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Francisca AntmanFrancisca Antman
Incentives to Identify: Racial Identity in the Age of Affirmative Action, (with Brian Duncan), Review of Economics and Statistics, forthcoming.

Abstract
We link data on racial self-identification with changes in state-level affirmative action policies to ask whether racial self-identification responds to economic incentives. We find that after a state bans affirmative action, multiracial individuals who face an incentive to identify under affirmative action are about 30 percent less likely to identify with their minority groups. In contrast, multiracial individuals who face a disincentive to identify under affirmative action are roughly 20 percent more likely to identify with their minority groups once affirmative action policies are banned.


Tania BarhamTania Barham
Staying for Benefits? The Effect of a Health and Family Planning Program on Out-Migration Patterns in Bangladesh, (with Randall Kuhn), Journal of Human Resources, Volume 49 (4), Fall 2014. 

Abstract
There is concern that government programs or development aid alter the pattern of domestic migration. We exploit the quasi-random placement of a health and family planning program in Bangladesh to examine if the program changed migration patterns between 1979-91. We find the flow of out-migration to domestic destinations was 19 percent lower in the treatment than the comparison area for men and women when program differences were largest. Due to return migration, program effects diminished and the stock of migrants living outside the study area was lower for women at 9 percent and there were no significant effects for men.


Tania BarhamBrian Cadena
Human Capital and the Lifetime Costs of Impatience,
(with Benjamin Keys), American Economic Journal: Economic Policy, August 2015.

Abstract
In this paper, we examine the role of impatience in the formation of human capital - arguably the most important investment decision individuals make during their lifetimes. We pay particular attention to a set of investment behaviors that cannot be explained solely by variation in exponential discount rates. Using data from the NLSY and a straightforward measure of impatience, we find that impatient people systematically acquire lower levels of multiple measures of human capital and that a substantial fraction of these differences arise from dynamically inconsistent behavior, such as starting an educational program but failing to complete it. The cumulative investment differences result in the impatient earning 18 percent less and expressing significantly more regret as this cohort reaches middle age.


Tania BarhamBrian Cadena
Immigrants Equilibrate Local Labor Markets: Evidence from the Great Recession
, (with Brian K. Kovak), American Economic Journal: Applied Economics, forthcoming.

Abstract
This paper demonstrates that low-skilled Mexican-born immigrants' location choices in the U.S. respond strongly to changes in local labor demand, and that this geographic elasticity helps equalize spatial di erences in labor market outcomes for low-skilled native workers, who are much less responsive. We leverage the substantial geographic variation in employment
losses that occurred during Great Recession, and our results con rm the standard nding that high-skilled populations are quite geographically responsive to employment opportunities while low-skilled populations are much less so. However, low-skilled immigrants, especially those from Mexico, respond even more strongly than high-skilled native-born workers. Moreover, we show that natives living in metro areas with a substantial Mexican-born population are insulated from the e ects of local labor demand shocks compared to those in places with few Mexicans. The reallocation of the Mexican-born workforce reduced the incidence of local demand shocks on low-skilled natives' employment outcomes by more than 50 percent.


Yongmin ChenYongmin Chen
Differential Pricing When Costs Differ: A Welfare Analysis,
(with M. Schwartz), RAND Journal of Economics, forthcoming

Abstract
This paper analyzes the welfare effects of monopoly differential pricing in the important but largely neglected case where marginal costs of service differ across consumer groups. Compared to uniform pricing, cost-based differential pricing generally raises total welfare. Although total output may fall or even its allocation across consumer groups may worsen, under a minor demand curvature condition at least one of these changes must be beneficial and dominate if the other is not. Aggregate consumer welfare also rises (under a mildly tighter condition). The source of consumer gains is not cost savings from output reallocation, which flow to the firm. Rather, to induce output reallocation the firm must vary its prices, thereby creating price dispersion without an upward bias in the average price. This improves consumer welfare even in cases where output falls. We contrast these results with those in the extensive literature on third-degree price discrimination and, furthermore, provide sufficient conditions for beneficial differential pricing when both demand elasticities and costs differ.


Yongmin ChenYongmin Chen
Prices, Profits, and Preference Dependence
, (with Michael Riordan), Journal of Industrial Economics, forthcoming.

Abstract
This paper develops a new approach to discrete choice demand for multiproduct industries, using copulas to separate the marginal distribution of consumer values for each product from their dependence relationship. The comparative statics of demand strength and preference diversity, both properties of the marginal distribution, are remarkably similar across market structures, revealing unifying principles of industry conduct and performance. Preference dependence, disentangled from preference diversity as a distinct indicator of product differentiation, is a key determinant of how prices differ between multiproduct industries and single-product monopoly. Sufficient conditions are found under which multiproduct monopoly or symmetric single-product oligopoly prices are above or below the single-product monopoly price.


Murat IyigunJonathan Hughes
Some Inconvenient Truths About Climate Change Policy: The Distributional Impacts of Transportation Policies, (with Stephen Holland, Christopher Knittel and Nathan Parker), The Review of Economics and Statistics, forthcoming.

Abstract
Instead of efficiently pricing greenhouse gases, policy makers have favored measures that implicitly or explicitly subsidize low carbon fuels. We simulate a transportation-sector cap & trade program (CAT) and three policies currently in use: ethanol subsidies, a renewable fuel standard (RFS), and a low carbon fuel standard (LCFS). Our simulations confirm that the alternatives to CAT are quite costly–2.5 to 4 times more expensive. We provide evidence that the persistence of these alternatives in spite of their higher costs lies in the political economy of carbon policy. The alternatives to CAT exhibit a feature that make them amenable to adoption–a right skewed distribution of gains and losses where many counties have small losses, but a smaller share of counties gain considerably–as much as $6,800 per capita, per year. We correlate our estimates of gains from CAT and the RFS with Congressional voting on the Waxman-Markey cap & trade bill, H.R. 2454. Because Waxman-Markey (WM) would weaken the RFS, House members likely viewed the two policies as competitors. Conditional on a district's CAT gains, increases in a district's RFS gains are associated with decreases in the likelihood of voting for WM. Furthermore, we show that campaign contributions are correlated with a district's gains under each policy and that these contributions are correlated with a Member's vote on WM.


Xiaodong LiuDaniel Kaffine
The Effects of Regulation in the Presence of Multiple Unpriced Externalities: Evidence from the Transportation Sector, (with Antonio Bento, Kevin Roth, and Matt Zaragoza), American Economic Journal: Economic Policy, forthcoming.

Abstract
In transportation systems with unpriced congestion, allowing single-occupant low-emission vehicles in high occupancy vehicle (HOV) lanes to encourage their adoption exacerbates congestion costs for carpoolers. The resulting welfare effects of the policy are negative, with environmental benefits overwhelmingly dominated by the increased congestion costs. Exploiting the introduction of the Clean Air Vehicle Stickers policy in California with a regression discontinuity design, our results imply a best-case cost of $124 per ton of reductions in greenhouse gases, $606,000 dollars per ton of nitrogen oxides reduction, and $505,000 dollars per ton of hydrocarbon reduction, exceeding those of other options readily available to policymakers.


Xiaodong LiuDaniel Kaffine
Can Decentralized Planning Really Achieve First-best in the Presence of Environmental Spillovers? (with Harrison Fell), Journal of Environmental Economics and Management, Forthcoming.

Abstract
Strikingly, Ogawa and Wildasin (2009) find that in a model with heterogenous jurisdictions, interjurisdictional capital flows, and interjurisdictional envirionmental damage spillovers, decentralized planning outcomes are equivalent to that under a single centralized planner. Taken to its extreme this result renders international agreements such as the Kyoto Protocol irrelevant. We first show the critical importance of two key assumptions (no retirement of capital, fixed environmental damages per unit of capital) in obtaining this result. Second, we consider a more general model allowing for capital retirement and abatement activities and show that generally the outcome of a decentralized market differs from the solution of a centralized planner's social welfare-maximizing problem.


Wolfgang KellerWolfgang Keller
Supplier Responses to Wal-Mart's Invasion of Mexico, (with Iacovone, Javorcik, and Tybout), Journal of International Economics, January 2015.

Abstract
This paper examines the effect of Wal-Mart's entry into Mexico on Mexican manufacturers of consumer goods. Guided by firm interviews that suggested substantial heterogeneity across firms in how they responded to Wal-Mart's entry, we develop a dynamic industry model in which firms decide whether to sell their products through Walmex (short for Wal-Mart de Mexico), or use traditional retailers. Walmex provides access to a larger market, but it puts continuous pressure on its suppliers to improve their product's appeal, and it forces them to accept relatively low prices relative to product appeal. Simulations of the model show that the arrival of Walmex separates potential suppliers into two groups. Those with relatively high-appeal products choose Walmex as their retailer, whereas those with lower appeal products do not. For the industry as a whole, the model predicts that the associated market share reallocations, adjustments in innovative effort, and exit patterns increase productivity and the rate of innovation. These predictions accord well with the results from our firm interviews. The model's predictions are also supported by establishment-level panel data that characterize Mexican producers' domestic sales, investments, and productivity gains in regions with differing levels of Walmex presence during the years 1994 to 2002.


Wolfgang KellerWolfgang Keller
Endogenous Formation of Free Trade Agreements: Evidence from the Zollverein's Impact on Market Integration, (with Carol Shiue), Journal of Economic History, December 2014.

Abstract
The Zollverein was arguably the most important free trade agreement of the nineteenth century. Although 1834 is the official date of the Zollverein's establishment, member states joined in a non-random sequence over several decades because the benefits of becoming a member increased, both as the size of the union increased, and as membership in the union became increasingly important for accessing foreign markets. We incorporate the endogenous effects of accession into an estimate of the economic impact of the Zollverein customs union. Our estimated effects are several times larger than simple estimates that do not take these effects into account.


Jin HyukJin-Hyuk Kim
Screening Incentives and Privacy Protection in Financial Markets: A Theoretical and Empirical Analysis, (with Liad Wagman), RAND Journal of Economics, forthcoming

Abstract
In 1999, Congress enacted the Gramm-Leach-Bliley Act, allowing a variety of financial institutions to sell, trade, share, or give out nonpublic personal information about their customers unless their customers direct that such information not be disclosed. We study a model in which firms offer financial products to individuals, such as loans, post prices for their products, and screen consumers who apply to purchase them. Any information obtained in the screening process may be traded to another firm selling related products. We show that firms' ability to sell consumer information can lead to lower prices, higher screening intensities, higher rejection rates of applicants, and increased social welfare. By exploiting variations in the adoption of local financial-privacy ordinances in five California Bay Area counties, we are able to provide simple estimates of the effects of stricter financial-privacy laws on the denial rates of applications for home-purchase loans and loan refinancing during 2001-2004. Consistent with the model's predictions, we show that denial rates for both purchase loans and loan refinancing decreased in counties where opt-in privacy ordinances were adopted. Moreover, we find that during the financial crisis of 2007-2008, estimated foreclosure rates were higher in counties where the privacy ordinance was adopted.


Xiadong LiuXiadong Liu
Endogenous Network Production Functions with Selectivity, (with William Horace and Eleonora Patacchini), Journal of Econometrics, forthcoming.

Abstract
We consider a production function model that transforms worker inputs into outputs through peer effect networks. The distinguishing features of this production model are that the network is formal and observable through worker scheduling, and selection into the network is done by a manager. We discuss identification and suggest a variety of estimation techniques. In particular, we tackle endogeneity issues arising from selection into groups and exposure to common group factors by employing a polychotomous Heckman-type selection correction. We illustrate our method using data from the Syracuse University Men's Basketball team, where at any point in time the coach selects a lineup and the players interact strategically to win games.


James MarkusenJames Markusen
International Trade Puzzles: A Solution Linking Production and Preferences, (with Justin Caron and Thibault Fally), Quaterly Journal of Economics, 129 (2014), 1501-1552.

Abstract
International trade theory is a general-equilibrium discipline, yet most of the standard portfolio of research focuses on the production side of general equilibrium. In addition, we do not have a good understanding of the relationship between characteristics of goods in production and characteristics of preferences. This paper conducts an empirical investigation into the relationship between a good's factor intensity in production and its income elasticity of demand in consumption. In particular, we find a strong and significant positive relationship between skilled-labor intensity in production and income elasticity of demand for several types of preferences, with and without accounting for trade costs and differences in prices. Counter-factual simulations yield a number of results. We can explain about half of “missing trade”, and show an important role for per-capita income in understanding trade/GDP ratios, the choice of trading partners, and the composition of trade. Furthermore, an equal rise in productivity in all sectors in all countries leads to a rising skill premium in all countries, with particularly large increases in developing countries.


James MarkusenTerra McKinnish
Who Marries Differently-Aged Spouses? Education, Occupation, Earnings, Ability and Appearance, (with Hani Mansour), Review of Economics and Statistics, forthcoming.

Abstract
In direct contrast to conventional wisdom and most economic models of marital age gaps, we present robust evidence that men and women who are married to differently-aged spouses are negatively selected. Empirical results show lower cognitive ability, lower educational attainment, lower occupational wages, lower earnings, and less attractive appearance among those married to a differently-aged spouse. These results, obtained using samples of first marriages and controlling for age of marriage, are consistent with a model in which individuals with more schooling and more upwardly-mobile occupations interact more heavily with similarly-aged peers and are ultimately more likely to marry similarly-aged spouses.


Carol ShiueCarol Shiue
Endogenous Formation of Free Trade Agreements: Evidence from the Zollverein's Impact on Market Integration, (with Wolgang Keller), Journal of Economic History, December 2014.

Abstract
The Zollverein was arguably the most important free trade agreement of the nineteenth century. Although 1834 is the official date of the Zollverein's establishment, member states joined in a non-random sequence over several decades because the benefits of becoming a member increased, both as the size of the union increased, and as membership in the union became increasingly important for accessing foreign markets. We incorporate the endogenous effects of accession into an estimate of the economic impact of the Zollverein customs union. Our estimated effects are several times larger than simple estimates that do not take these effects into account.