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Alex Catling



Articles by Alex Catling

What Medicare Part D Teaches Us About Social Insurance Markets

3 days ago

Summary

Seeking to reduce costs and increase the quality of services, policymakers have recently transferred the provision of certain traditional government social services to private firms. The central economic problem to be solved in this arrangement is how to structure payments to these firms and reduce their ability to capture rents from subsidies intended for consumers.

This paper illustrates the complex interplay between subsidy payments, market power, and equilibrium outcomes in the setting of prescription drug coverage in Medicare Part D, an example of such a market. These findings can apply to other privately-provided social insurance markets and

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Poor Little Rich Kids? The Role of Nature versus Nurture in Wealth and Other Economic Outcomes and Behaviors

22 days ago

Summary

Which has more impact on our wealth and behavior: biology or environment? This research attempts to disentangle the role of nature versus nurture and the role of nature-nurture interactions in the intergenerational transmission of wealth. Results suggest that persistence in wealth across generations is primarily driven by environment, while biology has more impact on educational achievement.

Wealth is highly correlated between parents and their children; however, little is known about what drives this relationship. Is it that children of wealthy parents are inherently more talented, and that is what shapes their later success? Or is it that children had

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Who Profits from Patents? Rent-Sharing at Innovative Firms

October 21, 2020

Summary

Mounting empirical evidence that intra-firm wage differences contribute substantially to wage inequality among identically skilled workers has renewed interest in theoretical models of the ways in which variation in firm productivity can influence worker pay.
A key question is the extent to which firms pass changes in the average labor productivity through into wages, but observational fluctuations in standard labor productivity measures are likely to reflect a number of factors that can influence wages without necessarily signaling a violation of price-taking behavior by firms.

This paper circumvents the endogeneity problem by using patent allowance

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Improved allocation of talent boosts US economic growth

October 5, 2020

Summary

In 1960, 94% of American doctors and lawyers were white men: by 2010, the fraction was just over 60%. Similar changes have occurred throughout the US economy over the last 50 years, particularly among high-skilled occupations.
Since the innate talent for a profession among members of a group is unlikely to change over time, the change in the distribution of occupations since 1960 suggests that, historically, many innately talented people were not pursuing their comparative advantage. The resulting misallocation of talent potentially had important aggregate consequences.
The fact that the occupational distribution of women and black men has converged towards that of white men suggests that

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Capitalists in the Twenty-First Century

August 21, 2020

Summary

In the 21st century, top incomes have risen due to business income and other non-wage income like interest and rent (Piketty 2014; Piketty, Saez, and Zucman 2018). Hence, recent trends raise the possibility that the financial-capital rich—those who derive most of their income from nonhuman capital—may possibly now dominate the ranks of America’s highest earners instead of the human-capital rich—the entrepreneurs and wage earners who derive most of their income from their human capital.

Identifying the nature of top income is stymied, however, by a data issue: most income at the very top of the income distribution is private business income, and standard

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Insuring the Poor: Experimental evidence from contract farming in Kenya

August 7, 2020

Summary

Around the world, the poor do not typically purchase insurance, despite having the most to gain from risk reduction. In the case of crop insurance, studies consistently find low adoption among small farmers, despite the large risks they face from drought, flood, and pests. One explanation is that insurance products typically require the premium to be paid upfront. Farmers must pay premiums at the time of planting, when they are typically low on cash, and they are paid at harvest, when most farmers receive at least some income.

Using a randomized controlled trial, we evaluate demand for a pay-at-harvest insurance product, where the premium is deducted

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Life-cycle benefits of early childhood programs: evidence from an influential early childhood program

July 17, 2020

Summary

There is a substantial body of evidence showing that early childhood programs can boost the skills of disadvantaged children. Most of this research has evaluated the short-run ‘treatment effects’ of these programs, focusing on outcomes such as cognitive test scores, school readiness, and measures of social behavior. So far, few studies have analyzed longer-term effects such as completed education, adult health, crime, and labor income.
New research aims to bridge this gap, focusing on influential early childhood programs for disadvantaged children in North Carolina. Guided by economic theory, the study shows that it is possible to supplement experimental data with non-experimental data to

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Wealth Taxation and Wealth Accumulation: Theory and Evidence from Denmark

July 6, 2020

Summary

Extensive literature estimates the impact of taxes on labor, but much less is known about how taxes affect the supply of capital. In theory, wealth taxes may affect saving and consumption decisions, business creation, tax compliance, and inter-generational wealth transmission. Capturing the precise economic effects of taxing wealth poses formidable empirical challenges, however, due to the lack of reliable micro data on household wealth, particularly amongst the wealthiest.
This paper provides new evidence from Denmark, which used to impose one of the world’s highest marginal tax rates on wealth, and therefore has a rich and comprehensive annual dataset of taxable wealth. In addition,

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The First 2,000 Days: Investing in Children’s Skills Through Early Intervention

June 5, 2020

Summary

Children from poorer backgrounds typically have lower cognitive and socio-emotional skills due to differences in the quality of the environment they live in, and these early differences can feed into worse health, education and labor market outcomes later in life. Existing research suggests that these inequalities can be reduced through targeted early childhood intervention programs. Most of the evidence to date, however, comes from the US and from developing countries; this article examines whether these interventions can also be effective in Ireland, a developed country with more redistributive social policies.

Starting in 2008, pregnant women in a

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Consumer spending during unemployment: evidence from US bank account data

March 9, 2020

Summary

Unemployment insurance (UI) benefits provide an important financial cushion for the many people who lose their jobs, helping to stabilize their consumer spending while they look for new work opportunities. But is the typical duration of UI benefits in the United States of six months the appropriate length of time – or might some people be better off with a longer period, perhaps at a lower level of monthly payments?
New research indicates that consumption drops sharply at the large and predictable fall in income that happens when UI benefits expire. Looking at the changing patterns of 22 different types of spending, the study detects reductions in all 22, including particularly severe drops

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Jury verdicts: evidence from eighteenth century London of the dangers of sequential decision-making

February 25, 2020

Summary

When juries in criminal courts determine whether a defendant is guilty or not guilty, are their decisions at all influenced by the verdict and characteristics of the previous trial on which they were sitting? In an ideal world, every case should be assessed solely on its own merits, but a new study suggests that there is a strong element of what economists call ‘path dependency’ in jury decision-making: a guilty verdict in one trial raises the likelihood of a guilty verdict in the next one.

The context for this evidence of biases in sequential decision-making is the Central Criminal Court at London’s Old Bailey in the eighteenth century. This was a

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The Age of Mass Migration: contrasting economic and political effects

February 7, 2020

Summary

Recent waves of immigration to Europe and the United States have triggered concerns about the economic impact on the native populations, as well as calls for tighter restrictions. There are historical echoes in the Age of Mass Migration in the late nineteenth and early twentieth centuries, when more than 30 million European immigrants moved to the United States, and the share of immigrants in the US population peaked at 14% – even higher than today’s record of 13.7%.
A new study explores the economic and political effects on US cities of the later years of those large migration flows, between 1910 and 1930, when mass migration of Europeans was interrupted by two major shocks – the First World

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Performance management and workplace culture: evidence from a US trucking firm

January 24, 2020

Summary

Firms increasingly collect data on their employees’ performance, a management practice that they can use to promote comparisons among staff and potentially boost productivity. At the same time, there is growing corporate emphasis on employee empowerment, teamwork, and happiness – again with the goal of improving overall performance.
Are these two objectives compatible? A new study investigates how the success of a management practice depends on the underlying values articulated by senior managers. The researchers report evidence on what happened when a large US transport company tried to combine performance management with changing the workplace culture.

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The impact of new entry in regulated transport markets: evidence from New York City taxis

December 13, 2019

Summary

Traditional taxi services are giving way to ride-hailing companies such as Uber in many cities around the world – partly as a result of new technologies that make it easier to match waiting passengers with searching drivers; and partly because new entrants have been able to avoid local price and entry regulation. A new study uses data from New York City yellow cabs before the arrival of Uber to analyze the matching process, and to simulate the effects of new entry into the market, alternative matching technologies, and different market densities.

While in textbook markets, prices serve to balance demand and supply, in the traditional taxi market, this

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Who benefits from rent control? Evidence from San Francisco

November 21, 2019

Summary

Steadily rising rents in many American cities have brought the issue of affordable housing to the forefront of policy debate. This column reports evidence on the effects of an expansion of rent control in San Francisco on tenants, landlords, and inequality. The researchers find that while the policy prevented short-term displacement of incumbent tenants, landlords responded by converting rental housing to other uses, reducing the overall supply and ultimately making rents even less affordable. Rent control seems to have contributed to the gentrification of San Francisco, the exact opposite of the intended goal. Indeed, by simultaneously bringing in higher income residents and preventing

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Effects of vertical mergers in multichannel TV markets: evidence from regional sports programming

November 6, 2019

Summary

When producers of TV channels, such as Time Warner, and distributors of those channels, such as AT&T, are merged, what are the impacts on consumers, rival producers and rival distributors? Because ‘vertical integration’ of this kind can have both efficiency and anti-competitive effects, competition authorities and courts evaluating a prospective merger need to assess both the potential benefits and the potential harms to determine the overall welfare effects.

A team of economists has developed a new framework for doing just that, and used it to quantify welfare effects in the context of high-value sports content in the US cable and satellite TV

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When Fewer Options are Better for Consumers: The Benefits of Narrow Health Insurance Networks

September 9, 2019

Summary

Should health insurers be required to allow their enrollees to visit any hospital or doctor?  Many insurers limit enrollees to “in-network” medical providers, forcing them to pay significant “out-of-network” costs if they seek care elsewhere. Our research examines the role that limited medical provider networks play in the U.S. commercial healthcare market and measures both their impact on spending and their potential for consumer harm. We show that by excluding certain medical providers, particularly those that are low-quality or high-cost, insurers can obtain significant rate reductions when negotiating with hospitals. These reductions may then be partly passed along to consumers in the form

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Providing low-cost labor market information to assist jobseekers

August 14, 2019

Summary

People who are receiving unemployment benefits and looking for a job are typically required to consider occupations beyond their preferred line of work, at least after an initial period of joblessness. But how should jobseekers decide which occupations to consider, and how should employment agencies advise them?

A team of economists has developed a new tool to provide tailored advice to jobseekers at low cost. The tool is based on two alternative algorithms that identify potentially suitable occupations: one based on observed labor market transitions; the other drawing on O*NET, an online tool for career exploration and job analysis, which identifies

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Subsidizing health insurance for low-income adults: evidence from Massachusetts

July 24, 2019

Summary

How much are low-income individuals willing to pay for health insurance? And what are the implications for insurance market reforms that propose to change government subsidies? Using administrative data from the pioneer subsidized insurance exchange in Massachusetts over the period 2009 to 2013, this study exploits discontinuities in the premium subsidy schedule to estimate willingness to pay and costs of insurance among low-income adults. The researchers have three main findings.

Subsidies matter
Insurance take-up falls rapidly as subsidies decline. About 25% of the eligible population of low-income individuals drop coverage in response to a $40

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Understanding the Average Impact of Microcredit

July 17, 2019

Summary

The global microloan portfolio is now worth over 102 billion dollars and is growing yearly. This research estimates the impact of the policy and the extent to which this impact is different across different contexts. It finds that overall, the best existing evidence suggests that the average impact of these loans is small and that in the future, it may be beneficial to seek alternative approaches to improve the lives of poor households in the developing world.

Microcredit, the idea that giving small or “micro” loans to poor households in developing countries to help them escape poverty by starting or growing their own businesses, has become widely

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Nominal wage rigidity in village labor markets: evidence from India

July 1, 2019

Summary

Markets for daily wage labor in agriculture are ubiquitous in poor countries, providing employment for hundreds of millions of workers in India alone. In an exploration of how nominal wages in these markets respond to changing economic conditions, this research finds strong evidence of limited downward adjustment in the face of a negative shock, such as a drought.

A key part of the explanation for nominal wage rigidity lies in perceptions that wage cuts are unfair and reduce worker productivity. The study presented 396 agricultural laborers and employers in 34 villages across six districts in India with scenarios about wage-setting behavior, and asked

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Market power and the Laffer curve

June 18, 2019

Summary

Arthur Laffer, who was recently awarded the Presidential Medal of Freedom, is famous for sketching an inverted U-shaped diagram of the supposed trade-off between tax rates and tax revenues. The Laffer curve originates from the economist’s 1974 conversation with Wall Street Journal reporter Jude Wanniski, and politicians Dick Cheney and Donald Rumsfeld.
During the meeting, Laffer is said to have argued that then President Ford’s proposed tax rise would actually reduce tax revenue collected. He demonstrated the effect by sketching the first Laffer curve on a napkin, a replica of which is in the archives of the National Museum of American History.

This

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