NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

5 December 2012

Retirement Pay and Officer Retention

The U.S. military retirement system underwent substantial changes in 1986 with the passage of the Military Retirement Reform Act, and again in 2000 when key provisions of that bill were repealed. Jeff Smith and Jim West study rates of officer retention under more and less generous pension benefit regimes brought about by those changes and find that reductions in benefits significantly reduce the probability of officers remaining in the military. They estimate that a 20-percent reduction in the generosity of retirement benefits has roughly the same effect on the probability of remaining on active duty as a 0.27 percentage point reduction in the unemployment rate, or a roughly 2 percent increase in the GDP growth rate.

4 December 2012

The Effects of Scientific Paper Retractions

With a sample of more than 1,100 retractions of scientific papers, Pierre Azoulay, Jeff Furman, Josh Krieger, and Fiona Murray study how closely related articles that were published prior to these retractions are affected by this taint of "false science." They find that related articles experience a lasting 5-to-10 percent decline in the rate at which they are cited, although citations in for-profit publications respond less to the retractions than citations in academic publications. The decline in citations of related papers is more severe when the retracted article involves fraud or misconduct, rather than an honest mistake.

3 December 2012

The Effect of Schooling on Cognitive Skills

Almost all 18 year-old males in Sweden who enlisted in the military between 1980 and 1994 were required to take a battery of cognitive tests in preparation for military service, but test dates were assigned randomly, so those of similar age and graduating class had accumulated slightly different days of schooling when tested. Magnus Carlsson, Gordon Dahl, and Dan-Olof Rooth find that an extra ten days of school instruction raises the cognitive scores of these young men on intelligence tests.

30 November 2012

Some Effects of Behavioral Interventions for Energy Conservation

Hunt Allcott and Todd Rogers study the short-run and long-run effects of an energy conservation initiative that involved mailing "Home Energy Reports" featuring personalized feedback, social comparisons, and energy conservation information to households monthly or every few months. This program has been running continuously since October 2008, and includes one randomly-selected group of households that stopped receiving the reports after two years. When the authors analyze over 200 million observations of daily electricity use over a six-year period, they find a pattern of "action and backsliding": consumers reduce electricity use markedly within days of receiving each of their initial reports, but their responses decay relatively quickly. However, there is a durable treatment effect that remains: for the group that continuously receives reports over a four-year period, the effects continue to grow. Even in the group whose reports were discontinued after two years, the backsliding happens more slowly, indicating that they had already formed habits of conserving.

29 November 2012

Who Ran on Repo?

A repurchase agreement -- "repo" -- is the sale of securities together with an agreement for the seller to buy back those securities at a later date. Between the second quarter of 2007 and the first quarter of 2009, net repo financing provided to U.S. banks and broker-dealers fell by about $1.3 trillion. Gary Gorton and Andrew Metrick analyze official data sources on repo, along with the results of a unique market survey conducted by the Bond Market Association among its members on their use of repo as of June 30, 2004. The researchers conclude that the 2007-9 “run on repo” was predominantly driven by the flight of foreign financial institutions, domestic and offshore hedge funds, and other unregulated cash pools.

28 November 2012

Re-Assessing Uncovered Interest Parity

According to the "unbiasedness hypothesis", the interest rate differential between two countries should be an unbiased predictor of the change in the exchange rate between them. In a sample of countries extending up to the year 2000, this was true at longer horizons of five and ten years, but not for shorter horizons of up to one year. Menzie Chinn and Saad Quayyum ask whether this relationship still holds in data extending up to 2011. They find that it does, but their results are sensitive to the bond yields used and are more pronounced at long horizons when they use the pound instead of the dollar as the base currency. For currencies characterized by particularly low bond yields – the Japanese yen and the Swiss franc -- interest rates from the mid-1990s onward do not point in the right direction for subsequent exchange rate changes.

27 November 2012

Financial Constraints on Corporate “Goodness”

Is corporate social responsibility profitable, and do financial constraints change the relationship between profits and corporate “goodness”? Harrison Hong, Jeffrey Kubik, and Jose Scheinkman study a sample of S&P 500 firms over the period 1991-2008 and find that during the Internet bubble, when firms that had previously faced financial constraints were less constrained, their “goodness” temporarily increased relative to their peers who had not previously had financial constraints. The researchers also find that a financially constrained firm's (environmental) sustainability score increases more with its equity valuation and a lower cost of capital than does the score of a less constrained firm.

26 November 2012

Do Compulsory Schooling Laws Matter?

Karen Clay, Jeff Lingwall, and Mel Stephens analyze the effect of compulsory attendance laws on the schooling of U.S. children for three overlapping time periods: 1880-1927, 1890-1927, and 1898-1927. They find that laws passed after 1880 had significant effects on both school enrollment and attendance. Laws passed after 1890 affected not only enrollment and attendance but also educational outcomes, and the timing of the increases in enrollment and attendance suggests that they were caused by the change in the laws. For men of school age in 1898-1927 who reported positive wage income in the 1940 census, the compulsory attendance laws increased both schooling and wage income.

21 November 2012

Insurance Markets and Agricultural Choices in Ghana

Dean Karlan, Robert Darko Osei, Isaac Osei-Akoto, and Christopher Udry analyze the results of an experiment in northern Ghana in which farmers were randomly assigned to one group that received a cash grant, another that received free rainfall-index insurance or the opportunity to purchase it, and a third group that received a combination of the two. They find that the demand for rainfall insurance is strong, and that having such insurance leads farmers to invest more in their land and to choose production methods that on average yield more crops, but are more rain-sensitive. For farmers, the constraint to investing in agriculture appears to be uninsured rainfall risk.

20 November 2012

Do Women Avoid Salary Negotiations?

To study gender differences in wage negotiation and related issues, Andreas Leibbrandt and John List posted job advertisements for administrative assistant positions in nine major US cities, to which nearly 2,500 job-seekers responded. They find that when there is no explicit initial statement that wages are negotiable, men are more likely to negotiate than women. The researchers also find that men are relatively more likely to apply to jobs where negotiation of initial wages is ambiguous, while women prefer job environments where the "rules of wage determination" are concrete.
 
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