Upward Mobility in Developing Countries - Genicot, Garance; Ray, Debraj; Concha-Arriagada, Carolina (National Bureau of Economic Research Working Paper Series, 2024)
This article provides an overview of the literature on mobility in developing countries. Explicit distinctions are drawn between directional and non-directional measures, absolute and relative measures, and combinations thereof. We note that the scarcity of panel data has hindered the measurement of mobility for many countries. We pay particular attention to the recent development of panel-free mobility measures, which allows us to measure upward mobility in 122 countries. Throughout this review, we discuss some central themes in the literature.
Author contact info: Garance Genicot Georgetown University Department of Economics 37th & O Streets, NW Washington, DC 20057 Tel: 202/687-7144 Fax: 202/687-6102 E-Mail: gg58@georgetown.edu Debraj Ray Department of Economics New York University 19 West Fourth Street New York, NY 10012 Tel: 212/998-8906 Fax: 212/995-4186 E-Mail: debraj.ray@nyu.edu Carolina Concha-Arriagada E-Mail: conchaarriagada@uchicago.edu

Loopholes and the Incidence of Public Services: Evidence from Funding Career & Technical Education - Goldring, Thomas; Jacob, Brian; Kreisman, Daniel; Ricks, Michael (National Bureau of Economic Research Working Paper Series, 2024)
In 2015, Michigan increased its Career and Technical Education (CTE) funding and changed its funding formula to reimburse programs-based student progression through program curricula. Although this change nearly doubled program completion rates, student enrollment and persistence were unaffected; instead, administrators accelerated student progress by reorganizing course curricula around notches in the new funding formula. As a result of response heterogeneity, 30% of the funding increase is transferred away from high-poverty districts to more affluent ones, underscoring how supply-side responses to loopholes shape the incidence of public services.
Author contact info: Thomas Goldring Andrew Young School of Policy Studies 55 Park Pl NE Atlanta, GA 30303 E-Mail: tgoldring@gsu.edu Brian Jacob Gerald R. Ford School of Public Policy University of Michigan 735 South State Street Ann Arbor, MI 48109 Tel: 734-615-6994 Fax: NA E-Mail: bajacob@umich.edu Daniel Kreisman Department of Economics Andrew Young School of Policy Studies P.O. Box 3992 Atlanta, GA 30302-3992 E-Mail: dkreisman@gsu.edu Michael Ricks HLN 525 H P.O. Box 880489 Lincoln, NE 68588-0489 E-Mail: mricks4@unl.edu

Immigration's Effect on US Wages and Employment Redux - Caiumi, Alessandro; Peri, Giovanni (National Bureau of Economic Research Working Paper Series, 2024)
In this article we revive, extend and improve the approach used in a series of influential papers written in the 2000s to estimate how changes in the supply of immigrant workers affected natives' wages in the US. We begin by extending the analysis to include the more recent years 2000-2022. Additionally, we introduce three important improvements. First, we introduce an IV that uses a new skill-based shift-share for immigrants and the demographic evolution for natives, which we show passes validity tests and has reasonably strong power. Second, we provide estimates of the impact of immigration on the employment-population ratio of natives to test for crowding out at the national level. Third, we analyze occupational upgrading of natives in response to immigrants. Using these estimates, we calculate that immigration, thanks to native-immigrant complementarity and college skill content of immigrants, had a positive and significant effect between +1.7 to +2.6% on wages of less educated native workers, over the period 2000-2019 and no significant wage effect on college educated natives. We also calculate a positive employment rate effect for most native workers. Even simulations for the most recent 2019-2022 period suggest small positive effects on wages of non-college natives and no significant crowding out effects on employment.
Author contact info: Alessandro Caiumi E-Mail: acaiumi@ucdavis.edu Giovanni Peri Department of Economics University of California, Davis One Shields Avenue Davis, CA 95616 Tel: 530/752-3033 E-Mail: gperi@ucdavis.edu

Teaching Teachers To Use Computer Assisted Learning Effectively: Experimental and Quasi-Experimental Evidence - Oreopoulos, Philip; Gibbs, Chloe; Jensen, Michael; Price, Joseph (National Bureau of Economic Research Working Paper Series, 2024)
Mastery learning - the process by which students must demonstrate proficiency with a single topic before moving on - is well recognized as one of the most effective ways to learn, yet many teachers struggle or remain unsure about how to implement it into a classroom setting. This study evaluates a program to encourage greater mastery learning through technology and proactive continuous teacher support. Focusing on elementary and middle school mathematics, teachers receive weekly coaching in how to use Computer Assisted Learning (CAL) for helping students follow a customized roadmap of incremental progress. Results from two field experiments indicate significant Intent To Treat effects on math performance of 0.12 - 0.22 standard deviations. Further analysis indicates that these gains are from students in classrooms with at least an average of 35 minutes of practice per week. Teachers able to achieve high-dosage practice have a high degree of initial buy-in, a clear implementation strategy for when practice occurs, and a willingness to closely monitor progress and follow-up with struggling students.
Author contact info: Philip Oreopoulos Department of Economics University of Toronto 150 St. George Street Toronto, ON M5S 3G7 E-Mail: philip.oreopoulos@utoronto.ca Chloe Gibbs Department of Economics University of Notre Dame 3057 Jenkins Nanovic Hall Notre Dame, IN 46556 Tel: 574.631.4963 E-Mail: chloe.gibbs@nd.edu Michael Jensen E-Mail: mjensen6@nd.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

The Dollar versus the Euro as International Reserve Currencies - Chinn, Menzie D; Frankel, Jeffrey A; Ito, Hiro (National Bureau of Economic Research Working Paper Series, 2024)
We begin by examining determinants of aggregate foreign exchange reserve holdings by central banks (size of issuing country’s economy and financial markets, ability of the currency to hold value, and inertia). But understanding the determination of reserve holdings probably requires going beyond the aggregate numbers, instead observing individual central bank behavior, including characteristics of the holding country (bilateral trade with the issuing country, bilateral currency peg, and proxies for bilateral exposure to sanctions), in addition to the characteristics of the reserve currency issuer. On a currency-by-currency basis, US dollar holdings are somewhat well explained by several issuer characteristics; but the other currencies are less successfully explained. It may be that the results from currency-by-currency estimation are impaired by insufficient sample size. This consideration offers a motivation for pooling the data across the major currencies and imposing the constraints that reserve holdings are determined in the same way for each currency. In this setting, most economic determinants enter with significance: economic size as measured by GDP, size of financial markets as measured by foreign exchange turnover, bilateral currency peg, and bilateral trade share. However, geopolitical variables (bilateral alliance, bilateral sanctions) usually do not enter with significance.
Author contact info: Menzie D. Chinn Department of Economics University of Wisconsin-Madison 1180 Observatory Drive Madison, WI 53706 Tel: 608/262-7397 Fax: 608/262-2033 E-Mail: mchinn@lafollette.wisc.edu Jeffrey A. Frankel Harvard Kennedy School 79 JFK Street Cambridge, MA 02138 Tel: 617/496-3834 Fax: 617/496-5747 E-Mail: jeffrey_frankel@harvard.edu Hiro Ito Portland State University 15787 NW Hackney Dr. Portland, OR 97229 Tel: 5039613168 E-Mail: ito@pdx.edu

The Rise and Fall of the Teaching Profession: Prestige, Interest, Preparation, and Satisfaction over the Last Half Century - Kraft, Matthew A; Lyon, Melissa Arnold (National Bureau of Economic Research Working Paper Series, 2024)
We examine the state of the U.S. K-12 teaching profession over the last half century by compiling nationally representative time-series data on four interrelated constructs: occupational prestige, interest among students, the number of individuals preparing for entry, and on-the-job satisfaction. We find a consistent and dynamic pattern across every measure: a rapid decline in the 1970s, a swift rise in the 1980s extending into the mid 1990s, relative stability, and then a sustained decline beginning around 2010. The current state of the teaching profession is at or near its lowest levels in 50 years. We identify and explore a range of hypotheses that might explain these historical patterns including economic and sociopolitical factors, education policies, and school environments.
Author contact info: Matthew A. Kraft Brown University PO Box 1938 Providence, RI 02912 Tel: 401/863-3795 E-Mail: mkraft@brown.edu Melissa Arnold Lyon E-Mail: mlyon@albany.edu

Ethics and Illusions: How Ethical Declarations Shape Market Behavior - Barrios, John M; Bertomeu, Jeremy; Lunawat, Radhika; Sall, Ibrahima (National Bureau of Economic Research Working Paper Series, 2024)
We examine the impacts of ethical declarations on market transactions through a controlled laboratory experiment, where privately-informed sellers issue a public report prior to a first-price auction. We find that while signing an ethical statement does not reduce misreporting by sellers, it significantly increases buyer trust, often skewing the terms of the trade in favor of sellers. Contrary to rational expectations, buyers consistently struggle to undo the bias. In counterfactual scenarios, from our structural analysis, we find that price efficiency improves when buyers rationally process uncertainty about sellers' ethical preferences, yet bias persists even when buyers have more accurate perceptions of sellers'’ ethical standards. Overall, our results suggests that disclosure interventions aimed at enhancing ethical conduct in market settings may not necessarily lead to more efficient pricing or reduced bias, and in some instances, may even disadvantage certain market participants.
Author contact info: John M. Barrios Olin Business School Washington University in St. Louis 1 Brookings Drive St. Louis, MO 63130 Tel: 314/935-4652 E-Mail: John.barrios@wustl.edu Jeremy Bertomeu E-Mail: jeremy.bertomeu@gmail.com Radhika Lunawat E-Mail: rlunawat@uci.edu Ibrahima Sall E-Mail: i.sall@wustl.edu

Gaining Steam: Incumbent Lock-in and Entrant Leapfrogging - Hornbeck, Richard; Hsu, Shanon; Humlum, Anders; Rotemberg, Martin (National Bureau of Economic Research Working Paper Series, 2024)
We examine the long transition from water to steam power in US manufacturing, focusing on early users of mechanical power: lumber and flour mills. Digitizing Census of Manufactures manuscripts for 1850 to 1880, we show that as steam costs declined, manufacturing activity grew faster in counties with less waterpower potential. This growth was driven by steam powered entrants and agglomeration, as water powered incumbents faced switching barriers primarily from sunk costs. Estimating a dynamic model of firm entry and steam adoption, we find that the interaction of switching barriers and high fixed costs creates a quantitatively important and socially inefficient drag on technology adoption. Despite substantial entry and exit, switching barriers remained influential for aggregate steam adoption throughout the 19th century, as water power required lower fixed costs and therefore was attractive to relatively low productivity entrants. These entrants then became incumbents, locked into water power even if their productivity grew.
Author contact info: Richard Hornbeck Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-8350 E-Mail: richard.hornbeck@chicagobooth.edu Shanon Hsuan-Ming Hsu E-Mail: shmhsu@uchicago.edu Anders Humlum Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 E-Mail: anders.humlum@chicagobooth.edu Martin Rotemberg E-Mail: mrotemberg@nyu.edu

Do Female–Owned Employment Agencies Mitigate Discrimination and Expand Opportunity for Women? - Hunt, Jennifer; Moehling, Carolyn (National Bureau of Economic Research Working Paper Series, 2024)
We create a dataset of 14,000 hand-coded help–wanted advertisements placed by employment agencies in three U.S. newspapers in 1950 and 1960, a time when help–wanted advertisements were divided into male and female sections, and collect information on agency ownership. We find that female-owned agencies specialized in vacancies for women, thereby expanding the access of female jobseekers to agency services, including for positions in majority-male occupations. Female-owned agencies advertised more skilled occupations to women than did male-owned agencies, leading to a 5.5% higher wage for women. On the other hand, female-owned agencies had a greater propensity to match male jobseekers to clerical jobs, contributing to 21% lower male wages than for male-owned agencies. The results are consistent with female proprietors having had a comparative advantage in female jobseekers and clerical occupations or with client firms having trusted female proprietors only with vacancies for women and homogeneous, lower-skill occupations. However, in choosing to establish an agency and to specialize in female jobseekers, female proprietors may have sought to mitigate employer discrimination against female jobseekers; their higher propensity to advertise majority-male occupations among professional, technical and managerial advertisements for women may also reflect discrimination mitigation.
Author contact info: Jennifer Hunt Department of Economics Rutgers University New Jersey Hall 75 Hamilton Street New Brunswick, NJ 08901-1248 Tel: 848/932-8654 E-Mail: jennifer.hunt@alum.mit.edu Carolyn Moehling Department of Economics Rutgers University 75 Hamilton Street New Brunswick, NJ 08901-1248 Tel: 732/932-7188 Fax: NA E-Mail: cmoehling@econ.rutgers.edu

Social Protection in the Developing World - Banerjee, Abhijit; Hanna, Rema; Olken, Benjamin A; Sverdlin Lisker, Diana (National Bureau of Economic Research Working Paper Series, 2024)
Social protection programs have become increasingly widespread in low- and middle-income countries, with their own distinct characteristics to match the environments in which they are operating. This paper reviews the growing literature on the design and impact of these programs. We review how to identify potential beneficiaries given the large informal sector, the design and implementation of redistribution and income support programs, and the challenges and potential of social insurance. We use our frameworks as a guide for consolidating and organizing the existing literature, and also to highlight areas and questions for future research.
Author contact info: Abhijit Banerjee Department of Economics, E52-540 MIT 77 Massachusetts Avenue Cambridge, MA 02139 Tel: 617/253-8855 Fax: 617/253-1330 E-Mail: banerjee@mit.edu Rema Hanna Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617/496-1140 Fax: 617/496-5747 E-Mail: Rema_Hanna@hks.harvard.edu Benjamin A. Olken Department of Economics, E52-542 MIT 77 Massachusetts Avenue Cambridge, MA 02139 Tel: 617/588-1437 Fax: 617/868-2742 E-Mail: bolken@mit.edu Diana Sverdlin Lisker 1818 H St, NW Washington, DC 20433 United States E-Mail: dsverdlinlisker@worldbank.org

Automated Social Science: Language Models as Scientist and Subjects - Manning, Benjamin S; Zhu, Kehang; Horton, John J (National Bureau of Economic Research Working Paper Series, 2024)
We present an approach for automatically generating and testing, in silico, social scientific hypotheses. This automation is made possible by recent advances in large language models (LLM), but the key feature of the approach is the use of structural causal models. Structural causal models provide a language to state hypotheses, a blueprint for constructing LLM-based agents, an experimental design, and a plan for data analysis. The fitted structural causal model becomes an object available for prediction or the planning of follow-on experiments. We demonstrate the approach with several scenarios: a negotiation, a bail hearing, a job interview, and an auction. In each case, causal relationships are both proposed and tested by the system, finding evidence for some and not others. We provide evidence that the insights from these simulations of social interactions are not available to the LLM purely through direct elicitation. When given its proposed structural causal model for each scenario, the LLM is good at predicting the signs of estimated effects, but it cannot reliably predict the magnitudes of those estimates. In the auction experiment, the in silico simulation results closely match the predictions of auction theory, but elicited predictions of the clearing prices from the LLM are inaccurate. However, the LLM's predictions are dramatically improved if the model can condition on the fitted structural causal model. In short, the LLM knows more than it can (immediately) tell.
Author contact info: Benjamin S. Manning 100 Main Street Cambridge, MA 02139 United States E-Mail: bmanning@mit.edu Kehang Zhu E-Mail: kehangzhu@gmail.com John J. Horton Massachusetts Institute of Technology Sloan School of Management 100 Main St Cambridge, MA 02142 E-Mail: john.joseph.horton@gmail.com

The Impact of Lump-Sum Retirement Withdrawals on Labor Supply: Evidence from Peru - Moreno, Carla; Slavov, Sita (National Bureau of Economic Research Working Paper Series, 2024)
We examine the labor supply impact of a 2016 policy that allows retirement-eligible individuals covered by Peru’s private pension system to receive retirement benefits as a lump sum rather than as an annuity. We present a theoretical model predicting that, for liquidity constrained workers, the lump sum option makes formal employment (requiring pension participation) more attractive relative to informal employment (not requiring pension participation); it also encourages early retirement. Using household panel data, we estimate the impact of the 2016 policy on the labor supply of workers covered by the private pension system compared to workers covered by the alternative pay-as-you-go defined benefit pension (which was unaffected by the policy). The policy is associated with an increase in the probability of being retired at ages 50 (early retirement age for women), 55 (early retirement age for men), and 65 (full retirement age for all workers). We also find increases in formal sector employment among women in their late 40s and men in their early 50s, consistent with increased efforts to qualify for early retirement (which requires recent pension contributions). The policy’s effects are concentrated among workers with less education, who are more likely to be liquidity constrained.
Author contact info: Carla Moreno E-Mail: carla.moreno@lmu.edu 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

Inflation Preferences - Afrouzi, Hassan; Dietrich, Alexander; Myrseth, Kristian; Priftis, Romanos; Schoenle, Raphael (National Bureau of Economic Research Working Paper Series, 2024)
We document novel survey-based facts on preferred long-run inflation rates among U.S. consumers. Consumers on average prefer a 0.20% annual inflation rate, considerably below the Federal Reserve’s 2% target. Inflation preferences not only correlate with demographic and socioeconomic characteristics, but also with economic reasoning. A randomized control trial reveals that two narratives based on economic models—describing how inflation lowers the real value of wages as well as money holdings—affect inflation preferences. While our results can inform the design of central bank communication on inflation targets, they also raise questions about the alignment between such targets and consumer preferences.
Author contact info: Hassan Afrouzi Department of Economics Columbia University 420 W 118th Street New York, NY 10027 E-Mail: ha2475@columbia.edu Alexander Dietrich E-Mail: amdi@nationalbanken.dk Kristian Myrseth University of York E-Mail: kristian.myrseth@outlook.com Romanos Priftis Sonnemannstrasse 20 Frankfurt am Main 60314 Germany E-Mail: romanos.priftis@ecb.europa.eu Raphael Schoenle Brandeis University Department of Economics 415 South Street Waltham, MA 02454 E-Mail: schoenle@brandeis.edu

The Provision of Information and Incentives in School Assignment Mechanisms - Neal, Derek; Root, Joseph (National Bureau of Economic Research Working Paper Series, 2024)
Research on centralized school assignment mechanisms often focuses on whether parents who participate in specific mechanisms are likely to truthfully report their preferences or engage in various costly strategic behaviors. However, a growing literature suggests that parents may not know enough about the school options available to them to form complete preference rankings. We develop a simple model that explains why it is not surprising that many participants in school assignment mechanisms possess limited information about the schools available to them. We then discuss policies that could improve both the information that participants bring to school assignment mechanisms and the quality of the schools in their choice sets.
Author contact info: Derek Neal Department of Economics University of Chicago 1126 East 59th Street Chicago, IL 60637 Tel: 773/702-8166 Fax: 773-702-8490 E-Mail: n9na@uchicago.edu Joseph Root E-Mail: jroot@uchicago.edu

Cities, Heterogeneous Firms, and Trade - Bakker, Jan David; Garcia Marin, Alvaro; Potlogea, Andrei V; Voigtländer, Nico; Yang, (National Bureau of Economic Research Working Paper Series, 2024)
Does international trade affect the growth of cities, and vice versa? Assembling disaggregate data for four countries, we document a novel stylized fact: Export activity is disproportionately concentrated in larger cities – even more so than overall economic activity. We rationalize this fact by marrying a standard quantitative spatial economics model with a heterogeneous firm model that features selection into the domestic and the export market. Our model delivers novel predictions for the bi-directional interactions between trade and urban dynamics: On the one hand, trade liberalization shifts employment towards larger cities, and on the other hand, liberalizing land use raises exports. We structurally estimate the model using data for the universe of Chinese manufacturing and French firms. We find that trade policies have quantitatively meaningful impacts on urban outcomes and vice versa, and that the aggregate effects of trade and urban policies differ from more standard models that do not account for the interaction between trade and cities. In addition, a distinguishing prediction of our model – which we confirm in the data – is that local trade elasticities vary systematically with city size, so that a country's aggregate trade elasticity depends on the spatial distribution of production within its borders.
Author contact info: Jan David Bakker Bocconi University Department of Economics Via Roentgen 1 20136 Milan Italy E-Mail: jan.bakker@unibocconi.it Alvaro Garcia Marin Universidad de los Andes Monseñor Álvaro del Portillo 12455 Las Condes, Santiago Chile E-Mail: alvarof.garciam@gmail.com Andrei V. Potlogea School of Economics University of Edinburgh Room 2.08, 31 Buccleuch Place Edinburgh, EH8 9JT Scotland Tel: +44 (0)131 651 3759 E-Mail: Andrei.Potlogea@ed.ac.uk Nico Voigtländer Anderson School of Management University of California, Los Angeles 110 Westwood Plaza C513 Entrepreneurs Hall Los Angeles, CA 90095 Tel: 310/794-6382 E-Mail: nico.v@anderson.ucla.edu Yang Yang 700 19th St NW Washington, DC 20431 United States E-Mail: yyang5@imf.org

Consumer-Financed Fiscal Stimulus: Evidence from Digital Coupons in China - Ding, Jing; Jiang, Lei; Msall, Lucy; Notowidigdo, Matthew J (National Bureau of Economic Research Working Paper Series, 2024)
In 2020, local governments in China began issuing digital coupons to stimulate spending in targeted categories such as restaurants and supermarkets. Using data from a large e-commerce platform and a bunching estimation approach, we find that the coupons caused large increases in spending of 3.1–3.3 yuan per yuan spent by the government. The large spending responses do not come from substitution away from non-targeted spending categories or from short-run intertemporal substitution. To rationalize these results, we develop a dynamic consumption model showing how coupons’ minimum spending thresholds create temporary notches that lead to large spending responses.
Author contact info: Jing Ding E-Mail: dingjingut@gmail.com Lei Jiang School of Economics and Management Tsinghua University Beijing 100084,China E-Mail: jianglei@sem.tsinghua.edu.cn Lucy Msall Booth School of Business The University of Chicago Chicago, IL 60637 E-Mail: lmsall@chicagobooth.edu Matthew J. Notowidigdo University of Chicago Booth School of Business 5807 S Woodlawn Ave Chicago, IL 60637 Tel: 773-834-6249 E-Mail: noto@chicagobooth.edu

Meritocracy across Countries - Bandiera, Oriana; Kotia, Ananya; Lindenlaub, Ilse; Moser, Christian; Prat, Andrea (National Bureau of Economic Research Working Paper Series, 2024)
Are labor markets in higher-income countries more meritocratic, in the sense that worker-job matching is based on skills rather than idiosyncratic attributes unrelated to productivity? If so, why? And what are the aggregate consequences? Using internationally comparable data on worker skills and job skill requirements of over 120,000 individuals across 28 countries, we document that workers' skills better match their jobs' skill requirements in higher-income countries. To quantify the role of worker-job matching in development accounting, we build an equilibrium matching model that allows for cross-country differences in three fundamentals: (i) the endowments of multidimensional worker skills and job skill requirements, which determine match feasibility; (ii) technology, which determines the returns to matching; and (iii) idiosyncratic matching frictions, which capture the role of nonproductive worker and job traits in the matching process. The estimated model delivers two key insights. First, improvements in worker-job matching due to reduced matching frictions account for only a small share of cross-country income differences. Second, however, improved worker-job matching is crucial for unlocking the gains from economic development generated by adopting frontier endowments and technology.
Author contact info: Oriana Bandiera London School of Economics International Growth Centre Houghton Street London WC2A 2AE, UK E-Mail: o.bandiera@lse.ac.uk Ananya Kotia Department of Economics London School of Economics Houghton Street London WC2A 2AE United Kingdom E-Mail: a.kotia1@lse.ac.uk Ilse Lindenlaub Department of Economics Yale University 87 Trumbull Street New Haven, CT 06511 E-Mail: ilse.lindenlaub@yale.edu Christian Moser Columbia Business School 546 Kravis Hall 665 West 130th Street New York, NY 10027 E-Mail: c.moser@columbia.edu Andrea Prat Columbia Business School 665 West 130th St New York, NY 10027-6902 E-Mail: andrea.prat@columbia.edu

Why Does Working from Home Vary Across Countries and People? - Zarate, Pablo; Dolls, Mathias; Davis, Steven J; Bloom, Nicholas; Barrero, Jose Maria; Aksoy, Cevat Giray (National Bureau of Economic Research Working Paper Series, 2024)
We use two surveys to assess why work from home (WFH) varies so much across countries and people. A measure of cultural individualism accounts for about one-third of the cross-country variation in WFH rates. Australia, Canada, the UK, and the US score highly on individualism and WFH rates, whereas Asian countries score low on both. Other factors such as cumulative lockdown stringency, population density, industry mix, and GDP per capita also matter, but they account for less of the variation. When looking across individual workers in the United States, we find that industry mix, population density and lockdown severity help account for current WFH rates, as does the partisan leaning of the county in which the worker resides. We conclude that multiple factors influence WFH rates, and technological feasibility is only one of them.
Author contact info: Pablo Zarate Princeton University Department of Economics Princeton, NJ 08540 E-Mail: pzarate@princeton.edu Mathias Dolls ifo Institute Poschingerstraße 5 81679 Munich Germany Tel: +49(0)89/9224-1227 Fax: +49(0)89/985369 E-Mail: dolls@ifo.de 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 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 Jose Maria Barrero Instituto Tecnologico Autonomo de Mexico Av. Camino a Santa Teresa #930 Col. Heroes de Padierna CP. 10700. Alc. Magdalena Contreras CDMX Mexico E-Mail: barsanjmb@gmail.com Cevat Giray Aksoy European Bank for Reconstruction and Development 5 Bank Street London E14 4BG Europe E-Mail: aksoyc@ebrd.com

Estimating Racial Disparities When Race is Not Observed - McCartan, Cory; Fisher, Robin; Goldin, Jacob; Ho, Daniel E; Imai, Kosuke (National Bureau of Economic Research Working Paper Series, 2024)
The estimation of racial disparities in various fields is often hampered by the lack of individual-level racial information. In many cases, the law prohibits the collection of such information to prevent direct racial discrimination. As a result, analysts have frequently adopted Bayesian Improved Surname Geocoding (BISG) and its variants, which combine individual names and addresses with Census data to predict race. Unfortunately, the residuals of BISG are often correlated with the outcomes of interest, generally attenuating estimates of racial disparities. To correct this bias, we propose an alternative identification strategy under the assumption that surname is conditionally independent of the outcome given (unobserved) race, residence location, and other observed characteristics. We introduce a new class of models, Bayesian Instrumental Regression for Disparity Estimation (BIRDiE), that take BISG probabilities as inputs and produce racial disparity estimates by using surnames as an instrumental variable for race. Our estimation method is scalable, making it possible to analyze large-scale administrative data. We also show how to address potential violations of the key identification assumptions. A validation study based on the North Carolina voter file shows that BISG+BIRDiE reduces error by up to 84% when estimating racial differences in party registration. Finally, we apply the proposed methodology to estimate racial differences in who benefits from the home mortgage interest deduction using individual-level tax data from the U.S. Internal Revenue Service. Open-source software is available which implements the proposed methodology.
Author contact info: Cory McCartan E-Mail: cm6753@nyu.edu Robin Fisher U.S. Department of the Treasury 1500 Pennsylvania Ave Washington, DC 20220 E-Mail: Robin.fisher@treasury.gov Jacob Goldin University of Chicago Law School 1111 E 60th Street Chicago, IL 60637 E-Mail: jsgoldin@gmail.com Daniel E. Ho E-Mail: dho@law.stanford.edu Kosuke Imai Harvard University 1737 Cambridge Street Cambridge, MA 02138 E-Mail: imai@harvard.edu

Transparency and Percent Plans - Kapor, Adam (National Bureau of Economic Research Working Paper Series, 2024)
Transparency vs. opacity is an important dimension of college admission policy. Colleges may gain useful information from a holistic review of applicants’ materials, but in doing so may contribute to uncertainty that discourages potential applicants with poor information. This paper investigates the impacts of admissions transparency in the context of Texas’ Top Ten Percent Plan, using survey and administrative data from Texas and a model of college applications, admissions, enrollment, grades, and persistence. I estimate that two thirds of the plan’s 9.1 point impact on top-decile students’ probability of attending a flagship university was due to information rather than mechanical effects. Students induced to enroll are more likely to come from low- income high schools, and academically outperform the students that they displace. These effects would be larger if complemented by financial-aid information, and are driven by transparency, not misalignment between the rules used for automatic and discretionary admissions.
Author contact info: Adam Kapor Department of Economics Princeton University 280 Julis Romo Rabinowitz Building Princeton, NJ 08544 Tel: 203/710-0527 E-Mail: akapor@princeton.edu

Labor Market Externalities of Pre-retirement Employment Protection - Chrostek, Paweł; Karbownik, Krzysztof; Myck, Michał (National Bureau of Economic Research Working Paper Series, 2024)
Using population-level administrative data, we study labor market externalities stemming from age-specific employment protection legislation (EPL) targeted towards older workers. Our results show no economically meaningful overall effects of the EPL on employment or earnings of either men or women approaching eligibility. Considering separately incumbent workers and non-employees we find small positive and small negative employment effects for the former and the latter groups, respectively.
Author contact info: Paweł Chrostek E-Mail: pawel.chrostek@mf.gov.pl Krzysztof Karbownik Department of Economics Emory University Rich Memorial Building 1602 Fishburne Drive Atlanta, GA 30322 E-Mail: krzysztof.karbownik@emory.edu Michał Myck Centre for Economic Analysis (CenEA) ul. Cyfrowa 2 71-441 Szczecin, Poland E-Mail: mmyck@cenea.org.pl

The Evolution of Black-White Differences in Occupational Mobility Across Post-Civil War America - Durlauf, Steven N; Kim, Gueyon; Lee, Dohyeon; Song, Xi (National Bureau of Economic Research Working Paper Series, 2024)
This paper studies long-run differences in intergenerational occupational mobility between Black and White Americans. Combining data from linked historical censuses and contemporary large-scale surveys, we provide a comprehensive set of mobility measures based on Markov chains that trace the short- and long-run dynamics of occupational differences. Our findings highlight the unique importance of changes in mobility experienced by the 1940–1950 birth cohort in shaping the current occupational distribution and reducing the racial occupational gap. We further explore the properties of continuing occupational inequalities and argue that these disparities are better understood by a lack of exchange mobility rather than structural mobility. Thus, contemporary occupational disparities cannot be expected to disappear based on the occupational dynamics seen historically.
Author contact info: Steven N. Durlauf University of Chicago Harris School of Public Policy 1307 E. 60th Street Chicago, IL 60637 E-Mail: durlauf@gmail.com Gueyon Kim 1156 High Street Santa Cruz, CA 95064 E-Mail: gkim44@ucsc.edu Dohyeon Lee 410 Terry Ave N Seattle, WA 98109 USA E-Mail: dohnlee@gmail.com Xi Song 3718 Locust Walk Philadelphia, PA 19104 USA E-Mail: xisong@upenn.edu

Mechanism Reform: An Application to Child Welfare - Baron, E. Jason; Lombardo, Richard; Ryan, Joseph P; Suh, Jeongsoo; Valenzuela-Stookey, Quitze (National Bureau of Economic Research Working Paper Series, 2024)
In many market-design applications, a new mechanism is introduced to reform an existing institution. Compared to the design of a mechanism in isolation, the presence of a status-quo system introduces both challenges and opportunities for the designer. We study this problem in the context of reforming the mechanism used to assign Child Protective Services (CPS) investigators to reported cases of child maltreatment in the U.S. CPS investigators make the consequential decision of whether to place a child in foster care when their safety at home is in question. We develop a design framework built on two sets of results: (i) an identification strategy that leverages the status-quo random assignment of investigators—along with administrative data on previous assignments and outcomes—to estimate investigator performance; and (ii) mechanism-design results allowing us to elicit investigators’ preferences and efficiently allocate cases. This alternative mechanism can be implemented by setting personalized non-linear rates at which each investigator can exchange various types of cases. In a policy simulation, we show that this mechanism reduces the number of investigators’ false positives (children placed in foster care who would have been safe in their homes) by 10% while also decreasing false negatives (children left at home who are subsequently maltreated) and overall foster care placements. Importantly, the mechanism is designed so that no investigator is made worse-off relative to the status quo. We show that a naive approach which ignores investigator preference heterogeneity would generate substantial welfare losses for investigators, with potential adverse effects on investigator recruitment and turnover.
Author contact info: E. Jason Baron Economics Department Duke University 228B Social Sciences Building Durham, NC 27708 E-Mail: jason.baron@duke.edu Richard Lombardo Department of Economics Littauer M-12 Harvard University Cambridge, MA 02138 E-Mail: richardlombardo76@gmail.com Joseph P. Ryan School of Social Work University of Michigan 1080 South University Avenue Ann Arbor, MI 48109 E-Mail: joryan@umich.edu Jeongsoo Suh E-Mail: jeongsoo.suh@duke.edu Quitze Valenzuela-Stookey E-Mail: quitze@berkeley.edu

New Gig Work or Changes in Reporting? Understanding Self-Employment Trends in Tax Data - Garin, Andrew; Jackson, Emilie; Koustas, Dmitri K (National Bureau of Economic Research Working Paper Series, 2024)
Rising self-employment rates in U.S. tax data that are absent in survey data have led to speculation that tax records capture a rise in new “gig” work that surveys miss. Drawing on the universe of IRS tax returns, we show that trends in firm-reported payments to “gig” and other contract workers do not explain the rise in self-employment reported to the IRS; rather, that increase is driven by self-reported earnings of individuals in the EITC phase-in range. We isolate pure reporting responses from real labor supply responses by examining births of workers’ first children around an end-of-year cutoff for credit eligibility that creates exogenous variation in tax rates at the end of the tax year after labor supply decisions are already sunk. We ﬁnd that ex-posing workers with sunk labor supply to negative marginal tax rates results in large increases in their propensity to self-report self-employment—only a small minority of which leads to bunching at kink-points. Consistent with pure strategic reporting behavior, we find no impact on reporting among taxpayers with no incentive to report additional income and no eﬀects on firm-reported payments of any kind. Moreover, we find these reporting responses have grown over time as knowledge of tax incentives has become widespread. Quantification exercises suggest that changes in taxpayer reporting behavior are a major driver of discrepancies between self-employment trends in self-reported and third-party reported data. Our findings suggest caution is warranted before deferring to self-reported tax data over other data sources when measuring labor market trends.
Author contact info: Andrew Garin Heinz College Carnegie Mellon University 5000 Forbes Avenue Pittsburgh, PA 15213 Tel: 202/494-3361 E-Mail: agarin@andrew.cmu.edu Emilie Jackson Michigan State University 486 W. Circle Dr 25D Marshall-Adams Hall East Lansing, MI 48824 E-Mail: emiliej@msu.edu Dmitri K. Koustas Harris Public Policy, University of Chicago 1307 E. 60th St. Room 3055 Chicago, IL 60605 Tel: 872.444.6901 E-Mail: dkoustas@uchicago.edu

Slow Learning - Christiano, Lawrence; Eichenbaum, Martin S; Johannsen, Benjamin K (National Bureau of Economic Research Working Paper Series, 2024)
This paper investigates what features of an economy determine whether convergence under learning is fast or slow. In all of the models that we consider, people's beliefs about model outcomes are central determinants of those outcomes. We argue that under certain circumstances, convergence of a learning equilibrium to the rational expectations equilibrium can be so slow that policy analysis based on rational expectations is very misleading. We also develop new analytic results regarding rates of convergence in learning models.
Author contact info: Lawrence Christiano Department of Economics Northwestern University 2001 Sheridan Road Evanston, IL 60208 Tel: 847/491-8231 Fax: 847/491-7001 E-Mail: l-christiano@northwestern.edu Martin S. Eichenbaum Department of Economics Northwestern University 2003 Sheridan Road Evanston, IL 60208 Tel: 847/491-8232 Fax: 847/491-7001 E-Mail: eich@northwestern.edu Benjamin K. Johannsen Board of Governors of the Federal Reserve System 20th and C Streets, N.W. Washington, DC 20551 Tel: 202-530-6221 E-Mail: benjamin.k.johannsen@frb.gov

Toward an Understanding of the Economics of Misinformation: Evidence from a Demand Side Field Experiment on Critical Thinking - List, John A; Ramírez, Lina M; Seither, Julia; Unda, Jaime; Vallejo, Beatriz (National Bureau of Economic Research Working Paper Series, 2024)
Misinformation represents a vital threat to the societal fabric of modern economies. While the supply side of the misinformation market has begun to receive increased scrutiny, the demand side has received scant attention. We explore the demand for misinformation through the lens of augmenting critical thinking skills in a field experiment during the 2022 Presidential election in Colombia. Data from roughly 2.000 individuals suggest that our treatments enhance critical thinking, causing subjects to more carefully consider the truthfulness of potential misinformation. We furthermore provide evidence that reducing the demand of fake news can deliver on the dual goal of reducing the spread of fake news by encouraging reporting of misinformation.
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 Lina M. Ramírez E-Mail: lmramirez@uchicago.edu Julia Seither Bogota Colombia E-Mail: julia.seither@urosario.edu.co Jaime Unda E-Mail: unda10a@gmail.com Beatriz H. Vallejo E-Mail: beatriz.vallejo@ethosbt.com

Shocking Offers: Gender, Wage Inequality, and Recessions in Online Labor Markets - Archibong, Belinda; Henry, Peter Blair (National Bureau of Economic Research Working Paper Series, 2024)
Author contact info: Belinda Archibong Department of Economics Columbia University 3009 Broadway New York, NY 10027 Tel: 212/854-8952 E-Mail: ba2207@columbia.edu Peter Blair Henry Stanford UniversityAB - Using data from the largest online job portal in Nigeria, we document: (a) gender differences in salary offers for jobs, and (b) the response of (a) to recessions. Jobs in industries where the number of job applicants skews female, offer lower starting salaries than jobs in industries where applicants skew male. During Nigeria’s 2016 recession, overall job applications rose, but applications to jobs in industries that skew male increased more than applications to jobs in industries that skew female. Salary offers fell sharply for jobs in male-skewed industries compared to female-skewed industries. In accordance with this relative shift in applications, in 2016, the salary-offer gender gap almost disappeared.

One Factor to Bind the Cross-Section of Returns - Borri, Nicola; Chetverikov, Denis; Liu, Yukun; Tsyvinski, Aleh (National Bureau of Economic Research Working Paper Series, 2024)
We propose a new non-linear single-factor asset pricing model. Despite its parsimony, this model represents exactly any non-linear model with an arbitrary number of factors and loadings – a consequence of the Kolmogorov-Arnold representation theorem. It features only one pricing component comprising a nonparametric link function of the time-dependent factor and factor loading that we jointly estimate with sieve-based estimators. Using 171 assets across major classes, our model delivers superior cross-sectional performance with a low-dimensional approximation of the link function. Most known finance and macro factors become insignificant controlling for our single-factor.
Author contact info: Nicola Borri Dipartimento di Economia e Finanza LUISS Guido Carli Viale Romania 32 00197 Rome (ITALY) Tel: 39-06-85225959 Fax: 39-06-85225949 E-Mail: nborri@luiss.it Denis Chetverikov UCLA, Department of Economics 315 Portola Plaza Bunche Hall, Room 8283 Los Angeles, CA 90095-1477 E-Mail: chetverikov@econ.ucla.edu Yukun Liu Department of Finance Simon Business School University of Rochester Rochester, NY 14620 E-Mail: yliu229@simon.rochester.edu Aleh Tsyvinski Department of Economics Yale University Box 208268 New Haven, CT 06520-8268 E-Mail: a.tsyvinski@yale.edu

Does Inflation Affect Earnings Relevance? A Century-Long Analysis - Binz, Oliver; Graham, John; Kubic, Matthew (National Bureau of Economic Research Working Paper Series, 2024)
Financial reports present assets, liabilities, and earnings on a nominal basis (unadjusted for inflation). Using a novel dataset of nearly a century of financial reports, this paper examines whether and how inflation affects the relation between accounting earnings and stock market value, i.e., earnings relevance. On the one hand, inflation may decrease earnings relevance as historical cost accounting relies on historical transaction prices that become less relevant when inflation changes the price level. On the other hand, inflation may increase earnings relevance by increasing firms’ discount rates and thereby shifting agents’ focus towards nearer-term payoffs. Consistent with the latter hypothesis, we document a strong positive relation between earnings relevance and inflation. Cross-sectional tests indicate that this relation is stronger for firms that are more sensitive to discount rate changes. We find that inflation is of first-order importance relative to determinants of earnings relevance explored in prior literature.
Author contact info: Oliver Binz E-Mail: oliver.binz@esmt.org John Graham Duke University Fuqua School of Business 100 Fuqua Drive Durham, NC 27708-0120 Tel: 919/660-7857 Fax: 919/660-8038 E-Mail: john.graham@duke.edu Matthew Kubic E-Mail: matt.kubic@mccombs.utexas.edu

The Big Shift in Working Arrangements: Eight Ways Unusual - Davis, Steven J (National Bureau of Economic Research Working Paper Series, 2024)
The COVID-19 pandemic instigated a big shift in working arrangements. I first describe the scale of this shift in the United States, drawing on the Survey of Working Arrangements and Attitudes and other sources. I then review differences, circa 2023, in work-from-home rates across industries, demographic groups, and countries. The big shift had surprisingly benign (or even positive) effects on productivity, which is one reason it has endured. Compared to other shocks that strike modern economies, the big shift is also unusual in other respects: It relaxes time budget constraints, improves flexibility in time use, enhances individual autonomy, relaxes locational constraints, drives a major re-sorting of workers to jobs and employers, and alters the structure of wages. The big shift also reduces wage-growth pressures during the transition to new working arrangements and life styles. The shift benefits workers, on average, even as it lowers non-labor costs and real product wages for firms.
Author contact info: 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

Education and Adult Cognition in a Low-income Setting: Differences among Adult Siblings - Zhang, Yuan S; Frankenberg, Elizabeth; Thomas, Duncan (National Bureau of Economic Research Working Paper Series, 2024)
The relationship between completed education and adult cognition is investigated using data from the Indonesia Family Life Survey. We compare adult siblings to account for shared, difficult-to-measure characteristics that likely affect this relationship, including genetics and parental preferences and investments. After establishing the importance of shared family background factors, we document substantively large, significant impacts of education on cognition in models with sibling fixed effects. In contrast, the strong positive correlation between education and adult height is reduced to zero in models with sibling fixed effects, suggesting little contamination in the education-height association beyond factors common to siblings.
Author contact info: Yuan S. Zhang 722 W 168th St New York, NY 10032 E-Mail: yuan.zhang@columbia.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

After 40 Years, How Representative Are Labor Market Outcomes in the NLSY79? - Bick, Alexander; Blandin, Adam; Rogerson, Richard (National Bureau of Economic Research Working Paper Series, 2024)
In 1979, the National Longitudinal Study of Youth 1979 (NLSY79) began following a group of US residents born between 1957 and 1964. It has continued to re-interview these same individuals for more than four decades. Despite this long sampling period, attrition remains modest. This paper shows that after 40 years of data collection, the remaining NLYS79 sample continues to be broadly representative of their national cohorts with regard to key labor market outcomes. For NLSY79 age cohorts, life-cycle profiles of employment, hours worked, and earnings are comparable to those in the Current Population Survey. Moreover, average lifetime earnings over the age range 25 to 55 closely align with the same measure in Social Security Administration data. Our results suggest that the NLSY79 can continue to provide useful data for economists and other social scientists studying life-cycle and lifetime labor market outcomes, including earnings inequality.
Author contact info: Alexander Bick E-Mail: alexander.bick@mailbox.org Adam Blandin Department of Economics Vanderbilt University VU Station B #351819 2301 Vanderbilt Place Nashville, TN 37235-1819 E-Mail: adam.blandin@vanderbilt.edu Richard Rogerson Department of Economics JRR Building Room 292 Princeton University Princeton, NJ 08544 Tel: 609-258-4839 Fax: 609-258-5349 E-Mail: rdr@princeton.edu

Bargaining and Dynamic Competition - Deng, Shanglyu; Jia, Dun; Leccese, Mario; Sweeting, Andrew (National Bureau of Economic Research Working Paper Series, 2024)
Industries with significant scale economies or learning-by-doing may come to be dominated by a single firm. Economists have studied how likely this is to happen, and whether it is efficient, using models where buyers are price or quantity takers, even though these industries are often also characterized by buyer-seller negotiations. We extend the dynamic “learning-by-doing and forgetting” model of Besanko, Doraszelski, Kryukov, and Satterthwaite (2010) to allow for Nash-in-Nash bargaining over prices. Price-taking and the social planner solution are captured as special cases. We show that sellers’ dynamic incentives, market concentration and welfare can change sharply, and non-monotonically, as one moves away from the price-taking assumption. We study the implications of buyer bargaining power for the existence of multiple equilibria, the design of subsidy policies and the welfare effects of policies designed to increase competition.
Author contact info: Shanglyu Deng Department of Economics University of Macau China E-Mail: shanglyudeng@gmail.com Dun Jia Peking University HSBC Business School University Town, Nanshan District Shenzhen 518055 China E-Mail: dun.jia@phbs.pku.edu.cn Mario Leccese University of Maryland - Department of Economics Tydings Hall 7343 Preinkert Dr. College Park, MD 20742 United States E-Mail: leccese@umd.edu Andrew Sweeting Department of Economics University of Maryland Tydings Hall 3135 College Park, MD 20742 Tel: 301/405-8325 E-Mail: sweeting@econ.umd.edu

Technological Progress and Rent Seeking - Glode, Vincent; Ordoñez, Guillermo (National Bureau of Economic Research Working Paper Series, 2024)
We model firms’ allocation of resources across surplus-creating (i.e., productive) and surplus-appropriating (i.e., rent-seeking) activities. Our model predicts that industry-wide technological advancements, such as recent progress in data collection and processing, induce a disproportionate and socially inefficient reallocation of resources toward surplus-appropriating activities. As technology improves, firms rely more on appropriation to obtain their profits, endogenously reducing the impact of technological progress on economic progress and inflating the price of the resources used for both types of activities. We apply our theoretical insights to shed light on the rise of high-frequency trading
Author contact info: Vincent Glode University of Pennsylvania, Wharton School 3620 Locust Walk Phildelaphia, PA 19104 USA E-Mail: vglode@wharton.upenn.edu Guillermo Ordoñez University of Pennsylvania Department of Economics PCPSE - Room 505 133 South 36th Street Philadelphia, PA 19104 Tel: (215) 898-1875 Fax: (215) 573-2057 E-Mail: ordonez@econ.upenn.edu

Assessing the Costs of Balancing College and Work Activities: The Gig Economy Meets Online Education - Aucejo, Esteban M; Perry, A. Spencer; Zafar, Basit (National Bureau of Economic Research Working Paper Series, 2024)
Balancing the demands of work and schooling is a challenging task for an increasing number of students who have to pay their way through college and for workers who intend to upgrade their skills. However, flexible learning and working environments could play an important role in easing many frictions associated with performing both activities simultaneously. Using detailed (work and study effort) data -- from a partnership between Arizona State University and Uber that allows eligible drivers to enroll in online college courses for free -- we analyze how labor supply and study efforts respond to changes in labor market conditions and college activities/tasks. Our findings indicate that a 10% increase in average weekly online college activities reduces weekly time spent on the Uber platform by about 1%, indicating a low “short run” opportunity cost of studying when working. We also show that study time is not particularly sensitive to changes in labor market conditions, where a 10% increase in average weekly pay reduces study hours by only 2%. Consistent with these results, we find that workers take advantage of their flexible schedules by changing their usual working hours when their college courses are more demanding. We do not find adverse effects of work hours on academic performance in this context, or of study hours on workplace performance (as measured by driver ratings or tips). Finally, the (elicited) value assigned to flexible working and educational formats is high among the students in our sample, who view online education as an important vehicle for increasing expected future income. Overall, this study underscores that combining flexible working and learning formats could constitute a suitable path for many (lowSES) students who work to afford an increasingly expensive college education and for workers aiming to improve their skill set.
Author contact info: Esteban M. Aucejo Department of Economics Arizona State University P.O. Box 879801 Tempe, AZ 85287 Tel: 480/965-3531 E-Mail: Esteban.Aucejo@asu.edu A. Spencer Perry E-Mail: asperry5@asu.edu Basit Zafar Department of Economics University of Michigan 611 Tappan Street Ann Arbor, Michigan 48109 E-Mail: basitak@gmail.com

Private Adoption of Public Good Technologies: The Case of PurpleAir - Graff Zivin, Joshua S; Krebs, Benjamin; Neidell, Matthew J (National Bureau of Economic Research Working Paper Series, 2024)
We study the private adoption and diffusion of a technology that provides a local public good – PurpleAir (PA) pollution monitors. From a purely informational perspective, the ideal spacing of these monitors should reflect the degree of spatial correlation in pollution. In stark contrast, we find that monitor adoption is spatially highly clustered in less polluted areas, suggesting the marginal monitor adopted provides minimal additional public information. Moreover, monitor adoption mainly occurs in affluent, predominantly white neighborhoods, underscoring the potential environmental justice concerns associated with the private provision of this public good.
Author contact info: 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 Benjamin Krebs Massachusetts Institute of Technology Center for Energy and Environmental Policy Research 400 Main Street Cambridge, Mass 02142-1017 E-Mail: bkrebs@mit.edu Matthew J. Neidell Department of Health Policy and Management Columbia University 722 W 168th Street, 6th Floor New York, NY 10032 Tel: 212/342-4522 Fax: 212/305-3405 E-Mail: mn2191@columbia.edu

Financial Literacy and Financial Education: An Overview - Kaiser, Tim; Lusardi, Annamaria (National Bureau of Economic Research Working Paper Series, 2024)
This article provides a concise narrative overview of the rapidly growing empirical literature on financial literacy and financial education. We first discuss stylized facts on the demographic correlates of financial literacy. We next cover the evidence on the effects of financial literacy on financial behaviors and outcomes. Finally, we review the evidence on the causal effects of financial education programs focusing on randomized controlled trial evaluations. The article concludes with perspectives on future research priorities for both financial literacy and financial education.
Author contact info: Tim Kaiser Department of Economics University of Kaiserslautern-Landau (RPTU) Landau D-76829 Germany E-Mail: tim.kaiser@rptu.de 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

Macroeconomics of Mental Health - Abramson, Boaz; Boerma, Job; Tsyvinski, Aleh (National Bureau of Economic Research Working Paper Series, 2024)
We develop an economic theory of mental health. The theory is grounded in classic and modern psychiatric literature, is disciplined with micro data, and is formalized in a life-cycle heterogeneous agent framework. In our model, individuals experiencing mental illness have pessimistic expectations and lose time due to rumination. As a result, they work less, consume less, invest less in risky assets, and forego treatment which in turn reinforces mental illness. We quantify the societal burden of mental illness and evaluate the efficacy of prominent policy proposals. We show that expanding the availability of treatment services and improving treatment of mental illness in late adolescence substantially improve mental health and welfare.
Author contact info: Boaz Abramson 665 West 130 Street New York, NY 10027 E-Mail: ba2695@gsb.columbia.edu Job Boerma University of Wisconsin-Madison Department of Economics 7432 Social Sciences Bldg 1180 Observatory Drive Madison, WI 53706 E-Mail: job.boerma@wisc.edu Aleh Tsyvinski Department of Economics Yale University Box 208268 New Haven, CT 06520-8268 E-Mail: a.tsyvinski@yale.edu

The Benefits and Costs of Secured Debt - Benmelech, Efraim (National Bureau of Economic Research Working Paper Series, 2024)
Secured debt—a debt contract that offers security to creditors in the form of collateralized assets—has been a cornerstone of credit markets in most societies since antiquity. The ability to seize and sell collateral reduces the creditor’s expected losses when the debtor defaults on a promised payment. Moreover, when a firm borrows from multiple creditors with different seniorities, debt secured by assets has higher priority relative to other creditors and is first in line for payment if the firm is bankrupt. While the benefits of secured debt have been shown in both the theoretical and empirical literature, less is known about the costs associated with secured borrowing. This paper surveys the burgeoning empirical literature on secured debt and provides an assessment of the costs and benefits of secured debt.
Author contact info: Efraim Benmelech Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, IL 60208 Tel: 847/491-4462 Fax: 847/491-5719 E-Mail: e-benmelech@kellogg.northwestern.edu

Return Migration and Human Capital Flows - Amanzadeh, Naser; Kermani, Amir; McQuade, Timothy (National Bureau of Economic Research Working Paper Series, 2024)
We bring to bear a novel dataset covering the employment history of about 450 million individuals from 180 countries to study return migration and the impact of skilled international migration on human capital stocks across countries. Return migration is a common phenomenon, with 38% of skilled migrants returning to their origin countries within 10 years. Return migration is significantly correlated with industry growth in the origin and destination countries, and is asymmetrically exposed to negative firm employment growth. Using an AKM-style model, we identify worker and country-firm fixed effects, as well as the returns to experience and education by location and current workplace. For workers in emerging economies, the returns to a year of experience in the United States are 59-204% higher than a year of experience in the origin country. Migrants to advanced economies are positively selected on ability relative to stayers, while within this migrant population, returnees exhibit lower ability. Simulations suggest that eliminating skilled international migration would have highly heterogeneous effects across countries, adjusting total (average) human capital stocks within a range of -60% to 40% (-3% to 4%).
Author contact info: Naser Amanzadeh Haas School of Business University of California, Berkeley Berkeley, CA 94720 United States E-Mail: amanzadeh@berkeley.edu Amir Kermani Haas School of Business University of California, Berkeley 545 Student Services Building #1900 Berkeley, CA 94720 Tel: 510/664-4139 E-Mail: kermani@berkeley.edu Timothy McQuade Haas School of Business University of California, Berkeley Berkeley, CA 94720 E-Mail: tmcquade@haas.berkeley.edu

Balancing Federalism: The Impact of Decentralizing School Accountability - Hanushek, Eric A; Saenz-Armstrong, Patricia; Salazar, Alejandra (National Bureau of Economic Research Working Paper Series, 2024)
Education policy, while primarily the responsibility of the state governments, involves complicated decision making at the local, state, and federal levels. The federal involvement dramatically increased with the introduction of test-based accountability under the No Child Left Behind Act of 2001. But, reflecting resistance to various parts of this law, the involvement of federal policy making was substantially reduced when Congress passed the Every Student Succeeds Act in 2015. This change in policy allows estimation of the impact of altered federalism. By looking at how states reacted to their enhanced decision-making role, we see a retreat from the use of output-based policy toward teachers, and this retreat was associated with significantly lower student achievement growth. As a result, this readjustment of federalism to decision making by lower levels appeared to lower national achievement. The snapshot of federalism impacts here is a lower bound on the effects as more states will very likely react to the flexibility of ESSA and as more school districts change their teacher force.
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 Patricia Saenz-Armstrong E-Mail: Patricia@CasaArsava.com Alejandra Salazar Center for Analysis of Longitudinal Data in Education Research (CALDER) American Institutes for Research Washington, DC E-Mail: asalazar@air.org

Information-Optional Policies and the Gender Concealment Gap - Exley, Christine L; Fisman, Raymond; Kessler, Judd B; Lepage, Louis-Pierre; Li, Xiaomeng; Low, Corinne; Shan, Xiaoyue; Toma, Mattie; Zafar, Basit (National Bureau of Economic Research Working Paper Series, 2024)
We analyze data from two universities that allowed students to conceal grades from their transcripts during the Covid-19 pandemic. Across both institutions, we observe a significant and substantial gender concealment gap: women are less likely than men to conceal grades that would harm their GPA. We explore the robustness, drivers, and consequences of the concealment gap via rich data on student traits and course-level characteristics as well as complementary data from an experiment with real employers and a survey of impacted students. Our findings highlight how information-optional policies can create unexpected and potentially undesirable disparities.
Author contact info: Christine L. Exley Department of Economics University of Michigan Lorch Hall 365B 611 Tappan Ave Ann Arbor, MI 48109 E-Mail: clexley@gmail.com Raymond Fisman Department of Economics Boston University 270 Bay State Road, 304A Boston, MA 02215 Tel: 617-353-6821 E-Mail: rfisman@bu.edu Judd B. Kessler The Wharton School University of Pennsylvania 320 Vance Hall Philadelphia, PA 19104 Tel: 215/898-7696 Fax: 215/898-7635 E-Mail: judd.kessler@wharton.upenn.edu Louis-Pierre Lepage Stockholm University E-Mail: louis-pierre.lepage@sofi.su.se Xiaomeng Li Department of Economics 611 Tappan St. Ann Arbor E-Mail: lixiaom@umich.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 Xiaoyue Shan 1 Arts Link AS2, #05-36 Singapore E-Mail: x.shan@nus.edu.sg Mattie Toma Warwick Business School University of Warwick Scarman Road Coventry CV4 7AL Tel: 8596210517 E-Mail: Mattie.Toma@wbs.ac.uk Basit Zafar Department of Economics University of Michigan 611 Tappan Street Ann Arbor, Michigan 48109 E-Mail: basitak@gmail.com

Examiner and Judge Designs in Economics: A Practitioner's Guide - Chyn, Eric; Frandsen, Brigham; Leslie, Emily C (National Bureau of Economic Research Working Paper Series, 2024)
This article provides empirical researchers with an introduction and guide to research designs based on variation in judge and examiner tendencies to administer treatments or other interventions. We review the basic theory behind the research design, outline the assumptions under which the design identifies causal effects, describe empirical tests of those assumptions, and discuss tradeoffs associated with choices researchers must make for estimation. We demonstrate concepts and best practices concretely in an empirical case study that uses an examiner tendency research design to study the effects of pre-trial detention.
Author contact info: 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 Brigham Frandsen Department of Economics Brigham Young University Provo, UT 84602 E-Mail: frandsen@byu.edu Emily C. Leslie Department of Economics Brigham Young University 435 Crabtree Technology Building Provo, UT 84602 Tel: 319-331-6383 E-Mail: emily.leslie@byu.edu

A Field Experiment on Antitrust Compliance - Kawai, Kei; Nakabayashi, Jun (National Bureau of Economic Research Working Paper Series, 2024)
We study the effectiveness of firms' compliance programs by conducting a field experiment in which we disclose to a subset of Japanese firms that the firm is potentially engaging in illegal bid-rigging. We find that the information that we disclose affects the bidding behavior of the treated firms: our test of bid-rigging is less able to reject the null of competition when applied to the bidding data of the treated firms after the intervention. We find evidence that this change is not the result of firms ceasing to collude, however. We find evidence suggesting that firms continue to collude even after our intervention and that the change in the bidding behavior we document is the result of active concealment of evidence by cartelizing firms.
Author contact info: Kei Kawai Department of Economics University of California, Berkeley 530 Evans Hall #3880 Berkeley, CA 94720 E-Mail: kei@berkeley.edu Jun Nakabayashi Kyoto University Yoshidahonmachi, Sakyo Ward Kyoto Osaka 606-8317 Japan E-Mail: nakabayashi.1@eco.kindai.ac.jp

Human Capital Spillovers and Health: Does Living Around College Graduates Lengthen Life? - Bor, Jacob H; Cutler, David M; Glaeser, Edward L; Ristovska, Ljubica (National Bureau of Economic Research Working Paper Series, 2024)
Equally educated people are healthier if they live in more educated places. Every 10 percent point increase in an area’s share of adults with a college degree is associated with a decline in all-cause mortality by 7%, controlling for individual education, demographics, and area characteristics. Area human capital is also associated with lower disease prevalence and improvements in self-reported health. The association between area education and health increased greatly between 1990 and 2010. Spatial sorting does not drive these externalities; there is little evidence that sicker people move disproportionately into less educated areas. Differences in health-related amenities, ranging from hospital quality to pollution, explain no more than 17% of the area human capital spillovers on health. Over half of the correlation between area human capital and health is a result of the correlation between area human capital and smoking and obesity. More educated areas have stricter regulations regarding smoking and more negative beliefs about smoking. These have translated over time into a population that smokes noticeably less and that is less obese, leading to increasing divergence in health outcomes by area education.
Author contact info: Jacob H. Bor 715 Albany Street Boston, MA 02118 E-Mail: jbor@bu.edu David M. Cutler Department of Economics Harvard University 1875 Cambridge Street Cambridge, MA 02138 Tel: 617/496-5216 Fax: 617/496-8951 E-Mail: dcutler@harvard.edu Edward L. Glaeser Department of Economics 315A Littauer Center Harvard University Cambridge, MA 02138 Tel: 617/495-0575 Fax: 617/495-7730 E-Mail: eglaeser@harvard.edu Ljubica Ristovska Tobin Center for Economic Policy Department of Economics Yale University 87 Trumbull St New Haven, Conn 06511 United States E-Mail: ljubica.ristovska@yale.edu

Child Tax Benefits and Labor Supply: Evidence from California - Goldin, Jacob; Homonoff, Tatiana; Lal, Neel A; Lurie, Ithai; Michelmore, Katherine (National Bureau of Economic Research Working Paper Series, 2024)
The largest tax-based social welfare programs in the US limit their benefits to taxpayers with labor market income. Eliminating these work requirements would better target transfers to the neediest families but risks attenuating tax-based incentives to work. We study changes in labor force participation from the elimination of a work requirement in a tax credit for parents of young children, drawing on quasi-random variation in birth timing and administrative tax records. To do so, we develop and implement a novel approach for selecting an empirical specification to maximize the precision of our estimate. The unique design of the policy along with its subsequent reform allow us to isolate taxpayers' sensitivity to conditioning child tax benefits on work -- the parameter at the center of recent debates about the labor supply consequences of reforming federal tax policy for children. We estimate that eliminating the work requirement causes very few mothers to exit the labor force, with a 95% confidence interval excluding labor supply reductions of one-third of a percentage point or greater. Our results suggest expanding tax benefits for low-income children need not meaningfully reduce labor force participation.
Author contact info: Jacob Goldin University of Chicago Law School 1111 E 60th Street Chicago, IL 60637 E-Mail: jsgoldin@gmail.com Tatiana Homonoff New York University Robert F. Wagner School of Public Service 295 Lafayette Street, 2nd Floor New York, NY 10012 Tel: 212/998-7443 E-Mail: tatiana.homonoff@nyu.edu Neel A. Lal University of Chicago Law School 1155 East 60th Street Chicago, IL 60637 USA E-Mail: nlal@uchicago.edu Ithai Lurie Department of the Treasury 1500 Pennsylvania Avenue NW Washington, DC 20220 Tel: 202-622-1789 Fax: Financial Economist E-Mail: Ithai.Lurie@treasury.gov Katherine Michelmore Gerald R. Ford School of Public Policy University of Michigan 735 S State St Ann Arbor, MI 48109 E-Mail: kmichelm@umich.edu

Bank Failures and Economic Activity: Evidence from the Progressive Era - Richardson, Gary; Del Angel, Marco; Gou, Michael (National Bureau of Economic Research Working Paper Series, 2024)
During the Progressive Era (1900-29), economic growth was rapid but volatile. Boom and busts witnessed the formation and failure of tens of thousands of firms and thousands of banks. This essay uses new data and methods to identify causal links between failures of banks and bankruptcies of firms. Our analysis indicates that bank failures triggered bankruptcies of firms that depended upon banks for ongoing access to commercial credit. Firms that did not depend upon banks for credit did not fail in appreciably larger numbers after banks failed or during financial panics.
Author contact info: 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 Marco Del Angel 403 Verano PL Irvine, CA 92617 E-Mail: marcom3@uci.edu Michael Gou United States E-Mail: michaelgou@gmail.com

Noisy Experts? Discretion in Regulation - Agarwal, Sumit; Morais, Bernardo C; Seru, Amit; Shue, Kelly (National Bureau of Economic Research Working Paper Series, 2024)
While reliance on human discretion is a pervasive feature of institutional design, human discretion can also introduce costly noise (Kahneman, Sibony, and Sunstein 2021). We evaluate the consequences, determinants, and trade-offs associated with discretion in high-stake decisions assessing bank safety and soundness. Using detailed data on the supervisory ratings of US banks, we find that professional bank examiners exercise significant personal discretion—their decisions deviate substantially from algorithmic benchmarks and can be predicted by examiner identities, holding bank fundamentals constant. Examiner discretion has a large and persistent causal impact on future bank capitalization and supply of credit, leading to volatility and uncertainty in bank outcomes, and a conservative anticipatory response by banks. We identify a novel source of noise: weights assigned to specific issues. Disagreement in ratings across examiners can be attributed to high average weight (50%) assigned to subjective assessment of banks’ management quality, as well as heterogeneity in weights attached to more objective issues such as capital adequacy. Replacing human discretion with a simple algorithm leads to worse predictions of bank health, while moderate limits on discretion can translate to more informative and less noisy predictions.
Author contact info: Sumit Agarwal National University of Singapore Mochtar Raidy Building 15 Kent Ridge Drive Singapore Tel: +1-202-687-8207 E-Mail: ushakri@yahoo.com Bernardo C. Morais Mail Stop 18 20th & C St. NW Washington, DC 20551 E-Mail: bernardo.c.morais@frb.gov Amit Seru Stanford Graduate School of Business Stanford University 655 Knight Way Tel: 650/736-0223 E-Mail: aseru@stanford.edu Kelly Shue Yale School of Management 165 Whitney Avenue P.O. Box 208200 New Haven, CT 06520-8200 E-Mail: kelly.shue@yale.edu

Social Movements and Public Opinion in the United States - Gethin, Amory; Pons, Vincent (National Bureau of Economic Research Working Paper Series, 2024)
Recent social movements stand out by their spontaneous nature and lack of stable leadership, raising doubts on their ability to generate political change. This article provides systematic evidence on the effects of protests on public opinion and political attitudes. Drawing on a database covering the quasi-universe of protests held in the United States, we identify 14 social movements that took place from 2017 to 2022, covering topics related to environmental protection, gender equality, gun control, immigration, national and international politics, and racial issues. We use Twitter data, Google search volumes, and high-frequency surveys to track the evolution of online interest, policy views, and vote intentions before and after the outset of each movement. Combining national-level event studies with difference-in-differences designs exploiting variation in local protest intensity, we find that protests generate substantial internet activity but have limited effects on political attitudes. Except for the Black Lives Matter protests following the death of George Floyd, which shifted views on racial discrimination and increased votes for the Democrats, we estimate precise null effects of protests on public opinion and electoral behavior.
Author contact info: Amory Gethin E-Mail: amory.gethin@psemail.eu Vincent Pons Harvard Business School Morgan Hall 289 Soldiers Field Boston, MA 02163 Tel: 617/495-9329 E-Mail: vpons@hbs.edu

Bank Runs, Fragility, and Regulation - Amador, Manuel; Bianchi, Javier (National Bureau of Economic Research Working Paper Series, 2024)
We examine banking regulation in a macroeconomic model of bank runs. We construct a general equilibrium model where banks may default because of fundamental or self-fulfilling runs. With only fundamental defaults, we show that the competitive equilibrium is constrained efficient. However, when banks are vulnerable to runs, banks’ leverage decisions are not ex-ante optimal: individual banks do not internalize that higher leverage makes other banks more vulnerable. The theory calls for introducing minimum capital requirements, even in the absence of bailouts.
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

Countries for Old Men: An Analysis of the Age Pay Gap - Bianchi, Nicola; Paradisi, Matteo (National Bureau of Economic Research Working Paper Series, 2024)
This study investigates the growing wage disparity between older and younger workers in high-income countries. We propose a conceptual framework of the labor market in which firms cannot change the contracts of older employees and cannot freely add higher-ranked positions to their organizations. In this model, a larger supply of older workers and declining economic growth restrict younger workers’ access to higher-paying roles and widen the age pay gap in favor of older workers. Drawing on extensive administrative and survey data, we document that the characteristics of these negative spillovers on younger workers’ careers align with the model’s predictions. As older workers enjoy more successful careers, younger workers become less likely to hold higher-ranked jobs and fall toward the bottom of the wage distribution. The pay gap between younger and older workers increases more in slower-growing, older, and larger firms and in firms with higher mean wages, where these negative spillovers on younger workers are larger in magnitude. Moreover, younger employees become less likely to work for higher-paying firms, whose share of older workers disproportionately increases over time. Finally, we show that alternative explanations for these findings receive little empirical support.
Author contact info: Nicola Bianchi Kellogg School of Management Northwestern University 2211 Campus Drive Evanston, IL 60208 Tel: 847/467-5672 E-Mail: nicola.bianchi@kellogg.northwestern.edu Matteo Paradisi Einaudi Institute for Economics and Finance (EIEF) Via Sallustiana, 62 00187, Rome Italy E-Mail: matteo.paradisi@eief.it

Three Things about Mobile App Commissions - Gans, Joshua S (National Bureau of Economic Research Working Paper Series, 2024)
Mobile app commissions paid by app developers to a monopolist device maker/app store operator are examined. Three results are demonstrated. First, unregulated app commissions are set at a level that maximises consumer surplus. Second, eliminating app commissions will lead to higher device prices. Third, requiring a menu of options for consumers as to how device makers receive subsidies from app developers constrains app commissions in a way that provides a more equal balance between consumer versus app developer interests.
Author contact info: Joshua S. Gans Rotman School of Management University of Toronto 105 St. George Street Toronto ON M5S 3E6 Tel: 416/978-3243 E-Mail: joshua.gans@rotman.utoronto.ca

Heterogeneity and Endogenous Compliance: Implications for Scaling Class Size Interventions - Adusumilli, Karun; Agostinelli, Francesco; Borghesan, Emilio (National Bureau of Economic Research Working Paper Series, 2024)
This paper examines the scalability of the results from the Tennessee Student-Teacher Achievement Ratio (STAR) Project, a prominent educational experiment. We explore how the misalignment between the experimental design and the econometric model affects researchers' ability to learn about the intervention's scalability. We document heterogeneity in compliance with class-size reduction that is more extensive than previously acknowledged and discuss its consequences for the evaluation of the experiment. Guided by this finding, we implement a new econometric framework incorporating heterogeneous treatment effects and endogenous class size determination. We find that the effect of class size on test scores differs considerably across schools, with only a small fraction of schools having significant benefits from reduced class sizes. We discuss the challenges this poses for the intervention's scalability and conclude by analyzing targeted class-size interventions.
Author contact info: Karun Adusumilli Department of Economics University of Pennsylvania 133 S 36th St Philadelphia, PA 19104 E-Mail: akarun@sas.upenn.edu Francesco Agostinelli University of Pennsylvania Perelman Center for Political Science and Economics 133 South 36th Street Philadelphia, PA 19104 E-Mail: fagostin@upenn.edu Emilio Borghesan Industrial Relations Section Princeton University 20 Washington Road Princeton, NJ 08544 E-Mail: emilio.borghesan@gmail.com

The Declining Mental Health Of The Young And The Global Disappearance Of The Hump Shape In Age In Unhappiness - Blanchflower, David G; Bryson, Alex; Xu, Xiaowei (National Bureau of Economic Research Working Paper Series, 2024)
Across many studies subjective well-being follows a U-shape in age, declining until people reach middle-age, only to rebound subsequently. Ill-being follows a mirror-imaged hump-shape. But this empirical regularity has been replaced by a monotonic decrease in illbeing by age. The reason for the change is the deterioration in young people’s mental health both absolutely and relative to older people. We reconsider evidence for this fundamental change in the link between illbeing and age with micro data for the United States and the United Kingdom. Beginning around 2011 there is a monotonic and declining cross-sectional association between well-being and age. In the UK the recent COVID pandemic exacerbated the trends by impacting most heavily on the wellbeing of the young, but this was not the case in the United States. We replicate the decrease in illbeing by age across 34 countries, including the United States and the United Kingdom, using five ill-being metrics for the period 2020-2024 and confirm the findings.
Author contact info: David G. Blanchflower Bruce V. Rauner Professor of Economics 6106 Rockefeller Hall Dartmouth College Hanover, NH 03755-3514 Tel: 603/646-2536 Fax: 603/646-2122 E-Mail: blanchflower@dartmouth.edu Alex Bryson Professor of Quantitative Social Science UCL Social Research Institute University College London 20 Bedford Way London WC1H 0AL London United Kingdom Tel: +44 7969179755 E-Mail: a.bryson@ucl.ac.uk Xiaowei Xu E-Mail: xiaowei.xu@ifs.org.uk

Nothing for Something: Marketing Cancer Drugs to Physicians Increases Prescribing Without Improving Mortality - Carey, Colleen; Daly, Michael; Li, Jing (National Bureau of Economic Research Working Paper Series, 2024)
Physicians commonly receive marketing-related transfers from drug firms. We examine the impact of these relationships on the prescribing of physician-administered cancer drugs in Medicare. We find that prescribing of the associated drug increases 4% in the twelve months after a payment is received, with the increase beginning sharply in the month of payment and fading out within a year. A marketing payment also leads physicians to begin treating cancer patients with lower expected mortality. While payments result in greater expenditure on cancer drugs, there are no associated improvements in patient mortality.
Author contact info: 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 Michael Daly Cornell University E-Mail: mrd257@cornell.edu Jing Li 1959 NE Pacific St Health Sciences Building, Room H375-I Seattle, WA 98195 U.S.A. E-Mail: jli0321@uw.edu

The Global Life-Cycle Optimizer – Analyzing Fiscal Policy's Potential to Dramatically Distort Labor Supply and Saving - Brumm, Johannes; Kotlikoff, Laurence J; Krause, Christopher (National Bureau of Economic Research Working Paper Series, 2024)
Fiscal policy in the U.S. and other countries renders intertemporal budgets non-differentiable, nonconvex, and discontinuous. Consequently, assessing work and saving responses to policy requires global optimization. This paper develops the Global Life-Cycle Optimizer (GLO), a stochastic pattern-search algorithm. The GLO robustly, precisely, and quickly locates global optima in highly complex fiscal settings. We use the GLO to study how a stylized U.S. fiscal system distorts workers’ labor supply and saving assuming standard preferences. The system incorporates kinks from federal personal income tax brackets, Social Security’s FICA tax, and a notch from the provision of basic income below a threshold. The GLO reproduces theoretically predicted earnings bunching and flipping over a remarkably wide range of wage rates. Saving distortions can be equally dramatic. Associated excess burdens range from substantial to massive. Restricting labor supply to full-or part-time work can eliminate flipping when it’s optimal and produce flipping when it’s suboptimal. Joint filing can significantly reduce the earnings of lower-wage spouses relative to that of higher-wage spouses. The GLO can be applied to assess a country’s or state’s full set of work and saving disincentives. Consequently, it can facilitate analyses of structural labor supply and tax reform.
Author contact info: Johannes Brumm Karlsruhe Institute of Technology Waldhornstr. 27 76131 Karlsruhe Germany E-Mail: jo.brumm@gmail.com Laurence J. Kotlikoff Department of Economics Boston University 270 Bay State Road Boston, MA 02215 Tel: 617/353-4002 Fax: 617/353-4001 E-Mail: kotlikoff@gmail.com Christopher Krause Waldhornstr. 27 Karlsruhe 76131 Germany E-Mail: christopher.krause@kit.edu

Religious Worship Attendance in America: Evidence from Cellphone Data - Pope, Devin G (National Bureau of Economic Research Working Paper Series, 2024)
Religious worship is integral to the lives of millions of Americans. In this paper, I provide a descriptive analysis of religious worship attendance using geodata from smartphones for over 2 million Americans in 2019. I establish several key findings. First, 73% of people step into a religious place of worship at least once during the year on the primary day of worship (e.g. Sundays for most Christian churches). However, only 5% of Americans attend services “weekly”, far fewer than the ~22% who report to do so in surveys. The number of occasional vs. frequent attenders varies substantially by religion. I estimate that approximately 45M Americans attend worship services in a typical week of the year, but with large changes around Holidays (e.g. Easter). I document how start times, duration of attendance, and average household income all differ meaningfully across religious traditions. The intensity of religious observance correlates with a host of other activities. For example, relative to non-attenders and infrequent attenders, frequent religious attenders are less likely to go to strip clubs, liquor stores, and casinos. While cell phone data has limitations, this paper provides a unique way of understanding worship attendance and its correlates.
Author contact info: Devin G. Pope Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-2297 Fax: 773/702-0458 E-Mail: devin.pope@chicagobooth.edu

Neighborhood Effects: Evidence from Wartime Destruction in London - Redding, Stephen J; Sturm, Daniel M (National Bureau of Economic Research Working Paper Series, 2024)
We use the German bombing of London during the Second World War as an exogenous source of variation to provide evidence on neighborhood effects. We construct a newly-digitized dataset at the level of individual buildings on wartime destruction, property values, and socioeconomic composition in London before and after the Second World War. We develop a quantitative spatial model, in which heterogeneous groups of individuals endogenously sort across locations in response to differences in natural advantages, wartime destruction and neighborhood effects. We find substantial and highly localized neighborhood effects, which magnify the direct impact of wartime destruction, and make a substantial contribution to observed patterns of spatial sorting across locations.
Author contact info: Stephen J. Redding Department of Economics & School of Public and International Affairs Princeton University Princeton, NJ 08544 Tel: 609/258-4016 Fax: 609/258-6419 E-Mail: reddings@princeton.edu Daniel M. Sturm Department of Economics London School of Economics Houghton Street London WC2A 2AE United Kingdom Tel: +44-20-7955 7522 E-Mail: d.m.sturm@lse.ac.uk

To Pay or Autopay? Fintech Innovation and Credit Card Payments - Wang, Jialan (National Bureau of Economic Research Working Paper Series, 2024)
Digital technologies and fintech firms have rapidly reshaped the consumer financial landscape in recent years, and have the potential to help consumers make better decisions and improve their financial health. Existing technologies such as autopay are also experiencing increased takeup, a trend that could be accelerated by innovations such as open banking. I examine the extent to which autopay affects payment behavior for customers of a credit card serviced by a fintech company. Using sharp changes in the company's practices in a regression discontinuity design, I find that a small nudge accounts for half of all autopay enrollment during the sample period, and that enrollment at account opening is persistent. Autopay increases the likelihood of making the minimum payment by 20 to 29pp, more than doubling the baseline rate. The results show that seemingly minor technological defaults can have economically large effects on consumer credit outcomes.
Author contact info: Jialan Wang Department of Finance University of Illinois at Urbana-Champaign 340 Wohlers Hall 1206 S. Sixth Street MC-706 Champaign, IL 61820 Tel: 217/300-4697 E-Mail: jialanw@gmail.com

How You Pay Drives What You Choose: Health Savings Accounts versus Cash in Health Insurance Plan Choice - Gruber, Jonathan; Lin, Mengyun M; Liu, Haoming; Yi, Junjian (National Bureau of Economic Research Working Paper Series, 2024)
A marked feature of health insurance plan choice is inconsistent choices through the overweighting of premiums relative to out-of-pocket spending. We show that this source of inconsistency disappears when both types of spending come from the same source of designated funds. We focus on the MediSave program in Singapore, whereby residents can pay their health insurance premiums with cash or MediSave funds, but are subject to limits that vary by age and over time. By exploiting variations in those limits, we consistently find that when individuals are able to pay their health insurance premiums with MediSave funds, they are less price sensitive and more willing to enroll in more generous plans—which results in lower spending levels and variance, and lower adverse selection in the market. The results suggest a strong role for mental accounting in insurance decisions.
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 Mengyun M. Lin The Wang Yanan Institute for Studies in Economics Xiamen University E-Mail: lin.mengyun@xmu.edu.cn Haoming Liu National University of Singapore Department of Economics AS2 #06-02, 1 Arts Link, Singapore 117570 E-Mail: ecsliuhm@nus.edu.sg Junjian Yi National School of Development Peking University E-Mail: junjian@nsd.pku.edu.cn

Global Spillovers from FED Hikes and a Strong Dollar: The Risk Channel - Cristi, José; Kalemli-Özcan, Ṣebnem; Sans, Mariana; Unsal, Filiz D (National Bureau of Economic Research Working Paper Series, 2024)
We study the international transmission of U.S. monetary policy (FED hikes) and a strong U.S. dollar. Both of these variables are endogenous and thus we follow the recent developments in the literature to measure the exogenous components of each from the perspective of the rest of the world (ROW). We show that while U.S. monetary policy shocks act as financial shocks increasing risk premia in emerging markets, a shock to U.S. dollar does not generate the same effect.
Author contact info: José Cristi University of Maryland E-Mail: jicristi@umd.edu Ṣebnem Kalemli-Özcan Department of Economics University of Maryland Tydings Hall 4118D College Park, MD 20742-7211 Tel: 301/405-3266 E-Mail: kalemli@econ.umd.edu Mariana Sans University of Maryland E-Mail: msans@umd.edu Filiz D. Unsal OECD Economics Department 2 Rue Andre Pascal Paris 75016 France Tel: +33640339874 E-Mail: filiz.unsal@oecd.org

Global Transmission of FED Hikes: The Role of Policy Credibility and Balance Sheets - Kalemli-Özcan, Ṣebnem; Unsal, Filiz D (National Bureau of Economic Research Working Paper Series, 2024)
Contrary to historical episodes, the 2022–2023 tightening of US monetary policy has not yet triggered financial crisis in emerging markets. Why is this time different? To answer this question, we analyze the current situation through the lens of historical evidence. In emerging markets, the financial channel–based transmission of US policy historically led to more adverse outcomes compared to advanced economies, where the trade channel fails to smooth out these negative effects. When the Federal Reserve increases interest rates, global investors tend to shed risky assets in response to the tightening global financial conditions, affecting emerging markets more severely due to their lower credit ratings and higher risk profiles. This time around, the escape from emerging market assets and the increase in risk spreads have been limited. We document that the historical experience of higher risk spreads and capital outflows can be largely explained by the lack of credible monetary policies and dollar-denominated debt. The improvement in monetary policy frameworks combined with reduced levels of dollar-denominated debt have helped emerging markets weather the recent Federal Reserve hikes.
Author contact info: Ṣebnem Kalemli-Özcan Department of Economics University of Maryland Tydings Hall 4118D College Park, MD 20742-7211 Tel: 301/405-3266 E-Mail: kalemli@econ.umd.edu Filiz D. Unsal OECD Economics Department 2 Rue Andre Pascal Paris 75016 France Tel: +33640339874 E-Mail: filiz.unsal@oecd.org

Smoke from Factory Chimneys: The Applied Economics of Air Pollution in the Progressive Era - Banzhaf, H. Spencer; Walsh, Randall (National Bureau of Economic Research Working Paper Series, 2024)
Like today, one hundred years ago air pollution was a matter of grave concern in the world's most polluted cities. In the wake of its famous 1908-9 social survey, the City of Pittsburgh commissioned an "Economic Survey of Pittsburgh" from John T. Holdsworth, a prominent institutional economist at the University of Pittsburgh. Although wide ranging, the report opened by stating that "The first fundamental need in Pittsburgh is the eradication of smoke." This report was followed by a series of Smoke Investigations, in which, astonishingly, jars were placed around the city and the ash weighed monthly. In one application, Holdsworth's assistant, John J. O'Connor, estimated the economic costs from smoke. Arguably the first damage-cost study, O'Connor's work challenges our understanding of what counts as "economic" in the progressive era.
Author contact info: H. Spencer Banzhaf North Carolina State University Nelson Hall Campus Box 8109 2801 Founders Drive Raleigh, NC 2769 Tel: 919-515-7727 E-Mail: spencer_banzhaf@ncsu.edu Randall Walsh Department of Economics University of Pittsburgh 4901 WW Posvar Hall 230 S. Bouquet St. Pittsburgh, PA 15260 Tel: 412/648-1737 Fax: 412/648-3011 E-Mail: walshr@pitt.edu

Recovering Overlooked Information in Categorical Variables with LLMs: An Application to Labor Market Mismatch - Chen, Yi; Fang, Hanming; Zhao, Yi; Zhao, Zibo (National Bureau of Economic Research Working Paper Series, 2024)
Categorical variables have no intrinsic ordering, and researchers often adopt a fixed-effect (FE) approach in empirical analysis. However, this approach has two significant limitations: it overlooks textual labels associated with the categorical variables; and it produces unstable results when there are only limited observations in a category. In this paper, we propose a novel method that utilizes recent advances in large language models (LLMs) to recover overlooked information in categorical variables. We apply this method to investigate labor market mismatch. Specifically, we task LLMs with simulating the role of a human resources specialist to assess the suitability of an applicant with specific characteristics for a given job. Our main findings can be summarized in three parts. First, using comprehensive administrative data from an online job posting platform, we show that our new match quality measure is positively correlated with several traditional measures in the literature, and at the same time, we highlight the LLM's capability to provide additional information conditional on the traditional measures. Second, we demonstrate the broad applicability of the new method with a survey data containing significantly less information than the administrative data, which makes it impossible to compute most of the traditional match quality measures. Our LLM measure successfully replicates most of the salient patterns observed in a hard-to-access administrative dataset using easily accessible survey data. Third, we investigate the gender gap in match quality and explore whether there exists gender stereotypes in the hiring process. We simulate an audit study, examining whether revealing gender information to LLMs influences their assessment. We show that when gender information is disclosed to the GPT, the model deems females better suited for traditionally female-dominated roles.
Author contact info: Yi Chen 393 Middle Huaxia Road ShanghaiTech University School of Entrepreneurship and Management Shanghai 201210 CHINA Tel: 86-021-20684771 E-Mail: chenyiecon@163.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 Yi Zhao E-Mail: zhao-y21@mails.tsinghua.edu.cn Zibo Zhao E-Mail: AndrewZhao054@gmail.com

After the Storm: How Emergency Liquidity Helps Small Businesses Following Natural Disasters - Collier, Benjamin L; Howell, Sabrina T; Rendell, Lea (National Bureau of Economic Research Working Paper Series, 2024)
Does emergency credit prevent long-term financial distress? We study the causal effects of government-provided recovery loans to small businesses following natural disasters. The rapid financial injection might enable viable firms to survive and grow or might hobble precarious firms with more risk and interest obligations. We show that the loans reduce exit and bankruptcy, increase employment and revenue, unlock private credit, and reduce delinquency. These effects, especially the crowding-in of private credit, appear to reflect resolving uncertainty about repair. We do not find capital reallocation away from neighboring firms and see some evidence of positive spillovers on local entry.
Author contact info: Benjamin L. Collier Department of Risk, Insurance, and Healthcare Management Fox School of Business 1801 Liacouras Walk Philadelphia, PA 19122 Tel: 215-204-8155 E-Mail: collier@temple.edu Sabrina T. Howell NYU Stern School of Business KMC 9-93 44 West 4th Street New York, NY 10012 E-Mail: showell@stern.nyu.edu Lea Rendell E-Mail: lrendell@umd.edu

Interdependent Values in Matching Markets: Evidence from Medical School Programs in Denmark - Friedrich, Benjamin; Hackmann, Martin B; Kapor, Adam; Moroni, Sofia J; Nandrup, Anne Brink (National Bureau of Economic Research Working Paper Series, 2024)
This paper presents the first empirical evidence of interdependent values and strategic responses by market participants in a two-sided matching market. We consider the market for medical school programs in Denmark, which uses a centralized assignment mechanism. Leveraging unique administrative data and an information experiment, we show that students and rival programs hold payoff-relevant information that each program could use to admit students with higher persistence rates. Programs respond to these two sources of interdependent values, student self-selection and interdependent program values, by exhibiting ”home bias” towards local applicants. We construct and estimate a novel equilibrium model reflecting this evidence, and find that fully sharing information could significantly increase student persistence and program payoffs, but enabling students to communicate first preferences would leave outcomes unchanged. An alternative model assuming independent private values contradicts the empirical evidence, highlighting the importance of accounting for interdependent values in understanding and designing matching markets.
Author contact info: Benjamin Friedrich Kellogg School of Management Strategy Department 2211 Campus Drive Evanston, IL 60208 E-Mail: benjamin.friedrich@kellogg.northwestern.edu Martin B. Hackmann Department of Economics University of California, Los Angeles 8283 Bunche Hall Los Angeles, CA 90095 Tel: 203/298-2916 E-Mail: mbhackmann@gmail.com Adam Kapor Department of Economics Princeton University 280 Julis Romo Rabinowitz Building Princeton, NJ 08544 Tel: 203/710-0527 E-Mail: akapor@princeton.edu Sofia J. Moroni 73 Wilson Rd Princeton, NJ 08540 USA E-Mail: smoroni@princeton.edu Anne B. Nandrup Olof Palmes Allé 22 8200 Aarhus N Aarhus Denmark E-Mail: anna@vive.dk

Monetary Policy, Segmentation, and the Term Structure - Kekre, Rohan; Lenel, Moritz; Mainardi, Federico (National Bureau of Economic Research Working Paper Series, 2024)
We develop a segmented markets model which rationalizes the effects of monetary policy on the term structure of interest rates. When arbitrageurs’ portfolio features positive duration, an unexpected rise in the short rate lowers their wealth and raises term premia. A calibration to the U.S. economy accounts for the transmission of monetary shocks to long rates. We discuss the additional implications of our framework for state-dependence in policy transmission, the volatility and slope of the yield curve, and trends in term premia accompanying trends in the natural rate.
Author contact info: Rohan Kekre Booth School of Business University of Chicago 5807 S. Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-3239 E-Mail: rohan.kekre@chicagobooth.edu Moritz Lenel Princeton University Department of Economics Julis Romo Rabinowitz Building Princeton, NJ 08544 E-Mail: lenel@princeton.edu Federico Mainardi Booth School of Business University of Chicago 5807 S. Woodlawn Avenue Chicago, IL 60637 USA E-Mail: fmainard@chicagobooth.edu

Homelessness and the Persistence of Deprivation: Income, Employment, and Safety Net Participation - Meyer, Bruce D; Wyse, Angela; Meyer, Gillian; Grunwaldt, Alexa; Wu, Derek (National Bureau of Economic Research Working Paper Series, 2024)
Homelessness is arguably the most extreme hardship associated with poverty in the United States, yet people experiencing homelessness are excluded from official poverty statistics and much of the extreme poverty literature. This paper provides the most detailed and accurate portrait to date of the level and persistence of material disadvantage faced by this population, including the first national estimates of income, employment, and safety net participation based on administrative data. Starting from the first large and nationally representative sample of adults recorded as sheltered and unsheltered homeless taken from the 2010 Census, we link restricted-use longitudinal tax records and administrative data on the Supplemental Nutrition Assistance Program (SNAP), Medicare, Medicaid, Disability Insurance (DI), Supplemental Security Income (SSI), veterans’ benefits, housing assistance, and mortality. Nearly half of these adults had formal employment in the year they were observed as homeless, and nearly all either worked or were reached by at least one safety net program. Nevertheless, their incomes remained low for the decade surrounding an observed period of homelessness, suggesting that homelessness tends to arise in the context of long-term, severe deprivation rather than large and sudden losses of income. People appear to experience homelessness because they are very poor despite being connected to the labor market and safety net, with low permanent incomes leaving them vulnerable to the loss of housing when met with even modest disruptions to life circumstances.
Author contact info: Bruce D. Meyer Harris School of Public Policy University of Chicago 1307 E 60th Street Chicago, IL 60637 Tel: 773/702-2712 E-Mail: bdmeyer@uchicago.edu Angela Wyse University of Chicago 1307 E 60th Street Chicago, IL 60637 E-Mail: awyse@uchicago.edu Gillian Meyer E-Mail: gplmeyer@wharton.upenn.edu Alexa Grunwaldt E-Mail: alexa.grunwaldt@yale.edu Derek Wu Frank Batten School of Leadership and Public Policy University of Virginia 235 McCormick Road Charlottesville, VA 22904 E-Mail: derek.wu@virginia.edu

The Dominant Role of Expectations and Broad-Based Supply Shocks in Driving Inflation - Beaudry, Paul; Hou, Chenyu; Portier, Franck (National Bureau of Economic Research Working Paper Series, 2024)
The object of this paper is to assess the role of supply shocks, labour market tightness and expectation formation in explaining bouts of inflation. We begin by showing that a quasi-flat Phillips curve, which was popular prior to the pandemic, still fits the post-2020 US data well and that changes in short term inflation expectations induced by supply shocks likely played a major role in the recent inflation episode. We then document features of the joint dynamics of inflation and inflation expectations. Given the difficulty of reproducing these dynamics under rational expectations, we propose and evaluate a model with imperfect information and bounded rationality. In our model, agents see sectoral inflations as being driven by a component common to all the sectors of the economy and by sector-specific shocks. When supply shocks affect many sectors (what we refer to as a broad-based supply shock), agents infer that the common component of inflation has increased, which drive persistent inflation dynamics through their effect of expectations. We show that departure from full rationality is minor, but that it is enough for broad-based supply shocks to be amplified and propagated over time in a manner needed to explain the data.
Author contact info: Paul Beaudry Vancouver School of Economics, University of British Columbia 6000 Iona Drive Vancouver, V6T 1Z1 Canada Tel: 604/822-8624 Fax: 604/822-5915 E-Mail: Paul.Beaudry@ubc.ca Chenyu Hou 2001 Longxiang Boulevard Longgang District Shenzhen China E-Mail: sevhou1989@gmail.com Franck Portier Department of Economics University College London 30 Gordon Street WC1H 0AX London United Kingdom E-Mail: f.portier@ucl.ac.uk

Quantitative Tightening Around the Globe: What Have We Learned? - Du, Wenxin; Forbes, Kristin; Luzzetti, Matthew N (National Bureau of Economic Research Working Paper Series, 2024)
This paper uses the recent cross-country experience with quantitative tightening (QT) to assess the impact of shrinking central bank balance sheets. We analyze the experience in seven advanced economies (Australia, Canada, Euro area, New Zealand, Sweden, UK and US)—documenting different strategies and the substantive reduction in central bank balance sheets that has already occurred. Then we assess the macroeconomic and financial impact of QT announcements on yields and a range of other market prices. QT announcements increase government bond yields, steepening the yield curve and potentially signaling a greater commitment to raising policy interest rates, but have more limited effects on most other financial market indicators. Active QT has a larger impact than passive QT, particularly on longer maturities. The implementation of QT has been associated with a modest rise in overnight funding spreads and a decline in the “convenience yield” of government bonds, but QT transactions did not significantly affect the pricing and market liquidity of government debt securities. Finally, we evaluate who buys assets when central banks unwind balance sheets, an issue which will become increasingly important if central banks continue to reduce their security holdings while government debt issuance remains elevated. We find that increased demand by domestic nonbanks has largely compensated for reduced bond holdings by central banks. This series of cross-country results suggests that QT has had more of an impact than “paint drying”, but far less than simply reversing the effects of the quantitative easing programs launched during periods of market stress. Looking ahead, although QT has been smooth to date, frictions could increase in the future so that QT quickly evolves into more like watching “water boil”.
Author contact info: Wenxin Du Columbia Business School 665 West 130th St. New York, NY 10027 Tel: 773/834-5354 E-Mail: wenxin.du@columbia.edu Kristin Forbes MIT Sloan School of Management 100 Main Street, E62-416 Cambridge, MA 02142 Tel: 617/253-8996 Fax: 617/258-6855 E-Mail: kjforbes@mit.edu Matthew N. Luzzetti Chief US Economist Deutsche Bank Securities The Deutsche Bank Center 1 Columbus Circle New York, NY 10019 E-Mail: matthew.luzzetti@db.com

Application Flows - Davis, Steven J; Samaniego de la Parra, Brenda (National Bureau of Economic Research Working Paper Series, 2024)
We build and analyze a new U.S. database that links 125 million applications to job vacancies and employer-side clients on Dice.com, an online platform for jobs and workers in software design, computer systems, engineering, financial analysis, management consulting, and other occupations that require technical skills. We find, first, that posting durations are quite short, often only two or three days, with a median of seven days. Second, labor market tightness has tiny effects on posting durations. Third, job seekers display a striking propensity to target new postings, with almost half of applications flowing to openings posted in the past 48 hours. Fourth, applications per posting are much too uneven to reflect random search, even within narrow market segments and job categories. Moreover, posted offer wages play no role in explaining the deviations from a random-search benchmark. Fifth, intermediaries play a huge role on both sides of the platform: Recruitment and staffing firms account for two-thirds of all postings and attract most of the applications. We relate these and other findings to theories of labor market search.
Author contact info: 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 Brenda Samaniego de la Parra 1156 High Street MS Economics Santa Cruz, CA 95064 E-Mail: bsamanie@ucsc.edu

Tracking Firm Use of AI in Real Time: A Snapshot from the Business Trends and Outlook Survey - Bonney, Kathryn; Breaux, Cory; Buffington, Cathy; Dinlersoz, Emin; Foster, Lucia S; Goldschlag, Nathan; Haltiwanger, John C; Kroff, Zachary; Savage, Keith (National Bureau of Economic Research Working Paper Series, 2024)
Timely and accurate measurement of AI use by firms is both challenging and crucial for understanding the impacts of AI on the U.S. economy. We provide new, real-time estimates of current and expected future use of AI for business purposes based on the Business Trends and Outlook Survey for September 2023 to February 2024. During this period, bi-weekly estimates of AI use rate rose from 3.7% to 5.4%, with an expected rate of about 6.6% by early Fall 2024. The fraction of workers at businesses that use AI is higher, especially for large businesses and in the Information sector. AI use is higher in large firms but the relationship between AI use and firm size is non-monotonic. In contrast, AI use is higher in young firms although, on an employment-weighted basis, is U-shaped in firm age. Common uses of AI include marketing automation, virtual agents, and data/text analytics. AI users often utilize AI to substitute for worker tasks and equipment/software, but few report reductions in employment due to AI use. Many firms undergo organizational changes to accommodate AI, particularly by training staff, developing new workflows, and purchasing cloud services/storage. AI users also exhibit better overall performance and higher incidence of employment expansion compared to other businesses. The most common reason for non-adoption is the inapplicability of AI to the business.
Author contact info: Kathryn Bonney E-Mail: Kathryn.Bonney@census.gov Cory L. Breaux E-Mail: Cory.Breaux@census.gov Cathy Buffington E-Mail: Catherine.D.Buffington@census.gov Emin Dinlersoz E-Mail: emin.m.dinlersoz@census.gov Lucia S. Foster US Bureau of the Census Washington, DC 20233 E-Mail: lucia.s.foster@census.gov Nathan Goldschlag Center for Economic Studies US Census Bureau 4600 Silver Hill Road Washington, DC 20233 E-Mail: Nathan.Goldschlag@census.gov John C. Haltiwanger Department of Economics University of Maryland College Park, MD 20742 Tel: 301/405-3504 Fax: 301/405-3542 E-Mail: haltiwan@econ.umd.edu Zachary Kroff Center for Economic Studies U.S. Census Bureau 4600 Silver Hill Road Washington, DC 20233 Tel: 301-763-2199 E-Mail: zachary.kroff@census.gov Keith Savage E-Mail: aaron.k.savage@census.gov

Theory-Driven Entrepreneurial Search - Chavda, Ankur; Gans, Joshua S; Stern, Scott (National Bureau of Economic Research Working Paper Series, 2024)
How should theory-based entrepreneurs search for strategies to implement their ideas? The theory-based view of strategy posits that decision-makers hold theories about their environment premised on beliefs that should be actively tested. This causal framework, which underlies the theory-based view, also has implications for entrepreneurial search: the process by which entrepreneurs uncover strategies to implement their ideas. In this paper, we develop a Bayesian model where entrepreneurs update their beliefs as they conduct entrepreneurial search. We find several optimal behaviors for theory-based entrepreneurs such as reverting to a previous strategy after finding a relatively poor strategy and continuing to search after finding a relatively good strategy, which are missing when entrepreneurs lack such a theory-based approach. As these predictions align with examples of successful entrepreneurs, our findings both provide a method to empirically identify skilled entrepreneurs and demonstrate the usefulness of applying the theory-based view to entrepreneurial behavior more generally.
Author contact info: Ankur Chavda 1 rue de la Libaration Jouy-en-Josas 78351 France E-Mail: chavda@hec.fr Joshua S. Gans Rotman School of Management University of Toronto 105 St. George Street Toronto ON M5S 3E6 Tel: 416/978-3243 E-Mail: joshua.gans@rotman.utoronto.ca Scott Stern MIT Sloan School of Management 100 Main Street, E62-476 Cambridge, MA 02142 Tel: 617/253-3053 Fax: 617/253-2660 E-Mail: sstern@mit.edu

The Impact of Green Investors on Stock Prices - Cheng, Gong; Jondeau, Eric; Mojon, Benoit; Vayanos, Dimitri (National Bureau of Economic Research Working Paper Series, 2024)
We study the impact of green investors on stock prices in a dynamic equilibrium model where investors are green, passive or active. Green investors track an index that progressively excludes the stocks of the brownest firms; passive investors hold a value-weighted index of all stocks; and active investors hold a mean-variance efficient portfolio of all stocks. Contrary to the literature, we find large drops in the stock prices of the brownest firms and moderate increases for greener firms. These effects occur primarily upon the announcement of the green index's formation and continue during the exclusion phase. The announcement effects imply a first-mover advantage to early adopters of decarbonisation strategies.
Author contact info: Gong Cheng E-Mail: chengjacques@gmail.com Eric Jondeau HEC Lausanne University of Lausanne E-Mail: eric.jondeau@unil.ch Benoit Mojon Bank for International Settlements E-Mail: Benoit.Mojon@bis.org Dimitri Vayanos Department of Finance, OLD 3.41 London School of Economics Houghton Street London WC2A 2AE UNITED KINGDOM Tel: +44 (0)20 7955 6382 Fax: +44 (0)20 7955 7420 E-Mail: d.vayanos@lse.ac.uk

Where Do Banks End and NBFIs Begin? - Acharya, Viral V; Cetorelli, Nicola; Tuckman, Bruce (National Bureau of Economic Research Working Paper Series, 2024)
In recent years, assets of non-bank financial intermediaries (NBFIs) have grown significantly relative to those of banks. These two sectors are commonly viewed either as operating in parallel, performing different activities, or as substitutes, performing substantially similar activities, with banks inside and NBFIs outside the perimeter of banking regulation. We argue instead that NBFI and bank businesses and risks are so interwoven that they are better described as having transformed over time rather than as having migrated from banks to NBFIs. These transformations are at least in part a response to regulation and are such that banks remain special as both routine and emergency liquidity providers to NBFIs. We support this perspective as follows: (i) The new and enhanced financial accounts data for the United States (“From Whom to Whom”) show that banks and NBFIs finance each other, with NBFIs especially dependent on banks; (ii) Case studies and regulatory data show that banks remain exposed to credit and funding risks, which at first glance seem to have moved to NBFIs, and also to contingent liquidity risk from the provision of credit lines to NBFIs; and (iii) Empirical work confirms bank-NBFI linkages through the correlation of their abnormal equity returns and market-based measures of systemic risk. We discuss some potential regulatory responses, including treating the two sectors holistically; recognizing the implications for risk propagation and amplification; and exploring new ways to internalize the costs of systemic risk.
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 Nicola Cetorelli Federal Reserve Bank of New York 33 Liberty Street New York, NY 10045 Tel: 212 720 5071 Fax: 212 720 8363 E-Mail: nicola.cetorelli@ny.frb.org Bruce Tuckman 44 West 4th St New York NY 10012, USA E-Mail: btuckman@stern.nyu.edu

The Effects of Medical Debt Relief: Evidence from Two Randomized Experiments - Kluender, Raymond; Mahoney, Neale; Wong, Francis; Yin, Wesley (National Bureau of Economic Research Working Paper Series, 2024)
Two in five Americans have medical debt, nearly half of whom owe at least $2,500. Concerned by this burden, governments and private donors have undertaken large, high-profile efforts to relieve medical debt. We partnered with RIP Medical Debt to conduct two randomized experiments that relieved medical debt with a face value of $169 million for 83,401 people between 2018 and 2020. We track outcomes using credit reports, collections account data, and a multimodal survey. There are three sets of results. First, we find no impact of debt relief on credit access, utilization, and financial distress on average. Second, we estimate that debt relief causes a moderate but statistically significant reduction in payment of existing medical bills. Third, we find no effect of medical debt relief on mental health on average, with detrimental effects for some groups in pre-registered heterogeneity analysis.
Author contact info: Raymond Kluender Harvard Business School Rock Center 217 Soldiers Field Rd Boston, MA 02163 E-Mail: rkluender@hbs.edu Neale Mahoney Department of Economics Stanford University 579 Jane Stanford Way Stanford, CA 94305 E-Mail: nmahoney@stanford.edu Francis Wong LMU Munich Center for Economic Studies Geschwister-Scholl-Platz 1 Munich 80539 Germany E-Mail: francis.wong@econ.lmu.de Wesley Yin University of California, Los Angeles 3250 Public Affairs Building Los Angeles, CA 90095 Tel: 301-928-4308 E-Mail: wyin@ucla.edu

Inequality and Racial Backlash: Evidence from the Reconstruction Era and the Freedmen’s Bureau - Chyn, Eric; Haggag, Kareem; Stuart, Bryan A (National Bureau of Economic Research Working Paper Series, 2024)
How do majority groups respond to a narrowing of inequality in racially polarized environments? We study this question by examining the effects of the Freedmen’s Bureau, an agency created after the U.S. Civil War to provide aid to former slaves and launch institutional reform in the South. We use new historical records and an event study approach to estimate impacts of the Bureau on political economy in the South. In the decade immediately after the war, counties with Bureau field offices had reduced vote shares for Democrats, the major political party that previously championed slavery and opposed Black civil rights during Reconstruction. In the longer-run, we find evidence of backlash in the form of higher Democratic vote shares and increases in several forms of racial violence, including lynchings and attacks against Black schools. This backlash extends through the twentieth century, when we find that counties that once had a Bureau field office have higher rates of second-wave and third-wave Ku Klux Klan activity and lower rates of intergenerational economic mobility. Overall, our results suggest that the initial impacts of the Freedmen’s Bureau stimulated countervailing responses by White majorities who sought to offset social progress of Black Americans.
Author contact info: 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 Kareem Haggag Anderson School of Management University of California, Los Angeles Entrepreneurs Hall 110 Westwood Plaza Los Angeles, CA 90095-1481 E-Mail: kareem.haggag@anderson.ucla.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

A Discrimination Report Card - Kline, Patrick M; Rose, Evan K; Walters, Christopher R (National Bureau of Economic Research Working Paper Series, 2024)
We develop an empirical Bayes ranking procedure that assigns ordinal grades to noisy measurements, balancing the information content of the assigned grades against the expected frequency of ranking errors. Applying the method to a massive correspondence experiment, we grade the race and gender contact gaps of 97 U.S. employers, the identities of which we disclose for the first time. The grades are presented alongside measures of uncertainty about each firm’s contact gap in an accessible report card that is easily adaptable to other settings where ranks and levels are of simultaneous interest.
Author contact info: Patrick M. Kline Department of Economics University of California, Berkeley 530 Evans Hall #3880 Berkeley, CA 94720 Tel: 510/642-4628 E-Mail: pkline@econ.berkeley.edu Evan K. Rose Department of Economics University of Chicago 1126 East 59th Street Chicago, IL 60637 E-Mail: ekrose@uchicago.edu Christopher R. Walters Department of Economics University of California, Berkeley 530 Evans Hall #3880 Berkeley, CA 94720-3880 Tel: 510/643-8596 E-Mail: crwalters@econ.berkeley.edu

Quantifying the Uncertainty of Imputed Demographic Disparity Estimates: The Dual-Bootstrap - Lu, Benjamin; Wan, Jia; Ouyang, Derek; Goldin, Jacob; Ho, Daniel E (National Bureau of Economic Research Working Paper Series, 2024)
Measuring average differences in an outcome across racial or ethnic groups is a crucial first step for equity assessments, but researchers often lack access to data on individuals’ races and ethnicities to calculate them. A common solution is to impute the missing race or ethnicity labels using proxies, then use those imputations to estimate the disparity. Conventional standard errors mischaracterize the resulting estimate’s uncertainty because they treat the imputation model as given and fixed, instead of as an unknown object that must be estimated with uncertainty. We propose a dual-bootstrap approach that explicitly accounts for measurement uncertainty and thus enables more accurate statistical inference, which we demonstrate via simulation. In addition, we adapt our approach to the commonly used Bayesian Improved Surname Geocoding (BISG) imputation algorithm, where direct bootstrapping is infeasible because the underlying Census Bureau data are unavailable. In simulations, we find that measurement uncertainty is generally insignificant for BISG except in particular circumstances; bias, not variance, is likely the predominant source of error. We apply our method to quantify the uncertainty of prevalence estimates of common health conditions by race using data from the American Family Cohort.
Author contact info: Benjamin Lu University of California, Berkeley E-Mail: b.lu@berkeley.edu Jia Wan E-Mail: jiawan@mit.edu Derek Ouyang Stanford Law School Room 313, Crown Quadrangle 559 Nathan Abbott Way Stanford, CA 94305-8610 E-Mail: douyang1@law.stanford.edu Jacob Goldin University of Chicago Law School 1111 E 60th Street Chicago, IL 60637 E-Mail: jsgoldin@gmail.com Daniel E. Ho E-Mail: dho@law.stanford.edu

Ideology, Incidence and the Political Economy of Fuel Taxes: Evidence from the California 2018 Proposition 6 - Epstein, Lucas; Muehlegger, Erich (National Bureau of Economic Research Working Paper Series, 2024)
In 2018, California voters rejected Proposition 6, a ballot initiative that sought to repeal state gasoline taxes and vehicle fees enacted as part of the 2017 Road Repair and Accountability Act. We study the relationship between support for the proposition, political ideology and the economic burdens imposed by the Act. For every hundred dollars of annual per-household imposed costs, we estimate that support for the proposition rose by 3 - 9 percentage points. Notably, we find that the relationship between voting and the economic burden of the policy is seven times stronger in the most conservative tracts relative to the most liberal tracts. Since conservative areas in California and elsewhere tend to bear a higher burden from transportation and energy taxes than liberal areas, heterogeneity in the response to economic burdens has important implications for the popular support for environmental taxes and the ongoing policy debate about how to finance future road infrastructure.
Author contact info: Lucas Epstein Yale School of the Environment 195 Prospect Street New Haven, CT 06511 E-Mail: lucas.epstein@yale.edu Erich Muehlegger University of California,Davis Economics Department One Shields Ave Davis, CA 95616 E-Mail: emuehlegger@ucdavis.edu

Effects of Income on Infant Health: Evidence from the Expanded Child Tax Credit and Pandemic Stimulus Checks - Lyu, Wei; Wehby, George; Kaestner, Robert (National Bureau of Economic Research Working Paper Series, 2024)
During the COVID-19 pandemic, the federal government issued stimulus checks and expanded the child tax credit. These pandemic payments varied by marital status and the number of children in the household and were substantial with some families receiving several thousand dollars. We exploit this plausibly exogenous variation in income to obtain estimates of the effect income on infant health. We measure the total amount of pandemic payments received during pregnancy, or the year before birth, and examine how this additional income affects birthweight, the incidence of low birth weight, gestational age and fetal growth. Data are from birth certificates and analyses are conducted separately by maternal marital status and education (less than high school or high school) to isolate only the variation in pandemic payments due to differences in the number of children (parity). Estimates indicate that these pandemic cash payments had no statistically significant, or clinically or economically meaningful effects on infant health. Overall, the findings suggest that income transfers during pregnancy will have little effect on socioeconomic disparities in infant health.
Author contact info: Wei Lyu Division of Health Systems Management and Policy School of Public Health University of Memphis 3825 Desoto Avenue 124 Robison Hall Memphis, TN 38152 E-Mail: wlyu@memphis.edu George Wehby Department of Health Management and Policy College of Public Health University of Iowa 145 N. Riverside Dr. 100 College of Public Health Bldg., Room N248 Iowa City, IA 52242 Tel: 319/384-3814 E-Mail: george-wehby@uiowa.edu Robert Kaestner Harris School of Public Policy University of Chicago 1307 East 60th Street (Room 3057) Chicago, IL 60637 E-Mail: kaestner.robert@gmail.com

Identification of Marginal Treatment Effects using Subjective Expectations - Briggs, Joseph S; Caplin, Andrew; Leth-Petersen, Søren; Tonetti, Christopher (National Bureau of Economic Research Working Paper Series, 2024)
We develop a method to identify the individual latent propensity to select into treatment and marginal treatment effects. Identification is achieved with survey data on individuals' subjective expectations of their treatment propensity and of their treatment-contingent outcomes. We use the method to study how child birth affects female labor supply in Denmark. We find limited latent heterogeneity and large short-term effects that vanish by 18 months after birth. We support the validity of the identifying assumptions in this context by using administrative data to show that the average treatment effect on the treated computed using our method and traditional event-study methods are nearly equal. Finally, we study the effects of counterfactual changes to child care cost and quality on female labor supply.
Author contact info: Joseph S. Briggs Goldman Sachs 200 West Street New York, NY 10282 USA E-Mail: jsbriggs87@gmail.com 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 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 Christopher Tonetti Graduate School of Business Stanford University 655 Knight Way Stanford, CA 94305 Tel: 650/725-7985 Fax: 650/725-8916 E-Mail: tonetti@stanford.edu

Changing Central Bank Pressures and Inflation - Afrouzi, Hassan; Halac, Marina; Rogoff, Kenneth S; Yared, Pierre (National Bureau of Economic Research Working Paper Series, 2024)
We present a simple long-run aggregate demand and supply framework for evaluating long-run inflation. The framework illustrates how exogenous economic and political economy factors generate central bank pressures that can impact long-run inflation as well as transitions between steady states. We use the analysis to provide a fresh perspective on the forces that drove global inflation downward over the past four decades. We argue that for inflation to remain low and stable in the future, political economy factors, such as strengthened central bank independence or more credible public debt policy, would need to offset the global economic pressures now pushing average long-run inflation upwards.
Author contact info: Hassan Afrouzi Department of Economics Columbia University 420 W 118th Street New York, NY 10027 E-Mail: ha2475@columbia.edu Marina Halac Yale University Department of Economics 30 Hillhouse Avenue, Room 22B New Haven, CT 06511 E-Mail: marina.halac@yale.edu Kenneth S. Rogoff Maurits C. Boas Professor of International Economics Economics Department Harvard University Littauer Center 216 Cambridge, MA 02138-3001 Tel: 617-495-4022 Fax: 617/495-7730 E-Mail: krogoff@harvard.edu Pierre Yared Columbia University Graduate School of Business 3022 Broadway, Uris Hall 823 New York, NY 10027 Tel: 212/854-9670 Fax: 212/662-8474 E-Mail: pyared@columbia.edu

Mortality Burden From Wildfire Smoke Under Climate Change - Qiu, Minghao; Li, Jessica; Gould, Carlos F; Jing, Renzhi; Kelp, Makoto; Childs, Marissa; Kiang, Mathew; Heft-Neal, Sam; Diffenbaugh, Noah; Burke, Marshall (National Bureau of Economic Research Working Paper Series, 2024)
Wildfire activity has increased in the US and is projected to accelerate under future climate change. However, our understanding of the impacts of climate change on wildfire smoke and health remains highly uncertain. We quantify the past and future mortality burden in the US due to wildfire smoke fine particulate matter (PM2.5). We construct an ensemble of statistical and machine learning models that link variation in climate to wildfire smoke PM2.5, and empirically estimate smoke PM2.5-mortality relationships using georeferenced data on all recorded deaths in the US from 2006 to 2019. We project that climate-driven increases in future smoke PM2.5 could result in 27,800 excess deaths per year by 2050 under a high warming scenario, a 76% increase relative to estimated 2011-2020 averages. Cumulative excess deaths from wildfire smoke PM2.5 could exceed 700,000 between 2025-2055. When monetized, climate-induced smoke deaths result in annual damages of $244 billion by mid-century, comparable to the estimated sum of all other damages in the US in prior analyses. Our research suggests that the health cost of climate-driven wildfire smoke could be among the most important and costly consequences of a warming climate in the US.
Author contact info: Minghao Qiu E-Mail: mhqiu@stanford.edu Jessica Li Department of Economics University of California, San Diego 9500 Gilman Dr. #0508 Mail Code: 0508 La Jolla, CA 92093 E-Mail: jel142@ucsd.edu Carlos F. Gould 9515 Gilman Drive School of Public Health University of California San Diego La Jolla, CA 92093 E-Mail: cagould@ucsd.edu Renzhi Jing E-Mail: jingrenzhi.go@gmail.com Makoto Kelp E-Mail: mkelp@stanford.edu Marissa Childs Center for the Environment Harvard University E-Mail: mchilds@fas.harvard.edu Mathew Kiang E-Mail: mkiang@stanford.edu Sam Heft-Neal Center on Food Security and the Environment Stanford University 473 Via Ortega Stanford, CA 94305 E-Mail: sheftneal@stanford.edu Noah Diffenbaugh E-Mail: diffenbaugh@stanford.edu Marshall Burke Doerr School of Sustainability Stanford University Stanford, CA 94305 E-Mail: mburke@stanford.edu

Taxation of Capital: Capital Levies and Commitment - Barro, Robert J; Chari, Varadarajan V (National Bureau of Economic Research Working Paper Series, 2024)
Chamley and Judd argued that optimal taxation dictates zero long-run tax rates on capital income, but Straub and Werning found that tax rates may be positive even in the steady state. These models feature a “period-zero problem” in the underlying Ramsey formulation, which omits past commitments but includes future ones. The period-zero policymaker then imposes capital levies on initial assets—directly or indirectly through positive tax rates on future asset income and non-constant tax rates on consumption. Chari, Nicolini, and Teles add commitment by the period-zero policymaker to households’ initial wealth in utility units. In this case, a nonzero capital levy may apply in period zero, future tax rates on asset income equal zero, and tax rates on consumption are constant. Time-consistency fails if future policymakers are unconstrained but holds if commitments to initial wealth in utility units are strict enough each period to motivate each policymaker to choose zero direct capital levies. In that case, a timeless perspective applies where period zero is not special, tax rates on asset income are always zero, and tax rates on consumption are constant. Introduction of uncertainty generates state-contingent levies on assets and random-walk-like variations in consumption tax rates.
Author contact info: Robert J. Barro Department of Economics Littauer Center 218 Harvard University Cambridge, MA 02138 Tel: 617/495-3203 Fax: 617/496-8629 E-Mail: rbarro@harvard.edu 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

Bad Luck or Bad Decisions? Macroeconomic Implications of Persistent Heterogeneity in Cognitive Skills and Overconfidence - Pfäuti, Oliver; Seyrich, Fabian; Zinman, Jonathan (National Bureau of Economic Research Working Paper Series, 2024)
Business cycle models often abstract from persistent household heterogeneity, despite its potentially significant implications for macroeconomic fluctuations and policy. We show empirically that the likelihood of being persistently financially constrained decreases with cognitive skills and increases with overconfidence thereon. Guided by this and other micro evidence, we add persistent heterogeneity in cognitive skills and overconfidence to an otherwise standard HANK model. Overconfidence proves to be the key innovation, driving households to spend instead of precautionary save and producing empirically realistic wealth distributions and hand-to-mouth shares and MPCs across the income distribution. We highlight implications for various fiscal policies.
Author contact info: Oliver Pfäuti E-Mail: pfaeuti.oliver@gmail.com Fabian Seyrich Driesener Straße 21 Berlin 10439 Germany E-Mail: fabian.seyrich@gmail.com Jonathan Zinman Department of Economics Dartmouth College 314 Rockefeller Hall Hanover, NH 03755 Tel: 603/646-0075 Fax: 603/646-2122 E-Mail: jzinman@dartmouth.edu

Location Sorting and Endogenous Amenities: Evidence from Amsterdam - Almagro, Milena; Domínguez-Iino, Tomás (National Bureau of Economic Research Working Paper Series, 2024)
This paper shows the endogeneity of amenities plays a crucial role in determining the welfare distribution of a city’s residents. We quantify this mechanism by building a dynamic model of residential choice with heterogeneous households, where consumption amenities are the equilibrium outcome of a market for non-tradables. We estimate our model using Dutch microdata and leveraging variation in Amsterdam’s spatial distribution of tourists as a demand shifter, finding significant heterogeneity in residents’ preferences over amenities and in the supply responses of amenities to changes in demand composition. This two-way heterogeneity dictates the degree of horizontal differentiation across neighborhoods, residential sorting, and inequality. Finally, we show the distributional effects of mass tourism depend on this heterogeneity: following rent increases due to growing tourist demand for housing, younger residents—whose amenity preferences are closest to tourists—are compensated by amenities tilting in their favor, while the losses of older residents are amplified.
Author contact info: Milena Almagro Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 E-Mail: Milena.almagro@chicagobooth.edu Tomás Domínguez-Iino 5807 South Woodlawn Avenue Booth School of Business University of Chicago Chicago, IL 60637 United States Tel: 9292941243 E-Mail: tomasdi@uchicago.edu

The Performance of Emerging Markets During The Fed’s Easing and Tightening Cycles: A Cross-Country Resilience Analysis - Aizenman, Joshua; Park, Donghyun; Qureshi, Irfan A; Uddin, Gazi Salah; Saadaoui, Jamel (National Bureau of Economic Research Working Paper Series, 2024)
We investigate the determinants of emerging markets performance during five U.S. Federal Reserve monetary tightening and easing cycles during 2004–2023. We study how macroeconomic and institutional conditions of an Emerging Market (EM) at the beginning of a cycle explain EM resilience during each cycle. More specifically, our baseline cross-sectional regressions examine how those conditions affect three measures of resilience, namely bilateral exchange rate against the USD, exchange rate market pressure, and country-specific Morgan Stanley Capital International index (MSCI). We then stack the five cross-sections to build a panel database to investigate potential asymmetry between tightening versus easing cycles. Our evidence indicates that macroeconomic and institutional variables are associated with EM performance, determinants of resilience differ during tightening versus easing cycles, and institutions matter more during difficult times. Our specific findings are largely consistent with economic intuition. For instance, we find that current account balance, international reserves, and inflation are all important determinants of EM resilience.
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 Donghyun Park Economic Research and Development Impact Department Asian Development Bank Manila, Philippines Tel: (632) 632-5825/6385 Fax: (632) 636-2342 E-Mail: dpark@adb.org Irfan A. Qureshi Economic Research and Development Impact Department Asian Development Bank Manila, Philippines E-Mail: iqureshi@adb.org Gazi Salah Uddin Department of Management and Engineering Linköping University Linköping 58183 Sweden E-Mail: gazi.salah.uddin@liu.se Jamel Saadaoui 46 Avenue de la Foret Noire Strasbourg 67000 France E-Mail: jamelsaadaoui@gmail.com

The Effect of E-cigarette Taxes on Substance Use - Dave, Dhaval M; Liang, Yang; Maclean, Johanna Catherine; Muratori, Caterina; Sabia, Joseph J (National Bureau of Economic Research Working Paper Series, 2024)
Public health advocates warn that the rapid growth of legal markets for electronic nicotine delivery systems (ENDS) may generate a “gateway” to marijuana and harder drug consumption, particularly among teenagers. This study is the first to explore the effects of ENDS taxes on substance use. We find that a one-dollar increase in ENDS taxes (2019$) is associated with a 1-to-2 percentage point decline in teen marijuana use and a 0.8 percentage point reduction in adult marijuana use. This result is consistent with e-cigarettes and marijuana being economic complements. We find no evidence that ENDS taxes affect drug treatment admissions or consumption of illicit drugs other than marijuana such as cocaine, methamphetamine, or opioids over this sample period.
Author contact info: Dhaval M. Dave Bentley University Department of Economics 175 Forest Street, AAC 195 Waltham, MA 02452-4705 E-Mail: ddave@bentley.edu Yang Liang San Diego State University Department of Economics Center for Health Economics & Policy Studies 5500 Campanile Drive San Diego, CA 92182 E-Mail: yang.liang@sdsu.edu Johanna Catherine Maclean Schar School of Policy and Government George Mason University Mason Square Van Metre Hall 3351 Fairfax Drive Arlington, VA 22201 E-Mail: jmaclea@gmu.edu Caterina Muratori San Diego State University Center for Health Economics & Policy Studies 5500 Campanile Drive San Diego, CA 92182 E-Mail: cmuratori@sdsu.edu 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

What Hundreds of Economic News Events Say About Belief Overreaction in the Stock Market - Bianchi, Francesco; Ludvigson, Sydney C; Ma, Sai (National Bureau of Economic Research Working Paper Series, 2024)
We measure the nature and severity of a variety of belief distortions in market reactions to hundreds of economic news events using a new methodology that synthesizes estimation of a structural asset pricing model with algorithmic machine learning to quantify bias. We estimate that investors systematically overreact to perceptions about multiple fundamental shocks in a macro-dynamic system, generating asymmetric compositional effects when several counteracting shocks occur simultaneously in real-world events. We show that belief overreaction to all shocks can lead the market to over- or underreact to events, amplifying or dampening volatility.
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 Sydney C. Ludvigson Department of Economics New York University 19 W. 4th Street, 6th Floor New York, NY 10002 Tel: 212/998-8927 Fax: 212/995-4186 E-Mail: sydney.ludvigson@nyu.edu Sai Ma Federal Reserve Board, C Ave & 20th Street NW Washington, DC 20551 E-Mail: sai.ma@frb.gov

Why Do We Dislike Inflation? - Stantcheva, Stefanie (National Bureau of Economic Research Working Paper Series, 2024)
This paper provides new evidence on a long-standing question asked by Shiller (1997): Why do we dislike inflation? I conducted two surveys on representative samples of the US population to elicit people’s perceptions about the impacts of inflation and their reactions to it. The predominant reason for people’s aversion to inflation is the widespread belief that it diminishes their buying power, as neither personal nor general wage increases seem to match the pace of rising prices. As a result, respondents report having to make costly adjustments in their budgets and behaviors, especially among lower-income groups. Inflation also provokes stress, emotional responses, and a sense of inequity, as the wages of high-income individuals are perceived to grow more rapidly amidst inflation. Many respondents believe that firms have considerable discretion in setting wages, opting not to raise them in order to boost profits, rather than being compelled by market dynamics. The potential positive associations of inflation, such as with reduced unemployment or enhanced economic activity, are typically not recognized by respondents. Inflation ranks high in priority among various economic and social issues, with respondents blaming the government and businesses for it. I also highlight a substantial polarization in attitudes towards inflation along partisan lines, as well as across income groups.
Author contact info: Stefanie Stantcheva Department of Economics Littauer Center 232 Harvard University Cambridge, MA 02138 Tel: 617-496-2614 E-Mail: sstantcheva@fas.harvard.edu

Amazon Self-preferencing in the Shadow of the Digital Markets Act - Waldfogel, Joel (National Bureau of Economic Research Working Paper Series, 2024)
Regulators around the world are discussing, or taking action to limit, self-preferencing by large platforms. This paper explores Amazon's search rankings of its own products as the European Union's Digital Markets Act (DMA) was coming into effect. Using data on over 8 million Amazon search results at 22 Amazon domains in the US, Europe, and elsewhere, I document three things. First, conditional on rudimentary product characteristics, Amazon's own products receive search ranks that are 24 positions better on average throughout the sample period. Second, the Amazon rank differential is large in comparison with the differential for 142 other popular brands. Third, shortly after the EU designated Amazon a “gatekeeper” platform in September 2023, the Amazon rank differential fell from a 30 position advantage to a 20 position advantage, while other major brands' rank positions were unaffected. The changed Amazon search rankings appear in both Europe and other jurisdictions.
Author contact info: Joel Waldfogel Frederick R. Kappel Chair in Applied Economics 3-177 Carlson School of Management University of Minnesota 321 19th Avenue South Minneapolis, MN 55455 Tel: 612/626-7128 E-Mail: jwaldfog@umn.edu

Consumption Dynamics and Welfare Under Non-Gaussian Earnings Risk - Guvenen, Fatih; Ozkan, Serdar; Madera, Rocio (National Bureau of Economic Research Working Paper Series, 2024)
Recent empirical studies document that the distribution of earnings changes displays substantial deviations from lognormality: in particular, earnings changes are negatively skewed with extremely high kurtosis (long and thick tails), and these non-Gaussian features vary substantially both over the life cycle and with the earnings level of individuals. Furthermore, earnings changes display nonlinear (asymmetric) mean reversion. In this paper, we embed a very rich “benchmark earnings process” that captures these non-Gaussian and nonlinear features into a lifecycle consumption-saving model and study its implications for consumption dynamics, consumption insurance, and welfare. We show four main results. First, the benchmark process essentially matches the empirical lifetime earnings inequality—a first-order proxy for consumption inequality—whereas the canonical Gaussian (persistent-plus-transitory) process understates it by a factor of five to ten. Second, the welfare cost of idiosyncratic risk implied by the benchmark process is between two-to-four times higher than the canonical Gaussian one. Third, the standard method in the literature for measuring the pass-through of income shocks to consumption—can significantly overstate the degree of consumption smoothing possible under non-Gaussian shocks. Fourth, the marginal propensity to consume out of transitory income (e.g., from a stimulus check) is higher under non-Gaussian earnings risk.
Author contact info: Fatih Guvenen Department of Economics University of Minnesota 4-101 Hanson Hall 1925 Fourth Street South Minneapolis, MN, 55455 Tel: 612-6250767 E-Mail: guvenen@umn.edu Serdar Ozkan Federal Reserve Bank of St Louis St Louis, MO 63102 USA Tel: (314) 444-8533 Fax: (314) 444-8731 E-Mail: serdarozkan@gmail.com Rocio Madera Department of Economics Southern Methodist University 3300 Dyer St. Umphrey Lee 301 Dallas, TX 75275 E-Mail: romadera@smu.edu

Does nothing stop a bullet like a job? The effects of income on crime - Ludwig, Jens; Schnepel, Kevin (National Bureau of Economic Research Working Paper Series, 2024)
Do jobs and income-transfer programs affect crime? The answer depends on why one is asking the question, which shapes what one means by “crime.” Many studies focus on understanding why overall crime rates vary across people, places, and time; since 80% of all crimes are property offenses, that’s what this type of research typically explains. But if the goal is to understand what to do about the crime problem, the focus will instead be on serious violent crimes, which account for the majority of the social costs of crime. The best available evidence suggests that policies that reduce economic desperation reduce property crime (and hence overall crime rates) but have little systematic relationship to violent crime. The difference in impacts surely stems in large part from the fact that most violent crimes, including murder, are not crimes of profit but rather crimes of passion – including rage. Policies to alleviate material hardship, as important and useful as those are for improving people’s lives and well-being, are not by themselves sufficient to also substantially alleviate the burden of crime on society.
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 Kevin Schnepel Department of Economics 8888 University Drive Simon Fraser University Burnaby, British Columbia, V5A 1S6 Canada Tel: 778-782-3795 E-Mail: kevin_schnepel@sfu.ca

Marginal Returns to Public Universities - Mountjoy, Jack (National Bureau of Economic Research Working Paper Series, 2024)
This paper studies the causal impacts of public universities on the outcomes of their marginally admitted students. I use administrative admission records spanning all 35 public universities in Texas, which collectively enroll 10 percent of American public university students, to systematically identify and employ decentralized cutoffs in SAT/ACT scores that generate discontinuities in admission and enrollment. The typical marginally admitted student completes an additional year of education in the four-year sector, is 12 percentage points more likely to earn a bachelor's degree, and eventually earns 5-10 percent more than their marginally rejected but otherwise identical counterpart. Marginally admitted students pay no additional tuition costs thanks to offsetting grant aid; cost-benefit calculations show internal rates of return of 19-23 percent for the marginal students themselves, 10-12 percent for society (which must pay for the additional education), and 3-4 percent for the government budget. Finally, I develop a method to disentangle separate effects for students on the extensive margin of the four-year sector versus those who would fall back to another four-year school if rejected. Substantially larger extensive margin effects drive the results.
Author contact info: Jack Mountjoy Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 E-Mail: jack.mountjoy@chicagobooth.edu

Beliefs that Entertain - Gandhi, Ashvin; Giuliano, Paola; Guan, Eric; Keefer, Quinn; McDonald, Chase; Pagel, Michaela; Tasoff, Joshua (National Bureau of Economic Research Working Paper Series, 2024)
Economic research on entertainment is scant despite its large share of time use. We test economic theories of belief-based utility in the context of video-game engagement. Using data on 2.8 million matches from League of Legends, we find evidence supporting reference-dependent preferences, loss aversion, preferences for surprise and suspense, preferences for clumped surprise, and flow theory from psychology. We then leverage our estimated model and an evolutionary algorithm to find the information-revealing process that maximizes player engagement. We find that the optimal version of the game has increased game play equivalent to 43% of the winner-loser gap.
Author contact info: Ashvin Gandhi University of California at Los Angeles Anderson School of Management 110 Westwood Plaza Los Angeles, CA 90095 Tel: 310/206-5572 E-Mail: ashvin.gandhi@anderson.ucla.edu Paola Giuliano Anderson School of Management UCLA 110 Westwood Plaza C517 Entrepreneurs Hall Los Angeles, CA 90095-1481 Tel: 310/206-6890 Fax: 310/825-4011 E-Mail: paola.giuliano@anderson.ucla.edu Eric Guan E-Mail: e.guan.yw@gmail.com Quinn Keefer California State University, San Marcos E-Mail: qkeefer@csusm.edu Chase McDonald E-Mail: chasemcdonald@gmail.com Michaela Pagel Washington University Olin Business School John Simon Hall 242 1 Brookings Drive St. Louis, MO 63130 E-Mail: mpagel@wustl.edu Joshua Tasoff Claremont Graduate University Department of Economics 160 East Tenth Street Claremont, CA 91711 E-Mail: joshua.tasoff@cgu.edu

Book Value Risk Management of Banks: Limited Hedging, HTM Accounting, and Rising Interest Rates - Granja, João; Jiang, Erica Xuewei; Matvos, Gregor; Piskorski, Tomasz; Seru, Amit (National Bureau of Economic Research Working Paper Series, 2024)
In the face of rising interest rates in 2022, banks mitigated interest rate exposure of the accounting value of their assets but left the vast majority of their long-duration assets exposed to interest rate risk. Data from call reports and SEC filings shows that only 6% of U.S. banking assets used derivatives to hedge their interest rate risk, and even heavy users of derivatives left most assets unhedged. The banks most vulnerable to asset declines and solvency runs decreased existing hedges, focusing on short-term gains but risking further losses if rates rose. Instead of hedging the market value risk of bank asset declines, banks used accounting reclassification to diminish the impact of interest rate increases on book capital. Banks reclassified $1 trillion in securities as held-to-maturity (HTM) which insulated these assets book values from interest rate fluctuations. More vulnerable banks were more likely to reclassify. Extending Jiang et al.’s (2023) solvency bank run model, we show that capital regulation could address run risk by encouraging capital raising, but its effectiveness depends on the regulatory capital definitions and can by eroded by the use of HTM accounting. Including deposit franchise value in regulatory capital calculations without considering run risk could weaken capital regulation’s ability to prevent runs. Our findings have implications for regulatory capital accounting and risk management practices in the banking sector.
Author contact info: João Granja Booth School of Business University of Chicago 5807 S. Woodlawn Avenue Chicago, IL 60637-1610 E-Mail: joaogranja@chicagobooth.edu 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

The Missing Link? Using LinkedIn Data to Measure Race, Ethnic, and Gender Differences in Employment Outcomes at Individual Companies - Berry, Alexander; Maloney, Elizabeth M; Neumark, David (National Bureau of Economic Research Working Paper Series, 2024)
Stronger enforcement of discrimination laws can help to reduce disparities in economic outcomes with respect to race, ethnicity, and gender in the United States. However, the data necessary to detect possible discrimination and to act to counter it is not publicly available – in particular, data on racial, ethnic, and gender disparities within specific companies. In this paper, we explore and develop methods to use information extracted from publicly available LinkedIn data to measure the racial, ethnic, and gender composition of company workforces. We use predictive tools based on both names and pictures to identify race, ethnicity, and gender. We show that one can use LinkedIn data to obtain reasonably reliable measures of workforce demographic composition by race, ethnicity, and gender, based on validation exercises comparing estimates from scraped LinkedIn data to two sources – ACS data, and company diversity or EEO-1 reports. Next, we apply our methods to study the race, ethnic, and gender composition of workers who were hired and those who experienced mass layoffs at two large companies. Finally, we explore using LinkedIn data to measure race, ethnic, and gender differences in promotion.
Author contact info: Alexander Berry E-Mail: aberry@econone.com Molly Maloney University of California, Irvine E-Mail: molly.maloney@brattle.com David Neumark Department of Economics University of California, Irvine 3151 Social Science Plaza Irvine, CA 92697 Tel: 949-824-8496 Fax: 949/824-2182 E-Mail: dneumark@uci.edu

The Influence of Occupational Licensing on Workforce Transitions to Retirement - Oh, Yun taek; Kleiner, Morris M (National Bureau of Economic Research Working Paper Series, 2024)
Ways of leaving the labor force has been an understudied aspect of labor market outcomes. Labor market institutions such as occupational licensing may influence how individuals transition to retirement. When and how workers transition from career jobs to full retirement may contribute to pre- and post-retirement well-being. Previous investigations of retirement pathways focused on the patterns and outcomes of retirement transitions, yet the influence of occupational licensing on retirement transition has not been analyzed. In this study, we use the Current Population Survey and Survey of Income and Program Participation to investigate how occupational licensing influences American later-career workers’ choice of retirement pathways. Our results show that licensed workers are less likely to choose to change careers but more likely to reduce work hours in transitioning out of the workforce. These results are consistent with the findings that licensed workers receive more benefits in the form of preferable retirement options, suggesting that these workers tend to have higher wages, benefits, and flexibility even toward the end of their careers.
Author contact info: Yun taek Oh 426 Thompson St 3445 Institute for Social Research Ann Arbor, Mich 48104 United States Tel: N/A E-Mail: ytoh@umich.edu Morris M. Kleiner University of Minnesota Humphrey School of Public Affairs 260 Humphrey Center 301 19th Street South Minneapolis, MN 55455 Tel: 612/625-2089 Fax: 612/625-6351 E-Mail: kleiner@umn.edu

Aggregate Demand Externality and Self-Fulfilling Default Cycles - Benhabib, Jess; Dong, Feng; Wang, Pengfei; Xu, Zhenyang (National Bureau of Economic Research Working Paper Series, 2024)
We develop a model of self-fulfilling default cycles with demand externality a la Dixit- Stiglitz to explain the recurrent clustered defaults observed in the data. The literature reports that observable fundamental factors alone are insufficient to explain the cluster. A decline in aggregate output reduces the value of firms and increases their probability of default. As defaults take more firms out of production, aggregate output declines further, creating a positive feedback loop that generates multiple equilibria and self-fulfilling default cycles. Our global analysis using Bogdanov-Takens bifurcation reveals the existence of multiple or even infinite paths that satisfy all equilibrium conditions. Moreover, a family of periodic orbits can emerge in the perfect foresight equilibrium. Our model is consistent with the view that business cycles arise largely because the economy’s internal forces tend to endogenously generate cyclical mechanisms (Beaudry et al., 2020).
Author contact info: Jess Benhabib Department of Economics New York University 19 West 4th Street, 6th Floor New York, NY 10012 Tel: 212/998-8971 Fax: 212/995-4186 E-Mail: jess.benhabib@nyu.edu Feng Dong 30 Shuangqing Rd Beijing, China, 100190 Haidian District Beijing China, 100190 E-Mail: dongfeng@sem.tsinghua.edu.cn Pengfei Wang HSBC Business School Peking University Shenzhen, Guan 518055 China E-Mail: pfwang@phbs.pku.edu.cn Zhenyang Xu 30 Shuangqing Rd, 蓝旗营 Haidian District, Beijing China, 100190 E-Mail: xu-zy22@mails.tsinghua.edu.cn

Contracts with Interdependent Preferences - Ray, Debraj; Weretka, Marek (National Bureau of Economic Research Working Paper Series, 2024)
A principal contracts with multiple agents, as in Lazear and Rosen (1981) and Green and Stokey (1983). The setup is classical except for the assumption that agents have interdependent preferences. We characterize cost effective contracts, and relate the direction of co-movement in rewards — “joint liability” (positive) or “tournaments” (negative) — to the assumed structure of preference interdependence. We also study the implications of preference interdependence for the principal’s payoffs. We identify two asymmetries. First, the optimal contract leans towards joint liability rather than tournaments, especially in larger teams, in a sense made precise in the paper. Second, when the mechanism-design problem is augmented by robustness constraints designed to eliminate multiple equilibria, the principal may prefer teams linked via adversarial rather than altruistic preferences.
Author contact info: Debraj Ray Department of Economics New York University 19 West Fourth Street New York, NY 10012 Tel: 212/998-8906 Fax: 212/995-4186 E-Mail: debraj.ray@nyu.edu Marek Weretka Department of Economics University of Wisconsin-Madison 1180 Observatory Dr Madison, WI 53706 E-Mail: weretka@wisc.edu

Discrimination During Eviction Moratoria - Arefeva, Alina; Jowers, Kay; Hu, Qihui; Timmins, Christopher (National Bureau of Economic Research Working Paper Series, 2024)
We provide evidence of intensified discriminatory behavior by landlords in the rental housing market during the eviction moratoria instituted during the COVID-19 pandemic. Using data collected from an experiment that involved more than 25,000 inquiries of landlords in the 50 largest cities in the United States in the spring and summer of 2020, our analysis shows that the implementation of an eviction moratorium significantly disadvantaged African Americans in the housing search process. A housing search model explains this result, showing that discrimination is worsened when landlords cannot evict tenants for the duration of the eviction moratorium.
Author contact info: Alina Arefeva University of Wisconsin-Madison Wisconsin Business School 5259 Grainger Hall 975 University Ave Madison, WI 53706 E-Mail: arefeva@wisc.edu Kay Jowers Kenan & Nicholas Institutes Duke University West Duke Suite 101 1364 Campus Drive Durham, NC 27708 E-Mail: kay.jowers@duke.edu Qihui Hu Heinz School of Public Policy Carnegie Mellon University 5000 Forbes Ave Pittsburgh, PA 15213 USA E-Mail: qihuih@andrew.cmu.edu Christopher Timmins Real Estate and Urban Land Economics Wisconsin School of Business 4291 Grainger Hall 975 University Avenue Madison, WI 53706 Tel: 919-357-0473 E-Mail: ctimmins@wisc.edu

How Does Expropriation Risk Affect Innovation? - Benavente, Jose-Miguel; Bravo-Ortega, Claudio; Egaña-delSol, Pablo; Hall, Bronwyn H (National Bureau of Economic Research Working Paper Series, 2024)
We analyze how expropriation risk reduces incentives for innovation and reallocates resources from the innovative sector, building on Romer’s(1990) model. Our framework predicts the R&D expenditure, the share of human capital in R&D, the number of patents, technical progress, and economic growth are all lower due to lower expected profits and patent devaluation in the presence of expropriation risks. Empirical analyses, based on a LASSO Instrumental Variable approach and a novel comprehensive dataset spanning nearly two decades, confirm our theoretical predictions. We find robust evidence that expropriation risk, such as corruption, negatively impacts innovation by reducing R&D expenditure, human capital in R&D, number of patents, scientific publications, and the Economic Complexity Index, which is our proxy for technical progress. These findings highlight the detrimental effects of expropriation risk on innovation and economic development at the country level.
Author contact info: Jose-Miguel Benavente Moneda 921 Santiago Chile E-Mail: josemiguel.benavente@corfo.cl Claudio Bravo-Ortega School of Business Universidad Adolfo Ibañez Diagonal Las Torres 2640 Peñalolén Santiago Chile E-Mail: claudio.bravo@uai.cl Pablo Egaña-delSol Escuela de Negocios Universidad Adolfo Ibanez Diagonal Las Torres 2640 Peñalolén Santiago Chile E-Mail: pablo.egana@uai.cl Bronwyn H. Hall University of California, Berkeley Economics Department 123 Tamalpais Road Berkeley, CA 94708 E-Mail: bhhall@berkeley.edu

Blended Finance - Flammer, Caroline; Giroux, Thomas; Heal, Geoffrey (National Bureau of Economic Research Working Paper Series, 2024)
Blended finance---the use of public and philanthropic funding to crowd in private capital---is a potential way to finance a more sustainable world. While blended finance holds the promise of being catalytic in mobilizing vast amounts of private capital, little is known about this practice. In this paper, we provide a conceptual framework that formalizes the decision-making of development finance institutions (DFIs) that engage in blended finance. We then provide empirical evidence on blended finance using data from a major DFI. The key variable we study is the level of concessionality, which captures the subsidy from the blended co-investment. Our findings indicate that DFIs provide higher concessionality for projects that have a higher sustainability impact per dollar invested. Moreover, the concessionality is higher for projects in countries with higher political risk and a higher degree of information asymmetries. In such cases, the blending tends to also include risk-management provisions. These findings are consistent with the predictions from our conceptual framework, in which DFIs have a limited budget that they allocate across projects to create societal value.
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

Promoting Public Health with Blunt Instruments: Evidence from Vaccine Mandates - Abouk, Rahi; Earle, John S; Maclean, Johanna Catherine; Park, Sungbin (National Bureau of Economic Research Working Paper Series, 2024)
We study the effect of mandates requiring COVID-19 vaccination among healthcare industry workers adopted in 2021 in the United States. There are long-standing worker shortages in the U.S. healthcare industry, pre-dating the COVID-19 pandemic. The impact of COVID-19 vaccine mandates on shortages is ex ante ambiguous. If mandates increase perceived safety of the healthcare industry, marginal workers may be drawn to healthcare, relaxing shortages. On the other hand, if marginal workers are vaccine hesitant or averse, then mandates may push workers away from the industry and exacerbate shortages. We combine monthly data from the Current Population Survey 2021 to 2022 with difference-in-differences methods to study the effects of state vaccine mandates on the probability of working in healthcare, and of employment transitions into and out of the industry. Our findings suggest that vaccine mandates may have worsened healthcare workforce shortages: following adoption of a state-level mandate, the probability of working in the healthcare industry declines by 6%. Effects are larger among workers in healthcare-specific occupations, who leave the industry at higher rates in response to mandates and are slower to be replaced than workers in non-healthcare occupations. Findings suggest trade-offs faced by health policymakers seeking to achieve multiple health objectives.
Author contact info: 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 John S. Earle George Mason University Schar School of Policy and Government 3351 Fairfax Drive, MS 3B1 Arlington VA 22201 E-Mail: earle@gmu.edu Johanna Catherine Maclean Schar School of Policy and Government George Mason University Mason Square Van Metre Hall 3351 Fairfax Drive Arlington, VA 22201 E-Mail: jmaclea@gmu.edu Sungbin Park Schar School of Policy and Government George Mason University Van Metre Hall 3351 Fairfax Drive Arlington, VA 22201 E-Mail: spark224@gmu.edu

Explorations of Cumulative Advantage Using Data on French Physicists - Hall, Bronwyn H; Mairesse, Jacques (National Bureau of Economic Research Working Paper Series, 2024)
We use a large dataset of approximately 1500 physicists employed by the Centre National de la Recherche Scientifique (CNRS) in France to investigate the role of cumulative advantage in their publication career. Measuring output by time series of the number of publications and the number of cite-weighted publications for each physicist, we find that the simple stylized facts predicted by cumulative advantage hold only weakly for these physicists. However, regressions with fixed effects, life cycle effects, and past productivity provide strong evidence that cumulative advantage matters for future productivity. In future work, we plan to compare this sample with those from other countries that have different systems for the conduct of scientific research.
Author contact info: Bronwyn H. Hall University of California, Berkeley Economics Department 123 Tamalpais Road Berkeley, CA 94708 E-Mail: bhhall@berkeley.edu Jacques Mairesse CREST (ParisTech-ENSAE) 5, Avenue Henri Le Chatelier 91120 PALAISEAU FRANCE Tel: 33-1-41-17-35-50 Fax: 33-1-41-17-76-34 E-Mail: mairesse@ensae.fr

Deposit Insurance, Uninsured Depositors, and Liquidity Risk During Panics - Jaremski, Matthew S; Sprick Schuster, Steven (National Bureau of Economic Research Working Paper Series, 2024)
The lack of universal deposit insurance coverage can create liquidity risk during financial crises. This aspect of deposit insurance is hard to test in modern data because of the broad coverage of most systems. We, therefore, study the role that the U.S. Postal Savings System played in commercial bank closures during the Great Depression. The system offered households a federally insured deposit account at post offices throughout the nation, and its structure provides a near-ideal environment to identify this competitive liquidity risk during a crisis. We find that banks that operated nearby a post office that accepted deposits were more likely to close between 1929 and 1935. We further make use of a structural change in the availability of postal depositories in the early 1910 to estimate an IV regression that confirms the results. In either model, the effect is strongest for those banks with low reserves, suggesting that the mechanism was through depositor withdrawals rather than other factors.
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 Steven Sprick Schuster E-Mail: stevenschuster@gmail.com

Project Development with Delegated Bargaining: The Role of Elevated Hurdle Rates - Barry, John W; Carlin, Bruce I; Crane, Alan D; Graham, John (National Bureau of Economic Research Working Paper Series, 2024)
During project development, costs are endogenously determined through delegated bargaining with counterparties. In surveys, nearly 80% of CFOs report using an elevated hurdle rate, the implications of which we explore in a delegated bargaining model. We show that elevated hurdle rates can convey a bargaining advantage that exceeds the opportunity cost of forgone projects, whether hurdle rate buffers arise for strategic or non-strategic reasons. Using CFO survey data, we find buffer use is negatively related to the cost of capital and ex ante bargaining power, consistent with the model, and that realized returns exhibit “beat the hurdle rate benchmark” behavior.
Author contact info: John W. Barry E-Mail: john.w.barry@duke.edu Bruce I. Carlin Jones Graduate School of Business Rice University 1900 Rice Boulevard Houston, TX 77005 E-Mail: carlin@rice.edu Alan D. Crane Rice University 6100 Main St Houston, TX 77005 E-Mail: alan.d.crane@rice.edu John Graham Duke University Fuqua School of Business 100 Fuqua Drive Durham, NC 27708-0120 Tel: 919/660-7857 Fax: 919/660-8038 E-Mail: john.graham@duke.edu

“Something Works” in U.S. Jails: Misconduct and Recidivism Effects of the IGNITE Program - Alsan, Marcella; Barnett, Arkey M; Hull, Peter; Yang, Crystal (National Bureau of Economic Research Working Paper Series, 2024)
A longstanding and influential view in U.S. correctional policy is that “nothing works” when it comes to rehabilitating incarcerated individuals. We revisit this hypothesis by studying an innovative law-enforcement-led program launched in the county jail of Flint, Michigan: Inmate Growth Naturally and Intentionally Through Education (IGNITE). We develop an instrumental variable approach to estimate the effects of IGNITE exposure, which leverages quasi-random court delays that cause individuals to spend more time in jail both before and after the program’s launch. Holding time in jail fixed, we find that one additional month of IGNITE exposure reduces within-jail misconduct by 49% and reduces three-month recidivism by 18%, with the recidivism effects growing over time. Surveys of staff and community members, along with administrative test score records and within-jail text messages, suggest that cultural change and improved literacy and numeracy scores are key contributing mechanisms.
Author contact info: Marcella Alsan Kennedy School of Government Harvard University 79 John F. Kennedy St. Rubenstein Bldg R403 Cambridge, MA 02138 E-Mail: marcella_alsan@hks.harvard.edu Arkey M. Barnett Department of Economics University of Michigan 238 Lorch Hall 611 Tappan Ave. Ann Arbor, MI 48109-1220 E-Mail: arkeymb@umich.edu Peter Hull Department of Economics Box B, Brown University Providence RI 02912 E-Mail: peter_hull@brown.edu Crystal Yang Harvard Law School Griswold 301 Cambridge, MA 02138 Tel: 617/496-4477 E-Mail: cyang@law.harvard.edu

Anatomy of Technology and Tasks in the Establishment - Cirera, Xavier; Comin, Diego A; Cruz, Marcio (National Bureau of Economic Research Working Paper Series, 2024)
We construct a grid that covers the key business functions of an establishment and the main technologies used in each of them. We populate this grid with data from over 20,000 establishments in 15 countries. We use this dataset to document novel “facts” about how establishments use technology, the sourcing of business functions, the specialization of establishments from a task perspective, the measurement of technology, and the relationship between technology sophistication and productivity across establishments. We find that differences in technology sophistication account for 31% of cross-establishment dispersion in productivity and for more than half of the agricultural productivity gap.
Author contact info: Xavier Cirera The World Bank 1818 H ST NW Washington, DC 20433 United States E-Mail: xcirera@worldbank.org 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 Marcio Cruz 2121 Pennsylvania Avenue, NW Washington, DC 20433 USA E-Mail: marciocruz@ifc.org

When to Appease and When to Punish: Hitler, Putin, and Hamas - Levine, David K; Ohanian, Lee E (National Bureau of Economic Research Working Paper Series, 2024)
Much has been written about deterrence, the process of committing to punish an adversary to prevent an attack. But in sufficiently rich environments where attacks evolve over time, formulating a strategy involves not only deterrence but also appeasement, the less costly process of not responding to an attack. This paper develops a model that integrates these two processes to analyze the equilibrium time paths of attacks, punishment, and appeasement. We study an environment in which a small attack is launched and can be followed by a larger attack. There are pooling and separating equilibria. The pooling equilibrium turns the common intuition that appeasement is a sign of weakness, inviting subsequent attacks, on its head, because appeasement is a sign of strength in the pooling case. In contrast, the separating equilibrium captures the common intuition that appeasement is a sign of weakness, but only because deterrence in this equilibrium fails. We interpret several episodes of aggression, appeasement, and deterrence: Neville Chamberlain's responses to Hitler, Putin's invasion of Ukraine, Israel's response to Hamas, Turkey's invasion of Cyprus, and Serbia's attacks in Kosovo.
Author contact info: David K. Levine Department of Economics Campus Box, 1208 Washington University St. Louis, MO 63130-3629 Tel: 314-935-5648 E-Mail: davidklevine@gmail.com Lee E. Ohanian 8283 Bunche Hall UCLA, Department of Economics Box 951477 Los Angeles, CA 90095 Tel: 310/825-0979 Fax: 310/825-9528 E-Mail: ohanian@econ.ucla.edu

'Morality and Political Economy' from the Vantage Point of Economics - Enke, Benjamin (National Bureau of Economic Research Working Paper Series, 2024)
This article calls for a greater integration of moral psychology and political economy. While these disciplines were initially deeply intertwined, cross-disciplinary exchange became rare throughout the 20th century. More recently, the tide has shifted again – social scientists of different backgrounds recognized that morality and politico-economic outcomes influence each other in rich bi-directional ways. Because psychologists and economists possess distinct and complementary skill sets, part of this movement consists of productive ‘economic imperialism’ – economists leveraging their empirical toolkit to test and substantiate theories from moral psychology at scale or in the wild. To illustrate this, I present two case studies of recent economics research on prominent ideas in moral psychology. First, the theory that morality is ultimately economically functional – that it evolved as a form of ‘psychological and biological police’ to enforce cooperation in economic production and exchange. Second, that the structure of morality shapes political views and polarization, including on economic issues such as taxation and redistribution. I conclude from these case studies that economists have much to gain from integrating more ideas from moral psychology, and that moral psychologists will be able to make an even more compelling case that morality and politico-economic outcomes influence each other if they engage with research in economics.
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

Risk-Adjusting the Returns to Private Debt Funds - Erel, Isil; Flanagan, Thomas; Weisbach, Michael S (National Bureau of Economic Research Working Paper Series, 2024)
Private debt funds are the fastest growing segment of the private capital market. We evaluate their risk-adjusted returns, applying a cash-flow based method to form a replicating portfolio that mimics their risk profiles. Using both equity and debt benchmarks to measure risk, a typical private debt fund produces an insignificant abnormal return to its investors. However, gross-of-fee abnormal returns are positive, and using only debt benchmarks also leads to positive abnormal returns as funds contain equity risks. The rates at which private debt funds lend appear to be high enough to offset the funds’ fees and risks, but not high enough to exceed both their fees and investors' risk-adjusted rates of return.
Author contact info: Isil Erel Fisher College of Business The Ohio State University 2100 Neil Avenue Columbus, OH 43210 Tel: 614/292-5174 E-Mail: erel@fisher.osu.edu Thomas Flanagan Fisher College of Business The Ohio State University 2100 Neil Ave Columbus, OH 43210 Tel: 4095402356 E-Mail: flanagan.224@osu.edu Michael S. Weisbach Department of Finance Fisher College of Business The Ohio State University 2100 Neil Ave. Columbus, OH 43210 Tel: 614/292-3264 E-Mail: weisbach.2@osu.edu

The Impact of Unions on Wages in the Public Sector: Evidence from Higher Education - Baker, Michael; Halberstam, Yosh; Kroft, Kory; Mas, Alexandre; Messacar, Derek (National Bureau of Economic Research Working Paper Series, 2024)
We study the effects of the unionization of faculty at Canadian universities from 1970-2022 using an event-study design. Using administrative data which covers the full universe of faculty salaries, we find strong evidence that unionization leads to both average salary gains and compression of the distribution of salaries. Our estimates indicate that salaries increase on average by 2 to over 5 percent over the first 6 years post unionization. These effects are driven largely by gains in the bottom half of the wage distribution with little evidence of any impact at the top end. Our evidence indicates that the wage effects are primarily concentrated in the first half of our sample period. We do not find any evidence of an impact on employment.
Author contact info: Michael Baker Department of Economics University of Toronto 150 St. George Street Toronto, ON M5S 3G7 Tel: 416/978-4138 Fax: 416/978-6713 E-Mail: m.baker@utoronto.ca Yosh Halberstam E-Mail: yosh.halberstam@gmail.com Kory Kroft Department of Economics University of Toronto 150 St. George Street Toronto, ON M5S 3G7 Tel: 416/978-4355 E-Mail: kory.kroft@utoronto.ca Alexandre Mas University of California, Berkeley Haas School of Business 2220 Piedmont Ave Berkeley, CA 94720 E-Mail: amas@berkeley.edu Derek Messacar Department of Economics Memorial University 230 Elizabeth Avenue St. John's, NL A1C 5S7 Canada E-Mail: dmessacar@mun.ca

Invoicing Currency Choice: Strategic Complementarities and Currency Matching - Yoshida, Yushi; Shimizu, Junko; Ito, Takatoshi; Sato, Kiyotaka; Yoshimi, Taiyo; Yoshimoto, Uraku (National Bureau of Economic Research Working Paper Series, 2024)
Japanese exporters’ choice of invoice currencies is investigated using newly available official Customs declaration data, which records detailed information, including the trading partners’ names, invoicing currency, and product descriptions. The strategic complementarity mechanism, that is, choosing the same invoice currency as others in the same industry or the same destination market, is found among Japanese exporters. We propose the “broad two-way exporters” whose export destinations and import origins do not necessarily match and the “narrow two-way exporters” whose export destination and import origins match in the same year. It is found that currency matching for exports and imports is as essential as strategic complementarity for two-way exporters, regardless of dominant currency, producer currency, or local currency invoicing. However, as one of this paper’s novelty, we found evidence that newly entering two-way exporters are less concerned about currency matching. Therefore, the currency matching mechanism for two-way exporters is gradually formed as they continue to survive in international markets.
Author contact info: Yushi Yoshida Shiga University Faculty of Economics 1-1-1 Bamba, Hikone-shi, Shiga 522-8522 Japan E-Mail: yushi.yoshida@biwako.shiga-u.ac.jp Junko Shimizu Gakushuin University Faculty of Economics 1-5-1 Mejiro, Toshima-ku Tokyo, 171-8588, Japan E-Mail: Junko.Shimizu@gakushuin.ac.jp Takatoshi Ito Columbia University School of International and Public Affairs Room 927 IAB (MC 3333) 420 West 118th Street New York, NY 10027 Tel: 212-854-6401 Fax: 212-749-1497 E-Mail: ti2164@columbia.edu Kiyotaka Sato Yokohama National University Department of Economics, 79-3 Tokiwadai, Hodogaya-ku Yokohama, 240-8501, Kanagawa Japan E-Mail: sato@ynu.ac.jp Taiyo Yoshimi Chuo University, Faculty of Economics 742–1 Higashinakano, Hachioji-shi, Tokyo, 192-0393 Japan E-Mail: yoshimi@tamacc.chuo-u.ac.jp Uraku Yoshimoto Ministry of Finance, Policy Research Institute 3-1-1 Kasumigaseki Chiyoda-ku, Tokyo, 100-0013 Japan E-Mail: uraku.yoshimoto@gmail.com

The Geography of Capital Allocation in the Euro Area - Beck, Roland; Coppola, Antonio; Lewis, Angus J; Maggiori, Matteo; Schmitz, Martin; Schreger, Jesse (National Bureau of Economic Research Working Paper Series, 2024)
We assess the pattern of Euro Area financial integration adjusting for the role of “onshore offshore financial centers” (OOFCs) within the Euro Area. The OOFCs of Luxembourg, Ireland, and the Netherlands serve dual roles as both hubs of investment fund intermediation and centers of securities issuance by foreign firms. We provide new estimates of Euro Area countries' bilateral portfolio investments which look through both roles, attributing the wealth held via investment funds to the underlying holders and linking securities issuance to the ultimate parent firms. Our new estimates show that the Euro Area is less financially integrated than it appears, both within the currency union and vis-a-vis the rest of the world. While official data suggests a sharp decline in portfolio home bias for Euro Area countries relative to other developed economies following the introduction of the euro, we demonstrate that this pattern only remains true for bond portfolios, while it is artificially generated by OOFC activities for equity portfolios. Further, using new administrative evidence on the identity of non-Euro Area investors in OOFC funds, we document that the bulk of the positions constituting missing wealth in international financial accounts are now accounted for by United Kingdom counterparts.
Author contact info: Roland Beck European Central Bank Sonnemannstrasse 20 Frankfurt, Germany Europe E-Mail: roland.beck@ecb.int Antonio Coppola Stanford University 655 Knight Way Stanford, CA 94305 E-Mail: acoppola@stanford.edu Angus J. Lewis E-Mail: angus.j.lewis@gmail.com Matteo Maggiori Stanford University Graduate School of Business 655 Knight Way Stanford, CA 94305 E-Mail: maggiori@stanford.edu Martin Schmitz European Central Bank Sonnemannstrasse 20 Frankfurt, Germany Europe E-Mail: martin.schmitz@ecb.int Jesse Schreger Columbia Business School 665 W 130th St Kravis Hall, 551 New York, NY 10027 Tel: 212-851-0171 Fax: 212-662-8474 E-Mail: jesse.schreger@columbia.edu

Not in My Backyard? The Local Impact of Wind and Solar Parks in Brazil - Scheifele, Fabian; Popp, David (National Bureau of Economic Research Working Paper Series, 2024)
Support from local citizens is important for the scale-up of renewable energy. We investigate the impact of utility-scale wind and solar parks on employment, GDP and public finances in Brazilian municipalities using a difference-in-differences design with matching. We find a positive employment impact of 1-1.5 jobs/MW in the 15 months preceding the commissioning of a solar park, when the park is under construction, but no impacts thereafter. For wind, we find no employment impacts during the construction phase and potentially a small impact of 0.2-0.25 jobs/MW in the 12 months following commissioning. In the year after commissioning, GDP increases 23% for an average sized solar park and 12% for an average sized wind project. The impacts only decrease slightly in the following years. We also find significant persistent fiscal revenue impacts in wind compared to only a one-time tax revenue increase in solar at the time of construction. Our results provide different implications for policymakers that want to advocate for renewable energy in their towns. While for solar, the main benefit constitutes a short-term increase in low-skilled employment and public revenues, wind energy provides more long-term financial benefits but less local employment opportunities.
Author contact info: Fabian Scheifele 1818 H Street NW Washington, DC 20433 E-Mail: fscheifele@worldbank.org David Popp Department of Public Administration and International Affairs Syracuse University The Maxwell School 426 Eggers Hall Syracuse, NY 13244-1020 Tel: 315/443-2482 Fax: 315/443-1081 E-Mail: dcpopp@maxwell.syr.edu

Ban-the-Box Laws: Fair and Effective? - Kaestner, Robert; Wang, Xufei (National Bureau of Economic Research Working Paper Series, 2024)
Ban-the-box (BTB) laws are a widely used public policy rooted in employment law related to unnecessarily exclusionary hiring practices. BTB laws are intended to improve the employment opportunities of those with criminal backgrounds by giving them a fair chance during the hiring process. Prior research on the effectiveness of these laws in meeting their objective is limited and inconclusive. In this article, we extend the prior literature in two ways: we expand the years of analysis to a period of rapid expansion of BTB laws and we examine different types of BTB laws depending on the employers affected (e.g., public sector). Results indicate that BTB laws, any type of BTB law or BTB laws covering different types of employers, have no systematic or statistically significant association with employment of low-educated men, both young and old and across racial and ethnic groups. We speculate that the lack of effectiveness of BTB laws stems from the difficulty in enforcing such laws and already high rates of employer willingness to hire those with criminal histories.
Author contact info: Robert Kaestner Harris School of Public Policy University of Chicago 1307 East 60th Street (Room 3057) Chicago, IL 60637 E-Mail: kaestner.robert@gmail.com Xufei Wang E-Mail: xufeiwang@uchicago.edu

Apart but Connected: Online Tutoring, Cognitive Outcomes, and Soft Skills - Carlana, Michela; La Ferrara, Eliana (National Bureau of Economic Research Working Paper Series, 2024)
We study the Tutoring Online Program (TOP), where: (i) tutoring is entirely online; (ii) tutors are volunteer university students, matched with underprivileged middle school students. We leverage random assignment to estimate effects during and after the pandemic (2020 and 2022), investigating channels of impact. Three hours of individual tutoring per week increased math performance by 0.23 SD in 2020 and 0.20 SD in 2022. Higher-dosage yielded stronger effects, while group tutoring smaller effects. TOP enhanced students’ aspirations, socio-emotional skills and psychological well-being, but only during school closures. We also estimate the impact of TOP on tutors, finding increases in empathy.
Author contact info: Michela Carlana Harvard Kennedy School 79 JFK Street Taubman Bldg Cambridge, MA 02138 E-Mail: michela_carlana@hks.harvard.edu Eliana La Ferrara Harvard Kennedy School 79 JFK Street Cambridge, MA 02138 Tel: 617/496-6256 E-Mail: elaferrara@hks.harvard.edu

The Distributional Impact of Sectoral Supply and Demand Shifts: A Unified Framework - Bergman, Nittai K; Jaimovich, Nir; Saporta-Eksten, Itay (National Bureau of Economic Research Working Paper Series, 2024)
Economies routinely experience a variety of sector-specific supply and demand shifts. Yet, the distributional welfare consequences of these shifts are not well understood. We address this gap by developing an analytical framework that jointly integrates supply-side and demand-side heterogeneity without imposing specific functional forms on consumption and production. This enables us to identify the key forces that shape the distributional welfare impact of sector-specific supply and demand shifts—in terms of consumer preferences and sectoral production functions. We estimate key parameters and quantify the heterogeneous welfare effects of sectoral shifts, revealing significant variation in their impact.
Author contact info: Nittai K. Bergman Berglas School of Economics Tel Aviv University Tel Aviv-Yafo Israel E-Mail: nbergman@tauex.tau.ac.il Nir Jaimovich Department of Economics University of California, San Diego 9500 Gilman Drive La Jolla, CA 92093 E-Mail: nijaimovich@ucsd.edu Itay Saporta-Eksten The Eitan Berglas School of Economics Tel Aviv University P.O.B. 39040 Ramat Aviv, Tel Aviv, 6997801 E-Mail: itaysap@tauex.tau.ac.il

Market Power in Artificial Intelligence - Gans, Joshua S (National Bureau of Economic Research Working Paper Series, 2024)
This paper surveys the relevant existing literature that can help researchers and policy makers understand the drivers of competition in markets that constitute the provision of artificial intelligence products. The focus is on three broad markets: training data, input data, and AI predictions. It is shown that a key factor in determining the emergence and persistence of market power will be the operation of markets for data that would allow for trading data across firm boundaries.
Author contact info: Joshua S. Gans Rotman School of Management University of Toronto 105 St. George Street Toronto ON M5S 3E6 Tel: 416/978-3243 E-Mail: joshua.gans@rotman.utoronto.ca

Comprehensive OOS Evaluation of Predictive Algorithms with Statistical Decision Theory - Dominitz, Jeff; Manski, Charles F (National Bureau of Economic Research Working Paper Series, 2024)
We argue that comprehensive out-of-sample (OOS) evaluation using statistical decision theory (SDT) should replace the current practice of K-fold and Common Task Framework validation in machine learning (ML) research. SDT provides a formal framework for performing comprehensive OOS evaluation across all possible (1) training samples, (2) populations that may generate training data, and (3) populations of prediction interest. Regarding feature (3), we emphasize that SDT requires the practitioner to directly confront the possibility that the future may not look like the past and to account for a possible need to extrapolate from one population to another when building a predictive algorithm. SDT is simple in abstraction, but it is often computationally demanding to implement. We discuss progress in tractable implementation of SDT when prediction accuracy is measured by mean square error or by misclassification rate. We summarize research studying settings in which the training data will be generated from a subpopulation of the population of prediction interest. We also consider conditional prediction with alternative restrictions on the state space of possible populations that may generate training data. We conclude by calling on ML researchers to join with econometricians and statisticians in expanding the domain within which implementation of SDT is tractable.
Author contact info: Jeff Dominitz E-Mail: dominitz-jeff@norc.org Charles F. Manski Department of Economics Northwestern University 2211 Campus Drive Evanston, IL 60208-2600 Tel: 847/491-8223 Fax: 847/491-7001 E-Mail: cfmanski@northwestern.edu

Aggregation, Liquidity, and Asset Prices with Incomplete Markets - Di Tella, Sebastian; Hébert, Benjamin M; Kurlat, Pablo (National Bureau of Economic Research Working Paper Series, 2024)
We analytically characterize asset-pricing and consumption behavior in two-account heterogeneous-agent models with aggregate risk. We show that trading frictions can simultaneously explain (1) household-level consumption behavior such as high marginal propensities to consume, (2) a zero-beta rate on equities that satisfies an aggregate consumption Euler equation, (3) a return on safe assets that does not, and (4) a flat securities market line. The return of equities is well explained by aggregate consumption, while the return of safe assets reflects a large and volatile liquidity premium.
Author contact info: Sebastian Di Tella Stanford University Graduate School of Business 655 Knight Way Stanford, CA 94305 Tel: 650/725-8767 E-Mail: sditella@stanford.edu Benjamin M. Hébert Graduate School of Business Stanford University 655 Knight Way Stanford, CA 94305 Tel: 617/869-8502 E-Mail: bhebert@stanford.edu Pablo Kurlat University of Southern California Kaprielian Hall 3620 Vermont Ave Los Angeles, CA 90089 E-Mail: kurlat@usc.edu

Does Consolidation in Insurer Markets affect Insurance Enrollment and Drug Expenditures? Evidence from Medicare Part D - Chatterji, Pinka; Ho, Chun-Yu; Jin, Tao; Wang, Yichuan (National Bureau of Economic Research Working Paper Series, 2024)
Since the inception of Medicare Part D in 2006, mergers and acquisitions (M&A) and regulatory changes have led to increased concentration and reduced plan variety in the standalone prescription drug plan (PDP) portion of the market. We examine how this industry consolidation affects Medicare beneficiaries’ enrollment in PDPs and their out-of-pocket (OOP) drug expenditures using individual-level data from the 2006-2018 waves of the Health and Retirement Study (HRS) merged with PDP market-level characteristics. Overall, we find that lower plan variety in the PDP market decreases the likelihood that elderly individuals enroll in PDPs, and higher PDP market concentration increases OOP drug expenditures. Our main results are robust to considering possible effects of unobserved individual-level heterogeneity, region-specific time trends, and entry/exit of insurers, as well as to the use of an alternative identification scheme based on a quasi-experimental design. Further, we find that younger, more advantaged, and healthier individuals respond differently to industry consolidation compared to their older, less advantaged, and sicker counterparts. The former groups are more likely to adjust their PDP enrollment in response to reduced PDP variety and have higher OOP drug expenditures in response to increased PDP market concentration compared to the latter groups. Finally, we find that not only do lower PDP variety and greater PDP market concentration directly affect PDP enrollment and OOP drug expenditures, but these changes also affect Medicare beneficiaries indirectly through impacting PDP characteristics.
Author contact info: Pinka Chatterji State University of New York at Albany Economics Department 1400 Washington Avenue Albany, NY 12222 Tel: 518/442-4746 E-Mail: pchatterji@albany.edu Chun-Yu Ho Economics Department State University of New York at Albany 1400 Washington Avenue Albany, NY 12222 E-Mail: cho@albany.edu Tao Jin E-Mail: tjin@albany.edu Yichuan Wang E-Mail: wangyichuan89@hotmail.com

Forced Migration and Refugees: Policies for Successful Economic and Social Integration - Bahar, Dany; Brough, Rebecca J; Peri, Giovanni (National Bureau of Economic Research Working Paper Series, 2024)
The inflow of refugees and their subsequent integration can be an important challenge for both the refugees themselves and the host society. Policy interventions can improve the lives and economic success of refugees and of their communities. In this paper, we review the socioeconomic integration policy interventions focused on refugees and the evidence surrounding them. We also highlight some interesting topics for future research and stress the need to rigorously evaluate their effectiveness and implications for the successful integration of refugees.
Author contact info: Dany Bahar 111 Thayer St Providence, RI 02912 United States E-Mail: dany_bahar@brown.edu Rebecca J. Brough E-Mail: rjbrough@ucdavis.edu Giovanni Peri Department of Economics University of California, Davis One Shields Avenue Davis, CA 95616 Tel: 530/752-3033 E-Mail: gperi@ucdavis.edu

The Long-Run Impacts of Public Industrial Investment on Local Development and Economic Mobility: Evidence from World War II - Garin, Andrew; Rothbaum, Jonathan L (National Bureau of Economic Research Working Paper Series, 2024)
This paper studies the long-run effects of government-led construction of manufacturing plants on the regions where they were built and on individuals from those regions. Specifically, we examine publicly financed plants built in dispersed locations outside of major urban centers for security reasons during the United States' industrial mobilization for World War II. Wartime plant construction had large and persistent impacts on local development, characterized by an expansion of relatively high-wage manufacturing employment throughout the postwar era. These benefits were shared by incumbent residents; we find men born before WWII in counties where plants were built earned $1,200 (in 2020 dollars) or 2.5 percent more per year in adulthood relative to those born in counterfactual comparison regions, with larger benefits accruing to children of lower-income parents. The balance of evidence suggests that these individuals benefited primarily from the local expansion of higher-wage jobs to which they had access as adults, rather than because of developmental effects from exposure to better environments during childhood.
Author contact info: Andrew Garin Heinz College Carnegie Mellon University 5000 Forbes Avenue Pittsburgh, PA 15213 Tel: 202/494-3361 E-Mail: agarin@andrew.cmu.edu Jonathan L. Rothbaum Social, Economic, and Housing Statistics US Census Bureau 4600 Silver Hill Road Washington, DC 20233 E-Mail: jonathan.l.rothbaum@census.gov

Attribute-based Subsidies and Market Power: an Application to Electric Vehicles - Barwick, Panle Jia; Kwon, Hyuk-Soo; Li, Shanjun (National Bureau of Economic Research Working Paper Series, 2024)
Attribute-based subsidies (ABS) are commonly used to promote the diffusion of energy-efficient products, whose manufacturers often wield significant market power. We develop a theoretical framework for the optimal design of ABS to account for endogenous product attributes, environmental externalities, and market power. We then estimate an equilibrium model of China's vehicle market under ABS and conduct counterfactual simulations to evaluate the welfare impacts of various subsidy designs. Compared to the uniform subsidies, ABS lead to higher product quality and are more effective in mitigating quantity distortions, albeit with a modest environmental cost. Between 42% to 62% of welfare gains under ABS relative to uniform subsidies are attributed to more desirable product attributes, with the remainder explained by reductions in market power distortions. Allowing subsidy redistribution through product-level subsidies, as suggested by our theoretical model, further enhances welfare gains by an additional 34% to 62%. Among the ABS designs, China's notched subsidy design based on driving range leads to vehicle downsizing that undermines welfare benefits. Subsidies based on battery capacity, as implemented in the U.S., achieve the highest welfare gains by effectively balancing market power and environmental impacts.
Author contact info: Panle Jia Barwick University of Wisconsin-Madison Department of Economics 1180 Observatory Dr Madison, WI 53706 E-Mail: panle.barwick@gmail.com Hyuk-Soo Kwon Stanford Institute for Economic Policy Research Stanford University United States Tel: 6073793212 E-Mail: hskwon.econ@gmail.com Shanjun Li Cornell University 405 Warren Hall Ithaca, NY 14853 Tel: 607/255-1832 E-Mail: SL2448@cornell.edu

Shortening the Path to Productive Investment: Evidence from Input Fairs and Cash Transfers in Malawi - Aggarwal, Shilpa; Jeong, Dahyeon; Kumar, Naresh; Park, David Sungho; Robinson, Jonathan; Spearot, Alan (National Bureau of Economic Research Working Paper Series, 2024)
While cash transfers consistently show large effects on immediate outcomes like consumption, limited access to markets may mute their impact on productive investment. In an experiment in Malawi, we cross-cut cash transfers with an "input fair," designed to reduce transport costs to access agricultural inputs. Cash alone increases investment by 27%, while the joint provision of cash and the input fair increases investment by about 40%; thus, the incremental effect of the input fair is equivalent to about a 50% increase compared to the effect of cash alone. Input fairs alone were ineffective.
Author contact info: Shilpa Aggarwal Indian School of Business Gachibowli, Hyderabad 500032 India E-Mail: shilpa_aggarwal@isb.edu Dahyeon Jeong World Bank E-Mail: dahyeonjeong@worldbank.org Naresh Kumar E-Mail: nkumar18@worldbank.org David Sungho Park 263 Namsejong-ro Sejong 30149 South Korea E-Mail: park@kdis.ac.kr Jonathan Robinson Department of Economics University of California, Santa Cruz 457 Engineering 2 Santa Cruz, CA 95064 Tel: 831/459-5618 Fax: 831/459-5077 E-Mail: jmrtwo@ucsc.edu Alan Spearot University of California, Santa Cruz Santa Cruz, CA 95064 E-Mail: acspearot@gmail.com

Measuring the Commercial Potential of Science - Masclans, Roger; Hasan, Sharique; Cohen, Wesley M (National Bureau of Economic Research Working Paper Series, 2024)
This paper uses a large language model to develop an ex-ante measure of the commercial potential of scientific findings. In addition to validating the measure against the typical holdout sample, we validate it externally against 1.) the progression of scientific findings through a major university’s technology transfer process and 2.) firms’ use of the academic science of major American research universities. We then illustrate the measure’s utility by applying it to two questions. First, does the patenting of academic research by universities impede its breadth of use by firms? Second, to illustrate how this measure can advance our understanding of the determinants of firms’ use of science generally, we use it to analyze how one factor, universities’ reputations for generating commercializable science, impacts firms’ use of academic science. For the former question, using our measure to control for commercializable science, we find that patenting does not dampen the dissemination of academic science in industry. For the second, we find that reputation per se, apart from the production of commercializable science, impacts industry’s use of science, especially for that science with high commercial potential, implying that the commercializable science of less prominent universities is disproportionately overlooked by industry.
Author contact info: Roger Masclans E-Mail: roger.masclans@duke.edu Sharique Hasan Duke University Fuqua School of Business Box 90120 Durham, NC 27708-0120 E-Mail: sh424@duke.edu Wesley M. Cohen The Fuqua School of Business Duke University Box 90120 Durham, NC 27708-0120 Tel: 919-451-9770 Fax: NA E-Mail: wcohen@duke.edu

3D-PCA: Factor Models with Restrictions - Lettau, Martin (National Bureau of Economic Research Working Paper Series, 2024)
This paper proposes latent factor models for multidimensional panels called 3D-PCA. Factor weights are constructed from a small set of dimension-specific building blocks, which give rise to proportionality restrictions of factor weights. While the set of feasible factors is restricted, factors with long/short structures often found in pricing factors are admissible. I estimate the model using a 3-dimensional data set of double-sorted portfolios of 11 characteristics. Factors estimated by 3D-PCA have higher Sharpe ratios and smaller cross-sectional pricing errors than models with PCA or Fama-French factors. Since factor weights are subject to restrictions, the number of free parameters is small. Consequently, the model produces robust results in short time series and performs well in recursive out-of-sample estimations.
Author contact info: Martin Lettau Haas School of Business University of California, Berkeley 545 Student Services Bldg. #1900 Berkeley, CA 94720-1900 Tel: 510/642-6349 Fax: 510/643-1412 E-Mail: lettau@haas.berkeley.edu

Navigating Higher Education Insurance: An Experimental Study on Demand and Adverse Selection - Balakrishnan, Sidhya; Bettinger, Eric; Kofoed, Michael S; Ritter, Dubravka; Webber, Douglas A; Aksu, Ege; Hartley, Jonathan S (National Bureau of Economic Research Working Paper Series, 2024)
We conduct a survey-based experiment with 2,776 students at a non-profit university to analyze income insurance demand in education financing. We offered students a hypothetical choice: either a federal loan with income-driven repayment or an income-share agreement (ISA), with randomized framing of downside protections. Emphasizing income insurance increased ISA uptake by 43%. We observe that students are responsive to changes in contract terms and possible student loan cancellation, which is evidence of preference adjustment or adverse selection. Our results indicate that framing specific terms can increase demand for higher education insurance to potentially address risk for students with varying outcomes.
Author contact info: Sidhya Balakrishnan 568 Broadway Suite 601 New York, NY 10012 E-Mail: sidhya.balakrishnan@jainfamilyinstitute.org Eric Bettinger Stanford School of Education CERAS 522, 520 Galvez Mall Stanford, CA 94305 Tel: 650/736-7727 Fax: 650/723-9931 E-Mail: ebettinger@stanford.edu Michael S. Kofoed 2280 Sutherland Ave., Suite 228 Knoxville, TN 37919 USA E-Mail: mkofoed1@utk.edu Dubravka Ritter Consumer Finance Institute Federal Reserve Bank of Philadelphia 10 Independence Mall W Philadelphia, PA 19106 Tel: 215-519-6244 E-Mail: dubravka.ritter@phil.frb.org Douglas A. Webber Federal Reserve Bank 20th St and Constitutional Avenue, NW Washington, DC 20511 E-Mail: douglas.a.webber@frb.gov Ege Aksu City University of New York Graduate Center, Dept. of Economics 365 5th Avenue New York, NY 10016 United States Tel: 6467175387 E-Mail: ege.aksu@jainfamilyinstitute.org Jonathan S. Hartley Stanford University Department of Economics 579 Jane Stanford Way Stanford, CA 94305 USA E-Mail: hartleyj@stanford.edu

Effects of COVID-19 Shutdowns on Domestic Violence in the U.S. - Chen, Yutong; Miller, Amalia R; Segal, Carmit; Spencer, Melissa K (National Bureau of Economic Research Working Paper Series, 2024)
This chapter examines the impact of COVID-19 shutdowns on domestic violence (DV) in the United States. Despite widespread concerns that pandemic shutdowns could increase DV, initial studies found mixed evidence that varied across data sources and locations. We review the evolving literature on the effects of the pandemic and highlight results from studies that examine multiple measures of DV across a common set of large cities. These studies show that the conflicting early results are due to opposite effects of pandemic shutdowns on two measures of DV in police data: an increase in domestic violence 911 calls and a decrease in DV crime reports. In theory, this divergence can come from either higher DV reporting rates, possibly because of additional media attention to DV and greater third-party calling, or from lower policing intensity for DV crimes. Prior evidence from police data and other sources supports the conclusion that the increase in calls came from greater reporting, while the incidence of criminal DV decreased. Finally, we present new evidence drawing on police and hospitals records from across the state of California to show that DV crimes and hospital emergency department (ED) visits were both lower during pandemic shutdowns.
Author contact info: Yutong Chen E-Mail: yc3jk@virginia.edu Amalia R. Miller Department of Economics University of Virginia P. O. Box 400182 Charlottesville, VA 22904 Tel: 434/924-6750 Fax: 434/982-2904 E-Mail: armiller@virginia.edu Carmit Segal Department of Business Administration University of Zurich Plattenstrasse 14 CH - 8032 Zurich Switzerland E-Mail: carmit.segal@gmail.com Melissa K. Spencer Department of Economics Robins School of Business 410 Westhampton Way Richmond, VA 23173 E-Mail: mspencer@richmond.edu

Tunneling and Hidden Profits in Health Care - Gandhi, Ashvin; Olenski, Andrew (National Bureau of Economic Research Working Paper Series, 2024)
This study examines “tunneling” practices through which health care providers covertly extract profit by making inflated payments for goods and services to commonly-owned related parties. While incentives to tunnel exist across sectors, health care providers may find it uniquely advantageous to do so. Masking profits as costs, thereby obscuring true profitability, may dissuade regulators from imposing stricter quality standards and encourage public payers to increase reimbursement rates. Likewise, tunneling effectively “shields” assets from malpractice liability risk, by moving them off the firm’s balance sheet. Using uniquely detailed financial data on the nursing home industry, we apply a difference-in-differences approach to study how firms’ stated costs change when they start transacting with a related party, allowing us to infer by how much these payments are inflated. We find evidence of widespread tunneling through inflated rents and management fees paid to related parties. Extrapolating these markups to all firms’ related party transactions, our estimates suggest that in 2019, 63% of nursing home profits were hidden and tunneled to related parties through inflated transfer prices.
Author contact info: Ashvin Gandhi University of California at Los Angeles Anderson School of Management 110 Westwood Plaza Los Angeles, CA 90095 Tel: 310/206-5572 E-Mail: ashvin.gandhi@anderson.ucla.edu Andrew Olenski Lehigh University Department of Economics Rauch Business Center Room 428 621 Taylor St Bethlehem, PA 18015 E-Mail: ano223@lehigh.edu

The Impact of Municipal Broadband Restrictions on COVID-19 Labor Market Outcomes - Hegde, Saket S; Van Parys, Jessica (National Bureau of Economic Research Working Paper Series, 2024)
The COVID-19 pandemic initiated a trend in “work-from-home (WFH),” but workers need reliable and fast internet connections (e.g., broadband) to work from home. Yet, as of January 2020, 18 states had legally restricted local governments and cooperatives from building their own broadband infrastructure and/or providing broadband internet to their communities. Such policies reduced broadband access and competition in states with restrictions compared to states without restrictions leading up to the pandemic (Whitacre and Gallardo 2020). We use CPS data from 2018-2023 to estimate a dynamic difference-in-differences model that shows how labor force participation (LFP) rates changed in states with and without broadband restrictions, before and after the COVID-19 pandemic. We focus on married women with children, a population with more elastic labor supply that may especially value the flexibility that WFH offers (Dettling 2017). We find that married mothers’ LFP and employment decreased by 1.7% and 2.2%, respectively, in states with restrictions after the pandemic compared to states without restrictions. Labor force outcomes for women without children and married men with children were unaffected by broadband restrictions. The results suggest that married women with children were less able to remain in the workforce in states where their ability to WFH was limited by broadband restrictions.
Author contact info: Saket S. Hegde E-Mail: saket.hegde@phil.frb.org Jessica Van Parys Department of Economics Hunter College 695 Park Avenue, HW 1534 New York, NY 10065 E-Mail: jessica.vanparys@hunter.cuny.edu

Banks in Space - Oberfield, Ezra; Rossi-Hansberg, Esteban; Trachter, Nicholas; Wenning, Derek T (National Bureau of Economic Research Working Paper Series, 2024)
We study the spatial expansion of banks in response to banking deregulation in the 1980s and 90s. During this period, large banks expanded rapidly, mostly by adding new branches in new locations, while many small banks exited. We document that large banks sorted into the densest markets, but that sorting weakened over time as large banks expanded to more marginal markets in search of locations with a relative abundance of retail deposits. This allowed large banks to reduce their dependence on expensive wholesale funding and grow further. To rationalize these patterns we propose a theory of multi-branch banks that sort into heterogeneous locations. Our theory yields two forms of sorting. First, span-of-control sorting incentivizes top firms to select the largest markets and smaller banks the more marginal ones. Second, mismatch sorting incentivizes banks to locate in more marginal locations, where deposits are abundant relative to loan demand, to better align their deposits and loans and minimize wholesale funding. Together, these two forms of sorting account well for the sorting patterns we document in the data.
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 Esteban Rossi-Hansberg The Kenneth C. Griffin Department of Economics University of Chicago 5757 S. University Avenue Chicago, IL 60637 Tel: (650) 714 2093 E-Mail: rossihansberg@uchicago.edu Nicholas Trachter Federal Reserve Bank of Richmond 701 E Byrd Street Richmond, VA 23219 USA E-Mail: trachter@gmail.com Derek Wenning Department of Economics Princeton University Julis Romo Rabinowitz Building Princeton, NJ 08544 E-Mail: dwenning@princeton.edu

Scenarios for the Transition to AGI - Korinek, Anton; Suh, Donghyun (National Bureau of Economic Research Working Paper Series, 2024)
We analyze how output and wages behave under different scenarios for technological progress that may culminate in Artificial General Intelligence (AGI), defined as the ability of AI systems to perform all tasks that humans can perform. We assume that human work can be decomposed into atomistic tasks that differ in their complexity. Advances in technology make ever more complex tasks amenable to automation. The effects on wages depend on a race between automation and capital accumulation. If automation proceeds sufficiently slowly, then there is always enough work for humans, and wages may rise forever. By contrast, if the complexity of tasks that humans can perform is bounded and full automation is reached, then wages collapse. But declines may occur even before if large-scale automation outpaces capital accumulation and makes labor too abundant. Automating productivity growth may lead to broad-based gains in the returns to all factors. By contrast, bottlenecks to growth from irreproducible scarce factors may exacerbate the decline in wages.
Author contact info: Anton Korinek Department of Economics University of Virginia Monroe Hall 246 248 McCormick Rd Charlottesville, VA 22904 E-Mail: anton@korinek.com Donghyun Suh E-Mail: ds2qzc@virginia.edu

Regulation of Access, Pricing, and Planning of High Voltage Transmission in the U.S. - DeLosa, Joe, III; Pfeifenberger, Johannes P; Joskow, Paul (National Bureau of Economic Research Working Paper Series, 2024)
The U.S. regulation of high-voltage transmission is highly complex and, as a result, generally poorly understood. The complexity is created by separate, but overlapping, jurisdictional authorities of the U.S. federal regulators and those of individual states, districts, and territories. While U.S. federal regulators have authority over stand-alone transmission service and the regional wholesale power markets that use the transmission grid, state regulators have jurisdiction over both (1) retail electricity services that include the distribution network, the retail cost of transmission service, and often generation service; and (2) the permitting of most new transmission facilities within their states’ boundaries. Some of these federal and state regulatory authorities overlap and some of them do not apply to non-jurisdictional transmission providers (such as certain municipal utilities, cooperatives, and federal power marketing agencies) and states (such as Texas) that are not synchronized with the larger regional grid. We summarize this complex structure of transmission regulation in the U.S. and the history of regulations that have created the industry structure and regulatory frameworks that exist today. We provide an overview of how transmission investments are priced and recovered and the planning processes that individual transmission owners and regional grid operators use to plan the necessary expansion of the high-voltage transmission grid. We also point out some of the economic inefficiencies that are created by a combination of balkanized regulatory structures and outdated industry planning practices.
Author contact info: Joe DeLosa III The Brattle Group 1800 M Street Washington, DC 20036 USA E-Mail: Joe.DeLosa@brattle.com Johannes P. Pfeifenberger Visiting Scholar, MIT Center for Energy and Environmental Policy Research and Principal, The Brattle Group One Beacon Street Suite 2600 Boston, MA 02108 E-Mail: Hannes.Pfeifenberger@brattle.com Paul Joskow E-Mail: pjoskow@mit.edu

The Household Equipment Revolution - Adamopoulou, Effrosyni; Greenwood, Jeremy; Guner, Nezih (National Bureau of Economic Research Working Paper Series, 2024)
A brief historical overview of the household equipment revolution and the women who transformed the home in Germany and the United States.
Author contact info: Effrosyni Adamopoulou ZEW L 7,1 68161 Mannheim Germany E-Mail: effrosyni.adamopoulou@zew.de Jeremy Greenwood University of Pennsylvania Nezih Guner CEMFI Calle Casado del Alisal, 5 28014 Madrid Spain E-Mail: ngunermail@gmail.com

Re-assessing the Spatial Mismatch Hypothesis - Card, David; Rothstein, Jesse; Yi, Moises (National Bureau of Economic Research Working Paper Series, 2024)
We use detailed location information from the Longitudinal Employer-Household Dynamics (LEHD) database to develop new evidence on the effects of spatial mismatch on the relative earnings of Black workers in large US cities. We classify workplaces by the size of the pay premiums they offer in a two-way fixed effects model, providing a simple metric for defining “good” jobs. We show that: (a) Black workers earn nearly the same average wage premiums as whites; (b) in most cities Black workers live closer to jobs, and closer to good jobs, than do whites; (c) Black workers typically commute shorter distances than whites; and (d) people who commute further earn higher average pay premiums, but the elasticity with respect to distance traveled is slightly lower for Black workers. We conclude that geographic proximity to good jobs is unlikely to be a major source of the racial earnings gaps in major U.S. cities today.
Author contact info: David Card Department of Economics 549 Evans Hall, #3880 University of California, Berkeley Berkeley, CA 94720-3880 Tel: 510/642-5222 Fax: 510/643-7042 E-Mail: card@econ.berkeley.edu Jesse Rothstein Goldman School of Public Policy and Department of Economics University of California, Berkeley 2607 Hearst Avenue #7320 Berkeley, CA 94720-7320 Tel: 510/495-0646 Fax: 510/643-9657 E-Mail: rothstein@berkeley.edu Moises Yi U.S. Census Bureau Center for Economic Studies 4600 Silver Hill Rd 5K056B Suitland, MD 20746 E-Mail: moisesyi@gmail.com

Non-robustness of Diffusion Estimates on Networks with Measurement Error - Chandrasekhar, Arun G; Goldsmith-Pinkham, Paul; McCormick, Tyler; Thau, Samuel A; Wei, Jerry (National Bureau of Economic Research Working Paper Series, 2024)
Network diffusion models are used to study things like disease transmission, information spread, and technology adoption. However, small amounts of mismeasurement are extremely likely in the networks constructed to operationalize these models. We show that estimates of diffusions are highly non-robust to this measurement error. First, we show that even when measurement error is vanishingly small, such that the share of missed links is close to zero, forecasts about the extent of diffusion will greatly underestimate the truth. Second, a small mismeasurement in the identity of the initial seed generates a large shift in the locations of expected diffusion path. We show that both of these results still hold when the vanishing measurement error is only local in nature. Such non-robustness in forecasting exists even under conditions where the basic reproductive number is consistently estimable. Possible solutions, such as estimating the measurement error or implementing widespread detection efforts, still face difficulties because the number of missed links are so small. Finally, we conduct Monte Carlo simulations on simulated networks, and real networks from three settings: travel data from the COVID-19 pandemic in the western US, a mobile phone marketing campaign in rural India, and in an insurance experiment in China.
Author contact info: Arun G. Chandrasekhar Department of Economics Stanford University 579 Jane Stanford Way Stanford, CA 94305 E-Mail: arungc@stanford.edu Paul Goldsmith-Pinkham Yale School of Management 165 Whitney Avenue New Haven, CT 06511 E-Mail: paulgp@gmail.com Tyler McCormick Department of Statistics Department of Sociology University of Washington Box 354322 Seattle, WA 98195-4322 E-Mail: tylermc@u.washington.edu Samuel A. Thau E-Mail: samthau@stanford.edu Jerry Wei E-Mail: zwei5@uw.edu

Size Matters: Matching Externalities and the Advantages of Large Labor Markets - Moretti, Enrico; Yi, Moises (National Bureau of Economic Research Working Paper Series, 2024)
Economists have long hypothesized that large and thick labor markets facilitate the matching between workers and firms. We use administrative data from the LEHD to compare the job search outcomes of workers originally in large and small markets who lost their jobs due to a firm closure. We define a labor market as the Commuting Zone×industry pair in the quarter before the closure. To account for the possible sorting of high-quality workers into larger markets, the effect of market size is identified by comparing workers in large and small markets within the same CZ, conditional on workers fixed effects. In the six quarters before their firm’s closure, workers in small and large markets have a similar probability of employment and quarterly earnings. Following the closure, workers in larger markets experience significantly shorter non-employment spells and smaller earning losses than workers in smaller markets, indicating that larger markets partially insure workers against idiosyncratic employment shocks. A 1 percent increase in market size results in a 0.014 and 0.023 percentage points increase in the 1-year re-employment probability of high school and college graduates, respectively. Displaced workers in larger markets also experience a significantly lower need for relocation to a different CZ. Conditional on finding a new job, the quality of the new worker-firm match is higher in larger markets, as proxied by a higher probability that the new match lasts more than one year; the new industry is the same as the old one; and the new industry is a “good fit” for the worker’s college major. Consistent with the notion that market size should be particularly consequential for more specialized workers, we find that the effects are larger in industries where human capital is more specialized and less portable. Our findings may help explain the geographical agglomeration of industries—especially those that make intensive use of highly specialized workers—and validate one of the mechanisms that urban economists have proposed for the existence of agglomeration economies.
Author contact info: Enrico Moretti University of California, Berkeley Department of Economics 549 Evans Hall Berkeley, CA 94720-3880 Tel: 510/642 6649 Fax: 510/643 7042 E-Mail: moretti@econ.berkeley.edu Moises Yi U.S. Census Bureau Center for Economic Studies 4600 Silver Hill Rd 5K056B Suitland, MD 20746 E-Mail: moisesyi@gmail.com

The Effect of Price Caps on Pharmaceutical Advertising: Evidence from the 340b Drug Pricing Program - Hristakeva, Sylvia; Mortimer, Julie Holland; Yde, Eric (National Bureau of Economic Research Working Paper Series, 2024)
We study the effect of price caps on the provision of costly effort by pharmaceutical firms using variation in drug discounts generated by a price regulation program that allows eligible hospitals to purchase outpatient drugs at steep discounts. These discounts directly affect drug manufacturers’ markups, and may change firms’ incentives to exert promotional effort targeted towards physicians at these hospitals. We find that the effects of price regulation on pharmaceutical firm effort depend crucially on the design of the regulations. Using detailed data on marketing payments from pharmaceutical firms to physicians, we observe that physicians receive 12% fewer promotional payments after their hospitals take up the program. The design of the price caps imply that discounts tend to increase with a drug’s age. Consistent with theoretical predictions, we find that pharmaceutical firms shift promotional payments away from older drugs and towards newer drugs, which are less affected by the price caps.
Author contact info: Sylvia Hristakeva Cornell University Ithaca, NY E-Mail: sylvia.hristakeva@gmail.com Julie Holland Mortimer Department of Economics University of Virginia 248 McCormick Rd Monroe Hall 200 Charlottesville, VA 22903 E-Mail: rrd9am@virginia.edu Eric Yde E-Mail: edy9g@virginia.edu

Asset Demand and Real Interest Rates - Beaudry, Paul; Kartashova, Katya; Meh, Césaire (National Bureau of Economic Research Working Paper Series, 2024)
Understanding factors that drive asset demand is central to explaining movements in long-term real interest rates. In this paper, we begin by documenting that much of the increase in the demand for assets in the US in the 30 years prior to Covid represented greater desire to hold assets by households of given age and income levels. For example, if we focus on the 55-64 age group, its wealth-to-income ratio increased by 45-55%, depending on whether housing is included or not. We then develop a model of asset demands which combines retirement motives and inter-temporal substitution motives to quantitatively explore different factors that may have contributed to such an increase. Our findings suggest that decreasing interest rates likely led to a substantial increase in demand for retirement wealth. We also explore some of the across group heterogeneity and show how social security may explain why the lowest income groups did not follow the general trend. Finally, we discuss macroeconomic implications of long-run asset demands that are a decreasing function of interest rates.
Author contact info: Paul Beaudry Vancouver School of Economics, University of British Columbia 6000 Iona Drive Vancouver, V6T 1Z1 Canada Tel: 604/822-8624 Fax: 604/822-5915 E-Mail: Paul.Beaudry@ubc.ca Katya Kartashova Bank of Canada 234 Wellington Street Ottawa, Ontario K1A0G9 Canada E-Mail: kartashova.katya@gmail.com Césaire Meh International Finance Corporation World Bank Group 2121 Pennsylvania Avenue NW Washington, DC 20433 E-Mail: mehcesaire@gmail.com

Technological Synergies, Heterogeneous Firms, and Idiosyncratic Volatility - Fernández-Villaverde, Jesús; Yu, Yang; Zanetti, Francesco (National Bureau of Economic Research Working Paper Series, 2024)
This paper shows the importance of technological synergies among heterogeneous firms for aggregate fluctuations. First, we document six novel empirical facts using microdata that suggest the existence of important technological synergies between trading firms, the presence of positive assortative matching among firms, and their evolution during the business cycle. Next, we embed technological synergies in a general equilibrium model calibrated on firm-level data. We show that frictions in forming trading relationships and separation costs explain imperfect sorting between firms in equilibrium. In particular, an increase in the volatility of idiosyncratic productivity shocks significantly decreases aggregate output without resorting to non-convex adjustment costs.
Author contact info: Jesús Fernández-Villaverde Department of Economics University of Pennsylvania The Ronald O. Perelman Center for Political Science and Economics 133 South 36th Street Suite 150 Philadelphia, PA 19104 E-Mail: jesusfv@econ.upenn.edu Yang Yu Shanghai Jiao Tong University Shanghai China E-Mail: yu.yang.econ@sjtu.edu.cn Francesco Zanetti University of Oxford Department of Economics E-Mail: francesco.zanetti@economics.ox.ac.uk

On the Spatial Determinants of Educational Access - Agostinelli, Francesco; Luflade, Margaux; Martellini, Paolo (National Bureau of Economic Research Working Paper Series, 2024)
We define educational access as the component of a neighborhood's value that is determined by the set of schools available to its residents. This paper studies the extent to which educational access is determined by sorting based on heterogeneous preferences over school attributes, or local institutions that constrain residential location and school choice---such as school catchment areas and housing regulation. We develop a spatial equilibrium model of residential sorting and school choice, estimated using data from a large school district in the United States. The model replicates the responses of house prices and school enrollment to quasi-experimental variation in school peer composition and school transportation provision. We find that low-income families prioritize proximity to schools while high-income families and families with high-skilled children place more value on school peer composition. We use the model to evaluate how the geography of neighborhood sorting influences the aggregate and distributional outcomes of a school-choice expansion (place-based) and a housing voucher (people-based) policy. We find that both policies result in net welfare losses, with only marginal improvements in school peer composition for the average low-income family. Although eligible families benefit from these policies, the negative impact falls on families who currently invest in their children's education by residing in expensive neighborhoods. Under both policies, higher-income families are less exposed to the inflow of low-income children into their schools, either because of their longer distance from target neighborhoods or because of the cost imposed by residential zoning regulation on voucher recipients.
Author contact info: Francesco Agostinelli University of Pennsylvania Perelman Center for Political Science and Economics 133 South 36th Street Philadelphia, PA 19104 E-Mail: fagostin@upenn.edu Margaux Luflade University of Pennsylvania Perelman Center for Political Science and Economics 133 South 36th Street Philadelphia, PA 19104 E-Mail: mluflade@sas.upenn.edu Paolo Martellini 1180 Observatory Drive William H. Sewell Social Science Building, Office 8442 Madison, Wisc 53706-1393 United States Tel: 2672100600 E-Mail: pa.martellini@gmail.com

Spillovers and Spillbacks - Acharya, Sushant; Pesenti, Paolo A (National Bureau of Economic Research Working Paper Series, 2024)
We study international monetary policy spillovers and spillbacks in a tractable two-country Heterogeneous Agent New Keynesian model. Relative to Representative Agent (RANK) models, our framework introduces a precautionary-savings channel, as households in both countries face uninsurable income risk, and a real-income channel, as households have heterogeneous marginal propensities to consume (MPC). While both channels amplify the size of spillovers/spillbacks, only precautionary savings can change their sign relative to RANK. Spillovers are likely to be larger in economies with higher fractions of high MPC households and more countercyclical income risk. Quantitatively, both channels amplify spillovers by 30-60% relative to RANK.
Author contact info: Sushant Acharya Bank of Canada 234 Wellington St. West Ottawa ON K1A 0G9 Canada E-Mail: sushant.acharya.econ@gmail.com Paolo A. Pesenti Federal Reserve Bank of New York 33 Liberty Street New York, NY 10045 Tel: 212/720-5493 Fax: 212/720-6831 E-Mail: paolo.pesenti@ny.frb.org

Adaptation Using Financial Markets: Climate Risk Diversification through Securitization - Kahn, Matthew E; Ouazad, Amine; Yönder, Erkan (National Bureau of Economic Research Working Paper Series, 2024)
In the face of rising climate risk, financial institutions may adapt by transferring such risk to securitizers that have the skill and expertise to build diversified pools, such as Mortgage-Backed Securities. In diversified pools, exposure to climate risk may be a drop in the ocean of cash flows. This paper builds a data set of the entire securitization chain from mortgage-level to MBS deal-level cash flows, and observes the prices of the tranches at monthly frequency. Wildfires lead to higher rates of prepayment and foreclosure at the mortgage level, and larger losses during foreclosure sales. At the MBS deal level, a lower spatial concentration of dollar balances (lower spatial dollar Herfindahl), a lower spatial correlation in wildfire events (within-deal correlation), leads to a lower exposure to wildfire events. These quantifiable metrics of diversification identify those existing deals whose design makes them resilient to climate change. This paper builds optimal deals by finding the portfolio weights in an asset demand system that targets return and risk. Extrapolating wildfire risk using a granular wildfire probability model and temperature projections in 2050, we build climate resilient MBSs whose returns are minimally impacted by wildfire risk even as they supply mortgage credit to wildfire prone areas. Finally, we test whether the market prices the sensitivity of each deal’s cash flow to wildfire risk.
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 Amine Ouazad 1 Washington Place Rutgers Business School Newark, New 07102 E-Mail: aouazad@gmail.com Erkan Yönder 1455 de Maisonneuve Boulevard West Montreal, QC H3G 1M8 Canada E-Mail: erkan.yonder@concordia.ca

Community Engagement with Law Enforcement after High-profile Acts of Police Violence - Ang, Desmond; Bencsik, Panka; Bruhn, Jesse M; Derenoncourt, Ellora (National Bureau of Economic Research Working Paper Series, 2024)
We document a sharp rise in gunshots coupled with declining 911 call volume across thirteen major US cities in the aftermath of the murder of George Floyd. National survey data also indicate that victims of crime became less likely to report their victimization to law enforcement due to mistrust of police. Our results suggest that high-profile acts of police violence may erode community engagement with law enforcement and highlight the call-to-shot ratio as a natural measure of attitudes towards the police.
Author contact info: Desmond Ang Harvard Kennedy School 79 JFK Street Cambridge, MA 02138 Tel: 6174954505 E-Mail: desmond_ang@hks.harvard.edu Panka Bencsik 2301 Vanderbilt Place Nashville, TN 37235-1665 United States E-Mail: panka.bencsik@vanderbilt.edu Jesse Bruhn Department of Economics Brown University Providence, RI 02912 E-Mail: jesse_bruhn@brown.edu Ellora Derenoncourt Princeton University Industrial Relations Section Louis A. Simpson International Building Princeton, NJ 08544 E-Mail: ellora.derenoncourt@princeton.edu

Competing Narratives in Action: An Empirical Analysis of Model Adoption Dynamics - Angrisani, Marco; Samek, Anya; Serrano-Padial, Ricardo (National Bureau of Economic Research Working Paper Series, 2024)
We use a longitudinal dataset measuring beliefs and behaviors to study the dynamics of model – or narrative – adoption during the Covid-19 pandemic. We show that individuals switch beliefs about the effectiveness of preventive behaviors following changes in perceived risk. The adoption of narratives promoting preventive behaviors is procyclical and narrative switching is influenced by exposure to conflicting information. We explain the data using a heterogeneous-agent model of competing narratives in which agents exhibit motivated beliefs. Adopting misspecified narratives increases infection rates, highlighting the importance of promoting accurate beliefs to guide behavior in the presence of novel risks.
Author contact info: Marco Angrisani Center for Economic and Social Research and Department of Economics University of Southern California 635 Downey Way Los Angeles, CA 90089 E-Mail: angrisan@usc.edu Anya Samek University of California, San Diego Rady School of Management Wells Fargo Hall 9500 Gilman Drive #0553 La Jolla, CA 92093-0553 E-Mail: anyasamek@gmail.com Ricardo Serrano-Padial Drexel University School of Economics E-Mail: rspadial@gmail.com

Can VAT Cuts and Anti-Profiteering Measures Dampen the Effects of Food Price Inflation? - Benzarti, Youssef; Garriga, Santiago; Tortarolo, Darío (National Bureau of Economic Research Working Paper Series, 2024)
This paper estimates the effect of a temporary and large (21 p.p.) value-added tax (VAT) cut along with anti-profiteering measures on food necessities during a period of high inflation in Argentina. Using barcode-level data across more than 3,000 supermarkets, we find that (1) absent the anti-profiteering measures, the pass-through of the temporary VAT cut to prices was asymmetric: prices responded less to the VAT cut than its repeal resulting in prices that were higher than their pre-VAT cut levels; (2) imposing anti-profiteering measures, such as setting a ceiling on price increases, led to symmetric pass-through rates. Using a household welfare model, we show that the VAT cut resulted in progressive welfare effects and that the anti-profiteering measures were successful at dampening the regressive welfare effects of the asymmetric pass-through. However, we show that these policies benefited high-income households more because pass-through rates are more asymmetric in independent grocery stores, which is precisely where low-income households tend to shop the most.
Author contact info: Youssef Benzarti Department of Economics University of California Santa Barbara, CA 93106 E-Mail: youssef.benzarti@gmail.com Santiago Garriga CEFIP-IIE-FCE-UNLP Calle 6 No 777 La Plata, Argentina E-Mail: garrigasantiago@gmail.com Darío Tortarolo The World Bank 1818 H Street, NW Office MC3-361 Washington, DC 20433 Tel: +12028767193 E-Mail: dtortarolo@worldbank.org

Within-Firm Pay Inequality and Productivity - Wallskog, Melanie; Bloom, Nicholas; Ohlmacher, Scott W; Tello-Trillo, Cristina (National Bureau of Economic Research Working Paper Series, 2024)
Combining confidential Census worker and firm data, we find three key results. First, employees at more productive firms earn higher pay at all earnings levels. Second, this pay-productivity relationship strengthens with seniority, doubling from an elasticity of 0.07 for pay on productivity for the median-paid employee to 0.15 for the top-paid employee. Consequently, more productive firms have higher within-firm inequality. Our data suggests this is driven by their greater adoption of aggressive performance-pay bonus and management schemes. Finally, the magnitude of this pay-performance slope suggests rising productivity can explain 40% of the rise in within-firm inequality since 1980.
Author contact info: Melanie Wallskog Fuqua School of Business Duke University 100 Fuqua Dr. Durham, NC 27708 United States Tel: 8122721037 E-Mail: melanie.wallskog@duke.edu 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 Scott W. Ohlmacher 20th Street and C St. NW Federal Reserve Board of Governors M-2948 Washington, DC 20551 E-Mail: Scott.W.Ohlmacher@frb.gov Cristina Tello-Trillo U.S. Census Bureau 4600 Silver Hill Rd Washington, DC 20233-6300 E-Mail: cristina.j.tello.trillo@census.gov

Evaluating and Pricing Health Insurance in Lower-income Countries: A Field Experiment in India - Malani, Anup; Kinnan, Cynthia; Conti, Gabriella; Imai, Kosuke; Miller, Morgen; Swaminathan, Shailender; Voena, Alessandra; Woda, Bartosz (National Bureau of Economic Research Working Paper Series, 2024)
Universal health coverage is a widely shared goal across lower-income countries. We conducted a large-scale, 4-year trial that randomized premiums and subsidies for India’s first national, public hospital insurance program, RSBY. We find roughly 60% uptake even when consumers were charged premiums equal to the government’s cost for insurance. We also find substantial adverse selection into insurance at positive prices. Insurance enrollment increases insurance utilization, partly due to spillovers from use of insurance by neighbors. However, many enrollees attempted to use insurance but failed, suggesting that learning is critical to the success of public insurance. We find very few statistically significant impacts of insurance access or enrollment on health. Because there is substantial willingness-to-pay for insurance, and given how distortionary it is to raise revenue in the Indian context, we calculate that our sample population should be charged a premium for RSBY between INR 500-1000 rather than a zero premium to maximize the marginal value of public funds.
Author contact info: Anup Malani University of Chicago Law School 1111 E. 60th Street Chicago, IL 60637 Tel: 773/702-9602 E-Mail: amalani@uchicago.edu Cynthia Kinnan Department of Economics Tufts University 177 College Ave #620 Medford, MA 02155 E-Mail: cynthia.kinnan@tufts.edu Gabriella Conti Department of Economics University College London Drayton House 30 Gordon Street London WC1H 0AX United Kingdom Tel: Tel. +44(0)20 76794 1731 E-Mail: gabriella.conti@ucl.ac.uk Kosuke Imai Harvard University 1737 Cambridge Street Cambridge, MA 02138 E-Mail: imai@harvard.edu Morgen Miller University of Chicago Law School 1111 E. 60th St. Chicago, IL 60637 E-Mail: mmmiller@uchicago.edu Shailender Swaminathan Sai University SSPDL Building, Beta Block 4th Floor Navalur Old Mahabalipuram Rd Chennai India E-Mail: shailender.s@saiuniversity.edu.in Alessandra Voena Stanford University Landau Economics Building 579 Jane Stanford Way Stanford, CA 94305 Tel: 650/498-1096 E-Mail: avoena@stanford.edu Bartosz Woda University of Chicago Law School 1111 E. 60th St. Chicago, IL 60637 USA E-Mail: bartekwoda@gmail.com

Sticky Discount Rates - Fukui, Masao; Gormsen, Niels Joachim; Huber, Kilian (National Bureau of Economic Research Working Paper Series, 2024)
We show that firms' nominal required returns to capital (i.e., their discount rates) are sticky with respect to expected inflation. Such nominally sticky discount rates imply that increases in expected inflation directly lower firms' real discount rates and thereby raise real investment. We analyze the macroeconomic implications of sticky discount rates using a New Keynesian model. The model naturally generates investment-consumption comovement in response to household demand shocks and higher investment in response to government spending. Sticky discount rates imply that inflation has real effects, even absent other nominal rigidities, making them a distinct source of monetary non-neutrality. At the same time, sticky discount rates make the short-term interest rate less effective at stimulating investment. Optimal monetary policy focuses on inflation expectations and permanently lowers the long-run inflation target in response to expansionary shocks, even when shocks are temporary.
Author contact info: Masao Fukui Boston University 400 Bostov, MA 02215 E-Mail: fukuimasao@gmail.com Niels Joachim Gormsen Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 E-Mail: niels.gormsen@chicagobooth.edu Kilian Huber Booth School of Business University of Chicago 5807 S. Woodlawn Avenue Chicago, IL 60637 E-Mail: kilianhuber@uchicago.edu

Central Banking Post Crises - Kiley, Michael; Mishkin, Frederic S (National Bureau of Economic Research Working Paper Series, 2024)
The world economy has experienced the largest financial crisis in generations, a global pandemic, and a resurgence in inflation during the first quarter of the 21st century, yielding important insights for central banking. Price stability has important benefits and is the responsibility of a central bank. Achieving price stability in a complex and uncertain environment involves a credible commitment to a nominal anchor with a strong response to inflation and pre-emptive leaning against an overheating economy. Associated challenges imply that central bank communication and transparency are key elements of monetary policy strategies and tactics. Crises have emphasized the role of central banks in promoting financial stability, as financial stability is key to achieving price and economic stability, but this role increases risks to independence. Goals for central banks other than price and economic stability, complemented by financial stability, can make it more difficult for them to stabilize both inflation and economic activity.
Author contact info: Michael Kiley Federal Reserve Board 20th and Constitution Avenue, NW Washington, DC 20551 United States E-Mail: michaeltkiley@gmail.com Frederic S. Mishkin 8 Castle Rd Irvington, NY 10533 United States Tel: 19145916903 E-Mail: fsm3@columbia.edu

The Effect of Early Childhood Programs on Third-Grade Test Scores: Evidence from Transitional Kindergarten in Michigan - Berne, Jordan S; Jacob, Brian A; Musaddiq, Tareena; Shapiro, Anna; Weiland, Christina (National Bureau of Economic Research Working Paper Series, 2024)
Transitional Kindergarten (TK) is a relatively recent entrant into the U.S. early education landscape, combining features of public pre-K and regular kindergarten. We provide the first estimates of the impact of Michigan’s TK program on 3rd grade test scores. Using an augmented regression discontinuity design, we find that TK improves 3rd grade math scores by 0.29 standard deviations relative to a counterfactual that includes other formal and informal learning options. This impact is notably large relative to the prior pre-K literature. Estimates for English Language Arts (ELA) are imprecise but suggestive of a positive effect as well.
Author contact info: Jordan S. Berne University of Michigan Department of Economics 611 Tappan Ave Ann Arbor, MI 48109 E-Mail: jsberne@umich.edu Brian Jacob Gerald R. Ford School of Public Policy University of Michigan 735 South State Street Ann Arbor, MI 48109 Tel: 734-615-6994 Fax: NA E-Mail: bajacob@umich.edu Tareena Musaddiq 600 Alexander Park, Suite 100 Princeton, New 08543-2393 E-Mail: tmusaddiq@mathematica-mpr.com Anna Shapiro RAND Corporation 1200 S Hayes St. Arlington, VA 22202 E-Mail: ashapiro@rand.org Christina Weiland University of Michigan School of Education 610 E. University Ave Ann Arbor, MI 48104 USA E-Mail: weilandc@umich.edu

On the Feasibility, Costs, and Benefits of an Immediate Phasedown of Coal for U.S. Electricity Generation - Holland, Stephen P; Kotchen, Matthew; Mansur, Erin T; Yates, Andrew J (National Bureau of Economic Research Working Paper Series, 2024)
The phasedown of coal for electricity generation is considered vital to meeting global climate targets. Many countries have pledged to stop using coal, with some as early as 2030. While the United States has no target currently in place, several states do. In this paper, we examine the feasibility of phasing down U.S. coal-generated electricity given the existing fleet of power plants. In particular, we take consumption as given and evaluate how prioritizing natural gas generation over that of coal would change emissions and operating costs. To do this, we develop a replacement algorithm based on transmission regions and marginal cost comparisons. Using our preferred scenarios, we find that between 66 and 94 percent of coal generation could be replaced immediately, reducing electricity sector carbon dioxide (CO₂) emissions between 18 and 29 percent – equivalent to between 5 and 8 percent of total U.S. energy related emissions. The cost range is between $49 and $92 per ton of CO₂, where benefit-cost ratios are favorable in some scenarios considering local pollutant co-benefits alone. Despite the command-and-control nature of prioritizing natural gas generation, we find it relatively cost effective even in comparison to a Pigouvian tax. We examine sensitivity of the results to transmission regions, replacement cost conditions, natural gas pipeline capacity, and alternative fuel prices.
Author contact info: Stephen P. Holland Bryan School of Business and Economics University of North Carolina, Greensboro P.O. Box 26165 Greensboro, NC 27402-6165 Tel: 336/334-4925 Fax: 336/334-4089 E-Mail: sphollan@uncg.edu Matthew Kotchen School of the Environment, School of Management, and Department of Economics Yale University 195 Prospect Street New Haven, CT 06511 Tel: 203/432-9533 Fax: 203/436-9150 E-Mail: matthew.kotchen@yale.edu Erin T. Mansur Dartmouth College 100 Tuck Hall Hanover, NH 03755 Tel: (603) 646-2398 Fax: (603) 646-0995 E-Mail: erin.mansur@dartmouth.edu Andrew J. Yates Department of Economics and Curriculum for the Environment and Ecology University of North Carolina at Chapel Hill CB 3305 Chapel Hill, NC 27599 E-Mail: ajyates@email.unc.edu

On Recoding Ordered Treatments as Binary Indicators - Rose, Evan K; Shem-Tov, Yotam (National Bureau of Economic Research Working Paper Series, 2024)
Researchers using instrumental variables to investigate ordered treatments often recode treatment into an indicator for any exposure. We investigate this estimand under the assumption that the instruments shift compliers from no treatment to some but not from some treatment to more. We show that when there are extensive margin compliers only (EMCO) this estimand captures a weighted average of treatment effects that can be partially unbundled into each complier group's potential outcome means. We also establish an equivalence between EMCO and a two-factor selection model and apply our results to study treatment heterogeneity in the Oregon Health Insurance Experiment.
Author contact info: Evan K. Rose Department of Economics University of Chicago 1126 East 59th Street Chicago, IL 60637 E-Mail: ekrose@uchicago.edu Yotam Shem-Tov University of California, Los Angeles Department of Economics Box 951477 Los Angeles, CA 90095 E-Mail: shemtov@econ.ucla.edu

Driving Under the Influence of Allergies: The Effect of Seasonal Pollen on Traffic Fatalities - Danagoulian, Shooshan; Deza, Monica (National Bureau of Economic Research Working Paper Series, 2024)
Traffic fatalities are the leading cause of mortality in the United States despite being preventable. While several policies have been introduced to improve traffic safety and their effects have been well documented, the role of transitory health shocks or situational factors at explaining variations in fatal traffic accidents has been understudied. Exploring daily variation in city-specific pollen counts, this study finds novel evidence that traffic fatalities increase on days in which the local pollen count is particularly high. We find that the effects are present in accidents involving private vehicles and occur most frequently on the weekends, suggesting potentially the missed opportunity to avoid these fatalities. We do not find similar effects for fleet vehicles. These findings remain robust to alternative specifications and alternative definitions of high pollen count. Taken together, this study finds evidence that a prevalent and transitory exogenous health-shock, namely pollen allergies, increases traffic fatalities. Given our lack of evidence of avoidance, these effects are not mechanical and are likely driven by cognitive impairments that arise as a result of seasonal allergies.
Author contact info: Shooshan Danagoulian Department of Economics Wayne State University 656 W. Kirby St. FAB 2095 Detroit, MI 48202 Tel: 313-577-1078 E-Mail: fr4523@wayne.edu Monica Deza Department of Economics Syracuse University Maxwell School of Citizenship and Public Affairs 426 Eggers Hall Syracuse, NY 13244 E-Mail: mdeza@syr.edu

Air Pollution, Wildfire Smoke, and Worker Health - Cabral, Marika; Dillender, Marcus (National Bureau of Economic Research Working Paper Series, 2024)
Little is known about how pollution impacts worker health and workplace safety. This paper leverages high-frequency, plausibly exogenous variation in wildfire smoke to estimate the impact of pollution on workplace injuries. Our analysis draws on unique data we construct through linking information on smoke plumes and pollution to comprehensive administrative data on workers’ compensation injury claims from Texas. We first document that wildfire smoke increases ambient air pollution—with our estimates indicating that a day of smoke coverage is associated with an average increase in PM₂.₅ of 18.6%. We find that an additional day of smoke coverage leads to a 2.8% increase in workplace injury claims. Similar percent increases in workplace injuries are found across different types of injuries and workers. However, because of large variation in baseline injury risk, the incidence of these pollution-induced injuries is concentrated among workers in high-risk occupations, and supplemental analysis illustrates potential opportunities for improving the targeting of costly mitigation. Our estimates indicate that pollution—and wildfire smoke in particular—substantially harms worker health, even at pollution levels well below current and proposed regulatory standards. Overall, our findings suggest workers face unique risks from pollution and provide insights for policy aiming to address these risks.
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 Marcus Dillender Department of Medicine, Health, and Society Vanderbilt University 422 Buttrick Hall Nashville, TN 37235 E-Mail: marcus.o.dillender@vanderbilt.edu

A Practical Guide to Endogeneity Correction Using Copulas - Qian, Yi; Koschmann, Anthony; Xie, Hui (National Bureau of Economic Research Working Paper Series, 2024)
Causal inference is of central interests in many empirical applications yet often challenging because of the presence of endogenous regressors. The classical approach to the problem requires using instrumental variables that must satisfy the stringent condition of exclusion restriction. At the forefront of recent research, instrument-free copula methods have been increasingly used to handle endogenous regressors. This article aims to provide a practical guide for how to handle endogeneity using copulas. The authors give an overview of copula endogeneity correction and its usage in marketing research, discuss recent advances that broaden the understanding, applicability, and robustness of copula correction, and examine implementation challenges of copula correction such as construction of copula control functions and handling of higher-order terms of endogenous regressors. To facilitate the appropriate usage of copula correction, the authors detail a process of checking data requirements and identification assumptions to determine when and how to use copula correction methods, and illustrate its usage using empirical examples.
Author contact info: 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 Anthony Koschmann Eastern Michigan University 121 Hill Hall College of Business Ypsilanti, MI 48178 Tel: 775-843-6268 E-Mail: akoschma@emich.edu Hui Xie Department of Biostatistics School of Public Health University of Illinois at Chicago E-Mail: huixie@uic.edu

Sectoral Development Multipliers - Buera, Francisco J; Trachter, Nicholas (National Bureau of Economic Research Working Paper Series, 2024)
How should industrial policies be directed to reduce distortions and foster economic development? We study this question in a multi-sector model with technology adoption, where the production of goods and modern technologies features rich network structures. We provide simple formulas for the sectoral policy multipliers, and provide insights regarding the power of alternative policy instruments. We devise a simple procedure to estimate the model parameters and the distribution of technologies across sectors, which we apply to Indian data. We find that technology adoption greatly amplifies the multipliers' magnitudes, and it changes the ranking of priority sectors for industrial policy. Further, we find that adoption subsidies are the most cost-effective instrument for promoting economic development.
Author contact info: Francisco J. Buera Department of Economics Washington University in St. Louis One Brookings Drive St. Louis, MO 63130 Tel: 314/935-5648 E-Mail: fjbuera@wustl.edu Nicholas Trachter Federal Reserve Bank of Richmond 701 E Byrd Street Richmond, VA 23219 USA E-Mail: trachter@gmail.com

Toward an Understanding of the Returns to Cognitive Skills Across Cohorts - Hellerstein, Judith K; Luo, Sai; Urzúa, Sergio S (National Bureau of Economic Research Working Paper Series, 2024)
Recent research concludes that wage returns to cognitive skills have declined in the U.S. We reassess this finding. Using decomposition methods, we document the pivotal role played by dynamic shifts in the distributions of pre-labor market cognitive skills. Our findings show these shifts explain the declining estimated returns to cognitive skills, especially for white men. We discard measurement error as a potential driver. Although often overlooked, grappling with changing pre-labor market skill distributions is necessary for capturing the evolution of labor market returns to cognitive skills. This may prove especially important in the future given continuing changes in skill development in recent youth cohorts.
Author contact info: Judith K. Hellerstein Department of Economics Tydings Hall University of Maryland College Park, MD 20742 Tel: 301/405-3545 Fax: 301/405-3542 E-Mail: hellerst@econ.umd.edu Sai Luo Room 418, School of Economics Building Shanghai University of Finance and Economics 111 Wuchuan Road, Shanghai China E-Mail: luosaiecon@gmail.com Sergio S. Urzúa Department of Economics University of Maryland 3115J Tydings Hall College Park, MD 20742 Tel: 301-405-3266 E-Mail: urzua@econ.umd.edu

The Market and Climate Implications of U.S. LNG Exports - Stock, James H; Zaragoza-Watkins, Matthew (National Bureau of Economic Research Working Paper Series, 2024)
From 2015 to 2023, the United States transformed from a net importer of natural gas to the world's largest liquified natural gas (LNG) exporter. We find that this surge in LNG exports has reconnected U.S. gas prices to world market prices, after a hiatus of “shut-in” fracked gas. We estimate that the domestic gas price effect of this recoupling is comparable to a $30/ton carbon tax. For coal prices, which are coupled to gas through competition in the power sector, this effect is comparable to a $20/ton carbon tax. Using the NREL ReEDS model, we estimate that this recoupling reduces U.S. 2030 power sector CO2 emissions by roughly 145 million metric tons. These domestic estimates contribute to estimating the overall climate impact of LNG exports.
Author contact info: James H. Stock Department of Economics Harvard University Littauer Center M26 Cambridge, MA 02138 Tel: 617/496-0502 Fax: 617/495-7730 E-Mail: James_Stock@harvard.edu Matthew Zaragoza-Watkins 3215 Gallagher Hall Graduate School of Management University of California, Davis 1 Shields Avenue Davis, CA 95616 E-Mail: mdzwatkins@ucdavis.edu

Losing Medicaid and Crime - Deza, Monica; Lu, Thanh; Maclean, Johanna Catherine; Ortega, Alberto (National Bureau of Economic Research Working Paper Series, 2024)
We study the impact of losing health insurance on criminal activity by leveraging one of the most substantial Medicaid disenrollments in U.S. history, which occurred in Tennessee in 2005 and lead to 190,000 non–elderly and non–disabled adults without dependents unexpectedly losing coverage. Using police agency–level data and a difference–in–differences approach, we find that this mass insurance loss increased total crime rates with particularly strong effects for non–violent crime. We test for several potential mechanisms and find that our results may be explained by economic stability and access to healthcare.
Author contact info: Monica Deza Department of Economics Syracuse University Maxwell School of Citizenship and Public Affairs 426 Eggers Hall Syracuse, NY 13244 E-Mail: mdeza@syr.edu Thanh Lu Health Economics Program Center for Public Health Methods RTI International 3040 East Cornwallis Road Research Triangle Park, NC 27709 E-Mail: tlu@rti.org Johanna Catherine Maclean Schar School of Policy and Government George Mason University Mason Square Van Metre Hall 3351 Fairfax Drive Arlington, VA 22201 E-Mail: jmaclea@gmu.edu Alberto Ortega O'Neill School of Public and Environmental Affairs Indiana University 1315 E 10 St Bloomington, IN 47401 E-Mail: alorte@iu.edu

Fallow Lengths and the Structure of Property Rights - Le Rossignol, Etienne; Lowes, Sara; Montero, Eduardo (National Bureau of Economic Research Working Paper Series, 2024)
We study a fundamental institution in many societies: the structure of property rights over land. Across societies, communal land rights have been more common than private land rights. We test the hypothesis that longer fallow requirements – the time needed to leave land uncultivated to restore fertility – led to a higher prevalence of communal property rights. Longer fallow requirements generate higher protection costs and therefore make communal rights more beneficial. We construct an ecological measure of the optimal fallow length for the most suitable staple crop across grid cells based on soil type, temperature, and climate. We find that places where land needs to be fallowed for longer periods are more likely to have communal property rights both historically and presently. We then examine the implications for efforts to title land. We find that World Bank land titling interventions are less effective in places with longer fallow requirements, suggesting a mismatch between development policy and underlying institutions. Finally, we examine implications for income inequality and conflict. We find that longer fallow requirements are associated with less inequality, less conflict, and greater resilience to negative shocks. Our results highlight the origins of property rights structures and how communal property rights interact with development policies.
Author contact info: Etienne Le Rossignol University of Namur PARIS France E-Mail: etienne.lerossignol@unamur.be Sara Lowes Department of Economics University of California at San Diego 9500 Gilman Drive La Jolla, CA 92093 E-Mail: slowes@ucsd.edu Eduardo Montero Harris School of Public Policy University of Chicago 1307 E 60th St Chicago, IL 60637 E-Mail: emontero@uchicago.edu

Corporate Debt, Boom-Bust Cycles, and Financial Crises - Ivashina, Victoria; Kalemli-Özcan, Ṣebnem; Laeven, Luc; Müller, Karsten (National Bureau of Economic Research Working Paper Series, 2024)
Using a new dataset on sectoral credit exposures covering financial and non-financial sectors in 115 economies over the period 1940–2014, we document the following evidence that corporate debt plays a key role in explaining boom-bust cycles, financial crises, and slow macroeconomic recoveries: (i) corporate debt accounts for two thirds of the aggregate credit expansion before crises and three quarters of total nonperforming loans during the bust; (ii) expansions in corporate debt predict crises similarly to household debt; (iii) a measure of imbalance in credit growth flowing disproportionately to some sectors, such as construction and non-bank financial intermediation, is associated with crises; and (iv) the recovery from financial crises is slower after a boom in corporate debt, especially when backed by procyclical collateral values, due to higher nonperforming loans.
Author contact info: Victoria Ivashina Harvard Business School Baker Library 233 Soldiers Field Boston, MA 02163 Tel: 617/495-8018 Fax: 617/495-6198 E-Mail: vivashina@hbs.edu Ṣebnem Kalemli-Özcan Department of Economics University of Maryland Tydings Hall 4118D College Park, MD 20742-7211 Tel: 301/405-3266 E-Mail: kalemli@econ.umd.edu Luc Laeven European Central Bank Research Department Sonnemannstrasse 20 Frankfurt am Main GERMANY E-Mail: Luc.Laeven@ecb.europa.eu Karsten Müller National University of Singapore 15 Kent Ridge Dr Singapore, 119245 E-Mail: kmueller@nus.edu.sg

Health Shocks under Hospital Capacity Constraint: Evidence from Air Pollution in Sao Paulo, Brazil - Guidetti, Bruna; Pereda, Paula; Severnini, Edson R (National Bureau of Economic Research Working Paper Series, 2024)
How responsive to health shocks are healthcare systems in the developing world? Developing countries are known to have both lower levels of hospital infrastructure and serious health shocks driven by air pollution. These shocks are transitory and may be marginal relative to other health demands, so healthcare systems might be able to manage them. On the other hand, with limited capacity hospitals may not be able to respond rapidly, possibly exacerbating health damages from pollution. In this study, we examine the consequences of health shocks induced by air pollution in a megacity in the developing world: Sao Paulo, Brazil. Using daily data on pediatric hospitalizations from 2015-2017, an instrumental variable approach based on wind speed, and a plausibly exogenous measure of hospital capacity constraints, we show that such transitory health shocks can disrupt healthcare services due to limited capacity, including for conditions seemingly unrelated to air pollution. Also, we cannot rule out severe deterioration of health outcomes.
Author contact info: Bruna Guidetti Department of Economics University of Michigan Ann Arbor, MI 48104 Tel: 7348829097 E-Mail: guidetti@umich.edu Paula Pereda Department of Economics University of Sao Paulo Office 218, 2th floor (FEA 2) Av Prof Luciano Gualberto, 908 Cid. Universitária São Paulo - Brazil E-Mail: pereda@usp.br 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

The Causal Effect of Parents’ Education on Children’s Earnings - Lee, Sang Yoon (Tim); Roys, Nicolas A; Seshadri, Ananth (National Bureau of Economic Research Working Paper Series, 2024)
We present a model of endogenous schooling and earnings to isolate the causal effect of parents’ education on children’s education and earnings outcomes. The model suggests that parents’ education is positively related to children’s earnings, but its relationship with children’s education is ambiguous. Identification is achieved by comparing the earnings of children with the same length of schooling, whose parents have different lengths of schooling. The model also features heterogeneous preferences for schooling, and is estimated using HRS data. The empirically observed positive OLS coefficient obtained by regressing children’s schooling on parents’ schooling is mainly accounted for by the correlation between parents’ schooling and children’s unobserved preferences for schooling. This is countered by a negative, structural relationship between parents’ and children’s schooling choices, resulting in an IV coefficient close to zero when exogenously increasing parents’ schooling. Nonetheless, an exogenous one-year increase in parents’ schooling increases children’s lifetime earnings by 1.2 percent on average.
Author contact info: Sang Yoon (Tim) Lee United Kingdom E-Mail: sylee.tim@gmail.com Nicolas A. Roys Department of Economics Royal Holloway University of London Egham, Surrey TW20 OEX United Kingdom E-Mail: nicolasroys@gmail.com Ananth Seshadri Department of Economics University of Wisconsin-Madison 1180 Observatory Drive Madison, WI 53706 Tel: 608/262-6196 E-Mail: aseshadr@ssc.wisc.edu

Non-Binary Gender Economics - Coffman, Katherine B; Coffman, Lucas C; Ericson, Keith Marzilli (National Bureau of Economic Research Working Paper Series, 2024)
Economics research has largely overlooked non-binary individuals. We aim to jump-start the literature by providing data on several economically-important beliefs and preferences. Among many results, non-binary individuals report more gender-based discrimination and express different career and life aspirations, including less desire for children. Anti-non-binary sentiment is stronger than anti-LGBT sentiment, and strongest among men. Non-binary respondents report lower assertiveness than men and women, and their social preferences are similar to men’s and less prosocial than women’s, with age an important moderator. Elicited beliefs reveal inaccurate stereotypes as people often mistake the direction of group differences or exaggerate their size.
Author contact info: Katherine B. Coffman 445 Baker Library Harvard Business School Boston, MA 02163 E-Mail: kcoffman@hbs.edu Lucas C. Coffman Department of Economics Boston College Chestnut Hill, MA 02467 E-Mail: lucas.coffman@bc.edu Keith Marzilli Ericson Boston University Questrom School of Business 595 Commonwealth Avenue Boston, MA 02215 Tel: 617/353-4553 E-Mail: kericson@bu.edu

Are Supply Networks Efficiently Resilient? - Capponi, Agostino; Du, Chuan; Stiglitz, Joseph E (National Bureau of Economic Research Working Paper Series, 2024)
We show that supply networks are inefficiently, and insufficiently, resilient. Upstream firms can expand their production capacity to hedge against supply and demand shocks. But the social benefits of such investments are not internalized due to market power and market incompleteness. Upstream firms under-invest in capacity and resilience, passing-on the costs to down-stream firms, and drive trade excessively towards the spot markets. There is a wedge between the market solution and a constrained optimal benchmark, which persists even without rare and large shocks. Policies designed to incentivize capacity investment, reduce reliance on spot markets, and enhance competition ameliorate the externality.
Author contact info: Agostino Capponi Mudd Hall 535-G Columbia University 500 W 120th St. New York, NY 10027 E-Mail: ac3827@columbia.edu Chuan Du 1801 K Street NW Board of Governors of the Federal Reserve System Washington, D.C. 20006 E-Mail: chuan.du@aya.yale.edu Joseph E. Stiglitz 5th Floor, Kravis Hall Columbia University 665 West 130th St. New York, NY 10027 Tel: (929) 274-2912 Fax: (929) 349-5197 E-Mail: jes322@columbia.edu

Movies - Michalopoulos, Stelios; Rauh, Christopher (National Bureau of Economic Research Working Paper Series, 2024)
Why are certain movies more successful in some markets than others? Are the entertainment products we consume reflective of our core values and beliefs? These questions drive our investigation into the relationship between a society’s oral tradition and the financial success of films. We combine a unique catalog of local tales, myths, and legends around the world with data on international movie screenings and revenues. First, we quantify the similarity between movies’ plots and traditional motifs employing machine learning techniques. Comparing the same movie across different markets, we establish that films that resonate more with local folklore systematically accrue higher revenue and are more likely to be screened. Second, we document analogous patterns within the US. Google Trends data reveal a pronounced interest in markets where ancestral narratives align more closely with a movie’s theme. Third, we delve into the explicit values transmitted by films, concentrating on the depiction of risk and gender roles. Films that promote risk-taking sell more in entrepreneurial societies today, rooted in traditions where characters pursue dangerous tasks successfully. Films portraying women in stereotypical roles continue to find a robust audience in societies with similar gender stereotypes in their folklore and where women today continue being relegated to subordinate positions. These findings underscore the enduring influence of traditional storytelling on entertainment patterns in the 21st century, highlighting a profound connection between movie consumption and deeply ingrained cultural narratives and values.
Author contact info: Stelios Michalopoulos Brown University Department of Economics 64 Waterman Street Providence, RI 02912 Tel: 401/863-2506 Fax: 401/863-1970 E-Mail: smichalo@brown.edu Christopher Rauh University of Cambridge Cambridge United Kingdom E-Mail: cr542@cam.ac.uk

Navigating by Falling Stars: Monetary Policy with Fiscally Driven Natural Rates - Campos, Rodolfo G; Fernández-Villaverde, Jesús; Nuño, Galo; Paz, Peter (National Bureau of Economic Research Working Paper Series, 2024)
We study a new type of monetary-fiscal interaction in a heterogeneous-agent New Keynesian model with a fiscal block. Due to household heterogeneity, the stock of public debt affects the natural interest rate, forcing the central bank to adapt its monetary policy rule to the fiscal stance to guarantee that inflation remains at its target. There is, however, a minimum level of debt below which the steady-state inflation deviates from its target due to the zero lower bound on nominal rates. We analyze the response to a debt-financed fiscal expansion and quantify the impact of different timings in the adaptation of the monetary policy rule, as well as the performance of alternative monetary policy rules that do not require an assessment of the natural rates. We validate our findings with a series of empirical estimates.
Author contact info: Rodolfo G. Campos E-Mail: rodolfo.campos@bde.es Jesús Fernández-Villaverde Department of Economics University of Pennsylvania The Ronald O. Perelman Center for Political Science and Economics 133 South 36th Street Suite 150 Philadelphia, PA 19104 E-Mail: jesusfv@econ.upenn.edu Galo Nuño Bank of Spain and BIS Spain E-Mail: galonunobarrau@gmail.com Peter Paz E-Mail: peter.paz@bde.es

Weathering the Storm: Supply Chains and Climate Risk - Castro-Vincenzi, Juanma; Khanna, Gaurav; Morales, Nicolas; Pandalai-Nayar, Nitya (National Bureau of Economic Research Working Paper Series, 2024)
We characterize how firms structure supply chains under climate risk. Using new data on the universe of firm-to-firm transactions from an Indian state, we show that firms diversify sourcing locations, and suppliers exposed to climate risk charge lower prices. Our event-study analysis finds that firms with suppliers in flood-affected districts experience a decline in inputs lasting two months, followed by a return to original suppliers. We develop a general equilibrium model of firm input sourcing under climate risk. Firms diversify identical inputs from suppliers across space, trading off the probability of a climate shock against higher input costs. We quantify the model using data on 271 Indian districts, showing real wages vary across space and are correlated with geography and productivity. Wages are inversely correlated with sourcing risk, giving rise to a cost minimization-resilience tradeoff. Supply chain diversification unambiguously reduces real wage volatility, but ambiguously affects their levels, as diversification may come with higher input costs. While diversification helps mitigate climate risk, it exacerbates the distributional effects of climate change by reducing wages in regions prone to more frequent shocks.
Author contact info: Juanma Castro-Vincenzi Department of Economics Harvard University 1805 Cambridge Street Littauer Center 211 Cambridge, Mass 02138 E-Mail: jcastrovincenzi@fas.harvard.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 Nicolas Morales Federal Reserve Bank of Richmond 701 E Byrd St Richmond, VA 23219 E-Mail: nicolas.morales.uy@gmail.com Nitya Pandalai-Nayar Department of Economics University of Texas at Austin 3.142 BRB, 2225 Speedway Austin, TX 78713 Tel: 503/616-1616 E-Mail: npnayar@utexas.edu

The Feasibility of Using Bayh-Dole March-In Rights to Lower Drug Prices: An Update - Ouellette, Lisa Larrimore; Sampat, Bhaven N (National Bureau of Economic Research Working Paper Series, 2024)
In December 2023, the Biden-Harris Administration released a proposed framework for exercising government “march-in” rights on high-priced taxpayer-funded drugs. While both proponents and critics of the new rules view them as having broad scope, march-in rights can be exercised only on patents that result from federally funded research, and they can enable generic entry only if all patents on a drug were public-sector patents. In this paper, we examine the feasibility of using march-in rights to lower pharmaceutical prices by examining patents on drugs approved by the U.S. Food and Drug Administration (FDA) from 1985 to 2022. Our primary analyses focus on the 883 new molecular entities with at least one patent listed in the FDA’s Orange Book since 1985. While 9 percent of these drugs have a public-sector patent, only 2.5 percent have only public-sector patents. While the new march-in rules could be a tool to lower prices for a few drugs, their overall impact on prices or expenditures will likely be limited. In addition to the updated analyses, we provide links to the data used in the analyses.
Author contact info: Lisa Larrimore Ouellette Stanford Law School 559 Nathan Abbott Way Stanford, CA 94305 Tel: 650-721-2928 E-Mail: ouellette@law.stanford.edu Bhaven N. Sampat Arizona State University Consortium for Science, Policy, and Outcomes 1800 I Street NW, Suite 300 Washington, DC 20006 E-Mail: bhaven.sampat@asu.edu

Equilibrium Responses to Price Controls: A Supply-Chain Approach - Mulligan, Casey B (National Bureau of Economic Research Working Paper Series, 2024)
Prices are regulated in many markets, ranging from healthcare to labor to telecommunications. This paper reinterprets the variables in the basic supply-demand model so that both product-definition and quantity are equilibrium outcomes. Specifically, compliance with price controls is achieved by altering the production-factor mix along the supply chain. This approach yields surprising insights into the incidence of price regulations and their effects on the amount of trade. Furthermore, it reveals how many of the short-run effects of price controls can be opposite of what they are in the long run. The supply-chain framework also easily represents business-to-business price controls, which have been more prevalent in policy practice than price-theoretic analysis.
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

Product Liability Litigation and Innovation: Evidence from Medical Devices - Galasso, Alberto; Luo, Hong (National Bureau of Economic Research Working Paper Series, 2024)
We examine the relationship between product liability litigation and innovation by systematically combining data on product liability lawsuits with data on new product introductions in a panel dataset of leading medical device firms. We first document a decline in the propensity to introduce new products for both defendant firms and other firms operating in litigated device categories. This decline, however, does not spill over to other device categories, and we also do not find any slowing down in firms' patenting activities. We then show that changes in two features of the regulatory environment---(1) the availability of public information regarding adverse events and (2) federal law taking precedence over state law---substantially affect the likelihood of litigation. These changes also provide quasi-exogenous variations in litigation that confirm our baseline findings. Finally, we show that litigation appears to induce firms to develop safer devices. Overall, our findings suggest that product liability litigation affects the rate and direction of technological progress, and that safety regulation and liability regimes interact with one another in significant ways.
Author contact info: Alberto Galasso Rotman School of Management University of Toronto 105 St. George Street Toronto, ON M5S 3E6 Tel: 905/569-4740 Fax: 905/569-4397 E-Mail: alberto.galasso@rotman.utoronto.ca Hong Luo Harvard University Morgan Hall 241 Soldiers Field Road Boston, MA 02163 E-Mail: hluo@hbs.edu

Behavioral Sticky Prices - Rebelo, Sergio; Santana, Miguel; Teles, Pedro (National Bureau of Economic Research Working Paper Series, 2024)
We study a model where households make decisions according to a dual-process framework widely used in cognitive psychology. System 1 uses effortless heuristics but is susceptible to biases and errors. System 2 uses mental effort to make more accurate decisions. Through their pricing behavior, monopolistic producers can influence whether households deploy Systems 1 or 2. The strategic use of this influence creates a new source of price inertia and provides a natural explanation for the “rockets and feathers” phenomenon: prices rise quickly when costs increase but fall slowly when costs fall. Our model implies that price stability is not optimal.
Author contact info: Sergio Rebelo Northwestern University Kellogg School of Management Department of Finance Leverone Hall Evanston, IL 60208-2001 Tel: 847/467-2329 Fax: 847/491-5719 E-Mail: s-rebelo@northwestern.edu Miguel Santana E-Mail: msantana@u.northwestern.edu Pedro Teles Banco de Portugal R. Francisco Ribeiro 2 1150 Lisboa Portugal E-Mail: pteles@ucp.pt

The Puzzling Persistence of Financial Crises - Calomiris, Charles W; Jaremski, Matthew S (National Bureau of Economic Research Working Paper Series, 2024)
The high social costs of financial crises imply that economists, policymakers, businesses, and households have a tremendous incentive to understand, and try to prevent them. And yet, so far we have failed to learn how to avoid them. In this article, we take a novel approach to studying financial crises. We first build ten case studies of financial crises that stretch over two millennia, and then consider their salient points of differences and commonalities. We see this as the beginning of developing a useful taxonomy of crises – an understanding of the most important factors that reappear across the many examples, which also allows (as in any taxonomy) some examples to be more similar to each other than others. From the perspective of our review of the ten crises, we consider the question of why it has proven so difficult to learn from past crises to avoid future ones.
Author contact info: Charles W. Calomiris Columbia Business School Kravis 1101 665 W 130th St. New York, NY 10027 Tel: 212/854-8748 Fax: 212/316-9219 E-Mail: cc374@columbia.edu Matthew S. Jaremski Utah State University Department of Economics and Finance 3565 Old Main Hill Logan, UT 84322 E-Mail: matthew.jaremski@usu.edu

Persistent Effects of Social Program Participation on the Third Generation - Dahl, Gordon B; Gielen, Anne (National Bureau of Economic Research Working Paper Series, 2024)
Can participation in safety net programs have long-lasting negative effects across multiple generations? Prior work shows a 1993 Dutch disability insurance reform which tightened requirements and lowered benefits for participants resulted in better outcomes for their children. We study the third generation, finding that grandchildren of individuals whose DI eligibility and benefits were reduced are less likely to be born premature, have low birthweight, or experience complicated deliveries. They also have better health and schooling outcomes during early childhood. These early-life improvements are consequential, as they have been linked to better health, education, and labor market outcomes in adulthood.
Author contact info: Gordon B. Dahl Department of Economics University of California, San Diego 9500 Gilman Drive #0508 La Jolla, CA 92093-0508 Tel: 858-822-0644 E-Mail: gdahl@ucsd.edu Anne Gielen Erasmus School of Economics Erasmus University Rotterdam PO Box 1738 3000 DR Rotterdam The Netherlands Tel: +31 10 4088741 E-Mail: gielen@ese.eur.nl

A Housing Portfolio Channel of QE Transmission - Boddin, Dominik; te Kaat, Daniel Marcel; Ma, Chang; Rebucci, Alessandro (National Bureau of Economic Research Working Paper Series, 2024)
We document a housing portfolio channel of quantitative easing (QE) transmission exploiting variation in German household data in a difference-in-differences setting around QE adoption in 2015. We find that QE encourages households with larger initial bond positions to rebalance more toward second homes. Rebalancing is especially pronounced among higher-income and church-affiliated households with stronger tax incentives to purchase and rent out properties. We also show that, in regions more exposed to this channel, house prices increase more than rents, and sale listings decrease more than rental ones, suggesting that the rental supply may increase in response to QE.
Author contact info: Dominik Boddin Wilhelm-Epstein-Straße 14 Frankfurt am Main 60431 Germany E-Mail: dominik.boddin@bundesbank.de Daniel Marcel te Kaat University of Groningen Nettelbosje 2 Groningen 9747 AE Netherlands E-Mail: d.m.te.kaat@rug.nl Chang Ma International School of Finance Fudan University Shanghai, China 200433 E-Mail: machang.china@gmail.com Alessandro Rebucci Johns Hopkins Carey Business School 100 International Drive Baltimore, MD 21202 Tel: 202/251-2106 E-Mail: arebucci@jhu.edu

Portfolio Flows and Household Portfolios - te Kaat, Daniel Marcel; Ma, Chang; Rebucci, Alessandro (National Bureau of Economic Research Working Paper Series, 2024)
In this paper, we show that cross-border portfolio flows around the peak of the European Crisis induced households to rebalance their portfolios toward housing. Estimating difference-in-differences regressions around Draghi's “Whatever It Take” speech in July 2012 with household data from the ECB's Household Finance and Consumption Survey, we find that portfolio inflows induce households with larger ex-ante bond and equity shares to rebalance more strongly toward housing. The effect is not driven by higher pre-treatment access to credit or higher credit growth during the treatment period and is stronger for wealthier and less risk-averse households.
Author contact info: Daniel Marcel te Kaat University of Groningen Nettelbosje 2 Groningen 9747 AE Netherlands E-Mail: d.m.te.kaat@rug.nl Chang Ma International School of Finance Fudan University Shanghai, China 200433 E-Mail: machang.china@gmail.com Alessandro Rebucci Johns Hopkins Carey Business School 100 International Drive Baltimore, MD 21202 Tel: 202/251-2106 E-Mail: arebucci@jhu.edu

Housing Speculation, GSEs, and Credit Market Spillovers - Amornsiripanitch, Natee; Strahan, Philip E; Zhang, Song; Zheng, Xiang (National Bureau of Economic Research Working Paper Series, 2024)
In 2021, the U.S. Treasury reduced Government Sponsored Enterprises (GSEs) exposure to speculative mortgages. As a result, GSE purchases fell by about 20 percentage points. The policy reduced credit to speculative investors in housing, but increased credit to unaffected parts of the conforming-mortgage market. Banks responded by reallocating provision of speculative mortgage credit across their local markets, which in turn affected their provision of small business credit. These adjustments are most pronounced where banks do not own branches. The results suggest that banks manage credit provision not only in a macro sense – the focus of most research – but also market-by-market.
Author contact info: Natee Amornsiripanitch 10 N Independence Mall W Philadelphia, PA 19106 United States Tel: 4047919992 E-Mail: natee.amornsiripanitch@phil.frb.org Philip Strahan Carroll School of Management 324B Fulton Hall Boston College Chestnut Hill, MA 02467 Tel: 617/552-6430 E-Mail: philip.strahan@bc.edu Song Zhang University of Delaware Lerner College of Business and Economics 315 Purnell Hall Newark, DE 19716 E-Mail: songz@udel.edu Xiang Zheng 2100 Hillside Road Unit 1041 Storrs, CT 06269 Tel: 8574004313 E-Mail: xiang.zheng@uconn.edu

Do People Report Happiness Accurately? - Andreoni, James; Bernheim, B. Douglas; Jia, Tingyan (National Bureau of Economic Research Working Paper Series, 2024)
Validation of happiness measures is inherently challenging because subjective sensations are unobserved. We introduce a novel validation method: subjects report how happy they would feel (or did feel) after some specified event, as well as how they would respond (or would have responded) to a survey question about their happiness after the same event. The difference between these two responses measures “self-reported misreporting.” We demonstrate that self-reported misreporting varies across events and is substantial for certain types of events. These findings imply that caution is warranted when interpreting differences in self-reported well-being across contexts.
Author contact info: James Andreoni Department of Economics University of California, San Diego 9500 Gilman Drive La Jolla, CA 92093-0508 Tel: 858/534-3832 Fax: 858/534-7040 E-Mail: andreoni@ucsd.edu B. Douglas Bernheim Department of Economics Stanford University Stanford, CA 94305-6072 Tel: 650/725-8732 Fax: 650/725-5702 E-Mail: bernheim@stanford.edu Tingyan Jia E-Mail: jiatingyan2011@gmail.com

A Supply Curve for Forest-Based CO₂ Removal - Franklin, Sergio L, Jr.; Pindyck, Robert S (National Bureau of Economic Research Working Paper Series, 2024)
Forestation is viewed as an important means of removing CO₂ from the atmosphere and thereby reducing net CO₂ emissions. But how much CO₂ can be removed, and at what cost? Focusing on forested and forestable areas in South America, and using spatially disaggregated data, we estimate a supply curve for forest-based atmospheric CO₂ removal. The supply curve traces out the marginal cost of removing a metric ton of CO₂ as a function of total annual CO₂ removal. Each point on the curve corresponds to a specific location, and accounts for land opportunity costs as well as costs of tree planting and maintenance. We show that over a billion tons of CO₂ can be removed annually via forestation at a cost below $45 per ton, and about 2.5 billion tons can be removed at a cost below $90 per ton. The supply curve applies to only South America, but with sufficient data could be extended to the entire world.
Author contact info: Sergio L. Franklin Jr. Superintendencia de Seguros Privados Av. Presidente Vargas 730 Rio de Janeiro 20071-900 Brasil E-Mail: sergio.franklin@insead.edu Robert S. Pindyck MIT Sloan School of Management 100 Main Street, E62-522 Cambridge, MA 02142 Tel: 617/253-6641 Fax: 617/258-6855 E-Mail: RPINDYCK@MIT.EDU

New Area- and Population-based Geographic Crosswalks for U.S. Counties and Congressional Districts, 1790–2020 - Ferrara, Andreas; Testa, Patrick A; Zhou, Liyang (National Bureau of Economic Research Working Paper Series, 2024)
In applied historical research, geographic units often differ in level of aggregation across datasets. One solution is to use crosswalks that associate factors located within one geographic unit to another, based on their relative areas. We develop an alternative approach based on relative populations, which accounts for heterogeneities in urbanization within counties. We construct population-based crosswalks for 1790 through 2020, which map county-level data across U.S. censuses, as well as from counties to congressional districts. Using official census data for congressional districts, we show that population-based weights outperform area-based ones in terms of similarity to official data.
Author contact info: Andreas Ferrara Department of Economics University of Pittsburgh 4906 Wesley W. Posvar Hall Pittsburgh, PA 15260 E-Mail: a.ferrara@pitt.edu Patrick A. Testa Department of Economics 6823 St Charles Ave Tilton Hall New Orleans, LA 70118 United States E-Mail: ptesta@tulane.edu Liyang Zhou Department of Economics University of Pittsburgh 4514 Wesley W. Posvar Hall Pittsburgh, PA 15260 E-Mail: liz113@pitt.edu

Decarbonizing Aviation: Cash-for-Clunkers in the Airline Industry - Brueckner, Jan K; Kahn, Matthew E; Nickelsburg, Jerry (National Bureau of Economic Research Working Paper Series, 2024)
The durability of the transportation capital stock slows down the pace of decarbonization since newer vintages feature cutting-edge technology. If older vintages were to be retired sooner, the social cost of travel would decline. This paper analyzes and explores the viability of a potential cash-for-clunkers program for the airline industry, which would help to hasten decarbonization of US aviation. Our estimation and calculations show that airlines can be induced to scrap rather than sell older planes upon retirement with a payment that is less than the forgone carbon damage, yielding net social benefits.
Author contact info: Jan Brueckner Department of Economics UCI 3151 Social Science Plaza Irvine, CA 92697 E-Mail: jkbrueck@uci.edu 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 Jerry Nickelsburg University of California, Los Angeles Anderson School of Management Los Angeles, CA 90095 E-Mail: jerry.nickelsburg@anderson.ucla.edu

The Multigenerational Impact of Children and Childcare Policies - Karademir, Sencer; Laliberté, Jean-William P; Staubli, Stefan (National Bureau of Economic Research Working Paper Series, 2024)
This paper examines the multigenerational impact of children and whether the public provision of formal childcare lessens the earnings and employment impacts of children. We find that the arrival of a firstborn reduces employment and earnings of mothers and employment of grandmothers. Studying a universal childcare program in Quebec, we find formal childcare increases the employment rates of mothers, as well as that of grandmothers to a lesser extent. Examining heterogeneity of the program's impact across Census Divisions, we find a negative correlation between the positive effects on mothers' employment and the pre-policy supply of informal childcare by grandmothers.
Author contact info: Sencer Karademir Department of Economics University of Calgary 2500 University Drive NW Calgary, Alberta, T2N 1N4 Canada E-Mail: sencer.karademir@ucalgary.ca Jean-William P. Laliberté Department of Economics University of Calgary 2500 University Drive NW Calgary, Alberta, T2N 1N4 CANADA E-Mail: jeanwilliam.lalibert@ucalgary.ca Stefan Staubli Department of Economics University of Calgary 2500 University Drive NW Calgary, AB T2N 1N4 Tel: 403/220-6180 E-Mail: sstaubli@ucalgary.ca

Inequality Within Countries is Falling: Underreporting-Robust Estimates of World Poverty, Inequality and the Global Distribution of Income - Pinkovskiy, Maxim; Sala-i-Martin, Xavier; Chatterji-Len, Kasey; Nober, William H (National Bureau of Economic Research Working Paper Series, 2024)
Household surveys suffer from persistent and growing underreporting. We propose a novel procedure to adjust reported survey incomes for underreporting by estimating a model of misreporting whose main parameter of interest is the elasticity of regional national accounts income to regional survey income, which is closely related to the elasticity of underreporting with respect to income. We find this elasticity to be substantial but roughly constant over time, implying a large but relatively constant correction to survey-derived inequality estimates. Underreporting of income by the bottom 50% of the world income distribution has become particularly important in recent decades. We reconfirm the findings of the literature that global poverty and inequality have declined dramatically between 1980 and 2019. Finally, we find that within-country inequality is falling on average, and has been largely constant since the 1990s.
Author contact info: Maxim Pinkovskiy Federal Reserve Bank of New York 33 Liberty Street New York, NY 10045 E-Mail: maxim.pinkovskiy@ny.frb.org Xavier Sala-i-Martin Department of Economics Columbia University 420 West 118th Street, 1005 New York, NY 10027 Tel: 212/854-7055 Fax: 212/854-8059 E-Mail: xs23@columbia.edu Kasey Chatterji-Len E-Mail: kasey.clen@gmail.com William H. Nober Columbia University 420 118th Street New York, NY 10027 E-Mail: whn2105@columbia.edu

Globalization and Profitability of US Firms: The Role of Intangibles - Chintha, Bullipe R; Jagannathan, Ravi; Sridhar, Sri S (National Bureau of Economic Research Working Paper Series, 2024)
China's admission into the WTO in 2001 heralded a new era of globalization, increasing both import competition in domestic markets and foreign opportunities for US firms. In the aggregate, the average annual profitability of US public firms during the post globalization period (2003-2019) increased by 11.5% of the corresponding pre-globalization period (1984-2002) profitability. This increase in overall aggregate profitability was primarily driven by foreign profitability increasing by 47.4% for firms in the S&P 500 index, which are larger and have more intangible assets created by R&D and SG&A expenditures. In contrast, following globalization, the average aggregate domestic profitability of US firms remained flat, and firms employed more capital to generate sales. Firms with higher intangible assets benefited more from globalization.
Author contact info: Bullipe R. Chintha E-Mail: bullipereddy_chintha@isb.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 Sri S. Sridhar E-Mail: s-sridharan@kellogg.northwestern.edu

Is There Information in Corporate Acquisition Plans? - Gokkaya, Sinan; Liu, Xi; Stulz, René M (National Bureau of Economic Research Working Paper Series, 2024)
For many firms, the acquisition process begins with the development of an acquisition plan that is communicated to investors. We construct a comprehensive sample of acquisition plans to provide novel perspectives on the acquisition process and find that acquisition plans are informative to investors and incrementally predict subsequent acquisition activity. These results are more pronounced for firms announcing their commitment to acquisitions from an internal pipeline. Acquisition plans improve acquisition performance due to learning from market feedback and alleviate acquisition-related market uncertainty. Communication of acquisition plans does not increase takeover premiums but is less common in more competitive industries.
Author contact info: Sinan Gokkaya Department of Finance Ohio University E-Mail: gokkaya@ohio.edu Xi Liu Farmer School of Business Department of Finance 800 E. High St. Oxford, OH 45056 E-Mail: liux60@miamioh.edu René M. Stulz The Ohio State University Fisher College of Business 806A Fisher Hall Columbus, OH 43210-1144 Tel: 614/292-1970 Fax: 614/292-2359 E-Mail: stulz@cob.osu.edu

Welfare and the Act of Choosing - Bernheim, B. Douglas; Kim, Kristy; Taubinsky, Dmitry (National Bureau of Economic Research Working Paper Series, 2024)
The standard revealed-preference approach to welfare economics encounters fundamental difficulties when the act of choosing directly affects welfare through emotions such as guilt, pride, and anxiety. We address this problem by developing an approach that redefines consumption bundles in terms of the sensations they produce, and measures welfare by blending choice-based methods with self-reported well-being techniques. In applications to classic social preferences paradigms, our approach shows that standard revealed-preference methods, including those that exploit choices over menus, mismeasure welfare because preferences depend on choice sets, while self-reported happiness and satisfaction are not sufficient statistics for welfare.
Author contact info: B. Douglas Bernheim Department of Economics Stanford University Stanford, CA 94305-6072 Tel: 650/725-8732 Fax: 650/725-5702 E-Mail: bernheim@stanford.edu Kristy Kim 530 Evans Hall #3880 Berkeley, CA 94720 USA E-Mail: kristykim@berkeley.edu Dmitry Taubinsky University of California, Berkeley Department of Economics 530 Evans Hall #3880 Berkeley, CA 94720-3880 E-Mail: dmitry.taubinsky@berkeley.edu

Why Survey-Based Subjective Expectations are Meaningful and Important - D’Acunto, Francesco; Weber, Michael (National Bureau of Economic Research Working Paper Series, 2024)
For decades, households' subjective expectations elicited via surveys have been considered meaningless because they often differ substantially from the forecasts of professionals and ex-post realizations. In sharp contrast, the literature we review shows household characteristics and the ways in which households collect and process economic information help us understand previously-considered puzzling facts about their subjective expectations. In turn, subjective expectations contribute to explain heterogeneous consumption, saving, investment, and debt choices as well as different reactions by similar households to the same monetary and fiscal policy measures. Matching microdata on households' characteristics with the price signals the same households observe, their subjective expectations, and their real-world economic decisions is crucial to establishing these facts. Our growing understanding of households' subjective expectations inspires several theoretical and empirical research directions and begets the design of innovative and more effective policy instruments.
Author contact info: Francesco D’Acunto McDonough School of Business Georgetown University Washington, DC 20057 E-Mail: francesco.dacunto@georgetown.edu Michael Weber Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-1241 E-Mail: michael.weber@chicagobooth.edu

Uncertainty or Frictions? A Quantitative Model of Scarce Safe Assets - Ilut, Cosmin L; Krivenko, Pavel; Schneider, Martin (National Bureau of Economic Research Working Paper Series, 2024)
Why did the real interest rate decline and the equity premium increase over the last 30 years? This paper assesses the role of uncertainty and credit market frictions. We quantify a model with heterogeneous households using data on asset prices and macro aggregates, as well as on households' debt and equity positions. We find that compensation for both uncertainty and frictions is reflected in asset prices. Moreover, a secular increase in frictions is important to understand jointly the decline in real rate and the relative scarcity of debt. Modeling uncertainty as ambiguity allows for tractable characterization of asset premia and precautionary savings effects in steady state.
Author contact info: Cosmin L. Ilut Department of Economics Duke University 223 Social Sciences Building Box 90097 Durham, NC 27708 Tel: 919/660-1844 E-Mail: cosmin.ilut@duke.edu Pavel Krivenko 137 E 22nd Street Office 408 New York, New 10010 United States Tel: 4087072123 E-Mail: pavel.krivenko@gmail.com Martin Schneider Department of Economics Stanford University 579 Jane Stanford Way Stanford, CA 94305-6072 Tel: (650) 721 6320 E-Mail: schneidr@stanford.edu

Climate Change Economics over Time and Space - Desmet, Klaus; Rossi-Hansberg, Esteban (National Bureau of Economic Research Working Paper Series, 2024)
With average temperature ranging from -20°C at the North Pole to 30°C at the Equator and with global warming expected to reach 1.4°C to 4.5°C by the year 2100, it is clear that climate change will have vastly different effects across the globe. Given the abundance of land in northern latitudes, if population and economic activity could freely move across space, the economic cost of global warming would be greatly reduced. But spatial frictions are real: migrants face barriers, trade and transportation are costly, physical infrastructure is not footloose, and knowledge embedded in clusters of economic activity diffuses only imperfectly. Thus, the economic cost of climate change is intimately connected to these spatial frictions. Building on earlier integrated assessment models that largely ignored space, in the past decade there has been significant progress in developing dynamic spatial integrated assessment models (S-IAMs) aimed at providing a more realistic evaluation of the economic cost of climate change, both locally and globally. This review article discusses this progress and provides a guide for future work in this area.
Author contact info: Klaus Desmet Department of Economics and Cox School of Business Southern Methodist University 3300 Dyer, Suite 301 Dallas, TX 75205 Tel: 214/768-2689 E-Mail: kdesmet@smu.edu Esteban Rossi-Hansberg The Kenneth C. Griffin Department of Economics University of Chicago 5757 S. University Avenue Chicago, IL 60637 Tel: (650) 714 2093 E-Mail: rossihansberg@uchicago.edu

Long Term Care Risk for Couples and Singles - Capatina, Elena; Hansen, Gary; Hsu, Minchung (National Bureau of Economic Research Working Paper Series, 2024)
This paper compares the impact of long term care (LTC) risk on single and married households and studies the roles played by informal care (IC), consumption sharing within households, and Medicaid in insuring this risk. We develop a life-cycle model where individuals face survival and health risk, including the possibility of becoming highly disabled and needing LTC. Households are heterogeneous in various important dimensions including education, productivity, and the age difference between spouses. Health evolves stochastically. Agents make consumption-savings decisions in a framework featuring an LTC state-dependent utility function. We find that household expenditures increase significantly when LTC becomes necessary, but married individuals are well insured against LTC risk due to IC. However, they still hold considerable assets due to the concern for the spouse who might become a widow/widower and can expect much higher LTC costs. IC significantly reduces precautionary savings for middle and high income groups, but interestingly, it encourages asset accumulation among low income groups because it reduces the probability of means-tested Medicaid LTC.
Author contact info: Elena Capatina E-Mail: elena.capatina@anu.edu.au Gary Hansen UCLA Department of Economics 8283 Bunche Hall Box 951477 Los Angeles, CA 90095 Tel: 310/825-3847 Fax: 310/825-9528 E-Mail: ghansen@econ.ucla.edu Minchung Hsu National Graduate Institute for Policy Studies 7-22-1 Roppongi, Minato-ku Tokyo 106-8677, Japan E-Mail: minchunghsu@grips.ac.jp

Temperature Extremes Impact Mortality and Morbidity Differently - Gould, Carlos F; Heft-Neal, Sam; Heaney, Alexandra K; Bendavid, Eran; Callahan, Christopher W; Kiang, Mathew; Graff Zivin, Joshua S; Burke, Marshall (National Bureau of Economic Research Working Paper Series, 2024)
Increased temperature-related mortality is predicted to be one of the largest contributors to future economic damages from climate change globally, with declines in cold-related deaths in some regions outweighed by increases in heat-related deaths in others. Changes in temperature could also affect non-fatal health outcomes, whose aggregate societal burden is large, yet much less is known about how temperature affects the overall level and distribution of morbidity. Using georeferenced data on emergency department visits, mortality, and daily temperatures across California from 2006-2017, we show that the effect of temperature on mortality differs substantially from its effect on ED visits: mortality increases under extreme heat and cold, whereas ED visits increase under extreme heat but decline under extreme cold. These differential responses fundamentally shape the burden of future climate change: we predict that mortality in California will decrease by 0.32% due to changes in temperatures by mid-century, with declining cold deaths outweighing increasing heat deaths, but that ED visits will increase by 0.46% over the same period in the state, representing a total of 1.9 million excess visits. Our findings suggest that projected impacts of future warming on mortality, including benefits in many areas, might be a poor guide for morbidity impacts.
Author contact info: Carlos F. Gould 9515 Gilman Drive School of Public Health University of California San Diego La Jolla, CA 92093 E-Mail: cagould@ucsd.edu Sam Heft-Neal Center on Food Security and the Environment Stanford University 473 Via Ortega Stanford, CA 94305 E-Mail: sheftneal@stanford.edu Alexandra Heaney Herbert Wertheim School of Public Health & Human Longevity Science School University of California San Diego E-Mail: aheaney@health.ucsd.edu Eran Bendavid Department of Medicine Stanford University E-Mail: ebd@stanford.edu Christopher W. Callahan E-Mail: christophercallahan@stanford.edu Mathew Kiang E-Mail: mkiang@stanford.edu 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 Marshall Burke Doerr School of Sustainability Stanford University Stanford, CA 94305 E-Mail: mburke@stanford.edu

What Drives Inflation? Lessons from Disaggregated Price Data - Rubbo, Elisa (National Bureau of Economic Research Working Paper Series, 2024)
The Covid pandemic disrupted supply chains and labor markets, with heterogeneous effects on demand and supply across industries. Meanwhile governments responded with unprecedented stimulus packages, and inflation increased to its highest values in 40 years. In this paper I investigate the contribution of aggregate monetary and fiscal policies to inflation, compared to industry-specific disruptions. I argue that, in an economy where multiple industries and primary factors have heterogeneous supply curves, industry-specific shocks to inelastically supplied goods increase aggregate inflation through a cost-push shock. Moreover industry-specific and aggregate shocks have different effects on relative prices, which allows me to identify their respective contribution to aggregate inflation. For US consumer prices, I find that deflation and subsequent inflation in 2020 were due to industry-specific shocks, while since 2021 inflation is primarily driven by aggregate factors.
Author contact info: Elisa Rubbo Booth School of Business University of Chicago 5807 S. Woodlawn Avenue Chicago, IL 60637 E-Mail: elisarubbo@uchicago.edu

Appropriate Entrepreneurship? The Rise of China and the Developing World - Lerner, Josh; Liu, Junxi; Moscona, Jacob; Yang, David Y (National Bureau of Economic Research Working Paper Series, 2024)
Global innovation and entrepreneurship has traditionally been dominated by a handful of high-income countries, especially the US. This paper investigates the international consequences of the rise of a new hub for innovation, focusing on the dramatic growth of high-potential entrepreneurship and venture capital in China. First, using comprehensive data on global venture activities, we show that as the Chinese venture industry rose in importance, entrepreneurship increased substantially in other emerging markets, particularly in sectors dominated by Chinese companies. Using a broad set of country-level economic indicators, we find that this effect was driven by country-sector pairs most similar to their counterparts in China. Second, turning to mechanisms, we show that the baseline findings are driven by local investors and by new firms that more closely resemble existing Chinese companies. Third, we find that this growth in emerging-market investment had wide-ranging positive consequences, including a rise in serial entrepreneurship, cross-sector spillovers, innovation, and broader measures of socioeconomic well-being. Together, our findings suggest that developing countries benefited from more “appropriate” businesses and technology pioneered by China, and that a system where only rich countries lead in innovation could limit entrepreneurial activity in large parts of the world.
Author contact info: Josh Lerner Harvard Business School Rock Center 214 Soldiers Field Boston, MA 02163 Tel: 617/495-6065 Fax: 617/496-7357 E-Mail: jlerner@hbs.edu Junxi Liu University of Warwick Coventry CV4 7AL United Kingdom E-Mail: junxi.liu@warwick.ac.uk Jacob Moscona Department of Economics Harvard University Littauer Center M-07 Cambridge, MA 02138 E-Mail: moscona@fas.harvard.edu David Y. Yang Department of Economics Harvard University Littauer Center M-31 Cambridge, MA 02138 E-Mail: davidyang@fas.harvard.edu

Innovation: The Bright Side of Common Ownership? - Antón, Miguel; Ederer, Florian; Giné, Mireia; Schmalz, Martin C (National Bureau of Economic Research Working Paper Series, 2024)
Firms have inefficiently low incentives to innovate when other firms benefit from their inventions and the innovating firm therefore does not capture the full surplus of its innovations. We show that common ownership of firms mitigates this impediment to corporate innovation. By contrast, without technological spillovers, innovation has the effect of stealing market share from rivals; in that case, more common ownership reduces innovation. Empirically, the association between common ownership and innovation inputs and outputs decreases with product market proximity and increases with technology proximity. The sign and magnitude of the overall relationship between common ownership and corporate innovation thus varies considerably across the universe of firms depending on their relative proximity in technology and product market space. These results persist if we use only variation from BlackRock's acquisition of BGI. Our results inform the debate about the welfare effects of increasing common ownership among U.S. corporations.
Author contact info: Miguel Antón IESE Business School Av. Pearson 21 Barcelona 08034 Tel: +34633432181 E-Mail: manton@iese.edu Florian Ederer Questrom School of Business Boston University 595 Commonwealth Avenie Boston, MA 02215 E-Mail: florian.ederer@gmail.com Mireia Giné IESE Business School Av. Pearson 21 Barcelona 08034 E-Mail: mgine@iese.edu Martin C. Schmalz University of Oxford Park End Street Oxford United Kingdom E-Mail: Martin.C.Schmalz@gmail.com

The How and Why of Household Reactions to Income Shocks - Colarieti, Roberto; Mei, Pierfrancesco; Stantcheva, Stefanie (National Bureau of Economic Research Working Paper Series, 2024)
This paper studies how and why households adjust their spending, saving, and borrowing in response to transitory income shocks. We leverage new large-scale survey data to first quantitatively assess households’ intertemporal marginal propensities to consume (MPCs) and deleverage (MPDs) (the “how”), and second to dive into the motivations and decision-making processes across households (the “why”). The combination of the quantitative estimation of household response dynamics with a qualitative exploration of the mental models employed during financial decisions provides a more complete view of household behavior. Our findings are as follows: First, we validate the reliability of surveys in predicting actual economic behaviors using a new approach called cross-validation, which compares the responses to hypothetical financial scenarios with observed actions from past studies. Participants’ predicted reactions closely align with real-life behaviors. Second, we show that MPCs are significantly higher immediately following an income shock and diminish over time, with cumulative MPCs over a year showing significant variability. However, MPDs play a critical role in household financial adjustments and display significantly more cross-sectional heterogeneity. Neither is easily explained by socioeconomic or financial characteristics alone, and the explanatory power is improved by adding psychological factors, past experiences, and expectations. Third, using specifically-designed survey questions, we find that there is a broad range of motivations behind households’ financial decisions and identify four household types using machine learning: Strongly Constrained, Precautionary, Quasi-Smoothers, and Spenders. Similar financial actions stem from diverse reasons, challenging the predictability of financial behavior solely based on socioeconomic and financial characteristics. Finally, we use our findings to address some puzzles in household finance.
Author contact info: Roberto Colarieti E-Mail: robertocolarieti@fas.harvard.edu Pierfrancesco Mei Department of Economics Littauer Center G7 Harvard University Cambridge, MA 02138 E-Mail: pierfrancescomei@g.harvard.edu Stefanie Stantcheva Department of Economics Littauer Center 232 Harvard University Cambridge, MA 02138 Tel: 617-496-2614 E-Mail: sstantcheva@fas.harvard.edu