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Friday, February 24, 2017

On the inside

Immigration Restrictions as Active Labor Market Policy: Evidence from the Mexican Bracero Exclusion

Michael Clemens, Ethan Lewis & Hannah Postel

NBER Working Paper, February 2017

Abstract:
An important class of active labor market policy has received little rigorous impact evaluation: immigration barriers intended to improve the terms of employment for domestic workers by deliberately shrinking the workforce. Recent advances in the theory of endogenous technical change suggest that such policies could have limited or even perverse labor-market effects, but empirical tests are scarce. We study a natural experiment that excluded almost half a million Mexican ‘bracero’ seasonal agricultural workers from the United States, with the stated goal of raising wages and employment for domestic farm workers. We build a simple model to clarify how the labor-market effects of bracero exclusion depend on assumptions about production technology, and test it by collecting novel archival data on the bracero program that allow us to measure state-level exposure to exclusion for the first time. We cannot reject the hypothesis that bracero exclusion had no effect on U.S. agricultural wages or employment, and find that important mechanisms for this result include both adoption of less labor-intensive technologies and shifts in crop mix.

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Open Borders in the European Union and Beyond: Migration Flows and Labor Market Implications

John Kennan

NBER Working Paper, January 2017

Abstract:
In 2004, the European Union admitted 10 new countries, and wages in these countries were generally well below the levels in the existing member countries. Citizens of these newly-admitted countries were subsequently free to take jobs anywhere in the EU, and many did so. In 2015, a large number of refugees from Syria and other broken countries sought to migrate to EU countries (along very dangerous routes), and these refugees were met with fierce resistance, at least in some places. This paper seeks to understand the labor market implications of allowing free migration across borders, with particular reference to the EU. The aim is to quantify the migration flows associated with EU enlargement, and to analyze the extent to which these flows affected equilibrium wages. The main conclusion is that the real wage effects are small, and the gains from open borders are large.

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Understanding the Economic Impact of the H-1B Program on the U.S.

John Bound, Gaurav Khanna & Nicolas Morales

NBER Working Paper, February 2017

Abstract:
Over the 1990s, the share of foreigners entering the US high-skill workforce grew rapidly. This migration potentially had a significant effect on US workers, consumers and firms. To study these effects, we construct a general equilibrium model of the US economy and calibrate it using data from 1994 to 2001. Built into the model are positive effects high skilled immigrants have on innovation. Counterfactual simulations based on our model suggest that immigration increased the overall welfare of US natives, and had significant distributional consequences. In the absence of immigration, wages for US computer scientists would have been 2.6% to 5.1% higher and employment in computer science for US workers would have been 6.1% to 10.8% higher in 2001. On the other hand, complements in production benefited substantially from immigration, and immigration also lowered prices and raised the output of IT goods by between 1.9% and 2.5%, thus benefiting consumers. Finally, firms in the IT sector also earned substantially higher profits due to immigration.

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Inter-firm mobility and return migration patterns of skilled guest workers

Briggs Depew, Peter Norlander & Todd Sørensen

Journal of Population Economics, February 2017, Pages 681–721

Abstract:
Two concerns central to the debate over skilled guest worker programs in the USA are that (1) guest workers are restricted from inter-firm mobility and are “effectively tied” to their firms, and (2) guest workers provide cheap and immobile labor that crowds out natives, especially during times of heightened unemployment. We address these concerns by using a unique dataset of employee records from six large Indian IT firms operating in the USA. We find that the guest workers in our sample exhibit a significant amount of inter-firm mobility that varies over both the earnings distribution and the business cycle. We also find that these workers exit the USA during periods of heightened unemployment. These findings provide new evidence on the implications of the institutional features and debate surrounding guest worker programs.

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Urban crime rates and the changing face of immigration: Evidence across four decades

Robert Adelman et al.

Journal of Ethnicity in Criminal Justice, Winter 2017, Pages 52-77

Abstract:
Research has shown little support for the enduring proposition that increases in immigration are associated with increases in crime. Although classical criminological and neoclassical economic theories would predict immigration to increase crime, most empirical research shows quite the opposite. We investigate the immigration-crime relationship among metropolitan areas over a 40 year period from 1970 to 2010. Our goal is to describe the ongoing and changing association between immigration and a broad range of violent and property crimes. Our results indicate that immigration is consistently linked to decreases in violent (e.g., murder) and property (e.g., burglary) crime throughout the time period.

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The Hidden Educational Costs of Intensified Immigration Enforcement

Catalina Amuedo-Dorantes & Mary Lopez

Southern Economic Journal, forthcoming

Abstract:
The past two decades have witnessed an unprecedented increase in interior immigration enforcement that may have adversely impacted the children of unauthorized migrants—the vast majority of whom are U.S.-born citizens. Using 2000 through 2013 data from the Current Population Survey, we gauge the impact that intensified interior immigration enforcement in the United States is having on the schooling progression of Hispanic youth with likely unauthorized parents. Intensified enforcement raises the probability of repeating a grade for children ages 6–13 by 14%, and the likelihood of dropping out of school for youth ages 14–17 by 18%. Furthermore, younger children are more responsive to police-based enforcement, whereas older youth are more responsive to employment-based enforcement. Awareness of the impacts that current immigration policies have on the children of immigrants is critical in informing the policy debate and in protecting the well-being of children.

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“We Only Speak English Here”: English Dominance in Language Diverse, Immigrant After-School Programs

Melanie Jones Gast, Dina Okamoto & Valerie Feldman

Journal of Adolescent Research, January 2017, Pages 94-121

Abstract:
Past research suggests that community after-school programs (ASPs) are crucial sites for culturally relevant programming for minority and immigrant youth; yet, we know little about how ASPs address language in their programming. Using an ethnographic fieldwork approach, we examine the goals and practices of ASP workers serving immigrant youth with diverse ethnic and language backgrounds in San Francisco, California. We find that, despite the best intentions regarding culturally relevant programming, ASP workers faced funding mandates, capacity issues, and increasingly diverse youth populations, and they adopted English-only policies or simply placed little priority on native-language usage. Ultimately, we observed competing processes related to English dominance: a lack of support for English language learners (ELLs) and bilingual youth, and the use of English as a bridge language across racial and ethnic lines. While staff sought to support and empower immigrant youth, ELL youth were often left on the sidelines and had limited opportunities to develop social capital in ASPs. Without reworking funding and institutional systems for language programming, English dominance may continue as a normalized method of practice in city youth programs.

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Change in birth outcomes among infants born to Latina mothers after a major immigration raid

Nicole Novak, Arline Geronimus & Aresha Martinez-Cardoso

International Journal of Epidemiology, forthcoming

Background: Growing evidence indicates that immigration policy and enforcement adversely affect the well-being of Latino immigrants, but fewer studies examine ‘spillover effects’ on USA-born Latinos. Immigration enforcement is often diffuse, covert and difficult to measure. By contrast, the federal immigration raid in Postville, Iowa, in 2008 was, at the time, the largest single-site federal immigration raid in US history.

Methods: We employed a quasi-experimental design, examining ethnicity-specific patterns in birth outcomes before and after the Postville raid. We analysed Iowa birth-certificate data to compare risk of term and preterm low birthweight (LBW), by ethnicity and nativity, in the 37 weeks following the raid to the same 37-week period the previous year (n = 52 344). We model risk of adverse birth outcomes using modified Poisson regression and model distribution of birthweight using quantile regression.

Results: Infants born to Latina mothers had a 24% greater risk of LBW after the raid when compared with the same period 1 year earlier [risk ratio (95% confidence interval) = 1.24 (0.98, 1.57)]. No such change was observed among infants born to non-Latina White mothers. Increased risk of LBW was observed for USA-born and immigrant Latina mothers. The association between raid timing and LBW was stronger among term than preterm births. Changes in birthweight after the raid primarily reflected decreased birthweight below the 5th percentile of the distribution, not a shift in mean birthweight.

Conclusions: Our findings highlight the implications of racialized stressors not only for the health of Latino immigrants, but also for USA-born co-ethnics.

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Career Duration in the NBA: Do Foreign Players Exit Early?

Peter Groothuis & James Richard Hill

Journal of Sports Economics, forthcoming

Abstract:
Using a panel of National Basketball Association players from 1990 through 2013, we analyze the determinants of career length in the league. We find that foreign-born players who did not play college basketball in the United States have shorter careers than do American-born players holding performance constant. Foreign-born players who played college basketball in the United States do not have shorter careers. We suggest that both push and pull immigration factors might cause this early exit.

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Earnings distribution of Cuban immigrants in the USA: Evidence from quantile regression with sample selection

Aleida Cobas-Valdés, Javier Fernández-Macho & Ana Fernández-Sainz

Applied Economics, forthcoming

Abstract:
This article analyses the conditional earnings distribution for Cuban immigrants in the USA considering Buchinsky sample selection in a quantile regression model. The test proposed by Huber and Melly to test the independence between error terms and regressors (conditional on the selection probability) is also considered. This is the first attempt in the migration literature to use quantile regression with sample selection. The data used come from the US American Community Survey. The results show that the hypothesis of conditional independence is not rejected, and increments in earnings associated with the usual socioeconomic characteristics in labour studies vary between the cohorts considered. The main conclusions are that a decline in returns from education may be a sign that a high level of education no longer provides a competitive advantage and that being a black person is associated with substantially lower earnings regardless of the individuals’ position in the earnings distribution. This may explain why, historically, comparatively fewer black Cubans have made the decision to emigrate to the USA because of a lack of economic incentives.

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Immigration and the Rise of American Ingenuity

Ufuk Akcigit, John Grigsby & Tom Nicholas

NBER Working Paper, February 2017

Abstract:
This paper builds on the analysis in Akcigit, Grigsby, and Nicholas (2017) by using U.S. patent and Census data to examine macro and micro-level aspects of the relationship between immigration and innovation. We construct a measure of "foreign born expertise" and show that technology areas where immigrant inventors were prevalent between 1880 and 1940 experienced more patenting and citations between 1940 and 2000. We also show that immigrant inventors were more productive during their life cycle than native born inventors, although they received significantly lower levels of labor income than their native born counterparts. Overall, the contribution of foreign born inventors to US innovation was substantial, but we also find evidence of an immigrant inventor wage-gap that cannot be explained by differentials in productivity.

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Green Cards, Patents, and Firm Value

Rahmi Erdem Aktug

Federal Reserve Working Paper, January 2017

Abstract:
This is the first study to use the approved Green Card Applications (or Certified Permanent Residency Applications) from the Program Electronic Review Management (PERM) database, and the first to link the PERM database to patents database kept by the US Patent and Trademark Office (USPTO). We find that the number of approved permanent residency applications (perms, as a percentage of total employment) has a positive impact on firms’ value and growth opportunities proxied by Tobin’s Q (TQ). Specifically, a 1% increase in perms lead to a 15-20% increase in firm value. Although we were not able to confirm that more green cards lead to more innovation, we discover that more innovation gets firms more Green Cards. We find that a 1% increase in the patent variable (patents as a percentage of total employment) lead to a 0.03% increase in Green Card Approvals. Our findings carry importance for US policy makers, firms, investors, and academics.

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Immigration and housing: A spatial econometric analysis

Abeba Mussa, Uwaoma Nwaogu & Susan Pozo

Journal of Housing Economics, March 2017, Pages 13–25

Abstract:
In this paper we examine the effect of immigration into the U.S. on the U.S. housing market, both in terms of rents and single family house prices. We model the housing market in a spatial econometrics context using the spatial Durbin model. This approach helps us exploit and capture both the direct and indirect effects of immigration inflows on the U.S. housing market. We find that an increase in immigration inflows into a particular MSA is associated with increases in rents and with house prices in that MSA while also seeming to drive up rents and prices in neighboring MSAs. The patterns observed in the rental and house price markets, along with the larger spillover effects, are consistent with native-flight from immigrant receiving areas.

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Moving to the Right Place at the Right Time: Economic Effects on Migrants of the Manchuria Plague of 1910-11

Dan Li & Nan Li

Explorations in Economic History, January 2017, Pages 91–106

Abstract:
How do initial arrival conditions in a host locality affect migrants’ subsequent economic welfare? Manchuria (Northeast China), which attracted millions of migrants from North China during the first half of the twentieth century, experienced a devastating pneumonic plague outbreak in 1910-11. Using data from a rural household survey in the mid-1930s, we explore how the post-plague conditions in various villages affected migrant cohorts’ long-term wealth accumulation. We find that the migrant households that moved to plague-hit villages soon after the plague ended prospered the most: they owned at least 112% more land than migrant households that either moved elsewhere or migrated to the same village before or long after the plague outbreak. Our results are robust after controlling for factors that influence the long-term wealth accumulation of migrants and are not caused by selection.

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How does the internet affect migration decisions?

Hernan Winkler

Applied Economics Letters, forthcoming

Abstract:
This article provides new evidence on the impact of the internet on migration decisions. I find that an increase in internet adoption among migrant-sending countries reduces the stock of migrants from these locations. The results are robust to a number of specifications, including an instrumental variable approach that addresses the endogeneity of internet adoption. The findings suggest that the internet may weaken the importance of push factors in the decision to migrate, and that these effects outweigh declines in mobility costs.

By KEVIN LEWIS | 09:00:00 AM

Thursday, February 23, 2017

Do the math

The Labor of Division: Returns to Compulsory High School Math Coursework

Joshua Goodman

NBER Working Paper, January 2017

Abstract:
Despite great focus on and public investment in STEM education, little causal evidence connects quantitative coursework to students' economic outcomes. I show that state changes in minimum high school math requirements substantially increase black students' completed math coursework and their later earnings. The marginal student's return to an additional math course is 10 percent, roughly half the return to a year of high school, and is partly explained by a shift toward more cognitively skilled occupations. Whites' coursework and earnings are unaffected. Rigorous standards for quantitative coursework can close meaningful portions of racial gaps in economic outcomes.

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General Education, Vocational Education, and Labor-Market Outcomes over the Lifecycle

Eric Hanushek et al.

Journal of Human Resources, Winter 2017, Pages 48-87

Abstract:
Policy proposals promoting vocational education focus on the school-to-work transition. But with technological change, gains in youth employment may be offset by less adaptability and diminished employment later in life. To test for this tradeoff, we employ a difference-in-differences approach that compares employment rates across different ages for people with general and vocational education. Using microdata for 11 countries from IALS, we find strong and robust support for such a tradeoff, especially in countries emphasizing apprenticeship programs. German Microcensus data and Austrian administrative data confirm the results for within-occupational-group analysis and for exogenous variation from plant closures, respectively.

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Demonstrated Interest: Signaling Behavior in College Admissions

James Dearden et al.

Contemporary Economic Policy, forthcoming

Abstract:
In college admission decisions, important and possibly competing goals include increasing the quality of the freshman class and making the school more selective while attaining the targeted size of the incoming class. Especially for high-quality applicants who receive multiple competing offers, colleges are concerned about the probability that these students accept the offers of admission. As a result, applicants' contacts with admissions offices, such as campus visits, can be viewed positively by the officers as demonstrated interest in the colleges. We provide empirical evidence on the effects of demonstrated interest on admission outcomes. Specifically, we use unique and comprehensive administrative data, which include all contacts made by each applicant to the admissions office of a medium-sized highly selective university during two admission cycles. We find that an applicant who contacts the university is more likely to be admitted, and that the effect of the contact on the probability of admission is increasing in the applicant's Scholastic Assessment Test score, particularly when the contact is costly to make. We also use a numerical example to explore policies to reduce the inequity associated with the use of demonstrated interest in admission decisions, examining in particular the subsidization of costly demonstrated interest by low-income students.

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School Spending and New Construction

David Brasington

Regional Science and Urban Economics, March 2017, Pages 76-84

Abstract:
School districts that vote in favor of property tax levies may signal that they are education-oriented. Through Tiebout sorting and housing developer activity, new residents might move to such communities. New retail development may occur near these new residents, and office firms that rely on high-skilled residents might be drawn too. Using regression discontinuity we find school districts that renew property tax levies have a higher value of new construction than districts that do not renew these school expenditures. School tax levy renewal is responsible for 14% of new residential construction and 25% of new commercial construction.

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Peer Delinquency and Student Achievement in Middle School

Tom Ahn & Justin Trogdon

Labour Economics, January 2017, Pages 192-217

Abstract:
This paper studies the relationship between peer delinquency and student achievement in North Carolina middle schools. We define severity of the delinquent act using the associated punishment and calculate the average exposure to peer delinquency. Our identification strategy uses this new measure, a rich set of control variables including student, peer, and teacher characteristics, and a novel instrumental variable that captures the indirect social network impact of peer misbehavior. The instrument uses lagged delinquent behavior from students who went to 5th grade with peers of the index student's current 6th grade peers but not the index student him/herself. A 10 percent increase in the number of "major" incidents that a student at an average North Carolina school is exposed to was associated with a 6.2 percent of a standard deviation decrease in his or her standardized math score.

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Debt and Human Capital: Evidence from Student Loans

Vyacheslav Fos, Andres Liberman & Constantine Yannelis

NYU Working Paper, January 2017

Abstract:
This paper investigates the dynamic relation between debt and investments in human capital. We document a negative causal effect of the level of undergraduate student debt on the probability of enrolling in a graduate degree for a random sample of the universe of federal student loan borrowers in the US. We compare students (i) within school and cohort, and (ii) across cohorts within the same school at the time of a large tuition change. The latter strategy exploits the fact that students who face a tuition increase in earlier grades end up with significantly more debt than students who face the same tuition increase in later grades. We find that $4,000 in higher debt causes a two percentage point reduction in the probability of enrolling in graduate school relative to a mean of 12%. Further results suggest this effect is largely driven by credit constraints, is monotonically weaker with family income, and is attenuated for students who had compulsory personal finance training in high school. The results highlight an important trade off associated with debt-financing of human capital, and inform the debate on the effects of the large and increasing stock of student debt in the US.

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From the Delta Banks to the Upper Ranks: An Evaluation of KIPP Charter Schools in Rural Arkansas

Caleb Rose, Robert Maranto & Gary Ritter

Educational Policy, March 2017, Pages 180-201

Abstract:
Knowledge is Power Program Delta College Preparatory School (KIPP DCPS), an open-enrollment charter school, opened in 2002 in Helena, Arkansas. KIPP DCPS students have consistently outperformed their peers from neighboring districts on year-end student achievement scores, and KIPP's national reputation led Arkansas lawmakers to exempt KIPP from the state's charter school cap. Yet, skeptics of KIPP in particular, and charter schools in general, voiced a concern that the apparent KIPP advantage in student achievement may have been due to the prior academic ability of the students who selected into KIPP rather than to the KIPP school itself. Furthermore, some KIPP critics have argued that student attrition at KIPP schools accounts for the apparent KIPP advantage. Until now, no prior study has rigorously compared performance of KIPP students with traditional public school peers on matched observable academic and demographic variables or carefully considered student attrition rates at KIPP DCPS. Here, we begin by summarizing prior evaluations of KIPP schools nationally. Next, we carefully examine student attrition from 2005 through 2011, and we find that KIPP DCPS attrition resembles that found in nearby traditional public schools. Finally, using regression models that control demographic and prior academic indicators, we find that KIPP DCPS students gain significantly more each year on standardized assessments than do their matched peers. These results are important as nearly all prior empirical work on KIPP schools has been conducted in urban settings. Despite the fact that many rural students struggle academically or attend struggling schools, we know relatively little about the potential benefits of No Excuses charter schools in rural areas, such as KIPP DCPS.

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The Effects of Academic Incubators on University Innovation

Christos Kolympiris & Peter Klein

Strategic Entrepreneurship Journal, forthcoming

Abstract:
In this article, we analyze the impact of academic incubators on the quality of innovations produced by U.S. research-intensive academic institutions. We show that establishing a university-affiliated incubator is followed by a reduction in the quality of university innovations. The conclusion holds when we control for the endogeneity of the decision to establish an incubator using the presence of incubators at peer institutions as an instrument. We also document a reduction in licensing income following the establishment of an incubator. The results suggest that university incubators compete for resources with technology transfer offices and other campus programs and activities, such that the useful outputs they generate can be partially offset by reductions in innovation elsewhere.

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Evaluating Post-Secondary Aid: Enrollment, Persistence, and Projected Completion Effects

Joshua Angrist et al.

NBER Working Paper, December 2016

Abstract:
This paper reports updated findings from a randomized evaluation of a generous, privately-funded scholarship program for Nebraska public college students. Scholarship offers boosted college enrollment and persistence. Four years after award receipt, randomly-selected scholarship winners were 13 percentage points more likely to be enrolled in college. Enrollment effects were larger for groups with historically low college attendance, including nonwhite students, first-generation college-goers, and students with low high school GPAs. Scholarships shifted many students from two- to four-year colleges, reducing associate's degree completion in the process. Despite their substantial gains in four-year college enrollment, award winners from the first study cohort were slightly less likely to graduate on time than control applicants, suggesting that scholarships delay degree completion for some students. Projected graduation rates using the last cohort of pre-experimental scholarship applicants indicate that scholarships are likely to increase bachelor's degree completion within five years.

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Market Power and Incidence in Higher Education

Mahyar Kargar & William Mann

University of California Working Paper, January 2017

Abstract:
We estimate the degree of private colleges' market power, in order to better understand the incidence of financial aid (the Bennett Hypothesis). For identification, we exploit a 2011 tightening of credit standards in the PLUS loan program, in response to which enrollment, tuition, and expenditures all fell at colleges where a large fraction of students come from low-income households. We exploit this demand shock to estimate these colleges' marginal revenues and marginal costs, then compute markups. We find that marginal costs are roughly a third of tuition charges per student at the median, implying that colleges have substantial market power in setting their prices. We further document that market power is greater (markups are higher) at for-profit schools, and at schools in states with fewer public schools per capita. Our results contrast prior studies that estimate small markups in higher education.

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Life in shackles? The quantitative implications of reforming the educational financing system

Ben Heijdra, Fabian Kindermann & Laurie Reijnders

Review of Economic Dynamics, forthcoming

Abstract:
We conduct a quantitative analysis of educational financing systems in a stochastic overlapping generations model in which human capital can be enhanced through both formal schooling and learning-by-doing. The model is calibrated to the United States economy, including a stylized version of its student loan system. We find that moving to an income-contingent educational financing system, whereby transfers to students are financed from taxes on labor income, generates aggregate welfare gains. Such a system improves risk-sharing among college graduates and incentivizes individuals to obtain more education. These positive effects overturn the negative impact from labor supply distortions. Reforming the educational financing system towards income contingency, however, generates a considerable amount of transitional dynamics, so that welfare gains and losses are distributed unevenly across generations.

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Do For-Profit Managers Spend Less on Schools and Instruction? A National Analysis of Charter School Staffing Expenditures

Mark Weber & Bruce Baker

Educational Policy, forthcoming

Abstract:
This article takes advantage of a recently released national data set on school site expenditures to evaluate spending variations between traditional district operated schools and charter schools operated by for-profit versus nonprofit management firms. Prior research has revealed the revenue-enhancement, private fund-raising capacity of major nonprofit providers. For-profit providers may face greater pressure to reduce operating expenses. As such, we hypothesize that regardless of average differences in staffing expenses between district and charter schools, school site staffing expenditures are likely to be lower in for-profit than in nonprofit managed charter schools. Furthermore, school site instructional staffing expenditures may be lower yet. Applying national, then state-level models to compare spending for schools of similar size, serving similar grade ranges and students with similar attributes (income status, special education, and language proficiency status), we find these assumptions largely to be true. Specifically, on average across all settings (global model) we find that charters spend less per pupil on instructional salaries compared with districts; furthermore, for-profit charters spend less than nonprofits. Furthermore, for-profit charters spend statistically significantly less (p < .05) on instructional salaries, compared with district schools in many states.

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Does Attending a Charter School Reduce the Likelihood of Being Placed Into Special Education? Evidence From Denver, Colorado

Marcus Winters, Dick Carpenter & Grant Clayton

Educational Evaluation and Policy Analysis, forthcoming

Abstract:
We use administrative data to measure whether attending a charter school in Denver, Colorado, reduces the likelihood that students are newly classified as having a disability in primary grades. We employ an observational approach that takes advantage of Denver's Common Enrollment System, which allows us to observe each school that the student listed a preference to attend. We find evidence that attending a Denver charter school reduces the likelihood that a student is classified as having a specific learning disability, which is the largest and most subjectively diagnosed disability category. We find no evidence that charter attendance reduces the probability of being classified as having a speech or language disability or autism, which are two more objectively diagnosed classifications.

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Do anti-bullying laws work? New evidence on school safety and youth violence

Joseph Sabia & Brittany Bass

Journal of Population Economics, February 2017, Pages 473-502

Abstract:
This study is the first to comprehensively examine the effect of state anti-bullying laws (ABLs) on school safety and youth violence. Using existing data from the Youth Risk Behavior Surveys and the Uniform Crime Reports, and newly-collected data on school shootings, we find little evidence that the typical state ABL is effective in improving school safety and student well-being. However, this null finding masks substantial policy heterogeneity. State mandates that require school districts to implement strong, comprehensive anti-bullying policies are associated with a 7 to 13 % reduction in school violence and an 8 to 12 % reduction in bullying. In addition, our results show that strong anti-bullying policy mandates are associated with a reduction in minor teen school shooting deaths and violent crime arrests, suggesting potentially important spillover effects.

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Principal Licensure Exams and Future Job Performance: Evidence From the School Leaders Licensure Assessment

Jason Grissom, Hajime Mitani & Richard Blissett

Educational Evaluation and Policy Analysis, forthcoming

Abstract:
Many states require prospective principals to pass a licensure exam to obtain an administrative license, but we know little about the potential effects of principal licensure exams on the pool of available principals or whether scores predict later job performance. We investigate the most commonly used exam, the School Leaders Licensure Assessment (SLLA), using 10 years of data on Tennessee test takers. We uncover substantial differences in passage rates by test-taker characteristics. In particular, non-Whites are 12 percentage points less likely than otherwise similar White test takers to attain the required licensure score. Although candidates with higher scores are more likely to be hired as principals, we find little evidence that SLLA scores predict measures of principal job performance, including supervisors' evaluation ratings or teachers' assessments of school leadership from a statewide survey. Our results raise questions about whether conditioning administrative licensure on SLLA passage is consistent with principal workforce diversity goals.

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Knowledge of Earnings Risk and Major Choice: Evidence from an Information Experiment

Alex Ruder & Michelle Van Noy

Economics of Education Review, forthcoming

Abstract:
Policymakers increasingly seek to inform students about the expected economic returns to different college majors. Less attention has been given to the earnings risk of major choice. In this paper, we use an experiment to study the impact of an information intervention by providing individuals with data that show the earnings risk of a major choice. Our intervention allows us to compare earnings risk and major preferences among a group who is informed about earnings risk compared to a group not given information about risk. Our results show that individuals who see information about earnings risk form different earnings risk estimates and preferences over majors than individuals who see median earnings only. These differences show the negative consequences of making academic major decisions when holding incorrect estimates of earnings risk, and suggest the value of including earnings risk in tools such as college scorecards to inform students.

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What Is the Long-Run Impact of Learning Mathematics During Preschool?

Tyler Watts et al.

Child Development, forthcoming

Abstract:
The current study estimated the causal links between preschool mathematics learning and late elementary school mathematics achievement using variation in treatment assignment to an early mathematics intervention as an instrument for preschool mathematics change. Estimates indicate (n = 410) that a standard deviation of intervention-produced change at age 4 is associated with a 0.24-SD gain in achievement in late elementary school. This impact is approximately half the size of the association produced by correlational models relating later achievement to preschool math change, and is approximately 35% smaller than the effect reported by highly controlled ordinary least squares (OLS) regression models (Claessens et al., 2009; Watts et al., 2014) using national data sets. Implications for developmental theory and practice are discussed.

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The effects of Greek affiliation on academic performance

Andrew De Donato & James Thomas

Economics of Education Review, April 2017, Pages 41-51

Abstract:
We use a difference-in-differences approach to estimate the effects of Greek affiliation on academic performance. There are strong negative effects in some periods but smaller effects in others: fraternity affiliation hurts performance by .32 standard deviations in the Freshman Spring; sorority affiliation hurts performance by .22 standard deviations in Spring semesters after Freshman year. We estimate both ceteris-paribus effects and non-ceteris-paribus effects which allow Greek affiliation to influence course choice behavior. We account for censoring of grades and show ignoring censoring leads to attenuation bias. We also document heterogeneity in treatment effects by student preparation and organization social status.

By KEVIN LEWIS | 09:00:00 AM

Wednesday, February 22, 2017

For the shareholders

When is good news bad and vice versa? The Fortune rankings of America's most admired companies

Yingmei Cheng et al.

Journal of Corporate Finance, April 2017, Pages 378–396

Abstract:
We use increases and decreases in the ranking scores of Fortune's Most Admired Companies to test the proposition that media shocks can increase (decrease) the value of a manager's reputational capital and, thus, enhance (diminish) his power to extract corporate resources for private benefit at the expense of shareholders. Consistent with the proposition increases (decreases) in scores are associated with stock price decreases (increases). And, CEOs whose firms experience increases (reductions) in scores experience increases (reductions) in compensation and in job tenure, and their firms undertake more (fewer) acquisitions and the acquisitions are less (more) value increasing.

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Ripple Effects of CEO Awards: Investigating the Acquisition Activities of Superstar CEOs’ Competitors

Wei Shi, Yan Zhang & Robert Hoskisson

Strategic Management Journal, forthcoming

Abstract:
This study proposes that CEOs may undertake intensive acquisition activities to increase their social recognition and status after witnessing their competitors’ winning CEO awards. Using a sample of U.S. S&P 1500 firm CEOs, we find that CEOs engage in more intensive acquisition activities in the period after their competitors won CEO awards (i.e., post-award period), compared to the pre-award period. Moreover, this effect is stronger when focal CEOs themselves had a high likelihood of winning CEO awards. Our findings also show that acquisitions by focal CEO firms in the post-award period realize lower announcement returns compared to acquisitions by the same CEOs in the pre-award period.

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Do exogenous changes in passive institutional ownership affect corporate governance and firm value?

Cornelius Schmidt & Rüdiger Fahlenbrach

Journal of Financial Economics, forthcoming

Abstract:
We investigate whether corporations and their executives react to an exogenous change in passive institutional ownership and alter their corporate governance structure. We find that exogenous increases in passive ownership lead to increases in CEO power and fewer new independent director appointments. Consistent with these changes not being beneficial for shareholders, we observe negative announcement returns to the appointments of new independent directors. We also show that firms carry out worse mergers and acquisitions after exogenous increases in passive ownership. These results suggest that the changed ownership structure causes higher agency costs.

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Tax Rates and Corporate Decision Making

John Graham et al.

Review of Financial Studies, forthcoming

Abstract:
We survey companies and find that many use incorrect tax rate inputs into important corporate decisions. Specifically, many companies use an average tax rate (the GAAP effective tax rate, ETR) to evaluate incremental decisions, rather than using the theoretically correct marginal tax rate. We find evidence consistent with behavioral biases (heuristics, salience) and managers’ educational backgrounds affecting these choices. We estimate the economic consequences of using the theoretically incorrect tax rate and find that using the ETR for capital structure decisions leads to suboptimal leverage choices and using the ETR in investment decisions makes firms less responsive to investment opportunities.

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Strategic Reactions in Corporate Tax Avoidance

Chris Armstrong, Stephen Glaeser & John Kepler

University of Pennsylvania Working Paper, December 2016

Abstract:
We find that the tax avoidance of firms in the same industry exhibit strategic complementarities: a change in a firm’s tax avoidance leads to a direct change in its industry-competitors’ tax avoidance, and vice versa. We document evidence of these strategic complementarities in several measures of corporate tax avoidance using multiple sources of exogenous variation in competitors’ tax avoidance. We also find evidence that firms’ strategic response to their competitors’ tax avoidance stems from concerns about appearing more tax aggressive than their industry competitors and drawing unwanted scrutiny as a result.

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Foreign Cash: Taxes, Internal Capital Markets, and Agency Problems

Jarrad Harford, Cong Wang & Kuo Zhang

Review of Financial Studies, forthcoming

Abstract:
When the fraction of a firm’s cash held overseas is greater, its shareholders value that cash lower. This goes beyond a pure tax effect: the repatriation tax friction disrupts the firm’s internal capital market, distorting its investment policy. Firms underinvest domestically and overinvest abroad. Our findings are more pronounced when firms are subject to higher repatriation tax rates, higher costs of borrowing, and more agency problems. Overall, our evidence suggests that a combination of taxes, financing frictions, and agency problems leads to a valuation discount for foreign cash and documents real effects of how foreign earnings are taxed.

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High-Reputation Firms and Their Differential Acquisition Behaviors

Jerayr “John” Haleblian, Michael Pfarrer & Jason Kiley

Strategic Management Journal, forthcoming

Abstract:
Emerging reputation research suggests that high-reputation firms will act to maintain their reputations in the face of high expectations. Yet this research remains unclear on how high-reputation firms do so. We advance this research by exploring three questions related to high-reputation firms’ differential acquisition behaviors: Do high-reputation firms make more acquisitions than similar firms without this distinction? What kind of acquisitions do they make? How do investors react to high-reputation firms’ differential acquisition behaviors? We find that high-reputation firms make more acquisitions and more unrelated acquisitions than other firms. Yet we also find that investors bid down high-reputation firms’ stock more than other firms’ in response to acquisition announcements, suggesting that investors are skeptical of how high-reputation firms maintain their reputations.

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The impact of board gender composition on dividend payouts

Jie Chen, Woon Sau Leung & Marc Goergen

Journal of Corporate Finance, April 2017, Pages 86–105

Abstract:
This paper investigates whether female independent directors are more likely to impose high dividend payouts. We find evidence that firms with a larger fraction of female directors on their board have greater dividend payouts. This finding is robust to alternative econometric specifications, and alternative measures of dividend payouts and female board representation. The positive effect of board gender composition on dividends remains when we employ propensity score matching, the instrumental variable approach, and difference-in-differences approach to address potential endogeneity concerns. Furthermore, we find that board gender composition significantly increases the dividend payout only for firms with weak governance, suggesting that female directors use dividend payouts as a governance device.

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Private Equity, Layoffs, and Job Polarization

Martin Olsson & Joacim Täg

Journal of Labor Economics, forthcoming

Abstract:
Private equity firms are often criticized for laying off workers, but the evidence on who loses their jobs and why is scarce. This paper argues that explanations for job polarization also explain layoffs after private equity buyouts. Buyouts reduce agency problems, which triggers automation and offshoring. Using rich employer-employee data, we show that buyouts generally do not affect unemployment incidence. However, unemployment incidence doubles for workers in less productive firms who perform routine or offshorable job tasks. Job polarization is also much more marked among workers affected by buyouts than for the economy at large.

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Is There a ‘Dark Side’ to Monitoring? Board and Shareholder Monitoring Effects on M&A Performance Extremeness

Maria Goranova et al.

Strategic Management Journal, forthcoming

Abstract:
We investigate the effects of monitoring by boards of directors and institutional shareholders on merger and acquisition (M&A) performance extremeness using a sample of M&A deals from 1997–2006. Both governance research and legal reforms generally have espoused a ‘raise all boats’ view of monitoring. We instead investigate whether monitoring may serve as a double-edged sword that limits CEO discretion to undertake both value-destroying M&A deals and value-creating ones. Our findings indicate that the relationship between monitoring and M&A performance is more complex than previously believed. Rather than ‘raising all boats’ in a shift towards better M&A outcomes, monitoring instead is associated with lower M&A losses, but also with lower M&A gains.

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Compensation goals and firm performance

Ben Bennett et al.

Journal of Financial Economics, forthcoming

Abstract:
Using a large data set of performance goals employed in executive incentive contracts, we find that a disproportionately large number of firms exceed their goals by a small margin as compared to the number that fall short of the goal by a similar margin. This asymmetry is particularly acute for earnings goals, when compensation is contingent on a single goal, when the pay-performance relationship around the goal is concave-shaped, and for grants with non-equity-based payouts. Firms that exceed their compensation target by a small margin are more likely to beat the target the next period and CEOs of firms that miss their targets are more likely to experience a forced turnover. Firms that just exceed their Earnings Per Share (EPS) goals have higher abnormal accruals and lower Research and Development (R&D) expenditures, and firms that just exceed their profit goals have lower Selling, General & Administrative (SG&A) expenditures. Overall, our results highlight some of the costs of linking managerial compensation to specific compensation targets.

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Executive Suite Independence: Is It Related to Board Independence?

Han Kim

Management Science, forthcoming

Abstract:
The executive suite and the board are closely bound to each other through their fiduciary responsibility to the same shareholders. With chief executive officers’ (CEOs) prominent role in both governing bodies, their independence from CEOs’ self-serving behavior might be related to each other. We explore the interdependence using an external shock increasing board independence. The shock weakens executive suite independence by increasing CEO connectedness within executive suites through appointments and preexisting social ties. We also uncover interesting dynamics between the two governing bodies: (1) the spillover does not occur when treated firms increase CEO-independent director social ties, suggesting CEO-executive connections and CEO-director connections are substitutes; (2) consistent with theories of board independence, when an information environment calls for dependent boards, increasing CEO-executive connections, which helps negate the shock effect on the board, has positive marginal effects on firm performance. Our findings are not driven by the Sarbanes–Oxley Act and are robust to a battery of other tests. We conclude that independence in the board and executive suite are inversely related; inferring the overall independence from board independence alone can be highly misleading.

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How do Quasi-Random Option Grants Affect CEO Risk-Taking?

Kelly Shue & Richard Townsend

NBER Working Paper, January 2017

Abstract:
We examine how an increase in stock option grants affects CEO risk-taking. The overall net effect of option grants is theoretically ambiguous for risk-averse CEOs. To overcome the endogeneity of option grants, we exploit institutional features of multi-year compensation plans, which generate two distinct types of variation in the timing of when large increases in new at-the-money options are granted. We find that, given average grant levels during our sample period, a 10 percent increase in new options granted leads to a 2.8–4.2 percent increase in equity volatility. This increase in risk is driven largely by increased leverage.

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Offshore Expertise for Onshore Companies: Director Connections to Island Tax Havens and Corporate Tax Policy

Chao Jiang et al.

Management Science, forthcoming

Abstract:
Theory and recent empirical literature suggest that social and professional connections may influence corporate policy. However, inference may be biased by the possibility that firms who share peers also share unobserved characteristics that are correlated with observed policy. Using a novel identification strategy, we predict and find that director connections through well-known island tax havens have a significant effect on corporate tax policy. Specifically, we find that U.S. firms with directors who are connected to firms domiciled on the islands of the Bahamas, Bermuda, or the Caymans, exhibit significantly greater tax avoidance than other U.S. firms. The presence or arrival of an island director is associated with a reduction of between one and three percentage points in the firm's effective tax rate. We also observe a significant increase in the use of tax haven subsidiaries following the arrival of the island director.

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Do Voluntary Clawback Adoptions Curb Overinvestment?

Yu-Chun Lin

Corporate Governance, forthcoming

Research Question/Issue: This study tests whether the adoption of clawback provisions mitigates overinvestment. A clawback provision is a recoupment policy that allows certain bonuses previously paid to executives to be cancelled or “clawed back” if financial statements are restated.

Research Findings/Insights: This study focuses on 1,093 voluntary clawback adopters in the U.S. during 2006–2012 and uses propensity score matching to obtain a matched sample. We then perform a difference-in-differences analysis to assess pre- and post-adoption changes in overinvestment. The empirical results show that (i) clawback provisions mitigate overinvestment, and (ii) overinvestment decreases most for those executives identified as overconfident or receiving higher option compensation.

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Does index addition affect corporate tax avoidance?

Fariz Huseynov, Sabuhi Sardarli & Wei Zhang

Journal of Corporate Finance, April 2017, Pages 241–259

Abstract:
We examine corporate tax avoidance of firms around addition to the S&P 500 index. We find that corporate tax avoidance for firms at high levels of tax avoidance decreases after index addition, whereas tax avoidance for firms at low levels of tax avoidance increases after index addition. We disentangle the impact of changing governance practices from that of declining investment opportunities. Our findings indicate that the changes in tax avoidance can be attributed to improving governance practices, specifically higher institutional ownership and executive compensations, and this impact is above and beyond the changes in growth opportunities of index firms.

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Uncertainty in Managers’ Reporting Objectives and Investors’ Response to Earnings Reports: Evidence from the 2006 Executive Compensation Disclosures

Fabrizio Ferri, Ronghuo Zheng & Yuan Zou

Columbia University Working Paper, January 2017

Abstract:
We examine whether the information content of the earnings report, as captured by the earnings response coefficient (ERC), increases when investors’ uncertainty about the manager’s reporting objective decreases, using the 2006 compensation disclosures as an instrument to capture a decrease in investors’ uncertainty about managers’ incentives and reporting objectives. Using a difference-in-differences design and exploiting the staggered adoption of the new rules, we find a statistically and economically significant increase in ERC for treated firms relative to control firms. The effect is weaker in firms that received a comment letter from the SEC urging them to improve their compliance with the new rules (a proxy for firms less responsive to the new rules), and stronger in firms with more independent boards (a proxy for firms more responsive to the new rules). Our findings represent the first empirical evidence of a role of compensation disclosures in enhancing the information content of financial reports, consistent with the theoretical prediction in Fischer and Verrecchia (2000). As such, they may be of interest to both policy-makers and investors.

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Did Family Firms Perform Better during the Financial Crisis? New Insights from the S&P 500 Firms

Haoyong Zhou, Fan He & Yangbo Wang

Global Finance Journal, forthcoming

Abstract:
This paper provides new evidence on whether family firms performed better during the global financial crisis (2008–2010). Using the dataset of the S&P 500 nonfinancial firms during the period 2006–2010, we find that family firms outperformed nonfamily firms during the crisis. Among family firms, the ones that contributed to the outperformance were those where the founder was still present. We also find that during the global financial crisis, founder firms invested significantly less and had better access to the credit market than nonfamily firms. Our analysis suggests that the superior performance of founder firms is largely caused by their having less incentive to overinvest in order to boost short-term earnings during the crisis.

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Higher Highs and Lower Lows: The Role of Corporate Social Responsibility in CEO Dismissal

Timothy Hubbard, Dane Christensen & Scott Graffin

Strategic Management Journal, forthcoming

Abstract:
Investing a firm's resources in Corporate Social Responsibility (CSR) initiatives remains a contentious issue. While research suggests firm financial performance is the primary driver of CEO dismissal, we propose that CSR will provide important additional context when interpreting a firm's financial performance. Consistent with this prediction, our results suggest that past CSR decisions amplify the negative relationship between financial performance and CEO dismissal. Specifically, we find that greater prior investments in CSR appear to expose CEOs of firms with poor financial performance to a greater risk of dismissal. In contrast, greater past investments in CSR appear to help shield CEOs of firms with good financial performance from dismissal. These findings provide novel insight into how CEOs’ career outcomes may be affected by earlier CSR decisions.

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Is the Market Grossed out by Gross-Ups? An Investigation of Firms that Pay Their CEOs' Taxes

Jeffrey Hoopes, Xiaoli (Shaolee) Tian & Ryan Wilson

Ohio State University Working Paper, January 2017

Abstract:
This study provides evidence on whether investors value tax gross-up provisions for executives, and how the elimination of these provisions changes executive compensation. We examine the market response to tax gross-up eliminations and find investors react favorably to the removal of these provisions, suggesting that on average, investors perceived these agreements as a bad compensation practice that destroyed firm value. Next, we examine whether firms respond to these eliminations by increasing other forms of executive compensation. We find firms eliminating tax gross-up provisions increase bonus but not salary. Broadly, we provide evidence that some features of compensation contracts are not valued by shareholders, and that the elimination of these features can lead to increased firm value.

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On the Foundations of Corporate Social Responsibility

Hao Liang & Luc Renneboog

Journal of Finance, forthcoming

Abstract:
Using CSR ratings for 23,000 companies from 114 countries, we find that a firm's corporate social responsibility (CSR) rating and its country's legal origin are strongly correlated. Legal origin is a stronger explanation than “doing good by doing well” factors or firm and country characteristics (ownership concentration, political institutions, and globalization): firms from common law countries have lower CSR than companies from civil law countries, with Scandinavian civil law firms having the highest CSR ratings. Evidence from quasi-natural experiments such as scandals and natural disasters suggests that civil law firms are more responsive to CSR shocks than common law firms.

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Organized Labor and Loan Pricing: A Regression Discontinuity Design Analysis

Yue Qiu & Tao Shen

Journal of Corporate Finance, forthcoming

Abstract:
This paper provides new evidence on the effect of unionization on the cost of bank loans. By using a regression discontinuity design, we establish a causal relation between new unionization and bank loan pricing. Relative to firms in which unions barely lose elections, firms in which unions barely win elections experience an increase in the spread of the newly originated loans. Further tests suggest that the effect of labor unions on the loan spread arises through the channel of reducing the recovery rate of banks in bankruptcy rather than increasing firms’ default risk.

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The Effects of Short-Selling Threats on Incentive Contracts: Evidence from an Experiment

David De Angelis, Gustavo Grullon & Sébastien Michenaud

Review of Financial Studies, forthcoming

Abstract:
This paper examines the effects of a shock to the stock-price formation process on the design of executive incentive contracts. We find that an exogenous removal of short-selling constraints causes firms to convexify compensation payoffs by granting relatively more stock options to their managers. We also find that treated firms adopt new antitakeover provisions. These results suggest that when firms face the threat of bear raids, they incentivize managers to take actions that mitigate the adverse effects of unrestrained short selling. Overall, this paper provides causal evidence that financial markets affect incentive contract design.

By KEVIN LEWIS | 09:00:00 AM

Tuesday, February 21, 2017

Fine-tuned machine

Those Closest Wield the Sharpest Knife: How Ingratiation Leads to Resentment and Social Undermining of the CEO

Gareth Keeves, James Westphal & Michael McDonald

Administrative Science Quarterly, forthcoming

Abstract:
Using survey data from CEOs and other top managers at large and mid-sized public companies in the U.S., as well as from journalists, we explore how ingratiation, a fundamental means of building and maintaining one's social capital, may trigger behavior that damages the social capital of the person being ingratiated. Although ingratiation, such as flattery or opinion conformity, may elicit positive affect from its target, we suggest it can also elicit a specific form of negative affect toward the target, which in turn can trigger interpersonal harm-doing. Focusing on ingratiation by top managers toward the CEO, we find that ingratiating managers are likely to develop feelings of resentment toward the CEO and that ingratiation may be especially likely to elicit resentment among top managers when the CEO is a racial minority or a woman. We also find that negative affect from ingratiation can induce interpersonal behavior that has the potential to damage the social capital of the influence target, as feelings of resentment that result from ingratiatory behavior can trigger social undermining of the CEO in the manager's communications with journalists.

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With great power comes shared responsibility: Psychological power and the delegation of authority

Michael Haselhuhn, Elaine Wong & Margaret Ormiston

Personality and Individual Differences, 1 April 2017, Pages 1-4

Abstract:
Despite the importance of delegation as a managerial tool, we know little about how leaders' characteristics affect their decision to delegate. In this paper, we demonstrate that, holding objective markers of power constant, a psychological sense of power predicts preferences for delegation. Specifically, individuals who feel relatively powerless are less willing to delegate decision making authority compared to those who feel powerful. We find support for this pattern in two studies. These results provide insight into the factors linking power and delegation.

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Serial correlation in National Football League play calling and its effects on outcomes

Noha Emara et al.

Journal of Behavioral and Experimental Economics, forthcoming

Abstract:
We investigate the strategic behavior of highly informed agents playing zero-sum games under highly incentivized conditions. We examine data from 3455 National Football League (NFL) games from the 2000 season through the 2012 season, and categorize each play as "rush" or a "pass." We find that the pass-rush mix exhibits negative serial correlation: play types alternate more frequently than an independent stochastic process. This is a seemingly exploitable strategy, and we find that this serial correlation, according to two distinct measures, negatively affects play efficacy. Our analysis suggests that teams could profit from more clustered play selections, which switch play type less frequently. Our results are consistent with teams excessively switching play types in an effort to be perceived as unpredictable.

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Going For Two: Optimizing Between Extra Points And Two Point Conversions In The NFL

Jonathan Hartley

University of Pennsylvania Working Paper, February 2017

Abstract:
In 2015, to make extra-point plays after touchdowns more uncertain, the NFL moved the extra-point distance from the 2-yard line to the 15-yard line. Since the rule change, the expected points from an extra-point attempt has fallen from 0.99 (averaging between the 2002 and 2014 NFL seasons) to 0.94 (averaging the 2015 and 2016 NFL seasons) while the expected points from the two-point conversion remains 0.95 (averaging between 2002 and 2016 NFL seasons). While the total number of two-point conversion attempts per season has almost doubled, most coaches still rarely attempt two-point conversions when it would be point-maximizing (and win-maximizing under risk-neutral or risk-seeking preferences). Using dynamic programming, this paper argues that this result is evidence of a conservative bias and that teams could improve expected wins by attempting more two-point conversions.

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March Madness? Underreaction to Hot and Cold Hands in NCAA Basketball

Daniel Stone & Jeremy Arkes

Bowdoin College Working Paper, January 2017

Abstract:
The hot hand bias is the widely documented bias toward overestimation of positive serial correlation in sequential events. We test for the hot hand bias in a novel real-world context, NCAA basketball tournament seeds. The seeds are determined by a committee that only has implicit incentives, but the committee's decisions are highly scrutinized by the media, fans, and other stakeholders. We find that, contra the hot hand bias, the committee underreacts to signals of momentum heading into the NCAA tournament. We note that the NCAA tournament has been highly popular and lucrative partly due to the "madness" (high frequency of wins by lower-seeded teams), which the bias we document contributes to.

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Understanding the (unexpected) consequences of unexpected recognition

Susanne Neckermann & Xiaolan Yang

Journal of Economic Behavior & Organization, March 2017, Pages 131-142

Abstract:
Unexpected, informal recognition is common in the workplace, but rarely analyzed by academics. The few existing studies have generated surprising results: no impact of selective recognition on future productivity for those workers who receive recognition, but increases in productivity for those who do not. We confirm those results for recognition in the form of a Thank you message and show that the same patterns hold true with unexpected financial recognition. Low-performing workers do better when others are recognized but they are left out. Previous studies have all argued that the pure relative performance information that is revealed through recognition drives these effects. We test this hypothesis with a treatment that has relative rank information only and show that this is indeed the case: financial or verbal recognition are not necessary to induce low performers to increase subsequent performance.

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The Microstructure of Work: How Unexpected Breaks Let You Rest, but Not Lose Focus

Pradeep Pendem et al.

Harvard Working Paper, December 2016

Abstract:
How best to structure the work day is an important operational question for organizations. A key structural consideration is the effective use of breaks from work. Breaks serve the critical purpose of allowing employees to recharge, but in the short term, translate to a loss of time that usually leads to reduced productivity. We evaluate the effects of two types of breaks (expected versus unexpected), and two distinct forms of unexpected breaks, and find that unexpected breaks can, under certain conditions, yield immediate post-break performance increases. We test our hypotheses using productivity data from 212 fruit harvesters collected over one harvesting season yielding nearly 250,000 truckloads of fruit harvested over the course of 9,832 shifts. We provide a conceptual laboratory replication of these findings, showing that unexpected breaks lead to increased performance when they allow people to maintain attention on the focal task. Our results suggest that the characteristics of a break can lead the break to be experienced as an interruption, with all consequent negative outcomes, or as a rejuvenating experience, with positive post-break consequences.

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Do volatile firms pay volatile earnings? Evidence from linked worker-firm data

Michael Strain

Applied Economics, forthcoming

Abstract:
Despite the importance of earnings instability, little is known about its correlates or causes. This article seeks to better understand earnings instability by studying whether volatile firms pay volatile earnings and is the first to directly test the relationship using US linked employer-employee data. The article finds a positive and statistically significant relationship using within-firm variation. In addition, this article finds that lower earning workers are passed significantly more volatility from their employing firms than are higher earning workers.

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Is There a Doctor in the House? Expert Product Users, Organizational Roles, and Innovation

Riitta Katila et al.

Academy of Management Journal, forthcoming

Abstract:
We explore the impact on innovation that professional end-users of a product have as inventors, executives, and board members in a young firm. In contrast to prior literature, which has emphasized technology roles, we put the spotlight on the executive and governance roles that many professional users take in young firms. Using an extensive custom-collected dataset of 231 surgical instrument ventures over a 25-year period, we find that professional users strengthen innovation in some roles but block it in others. Physician-users are related with the increase in a firm's innovation when they take a technology role as inventors, and particularly when they take a governance role on the young firm's board. However, despite their frequent involvement in executive roles, physician-executives are less likely to be helpful, and especially likely to block innovation as chief executives. Our results emphasize professional users as a critical external dependency for a young firm's innovation, but show that a mismatch with a particular organizational role may have unanticipated negative effects on innovation. In their roles, users can be helpful by expanding the variety of solutions to the firm's innovation problems, but are significantly less helpful in just improving their selection. Our findings have implications for research on evolutionary perspective on user innovation, organizational roles in young firms, and entrepreneurial policy.

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Alternating individual and group idea generation: Finding the elusive synergy

Runa Korde & Paul Paulus

Journal of Experimental Social Psychology, forthcoming

Abstract:
Three experiments were designed to test the efficacy of ideation procedures that involved alternation of individual and group idea generation sessions (hybrid brainstorming) as compared to traditional individual and group ideation. The hybrid condition led to the best performance in terms of number of ideas generated. This effect was strongest in comparison to the group condition. A meta-analytic comparison involving all three experiments indicated that the hybrid condition outperformed both the alone and the group conditions. Since after each group idea exchange session there was an enhancement in the number of ideas generated in the alone session, the pattern of performance in the hybrid condition supported the cognitive perspective of group creativity (Nijstad & Stroebe, 2006; Paulus & Brown, 2007). Social cues in the form of the co-presence of other participants in the alone condition, the addition of practice sessions to all conditions, and an additional phase did not change the pattern of results. The results of the experiments support the original suggestion by Osborn (1953) that the most effective brainstorming process is one that involves a variation in individual and group ideation.

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Screening Spinouts? How Noncompete Enforceability Affects the Creation, Growth, and Survival of New Firms

Evan Starr, Natarajan Balasubramanian & Mariko Sakakibara

Management Science, forthcoming

Abstract:
This paper examines how the enforceability of noncompete covenants affects the creation, growth, and survival of spinouts and other new entrants. The impact of noncompete enforceability on new firms is ambiguous, since noncompetes reduce knowledge leakage but impose hiring costs. However, we posit that enforceability screens formation of within-industry spinouts (WSOs) relative to non-WSOs by dissuading founders with lower human capital. Using data on 5.5 million new firms, we find greater enforceability is associated with fewer WSOs, but relative to non-WSOs, WSOs that are created tend to start and stay larger, are founded by higher-earners, and are more likely to survive their initial years. In contrast, we find no impact on non-WSO entry and a negative effect on size and short-term survival.

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Trust in Direct Leaders and Top Leaders: A Trickle-Up Model

Ashley Fulmer & Cheri Ostroff

Journal of Applied Psychology, forthcoming

Abstract:
Low levels of employee trust in top leaders pose challenges to organizations with respect to retention, performance, and profits. This research examines how trust in top leaders can be fostered through the relationships individuals have with their direct leaders. We propose a trickle-up model whereby trust in direct leaders exerts an upward influence on trust in top leaders. Drawing on the group value model, we predict that direct leaders' procedural justice serves as the key mechanism in facilitating the trickle-up process. Further, this process should be particularly strong for employees high on vertical collectivism, and the trickled-up trust in top leaders should exert a stronger impact on employees' overall performance in the organization than trust in direct leaders. Multiphase and multisource data from 336 individuals support these hypotheses. The findings advance our understanding of trust and leadership by highlighting that trust in leaders at different levels does not form independently and that trust in leaders trickles up across hierarchical levels.

By KEVIN LEWIS | 09:00:00 AM

Monday, February 20, 2017

Battle lines

Does the Presidency Moderate the President?

Barry Edwards

Presidential Studies Quarterly, forthcoming

Abstract:
A claim so often made about the presidency that it approaches conventional wisdom is that the president sees, and therefore decides, issues differently than members of Congress do. This thesis emerged in the late 1700s in debates over ratification and has been consistently asserted by legal scholars, political scientists, and, most passionately, by U.S. presidents. I test this thesis by examining the legislative behavior of 23 men who have represented both a narrow constituency in Congress and the entire country as president. My results indicate that the presidency effectively moderated the legislative behavior of legislators who became president for roughly one and a half centuries; however, the modern presidency not only fails to moderate presidents, the presidency now appears to amplify the partisan bent of those who occupy the office.

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Blue and Red Voices: Effects of Political Ideology on Consumers’ Complaining and Disputing Behavior

Kiju Jung et al.

Journal of Consumer Research, forthcoming

Abstract:
Political ideology plays a pivotal role in shaping individuals’ attitudes, opinions, and behaviors. However, apart from a handful of studies, little is known about how consumers’ political ideology affects their marketplace behavior. The authors used three large consumer complaint databases from the Consumer Financial Protection Bureau, National Highway Traffic Safety Administration, and Federal Communication Committee in conjunction with a county-level indicator of political ideology (the 2012 US presidential election results) to demonstrate that conservative consumers are not only less likely than liberal consumers to report complaints but also less likely to dispute complaint resolutions. A survey also sheds light on the relationship between political ideology and complaint/dispute behavior. Due to stronger motivations to engage in “system justification,” conservative (as opposed to liberal) consumers are less likely to complain or dispute. The present research offers a useful means of identifying those consumers most and least likely to complain and dispute, given that political ideology is more observable than most psychological factors and more stable than most situational factors. Furthermore, this research and its theoretical framework open opportunities for future research examining the influence of political ideology on other marketplace behaviors.

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Extreme Protest Tactics Reduce Popular Support for Social Movements

Matthew Feinberg, Robb Willer & Chloe Kovacheff

University of Toronto Working Paper, February 2017

Abstract:
Social movements are critical agents of change that vary greatly in both tactics and popular support. Prior work shows that extreme protest tactics – actions that are highly counter-normative, disruptive, or harmful to others, including inflammatory rhetoric, blocking traffic, and damaging property – are effective for gaining publicity. However, we find across three experiments that extreme protest tactics decreased popular support for a given cause because they reduced feelings of identification with the movement. Though this effect obtained in tests of popular responses to extreme tactics used by animal rights, Black Lives Matter, and anti-Trump protests (Studies 1-3), we found that self-identified political activists were willing to use extreme tactics because they believed them to be effective for recruiting popular support (Studies 4a & 4b). The activist’s dilemma – wherein tactics that raise awareness also tend to reduce popular support – highlights a key challenge faced by social movements struggling to affect progressive change.

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Small-World Conservatives and Rigid Liberals: Attitudes Towards Sharing in Self-Proclaimed Left and Right

Kaj Thomsson & Alexander Vostroknutov

Journal of Economic Behavior & Organization, forthcoming

Abstract:
We experimentally explore the way political preferences shape giving behavior. We find no difference in average giving between the Left and the Right in a Dictator game environment. However, we find the reasons for giving to be different. Right-leaning individuals give according to a norm-dependent utility that takes into account the beliefs of the receiver. The behavior of left-leaning individuals is not shaped by such an interaction between norms and beliefs. We conclude that right-wingers choose in accordance with a “small world” view, where giving is shaped by social interaction, while left-wingers appear rigid in their reaction to social context.

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The Perverse Politics of Polarization

Nageeb Ali, Maximilian Mihm & Lucas Siga

Pennsylvania State University Working Paper, January 2017

Abstract:
Many policies, such as trade and immigration, bear important consequences for both the size and distribution of surplus. Oftentimes, people are asked to vote on these policies despite not being all that well-informed about the consequences. This paper studies the extent to which an electorate can aggregate information when voters anticipate that some may benefit from a policy reform at a cost borne by others. We show that information aggregation may fail: with high probability, the outcome chosen when voters are privately informed departs from the outcome when all information is public. We identify a form of "negative correlation'' --- where voters treat good news for others as bad news for themselves --- that is necessary and sufficient for this informational failure. Commitments to post-policy redistribution can mitigate this inefficiency, and lead voters to select better policies. We characterize features of economic environments that may foster or preclude negative correlation. Our results offer an understanding of how information can amplify electoral status quo bias, or generate popular support for ill-advised reforms that are ex post regretted and subsequently reversed.

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The political reference point: How geography shapes political identity

Matthew Feinberg et al.

PLoS ONE, February 2017

Abstract:
It is commonly assumed that how individuals identify on the political spectrum – whether liberal, conservative, or moderate – has a universal meaning when it comes to policy stances and voting behavior. But, does political identity mean the same thing from place to place? Using data collected from across the U.S. we find that even when people share the same political identity, those in “bluer” locations are more likely to support left-leaning policies and vote for Democratic candidates than those in “redder” locations. Because the meaning of political identity is inconsistent across locations, individuals who share the same political identity sometimes espouse opposing policy stances. Meanwhile, those with opposing identities sometimes endorse identical policy stances. Such findings suggest that researchers, campaigners, and pollsters must use caution when extrapolating policy preferences and voting behavior from political identity, and that animosity toward the other end of the political spectrum is sometimes misplaced.

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Political Orientation Predicts Credulity Regarding Putative Hazards

Daniel Fessler, Anne Pisor & Colin Holbrook

Psychological Science, forthcoming

Abstract:
To benefit from information provided by others, people must be somewhat credulous. However, credulity entails risks. The optimal level of credulity depends on the relative costs of believing misinformation versus failing to attend to accurate information. When information concerns hazards, erroneous incredulity is often more costly than erroneous credulity, as disregarding accurate warnings is more harmful than adopting unnecessary precautions. Because no equivalent asymmetry characterizes information concerning benefits, people should generally be more credulous of hazard information than of benefit information. This adaptive negatively-biased credulity is linked to negativity bias in general, and is more prominent among those who believe the world to be dangerous. Because both threat sensitivity and dangerous-world beliefs differ between conservatives and liberals, we predicted that conservatism would positively correlate with negatively-biased credulity. Two online studies of Americans support this prediction, potentially illuminating the impact of politicians’ alarmist claims on different portions of the electorate.

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Experienced Adversity in Life Is Associated With Polarized and Affirmed Political Attitudes

Daniel Randles et al.

Social Psychological and Personality Science, forthcoming

Abstract:
Many studies find that when made to feel uncertain, participants respond by affirming importantly held beliefs. However, while theories argue that these effects should persist over time for highly disruptive experiences, almost no research has been performed outside the lab. We conducted a secondary analysis of data from a national sample of U.S. adults (N = 1,613) who were followed longitudinally for 3 years. Participants reported lifetime and recent adversities experienced annually, as well as their opinions on a number of questions related to intergroup hostility and aggression toward out-groups, similar to those used in many lab studies of uncertainty. We anticipated that those who had experienced adversity would show more extreme support for their position. There was a positive relationship between adversity and the tendency to strongly affirm and polarize their positions. Results suggest that adverse life events may lead to long-lasting changes in one’s tendency to polarize one’s political attitudes.

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Cognitive ability and party affiliation: The role of the formative years of political socialization

Yoav Ganzach

Intelligence, forthcoming

Abstract:
We study the effect of time on the relationship between intelligence and party affiliation in the United States. Our results indicate that time affects this relationship, and that this effect is due to the formative years in which political preferences were developed rather than the time in which the survey was conducted. For people who were born in the 20th century, the later their formative years, the more positive the relationship between intelligence and Democratic, as opposed to Republican, affiliation. The current results shed light on recent conflicting findings about the relationship between intelligence and party affiliation in the US, and suggest that the effect of intelligence on party affiliation changes with time.

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Verbal ability drives the link between intelligence and ideology in two American community samples

Steven Ludeke, Stig Rasmussen & Colin DeYoung

Intelligence, forthcoming

Abstract:
Despite meta-analyses highlighting a nontrivial relation between intelligence and ideology, theoretical accounts of the origins of ideological differences often neglect these differences. Two potential contributors to this neglect are that (a) the true magnitude of the association may be understated by studies using imperfect cognitive ability measures, and (b) nuances on the general association between ideology and intelligence are underexplored, limiting our ability to select among several highly divergent accounts of this association. The present study uses two moderately large (Ns = 786 and 338) American community samples to explore two questions: (1) how does the link between ideology and ability differ between self-administered and more conventional ability tests, and (2) is this link common to all aspects of ability, or does it depend primarily on one domain. We found a clear dominant role for verbal rather than non-verbal ability, and support for the proposition that self-administered ability measures understate the intelligence-ideology link.

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Can Information Decrease Political Polarization? Evidence From the U.S. Taxpayer Receipt

Erik Duhaime & Evan Apfelbaum

Social Psychological and Personality Science, forthcoming

Abstract:
Scholars, politicians, and laypeople alike bemoan the high level of political polarization in the United States, but little is known about how to bring the views of liberals and conservatives closer together. Previous research finds that providing people with information regarding a contentious issue is ineffective for reducing polarization because people process such information in a biased manner. Here, we show that information can reduce political polarization below baseline levels and also that its capacity to do so is sensitive to contextual factors that make one’s relevant preferences salient. Specifically, in a nationally representative sample (Study 1) and a preregistered replication (Study 2), we find that providing a taxpayer receipt — an impartial, objective breakdown of how one’s taxes are spent that is published annually by the White House — reduces polarization regarding taxes, but not when participants are also asked to indicate how they would prefer their taxes be spent.

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Our Followers Are Lions, Theirs Are Sheep: How Social Identity Shapes Theories About Followership and Social Influence

Niklas Steffens et al.

Political Psychology, forthcoming

Abstract:
Two studies examine how self-categorization theory can be used to refine our understanding of people's implicit theories about followership and social influence. Results from Study 1 show that perceivers regard followers of a group they themselves identify strongly with (rather than not at all) to be more representative of the prototype of effective followers (displaying enthusiasm, industry, good citizenship) and to be less representative of the antiprototype of effective followers (displaying conformity, incompetence, and insubordination). Results are replicated in a second experiment in which we compare the views of those self-categorizing as either Republican or Democrat responding to followers of the Republican and Democratic Party. Results of Study 2 replicate those of Study 1 and also reveal qualitative differences in the preferred influence strategy for dealing with followers. Specifically, respondents seek to engage in persuasion when trying to change the behavior of ingroup followers, while resorting to coercion when trying to change the behavior of outgroup followers. Our results are the first to provide evidence that perceivers' theories about what followers are like and how they are influenced most effectively are structured by perceivers' identification (and dis-identification) with the particular groups that leaders are championing.

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Analytic Thought Training Promotes Liberalism on Contextualized (But Not Stable) Political Opinions

Onurcan Yilmaz & Adil Saribay

Social Psychological and Personality Science, forthcoming

Abstract:
Previous research revealed that inducing an intuitive thinking style led people to adopt more conservative social and economic attitudes. No prior study, however, has shown a causal effect of analytic cognitive style (ACS) on political conservatism. It is also not clear whether these cognitive-style manipulations influence stable or contextualized (less stable) political attitudes differentially. The current research investigated the causal effect of ACS on both stable and contextualized political opinions. In Experiment 1, we briefly trained participants to think analytically (or not) and assessed their contextualized and stable political attitudes. Those in the analytic thinking group responded more positively to liberal (but not conservative) arguments on contextualized opinions. However, no significant change occurred in stable opinions. In Experiment 2, we replicated this basic finding with a larger sample. Thus, the results demonstrate that inducing ACS causally influences contextualized liberal attitudes, but not stable ones.

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The Political Economy: Political Attitudes and Economic Behavior

Ellen Key & Kathleen Donovan

Political Behavior, forthcoming

Abstract:
It has long been recognized that voters bring their political behaviors in line with economic assessments. Recent work, however, suggests that citizens also engage in economic behaviors that align with their confidence — or lack thereof — in the political system. This alignment can happen consciously or, as we suggest, unconsciously, in the same way that positivity carries over to other behaviors on a micro-level. Using monthly time series data from 1978 to 2008, we contribute further evidence of this relationship by demonstrating that political confidence affects consumer behavior at the aggregate level over time. Our analyses employ measures more closely tied to the theoretical concepts of interest while simultaneously accounting for the complex relationships between subjective and objective economic indicators, economic behavior, political attitudes, and the media. Our results suggest that approval of the president not only increases the electorate’s willingness to spend money, but also affects the volatility of this spending. These findings suggest that the economy is influenced by politics beyond elections, and gives the “Chief Economist” another avenue by which they can affect the behavior of the electorate.

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The Correlates of Discord: Identity, Issue Alignment, and Political Hostility in Polarized America

Lori Bougher

Political Behavior, forthcoming

Abstract:
The American public remains largely moderate on many issues, but incivility and hostility are rife in American politics. In this paper, I argue that the alignment of multiple issue attitudes along the traditional ideological spectrum helps explain the asymmetrical rise in negative political affect. I introduce belief congruence theory as a supplemental theoretical framework to social identity theory. Cross-sectional data reveal a significant association between issue alignment and negative out-party affect that is neither mediated nor moderated by partisan identity. A first-difference approach using two panel studies then addresses potential heterogeneity bias by testing a change-on-change model within individuals. Both panels, which are from different time periods, covering different issues, reveal significant associations between issue alignment and outgroup dislike. In contrast, partisan identity was only significantly associated with ingroup affect. This work suggests that cross-cutting issue preferences could help attenuate political hostility and reiterate the need to reconsider the role of issue-based reasoning in polarized America.

By KEVIN LEWIS | 09:00:00 AM

Sunday, February 19, 2017

Natives

Genetic signature of natural selection in first Americans

Carlos Eduardo Amorim et al.

Proceedings of the National Academy of Sciences, forthcoming

Abstract:
When humans moved from Asia toward the Americas over 18,000 y ago and eventually peopled the New World they encountered a new environment with extreme climate conditions and distinct dietary resources. These environmental and dietary pressures may have led to instances of genetic adaptation with the potential to influence the phenotypic variation in extant Native American populations. An example of such an event is the evolution of the fatty acid desaturases (FADS) genes, which have been claimed to harbor signals of positive selection in Inuit populations due to adaptation to the cold Greenland Arctic climate and to a protein-rich diet. Because there was evidence of intercontinental variation in this genetic region, with indications of positive selection for its variants, we decided to compare the Inuit findings with other Native American data. Here, we use several lines of evidence to show that the signal of FADS-positive selection is not restricted to the Arctic but instead is broadly observed throughout the Americas. The shared signature of selection among populations living in such a diverse range of environments is likely due to a single and strong instance of local adaptation that took place in the common ancestral population before their entrance into the New World. These first Americans peopled the whole continent and spread this adaptive variant across a diverse set of environments.

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Hemorrhagic fever virus, human blood, and tissues in Iron Age mortuary vessels

Conner Wiktorowicz et al.

Journal of Archaeological Science, February 2017, Pages 29-39

Abstract:
This study identifies and interprets the proteins present on sherds from six ceramic mortuary vessels from a burial mound near the Heuneburg, an early Iron Age (750-400 BCE) hillfort in southwest Germany, using a novel adaptation of proteomic analysis that identified 166 proteins with high confidence. Surprisingly, among the identified proteins were peptides from Crimean-Congo hemorrhagic fever virus (CCHFV), a pathogen previously unknown in this geographic region and time period, as well as peptides from human blood and tissues. These results highlight the first example of a viral cause of death of at least one high-status individual from the Iron Age west-central Europe and provide the first archaeological evidence for the interment of human organs in mortuary vessels in the region. We also demonstrate the suitability and value of a proteomics approach for discovery-based residue analysis of archaeological ceramic vessels and reveal how identification of adsorbed proteins can provide insight into prehistoric mortuary practices.

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Midcontinental Native American population dynamics and late Holocene hydroclimate extremes

Broxton Bird et al.

Scientific Reports, January 2017

Abstract:
Climate’s influence on late Pre-Columbian (pre-1492 CE), maize-dependent Native American populations in the midcontinental United States (US) is poorly understood as regional paleoclimate records are sparse and/or provide conflicting perspectives. Here, we reconstruct regional changes in precipitation source and seasonality and local changes in warm-season duration and rainstorm events related to the Pacific North American pattern (PNA) using a 2100-year-long multi-proxy lake-sediment record from the midcontinental US. Wet midcontinental climate reflecting negative PNA-like conditions occurred during the Medieval Climate Anomaly (950-1250 CE) as Native American populations adopted intensive maize agriculture, facilitating population aggregation and the development of urban centers between 1000-1200 CE. Intensifying midcontinental socio-political instability and warfare between 1250-1350 CE corresponded with drier positive PNA-like conditions, culminating in the staggered abandonment of many major Native American river valley settlements and large urban centers between 1350-1450 CE during an especially severe warm-season drought. We hypothesize that this sustained drought interval rendered it difficult to support dense populations and large urban centers in the midcontinental US by destabilizing regional agricultural systems, thereby contributing to the host of socio-political factors that led to population reorganization and migration in the midcontinent and neighboring regions shortly before European contact.

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Modeling the role of voyaging in the coastal spread of the Early Neolithic in the West Mediterranean

Neus Isern et al.

Proceedings of the National Academy of Sciences, 31 January 2017, Pages 897-902

Abstract:
The earliest dates for the West Mediterranean Neolithic indicate that it expanded across 2,500 km in about 300 y. Such a fast spread is held to be mainly due to a demic process driven by dispersal along coastal routes. Here, we model the Neolithic spread in the region by focusing on the role of voyaging to understand better the core elements that produced the observed pattern of dates. We also explore the effect of cultural interaction with Mesolithic populations living along the coast. The simulation study shows that (i) sea travel is required to obtain reasonable predictions, with a minimum sea-travel range of 300 km per generation; (ii) leapfrog coastal dispersals yield the best results (quantitatively and qualitatively); and (iii) interaction with Mesolithic people can assist the spread, but long-range voyaging is still needed to explain the archaeological pattern.

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Impact of pre-Columbian “geoglyph” builders on Amazonian forests

Jennifer Watling et al.

Proceedings of the National Academy of Sciences, forthcoming

Abstract:
Over 450 pre-Columbian (pre-AD 1492) geometric ditched enclosures (“geoglyphs”) occupy ∼13,000 km2 of Acre state, Brazil, representing a key discovery of Amazonian archaeology. These huge earthworks were concealed for centuries under terra firme (upland interfluvial) rainforest, directly challenging the “pristine” status of this ecosystem and its perceived vulnerability to human impacts. We reconstruct the environmental context of geoglyph construction and the nature, extent, and legacy of associated human impacts. We show that bamboo forest dominated the region for ≥6,000 y and that only small, temporary clearings were made to build the geoglyphs; however, construction occurred within anthropogenic forest that had been actively managed for millennia. In the absence of widespread deforestation, exploitation of forest products shaped a largely forested landscape that survived intact until the late 20th century.

By KEVIN LEWIS | 09:00:00 AM

Saturday, February 18, 2017

Go with it

What's So Great About Self-Control? Examining the Importance of Effortful Self-Control and Temptation in Predicting Real-Life Depletion and Goal Attainment

Marina Milyavskaya & Michael Inzlicht

Social Psychological and Personality Science, forthcoming

Abstract:
Self-control is typically viewed as a key ingredient responsible for effective self-regulation and personal goal attainment. This study used experience sampling, daily diary, and prospective data collection to investigate the immediate and semester-long consequences of effortful self-control and temptations on depletion and goal attainment. Results showed that goal attainment was influenced by experiences of temptations rather than by actively resisting or controlling those temptations. This study also found that simply experiencing temptations led people to feel depleted. Depletion in turn mediated the link between temptations and goal attainment, such that people who experienced increased temptations felt more depleted and thus less likely to achieve their goals. Critically, results of Bayesian analyses strongly indicate that effortful self-control was consistently unrelated to goal attainment throughout all analyses.

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The relationship between intertemporal choice and following the path of least resistance across choices, preferences, and beliefs

Amitai Shenhav, David Rand & Joshua Greene

Judgment and Decision Making, January 2017, Pages 1-18

Abstract:
The degree to which individuals prefer smaller sooner versus larger delayed rewards serves as a powerful predictor of their impulsivity towards a number of different kinds of rewards. Here we test the limits of its predictive ability within a variety of cognitive and social domains. Across several large samples of subjects, individuals who prefer smaller more immediate rewards (steeper discounters) are less reflective (or more impulsive) in their choices, preferences, and beliefs. First, steeper discounters used more automatic, less controlled choice strategies, giving more intuitive but incorrect responses on the Cognitive Reflection Test (replicating previous findings); employing a suboptimal probability matching heuristic for a one-shot gamble (rather than maximizing their probability of reward); and relying less on optimal planning in a two-stage reinforcement learning task. Second, steeper discounters preferred to consume information that was less complex and multi-faceted, as suggested by their self-reported Need for Cognitive Closure, their use of short-form social media (i.e., Twitter), and their preferred news sources (in particular, whether or not they preferred National Public Radio over other news sources). Third, steeper discounters had interpersonal and religious beliefs that are associated with reduced epistemic complexity: they were more likely to believe that the behavior of others could be explained by fixed rather than dynamic factors, and they believed more strongly in God and in the afterlife. Together these findings provide evidence for a link between individual differences in temporal discounting for monetary rewards and preferences for the path of least resistance (less reflective and/or more automatic modes of processing) across a variety of domains.

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The Risky Side of Creativity: Domain Specific Risk Taking in Creative Individuals

Vaibhav Tyagi et al.

Frontiers in Psychology, February 2017

Abstract:
Risk taking is often associated with creativity, yet little evidence exists to support this association. The present article aimed to systematically explore this association. In two studies, we investigated the relationship between five different domains of risk taking (financial, health and safety, recreational, ethical and social) and five different measures of creativity. Results from the first (laboratory-based) offline study suggested that creativity is associated with high risk taking tendencies in the social domain but not the other domains. Indeed, in the second study conducted online with a larger and diverse sample, the likelihood of social risk taking was the strongest predictor of creative personality and ideation scores. These findings illustrate the necessity to treat creativity and risk taking as multi-dimensional traits and the need to have a more nuanced framework of creativity and other related cognitive functions.

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Spontaneous eye blink rate as predictor of dopamine-related cognitive function - A review

Bryant Jongkees & Lorenza Colzato

Neuroscience & Biobehavioral Reviews, December 2016, Pages 58-82

Abstract:
An extensive body of research suggests the spontaneous eye blink rate (EBR) is a non-invasive indirect marker of central dopamine (DA) function, with higher EBR predicting higher DA function. In the present review we provide a comprehensive overview of this literature. We broadly divide the available research in studies that aim to disentangle the dopaminergic underpinnings of EBR, investigate its utility in diagnosis of DA-related disorders and responsivity to drug treatment, and, lastly, investigate EBR as predictor of individual differences in DA-related cognitive performance. We conclude (i) EBR can reflect both DA receptor subtype D1 and D2 activity, although baseline EBR might be most strongly related to the latter, (ii) EBR can predict hypo- and hyperdopaminergic activity as well as normalization of this activity following treatment, and (iii) EBR can reliably predict individual differences in performance on many cognitive tasks, in particular those related to reward-driven behavior and cognitive flexibility. In sum, this review establishes EBR as a useful predictor of DA in a wide variety of contexts.

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Do Positive Spontaneous Thoughts Function as Incentive Salience?

Elise Rice & Barbara Fredrickson

Emotion, forthcoming

Abstract:
The present work explores the theoretical relationship between positive spontaneous thoughts and incentive salience - a psychological property thought to energize wanting and approach motivation by rendering cues that are associated with enjoyment more likely to stand out to the individual when subsequently encountered in the environment (Berridge, 2007). We reasoned that positive spontaneous thoughts may at least be concomitants of incentive salience, and as such, they might likewise mediate the effect of liking on wanting. In Study 1, 103 adults recruited via Amazon's Mechanical Turk reported on key aspects of 10 everyday activities. As predicted, positive spontaneous thoughts mediated the relationship between liking an activity in the past and wanting to engage in it in the future. In Study 2, 99 undergraduate students viewed amusing and humorless cartoons and completed a thought-listing task, providing experimental evidence for the causal effect of liking on positive spontaneous thoughts. In Study 3, we tested whether positive spontaneous thoughts play an active role in energizing wanting rather than merely co-occurring with (inferred) incentive salience. In that experiment involving 80 undergraduates, participants who were led to believe that their spontaneous thoughts about a target activity were especially positive planned to devote more time to that activity over the coming week than participants who received no such information about their spontaneous thoughts. Collectively, these findings suggest that positive spontaneous thoughts may play an important role in shaping approach motivation. Broader implications and future directions in the study of positive spontaneous thoughts are discussed.

By KEVIN LEWIS | 09:00:00 AM

Friday, February 17, 2017

Life support

Did Medicaid Expansion Reduce Medical Divorce?

David Slusky & Donna Ginther

NBER Working Paper, February 2017

Abstract:
Prior to the Affordable Care Act, many state Medicaid eligibility rules had maximum asset levels. This was a problem when one member of a couple was diagnosed with a degenerative disease requiring expensive care. Draining the couple’s assets so that the sick individual could qualify for Medicaid would leave no resources for the retirement of the other member; thus divorce and separating assets was often the only option. The ACA’s Medicaid expansion removed all asset tests. Using a difference-in-differences approach on states that did and did not expand Medicaid, we find that the expansion decreased the prevalence of divorce by 5.6% among those 50-64, strongly suggesting that it reduced medical divorce.

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Is American Health Care Uniquely Inefficient? Evidence from Prescription Drugs

Margaret Kyle & Heidi Williams

NBER Working Paper, January 2017

Abstract:
Alan Garber and Jonathan Skinner (2008) famously conjectured that the US health care system was “uniquely inefficient” relative to other countries. We test this idea using cross-country data on prescription drug sales newly linked with an arguably objective measure of relative therapeutic benefits, or drug quality. Specifically, we investigate how higher and lower quality drugs diffuse in the US relative to Australia, Canada, Switzerland, and the UK. Our tabulations suggest that lower quality drugs diffuse more in the US relative to high quality drugs, compared to each of our four comparison countries – consistent with Garber and Skinner’s conjecture.

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The Long-Term Impact of Price Controls in Medicare Part D

Gigi Moreno et al.

Forum for Health Economics and Policy, forthcoming

Abstract:
Price controls for prescription drugs are once again at the forefront of policy discussions in the United States. Much of the focus has been on the potential short-term savings – in terms of lower spending – although evidence suggests price controls can dampen innovation and adversely affect long-term population health. This paper applies the Health Economics Medical Innovation Simulation, a microsimulation of older Americans, to estimate the long-term impacts of government price setting in Medicare Part D, using pricing in the Federal Veterans Health Administration program as a proxy. We find that VA-style pricing policies would save between $0.1 trillion and $0.3 trillion (US$2015) in lifetime drug spending for people born in 1949–2005. However, such savings come with social costs. After accounting for innovation spillovers, we find that price setting in Part D reduces the number of new drug introductions by as much as 25% relative to the status quo. As a result, life expectancy for the cohort born in 1991–1995 is reduced by almost 2 years relative to the status quo. Overall, we find that price controls would reduce lifetime welfare by $5.7 to $13.3 trillion (US$2015) for the US population born in 1949–2005.

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Antitrust Treatment of Nonprofits: Should Hospitals Receive Special Care?

Cory Capps, Dennis Carlton & Guy David

NBER Working Paper, February 2017

Abstract:
Nonprofit hospitals receive favorable tax treatment in exchange for providing socially beneficial activities. Extending this rationale would suggest that, insofar as suppression of competition would allow nonprofits to cross-subsidize care for needy populations, nonprofit hospital mergers should be evaluated differently than mergers of for-profit hospitals. However, this rationale rests upon the premise that nonprofit hospitals with greater market power provide more care to the needy. In this paper, we develop a theoretical model showing that the welfare implications of an antitrust policy that favors nonprofit hospitals depends on the link between market power and charity care provision. To test the link, we use three measures of charity care — two dollar-denominated and one based on service volume — to study charity care provision by for-profit and non-profit hospitals under different competition conditions. Using detailed California data from 2001 to 2011, we find no evidence that nonprofit hospitals are more likely than for-profit hospitals to provide more charity care, or to offer more unprofitable services, when competition falls. Overall, while some courts have given deference to defendants’ nonprofit status, our study finds no empirical evidence that such hospitals provide greater charity care as they have greater market power.

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Less Intense Postacute Care, Better Outcomes For Enrollees In Medicare Advantage Than Those In Fee-For-Service

Peter Huckfeldt et al.

Health Affairs, January 2017, Pages 91-100

Abstract:
Traditional fee-for-service (FFS) Medicare’s prospective payment systems for postacute care provide little incentive to coordinate care or control costs. In contrast, Medicare Advantage plans pay for postacute care out of monthly capitated payments and thus have stronger incentives to use it efficiently. We compared the use of postacute care in skilled nursing and inpatient rehabilitation facilities by enrollees in Medicare Advantage and FFS Medicare after hospital discharge for three high-volume conditions: lower extremity joint replacement, stroke, and heart failure. After accounting for differences in patient characteristics at discharge, we found lower intensity of postacute care for Medicare Advantage patients compared to FFS Medicare patients discharged from the same hospital, across all three conditions. Medicare Advantage patients also exhibited better outcomes than their FFS Medicare counterparts, including lower rates of hospital readmission and higher rates of return to the community. These findings suggest that payment reforms such as bundling in FFS Medicare may reduce the intensity of postacute care without adversely affecting patient health.

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Effect of Medicaid Expansion on Workforce Participation for People With Disabilities

Jean Hall et al.

American Journal of Public Health, February 2017, Pages 262-264

Objectives: To use data from the Health Reform Monitoring Survey (HRMS) to examine differences in employment among community-living, working-age adults (aged 18–64 years) with disabilities who live in Medicaid expansion states and nonexpansion states.

Methods: Analyses used difference-in-differences to compare trends in pooled, cross-sectional estimates of employment by state expansion status for 2740 HRMS respondents reporting a disability, adjusting for individual and state characteristics.

Results: After the Affordable Care Act (ACA), respondents in expansion states were significantly more likely to be employed compared with those in nonexpansion states (38.0% vs 31.9%; P = .011).

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Malpractice Claim Fears and the Costs of Treating Medicare Patients: A New Approach to Estimating the Costs of Defensive Medicine

James Reschovsky & Cynthia Saiontz-Martinez

Health Services Research, forthcoming

Data Sources: We use a 2008 national physician survey linked to respondents’ elderly Medicare patients’ claims data.

Study Design: Using a sample of survey respondent/beneficiary dyads stratified by physician specialty, we estimated cross-sectional regressions of annual costs on patient covariates and a medical malpractice fear index formed from five validated physician survey questions. Defensive medicine costs were calculated as the difference between observed patient costs and those under hypothetical alternative levels of malpractice concern, and then aggregated to estimate average defensive medicine costs per beneficiary.

Data Collection Methods: The physician survey was conducted by mail. Patient claims were linked to survey respondents and reweighted to approximate the elderly Medicare beneficiary population.

Principal Findings: Higher levels of the malpractice fear index were associated with higher patient spending. Based on the measured associations, we estimated that defensive medicine accounted for 8 to 20 percent of total costs under alternative scenarios. The highest estimate is associated with a counterfactual of no malpractice concerns, which is unlikely to be socially optimal as some extrinsic incentives to avoid medical errors are desirable. Among specialty groups, primary care physicians contributed the most to defensive medicine spending. Higher costs resulted mostly from more hospital admissions and greater postacute care.

Conclusions: Although results are based on measured associations between malpractice fears and spending, and may not reflect the true causal effects, they suggest defensive medicine likely contributes substantial additional costs to Medicare.

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Price-Linked Subsidies and Health Insurance Markups

Sonia Jaffe & Mark Shepard

NBER Working Paper, January 2017

Abstract:
Subsidies in many health insurance programs depend on prices set by competing insurers – as prices rise, so do subsidies. We study the economics of these “price-linked” subsidies compared to “fixed” subsidies set independently of market prices. We show that price-linked subsidies weaken price competition, leading to higher markups and subsidy costs for the government. We argue that price-linked subsidies make sense only if (1) there is uncertainty about costs/prices, and (2) optimal subsidies increase as prices rise. We propose two reasons why optimal health insurance subsidies may rise with prices: doing so both insures consumers against cost risk and indirectly links subsidies to market-wide shocks affecting the cost of “charity care” used by the uninsured. We evaluate these tradeoffs empirically using a structural model estimated with data from Massachusetts’ health insurance exchange. Relative to fixed subsidies, price-linking increase prices by up to 5%, and by 5-10% when we simulate markets with fewer insurers. For levels of cost uncertainty that are reasonable in a mature market, we find that the losses from higher prices outweigh the benefits of price-linking.

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Beyond Health Effects? Examining the Social Consequences of Community Levels of Uninsurance Pre-ACA

Tara McKay & Stefan Timmermans

Journal of Health and Social Behavior, forthcoming

Abstract:
The lack of health insurance is traditionally considered a problem faced by individuals and their families. However, because of the geographically bounded organization and funding of healthcare in the United States, levels of uninsurance in a community may affect everyone living there. Health economists have examined how the effects of uninsurance spillover from the uninsured to the insured, negatively affecting healthcare access and quality for the insured. We extend research on uninsurance into the domain of sociologists by theorizing how uninsurance might exacerbate social inequalities and undermine social cohesion within communities. Using data from the Los Angeles Family and Neighborhood Survey, we show that individuals living in communities with higher levels of uninsurance report lower social cohesion net of other individual and neighborhood factors and discuss implications for implementation of the Affordable Care Act.

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Variation in the Ratio of Physician Charges to Medicare Payments by Specialty and Region

Ge Bai & Gerard Anderson

Journal of the American Medical Association, 17 January 2017, Pages 315-318

"Nearly all physicians charge more than the Medicare program actually pays (herein referred to as 'excess charges'), with complete discretion to determine the amount charged. High excess charges can impose financial burdens on uninsured patients and privately insured patients using out-of-network physicians...Physician charge-to-Medicare payment ratio ranged between 1.0 and 101.1 across individual physicians, with a median of 2.5 (interquartile range [IQR], 1.8-3.6). The ratio varied across specialties, with anesthesiology having the highest median (5.8 [IQR, 4.5-7.9]) and general practice having the lowest (1.6 [IQR, 1.3-2.2]). The ratio also varied across states (Table 2), with state median ranging between 2.0 (IQR, 1.5-3.1 for Michigan) and 3.8 (IQR, 2.9-6.5 for Wisconsin)...Physician excess charge was higher for specialties in which patients have fewer opportunities to choose a physician or be informed of the physician’s network status (eg, anesthesiology)."

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Nudging Leads Consumers In Colorado To Shop But Not Switch ACA Marketplace Plans

Keith Marzilli Ericson et al.

Health Affairs, February 2017, Pages 311-319

Abstract:
The Affordable Care Act (ACA) dramatically expanded the use of regulated marketplaces in health insurance, but consumers often fail to shop for plans during open enrollment periods. Typically these consumers are automatically reenrolled in their old plans, which potentially exposes them to unexpected increases in their insurance premiums and cost sharing. We conducted a randomized intervention to encourage enrollees in an ACA Marketplace to shop for plans. We tested the effect of letters and e-mails with personalized information about the savings on insurance premiums that they could realize from switching plans and the effect of generic communications that simply emphasized the possibility of saving. The personalized and generic messages both increased shopping on the Marketplace’s website by 23 percent, but neither type of message had a significant effect on plan switching. These findings show that simple “nudges” with even generic information can promote shopping in health insurance marketplaces, but whether they can lead to switching remains an open question.

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Causes and Consequences of Fragmented Care Delivery: Theory, Evidence, and Public Policy

Leila Agha, Brigham Frandsen & James Rebitzer

NBER Working Paper, January 2017

Abstract:
Fragmented health care occurs when care is spread out across a large number of poorly coordinated providers. We analyze care fragmentation, an important source of inefficiency in the US healthcare system, by combining an economic model of regional practice styles with an empirical study of Medicare enrollees who move across regions. Roughly sixty percent of cross-regional variation in care fragmentation is independent of patients’ clinical needs or preferences for care. A one standard deviation increase in regional fragmentation is associated with a 10% increase in utilization. Our analysis also identifies conditions under which anti-fragmentation policies can improve efficiency.

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The Extraregulatory Effect of Nurse Practitioner Scope-of-Practice Laws on Physician Malpractice Rates

Benjamin McMichael, Barbara Safriet & Peter Buerhaus

Medical Care Research and Review, forthcoming

Abstract:
Patients can hold physicians directly or vicariously liable for the malpractice of nurse practitioners under their supervision. Restrictive scope-of-practice laws governing nurse practitioners can ease patients’ legal burdens in establishing physician liability. We analyze the effect of restrictive scope-of-practice laws on the number of malpractice payments made on behalf of physicians between 1999 and 2012. Enacting less restrictive scope-of-practice laws decreases the number of payments made by physicians by as much as 31%, suggesting that restrictive scope-of-practice laws have a salient extraregulatory effect on physician malpractice rates. The effect of enacting less restrictive laws varies depending on the medical malpractice reforms that are in place, with the largest decrease in physician malpractice rates occurring in states that have enacted fewer malpractice reforms. Relaxing scope-of-practice laws could mitigate the adverse extraregulatory effect on physicians identified in this study and could also lead to improvements in access to care.

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Dermatologist-level classification of skin cancer with deep neural networks

Andre Esteva et al.

Nature, 2 February 2017, Pages 115–118

Abstract:
Skin cancer, the most common human malignancy, is primarily diagnosed visually, beginning with an initial clinical screening and followed potentially by dermoscopic analysis, a biopsy and histopathological examination. Automated classification of skin lesions using images is a challenging task owing to the fine-grained variability in the appearance of skin lesions. Deep convolutional neural networks (CNNs) show potential for general and highly variable tasks across many fine-grained object categories. Here we demonstrate classification of skin lesions using a single CNN, trained end-to-end from images directly, using only pixels and disease labels as inputs. We train a CNN using a dataset of 129,450 clinical images — two orders of magnitude larger than previous datasets — consisting of 2,032 different diseases. We test its performance against 21 board-certified dermatologists on biopsy-proven clinical images with two critical binary classification use cases: keratinocyte carcinomas versus benign seborrheic keratoses; and malignant melanomas versus benign nevi. The first case represents the identification of the most common cancers, the second represents the identification of the deadliest skin cancer. The CNN achieves performance on par with all tested experts across both tasks, demonstrating an artificial intelligence capable of classifying skin cancer with a level of competence comparable to dermatologists. Outfitted with deep neural networks, mobile devices can potentially extend the reach of dermatologists outside of the clinic. It is projected that 6.3 billion smartphone subscriptions will exist by the year 2021 and can therefore potentially provide low-cost universal access to vital diagnostic care.

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The Impact of the Affordable Care Act Young Adult Provision on Childbearing, Marriage, and Tax Filing Behavior: Evidence from Tax Data

Bradley Heim, Ithai Lurie & Kosali Simon

NBER Working Paper, January 2017

Abstract:
We use panel U.S. tax data spanning 2008-2013 to study the impact of the Affordable Care Act (ACA) young adult provision on two important demographic outcomes—childbearing and marriage. The impact on childbearing is theoretically ambiguous, as gaining insurance may increase access to contraceptive services, while also reducing the out-of-pocket costs of childbirth. The impact on marriage is also ambiguous, as marriage rates may decrease when young adults have less need for dependent health insurance through a spouse, but may increase when they are now allowed to stay on their parent’s plans even if they are married. Changes in childbearing and marriage can, in turn, lead to changes in the likelihood of filing a tax return. Since W-2 forms record access to employer-provided fringe benefits, we were able to examine the impact of the coverage expansion by focusing on young adults whose parents have access to benefits. We compare those who are slightly younger than the age threshold to those who are slightly older. Our results suggest that the ACA young adult provision led to a modest decrease in childbearing and marriage rates, though the propensity to file a tax return did not change significantly.

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How Vertical Integration Affects the Quantity and Cost of Care for Medicare Beneficiaries

Thomas Koch, Brett Wendling & Nathan Wilson

Journal of Health Economics, forthcoming

Abstract:
Health systems are employing physicians in growing numbers. The implications of this trend are poorly understood and controversial. We use rich data from the Centers for Medicare and Medicaid Services to examine the effects of a set of physician acquisitions by hospital systems on outpatient utilization and spending. We find that financial integration systematically produces economically large changes in the acquired physicians’ behavior, but has less consistent effects at the acquiring system level.

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Projected Coding Intensity In Medicare Advantage Could Increase Medicare Spending By $200 Billion Over Ten Years

Richard Kronick

Health Affairs, February 2017, Pages 320-327

Abstract:
Over the past decade, the average risk score for Medicare Advantage (MA) enrollees has risen steadily relative to that for fee-for-service Medicare beneficiaries, by approximately 1.5 percent per year. The Centers for Medicare and Medicaid Services (CMS) uses patient demographic and diagnostic information to calculate a risk score for each beneficiary, and these risk scores are used to determine payment to MA plans. The increase in relative MA risk scores is largely the result of successful efforts by MA plans to identify additional diagnoses, also known as coding intensity, and not of changes in enrollees’ true health. In this article I estimate the effects of coding intensity on Medicare spending over the next decade. Under the moderately conservative assumption that coding intensity will decelerate, Medicare expenditures are expected to increase by approximately $200 billion. CMS has implemented a variety of strategies since 2010 that lessened the impact of coding intensity on Medicare spending; it has a variety of policy responses at its disposal to mitigate the impact going forward. The problem could be largely solved if CMS adjusted for coding intensity using the principle that MA beneficiaries are no healthier and no sicker than demographically similar fee-for-service Medicare beneficiaries, returning to the budget-neutrality approach that was introduced in 2004 and later abandoned.

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The Impact of Minimum Quality Standard Regulations on Nursing Home Staffing, Quality, and Exit Decisions

John Bowblis & Andrew Ghattas

Review of Industrial Organization, February 2017, Pages 43–68

Abstract:
The regulation of nursing homes in the U.S. often includes mandates that require a minimum nurse staffing level. In this paper, we exploit new minimum nurse staffing regulations by the states of New Mexico and Vermont that were implemented in the early 2000s to determine how nursing homes responded in terms of staffing, quality, and the decision to exit the market. Our identification strategy exploits the fact that some nursing homes had pre-regulatory staffing levels near the new requirement and did not need to change staffing levels. We compare these nursing homes to a group that faced binding constraints (low-staffed) and those that were significantly over the constraint (high-staffed). Low-staffed nursing homes increase staffing levels but also use less expensive nurse types to satisfy the new standard. High-staffed nursing homes decrease staffing and use fewer contracted staff. Overall, dispersion in staffing is reduced, but we find little effect by pre-regulatory staffing level on non-staffing measures of quality and the decision to exit the market.

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Benchmarks for Reducing Emergency Department Visits and Hospitalizations Through Community Health Workers Integrated Into Primary Care: A Cost-Benefit Analysis

Sanjay Basu et al.

Medical Care, February 2017, Pages 140–147

Background: Uncertainty about the financial costs and benefits of community health worker (CHW) programs remains a barrier to their adoption.

Objectives: To determine how much CHWs would need to reduce emergency department (ED) visits and associated hospitalizations among their assigned patients to be cost-neutral from a payer’s perspective.

Research Design: Using a microsimulation of patient health care utilization, costs, and revenues, we estimated what portion of ED visits and hospitalizations for different conditions would need to be prevented by a CHW program to fully pay for the program’s expenses. The model simulated CHW programs enrolling patients with a history of at least 1 ED visit for a chronic condition in the prior year, utilizing data on utilization and cost from national sources.

Results: CHWs assigned to patients with uncontrolled hypertension and congestive heart failure, as compared with other common conditions, achieve cost-neutrality with the lowest number of averted visits to the ED. To achieve cost-neutrality, 4–5 visits to the ED would need to be averted per year by a CHW assigned a panel of 70 patients with uncontrolled hypertension or congestive heart failure — approximately 3%–4% of typical ED visits among such patients, respectively. Most other chronic conditions would require between 7% and 12% of ED visits to be averted to achieve cost-savings.

Conclusion: Offsetting costs of a CHW program is theoretically feasible for many common conditions. Yet the benchmark for reducing ED visits and associated hospitalizations varies substantially by a patient’s primary diagnosis.

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Health Care Use And Spending Patterns Vary By Wage Level In Employer-Sponsored Plans

Bruce Sherman et al.

Health Affairs, February 2017, Pages 250-257

Abstract:
Employees face an increasing financial burden for health services as health care costs increase relative to earnings. Yet little is known about health care utilization patterns relative to employee wages. To better understand this association and the resulting implications, we examined patterns of health care use and spending by wage category during 2014 among 42,936 employees of four self-insured employers enrolled in a private health insurance exchange. When demographics and other characteristics were controlled for, employees in the lowest-wage group had half the usage of preventive care (19 percent versus 38 percent), nearly twice the hospital admission rate (31 individuals per 1,000 versus 17 per 1,000), more than four times the rate of avoidable admissions (4.3 individuals per 1,000 versus 0.9 per 1,000), and more than three times the rate of emergency department visits (370 individuals per 1,000 versus 120 per 1,000) relative to top-wage-group earners. Annual total health care spending per patient was highest in both the lowest-wage ($4,835) and highest-wage ($5,074) categories relative to the middle two wage groups ($3,952 and $3,987, respectively). These findings provide new insights about wage-associated variations in health care use and spending in employer-sponsored plans. For policy makers, these findings can inform employer benefit design strategies and research priorities, to encourage effective use of health care services.

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Healthcare Spending and Utilization in Public and Private Medicare

Vilsa Curto et al.

NBER Working Paper, January 2017

Abstract:
We compare healthcare spending in public and private Medicare using newly available claims data from Medicare Advantage (MA) insurers. MA insurer revenues are 30 percent higher than their healthcare spending. Healthcare spending is 25 percent lower for MA enrollees than for enrollees in traditional Medicare (TM) in the same county with the same risk score. Spending differences between MA and TM are similar across sub-populations of enrollees and sub-categories of care, with similar reductions for "high value" and "low value" care. Spending differences primarily reflect differences in healthcare utilization; spending per encounter and hospital payments per admission are very similar in MA and TM. Geographic variation in MA spending is about 20 percent higher than in TM, but geographic variation in hospital prices is about 20 percent lower. We present evidence consistent with MA plans encouraging substitution to less expensive care, such as primary rather than specialist care, and outpatient rather than inpatient surgery, and with employing various types of utilization management. Some of the overall spending differences between MA and TM may be driven by selection on unobservables, and we report a range of estimates of this selection effect using mortality outcomes to proxy for selection.

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Internal Governance and Performance: Evidence From When External Discipline is Weak

Jonathan Kalodimos

Journal of Corporate Finance, April 2017, Pages 193–216

Abstract:
The effect of internal governance on performance is potentially economically significant but may be difficult to identify because of confounding external disciplinary mechanisms and the endogenous choice of internal governance. This study addresses those difficulties by using nonprofit hospitals as an economic environment with muted external disciplinary mechanisms and instrumenting for internal governance using governance spillovers of geographically local public firms. Using patient heart attack survival as a measure of performance, a one standard deviation increase in strength of internal governance reduces the probability of death by 0.89 percentage points after controlling for patient characteristics.

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Evaluating Measures of Hospital Quality

Joseph Doyle, John Graves & Jonathan Gruber

NBER Working Paper, February 2017

Abstract:
In response to unsustainable growth in health care spending, there is enormous interest in reforming the payment system to “pay for quality instead of quantity.” While quality measures are crucial to such reforms, they face major criticisms largely over the potential failure of risk adjustment to overcome endogeneity concerns. In this paper we implement a methodology for estimating the causal relationship between hospital quality measures and patient outcomes. To compare similar patients across hospitals in the same market, we exploit ambulance company preferences as an instrument for patient assignment. We find that a variety of measures used by insurers to measure provider quality are successful: assignment to a higher-scoring hospital results in better patient outcomes. We estimate that a two-standard deviation improvement in a composite quality measure based on existing data collected by CMS is causally associated with reductions in readmissions and mortality of roughly 15%.

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Comparison of Medicaid Payments Relative to Medicare Using Inpatient Acute Care Claims from the Medicaid Program: Fiscal Year 2010–Fiscal Year 2011

Devin Stone, Bridget Dickensheets & John Poisal

Health Services Research, forthcoming

Objective: To compare Medicaid fee-for-service (FFS) inpatient hospital payments to expected Medicare payments.

Data Sources: Medicaid and Medicare claims data, Medicare's MS-DRG grouper and inpatient prospective payment system pricer (IPPS pricer).

Principal Findings: Average inpatient hospital claim payments for Medicaid were 68.8 percent of what Medicare would have paid in fiscal year 2010, and 69.8 percent in fiscal year 2011. Including Medicaid disproportionate share hospital (DSH), graduate medical education (GME), and supplemental payments reduces a substantial proportion of the gap between Medicaid and Medicare payments.

Conclusions: Medicaid payments relative to expected Medicare payments tend to be lower and vary by state Medicaid program, length of stay, and whether payments made outside of the Medicaid claims process are included.

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ACOs Serving High Proportions Of Racial And Ethnic Minorities Lag In Quality Performance

Valerie Lewis et al.

Health Affairs, January 2017, Pages 57-66

Abstract:
Accountable care organizations (ACOs) are intended, in part, to improve health care quality. However, little is known about how ACOs may affect disparities or how providers serving disadvantaged patients perform under Medicare ACO contracts. We analyzed racial and ethnic disparities in health care outcomes among ACOs to investigate the association between the share of an ACO’s patients who are members of racial or ethnic minority groups and the ACO’s performance on quality measures. Using data from Medicare and a national survey of ACOs, we found that having a higher proportion of minority patients was associated with worse scores on twenty-five of thirty-three Medicare quality performance measures, two disease composite measures, and an overall quality composite measure. However, ACOs serving a high share of minority patients were similar to other ACOs in most observable characteristics and capabilities, including provider composition, services, and clinical capabilities. Our findings suggest that ACOs with a high share of minority patients may struggle with quality performance under ACO contracts, especially during their early years of participation — maintaining or potentially exacerbating current inequities. Policy makers must consider how to refine ACO programs to encourage the participation of providers that serve minority patients and to reward performance appropriately.

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The Effect of State Medicaid Expansions on Prescription Drug Use: Evidence from the Affordable Care Act

Ausmita Ghosh, Kosali Simon & Benjamin Sommers

NBER Working Paper, January 2017

Abstract:
This study provides a national analysis of how the 2014 Affordable Care Act (ACA) Medicaid expansions have affected aggregate prescription drug utilization. Given the prominent role of prescription medications in the management of chronic conditions, as well as the high prevalence of unmet health care needs in the population newly eligible for Medicaid, the use of prescription drugs represents an important measure of the ACA’s policy impact. Prescription drug utilization also provides insights into whether insurance expansions have increased access to physicians, since obtaining these medications requires interaction with a health care provider. We use 2013-2015 data from a large, nationally representative, all-payer pharmacy transactions database to examine effects on overall prescription medication utilization as well as effects within specific drug classes. Using a differences-in-differences (DD) regression framework, we find that within the first 15 months of expansion, Medicaid-paid prescription utilization increased by 19 percent in expansion states relative to states that did not expand; this works out to approximately seven additional prescriptions per year per newly enrolled beneficiary. The greatest increases in Medicaid prescriptions occurred among diabetes medications, which increased by 24 percent. Other classes of medication that experienced relatively large increases include contraceptives (22 percent) and cardiovascular drugs (21 percent), while several classes more consistent with acute conditions such as allergies and infections experienced significantly smaller increases. As a placebo test, we examine Medicare-paid prescriptions and find no evidence of a post-ACA effect. Both expansion and non-expansion states followed statistically similar trends in Medicaid prescription utilization in the pre-policy era, offering support for our DD approach. We did not observe reductions in uninsured or privately insured prescriptions, suggesting that increased utilization under Medicaid did not substitute for other forms of payment. Within expansion states, increases in prescription drug utilization were larger in geographical areas with higher uninsured rates prior to the ACA. Finally, we find some suggestive evidence that increases in prescription drug utilization were greater in areas with larger Hispanic and black populations.

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Spending On Care After Surgery Driven By Choice Of Care Settings Instead Of Intensity Of Services

Lena Chen et al.

Health Affairs, January 2017, Pages 83-90

Abstract:
The rising popularity of episode-based payment models for surgery underscores the need to better understand the drivers of variability in spending on postacute care. Examining postacute care spending for fee-for-service Medicare beneficiaries after three common surgical procedures in the period 2009–12, we found that it varied widely between hospitals in the lowest versus highest spending quintiles for postacute care, with differences of 129 percent for total hip replacement, 103 percent for coronary artery bypass grafting (CABG), and 82 percent for colectomy. Wide variation persisted after we adjusted for the intensity of postacute care. However, the variation diminished considerably after we adjusted instead for postacute care setting (home health care, outpatient rehabilitation, skilled nursing facility, or inpatient rehabilitation facility): It decreased to 16 percent for hip replacement, 4 percent for CABG, and 21 percent for colectomy. Health systems seeking to improve surgical episode efficiency should collaborate with patients to choose the highest-value postacute care setting.

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Lower- Versus Higher-Income Populations In The Alternative Quality Contract: Improved Quality And Similar Spending

Zirui Song et al.

Health Affairs, January 2017, Pages 74-82

Abstract:
As population-based payment models become increasingly common, it is crucial to understand how such payment models affect health disparities. We evaluated health care quality and spending among enrollees in areas with lower versus higher socioeconomic status in Massachusetts before and after providers entered into the Alternative Quality Contract, a two-sided population-based payment model with substantial incentives tied to quality. We compared changes in process measures, outcome measures, and spending between enrollees in areas with lower and higher socioeconomic status from 2006 to 2012 (outcome measures were measured after the intervention only). Quality improved for all enrollees in the Alternative Quality Contract after their provider organizations entered the contract. Process measures improved 1.2 percentage points per year more among enrollees in areas with lower socioeconomic status than among those in areas with higher socioeconomic status. Outcome measure improvement was no different between the subgroups; neither were changes in spending. Larger or comparable improvements in quality among enrollees in areas with lower socioeconomic status suggest a potential narrowing of disparities. Strong pay-for-performance incentives within a population-based payment model could encourage providers to focus on improving quality for more disadvantaged populations.

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ACO-Affiliated Hospitals Reduced Rehospitalizations From Skilled Nursing Facilities Faster Than Other Hospitals

Ulrika Winblad et al.

Health Affairs, January 2017, Pages 67-73

Abstract:
Medicare’s more than 420 accountable care organizations (ACOs) provide care for a considerable percentage of the elderly in the United States. One goal of ACOs is to improve care coordination and thereby decrease rates of rehospitalization. We examined whether ACO-affiliated hospitals were more effective than other hospitals in reducing rehospitalizations from skilled nursing facilities. We found a general reduction in rehospitalizations from 2007 to 2013, which suggests that all hospitals made efforts to reduce rehospitalizations. The ACO-affiliated hospitals, however, were able to reduce rehospitalizations more quickly than other hospitals. The reductions suggest that ACO-affiliated hospitals are either discharging to the nursing facilities more effectively compared to other hospitals or targeting at-risk patients better, or enhancing information sharing and communication between hospitals and skilled nursing facilities. Policy makers expect that reducing readmissions to hospitals will generate major savings and improve the quality of life for the frail elderly. However, further work is needed to investigate the precise mechanisms that underlie the reduction of readmissions among ACO-affiliated hospitals.

By KEVIN LEWIS | 09:00:00 AM

Thursday, February 16, 2017

Untax and spend

Baumol's Cost Disease and the Sustainability of the Welfare State

Torben Andersen & Claus Kreiner

Economica, forthcoming

Abstract:
If productivity increases more slowly for services than for manufactured goods, then services suffer from Baumol's cost disease and tend to become relatively more costly over time. Since the welfare state in all countries is an important supplier of tax financed services, this translates into a financial pressure that seems to leave policymakers with a trilemma: increase tax distortions, cut spending or redistribute less. Under the assumptions underlying Baumol's cost disease, we show that these dismal implications are not warranted. The welfare state is sustainable, and there is even scope for Pareto improvements under Baumol's cost disease.

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Do Corporate Taxes Hinder Innovation?

Abhiroop Mukherjee, Manpreet Singh & Alminas Žaldokas

Journal of Financial Economics, forthcoming

Abstract:
We exploit staggered changes in state-level corporate tax rates to show that an increase in taxes reduces future innovation. A variety of tests, including those based on policy discontinuity at contiguous counties straddling borders of politically similar states, show that local economic conditions do not drive our results. The effect we document is consistent across the innovation spectrum: taxes affect not only patenting and R&D investment but also new product introductions, which we measure using textual analysis. Our empirical results are consistent with models that highlight the role of higher corporate taxes in reducing innovator incentives and discouraging risk-taking.

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Government Size and Macroeconomic Volatility

Fabrice Collard, Harris Dellas & George Tavlas

Economica, forthcoming

Abstract:
We examine the implications of government size for macroeconomic volatility in a standard New-Keynesian model with multiple shocks. Larger government size mitigates volatility arising from technology, preference, mark-up and monetary policy shocks, but amplifies that emanating from expenditure shocks. The degree of mitigation-amplification varies with the size of government, which opens up the possibility of a non-monotone relationship between volatility and government size. When we estimate the model on US data we find that the relationship is negative around the current US size, but it could eventually turn positive as the ratio of government spending to GDP increased. The location of the turning point in this relationship depends mainly on the type of private expenditure crowded out by higher government spending and on the degree of price stickiness.

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Austerity in the Aftermath of the Great Recession

Christopher House, Christian Proebsting & Linda Tesar

NBER Working Paper, February 2017

Abstract:
We examine austerity in advanced economies since the Great Recession. Austerity shocks are reductions in government purchases that exceed reduced-form forecasts. Austerity shocks are statistically associated with lower real GDP, lower inflation and higher net exports. We estimate a cross-sectional multiplier of roughly 2. A multi-country DSGE model calibrated to 29 advanced economies generates a multiplier consistent with the data. Counterfactuals suggest that eliminating austerity would have substantially reduced output losses in Europe. Austerity shocks were sufficiently contractionary that debt-to-GDP ratios in some European countries increased as a consequence of endogenous reductions in GDP and tax revenue.

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Profit shifting of U.S. multinationals

Tim Dowd, Paul Landefeld & Anne Moore

Journal of Public Economics, forthcoming

Abstract:
We analyze the profit shifting behavior of U.S. multinational firms using a unique panel data set of U.S. tax returns over the period 2002-2012. Prior research has found significant effects of tax rates in affiliate and parent countries on the profit shifting behavior of multinational entities, with semi-elasticities ranging from close to zero to well above one. We build on this prior work by allowing more heterogeneity in response across the distribution of tax rates and by including affiliates located in tax havens around the world. Our findings suggest that elasticities based on a log-linear specification may severely understate the sensitivity of profits to tax in low-tax jurisdictions while simultaneously overstating this elasticity in high-tax jurisdictions. Accounting for this type of nonlinearity appears crucial in considering how the global allocation of firm profits might change in response to tax rate changes.

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The Role of Budgetary Information in the Preference for Externality-Correcting Subsidies over Taxes: A Lab Experiment on Public Support

David Heres, Steffen Kallbekken & Ibon Galarraga

Environmental and Resource Economics, January 2017, Pages 1-15

Abstract:
The potential of taxes to correct environmental externalities has long been recognized among economists. Yet, this welfare-enhancing policy commonly faces strong opposition by citizens. Conversely, externality-correcting subsidies frequently enjoy high public support. We conduct a lab experiment to explore public support for Pigouvian taxes and subsidies. In an experimental market with a negative externality, participants vote on the introduction of Pigouvian taxes and subsidies under full or reduced information concerning how the tax revenues will be spent and the subsidy paid for. Theoretically the two instruments should produce identical outcomes. However, we find substantially greater support for subsidies than for taxes. This can partially be explained by the participants' expectation that the subsidy will increase their own payoffs more than a tax, but not because it is expected to be more effective in changing behavior. Furthermore, we find that with greater uncertainty, the preference for subsidies is even stronger, a result which is consistent with loss aversion.

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Impact of income tax on happiness: Evidence from the United States

Taurean Hutchinson & Ishraq Ahmed

Applied Economics Letters, forthcoming

Abstract:
The present work considers the level of demonstrated happiness and unhappiness within groups, the latter measured by the conditional probability of suicide within groups facing an income tax rate and those without. Using US data for the year 2004, our results show that individuals have lower rates of suicide or are 'happy' when they do not pay income taxes than those who pay.

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The Effective Income Tax Experience of U.S. and Non-U.S. Multinationals

Eric Allen & Susan Morse

University of Southern California Working Paper, December 2016

Abstract:
In this paper we examine how the incorporation of a parent firm outside the United States affects the effective income tax rates of global firms with material business operations in the U.S. We find that for profit firm years, firms with a non-U.S. parent corporation have lower effective tax rates than firms with a U.S. parent. However, in loss firm years we find that these non-U.S. firms report smaller negative tax expense. We find no statistically significant difference in outcomes if the non-U.S. firm engaged in an inversion transaction. We provide evidence that earnings stripping opportunities available to non-U.S. firms and the worldwide tax law applicable to U.S. firms contribute to the better tax results of non-U.S. firms in profit years. For loss firm years, we find evidence that the U.S. worldwide tax law and differences in valuation allowance practice support better tax outcomes for U.S. firms.

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Subsidies and Stadia' Opulence

Geoffrey Propheter

Journal of Sports Economics, January 2017, Pages 3-18

Abstract:
Quirk and Fort's gold plating hypothesis stipulates that subsidies are partly capitalized into stadia' opulence. If the gold plating hypothesis is true, it would indicate that subsidies contribute to their own existence, as owners and major league executives argue subsidies are necessary to meet leagues' increasing facility design standards. This study tests the gold plating hypothesis using a pooled cross section of stadia from the five major leagues. The findings confirm that subsidies increase stadia' opulence. As evaluated at leagues' mean stadia acreage, the marginal opulence of an additional US$1 million construction subsidy ranges from US$188,490 to US$501,420 depending on the league.

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A note on economic freedom and political ideology

Ji Gu et al.

Applied Economics Letters, forthcoming

Abstract:
Within the field of public economics, there is the perception that Republicans are associated with 'small government' and Democrats with 'big government'. We test this notion by examining whether economic freedom is affected when a single party is in control of the state legislature. We find no link between party control and our main economic freedom indicator, but we do find a positive link between Republican control and the taxation component of economic freedom, suggesting a Republican legislature leads to lower taxation.

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Does The Samaritan's Dilemma Matter? Evidence From U.S. Agriculture

Tatyana Deryugina & Barrett Kirwan

NBER Working Paper, November 2016

Abstract:
The Samaritan's dilemma posits a downside to charity: recipients may rely on free aid instead of their own efforts. Anecdotally, the expectation of free assistance is thought to be important for decisions about insurance and risky behavior in numerous settings, but reliable empirical evidence is scarce. We estimate whether the Samaritan's dilemma exists in U.S. agriculture, where both private crop insurance and frequent federal disaster assistance are present. We find that bailout expectations are qualitatively and quantitatively important for the insurance decision. Furthermore, aid expectations reduce both the amount of farm inputs and subsequent crop revenue.

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The long-run effects of privatization on productivity: Evidence from Canada

Anthony Boardman, Aidan Vining & David Weimer

Journal of Policy Modeling, November-December 2016, Pages 1001-1017

Abstract:
From a public policy perspective, the social value of privatization depends on the aggregate efficiency benefits over the long term. However, most privatization studies that examine the efficiency impacts of privatization employ relatively short time frames: usually 3-years before and 3-years after the privatization. In contrast, this study examines the long run effects (up to 24 years) of privatization on productivity based on an examination of major, mostly federal, share-issue privatizations in Canada. We control for factors that might affect productivity apart from privatization by including panels of Always-SOE firms and Always-Private firms, and estimating difference-in-difference models. The major finding is that the productivity of Privatized SOEs increases relative to SOEs at a decreasing rate, peaking at 14-16 years. Despite this improvement, the productivity of privatized firms continues to lag that of Always-Private firms. We consider some of the policy implications of these findings.

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Raising the Social Security Entitlement Age: Implications for the Productive Activities of Older Adults

Julie Zissimopoulos et al.

Research on Aging, January 2017, Pages 166-189

Abstract:
An aging America presents challenges but also brings social and economic capital. We quantify public revenues from, and public expenditures on, Americans aged 65 and older, the value of their unpaid, productive activities and financial gifts to family. Using microsimulation, we project the value of these activities, and government revenues and expenditures, under different scenarios of change to the Old Age and Survivors Insurance eligibility age through 2050. We find the value of unpaid productive activities and financial gifts are US$721 billion in 2010, while net (of tax revenues) spending on the 65 years and older is US$984 billion. Five-year delay in the full retirement age decreases federal spending by 10%, while 2-year delay in the early entitlement age increases it by 1.5%. The effect of 5-year delay on unpaid activities and transfers is small: US$4 billion decrease in services and US$4.5 billion increase in bequests and monetary gifts.

By KEVIN LEWIS | 09:00:00 AM

Wednesday, February 15, 2017

To employ or not to employ

Minimum Wages and Relational Contracts

Matthias Fahn

Journal of Law, Economics, and Organization, forthcoming

Abstract:
The need to give incentives is usually absent in the literature on minimum wages. However, especially in the service sector it is important how well a job is done, and employees must be incentivized to perform accordingly. Furthermore, many aspects regarding service quality cannot be verified and relational contracts have to be used to provide incentives. The present article shows that in this case, a minimum wage increases implemented effort, as well as the efficiency of an employment relationship. Hence, it can be explained why productivity and service quality went up after the introduction of the British National Minimum Wage, and that this might actually have caused a more efficient labor market. Furthermore, if workers have low bargaining power, a higher minimum wage also increases profits and consequently employment. Therefore, the present article presents a new perspective on reasons for why minimum wages often have no or only negligible negative employment effects.

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Declining Labor and Capital Shares

Simcha Barkai

University of Chicago Working Paper, November 2016

Abstract:
This paper shows that the decline in the labor share over the last 30 years was not offset by an increase in the capital share. I calculate payments to capital as the product of the required rate of return on capital and the value of the capital stock. I document a large decline in the capital share and a large increase in the profit share in the U.S. non-financial corporate sector over the last 30 years. I show that the decline in the capital share is robust to many calculations of the required rate of return and is unlikely to be driven by unobserved capital. I interpret these results through the lens of a standard general equilibrium model, and I show that only an increase in markups can generate a simultaneous decline in the shares of both labor and capital. I provide reduced form empirical evidence that an increase in markups plays a significant role in the decline in the labor share. These results suggest that the decline in the shares of labor and capital are due to an increase in markups and call into question the conclusion that the decline in the labor share is an efficient outcome.

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Concentrating on the Fall of the Labor Share

David Autor et al.

NBER Working Paper, January 2017

Abstract:
The recent fall of labor's share of GDP in numerous countries is well-documented, but its causes are poorly understood. We sketch a "superstar firm" model where industries are increasingly characterized by "winner take most" competition, leading a small number of highly profitable (and low labor share) firms to command growing market share. Building on Autor et al. (2017), we evaluate and confirm two core claims of the superstar firm hypothesis: the concentration of sales among firms within industries has risen across much of the private sector; and industries with larger increases in concentration exhibit a larger decline in labor's share.

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Estimating the Employment Effects of Recent Minimum Wage Changes: Early Evidence, an Interpretative Framework, and a Pre-Commitment to Future Analysis

Jeffrey Clemens & Michael Strain

NBER Working Paper, January 2017

Abstract:
This paper presents early evidence on the employment effects of state minimum wage increases enacted between January 2013 and January 2015, and offers an interpretative framework to understand why it is of interest to study recent changes in isolation. Given the ongoing transitions of many states' minimum wage rates, we also set the stage for a pre-committed analysis of the minimum wage changes scheduled for coming years. Through 2015, we estimate that employment among young adults and young individuals with less than a completed high school education expanded modestly less quickly in states that enacted one-time or multi-phase statutory minimum wage increases than in states that enacted no minimum wage increases. Across the specifications we implement and the samples we analyze, many of our estimates are statistically indistinguishable from zero. Data on the longer-run effects of this period's minimum wage changes will be essential for more fully assessing these changes' effects and for drawing strong conclusions regarding how minimum wage increases affect employment in this decade's institutional and economic environment. As data become available for the full 2016 through 2019 calendar years, we will execute and report the results of analyses that follow the road map this paper develops.

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Does Manufacturing Matter for Economic Growth in the Era of Globalization?

Roshan Pandian

Social Forces, March 2017, Pages 909-940

Abstract:
This study adjudicates between two competing perspectives regarding the importance of manufacturing employment for economic growth with the onset of the most recent round of economic globalization. Established economic theories link shifts toward industrial activities to higher growth due to increases in aggregate productivity. While some scholars argue that the global restructuring of manufacturing in the era of globalization presents novel opportunities for development in the South, others suggest that the importance of manufacturing employment for economic growth in less developed countries declines during this period as competitive pressures increase and barriers to entry decline. I use difference models and a broad sample of both developed and less developed countries in the time period 1970-2010 to examine the effects of manufacturing share of employment on economic growth and how these effects have changed over time. First, I find that manufacturing employment has strong positive effects on economic growth net of neoclassical controls for all countries. Second, I find that for less developed countries, the importance of manufacturing share of employment for growth has declined through the course of the time period studied, particularly after 1990. In contrast, my results do not show a similar decline for developed countries. These findings are robust across alternative estimation strategies. I conclude by considering the theoretical implications of these results.

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Recent Flattening in the Higher Education Wage Premium: Polarization, Skill Downgrading, or Both?

Robert Valletta

NBER Working Paper, December 2016

Abstract:
Wage gaps between workers with a college or graduate degree and those with only a high school degree rose rapidly in the United States during the 1980s. Since then, the rate of growth in these wage gaps has progressively slowed, and though the gaps remain large, they were essentially unchanged between 2010 and 2015. I assess this flattening over time in higher education wage premiums with reference to two related explanations for changing U.S. employment patterns: (i) a shift away from middle-skilled occupations driven largely by technological change ("polarization"); and (ii) a general weakening in the demand for advanced cognitive skills ("skill downgrading"). Analyses of wage and employment data from the U.S. Current Population Survey suggest that both factors have contributed to the flattening of higher education wage premiums.

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Price Floors and Employer Preferences: Evidence from a Minimum Wage Experiment

John Horton

NYU Working Paper, January 2017

Abstract:
Firms posting job openings in an online labor market were randomly assigned minimum hourly wages. When facing a minimum wage, fewer firms made a hire, but those workers they did hire were paid a higher wage. However, the reduction in hiring was not large, even at the highest minimum wage imposed. In contrast, minimum wages substantially reduced hours-worked, across cells. Firms facing a higher minimum wage also hired more productive workers, which can explain, in part, the reduction in hours-worked: with more productive workers, projects were simply completed in less time. This labor-labor substitution margin of adjustment would presumably be less effective in equilibrium, if all firms sought out more productive workers. However, using the platform's imposition of a market-wide minimum wage after the experiment, I find that many of the experimental results also hold in equilibrium, including the labor-labor substitution towards more productive workers.

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Understanding the Long-Run Decline in Interstate Migration

Greg Kaplan & Sam Schulhofer-Wohl

International Economic Review, February 2017, Pages 57-94

Abstract:
We analyze the secular decline in gross interstate migration in the United States from 1991 to 2011. We argue that migration fell because of a decline in the geographic specificity of returns to occupations, together with an increase in workers' ability to learn about other locations before moving. Micro data on earnings and occupations across space provide evidence for lower geographic specificity. Other explanations do not fit the data. A calibrated model formalizes the geographic specificity and information mechanisms and is consistent with cross-sectional and time-series evidence. Our mechanisms can explain at least half of the decline in migration.

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Secular Stagnation? The Effect of Aging on Economic Growth in the Age of Automation

Daron Acemoglu & Pascual Restrepo

NBER Working Paper, January 2017

Abstract:
Several recent theories emphasize the negative effects of an aging population on economic growth, either because of the lower labor force participation and productivity of older workers or because aging will create an excess of savings over desired investment, leading to secular stagnation. We show that there is no such negative relationship in the data. If anything, countries experiencing more rapid aging have grown more in recent decades. We suggest that this counterintuitive finding might reflect the more rapid adoption of automation technologies in countries undergoing more pronounced demographic changes, and provide evidence and theoretical underpinnings for this argument.

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Labor Reallocation, Employment, and Earnings: Vector Autoregression Evidence

Henry Hyatt & Tucker McElroy

U.S. Census Bureau Working Paper, January 2017

Abstract:
An increasing number of data sources have measured the components of reallocation of jobs across employers and workers across jobs. Whether and how job reallocation across employers and excess worker "churn" affect other measures of the health of the U.S. economy remains an open question. In this paper, we present time series evidence for the U.S. 1993-2013 and consider the relationship between labor reallocation, employment, and earnings using a vector autoregression (VAR) framework. We find that labor market churn Granger-causes higher employment and lower unemployment, while job destruction does the opposite. We also find more limited evidence that churn and job destruction predict increased earnings, although this is not found for all earnings measures.

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Unemployment Insurance Generosity and Aggregate Employment

Arindrajit Dube et al.

University of Massachusetts Working Paper, December 2016

Abstract:
This paper examines the impact of unemployment insurance (UI) on aggregate employment by exploiting cross-state variation in the maximum benefit duration during the Great Recession. Comparing adjacent counties located in neighboring states, we find no statistically significant impact of increasing UI generosity on aggregate employment. Our point estimates are uniformly small in magnitude, and the most precise estimates rule out employment-to-population ratio reductions in excess of 0.5 percentage points from the UI extension. We show that a moderately sized fiscal multiplier can rationalize our findings with the small negative labor supply impact of UI typically found in the literature.

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Reference Dependent Preferences and Labor Supply in Historical Perspective

Daniel MacDonald & Philip Mellizo

Journal of Behavioral and Experimental Economics, forthcoming

Abstract:
To evaluate voluntary labor supply decisions under transitory monthly piece-rate schedules, we draw from a novel dataset on workers who originated from self-sufficient farms in New Hampshire, Vermont, and Massachusetts, and were recruited into textile mills in eastern Massachusetts in the early 19th century. Where life-cycle models of labor supply predict a positive relationship between labor supply and transitory changes in wages, we instead find negative wage-labor supply elasticities consistent with reference-dependent income targeting. Our findings contribute to the contemporary debate over the empirical validity of competing labor supply models. They also bring into question common modeling conventions in economic history that are used in the construction of historical narratives.

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Social influence in career choice: Evidence from a randomized field experiment on entrepreneurial mentorship

Charles Eesley & Yanbo Wang

Research Policy, forthcoming

Abstract:
How do different sources of social influence impact the likelihood of entrepreneurship? We examine this question in the setting of an entrepreneurship class in which students were randomly assigned to receive mentorship from either an entrepreneur or a non-entrepreneur. Using a longitudinal field experiment with a pre-test/post-test design, we find that randomization to an entrepreneur mentor increases the likelihood of entrepreneurial careers, particularly for students whose parents were not entrepreneurs. Additional analysis shows the mentor influences the decision to join an early-stage venture, but not to become a founder. Performance data suggests that entrepreneurial influence is not encouraging "worse" entrepreneurship and may have helped students in joining or founding better-performing ventures. We contribute to the literature on social influence in entrepreneurship by examining the interaction between multiple sources of social influence and by using a randomized field experiment to overcome the endogenous process of tie formation.

By KEVIN LEWIS | 09:00:00 AM


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