The Latest NBER Working Papers http://www.nber.org/new.html We nested a large-scale field experiment into the national rollout of the introduction of performance pay for medical care providers in Rwanda to study the effect of incentives for health care providers. In order to identify the effect of incentives separately from higher compensation, we held constant compensation across treatment and comparison groups - a portion of the treatment group's compensation was based on performance whereas the compensation of the comparison group was fixed. The incentives led to a 20% increase in productivity, and significant improvements in child health. We also find evidence of a strong complementarity between performance incentives and baseline provider skill. http://papers.nber.org/papers/w19046#fromrss http://papers.nber.org/papers/w19046#fromrss This paper aims at investigating the relationship between employment and GDP in the United States. We disentangle trend and cyclical employment components by estimating a non-linear Okun's law based on a smooth transition error-correction model that simultaneously accounts for long-term relationships between growth and employment and short-run instability over the business cycle. Our findings based on out-of-sample conditional forecasts show that, since the exit of the 2008-09 recession, US employment is on average around 1% below the level implied by the long run output-employment relationship, meaning that about 1.2 million of the trend employment loss cannot be attributed to the identified cyclical factors. http://papers.nber.org/papers/w19047#fromrss http://papers.nber.org/papers/w19047#fromrss In response to the Great Recession, the availability of unemployment insurance (UI) benefits was extended to an unprecedented 99 weeks in many U.S. states in the 2009-2012 period. We use matched monthly data from the CPS to exploit variation in the timing and size of the UI benefit extensions across states to estimate the overall impact of these extensions on individual exit from unemployment, and we compare the estimated impact with that for the prior extension of benefits during the much milder downturn in the early 2000s. In both periods, we find a small but statistically significant reduction in the unemployment exit rate and a small increase in the expected duration of unemployment. The effects on exits and duration are primarily due to a reduction in exits from the labor force rather than to a decrease in exits to employment (the job finding rate). Although the overall effect of UI extensions on exit from unemployment is small, it implies a substantial effect of extended benefits on the steady-state share of unemployment in the cross-section that is long-term. http://papers.nber.org/papers/w19048#fromrss http://papers.nber.org/papers/w19048#fromrss Goldin and Katz (2008) document the key role that the educational attainment of native-born workers in the U.S. has played in determining changing returns to skill and income distribution in the twentieth century, emphasizing the need to understand the forces driving the supply of educated workers. This paper examines stagnation in high school graduation rates from about 1970 to 2000, alongside dramatic changes in elementary and secondary educational institutions and income inequality over those years. I review the policy history of major changes in educational institutions, including but not limited to the massive increase in school spending, and related literature. I then present descriptive analysis of the relationships between income inequality and both graduation and school spending from 1963 to 2007. Results suggest that inequality at the top of the income distribution, which was negatively correlated with the establishment of public secondary schooling earlier in the twentieth century, was positively correlated not only with education spending levels but also with aggregate high school graduation rates at the state level in this later period. http://papers.nber.org/papers/w19049#fromrss http://papers.nber.org/papers/w19049#fromrss We use unique micro-level depositor data for a bank that faced a run due to a shock to its solvency to study whether depositors monitor banks. Specifically, we examine depositor withdrawal patterns in response to a timeline of private and public signals of the bank's financial health. In response to a public announcement of the bank's financial troubles, we find depositors with uninsured balances, depositors with loan linkages and staff of the bank are far more likely to run. Even before the run, a regulatory audit, which was in principle private information, found the bank insolvent. We find that depositors act on this private information and withdraw in a pecking order beginning at the time of the regulatory audit, with staff moving first, followed by uninsured depositors and finally other depositors. By comparing the response to this fundamental shock with an earlier panic at the same bank, we argue that withdrawals in the fundamental run are due in part to monitoring by depositors though the monitoring appears to be more of regulatory signals rather than of fundamentals. Our results give sharp empirical evidence on the importance of fragility in a bank's capital structure and may inform banking regulation. http://papers.nber.org/papers/w19050#fromrss http://papers.nber.org/papers/w19050#fromrss Poor loan quality is often attributed to loan officers exercising poor judgment. A potential solution is to base loans on hard information alone. However, we find other consequences of bypassing discretion stemming from loan officer incentives and limits of hard information verifiability. Using unique data where loans are based on hard information, and loan officers are volume-incentivized, we find loan officers increasingly use multiple trials to move loans over the cut-off, both in a regression-discontinuity design and when the cut-off changes. Additional trials positively predict default suggesting strategic manipulation of information even when loans are based on hard information alone. http://papers.nber.org/papers/w19051#fromrss http://papers.nber.org/papers/w19051#fromrss This chapter discusses different approaches pursued to explore three broad questions related to technology diffusion: what general patterns characterize the diffusion of technologies, and how have they changed over time; what are the key drivers of technology, and what are the macroeconomic consequences of technology. We prioritize in our discussion unified approaches to these three questions that are based on direct measures of technology. http://papers.nber.org/papers/w19052#fromrss http://papers.nber.org/papers/w19052#fromrss A common heuristic for evaluating the problem of omitted variable bias in economics is to look at coeffcient movements after inclusion of controls. The theory under which this is informative is one in which the selection on observables is proportional to selection on unobservables, an idea which is formalized in Altonji, Elder and Taber (2005). However, this connection is rarely made explicit and the underlying assumption is rarely tested. In this paper I first show how, under proportional selection, coeffcient movements, along with movements in R-squared values, can be used to calculate a measure of omitted variable bias. I then undertake two validation exercises. First, I relate maternal behavior on child birth weight and IQ. Simple controlled regressions give misleading estimates; estimates adjusted with a proportional selection adjustment fit significantly better. Second, I match observational and randomized trial data for 29 relationships in public health. I show that on average bias-adjusted coeffcients perform much better than simple controlled coeffcients and I suggest that a simple form of this adjustment could dramatically improve inference in many public health contexts. http://papers.nber.org/papers/w19054#fromrss http://papers.nber.org/papers/w19054#fromrss We estimate the sensitivity of scrap decisions to changes in used car values - the "scrap elasticity" - and show how it influences used car fleets under policies aimed at reducing gasoline use. Large scrap elasticities will tend to produce emissions leakage under efficiency standards as the longevity of used vehicles is increased, a process known as the Gruenspecht effect. To explore the magnitude of this leakage we assemble a novel dataset of U.S. used vehicle registrations and prices, which we relate through time via differential effects in gasoline cost: A gasoline price increase or decrease of $1 alters the number of fuel-efficient vs. fuel-inefficient vehicles scrapped by 18%. These relationships allow us to provide what we believe are the first estimates of the scrap elasticity itself, which we find to be about -0.7. When applied in a model of fuel economy standards, the elasticities we estimate suggest that 13-23% of the expected fuel savings will leak away through the used vehicle market. This considerably reduces the cost-effectiveness of the standard, rivaling or exceeding the importance of the often-cited mileage "rebound" effect. http://papers.nber.org/papers/w19055#fromrss http://papers.nber.org/papers/w19055#fromrss If commercial producers or financial investors use futures contracts to hedge against commodity price risk, the arbitrageurs who take the other side of the contracts may receive compensation for their assumption of nondiversifiable risk in the form of positive expected returns from their positions. We show that this interaction can produce an affine factor structure to commodity futures prices, and develop new algorithms for estimation of such models using unbalanced data sets in which the duration of observed contracts changes with each observation. We document significant changes in oil futures risk premia since 2005, with the compensation to the long position smaller on average in more recent data. This observation is consistent with the claim that index-fund investing has become more important relative to commerical hedging in determining the structure of crude oil futures risk premia over time. http://papers.nber.org/papers/w19056#fromrss http://papers.nber.org/papers/w19056#fromrss This Economica Coase Lecture reviews research that has revolutionized the field of international trade and foreign direct investment. It explains the motivation behind the development of new analytical frameworks, the nature of these frameworks, and the empirical studies that sprouted from them. http://papers.nber.org/papers/w19057#fromrss http://papers.nber.org/papers/w19057#fromrss Many national accounts of economic output and prosperity, such as gross domestic product (GDP) or net domestic product (NDP), offer an incomplete picture by ignoring, for example, the value of leisure, home production, and the value of health. Discussed shortcomings have focused on how unobserved dimensions affect GDP levels but not their cyclicality, which affects the measurement of the business cycle. This paper proposes new measures of the business cycle that incorporate monetized changes in health of the population. In particular, we incorporate in GDP the dollar value of mortality, treating it as depreciation in human capital analogous to how NDP measures treat depreciation of physical capital. We examine the macroeconomic fluctuations in the United States and globally during the past 50 years, taking into account how depreciation in health affects the cycle. Because mortality tends to be pro-cyclical, fluctuations in standard GDP measures are offset by monetized changes in health; booms are not as valuable as traditionally measured because of increased mortality, and recessions are not as bad because of reduced mortality. Consequently, we find that U.S. business cycle fluctuations appear milder than commonly measured and may even be reversed for the majority of "recessions" after accounting for the cyclicality of health. We find that adjusting for mortality reduces the measured U.S. business cycle volatility during the past 50 years by about 37% in the United States and 46% internationally. We discuss future research directions for more fully incorporating the cyclicality of unobserved health capital into standard output measurement. http://papers.nber.org/papers/w19058#fromrss http://papers.nber.org/papers/w19058#fromrss Allowing for three labor market settings (perfect competition or right-to-manage bargaining, efficient bargaining and monopsony), this paper relies on two extensions of Hall's econometric framework for estimating simultaneously price-cost margins and scale economies. Using an unbalanced panel of 17,653 firms over the period 1986-2001 in France, 8,725 firms over the period 1994-2006 in Japan and 7,828 firms over the period 1993-2008 in the Netherlands, we first apply two procedures to classify 30 comparable manufacturing industries in 6 distinct regimes that differ in terms of the type of competition prevailing in product and labor markets. For each of the three predominant regimes in each country, we then investigate industry differences in the estimated product and labor market imperfections and scale economies. We find important regime differences across the three countries and also observe differences in the levels of product and labor market imperfections and scale economies within regimes. http://papers.nber.org/papers/w19059#fromrss http://papers.nber.org/papers/w19059#fromrss Computers are an important part of modern education, yet many schoolchildren lack access to a computer at home. We test whether this impedes educational achievement by conducting the largest-ever field experiment that randomly provides free home computers to students. Although computer ownership and use increased substantially, we find no effects on any educational outcomes, including grades, test scores, credits earned, attendance and disciplinary actions. Our estimates are precise enough to rule out even modestly-sized positive or negative impacts. The estimated null effect is consistent with survey evidence showing no change in homework time or other "intermediate" inputs in education. http://papers.nber.org/papers/w19060#fromrss http://papers.nber.org/papers/w19060#fromrss Recent estimates in standard models of wage determination for both unionization and occupational licensing have shown wage effects that are similar across the two institutions. These cross-sectional estimates use specialized data sets, with small sample sizes, for the period 2006 through 2008. Our analysis examines the impact of unions and licensing coverage on wage determination using new data collected on licensing statutes that are then linked to longitudinal data from the National Longitudinal Survey of Youth (NLSY79) from 1979 to 2010. We develop several approaches, using both cross-sectional and longitudinal analyses, to measure the impact of these two labor market institutions on wage determination. Our estimates of the economic returns to union coverage are greater than those for licensing requirements. http://papers.nber.org/papers/w19061#fromrss http://papers.nber.org/papers/w19061#fromrss