NBER News and Research Archive

16 October 2012

The Effect of Pollution on Infant Mortality

Eva Arceo-Gomez, Rema Hanna, and Paulina Oliva construct weekly, municipality- level measures of air pollution and infant mortality for 48 municipalities across Mexico City between the years 1997 and 2006. They examine the effect of thermal inversions, which occur when a mass of hot air gets caught above a mass of cold air, trapping pollutants. They estimate that on average, an inversion leads to a 5.4 percent increase in carbon monoxide (CO), and that the effect of elevated CO levels on infant mortality rates in Mexico is larger than the effect found in studies of U.S. data.

15 October 2012

Effects of the Social Security Windfall Elimination Provision

Millions of federal, state, and local government employees have lifetime earnings that are divided between employment that is covered by the Social Security system and employment that is not covered. Simply applying the standard benefit formula only to their covered earnings would provide a higher replacement rate on those earnings than is appropriate given their total (covered plus uncovered) lifetime earnings. The Windfall Elimination Provision (WEP), established in 1983, is intended to correct this situation by applying a modified benefit formula to the earnings of individuals with non-covered employment. Jeff Brown and Scott Weisbenner find that the WEP reduces benefits disproportionately for lower earning households because it changes the marginal Social Security benefit only on the first $711 (in 2008) of average indexed monthly earnings.

12 October 2012

Physical Education and Obesity among Elementary School Children

Comparing states with different physical education (PE) requirements in elementary schools over the period 1998-2004, John Cawley, David Frisvold, and Chad Meyerhoefer find that PE requirements lower body mass index and reduce the probability of obesity among fifth graders (in particular, boys). They do not find that increased PE time crowds out time in academic courses or affects achievement test results.

11 October 2012

Manipulating Online Reviews

Dina Mayzlin, Yaniv Dover, and Judy Chevalier compare hotel reviews on and to try to determine whether conscious manipulation of online reviews occurs. They note that anyone can post a review on Tripadvisor, but customers can only post a review of a hotel on Expedia if they have actually booked at least one night at the hotel through the website. Independent hotels that are individually owned have the most to gain from good reviews; branded chain hotels owned by multi-unit owners have the least to gain. The researchers find that hotels with a high incentive to fake reviews have a greater share of five-star (positive) reviews on Tripadvisor than on Expedia. They also find that the hotels that are neighbors of these hotels have more one- and two-star (negative) reviews on Tripadvisor than Expedia.

10 October 2012

Job Polarization and Jobless Recoveries

Over the past 30 years the U.S. labor market has been characterized by job polarization -- the loss of middle-skill, routine jobs -- and jobless recoveries following recessions. Nir Jaimovich and Henry Siu show that job polarization is most pronounced in economic downturns and is therefore a business cycle phenomenon. They also show that job polarization explains jobless recoveries: almost all of the contraction in aggregate employment during recessions can be attributed to job losses in middle-skill, routine occupations.

9 October 2012

Entrepreneurship and Urban Growth

Ed Glaeser, Sari Pekkala Kerr, and Bill Kerr investigate the connection between historical mineral and coal deposits and modern entrepreneurship. They demonstrate that a city's proximity to mineral and coal deposits in the year 1900 is strongly positively correlated with its average manufacturing establishment size in 1963 and later years. Cities with such proximity have fewer smaller firms and startups, which are characteristic of entrepreneurship. Having mineral deposits near the city is also associated with larger average establishment size in quite unrelated industries in the 1970s and 1980s. In fact, the authors conclude that proximity to mines in 1900 predicts larger establishments, less entry, and less urban growth in trade, services, and finance today.

5 October 2012

Debt- and Equity-Led Capital Flow Episodes

Using data from 1980 through 2009 from more than 50 emerging and developed economies, Kristin Forbes and Frank Warnock document a number of episodes of extreme capital flow movements: surges, stops, flight, and retrenchment. They uncover an unprecedented incidence of stops and retrenchment during the recent Global Financial Crisis, as investors around the world liquidated foreign investment positions and brought money home. The vast majority of these extreme capital flow episodes - 80 percent of inflow episodes (surges and stops) and 70 percent of outflow episodes (flight and retrenchments) - were fueled by debt, not equity, flows. Risk measures are important in explaining debt-led episodes; when risk aversion is high, debt-led surges are less likely and debt-led stops are more likely. Contagion, especially regional, is also important for debt-led episodes.

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.

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