What a country has done in the past, and what other countries are doing in the present, can feedback for good or for ill in debt markets. We develop a simple model of sovereign bond markets with global investors and endogenous information acquisition about fundamental default probabilities. This model displays hysteresis and contagion in sovereign bond spreads. Small fundamental shocks in one country can induce investors to acquire information, generating price volatility and increased risk premia. These changes may also induce investors to rebalance their portfolio, generating market segmentation and information acquisition in seemingly unrelated economies. Information regimes may persist over time, requiring large improvements in fundamentals to return to more stable bond spread conditions.
Debt Crises: For Whom the Bell Tolls -- by Harold Cole, Daniel Neuhann, Guillermo Ordonyez
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Migration and Redistribution: Why the Federal Governance of an Economic Union Matters -- by Assaf Razin, Efraim Sadka
Federal governance matters. Policy coordination allows the economic union to exercise monopsony power over migrants. Therefore the migration volumes under the policy-competition regime exceed those under the policy-coordination regime. With loose federal governance, competition over low-skilled migrants, who come with no capital, induces the individual member state to raise the provision of social benefit, so as to attract more migrants when starting from the coordination equilibrium. As a result, the social benefits in all other member States must also be raised to keep these migrants at their own economy. This amounts to excessively high income redistribution - a negative fiscal externality.
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The Effect of Pollution on Worker Productivity: Evidence from Call-Center Workers in China -- by Tom Chang, Joshua Graff Zivin, Tal Gross, Matthew Neidell
We investigate the effect of pollution on worker productivity in the service sector by focusing on two call centers in China. Using precise measures of each worker's daily output linked to daily measures of pollution and meteorology, we find that higher levels of air pollution decrease worker productivity by reducing the number of calls that workers complete each day. These results manifest themselves at commonly found levels of pollution in major cities throughout the developing and developed world, suggesting that these types of effects are likely to apply broadly. When decomposing these effects, we find that the decreases in productivity are explained by increases in time spent on breaks rather than the duration of phone calls. To our knowledge, this is the first study to demonstrate that the negative impacts of pollution on productivity extend beyond physically demanding tasks to indoor, white-collar work.
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Management as a Technology? -- by Nicholas Bloom, Raffaella Sadun, John Van Reenen
Are some management practices akin to a technology that can explain company and national productivity, or do they simply reflect contingent management styles? We collect data on core management practices from over 11,000 firms in 34 countries. We find large cross-country differences in the adoption of basic management practices, with the US having the highest size-weighted average management score. We present a formal model of "Management as a Technology", and structurally estimate it using panel data to recover parameters including the depreciation rate and adjustment costs of managerial capital (both found to be larger than for tangible non-managerial capital). Our model also predicts (i) a positive effect of management on firm performance; (ii) a positive relationship between product market competition and average management quality (part of which stems from the larger covariance between management with firm size as competition strengthens); and (iii) a rise (fall) in the level (dispersion) of management with firm age. We find strong empirical support for all of these predictions in our data. Finally, building on our model, we find that differences in management practices account for about 30% of cross-country total factor productivity differences.
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Individual Migration and Household Incomes -- by Julia Garlick, Murray Leibbrandt, James Levinsohn
We estimate the returns to internal migration in South Africa. These appear to be the first nationally representative estimates of the return to migration for any African country-- a somewhat surprising claim for a literature that's over 60 years old. We develop a framework to analyze individual migration in the context of income pooling within endogenously formed households. We apply this framework to estimate the return to migration from the perspective of the migrant (as is typically done) as well as from the perspectives of the sending and receiving households.
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College Attrition and the Dynamics of Information Revelation -- by Peter Arcidiacono, Esteban Aucejo, Arnaud Maurel, Tyler Ransom
This paper investigates the role played by informational frictions in college and the workplace. We estimate a dynamic structural model of schooling and work decisions, where individuals have imperfect information about their schooling ability and labor market productivity. We take into account the heterogeneity in schooling investments by distinguishing between two- and four-year colleges, graduate school, as well as science and non-science majors for four-year colleges. Individuals may also choose whether to work full-time, part-time, or not at all. A key feature of our approach is to account for correlated learning through college grades and wages, whereby individuals may leave or re-enter college as a result of the arrival of new information on their ability and productivity. Our findings indicate that the elimination of informational frictions would increase the college graduation rate by 9 percentage points, and would increase the college wage premium by 32.7 percentage points through increased sorting on ability.
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Financing Durable Assets -- by Adriano A. Rampini
This paper studies the effect of durability on the financing of durable assets. We show that more durable assets require larger down payments of internal funds per unit of capital making them harder to finance, because durability affects the price of an asset and hence the overall financing need more than its collateral value. This insight has implications for the choice between new and used capital, technology adoption, and the rent versus buy decision. Constrained borrowers purchase used assets which are less durable than new assets and adopt less durable, low quality assets, that are otherwise dominated technologies. More durable assets are more likely to be rented given their larger financing need. Legal enforcement affects trade and technology adoption; weak legal enforcement economies are net importers of used assets and invest a larger fraction in less durable, low quality assets. There is a critical distinction between the pledgeability and durability of assets: pledgeability facilitates financing whereas the net effect of durability is to impede financing.
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Tuskegee and the Health of Black Men -- by Marcella Alsan, Marianne Wanamaker
For forty years, the Tuskegee Study of Untreated Syphilis in the Negro Male passively monitored hundreds of adult black males with syphilis despite the availability of effective treatment. The study's methods have become synonymous with exploitation and mistreatment by the medical community. We find that the historical disclosure of the study in 1972 is correlated with increases in medical mistrust and mortality and decreases in both outpatient and inpatient physician interactions for older black men. Our estimates imply life expectancy at age 45 for black men fell by up to 1.4 years in response to the disclosure, accounting for approximately 35% of the 1980 life expectancy gap between black and white men.
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The Incidental Fertility Effects of School Condom Distribution Programs -- by Kasey S. Buckles, Daniel M. Hungerman
While the fertility effects of improving teenagers' access to contraception are theoretically ambiguous, most empirical work has shown that access decreases teen fertility. In this paper, we consider the fertility effects of access to condoms--a method of contraception not considered in prior work. We exploit variation across counties and across time in teenagers' exposure to condom distribution programs in schools. We find that access to condoms in schools increases teen fertility by about 10 percent. These effects are driven by communities where condoms are provided without mandated counseling.
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The Political Economy of Underfunded Municipal Pension Plans -- by Jeffrey Brinkman, Daniele Coen-Pirani, Holger Sieg
This paper analyzes the determinants of underfunding of local government's pension funds using a politico-economic overlapping generations model. We show that a binding downpayment constraint in the housing market dampens capitalization of future taxes into current land prices. Thus, a local government's pension funding policy matters for land prices and the utility of young households. Underfunding arises in equilibrium if the pension funding policy is set by the old generation. Young households instead favor a policy of full funding. Empirical results based on cross-city comparisons in the magnitude of unfunded liabilities are consistent with the predictions of the model.
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Keeping College Options Open: A Field Experiment to Help All High School Seniors Through the College Application Process -- by Philip Oreopoulos, Reuben Ford
Recent research suggests that the college application process itself prevents access. This paper reports results from a large school-based experiment in which application assistance is incorporated into the high school curriculum for all graduating seniors at low-transition schools. Over three workshops, students were guided to pick programs of interest that they were eligible for, apply for real, and complete the financial aid application. The goal was to create a college option for exiting students to make the transition easier and more salient. On average, the program increased application rates from 64 to 78 per cent. College enrolment increased the following school year by 5.2 percentage points with virtually all of this increase in two-year community college programs. The greatest impact was for students who were not taking any university-track courses in high school: the application rate for these students increased by 24 percentage points with a nine per cent increase in two-year college enrolment. A second experiment was conducted two years later to explore several variations of the program. Offering personal assistance without waiving application fees had a negligible or even negative impact on applications and enrollment. Using laptops in homeroom classrooms instead of sending students to computer labs while combining the initial 2 workshops into one full-morning session increased application rates. However, subsequent enrollment effects were negligible. We provide some evidence consistent with the possibility that decreased guidance in choosing eligible programs was responsible for the second-experiment's decline in enrollment impacts.
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Macroeconomics and Household Heterogeneity -- by Dirk Krueger, Kurt Mitman, Fabrizio Perri
The goal of this chapter is to study how, and by how much, household income, wealth, and preference heterogeneity amplify and propagate a macroeconomic shock. We focus on the U.S. Great Recession of 2007-2009 and proceed in two steps. First, using data from the Panel Study of Income Dynamics, we document the patterns of household income, consumption and wealth inequality before and during the Great Recession. We then investigate how households in different segments of the wealth distribution were affected by income declines, and how they changed their expenditures differentially during the aggregate downturn. Motivated by this evidence, we study several variants of a standard heterogeneous household model with aggregate shocks and an endogenous cross-sectional wealth distribution. Our key finding is that wealth inequality can significantly amplify the impact of an aggregate shock, and it does so if the distribution features a sufficiently large fraction of households with very little net worth that sharply increase their saving (i.e. they are not hand-to mouth) as the recession hits. We document that both these features are observed in the PSID. We also investigate the role that social insurance policies, such as unemployment insurance, play in shaping the cross-sectional income and wealth distribution, and through it, the dynamics of business cycles.
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Claims-Shifting: The Problem of Parallel Reimbursement Regimes -- by Olesya Fomenko, Jonathan Gruber
Parallel reimbursement regimes, under which providers have some discretion over which payer gets billed for patient treatment, are a common feature of health care markets. In the U.S., the largest such system is under Workers' Compensation (WC), where the treatment workers with injuries that are not definitively tied to a work accident may be billed either under group health insurance plans or under WC. We document that there is significant reclassification of injuries from group health plans into WC, or "claims shifting", when the financial incentives to do so are strongest. In particular, we find that injuries to workers enrolled in capitated group health plans (such as HMOs) see a higher incidence of their claims for soft-tissue injuries under WC than under group health, relative to those in non-capitated plans. Such a pattern is not evident for workers with traumatic injuries, which are easier to classify specifically as work related. Moreover, we find that such reclassification is more common in states with higher WC fees, once again for soft tissue but not traumatic injuries. Our results imply that a significant shift towards capitated reimbursement, or reimbursement reductions, under GH could lead to a large rise in the cost of WC plans
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Adult Mortality Five Years after a Natural Disaster: Evidence from the Indian Ocean Tsunami -- by Jessica Y. Ho, Elizabeth Frankenberg, Cecep Sumantri, Duncan Thomas
Exposure to extreme events has been hypothesized to affect subsequent mortality because of mortality selection and scarring effects of the event itself. We examine survival at and in the five years after the 2004 Indian Ocean earthquake and tsunami for a population-representative sample of residents of Aceh, Indonesia who were differentially exposed to the disaster. For this population, the dynamics of selection and scarring are a complex function of the degree of tsunami impact in the community, the nature of individual exposures, age at exposure, and gender. Among individuals from tsunami-affected communities we find evidence for positive mortality selection among older individuals, with stronger effects for males than for females, and no evidence of scarring. Among individuals from other communities, property loss is associated with elevated mortality risks in the five years after the disaster only for those who were age 50 or older at the time of the disaster.
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Does Legalization Reduce Black Market Activity? Evidence from a Global Ivory Experiment and Elephant Poaching Data -- by Solomon Hsiang, Nitin Sekar
Black markets are estimated to represent a fifth of global economic activity, but their response to policy is poorly understood because participants systematically hide their actions. It is widely hypothesized that relaxing trade bans in illegal goods allows legal supplies to competitively displace illegal supplies, but a richer economic theory provides more ambiguous predictions. Here we evaluate the first major global legalization experiment in an internationally banned market, where a monitoring system established before the experiment enables us to observe the behavior of illegal suppliers before and after. International trade of ivory was banned in 1989, with global elephant poaching data collected by field researchers since 2003. A one-time legal sale of ivory stocks in 2008 was designed as an experiment, but its global impact has not been evaluated. We find that international announcement of the legal ivory sale corresponds with an abrupt ~66% increase in illegal ivory production across two continents, and a possible ten-fold increase in its trend. An estimated ~71% increase in ivory smuggling out of Africa corroborates this finding, while corresponding patterns are absent from natural mortality and alternative explanatory variables. These data suggest the widely documented recent increase in elephant poaching likely originated with the legal sale. More generally, these results suggest that changes to producer costs and/or consumer demand induced by legal sales can have larger effects than displacement of illegal production in some global black markets, implying that partial legalization of banned goods does not necessarily reduce black market activity.
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The Effect of Cigarette Prices on Cigarette Sales: Exploring Heterogeneity in Price Elasticities at High and Low Prices -- by John A. Tauras, Michael F. Pesko, Jidong Huang, Frank J. Chaloupka, Matthew C. Farrelly
Numerous studies have examined the effect of cigarette prices on cigarette consumption. These studies either evaluate the price elasticity of demand for each observation and report the average price elasticity across all observations or report the price elasticity of demand at the mean of the price variable. Policy makers rely on these average price elasticity estimates for public health and revenue generation purposes. The use of an average price elasticity may yield misleading predictions given the substantial variation in cigarette prices between states. This research is the first econometric study to examine the price elasticity of cigarette demand at different price levels. We use aggregate state-level data for years 1991 - 2012 and employ generalized linear models with log link and gamma distribution to estimate cigarette demand equations. We find that the absolute value of the price elasticity of demand monotonically increases with price. The findings from this study will be valuable to policymakers contemplating the use of cigarette excise taxes to reduce cigarette consumption or to generate revenue.
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SEC To Permit Voluntary Filing Using Inline XBRL
The Securities and Exchange Commission today announced that it will allow companies to voluntarily file structured financial statement data in a format known as Inline XBRL. This initiative represents another step in the SEC’s continuing efforts to modernize and enhance its requirements to facilitate transparency of, and access to, companies’ disclosures.
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BME: Hadley Investments SOCIMI To Start Trading On MAB On 15 June
The Coordination and Admissions Committee of the Mercado Alternativo Bursátil (MAB) has submitted to the Board of Directors a favourable report on HADLEY INVESTMENTS SOCIMI,stating that the company is eligible for admission to the SOCIMIs (REITs) segment of this market, following a review of all the information presented by the company.
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ACER Publishes A New Edition Of Questions & Answers On REMIT
The Agency has published another monthly edition of the Questions & Answers on REMIT (Q&A). In the Q&A the Agency answers to questions it has received via remit(at)acer.europa.eu. Updates of the Q&A are regularly published with the aim of providing transparency on the application of REMIT.
The latest Q&A is available here.
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UKâs Financial Conduct Authority: Former Equities Trader At Schroders Investment Management
Damian Clarke, a former equities trader at Schroders Investment Management has today been sentenced to two years imprisonment having pleaded guilty to nine counts of insider dealing.
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