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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

  • 7 August

    Insuring the Poor: Experimental evidence from contract farming in Kenya

    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

July, 2020

  • 17 July

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

    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

  • 6 July

    Wealth Taxation and Wealth Accumulation: Theory and Evidence from Denmark

    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,

  • 1 July

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June, 2020

  • 5 June

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

    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