23 August 2012

Global Banks and Crisis Transmission

Sebnem Kalemli-Ozcan, Elias Papaioannou, and Fabrizio Perri find that for 20 developed countries between 1978 and 2009, in periods without financial crises the increases in bilateral banking linkages were associated with more divergent output cycles. However, this relationship was significantly weaker during periods of financial turmoil, suggesting that financial crises induce co-movement among more financially integrated countries. The researchers also show that countries with stronger financial ties to the United States, whether direct or indirect, experienced cycles that were more synchronized with the United States during the 2007-9 downturn.

22 August 2012

Job Applications to Distressed Firms

Looking at jobs posted by 40 high-profile financial services firms to a job search platform between April 2008 and December 2009, Jennifer Brown and David Matsa find that firms attract significantly fewer applications per job opening during periods of firm-level financial distress. On average, about 20 percent fewer job seekers apply to a given position for each 10-percentage point increase in the firm’s probability of default. These effects are particularly evident in locations where workers have weaker protections against unemployment and for positions requiring advanced training.

21 August 2012

The Effect of the Earned Income Tax Credit on Infant Health

Hilary Hoynes, Doug Miller, and David Simon examine the impact of the federal Earned Income Tax Credit (EITC) on birth weight and the prevalence of low birth weight infants (weighing less than 2,500 grams), two widely used measures of infant health. They use data from U.S. Vital Statistics covering all births beginning in 1984, and look at the outcomes a few years before the 1986 expansion in the EITC, through the year 1998, and then a few years after the fully phased in 1993 expansion in the EITC. They find that for single mothers with less than a high school education, an increase of $1000 in EITC income is associated with a 6 to 10 percent reduction in low birth weight rate. The effects are even larger among African-American mothers.

20 August 2012

Effects of Federal Policies to Insure Young Adults

The federal Affordable Care Act (ACA) required private health insurers to allow older dependent children to stay on their parents' policies until age 26. Using data covering the period from August 2008 to November 2011, Yaa Akosa Antwi, Asako Moriya, and Kosali Simon find the ACA substantially reduced a lack of insurance among young adults. They were about 30 percent more likely to be on their parents’ employer policies after the staggered implementation had begun in September 2010 than before the law was enacted. Increases in dependent coverage were greater for whites than non-whites, for single individuals than for married individuals, and for non-students relative to students.

17 August 2012

How Weather Affects the Car and Housing Markets

Meghan Busse, Devin Pope, Jaren Pope, and Jorge Silva-Risso analyze data on more than forty million vehicle transactions and four million housing purchases in order to estimate the effect of weather on purchasing decisions. They find that the decision to buy a convertible, a 4-wheel drive vehicle, or a vehicle with black exterior finish is highly dependent on the weather at the time of purchase. Similarly, what potential buyers say they would pay for having a swimming pool or central air in a house is higher when the house goes under contract in the summertime than in the wintertime.

16 August 2012

The Benefits of College Athletic Success

Michael Anderson gathered data on games played by all FBS (Football Bowl Subdivision, formerly known as “Division I-A”) college teams from 1986 to 2009 from the website, including data on the game’s date, the opponent, the score of each team, and the expected score differential between the two teams (known as the spread). He finds that having a winning team reduces acceptance rates and increases donations, applications, academic reputation, in-state enrollment, and incoming SAT scores.

15 August 2012

An Options Market Based on the Probability of Inflation

Recently, a market in options based on Consumer Price Index inflation has emerged in the United States, where the payoff to investors is tied to the realized inflation rate. Yuriy Kitsul and Jonathan Wright use price quotes from this market to create implied probability density functions (pdfs) for inflation at different maturities. They then study how these pdfs respond to macroeconomic news announcements. They find that certain news announcements significantly affect the implied probabilities of deflation and of high inflation. The option-implied pdfs put substantially more weight on both high inflation and deflation than their objective counterparts, implying that investors have high marginal utility in the state of the world where inflation is high and in the deflationary state.

14 August 2012

Deep Recessions, Fast Recoveries, and Financial Crises

Looking back at America's economic history, Michael Bordo and Joseph Haubrich find that, in general, recessions associated with financial crises are followed by rapid recoveries. Three exceptions to this pattern exist: the recovery from the Great Contraction in the 1930s; the recovery after the recession of the early 1990s; and the current recovery, which is strikingly more tepid than the one in the 1990s.

13 August 2012

Has Surface Water Quality Improved Since the Clean Water Act?

On the fortieth anniversary of the federal Clean Water Act, Kerry Smith and Carlos Valcarcel Wolloh use a single standard of "water cleanliness" for the period 1975-2011 and find that for the nation as a whole, fresh water lakes are about at the same quality levels as they were in 1975. Water quality appears to be affected by the business cycle: as the unemployment rate rises, all of the national indexes for water quality improve, and the reverse seems to accompany improving economic conditions.

10 August 2012

The Returns to Education in China

Hai Fang, Karen Eggleston, John Rizzo, Scott Rozelle, and Dick Zeckhauser find that China's Compulsory Education Law of 1986 raised overall educational attainment by about 0.8 years of schooling during the period 1997-2006. The impact of the law varied by location and by gender. The authors further find that the overall returns to education after the implementation of the Act are approximately 20 percent per year on average. This is fairly consistent with, albeit slightly higher than, the returns to education in most industrialized economies.
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