NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Michael C. Best

Department of Economics
Columbia University
420 West 118th Street
New York, NY 10027
Tel: 415/316-5006

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NBER Program Affiliations: PE , DEV
NBER Affiliation: Faculty Research Fellow

NBER Working Papers and Publications

August 2018Estimating the Elasticity of Intertemporal Substitution Using Mortgage Notches
with James Cloyne, Ethan Ilzetzki, Henrik Kleven: w24948
Using a novel source of quasi-experimental variation in interest rates, we develop a new approach to estimating the Elasticity of Intertemporal Substitution (EIS). In the UK, the mortgage interest rate features discrete jumps – notches – at thresholds for the loan-to-value (LTV) ratio. These notches generate large bunching below the critical LTV thresholds and missing mass above them. We develop a dynamic model that links these empirical moments to the underlying structural EIS. The average EIS is small, around 0.1, and quite homogeneous in the population. This finding is robust to structural assumptions and can allow for uncertainty, a wide range of risk preferences, portfolio reallocation, liquidity constraints, present bias, and optimization frictions. Our findings have implications for...
April 2017Individuals and Organizations as Sources of State Effectiveness, and Consequences for Policy
with Jonas Hjort, David Szakonyi: w23350
How much of the variation in state effectiveness is due to the individuals and organizations responsible for implementing policy? We investigate this question and its implications for policy design in the context of public procurement, using a text-based product classification method to measure bureaucratic output. We show that effective procurers lower bid preparation/submission costs, and that 60% of within-product purchase-price variation across 16 million purchases in Russia in 2011-2015 is due to the bureaucrats and organizations administering procurement processes. This has dramatic policy consequences. To illustrate these, we study a ubiquitous procurement policy: bid preferences for favored firms (here domestic manufacturers). The policy decreases overall entry and increases prices...
 
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