Effects of COVID-19 Shutdowns on Domestic Violence in the U.S. -- by Yutong Chen, Amalia R. Miller, Carmit Segal, Melissa K. Spencer

This chapter examines the impact of COVID-19 shutdowns on domestic violence (DV) in the United States. Despite widespread concerns that pandemic shutdowns could increase DV, initial studies found mixed evidence that varied across data sources and locations. We review the evolving literature on the effects of the pandemic and highlight results from studies that examine multiple measures of DV across a common set of large cities. These studies show that the conflicting early results are due to opposite effects of pandemic shutdowns on two measures of DV in police data: an increase in domestic violence 911 calls and a decrease in DV crime reports. In theory, this divergence can come from either..

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Navigating Higher Education Insurance: An Experimental Study on Demand and Adverse Selection -- by Sidhya Balakrishnan, Eric Bettinger, Michael S. Kofoed, Dubravka Ritter, Douglas A. Webber, Ege Aksu, Jonathan S. Hartley

We conduct a survey-based experiment with 2,776 students at a non-profit university to analyze income insurance demand in education financing. We offered students a hypothetical choice: either a federal loan with income-driven repayment or an income-share agreement (ISA), with randomized framing of downside protections. Emphasizing income insurance increased ISA uptake by 43%. We observe that students are responsive to changes in contract terms and possible student loan cancellation, which is evidence of preference adjustment or adverse selection. Our results indicate that framing specific terms can increase demand for higher education insurance to potentially address risk for students with ..

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3D-PCA: Factor Models with Restrictions -- by Martin Lettau

This paper proposes latent factor models for multidimensional panels called 3D-PCA. Factor weights are constructed from a small set of dimension-specific building blocks, which give rise to proportionality restrictions of factor weights. While the set of feasible factors is restricted, factors with long/short structures often found in pricing factors are admissible. I estimate the model using a 3-dimensional data set of double-sorted portfolios of 11 characteristics. Factors estimated by 3D-PCA have higher Sharpe ratios and smaller cross-sectional pricing errors than models with PCA or Fama-French factors. Since factor weights are subject to restrictions, the number of free parameters is sma..

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Measuring the Commercial Potential of Science -- by Roger Masclans-Armengol, Sharique Hasan, Wesley M. Cohen

This paper uses a large language model to develop an ex-ante measure of the commercial potential of scientific findings. In addition to validating the measure against the typical holdout sample, we validate it externally against 1.) the progression of scientific findings through a major university’s technology transfer process and 2.) firms’ use of the academic science of major American research universities. We then illustrate the measure’s utility by applying it to two questions. First, does the patenting of academic research by universities impede its breadth of use by firms? Second, to illustrate how this measure can advance our understanding of the determinants of firms’ use of ..

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Market Power in Artificial Intelligence -- by Joshua S. Gans

This paper surveys the relevant existing literature that can help researchers and policy makers understand the drivers of competition in markets that constitute the provision of artificial intelligence products. The focus is on three broad markets: training data, input data, and AI predictions. It is shown that a key factor in determining the emergence and persistence of market power will be the operation of markets for data that would allow for trading data across firm boundaries.

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Shortening the Path to Productive Investment: Evidence from Input Fairs and Cash Transfers in Malawi -- by Shilpa Aggarwal, Dahyeon Jeong, Naresh Kumar, David Sungho Park, Jonathan Robinson, Alan Spearot

While cash transfers consistently show large effects on immediate outcomes like consumption, limited access to markets may mute their impact on productive investment. In an experiment in Malawi, we cross-cut cash transfers with an "input fair," designed to reduce transport costs to access agricultural inputs. Cash alone increases investment by 27%, while the joint provision of cash and the input fair increases investment by about 40%; thus, the incremental effect of the input fair is equivalent to about a 50% increase compared to the effect of cash alone. Input fairs alone were ineffective.

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Attribute-based Subsidies and Market Power: an Application to Electric Vehicles -- by Panle Jia Barwick, Hyuk-Soo Kwon, Shanjun Li

Attribute-based subsidies (ABS) are commonly used to promote the diffusion of energy-efficient products, whose manufacturers often wield significant market power. We develop a theoretical framework for the optimal design of ABS to account for endogenous product attributes, environmental externalities, and market power. We then estimate an equilibrium model of China's vehicle market under ABS and conduct counterfactual simulations to evaluate the welfare impacts of various subsidy designs. Compared to the uniform subsidies, ABS lead to higher product quality and are more effective in mitigating quantity distortions, albeit with a modest environmental cost. Between 42% to 62% of welfare gains ..

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The Long-Run Impacts of Public Industrial Investment on Local Development and Economic Mobility: Evidence from World War II -- by Andrew Garin, Jonathan L. Rothbaum

This paper studies the long-run effects of government-led construction of manufacturing plants on the regions where they were built and on individuals from those regions. Specifically, we examine publicly financed plants built in dispersed locations outside of major urban centers for security reasons during the United States' industrial mobilization for World War II. Wartime plant construction had large and persistent impacts on local development, characterized by an expansion of relatively high-wage manufacturing employment throughout the postwar era. These benefits were shared by incumbent residents; we find men born before WWII in counties where plants were built earned $1,200 (in 2020 do..

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Forced Migration and Refugees: Policies for Successful Economic and Social Integration -- by Dany Bahar, Rebecca J. Brough, Giovanni Peri

The inflow of refugees and their subsequent integration can be an important challenge for both the refugees themselves and the host society. Policy interventions can improve the lives and economic success of refugees and of their communities. In this paper, we review the socioeconomic integration policy interventions focused on refugees and the evidence surrounding them. We also highlight some interesting topics for future research and stress the need to rigorously evaluate their effectiveness and implications for the successful integration of refugees.

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Does Consolidation in Insurer Markets affect Insurance Enrollment and Drug Expenditures? Evidence from Medicare Part D -- by Pinka Chatterji, Chun-Yu Ho, Tao Jin, Yichuan Wang

Since the inception of Medicare Part D in 2006, mergers and acquisitions (M&A) and regulatory changes have led to increased concentration and reduced plan variety in the standalone prescription drug plan (PDP) portion of the market. We examine how this industry consolidation affects Medicare beneficiaries’ enrollment in PDPs and their out-of-pocket (OOP) drug expenditures using individual-level data from the 2006-2018 waves of the Health and Retirement Study (HRS) merged with PDP market-level characteristics. Overall, we find that lower plan variety in the PDP market decreases the likelihood that elderly individuals enroll in PDPs, and higher PDP market concentration increases OOP drug exp..

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Aggregation, Liquidity, and Asset Prices with Incomplete Markets -- by Sebastian Di Tella, Benjamin M. Hébert, Pablo Kurlat

We analytically characterize asset-pricing and consumption behavior in two-account heterogeneous-agent models with aggregate risk. We show that trading frictions can simultaneously explain (1) household-level consumption behavior such as high marginal propensities to consume, (2) a zero-beta rate on equities that satisfies an aggregate consumption Euler equation, (3) a return on safe assets that does not, and (4) a flat securities market line. The return of equities is well explained by aggregate consumption, while the return of safe assets reflects a large and volatile liquidity premium.

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Comprehensive OOS Evaluation of Predictive Algorithms with Statistical Decision Theory -- by Jeff Dominitz, Charles F. Manski

We argue that comprehensive out-of-sample (OOS) evaluation using statistical decision theory (SDT) should replace the current practice of K-fold and Common Task Framework validation in machine learning (ML) research. SDT provides a formal framework for performing comprehensive OOS evaluation across all possible (1) training samples, (2) populations that may generate training data, and (3) populations of prediction interest. Regarding feature (3), we emphasize that SDT requires the practitioner to directly confront the possibility that the future may not look like the past and to account for a possible need to extrapolate from one population to another when building a predictive algorithm. SD..

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The Distributional Impact of Sectoral Supply and Demand Shifts: A Unified Framework -- by Nittai K. Bergman, Nir Jaimovich, Itay Saporta-Eksten

Economies routinely experience a variety of sector-specific supply and demand shifts. Yet, the distributional welfare consequences of these shifts are not well understood. We address this gap by developing an analytical framework that jointly integrates supply-side and demand-side heterogeneity without imposing specific functional forms on consumption and production. This enables us to identify the key forces that shape the distributional welfare impact of sector-specific supply and demand shifts—in terms of consumer preferences and sectoral production functions. We estimate key parameters and quantify the heterogeneous welfare effects of sectoral shifts, revealing significant variation in..

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Apart but Connected: Online Tutoring, Cognitive Outcomes, and Soft Skills -- by Michela Carlana, Eliana La Ferrara

We study the Tutoring Online Program (TOP), where: (i) tutoring is entirely online; (ii) tutors are volunteer university students, matched with underprivileged middle school students. We leverage random assignment to estimate effects during and after the pandemic (2020 and 2022), investigating channels of impact. Three hours of individual tutoring per week increased math performance by 0.23 SD in 2020 and 0.20 SD in 2022. Higher-dosage yielded stronger effects, while group tutoring smaller effects. TOP enhanced students’ aspirations, socio-emotional skills and psychological well-being, but only during school closures. We also estimate the impact of TOP on tutors, finding increases in empat..

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Ban-the-Box Laws: Fair and Effective? -- by Robert Kaestner, Xufei Wang

Ban-the-box (BTB) laws are a widely used public policy rooted in employment law related to unnecessarily exclusionary hiring practices. BTB laws are intended to improve the employment opportunities of those with criminal backgrounds by giving them a fair chance during the hiring process. Prior research on the effectiveness of these laws in meeting their objective is limited and inconclusive. In this article, we extend the prior literature in two ways: we expand the years of analysis to a period of rapid expansion of BTB laws and we examine different types of BTB laws depending on the employers affected (e.g., public sector). Results indicate that BTB laws, any type of BTB law or BTB laws cov..

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The Effect of Early Childhood Programs on Third-Grade Test Scores: Evidence from Transitional Kindergarten in Michigan -- by Jordan S. Berne, Brian A. Jacob, Tareena Musaddiq, Anna Shapiro, Christina Weiland

Transitional Kindergarten (TK) is a relatively recent entrant into the U.S. early education landscape, combining features of public pre-K and regular kindergarten. We provide the first estimates of the impact of Michigan’s TK program on 3rd grade test scores. Using an augmented regression discontinuity design, we find that TK improves 3rd grade test scores by 0.29 (math) and 0.19 (English Language Arts) standard deviations relative to a counterfactual that includes other formal and informal early learning options. These impacts are notably large relative to the prior pre-K literature.

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Central Banking Post Crises -- by Michael Kiley, Frederic S. Mishkin

The world economy has experienced the largest financial crisis in generations, a global pandemic, and a resurgence in inflation during the first quarter of the 21st century, yielding important insights for central banking. Price stability has important benefits and is the responsibility of a central bank. Achieving price stability in a complex and uncertain environment involves a credible commitment to a nominal anchor with a strong response to inflation and pre-emptive leaning against an overheating economy. Associated challenges imply that central bank communication and transparency are key elements of monetary policy strategies and tactics. Crises have emphasized the role of central banks..

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Sticky Discount Rates -- by Masao Fukui, Niels Joachim Gormsen, Kilian Huber

We show that firms' nominal required returns to capital (i.e., their discount rates) are sticky with respect to expected inflation. Such nominally sticky discount rates imply that increases in expected inflation directly lower firms' real discount rates and thereby raise real investment. We analyze the macroeconomic implications of sticky discount rates using a New Keynesian model. The model naturally generates investment-consumption comovement in response to household demand shocks and higher investment in response to government spending. Sticky discount rates imply that inflation has real effects, even absent other nominal rigidities, making them a distinct source of monetary non-neutralit..

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Evaluating and Pricing Health Insurance in Lower-income Countries: A Field Experiment in India -- by Anup Malani, Cynthia Kinnan, Gabriella Conti, Kosuke Imai, Morgen Miller, Shailender Swaminathan, Alessandra Voena, Bartosz Woda

Universal health coverage is a widely shared goal across lower-income countries. We conducted a large-scale, 4-year trial that randomized premiums and subsidies for India’s first national, public hospital insurance program, RSBY. We find roughly 60% uptake even when consumers were charged premiums equal to the government’s cost for insurance. We also find substantial adverse selection into insurance at positive prices. Insurance enrollment increases insurance utilization, partly due to spillovers from use of insurance by neighbors. However, many enrollees attempted to use insurance but failed, suggesting that learning is critical to the success of public insurance. We find very few stati..

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The Household Equipment Revolution -- by Effrosyni Adamopoulou, Jeremy Greenwood, Nezih Guner

A brief historical overview of the household equipment revolution and the women who transformed the home in Germany and the United States.

NBER > Working Papers

Within-Firm Pay Inequality and Productivity -- by Melanie Wallskog, Nicholas Bloom, Scott W. Ohlmacher, Cristina Tello-Trillo

Combining confidential Census worker and firm data, we find three key results. First, employees at more productive firms earn higher pay at all earnings levels. Second, this pay-productivity relationship strengthens with seniority, doubling from an elasticity of 0.07 for pay on productivity for the median-paid employee to 0.15 for the top-paid employee. Consequently, more productive firms have higher within-firm inequality. Our data suggests this is driven by their greater adoption of aggressive performance-pay bonus and management schemes. Finally, the magnitude of this pay-performance slope suggests rising productivity can explain 40% of the rise in within-firm inequality since 1980.

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Can VAT Cuts and Anti-Profiteering Measures Dampen the Effects of Food Price Inflation? -- by Youssef Benzarti, Santiago Garriga, Darío Tortarolo

This paper estimates the effect of a temporary and large (21 p.p.) value-added tax (VAT) cut along with anti-profiteering measures on food necessities during a period of high inflation in Argentina. Using barcode-level data across more than 3,000 supermarkets, we find that (1) absent the anti-profiteering measures, the pass-through of the temporary VAT cut to prices was asymmetric: prices responded less to the VAT cut than its repeal resulting in prices that were higher than their pre-VAT cut levels; (2) imposing anti-profiteering measures, such as setting a ceiling on price increases, led to symmetric pass-through rates. Using a household welfare model, we show that the VAT cut resulted in ..

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Competing Narratives in Action: An Empirical Analysis of Model Adoption Dynamics -- by Marco Angrisani, Anya Samek, Ricardo Serrano-Padial

We use a longitudinal dataset measuring beliefs and behaviors to study the dynamics of model – or narrative – adoption during the Covid-19 pandemic. We show that individuals switch beliefs about the effectiveness of preventive behaviors following changes in perceived risk. The adoption of narratives promoting preventive behaviors is procyclical and narrative switching is influenced by exposure to conflicting information. We explain the data using a heterogeneous-agent model of competing narratives in which agents exhibit motivated beliefs. Adopting misspecified narratives increases infection rates, highlighting the importance of promoting accurate beliefs to guide behavior in the presenc..

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Community Engagement with Law Enforcement after High-profile Acts of Police Violence -- by Desmond Ang, Panka Bencsik, Jesse M. Bruhn, Ellora Derenoncourt

We document a sharp rise in gunshots coupled with declining 911 call volume across thirteen major US cities in the aftermath of the murder of George Floyd. National survey data also indicate that victims of crime became less likely to report their victimization to law enforcement due to mistrust of police. Our results suggest that high-profile acts of police violence may erode community engagement with law enforcement and highlight the call-to-shot ratio as a natural measure of attitudes towards the police.

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Adaptation Using Financial Markets: Climate Risk Diversification through Securitization -- by Matthew E. Kahn, Amine Ouazad, Erkan Yönder

In the face of rising climate risk, financial institutions may adapt by transferring such risk to securitizers that have the skill and expertise to build diversified pools, such as Mortgage-Backed Securities. In diversified pools, exposure to climate risk may be a drop in the ocean of cash flows. This paper builds a data set of the entire securitization chain from mortgage-level to MBS deal-level cash flows, and observes the prices of the tranches at monthly frequency. Wildfires lead to higher rates of prepayment and foreclosure at the mortgage level, and larger losses during foreclosure sales. At the MBS deal level, a lower spatial concentration of dollar balances (lower spatial dollar Herf..

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Spillovers and Spillbacks -- by Sushant Acharya, Paolo A. Pesenti

We study international monetary policy spillovers and spillbacks in a tractable two-country Heterogeneous Agent New Keynesian model. Relative to Representative Agent (RANK) models, our framework introduces a precautionary-savings channel, as households in both countries face uninsurable income risk, and a real-income channel, as households have heterogeneous marginal propensities to consume (MPC). While both channels amplify the size of spillovers/spillbacks, only precautionary savings can change their sign relative to RANK. Spillovers are likely to be larger in economies with higher fractions of high MPC households and more countercyclical income risk. Quantitatively, both channels amplify ..

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On the Spatial Determinants of Educational Access -- by Francesco Agostinelli, Margaux Luflade, Paolo Martellini

We define educational access as the component of a neighborhood's value that is determined by the set of schools available to its residents. This paper studies the extent to which educational access is determined by sorting based on heterogeneous preferences over school attributes, or local institutions that constrain residential location and school choice---such as school catchment areas and housing regulation. We develop a spatial equilibrium model of residential sorting and school choice, estimated using data from a large school district in the United States. The model replicates the responses of house prices and school enrollment to quasi-experimental variation in school peer composition..

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Technological Synergies, Heterogeneous Firms, and Idiosyncratic Volatility -- by Jesús Fernández-Villaverde, Yang Yu, Francesco Zanetti

This paper shows the importance of technological synergies among heterogeneous firms for aggregate fluctuations. First, we document six novel empirical facts using microdata that suggest the existence of important technological synergies between trading firms, the presence of positive assortative matching among firms, and their evolution during the business cycle. Next, we embed technological synergies in a general equilibrium model calibrated on firm-level data. We show that frictions in forming trading relationships and separation costs explain imperfect sorting between firms in equilibrium. In particular, an increase in the volatility of idiosyncratic productivity shocks significantly dec..

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Asset Demand and Real Interest Rates -- by Paul Beaudry, Katya Kartashova, Césaire Meh

Understanding factors that drive asset demand is central to explaining movements in long-term real interest rates. In this paper, we begin by documenting that much of the increase in the demand for assets in the US in the 30 years prior to Covid represented greater desire to hold assets by households of given age and income levels. For example, if we focus on the 55-64 age group, its wealth-to-income ratio increased by 45-55%, depending on whether housing is included or not. We then develop a model of asset demands which combines retirement motives and inter-temporal substitution motives to quantitatively explore different factors that may have contributed to such an increase. Our findings s..

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The Effect of Price Caps on Pharmaceutical Advertising: Evidence from the 340b Drug Pricing Program -- by Sylvia Hristakeva, Julie Holland Mortimer, Eric Yde

We study the effect of price caps on the provision of costly effort by pharmaceutical firms using variation in drug discounts generated by a price regulation program that allows eligible hospitals to purchase outpatient drugs at steep discounts. These discounts directly affect drug manufacturers’ markups, and may change firms’ incentives to exert promotional effort targeted towards physicians at these hospitals. We find that the effects of price regulation on pharmaceutical firm effort depend crucially on the design of the regulations. Using detailed data on marketing payments from pharmaceutical firms to physicians, we observe that physicians receive 12% fewer promotional payments after..

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