22 September 2010

Can Cheap Credit Explain the Housing Boom?

According to the Federal Housing Finance Agency, real house prices rose by 53 percent between 1996 and 2006. Ed Glaeser, Josh Gottlieb, and Joe Gyourko conclude that lower real interest rates -- easy credit -- can explain only one-fifth of that increase. They do not find any evidence that changes in approval rates or loan-to-value levels were substantial contributors to the large changes in house prices over this period either.

21 September 2010

Why has the yen failed to become a dominant invoicing currency in Asia?

Although the yen is the only fully convertible currency in Asia, Japanese trading firms tend to invoice their exports to advanced countries in the importer's currency, and frequently they invoice their exports to East Asia in U.S. dollars.Taka Ito, Satoshi Koibuchi, Kiyotaka Sato, and Junko Shimizu conducted interviews with 23 Japanese representative firms in four industries -- automobile, electrical machinery, general machinery, and electrical component -- to learn more about their currency invoicing practices and their exchange rate risk management. Based on these interviews, the researchers find that there may be some savings to the firms from concentrating currency risk at the headquarters, and that the final products of Japanese electronics companies in Asia tend to be exported to the United States or Europe, so they may as well be priced in dollars.

20 September 2010

Income Differences and the Prices of Tradables

After analyzing the prices of identical goods that were sold online in 28 countries in 2008 by the Spanish women's clothing manufacturing company "Mango", Ina Simonovska finds that Mango exploits cross-country differences in price elasticities of demand and sets systematically higher prices and mark-ups in its richer destinations. When she extends her analysis, she concludes that final tradable goods are more expensive in richer countries. Her model suggests that variable mark-ups account for 80 percent of the positive price-income relationship that can be observed across 123 countries.

17 September 2010

A Reexamination of the HighScope Perry Preschool Program

The HighScope Perry Preschool Program was a social experiment conducted in the 1960s in Ypsilanti, Michigan, which provided preschool education and home visits to disadvantaged children during their preschool years. James Heckman, Seong Hyeok Moon, Rodrigo Pinto, Peter Savelyev, and Adam Yavitz find that the intended randomization protocol of this social experiment, which was necessary to appropriately evaluate its outcome, was compromised. Nonetheless, when they re-evaluate the program using improved methodology, they confirm that it had statistically significant and economically important effects.

16 September 2010

Information and Employee Evaluation

In a randomized pilot program in New York City in 2007-8, some school principals were provided with estimates of how well individual teachers in their school did in raising their students’ test scores in math and English. Jonah Rockoff, Doug Staiger, Tom Kane, and Eric Taylor find that principals who are provided with this type of objective performance data tend to use it. Those teachers whose performance is rated low are more likely to leave their job by being fired or by resigning. Perhaps because of this change in personnel, student achievement improves slightly in the following year in those schools where principals received this information.

15 September 2010

The Relationship between Environmental Concerns and the Business Cycle

Matt Kahn and Matthew Kotchen find that an increase in a state’s unemployment rate decreases Google searches for the term “global warming” and increases searches for the word “unemployment.” From national surveys, they learn that an increase in a state’s unemployment rate is associated with a decrease in the probability that residents think that global warming exists, which translates to reduced support for targeted policies intended to mitigate global warming. Finally, they find that in California, an increase in a county’s unemployment rate is associated with a significant decrease in county residents choosing the environment as the most important policy issue.

14 September 2010

Does the Effectiveness of Fiscal Stimulus Depend on How It Is Delivered?

Claudia Sahm, Matt Shapiro, and Joel Slemrod quantify the spending response to the one-time economic stimulus payments to households in 2008 versus the Making Work Pay tax credit which most working households received in the form of reduced withholding in 2009. Based on the survey responses of a representative sample of households, the researchers find that the reduction in withholding led to a substantially lower rate of spending than the one-time payments. Specifically, 25 percent of households reported that the one-time economic stimulus payment in 2008 led them to mostly increase their spending -- only 13 percent reported that the extra pay from the lower withholding in 2009 led them to mostly increase their spending.

13 September 2010

How Publicly Reported Provider Quality Information Affects the CABG Market in Pennsylvania

Since 1992, the Pennsylvania Health Care Cost Containment Council has published report cards on the providers of cardiac surgery. Justin Wang, Jason Hockenberry, Shin-Yi Chou, and Muzhe Yang ask how the grades of providers of coronary artery bypass grafts affect their total number of patients and the severity of those patients' conditions. The researchers find a reduction in the volume of patients of poorly performing and unrated surgeons, but no effect on the more highly rated surgeons.

10 September 2010

Hard Economic Times

John Campbell, Stefano Giglio, and Christopher Polk show that the stock market downturns of 2000-2 and 2007-9 had very different proximate causes. In the early 2000s, there was a large increase in the discount rates that rational investors applied to corporate profits. In the late 2000s, rational expectations of future profits decreased. In both periods, the downturn reversed the trends of the previous boom. This implies that the downturn in 2007-9 was particularly serious for rational long-term investors, who did not expect a strong recovery in stock prices as they had earlier in the decade.
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