4 October 2012

Lead Policy and Academic Performance

Jessica Wolpaw Reyes analyzes data on children born between 1991 and 2000 who were attending third and fourth grade between 2000 and 2009 at more than 1,000 public elementary schools in Massachusetts. She finds that elevated levels of blood lead in early childhood adversely affect standardized test performance, even when she controls for both community and school characteristics. Her results imply that public health policy, which reduced levels of childhood lead in the 1990s, was responsible for some improvement in test performance in the 2000s. She estimates that such policies lowered the share of children scoring "unsatisfactory" on standardized tests by 1 to 2 percentage points.

3 October 2012

The Effect of Recent Cigarette Tax Increases on Adult Smoking

Using data from the Current Population Survey's Tobacco Use Supplements covering 1995-2007, Kevin Callison and Robert Kaestner estimate that among adults, increases in cigarette taxes are associated with only small decreases in cigarette consumption. They conclude that it would take sizable tax increases, on the order of 100 percent, to decrease adult smoking by as much as 5 percent.

2 October 2012

The Cost of Financial Frictions for Life Insurers

Ralph Koijen and Motohiro Yogo find that life insurers reduced the price of long-term insurance policies in January 2009 when historically low interest rates implied that they should have raised prices instead. The price reductions were larger for policies with looser statutory reserve requirements and among those companies whose balance sheets had deteriorated prior to January 2009. The researchers conclude that there were two reasons for this pricing behavior: first, the financial crisis had an adverse impact on insurance companies’ balance sheets, so insurance companies had to quickly recapitalize to contain their leverage ratio and to avoid a rating downgrade; and second, statutory reserve regulation in the United States allowed life insurers to record far less than a dollar of reserve per dollar of future insurance liability in January 2009. Analyzing nearly 35,000 insurance prices from January 1989 through July 2011, Koijen and Yogo find that the shadow cost of financial frictions is essentially zero for most of the sample but was nearly $5 per dollar of excess reserve for the average insurance company in January 2009.

1 October 2012

Marriage Institutions and Sibling Competition

Using data from Bangladesh, India, Nepal, and Pakistan, Tom Vogl examines one of the effects of arranged marriage: the rivalry that it cultivates among sisters. In countries where arranged marriages are common, parents typically want to marry off their oldest daughter first. Because girls in these countries leave school when they marry and thus face limited earnings opportunities when they reach adulthood, the number of sisters one has, and whether they are older or younger, has consequences for a woman's well-being over her life time. Vogl finds that having younger sisters is correlated with a girl leaving school earlier, leading to lower literacy, and to being matched to a husband with less education and a less-skilled occupation. He finds that these cross-sister pressures on marriage age are common throughout the developing world, although their effect on schooling costs varies by country.

28 September 2012

The Value of Bosses

Edward Lazear, Kathryn Shaw, and Christopher Stanton analyze measures of daily productivity for over 23,000 workers, matched to nearly 2,000 bosses (supervisors) over the five years from June 2006 through May 2010. The workers' productivity is measured by computer for a single "technology-based service" job -- such jobs include retail sales clerk, movie theater concession stand employee, in-house IT specialist, airline gate agent, call center worker, technical repair worker, or other jobs in which an employee is logged into a computer while working. The researchers find that bosses vary in quality, in terms of their effect on workers' productivity: replacing a boss who is in the lower 10 percent of quality with one who is in the upper 10 percent of quality increases a team’s total output by about the same amount as adding one worker to a nine member team. The results imply that the average boss is about 1.75 times as productive as the average worker.

27 September 2012

Do Patent Pools Encourage Innovation?

Patent pools allow competing firms to combine their patents for the same technology as if they are a single firm. Ryan Lampe and Petra Moser analyze over 75,000 patent applications across 20 industries between 1921 and 1948, encompassing the period when New Deal regulations made it easier for firms to pool their patents. They find a 16 percent decline in patenting in response to the creation of a patent pool, which occurred in fields where competing firms were combining patents for substitute technologies.

26 September 2012

Is U.S. Economic Growth Over?

Robert Gordon asks whether it is reasonable to assume that economic growth will continue, especially for the United States, at a pace similar to that of the past 250 years, which encompassed the Industrial Revolution, various advances in transportation, and the rise of the computer and related inventions. He concludes that even if innovation were to continue at the rate of the two decades before 2007, six "headwinds" -- demography, education, inequality, globalization, energy/environment, and the overhang of consumer and government debt -- would reduce long-term growth to half or less of its 1860-2007 annual rate of 1.9 percent. His estimates suggest that for all but the top one percent of the income distribution, future growth in consumption per capita could fall below 0.5 percent per year for decades to come.

25 September 2012

Local Ethnic Communities Provide Channels of Influence

By analyzing customs and port authority data on the international shipments of all U.S. publicly-traded firms over the past 17 years, Lauren Cohen, Umit Gurun, and Christopher Malloy find a causal link between local networks of ethnic residents and a firm's trade links. For example, a firm in a largely Indian area of New Jersey is more likely to trade with India. They also find that firms that exploit such networks experience stronger future sales growth and profitability, and their risk-adjusted stock returns outperform other importers and exporters by 5 to 7 percent per year. They conclude that immigrants play a surprisingly large economic role as conduits of information for firms in their new countries.

24 September 2012

Evidence from the Home Affordable Modification Program

The 2009 Home Affordable Modification Program (HAMP), which was one of the federal government's responses to the foreclosure crisis, provided financial incentives to mortgage servicers to renegotiate mortgage loans. Sumit Agarwal, Gene Amromin, Itzhak Ben-David, Souphala Chomsisengphet, Tomasz Piskorski, and Amit Seru estimate that the HAMP program will reach only about one-third of its targeted households. The reason for this shortfall is that a few large servicers have been renegotiating mortgages at half the rate of other mortgage lenders, possibly because of limited organizational capacity. Experience with this program suggests that it is not possible for the government to quickly influence firm behavior with financial incentives.

21 September 2012

Medicaid Eligibility and Teenage Mortality

Several early expansions of Medicaid extended eligibility for this publicly provided health insurance only to children born after September 30, 1983. If their family incomes were at or just below the poverty line, children had nearly five more years of Medicaid eligibility if they were born just after the cutoff date than if they were born just before it. Bruce Meyer and Laura Wherry find that these program expansions had a particularly large effect on Medicaid eligibility for black children, and that these expansions were associated with a a 13-18 percent decrease in the mortality rate of black teens born after September 30, 1983.
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