当代中国经济与社会工作室
Fudan Lab for China Development Studies

 

 

Matthew Grant(2019). Why Special Economic Zones? Using Trade Policy to Discriminate across Importers. American Economic Review, Forthcoming

 

Abstract:Tariffs are generally assumed to depend on the product, not the identity of the importer. However, special economic zones are a common, economically important policy used worldwide to lower tariffs on selected goods for selected manufacturers. I show this is motivated by policymakers' desire to discriminate across buyers when a tax is intended to raise prices for sellers, through a mechanism distinct from existing theories of optimal taxation. Using a new dataset compiled from public records and exogenous changes in imports of intermediate goods, I find the form, composition, and size of U.S. zones are consistent with the theory.

 

 

Tatyana Deryugina, Garth Heutel, Nolan H. Miller, David Molitor, Julian Reif.”The Mortality and Medical Costs of Air Pollution: Evidence from Changes in Wind Direction.” American Economic Review,109.12(2019): 4178-4219.

 

Abstract：We estimate the causal effects of acute fine particulate matter exposure on mortality, health care use, and medical costs among the US elderly using Medicare data. We instrument for air pollution using changes in local wind direction and develop a new approach that uses machine learning to estimate the life-years lost due to pollution exposure. Finally, we characterize treatment effect heterogeneity using both life expectancy and generic machine learning inference. Both approaches find that mortality effects are concentrated in about 25 percent of the elderly population.

（说明：这个其实有较多同类文献，这篇能发AER，应该有其独特之处。其中提到机器学习，可以关注。）

 

 

Couttenier, Mathieu, Veronica Petrencu, Dominic Rohner, and Mathias Thoenig."The Violent Legacy of Conflict: Evidence on Asylum Seekers, Crime, and Public Policy in Switzerland." American Economic Review,109.12(2019): 4378-4425.  

 

Abstract: We study empirically how past exposure to conflict in origin countries makes migrants more violence-prone in their host country, focusing on asylum seekers in Switzerland. We exploit a novel and unique dataset on all crimes reported in Switzerland by the nationalities of perpetrators and of victims over 2009–2016. Our baseline result is that cohorts exposed to civil conflict/mass killing during childhood are 35 percent more prone to violent crime than the average cohort. This effect is particularly strong for early childhood exposure and is mostly confined to co-nationals, consistent with inter-group hostility persisting over time. We exploit cross-region heterogeneity in public policies within Switzerland to document which integration policies are best able to mitigate the detrimental effect of past conflict exposure on violent criminality. We find that offering labor market access to asylum seekers eliminates two-thirds of the effect.

（说明：早期经历与后期的行为，这样的研究设定在中国会有很多应用 。）

 

 

Rotemberg, Martin."Equilibrium Effects of Firm Subsidies." American Economic Review,109.10(2019):3475-3513. 

 

Abstract: Subsidy programs have two countervailing effects on firms: direct gains for eligible firms and indirect losses for those whose competitors are eligible. In 2006, India changed the eligibility criteria for small-firm subsidies, and the sales of newly eligible firms grew by roughly 35 percent. Competitors of the newly eligible firms were affected, with almost complete crowd-out within products that were less internationally traded, but little crowd-out for more-traded products. The newly eligible firms had relatively high marginal products, so relaxing the eligibility criteria for subsidies increased aggregate productivity by around 1−2 percent. Targeting different firms could have led to similar gains.

 

 

Yue Yu.(2019)"Land-Use Regulation and Economic Development: Evidence from the Farmland Red Line Policy in China." NBER Working Paper

 

Abstract: Many countries have land-use regulations to preserve farmland for food security reasons. In this paper, I show that such regulations can distort economic activity across sectors and locations at a substantial cost to aggregate welfare in developing countries during urbanization. I study a major policy restricting farm-to-urban land conversion in China - the Farmland Red Line Policy - to pro- vide causal evidence on the impact of land-use regulation on local development measured by GDP and population growth. The policy imposes a barrier to urban land development, the strength of which depends on exogenous local geographical features. I show that a greater barrier significantly reduces urban land supply, lowers GDP, and decreases population. To understand the aggregate impact of the policy, I develop a quantitative spatial equilibrium model that features endogenous land-use decisions. According to the model, the policy causes an excess supply of farmland and an under-supply of urban land, and the extent of such land misallocation varies across locations due to their local geographical features. In the constrained equilibrium, the spatial and sectoral mobility of workers implies that land misallocation leads to labor misallocation. The calibrated model reveals that the welfare of workers would have been 6% higher in 2010 if the policy had not been implemented. Moreover, a cap-and-trade system that achieved the same aggregate level of farmland would have been far less costly in terms of welfare. The results suggest that fast-growing economies in developing countries need to design land-use policies carefully, as the welfare costs of poorly designed policies can be substantial. 

 

 

Sebastian Heise, Tommaso Porzio(2019)"Spatial Wage Gaps in Frictional Labor Markets", NBER working paper

 

Abstract: We develop a job ladder model with labor reallocation across firms and space to study why differences in wages and labor productivity persist across regions within the same country. We apply the model to Germany, where real wages are still 26% lower in the East than in the West. Estimating the model on matched employer-employee data, we find that 60% of the gap is due to the fact that workers are paid a higher wage per efficiency unit in West Germany. We quantify a rich set of frictions preventing worker reallocation across space and across firms, and find that three spatial barriers impede East Germans’ ability to migrate West: migration costs, workers’ preferences to live in their home region, and more frequent job opportunities received from home. The estimated model highlights that the spatial barriers needed to generate the large wage gap between East and West are small relative to the frictions preventing the reallocation of labor across firms. As a result, policies that directly promote regional integration lead to smaller aggregate benefits than equally costly subsidies to worker hiring within region. Our findings show the importance of studying spatial wage gaps and frictional wage dispersion within a unified framework. 

 

 

Lorenzo Caliendo, Luca David Opromolla, Fernando Parro, Alessandro Sforza(2017). "Goods and Factor Market Integration: A Quantitative Assessment of the EU Enlargement.” NBER working paper

 

Abstract: The economic effects from labor market integration are crucially affected by the extent to which countries are open to trade. In this paper we build a multi-country dynamic general equilibrium model with trade in goods and labor mobility across countries to study and quantify the economic effects of trade and labor market integration. In our model trade is costly and features households of different skills and nationalities facing costly forward-looking relocation decisions. We use the EU Labour Force Survey to construct migration flows by skill and nationality across 17 countries for the period 2002-2007. We then exploit the timing variation of the 2004 EU enlargement to estimate the elasticity of migration flows to labor mobility costs, and to identify the change in labor mobility costs associated to the actual change in policy. We apply our model and use these estimates, as well as the observed changes in tariffs, to quantify the effects from the EU enlargement. We find that new member state countries are the largest winners from the EU enlargement, and in particular unskilled labor. We find smaller welfare gains for EU-15 countries. However, in the absence of changes to trade policy, the EU-15 would have been worse off after the enlargement. We study even further the interaction effects between trade and migration policies and the role of different mechanisms in shaping our results. Our results highlight the importance of trade for the quantification of the welfare and migration effects from labor market integration.

 

 

Lorenzo Caliendo, Maximiliano Dvorkin, Fernando Parro. "Trade and Labor Market Dynamics: General Equilibrium Analysis of the China Trade Shorck.” Econometrica,87.3(2019): 741-835

 

Abstract: We develop a dynamic trade model with spatially distinct labor markets facing varying exposure to international trade. The model captures the role of labor mobility frictions, goods mobility frictions, geographic factors, and input‐output linkages in determining equilibrium allocations. We show how to solve the equilibrium of the model and take the model to the data without assuming that the economy is at a steady state and without estimating productivities, migration frictions, or trade costs, which can be difficult to identify. We calibrate the model to 22 sectors, 38 countries, and 50 U.S. states. We study how the rise in China's trade for the period 2000 to 2007 impacted U.S. households across more than a thousand U.S. labor markets distinguished by sector and state. We find that the China trade shock resulted in a reduction of about 0.55 million U.S. manufacturing jobs, about 16% of the observed decline in manufacturing employment from 2000 to 2007. The U.S. gains in the aggregate, but due to trade and migration frictions, the welfare and employment effects vary across U.S. labor markets. Estimated transition costs to the new long‐run equilibrium are also heterogeneous and reflect the importance of accounting for labor dynamics.

 

 

Gollin, Douglas and Udry, Christopher(2019) “Heterogeneity, Measurement Error and Misallocation: Evidence from African Agriculture.” NBER Working Paper

  

Abstract: Standard measures of productivity display enormous dispersion across farms in Africa. Crop yields and input intensities appear to vary greatly, seemingly in conflict with a model of efficient allocation across farms. In this paper, we present a theoretical framework for distinguishing between measurement error, unobserved heterogeneity, and potential misallocation. Using rich panel data from farms in Tanzania and Uganda, we estimate our model using a flexible specification in which we allow for several kinds of measurement error and heterogeneity. We find that measurement error and heterogeneity together account for a large fraction – as much as ninety percent -- of the dispersion in measured productivity. In contrast to some previous estimates, we suggest that the potential for efficiency gains through reallocation of land across farms and farmers may be relatively modest.

 

 

David Lagakos, Ahmed Mushfiq Mobarak, Michael E.Waugh(2018) “The Welfare Effects of Encouraging Rural-Urban Migration.” NBER Working Paper

 

Abstract: This paper studies the welfare effects of encouraging rural-urban migration in the developing world. To do so, we build a dynamic incomplete-markets model of migration in which heterogenous agents face seasonal income fluctuations, stochastic income shocks, and disutility of migration that depends on past migration experience. We calibrate the model to replicate a field experiment that subsidized migration in rural Bangladesh, leading to significant increases in both migration rates and in consumption for induced migrants. The model’s welfare predictions for migration subsidies are driven by two main features of the model and data: first, induced migrants tend to be negatively selected on income and assets; second, the model’s non-monetary disutility of migration is substantial, which we validate using using newly collected survey data from this same experimental sample. The average welfare gains are similar in magnitude to those obtained from an unconditional cash transfer, though migration subsidies lead to larger gains for the poorest households, which have the greatest propensity to migrate.

 

 

Benjamin Faber, Thibault Fally(2020)“Firm Heterogeneity in Consumption Baskets:Evidence from Home and Store Scanner Data.” NBER Working Paper

 

Abstract: A growing literature has documented the role of firm heterogeneity within sectors for nominal income inequality. This paper explores the implications for household price indices across the income distribution. Using detailed matched US home and store scanner microdata, we present evidence that rich and poor households source their consumption from different parts of the firm size distribution within disaggregated product groups. We use the data to examine alternative explanations, propose a tractable quantitative model with two-sided heterogeneity that rationalizes the observed moments, and calibrate it to explore general-equilibrium counterfactuals. We find that larger, more productive firms endogenously sort into catering to the taste of richer households, and that this gives rise to asymmetric effects on household price indices. We quantify these effects in the context of policy counterfactuals that affect the distribution of disposable incomes on the demand side or profits across firms on the supply side.

 

 

Xavier Jaravel. “The Unequal Gains from Product Innovations: Evidence from the U.S. Retail Sector.”The Quarterly Journal of Economics, 134.2 (2019):715–783

 

Abstract: This article examines how product innovations led to inflation inequality in the United States from 2004 to 2015. Using scanner data from the retail sector, I find that annual inflation for retail products was 0.661 (std. err. 0.0535) percentage points higher for the bottom income quintile relative to the top income quintile. When including changes in product variety over time, this difference increases to 0.8846 (std. err. 0.0739) percentage points a year. In CEX-CPI data covering the full consumption basket, the annual inflation difference is 0.368 (std. err. 0.0502) percentage points. I investigate the following hypothesis: (i) the relative demand for products consumed by high-income households increased because of growth and rising inequality; (ii) in response, firms introduced more new products catering to such households; (iii) as a result, the prices of continuing products in these market segments fell due to increased competitive pressure. Using a shift-share research design, I find causal evidence that increasing relative demand leads to increasing product variety and lower inflation for continuing products. A calibration indicates that the hypothesized channel accounts for a large fraction (over 50%) of observed inflation inequality.

 

 

Itskhoki, Oleg, and Benjamin Moll. "Optimal Development Policies With Financial Frictions." Econometrica 87.1 (2019): 139-173.

 

Abstract: Is there a role for governments in emerging countries to accelerate economic development by intervening in product and factor markets? To address this question, we study optimal dynamic Ramsey policies in a standard growth model with financial frictions. The optimal policy intervention involves pro‐business policies like suppressed wages in early stages of the transition, resulting in higher entrepreneurial profits and faster wealth accumulation. This, in turn, relaxes borrowing constraints in the future, leading to higher labor productivity and wages. In the long run, optimal policy reverses sign and becomes pro‐worker. In a multi‐sector extension, optimal policy subsidizes sectors with a latent comparative advantage and, under certain circumstances, involves a depreciated real exchange rate. Our results provide an efficiency rationale, but also identify caveats, for many of the development policies actively pursued by dynamic emerging economies. 

 

 

Paul Dolfen, Liran Einav, Peter J. Klenow, Benjamin Klopack, Jonathan D. Levin, Laurence Levin, Wayne Best (2019).”Assessing the Gains from E-Commerce.” NBER Working Paper.

 

Abstract: E-Commerce represents a rapidly growing share of consumer spending in the U.S. We use transactions-level data on credit and debit cards from Visa, Inc. between 2007 and 2017 to quantify the resulting consumer surplus. We estimate that E-Commerce spending reached 8% of consumption by 2017, yielding consumers the equivalent of a 1% permanent boost to their consumption, or over $1,000 per household. While some of the gains arose from saving travel costs of buying from local merchants, most of the gains stemmed from substituting to online merchants. Higher income cardholders gained more, as did consumers in more densely populated counties.

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Dobkin, Carlos, Amy Finkelstein, Raymond Kluender, and Matthew J. Notowidigdo. 2018. "The Economic Consequences of Hospital Admissions." American Economic Review, 108 (2): 308-52.

 

Abstract: We use an event study approach to examine the economic consequences of hospital admissions for adults in two datasets: survey data from the Health and Retirement Study, and hospitalization data linked to credit reports. For non-elderly adults with health insurance, hospital admissions increase out-of-pocket medical spending, unpaid medical bills, and bankruptcy, and reduce earnings, income, access to credit, and consumer borrowing. The earnings decline is substantial compared to the out-of-pocket spending increase, and is minimally insured prior to age-eligibility for Social Security Retirement Income. Relative to the insured non-elderly, the uninsured non-elderly experience much larger increases in unpaid medical bills and bankruptcy rates following a hospital admission. Hospital admissions trigger fewer than 5 percent of all bankruptcies in our sample.

 

 

Smith, M., Yagan, D., Zidar, O. M., & Zwick, E. (2019). Capitalists in the Twenty-first Century . Quarterly Journal of Economics (Forthcoming).

 

Abstract: How important is human capital at the top of the U.S. income distribution? A primary source of top income is private "pass-through" business profit, which can include entrepreneurial labor income for tax reasons. This paper asks whether top pass-through profit mostly reflects human capital, defined as all inalienable factors embodied in business owners, rather than financial capital. Tax data linking 11 million firms to their owners show that top pass-through profit accrues to working-age owners of closely-held, mid-market firms in skill-intensive industries. Pass-through profit falls by three-quarters after owner retirement or premature death. Classifying three-quarters of pass-through profit as human capital income, we find that the typical top earner derives most of her income from human capital, not financial capital. Growth in pass- through profit is explained by both rising productivity and a rising share of value added accruing to owners.

 

 

Anderson, H., Paddrik, M., & Wang, J. J. (2018). Bank Networks and Systemic Risk: Evidence from the National Banking Acts. American Economic Review.

 

Abstract : The National Banking Acts (NBAs) of 1863–1864 established rules governing the amounts and locations of interbank deposits, thereby reshaping the bank networks. Using unique data on bank balance sheets and detailed interbank deposits in 1862 and 1867 in Pennsylvania, we study how the NBAs changed the network structure and quantify the effect on financial stability in an interbank network model. We find that the NBAs induced a concentration of interbank deposits at both the city and bank levels, creating systemically important banks. Although the concentration facilitated diversification, contagion would have become more likely when financial center banks faced large shocks.

 

Mueller, H., & Giroud, X. Firms' Internal Networks and Local Economic Shocks. American Economic Review.

 

Abstract: Using confidential establishment-level data from the US Census Bureau’s Longitudinal Business Database, this paper documents how local shocks propagate across US regions through firms’ internal networks of establishments. Consistent with a model of optimal within-firm resource allocation, we find that establishment-level employment is sensitive to shocks in distant regions in which the establishment’s parent firm is operating, and that the elasticity with respect to such shocks increases with the firm’s financial constraint. At the aggregate regional level, we find that aggregate county-level employment is sensitive to shocks in distant counties linked through firms’ internal networks.

 

 

Akcigit, U., Caicedo, S., Miguelez, E., Stantcheva, S., & Sterzi, V. (2019). Dancing with the stars: Innovation through interactions . Revise and Resubmit, Econometrica.

 

Abstract: An inventor's own knowledge is a key input in the innovation process. This knowledge can be built by interacting with and learning from others. This paper uses a new large-scale panel dataset on European inventors matched to their employers and patents. We document key empirical facts on inventors' productivity over the life cycle, inventors' research teams, and interactions with other inventors. Among others, most patents are the result of collaborative work. Interactions with better inventors are very strongly correlated with higher subsequent productivity. These facts motivate the main ingredients of our new innovation-led endogenous growth model, in which innovations are produced by heterogeneous research teams of inventors using inventor knowledge. The evolution of an inventor's knowledge is explained through the lens of a diffusion model in which inventors can learn in two ways: By interacting with others at an endogenously chosen rate; and from an external, age-dependent source that captures alternative learning channels, such as learning-by-doing. Thus, our knowledge diffusion model nests inside the innovation-based endogenous growth model. We estimate the model, which fits the data very closely, and use it to perform several policy exercises, such as quantifying the large importance of interactions for growth, studying the effects of reducing interaction costs (e.g., through IT or infrastructure), and comparing the learning and innovation processes of different countries.

 

Zacchia, Paolo. "Knowledge Spillovers through Networks of Scientists." (2019). The Review of Economic Studies

 

Abstract: In this paper I directly test the hypothesis that interactions between inventors of different firms drive knowledge spillovers. I construct a network of publicly traded companies in which each link is a function of the relative proportion of two firms’ inventors who have former patent collaborators in both organizations. I use this measure to weigh the impact of R&D performed by each firm on the productivity and innovation outcomes of its network linkages. An empirical concern is that the resulting estimates may reflect unobserved, simultaneous determinants of firm performance, network connections and external R&D. I address this problem with an innovative IV strategy, motivated by a game-theoretic model of firm interaction. I instrument the R&D of one firm’s connections with that of other firms that are sufficiently distant in network space. With the resulting spillover estimates, I calculate that among firms connected to the network the marginal social return of R&D amounts to approximately 112% of the marginal private return.

 

 

Davis, D. R., & Dingel, J. I. (2019). A spatial knowledge economy. American Economic Review, 109(1), 153-70.

 

Abstract: Leading empiricists and theorists of cities have recently argued that the generation and exchange of ideas must play a more central role in the analysis of cities. This paper develops the first system of cities model with costly idea exchange as the agglomeration force. The model replicates a broad set of established facts about the cross section of cities. It provides the first spatial equilibrium theory of why skill premia are higher in larger cities and how variation in these premia emerges from symmetric fundamentals.

 

 

Cengiz, D., Dube, A., Lindner, A., & Zipperer, B. (2019). The effect of minimum wages on low-wage jobs. The Quarterly Journal of Economics, 134(3), 1405-1454.

 

Abstract: We estimate the effect of minimum wages on low-wage jobs using 138 prominent state-level minimum wage changes between 1979 and 2016 in the United States using a difference-in-differences approach. We first estimate the effect of the minimum wage increase on employment changes by wage bins throughout the hourly wage distribution. We then focus on the bottom part of the wage distribution and compare the number of excess jobs paying at or slightly above the new minimum wage to the missing jobs paying below it to infer the employment effect. We find that the overall number of low-wage jobs remained essentially unchanged over the five years following the increase. At the same time, the direct effect of the minimum wage on average earnings was amplified by modest wage spillovers at the bottom of the wage distribution. Our estimates by detailed demographic groups show that the lack of job loss is not explained by labor-labor substitution at the bottom of the wage distribution. We also find no evidence of disemployment when we consider higher levels of minimum wages. However, we do find some evidence of reduced employment in tradeable sectors. We also show how decomposing the overall employment effect by wage bins allows a transparent way of assessing the plausibility of estimates.

 

Harasztosi, P., & Lindner, A. (2017). Who Pays for the Minimum Wage? American Economic Review, Forthcoming

 

Abstract: This paper provides a comprehensive assessment of the margins along which firms responded to a large and persistent minimum wage increase in Hungary. We show that employment elasticities are negative but small even four years after the reform; that around 75 percent of the minimum wage increase was paid by consumers and 25 percent by firm owners; that firms responded to the minimum wage by substituting labor with capital; and that dis-employment effects were greater in industries where passing the wage costs to consumers is more difficult. We estimate a model with monopolistic competition to explain these findings.

 

 

Wolfgang Dauth, Sebastian Findeisen, Enrico Moretti, & Jens Suedekum (2018). Matching in Cities. NBER Working Paper.

 

Abstract: In most countries, average wages tend to be higher in larger cities. In this paper, we focus on the role played by the matching of workers to firms in explaining geographical wage differences. Using rich administrative German data for 1985-2014, we show that wages in large cities are higher not only because large cities attract more high-quality workers, but also because high-quality workers are significantly more likely to be matched to high-quality plants. In particular, we find that assortative matching—measured by the correlation of worker fixed effects and plant fixed effects—is significantly stronger in large cities. The elasticity of assortative matching with respect to population has increased by around 75% in the last 30 years. We estimate that in a hypothetical scenario in which we keep the quality and location of German workers and plants unchanged, and equalize within-city assortative matching geographical wage inequality in Germany would decrease significantly. Overall, assortative matching magnifies wage differences caused by worker sorting and is a key factor in explaining the growth of wage disparities between communities over the last three decades. If high-quality workers and firms are complements in production, moreover, increased assortative matching will increase aggregate earnings. We estimate that the increase in within-city assortative matching observed between 1985 and 2014 increased aggregate labor earnings in Germany by 2.1%, or 31.32 billion euros. We conclude that assortative matching increases earnings inequality across communities, but it also generates important efficiency gains for the German economy as a whole.

 

 

Holmes, T. J., McGrattan, E. R., & Prescott, E. C. (2015). Quid Pro Quo: Technology Capital Transfers for Market Access in China. The Review of Economic Studies, 82(3), 1154-1193.

 

Abstract: By the 1970s, quid pro quo policy, which requires multinational firms to transfer technology in return for market access, had become a common practice in many developing countries. While many countries have subsequently liberalized quid pro quo requirements, China continues to follow the policy. In this article, we incorporate quid pro quo policy into a multicountry dynamic general equilibrium model, using microevidence from Chinese patents to motivate key assumptions about the terms of the technology transfer deals and macroevidence on China's inward foreign direct investment (FDI) to estimate key model parameters. We then use the model to quantify the impact of China's quid pro quo policy and show that it has had a significant impact on global innovation and welfare.

 

 

Ramondo, N., Rodríguez-Clare, A., & Saborío-Rodríguez, M. (2016). Trade, Domestic Frictions, and Scale Effects. American Economic Review, 106(10), 3159-3184.

 

Abstract: Because of scale effects, idea-based growth models imply that larger countries should be much richer than smaller ones. New trade models share the same counterfactual feature. In fact, new trade models exhibit other counterfactual implications associated with scale effects: import shares decrease and relative income levels increase too steeply with country size. We argue that these implications are largely a result of the standard assumption that countries are fully integrated domestically. We depart from this assumption by treating countries as collections of regions that face positive costs to trade among themselves. The resulting model is largely consistent with the data.

 

 

Chang-Tai Hsieh, Erik Hurst, Charles I. Jones, & Peter J. Klenow (2019).The Allocation of Talent and U.S. Economic Growth. NBER Working Paper.

 

Abstract: In 1960, 94 percent of doctors and lawyers were white men. By 2010, the fraction was just 62 percent. Similar changes in other highly-skilled occupations have occurred throughout the U.S. economy during the last fifty years. Given that the innate talent for these professions is not likely to have changed differently across groups, the change in the occupational distribution since 1960 suggests that a substantial pool of innately talented blacks and women in 1960were not pursuing their comparative advantage. We examine the effect on aggregate productivity of the convergence in the occupational distribution between 1960 and 2010 through the prism of a Roy model. Across our various specifications, between one-fifth and two-fifths of growth in aggregate market output per person can be explained by the improved allocation of talent.

 

 

Kleinberg, J., Lakkaraju, H., Leskovec, J., Ludwig, J., & Mullainathan, S. (2017). Human Decisions and Machine Predictions*. The Quarterly Journal of Economics, 133(1), 237-293.

 

Abstract: Can machine learning improve human decision making? Bail decisions provide a good test case. Millions of times each year, judges make jail-or-release decisions that hinge on a prediction of what a defendant would do if released. The concreteness of the prediction task combined with the volume of data available makes this a promising machine-learning application. Yet comparing the algorithm to judges proves complicated. First, the available data are generated by prior judge decisions. We only observe crime outcomes for released defendants, not for those judges detained. This makes it hard to evaluate counterfactual decision rules based on algorithmic predictions. Second, judges may have a broader set of preferences than the variable the algorithm predicts; for instance, judges may care specifically about violent crimes or about racial inequities. We deal with these problems using different econometric strategies, such as quasi-random assignment of cases to judges. Even accounting for these concerns, our results suggest potentially large welfare gains: one policy simulation shows crime reductions up to 24.7% with no change in jailing rates, or jailing rate reductions up to 41.9% with no increase in crime rates. Moreover, all categories of crime, including violent crimes, show reductions; these gains can be achieved while simultaneously reducing racial disparities. These results suggest that while machine learning can be valuable, realizing this value requires integrating these tools into an economic framework: being clear about the link between predictions and decisions; specifying the scope of payoff functions; and constructing unbiased decision counterfactuals.

 

 

Cemal Eren Arbatlı, Quamrul H. Ashraf, Oded Galor, & Marc Klemp (2019). Diversity and Conflict. Econometrica Forthcoming.

 

Abstract: This research advances the hypothesis and establishes empirically that interpersonal population diversity has contributed significantly to the emergence, prevalence, recurrence, and severity of intrasocietal conflicts. Exploiting an exogenous source of variations in population diversity across nations and ethnic groups, it demonstrates that population diversity, as determined predominantly during the exodus of humans from Africa tens of thousands of years ago, has contributed significantly to the risk and intensity of historical and contemporary civil conflicts. The findings arguably reflect the adverse effect of population diversity on interpersonal trust, its contribution to divergence in preferences for public goods and redistributive policies, and its impact on the degree of fractionalization and polarization across ethnic, linguistic, and religious groups.

 

 

David Autor, David Dorn, Lawrence F. Katz, Christina Patterson, & John Van Reenen (2019). The Fall of the Labor Share and the Rise of Superstar Firms. NBER Working Papers.

 

Abstract: The fall of labor's share of GDP in the United States and many other countries in recent decades is well documented but its causes remain uncertain. Existing empirical assessments typically rely on industry or macro data, obscuring heterogeneity among firms. In this paper, we analyze micro panel data from the U.S. Economic Census since 1982 and document empirical patterns to assess a new interpretation of the fall in the labor share based on the rise of "superstar firms." If globalization or technological changes push sales towards the most productive firms in each industry, product market concentration will rise as industries become increasingly dominated by superstar firms. Since these firms have high markups and a low labor share of value-added and sales, a reallocation of output toward superstar firms depresses the aggregate labor share. We empirically assess seven predictions of this hypothesis: (i) industry sales will increasingly concentrate in a small number of firms; (ii) industries where concentration rises most will have the largest declines in the labor share; (iii) the fall in the labor share will be driven largely by reallocation rather than a fall in the unweighted mean labor share across all firms; (iv) the between-firm reallocation component of the fall in the labor share will be greatest in the sectors with the largest increases in market concentration; (v) the industries that are becoming more concentrated will exhibit faster growth of productivity; (vi) the aggregate markup will rise more than the typical firm's markup; and (vii) these patterns should be observed not only in U.S. firms, but also internationally. We find support for all of these predictions.

 

 

David Autor, David Dorn, Gordon Hanson, & Kaveh Majlesi (2017). Importing Political Polarization? The Electoral Consequences of Rising Trade Exposure. NBER Working Papers.

 

Abstract: Has rising import competition contributed to the polarization of U.S. politics? Analyzing outcomes from the 2002 and 2010 congressional elections and the 2000, 2008, and 2016 presidential elections, we detect an ideological realignment that is centered in trade-exposed local labor markets and that commences prior to the divisive 2016 U.S. presidential election. Exploiting the exogenous component of rising trade with China and classifying legislator ideologies by congressional voting records, we find strong evidence that congressional districts exposed to larger increases in import penetration disproportionately removed moderate representatives from office in the 2000s. Trade-exposed districts with an initial majority white population or initially in Republican hands became substantially more likely to elect a conservative Republican, while trade-exposed districts with an initial majority-minority population or initially in Democratic hands also become more likely to elect a liberal Democrat. In presidential elections, counties with greater trade exposure shifted towards the Republican candidate. We interpret these results as supporting a political economy literature that connects adverse economic conditions to support for nativist or extreme politicians.

 

 

Card, D., Cardoso, A. R., Heining, J., & Kline, P. (2017). Firms and Labor Market Inequality: Evidence and Some Theory. Journal of Labor Economics, 36(S1), S13-S70.

 

Abstract: We synthesize two related literatures on firm-level drivers of wage inequality. Studies of rent sharing that use matched worker-firm data find elasticities of wages with respect to value added per worker in the range of 0.05–0.15. Studies of wage determination with worker and firm fixed effects typically find that firm-specific premiums explain 20% of overall wage variation. To interpret these findings, we develop a model of wage setting in which workers have idiosyncratic tastes for different workplaces. Simple versions of this model can rationalize standard fixed effects specifications and also match the typical rent-sharing elasticities in the literature.

 

 

Raj Chetty, John N. Friedman, Emmanuel Saez, Nicholas Turner, & Danny Yagan (2019). Income Segregation and Intergenerational Mobility Across Colleges in the United States. Working Paper.

 

Abstract: We construct publicly available statistics on parents' incomes and students' earnings outcomes for each college in the U.S. using de-identfied data from tax records. These statistics reveal that the degree of parental income segregation across colleges is very high, similar to that across neighborhoods where children grow up. Differences in post-college earnings between children from low- and high-income families are much smaller among students who attend the same college than across colleges. Colleges with the best earnings outcomes predominantly enroll students from high-income families, although a few mid-tier public colleges have both low parent income levels and high student earnings. Linking these income data to SAT and ACT scores, we analyze how changes in the college admissions process would affect segregation and intergenerational mobility. Equalizing application, admission, and matriculation rates across parental income groups conditional on test scores would increase the fraction of middle-class students at the most selective colleges substantially but leave the fraction of low-income students unchanged - suggesting that there is a "missing middle" at the most selective colleges. Income segregation across colleges would be fully eliminated by a "need-affirmative" policy that gives lower-income applicants a boost in test scores similar to that implicitly given to legacy students at elite private colleges. Assuming that differences in students' earnings conditional on test scores and parent income reflect colleges' causal effects - an assumption consistent with prior estimates - such a policy would reduce intergenerational income persistence among college students by one-third. We conclude that feasible changes in the allocation of students to colleges could substantially reduce segregation and increase intergenerational mobility, even without changes to colleges' educational programs.

 

 

Esteban Rossi-Hansberg, Pierre-Daniel Sarte, & Nicholas Trachter (2019). Diverging Trends in National and Local Concentration. NBER Working Papers.

 

Abstract: Using U.S. NETS data, we present evidence that the positive trend observed in national product market concentration between 1990 and 2014 becomes a negative trend when we focus on measures of local concentration. We document diverging trends for several geographic definitions of local markets. SIC 8 industries with diverging trends are pervasive across sectors. In these industries, top firms have contributed to the amplification of both trends. When a top firm opens a plant, local concentration declines and remains lower for at least 7 years. Our findings, therefore, reconcile the increasing national role of large firms with falling local concentration, and a likely more competitive local environment.