National Bureau of Economic Research

About: National Bureau of Economic Research is a nonprofit organization based out in Cambridge, Massachusetts, United States. It is known for research contribution in the topics: Monetary policy & Population. The organization has 2626 authors who have published 34177 publications receiving 2818124 citations. The organization is also known as: NBER & The National Bureau of Economic Research.

Measuring Economic Policy Uncertainty

Abstract: Many commentators argue that uncertainty about tax, spending, monetary and regulatory policy slowed the recovery from the 2007-2009 recession. To investigate this we develop a new index of economic policy uncertainty (EPU), built on three components: the frequency of newspaper references to economic policy uncertainty, the number of federal tax code provisions set to expire, and the extent of forecaster disagreement over future inflation and government purchases. This EPU index spikes near consequential presidential elections and major events such as the Gulf wars and the 9/11 attack. It also rises steeply from 2008 onward. We then evaluate our EPU index, first on a sample of 3,500 human audited news articles, and second against other measures of policy uncertainty, with these suggesting our EPU index is a good proxy for actual economic policy uncertainty. Drilling down into our index we find that the post-2008 increase was driven mainly by tax, spending and healthcare policy uncertainty. Finally, VAR estimates show that an innovation in policy uncertainty equal to the increase from 2006 to 2011 foreshadows declines of up to 2.3% in GDP and 2.3 million in employment.

Public-Sector Capital and the Productivity Puzzle

Abstract: A number of studies have suggested a quantitatively important relationship between public-sector capital accumulation and private sector productivity, with the most compelling evidence derived from analyses of state-level data. Estimates herein of production functions that use standard techniques to control for unobserved, state-specific characteristics, however, reveal essentially no role for public-sector capital in affecting private sector productivity. Only estimates of state production functions that do not include such controls find substantial productivity impacts. This result reconciles existing econometric estimates with the findings of Hulten and Schwab based on growth accounting techniques, as such techniques effectively control for state-specific effects. Region-level estimates are essentially identical to those from state data, suggesting no quantitatively important spillover effects across states.

House Prices, Home Equity-Based Borrowing, and the U.S. Household Leverage Crisis

Abstract: Using individual-level data on homeowner debt and defaults from 1997 to 2008, we show that borrowing against the increase in home equity by existing homeowners is responsible for a significant fraction of both the rise in U.S. household leverage from 2002 to 2006 and the increase in defaults from 2006 to 2008. Employing land topology-based housing supply elasticity as an instrument for house price growth, we estimate that the average homeowner extracts 25 cents for every dollar increase in home equity. Home equity-based borrowing is stronger for younger households, households with low credit scores, and households with high initial credit card utilization rates. Money extracted from increased home equity is not used to purchase new real estate or pay down high credit card balances, which suggests that borrowed funds may be used for real outlays. Lower credit quality households living in high house price appreciation areas experience a relative decline in default rates from 2002 to 2006 as they borrow heavily against their home equity, but experience very high default rates from 2006 to 2008. Our conservative estimates suggest that home equity-based borrowing added $1.25 trillion in household debt, and accounts for at least 39% of new defaults from 2006 to 2008.

How Does Your Kindergarten Classroom Affect Your Earnings? Evidence from Project Star

Abstract: In Project STAR, 11,571 students in Tennessee and their teachers were randomly assigned to classrooms within their schools from kindergarten to third grade. This article evaluates the long-term impacts of STAR by linking the experimental data to administrative records. We first demonstrate that kindergarten test scores are highly correlated with outcomes such as earnings at age 27, college attendance, home ownership, and retirement savings. We then document four sets of experimental impacts. First, students in small classes are significantly more likely to attend college and exhibit improvements on other outcomes. Class size does not have a significant effect on earnings at age 27, but this effect is imprecisely estimated. Second, students who had a more experienced teacher in kindergarten have higher earnings. Third, an analysis of variance reveals significant classroom effects on earnings. Students who were randomly assigned to higher quality classrooms in grades K–3—as measured by classmates' end-of-class test scores—have higher earnings, college attendance rates, and other outcomes. Finally, the effects of class quality fade out on test scores in later grades, but gains in noncognitive measures persist.

Costly Capital Reallocation and the Effects of Government Spending

Abstract: Changes in government spending often lead to significant shifts in demand across sectors. This paper analyzes the effects of sector-specific changes in government spending in a two-sector dynamic general equilibrium model in which the reallocation of capital across sectors is costly. The two-sector model leads to a richer array of possible responses of aggregate variables than the one-sector model. The empirical part of the paper estimates the effects of military buildups on a variety of macroeconomic variables using a new measure of military shocks. The behavior of macroeconomic aggregates is consistent with the predictions of a multi-sector neoclassical model. In particular, consumption, real product wages and manufacturing productivity fall in response to exogenous military buildups in the post-World War II United States.