Francisca Antman
- For Want of a Cup: The Rise of Tea in England and the Impact of Water Quality on Mortality, Review of Economics and Statistics,2022.
This paper explores the impact of water quality on mortality by exploiting a natural experiment -- the rise of tea consumption in 18th century England. This resulted in an unintentional increase in consumption of boiled water, thereby reducing mortality rates. The methodology uses two identification strategies tying areas with lower initial water quality to larger declines in mortality rates after tea drinking became widespread and following larger volumes of tea imports. Results are robust to the inclusion of controls for income and access to trade. The hypothesis is further bolstered by suggestive evidence from cause-specific deaths and early childhood mortality.
Brian Cadena
- Investment over the Business Cycle: Insights from College Major Choice, (with Erica Blom and Benjamin J. Keys) Journal of Labor Economics October, 2021.
Abstract: How does presonal exposure to economic contidions affect individual human capital investment choices? Focusing on bachelor’s degree recipients, we find that cohorts exposed to higher unemployment rates during typical schooling years select majors that earn higher wages, have better employment prospects, and lead to work in a related field. Conditional on expected earnings, recessions also encourage women to enter male-dominated fields, and students of both genders pursue more difficult majors. We conclude that economic environments change how students select majors, and we find evidence that students who respond to the business cycle enjoy earnings typical of their new majors. - Performance Pay, Productivity, and Strategic Opt-Out: Evidence from a Community Health Center, (with Austin C. Smith) Journal of Public Economics, February 2022.
Abstract: We use data from a Federally Qualified Health Center to examine changes in med- ical providers’ output in response to a change from a salary-based compensation plan to one that rewarded providers for seeing more patients each month. Leveraging the staggered rollout of the plan and provider-level productivity data, we find an 18 per- cent increase in observed productivity overall, with only a small portion resulting from individual responses to the change in incentives. The small incentive effect is consistent with experimental evidence that effort is less sensitive to financial incentives when in- dividuals work for an organization whose mission is aligned with their values. Further, we demonstrate a less-studied response to piece rates – strategic non-compliance. We find that lower-productivity providers were slower to join the piece-rate plan and that providers managed to time their entry into the plan based on within-person differences in productivity.
Jeronimo Carballo
- The Effect of Transit Systems on International Trade (with Alejandro Graziano, Georg Schaur and Christian Volpe Martincus) Review of Economics and Statistics, forthcoming.
Abstract: In this paper, we estimate the trade effects of a transit system upgrading that streamlines border processing in developing countries. Our empirical approach combines transaction level export data from El Salvador with unique data that distinguishes export flows that were processed on the transit system. Our results indicate that the new transit system lowered regulatory border costs and raised exports. At the low end, our back-of-the-envelope estimate of the return to investment is US$ 3-to-1. The estimation results also suggest that existing frameworks that emphasize shipping frequency and the formation of new trade relationships are important to interpret trade facilitation policy. This evidence informs an important policy covered by the 2013 WTO Agreement of Trade Facilitation. - Online Business Platforms and International Trade (with Marisol Rodriguez Chatruc, Catalina Salas Santa and Christian Volpe Martincus) Journal of International Economics, forthcoming.
Abstract: International trade is subject to information incompleteness. Firms must therefore engage in a costly search process to find business partners. Online platforms can reduce these search costs and thereby favor firms exports. We examine whether this is actually the case and the underlying mechanisms thereof by focusing on ConnectAmericas, a free, purely informational online platform that, by the end of 2018, connected more than 45,000 firms from 140 countries. In particular, we estimate the impact of using the platform on firms foreign sales utilizing detailed data on both firms participation therein and the entire universe of export transactions for Peru over the period 2010-2018. In so doing, we apply a difference-in-differences strategy and specifically exploit visits firms received to their profiles as a source of identifying variation. Consistent with the interpretation of the platform as a search cost-reducing mechanism, our estimates suggest that ConnectAmericas resulted in increased firms exports, particularly from those that had no digital presence, of differentiated products, and to less familiar destinations. - Economic and Policy Uncertainty: Export Dynamics and Value of Agreements (with Kyle Handley and Nuno Limao) Journal of International Economics, forthcoming.
Abstract: We examine the interaction of economic and policy uncertainty in a dynamic, heterogeneous firms model. Uncertainty about foreign income, trade protection and their interaction dampens export investment. This can be mitigated by trade agreements, which are particularly valuable in periods of increased demand volatility. We use firm data to establish new facts about U.S. export dynamics in 2003-2011 and estimate the model. We find a significant role for uncertainty in explaining the trade collapse in the 2008 crisis and partial recovery in its aftermath. Consistent with the model predictions, we find that the negative effects worked (1) through the extensive margin, (2) in destinations without preferential agreements with the U.S. (accounting for over half its trade) and (3) in industries with higher potential protection. U.S. exports to non- preferential markets would have been 6.5% higher under an agreement—equivalent to an 8% foreign GDP increase. These findings highlight and quantify the value of international policy commitments through agreements that mitigate uncertainty, particularly during downturns.
Yongmin Chen
- Experience Goods and Consumer Search, (with Zhuozheng Li and Tianle Zhang) American Economic Journals: Microeconomics, August 2022
Abstract: We introduce a search model where products differ in variety and unobserved quality ('experience goods'), and firms can establish quality reputation. We show that the inability of consumers to observe quality before purchase significantly changes how search frictions affect market performance. In equilibrium, higher search costs hinder consumers' search for better-matched variety and increase price, but can boost firms' investment in product quality. Under plausible conditions, both consumer and total welfare initially increase in search cost, whereas both would monotonically decrease if quality were observable. We apply the analysis to online markets, where low search costs coexist with low-quality products. - Efficient Liability in Expert Markets, (with Jianpei Li and Jin Zhang), International Economic Review, forthcoming.
Abstract: When providing professional services, an expert may misbehave by either prescribing “wrong” treatment for consumer's problem or failing to exert proper effort to diagnose it. We show that under a range of liabilities the expert will recommend the appropriate treatment based on his private information if markups for alternative treatments are close enough; however, a well-designed liability rule is essential for also motivating efficient diagnosis effort. We further demonstrate that unfettered price competition between experts may undermine the efficient role of liability, whereas either a minimum-price constraint or an obligation-to-serve requirement can restore it. - International protection of consumer data, (with Xinyu Hua and Keith Maskus) Journal of International Economics, Volume 132, September 2021.
Abstract: We study the international protection of consumer data in a model where data from product sales generate additional revenue to firms but disutility to consumers. When data usage lacks transparency, a firm suffers a commitment problem and overuses consumer data. Greater transparency enables the firm to commit to less data usage, which boosts consumer demand and leads to a higher price but also higher output if the firm operates only in one country. A multinational firm faces more challenges when balancing the trade-offs in data usage across countries that differ in consumer preferences for privacy. Contrary to the result for a single country, more transparency can exacerbate data-usage and output distortions in the global economy, and unilateral data regulation by a country may reduce global welfare. There can be substantial gains from international coordination—though not necessarily uniformity—of data regulations.
Jonathan Hughes
- The Value of Rarity: Evidence from a Collectible Good, Journal of Industrial Economics, 70(1), pp. 147-167. March 2022.
Markets for art, coins and other collectibles, culinary delicacies and eco-tourism suggest consumers value the rarity of many goods. While empirical evidence supports higher prices for rare goods, isolating the value of rarity has proven difficult. I analyze prices for a collectible card game and show goods that are designated as rare trade at higher prices than functionally-equivalent substitutes. Importantly, I use novel features of this market to account for scarcity, observed and unobserved product characteristics and separately identify rarity effects. These results have important implications for markets ranging from luxury goods to conservation of endangered species.
Murat Iyigun
- Putting the Husband Through: Role of Credit Constraints in Timing of Marriage and Spousal Education, (with Jeanne Lafortune) Journal of Labor Economics, forthcoming.
Abstract: In the United States, age at first marriage was lowest and the education gap between hus- bands and wives was highest during the 1950s. The conventional explanation for such a negative correlation between age at first marriage and educational gap is that early marriage leads to ear- lier and higher fertility, which in turn prevents women from acquiring education. In this paper, we propose a complementary but novel explanation: early marriages enabled couples to over- come some of the credit constraints that could have bound husbands from acquiring education. We show that a model that includes this motive and mechanism, in combination with declining startup costs of marriage, can replicate not only the marriage and education patterns observed in the middle of the century in the United States, but also the trends in both variables over the 20th century. We then use micro-level data to argue that this explanation matches patterns seen in the data, including how changes in minimum marriage age laws impacted differences in spousal educational attainment.
Taylor Jaworski
- Spillover Effects of Intellectual Property Protection in the Interwar Aircraft Industry, (with Walker Hanlon) Economic Journal,Vol. 132, No. 645 (July 2022), pp. 1824–1851.
Abstract: Can strengthening intellectual property protection for producers of one good affect innovation in other related goods? To answer this question, we exploit a unique policy experiment in the interwar military aircraft industry. Airframe designs had little intellectual property protection before 1926, but changes passed by Congress in 1926 provided airframe manufacturers with enhanced property rights over new designs. We show that granting property rights to airframe producers increased innovation in airframes, but slowed innovation in aero-engines, a complementary good where there was no change in the availability of intellectual property protection. We propose and test a simple theory that explains these patterns.
Daniel Kaffine
- Emissions, Transmission, and the Environmental Value of Renewable Energy, (with Harrison Fell and Kevin Novan) American Economic Journal: Economic Policy May 2021.
Abstract: Growth in renewable electricity generation has spurred substantial private and public interest in increasing transmission capacity to export electricity from renewable-rich, demand-poor regions to urban demand centers. While the primary motives for these transmission investments are market-based (e.g., arbitraging regional electricity prices), they can also have large non-market impacts (e.g., altering the level and location of emissions). In this paper, we examine how transmission congestion alters the environmental benefits provided by renewable generation. Using hourly data from the Texas and Mid-Continent electricity markets, we find that relaxing transmission constraints between the wind-rich areas and the demand centers of the respective markets increases the non-market value of a MWh of wind by 31% for Texas and 13% for Mid-Continent markets, conservatively. Much of this increase in the non-market value arises from a redistribution in where emissions are avoided – which transmission is not constrained, wind offsets much more pollution from fossil fuel units located near highly populated demand centers. - Private monitoring and public enforcement: Evidence from complaints and regulation of oil and gas wells, (with Peter Maniloff) Journal of Environmental Economics and Management, July 2021.
Abstract: The traditional theory of firm regulatory compliance examines the interplay of firms and regulator, with the general public as passive consumers of goods or providers of votes. However, members of the public can play an important role in monitoring for compliance, which we analyze with a novel dataset of Colorado regulatory activities. We find regulators frequently conduct follow-up inspections of people’s complaints, and these complaint-driven inspections are at least as likely to be followed by regulatory action as “normal” scheduled inspections. However, regulators do not increase inspection activity of other assets owned by a firm that was complained about, consistent with regulators treating these complaints as “one-offs”. An inspector conducting a complaint inspection crowds out two regular inspections at the daily level, but we find no evidence of crowd-out at time scales of one month or greater. Finally, heterogeneity across complaint types suggests people are more adept at identifying nuisance-related violations (e.g. noise, smell), but are less adept at identifying more technical violations.
Wolfgang Keller
- Globalization, Gender, and the Family, (with Hale Utar), Review of Economic Studies, March 2022.
Abstract: This paper shows that in the presence of labor market shocks, child-bearing and child-rearing have far-reaching implications for gender inequality, household specialization and family structure. Using population register data on all births, marriages, and divorces together with employer-employee linked data for Denmark, we show that reduced labor market opportunities due to Chinese import competition lead to a move towards family, with higher rates of fertility, parental leave, and marriage, as well as lower rates of divorce. This move is driven by women, not men. We document substantial long-run earnings losses concentrated on women, and gender inequality increases. The gender-specific effects are due to a woman’s ability to give birth during a fixed period of life–her biological clock. Women have a higher reservation value for staying in the labor market when young, and a negative trade shock induces women to substitute more to family activities than men. High-earning women in their late 30s contribute strongly to the gender difference in fertility because switching to new comparable employment would require high initial commitment which is incompatible with having a newborn in the short time remaining on the biological clock. There is no gender difference (1) for workers past their fertile age, (2) in the size of the negative labor shock, and (3) due to occupational composition since we exploit within-worker variation. Despite lower labor earnings, positive family responses in Denmark are also sustained by insurance payments and government transfers so that workers can afford the shift to family. - Capital Markets in China and England, 18th and 19th Century: Evidence from Grain Prices, (with Carol H. Shiue and Xin Wang) American Economic Journal: Applied Economics July 2021.
Abstract: Based on the most comprehensive grain prices available, we employ a storage model to estimate consistent interest rates and compare capital market development in Britain and China. Interest rates for Britain were lower than China’s on average by about three percentage points from 1770 to 1860. Regional capital market integration in the Yangzi Delta comes close to the British average at distances below 200 kilometers, but at larger distances interest rate correlations in Britain are twice those of the Delta, and three or more times as high as elsewhere in China. Overall, our results suggest capital market divergence at an early date.
Miles Kimball
- Liquidity Constraints and Precautionary Saving, (with Martin Holm and Christopher Carroll) Journal of Economic Theory May 2021.
Abstract: We provide the analytical explanation of the interactions between precautionary saving and liquidity constraints. The effects of liquidity constraints and risks are similar because both stem from the same source: a concavification of the consumption function. Since a more concave consumption function exhibits heightened prudence, both constraints and risks strengthen the precautionary saving motive. In addition, we explain the apparently contradictory results that constraints and risks in some cases intensify, but in other cases weaken the precautionary saving motive. The central insight is that the effect of introducing an additional constraint or risk depends on whether it interacts with preexisting constraints or risks. If it does not interact with any preexisting constraints or risks, it intensifies the precautionary motive. If it does interact, it may reduce the precautionary motive in earlier periods at some levels of wealth.
Xiaodong Liu
- A Structural Model for the Coevolution of Networks and Behavior, (with Chih-Sheng Hsieh andMichael Kӧnig) The Review of Economics and Statistics, 104, 355-367, 2022.
Abstract: This paper introduces a structural model for the coevolution of networks and behavior. We characterize the equilibrium of the underlying game and adopt the Bayesian Double Metropolis-Hastings algorithm to estimate the model. We further extend the model to incorporate unobserved heterogeneity and show that ignoring this heterogeneity can lead to biased estimates in simulation experiments. We apply the model to study R&D investment and collaboration decisions in the chemical and pharmaceutical industry and find a positive knowledge spillover effect. Our model also provides a tractable framework for a long-run key player analysis.
Adam McCloskey
- Short and Simple Confidence Intervals when the Directions of Some Effects are Known, (with Philipp Ketz) Review of Economics and Statistics conditionally accepted.
Abstract: We introduce adaptive confidence intervals on a parameter of interest in the presence of nuisance parameters, such as coefficients on control variables, with known signs. Our confidence intervals are trivial to compute and can provide significant length reductions relative to standard ones when the nuisance parameters are small. At the same time, they entail minimal length increases at any parameter values. We apply our confidence intervals to the linear regression model, prove their uniform validity and illustrate their length properties in an empirical application to a factorial design field experiment and a Monte Carlo study calibrated to the empirical application. - Inference After Estimation of Breaks, (with Isaiah Andrews and Toru Kitagawa) Journal of Econometrics 224(1), 2021.
Abstract: In an important class of econometric problems, researchers select a target parameter by maximizing the Euclidean norm of a data-dependent vector. Examples that can be cast into this frame include threshold regression models with estimated thresholds and structural break models with estimated break dates. Estimation and inference procedures that ignore the randomness of the target parameter can be severely biased and misleading when this randomness is non-negligible. This paper studies conditional and unconditional inference in such settings, accounting for the data-dependent choice of target parameters. We detail the construction of quantile-unbiased estimators and confidence sets with correct coverage, and prove their asymptotic validity under data generating process such that the target parameter remains random in the limit. We also provide a novel sample splitting approach that improves on conventional split-sample inference.
Alessandro Peri
- Optimal social distancing and the economics of uncertain vaccine arrival, (with Terrence Iverson and Larry Karp) Journal of Industrial Economics 69(2), 2021, 369-409.
Abstract: We analytically identify two mechanisms that explain why a later arrival time for a pandemic-ending vaccine has an ambiguous effect on optimal social-distancing policy. We assess the net effect of these channels using a quantitative model solved for over a thousand parameter combinations. Optimal policy and welfare comparisons are both highly sensitive to beliefs about vaccine arrival. A policy of moving quickly to herd immunity by requiring social distancing for only the most vulnerable might be loosely justified for expected vaccine arrivals over 2 years, but becomes catastrophic if the expected arrival is within a year.
Scott Savage
- Tariff Pass-Through and Welfare in the Tablet Computer Market, (with R. Scott Hiller) Journal of Industrial Economics 69(2), 2021, 369-409.
Abstract: This paper estimates the short-run effects of tariffs on United States tablet computer prices and welfare. Market-level data are used to estimate a model of demand, supply and trade policy and to simulate equilibria prices and sales in scenarios with tariffs on Chinese production. A 25 percent tariff on firms assembling in China results in a tariff elasticity of consumer prices of 1.108, a 29.6 percent decline in profits for firms assembling in China, and a deadweight loss of 28.8 percent of total economic surplus. Firms assembling elsewhere benefit from the reduction in rival’s competitiveness by increasing their prices, market shares and profits. A long-run implication is that firms may be incented to shift production from “uncompetitive” facilities in China to lower-cost countries that are politically favored by the United States.
Carol H. Shiue
- Capital Markets in China and England in the 18th and 19th Centuries: Evidence from Grain Prices, (with Wolfgang Keller and Wang Xin) American Economic Journal: Applied Economics 13(3), 2021.
Abstract: Based on the most comprehensive grain prices available, we employ a storage model to estimate consistent interest rates and compare capital market development in Britain and China. Interest rates for Britain were lower than China’s on average by about three percentage points from 1770 to 1860. Regional capital market integration in the Yangzi Delta comes close to the British average at distances below 200 kilometers, but at larger distances interest rate correlations in Britain are twice those of the Delta, and three or more times as high as elsewhere in China. Overall, our results suggest capital market divergence at an early date.