educational attainment, were less likely to marry, and had lower-earning, less-educated husbands. These patterns are consistent with more severe contemporaneous discrimination against African-American women with darker perceived skin tones. In contrast, we find similar educational attainment, marital outcomes, and incomes among differently-classified brothers. Men perceived as African Americans of any skin tone faced similar contemporaneous discrimination, consistent with the “one-drop” racial classification rule that grouped together individuals with any known Black ancestry. Lower incomes for African-American men perceived as having darker skin tone in the general population were driven by differences in opportunities and resources that varied across families, likely reflecting the impacts of historical or family-level discrimination
Author contact info: Ran Abramitzky Department of Economics Stanford University 579 Jane Stanford Way Stanford, CA 94305 Tel: 650/723-9276 Fax: 650/725-5702 E-Mail: ranabr@stanford.edu Jacob Conway Stanford University Department of Economics 579 Jane Stanford Way Stanford, CA 94305 E-Mail: jcconway@stanford.edu Roy Mill E-Mail: milmilon@gmail.com Luke C.D. Stein Finance Division 224 Tomasso Hall 231 Forest Street Babson Park, MA 02457 United States Tel: +1 (781) 239-5060 E-Mail: lcdstein@babson.edu

Do Government Spending Multipliers Depend on the Sign of the Shock? - Ben Zeev, Nadav; Ramey, Valerie A; Zubairy, Sarah (National Bureau of Economic Research Working Paper Series, 2023)
We analyze whether government spending multipliers differ by the sign of the shock. Using aggregate historical U.S. data, we apply Ben Zeev’s (2020) nonlinear diagnostic tests and find evidence of nonlinearities in the impulse response functions of both government spending and GDP. We then extend Ramey and Zubairy’s (2018) framework to allow for asymmetric effects as a type of state dependence to estimate multipliers. While we find differences in the impulse response functions, the resulting multipliers do not differ by sign of the shock. Thus, we find no evidence of asymmetry of government spending multipliers.
Author contact info: Nadav Ben Zeev Department of Economics Ben-Gurion University of the Negev, Beer-Sheva, Israel Israel E-Mail: nadavbz@bgu.ac.il Valerie A. Ramey Hoover Institution Stanford University 434 Galvez Mall Stanford, CA 94305 Tel: 858/534-2388 Fax: 858/534-7040 E-Mail: vramey@stanford.edu Sarah Zubairy Department of Economics Texas A&M University 4228 TAMU College Station, TX 77843 Tel: 979/845-7382 E-Mail: szubairy@tamu.edu

A Human Capital Theory of Who Escapes the Grasp of the Local Monopsonist - Kahn, Matthew E; Tracy, Joseph (National Bureau of Economic Research Working Paper Series, 2023)
Over the last thirty years, there has been a rise in several empirical measures of local labor market monopsony power. The monopsonist has a profit incentive to offer lower wages to local workers. Mobile high skill workers can avoid the lower monopsony wages by moving to other more competitive local labor markets featuring a higher skill price vector. We present a Roy Model of heterogeneous worker sorting across local labor markets that has several empirical implications. Monopsony markets are predicted to experience a “brain drain” over time. Using data over four decades we document this deskilling associated with local monopsony power. This means that observed cross-sectional wage gaps in monopsony markets partially reflect sorting on worker ability. Going forward the rise of work from home may act as a substitute for high-skill worker migration from monopsony markets.
Author contact info: Matthew E. Kahn Department of Economics University of Southern California 3620 South Vermont Ave. Kaprielian (KAP) Hall, 300 Los Angeles, CA 90089-0253 E-Mail: kahnme@usc.edu Joseph Tracy Executive Vice President Federal Reserve Bank of Dallas 2200 N Pearl St Dallas Texas 75201 Tel: 214/992-5996 E-Mail: joestracy@gmail.com

House Prices and Rents in the 21st Century - Loewenstein, Lara; Willen, Paul S (National Bureau of Economic Research Working Paper Series, 2023)
We study the joint evolution of prices and rents of residential property. After constructing rent and price indices for renter- and owner-occupied properties, we decompose the change in the price of occupant-owned property into (1) changes in rent, (2) changes in the relative prices of investor- and occupant-owned properties, and (3) changes in the price-rent ratio. Via a simple model, we link our decomposition to different sources of variation in house prices. We argue that while the 2000s boom was plausibly driven by exuberant expectations, the boom of the 2020s more likely resulted from a preference shock.
Author contact info: Lara Loewenstein Federal Reserve Bank of Cleveland Research Department 1455 E 6th St Cleveland, OH 44114 Tel: 216-579-2913 E-Mail: lara.loewenstein@clev.frb.org Paul S. Willen Federal Reserve Bank of Boston Research Department 600 Atlantic Avenue Boston, MA 02210-2204 Tel: 617/973-3149 Fax: 617/973-2123 E-Mail: paul.willen@bos.frb.org

The Great Migration and Educational Opportunity - Baran, Cavit; Chyn, Eric; Stuart, Bryan A (National Bureau of Economic Research Working Paper Series, 2023)
This paper studies the impact of the First Great Migration on children. We use the complete count 1940 Census to estimate selection-corrected place effects on education for children of Black migrants. On average, Black children gained 0.8 years of schooling (12 percent) by moving from the South to North. Many counties that had the strongest positive impacts on children during the 1940s offer relatively poor opportunities for Black youth today. Opportunities for Black children were greater in places with more schooling investment, stronger labor market opportunities for Black adults, more social capital, and less crime.
Author contact info: Cavit Baran E-Mail: cavit.baran@sabanciuniv.edu Eric Chyn The University of Texas at Austin Department of Economics 2225 Speedway, Stop C3100 Austin, TX 78712-1690 E-Mail: eric.chyn@austin.utexas.edu Bryan A. Stuart Federal Reserve Bank of Philadelphia Research Department 10 Independence Mall Philadelphia, PA 19106 USA E-Mail: bryan.stuart@phil.frb.org

Monitoring Harassment in Organizations - Boudreau, Laura E; Chassang, Sylvain; Gonzalez-Torres, Ada; Heath, Rachel M (National Bureau of Economic Research Working Paper Series, 2023)
We evaluate secure survey methods designed for the ongoing monitoring of harassment in organizations. We use the resulting data to answer policy relevant questions about the nature of harassment: How prevalent is it? What share of managers is responsible for the misbehavior? How isolated are its victims? To do so, we partner with a large Bangladeshi garment manufacturer to experiment with different designs of phone-based worker surveys. Garbling responses to sensitive questions by automatically recording a random subset as complaints increases reporting of physical harassment by 288%, sexual harassment by 269%, and threatening behavior by 46%. A rapport-building treatment has an insignificant aggregate effect, but may affect men and women differently. Removing team identifiers from survey responses does not significantly increase reporting and prevents the computation of policy-relevant team-level statistics. The resulting data shows that harassment is widespread, that the problem is not restricted to a minority of managers, and that victims are often isolated in teams.
Author contact info: Laura E. Boudreau Columbia University Columbia Business School 3022 Broadway New York, NY 10027 E-Mail: l.boudreau@columbia.edu Sylvain Chassang Department of Economics Princeton University Julis Romo Rabinowitz Building Princeton, NJ 08544 E-Mail: chassang@princeton.edu Ada Gonzalez-Torres Department of Economics P.O. Box 653 Beer Sheba 8410501 Israel E-Mail: adagt@bgu.ac.il Rachel M. Heath Department of Economics University of Washington Box 353330 Seattle, WA 98103 E-Mail: rmheath@uw.edu

Inflation and Asset Returns - Cieslak, Anna; Pflueger, Carolin (National Bureau of Economic Research Working Paper Series, 2023)
The past half-century has seen major shifts in inflation expectations, how inflation comoves with the business cycle, and how stocks comove with Treasury bonds. Against this backdrop, we review the economic channels and empirical evidence on how inflation is priced in financial markets. Not all inflation episodes are created equal. Using in a New Keynesian model, we show how “good” inflation can be linked to demand shocks and “bad” inflation to supply shocks driving the economy. We then discuss asset pricing implications of “good” and “bad” inflation. We conclude by providing an outlook for inflation risk premia in the world of newly rising inflation.
Author contact info: Anna Cieslak Fuqua School of Business Duke University P.O. Box 90120 Durham, NC 27708 Tel: 919/660-7879 E-Mail: Anna.cieslak@duke.edu Carolin Pflueger University of Chicago Harris School of Public Policy 1307 E 60th St Chicago, IL 60637 E-Mail: cpflueger@uchicago.edu

The Unexpected Compression: Competition at Work in the Low Wage Labor Market - Autor, David; Dube, Arindrajit; McGrew, Annie (National Bureau of Economic Research Working Paper Series, 2023)
Labor market tightness following the height of the Covid-19 pandemic led to an unexpected compression in the US wage distribution that reflects, in part, an increase in labor market competition. Rapid relative wage growth at the bottom of the distribution reduced the college wage premium and counteracted nearly 40% of the four-decade increase in aggregate 90-10 log wage inequality. Wage compression was accompanied by rapid nominal wage growth and rising job-to-job separations—especially among young non-college (high school or less) workers. Comparing across states, post-pandemic labor market tightness became strongly predictive of real wage growth among low-wage workers (wage-Phillips curve), and aggregate wage compression. Simultaneously, the wage-separation elasticity—a key measure of labor market competition—rose among young non-college workers, with wage gains concentrated among workers who changed employers. Seen through the lens of a canonical job ladder model, the pandemic increased the elasticity of labor supply to firms in the low-wage labor market, reducing employer market power and spurring rapid relative wage growth among young noncollege workers who disproportionately moved from lower-paying to higher-paying and potentially more-productive jobs.
Author contact info: David Autor Department of Economics, E52-438 Massachusetts Institute of Technology 77 Massachusetts Avenue Cambridge, MA 02139 Tel: 617/258-7698 Fax: 617/253-1330 E-Mail: dautor@mit.edu Arindrajit Dube Department of Economics University of Massachusetts Crotty Hall 412 N. Pleasant Street Amherst, MA 01002 Tel: 413/545-2012 E-Mail: adube@econs.umass.edu Annie McGrew E-Mail: amcgrew@umass.edu

Robots and Workers: Evidence from the Netherlands - Acemoglu, Daron; Koster, Hans R. A; Ozgen, Ceren (National Bureau of Economic Research Working Paper Series, 2023)
We estimate the effects of robot adoption on firm-level and worker-level outcomes in the Netherlands using a large employer-employee panel dataset spanning 2009-2020. Our firm-level results confirm previous findings, with positive effects on value added and hours worked for robot-adopting firms and negative outcomes on competitors in the same industry. Our worker-level results show that directly-affected workers (e.g., blue-collar workers performing routine or replaceable tasks) face lower earnings and employment rates, while other workers indirectly gain from robot adoption. We also find that the negative effects from competitors' robot adoption load on directly-affected workers, while other workers benefit from this industry-level robot adoption. Overall, our results highlight the uneven effects of automation on the workforce.
Author contact info: Daron Acemoglu Department of Economics, E52-446 Massachusetts Institute of Technology 77 Massachusetts Avenue Cambridge, MA 02139 Tel: 617/253-1927 Fax: 617/253-1330 E-Mail: daron@mit.edu Hans R. A. Koster Vrije Universiteit Amsterdam Department of Spatial Economics De Boelelaan 1105 1081HV Amsterdam the Netherlands E-Mail: h.koster@vu.nl Ceren Ozgen Department of Economics University House University of Birmingham Edgbaston Birmingham B15 2TT United Kingdom E-Mail: c.ozgen@bham.ac.uk

Input Subsidies and the Destruction of Natural Capital: Chinese Distant Water Fishing - Englander, Gabriel; Zhang, Jihua; Villaseñor-Derbez, Juan Carlos; Jiang, Qutu; Hu, Mingzhao; Deschenes, Olivier; Costello, Christopher (National Bureau of Economic Research Working Paper Series, 2023)
Input subsidies in natural resource sectors are widely believed to cause depletion of the natural capital on which those sectors rely. But identification and data challenges have stymied attempts to empirically estimate the causal effect of subsidies on resource extraction. China’s fishing fleet is the world’s largest, and in 2016 the government changed its fuel subsidy policy for distant water vessels to one that increases with predetermined vessel characteristics. The policy features 25 thresholds at which subsidies discontinuously increase. Using a regression discontinuity design, we estimate that a 1% increase in fuel subsidy increases hours of fishing by 2.2%. Reducing Chinese distant water fuel subsidies by 50% could eliminate biological overfishing in several ocean regions.
Author contact info: Gabriel Englander The World Bank Development Research Group 1818 H St NW Washington, DC 20433 E-Mail: aenglander@worldbank.org Jihua Zhang School of economics Ocean University of China Qingdao, Shandong 266100 China E-Mail: zhangjihua6811@gmail.com Juan Carlos Villaseñor-Derbez Hopkins Marine Station 120 Ocean View Blvd Pacific Grove, CA 93950 USA E-Mail: juancvd@stanford.edu Qutu Jiang Pokfulam Road The Jockey Club Tower Centennial Campus Hong Kong, Hong 999077 China Tel: 60402495 E-Mail: jiangqt@hku.hk Mingzhao Hu Department of Statistics and Applied Probability 5431 South Hall Santa Barbara, CA 93106 USA E-Mail: mingzhaohu@ucsb.edu Olivier Deschenes Department of Economics 2127 North Hall University of California, Santa Barbara Santa Barbara, CA 93106 Tel: 805/893-5617 Fax: 805/893-8830 E-Mail: olivier@econ.ucsb.edu Christopher Costello Bren School of Environmental Science & Management University of California, Santa Barbara Santa Barbara, CA 93106 Tel: 805/893-5802 Fax: 805/893-7612 E-Mail: costello@bren.ucsb.edu

Remote Work across Jobs, Companies, and Space - Hansen, Stephen; Lambert, Peter John; Bloom, Nicholas; Davis, Steven J; Sadun, Raffaella; Taska, Bledi (National Bureau of Economic Research Working Paper Series, 2023)
The pandemic catalyzed an enduring shift to remote work. To measure and characterize this shift, we examine more than 250 million job vacancy postings across five English-speaking countries. Our measurements rely on a state-of-the-art language-processing framework that we fit, test, and refine using 30,000 human classifications. We achieve 99% accuracy in flagging job postings that advertise hybrid or fully remote work, greatly outperforming dictionary methods and also outperforming other machine-learning methods. From 2019 to early 2023, the share of postings that say new employees can work remotely one or more days per week rose more than three-fold in the U.S and by a factor of five or more in Australia, Canada, New Zealand and the U.K. These developments are highly non-uniform across and within cities, industries, occupations, and companies. Even when zooming in on employers in the same industry competing for talent in the same occupations, we find large differences in the share of job postings that explicitly offer remote work.
Author contact info: Stephen Hansen University College London Department of Economics Drayton House London WC1H 0AX United Kingdom E-Mail: stephen.hansen@ucl.ac.uk Peter J. Lambert E-Mail: p.j.lambert@lse.ac.uk Nicholas Bloom Stanford University Department of Economics 579 Jane Stanford Way Stanford, CA 94305-6072 Tel: 650/725-3266 Fax: 650/725-5702 E-Mail: nbloom@stanford.edu Steven J. Davis Hoover Institution Stanford University 434 Galvez Mall Stanford, CA 94305 Tel: 773/251-1795 Fax: 773/834-0733 E-Mail: stevend5@stanford.edu Raffaella Sadun Harvard Business School Morgan Hall 233 Soldiers Field Boston, MA 02163 Tel: 617/495-6190 Fax: 617/495-0355 E-Mail: rsadun@hbs.edu Bledi Taska E-Mail: bt540@nyu.edu

Revisiting Productivity Dynamics in Europe: A New Measure of Utilization-Adjusted TFP Growth - Comin, Diego A; Quintana, Javier; Schmitz, Tom G; Trigari, Antonella (National Bureau of Economic Research Working Paper Series, 2023)
We compute new estimates of Total Factor Productivity (TFP) growth in the five largest European economies. Our estimates account for positive profits and use firm surveys to proxy for unobserved changes in factor utilization. These novelties have a major impact: our estimated TFP growth series are substantially less volatile and less cyclical than the ones obtained with standard methods. Based on our approach, we provide annual industry-level and aggregate TFP series, as well as the first estimates of profit and utilization-adjusted quarterly TFP growth in Europe.
Author contact info: Diego A. Comin Dartmouth College Economics Department 6106 Rockefeller Hall, Room 327 Hanover, NH 03755 Tel: (603) 646-2531 E-Mail: diego.comin@dartmouth.edu Javier Quintana Bank of Spain Calle Alcalá, 48 8014 Madrid Spain Tel: +34686560449 E-Mail: javier.quintana@bde.es Tom G. Schmitz Graduate Centre Mile End Road London E1 4NS United Kingdom E-Mail: t.schmitz@qmul.ac.uk Antonella Trigari Bocconi University Via Roentgen 1 20136 Milano Italy Tel: +39 02 58363040 Fax: +39 02 58363302 E-Mail: antonella.trigari@unibocconi.it

Partial Identification of Treatment-Effect Distributions with Count-Valued Outcomes - Mullahy, John (National Bureau of Economic Research Working Paper Series, 2023)
With count-valued outcomes y in {0,1,...,M} identification and estimation of average treatment effects raise no special considerations beyond those involved in the continuous-outcome case. If partial identification of the distribution of treatment effects is of interest, however, count-valued outcomes present some subtle yet important considerations beyond those involved in continuous-outcome contexts. This paper derives appropriate bounds on the distribution of treatment effects for count-valued outcomes.
Author contact info: John Mullahy University of Wisconsin-Madison Dept. of Population Health Sciences 787 WARF, 610 N. Walnut Street Madison, WI 53726 Tel: 608/265-5410 Fax: 608/263-2820 E-Mail: jmullahy@facstaff.wisc.edu

The Global Dollar Cycle - Obstfeld, Maurice; Zhou, Haonan (National Bureau of Economic Research Working Paper Series, 2023)
The U.S. dollar’s nominal effective exchange rate closely tracks global financial conditions, which themselves show a cyclical pattern. Over that cycle, world asset prices, leverage, and capital flows move in concert with global growth, especially influencing the fortunes of emerging and developing economies (EMDEs). This paper documents that dollar appreciation shocks predict economic downturns in EMDEs and highlights policies countries could implement to dampen the effects of dollar fluctuations. Dollar appreciation shocks themselves are highly correlated not just with tighter U.S. monetary policies, but also with measures of U.S. domestic and international dollar funding stress that themselves reflect global investors’ risk appetite. After the initial market panic and upward dollar spike at the start of the COVID-19 pandemic, the dollar fell as global financial conditions eased; but the higher inflation that followed has induced central banks everywhere to tighten monetary policies more recently. The dollar has strengthened considerably since mid-2021 and a contractionary phase of the global financial cycle is now under way. Owing to increases in public- and business-sector debts during the pandemic, a strong dollar, higher interest rates, and slower economic growth will be challenging for EMDEs.
Author contact info: Maurice Obstfeld Peterson Institute for International Economics 1750 Massachusetts Avenue, NW Washington, DC 20036 E-Mail: obstfeld@econ.berkeley.edu Haonan Zhou Department of Economics Princeton University Julis Romo Rabinowitz Building Princeton, NJ 08544 E-Mail: haonan@princeton.edu

Asymmetries in Federal Reserve Objectives - Kocherlakota, Narayana R (National Bureau of Economic Research Working Paper Series, 2023)
This paper uses evidence from the Federal Open Market Committee’s Summary of Economic Projections to show that US monetary policymakers have objectives over unemployment and inflation outcomes that are not well-approximated through a conventional quadratic loss function. Rather, policymakers derive material costs (benefits) from overshooting (undershooting) their long-run inflation and unemployment goals. The trade-off between the resultant downward tilts in unemployment and inflation played a key role in shaping the evolution of monetary policy choices since the Great Recession.
Author contact info: Narayana R. Kocherlakota Department of Economics University of Rochester 238B Harkness Hall P.O. Box 270156 Rochester, NY 14627 E-Mail: nkocherl@ur.rochester.edu

Competitive Model Selection in Algorithmic Targeting - Iyer, Ganesh; Ke, T. Tony (National Bureau of Economic Research Working Paper Series, 2023)
This paper studies how market competition influences the algorithmic design choices of firms in the context of targeting. Firms face the general trade-off between bias and variance when choosing the design of a supervised learning algorithm in terms of model complexity or the number of predictors to accommodate. Each firm then appoints a data analyst that uses the chosen algorithm to estimate demand for multiple consumer segments, based on which, it devises a targeting policy to maximize estimated profit. We show that competition may induce firms to strategically choose simpler algorithms which involve more bias. This implies that more complex/flexible algorithms tend to have higher value for firms with greater monopoly power.
Author contact info: Ganesh Iyer 2220 Piedmont Ave Berkeley, CALI 94720 United States E-Mail: giyer@berkeley.edu Tony Ke E-Mail: tonyke@cuhk.edu.hk

Multidimensional Human Capital and the Wage Structure - Deming, David J (National Bureau of Economic Research Working Paper Series, 2023)
This paper reviews and synthesizes the literature on the macroeconomic implications of human capital theory. I begin with a review of the canonical model of education and the wage structure pioneered by Tinbergen (1975) and developed more fully by Goldin and Katz (2007). I also review innovations such as the task framework developed by Acemoglu and Autor (2011). The canonical model does a surprisingly good job of predicting changes in the wage structure in the U.S. and other developed countries over the last half-century. Relative to the canonical model, the task framework adopts a more flexible view of technology and does a better job of fitting non-monotonic changes in the wage structure. Yet the task framework does not fully explain why educated workers have done so well since 1980, nor does it explain other recent facts such as flattening returns to cognitive skills and growing returns to non-cognitive, “higher-order” skills such as teamwork. To understand these recent trends, we must move beyond a single index view of human capital, toward richer, multi-dimensional frameworks. I conclude with a discussion of the nascent literature on the implications of multi-dimensional human capital for the wage structure, which raises more questions than it answers.
Author contact info: David J. Deming Harvard Kennedy School Malcolm Wiener Center for Social Policy 79 JFK St Cambridge, MA 02138 Tel: 617/496-4702 E-Mail: david_deming@harvard.edu

Human Capital and Climate Change - Angrist, Noam; Winseck, Kevin; Patrinos, Harry A; Graff Zivin, Joshua S (National Bureau of Economic Research Working Paper Series, 2023)
Addressing climate change requires individual behavior change and voter support for pro-climate policies, yet surprisingly little is known about how to achieve these outcomes. In this paper, we estimate causal effects of additional education on pro-climate outcomes using new compulsory schooling law data across 20 European countries. We analyze effects on pro-climate beliefs and behaviors, as well as novel data on policy preferences and voting for green parties. Results show that a year of education substantially increases pro-climate beliefs, behaviors, and policy preferences.
Author contact info: Noam Angrist University of Oxford 120 Walton St Oxford OX2 6GG United Kingdom E-Mail: noam.angrist@bsg.ox.ac.uk Kevin Winseck E-Mail: kwinseck@ucsd.edu Harry A. Patrinos World Bank 1818 H Street NW MSN G8-800 Washington DC 20433 Washington, DC 20043 United States Tel: 202-473-5510 E-Mail: hpatrinos@worldbank.org Joshua S. Graff Zivin University of California, San Diego 9500 Gilman Drive, MC 0519 La Jolla, CA 92093-0519 Tel: 858/822-6438 E-Mail: jgraffzivin@ucsd.edu

When we change the clock, does the clock change us? - Baylis, Patrick; Borenstein, Severin; Rubin, Edward A (National Bureau of Economic Research Working Paper Series, 2023)
The practice of standardizing the designation of time is a central device for coordinating activities and economic behaviors across individuals. However, there is nearly always conflict between an individual's goals of coordinating activities with others and engaging in those activities at their own preferred time. When time is standardized across large geographic areas, that tension is enhanced, because norms about the "clock times" of activities conflict with adapting to local environmental conditions created by natural or "solar" time. This tension is at the heart of current state and national debates about adopting daylight saving time or switching time zones. We study this conflict by examining how geographic and temporal variation in solar time within time zones affects the timing of a range of common behaviors in the United States. Specifically, we estimate the degree to which people shift their online behavior (through Twitter), their commute (using data from the Census), and their visits to businesses and other establishments (using foot traffic data). We find that, on average, a one-hour shift in the differential between solar time and clock time -- approximately the width of a time zone -- leads to shifting the clock time of behavior by between 9 and 26 minutes. This result shows that while adapting to local environmental factors significantly offsets the differential between solar time and clock time, the behavioral nudge and coordination value of clock time has the larger influence on activity. We also study how the trade-off differs across different activities and population demographics.
Author contact info: Patrick Baylis Vancouver School of Economics University of British Columbia 6000 Iona Drive Vancouver, BC V6T1L4 Canada E-Mail: patrick.baylis@ubc.ca Severin Borenstein Haas School of Business University of California, Berkeley Berkeley, CA 94720-1900 Tel: 510/642-3689 E-Mail: severinborenstein@berkeley.edu Edward A. Rubin Department of Economics University of Oregon 1415 Kincaid Street Eugene, OR 97405 E-Mail: edwardr@uoregon.edu

Restrict the Middleman? Quantitative Models of PBM Regulations and Their Consequences - Mulligan, Casey B (National Bureau of Economic Research Working Paper Series, 2023)
This paper provides the first quantitative economic models of pharmacy benefit management regulation. The price-theoretic models allow for various market frictions and imperfections including market power, coordination costs, tax distortions, and incomplete innovation incentives. A rigorous economic interpretation is provided for what are sometimes called “rebate walls” or “rebate traps.” Applicable types of regulation include rebate rules, such as the HHS rebate rule and the Insulin Act; disclosure requirements such as the PBM Transparency Act of 2023; and pharmacy contract restrictions such as the CMS Medicare rule to take effect in 2024. Utilization of brands and generics, plan spending, cost sharing, spillovers to nonpharmacy medical spending, government budgets, and the pace of drug innovation are among the outcomes tracked by the open-source model.
Author contact info: Casey B. Mulligan University of Chicago Department of Economics 1126 East 59th Street Chicago, IL 60637 Tel: 773/702-9017 Fax: 773/702-8490 E-Mail: c-mulligan@uchicago.edu

The Independent Contractor Workforce: New Evidence On Its Size and Composition and Ways to Improve Its Measurement in Household Surveys - Abraham, Katharine G; Hershbein, Brad; Houseman, Susan N; Truesdale, Beth (National Bureau of Economic Research Working Paper Series, 2023)
Good data on the size and composition of the independent contractor workforce are elusive, with household survey and administrative tax data often disagreeing on levels and trends. We carried out a series of focus groups to learn how self-employed independent contractors speak about their work. Based on these findings, we designed and fielded a large-scale telephone survey to elicit more accurate and complete information on independent contractors, including those who may be coded incorrectly as employees in conventional household survey data and those who are independent contractors in a secondary work activity. We find that, upon probing, roughly one in 10 workers who initially reports working for an employer on one or more jobs (and thus is coded as an employee) is in fact an independent contractor on at least one of those jobs. Incorporating these miscoded workers into estimates of work arrangement on the main job nearly doubles the share who are independent contractors, to about 15 percent of all workers. Young workers, less-educated workers, workers of color, multiple-job holders, and those with low hours are more likely to be miscoded. Taking these workers into account substantively changes the demographic profile of the independent contractor workforce. Our research indicates that probing in household surveys to clarify a worker’s employment arrangement and identify all low-hours work is critical for accurately measuring independent contractor work.
Author contact info: Katharine G. Abraham Department of Economics and Joint Program in Survey Methodology University of Maryland 1218 LeFrak Hall College Park, MD 20742 Tel: 301/405-1004 E-Mail: kabraham@umd.edu Brad Hershbein W.E. Upjohn Institute for Employment Research 300 S. Westnedge Ave. Kalamazoo, MI 49007 E-Mail: hershbein@upjohn.org Susan N. Houseman W.E. Upjohn Institute for Employment Research 300 S. Westnedge Ave. Kalamazoo, MI 49007 E-Mail: houseman@upjohn.org Beth Truesdale E-Mail: truesdale@upjohn.org

The Prices in the Crises: What We Are Learning from Twenty Years of Health Insurance in Low- and Middle-Income Countries - Das, Jishnu; Do, Quy-Toan (National Bureau of Economic Research Working Paper Series, 2023)
Governments in many low- and middle-income countries are developing health insurance products as a complement to tax-funded, subsidized provision of health care through publicly operated facilities. This paper discusses two rationales for this transition. First, health insurance would boost fiscal revenues for health care, as post-treatment out-of-pocket payments to providers would be replaced by pre-treatment insurance premia to health ministries. Second, increased patient choice and carefully designed physician reimbursements would increase quality in the health care sector. This essay shows that, at best, these objectives have only been partially met. Despite evidence that health insurance has provided financial protection, consumers are not willing to pay for unsubsidized premia. Health outcomes have not improved despite an increase in utilization. We argue that this is not because there was no room to improve the quality of care but because behavioral responses among health care providers have systematically undermined the objectives of these insurance schemes.
Author contact info: Jishnu Das McCourt School of Public Policy Georgetown University 37th & O Street NW Washington, DC 20057 Tel: 202/687-0433 E-Mail: jishnu.das@georgetown.edu Quy-Toan Do The World Bank 1818 H Street NW Washington, DC 20433 E-Mail: qdo@worldbank.org

Taking Teacher Evaluation to Scale: The Effect of State Reforms on Achievement and Attainment - Bleiberg, Joshua; Brunner, Eric; Harbatkin, Erica; Kraft, Matthew A; Springer, Matthew G (National Bureau of Economic Research Working Paper Series, 2023)
Federal incentives and requirements under the Obama administration spurred states to adopt major reforms to their teacher evaluation systems. We examine the effects of these reforms on student achievement and attainment at a national scale by exploiting the staggered timing of implementation across states. We find precisely estimated null effects, on average, that rule out impacts as small as 0.015 standard deviation for achievement and 1 percentage point for high school graduation and college enrollment. We also find little evidence that the effect of teacher evaluation reforms varied by system design rigor, specific design features or student and district characteristics. We highlight five factors that may have undercut the efficacy of teacher evaluation reforms at scale: political opposition, the decentralized structure of U.S. public education, capacity constraints, limited generalizability, and the lack of increased teacher compensation to offset the non-pecuniary costs of lower job satisfaction and security.
Author contact info: Joshua Bleiberg E-Mail: jbleiber@pitt.edu Eric Brunner Department of Public Policy University of Connecticut 10 Prospect Street, 4th Floor Hartford, CT 06103 E-Mail: eric.brunner1@gmail.com Erica Harbatkin Tallahassee, FL 32306 United States E-Mail: eharbatkin@fsu.edu Matthew A. Kraft Brown University PO Box 1938 Providence, RI 02912 Tel: 401/863-3795 E-Mail: mkraft@brown.edu Matthew G. Springer University of North Carolina - Chapel Hill E-Mail: mgspringer@unc.edu

The US, Economic News, and the Global Financial Cycle - Boehm, Christoph E; Kroner, T. Niklas (National Bureau of Economic Research Working Paper Series, 2023)
We provide evidence for a causal link between the US economy and the global financial cycle. Using intraday data, we show that US macroeconomic news releases have large and significant effects on global risky asset prices. Stock price indexes of 27 countries, the VIX, and commodity prices all jump instantaneously upon news releases. The responses of stock indexes co-move across countries and are large—often comparable in size to the response of the S&P 500. Further, US macroeconomic news explains on average 23 percent of the quarterly variation in foreign stock markets. The joint behavior of stock prices, bond yields, and risk premia suggests that systematic US monetary policy reactions to news do not drive the estimated effects. Instead, the evidence points to a direct effect on investors’ risk-taking capacity. Our findings show that a byproduct of the United States' central position in the global financial system is that news about its business cycle has large effects on global financial conditions.
Author contact info: Christoph Boehm Department of Economics University of Texas at Austin BRB 3.114 2225 Speedway Austin, TX 78712 Tel: 512/475-8531 E-Mail: chris.e.boehm@gmail.com T. Niklas Kroner GMSM - Division of International Finance Federal Reserve Board 20th St. and Constitution Ave. N.W. Washington, DC 20551 USA E-Mail: t.niklas.kroner@gmail.com

Endogenous Production Networks with Fixed Costs - Dhyne, Emmanuel; Kikkawa, Ken; Kong, Xianglong; Mogstad, Magne; Tintelnot, Felix (National Bureau of Economic Research Working Paper Series, 2023)
This paper presents a tractable model of endogenous production networks with fixed costs associated with the formation of links between firms. The model consists of a finite number of firm types producing differentiated products. Each firm is characterized by firm-specific parameters describing its CES production function, firm-specific domestic and foreign demand shifters, and a firm-specific set of potential suppliers and buyers. We consider versions of the model in which either the buyer or the supplier initiates the formation of links, and versions in which the production network can be cyclic or acyclic. Our main theoretical result is that the closed economy equilibrium is unique if the set of feasible networks consists only of networks that are acyclic and the buyer initiates the link formation while having full bargaining power in price negotiations with the supplier. We provide examples of multiple equilibria if the supplier initiates the link formation in both cyclic and acyclic feasible networks or if the buyer initiates the link formation in a cyclic production network. We take the acyclic production network model to Belgian data on firm-to-firm production networks and show that it approximates well the salient features of the network. The endogenous network model generates substantial churn in domestic firm-to-firm linkages in response to trade shocks. However, the endogenous network model generates only moderately different welfare changes compared to a model with fixed linkages, suggesting that exogenous production networks can approximate the welfare response to trade shocks reasonably well.
Author contact info: Emmanuel Dhyne National Bank of Belgium Boulevard de Berlaimont, 14 1000 Brussels Belgium E-Mail: emmanuel.dhyne@nbb.be Ken Kikkawa Sauder School of Business University of British Columbia 2053 Main Mall Vancouver, BC V6T 1Z2 Canada E-Mail: ken.kikkawa@sauder.ubc.ca Xianglong Kong Kenneth C. Griffin Department of Economics University of Chicago 5757 South University Avenue Chicago, IL 60637 E-Mail: xlkong@uchicago.edu Magne Mogstad Department of Economics University of Chicago 1126 East 59th Street Chicago, IL 60637 Tel: 773/702-3877 E-Mail: magne.mogstad@gmail.com Felix Tintelnot Kenneth C. Griffin Department of Economics University of Chicago 5757 South University Avenue Chicago, IL 60637 Tel: 773/702-5403 E-Mail: felix.tintelnot@gmail.com

Fighting Poverty One Family at a Time: Experimental Evidence from an Intervention with Holistic, Individualized, Wrap-Around Services - Evans, William N; Kolka, Shawna; Sullivan, James X; Turner, Patrick S (National Bureau of Economic Research Working Paper Series, 2023)
Families in poverty face numerous barriers to establishing stable economic footing. This paper examines the effect of a holistic, individualized wrap-around service intervention on outcomes for low-income individuals. The intervention includes a detailed assessment, an individualized service plan, intensive case management administered by a two-person team with small caseloads, and temporary financial assistance used to overcome obstacles to self-sufficiency and incentivize behavior. We evaluate the intervention through a randomized controlled trial among participants seeking assistance at a local social service provider. Results indicate that the program improved labor market and housing outcomes two years after enrollment. Given the customized nature of the services, overall program effects might mask important heterogeneity. Exploratory analysis suggests the program helped employ participants who lacked employment but had stable housing, and that those without stable housing were helped in securing it.
Author contact info: William N. Evans Keough-Hesburgh Professor of Economics Department of Economics University of Notre Dame 3111 Jenkins Nanovic Halls Notre Dame, IN 46556-7000 E-Mail: wevans1@nd.edu Shawna Kolka findhelp 3429 Executive Center Dr. Austin, TX 78731 E-Mail: shawna.kolka@gmail.com James X. Sullivan Department of Economics 3108 Jenkins Nanovic Halls University of Notre Dame Notre Dame, IN 46556 Tel: 574/631-7587 E-Mail: James.X.Sullivan.197@nd.edu Patrick S. Turner Department of Economics 3030 Jenkins Nanovic Hall Notre Dame, IN 46556 Tel: 574-631-5093 E-Mail: Patrick.turner@nd.edu