A well-known study by the economists Eli Berman and Linda T.M. Bui of Boston University looked at the aftermath of new regulations governing air quality in Los Angeles. The South Coast Air Quality Management District in Los Angeles enacted some of the country’s most stringent air quality standards in the 1980s, and Berman and Bui compared Los Angeles firms with those in Louisiana and Texas to see if the more regulated firms cut jobs as a result. They found that the local air quality regulations were not responsible for a large decline in employment, and that the regulations might have actually increased labor demand since firms need to hire people to help them deal with the new regulations. They argued that because all firms in a region were affected by the same regulations, they were still able to compete against one another while facing the same costs. “We find no evidence that local air quality regulation substantially reduced employment,” they concluded.
December 11, 2016 | Leave a Comment
Prof. Schoenle presented his research “YOLO: Mortality Beliefs and Household Finance Puzzles” at the 2016 annual Academic Forum of the Defined Contribution Institutional Investment Association (DCIIA). The meeting took place November 29 and 30 at the Goldman Sachs Headquarters in New York City.
In his research, Prof. Schoenle studies how subjective mortality beliefs contribute to contradictory savings rate puzzles at opposite ends of the life-cycle. He shows that relative to a benchmark model using actuarial transition probabilities, the young under-save by 30%, and retirees draw down their assets 15% more slowly. Empirically, distorted mortality beliefs correlate with savings behavior, even controlling for risk preferences, and cognitive and socioeconomic factors. Salience of causes-of-death is a pivotal source of mortality belief distortions over the life-cycle.
Prof. Ben Shiller is presenting his research on ad blocking at Harvard Business School this week, and at MIT in December. The research was completed while visiting Harvard Business School during his sabbatical this semester.
Prof. Shiller’s research, with Joel Waldfogel, employs data on both traffic and the share of visitors blocking advertisements at roughly 2500 websites. Using changes in traffic as a measure of changes in quality, they find that websites with a substantial fraction of ads blocked declined in quality relative to other websites, presumably because those sites had relatively less ad revenue to reinvest in producing high-quality content. This implies a potential “web browser’s dilemma” (like a prisoner’s dilemma) – while installing ad blockers may help individual users, it may lead to quality changes which may harm consumers on balance.
On Wednesday, October 5th, the economics department held their “Meet the Majors” event in the World Court of the Lemberg Academic Center. Students enjoyed Lizzie’s Homemade Ice Cream with all of the fixings while chatting with faculty, UDR’s, and other econ majors. The event is coordinated so that professors, TAs and UDRs are able to come and talk with prospective and declared Economics majors or minors who are looking for advice regarding courses, internships or jobs, and, of course, enjoy some ice cream!
October 11, 2016 | Leave a Comment
Professor Raphael Schoenle presented his latest research “The Propagation of Monetary Policy Shocks in a Heterogeneous Production Economy” at the bi-annual Federal Reserve Bank of Cleveland Inflation Conference on September 29-30. His research investigates how monetary policy shocks affect real economic activity when changing the conventional modeling of the economy. In particular, his paper studies the interaction of three kinds of heterogeneity not usually present in models of the monetary policy-makers: heterogeneity in customer-supplier relationships, heterogeneity of heavy-tailed frequencies of price changes and heterogeneity in the size of sectors.
On the theoretical side, one of the key findings is that it matters if the policy-maker chooses to work with a model with only a few sectors, and with a detailed model of many sectors. In a calibrated model, for example, a less disaggregated model of the economy with only 8 sectors understates the real effects of monetary policy by 20% relative to a 58-sector economy and by 34% relative to a more realistic 350-sector economy. The initial response of inflation – to which policy-makers pay a lot of attention – is similar across these calibrations, and thus does not provide sufficient information about where the economy is going. The paper also shows which of the heterogeneities matter the most quantitatively – it is the frequency of price changes – , which may prove useful for policy-makers.
The economics in Denmark program finished on Wednesday with a bang. The students had their microeconomic theory final in the morning, and then we all went to an elegant closing dinner at the restaurant, Host. The dinner consisted of three main courses, plus three surprise courses. We had a good discussion about returning to Boston, and as one student put it, “reverse culture shock.”
I spent our final morning in Copenhagen going on a long run around the Harbor. We will all miss the city, but we are looking forward to the coming semester. We return with both a greater knowledge of economics, and a greater knowledge of the world.
On Thursday morning, Claus Rehfeld, a Healthcare Consultant in Denmark, came to speak to the Economics in Denmark program about the Danish healthcare system. He focused both on economic principles and the institutional details of the Danish system. The Danish system is a single payer system, built upon free and equal access to everyone. But, as he pointed out in the cartoon below, what exactly does equal access mean?
The session raised some difficult questions. In addition to questions about equal access, the question was raised about the amount a country should be spending on its healthcare, and whether or not more spending equals more health. The organization of the healthcare system and the amount spent on healthcare are starkly different from organization and amount spent in the United States.
Professor Nader Habibi’s Op-Ed: How will Turkey’s failed coup and massive purge affect its economic future?
July 28, 2016 | Leave a Comment
… ..The economy was just beginning to recover this year after slowing to 2.9 percent in 2014, with growth pegged at a better-than-expected 4.8 percent in the first quarter. Concern about economic hardship was a major motivation behind Erdogan’s move to ease tensions with Russia, Egypt and Israel in June. He has even hinted at backing down from his demand that Syrian President Bashar al-Assad must go as a precondition for peace.
While the quick suppression of the coup meant economic policy hasn’t shifted, the attempted takeover and the harsh response have hurt investor confidence.
Fitch and Standard & Poor’s – two of the leading credit-rating agencies – downgraded their views of the Turkish economy, while Moody’s has left its rating unchanged so far. The Turkish lira plunged as much as six percent in the days after the coup but has since recovered.
Key risks for the economy
Nevertheless, investors remain cautious and have adopted a wait-and-see attitude to get a better idea of how far the political purges will go and how they will affect the business community.
Here are a few of the key risks they’ll be following closely to see how Erdogan’s response will affect the economy’s long-term outlook.
First, a widespread purge that reaches into the hundreds of thousands might cause a political backlash and social instability. The remarkable support of opposition parties for the AKP government after the coup might come to an end, while the forced resignation of a large number of university presidents and deans could lead to student unrest. ……
The Economics in Denmark group went on a tour of the Carlsberg factory today. We learned all about the founder, J.C. Jacobsen, along with his son, Carl Jacobsen, after which Carlsberg is named. We also learned about the transition from a family owned company to the Carlsberg foundation. A micro-brewery still exists on the original site that produces the Jacobsen brand of premium beers.
A guide instructed us in the production process and qualities of different types of beers, including Wheat Beer, India Pale Ale, Dark Lager (the original beer produced in the late 1800’s), and Porter. The afternoon was both informative and enjoyable.