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Tuesday, January 17, 2017

Legitimate

Exposure to justice diminishes moral perception

Ana Gantman & Jay Van Bavel

Journal of Experimental Psychology: General, December 2016, Pages 1728-1739

Abstract:
Evidence suggests that people have a lower threshold for the conscious awareness of moral words. Given the potential motivational relevance of moral concerns, the authors hypothesized and found that motivational relevance of moral stimuli enhanced the detection of moral words. People who saw a CrimeStoppers advertisement in which a majority (vs. minority) of wanted murderers had been brought to justice exhibited reduced detection of moral words (Experiment 1). Similarly, people who read that an assailant was arrested (vs. escaped punishment) exhibited reduced detection of moral words (Experiment 2). In both experiments, the effect of justice motives on moral word detection was specific to words presented near (vs. distant) to the threshold for perceptual awareness. These findings suggest that satiating (vs. activating) justice motives can reduce the frequency with which moral (vs. non-moral) words reach perceptual awareness. Implications for models of moral psychology, particularly the role of perception in morality, are discussed.

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Value Corruption: Instrumental Use Erodes Sacred Values

Rachel Ruttan & Loran Nordgren

Northwestern University Working Paper, September 2016

Abstract:
Sacred values like environmental-protection, patriotism, and diversity are increasingly leveraged by organizations, marketers, and individuals to yield profits and favorable reputations. In the current research, we investigated a potentially perverse consequence of this tendency: that observing values used instrumentally (i.e., in the service of self-interest) will negatively impact observers' perceptions of those values. Six studies demonstrate support for this value corruption hypothesis. Following exposure to the instrumental use of a sacred value, people perceived that value to be less sacred as assessed by both explicit (Studies 1-6) and implicit (Study 4) measures, and were less willing to act in value-consistent ways (Studies 4 and 5). Study 3 found that the value corruption effect was specific to sacred values, and was attenuated when a non-sacred value was used instrumentally. These results have important implications: People and organizations that use values instrumentally may ultimately undermine the values from which they intend to benefit. The results also suggest that introducing market norms into previously untouched domains will ultimately come at a cost.

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Variation in the oxytocin receptor gene (OXTR) is associated with differences in moral judgment

Regan Bernhard et al.

Social Cognitive and Affective Neuroscience, December 2016, Pages 1872-1881

Abstract:
Moral judgments are produced through the coordinated interaction of multiple neural systems, each of which relies on a characteristic set of neurotransmitters. Genes that produce or regulate these neurotransmitters may have distinctive influences on moral judgment. Two studies examined potential genetic influences on moral judgment using dilemmas that reliably elicit competing automatic and controlled responses, generated by dissociable neural systems. Study 1 (N = 228) examined 49 common variants (SNPs) within 10 candidate genes and identified a nominal association between a polymorphism (rs237889) of the oxytocin receptor gene (OXTR) and variation in deontological vs utilitarian moral judgment (that is, judgments favoring individual rights vs the greater good). An association was likewise observed for rs1042615 of the arginine vasopressin receptor gene (AVPR1A). Study 2 (N = 322) aimed to replicate these findings using the aforementioned dilemmas as well as a new set of structurally similar medical dilemmas. Study 2 failed to replicate the association with AVPR1A, but replicated the OXTR finding using both the original and new dilemmas. Together, these findings suggest that moral judgment is influenced by variation in the oxytocin receptor gene and, more generally, that single genetic polymorphisms can have a detectable effect on complex decision processes.

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Dirty Money: The Role of Moral History in Economic Judgments

Arber Tasimi & Susan Gelman

Cognitive Science, forthcoming

Abstract:
Although traditional economic models posit that money is fungible, psychological research abounds with examples that deviate from this assumption. Across eight experiments, we provide evidence that people construe physical currency as carrying traces of its moral history. In Experiments 1 and 2, people report being less likely to want money with negative moral history (i.e., stolen money). Experiments 3-5 provide evidence against an alternative account that people's judgments merely reflect beliefs about the consequences of accepting stolen money rather than moral sensitivity. Experiment 6 examines whether an aversion to stolen money may reflect contamination concerns, and Experiment 7 indicates that people report they would donate stolen money, thereby counteracting its negative history with a positive act. Finally, Experiment 8 demonstrates that, even in their recall of actual events, people report a reduced tendency to accept tainted money. Altogether, these findings suggest a robust tendency to evaluate money based on its moral history, even though it is designed to participate in exchanges that effectively erase its origins.

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Judging those who judge: Perceivers infer the roles of affect and cognition underpinning others' moral dilemma responses

Sarah Rom, Alexa Weiss & Paul Conway

Journal of Experimental Social Psychology, March 2017, Pages 44-58

Abstract:
Whereas considerable research examines antecedents of moral dilemma judgments where causing harm maximizes outcomes, this work examines social consequences: whether participants infer personality characteristics from others' dilemma judgments. We propose that people infer the roles of affective and cognitive processing underlying other peoples' moral dilemma judgments, and use this information to inform personality perceptions. In Studies 1 and 2, participants rated targets who rejected causing outcome-maximizing harm (consistent with deontology) as warmer but less competent than targets who accepted causing outcome-maximizing harm (consistent with utilitarianism). Studies 3a and 3b replicated this pattern and demonstrated that perceptions of affective processing mediated the effect on warmth, whereas perceptions of cognitive processing mediated the effect on competence. In Study 4 participants accurately predicted that affective decision-makers would reject harm, whereas cognitive decision-makers would accept harm. Furthermore, participants preferred targets who rejected causing harm for a social role prioritizing warmth (pediatrician), whereas they preferred targets who accepted causing harm for a social role prioritizing competence (hospital management, Study 5). Together, these results suggest that people infer the role of affective and cognitive processing underlying others' harm rejection and acceptance judgments, which inform personality inferences and decision-making.

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Beyond Purity: Moral Disgust Toward Bad Character

Roger Giner-Sorolla & Hanah Chapman

Psychological Science, January 2017, Pages 80-91

Abstract:
Previous studies support a link between moral disgust and impurity, whereas anger is linked to harm. We challenged these strict correspondences by showing that disgust is activated in response to information about moral character, even for harm violations. By contrast, anger is activated in response to information about actions, including their moral wrongness and consequences. Study 1 examined disgust and anger in response to an action that suggests bad moral character (animal cruelty) versus an action that is seen as inherently more wrong (domestic abuse). Animal cruelty was associated with more disgust than domestic abuse was, whereas domestic abuse was associated with more anger. Studies 2 and 3 manipulated character by varying the agent's desire to cause harm and also varied the action's harmful consequences. Desire to harm predicted only disgust (controlling for anger), whereas consequences were more closely related to anger (controlling for disgust). Taken together, these results indicate that disgust arises in response to evidence of bad moral character, not just to impurity.

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Corporate Personhood: Lay Perceptions and Ethical Consequences

Arthur Jago & Kristin Laurin

Journal of Experimental Psychology: Applied, forthcoming

Abstract:
Modern conceptions of corporate personhood have spurred considerable debate about the rights that society should afford business organizations. Across eight experiments, we compare lay perceptions of how corporations and people use rights, and also explore the with consequences of these judgments. We find that people believe corporations, compared to humans, are similarly likely to use rights in protective ways that prevent harm but more likely to use rights in nonprotective ways that appear independent from - or even create - harm (Experiments 1a through 1c and Experiment 2). Because of these beliefs, people support corporate rights to a lesser extent than human rights (Experiment 3). However, people are more supportive of specific corporate rights when we framed them as serving protective functions (Experiment 4). Also as a result of these beliefs, people attribute greater ethical responsibility to corporations, but not to humans, that gain access to rights (Experiments 5a and 5b). Despite their equitability in many domains, people believe corporations and humans use rights in different ways, ultimately producing different reactions to their behaviors as well as asymmetric moral evaluations.

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"Thou Shalt Kill": Practicing self-control supports adherence to personal values when asked to aggress

Thomas Denson et al.

Journal of Experimental Social Psychology, March 2017, Pages 71-78

Abstract:
Poor self-control is a root cause of aggression and criminality. But people can improve their self-control through repetitive practice. Because self-control involves acting in accordance with personal values, practicing self-control can promote attainment of value-consistent goals. The present research tested the hypothesis that practicing self-control could both decrease and increase obedient aggression. In Experiment 1, relative to the active control group, participants who practiced self-control were more hesitant to engage in mock violence (e.g., "cutting" the experimenter's throat with a rubber knife), especially for participants high in dispositional empathy. In Experiment 2, practicing self-control increased obedience to kill insects, but only among participants who felt little moral responsibility for their actions. There was a trend for decreased killing among participants who felt morally responsible for their actions. Our findings suggest that when asked to behave aggressively, self-control promotes adherence to personal values, which may or may not fuel aggression.

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Empathy by dominant versus minority group members in intergroup interaction: Do dominant group members always come out on top?

Jacquie Vorauer & Matthew Quesnel

Group Processes & Intergroup Relations, forthcoming

Abstract:
What power dynamics are instantiated when a minority group member empathizes with a dominant group member during social interaction? How do these dynamics compare to those instantiated when the dominant group member instead does the empathizing? According to a general power script account, because empathy is generally directed "down" toward disadvantaged targets needing support, the empathizer should come out "on top" with respect to power-relevant outcomes no matter who it is. According to a meta-stereotype account, because adopting an empathic stance in intergroup contexts leads individuals to think about how their own group is viewed (including with respect to power-relevant characteristics), the dominant group member might come out on top no matter which person empathizes. Two studies involving face-to-face intergroup exchanges yielded results that overall were consistent with the meta-stereotype account: Regardless of who does it, empathy in intergroup contexts seems more apt to exacerbate than mitigate group-based status differences.

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Public Attitudes Toward Legal Abortion, Euthanasia, Suicide, and Capital Punishment: Partial Evidence of a Consistent Life Ethic

Adam Trahan

Criminal Justice Review, forthcoming

Abstract:
Recent research suggests that public attitudes toward capital punishment are fundamentally value expressive rather than instrumental. This study explores the value-expressive basis of capital punishment attitudes by analyzing the relationships between various domains of life and the law. Logistic regression of data from the 1972-2012 cumulative data file of the General Social Survey was used to analyze whether composite variables for opposition to legal abortion, euthanasia, and suicide could predict capital punishment attitudes. Findings show that main effects of opposition to legal abortion, suicide, and euthanasia increased the odds of opposing capital punishment. Among 3 two-way interaction terms, only opposition to suicide and euthanasia was significant, and it was associated with increased support for capital punishment rather than opposition. These findings lend qualified support to the consistent life ethic framework and value-expressive basis of capital punishment attitudes.

By KEVIN LEWIS | 09:00:00 AM

Monday, January 16, 2017

Spent

The Persistent Reduction in Poverty from Filing a Tax Return

Shanthi Ramnath & Patricia Tong

American Economic Journal: Economic Policy, forthcoming

Abstract:
Low-income households not required to file often fail to receive benefits provided through the tax code. In 2008, the U.S. government made people with at least $3,000 in earnings eligible for a stimulus payment if they filed a tax return. Using eligibility for this credit as an instrument for filing, we find with administrative data that filing reduces the probability of living in poverty in future years, which is a result of increases in EITC claiming, workforce attachment, and earnings. These results demonstrate temporary incentives to participate in the tax system have persistent real effects on economic activity and poverty.

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The Relationship Between Mental Representations of Welfare Recipients and Attitudes Toward Welfare

Jazmin Brown-Iannuzzi et al.

Psychological Science, January 2017, Pages 92-103

Abstract:
Scholars have argued that opposition to welfare is, in part, driven by stereotypes of African Americans. This argument assumes that when individuals think about welfare, they spontaneously think about Black recipients. We investigated people’s mental representations of welfare recipients. In Studies 1 and 2, we used a perceptual task to visually estimate participants’ mental representations of welfare recipients. Compared with the average non-welfare-recipient image, the average welfare-recipient image was perceived (by a separate sample) as more African American and more representative of stereotypes associated with welfare recipients and African Americans. In Study 3, participants were asked to determine whether they supported giving welfare benefits to the people pictured in the average welfare-recipient and non-welfare-recipient images generated in Study 2. Participants were less supportive of giving welfare benefits to the person shown in the welfare-recipient image than to the person shown in the non-welfare-recipient image. The results suggest that mental images of welfare recipients may bias attitudes toward welfare policies.

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The Life-cycle Benefits of an Influential Early Childhood Program

Jorge Luis García et al.

NBER Working Paper, December 2016

Abstract:
This paper estimates the long-term benefits from an influential early childhood program targeting disadvantaged families. The program was evaluated by random assignment and followed participants through their mid-30s. It has substantial beneficial impacts on health, children's future labor incomes, crime, education, and mothers' labor incomes, with greater monetized benefits for males. Lifetime returns are estimated by pooling multiple data sets using testable economic models. The overall rate of return is 13.7% per annum, and the benefit/cost ratio is 7.3. These estimates are robust to numerous sensitivity analyses.

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Adolescence is a Sensitive Period for Housing Mobility to Influence Risky Behaviors: An Experimental Design

Nicole Schmidt, Maria Glymour & Theresa Osypuk

Journal of Adolescent Health, forthcoming

Methods: The Moving to Opportunity (MTO) study randomly assigned volunteer families (1994–1997) to receive a Section 8 voucher to move to lower poverty neighborhoods versus a public housing control group. We tested three-way treatment, gender, and age-at-randomization interactions using intent-to-treat linear regression predicting a risky behavior index (RBI; measured in 2002, N = 2,829), defined as the fraction of 10 behaviors the youth reported (six measuring risky substance use [RSU], four measuring risky sexual behavior), and the RSU and risky sexual behavior subscales.

Results: The treatment main effect on RBI was nonsignificant for girls (B = −.01, 95% confidence interval −.024 to .014) and harmful for boys (B = .03, 95% confidence interval .009 to .059; treatment-gender interaction p = .01). The treatment, gender, and age interaction was significant for RBI (p = .02) and RSU (p ≤ .001). Treatment boys 10 years or older at randomization were more likely (p < .05) than controls to exhibit RBI and RSU, whereas there was no effect of treatment for boys <10 years. There were no treatment control differences by age for girls' RBI, but girls 9+ years were less likely than girls ≤8 years to exhibit RSU (p < .05).

Conclusions: Moving families of boys aged 10 years or older with rental vouchers may have adverse consequences on risky behaviors but may be beneficial for girls' substance use. Developmental windows are different by gender for the effects of improving neighborhood contexts on adolescent risky behavior.

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Targeting Policies: Multiple Testing and Distributional Treatment Effects

Steven Lehrer, Vincent Pohl & Kyungchul Song

NBER Working Paper, December 2016

Abstract:
Economic theory often predicts that treatment responses may depend on individuals’ characteristics and location on the outcome distribution. Policymakers need to account for such treatment effect heterogeneity in order to efficiently allocate resources to subgroups that can successfully be targeted by a policy. However, when interpreting treatment effects across subgroups and the outcome distribution, inference has to be adjusted for multiple hypothesis testing to avoid an overestimation of positive treatment effects. We propose six new tests for treatment effect heterogeneity that make corrections for the family-wise error rate and that identify subgroups and ranges of the outcome distribution exhibiting economically and statistically significant treatment effects. We apply these tests to individual responses to welfare reform and show that welfare recipients benefit from the reform in a smaller range of the earnings distribution than previously estimated. Our results shed new light on effectiveness of welfare reform and demonstrate the importance of correcting for multiple testing.

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The Role of Policy and Practice in Short Spells of Child Care Subsidy Participation

Elizabeth Davis, Caroline Krafft & Nicole Forry

Journal of Public Administration Research and Theory, January 2017, Pages 1-19

Abstract:
A major change in US child care subsidy policy in 2014 established a 12-month eligibility period for families participating in the child care subsidy program. The primary policy objective of lengthening eligibility periods was to increase the stability of child care. Previous research in a small number of states has shown that families are more likely to leave the subsidy program at the time of eligibility recertification even though they may remain eligible. Using data from the state of Maryland, this article investigates whether longer eligibility periods contribute to longer continuous subsidy receipt and the degree to which local offices follow state guidelines when setting redetermination periods. Using a Cox proportional hazards model and controlling for child, family, and provider characteristics, we show that families were substantially more likely to leave the subsidy program when their voucher was due to expire or they were scheduled to recertify eligibility. We find that the span of time allotted to families before they need to recertify eligibility varied substantially across counties in ways that were not related to child or family characteristics, despite a statewide policy allowing eligibility recertification at 12-month intervals.

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Protective Prevention Effects on the Association of Poverty With Brain Development

Gene Brody et al.

JAMA Pediatrics, January 2017, Pages 46-52

Design, Setting, and Participants: In the rural southeastern United States, African American parents and their 11-year-old children were assigned randomly to the Strong African American Families randomized prevention trial or to a control condition. Parents provided data used to calculate income-to-needs ratios when children were aged 11 to 13 years and 16 to 18 years. When the participants were aged 25 years, hippocampal and amygdalar volumes were measured using magnetic resonance imaging.

Results: Of the 667 participants in the Strong African American Families randomized prevention trial, 119 right-handed African American individuals aged 25 years living in rural areas were recruited. Years lived in poverty across ages 11 to 18 years forecasted diminished left dentate gyrus (simple slope, −14.20; standard error, 5.22; P = .008) and CA3 (simple slope, −6.42; standard error, 2.42; P = .009) hippocampal subfields and left amygdalar (simple slope, −34.62; standard error, 12.74; P = .008) volumes among young adults in the control condition (mean [SD] time, 2.04 [1.88] years) but not among those who participated in the Strong African American Families program (mean [SD] time, 2.61 [1.77] years).

Conclusions and Relevance: In this study, we described how participation in a randomized clinical trial designed to enhance supportive parenting ameliorated the association of years lived in poverty with left dentate gyrus and CA3 hippocampal subfields and left amygdalar volumes. These findings are consistent with a possible role for supportive parenting and suggest a strategy for narrowing social disparities.

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The effects of minimum wages on the health of working teenagers

Susan Averett, Julie Smith & Yang Wang

Applied Economics Letters, forthcoming

Abstract:
This article examines the effect of minimum wage increases on the self-reported health of teenage workers. We use a difference-in-differences estimation strategy and data from the Current Population Survey, and disaggregate the sample by race/ethnicity and gender to uncover the differential effects of changes in the minimum wage on health. We find that white women are more likely to report better health with a minimum wage increase while Hispanic men report worse health.

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Landlords avoid tenants who pay with vouchers

David Phillips

Economics Letters, February 2017, Pages 48–52

Abstract:
This paper uses a correspondence experiment with fictional housing applicants to test how landlords respond to tenants paying with a subsidized voucher. Landlords respond positively to those wishing to pay by voucher only half as often as to those indicating no such desire. Within the set of apartments eligible for voucher rent limits, the voucher penalty increases with monthly rent. Landlord behavior places quantitatively important restrictions on the quantity and type of apartments available to voucher recipients.

By KEVIN LEWIS | 09:00:00 AM

Sunday, January 15, 2017

Mankind

Earliest Human Presence in North America Dated to the Last Glacial Maximum: New Radiocarbon Dates from Bluefish Caves, Canada

Lauriane Bourgeon, Ariane Burke & Thomas Higham

PLoS ONE, January 2017

Abstract:
The timing of the first entry of humans into North America is still hotly debated within the scientific community. Excavations conducted at Bluefish Caves (Yukon Territory) from 1977 to 1987 yielded a series of radiocarbon dates that led archaeologists to propose that the initial dispersal of human groups into Eastern Beringia (Alaska and the Yukon Territory) occurred during the Last Glacial Maximum (LGM). This hypothesis proved highly controversial in the absence of other sites of similar age and concerns about the stratigraphy and anthropogenic signature of the bone assemblages that yielded the dates. The weight of the available archaeological evidence suggests that the first peopling of North America occurred ca. 14,000 cal BP (calibrated years Before Present), i.e., well after the LGM. Here, we report new AMS radiocarbon dates obtained on cut-marked bone samples identified during a comprehensive taphonomic analysis of the Bluefish Caves fauna. Our results demonstrate that humans occupied the site as early as 24,000 cal BP (19,650 ± 130 14C BP). In addition to proving that Bluefish Caves is the oldest known archaeological site in North America, the results offer archaeological support for the “Beringian standstill hypothesis”, which proposes that a genetically isolated human population persisted in Beringia during the LGM and dispersed from there to North and South America during the post-LGM period.

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Myopia is an adaptive characteristic of vision: Not a disease or defect

Richard Wielkiewicz

Review of General Psychology, December 2016, Pages 437-451

Abstract:
This article proposes that myopia (nearsightedness) is an adaptive characteristic of human vision. Most theories of the evolution of vision assume myopia is a disease or defect that would have resulted in decreased reproductive fitness in the absence of modern corrective lenses. In contrast, the present article argues that myopic individuals may have played important roles in hunter–gatherer groups such as making tools and weapons, and identifying medicinal plants, contributing to individual and group survival. This idea is called the “adaptive myopia hypothesis.” Evidence favoring this hypothesis is reviewed in the context of the metatheory of evolutionary psychology.

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Large Scale Anthropogenic Reduction of Forest Cover in Last Glacial Maximum Europe

Jed Kaplan et al.

PLoS ONE, November 2016

Abstract:
Reconstructions of the vegetation of Europe during the Last Glacial Maximum (LGM) are an enigma. Pollen-based analyses have suggested that Europe was largely covered by steppe and tundra, and forests persisted only in small refugia. Climate-vegetation model simulations on the other hand have consistently suggested that broad areas of Europe would have been suitable for forest, even in the depths of the last glaciation. Here we reconcile models with data by demonstrating that the highly mobile groups of hunter-gatherers that inhabited Europe at the LGM could have substantially reduced forest cover through the ignition of wildfires. Similar to hunter-gatherers of the more recent past, Upper Paleolithic humans were masters of the use of fire, and preferred inhabiting semi-open landscapes to facilitate foraging, hunting and travel. Incorporating human agency into a dynamic vegetation-fire model and simulating forest cover shows that even small increases in wildfire frequency over natural background levels resulted in large changes in the forested area of Europe, in part because trees were already stressed by low atmospheric CO2 concentrations and the cold, dry, and highly variable climate. Our results suggest that the impact of humans on the glacial landscape of Europe may be one of the earliest large-scale anthropogenic modifications of the earth system.

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Low incidence of inbreeding in a long-lived primate population isolated for 75 years

Anja Widdig et al.

Behavioral Ecology and Sociobiology, January 2017

Abstract:
When close relatives mate, offspring are expected to suffer fitness consequences due to inbreeding depression. Inbreeding has previously been quantified in two ways: using a sufficiently large panel of markers or deep and complete pedigrees over several generations. However, the application of both approaches is still limited by the challenge of compiling such data for species with long generation times, such as primates. Here, we assess inbreeding in rhesus macaques living on Cayo Santiago (Puerto Rico), a population genetically isolated since 1938, but descendant of a large set of presumably unrelated founders. Using comprehensive genetic data, we calculated inbreeding coefficients (F) for 2669 individuals with complete three generation pedigrees and 609 individuals with complete four generation pedigrees. We found that 0.79 and 7.39% of individuals had an F > 0 when using data from three and four generation pedigrees, respectively. No evidence of an increase in inbreeding over the study period (up to 23 years) was found. Furthermore, the observed mean relatedness of breeding pairs differed significantly from the distribution of parental relatedness expected as simulated based on previous reproductive data, suggesting that kin generally avoid breeding with each other. Finally, inbreeding was not a predictor of early mortality measured as survival until weaning and sexual maturation, respectively. Our results remain consistent with three estimators of inbreeding (standardized heterozygosity, internal relatedness, and homozygosity by loci) using up to 42 highly polymorphic microsatellites for the same set of individuals. Together, our results demonstrate that close inbreeding may not be prevalent even in populations isolated over long periods when mechanisms of inbreeding avoidance can operate.

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Biomolecular Evidence of Silk from 8,500 Years Ago

Yuxuan Gong et al.

PLoS ONE, December 2016

Abstract:
Pottery, bone implements, and stone tools are routinely found at Neolithic sites. However, the integrity of textiles or silk is susceptible to degradation, and it is therefore very difficult for such materials to be preserved for 8,000 years. Although previous studies have provided important evidence of the emergence of weaving skills and tools, such as figuline spinning wheels and osseous lamellas with traces of filament winding, there is a lack of direct evidence proving the existence of silk. In this paper, we explored evidence of prehistoric silk fibroin through the analysis of soil samples collected from three tombs at the Neolithic site of Jiahu. Mass spectrometry was employed and integrated with proteomics to characterize the key peptides of silk fibroin. The direct biomolecular evidence reported here showed the existence of prehistoric silk fibroin, which was found in 8,500-year-old tombs. Rough weaving tools and bone needles were also excavated, indicating the possibility that the Jiahu residents may possess the basic weaving and sewing skills in making textile. This finding may advance the study of the history of silk, and the civilization of the Neolithic Age.

By KEVIN LEWIS | 09:00:00 AM

Saturday, January 14, 2017

Whatever you want

Immediate Rewards Predict Adherence to Long-Term Goals

Kaitlin Woolley & Ayelet Fishbach

Personality and Social Psychology Bulletin, forthcoming

Abstract:
People primarily pursue long-term goals, such as exercising, to receive delayed rewards (e.g., improved health). However, we find that the presence of immediate rewards is a stronger predictor of persistence in goal-related activities than the presence of delayed rewards. Specifically, immediate rewards (e.g., enjoyment) predicted current persistence at New Year’s resolutions whereas delayed rewards did not (Study 1). Furthermore, immediate rewards predicted persistence in a single session of studying and exercising whereas delayed rewards did not, even though people report primarily pursuing these activities for delayed rewards (Studies 2 and 3). This is true for both short (1 week) and long (3 month) time frames (Study 4), and regardless of whether anticipated or materialized rewards are assessed (Study 5). Overall, whereas delayed rewards may motivate goal setting and the intentions to pursue long-term goals, a meta-analysis of our studies finds that immediate rewards are more strongly associated with actual persistence in a long-term goal.

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The “Batman Effect”: Improving Perseverance in Young Children

Rachel White et al.

Child Development, forthcoming

Abstract:
This study investigated the benefits of self-distancing (i.e., taking an outsider's view of one's own situation) on young children's perseverance. Four- and 6-year-old children (N = 180) were asked to complete a repetitive task for 10 min while having the option to take breaks by playing an extremely attractive video game. Six-year-olds persevered longer than 4-year-olds. Nonetheless, across both ages, children who impersonated an exemplar other — in this case a character, such as Batman — spent the most time working, followed by children who took a third-person perspective on the self, or finally, a first-person perspective. Alternative explanations, implications, and future research directions are discussed.

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Goal Attainability and Performance: Evidence from Boston Marathon Qualifying Standards

Mariya Burdina, Scott Hiller & Neil Metz

Journal of Economic Psychology, forthcoming

Abstract:
In this paper we test if performance improves once goals become more attainable. Goal-setting literature suggests that workers respond to challenging but achievable goals with increased performance. Empirical evidence supports the notion of goals increasing performance, however the evidence on how attainability of goals affects performance is mixed. This paper tests whether efforts increase, improving performance as the goals become more attainable. We are employing a unique set of publicly available marathon data from 1970-2015 to directly analyze the effect of goal attainability on performance. With the probable goal of qualifying for the Boston Marathon, we test if runners increase their effort, and consequently improve their performance if they enter a new age group and as a result have a more attainable goal. We find that runners who enter a new age group perform better than the runners whose qualifying time did not change. This effect is seen with runners in younger age groups, but not found in the results of runners in more advanced years.

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Knowledge of the Self-Control Benefits of High-Level Versus Low-Level Construal

Karen MacGregor et al.

Journal of Personality and Social Psychology, forthcoming

Abstract:
Research indicates that inducing high-level construal (processing that highlights invariant, essential features) relative to low-level construal (processing that highlights idiosyncratic, peripheral features) promotes self-control (Fujita & Carnevale, 2012). In the present work, we investigate to what extent people recognize the self-control benefits of high-level construal, and explore the consequences of this knowledge. Studies 1 and 2 provide initial evidence that individuals are aware that high-level relative to low-level construal promotes self-control in the dieting domain. Studies 3 and 4 find that individual differences in this knowledge predict self-control success outcomes (i.e., body mass index) among those who are motivated by dieting goals. Examining academics as a domain of self-control, Study 5 demonstrates that those with higher knowledge of construal level’s impact on self-control earned higher end-of-semester grades to the extent that they were motivated to do well academically. Theoretical and practical implications of these findings are discussed.

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Clicks as a Healthy Alternative to Bricks: How Online Grocery Shopping Reduces Vice Purchases

Elke Huyghe et al.

Journal of Marketing Research, forthcoming

Abstract:
Although consumers are concerned about their health, obesity statistics suggest that contextual factors often lead them to choose unhealthy alternatives (i.e., vices) rather than healthy ones (i.e., virtues). Noting the increasing prevalence of online grocery shopping, the authors focus on shopping channels as one such contextual factor and investigate how food choices made online differ from food choices made in a traditional brick-and-mortar store. A database study and three lab experiments demonstrate that consumers choose relatively fewer vices in the online shopping environment. Moreover, this shopping channel effect arises because online channels present products symbolically, whereas offline stores present them physically. A symbolic presentation mode decreases the products’ vividness, which in turn diminishes consumers’ desire to seek instant gratification and ultimately leads them to purchase fewer vices. These findings highlight several unexplored differences between online and offline shopping, with important implications for consumers, public policy makers, and retailers.

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Self-affirmation improves performance on tasks related to executive functioning

Philine Harris, Peter Harris & Eleanor Miles

Journal of Experimental Social Psychology, forthcoming

Objectives: The current study explored the effect of self-affirmation on two aspects of performance that have been related to executive functioning: working memory (assessed by a 2-back task) and inhibition (assessed by a Stroop task). The goal was to establish whether self-affirmation improved performance on these tasks.

Method: Participants (N = 83) were randomized to either a self-affirmation or a control task and then completed the computerized tasks, in a fixed sequence.

Results: Self-affirmed participants performed better than non-affirmed participants on both tasks.

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Self-Control and Peer Groups: An Empirical Analysis

Marco Battaglini, Carlos Díaz & Eleonora Patacchini

Journal of Economic Behavior & Organization, February 2017, Pages 240–254

Abstract:
We exploit the exogenous variation in peer groups generated by high school to college transitions to study the theoretical predictions of Battaglini et al. (2005) model of self-control in peer groups. We find evidence consistent with the two key predictions of this theory regarding the relationship between an agent's expected level of self-control and the size and composition of his or her social circles: (i) students embedded in social circles have more self-control than those who are alone and their self-control is increasing in the size of their social group; (ii) students’ self-control is, however, a non-monotonic hump-shaped function of the average self-control of their friends.

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Cavum Septum Pellucidum Volume and Life History Strategy

Curtis Dunkel et al.

Evolutionary Behavioral Sciences, forthcoming

Abstract:
Life history (LH) theory is an increasingly important evolutionary framework for understanding patterns among individual differences. However, developments in LH theory have not been accompanied by research on the neuroanatomy underlying these individual differences. The current investigation is an initial attempt to make a connection between individual differences in LH strategy and the neuroanatomy of the brain by examining the association between cavum septum pellucidum (CSP) and LH strategy. CSP is the space between the leaflets of the septum pellucidum and CSP size has been found to be predictive of numerous psychological illnesses. Moreover, the nomological network of CSP size is similar to that found for LH strategy. Thus, it was hypothesized that CSP size would also be associated with LH strategy. Using structural MRI data from the Human Connectome Project on 542 participants, the relationship between CSP volume and LH strategy, covitality, personality and a Super-K factor composed of the 3 factors was examined. Consistent with predictions, CSP volume was associated with all of the indicators of LH strategy. Additional analyses using the method of correlated vectors supported the CSP volume-LH strategy association. The results are discussed in terms of why this relationship exists, along with a prescription for additional research connecting LH theory and neuroscience.

By KEVIN LEWIS | 09:00:00 AM

Friday, January 13, 2017

Death spiral

The Long-Term Health Impacts of Medicaid and CHIP

Owen Thompson

Journal of Health Economics, January 2017, Pages 26–40

Abstract:
This paper estimates the effect of US public health insurance programs for children on health. Previous work in this area has typically focused on the relationship between current program eligibility and current health. But because health is a stock variable which reflects the cumulative influence of health inputs, it would be preferable to estimate the impact of total program eligibility during childhood on longer-term health outcomes. I provide such estimates by using longitudinal data to construct Medicaid and CHIP eligibility measures that are observed from birth through age 18 and estimating the effect of cumulative program exposure on a variety of health outcomes observed in early adulthood. To account for the endogeneity of program eligibility, I exploit variation in Medicaid and CHIP generosity across states and over time for children of different ages. I find that an additional year of public health insurance eligibility during childhood improves a summary index of adult health by .079 standard deviations, and substantially reduces health limitations, chronic conditions and asthma prevalence while improving self-rated health.

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Market Share Matters: Evidence Of Insurer And Provider Bargaining Over Prices

Eric Roberts, Michael Chernew & Michael McWilliams

Health Affairs, January 2017, Pages 141-148

Abstract:
Proposed mergers among large US health insurers and growing consolidation among providers have renewed concerns about the effects of market concentration on commercial health care prices. Using multipayer claims for physician services provided in office settings, we estimated that — within the same provider groups — insurers with market shares of 15 percent or more (average: 24.5 percent), for example, negotiated prices for office visits that were 21 percent lower than prices negotiated by insurers with shares of less than 5 percent. Analyses stratified by provider market share suggested that insurers require greater market shares to negotiate lower prices from large provider groups than they do when negotiating with smaller provider groups. For example, office visit prices for small practices were $88, $72, and $70, for insurers with market shares of <5 percent, ≥5 to <15 percent, and ≥15 percent, respectively, whereas prices for large provider groups were $97, $86, and $76, exhibiting a continued decrease across higher insurer-market-share categories. These results suggest that mergers of health insurers could lower the prices paid to providers, particularly providers large enough to obtain higher prices from insurers with modest market shares. Continued monitoring will be important for determining the net effects of the countervailing trends of insurer and provider consolidation on the affordability of health care.

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Technological Change and Risk Adjustment: Benefit Design Incentives in Medicare Part D

Colleen Carey

American Economic Journal: Economic Policy, forthcoming

Abstract:
Subsidized health insurance markets use diagnosis-based risk adjustment to induce insurers to offer an equitable benefit to individuals of varying expected cost. I demonstrate that technological change after risk adjustment calibration – new drug entry and the onset of generic competition – made certain diagnoses profitable or unprofitable in Medicare Part D. I then exploit variation in diagnoses’ profitability driven by technological change to show insurers designed more favorable benefits for drugs that treat profitable diagnoses as compared to unprofitable diagnoses. In the presence of technological change, risk adjustment may not fully neutralize insurers’ incentives to select through benefit designs.

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One In Five Inpatient Emergency Department Cases May Lead To Surprise Bills

Christopher Garmon & Benjamin Chartock

Health Affairs, January 2017, Pages 177-181

Abstract:
A surprise medical bill is a bill from an out-of-network provider that was not expected by the patient or that came from an out-of-network provider not chosen by the patient. In 2014, 20 percent of hospital inpatient admissions that originated in the emergency department (ED), 14 percent of outpatient visits to the ED, and 9 percent of elective inpatient admissions likely led to a surprise medical bill.

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Health insurer market power and employer size: An empirical evaluation of insurer concentration and wages through compensating differentials

Christopher Brunt & John Bowblis

Applied Economics, forthcoming

Abstract:
This article explores the differentiated effects of health insurer market concentration on net compensation of employees across distinct firm sizes. Consistent with the existing literature evaluating insurer market concentration and the theory of compensating differentials, we find evidence of higher premiums and reduced net compensation for employees in markets with more concentrated insurers. Furthermore, we find evidence that the magnitude of these effects is distinctly smaller for large employers. This implies that mergers of large health insurance companies may have a significant impact on small businesses but that the effect is mitigated for larger employers.

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Quality of Care Provided by Board-Certified Versus Non-Board-Certified Psychiatrists and Neurologists

Anna Wallace et al.

Academic Medicine, January 2017, Pages 108–115

Purpose: To examine associations between board certification of psychiatrists and neurologists and quality-of-care measures, using multilevel models controlling for physician and patient characteristics, and to assess feasibility of linking physician information with patient records to construct quality measures from electronic claims data.

Method: The authors identified quality measures and matched claims data from 2006 to 2012 with 942 board-certified (BC) psychiatrists, 868 non-board-certified (nBC) psychiatrists, 963 BC neurologists, and 328 nBC neurologists. Using the matched data, they identified psychiatrists who treated at least one patient with a schizophrenia diagnosis, and neurologists attending patients discharged with a principal diagnosis of ischemic stroke, and analyzed claims from these patients. For patients with schizophrenia who were prescribed an atypical antipsychotic, quality measures were claims for glucose and lipid tests, duration of any antipsychotic treatment, and concurrent prescription of multiple antipsychotics. For patients with ischemic stroke, quality measures were dysphagia evaluation; speech/language evaluation; and prescription of clopidogrel, low-molecular-weight heparin, intravenous heparin, and warfarin (for patients with co-occurring atrial fibrillation).

Results: Overall, multilevel models (patients nested within physicians) showed no statistically significant differences in quality measures between BC and nBC psychiatrists and neurologists.

Conclusions: The authors demonstrated the feasibility of linking physician information with patient records to construct quality measures from electronic claims data, but there may be only minimal differences in the quality of care between BC and nBC psychiatrists and neurologists, or there may be a difference that could not be measured with the quality measures used.

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The Impact of Medicare Part D on Self-Employment

Jeremy Moulton, Jeffrey Diebold & John Scott

Research on Aging, January 2017, Pages 64-85

Abstract:
We explore the relationship between access to affordable health insurance and self-employment using exogenous variation from the introduction of Medicare Part D that reduced the out-of-pocket cost of prescription drugs and improved health outcomes in a difference-in-differences model using the American Community Survey. We find that our treatment group of individuals aged 65–69 were 0.5 percentage points (or 5%) more likely to be self-employed in relation to a control group aged 60–64.

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Sorry is Never Enough: The Effect of State Apology Laws on Medical Malpractice Liability Risk

Benjamin McMichael, Lawrence Van Horn & Kip Viscusi

Vanderbilt University Working Paper, December 2016

Abstract:
State apology laws offer a separate avenue from traditional damages-centric tort reforms to promote communication between physicians and patients and to address potential medical malpractice liability. These laws facilitate apologies from physicians by excluding statements of apology from malpractice trials. Using a unique dataset that includes all malpractice claims for 90% of physicians practicing in a single specialty across the country, this study examines whether apology laws limit malpractice risk. For physicians who do not regularly perform surgery, apology laws increase the probability of facing a lawsuit and increase the average payment made to resolve a claim. For surgeons, apology laws do not have a substantial effect on the probability of facing a claim or the average payment made to resolve a claim. Overall, the evidence suggests that apology laws do not effectively limit medical malpractice liability risk.

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National Health Spending: Faster Growth In 2015 As Coverage Expands And Utilization Increases

Anne Martin et al.

Health Affairs, January 2017, Pages 166-176

Abstract:
Total nominal US health care spending increased 5.8 percent and reached $3.2 trillion in 2015. On a per person basis, spending on health care increased 5.0 percent, reaching $9,990. The share of gross domestic product devoted to health care spending was 17.8 percent in 2015, up from 17.4 percent in 2014. Coverage expansions that began in 2014 as a result of the Affordable Care Act continued to affect health spending growth in 2015. In that year, the faster growth in total health care spending was primarily due to accelerated growth in spending for private health insurance (growth of 7.2 percent), hospital care (5.6 percent), and physician and clinical services (6.3 percent). Continued strong growth in Medicaid (9.7 percent) and retail prescription drug spending (9.0 percent), albeit at a slower rate than in 2014, contributed to overall health care spending growth in 2015.

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Effects of Payment Reform in More versus Less Competitive Markets

Neeraj Sood et al.

Journal of Health Economics, January 2017, Pages 66–83

Abstract:
Policymakers are increasingly interested in reducing healthcare costs and inefficiencies through innovative payment strategies. These strategies may have heterogeneous impacts across geographic areas, potentially reducing or exacerbating geographic variation in healthcare spending. In this paper, we exploit a major payment reform for home health care to examine whether reductions in reimbursement lead to differential changes in treatment intensity and provider costs depending on the level of competition in a market. Using Medicare claims, we find that while providers in more competitive markets had higher average costs in the pre-reform period, these markets experienced larger proportional reductions in treatment intensity and costs after the reform relative to less competitive markets. This led to a convergence in spending across geographic areas. We find that much of the reduction in provider costs is driven by greater exit of “high-cost” providers in more competitive markets.

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Health Spillovers Among Hospital Patients: Evidence from Roommate Assignments

Olga Yakusheva

American Journal of Health Economics, forthcoming

Abstract:
This study examines health spillovers among hospital patients using a natural experiment of conditionally random hospital roommate assignments and electronic medical records data for a sample of 3,793 patients and their roommates. The study finds that positive health spillover effects may play an important role in reducing the amount of care the patient requires during hospitalization, shortening length of hospital stay, and lowering hospitalization cost, with little evidence of negative health effects for most patients. Mechanisms of roommate effects and implications for health-care delivery and policy are also considered.

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Affordable Care Act Changes To Medicare Led To Increased Diagnoses Of Early-Stage Colorectal Cancer Among Seniors

Brett Lissenden & Nengliang “Aaron” Yao

Health Affairs, January 2017, Pages 101-107

Abstract:
The Affordable Care Act (ACA) helped make preventive care, including recommended cancer screening, more affordable and accessible for millions of Americans. Using population-based data from the Surveillance, Epidemiology, and End Results (SEER) Program, we estimated the impact of ACA policy changes to facilitate the diagnosis of cancer at an earlier and more treatable stage. We estimated that the ACA resulted in an increase of 8,400 (8 percent) diagnoses of early-stage colorectal cancer among US seniors in the period 2011–13. However, the ACA had no distinguishable effect on the number of diagnoses of early-stage breast cancer over the same time period. It is likely that the ACA initially affected the diagnosis of colorectal cancer more than that of breast cancer because the decrease in out-of-pocket spending was larger for colorectal than for breast cancer screening.

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Quantifying Geographic Variation in Health Care Outcomes in the United States before and after Risk-Adjustment

Barry Rosenberg et al.

PLoS ONE, December 2016

Methods and Findings: We used information from 16 independent data sources, including 22 million all-payer inpatient admissions from the Healthcare Cost and Utilization Project (which covers regions where 50% of the U.S. population lives) to analyze 24 inpatient mortality, inpatient safety, and prevention outcomes. We compared outcome variation at state, hospital referral region, hospital service area, county, and hospital levels. Risk-adjusted outcomes were calculated after adjusting for population factors, co-morbidities, and health system factors. Even after risk-adjustment, there exists large geographical variation in outcomes. The variation in healthcare outcomes exceeds the well publicized variation in US healthcare costs. On average, we observed a 2.1-fold difference in risk-adjusted mortality outcomes between top- and bottom-decile hospitals. For example, we observed a 2.3-fold difference for risk-adjusted acute myocardial infarction inpatient mortality. On average a 10.2-fold difference in risk-adjusted patient safety outcomes exists between top and bottom-decile hospitals, including an 18.3-fold difference for risk-adjusted Central Venous Catheter Bloodstream Infection rates. A 3.0-fold difference in prevention outcomes exists between top- and bottom-decile counties on average; including a 2.2-fold difference for risk-adjusted congestive heart failure admission rates. The population, co-morbidity, and health system factors accounted for a range of R2 between 18–64% of variability in mortality outcomes, 3–39% of variability in patient safety outcomes, and 22–70% of variability in prevention outcomes.

Conclusion: The amount of variability in health outcomes in the U.S. is large even after accounting for differences in population, co-morbidities, and health system factors. These findings suggest that: 1) additional examination of regional and local variation in risk-adjusted outcomes should be a priority; 2) assumptions of uniform hospital quality that underpin rationale for policy choices (such as narrow insurance networks or antitrust enforcement) should be challenged; and 3) there exists substantial opportunity for outcomes improvement in the US healthcare system.

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Disclosing Physician Ratings: Performance Effects and the Difficulty of Altering Ratings Consensus

Henry Eyring

Harvard Working Paper, December 2016

Abstract:
This study addresses the effects of a health care system publicly disclosing patient ratings of some of its physicians. I find evidence that the disclosure leads to: 1) performance improvement as measured by the ratings and by objective quality measures, and 2) a bias among raters, whereby raters positively weight a physician’s published average rating in forming their own subsequent ratings of the physician. This study provides the first evidence of either result in the context of the growing trend of consumer-rating disclosure. I use web traffic data to assess how the performance and bias effects vary with public attention to the disclosed ratings. I find evidence consistent with public attention reinforcing raters' bias toward echoing a physician's past rating, thus impeding rating improvement. On average, the disclosure yields a rating improvement of 17 percentile points in a national distribution of ratings, and biases ratings toward the physician’s published average by 24 percentile points in that distribution. Collectively, the results show that disclosing consumer ratings has performance benefits, but also introduces a bias that works against ratings reflecting changes in service.

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Correlations Among Hospital Quality Measures: What “Hospital Compare” Data Tell Us

Jianhui Hu et al.

American Journal of Medical Quality, forthcoming

Abstract:
A number of quality rating systems to rank health care providers have been developed over the years with the intention of helping consumers make informed health care purchasing decisions. Many use sets of individual quality measures to calculate a global rating. The utility of a global rating for consumer choice hinges on the relationships among included measures and the extent to which they jointly reflect an underlying dimension of quality. Publicly reported data on 4 quality domains — complication, mortality, readmission, and patient safety — from Centers for Medicare & Medicaid Services’ Hospital Compare website were used to examine correlations among individual measures within each measure group (within-group correlations) and correlations between pairs of measures across different measure groups (between-group correlations). Modest within-group correlations were found in only 2 domains (mortality and readmission), and there were no meaningful between-group associations. These findings raise questions about whether consumers can reliably depend on global quality ratings to make informed decisions.

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Hospital Quality, Medical Charge Variation, and Patient Care Efficiency: Implications for Bundled Payment Reform Models

Seokjun Youn et al.

Texas A&M University Working Paper, November 2016

Abstract:
Patient-centric healthcare reform models pursue lower healthcare costs, improved care quality, and better patient population health outcomes. Many patient-centric reform models focus on standardizing treatment protocols and reducing care delivery variability. Yet the structure of reform models themselves may lead to unintended process variability, the implications of which researchers should analyze. Prior research has not determined whether the reform models can potentially drive better patient-centric outcomes. A distinct challenge in analyzing their potential impact concerns a lack of publicly available historical data on reform models. We circumvent this challenge by recasting available data into relevant metrics, and examining how variation in hospital medical charges relates to patient-centric reform model goals. To do so, we develop a hospital-condition level measure called weighted average coefficient of variation (WACV) to identify the degree of variation in hospital medical charges resulting from underlying care process variability. WACV contributes by capturing unwarranted process variation in medical care protocols after controlling for warranted variation due to patient distributions of illness severity. Using Medicare data from New York state, we find evidence that higher charge variation (WACV) levels are indeed associated with lower hospital technical efficiency. Secondly, we show that prior-period process quality (that measures how well a hospital adheres to evidence-based medical guidelines) has a significant negative association with WACV. In contrast, the prior-period outcome quality measures are not associated with WACV. For policy-makers, the results imply that managerial incentives and interventions based on process quality may be more effective for changing operational behaviors, compared to basing incentives and interventions solely on outcome quality. Further, the results imply that WACV should play a role in the design of healthcare reform models. We examine these implications for bundled payment programs, which fix the amount of reimbursement for hospitals within a predefined boundary of patient care episode. Empirical results suggest that the current bundled payment provider selection mechanism does not consider the degree of unwarranted variation in charges, which we claim to be the improvement opportunity for each participating provider. In doing so, our results contribute by demonstrating that existing bundled payment program policies may not achieve intended goals.

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Health Insurance Costs and Employee Compensation: Evidence from the National Compensation Survey

Priyanka Anand

Health Economics, forthcoming

Abstract:
This paper examines the relationship between rising health insurance costs and employee compensation. I estimate the extent to which total compensation decreases with a rise in health insurance costs and decompose these changes in compensation into adjustments in wages, non-health fringe benefits, and employee contributions to health insurance premiums. I examine this relationship using the National Compensation Survey, a panel dataset on compensation and health insurance for a sample of establishments across the USA. I find that total hourly compensation reduces by $0.52 for each dollar increase in health insurance costs. This reduction in total compensation is primarily in the form of higher employee premium contributions, and there is no evidence of a change in wages and non-health fringe benefits. These findings show that workers are absorbing at least part of the increase in health insurance costs through lower compensation and highlight the importance of examining total compensation, and not just wages, when examining the relationship between health insurance costs and employee compensation.

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Impact of the Medicaid expansion on U.S. health services firms: Evidence from the 2010 Affordable Care Act

Daeyong Lee & Fan (Alicia) Zhang

Finance Research Letters, forthcoming

Abstract:
This article examines how the Medicaid expansion of the 2010 Affordable Care Act (ACA) affected firm performance in the health services industry. The U.S. federal government expanded Medicaid coverage up to 138% of the federal poverty level for low-income households, and the expansion increased demand for health care services after the ACA. Using quarterly Compustat data from the first quarter of 2009 to the first quarter of 2016, we find that the Medicaid expansion significantly increased firm performance (the return on assets by 0.01, Tobin's q by 0.21, and the return on equity by 0.17) in the health services industry.

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Why trash don’t pass? Pharmaceutical licensing and safety performance of drugs

Tannista Banerjee & Arnab Nayak

European Journal of Health Economics, January 2017, Pages 59–71

Abstract:
This paper examines how asymmetric information in pharmaceutical licensing affects the safety standards of licensed drugs. Pharmaceutical companies often license potential drug molecules at different stages of drug development from other pharmaceutical or biotechnology companies and complete the remaining of research stages before submitting the new drug application(NDA) to the food and drug administration. The asymmetric information associated with the quality of licensed molecules might result in the molecules which are less likely to succeed to be licensed out, while those with greater potential of success being held internally for development. We identify the NDAs submitted between 1993 and 2004 where new molecular entities were acquired through licensing. Controlling for other drug area specific and applicant firm specific factors, we investigate whether drugs developed with licensed molecules face higher probability of safety based recall and ultimate withdrawal from the market than drugs developed internally. Results suggest the opposite of Akerlof’s (Q J Econ 84:488–500, 1970) lemons problem. Licensed molecules rather have less probability of facing safety based recalls and ultimate withdrawal from the market comparing to internally developed drug molecules. This suggests that biotechnology and small pharmaceutical firms specializing in pharmaceutical research are more efficient in developing good potential molecules because of their concentrated research. Biotechnology firms license out good potential molecules because it increases their market value and reputation. In addition, results suggest that both the number of previous approved drugs in the disease area, and also the applicant firms’ total number of previous approvals in all disease areas reduce the probability that an additional approved drug in the same drug area will potentially be harmful.

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Paying Medicare Advantage Plans: To Level or Tilt the Playing Field

Jacob Glazer & Thomas McGuire

Journal of Health Economics, forthcoming

Abstract:
Medicare beneficiaries are eligible for health insurance through the public option of traditional Medicare (TM) or may join a private Medicare Advantage (MA) plan. Both are highly subsidized but in different ways. Medicare pays for most of costs directly in TM, and subsidizes MA plans based on a “benchmark” for each beneficiary choosing a private plan. The level of this benchmark is arguably the most important policy decision Medicare makes about the MA program. Many analysts recommend equalizing Medicare’s subsidy across the options − referred to in policy circles as a “level playing field.” This paper studies the normative question of how to set the level of the benchmark, applying the versatile model developed by Einav and Finkelstein (EF) to Medicare. The EF framework implies unequal subsidies to counteract risk selection across plan types. We also study other reasons to tilt the field: the relative efficiency of MA vs. TM, market power of MA plans, and institutional features of the way Medicare determines subsidies and premiums. After review of the empirical and policy literature, we conclude that in areas where the MA market is competitive, the benchmark should be set below average costs in TM, but in areas characterized by imperfect competition in MA, it should be raised in order to offset output (enrollment) restrictions by plans with market power. We also recommend specific modifications of Medicare rules to make demand for MA more price elastic.

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Children's health insurance, family income, and welfare enrollment

Martin Saavedra

Children and Youth Services Review, February 2017, Pages 182–186

Abstract:
Children from wealthier families are more likely to have health insurance than children from poorer families on average. However, the relationship between family income and health insurance is non-linear, as children near the Federal Poverty Line (FPL) are less likely to be insured than children from both wealthier families (who obtain health insurance from the private market) and poorer families (who obtain government-funded health insurance). This health insurance dip has persisted even as Medicaid has been expanded to cover those above the FPL. One explanation for this is that families who are far below the poverty line are better connected to the welfare system, and consequently, are more likely to enroll in Medicaid. This study uses data from the 2001–2013 Current Population Surveys and finds that (1) controlling for many of the determinants of eligibility, those on other forms of government assistance are more likely to have health insurance, and (2) the relationship between family income and children's health insurance status is strictly increasing after controlling for enrollment in other welfare programs.

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Modeling Health Care Spending Growth of Older Adults

Laura Hatfield et al.

Health Services Research, forthcoming

Data Sources: Dynamic microsimulation calibrated to survey and administrative data.

Study Design: We augment Urban Institute's Dynamic Simulation of Income Model (DYNASIM) with modules that incorporate demand responses and economic equilibria, with dynamics driven by exogenous technological change. A lengthy technical appendix provides details of the microsimulation model and economic assumptions for readers interested in applying these techniques.

Principal Findings: The model projects total out-of-pocket spending (point of care plus premiums) as a share of income for adults aged 65 and older. People with lower incomes and poor health fare worse, despite protections of Medicaid. Spending rises 40 percent from 2012 to 2035 (from 10 to 14 percent of income) for the median beneficiary, but it increases from 5 to 25 percent of income for low-income beneficiaries and from 23 to 29 percent for the near poor who are in fair/poor health.

Conclusions: Despite Medicare coverage, near-poor seniors will face out-of-pocket spending that would render them, in practical terms, underinsured.

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What’s the Rush? Tort Laws and Elective Early-term Induction of Labor

Louise Marie Roth

Journal of Health and Social Behavior, December 2016, Pages 486-501

Abstract:
Tort laws aim to deter risky medical practices and increase accountability for harm. This research examines their effects on deterrence of a high-risk obstetric practice in the United States: elective early-term (37–38 weeks gestation) induction of labor. Using birth certificate data from the Natality Detail Files and state-level data from publicly available sources, this study analyzes the effects of tort laws on labor induction with multilevel models (MLM) of 665,491 early-term births nested in states. Results reveal that caps on damages are associated with significantly higher odds of early-term induction and Proportionate Liability (PL) is associated with significantly lower odds compared to Joint and Several Liability (JSL). The findings suggest that clinicians are more likely to engage in practices that defy professional guidelines in tort environments with lower legal burdens. I discuss the implications of the findings for patient safety and the deterrence of high-risk practices.

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Closing the Productivity Gap: Improving Worker Productivity through Public Relative Performance Feedback and Validation of Best Practices

Hummy Song et al.

University of Pennsylvania Working Paper, December 2016

Abstract:
Public relative performance feedback (RPF) on an individual worker’s productivity metrics is used in various organizations with the hopes of improving worker productivity, but its effects are not well understood. We examine whether public RPF could be leveraged to facilitate best practice adoption in an organization by enabling the validation of best practices shared by identifiable top performers. We use data from two emergency departments, both of which shared best practices for improving productivity and one of which changed from privately to publicly disclosing RPF to physicians. The public disclosure of RPF allowed workers to identify their top-performing coworkers, which in turn enabled the identification and validation of best practices within the work group. We find that the intervention is associated with a 10.9% improvement in physician productivity. We also find evidence for a significant reduction in variation in productivity across providers, which stems from bottom-ranked workers exhibiting differentially large improvements in productivity. These effects hold without sacrificing system-level performance, service quality, or worker attrition. Our results suggest that public disclosure of RPF, along with the validation of the best practices being shared, can improve worker productivity.

By KEVIN LEWIS | 09:00:00 AM

Thursday, January 12, 2017

Gray area

Control Deprivation Motivates Acquisition of Utilitarian Products

Charlene Chen, Leonard Lee & Andy Yap

Journal of Consumer Research, forthcoming

Abstract:
This research investigates how the fundamental desire for control affects product acquisition. The authors propose that consumers compensate for a loss of perceived control by buying utilitarian products (e.g., household cleaning agents) because of these products’ association with problem solving, a quality that promotes a sense of control. Study 1 demonstrates this basic effect in a field setting involving real purchases, while studies 2 and 3 show that framing a product as utilitarian (vs. hedonic) moderates the effect of control on purchase intentions. Study 4 shows that a generalized problem-solving tendency mediates the effect of control on eagerness to pursue utilitarian consumption. Given the pervasiveness and ease of using product acquisition as a means to cope with psychological threat, this research has important implications for theory and practice.

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When science becomes too easy: Science popularization inclines laypeople to underrate their dependence on experts

Lisa Scharrer et al.

Public Understanding of Science, forthcoming

Abstract:
Science popularization fulfills the important task of making scientific knowledge understandable and accessible for the lay public. However, the simplification of information required to achieve this accessibility may lead to the risk of audiences relying overly strongly on their own epistemic capabilities when making judgments about scientific claims. Moreover, they may underestimate how the division of cognitive labor makes them dependent on experts. This article reports an empirical study demonstrating that this “easiness effect of science popularization” occurs when laypeople read authentic popularized science depictions. After reading popularized articles addressed to a lay audience, laypeople agreed more with the knowledge claims they contained and were more confident in their claim judgments than after reading articles addressed to expert audiences. Implications for communicating scientific knowledge to the general public are discussed.

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Exponential-Growth Bias and Overconfidence

Matthew Levy & Joshua Tasoff

Journal of Economic Psychology, February 2017, Pages 1–14

Abstract:
There is increasing evidence that people underestimate the magnitude of compounding interest. However, if people were aware of their inability to make such calculations they should demand services to ameliorate the consequences of such deficiencies. In a laboratory experiment, we find that people exhibit substantial exponential-growth bias but, more importantly, that they are overconfident in their ability to answer questions that involve exponential growth. They also exhibit overconfidence in their ability to use a spreadsheet to answer these questions. This evidence explains why a market solution to exponential-growth bias has not been forthcoming. Biased individuals have suboptimally low demand for tools and services that could improve their financial decisions.

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DeepStack: Expert-Level Artificial Intelligence in No-Limit Poker

Matej Moravčík et al.

University of Alberta Working Paper, January 2017

Abstract:
Artificial intelligence has seen a number of breakthroughs in recent years, with games often serving as significant milestones. A common feature of games with these successes is that they involve information symmetry among the players, where all players have identical information. This property of perfect information, though, is far more common in games than in real-world problems. Poker is the quintessential game of imperfect information, and it has been a longstanding challenge problem in artificial intelligence. In this paper we introduce DeepStack, a new algorithm for imperfect information settings such as poker. It combines recursive reasoning to handle information asymmetry, decomposition to focus computation on the relevant decision, and a form of intuition about arbitrary poker situations that is automatically learned from self-play games using deep learning. In a study involving dozens of participants and 44,000 hands of poker, DeepStack becomes the first computer program to beat professional poker players in heads-up no-limit Texas hold'em. Furthermore, we show this approach dramatically reduces worst-case exploitability compared to the abstraction paradigm that has been favored for over a decade.

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The Heart and the Head: On Choosing Experiences Intuitively and Possessions Deliberatively

Iñigo Gallo et al.

Journal of Behavioral Decision Making, forthcoming

Abstract:
An enduring question in the field of judgment and decision making is when people are likely to choose on the basis of intuition and when they are likely to pursue a more deliberative decision strategy. Here, we attempt to shed light on that question by examining whether people tend to weight intuition more heavily when making experiential purchases, and to weight deliberation more heavily when making material purchases. Results from seven studies indicate that they do. In Study 1 (and a replication), participants expressed an explicit preference for choosing experiential purchases intuitively and material purchases analytically. In Study 2 (and a replication), participants anticipated experiencing more regret after going against reason for material purchases and going against intuition for experiential purchases. Participants in Study 3 who were asked to think about an experiential purchase wanted to see the relevant information presented by alternative, which facilitates intuitive/holistic processing, more than did those who were asked to consider a material purchase. In two additional studies, participants who were induced to think intuitively chose experiential purchases more often (Study 4) and reported a higher willingness to pay for them (Study 5) compared with participants induced to think analytically.

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Hierarchy stability moderates the effect of status on stress and performance in humans

Erik Knight & Pranjal Mehta

Proceedings of the National Academy of Sciences, 3 January 2017, Pages 78–83

Abstract:
High social status reduces stress responses in numerous species, but the stress-buffering effect of status may dissipate or even reverse during times of hierarchical instability. In an experimental test of this hypothesis, 118 participants (57.3% female) were randomly assigned to a high- or low-status position in a stable or unstable hierarchy and were then exposed to a social-evaluative stressor (a mock job interview). High status in a stable hierarchy buffered stress responses and improved interview performance, but high status in an unstable hierarchy boosted stress responses and did not lead to better performance. This general pattern of effects was observed across endocrine (cortisol and testosterone), psychological (feeling in control), and behavioral (competence, dominance, and warmth) responses to the stressor. The joint influence of status and hierarchy stability on interview performance was explained by feelings of control and testosterone reactivity. Greater feelings of control predicted enhanced interview performance, whereas increased testosterone reactivity predicted worse performance. These results provide direct causal evidence that high status confers adaptive benefits for stress reduction and performance only when the social hierarchy is stable. When the hierarchy is unstable, high status actually exacerbates stress responses.

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Revered Today, Loved Tomorrow: Expert Creativity Ratings Predict Popularity of Architects’ Works 50 Years Later

Oshin Vartanian et al.

Psychology of Aesthetics, Creativity, and the Arts, forthcoming

Abstract:
Beginning in the 1950s, the Institute of Personality Assessment and Research (IPAR) began a program of research to study the psychology of effectively functioning persons. Among the most influential series of studies conducted by IPAR were the assessments of highly creative architects in 1957–1961, a sample that included some of the most eminent architects of the 20th century such as Eero Saarinen, Louis I. Kahn, I. M. Pei, and Philip C. Johnson. In turn, in 2006–2007, the American Institute of Architects conducted a survey to identify America’s favorite architecture, first among its 2,448 members and subsequently among 2,214 members of the general public. Creativity ratings of the architects (N = 40) by (a) journal editorial board members, (b) expert judges, and (c) the architects themselves collected in 1957–1961 predicted the popularity of their works 50 years later. Our results suggest that in the domain of architecture, expert assessments of individual-level creativity predict future product-level popularity.

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Arousal and Economic Decision Making

Salar Jahedi, Cary Deck & Dan Ariely

Journal of Economic Behavior & Organization, February 2017, Pages 165–189

Abstract:
Previous experiments have found that subjecting participants to cognitive load leads to poorer decision making, consistent with dual-system models of behavior. Rather than taxing the cognitive system, this paper reports the results of an experiment that takes a complementary approach: arousing the emotional system. The results indicate that exposure to arousing visual stimuli as compared to neutral images has a negligible impact on performance in arithmetic tasks, impatience, risk taking in the domain of losses, and snack choice although we find that arousal modestly increases risk-taking in the gains domain and increases susceptibility to anchoring effects. We find the effect of arousal on decision making to be smaller and less consistent then the effect of increased cognitive load for the same tasks.

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Mind the Gap! Automated Concept Map Feedback Supports Students in Writing Cohesive Explanations

Andreas Lachner, Christian Burkhart & Matthias Nückles

Journal of Experimental Psychology: Applied, forthcoming

Abstract:
Many students are challenged with the demand of writing cohesive explanations. To support students in writing cohesive explanations, we developed a computer-based feedback tool that visualizes cohesion deficits of students’ explanations in a concept map. We conducted three studies to investigate the effectiveness of such feedback as well as the underlying cognitive processes. In Study 1, we found that the concept map helped students identify potential cohesion gaps in their drafts and plan remedial revisions. In Study 2, students with concept map feedback conducted revisions that resulted in more locally and globally cohesive, and also more comprehensible, explanations than the explanations of students who revised without concept map feedback. In Study 3, we replicated the findings of Study 2 by and large. More importantly, students who had received concept map feedback on a training explanation 1 week later wrote a transfer explanation without feedback that was more cohesive than the explanation of students who had received no feedback on their training explanation. The automated concept map feedback appears to particularly support the evaluation phase of the revision process. Furthermore, the feedback enabled novice writers to acquire sustainable skills in writing cohesive explanations.

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I Am Aware of My Inconsistencies but Can Tolerate Them: The Effect of High Quality Listening on Speakers’ Attitude Ambivalence

Guy Itzchakov, Avraham Kluger & Dotan Castro

Personality and Social Psychology Bulletin, January 2017, Pages 105-120

Abstract:
We examined how listeners characterized by empathy and a non-judgmental approach affect speakers’ attitude structure. We hypothesized that high quality listening decreases speakers’ social anxiety, which in turn reduces defensive processing. This reduction in defensive processing was hypothesized to result in an awareness of contradictions (increased objective-attitude ambivalence), and decreased attitude extremity. Moreover, we hypothesized that experiencing high quality listening would enable speakers to tolerate contradictory responses, such that listening would attenuate the association between objective- and subjective-attitude ambivalence. We obtained consistent support for our hypotheses across four laboratory experiments that manipulated listening experience in different ways on a range of attitude topics. The effects of listening on objective-attitude ambivalence were stronger for higher dispositional social anxiety and initial objective-attitude ambivalence (Study 4). Overall, the results suggest that speakers’ attitude structure can be changed by a heretofore unexplored interpersonal variable: merely providing high quality listening.

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Who “believes” in the Gambler’s Fallacy and why?

George Farmer, Paul Warren & Ulrike Hahn

Journal of Experimental Psychology: General, January 2017, Pages 63-76

Abstract:
Humans possess a remarkable ability to discriminate structure from randomness in the environment. However, this ability appears to be systematically biased. This is nowhere more evident than in the Gambler’s Fallacy (GF) — the mistaken belief that observing an increasingly long sequence of “heads” from an unbiased coin makes the occurrence of “tails” on the next trial ever more likely. Although the GF appears to provide evidence of “cognitive bias,” a recent theoretical account (Hahn & Warren, 2009) has suggested the GF might be understandable if constraints on actual experience of random sources (such as attention and short term memory) are taken into account. Here we test this experiential account by exposing participants to 200 outcomes from a genuinely random (p = .5) Bernoulli process. All participants saw the same overall sequence; however, we manipulated experience across groups such that the sequence was divided into chunks of length 100, 10, or 5. Both before and after the exposure, participants (a) generated random sequences and (b) judged the randomness of presented sequences. In contrast to other accounts in the literature, the experiential account suggests that this manipulation will lead to systematic differences in postexposure behavior. Our data were strongly in line with this prediction and provide support for a general account of randomness perception in which biases are actually apt reflections of environmental statistics under experiential constraints. This suggests that deeper insight into human cognition may be gained if, instead of dismissing apparent biases as failings, we assume humans are rational under constraints.

By KEVIN LEWIS | 09:00:00 AM

Wednesday, January 11, 2017

Dirty jobs

Fracking, Drilling, and Asset Pricing: Estimating the Economic Benefits of the Shale Revolution

Erik Gilje, Robert Ready & Nikolai Roussanov

NBER Working Paper, December 2016

Abstract:
We quantify the effect of a significant technological innovation, shale oil development, on asset prices. Using stock returns on major news announcement days allows us to link aggregate stock price fluctuations to shale technology innovations. We exploit cross-sectional variation in industry portfolio returns on days of major shale oil-related news announcements to construct a shale mimicking portfolio. This portfolio can explain a significant amount of variation in aggregate stock market returns, but only during the time period of shale oil development, which begins in 2012. Our estimates imply that $3.5 trillion of the increase in aggregate U.S. equity market capitalization since 2012 can be explained by this mimicking portfolio. Similar portfolios based on major monetary policy announcements do not explain the positive market returns over this period. We also show that exposure to shale oil technology has significant explanatory power for the cross-section of employment growth rates of U.S. industries over this period.

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Institutions and the shale boom

Ilia Murtazashvili

Journal of Institutional Economics, forthcoming

Abstract:
This paper uses the institutional economics of Douglass North to explain three features of the shale boom: why fracking technology emerged in the United States, the rapid increase in production of natural gas in the United States and the uneven response to these new economic opportunities in shale-rich economies. It argues that the institutional matrix of the United States, in particular private ownership of minerals, encouraged experimentation on the barren Texas oil and gas fields, where fracking technology emerged and the rapid transfer of mineral rights to gas companies. Institutional entrepreneurs, namely landmen and lawyers, facilitated contracting between owners of mineral rights and drillers. Private ownership of minerals and an ideology supportive of drilling provide insight into the adoption of regulations that encourage hydraulic fracturing.

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Energy Efficiency Standards Are More Regressive Than Energy Taxes: Theory and Evidence

Arik Levinson

NBER Working Paper, December 2016

Abstract:
Economists promote energy taxes as cost-effective. But policymakers raise concerns about their regressivity, or disproportional burden on poorer families, preferring to set energy efficiency standards instead. I first show that in theory, regulations targeting energy efficiency are more regressive than energy taxes, not less. I then provide an example in the context of automotive fuel consumption in the United States: taxing gas would be less regressive than regulating the fuel economy of cars if the two policies are compared on a revenue-equivalent basis.

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The Law of the Test: Performance-Based Regulation and Diesel Emissions Control

Cary Coglianese & Jennifer Nash

Yale Journal on Regulation, forthcoming

Abstract:
The Volkswagen diesel emissions scandal of 2015 not only pushed that company’s stock and retail sales into freefall, but also raised serious questions about the efficacy of existing regulatory controls. The same furtive actions taken by Volkswagen had been taken nearly twenty years earlier by other firms in the diesel industry. In that previous scandal, the U.S. Environmental Protection Agency (EPA) discovered that diesel truck engine manufacturers had, like Volkswagen would later do, programmed on-board computers to calibrate their engines one way to satisfy the required emissions test. Those manufacturers had also programmed the on-board computers to re-calibrate the engines automatically to achieve better fuel economy and responsiveness when the trucks were on the road, even though doing so increased emissions above the mandated level. This paper provides an in-depth retrospective study of the federal government’s efforts to regulate diesel emissions. In particular, it chronicles the earlier saga over heavy-duty diesel truck engines to reveal important lessons for regulators who use a regulatory strategy known as performance-based regulation. Endorsed around the world and used in many settings, performance-based regulation mandates the attainment of outcomes — the passing of a test — but leaves the means for doing so up to the regulated entities. In theory, performance standards are highly appealing, but their actual performance in practice has remained virtually unstudied by scholars of regulation. This paper’s extensive analysis of U.S. diesel emissions control provides a new basis to learn how performance-based regulation works in action, revealing some of its previously unacknowledged limitations. Precisely because performance-based regulation offers flexibility, it facilitates, if not invites, private-sector firms to innovate in ways that allow them to pass mandated tests while confounding regulators’ broader policy objectives. When regulating the diesel industry or any other aspect of the economy, policymakers should temper their enthusiasm for performance standards and, when they use them, maintain constant vigilance for private-sector tactics that run counter to proper regulatory goals.

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EU air pollution regulation: A breath of fresh air for Eastern European polluting industries?

Igor Bagayev & Julie Lochard

Journal of Environmental Economics and Management, forthcoming

Abstract:
Does air quality regulation in the European Union (EU) foster polluting activity in emerging and developing countries? In this paper, we propose an original variable that evaluates regulation stringency, based on the EU Air Quality Framework Directive. Focusing on the underlying mechanism and controlling for endogeneity in the relation between regulation and trade, we provide robust evidence that EU countries implementing more stringent air pollution regulations import relatively more in pollution-intensive sectors from developing and emerging countries in Europe and Central Asia.

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Identifying the Impacts of Critical Habitat Designation on Land Cover Change

Erik Nelson et al.

Resource and Energy Economics, February 2017, Pages 89–125

Abstract:
The US Endangered Species Act (ESA) regulates what landowners, land managers, and industry can do on lands occupied by listed species. The ESA does this in part by requiring the designation of habitat within each listed species’ range considered critical to their recovery. Critics have argued that critical habitat (CH) designation creates significant economic costs while contributing little to species recovery. Here we examine the effects of CH designation on land cover change. We find that the rate of change from 1992 to 2011 in developed (urban and residential) and agricultural land in CH areas was not significantly different compared to similar lands without CH designation, but still subject to ESA regulations. Although CH designation on average does not affect overall rates of land cover change, CH designation did slightly modify the impact of land cover change drivers. Generally, variation in land prices played a larger role in land cover decisions within CH areas than in similar areas without CH designation. These trends suggest that developers may require a greater than typical expected return to development in CH areas to compensate for the higher risk of regulatory scrutiny. Ultimately, our results bring into question the very rationale for the CH regulation. If it is for the most part not affecting land cover choices, is CH helping species recover?

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Does the Modernization of Environmental Enforcement Reduce Toxic Releases? An Examination of Self-policing, Criminal Prosecutions, and Toxic Releases in the United States, 1988–2014

Paul Stretesky et al.

Sociological Spectrum, January/February 2017, Pages 48-62

Abstract:
According to modernization theory, enforcement schemes that rely on end-of-the-pipe regulation are not as effective at achieving improved environmental performance as market-based approaches that encourage pollution prevention. Consistent with that observation, the U.S. Environmental Protection Agency transitioned to the use of self-policing to encourage pollution prevention. Other studies note that environmental compliance is significantly affected by traditional “command-and-control” strategies. Using Prais Winston regression we examine these contrasting views by estimating the relationship between toxic releases, self-policing, and criminal prosecutions from 1988 through 2014. Initial correlations suggest that (1) self-policing is not associated with toxic releases but that (2) criminal prosecutions may reduce toxic releases through general deterrence signals. Subsequent analyses controlling for gross domestic product revealed that neither self-policing nor criminal enforcement correlate with toxic releases but that gross domestic product was the strongest predictor of emissions. The implications of these findings for the control of toxic emissions are discussed.

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Corrective Policy and Goodhart's Law: The Case of Carbon Emissions from Automobiles

Mathias Reynaert & James Sallee

NBER Working Paper, December 2016

Abstract:
Firms sometimes comply with externality-correcting policies by gaming the measure that determines policy. We show theoretically that such gaming can benefit consumers, even when it induces them to make mistakes, because gaming leads to lower prices by reducing costs. We use our insights to quantify the welfare effect of gaming in fuel-consumption ratings for automobiles, which we show increased sharply following aggressive policy reforms. We estimate a structural model of the car market and derive empirical analogs of the price effects and choice distortions identified by theory. We find that price effects outweigh distortions; on net, consumers benefit from gaming.

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Has the Clean Air Interstate Rule Fulfilled Its Mission? An Assessment of Federal Rule-Making in Preventing Regional Spillover Pollution

Derek Glasgow & Shuang Zhao

Review of Policy Research, forthcoming

Abstract:
The Environmental Protection Agency developed the Clean Air Interstate Rule (CAIR) to minimize sulfur dioxide and nitrogen oxide emissions from power plants and prevent pollution spillover into downwind states. While observers of CAIR claim success in the reduction of air pollution, our innovative multivariate statistical analysis based on spatial and facility-level panel data finds mixed results concerning the rule's effectiveness. On the one hand, we find that CAIR facilities are associated with increases in the reduction rate of pollution compared to non-CAIR facilities. However, the evidence suggests that sulfur dioxide levels decreased in CAIR-mandated facilities before the actual implementation of the program. Additionally, on the one hand, CAIR facilities in the interior of states are associated with slower pollution reduction rates than those on the border. However, this difference in reduction rate does not change dramatically before or after the adoption or implementation of this rule. This suggests that the CAIR program was ineffective in targeting specific facilities most likely to contribute to interstate pollution. We conclude that while CAIR spurred the electrical utility industry to reduce air pollution, some of these reductions occurred before the actual implementation of the program. More substantially, gains in interstate spillover pollution did not occur by targeting specific facilities most likely to spillover but rather through the overall reduction of air pollution in the eastern states.

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The Response of Consumer Spending to Changes in Gasoline Prices

Michael Gelman et al.

NBER Working Paper, December 2016

Abstract:
This paper estimates how overall consumer spending responds to changes in gasoline prices. It uses the differential impact across consumers of the sudden, large drop in gasoline prices in 2014 for identification. This estimation strategy is implemented using comprehensive, daily transaction-level data for a large panel of individuals. The estimated marginal propensity to consume (MPC) is approximately one, a higher estimate than estimates found in less comprehensive or well-measured data. This estimate takes into account the elasticity of demand for gasoline and potential slow adjustment to changes in prices. The high MPC implies that changes in gasoline prices have large aggregate effects.

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Employment Impacts of Upstream Oil and Gas Investment in the United States

Mark Agerton et al.

Energy Economics, forthcoming

Abstract:
We use dynamic panel methods at the state level to understand how the increase in exploration and production of oil and natural gas since the mid 2000s has impacted employment. We find robust statistical support for the hypothesis that changes in drilling do, in fact, have an economically meaningful and positive impact on employment. The strongest impact is contemporaneous, though months later in the year also experience statistically and economically meaningful growth. Once dynamic effects are accounted for, we estimate that an additional rig count results in the creation of 31 jobs immediately and 315 jobs in the long run. Robustness checks suggest that these multipliers could be even bigger. Our results imply that the national impact of upstream investment remains small, perhaps due to the sector’s small size and inter-state migration.

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Distributional Effects of Air Pollution from Electric Vehicle Adoption

Stephen Holland et al.

NBER Working Paper, November 2016

Abstract:
We examine the distributional effects of changes in local air pollution from driving electric vehicles in the United States. We employ an econometric model to estimate power plant emissions and an integrated assessment model to value damages in air pollution from both electric and gasoline vehicles. Using the locations of currently registered electric vehicles, we find that people living in census block groups with median income greater than about $65,000 receive positive environmental benefits from these vehicles while those below this threshold receive negative environmental benefits. Asian and Hispanic residents receive positive environmental benefits, but White and Black residents receive negative environmental benefits. In multivariate analyses, environmental benefits are positively correlated with income and urban measures, conditional on racial composition. In addition, conditional on income and urbanization, separate regressions find environmental benefits to be positively related with Asian and Hispanic block-group population shares, negatively correlated with White share, and uncorrelated with Black share. Environmental benefits tend to be larger in states offering purchase subsidies. However, for these states, an increase in subsidy size is associated with a decrease in created environmental benefits.

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Is Energy Efficiency Capitalized into Home Prices? Evidence from Three U.S. Cities

Margaret Walls et al.

Journal of Environmental Economics and Management, March 2017, Pages 104–124

Abstract:
We test for evidence that energy efficiency features are capitalized into home prices in three U.S. metropolitan areas. Using hedonic regressions and multiple matching procedures, we find that Energy Star certification is associated with higher sales prices in two of the markets: the Research Triangle region of North Carolina and Portland, Oregon. We find that local “green” certifications in Portland and in Austin, Texas, are also associated with higher prices and that the estimated price impacts are larger than those from Energy Star. Matching on observables proves to be important in some cases, reducing the estimated impacts compared with models without matching. We calculate the implied energy savings from the estimated premiums and find that, in the Research Triangle market, the Energy Star premiums approximately equal the savings that program is designed to achieve, but in Portland, the premiums are slightly greater than the program's savings due to low energy costs in the region.

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Bombs and Babies: US Navy Bombing Activity and Infant Health in Vieques, Puerto Rico

Gustavo Bobonis, Mark Stabile & Leonardo Tovar

NBER Working Paper, December 2016

Abstract:
We study the relationship between in utero exposure to military exercises and children’s early-life health outcomes in a no-war zone. This allows us to document non-economic impacts of military activity on neonatal health outcomes. We combine monthly data on tonnage of ordnance in the context of naval exercises in Vieques, Puerto Rico, with the universe of births in Puerto Rico between 1990 and 2000; studying this setting is useful because these exercises have no negative consequences for local economic activity. We find that a one standard deviation increase in exposure to bombing activity leads to a three per thousand point (70 percent) increase in extremely premature births; a three to seven per thousand point – 34 to 77 percent – increase in the incidence of congenital anomalies; and a five per thousand point increase in low APGAR scores (38 percent). The evidence is generally consistent with the channel of environmental pollution. Given the well-documented relationship between neonatal health and later life outcomes, there is reason to believe that our substantial short-term effects may have longer-term consequences for this population.

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Environmental consequences of oil production from oil sands

Lorenzo Rosa et al.

Earth's Future, forthcoming

Abstract:
Crude oil from oil sands will constitute a substantial share of future global oil demand. Oil sands deposits account for a third of globally proven oil reserves, underlie large natural forested areas, and have extraction methods requiring large volumes of freshwater. Yet little work has been done to quantify some of the main environmental impacts of oil sands operations. Here we examine forest loss and water use for the world's major oil sands deposits. We calculate actual and potential rates of water use and forest loss both in Canadian deposits, where oil sands extraction is already taking place, and in other major deposits worldwide. We estimated that their exploitation, given projected production trends, could result in 1.31 km3 yr−1 of freshwater demand and 8700 km2 of forest loss. The expected escalation in oil sands extraction thus portends extensive environmental impacts.

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Fault activation by hydraulic fracturing in western Canada

Xuewei Bao & David Eaton

Science, 16 December 2016, Pages 1406-1409

Abstract:
Hydraulic fracturing has been inferred to trigger the majority of injection-induced earthquakes in western Canada, in contrast to the Midwestern United States, where massive saltwater disposal is the dominant triggering mechanism. A template-based earthquake catalog from a seismically active Canadian shale play, combined with comprehensive injection data during a 4-month interval, shows that earthquakes are tightly clustered in space and time near hydraulic fracturing sites. The largest event [moment magnitude (MW) 3.9] occurred several weeks after injection along a fault that appears to extend from the injection zone into crystalline basement. Patterns of seismicity indicate that stress changes during operations can activate fault slip to an offset distance of >1 km, whereas pressurization by hydraulic fracturing into a fault yields episodic seismicity that can persist for months.

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Something in the Air? Air Quality and Children's Educational Outcomes

Dave Marcotte

Economics of Education Review, February 2017, Pages 141–151

Abstract:
Poor air quality has been shown to harm the health and development of children. Research on these relationships has focused almost exclusively on the effects of human-made pollutants, and has not fully distinguished between contemporaneous and long-run effects. This paper contributes on both of these fronts. Merging data on ambient levels of human-made pollutants and plant pollen with detailed panel data of children beginning kindergarten in 2010, I study the relationship between poor air quality on achievement in early grades. I also provide tentative estimates of the effects of air quality in the first years of life on school-readiness. I find that students score between 1 to 2 percent lower on math and reading scores on days with high levels of pollen or fine airborne particulate matter, and that asthmatic students score about 10 percent lower on days with high levels of ozone. I find suggestive evidence that poor air quality during early childhood negatively affects school readiness.

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Overcoming Salience Bias: How Real-Time Feedback Fosters Resource Conservation

Verena Tiefenbeck et al.

Management Science, forthcoming

Abstract:
Inattention and imperfect information bias behavior toward the salient and immediately visible. This distortion creates costs for individuals, the organizations in which they work, and society at large. We show that an effective way to overcome this bias is by making the implications of one’s behavior salient in real time, while individuals can directly adapt. In a large-scale field experiment, we gave participants real-time feedback on the resource consumption of a daily, energy-intensive activity (showering). We find that real-time feedback reduced resource consumption for the target behavior by 22%. At the household level, this led to much larger conservation gains in absolute terms than conventional policy interventions that provide aggregate feedback on resource use. High baseline users displayed a larger conservation effect, in line with the notion that real-time feedback helps eliminate “slack” in resource use. The approach is cost effective, is technically applicable to the vast majority of households, and generated savings of 1.2 kWh per day and household, which exceeds the average energy use for lighting. The intervention also shows how digitalization in our everyday lives makes information available that can help individuals overcome salience bias and act more in line with their preferences.

By KEVIN LEWIS | 09:00:00 AM

Tuesday, January 10, 2017

Racial past

“Undistinguished Destruction”: The Effects of Smallpox on British Emancipation Policy in the Revolutionary War

Gary Sellick

Journal of American Studies, forthcoming

Abstract:
In 1775, Lord Dunmore, the royal governor of Virginia, offered freedom to any African American who fought for the British cause against the colonial rebels in his province. Dunmore's plan to reconquer Virginia with his “Ethiopian Regiment” ended in failure, not due to a lack of willing volunteers but because of a familiar eighteenth-century killer: smallpox. Five years later, similar proclamations were issued in South Carolina. Yet smallpox again hindered British designs, devastating the eager African Americans who flooded to their lines. This paper uses primary source material and research on smallpox to analyze the experiences of African Americans who actively sought freedom with the British during the Revolutionary War. Focusing on the differing regions of Virginia and South Carolina this paper will assess the impact of smallpox on British military designs for runaway slaves while also evaluating the reasons why the disease had such a devastating effect on African Americans during the period. Overall, this paper will show how smallpox, so common in eighteenth-century Europe, put a fatal end to the first widespread push for emancipation on the American continent and helped derail one of Britain's best hopes for turning the tide in the Revolutionary War.

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Resilience in Adolescence, Health, and Psychosocial Outcomes

Gene Brody et al.

Pediatrics, December 2016

Methods: Secondary data analyses were executed with the use of waves 1 and 4 of the US Longitudinal Study of Adolescent to Adult Health (Add Health). At wave 1, when participants were age 16, data were obtained on a behavioral style termed “striving.” Striving includes high aspirations, unwavering persistence, investment in education, and avoidance of activities that sidetrack success. At wave 4, when participants were age 29, college graduation, personal income, symptoms of depression, and type 2 diabetes status were assessed.

Results: Black and non-Hispanic white youth who displayed striving during adolescence evinced, at age 29, a higher likelihood of college graduation, greater personal income, and fewer symptoms of depression than did nonstrivers. Among black participants, the findings were consistent with the “skin-deep resilience” pattern for type 2 diabetes. High-striving black adolescents in the most disadvantaged families had a greater likelihood of developing type 2 diabetes during adulthood than did similar high-striving black adolescents living in more privileged families. The skin-deep resilience pattern did not emerge among non-Hispanic white participants.

Conclusions: This study is the first to show that an unrelenting determination to succeed among black adolescents from disadvantaged backgrounds forecasts an elevated risk of developing type 2 diabetes during adulthood.

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Coloring the War on Drugs: Arrest Disparities in Black, Brown, and White

David Koch, Jaewon Lee & Kyunghee Lee

Race and Social Problems, December 2016, Pages 313–325

Abstract:
Using the National Longitudinal Survey of Youth 1997 (NLSY97) data, this study examines racial disparities in arrests for drug offending. Of the total 8984 NLSY97 participants, the study sample was restricted to the 4868 respondents who had ever reported using drugs (black = 1191, Hispanic = 980, white = 2697). The study questions are as follows: (1) Are there racial disparities in arrests for drug use, after controlling for incidence of drug use as well as other socio-demographic variables? (2) Are there racial disparities in arrests for drug dealing, after controlling for incidence of drug dealing as well as other socio-demographic variables? Compared with whites, blacks were more likely to be arrested for drug offending, even after controlling for incidence and other socio-demographic variables. Several socio-demographic variables, particularly gender, were also associated with arrests for drug offending. Bans on racial profiling and other legislative and policy changes are considered as potential strategies to ameliorate drug enforcement disparities.

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Where is Latisha’s Law? Black Invisibility in the Social Construction of Victimhood

Teresa Kulig & Francis Cullen

Justice Quarterly, forthcoming

Abstract:
Laws named after specific crime victims have become increasingly common. These laws are part of a broader effort to downgrade the status and rehabilitative needs of offenders and to hear the voices and trumpet the legitimate concerns of victims — often as a means of justifying punitive crime control policies. Beyond the substantive merit of individual statutes, collectively these named laws provide a clear image of which victims warrant protection and memorialization: Victims who are vulnerable in some way, who are pursued by predatory criminals into their otherwise safe domains, and — above all — who are White. In this regard, an analysis of 51 named laws from 1990 to 2016 reveals that the vast majority of them (86.3%) honor White victims. In asking the question, “Where is Latisha’s Law?,” we seek to illuminate the virtual invisibility of African American victims and the implicit social construction of which lives matter more in American society.

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Toward a Demographic Understanding of Incarceration Disparities: Race, Ethnicity, and Age Structure

Matt Vogel & Lauren Porter

Journal of Quantitative Criminology, December 2016, Pages 515–530

Methods: We apply two techniques commonly employed in the field of demography, age-standardization and decomposition, to data provided by the Bureau of Justice Statistics and the 2010 decennial census to assess the contribution of age structure to racial and ethnic disparities in incarceration.

Findings: The non-Hispanic black and Hispanic incarceration rates in 2010 would have been 13–20 % lower if these groups had age structures identical to that of the non-Hispanic white population. Moreover, age structure accounts for 20 % of the Hispanic/white disparity and 8 % of the black/white disparity.

Conclusion: The comparison of crude incarceration rates across racial/ethnic groups may not be ideal because these groups boast strikingly different age structures. Since the risk of imprisonment is tied to age, criminologists should consider adjusting for age structure when comparing rates of incarceration across groups.

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Race, Representation, and the Voting Rights Act

Sophie Schuit & Jon Rogowski

American Journal of Political Science, forthcoming

Abstract:
Despite wide scholarly interest in the Voting Rights Act, surprisingly little is known about how its specific provisions affected Black political representation. In this article, we draw on theories of electoral accountability to evaluate the effect of Section 5 of the Voting Rights Act, the preclearance provision, on the representation of Black interests in the 86th to 105th congresses. We find that members of Congress who represented jurisdictions subject to the preclearance requirement were substantially more supportive of civil rights–related legislation than legislators who did not represent covered jurisdictions. Moreover, we report that the effects were stronger when Black voters composed larger portions of the electorate and in more competitive districts. This result is robust to a wide range of model specifications and empirical strategies, and it persists over the entire time period under study. Our findings have especially important implications given the Supreme Court's recent decision in Shelby County v. Holder.

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Education Outcomes of Children of Asian Intermarriages: Does Gender of the Immigrant Parent Matter?

Sukanya Basu & Mike Insler

U.S. Naval Academy Working Paper, August 2016

Abstract:
Studies about the effects of native and immigrant intermarriage on the human capital of children generally group all immigrants. They ignore disparate impacts by gender, ethnicity, or other attributes. Using 2000 U.S. Census data, we compare the high school dropout rates of 16-17-year-old children of Asian intermarriages and intra-marriages. We study differences between Asian-father and Asian-mother only families, controlling for observable child, parental and residential characteristics, as well as unobservable selection into intermarriage. Despite the higher average education and income levels of intermarried families, the children of Asian-father-native-mother households have higher dropout rates compared to both Asian intra-married and Asian-mother-native-father households. Children of less-educated fathers do worse, relative to children of less-educated mothers, suggesting the importance of intergenerational paternal transmission of education. Racial self-identity is also important – children identify as “non-Asian” more often when the mother is native, and their families may under-emphasize education bringing them closer to native levels.

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Risk, Race, and Recidivism: Predictive Bias and Disparate Impact

Jennifer Skeem & Christopher Lowenkamp

Criminology, November 2016, Pages 680–712

Abstract:
One way to unwind mass incarceration without compromising public safety is to use risk assessment instruments in sentencing and corrections. Although these instruments figure prominently in current reforms, critics argue that benefits in crime control will be offset by an adverse effect on racial minorities. Based on a sample of 34,794 federal offenders, we examine the relationships among race, risk assessment [the Post Conviction Risk Assessment (PCRA)], and future arrest. First, application of well-established principles of psychological science revealed little evidence of test bias for the PCRA — the instrument strongly predicts arrest for both Black and White offenders, and a given score has essentially the same meaning — that is, the same probability of recidivism — across groups. Second, Black offenders obtain higher average PCRA scores than do White offenders (d = .34; 13.5 percent nonoverlap in groups’ scores), so some applications could create disparate impact. Third, most (66 percent) of the racial difference in PCRA scores is attributable to criminal history — which is already embedded in sentencing guidelines. Finally, criminal history is not a proxy for race, but instead it mediates the relationship between race and future arrest. Data are more helpful than rhetoric if the goal is to improve practice at this opportune moment in history.

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Residential segregation and mental health among Latinos in a nationally representative survey

Carrie Nobles et al.

Journal of Epidemiology & Community Health, forthcoming

Background: Among Latinos, living in a locality with greater Latino ethnic density may be protective for mental health, although findings vary by Latino subgroup, gender and birthplace. Although little studied, Latino residential segregation may capture different pathways linking risk and protective environmental factors to mental health than local ethnic density.

Methods: This study evaluated the association between residential segregation and mental distress as measured by the Kessler-10 (K10) among Latino participants in the National Latino and Asian American Study (NLAAS). Census data from 2000 was used to calculate metropolitan statistical area (MSA) residential segregation using the dissimilarity and isolation indices, as well as census tract ethnicity density and poverty. Latino subgroup (Puerto Rican, Mexican American, Cuban American and other Latino subgroup), gender and generation status were evaluated as moderators.

Results: Among 2554 Latino participants in NLAAS, residential segregation as measured by the isolation index was associated with less mental distress (β −0.14, 95% CI −0.26 to −0.03 log(K10)) among Latinos overall after adjustment for ethnic density, poverty and individual covariates. Residential segregation as measured by the dissimilarity index was significantly associated with less mental distress among men (β −0.56, 95% CI −1.04 to −0.08) but not among women (β −0.20, 95% CI −0.45 to 0.04, p-interaction=0.019). No modification was observed by Latino subgroup or generation.

Conclusions: Among Latinos, increasing residential segregation was associated with less mental distress, and this association was moderated by gender. Findings suggest that MSA-level segregation measures may capture protective effects associated with living in Latino communities for mental health.

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Understanding Racial and Ethnic Disparities in Arrest: The Role of Individual, Home, School, and Community Characteristics

Lauren Nichol Gase et al.

Race and Social Problems, December 2016, Pages 296–312

Abstract:
Contact with the justice system can lead to a range of poor health and social outcomes. While persons of color are disproportionately represented in both the juvenile and criminal justice systems, reasons for these patters remain unclear. This study sought to examine the extent and sources of differences in arrests during adolescence and young adulthood among blacks, whites, and Hispanics in the USA. Multilevel cross-sectional logistic regression analyses were conducted using data from waves I and IV of the National Longitudinal Study of Adolescent to Adult Health (n = 12,752 respondents). Results showed significantly higher likelihood of having ever been arrested among blacks, when compared to whites, even after controlling for a range of delinquent behaviors (odds ratio = 1.58, 95 % confidence interval = 1.27, 1.95). These black–white disparities were no longer present after accounting for racial composition of the neighborhood, supporting the growing body of research demonstrating the importance of contextual variables in driving disproportionate minority contact with the justice system.

By KEVIN LEWIS | 09:00:00 AM

Monday, January 9, 2017

Principals and agents

Who Killed the Inner Circle? The Decline of the American Corporate Interlock Network

Johan Chu & Gerald Davis

American Journal of Sociology, November 2016, Pages 714-754

Abstract:
U.S. corporations have shared members of their boards of directors since the early 1900s, creating a dense interlock network in which nearly every major corporation was connected through short paths and elevating a handful of well-connected directors to an influential "inner circle." This network remained highly connected throughout the 20th century, serving as a mechanism for the rapid diffusion of information and practices and promoting elite cohesion. Some of the most well-established findings in the sociology of networks sprang from this milieu. In the 2000s, however, board recruiting practices changed: the authors find that well-connected directors became less preferred. As a result, the inner circle disappeared and companies became less connected to each other. Revisiting three classic studies, on the diffusion of corporate policies, on corporate executives' political unity, and on elite socialization, shows that established understandings of the effects of board interlocks on U.S. corporations, directors, and social elites no longer hold.

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Short-Termism and Shareholder Payouts: Getting Corporate Capital Flows Right

Jesse Fried & Charles Wang

Harvard Working Paper, January 2017

Abstract:
During the period 2005-2014, S&P 500 firms distributed to shareholders more than $3.95 trillion via stock buybacks and $2.45 trillion via dividends―$6.4 trillion in total. These shareholder payouts amounted to over 93% of the firms' net income. Academics, corporate lawyers, asset managers, and politicians point to such shareholder-payout figures as compelling evidence that "short-termism" and "quarterly capitalism" are impairing firms' ability to invest, innovate, and provide good wages. We explain why S&P 500 shareholder-payout figures provide a misleadingly incomplete picture of corporate capital flows and the financial capacity of U.S. public firms. Most importantly, they fail to account for offsetting equity issuances by firms. We show that, taking into account issuances, net shareholder payouts by all U.S. public firms during the period 2005-2014 were in fact only about $2.50 trillion, or 33% of their net income. Moreover, much of these net shareholder payouts were offset by net debt issuances, and thus effectively recapitalizations rather than firm-shrinking distributions. After excluding marginal debt capital inflows, net shareholder payouts by public firms during the period 2005-2014 were only about 22% of their net income. In short, S&P 500 shareholder-payout figures are not indicative of actual capital flows in public firms, and thus cannot provide much basis for the claim that short-termism is starving public firms of needed capital. We also offer three other reasons why corporate capital flows are unlikely to pose a problem for the economy.

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The Role of Facial Appearance on CEO Selection After Firm Misconduct

David Gomulya et al.

Journal of Applied Psychology, forthcoming

Abstract:
We investigate a particular aspect of CEO successor trustworthiness that may be critically important after a firm has engaged in financial misconduct. Specifically, drawing on prior research that suggests that facial appearance is one critical way in which trustworthiness is signaled, we argue that leaders who convey integrity, a component of trustworthiness, will be more likely to be selected as successors after financial restatement. We predict that such appointments garner more positive reactions by external observers such as investment analysts and the media because these CEOs are perceived as having greater integrity. In an archival study of firms that have announced financial restatements, we find support for our predictions. These findings have implications for research on CEO succession, leadership selection, facial appearance, and firm misconduct.

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Into the Dark: Shifts in Corporate Political Activity after Social Movement Challenges

Mary-Hunter McDonnell & Timothy Werner

University of Pennsylvania Working Paper, December 2016

Abstract:
Using a unique database on social movement boycotts of corporations, we examine how firms alter their political activities in the wake of a reputational threat. We show that boycotts lead to significant reductions in the amount of targets' political action committee campaign contributions and simultaneous increases in targets' CEOs' personal campaign contributions, as well as targets' lobbying expenditures. We argue that these patterns represent a shift toward more covert forms of political engagement that present new problems for activists and shareholders seeking to monitor corporate political activity.

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Do Good Times Breed Cheats? Prosperous Times Have Immediate and Lasting Implications for CEO Misconduct

Emily Bianchi & Aharon Mohliver

Organization Science, November-December 2016, Pages 1488-1503

Abstract:
We examine whether prosperous economic times have both immediate and lasting implications for corporate misconduct among chief executive officers (CEOs). Drawing on research suggesting that prosperous times are associated with excessive risk-taking, overconfidence, and more opportunities to cheat, we first propose that CEOs will be more likely to engage in corporate misconduct during good economic times. Next, we propose that CEOs who begin their careers in prosperous times will be more likely to engage in self-serving corporate misconduct later in their careers. We tested these hypotheses by assembling a large data set of American CEOs and following their stock option reporting patterns between 1996 and 2005. We found that in good economic times, CEOs were more likely to backdate their stock options grants. Moreover, CEOs who began their careers in prosperous times were more likely to backdate stock option grants later in their careers. These findings suggest that the state of the economy can influence current ethical behavior and leave a lasting imprint on the moral proclivities of new workforce entrants.

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How Common Are Intentional GAAP Violations? Estimates from a Dynamic Model

Anastasia Zakolyukina

University of Chicago Working Paper, December 2016

Abstract:
This paper estimates the extent of undetected misstatements that violate GAAP using data on detected misstatements - earnings restatements - and a dynamic model. The model features a CEO who can manipulate his firm's stock price by misstating earnings. I find that the CEO's expected cost of misleading investors is low. The probability of detection over a five-year horizon is 13.91%, and the average misstatement, if detected, results in a 8.53% loss in the CEO's wealth. The low expected cost implies a high fraction of CEOs who misstate earnings at least once at 60%, inflation in stock prices across CEOs who misstate earnings at 2.02%, and inflation in stock prices across all CEOs at 0.77%. Wealthier CEOs with higher equity holdings or higher cash wealth manipulate less and the average misstatement is larger in smaller firms.

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Marital Status and Earnings Management

Gilles Hilary, Sterling Huang & Yanping Xu

Georgetown University Working Paper, November 2016

Abstract:
In this note, we examine the effect of CEO marital status on the riskiness of financial reporting. Using multiple proxies, we find that firms headed by a single CEO display a higher degree of earnings management than those headed by a married CEO. The effect is economically significant. Our results persist in an instrumental variable regression, suggesting that our results are not driven by innate heterogeneity in preferences.

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Do Fraudulent Firms Produce Abnormal Disclosure?

Gerard Hoberg & Craig Lewis

Journal of Corporate Finance, April 2017, Pages 58-85

Abstract:
Using text-based analysis of 10-K MD&A disclosures, we find that fraudulent firms produce verbal disclosure that is abnormal relative to strong counterfactuals. This abnormal text predicts fraud out of sample, has a verbal factor structure, and can be interpreted to reveal likely mechanisms that surround fraudulent behavior. Using a conservative difference-based approach, we find evidence that fraudulent managers discuss fewer details explaining the sources of the firm's performance, while disclosing more information about positive aspects of firm performance. They also provide less content relating the disclosure to the managerial team itself. We also find new interpretable verbal support for the well-known hypothesis that managers commit fraud in order to artificially lower their cost of capital.

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The impact of the Sarbanes-Oxley Act on corporate innovation

Yuqi Gu & Ling Zhang

Journal of Economics and Business, March-April 2017, Pages 17-30

Abstract:
We study the effect of the passage of the Sarbanes-Oxley Act (SOX) on corporate innovation. SOX dramatically changed corporate governance landscape of public firms in the U.S, especially in increasing monitoring from outside independent directors, which may have an impact on corporate innovation. The passage of SOX introduced an exogenous shock to the corporate governance structure, which enables us to establish causality between SOX and corporate innovation. Using patent and citation data from the NBER patent citation database, board of directors data from Institutional Shareholder Services (ISS) and a difference-in-difference regression technique, we find that SOX increases corporate innovation, as measured by the number of patents and the number of citations per patent. Moreover, we find that the effects are stronger for firms facing more severe agency problems, i.e., firms with more entrenched CEOs as proxied by a longer tenure, and firms with low institutional ownerships. The effect is also found to be stronger for firms operating in innovative industries.

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Do Clawbacks Have Claws? The Value Implications of Mandatory Clawback Provisions

Tor-Erik Bakke, Hamed Mahmudi & Aazam Virani

University of Oklahoma Working Paper, December 2016

Abstract:
Performance-based compensation can give managers an incentive to misreport financial information. This incentive can be mitigated by requiring the recoupment of erroneously awarded performance-based compensation from executives, which is known as a clawback provision. We study the value implications of having a clawback provision by examining the stock market's reaction to the SEC's announcement of proposed Rule 10D-1 that mandates clawback provisions. We find that relative to firms that had voluntarily adopted a clawback provision prior to the SEC's announcement, firms that did not have a clawback provision experienced positive abnormal returns, suggesting that clawback provisions are value-enhancing. Furthermore, the announcement had the greatest positive impact on firms without a clawback with more powerful managers. Our findings suggest that clawbacks create a valuable disincentive to misreport information, but that despite this, powerful managers may resist their adoption, which is why regulation mandating clawbacks may be necessary.

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How does governance affect tax avoidance? Evidence from shareholder proposals

Alex Young

Applied Economics Letters, forthcoming

Abstract:
I examine the effect of corporate governance on tax avoidance. Specifically, I use a regression discontinuity design to analyse the effect of governance-related shareholder proposals that pass or fail by a small percentage of votes. The passage of such proposals around the 50% threshold can be viewed as random assignment of improved governance and thus cleanly identifies a causal estimate. I find that the adoption of governance proposals decreases cash effective tax rates (ETR), which suggests that improved governance increases tax avoidance. The result contributes to our understanding of the determinants of firms' ETR.

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Decision Diversion in Diverse Teams: Findings from Inside a Corporate Boardroom

Sarah Harvey, Steven Currall & Tove Helland-Hammer

Academy of Management Discoveries, forthcoming

Abstract:
Using qualitative data from a five-year participant observation study conducted inside the corporate board of a publicly-held company, we discovered what happened when team composition changed to increase the diversity of perspectives and interests represented on the team. Based on board meeting transcripts over the five-year period, we observed that a change in team composition was followed by a process we label decision diversion, a dysfunctional process in which the team replaced its goal of effective task performance with negotiating the interests of sub-group members. A key insight of our study is that this process unfolded as team members attempted to engage in effective task-based information analysis and decision-making. Our study suggests that the traditional assumptions underlying the understanding of team composition may be insufficient. We provide alternative explanations for the origins of the dynamics of decision diversion in teams.

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Explaining CEO Retention in Misreporting Firms

Messod Beneish, Cassandra Marshall & Jun Yang

Journal of Financial Economics, forthcoming

Abstract:
We propose a framework that advances our understanding of Chief Executive Officer (CEO) retention decisions in misreporting firms. Consistent with economic intuition, outside directors are more likely to fire (retain) CEOs when retention (replacement) costs are high relative to replacement (retention) costs. When the decision is ambiguous because neither cost dominates, outside directors are more likely to retain the CEO when they both benefit from selling stock in the misreporting period. We show that joint abnormal selling captures director-CEO alignment incrementally to biographical overlap. This new proxy operationalizes information sharing and trust, making it useful for studying economic decision-making embedded in social relationships.

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Does a Long-Term Orientation Create Value? Evidence from a Regression Discontinuity

Caroline Flammer & Pratima Bansal

Strategic Management Journal, forthcoming

Abstract:
In this paper, we theorize and empirically investigate how a long-term orientation impacts firm value. To study this relationship, we exploit exogenous changes in executives' long-term incentives. Specifically, we examine shareholder proposals on long-term executive compensation that pass or fail by a small margin of votes. The passage of such "close call" proposals is akin to a random assignment of long-term incentives and hence provides a clean causal estimate. We find that the adoption of such proposals leads to i) an increase in firm value and operating performance ― suggesting that a long-term orientation is beneficial to companies ― and ii) an increase in firms' investments in long-term strategies such as innovation and stakeholder relationships. Overall, our results are consistent with a "time-based" agency conflict between shareholders and managers.

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Corporate social responsibility and CEO confidence

Scott McCarthy, Barry Oliver & Sizhe Song

Journal of Banking & Finance, February 2017, Pages 280-291

Abstract:
This study examines the relationship between firm corporate social responsibility (CSR) and CEO confidence. Research shows that CSR has a hedging feature. Research also shows that more confident CEOs underestimate firm risks, which, in turn, leads them to undertake relatively less hedging. Consistent with this, we find that CEO confidence is negatively related to the level of CSR. Closer analysis shows that this effect is stronger in the institutional aspects of CSR, such as community and workforce diversity, rather than in the technical aspects of CSR, such as corporate governance and product quality. Our results are robust to different competing explanations, including narcissism, which refers in this context to CEOs who engage in CSR to attract attention and alternative proxies for CSR and CEO confidence.

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Takeover Defenses: Entrenchment and Efficiency

Sanjeev Bhojraj, Partha Sengupta & Suning Zhang

Journal of Accounting and Economics, February 2017, Pages 142-160

Abstract:
This paper explores the potential role of anti-takeover provisions (ATPs) in long-term value creation. Using a change in the legal environment in Delaware as an exogenous event, we document that a subset of firms with a relatively longer term focus (innovative firms) benefit from ATPs. Particularly, these firms experience an increase in Tobin's Q following a state law change in Delaware that increases the effectiveness of ATPs in defending against hostile takeovers. This increase is greater than that for non-innovative firms in Delaware as well as for innovative firms outside Delaware. Furthermore, the innovative firms in Delaware experience a stronger positive market reaction around the state law change dates, relative to other firms. Finally, in a cross-sectional setting we find that innovative firms with above-average takeover protection outperform other firms and are less likely to engage in harmful real earnings management. Taken together, these results provide empirical evidence of potential benefits of ATPs and help explain why such protection continues to be prevalent in the United States.

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Outsourcing Corporate Governance: Conflicts of Interest Within the Proxy Advisory Industry

Tao Li

Management Science, forthcoming

Abstract:
Proxy advisory firms wield large influence with voting shareholders. However, conflicts of interest may arise when an advisor sells services to both investors and issuers. Using a unique data set on voting recommendations, I find that for most types of proposals, competition from a new entrant reduces favoritism toward management by an incumbent advisor that serves both corporations and investors. The results are not driven by factors that influence the entrant's coverage decision, such as the marginal cost of new coverage or previously biased recommendations by the incumbent. Similar to other information intermediaries, biased advice by proxy advisors is shown to have real, negative consequences that allow management to enjoy greater private benefits. These results suggest conflicts of interest are a real concern in the proxy advisory industry, and increasing competition could help alleviate them.

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Inside Directors, Risk Aversion, and Firm Performance

Arun Upadhyay et al.

Review of Financial Economics, forthcoming

Abstract:
Prior literature provides mixed evidence on managerial risk aversion. Using a sample of 1737 large US firms from 1996 to 2005, we find a negative association between the insider ratio and firm risk. Upon further analysis, we show that firms with a greater insider ratio are also likely to have more conservative CEO compensation and investment policies. Analysis of CEO compensation policies indicates that firms with a greater insider ratio offer lower equity based compensation, lower vega and lower total compensation to their CEOs. Also, firms with a greater insider ratio tend to invest more in tangible assets such as plant and equipment and have lower intangible investments. Consistent with these boards instituting conservative policies, we find that firms with a greater insider ratio perform better when they operate in highly volatile environments. Overall, this study suggests that high-insider boards are more conservative in policy initiation and that such boards are valuable in firms with greater operating uncertainties.

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Independent Boards and Innovation

Benjamin Balsmeier, Lee Fleming & Gustavo Manso

Journal of Financial Economics, forthcoming

Abstract:
Much research has suggested that independent boards of directors are more effective in reducing agency costs and improving firm governance. How they influence innovation is less clear. Relying on regulatory changes, we show that firms that transition to independent boards focus on more crowded and familiar areas of technology. They patent and claim more and receive more total future citations to their patents. However, the citation increase comes mainly from incremental patents in the middle of the citation distribution; the numbers of uncited and highly cited patents - arguably associated with riskier innovation strategies - do not change significantly.

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The Power of the Pen Reconsidered: The Media, CEO Human Capital, and Corporate Governance

Baixiao Liu, John McConnell & Wei Xu

Journal of Banking & Finance, March 2017, Pages 175-188

Abstract:
By examining the post-retirement outside board seats held by former CEOs of S&P 1500 firms, we find that CEOs' post-retirement outside board memberships are influenced by the level and the tone of media coverage given to the CEOs' firms while the CEOs were "on the job." These results provide evidence of a direct economic link between media coverage of CEOs' performance today and CEOs' future opportunity sets. These results lend support to the proposition that the media can play a role in corporate governance by influencing the value of CEOs' human capital.

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Corporate Governance and Nested Authority: Cohesive Network Structure, Actor-Driven Mechanisms, and the Balance of Power in American Corporations

Richard Benton

American Journal of Sociology, November 2016, Pages 661-713

Abstract:
Corporate governance describes practices that allocate power and control within public corporations, especially between shareholders, the board of directors, and managers. Shareholder value norms have replaced earlier managerialist governance models. Concurrently, cohesion among the managerial corporate elite has declined, further contributing to a declining managerialist governance consensus. This study considers how governance orientations in publicly held corporations are nested within interfirm networks. Drawing on prior theory, the author argues that cohesive substructures among the corporate elite help account for the surprising resilience of managerial control. He finds that more cohesive subgroups in the board interlock network have greater managerial control and shows how cohesive substructures emerge out of local actor-driven mechanisms: (1) directors affiliated with managerialist firms select into dense groups, (2) firms appoint directors from similarly governed firms, and (3) interlocks help spread governance orientations. These findings have implications for theory and research on collective action in corporate governance.

By KEVIN LEWIS | 09:00:00 AM

Sunday, January 8, 2017

Friend of a friend

Intensity of Facebook Use Is Associated With Lower Self-Concept Clarity: Cross-Sectional and Longitudinal Evidence

Markus Appel et al.

Journal of Media Psychology, forthcoming

Abstract:
Social networking sites such as Facebook provide individuals with opportunities to express and gather information relevant to their self-concept. Previous theoretical work yielded contrasting assumptions about a potential link between individuals’ Internet use and their self-concept clarity, that is, individuals’ perception of a clear and internally consistent self-concept content. Focusing on social networking sites, our aim was to provide cross-sectional as well as longitudinal evidence regarding the relationship between individuals’ feelings of connectedness to Facebook (Facebook intensity) and self-concept clarity. Two cross-sectional studies (N1 = 244; N2 = 166) and one longitudinal study (N3 = 101) are presented. Independent samples of adolescents, adults, and students from Austria participated. The statistical procedures included hierarchical regression analyses (Studies 1 and 2) and a cross-lagged panel analysis (Study 3). The studies provided consistent evidence of a negative relationship between Facebook intensity and self-concept clarity. Moreover, the longitudinal study showed that Facebook intensity predicted a decline in self-concept clarity over time whereas a reverse pathway was not supported. Future research should examine the content of the self-concept and should continue searching for specific Facebook activities that might explain the decline in self-concept clarity. Our results suggest that an intense attachment to Facebook contributes to an inconsistent and unclear self-concept.

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Is Virginia for lovers? Geographic variation in adult attachment orientation

William Chopik & Matt Motyl

Journal of Research in Personality, February 2017, Pages 38–45

Abstract:
People often use relationships to characterize and describe places. Yet, little research examines whether people’s relationships and relational style vary across geography. The current study examined geographic variation in adult attachment orientation in a sample of 127,070 adults from the 50 United States. The states that were highest in attachment anxiety tended to be in the mid-Atlantic and Northeast region of the United States. The states that were highest in attachment avoidance tended to be in the frontier region of the United States. State-level avoidance was related to state-level indicators of relationship status, social networks, and volunteering behavior. The findings are discussed in the context of the mechanisms that may give rise to regional variation in relational behavior.

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Heterogeneous peer effects in education

Eleonora Patacchini, Edoardo Rainone & Yves Zenou

Journal of Economic Behavior & Organization, forthcoming

Abstract:
We investigate whether, how, and why individual education attainment depends on the educational attainment of schoolmates. Specifically, using longitudinal data on students and their friends in a nationally representative set of US schools, we consider the influence of different types of peers on educational outcomes. We find that there are strong and persistent peer effects in education, but peers tend to be influential in the long run only when their friendships last more than a year. This evidence is consistent with a network model in which convergence of preferences and the emergence of social norms among peers require long-term interactions.

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Something to talk about: Gossip increases oxytocin levels in a near real-life situation

Natascia Brondino, Laura Fusar-Poli & Pierluigi Politi

Psychoneuroendocrinology, forthcoming

Abstract:
Gossip is a pervasive social behavior. Its evolutionary survival seems related to its social functions, such as establishing group rules, punishing trespassers, exercising social influence through reputational systems, and developing and strengthening social bonds. We aimed at evaluating the effect of gossip on hormones (oxytocin and cortisol) and at identifying potential mediators of hormonal response to gossip. Twenty-two female students were randomly assigned to a gossip conversation or to an emotional non-gossip conversation. Additionally, all participants underwent a neutral conversation on the second day of the study. Salivary oxytocin and cortisol levels were measured. Oxytocin increased significantly in the gossip compared to the emotional non-gossip conversation. A decrease in cortisol levels was observed in all three conditions (gossip, emotional non-gossip, neutral). Change in cortisol levels was similar across conditions. Psychological characteristics (e.g. empathy, autistic traits, perceived stress, envy) did not affect oxytocin rise in the gossip condition. Our findings suggest that oxytocin may represent a potential hormonal correlate of gossip behavior.

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Sex differences in biological response to peer rejection and performance challenge across development: A pilot study

Laura Stroud et al.

Physiology & Behavior, February 2017, Pages 224–233

Abstract:
A pilot study of sex differences in biological response to peer rejection and performance challenges across development was conducted. Participants were 59 typically-developing children (ages 8–17; 58% girls); 59 children completed one challenge: 37 completed both challenges. Following a habituation session, participants completed peer rejection (exclusion challenges) and/or performance (speech, arithmetic, tracing) stress sessions. Saliva cortisol and alpha amylase (AA) were measured throughout. Post-pubertal girls showed increased AA and equivalent cortisol output in response to rejection vs. performance; pre-pubertal girls showed heightened cortisol and AA response to performance vs. rejection. Boys showed similar biological responses across puberty, with pre- and post-pubertal boys demonstrating heightened cortisol, but equivalent AA output in response to performance vs. rejection stressors. Although results are preliminary, they suggest increases in relative sensitivity to rejection vs. performance stressors and malleability of stress response across development in girls, but stability of stress response across development in boys. Future, larger-scale, longitudinal studies are needed.

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Beyond risk: Prospective effects of GABA Receptor Subunit Alpha-2 (GABRA2) × Positive Peer Involvement on adolescent behavior

Elisa Trucco et al.

Development and Psychopathology, forthcoming

Abstract:
Research on Gene × Environment interactions typically focuses on maladaptive contexts and outcomes. However, the same genetic factors may also impact susceptibility to positive social contexts, leading to adaptive behavior. This paper examines whether the GABA receptor subunit alpha-2 (GABRA2) single nucleotide polymorphism rs279858 moderates the influence of positive peer affiliation on externalizing behavior and various forms of competence. Regions of significance were calculated to determine whether the form of the interaction supported differential susceptibility (increased sensitivity to both low and high positive peer affiliation) or vantage sensitivity (increased sensitivity to high positive peer affiliation). It was hypothesized that those carrying the homozygous minor allele (GG) would be more susceptible to peer effects. A sample (n = 300) of primarily male (69.7%) and White (93.0%) adolescents from the Michigan Longitudinal Study was assessed from ages 12 to 17. There was evidence for prospective Gene × Environment interactions in three of the four models. At low levels of positive peer involvement, those with the GG genotype were rated as having fewer adaptive outcomes, while at high levels they were rated as having greater adaptive outcomes. This supports differential susceptibility. Conceptualizing GABRA2 variants as purely risk factors may be inaccurate. Genetic differences in susceptibility to adaptive environmental exposures warrants further investigation.

By KEVIN LEWIS | 09:00:00 AM


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