Showing papers in "Eastern Economic Journal in 2019"
TL;DR: The authors empirically investigate the linkages between income inequality and the shadow economy using a panel vector autoregression model, and build impulse response functions to study the time path of income inequality following a shock to the shadow market and vice versa.
Abstract: We empirically investigate the linkages between income inequality and the shadow economy. Employing a panel vector autoregression model, we build impulse response functions to study the time path of income inequality following a shock to the shadow economy, and vice versa. Our results using panel data for 144 countries over the period 1960–2009 reveal a bidirectional positive relationship between the two: specifically, higher income inequality promotes the spread of the shadow economy while the development of the shadow economy contributes to income inequality. Overall, these findings withstand a variety of robustness checks.
26 citations
TL;DR: In this paper, the authors examined the impacts of the Affordable Care Act (ACA) on behaviors related to future health risks after three years, using data from the Behavioral Risk Factor Surveillance System and an identification strategy that leverages variation in pre-ACA uninsured rates and state Medicaid expansion decisions.
Abstract: This paper examines the impacts of the affordable care act (ACA)—which substantially increased insurance coverage through regulations, mandates, subsidies, and Medicaid expansions—on behaviors related to future health risks after 3 years. Using data from the Behavioral Risk Factor Surveillance System and an identification strategy that leverages variation in pre-ACA uninsured rates and state Medicaid expansion decisions, we show that the ACA increased preventive care utilization along several dimensions, but increased risky drinking. These results are driven by the private portions of the law, as opposed to the Medicaid expansion. We also conduct subsample analyses by income and age.
18 citations
TL;DR: In this paper, the authors evaluate the effect of the main provisions of the ACA on entrepreneurship and find that the ACA led to a 3-4% increase in self-employment.
Abstract: One goal of the Affordable Care Act (ACA) was to enable entrepreneurship by increasing access to non-employer-based health insurance. We evaluate the extent to which the ACA was successful at this, providing some of the first estimates of the effect of the main provisions of the ACA on entrepreneurship. We are the first to focus specifically on older adults, whose higher average health costs and health insurance premiums make health insurance more salient to their labor market decisions. We do so using data from the American Community Survey and a difference-in-difference strategy, taking advantage of Medicare-eligibles as a control group less affected by the ACA. We find that the ACA led to a 3–4% increase in self-employment. We find similar increases in the likelihood of being self-employed in an incorporated business and of generating at least $5000 in business income, as well as a 9% increase in the likelihood of being self-employed full time. By lowering the cost of non-employer health insurance policies to older adults, the ACA appears to have eased their transition from employment to self-employment.
15 citations
TL;DR: It is found that the expansions increase Medicaid enrollment for both men and women, and it is suggested that the effect of health insurance on women's retirement decisions may depend on men’s labor market responses to health insurance.
Abstract: This paper investigates the effect of the Affordable Care Act’s Medicaid expansion on the retirement decision of low-educated adults aged 55–64. I employ a difference-in-differences strategy that exploits the timing and expansion decisions of states for adults without dependent children. I find that the expansions increase Medicaid enrollment for both men and women. The estimates also suggest that the expansions result in women retiring early, whereas there is no significant change in the retirement behavior of men. These findings imply that the effect of health insurance on women’s retirement decisions may depend on men’s labor market responses to health insurance.
9 citations
TL;DR: It is found that aging out from the ACA’s dependent coverage mandate is significantly associated with an increase in the probability of being employed, but there are no significant changes in hourly wage, weekly working hours or job mobility at age 26.
Abstract: This paper identifies the effect of the Affordable Care Act’s dependent coverage mandate on health insurance coverage and labor market outcomes among young adults by exploiting the discrete change in health insurance coverage at age 26. Using a regression discontinuity design, we find that aging out from the ACA’s dependent coverage mandate is associated with up to a 4.2-percentage-point decrease in private insurance coverage at age 26. We also find that aging out from the mandate is significantly associated with an increase in the probability of being employed. However, we do not find any significant changes in hourly wage, weekly working hours or job mobility at age 26.
7 citations
TL;DR: In this paper, a measure of multinational technology transfer is employed using data on technology licensing payments versus imports from U.S. multinationals across many countries and industries, and the main finding is that a large technology gap of an affiliate favors indirect knowledge transfer through imports.
Abstract: Multinational corporations have long been recognized as both major creators of technology and as conduits of technology transfer. Technology transfer can happen directly, when the affiliate licenses the technology from the parent, or indirectly, when the affiliate imports intermediate goods with embodied technology. This paper estimates the effect of the affiliates’ productivity relative to the frontier—the technology gap—on the choice of licensing the technology or importing it through intermediate goods. A novel measure of multinational technology transfer is employed using data on technology licensing payments versus imports from U.S. multinationals across many countries and industries. The main finding of this paper is that a large technology gap of an affiliate favors indirect knowledge transfer through imports. On average, a 10% increase in the technology gap decreases the share of licensing versus importing inputs embodying the technology by 1.5%. Considering that access to ideas and generation of new ones are crucial for long-run economic growth, and convergence of a country, this study highlights the policy implications for countries to raise their productivity levels.
7 citations
TL;DR: In this article, the authors used fractionally integrated techniques based on monthly and annual data to analyze the persistence in the inflation rate in Argentina. But the results show evidence of fractional integration and long memory behavior in both cases, being especially noticeable in the case of monthly data with shocks having long-lived effects.
Abstract: This paper deals with the analysis of the persistence in the inflation rate in Argentina. For this purpose, we use fractionally integrated techniques based on monthly and annual data. The results show evidence of fractional integration and long memory behavior in both cases, being especially noticeable in the case of monthly data with shocks having long-lived effects.
7 citations
TL;DR: This paper found that students in larger prerequisite classes earn lower grades in follow-up courses, although this effect is mitigated as the time between the two courses increases, consistent with the hypothesis that students learn less in larger class sections, leaving them with less knowledge to decay and that any increase in student maturity may more than make up for the forgotten material.
Abstract: Using administrative data from a land-grant university, we estimate how class size and waiting longer between courses impact student grades using paired prerequisite and follow-up courses. We find that students in larger prerequisite classes earn lower grades in follow-up courses, although this effect is mitigated as the time between the two courses increases. This finding is consistent with the hypothesis that students learn less in larger class sections, leaving them with less knowledge to decay and that any increase in student maturity may more than make up for the forgotten material.
5 citations
TL;DR: This paper examined how religious affiliation and strength of religious beliefs are associated with support for free-market capitalism and found significant variation in views of free markets according to education, gender, income level, and early life family structure.
Abstract: We examine how religious affiliation and strength of religious beliefs are associated with support for free-market capitalism. A new dataset created with an innovative online survey platform includes more detailed data than has been used in prior studies. Protestants and Catholics are on the whole found to be similar in their view of markets. Christians are found to be more pro-market than those who are not religious. Separate from affiliation, religiosity is positively correlated with support for free markets. Further, significant variation in views of free markets is seen according to education, gender, income level, and early life family structure.
5 citations
TL;DR: This article explored and improved the social-architecture model, an agent-based macromodel that discards counterfactual assumptions about the knowledge and foresight of agents and about the pervasiveness of equilibrium exchange.
Abstract: Microfoundations proposed for macroeconomics often include strong counterfactual assumptions about the knowledge and foresight of agents and about the pervasiveness of equilibrium exchange. This paper explores and improves the social-architecture model, an agent-based macromodel that discards such assumptions. In this monetary exchange economy, individuals transact at disequilibrium prices in shopping-based goods markets and search-based labor markets. GDP and unemployment distributions are emergent outcomes of the individual-level interactions. These distributions expose some problems in the original model. Modest model amendments largely address these problems. Some apparently central ingredients of the model prove to have little influence on the simulation results.
5 citations
TL;DR: This study uses data from the Consumer Expenditure Survey for 2010 through 2016 to compare trends in insurance coverage and consumption for household that did and did not expand eligibility for Medicaid under the Affordable Care Act in 2014.
Abstract: We use data from the Consumer Expenditure Survey for 2010 through 2016 to compare trends in insurance coverage and consumption for household that did and did not expand eligibility for Medicaid under the Affordable Care Act in 2014. Consistent with earlier studies, we find significant increases in Medicaid coverage in expansion relative to non-expansion states, and we find small but significant reductions in quarterly health spending of about $60, or just less than one-quarter of the baseline value. We find no significant change in non-health consumption as a result of Medicaid expansion.
TL;DR: This paper found a strong and robust relationship between personality traits, particularly conscientiousness, and low relative wealth among American men aged 60-66, and the size of the effect is similar to those of risk aversion and time preference and is not explained by these factors or by income, age, or family size.
Abstract: This paper builds on research linking personality traits to saving and wealth by focusing on determinants of very low wealth among American men aged 60–66. There is a strong and robust relationship between personality traits, particularly conscientiousness, and low relative wealth. The size of the effect is similar to those of risk aversion and time preference and is not explained by these factors or by income, age, or family size. The relationship between personality and wealth is found to be specific to people with low relative wealth and is independent of education and financial literacy.
TL;DR: The authors showed that countries using capital controls on short-term capital inflows receive a higher level of direct investment inflows, and that this effect is decreasing in the country's growth rate.
Abstract: Capital controls remain a common approach to capital flows management. Meanwhile, the IMF has revised its position regarding selective use capital controls. However, the effects of granular variation in capital controls by asset category and direction of flow are not fully documented. Using a new dataset on capital control measures, I find that countries using capital controls on short-term capital inflows receive a higher level of direct investment inflows, and that this effect is decreasing in the country’s growth rate. I show that this result is consistent with the interpretation that the capital control serves as a signal of stability in slower-growing countries.
TL;DR: In this article, the authors investigate the factors that influence China's decision to retaliate using antidumping (AD) filings from 1995 to 2015 and find that higher levels of China's country-specific imports, lower growth rates of Chinese GDP, and China's WTO membership increase the likelihood of retaliation.
Abstract: China is the most frequent target of antidumping (AD) filings and the sixth most frequent user of antidumping duties. In this paper, we investigate the factors that influence China’s decision to retaliate using AD filings from 1995 to 2015. We consider an AD filing by China to be retaliatory if it occurs within 1 year of an initial AD filing against them and determine the factors that explain retaliatory antidumping filings. We find that higher levels of China’s country-specific imports, lower growth rates of Chinese GDP, and China’s WTO membership increase the likelihood of retaliation. In contrast, higher import growth reduces AD retaliation.
TL;DR: This article explored the linkage between school quality, educational attainment and the wage gap and showed that lower-quality education can lead to lower human capital accumulation if agents anticipate future labor market discrimination.
Abstract: This paper explores the linkage between school quality, educational attainment and the wage gap. In a model of statistical discrimination based on both the quality and quantity of schooling, we show that lower-quality education can, on average, lead to lower human capital accumulation if agents anticipate future labor market discrimination. Because blacks in general have less access to good-quality schools compared to whites, this link provides a novel explanation for the differences in black–white educational attainment and the resulting wage gap.
TL;DR: Findings indicate that the ACA dependent care provision is associated reductions in the probability that young adults are serving on active duty and are sponsors on TRICARE health insurance plans, which shows a corresponding increase in participation in the National Guard/Reserves.
Abstract: The ACA dependent care provision mandated that private health insurance plans that offer dependent coverage must allow young adults to stay on parents’ insurance until age 26. In addition to the health and labor market-related outcomes that have been studied, the ACA dependent care provision also may have affected young adults’ decisions about whether or not to serve in the military and the type of military service chosen. In this paper, we use data from the 2008–2016 American Community Survey to test whether the ACA dependent care provision is associated with participating in the military, being on active duty, participating in the National Reserves, and having military health insurance. Findings indicate that the provision is associated reductions in the probability that young adults (mainly men) are serving on active duty and are sponsors on TRICARE health insurance plans. The results also show a corresponding increase in participation in the National Guard/Reserves.
TL;DR: The authors proposed a modification of an otherwise standard New Consensus open economy model to include an endogenous risk premium to show that a Taylor Rule that satisfies the Taylor Principle may lead to instability if exchange rate depreciations worsen the balance sheet of firms, exerting a negative effect on output and employment.
Abstract: This paper proposes a simple modification of an otherwise standard New Consensus open economy model. We include an endogenous risk premium to show that a Taylor Rule that satisfies the Taylor Principle may lead to instability if exchange rate depreciations worsen the balance sheet of firms, exerting a negative effect on output and employment. Thus, the adoption of Inflation Targeting and a flexible exchange rate regime introduces destabilizing forces in economies that are exposed to liability dollarization, and this helps to rationalize central bank interventions in the foreign exchange market to avoid large exchange rate fluctuations.
TL;DR: In this article, the authors provide an empirical framework for computing a flow measure of public debt called the debt-to-duration ratio, which is a unit-free measure of debt burden interpreted as the percentage of income for debt service or repayment.
Abstract: This paper provides an empirical framework for computing a flow measure of public debt called the debt-to-duration ratio. A ratio of this measure to GDP (DD-to-GDP) is a unit-free measure of debt burden interpreted as the percentage of income for debt service or repayment. Using monthly US Treasury data (1997–2018), we compare this measure to the debt-to-GDP ratio. The DD-to-GDP ratio is an alternative for use in discussions about sustainability of current levels of debt. An empirical test of the relationship between rising debt ratios and growth shows that duration has an important counteracting relationship with higher debt lowering growth but longer duration being associated with higher growth in the medium term.
TL;DR: In this paper, the authors develop a theoretical model that studies the effects of FDI on growth in the absence of channels through which the spillover effects of the FDI operate, and examine how FDI affects growth through its primary function of capital accumulation.
Abstract: We develop a theoretical model that studies the effects of FDI on growth in the absence of channels through which the spillover effects of FDI operate. By isolating the effects of FDI, we examine how FDI affects growth through its primary function of capital accumulation. Untangling the growth effects of FDI operating through capital accumulation from the spillover effects of FDI can help explain the ambiguity in the empirical evidence on the subject. The transitional dynamics are characterized by the interdependence of the variables of the source and recipient countries. We study the dynamic system through the model calibration analysis.
TL;DR: In this paper, the potential impact of a ban on menthol cigarettes on smoking when compared to intervention policies such as taxes and public smoking restrictions was investigated using detailed household-level data.
Abstract: I use detailed household-level data to investigate the potential impact of a ban on menthol cigarettes on smoking when compared to intervention policies such as taxes and public smoking restrictions. The results show that menthols are less addictive than non-menthols and that demand for menthol cigarettes is less price sensitive. Public smoking restrictions are unsuccessful in reducing menthol smoking, though they do reduce non-menthol consumption. Additionally, higher prices do not increase the likelihood of quitting for menthol smokers. These findings indicate that current policies are ineffective in curbing menthol smoking and strengthen the case for a complete ban.
TL;DR: In the US housing market, the price-to-rent ratio is volatile and autocorrelated with future returns and rent growth as mentioned in this paper, and returns exhibit time-varying volatility.
Abstract: In the US housing market, the price-to-rent ratio is volatile and autocorrelated. Returns on housing are positively autocorrelated. The price-to-rent ratio is negatively correlated with future returns and rent growth. Housing returns exhibit time-varying volatility. A benchmark asset pricing model is inconsistent with these facts. A model where prices adjust slowly to their fundamental value and where the agent does not know whether housing fundamentals are trend or difference stationary so has changing beliefs over time, increases the volatility of prices and the autocorrelation of returns. The price-to-rent ratio negatively forecasts returns and rent growth. This model generates time-varying volatility.
TL;DR: The authors argue that a broader and theoretically richer Divisia aggregate can reconcile these two approaches, showing that the rise and collapse of asset bubbles can drive excess supply of and demand for money, respectively, that quantity theorists point to as determinative of short-run economic fluctuations.
Abstract: A challenge for quantity-theoretic explanations of business cycles is that recessions manifest despite central banks’ scrupulousness to avoid falls in monetary aggregates, a fact which would seem to indicate a structural explanation. This paper argues that a broader and theoretically richer Divisia aggregate—which reflects changes in financial market liquidity even without changes in the quantity of any particular asset—can reconcile these two approaches. Liquidity shocks such as the rise and collapse of asset bubbles can drive excess supply of and demand for money, respectively, that quantity theorists point to as determinative of short-run economic fluctuations.
TL;DR: In this paper, a genetic algorithm selects agents' discount factors based on their parents' wealth, and the model converges to intermediate levels of the discount factor and religion where wealth is maximized.
Abstract: This paper explores the determinants of religiosity in a growth model. Religion reduces the time available for labor and the perceived likelihood of hell. A genetic algorithm selects agents’ discount factors based on their parents’ wealth. A higher discount factor increases savings, encouraging wealth accumulation, but also increases the discounted disutility of eternal damnation, incentivizing religion. The model converges to intermediate levels of the discount factor and religion where wealth is maximized. The genetic process selects agents’ level of patience, and the impact on religion is a side effect. Religion thus exists in equilibrium, even if it reduces genetic fitness.
TL;DR: In this article, a three-player dictator-game experiment was used to find that similar performance during a shared experience with a real-effort task causes a redistributor to privilege the stakeholder who performed similarly.
Abstract: Using a three-player dictator-game experiment, we find that similar performance during a shared experience with a real-effort task causes a redistributor to privilege the stakeholder who performed similarly. We generate the shared experience by varying whether a third-party decision maker and a stakeholder acquire money through an effortful activity or through random selection of a ticket. Our results have implications for how perceptions of one’s own self-determination and social connectedness based on perceived similarities affect redistributive preferences.
TL;DR: The authors examined the impact of providing voters with additional information related to candidates' views on particular issues on voters' tendency to cross the party line and found that treatment increases the likelihood that a voter will cross the partisan line by an average of 4 percentage points.
Abstract: We examine the impact of providing voters with additional information related to candidates’ views on particular issues on voters’ tendencies to cross the party line. When we randomize the provision of this information in an experimental setting where participants are undergraduate students at a large public university, we find that “treatment” increases the likelihood that a voter will cross the party line by an average of 4 percentage points. This corresponds to an approximately 20% decrease in partisan voting. Surprisingly, treatment effects are not more pronounced among voters whose opposing party’s candidate is the relatively moderate candidate in the election. They are, however, more pronounced among Democrat voters. These findings suggest that transparency, with respect to candidates’ views on particular issues, has a corroding effect on partisanship among a subset of voters.
TL;DR: The authors developed a search model where the impact of macro labor market conditions on a worker's search effort depends on whether these two factors are substitutes or complements in the job search process.
Abstract: During the Great Recession of 2007, unemployment reached nearly 10 percent and the ratio of un- employment to open positions (as measured by the Help Wanted OnLine Index) more than tripled. The weak labor market prompted an unprecedented extension in the length of time in which a claimant can collect unemployment insurance (UI) to 99 weeks, at an expense to date of $226.4 billion. While many claim that extending UI during a recession will reduce search intensity, the effect of weak labor market conditions on search remains a mystery. As a result, policymakers are in the dark as to whether UI ex- tensions reduce already low search effort during recessions or perhaps decrease excessive search, which causes congestion in the labor market. At the same time, modelers of the labor market have little em- pirical justification for their assumptions on how search intensity changes over the business cycle. This paper develops a search model where the impact of macro labor market conditions on a worker's search effort depends on whether these two factors are substitutes or complements in the job search process. Parameter estimates of the structural model using a sample of unemployment spells from the National Longitudinal Survey of Youth 1997 indicate that macro labor market conditions and individual search effort are complements and move together over the business cycle. The estimation also reveals that more risk-averse and less wealthy individuals exhibit less search effort.