9 August 2012

Stand Your Ground Laws and Homicides

Since 2005, eighteen states have passed legislation extending the right to self-defense, with no duty to retreat, to places a person has a legal right to be. These are known as Stand Your Ground laws. Exploiting the variation in the timing of these laws across states, and using monthly data from the U.S. Vital Statistics, Chandler McClellan and Erdal Tekin find that Stand Your Ground laws are associated with a significant increase in the number of homicides among whites, especially white males. They find no evidence that these laws increase homicides among blacks.

8 August 2012

Measuring Managerial Skill in the Mutual Fund Industry

Using data on all actively managed mutual funds and a tradable benchmark for evaluating fund managers -- all available Vanguard index funds -- Jonathan Berk and Jules van Binsbergen find that the average mutual fund manager uses his or her talents and skills to add value of about $2 million a year. They also find that skills are persistent: it is possible to predict long-term performance as far out as ten years into the future. Investors appear to be able to identify talent and compensate it: the researchers find a strong relationship between managerial compensation and value added. Furthermore, current compensation predicts future performance.

7 August 2012

Competition among University Endowments

After identifying clusters of competitive universities, William Goetzmann and Sharon Oster find that schools competing in the same markets for students follow similar asset allocation policies over time, even with endowment size and other school characteristics held constant. They also find that when a school’s endowment return lags relative to that of its closest rival, it systematically changes its asset allocation. Endowments use marketable alternatives, such as hedge funds, to attempt to catch up with their competitors. Endowments with recent positive experience with various alternative asset classes tend to increase exposure to them.

6 August 2012

A Study of Private Disability Insurance

Using data on approximately 10,000 policies and 1 million workers from a private Long Term Disability (LTD) insurer, David Autor, Mark Duggan, and Jonathan Gruber find that LTD claims rates are much lower under the private system than under its public counterpart, the Social Security Disability Insurance program. Focusing on variation in private LTD plans within firms and over time, the researchers find that a higher replacement rate – that is, a higher ratio of benefits to earnings while working -- and a shorter waiting period before the receipt of benefits -- also known as the Elimination Period, or EP - significantly increase the likelihood that workers claim LTD. In contrast, a longer EP has a deterrent effect: workers are less likely to bother to make a claim for a disability if they will only be able to collect for a short period of time.

3 August 2012

Monetary Policy Affects Inequality in the U.S.

Analyzing data on U.S. income and consumption since 1980 from the Consumer Expenditures Survey, Olivier Coibion, Yuriy Gorodnichenko, Lorenz Kueng, and John Silvia find that contractionary monetary policies are associated with increased inequality in labor earnings, total income, consumption, and total expenditures. They also find that monetary shocks can explain much of the historical cyclical variation in income and consumption inequality.

2 August 2012

Plan Selection in Medicare Part D

Analyzing administrative data on medical claims under Medicare Part D (prescription drug benefit), researchers Florian Heiss, Adam Leive, Dan McFadden, and Joachim Winter find that less than 10 percent of individuals enroll in plans that would be lowest cost for them, when cost includes both premiums and co-payments. They estimate that relative to the Medicare administration's benchmark rule, which conditions next year’s plan choice only on the drugs consumed in the current year, enrollees lost on average about $300 per year.

1 August 2012

Leveraging Behavioral Economics to Improve Educational Performance

Steve Levitt, John List, Susanne Neckermann, and Sally Sadoff analyze the results of a number of field experiments conducted in the Chicago schools over a period of years that were designed to motivate primary and secondary school students to improve their test scores. They find that non-financial incentives are more cost-effective than financial incentives for younger students, but not for older students. They also find that the motivating power of incentives disappears when the rewards are not immediate, but they observe that the rewards to educational investment virtually always come with a delay. They conclude that in the absence of immediate incentives, many students may put forth low effort on standardized tests, and that may result in biased measures of student ability, teacher value added, school quality, and achievement gaps.

31 July 2012

The Effects of Accelerating Algebra in Middle School

In the 2002/3 school year, the Charlotte-Mecklenburg Schools in North Carolina initiated a program of accelerating entry into algebra coursework. As a result, the proportion of moderately-performing students who took algebra in eighth grade increased from 50 percent to 85 percent, and then returned to the baseline level, over a five-year period. Charlie Clotfelter, Helen Ladd, and Jake Vigdor find that the students affected by this initiative scored lower than students who were not in the accelerated program on end-of-course tests in Algebra I and were less likely, or at least no more likely, to pass the standard follow-up courses, Geometry and Algebra II, on a college-preparatory timetable.

30 July 2012

Do Male-Female Wage Differentials Reflect Differences in the Return to Skill?

In the United States, wage differentials between men and women with otherwise similar observable characteristics declined significantly over the 1980s and 1990s, while the returns to education increased. Paul Beaudry and Ethan Lewis find that at the city level, male-female wage differentials moved in the opposite directions to changes in the returns to education during this same period. Their cross-city estimates suggest that most of the aggregate reduction in the male-female wage differential observed over the period likely came from a change in the relative price of a skill that both females and educated workers have in greater abundance.

27 July 2012

The Role of Financial Incentives in the Call to Public Service

As part of its Regional Development Program (RDP), Mexico's federal government sought to enhance state presence in 167 of its most marginalized municipalities by, among other things, building a network of 350 community development agents. To hire those agents, the RDP conducted a recruitment drive in 2011. Different salaries were announced randomly across recruitment sites; job offers were subsequently randomized; and screening relied on exams designed to measure applicants' intellectual ability, personality, and motivation. Ernesto Dal Bó, Frederico Finan, and Martín Rossi find that higher wages attracted more able applicants as measured by their IQ, personality, and proclivity towards public sector work. Higher wage offers also increased acceptance rates. Distance and less attractive municipal characteristics strongly decreased acceptance rates, but higher wages helped to bridge the recruitment gap in those municipalities.
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