9 October 2012
, 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
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
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
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
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.