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Tania BarhamTania Barham
Living Longer: The Effect of the Mexican Conditional Cash Transfer Program on Elderly Mortality,
(with Jacob Rowberry) Journal of Development Economics, Volume 105: 226-236, November 2013.

Abstract
With both an aging population and a transition from communicable to chronic diseases, the health of the elderly is a growing issue in many developing countries. Conditional cash transfer programs are usually thought to benefit young people, but may also benefit other age groups since some programs require that all household members have regular preventive health check-ups. This paper exploits the phasing-in of the Mexican conditional cash transfer program, Progresa, between 1997 and 2000, and shows a 4% decline in average, municipality-level mortality for people aged 65 and older. The program not only reduced deaths due to more traditional infectious diseases, but also diabetes related deaths. Given that diabetes deaths are a leading cause of death in Mexico, and in the top 10 causes of death in many high- and middle-income countries, this is an important finding.



Tania BarhamTania Barham
Development Effects of Electrification: Evidence from the Topographic Placement of Hydropower Plants in Brazil,
(with Molly Lipscomb and  Mushfiq Mobarak)  American Economic Journal: Applied Economics, 5(2): 200-231, April 2013.

Abstract
We estimate the development effects of electrification across Brazil over the period 1960-2000. Brazil relies almost exclusively on hydropower, which requires intercepting water at high velocity. We build an engineering model which takes as inputs only geography (river gradient, water flow and Amazon) and simulates a time series of hypothetical electricity grids for Brazil that show how the grid would have evolved had infrastructure investments been made based solely on geologic cost considerations, ignoring all demand-side concerns. Using the model as an instrument, we document large positive effects of electrification on development that are underestimated when one fails to account for the political allocation of infrastructure projects or its targeting to under-developed areas. Broad-based improvement in labor productivity across sectors and areas rather than general equilibrium re-sorting (in-migration to electrified counties) appears to be the likely mechanism by which these development gains are realized.



Tania BarhamTania Barham
Enhancing Cognitive Functioning: Medium-Term Effects of a Health and Family Planning Program in Matlab, 
American Economic Journal: Applied Economics, 4(1): 245-73, January 2012.

Abstract
It is believed that early life circumstances are crucial to success later in life. Yet causal evidence that the impacts of early childhood health interventions continue into late childhood and adolescence is sparse. This paper exploits a quasi-random placement of the Matlab Maternal and Child Health and Family Planning Program in Bangladesh to determine whether children eligible for child health interventions in early childhood had better cognitive functioning at ages 8–14. I find a program effect of 0.39 standard deviations on cognitive functioning and similar effects for height and educational attainment.


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, forthcoming 2013. 

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
Native Competition and Low-Skilled Immigrant Inflows,
Journal of Human Resources, 48(4): 910-944, Fall 2013.

Abstract
This paper demonstrates that immigration decisions respond to differences in local labor market conditions by documenting the change in low-skilled immigrant inflows in response to supply increases among the US-born. Using pre-reform welfare participation rates as an instrument for changes in native labor supply, I find that immigrants prefer cities with fewer welfare leavers over cities with larger reform-induced supply shifts. The extent of the selection is substantial: for each additional native woman working in a city as a result of welfare reform, 0.8 fewer female immigrants choose to live and work there. These results provide direct evidence that international migration flows tend to equilibrate returns across US local labor markets.

 


Tania BarhamBrian Cadena
Can Self-Control Explain Avoiding Free Money? Evidence from Interest-Free Student Loans,
Review of Economics and Statistics, 95(4): 1117-1129, October 2013.

Abstract
This paper uses insights from behavioral economics to offer an explanation for a par- ticularly surprising borrowing phenomenon: One in six undergraduate students offered interest-free loans turn them down. Models of impulse control predict that students may optimally choose to turn down subsidized loans to avoid excessive consumption during school. Using the National Postsecondary Student Aid Study (NPSAS), we investigate students’ subsidized loan take-up decisions and identify a group of students for whom the loans funds create an especially tempting liquidity increase. Students who would receive their loans in cash are significantly more likely to reject the loan. These results suggest that consumers choose to limit their liquidity in economically meaningful situations, consistent with the predictions of the behavioral model.




Tania BarhamBrian Cadena
Recent Immigrants as Labor Market Arbitrageurs: Evidence from the Minimum Wage,
Journal of Urban Economics, 80: 1-12, March 2014.

Abstract
This paper investigates the local labor supply effects of changes to the minimum wage by examining the response of low-skilled immigrants' location decisions. Canonical models emphasize the importance of labor mobility when evaluating the employment effects of the minimum wage; yet few studies address this outcome directly. Low-skilled immigrant populations shift toward labor markets with stagnant minimum wages, and this result is robust to a number of alternative interpretations. This mobility provides behavior-based evidence in favor of a non-trivial disemployment effect of the minimum wage. Further, it reduces the estimated demand elasticity using teens; employment losses among native teens are substantially larger in states that have historically attracted few immigrant residents.

 


Yongmin ChenYongmin Chen
Profitability of Product Bundling
(with Michael Riordan), International Economic Review, 54(1): 35-57, February, 2013.

Abstract
Using copulas to model the stochastic dependence of values, this paper establishes new general conditions on the profitability of product bundling. A multiproduct monopolist generally achieves higher profit from mixed bundling than from separate selling if consumer values for two products are negatively dependent, independent, or have limited positive dependence. With more than two goods, the same conditions are sufficient for an optimal monopoly selling scheme to include a bundle of at least two products. The profitability of monopoly bundling also extends to situations where a multiproduct firm competes with a single-product rival.



Murat IyigunJonathan Hughes
Carpooling and Driver Responses to Fuel Price Changes: Evidence from Traffic Flows in Los Angeles (with Antonio Bento and Daniel Kaffine), Journal of Urban Economics, 77: 41-56, September 2013.

Abstract
There is substantial interest in policies to reduce carbon emissions and externalities from trans- portation. While there is a large literature investigating demand responses to fuel price changes, much less is known about particular margins of adjustment such as carpool formation. Because changes in the timing or number of vehicle trips can impact emissions, highway fatalities and congestion, understanding these effects has important policy implications. We explore the rela- tionships between fuel prices and the number of drivers commuting alone or as part of a carpool. Using a simple equilibrium sorting model we show that traffic flows in mainline lanes decrease when fuel prices increase. However, in carpool (HOV) lanes, flow can either increase or decrease with higher prices. Traffic flows in mainline lanes are shown to be more responsive to price changes when the presence of a carpool lane provides a substitute to driving alone. We test these predictions using eight years of traffic data covering over 1,700 locations in Los Angeles county. In our preferred specification, the elasticity of flow with respect to fuel price is -0.05 for mainline lanes and -0.08 for mainline lanes in highways with a HOV lane. The elasticity is 0.136 for HOV lanes. These estimates imply that the mean highway with an HOV lane experiences a 30 percent larger decrease in vehicle flow per hour when fuel prices rise compared with the mean highway without an HOV lane. Flows in HOV lanes show an immediate decrease following a price increase but respond positively to price increases over time, which suggests time is an important input to carpool formation.


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.

 


Murat IyigunMurat Iyigun
Social Organizations, Risk-Sharing Institutions and Industrialization (with Avner Greif and Diego Sasson) American Economic Review, P & P, May 2013.

Abstract
We analyze the role of risk-sharing institutions in transitions to modern economies. Transitions require individual-level risk-taking in pursuing productivity-enhancing ac- tivities including using and developing new knowledge. Individual-level, idiosyncratic risk implies that distinct risk sharing institutions – even those providing the same level of insurance – can lead to different growth trajectories if they differently mo- tivate risk-taking. Historically, risk sharing institutions were selected based on their cultural and institutional compatibility and not their unforeseen growth implications.

We simulate our growth model incorporating England’s and China’s distinct pre- modern risk-sharing institutions. The model predicts a transition in England and not China even with equal levels of risk sharing. Under the clan-based Chinese institution, the relatively risk-averse elders had more control over technological choices implying lower risk-taking.

Focusing on non-market institutions expands on previous growth-theoretic models to highlight that transitions can transpire even in the absence of exogenous productivity shocks or time-dependent state variables. Recognizing the role of non- market institutions in the growth process bridges the view that transitions are due to luck and the view that transitions are inevitable. Transitions transpire when ‘luck’ cre- ates the conditions under which economic agents find it beneficial to make the choices leading to positive rates of technological change. Luck came in the form of historical processes leading to risk-sharing institutions whose unintended consequences encour- aged productivity-enhancing risk-taking.



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 theincreased 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
Greenhouse Gas Emissions, Waste and Recycling Policy, (with Kaylee Acuff) Journal of Environmental Economics and Management, 65(1): 74-86, 2013.

Abstract
This paper examines least-cost policies for waste reduction, incorporating upstream greenhouse gas externalities associated with the production of consumption goods from various materials. In particular, we decompose the effect of deposit/refund, advance disposal fees, and recycling subsidies on upstream greenhouse gas emissions. We find that the benefits of reducing greenhouse gas emissions are of the same order as or larger than the benefits of reducing solid waste disposal, implying larger optimal total waste reduction than previous studies. Furthermore, the least-cost intervention levels will be material-specific and vary substantially across materials. Finally, despite the reductions in emissions implied by increased recycling rates, direct recycling subsidies are more costly and generate less emissions reductions than a deposit/refund or advance disposal fee.




Xiaodong Liu
Daniel Kaffine

Carpooling and Driver Responses to Fuel Price Changes: Evidence from Traffic Flows in Los Angeles (with Antonio Bento and Jonathan Hughes), Journal of Urban Economics,77: 41-56, September 2013.

Abstract
There is substantial interest in policies to reduce carbon emissions and externalities from trans- portation. While there is a large literature investigating demand responses to fuel price changes, much less is known about particular margins of adjustment such as carpool formation. Because changes in the timing or number of vehicle trips can impact emissions, highway fatalities and congestion, understanding these effects has important policy implications. We explore the rela- tionships between fuel prices and the number of drivers commuting alone or as part of a carpool. Using a simple equilibrium sorting model we show that traffic flows in mainline lanes decrease when fuel prices increase. However, in carpool (HOV) lanes, flow can either increase or decrease with higher prices. Traffic flows in mainline lanes are shown to be more responsive to price changes when the presence of a carpool lane provides a substitute to driving alone. We test these predictions using eight years of traffic data covering over 1,700 locations in Los Angeles county. In our preferred specification, the elasticity of flow with respect to fuel price is -0.05 for mainline lanes and -0.08 for mainline lanes in highways with a HOV lane. The elasticity is 0.136 for HOV lanes. These estimates imply that the mean highway with an HOV lane experiences a 30 percent larger decrease in vehicle flow per hour when fuel prices rise compared with the mean highway without an HOV lane. Flows in HOV lanes show an immediate decrease following a price increase but respond positively to price increases over time, which suggests time is an important input to carpool formation.

 


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.



Xiaodong LiuWolfgang Keller
The Gravity of Knowledge ( with Stephen Yeaple), American Economic Review, forthcoming

Abstract
We analyze the international operations of multinational firms to measure the spatial barriers to transferring knowledge. We model firms that can transfer bits of knowledge to their foreign affiliates in either embodied (traded intermediates) or disembodied form (direct communication). The model shows how knowledge transfer costs can be inferred from multinationals' operations. We use firm-level data on the trade and sales of U.S. multinationals to confirm the model's predictions. Disembodied knowledge transfer costs not only make the standard multinational firm model consistent with the fact that affiliate sales fall in distance but quantitativelyaccounts for much of the gravity in multinational activity.




James MarkusenJames Markusen
Expansion of Trade at the Extensive Margin: A General Gains-from-Trade Result and Illustrative Examples, Journal of International Economics (2012), 89(1): 262-270, January 2013.

Abstract
The basic gains-from-trade theorem makes a stark comparison between completely free trade and complete autarky. This paper is motivated by recent evidence that trade has greatly expanded on the extensive margin (aka fragmentation, offshoring) by adding newly traded goods and services and that much of this new trade is in intermediates. I provide an extension of existing gains-from-trade results by allowing trade in an added set of final and/or intermediate goods. As seems generally understood, a sufficient condition for all countries to gain from fragmentation is that the relative world prices of initially-trade goods don't change. However, trade costs break the strict link between domestic and world prices in my approach and this results in interesting subtleties as initially-traded goods change their trade status following fragmentation. I illustrate these results by applying them to two recent and quite specific formulations of expansion at the extensive margin: Grossman and Rossi-Hansberg (2008) and Markusen and Venables (2007). Symmetry in two senses results in gains for all countries: countries are relatively symmetric in size and the newly-traded goods are relatively symmetric in their factor intensities with respect to the world endowment ratio.

 


James MarkusenJames Markusen
Putting Per-Capita Income back into Trade Theory
, Journal of International Economics, 90(2): 255-265, July 2013.

Abstract
A major role for per-capita income in international trade, as opposed to simply country size, was persuasively advanced by Linder (1961). Yet this crucial element of Linder's story was abandon by most later trade economists in favor of the analytically-tractable but counter-empirical assumption that all countries share identical and homothetic preferences. This paper collects and unifies a number of disjoint points in the existing literature and builds further on them using simple and tractable alternative preferences. Adding non-homothetic preferences to a traditional models helps explain such diverse phenomenon as growing wage gaps, the mystery of the missing trade, home bias in consumption, and the role of intra-country income distribution, solely from the demand side of general equilibrium. With imperfect competition, we can explain higher markups and higher price levels in higher per-capita income countries, and the puzzle that gravity equations show a positive dependence of trade on per-capita incomes, aggregate income held constant. In all cases, the effects of growth are quite different depending on whether it is growth in productivity or through factor accumulation. The paper concludes with some suggestions for calibration, estimation, and gravity equations.


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

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.