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Seldomly updated

February, 2021

  • 1 February

    Age of marriage, weather shocks, and the direction of marriage payments

    Summary Child marriage, defined as marriage before the age of 18, has been associated with a wide array of poor economic, social, and health outcomes for women and their children. It was estimated in 2014, however, that around half of all prime-aged women living in South Asia and in Sub-Saharan Africa were married as children.  This post summarizes a recent article, which has demonstrated that aggregate economic shocks have sizable effects on the age of marriage of women living in developing countries. The study focuses on Sub-Saharan Africa, where it is customary for the groom or his family to pay a bride price to the bride’s family, and India, where the bride’s family traditionally pays a dowry to

January, 2021

  • 5 January

    Innovation in the global firm

    Summary Multinational corporations are among the most innovative firms in the world. Although they are defined by their geographically fragmented production processes, the innovation that they carry out is comparatively concentrated, with a large share of them pursuing innovation investment mainly in one ‘headquarters’ country.  A new study analyzes data on the global operations of US-based multinationals to quantify the impact of innovation investments by parent firms on their affiliates located abroad. These data have been collected by the Bureau of Economic Analysis and cover the period from 1989 to 2008. The results suggest that ‘headquarters innovation’

December, 2020

  • 21 December

    More Precise Regulation can Lower Pollution in India

    Summary Around the world, air pollution is a major problem, and today’s large developing countries have perhaps the highest levels of air pollution recorded in human history. The World Health Organization sets an air quality standard for fine particulate matter which all 687 districts in India fail to meet. Air pollution beyond the WHO standard lowers the life expectancy of 1.3 billion Indian citizens by five years, on average.  The high level of pollution is a puzzle, given that firms in developing countries have access to the same pollution abatement technologies as firms in the United States, at least in principle. Manufacturing in the United States has become markedly cleaner over time while

  • 9 December

    How acquisitions affect firm behavior and performance: Evidence from the dialysis industry

    Summary Health care markets have become increasingly concentrated through mergers and acquisitions. This consolidation can lower costs due to economies of scale and improve patient outcomes through coordinated care. However, greater concentration may also result in higher prices or lower quality. A recent paper studies the effects of mergers and acquisitions in the dialysis industry, which makes up 6% of total Medicare expenditures (Eliason et al., 2020). The dialysis industry has consolidated over the past three decades, with the share of independently owned dialysis facilities falling from 86% to 21%. This new research uses detailed claims data to show directly how large chains transfer their

  • 2 December

    The Return to Protectionism

    Summary After more than a half-century of leading efforts to lower international trade barriers, the United States enacted several waves of tariff increases on specific products and countries in 2018 and 2019. Overall, the U.S. implemented tariffs on 17.6% of its 2017 imports, primarily from China, raising tariffs on targeted imports from an average of 3.7% to an average of 25.8%. Trade partners retaliated by targeting 8.7% of U.S. exports, raising tariffs from an average of 8.7% to an average of 20.8%. This episode is the largest return to protectionism by the U.S. since the 1930 Smoot-Hawley Act (Irwin, 1998). Two recent papers look at U.S. trade and tariff

November, 2020

  • 25 November

    What Medicare Part D Teaches Us About Social Insurance Markets

    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

  • 6 November

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

    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

October, 2020

  • 21 October

    Who Profits from Patents? Rent-Sharing at Innovative Firms

    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

  • 5 October

    Improved allocation of talent boosts US economic growth

    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

August, 2020

  • 21 August

    Capitalists in the Twenty-First Century

    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