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Friday, September 2, 2016

That's the law

The Influence of Public Sentiment on Supreme Court Opinion Clarity

Ryan Black et al.

Law & Society Review, September 2016, Pages 703-732

Abstract:
We examine whether public opinion leads Supreme Court justices to alter the content of their opinions. We argue that when justices anticipate public opposition to their decisions, they write clearer opinions. We develop a novel measure of opinion clarity based on multifaceted textual readability scores, which we validate using human raters. We examine an aggregate time series analysis of the influence of public mood on opinion clarity and an individual-level sample of Supreme Court cases paired with issue-specific public opinion polls. The empirical results from both models show that justices write clearer opinions when their rulings contradict popular sentiment. These results suggest public opinion influences the Court, and suggest that future scholarship should analyze how public opinion influences the written content of decision makers' policies.

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Testing for Racial Discrimination in Police Searches of Motor Vehicles

Camelia Simoiu, Sam Corbett-Davies & Sharad Goel

Stanford Working Paper, July 2016

Abstract:
In the course of conducting traffic stops, officers have discretion to search motorists for drugs, weapons, and other contraband. There is concern that these search decisions are prone to racial bias, but it has proven difficult to rigorously assess claims of discrimination. Here we develop a new statistical method --- the threshold test --- to test for racial discrimination in motor vehicle searches. We use geographic variation in stop outcomes to infer the effective race-specific standards of evidence that officers apply when deciding whom to search, an approach we formalize with a hierarchical Bayesian latent variable model. This technique mitigates the problems of omitted variables and infra-marginality associated with benchmark and outcome tests for discrimination. On a dataset of 4.5 million police stops in North Carolina, we find that the standard for searching black and Hispanic drivers is considerably lower than the standard for searching white and Asian drivers, a pattern that holds consistently across the 100 largest police departments in the state.

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A Punishing Look: Skin Tone and Afrocentric Features in the Halls of Justice

Ryan King & Brian Johnson

American Journal of Sociology, July 2016, Pages 90-124

Abstract:
Two related lines of research have gained traction in the social sciences during the past three decades. One examines the association between race and punishment, while a second investigates stratification and colorism, defined as discrimination based on skin tone. Yet rarely do scholars examine these issues together. The current study uses new data to investigate the association between offender's skin tone, Afrocentric facial features, and criminal punishment. More than 850 booking photos of black and white male offenders in two Minnesota counties were coded and then matched to detailed sentencing records. Results indicate that darker skin tone and Afrocentric facial features are associated with harsher sanctions and that the latter effect is particularly salient for white defendants. The findings add to existing work on skin tone and stratification and suggest that future research should consider other aspects of appearance, such as facial features, in the study of punishment and inequality.

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Do Judges' Characteristics Matter? Ethnicity, Gender, and Partisanship in Texas State Trial Courts

Claire Lim, Bernardo Silveira & James Snyder

American Law and Economics Review, forthcoming

Abstract:
We explore how government officials' behavior varies with their ethnicity, gender, and political orientation. Specifically, we analyze criminal sentencing decisions in Texas state district courts using data on approximately half a million criminal cases from 2004 to 2013. We exploit randomized case assignments within counties and obtain precisely estimated effects of judges' ethnicity, gender, and political orientation that are near zero, conditional on geographic factors. However, we find substantial cross-judge heterogeneity in sentencing. Exploiting a unique overlapping structure of Texas state district courts, we find no evidence that this heterogeneity is driven by judges pandering to voters.

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The Economics of Rights: Does the Right to Counsel Increase Crime?

Itai Ater, Yehonatan Givati & Oren Rigbi

American Economic Journal: Economic Policy, forthcoming

Abstract:
We examine the broad consequences of the right to counsel by exploiting a legal reform in Israel that extended the right to publicly provided legal counsel to suspects in arrest proceedings. Using the staggered regional rollout of the reform, we find that the reform reduced arrest duration and the likelihood of arrestees being charged. We also find that the reform reduced the number of arrests made by the police. Lastly, we find that the reform increased crime. These findings indicate that the right to counsel improves suspects' situation, but discourages the police from making arrests, which results in higher crime.

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The Effects of Pre-Trial Detention on Conviction, Future Crime, and Employment: Evidence from Randomly Assigned Judges

Will Dobbie, Jacob Goldin & Crystal Yang

NBER Working Paper, August 2016

Abstract:
Over 20 percent of prison and jail inmates in the United States are currently awaiting trial, but little is known about the impact of pre-trial detention on defendants. This paper uses the detention tendencies of quasi-randomly assigned bail judges to estimate the causal effects of pre-trial detention on subsequent defendant outcomes. Using data from administrative court and tax records, we find that being detained before trial significantly increases the probability of a conviction, primarily through an increase in guilty pleas. Pre-trial detention has no detectable effect on future crime, but decreases pre-trial crime and failures to appear in court. We also find suggestive evidence that pre-trial detention decreases formal sector employment and the receipt of employment- and tax-related government benefits. We argue that these results are consistent with (i) pre-trial detention weakening defendants' bargaining position during plea negotiations, and (ii) a criminal conviction lowering defendants' prospects in the formal labor market.

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The Downstream Consequences of Misdemeanor Pretrial Detention

Paul Heaton, Sandra Mayson & Megan Stevenson

University of Pennsylvania Working Paper, July 2016

Abstract:
In misdemeanor cases, pretrial detention poses a particular problem because it may induce otherwise innocent defendants to plead guilty in order to exit jail, potentially creating widespread error in case adjudication. While practitioners have long recognized this possibility, empirical evidence on the downstream impacts of pretrial detention on misdemeanor defendants and their cases remains limited. This Article uses detailed data on hundreds of thousands of misdemeanor cases resolved in Harris County, Texas - the third largest county in the U.S. - to measure the effects of pretrial detention on case outcomes and future crime. We find that detained defendants are 25% more likely than similarly situated releases to plead guilty, 43% more likely to be sentenced to jail, and receive jail sentences that are more than twice as long on average. Furthermore, those detained pretrial are more likely to commit future crime, suggesting that detention may have a criminogenic effect. These differences persist even after fully controlling for the initial bail amount as well as detailed offense, demographic, and criminal history characteristics. Use of more limited sets of controls, as in prior research, overstates the adverse impacts of detention. A quasi-experimental analysis based upon case timing confirms that these differences likely reflect the casual effect of detention. These results raise important constitutional questions, and suggest that Harris County could save millions of dollars a year, increase public safety, and reduce wrongful convictions with better pretrial release policy.

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Distortion of Justice: How the Inability to Pay Bail Affects Case Outcomes

Megan Stevenson

University of Pennsylvania Working Paper, May 2016

Abstract:
Instrumenting for detention status with the bail-setting propensities of rotating magistrates I find that pretrial detention leads to a 13% increase in the likelihood of being convicted, an effect explained by an increase in guilty pleas among defendants who otherwise would have been acquitted or had their charges dropped. On average, those detained will be liable for $128 more in court fees and will receive incarceration sentences that are almost five months longer. Effects can be seen in both misdemeanor and felony cases, across age and race, and appear particularly large for first or second time arrestees. Case types where evidence tends to be weaker also show pronounced effects: a 30% increase in pleading guilty and an additional 18 months in the incarceration sentence. While previous research has shown correlations between pretrial detention and unfavorable case outcomes, this paper is the first to use a quasi-experimental research design to show that the relationship is causal.

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Plea discounts, time pressures, and false-guilty pleas in youth and adults who pleaded guilty to felonies in New York City

Tina Zottoli et al.

Psychology, Public Policy, and Law, August 2016, Pages 250-259

Abstract:
The overwhelming majority of criminal cases are resolved by a guilty plea. Concerns have been raised about the potential for plea bargaining to be coercive, but little is known about the actual choices faced by defendants who plead guilty. Through interviews of youth and adults who pleaded guilty to felonies in New York City, we found that substantial discounts were offered to participants in exchange for their guilty pleas and that a sizable portion of both the youth and adults claimed either that they were completely innocent (27% and 19%, respectively) or that they were not guilty of what they were charged with (20% and 41%, respectively). Participants also reported infrequent contact with their attorneys prior to accepting their plea deals and very short time periods in which to make their decisions. Our findings suggest the plea-bargaining system in New York City may be fraught with promises of leniency, time pressures, and insufficient attorney advisement-factors that may undermine the voluntariness of plea deal decisions for some defendants.

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From Bail to Jail: The Effect of Jail Capacity on Bail Decisions

Marian Williams

American Journal of Criminal Justice, September 2016, Pages 484-497

Abstract:
One of the more important decisions made by judges in the criminal justice system is the bail decision. Factors that judges take into consideration when making a bail decision, such as seriousness of the offense, flight risk, and public safety, are typically seen by researchers as the primary determinants of such a decision. However, one aspect that researchers have not studied extensively - rated jail capacity - could play an important role in a judge's decision. Overcrowding in jails leads to numerous problems, both for the offender and the system itself, so judges may be more willing to release offenders into the community during the pretrial period if the local jails are overcrowded. The current study examines the effect of rated jail capacity on decisions regarding bail amounts, release on recognizance (ROR), financial release, and conditional release in eight Florida counties. Results indicate that rated jail capacity plays a role in judges' bail decisions, suggesting that judges are concerned about housing more pretrial offenders in crowded jails.

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Stacking the Jury: Legal Professionals' Peremptory Challenges Reflect Jurors' Levels of Implicit Race Bias

Mike Morrison, Amanda DeVaul-Fetters & Bertram Gawronski

Personality and Social Psychology Bulletin, August 2016, Pages 1129-1141

Abstract:
Most legal systems are based on the premise that defendants are treated as innocent until proven guilty and that decisions will be unbiased and solely based on the facts of the case. The validity of this assumption has been questioned for cases involving racial minority members, in that racial bias among jury members may influence jury decisions. The current research shows that legal professionals are adept at identifying jurors with levels of implicit race bias that are consistent with their legal interests. Using a simulated voir dire, professionals assigned to the role of defense lawyer for a Black defendant were more likely to exclude jurors with high levels of implicit race bias, whereas prosecutors of a Black defendant did the opposite. There was no relation between professionals' peremptory challenges and jurors' levels of explicit race bias. Implications for the role of racial bias in legal decision making are discussed.

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The Role of Emotional Language in Briefs before the US Supreme Court

Ryan Black et al.

Journal of Law and Courts, Fall 2016, Pages 377-407

Abstract:
The legal brief is a primary vehicle by which lawyers seek to persuade appellate judges. Despite wide acceptance that briefs are important, empirical scholarship has yet to establish their influence on the Supreme Court or fully explore justices' preferences regarding them. We argue that emotional language conveys a lack of credibility to justices and thereby diminishes the party's likelihood of garnering justices' votes. The data concur. Using an automated textual analysis program, we find that parties who employ less emotional language in their briefs are more likely to win a justice's vote, a result that holds even after controlling for other features correlated with success, such as case quality. These findings suggest that advocates seeking to influence judges can enhance their credibility and attract justices' votes by employing measured, objective language.

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If You Judge, Investigate! Responsibility Reduces Confirmatory Information Processing in Legal Experts

Susanne Schmittat & Birte Englich

Psychology, Public Policy, and Law, forthcoming

Abstract:
Fair and well justified judicial decisions require that judges evaluate and interpret all relevant facts. However, heuristics and other shortcuts are used here as well. Additionally, it has been demonstrated that experts may be subject to the same decision biases as laypeople. Therefore, we investigated whether and to what extent judicial experts are protected against confirmatory information processing (CIP), a tendency to seek out (selective exposure) and evaluate information more positively (biased assimilation) when it confirms one's own preliminary decision. Results indicate that legal experts (judges, prosecutors, and defense-lawyers) evaluated information supporting their preliminary decision more positively than conflicting information. However, there is a clear expertise effect: domain-specific experts (e.g., criminal-law experts deciding a criminal-law case) showed less CIP than general experts (legal professionals with specializations in other fields than criminal-law), who did not differ from laypeople (pilot study). We further investigated whether either decision-certainty, knowledge, or a feeling of responsibility can be identified as potential underlying mechanism of this expertise effect. Higher decision-certainty or prior knowledge did not correlate with CIP (pilot study). In our main study, general experts significantly reduced their CIP to the same level as domain-specific experts if we induced responsibility. Without this induction general experts again showed more CIP than domain-specific experts. This implies a motivational explanation for the lower CIP in domain-specific experts. The advantage of specialized judges over general judges will be discussed.

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Predictors of Death Sentencing for Minority, Equal, and Majority Female Juries in Capital Murder Trials

Tara Richards et al.

Women & Criminal Justice, Summer 2016, Pages 260-280

Abstract:
The relatively small body of prior research investigating whether the sex composition of juries impacts sentencing decisions has produced equivocal results. Exploring this topic further, the current study used a large sample of capital cases from North Carolina (n = 675) to examine (a) whether jury sex composition predicted jury capital punishment sentencing decisions; and (b) whether there were different models of sentencing for male-majority, equal male-female, and female-majority juries. When we controlled for a number of legal and extralegal factors, our findings indicated that jury sex composition was independently related to sentencing outcomes. Specifically, equal male-female juries were significantly more likely and female-majority juries were significantly less likely to choose the death penalty versus a sentence of life in prison. In addition, different models (predictors) of sentencing were revealed for each of the jury sex compositions. Implications for future research and policy are discussed.

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Stress, stress-induced cortisol responses, and eyewitness identification performance

Melanie Sauerland et al.

Behavioral Sciences & the Law, July/August 2016, Pages 580-594

Abstract:
In the eyewitness identification literature, stress and arousal at the time of encoding are considered to adversely influence identification performance. This assumption is in contrast with findings from the neurobiology field of learning and memory, showing that stress and stress hormones are critically involved in forming enduring memories. This discrepancy may be related to methodological differences between the two fields of research, such as the tendency for immediate testing or the use of very short (1-2 hours) retention intervals in eyewitness research, while neurobiology studies insert at least 24 hours. Other differences refer to the extent to which stress-responsive systems (i.e., the hypothalamic-pituitary-adrenal axis) are stimulated effectively under laboratory conditions. The aim of the current study was to conduct an experiment that accounts for the contemporary state of knowledge in both fields. In all, 123 participants witnessed a live staged theft while being exposed to a laboratory stressor that reliably elicits autonomic and glucocorticoid stress responses or while performing a control task. Salivary cortisol levels were measured to control for the effectiveness of the stress induction. One week later, participants attempted to identify the thief from target-present and target-absent line-ups. According to regression and receiver operating characteristic analyses, stress did not have robust detrimental effects on identification performance.

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The Role of Courtroom Workgroups in Felony Case Dispositions: An Analysis of Workgroup Familiarity and Similarity

Christi Metcalfe

Law & Society Review, September 2016, Pages 637-673

Abstract:
While pleading guilty has become ubiquitous in criminal trial courts, limited research has focused on the plea process and the factors that influence guilty plea convictions. Numerous theoretical accounts of the plea process highlight the importance of the court actors and their interactions. Based on this research, the current study analyzes the impact of courtroom actor familiarity and similarity on the chosen mode of disposition and the time to disposition. The findings demonstrate that similarity among the actors and familiarity between the prosecutor and judge increase the odds of a plea disposition and reduce the days to disposition. However, familiarity of the defense attorney seems to impede on the informal plea process, such that cases are more likely to proceed to trial when the defense attorney is more familiar with the other actors.

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Complicating Race: Afrocentric Facial Feature Bias and Prison Sentencing in Oregon

Amanda Petersen

Race and Justice, forthcoming

Abstract:
Much research on race and sentencing utilizes broad racial categories to estimate the effect of race on sentencing outcomes; however, more nuanced conceptualizations of race have begun to appear in the literature. Specifically, a small but growing body of literature has assessed the role of discrimination based on Black stereotypicality of facial features, or Afrocentric facial feature bias, on sentencing outcomes for convicted males. By using Department of Corrections data from Black females and males incarcerated in Oregon, paired with experimentally derived facial feature ratings, this study extends past research by conducting both sex and race analyses in a new locale. These analyses are theoretically contextualized in feature-trait stereotyping and the focal concerns perspective - two previously unrelated literatures. The regression of sentence length on Afrocentric facial features, other extralegal factors, and legally relevant factors suggests that Afrocentric facial features do not explain sentence length for females. Afrocentricity predicts sentence length for males in the univariate and extralegal models, but significance is diminished with the inclusion of legally relevant variables. In interactional models, the sentence lengths of Black females and males do not vary in relation to one another either before or after the inclusion of legal factors. These findings are discussed in light of sentencing mechanisms in the state of Oregon, possible stereotype bias at earlier stages in the court process, and the racialized nature of offense histories and seriousness ratings.

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Americans' Knowledge of Their Local Judges

Mark Jonathan McKenzie et al.

Political Behavior, forthcoming

Abstract:
What do Americans know about their local judges and how do they know it? One of the central arguments in the debate over judicial elections is whether voters know enough about judicial candidates to make an informed democratic choice. The vast majority of criminal and civil matters in the U.S. begin with and filter through the local state courts. But judicial scholars know little about what explains the variance in voters' knowledge of their courts and judges. This paper draws on survey data from the 2012 Cooperative Congressional Election Study to investigate the origins of voter knowledge of local judges. A central finding of this study is that rural voters are a lot more knowledgeable about their local judges than are urban voters, ceteris paribus. This finding has significant consequences for the debate over the ways in which states structure their elections for local judges.

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Informal, Inquisitorial, and Accurate: An Empirical Look at a Problem-Solving Housing Court

Jessica Steinberg

Law & Social Inquiry, forthcoming

Abstract:
Substantive justice is often seen as elusive in courts dominated by low-income individuals. Complex court rules, coupled with pervasive lack of counsel, can make it difficult for the traditional adversary process to identify and redress legitimate grievances. This article takes on the social problem of substandard housing and examines whether inquisitorial procedure has the potential to produce accurate outcomes in a tribunal dominated by the unrepresented. Relying on in-court observations of nearly 300 hearings, and a longitudinal review of nearly seventy-five cases, this article surfaces the regularized procedures utilized by a purported "problem-solving" housing court, and theorizes that the inquisitorial features of judicially controlled investigation and enforcement may motivate landlords to repair substantiated housing code violations. This article adds nuance to our understanding of informal justice by identifying the hidden procedural formalisms that may guide alternative decision-making processes. Furthermore, it evaluates the relationship of one iteration of experimental formalism to substantive justice, and suggests that inquisitorial procedures may be correlated with improved accuracy in case outcomes.

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Ecological Contributors to Disparities in Bond Amounts and Pretrial Detention

John Wooldredge, James Frank & Natalie Goulette

Crime & Delinquency, forthcoming

Abstract:
Pretrial dispositions have been receiving greater attention in the literature on extralegal disparities in criminal case processing. We examined the relevance of areas in which crimes are committed for court decisions regarding bond amounts and whether suspects are ultimately detained prior to trial. A random sample of 2,677 persons charged with felony crimes committed in 820 blocks of a major urban U.S. jurisdiction was examined, with separate analyses of property, violent, and drug offenses. Defendants were more likely to be held in jail prior to trial when crimes were committed in more disadvantaged neighborhoods (higher percentages of female-headed households, vacant residences, renters, and African Americans). However, the odds of pretrial detention were also higher for defendants accused of crimes in less disadvantaged neighborhoods relative to their own. Evidence favors neighborhood composition as an important contributor to disparities in pretrial detention beyond individual factors such as a defendant's race.

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Measuring Judicial Ideology Using Clerk Hiring

Adam Bonica et al.

Stanford Working Paper, July 2016

Abstract:
We present a new measure of judicial ideology based on judicial hiring behavior. Specifically, we utilize the ideology of the law clerks hired by federal judges to estimate the ideology of the judges themselves. These Clerk-Based Ideology (CBI) scores complement existing measures of judicial ideology in several ways. First, CBI scores can be estimated for judges across the federal judicial hierarchy. Second, CBI scores can capture temporal changes in ideology. Third, CBI scores avoid case selection and strategic behavior concerns that plague existing vote-based measures. We illustrate the promise of CBI scores through a number of applications.

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Medical Malpractice Litigation and the Market for Plaintiff-Side Representation: Evidence from Illinois

David Hyman et al.

University of Illinois Working Paper, June 2016

Abstract:
How concentrated is the market for medical malpractice ("med mal") legal representation? Do successful plaintiffs' lawyers start off with better cases to begin with, do they add more value to the cases they handle, or both? How do top plaintiffs' lawyers market their services, and where did they go to school? How large are the "wages of risk" -the compensation to plaintiffs' lawyers for working on contingency? How often do plaintiffs proceed pro se, and with what results? We address these questions using a dataset of every insured med mal case closed in Illinois during 2000-2010. We show that most plaintiffs have a lawyer. We quantify the market share, case mix, and amount recovered by the 1,317 law firms that handled med mal cases in our sample, stratify firms into four tiers, and assess differences across tiers. We find that the market for plaintiff-side med mal representation is both un-concentrated and highly stratified. At all firms, a small number of cases account for a heavily disproportionate share of total recoveries. We use the extensive covariates in our data to (imperfectly) address sample selection, and estimate the effect of having a lawyer and of law firm tier on outcomes. Controlling for observable claim characteristics, having a lawyer predicts large increases in the probability of prevailing and expected recovery. Higher-tier firms have only modestly higher success rates, but substantially higher expected recoveries. However, the differences shrink and are statistically insignificant when we compare top tier to second tier firms. This suggests that there are substantial benefits to having a lawyer -- and a higher tier lawyer -- but diminishing marginal returns at the top of the market. Assuming that there is some unobserved case selection, our findings provide a plausible upper bound on the "value-added" by different tiers of plaintiffs' lawyers.

By KEVIN LEWIS | 09:00:00 AM

Thursday, September 1, 2016

Know it all

Predicting Experimental Results: Who Knows What?

Stefano DellaVigna & Devin Pope

NBER Working Paper, August 2016

Abstract:
Academic experts frequently recommend policies and treatments. But how well do they anticipate the impact of different treatments? And how do their predictions compare to the predictions of non-experts? We analyze how 208 experts forecast the results of 15 treatments involving monetary and non-monetary motivators in a real-effort task. We compare these forecasts to those made by PhD students and non-experts: undergraduates, MBAs, and an online sample. We document seven main results. First, the average forecast of experts predicts quite well the experimental results. Second, there is a strong wisdom-of-crowds effect: the average forecast outperforms 96 percent of individual forecasts. Third, correlates of expertise -- citations, academic rank, field, and contextual experience -- do not improve forecasting accuracy. Fourth, experts as a group do better than non-experts, but not if accuracy is defined as rank ordering treatments. Fifth, measures of effort, confidence, and revealed ability are predictive of forecast accuracy to some extent, especially for non-experts. Sixth, using these measures we identify 'superforecasters' among the non-experts who outperform the experts out of sample. Seventh, we document that these results on forecasting accuracy surprise the forecasters themselves. We present a simple model that organizes several of these results and we stress the implications for the collection of forecasts of future experimental results.

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A half-second glimpse often lets radiologists identify breast cancer cases even when viewing the mammogram of the opposite breast

Karla Evans et al.

Proceedings of the National Academy of Sciences, forthcoming

Abstract:
Humans are very adept at extracting the “gist” of a scene in a fraction of a second. We have found that radiologists can discriminate normal from abnormal mammograms at above-chance levels after a half-second viewing (d′ ∼ 1) but are at chance in localizing the abnormality. This pattern of results suggests that they are detecting a global signal of abnormality. What are the stimulus properties that might support this ability? We investigated the nature of the gist signal in four experiments by asking radiologists to make detection and localization responses about briefly presented mammograms in which the spatial frequency, symmetry, and/or size of the images was manipulated. We show that the signal is stronger in the higher spatial frequencies. Performance does not depend on detection of breaks in the normal symmetry of left and right breasts. Moreover, above-chance classification is possible using images from the normal breast of a patient with overt signs of cancer only in the other breast. Some signal is present in the portions of the parenchyma (breast tissue) that do not contain a lesion or that are in the contralateral breast. This signal does not appear to be a simple assessment of breast density but rather the detection of the abnormal gist may be based on a widely distributed image statistic, learned by experts. The finding that a global signal, related to disease, can be detected in parenchyma that does not contain a lesion has implications for improving breast cancer detection.

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Irrelevant Negative Information Enhances Positive Impressions

Meyrav Shoham, Sarit Moldovan & Yael Steinhart

Journal of Consumer Psychology, forthcoming

Abstract:
This research examines the impact of irrelevant information and its valence (positive or negative) on consumers' evaluations, choices, and post-choice satisfaction, within the context of online reviews. We demonstrate that seemingly irrelevant online reviews can enhance positive impressions, but only if they are labeled with a negative valence (e.g., with a one-star rather than a five-star rating). A series of studies provides support for this positive effect of negatively valenced irrelevant information; namely, the inclusion of a negatively valenced irrelevant review alongside positive reviews leads to greater product preferences, as consumers feel confident that the information they have about the product is more complete. We also demonstrate the moderating role of review source.

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The Sting of Social: How Emphasizing Social Consequences in Warning Messages Influences Perceptions of Risk

Mitchel Murdock & Priyali Rajagopal

Journal of Marketing, forthcoming

Abstract:
This research examines the effects of warning messages that emphasize the social consequences of negative health outcomes and demonstrates that when social (versus health) consequences are highlighted it leads to greater perceived temporal proximity of and increased perceived vulnerability to the outcome, thereby affecting risk perceptions, behavioral intentions, and customer perceptions of actual experience. This effect is documented across five studies in different health domains including flossing (study 1), soda consumption (study 2), smoking (study 3), and unprotected UV exposure (study 4, study 5). These findings point to the important role of the consequence type highlighted in warning messages, which can have a significant impact on risk perceptions and consumer experiences.

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Take It or Leave It: How Choosing versus Rejecting Alternatives Affects Information Processing

Tatiana Sokolova & Aradhna Krishna

Journal of Consumer Research, forthcoming

Abstract:
People can make decisions by choosing or by rejecting alternatives. This research shows that changing a task from choice to rejection makes people more likely to rely on deliberative processing, what we label the task-type effect. To demonstrate this effect, we use a set of established decision biases that can be attenuated under deliberative processing. We show that changing a task from choice to rejection makes people express more consistent preferences between safe and risky options in the Asian disease problem (Study 1A) and in financial decision-making (Study 1B), even with real monetary consequences (Study 1C). Further, switching a task from choice to rejection increases the quality of consideration sets in the context of hotel reviews (Study 2), and leads to more rational decisions in the context of cell phone plan selection (Study 3). Studies 4 and 5 tap into the process underlying the effect of task type. We demonstrate that a rejection task produces decisions similar to those observed in a choice task when decision-makers are cognitively depleted (Study 4), or encouraged to rely on their feelings (Study 5). The findings provide insight into the effect of task type on deliberation and decision outcomes.

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Embracing Chance Tactically: A Different Perspective on Risk Taking

Orit Tykocinski, Inbal Amir & Shahar Ayal

Journal of Behavioral Decision Making, forthcoming

Abstract:
Although they value certainty, people are willing to take risks to avoid losses. Consequently, they are risk-seeking in the domain of losses but risk-avoidant in the domain of gains. This behavior, frequently demonstrated in framing experiments, is traditionally explained in terms of prospect theory. We suggest a different account whereby involving chance in one's decisions may serve a strategic impression-formation function. In the domain of losses actors may embrace chance to distance themselves from the outcomes and deflect possible blame. Given potential gains, however, actors may avoid uncertainty to enhance their association with valued outcomes. We test this idea by manipulating the level of actors' personal responsibility for the decision outcomes. The results of four studies consistently showed that when personal responsibility is high, the original framing effect is replicated (i.e., greater risk-taking when choices are framed in terms of losses rather than gains). However, when because of assigned role or decision circumstances, actors experience low personal responsibility for the outcomes, and the classic framing effect is eliminated.

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The sky is falling: Evidence of a negativity bias in the social transmission of information

Keely Bebbington et al.

Evolution and Human Behavior, forthcoming

Abstract:
The method of serial reproduction has revealed that the social transmission of information is characterized by the gradual transformation of the original message. This transformation results from the preferential survival of certain types of information and the resolution of ambiguity. Here we present evidence of a bias favoring the social transmission of negatively-valenced information across multiple transmission episodes. Ninety-two, four-person chains transmitted a story containing unambiguously positive and unambiguously negative story events, along with ambiguous story events that could be interpreted positively or negatively. Analysis using mixed-effects modelling revealed the preferential survival of unambiguously negative events over positive events, and the increasingly negative resolution of ambiguous events across successive transmission episodes. Contrary to predictions, elevated state anxiety did not enhance the social transmission of negatively-valenced information. We also found that the survival of unambiguously negative story events was positively correlated with the negative resolution of ambiguous story events, reflecting a general negativity-bias in the social transmission of information.

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Classified or Coverup? The Effect of Redactions on Conspiracy Theory Beliefs

Brendan Nyhan et al.

Journal of Experimental Political Science, forthcoming

Abstract:
Conspiracy theories are prevalent among the public. Governments frequently release official documents attempting to explain events that inspire these beliefs. However, these documents are often heavily redacted, a practice that lay epistemic theory suggests might be interpreted as evidence for a conspiracy. To investigate this possibility, we tested the effect of redactions on beliefs in a well-known conspiracy theory. Results from two preregistered experiments indicate that conspiracy beliefs were higher when people were exposed to seemingly redacted documents compared to when they were exposed to unredacted documents that were otherwise identical. In addition, unredacted documents consistently lowered conspiracy beliefs relative to controls while redacted documents had reduced or null effects, suggesting that lay epistemic interpretations of the redactions undermined the effect of information in the documents. Our findings, which do not vary by conspiracy predispositions, suggest policymakers should be more transparent when releasing documents to refute misinformation.

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The Pitfall of Experimenting on the Web: How Unattended Selective Attrition Leads to Surprising (Yet False) Research Conclusions

Haotian Zhou & Ayelet Fishbach

Journal of Personality and Social Psychology, forthcoming

Abstract:
The authors find that experimental studies using online samples (e.g., MTurk) often violate the assumption of random assignment, because participant attrition — quitting a study before completing it and getting paid — is not only prevalent, but also varies systemically across experimental conditions. Using standard social psychology paradigms (e.g., ego-depletion, construal level), they observed attrition rates ranging from 30% to 50% (Study 1). The authors show that failing to attend to attrition rates in online panels has grave consequences. By introducing experimental confounds, unattended attrition misled them to draw mind-boggling yet false conclusions: that recalling a few happy events is considerably more effortful than recalling many happy events, and that imagining applying eyeliner leads to weight loss (Study 2). In addition, attrition rate misled them to draw a logical yet false conclusion: that explaining one’s view on gun rights decreases progun sentiment (Study 3). The authors offer a partial remedy (Study 4) and call for minimizing and reporting experimental attrition in studies conducted on the Web.

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Using the Internet to access information inflates future use of the Internet to access other information

Benjamin Storm, Sean Stone & Aaron Benjamin

Memory, forthcoming

Abstract:
The ways in which people learn, remember, and solve problems have all been impacted by the Internet. The present research explored how people become primed to use the Internet as a form of cognitive offloading. In three experiments, we show that using the Internet to retrieve information alters a person’s propensity to use the Internet to retrieve other information. Specifically, participants who used Google to answer an initial set of difficult trivia questions were more likely to decide to use Google when answering a new set of relatively easy trivia questions than were participants who answered the initial questions from memory. These results suggest that relying on the Internet to access information makes one more likely to rely on the Internet to access other information.

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Trading experience modulates anterior insula to reduce the endowment effect

Lester Tong et al.

Proceedings of the National Academy of Sciences, 16 August 2016, Pages 9238–9243

Abstract:
People often demand a greater price when selling goods that they own than they would pay to purchase the same goods—a well-known economic bias called the endowment effect. The endowment effect has been found to be muted among experienced traders, but little is known about how trading experience reduces the endowment effect. We show that when selling, experienced traders exhibit lower right anterior insula activity, but no differences in nucleus accumbens or orbitofrontal activation, compared with inexperienced traders. Furthermore, insula activation mediates the effect of experience on the endowment effect. Similar results are obtained for inexperienced traders who are incentivized to gain trading experience. This finding indicates that frequent trading likely mitigates the endowment effect indirectly by modifying negative affective responses in the context of selling.

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Sleep Increases Susceptibility to the Misinformation Effect

Dustin Calvillo et al.

Applied Cognitive Psychology, forthcoming

Abstract:
When individuals witness an event and are exposed to misleading postevent information, they often incorporate the misleading information into their memory for the original event, a phenomenon known as the misinformation effect. The present study examined the role of sleep in the misinformation effect. Participants (N = 177) witnessed two events; were exposed to misleading postevent information immediately, 12 hours later the same day, 12 hours later the next day, or 24 hours later; and then took a recognition test. All groups demonstrated the misinformation effect, and this effect was larger in groups with an overnight retention interval. Signal detection analyses revealed that sleep decreased sensitivity. These results suggest that sleep increases susceptibility to the misinformation effect, which may occur because sleep results in gist-based representations of original events or because sleep improves learning of postevent information. Implications for interviewing eyewitnesses are discussed.

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Embracing the Unusual: Feeling Tired and Happy is Associated With Greater Acceptance of Atypical Ideas

Brianna Middlewood, Jonathan Gallegos & Karen Gasper

Creativity Research Journal, Summer 2016, Pages 310-317

Abstract:
Three studies examined the hypothesis that feeling tired along with feeling happy might be linked to the acceptance of atypical ideas. Consistent with this hypothesis, across 3 studies and using 2 different measures of accepting atypical ideas, feelings of happiness and tiredness interacted. When people were high in tiredness, as happiness increased, so too did acceptance of atypical ideas (choosing more unusual exemplars and suggesting more unusual solutions to the gestalt completion test). When people were low in tiredness, happiness had no effect on acceptance of atypical ideas. The studies also examined whether differences in sensation-seeking (Studies 1 & 2) and acquiescence (Study 3) mediated the effect, but neither consistently did so. This work suggests that the combination of feeling tired and happy may enhance acceptance of atypical or unusual ideas, which could potentially help creative thought.

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The strength to face the facts: Self-regulation defends against defensive information processing

Rachel Ruttan & Loran Nordgren

Organizational Behavior and Human Decision Processes, November 2016, Pages 86–98

Abstract:
Five studies examined the impact of self-regulatory capacities on defensive information processing — the tendency to deny, distort, or avoid diagnostic self-threatening information. Across domains, we found that people low in trait (Studies 1 and 5) and state (Studies 2, 3, and 4) self-regulatory capacities were more likely to deny the validity and importance of negative feedback, and were less willing to seek improvement based on this information. Alternative explanations based on self-esteem and competence-based deficits were ruled out. Moreover, we demonstrated a boundary condition of this effect: For participants high in self-improvement motivation, reduced self-regulatory capacities did not affect defensive processing (Studies 4 and 5). Taken together, these results suggest that trait and state levels of self-regulatory capacities are a key factor in determining whether people engage in defensive information processing.

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Dissociating Divergent Thinking and Creative Achievement by Examining Attentional Flexibility and Hypomania

Jennifer Siegel & Julie Bugg

Psychology of Aesthetics, Creativity, and the Arts, forthcoming

Abstract:
Creativity is predominantly measured in scientific research with divergent thinking tasks that assess the potential for creative ideation. The current study aimed to further foster a distinction between divergent thinking and a second measure of creativity, creative achievement (the production of tangible or visible pieces), by examining whether these 2 measures are differentially related to attentional flexibility and hypomania. Evidence was found linking divergent thinking to better attentional flexibility and creative achievement to poorer attentional flexibility in a novel variant of the Stroop task. Additionally, creative achievement, especially nonscience-related (e.g., artistic) achievement, was positively associated with risk for hypomania whereas divergent thinking was not related to hypomania. The findings support a distinction between measures of creativity (divergent thinking ability vs. creative achievement), which may have clinical implications (e.g., for bipolar disorder) and theoretical implications for the study of attentional flexibility and rigidity.

By KEVIN LEWIS | 09:00:00 AM

Wednesday, August 31, 2016

Out of balance

The Lifecycle of the 47%

Don Fullerton & Nirupama Rao

NBER Working Paper, August 2016

Abstract:
We assess the concentration and duration of zero tax liabilities and of transfer receipts, using data for households with ten to forty years of observations from the Panel Survey of Income Dynamics. We find that neither is strongly concentrated. Nearly 68% owe no federal tax in at least one year, approximately 78% receive some type of transfer in at least one year, and more than 58% receive transfers other than Social Security in at least one year. Of those who do not owe federal tax in any given year, 18% pay tax the following year, and 39% contribute within five years. Of those who receive transfers other than Social Security within a given year, nearly 44% stop receiving such transfers the next year, and more than 90% stop within ten years.

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The fiscal externality of multifamily housing and its impact on the property tax: Evidence from cities and schools, 1980–2010

Ryan Gallagher

Regional Science and Urban Economics, September 2016, Pages 249–259

Abstract:
Negative fiscal externalities produced by apartments and other small housing units are commonly cited as the justification for many local land-use restrictions, such as minimum lot requirements and limits on multifamily developments. Because these laws effectively limit the number of small dwellings that can be built within a community, proponents argue that restrictions of this type help to guarantee that new homes will “pay for themselves” by discouraging free-riding behavior within a system of local governments. Critics, however, have maintained that such policies constitute a veiled attempt by suburban communities at restricting entry for low-income families. Focusing on the clear distinction between housing units located in multifamily structures (i.e., apartments) and single-family homes, this paper finds strong evidence that residential per-capita values, measured as value per person and value per child, are actually higher for apartments, not single-family residences. Consequently, communities' effective property tax rates decline as apartments' share of the housing stock rises, holding all else equal. These findings are contrary to the set of assumptions that are often used to justify many of today's land-use restrictions and raise serious questions regarding the efficacy of modern fiscal zoning as a tool for promoting efficient fiscal federalism.

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Estimating Local Fiscal Multipliers

Juan Carlos Suárez Serrato & Philippe Wingender

NBER Working Paper, July 2016

Abstract:
We propose a new source of cross-sectional variation that may identify causal impacts of government spending on the economy. We use the fact that a large number of federal spending programs depend on local population levels. Every ten years, the Census provides a count of local populations. Since a different method is used to estimate non-Census year populations, this change in methodology leads to variation in the allocation of billions of dollars in federal spending. Our baseline results follow a treatment-effects framework where we estimate the effect of a Census Shock on federal spending, income, and employment growth by re-weighting the data based on an estimated propensity score that depends on lagged economic outcomes and observed economic shocks. Our estimates imply a local income multiplier of government spending between 1.7 and 2, and a cost per job of $30,000 per year. A complementary IV estimation strategy yields similar estimates. We also explore the potential for spillover effects across neighboring counties but we do not find evidence of sizable spillovers. Finally, we test for heterogeneous effects of government spending and find that federal spending has larger impacts in low-growth areas.

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State and Local Fiscal Policy and Growth at the Border

Sam Peltzman

Journal of Urban Economics, September 2016, Pages 1–15

Abstract:
The paper studies the connection between state and local fiscal policy, as measured by the share of government spending and revenues in personal income, and the economic activity of counties that share a state border. I construct a panel of pairs of US counties that share a state border from the 1970s to 2012. Economic activity is measured by county employment, wages and business establishments. The state and local government spending and revenue shares are aggregates for the states on the respective sides of the border. I estimate distributed lag regressions of changes in economic activity on changes in state and local government budgets in two ways. The first (double difference) utilizes change in the difference between border counties. This suggests a quite modest relocation of economic activity away from states with fiscal expansion. I then look at activity on each side of the border separately and find more substantial and consistently negative effects of fiscal expansion on both sides of the border. A border county shares the negative consequences for its neighbor of growth in the size of that neighbor's state and local governments. This negative fiscal externality is roughly half the size of the direct negative effects from similar own-state spending increases, and the sum of the two is substantial economically.

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Labour Costs and the Size of Government

François Facchini, Mickael Melki & Andrew Pickering

Oxford Bulletin of Economics and Statistics, forthcoming

Abstract:
Given inelastic demand for labour-intensive public services, the size of government depends positively on labour costs. OECD data exhibit a strong statistical association between government size and the business-sector labour share of income. When the labour share is instrumented with measures of technological change, institutional variation and predetermined data it continues to positively impact government size. In contrast, transfer spending is unaffected by the labour share. The evidence is consistent with the idea that the recent decline in the labour share has contributed to the slowdown in the growth of government witnessed in much of the post-war era.

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Attention Variation and Welfare: Theory and Evidence from a Tax Salience Experiment

Dmitry Taubinsky & Alex Rees-Jones

NBER Working Paper, August 2016

Abstract:
This paper shows that accounting for variation in mistakes can be crucial for welfare analysis. Focusing on consumer underreaction to not-fully-salient sales taxes, we show theoretically that the efficiency costs of taxation are amplified by 1) individual differences in underreaction and 2) the degree to which attention is increasing with the size of the tax rate. To empirically assess the importance of these issues, we implement an online shopping experiment in which 2,998 consumers -- matching the U.S. adult population on key demographics -- purchase common household products, facing tax rates that vary in size and salience. We find that: 1) there are significant individual differences in underreaction to taxes. Accounting for this heterogeneity increases the efficiency cost of taxation estimates by at least 200%, as compared to estimates generated from a representative agent model. 2) Tripling existing sales tax rates roughly doubles consumers' attention to taxes. Our results provide new insights into the mechanisms and determinants of boundedly rational processing of not-fully-salient incentives, and our general approach provides a framework for robust behavioral welfare analysis.

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Fiscal Stimulus and Consumer Debt

Yuliya Demyanyk, Elena Loutskina & Daniel Patrick Murphy

Federal Reserve Working Paper, August 2016

Abstract:
In the aftermath of the consumer debt–induced recession, policymakers have questioned whether fiscal stimulus is effective during the periods of high consumer indebtedness. This study empirically investigates this question. Using detailed data on Department of Defense spending for the 2006–2009 period, we document that the open-economy relative fiscal multiplier is higher in geographies with higher consumer indebtedness. The results suggest that fiscal policy can mitigate the adverse effect of consumer (over)leverage on real economic output during a recession. We then exploit detailed microdata to evaluate aggregate demand and aggregate supply-side economic mechanisms potentially underlying this result.

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The Impact of Tax and Expenditure Limits on Municipal Credit Ratings

Craig Maher et al.

American Review of Public Administration, September 2016, Pages 592-613

Abstract:
The research focuses on the impact of the restrictiveness of tax and expenditure limitations (TELs) on the credit ratings of 566 U.S. municipalities over the 2007-2010 time period. The credit ratings used are by Moody’s rating agency, and municipal fiscal data are drawn from the Government Financial Officers Association’s (GFOA) Certificate of Achievement for Excellence in Financial Reporting program. Results suggest that more restrictive TELs imposed on municipalities by the states have a weak negative impact on credit ratings which will likely force municipalities to face higher interest costs.

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The Determinants of the Severity of State Fiscal Crises

David Mitchell & Dean Stansel

Public Budgeting & Finance, forthcoming

Abstract:
During the most recent recession, many state governments faced substantial budget shortfalls. Those shortfalls are often blamed on external factors like the declining economy or reductions in federal aid. What politicians themselves do, especially during expansionary years — whether they enact spending increases, implement tax cuts, increase the size of their rainy day funds, or some combination thereof — is typically given less attention. We examine those factors and find that fiscal stress tends to be positively associated with spending growth, negatively associated with the size of rainy day funds, and not statistically significantly associated with the unemployment rate or federal aid.

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Can Paying Firms Quicker Affect Aggregate Employment?

Jean-Noel Barrot & Ramana Nanda

NBER Working Paper, July 2016

Abstract:
In 2011, the federal government accelerated payments to their small business contractors, spanning virtually every county and industry in the US. We study the impact of this reform on county-sector employment growth over the subsequent three years. Despite firms being paid just 15 days sooner, we find payroll increased 10 cents for each accelerated dollar, with two-thirds of the effect coming from an increase in new hires and the balance from an increase in earnings. Importantly, however, we document substantial crowding out of non-treated firms employment, particularly in counties with low rates of unemployment. Our results highlight an important channel through which financing constraints can be alleviated for small firms, but also emphasize the general-equilibrium effects of large-scale interventions, which can lead to a substantially lower net impact on aggregate outcomes.

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Jobless capital? The role of capital subsidies

Carlianne Patrick

Regional Science and Urban Economics, September 2016, Pages 169–179

Abstract:
Using tax abatements, financial incentives, and public investments to attract (or retain) firms is the primary economic development tool for many local governments. Often local job creation policies focus on increasing capital through grants, low-interest financing, and other economic development incentives. Theory predicts that capital subsidies induce firm behaviors that limit their job creation effects. This paper employs the Incentives Environment Index, constructed from state constitutional provisions that limit and structure the ability of state and local governmental entities to aid private enterprises, and county panels to test theoretical predictions on county capital expenditure and input mixes as well as industry establishment shares. The results indicate the act of increasing capital subsidy tools is associated with capital-labor substitution, decreased employment density, and changes in local industry mix. Results are robust to alternative empirical specifications and measures of capital subsidy availability.

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Public-sector Unions and Government Policy: Reexamining the Effects of Political Contributions and Collective Bargaining Rights

George Crowley & Scott Beaulier

Public Finance Review, forthcoming

Abstract:
Recent events, including the failed recall of Wisconsin Governor Scott Walker and the Chicago teachers strike, have shed light on the relationship between state fiscal policy and public-sector union power. While a literature has developed focusing on various aspects of the link between public-sector unions and government policy, scholars have yet to reach consensus. In most cases, public-sector unions have multiple tools they can use to influence policy. We find that union political contributions and collective bargaining are associated with higher incomes for state and local employees and with higher public employment, both across state and local governments overall as well as within the education sector. We also find relatively little evidence that union activity influences total spending.

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The Responsiveness of Casino Revenue to the Casino Tax Rate

Kathryn Combs et al.

Public Budgeting & Finance, forthcoming

Abstract:
This paper examines the tax base elasticity of the regulated casino industry in Illinois to help estimate state-level revenue impacts of casino tax rate changes. Illinois’ shift to a graduated rate schedule increased the highest marginal tax rate on casino adjusted gross receipts (AGR) from 20 percent to 70 percent before reverting to a 50 percent rate. We construct a state-level casino tax rate variable, which is a statewide average for each month of the marginal casino tax rate facing each casino. We find that a 1 percent increase in this state-level casino tax rate decreases overall Illinois casino AGR by around 1.1 percent.

By KEVIN LEWIS | 09:00:00 AM

Tuesday, August 30, 2016

Where you come from

Long-Term Orientation and Educational Performance

David Figlio et al.

NBER Working Paper, August 2016

Abstract:
We use remarkable population-level administrative education and birth records from Florida to study the role of Long-Term Orientation on the educational attainment of immigrant students living in the US. Controlling for the quality of schools and individual characteristics, students from countries with long term oriented attitudes perform better than students from cultures that do not emphasize the importance of delayed gratification. These students perform better in third grade reading and math tests, have larger test score gains over time, have fewer absences and disciplinary incidents, are less likely to repeat grades, and are more likely to graduate from high school in four years. Also, they are more likely to enroll in advanced high school courses, especially in scientific subjects. Parents from long term oriented cultures are more likely to secure better educational opportunities for their children. A larger fraction of immigrants speaking the same language in the school amplifies the effect of Long-Term Orientation on educational performance. We validate these results using a sample of immigrant students living in 37 different countries.

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Arab Responses to Western Hegemony: Experimental Evidence from Egypt

Elizabeth Nugent, Tarek Masoud & Amaney Jamal

Journal of Conflict Resolution, forthcoming

Abstract:
Scholars have long held that Islamism — defined as a political ideology that demands the application of Islamic holy law and the deepening of religious identity — is in part a response to Western domination of Muslim lands. Drawing on the literatures on nationalism and international relations theory, we argue that Islamism is one of a menu of options that Muslims may adopt in response to Western hegemony — a menu that includes Arab nationalism and pro-Western accommodation. We hypothesize that a Muslim’s ideological response to Western domination is a function of the type of domination experienced — that is, military, cultural, or economic — as well as of individual-level characteristics such as intensity of religious practice. We test this hypothesis with a nationally representative survey experiment conducted in Egypt. We find that, among subjects in our study, pro-Western responses to Western domination were more common than “Islamist” or “nationalist” ones and that these were particularly driven by reminders of the West’s economic ascendancy. These findings suggest that foreign domination does not always yield defensive responses and often produces desires for greater cooperation with the hegemon.

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Indifference to dissonance in native Amazonians reveals cultural variation in music perception

Josh McDermott et al.

Nature, 28 July 2016, Pages 547–550

Abstract:
Music is present in every culture, but the degree to which it is shaped by biology remains debated. One widely discussed phenomenon is that some combinations of notes are perceived by Westerners as pleasant, or consonant, whereas others are perceived as unpleasant, or dissonant. The contrast between consonance and dissonance is central to Western music, and its origins have fascinated scholars since the ancient Greeks. Aesthetic responses to consonance are commonly assumed by scientists to have biological roots, and thus to be universally present in humans. Ethnomusicologists and composers, in contrast, have argued that consonance is a creation of Western musical culture. The issue has remained unresolved, partly because little is known about the extent of cross-cultural variation in consonance preferences. Here we report experiments with the Tsimane’ — a native Amazonian society with minimal exposure to Western culture — and comparison populations in Bolivia and the United States that varied in exposure to Western music. Participants rated the pleasantness of sounds. Despite exhibiting Western-like discrimination abilities and Western-like aesthetic responses to familiar sounds and acoustic roughness, the Tsimane’ rated consonant and dissonant chords and vocal harmonies as equally pleasant. By contrast, Bolivian city- and town-dwellers exhibited significant preferences for consonance, albeit to a lesser degree than US residents. The results indicate that consonance preferences can be absent in cultures sufficiently isolated from Western music, and are thus unlikely to reflect innate biases or exposure to harmonic natural sounds. The observed variation in preferences is presumably determined by exposure to musical harmony, suggesting that culture has a dominant role in shaping aesthetic responses to music.

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Individual Responsibility and Economic Development: Evidence from Rainfall Data

Lewis Davis

Kyklos, August 2016, Pages 426–470

Abstract:
This paper estimates the effect of individual responsibility on economic development using an instrument derived from rainfall data. I argue that a taste for collective responsibility was adaptive in preindustrial societies that were exposed to high levels of agricultural risk, and that these attitudes continue to influence contemporary social norms and economic outcomes. The link between agricultural risk and collective responsibility is formalized in a model of optimal parental socialization effort. Empirically, I find a robust negative correlation between rainfall variation, a measure of exogenous agricultural risk, and a measure of individual responsibility. Using rainfall variation as an instrument, I find that individual responsibility has a large positive effect on economic development. The relationships between rainfall variation, individual responsibility and economic development are robust to the inclusion of variables related to climate and agricultural and institutional development.

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Culture and Healthy Eating: The Role of Independence and Interdependence in the United States and Japan

Cynthia Levine et al.

Personality and Social Psychology Bulletin, forthcoming

Abstract:
Healthy eating is important for physical health. Using large probability samples of middle-aged adults in the United States and Japan, we show that fitting with the culturally normative way of being predicts healthy eating. In the United States, a culture that prioritizes and emphasizes independence, being independent predicts eating a healthy diet (an index of fish, protein, fruit, vegetables, reverse-coded sugared beverages, and reverse-coded high fat meat consumption; Study 1) and not using nonmeat food as a way to cope with stress (Study 2a). In Japan, a culture that prioritizes and emphasizes interdependence, being interdependent predicts eating a healthy diet (Studies 1 and 2b). Furthermore, reflecting the types of agency that are prevalent in each context, these relationships are mediated by autonomy in the United States and positive relations with others in Japan. These findings highlight the importance of understanding cultural differences in shaping healthy behavior and have implications for designing health-promoting interventions.

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Gender preference and age at arrival among Asian immigrant mothers in the US

Ben Ost & Eva Dziadula

Economics Letters, August 2016, Pages 286–290

Abstract:
We examine gender preference assimilation by comparing fertility patterns of Asian immigrants according to their age of arrival. Past work has shown that U.S. natives appear to value mixed sex composition whereas families in many Asian countries exhibit a strong son preference. We find that Asian immigrants who arrive to the US late in life show evidence of son preference since they are much more likely to have additional children if their first two children are girls. Asian immigrants who arrive early in life, however, exhibit a fertility pattern quite close to that of U.S. natives. Our results are suggestive of complete assimilation of gender preferences for immigrants who arrive as children, and very little gender preference assimilation for immigrants who arrive at later ages.

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Cooperation, Decision Time, and Culture: Online Experiments with American and Indian Participants

Akihiro Nishi, Nicholas Christakis & David Rand

Yale Working Paper, June 2016

Abstract:
Two separate bodies of work have examined whether culture affects cooperation in economic games and whether cooperative or non-cooperative decisions occur more quickly. Here, we connect this work by exploring the relationship between decision time and cooperation in American versus Indian subjects. We use a series of dynamic social network experiments in which subjects play a repeated public goods game: 80 sessions for a total of 1,462 subjects (1,059 from the United States, 337 from India, and 66 from other countries) making 13,560 decisions. In the first round, where subjects do not know if connecting neighbors are cooperative, American subjects are highly cooperative and decide faster when cooperating than when defecting, whereas a majority of Indian subjects defect and Indians decide faster when defecting than when cooperating. The same is true in later rounds where neighbors were previously cooperative (a cooperative environment) although the Indian decision time difference does not reach significance. Conversely, when connecting neighbors were previously not cooperative (a non-cooperative environment), a large majority of both American and Indian subjects defect, and defection is faster than cooperation among both sets of subjects. Our results imply the cultural background of subjects in their real life affects the speed of cooperation decision-making differentially in online social environments. 

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Do Institutions Affect Social Preferences? Evidence from Divided Korea

Byung-Yeon Kim et al.

Journal of Comparative Economics, forthcoming

Abstract:
The division of Korea is a historic social experiment that randomly assigned ex ante identical individuals into two different economic and political institutions. About 70 years after the division, we sample Koreans who were born and raised in the two different parts of Korea to study whether institutions affect social preferences. We find that those from North Korea behave in a less self-interested manner and support the market economy and democracy less than those from South Korea. A follow-up study shows that social preferences did not change considerably in two years. We check robustness against sample selection and potential confounding factors such as income differences. Our findings indicate that preferences are rooted in institutions.

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The relationship between momentary emotions and well-being across European Americans, Hispanic Americans, and Asian Americans

Eunsoo Choi & Yulia Chentsova-Dutton

Cognition and Emotion, forthcoming

Abstract:
Cultural differences in the emphasis on positive and negative emotions suggest that the impact of these emotions on well-being may differ across cultural contexts. The present study utilised a momentary sampling method to capture average momentary emotional experiences. We found that for participants from cultural contexts that foster positive emotions (European Americans and Hispanic Americans), average momentary positive emotions predicted well-being better than average momentary negative emotions. In contrast, average momentary negative emotions were more strongly associated with well-being measures for Asian Americans, the group from a cultural context that emphasises monitoring of negative emotions. Furthermore, we found that acculturation to American culture moderated the association between average momentary positive emotions and well-being for Asian Americans. These findings suggest the importance of culture in studying the impact of daily emotional experiences on well-being.

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Give me liberty and give me control: Economic freedom, control perceptions and the paradox of choice

Boris Nikolaev & Daniel Bennett

European Journal of Political Economy, forthcoming

Abstract:
We explore the relationship between individual control perceptions and the degree to which a country's institutions and policies are consistent with the principles of economic freedom. Using data from the World Values Surveys (WVS) and the Economic Freedom of the World (EFW) index, we find that people living in more economically free countries are more likely to perceive greater control over their lives. This effect is not diminishing at higher levels of economic freedom. One possible channel that explains this relationship is the perception of procedural fairness and social mobility. Decomposing the EFW index, we further find that the area of sound money is what drives the results.

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Exploring the Motivations for Punishment: Framing and Country-Level Effects

Jonathan Bone, Katherine McAuliffe & Nichola Raihani

PLoS ONE, August 2016

Abstract:
Identifying the motives underpinning punishment is crucial for understanding its evolved function. In principle, punishment of distributional inequality could be motivated by the desire to reciprocate losses ('revenge') or by the desire to reduce payoff asymmetries between the punisher and the target ('inequality aversion'). By separating these two possible motivations, recent work suggests that punishment is more likely to be motivated by disadvantageous inequality aversion than by a desire for revenge. Nevertheless, these findings have not consistently replicated across different studies. Here, we suggest that considering country of origin — previously overlooked as a possible source of variation in responses — is important for understanding when and why individuals punish one another. We conducted a two-player stealing game with punishment, using data from 2,400 subjects recruited from the USA and India. US-based subjects punished in response to losses and disadvantageous inequality, but seldom invested in antisocial punishment (defined here as punishment of non-stealing partners). India-based subjects, on the other hand, punished at higher levels than US-based subjects and, so long as they did not experience disadvantageous inequality, punished stealing and non-stealing partners indiscriminately. Nevertheless, as in the USA, when stealing resulted in disadvantageous inequality, India-based subjects punished stealing partners more than non-stealing partners. These results are consistent with the hypothesis that variation in punitive behavior varies across societies, and support the idea that punishment might sometimes function to improve relative status, rather than to enforce cooperation.

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Watching Subtitled Films Can Help Learning Foreign Languages

J. Birulés-Muntané & S. Soto-Faraco

PLoS ONE, June 2016

Abstract:
Watching English-spoken films with subtitles is becoming increasingly popular throughout the world. One reason for this trend is the assumption that perceptual learning of the sounds of a foreign language, English, will improve perception skills in non-English speakers. Yet, solid proof for this is scarce. In order to test the potential learning effects derived from watching subtitled media, a group of intermediate Spanish students of English as a foreign language watched a 1h-long episode of a TV drama in its original English version, with English, Spanish or no subtitles overlaid. Before and after the viewing, participants took a listening and vocabulary test to evaluate their speech perception and vocabulary acquisition in English, plus a final plot comprehension test. The results of the listening skills tests revealed that after watching the English subtitled version, participants improved these skills significantly more than after watching the Spanish subtitled or no-subtitles versions. The vocabulary test showed no reliable differences between subtitled conditions. Finally, as one could expect, plot comprehension was best under native, Spanish subtitles. These learning effects with just 1 hour exposure might have major implications with longer exposure times.

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I Am Dumber When I Look Dumb in Front of Many (vs. Few) Others: A Cross-Cultural Difference in How Audience Size Affects Perceived Social Reputation and Self-Judgments

Minjae Seo et al.

Journal of Cross-Cultural Psychology, September 2016, Pages 1019-1032

Abstract:
People from all cultures are averse to looking dumb in front of others, especially if there is a large audience. However, there could be a difference between Face and Dignity cultures in the extent to which their members see themselves as dumb when they perform poorly before a large versus small audience. In the present study, Chinese and Americans were asked to imagine themselves performing poorly on tasks either in front of 10 others or one other and make judgments about how poorly (a) they thought and (b) others would think they performed on the tasks. Chinese were found to judge their performance more negatively in the large (vs. small) audience, but Americans were not. Audience size effect on self-judgments was mediated by how the Chinese perceived others to judge their performance in the large (vs. small) audience. Findings are discussed in the context of the logic of Face and Dignity cultures.

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Why household inefficiency? An experimental approach to assess spousal resource distribution preferences in a subsistence population undergoing socioeconomic change

Jonathan Stieglitz et al.

Evolution and Human Behavior, forthcoming

Abstract:
Two disparate views of the sexual division of labour have dominated the representation of intra-household resource allocations. These joint and separate interests views differ in their interpretation of the relative roles of men and women, and make different predictions about the extent to which marriage promotes economic efficiency (i.e. maximized household production). Using an experimental “distribution task” stipulating a trade-off between household efficiency and spousal equality in allocating surpluses of meat and money, we examine factors influencing spousal distribution preferences among Tsimane forager-horticulturalists of Bolivia (n = 53 couples). Our primary goal is to understand whether and how access to perfectly fungible and liquid resources – which increases with greater participation in market economies – shifts intra-household distribution preferences. We hypothesize that greater fungibility of money compared to meat results in greater squandering of money for individual fitness gain at a cost to the family. Money therefore requires costly strategies to insure against a partner's claims for consumption. Whereas nearly all Tsimane spouses prefer efficient meat distributions, we find a substantially reduced efficiency preference for money compared to meat controlling for potential confounders (adjusted OR = 0.087, 95% CI: 0.02–0.38). Reported marital conflict over paternal disinvestment is associated with a nearly 13-fold increase in odds of revealing a selfish money distribution preference. Selfish husbands are significantly more likely than other husbands to be paired with selfish wives. Lastly, Tsimane husbands and wives are more likely than Western Europeans to prefer an efficient money distribution, but Tsimane wives are more likely than Western European wives to exhibit a selfish preference. In sum, preferences for the distribution of household production surplus support joint and separate interests views of marriage; a hybrid approach best explains how ecological-, family-, and individual-level factors influence spousal preferences through their effects on perceptions of marginal gains within and outside the household.

By KEVIN LEWIS | 09:00:00 AM

Monday, August 29, 2016

Pro tip

Can information be locked up? Informed trading ahead of macro-news announcements

Gennaro Bernile, Jianfeng Hu & Yuehua Tang

Journal of Financial Economics, September 2016, Pages 496-520

Abstract:
Government agencies routinely allow pre-release access to information to accredited news agencies under embargo agreements. Using high-frequency data, we find evidence consistent with informed trading during embargoes of Federal Open Market Committee (FOMC) scheduled announcements. The E-mini Standard & Poor's 500 futures' abnormal order imbalances are in the direction of subsequent policy surprises and contain information that predicts the market reaction to the policy announcements. The estimated informed trades' profits are arguably large. Notably, we find no evidence of informed trading prior to the start of FOMC news embargoes or during lockups ahead of nonfarm payroll, US Producer Price Index, and gross domestic product data releases.

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Family Descent as a Signal of Managerial Quality: Evidence from Mutual Funds

Oleg Chuprinin & Denis Sosyura

NBER Working Paper, August 2016

Abstract:
We study the relation between mutual fund managers' family backgrounds and their professional performance. Using hand-collected data from individual Census records on the wealth and income of managers' parents, we find that managers from poor families deliver higher alphas than managers from rich families. This result is robust to alternative measures of fund performance, such as benchmark-adjusted return and value extracted from capital markets. We argue that managers born poor face higher entry barriers into asset management, and only the most skilled succeed. Consistent with this view, managers born rich are more likely to be promoted, while those born poor are promoted only if they outperform. Overall, we establish the first link between family descent of investment professionals and their ability to create value.

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Low Interest Rates and Risk Taking: Evidence from Individual Investment Decisions

Chen Lian, Yueran Ma & Carmen Wang

Harvard Working Paper, June 2016

Abstract:
In recent years, many central banks have set benchmark interest rates to historic lows. In this paper, we provide evidence that individual investors "reach for yield", that is, have a greater appetite for risk taking in such low interest rate environment. We first document this phenomenon in a simple investment experiment, where investment risks and risk premia are held constant. We find significantly higher allocations to risky assets in the low rate condition, among MTurks as well as HBS MBAs. This reaching for yield behavior is unrelated to institutional frictions, and cannot be easily explained by conventional portfolio choice theory. We then propose and provide evidence for two sets of explanations related to people's preferences and psychology. We also present complementary evidence using historical data on individual investors' portfolio allocations and household investment flows.

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Political Sentiment and Predictable Returns

Jawad Addoum & Alok Kumar

Review of Financial Studies, forthcoming

Abstract:
This study shows that shifts in political climate influence stock prices. As the party in power changes, there are systematic changes in the industry-level composition of investor portfolios, which weaken arbitrage forces and generate predictable patterns in industry returns. A trading strategy that attempts to exploit demand-based return predictability generates an annualized risk-adjusted performance of 6% during the 1939 to 2011 period. This evidence of predictability spans 17%-27% of the market and is stronger during periods of political transition. Our demand-based predictability pattern is distinct from cash flow-based predictability identified in the recent literature.

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The Societal Benefit of a Financial Transaction Tax

Aleksander Berentsen, Samuel Huber & Alessandro Marchesiani

European Economic Review, October 2016, Pages 303-323

Abstract:
We provide a novel justification for a financial transaction tax for economies where agents face stochastic consumption opportunities. A financial transaction tax makes it more costly for agents to readjust their portfolios of liquid and illiquid assets in response to liquidity shocks, which increase both the demand for and the price of liquid assets. The higher price improves liquidity insurance and welfare for other market participants. We calibrate the model to U.S. data and find that the optimal financial transaction tax is 1.6 percent and that it reduces the volume of financial trading by 17 percent.

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How Rigged Are Stock Markets?: Evidence From Microsecond Timestamps

Robert Bartlett & Justin McCrary

NBER Working Paper, August 2016

Abstract:
We use new timestamp data from the two Securities Information Processors (SIPs) to examine SIP reporting latencies for quote and trade reports. Reporting latencies average 1.13 milliseconds for quotes and 22.84 milliseconds for trades. Despite these latencies, liquidity-taking orders gain on average $0.0002 per share when priced at the SIP-reported national best bid or offer (NBBO) rather than the NBBO calculated using exchanges' direct data feeds. Trading surrounding SIP-priced trades shows little evidence that fast traders initiate these liquidity-taking orders to pick-off stale quotes. These findings contradict claims that fast traders systematically exploit traders who transact at the SIP NBBO.

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Public reaction to stock market volatility: Evidence from the ATUS

Patrick Payne, Christopher Browning & Charlene Kalenkoski

Applied Economics Letters, Fall 2016, Pages 1197-1200

Abstract:
How does the public react to changes in the stock market? We know from the existing body of research that sentiment can predict future stock-market movements. However, do market movements affect sentiment? This article addresses these questions by testing whether market movements precede changes in the emotional well-being of the general public. Using Granger causality analysis, we compare how market movements affect public well-being during periods of increased (2010) and decreased (2012) volatility. The results show that 30-day-lagged returns are associated positively and significantly with the public's emotional well-being, and that this effect is stronger during periods of increased volatility. The results also show that this effect may persist for up to 120 days.

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The Price of Street Friends: Social Networks, Informed Trading, and Shareholder Costs

Jie Cai, Ralph Walkling & Ke Yang

Journal of Financial and Quantitative Analysis, June 2016, Pages 801-837

Abstract:
Recent studies suggest the transfer of privileged information via social ties but do not explicitly examine the cost of these ties to shareholders. We document a significant positive relation between stock transaction costs and a company's social ties to the investment community. Social ties based on education and leisure activities, stronger ties, and ties to individuals responsible for trading have greater effects. Using investment connection deaths as natural experiments, we document that exogenous severance of ties reduces trading costs and trading activities by connected parties. Our evidence illustrates an important and previously undocumented consequence of social ties.

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Measuring Institutional Investors' Skill from Their Investments in Private Equity

Daniel Cavagnaro et al.

NBER Working Paper, August 2016

Abstract:
Using a large sample of institutional investors' private equity investments in venture and buyout funds, we estimate the extent to which investors' skill affects returns from private equity investments. We first consider whether investors have differential skill by comparing the distribution of investors' returns relative to the bootstrapped distribution that would occur if funds were randomly distributed across investors. We find that the variance of actual performance is higher than the bootstrapped distribution, suggesting that higher and lower skilled investors consistently outperform and underperform. We then use a Bayesian approach developed by Korteweg and Sorensen (2015) to estimate the incremental effect of skill on performance. The results imply that a one standard deviation increase in skill leads to about a three percentage point increase in returns, suggesting that variation in institutional investors' skill is an important driver of their returns.

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Property crime, earnings variability, and the cost of capital

James Brushwood et al.

Journal of Corporate Finance, October 2016, Pages 142-173

Abstract:
We show that firms located in states where property crime is more prevalent have more uncertain earnings and higher financing costs. Specifically, firms located in states with higher property crime rates have more volatile and less persistent earnings as well as lower quality analysts' earnings forecasts. Firms located in states with higher property crime rates also have a higher cost of equity and debt capital. These results are robust to accounting for econometric and endogeneity concerns in various ways. Overall, our results suggest that a potentially large and overlooked cost of crime is a higher cost of capital.

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What's a name worth? The impact of a likeable stock ticker symbol on firm value

Xuejing Xing, Randy Anderson & Yan Hu

Journal of Financial Markets, forthcoming

Abstract:
We investigate the impact of the likeability and pronounceability of stock ticker symbols on firm value. Using a unique, comprehensive dataset with hand-collected ratings of ticker symbols, we find that higher likeability of ticker symbols leads to higher Tobin's Q. The pronounceability of ticker symbols has a similar but weaker effect. Further evidence suggests that the effect is possibly due to the impact of ticker symbols on stock liquidity or mispricing or both.

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Analyst Promotions within Credit Rating Agencies: Accuracy or Bias?

Darren Kisgen, Matthew Osborn & Jonathan Reuter

NBER Working Paper, August 2016

Abstract:
We examine whether credit rating agencies reward accurate or biased analysts. Using data collected from Moody's corporate debt credit reports, we find that Moody's is more likely to promote analysts who are accurate, but less likely to promote analysts who downgrade frequently. Combined, analysts who are accurate but not overly negative are approximately twice as likely to get promoted. Further, analysts whose rating changes are more informative to the market are more likely to get promoted, unless their ratings changes cause large negative market reactions. Moody's balances a desire for accuracy with a desire to cater to its corporate clients.

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Peer Pressure: Social Interaction and the Disposition Effect

Rawley Heimer

Review of Financial Studies, forthcoming

Abstract:
Social interaction contributes to some traders' disposition effect. New data from an investment-specific social network linked to individual-level trading records builds evidence of this connection. To credibly estimate causal peer effects, I exploit the staggered entry of retail brokerages into partnerships with the social trading web platform and compare trader activity before and after exposure to these new social conditions. Access to the social network nearly doubles the magnitude of a trader's disposition effect. Traders connected in the network develop correlated levels of the disposition effect, a finding that can be replicated using workhorse data from a large discount brokerage.

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Do Private Equity Funds Manipulate Reported Returns?

Gregory Brown, Oleg Gredil & Steven Kaplan

NBER Working Paper, August 2016

Abstract:
Private equity funds hold assets that are hard to value. Managers may have an incentive to distort reported valuations if these are used by investors to decide on commitments to subsequent funds managed by the same firm. Using a large dataset of buyout and venture funds, we test for the presence of reported return manipulation. We find evidence that some under-performing managers boost reported returns during times when fundraising takes place. However, those managers are unlikely to raise a next fund, suggesting that investors see through much of the manipulation. In contrast, we find that top-performing funds likely understate their valuations.

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The Activities of Buy-Side Analysts and the Determinants of Their Stock Recommendations

Lawrence Brown et al.

Journal of Accounting and Economics, August 2016, Pages 139-156

Abstract:
We survey 344 buy-side analysts from 181 investment firms and conduct 16 detailed follow-up interviews to gain insights into the activities of buy-side analysts, including the determinants of their compensation, the inputs to their stock recommendations, their beliefs about financial reporting quality, and the role of sell-side analysts in buy-side research. One important finding is that 10-K or 10-Q reports are more useful than quarterly conference calls and management earnings guidance for determining buy-side analysts' stock recommendations. Our results also suggest that sell-side analysts add value by providing buy-side analysts with in-depth industry knowledge and access to company management.

By KEVIN LEWIS | 09:00:00 AM

Sunday, August 28, 2016

We're cool

Trust Your Gut or Think Carefully? Examining Whether an Intuitive, Versus a Systematic, Mode of Thought Produces Greater Empathic Accuracy

Christine Ma-Kellams & Jennifer Lerner

Journal of Personality and Social Psychology, forthcoming

Abstract:
Cultivating successful personal and professional relationships requires the ability to accurately infer the feelings of others - that is, to be empathically accurate. Some are better at this than others, a difference which may be explained in part by mode of thought. Specifically, empathically accurate people may tend to rely more on intuitive rather than systematic thought when perceiving others. Or it may be the reverse: systematic thought may increase empathic accuracy. To determine which view is supported by the evidence, we conducted 4 studies examining relations between mode of thought (intuitive vs. systematic) and empathic accuracy. Study 1 revealed a lay belief that empathic accuracy arises from intuitive modes of thought. Studies 2 through 4, each using executive-level professionals as participants, demonstrated that, contrary to lay beliefs, people who tend to rely on intuitive thinking also tend to exhibit lower empathic accuracy. This pattern held when participants inferred others' emotional states based on (a) in-person face-to-face interactions with partners (Study 2) as well as on (b) pictures with limited facial cues (Study 3). Study 4 confirmed that the relationship is causal: experimentally inducing systematic (as opposed to intuitive) thought led to improved empathic accuracy. In sum, evidence regarding personal and social processes in these 4 samples of working professionals converges on the conclusion that, contrary to lay beliefs, empathic accuracy arises more from systematic thought than from gut intuition.

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Talking Less during Social Interactions Predicts Enjoyment: A Mobile Sensing Pilot Study

Gillian Sandstrom et al.

PLoS ONE, July 2016

Abstract:
Can we predict which conversations are enjoyable without hearing the words that are spoken? A total of 36 participants used a mobile app, My Social Ties, which collected data about 473 conversations that the participants engaged in as they went about their daily lives. We tested whether conversational properties (conversation length, rate of turn taking, proportion of speaking time) and acoustical properties (volume, pitch) could predict enjoyment of a conversation. Surprisingly, people enjoyed their conversations more when they spoke a smaller proportion of the time. This pilot study demonstrates how conversational properties of social interactions can predict psychologically meaningful outcomes, such as how much a person enjoys the conversation. It also illustrates how mobile phones can provide a window into everyday social experiences and well-being.

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Psychological Distance Moderates the Amplification of Shared Experience

Erica Boothby et al.

Personality and Social Psychology Bulletin, forthcoming

Abstract:
Sharing an experience with another person can amplify that experience. Here, we propose for the first time that amplification is moderated by the psychological distance between co-experiencers. We predicted that experiences would be amplified for co-experiencers who are psychologically proximate but not for co-experiencers who are psychologically distant. In two studies we manipulated both (a) whether or not a pleasant experience was shared and (b) the psychological distance between co-experiencers, via social distance (Study 1) and spatial distance (Study 2). In Study 1, co-experiencers either were unacquainted (i.e., strangers, socially distant) or became acquainted in the laboratory (i.e., socially proximate). In Study 2, co-experiencers were either in different rooms (i.e., spatially distant) or in the same room (i.e., spatially proximate). In both studies, the pleasant experience was amplified when shared compared with when not shared, but only when co-experiencers were psychologically proximate (vs. distant) to one another.

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New Students' Peer Integration and Exposure to Deviant Peers: Spurious Effects of School Moves?

Sonja Siennick, Alex Widdowson & Daniel Ragan

Journal of Early Adolescence, forthcoming

Abstract:
School moves during adolescence predict lower peer integration and higher exposure to delinquent peers. Yet mobility and peer problems have several common correlates, so differences in movers' and non-movers' social adjustment may be due to selection rather than causal effects of school moves. Drawing on survey and social network data from a sample of seventh and eighth graders, this study compared the structure and behavioral content of new students' friendship networks with those of not only non-movers but also students about to move schools; the latter should resemble new students in both observed and unobserved ways. The results suggest that the association between school moves and friends' delinquency is due to selection, but the association between school moves and peer integration may not be entirely due to selection.

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Impressions Based on a Portrait Predict, 1-Month Later, Impressions Following a Live Interaction

Gul Gunaydin, Emre Selcuk & Vivian Zayas

Social Psychological and Personality Science, forthcoming

Abstract:
When it comes to person perception, does one "judge a book by its cover?" Perceivers made judgments of liking, and of personality, based on a photograph of an unknown other, and at least 1 month later, made judgments following a face-to-face interaction with the same person. Photograph-based liking judgments predicted interaction-based liking judgments, and, to a lesser extent, photograph-based personality judgments predicted interaction-based personality judgments (except for extraversion). Consistency in liking judgments (1) partly reflected behavioral confirmation (i.e., perceivers with favorable photograph-based judgments behaved more warmly toward the target during the live interaction, which elicited greater target warmth); (2) explained, at least in part, consistency in personality judgments (reflecting a halo effect); and (3) remained robust even after controlling for perceiver effects, target effects, and perceived attractiveness. These findings support the view that even after having "read a book," one still, to some extent, judges it by its "cover."

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Persistent Social Networks: Civil War Veterans who Fought Together Co-Locate in Later Life

Dora Costa et al.

NBER Working Paper, July 2016

Abstract:
At the end of the U.S Civil War, veterans had to choose whether to return to their prewar communities or move to new areas. The late 19th Century was a time of sharp urban growth as workers sought out the economic opportunities offered by cities. By estimating discrete choice migration models, we quantify the tradeoffs that veterans faced. Veterans were less likely to move far from their origin and avoided urban immigrant areas and high mortality risk areas. They also avoided areas that opposed the Civil War. Veterans were more likely to move to a neighborhood or a county where men from their same war company lived. This co-location evidence highlights the existence of persistent social networks. Such social networks had long-term consequences: veterans living close to war time friends enjoyed a longer life.

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Do Your School Mates Influence How Long You Game? Evidence from the U.S.

Aliaksandr Amialchuk & Ales Kotalik

PLoS ONE, August 2016

Abstract:
The goal of this paper is to estimate peer influence in video gaming time among adolescents. Using a nationally representative sample of the U.S. school-aged adolescents in 2009-2010, we estimate a structural model that accounts for the potential biases in the estimate of the peer effect. Our peer group is exogenously assigned and includes one year older adolescents in the same school grade as the respondent. The peer measure is based on peers' own reports of video gaming time. We find that an additional one hour of playing video games per week by older grade-mates results in .47 hours increase in video gaming time by male responders. We do not find significant peer effect among female responders. Effective policies aimed at influencing the time that adolescents spend video gaming should take these findings into account.

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Oxytocin, but not vasopressin, impairs social cognitive ability among individuals with higher levels of social anxiety: A randomized controlled trial

Benjamin Tabak et al.

Social Cognitive and Affective Neuroscience, August 2016, Pages 1272-1279

Abstract:
Individuals with social anxiety are characterized by a high degree of social sensitivity, which can coincide with impairments in social cognitive functioning (e.g. theory of mind). Oxytocin (OT) and vasopressin (AVP) have been shown to improve social cognition, and OT has been theorized as a potential therapeutic agent for individuals with social anxiety disorder. However, no study has investigated whether these neuropeptides improve social cognitive ability among socially anxious individuals. In a randomized, double-blind, placebo controlled, between-subjects design we investigated whether social anxiety moderated the effects of OT or AVP (vs placebo) on social working memory (i.e. working memory that involves manipulating social information) and non-social working memory. OT vs placebo impaired social working memory accuracy in participants with higher levels of social anxiety. No differences were found for non-social working memory or for AVP vs placebo. Results suggest that OT administration in individuals with higher levels of social anxiety may impair social cognitive functioning.

By KEVIN LEWIS | 09:00:00 AM

Saturday, August 27, 2016

Antisocialism

Sexual Aggression When Power Is New: Effects of Acute High Power on Chronically Low-Power Individuals

Melissa Williams, Deborah Gruenfeld & Lucia Guillory

Journal of Personality and Social Psychology, forthcoming

Abstract:
Previous theorists have characterized sexually aggressive behavior as an expression of power, yet evidence that power causes sexual aggression is mixed. We hypothesize that power can indeed create opportunities for sexual aggression — but that it is those who chronically experience low power who will choose to exploit such opportunities. Here, low-power men placed in a high-power role showed the most hostility in response to a denied opportunity with an attractive woman (Studies 1 and 2). Chronically low-power men and women given acute power were the most likely to say they would inappropriately pursue an unrequited workplace attraction (Studies 3 and 4). Finally, having power over an attractive woman increased harassment behavior among men with chronic low, but not high, power (Study 5). People who see themselves as chronically denied power appear to have a stronger desire to feel powerful and are more likely to use sexual aggression toward that end.

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The longitudinal relationship between everyday sadism and the amount of violent video game play

Tobias Greitemeyer & Christina Sagioglou

Personality and Individual Differences, January 2017, Pages 238–242

Abstract:
Previous research found correlational evidence that the trait of everyday sadism is associated with the amount of violent video game play. Due to the correlational design, the direction of the association remained unclear. According to the selection hypothesis, everyday sadists should be attracted to violent video games, whereas the socialization hypothesis would propose that repeated exposure to violent video games makes the player more sadistic. However, these hypotheses are by no means mutually exclusive and the relation between everyday sadism and violent video game exposure could be bidirectional. To examine the causal mechanisms more closely, we carried out a longitudinal study (N = 743) for which we collected data at two points in time, six months apart. Results showed that (a) everyday sadists are more likely than others to play violent video games and (b) repeated exposure to violent video games predicts everyday sadism over time. Overall, this bidirectional influence reflects a downward spiral of everyday sadistic tendencies and violent video gaming reinforcing each other.

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Do beliefs about gender roles moderate the relationship between exposure to misogynistic song lyrics and men's female-directed aggression?

Courtland Hyatt et al.

Aggressive Behavior, forthcoming

Abstract:
Although independent lines of research have identified misogynistic lyrical content and traditional gender role beliefs as reliable predictors of men's female-directed aggression, more research is needed to understand the extent to which these variables may function in synthesis to potentiate aggression. In the current study, men (N = 193), who completed questionnaires relevant to their conformity to masculine norms and level of hostile and benevolent sexism, were exposed to either misogynistic or neutral lyrics before having the opportunity to shock an ostensible female confederate in a bogus reaction time task that, in effect, measured aggression. Results indicated that misogynistic lyrics and hostile sexism significantly predicted both unprovoked and provoked aggression against a female target. Contrary to expectations, moderating effects of gender role beliefs on the relationship between misogynistic lyrics and men's aggression were not found. Implications are discussed in terms of the costs of misogyny in media for women's lives.

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Learning to Love Guns? Gun-Based Gameplay’s Links to Gun Attitudes

Matthew Lapierre & Kirstie Farrar

Psychology of Popular Media Culture, forthcoming

Abstract:
Although there is a long empirical record exploring links between violent videogame play and aggression, little is known about how these games potentially affect players’ political attitudes. Specifically, with firearms frequently featured in videogames, including games where players are required to use firearms to succeed during gameplay, it is worth examining whether players’ experience with firearms relates to their attitudes toward guns and gun policy. Utilizing the General Learning Model, this survey explores whether public policy outcomes regarding gun control and public safety are related to exposure to violent video games, first-person shooter games, and realistic gun controllers. Results show that increased exposure to first-person shooter games was related to more negative attitudes concerning gun control. In addition, more experience using realistic gun controllers was associated with negative attitudes toward gun control and greater support for the idea that greater gun availability can help guarantee public safety. Thus, video game exposure may shape the gun attitudes of young people in small but important ways.

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An oxytocin receptor polymorphism predicts amygdala reactivity and antisocial behavior in men

Rebecca Waller et al.

Social Cognitive and Affective Neuroscience, August 2016, Pages 1218-1226

Abstract:
Variability in oxytocin (OXT) signaling is associated with individual differences in sex-specific social behavior across species. The effects of OXT signaling on social behavior are, in part, mediated through its modulation of amygdala function. Here, we use imaging genetics to examine sex-specific effects of three single-nucleotide polymorphisms in the human oxytocin receptor gene (OXTR; rs1042778, rs53576 and rs2254298) on threat-related amygdala reactivity and social behavior in 406 Caucasians. Analyses revealed that among men but not women, OXTR rs1042778 TT genotype was associated with increased right amygdala reactivity to angry facial expressions, which was uniquely related to higher levels of antisocial behavior among men. Moderated meditation analysis suggested a trending indirect effect of OXTR rs1042778 TT genotype on higher antisocial behavior via increased right amygdala reactivity to angry facial expressions in men. Our results provide evidence linking genetic variation in OXT signaling to individual differences in amygdala function. The results further suggest that these pathways may be uniquely important in shaping antisocial behavior in men.

By KEVIN LEWIS | 09:00:00 AM

Friday, August 26, 2016

Bringing back the jobs

Learning to Love the Government: Trade Unions and Late Adoption of the Minimum Wage

Brett Meyer

World Politics, July 2016, Pages 538-575

Abstract:
One counterintuitive variation in wage-setting regulation is that countries with the highest labor standards and strongest labor movements are among the least likely to set a statutory minimum wage. This, the author argues, is due largely to trade union opposition. Trade unions oppose the minimum wage when they face minimal low-wage competition, which is affected by the political institutions regulating industrial action, collective agreements, and employment, as well as by the skill and wage levels of their members. When political institutions effectively regulate low-wage competition, unions oppose the minimum wage. When political institutions are less favorable toward unions, there may be a cleavage between high- and low-wage unions in their minimum wage preferences. The argument is illustrated with case studies of the UK, Germany, and Sweden. The author demonstrates how the regulation of low-wage competition affects unions' minimum wage preferences by exploiting the following labor market institutional shocks: the Conservatives' labor law reforms in the UK, the Hartz labor market reforms in Germany, and the European Court of Justice's Laval ruling in Sweden. The importance of union preferences for minimum wage adoption is also shown by how trade union confederation preferences influenced the position of the Labour Party in the UK and the Social Democratic Party in Germany.

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Moving to a Job: The Role of Home Equity, Debt, and Access to Credit

Yuliya Demyanyk et al.

American Economic Journal: Macroeconomics, forthcoming

Abstract:
We use individual-level credit reports merged with loan-level mortgage data to estimate how home equity interacted with mobility in relatively weak and strong labor markets in the United States during the Great Recession. We construct a dynamic model of housing, consumption, employment, and relocation, which provides a structural interpretation of our empirical results and allows us to explore the role that foreclosure played in labor mobility. We find that negative home equity is not a significant barrier to job-related mobility because the benefits of accepting an out-of-area job outweigh the costs of moving. This pattern holds even if homeowners are not able to default on their mortgages.

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The Rise of Finance and Firm Employment Dynamics

Ken-Hou Lin

Organization Science, July-August 2016, Pages 972-988

Abstract:
This article sheds light on the ongoing employment stagnation in the United States by investigating the links between the rise of finance and firm employment dynamics during the 1982-2005 period. I argue that the rise of finance marginalized the role of labor in revenue generating and sharing processes, which led to employment stagnation among the largest nonfinancial firms in the United States. Evidence suggests that increasing investment in financial assets depresses the workforce size. The growing dependence on debt reprioritizes the order of distribution, heightening the need for workforce reduction. The increasing rewards for shareholders generate a downsize-and-distribute spiral, in which labor expense becomes a primary target of cost-cutting strategies. Further analysis indicates that production and service workers are more vulnerable to shifts associated with the rise of finance than managers and professionals.

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Partial Automation: Routine-Biased Technical Change, Deskilling, and the Minimum Wage

Mitch Downey

University of California Working Paper, May 2016

Abstract:
Recent research emphasizes the pressure technological change exerts on middle-wage occupations by automating routine tasks. I argue that technology only partially automates these tasks, which often still require labor. Rather, technology reduces task complexity enabling a less skilled worker to do the same job. The costs of automation, then, are not only the costs of the technology itself but also of low-wage workers to use it. By raising the cost of low-wage labor, the minimum wage reduces the profitability of adopting automating technologies. I test this prediction with state variation in the minimum wage and industry variation in complementarity between low-wage workers and technology. I show that accounting for state price differences induces new and useful minimum wage variation, derive new measures of complementarity from the Dictionary of Occupational Titles and the CPS Computer Use Supplement, and build a measure of technology based on IT employment, the largest component of IT spending. My results imply a $1 decrease in the minimum wage raises the average industry's technology use by 30% and decreases the routine share of the wage bill by 1 percentage point (3.3%), both relative to a counterfactual without complementarity. Routine-intensive industries often exhibit high complementarity, making the minimum wage an important policy lever to influence the pace of routine-biased technical change.

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Skill Demands and Mismatch in U.S. Manufacturing

Andrew Weaver & Paul Osterman

ILR Review, forthcoming

Abstract:
Recent economic events have sparked debates over the degree of structural mismatch in the U.S. economy. One of the most frequent claims is that workers lack the skills that employers demand. The existing literature, however, analyzes this potential mismatch at a high level of aggregation with abstract indices and noisy proxies that obscure the underlying mechanisms. The authors address these issues by presenting and analyzing results from a survey of U.S. manufacturing establishments. The survey is the first, to their knowledge, to directly measure concrete employer skill demands and hiring experiences in a nationally representative survey at the industry level. The findings indicate that demand for higher-level skills is generally modest, and that three-quarters of manufacturing establishments do not show signs of hiring difficulties. Among the remainder, demands for higher-level math and reading skills are significant predictors of long-term vacancies, but demands for computer skills and other critical-thinking/problem-solving skills are not. Of particular interest, high-tech plants do not experience greater levels of hiring challenges. When the authors examine the potential mechanisms that could contribute to hiring difficulties, they find that neither external regional supply conditions nor internal firm practices are predictive of hiring problems. Rather, the data show that establishments that are members of clusters or that demand highly specialized skills have the greatest probability of incurring long-term vacancies. The authors interpret these results as a sign that it is important to think about factors that complicate the interaction of supply and demand - such as disaggregation and communication/coordination failures - rather than simply focusing on inadequate labor supply.

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No Woman No Crime: Ban the Box, Employment, and Upskilling

Daniel Shoag & Stan Veuger

Harvard Working Paper, March 2016

Abstract:
A sizable number of localities have in recent years limited the use of criminal background checks in hiring decisions, or "banned the box." Using LEHD Origin-Destination Employment and American Community Survey data, we show that these bans increased employment of residents in high-crime neighborhoods by as much as 4%. These increases are particularly large in the public sector. At the same time, we establish using job postings data that employers respond to ban-the-box measures by raising experience requirements. A perhaps unintended consequence of this is that women, who are less likely to be convicted of crimes, see their employment opportunities reduced.

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Does employment growth increase travel time to work?: An empirical analysis using military troop movements

Geoffrey Morrison & Cynthia Lin Lawell

Regional Science and Urban Economics, September 2016, Pages 180-197

Abstract:
Employment growth is a common public policy goal, but it can lead to a number of unwanted environmental, social, and economic costs - particularly in high growth communities - due to its impact on peak-hour traffic. This paper examines the short-run impacts of rapid employment growth on travel time to work. We exploit exogenous variation in employment levels resulting from movements of military troops during the 2005 Base Realignment and Closure (BRAC) in order to identify the effect of employment growth on travel time using difference-in-difference-in-differences and instrumental variable methods. Our results show that for each additional 10 workers added per square kilometer, travel time increases by 0.171 to 0.244 min per one-way commute trip per commuter in the short run, which equates to $0.07 to $0.20 in travel time cost per commuter per day. Our estimates imply that the annualized short-run congestion costs of the 2005 BRAC were $79 to $761 million per year (in constant 2005 dollars) for military commuters and $3.15 to $6.3 billion per year (in constant 2005 dollars) for civilian commuters in BRAC-affected areas.

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The Effect of Population Aging on Economic Growth, the Labor Force and Productivity

Nicole Maestas, Kathleen Mullen & David Powell

NBER Working Paper, July 2016

Abstract:
Population aging is widely assumed to have detrimental effects on economic growth yet there is little empirical evidence about the magnitude of its effects. This paper starts from the observation that many U.S. states have already experienced substantial growth in the size of their older population and much of this growth was predetermined by historical trends in fertility. We use predicted variation in the rate of population aging across U.S. states over the period 1980-2010 to estimate the economic impact of aging on state output per capita. We find that a 10% increase in the fraction of the population ages 60+ decreases the growth rate of GDP per capita by 5.5%. Two-thirds of the reduction is due to slower growth in the labor productivity of workers across the age distribution, while one-third arises from slower labor force growth. Our results imply annual GDP growth will slow by 1.2 percentage points this decade and 0.6 percentage points next decade due to population aging.

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The General Equilibrium Impacts of Unemployment Insurance: Evidence from a Large Online Job Board

Ioana Marinescu

NBER Working Paper, July 2016

Abstract:
During the Great Recession, U.S. unemployment benefits were extended by up to 73 weeks. Theory predicts that extensions increase unemployment by discouraging job search, a partial equilibrium effect. Using data from the large job board CareerBuilder.com, I find that a 10% increase in benefit duration decreased state-level job applications by 1%, but had no robust effect on job vacancies. Job seekers thus faced reduced competition for jobs, a general equilibrium effect. Calibration implies that the general equilibrium effect reduces the impact of unemployment insurance on unemployment by 40%: increasing benefit duration by 10% increases unemployment by only 0.6% in equilibrium.

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Does the Unemployment Benefit Institution Affect the Productivity of Workers? Evidence from the Field

Mariana Blanco, Patricio Dalton & Juan Vargas

Management Science, forthcoming

Abstract:
This paper studies the effects of unemployment benefit schemes on individual productivity. We created employment and unemployment in the field and compared workers' productivity under no unemployment benefits to productivity under two different unemployment schemes. In one scheme, the unemployed received an unconditional monetary transfer. In the other, the monetary transfer was obtained conditional on the unemployed spending some time on an ancillary activity. Our results challenge the standard economic theory prediction that unemployment benefits, especially unconditional compensations, hinder workers' effort. We find that workers employed under the unconditional scheme are more productive than workers under the conditional one, and both schemes make workers more productive than having no unemployment benefit. We discuss two possible explanations for our results based on reciprocity and differential psychological costs of unemployment across unemployment benefit schemes.

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Potential Unemployment Insurance Duration and Labor Supply: The Individual and Market-Level Response to a Benefit Cut

Andrew Johnston & Alexandre Mas

NBER Working Paper, July 2016

Abstract:
We examine how a 16-week cut in potential unemployment insurance (UI) duration in Missouri affected search behavior of UI recipients and the aggregate labor market. Using a regression discontinuity design (RDD), we estimate a marginal effect of maximum duration on UI and nonemployment spells of approximately 0.5 and 0.3 respectively. We use RDD estimates to simulate the unemployment rate assuming no market-level externalities. The simulated response closely approximates the estimated change in the unemployment rate following the benefit cut, suggesting that even in a period of high unemployment the labor market absorbed this influx of workers without crowding-out other jobseekers.

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Effects of the unemployment insurance work test on long-term employment outcomes

Marta Lachowska, Merve Meral & Stephen Woodbury

Labour Economics, August 2016, Pages 246-265

Abstract:
Does requiring job seekers to be available and searching for work affect job quality? We examine the effects of this unemployment insurance (UI) work test on long-term employment outcomes. Adding administrative wage records to the Washington Alternative Work Search (WAWS) experiment, we examine effects on earnings, hours worked, employment, and job match quality in the nine years following the experiment. Among UI recipients as a whole, the effects of the work test were negligible, counter to the hypothesis that the work test may harm long-term earnings. But for permanent job losers, the work test reduced time to reemployment by 1-2 quarters, and increased job tenure with the first post-claim employer by about 2 quarters. Also, we find that the work test selected lower-wage workers into reemployment. Accordingly, the work test may be an important policy for improving the reemployment prospects of lower-wage, permanent job losers.

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Education, Participation, and the Revival of U.S. Economic Growth

Dale Jorgenson, Mun Ho & Jon Samuels

NBER Working Paper, July 2016

Abstract:
Labor quality growth captures the upgrading of the labor force through higher educational attainment and greater experience. Our first finding is that average levels of educational attainment of new entrants will remain high, but will no longer continue to rise, so that growing educational attainment will gradually disappear as a source of U.S. economic growth. Our second finding is that the investment boom of 1995-2000 drew many younger and less-educated workers into employment. Participation rates for these workers declined during the recovery of 2000-2007 and dropped further during the Great Recession of 2007-2009. In order to assess the prospects for recovery of participation as a potential source U.S. economic growth, we project the participation rates of each age-gender-education group. Our third finding is that the recovery of participation rates will provide an important opportunity for the revival of U.S. economic growth. Participation rates for less-educated workers are unlikely to recover the peak levels that followed the investment boom of 1995-2000. However, these rates can achieve the levels that preceded the Great Recession. While labor quality will grow more slowly, hours worked will grow much faster.

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Weathering the Great Recession: Variation in Employment Responses by Establishments and Countries

Erling Barth et al.

NBER Working Paper, July 2016

Abstract:
This paper finds that US employment changed differently relative to output in the Great Recession and recovery than in most other advanced countries or in the US in earlier recessions. Instead of hoarding labor, US firms reduced employment proportionately more than output in the Great Recession, with establishments that survived the downturn contracting jobs massively. Diverging from the aggregate pattern, US manufacturers reduced employment less than output while the elasticity of employment to gross output varied widely among establishments. In the recovery, growth of employment was dominated by job creation in new establishments. The variegated responses of employment to output challenges extant models of how enterprises adjust employment over the business cycle.

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Exploring Wage Determination by Education Level: A U.S. Metropolitan Statistical Area Analysis From 2005 to 2012

Penelope Prime, Donald Grimes & Mary Beth Walker

Economic Development Quarterly, August 2016, Pages 191-202

Abstract:
The purpose of this study is to explain urban wage differentials with a special focus on educational levels. The authors explore whether the share of people with a bachelor's degree or higher in the community matters to the wages of those within specific educational cohorts, accounting for cost of living, human capital externalities, consumer externalities, policy factors, and local labor market conditions. Using data for all U.S. Metropolitan Statistical Areas between 2005 and 2012, the authors find that the presence of more highly educated people will result in a higher median wage in the community overall, as do many studies, but that this factor does not significantly increase the wage for any individual education cohort. These results are hidden if we only look at the entire workforce in the aggregate.

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Employment Protection, Technology Choice, and Worker Allocation 

Eric Bartelsman, Pieter Gautier & Joris De Wind

International Economic Review, August 2016, Pages 787-826

Abstract:
We show empirically that high-risk sectors, which contribute strongly to aggregate productivity growth, are relatively small and have relatively low productivity growth in countries with strict employment protection legislation (EPL). To understand these findings, we develop a two-sector matching model where firms endogenously choose between a safe technology and a risky technology. For firms that have chosen the risky technology, EPL raises the costs of shedding workers in case they receive a low productivity draw. According to our calibrated model, high-EPL countries benefit less from the arrival of new risky technologies than low-EPL countries. Parameters estimated through reduced-form regressions of employment and productivity on exit costs, riskiness, and in particular their interaction are qualitatively similar for actual cross-country data and simulated model data. Our model is consistent with the slowdown in productivity in the European Union relative to the United States since the mid-1990s.

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Penalizing the Underdogs? Employment Protection and the Competitive Dynamics of Firm Innovation

Daniel Dongil Keum

NYU Working Paper, June 2016

Abstract:
This paper examines how constraining resource adjustment affects a firm's ability to increase innovation as a response to falling behind. By limiting the pace and efficiency with which laggard firms can release obsolete resources, resource constraints reduce their ability to experiment with new resources and increase innovation. To explore this theory empirically, I exploit staggered adoptions of employment protection laws by U.S. state courts that increase the cost of employee dismissal. In addition to showing that increasing employment protection results in fewer and safer yet lower quality patents by laggards, I find that the negative effects are highly asymmetrical, more heavily penalizing firms operating in sectors with high technological velocity or employee turnover, firms with limited financial slack, and technologies that require significant resource adjustments.

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Taking the Leap: The Determinants of Entrepreneurs Hiring their First Employee

Robert Fairlie & Javier Miranda

NBER Working Paper, July 2016

Abstract:
Job creation is one of the most important aspects of entrepreneurship, but we know relatively little about the hiring patterns and decisions of startups. Longitudinal data from the Integrated Longitudinal Business Database (iLBD), Kauffman Firm Survey (KFS), and the Growing America through Entrepreneurship (GATE) experiment are used to provide some of the first evidence in the literature on the determinants of taking the leap from a non-employer to employer firm among startups. Several interesting patterns emerge regarding the dynamics of non-employer startups hiring their first employee. Hiring rates among the universe of non-employer startups are very low, but increase when the population of non-employers is focused on more growth-oriented businesses such as incorporated and EIN businesses. If non-employer startups hire, the bulk of hiring occurs in the first few years of existence. After this point in time relatively few non-employer startups hire an employee. Focusing on more growth- and employment-oriented startups in the KFS, we find that Asian-owned and Hispanic-owned startups have higher rates of hiring their first employee than white-owned startups. Female-owned startups are roughly 10 percentage points less likely to hire their first employee by the first, second and seventh years after startup. The education level of the owner, however, is not found to be associated with the probability of hiring an employee. Among business characteristics, we find evidence that business assets and intellectual property are associated with hiring the first employee. Using data from the largest random experiment providing entrepreneurship training in the United States ever conducted, we do not find evidence that entrepreneurship training increases the likelihood that non-employers hire their first employee.

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Deterring Wage Theft: Alt-Labor, State Politics, and the Policy Determinants of Minimum Wage Compliance

Daniel Galvin

Perspectives on Politics, June 2016, Pages 324-350

Abstract:
Can stronger state-level public policies help protect workers from "wage theft?" In recent years, workers' rights groups have responded to policy drift and legislative inaction at the national level by launching campaigns to enact stronger penalties for wage and hour violations at the state level. Many of these campaigns have been legislatively successful and formative for the development of "alt-labor." But are such policies actually effective in deterring wage theft? Previous scholarship has long concluded that although stronger penalties should theoretically make a difference, in practice, they do not. But by confining the analysis to the admittedly weak national-level regulatory regime, the existing literature has eliminated all variation from the costs side of the equation and overlooked the rich variety of employment laws that exist at the state level. Using an original dataset of state laws, new estimates of minimum wage violations, and difference-in-differences analyses of a dozen recently enacted "wage-theft laws," I find that stronger penalties can, in fact, serve as an effective deterrent against wage theft, but the structure of the policy matters a great deal, as does its enforcement. The implications for workers' rights and the changing shape of the labor movement are discussed in detail.

By KEVIN LEWIS | 09:00:00 AM

Thursday, August 25, 2016

Stupefying

The Effect of Medical Marijuana on Sickness Absence

Darin Ullman

Health Economics, forthcoming

Abstract:
Utilizing the Current Population Survey, the study identifies that absences due to sickness decline following the legalization of medical marijuana. The effect is stronger in states with ‘lax’ medical marijuana regulations, for full-time workers, and for middle-aged males, which is the group most likely to hold medical marijuana cards.

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Racial-Ethnic Disparities in Opioid Prescriptions at Emergency Department Visits for Conditions Commonly Associated with Prescription Drug Abuse

Astha Singhal, Yu-Yu Tien & Renee Hsia

PLoS ONE, August 2016

Abstract:
Prescription drug abuse is a growing problem nationally. In an effort to curb this problem, emergency physicians might rely on subjective cues such as race-ethnicity, often unknowingly, when prescribing opioids for pain-related complaints, especially for conditions that are often associated with drug-seeking behavior. Previous studies that examined racial-ethnic disparities in opioid dispensing at emergency departments (EDs) did not differentiate between prescriptions at discharge and drug administration in the ED. We examined racial-ethnic disparities in opioid prescription at ED visits for pain-related complaints often associated with drug-seeking behavior and contrasted them with conditions objectively associated with pain. We hypothesized a priori that racial-ethnic disparities will be present among opioid prescriptions for conditions associated with non-medical use, but not for objective pain-related conditions. Using data from the National Hospital Ambulatory Medical Care Survey for 5 years (2007–2011), the odds of opioid prescription during ED visits made by non-elderly adults aged 18–65 for ‘non-definitive’ conditions (toothache, back pain and abdominal pain) or ‘definitive’ conditions (long-bone fracture and kidney stones) were modeled. Opioid prescription at discharge and opioid administration at the ED were the primary outcomes. We found significant racial-ethnic disparities, with non-Hispanic Blacks being less likely (adjusted odds ratio ranging from 0.56–0.67, p-value < 0.05) to receive opioid prescription at discharge during ED visits for back pain and abdominal pain, but not for toothache, fractures and kidney stones, compared to non-Hispanic whites after adjusting for other covariates. Differential prescription of opioids by race-ethnicity could lead to widening of existing disparities in health, and may have implications for disproportionate burden of opioid abuse among whites. The findings have important implications for medical provider education to include sensitization exercises towards their inherent biases, to enable them to consciously avoid these biases from defining their practice behavior.

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Does one day of drinking matter? 21st birthday drinking predicts subsequent drinking and consequences

Irene Geisner et al.

Addictive Behaviors, January 2017, Pages 57–61

Objective: There has been ample research on college student risks and consequences related to 21st Birthday Drinking. To date, no studies we are aware of have examined how 21st birthday drinking impacts subsequent drinking and related consequences. This study evaluates the effect of a single night of drinking on peak drinking, heavy drinking, and negative consequences over 12 months following the event. Furthermore, we examine if typical drinking behavior prior to 21st birthday moderates the relationship between the event drinking and subsequent use.

Method: Participants included 599 college students (46% male) who intended to consume at least five/four drinks (men/women respectively) on their 21st birthday. Screening and baseline assessments were completed approximately four weeks before turning 21. A follow-up assessment was completed approximately one week after students' birthdays and every 3 months for one year thereafter.

Results: Those who drank more on their 21st birthday, also reported higher peak consumption, increased likelihood of consequences, and increased number of consequences throughout the year. Additionally, baseline peak drinking moderated the relationship such that those who drank less at peak occasion prior to turning 21 showed the strongest effects of 21st BD drinking on subsequent consumption.

Conclusions: 21st BD drinking could impact subsequent choices and problems related to alcohol. Interventions are warranted and implications discussed.

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Cannabis Control and Crime: Medicinal Use, Depenalization and the War on Drugs

Arthur Huber, Rebecca Newman & Daniel LaFave B.E.

Journal of Economic Analysis & Policy, forthcoming

Abstract:
To date, 27 states and the District of Columbia have passed laws easing marijuana control. This paper examines the relationship between the legalization of medical marijuana, depenalization of possession, and the incidence of non-drug crime. Using state panel data from 1970 to 2012, results show evidence of 4–12 % reductions in robberies, larcenies, and burglaries due to the legalization of medical marijuana, but that depenalization has little effect and may instead increase crime rates. These effects are supported by null results for crimes unrelated to the cannabis market and are consistent with the supply-side effects of medicinal use that are absent from depenalization laws as well as existing evidence on the substitution between marijuana and alcohol. The findings contribute new evidence to the complex debate surrounding marijuana policy and the war on drugs.

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Young People’s More Permissive Views About Marijuana: Local Impact of State Laws or National Trend?

Laura Schmidt, Laurie Jacobs & Joanne Spetz American

Journal of Public Health, August 2016, Pages 1498-1503

Objectives: To determine whether state medical marijuana laws “send the wrong message,” that is, have a local influence on the views of young people about the risks of using marijuana.

Methods: We performed multilevel, serial, cross-sectional analyses on 10 annual waves of the US National Survey on Drug Use and Health (2004–2013) nationally and for states with marijuana laws using individual- and state-level controls.

Results: Living in medical marijuana states was associated with more permissive views regarding marijuana across 5 different measures. However, these associations became non–statistically significant after we adjusted for state-level differences. By contrast, there was a consistent and significant national time trend toward more permissive attitudes, which was less pronounced among children of middle school age than it was among their older counterparts.

Conclusions: Passing medical marijuana laws does not seem to directly affect the views of young people in medical marijuana states. However, there is a national trend toward young people taking more permissive views about marijuana independent of any effects within states.

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Why Alcoholics Ought to Compete Equally for Liver Transplants

Alexander Zambrano

Bioethics, forthcoming

Abstract:
Some philosophers and physicians have argued that alcoholic patients, who are responsible for their liver failure by virtue of alcoholism, ought to be given lower priority for a transplant when donated livers are being allocated to patients in need of a liver transplant. The primary argument for this proposal, known as the Responsibility Argument, is based on the more general idea that patients who require scarce medical resources should be given lower priority for those resources when they are responsible for needing them and when they are competing with patients who need the same resources through no fault of their own. Since alcoholic patients are responsible for needing a new liver and are in direct competition with other patients who need a new liver through no fault of their own, it follows that alcoholic patients ought to be given lower priority for a transplant. In this article, I argue against the Responsibility Argument by suggesting that in order for it to avoid the force of plausible counter examples, it must be revised to say that patients who are responsible for needing a scarce medical resource due to engaging in behavior that is not socially valuable ought to be given lower priority. I'll then argue that allocating organs according to social value is inconsistent or in tension with liberal neutrality on the good life. Thus, if one is committed to liberal neutrality, one ought to reject the Responsibility Argument.

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The Application of a Decision-Theoretic Model to Estimate the Public Health Impact of Vaporized Nicotine Product Initiation in the United States

David Levy et al.

Nicotine & Tobacco Research, forthcoming

Introduction: The public health impact of vaporized nicotine products (VNPs) such as e-cigarettes is unknown at this time. VNP uptake may encourage or deflect progression to cigarette smoking in those who would not have otherwise smoked, thereby undermining or accelerating reductions in smoking prevalence seen in recent years.

Methods: The public health impact of VNP use are modeled in terms of how it alters smoking patterns among those who would have otherwise smoked cigarettes and among those who would not have otherwise smoked cigarettes in the absence of VNPs. The model incorporates transitions from trial to established VNP use, transitions to exclusive VNP and dual use, and the effects of cessation at later ages. Public health impact on deaths and life years lost is estimated for a recent birth cohort incorporating evidence-informed parameter estimates.

Results: Based on current use patterns and conservative assumptions, we project a reduction of 21% in smoking-attributable deaths and of 20% in life years lost as a result of VNP use by the 1997 US birth cohort compared to a scenario without VNPs. In sensitivity analysis, health gains from VNP use are especially sensitive to VNP risks and VNP use rates among those likely to smoke cigarettes.

Conclusions: Under most plausible scenarios, VNP use generally has a positive public health impact. However, very high VNP use rates could result in net harms. More accurate projections of VNP impacts will require better longitudinal measures of transitions into and out of VNP, cigarette and dual use.

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Nonmedical use of prescription drugs and related negative sexual events: Prevalence estimates and correlates in college students

Kathleen Parks et al.

Addictive Behaviors, forthcoming

Abstract:
The present study of college students investigated (a) the prevalence of nonmedical use of three classes of prescription drugs (stimulants, anxiolytics/sedatives, analgesics), (b) the prevalence of negative sexual events (NSE) associated with any nonmedical use of prescription drugs (NMUPD), and (c) a set of correlates of NSE. The specific NSE were sexual aggression victimization and perpetration, and regretted sex. The correlates of the NSE were sex, race/ethnicity, year in school, psychological symptoms, alcohol use, illegal drug use, and NMUPD. Participants were 509 (254 females, 255 males) randomly-selected college students who reported any NMUPD. The majority (76.2%) of the sample reported ever using stimulants, 38.9% reported ever using anxiolytics/sedatives, and 40.9% reported using analgesics. During NMUPD, 14.3% of the students reported regretted sex, 7.1% of female students reported sexual victimization, and 6.3% of male students reported perpetrating sexual aggression. Multiple logistic regression analyses indicated that anxiolytic/sedative use (Adj. OR = 1.99; 95% CI = 1.51—2.62) was positively associated with regretted sex, whereas anxiolytic/sedative use (Adj. OR = 1.79; 95% CI = 1.01—3.16) and psychological symptoms (Adj. OR = 1.06; 95% CI = 1.02—1.10) were positively associated with sexual victimization. Illegal drug use was positively associated with perpetrating sexual aggression (Adj. OR = 4.10; 95% CI = 1.21—13.86). These findings suggest that among these college students, NMUPD-associated NSE were not uncommon, and primarily associated with anxiolytic/sedative use. Given the academic, physical, and psychological implications associated with NSE, research needs to further explore the causal nature of these relations.

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Alcohol consumption by youth: Peers, parents, or prices?

Olugbenga Ajilore, Aliaksandr Amialchuk & Keven Egan

Economics & Human Biology, December 2016, Pages 76–83

Abstract:
Using data from the National Longitudinal Survey of Adolescent to Adult Health, we estimate the effect of peers’ alcohol consumption and alcohol prices on the drinking habits of high-school-age youth. We use the two-stage residual inclusion method to account for the endogeneity of peer drinking in nonlinear models. For our sample of high school students, we find that peer effects are statistically and economically significant regarding the choice to participate in drinking but are not significant for the frequency of drinking, including binge drinking. Regarding alcohol prices, even though we have good price variation in our sample, alcohol prices are not found to be significant. The results are important for policymakers who are considering policies to reduce underage drinking, as we conclude that no significant impact on underage drinking will result from low-tax states’ increasing excise taxes on alcohol so they are similar to those of high-tax states. Policymakers may choose to focus instead on the influence of peers and changing the social norm behavior.

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The Couple That Smokes Together: Dyadic Marijuana Use and Relationship Functioning During Conflict

Cory Crane et al.

Psychology of Addictive Behaviors, forthcoming

Abstract:
Self-reported marijuana use has been associated with poor relationship functioning and decreased stability over time. The present study examined the behavioral interactions of couples with concordant and discordant patterns of marijuana use during conflict, using individual self-reports and observation by independent coders. Heavy drinking community couples (N = 149) participated in a conflict resolution paradigm. Interactions were recorded and coded by naïve coders. Approximately 30% of the sample reported past year marijuana use. Actor-Partner Interdependence Models and analysis of covariance (ANCOVA) were used to evaluate the individual and interactive effects of dyadic marijuana use on maladaptive relationship functioning. A Robust Actor × Partner Marijuana Use interaction was detected for a range of behavioral outcomes, assessed by both self-report and direct observation, including relationship satisfaction, anger experience, patterns of demand and withdrawal during conflict, constructive behaviors, and overall relationship quality. Specifically, couples in which both partners used or abstained from marijuana displayed more adaptive relationship functioning across indicators relative to couples in which only 1 partner identified as a marijuana user. This pattern was particularly strong for couples in which the female partner used marijuana and the male partner did not. Couples with discordant, rather than concordant, marijuana use displayed distinct conflict resolution behaviors that were consistent with the long-term negative relationship outcomes that have been observed in previous studies.

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The paradox of decreasing nonmedical opioid analgesic use and increasing abuse or dependence — An assessment of demographic and substance use trends, United States, 2003–2014

Christopher Jones

Addictive Behaviors, forthcoming

Methods: Data from the National Survey on Drug Use and Health were used to assess trends in opioid analgesic nonmedical use, abuse, and dependence for 2003–2005, 2006–2008, 2009–2011, and 2012–2014. Multivariable logistic regression was used to identify characteristics associated with opioid analgesic abuse or dependence.

Results: Rates of past-year opioid analgesic nonmedical use decreased from 48.4 per 1000 persons aged 12 years and older in 2003–2005 to 43.3 in 2012–2014. Declines were seen among most demographic and substance using groups. In contrast, rates of past-year opioid analgesic abuse or dependence increased from 6.0 per 1000 persons in 2003–2005 to 7.5 in 2012–2014; increases were seen among most demographic and substance using groups. In 2012–2014, odds of opioid analgesic abuse or dependence were highest among those with sedative or tranquilizer and heroin abuse or dependence.

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U.S. Demand for Tobacco Products in a System Framework

Yuqing Zheng et al.

Health Economics, forthcoming

Abstract:
This study estimated a system of demand for cigarettes, little cigars/cigarillos, large cigars, e-cigarettes, smokeless tobacco, and loose smoking tobacco using market-level scanner data for convenience stores. We found that the unconditional own-price elasticities for the six categories are −1.188, −1.428, −1.501, −2.054, −0.532, and −1.678, respectively. Several price substitute (e.g., cigarettes and e-cigarettes) and complement (e.g., cigarettes and smokeless tobacco) relationships were identified. Magazine and television advertising increased demand for e-cigarettes, and magazine advertising increased demand for smokeless tobacco and had spillover effects on demand for other tobacco products. We also reported the elasticities by U.S. census regions and market size. These results may have important policy implications, especially viewed in the context of the rise of electronic cigarettes and the potential for harm reduction if combustible tobacco users switch to non-combustible tobacco products.

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From Maize to Haze: Agricultural Shocks and the Growth of the Mexican Drug Sector

Oeindrila Dube, Omar García-Ponce & Kevin Thom

Journal of the European Economic Association, forthcoming

Abstract:
Understanding how economic incentives affect illegal drug production is essential for crafting policies in response to the international drug trade. Policymakers typically face a choice between two strategies: targeting criminal groups via law enforcement, and offering producers incentives to engage in alternate activities. Yet, little is known about how the returns to alternate legal activities affect drug supply. We contribute to this literature by examining how shocks to legal commodity prices affect the drug trade in Mexico. Our analysis exploits exogenous movements in the Mexican maize price stemming from weather conditions in US maize-growing regions, as well as exports of other major maize producers. Using data on over 2200 municipios spanning 1990–2010, we show that lower prices differentially increased the cultivation of both marijuana and opium poppies in municipios more climatically suited to growing maize. We also find impacts on downstream drug-trade outcomes, including drug cartel operations and killings perpetrated by these groups. Our findings demonstrate that maize price changes contributed to the burgeoning drug trade in Mexico, and point to the violent consequences of an expanding drug sector.

By KEVIN LEWIS | 09:00:00 AM

Wednesday, August 24, 2016

The golden rules

Beautiful Lemons: Adverse Selection in Durable-Goods Markets with Sorting

Jonathan Peterson & Henry Schneider

Management Science, forthcoming

Abstract:
We document a basic characteristic of adverse selection in secondhand markets for durable goods: goods with higher observed quality may have more adverse selection and hence lower unobserved quality. We provide a simple theoretical model to demonstrate this result, which is a consequence of the interaction of sorting between drivers over observed quality and adverse selection over unobserved quality. We then offer empirical support using data on secondhand prices and repair rates of used cars from the Consumer Expenditure Survey, and discuss a number of implications for everyday advertising and consumer questions.

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Economic freedom and economic crises

Christian Bjørnskov

European Journal of Political Economy, forthcoming

Abstract:
In this paper, I explore the politically contested association between the degree of capitalism, captured by measures of economic freedom, and the risk and characteristics of economic crises. After offering some brief theoretical considerations, I estimate the effects of economic freedom on crisis risk in the post-Cold War period 1993–2010. I further estimate the effects on the duration, peak-to-trough GDP ratios and recovery times of 212 crises across 175 countries within this period. Estimates suggest that economic freedom is robustly associated with smaller peak-to-trough ratios and shorter recovery time. These effects are driven by regulatory components of the economic freedom index.

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Property Is Another Name for Monopoly Facilitating Efficient Bargaining with Partial Common Ownership of Spectrum, Corporations, and Land

Eric Posner & Glen Weyl

University of Chicago Working Paper, August 2016

Abstract:
The existing system of private property interferes with allocative efficiency by giving owners the power to hold out for excessive prices. We propose a remedy in the form of a tax on property, based on the value self-assessed by its owner at intervals, along with a requirement that the owner sell the property to any third party willing to pay a price equal to the self-assessed value. The tax rate would reflect a tradeoff between gains from allocative efficiency and losses to investment efficiency, and would increase in line with expected developments in information technology. The legal and economic implications of this system are explored.

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The Bright Side of Patents

Joan Farre-Mensa, Deepak Hegde & Alexander Ljungqvist

NBER Working Paper, February 2016

Abstract:
Motivated by concerns that the patent system is hindering innovation, particularly for small inventors, this study investigates the bright side of patents. We examine whether patents help startups grow and succeed using detailed micro data on all patent applications filed by startups at the U.S. Patent and Trademark Office (USPTO) since 2001 and approved or rejected before 2014. We leverage the fact that patent applications are assigned quasi-randomly to USPTO examiners and instrument for the probability that an application is approved with individual examiners’ historical approval rates. We find that patent approvals help startups create jobs, grow their sales, innovate, and reward their investors. Exogenous delays in the patent examination process significantly reduce firm growth, job creation, and innovation, even when a firm’s patent application is eventually approved. Our results suggest that patents act as a catalyst that sets startups on a growth path by facilitating their access to capital. Proposals for patent reform should consider these benefits of patents alongside their potential costs.

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The Regulatory Determinants of Railroad Safety

Jerry Ellig & Patrick McLaughlin

Review of Industrial Organization, September 2016, Pages 371-398

Abstract:
The dramatic improvement in railroad safety since the 1970s has been accompanied by a substantial increase in safety regulation and a substantial reduction in economic regulation after 1980. We assess the effects of both regulatory changes on railroad safety with the use of RegData: a new data set that was developed by one of the authors that measures the amount of regulation that is imposed by specific regulatory agencies on specific industries. We find that partial economic deregulation is associated with improved safety. Safety regulation was most closely associated with improved railroad safety during the period when economic regulation curtailed railroads’ incentives to operate safely.

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Regional business climate and interstate manufacturing relocation decisions

Tessa Conroy, Steven Deller & Alexandra Tsvetkova

Regional Science and Urban Economics, September 2016, Pages 155–168

Abstract:
In this study, we use the National Establishment Time Series (NETS) database to study relocation by manufacturers based on differences in the business climate between the origin and destination states. We model interstate relocations for manufacturers in aggregate and for three subgroups characterized by their industry-level research and development (R&D) intensity. The analysis suggests that very few manufacturing firms relocate across state lines in any given year and the vast majority of those that do are small in size and move to adjoining states. Our results also reveal that interstate migration by manufacturing establishments varies with their R&D intensity. Whereas a number of factors considered in this study are statistically significant, marginal effects at the mean are infinitesimal. This implies that states attempting to encourage manufacturing firms to relocate from other states via traditional perspectives on business climate are unlikely to be successful.

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Insurance coverage of customers induces dishonesty of sellers in markets for credence goods

Rudolf Kerschbamer, Daniel Neururer & Matthias Sutter

Proceedings of the National Academy of Sciences, 5 July 2016, Pages 7454–7458

Abstract
Honesty is a fundamental pillar for cooperation in human societies and thus for their economic welfare. However, humans do not always act in an honest way. Here, we examine how insurance coverage affects the degree of honesty in credence goods markets. Such markets are plagued by strong incentives for fraudulent behavior of sellers, resulting in estimated annual costs of billions of dollars to customers and the society as a whole. Prime examples of credence goods are all kinds of repair services, the provision of medical treatments, the sale of software programs, and the provision of taxi rides in unfamiliar cities. We examine in a natural field experiment how computer repair shops take advantage of customers’ insurance for repair costs. In a control treatment, the average repair price is about EUR 70, whereas the repair bill increases by more than 80% when the service provider is informed that an insurance would reimburse the bill. Our design allows decomposing the sources of this economically impressive difference, showing that it is mainly due to the overprovision of parts and overcharging of working time. A survey among repair shops shows that the higher bills are mainly ascribed to insured customers being less likely to be concerned about minimizing costs because a third party (the insurer) pays the bill. Overall, our results strongly suggest that insurance coverage greatly increases the extent of dishonesty in important sectors of the economy with potentially huge costs to customers and whole economies.

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Economic freedom and social capital: Pooled mean group evidence

Jeremy Jackson

Applied Economics Letters, forthcoming

Abstract:
This article uses annual US-state-level data from 1986 to 2004 and pooled-mean group estimation based on Pesaran et al. (1999) to examine whether economic freedom influences social capital. We find economic freedom has a negative effect on our social capital measure. This result is driven by the labour market component of freedom which is indicative of the relationship between labour market freedom and Olson-type group social capital.

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Of Mice and Academics: Examining the Effect of Openness on Innovation

Fiona Murray et al

American Economic Journal: Economic Policy, February 2016, Pages 212-252

Abstract:
This paper argues that openness, by lowering costs to access existing research, can enhance both early and late stage innovation through greater exploration of novel research directions. We examine a natural experiment in openness: late-1990s NIH agreements that reduced academics' access costs regarding certain genetically engineered mice. Implementing difference-in-differences estimators, we find that increased openness encourages entry by new researchers and exploration of more diverse research paths, and does not reduce the creation of new genetically engineered mice. Our findings highlight a neglected cost of strong intellectual property restrictions: lower levels of exploration leading to reduced diversity of research output.

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Beyond Kelo: An Experimental Study of Public Opposition to Eminent Domain

Logan Strother

Journal of Law and Courts, Fall 2016, Pages 339-375

Abstract:
The power of government to take private property for public use has been a frequent source of political disquiet because of the tension it creates with notions of individual rights ingrained in liberal society. The backlash against takings after Kelo offers a case in point. Existing research has focused on the public’s distaste for the taking of homes and has thus missed an important cause of the backlash: the purpose for which property is taken. I utilize a combination of experimental and observational methods to advance our understanding of this important issue, finding that purpose is crucial in shaping attitudes toward takings.

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Money Secrets: How Does Trade Secret Legal Protection Affect Firm Market Value? Evidence from the Uniform Trade Secret Act

Francesco Castellaneta, Raffaele Conti & Aleksandra “Olenka” Kacperczyk

Strategic Management Journal, forthcoming

Abstract:
We investigate the impact of trade secret legal protection on firm market value in the context of acquisitions. On one hand, market value may increase because trade secret assets become better protected from rivals. On the other hand, market value may decrease because trade secret protection reduces information about the target and its competitors available to potential buyers, increasing uncertainty about its value. Buyers will discount their offers in expectation of being compensated for riskier deals. Using a sample of private equity investments in the United States, we find that trade secret protection has a positive effect in industries with high mobility of knowledge workers, and a negative effect in industries with (a) high resource-value uncertainty, and (b) high poor-investment risk.

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Low-quality Patents in the Eye of the Beholder: Evidence from Multiple Examiners

Gaétan de Rassenfosse, Adam Jaffe & Elizabeth Webster

NBER Working Paper, May 2016

Abstract:
Low-quality patents are of considerable concern to businesses operating in patent-dense markets. There are two pathways by which low-quality patents may be issued: the patent office may apply systematically a standard that is too lenient (low inventive step threshold); or the patent office may grant patents that are, in fact, below its own threshold (so-called ‘weak’ patents). This paper uses novel data from inventions that have been examined at the five largest patent offices and an explicit model of the grant process to derive first-of-their-kind office-specific estimates of the height of the inventive step threshold and the prevalence of weak patents. The empirical analysis is based on patent applications granted at one office but refused at another office. We estimate that the fraction of patent grants associated with a patent standard that is lower than that of other countries ranges from 2-15%, with Japan having the tightest standard and the United States and China the loosest. The fraction of grants that are inconsistent with the office’s own standard ranges from 2-6 per cent. The fraction of grants that are inconsistent in this sense is generally higher in newer fields such as software and biotechnology, and lower in traditional fields such as mechanical engineering. Our estimates of invalidity are much lower than those that have been derived from litigation studies, consistent with litigated patents being highly non-representative of the population.

By KEVIN LEWIS | 09:00:00 AM


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