Lord Mervyn King, Former Bank of England Governor,
Says Macroeconomic Analysis of Major Swings Is Weak

Delivering the annual Martin Feldstein Lecture at the NBER Summer Institute, former Bank of England Governor Mervyn King critiqued the effectiveness of modern macroeconomic models for addressing radical uncertainty and explaining large swings in economic activity. A video of his full presentation is available and a transcript of it is featured in the new edition of The NBER Reporter. Also in this edition, NBER affiliates write about their work applying Ricardian theory in international trade, creating models for assessing climate change impacts, identifying barriers to postsecondary educational achievement, and exploring gender discrimination in the developing world.

New NBER Research

20 October 2017

The Evolution of Corporate Cash

John R. Graham and Mark T. Leary find that the increase in average corporate cash ratios since 1980 is driven entirely by a shift in the cash policies of new firms: within-firm changes in cash holdings have been negative or flat since World War II.

19 October 2017

Fiscal Stimulus and Fiscal Sustainability

Alan J. Auerbach and Yuriy Gorodnichenko finds that government spending shocks associated with activist discretionary fiscal policy do not lead to persistent increases in debt-to-GDP ratios or costs of borrowing.

18 October 2017

Early Childhood Health Shocks and Adult Wellbeing:
Evidence from Wartime Britain

A study of England and Wales at the onset of World War II by Jeffrey C. Schiman, Robert Kaestner, and Anthony T. Lo Sasso finds that individuals born in areas with higher infant mortality exhibited higher likelihood of disability, lower probability of employment, and less earned income later in life.
More Research

Richard Thaler Wins Nobel Prize in Economic
Sciences for Research on Behavioral Economics

Richard Thaler of the University of Chicago's Booth School of Business, an NBER research associate for more than 25 years, was awarded the 2017 Nobel Prize in Economic Sciences October 9 for his contributions to behavioral economics.

The Royal Swedish Academy of Sciences' announcement of the prize explains that "Thaler has incorporated psychologically realistic assumptions into analyses of economic decision-making. By exploring the consequences of limited rationality, social preferences, and lack of self-control, he has shown how these human traits systematically affect individual decisions as well as market outcomes....

"His empirical findings and theoretical insights have been instrumental in creating the new and rapidly expanding field of behavioral economics, which has had a profound impact on many areas of economic research and policy."

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The NBER Digest

Some People Start Claiming Social Security
Benefits Early, Some Late. But Why?

Research summarized in the October edition of The NBER Digest finds that primary earners, the more educated, and those with retirement savings delay claiming — which increases their benefits — while people who claim earlier have stopped working, need money, or fear benefits will be cut in the future. In other work featured this month, NBER researchers look into the impact of the "default effect" on an electricity pricing scheme, compare the effects of tuition-cost reductions and institutional improvements on postsecondary educational attainment, measure the rise in citations of economic papers in other fields, probe the willingness to pay for health insurance of individuals who qualify for large subsidies, and analyze a loss of special status for moderate- and long-term U.S. Treasury bonds.

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The NBER Bulletin on Aging and Health

Incremental U.S. Emission Controls Provide
Setting for Pollution Exposure Study

The U.S. Acid Rain Program introduced in 1995 initially regulated sulfur dioxide output of only the 110 highest emitting power plants, making it possible for researchers to identify long-term effects of pollution exposure on otherwise similar populations. A study summarized in the current edition of the NBER's Bulletin on Aging and Health finds that trends in mortality changed significantly after the onset of the Acid Rain Program between populations near to and far from affected plants, linking reduction in sulfur dioxide emissions to a decline in mortality.

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2017 Summer Institute Methods Lectures Focus
on Research Avenues Opened by Data Linking

The increasing availability of large administrative data sets from both the public and private sectors has placed new emphasis on the tools and techniques for linking data from multiple sources. NBER Research Associates Martha Bailey (above) of the University of Michigan, John M. Abowd of Cornell University and the U.S. Bureau of the Census, and Joseph Ferrie of Northwestern University explained the possibilities and challenges of data linking in the Methods Lectures series at the 2017 NBER Summer Institute.
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