Showing papers in "The American Economic Review in 2021"

Social Media, News Consumption, and Polarization: Evidence from a Field Experiment

Abstract: Does the consumption of ideologically congruent news on social media exacerbate polarization? I estimate the effects of social media news exposure by conducting a large field experiment randomly offering participants subscriptions to conservative or liberal news outlets on Facebook. I collect data on the causal chain of media effects: subscriptions to outlets, exposure to news on Facebook, visits to online news sites, and sharing of posts, as well as changes in political opinions and attitudes. Four main findings emerge. First, random variation in exposure to news on social media substantially affects the slant of news sites that individuals visit. Second, exposure to counter-attitudinal news decreases negative attitudes toward the opposing political party. Third, in contrast to the effect on attitudes, I find no evidence that the political leanings of news outlets affect political opinions. Fourth, Facebook's algorithm is less likely to supply individuals with posts from counter-attitudinal outlets, conditional on individuals subscribing to them. Together, the results suggest that social media algorithms may limit exposure to counter-attitudinal news and thus increase polarization.

Testing the Waters: Behavior across Participant Pools

Abstract: We leverage a large-scale incentivized survey eliciting behaviors from (almost) an entire undergraduate university student population, a representative sample of the US population, and Amazon Mechanical Turk (MTurk) to address concerns about the external validity of experiments with student participants. Behavior in the student population offers bounds on behaviors in other populations, and correlations between behaviors are similar across samples. Furthermore, non-student samples exhibit higher levels of noise. Adding historical lab participation data, we find a small set of attributes over which lab participants differ from non-lab participants. An additional set of lab experiments shows no evidence of observer effects.

Notching R&D Investment with Corporate Income Tax Cuts in China

Abstract: We study a Chinese policy that awards substantial tax cuts to firms with R&D investment over a threshold or "notch." Quasi-experimental variation and administrative tax data show a significant increase in reported R&D that is partly driven by firms relabeling expenses as R&D. Structural estimates show relabeling accounts for 24.2 percent of reported R&D and that doubling R&D would increase productivity by 9 percent. Policy simulations show that firm selection and relabeling determine the cost-effectiveness of stimulating R&D, that notch-based policies are more effective than tax credits when relabeling is prevalent, and that modest spill-overs justify the program from a welfare perspective.

Synthetic Difference In Differences

Abstract: We present a new perspective on the Synthetic Control (SC) method as a weighted least squares regression estimator with time fixed effects and unit weights. This perspective suggests a generalization with two way (both unit and time) fixed effects, and both unit and time weights, which can be interpreted as a unit and time weighted version of the standard Difference In Differences (DID) estimator. We find that this new Synthetic Difference In Differences (SDID) estimator has attractive properties compared to the SC and DID estimators. Formally we show that our approach has double robustness properties: the SDID estimator is consistent under a wide variety of weighting schemes given a well-specified fixed effects model, and SDID is consistent with appropriately penalized SC weights when the basic fixed effects model is misspecified and instead the true data generating process involves a more general low-rank structure (e.g., a latent factor model). We also present results that justify standard inference based on weighted DID regression. Further generalizations include unit and time weighted factor models.

Venting out : exports during a domestic slump

Abstract: En este articulo utilizamos variacion geografica plausiblemente exogena en la reduccion de la demanda interna causada por la Gran Recesion en Espana para documentar la existencia de una robusta relacion causal negativa a nivel de empresa entre cambios provocados por la demanda en las ventas internas y en los flujos de exportaciones. Las empresas manufactureras espanolas cuyas ventas internas se redujeron en mayor medida durante la crisis experimentaron un mayor incremento en sus flujos de exportacion, incluso una vez que se controla por sus determinantes de oferta, tales como sus costes laborales. Esta relacion negativa entre cambios en las ventas internas y cambios en los flujos de exportacion provocados por cambios de la demanda ilustra la capacidad de los mercados de exportacion para compensar el impacto negativo de shocks de demanda locales. Los resultados presentados en el articulo se racionalizan a traves de un modelo estandar de exportaciones con heterogeneidad de empresas que permite la existencia de costes marginales de produccion no constantes. Utilizando una version de este modelo estimada de manera estructural, concluimos que las respuestas a nivel de empresa a la caida de la demanda interna en Espana podrian explicar alrededor de la mitad del espectacular incremento de las exportaciones de bienes en Espana (el denominado «milagro exportador espanol») en el periodo 2009-2013.

Can Network Theory-Based Targeting Increase Technology Adoption?

Abstract: Can targeting information to network-central farmers induce more adoption of a new agricultural technology? By combining social network data and a field experiment in 200 villages in Malawi, we find that targeting central farmers is important to spur the diffusion process. We also provide evidence of one explanation for why centrality matters: a diffusion process governed by complex contagion. Our results are consistent with a model in which many farmers need to learn from multiple people before they adopt themselves. This means that without proper targeting of information, the diffusion process can stall and technology adoption remains perpetually low.

Aggregate Nominal Wage Adjustments: New Evidence from Administrative Payroll Data

Abstract: Using administrative payroll data from the largest U.S. payroll processing company, we document a series of new facts about nominal wage adjustments in the United States. We first show that per-period contract (``base'') wages are a large share of compensation and are more persistent than bonuses suggesting that base wages may be a better proxy for allocative wages than average hourly earnings. Nominal base wage declines are much rarer than previously thought with only 2\% of job-stayers receiving a nominal base wage cut during a given year. However, accounting for shifts in nominal wages of job-changers implies that \textit{aggregate} nominal wages are more flexible than the base nominal wages of job-stayers. Other forms of compensation, such as bonuses, work similarly to sales in the output price literature, and provide a margin of short-run adjustment which may be important for earnings dynamics and for financially constrained firms. In addition, nominal wage adjustments are state-dependent: downward aggregate nominal wage adjustments were much more common during the Great Recessions than in the subsequent recovery period, and these downward adjustments were concentrated in industries hit hardest by the recession and in shrinking firms. Finally, we provide evidence that the flexibility of new hire base wages is similar to that of existing workers. Collectively, our results can be used to discipline models of worker nominal wage adjustments and models of wage rigidity.

On Her Own Account: How Strengthening Women's Financial Control Affects Labor Supply and Gender Norms

Abstract: Author(s): Field, Erica; Pande, Rohini; Rigol, Natalia; Schaner, Simone; Moore, Charity Troyer

The Legacy of Colonial Medicine in Central Africa

Abstract: Between 1921 and 1956, French colonial governments organized medical campaigns to treat and prevent sleeping sickness. Villagers were forcibly examined and injected with medications with severe, sometimes fatal, side effects. We digitized 30 years of archival records to document the locations of campaign visits at a granular geographic level for five central African countries. We find that greater campaign exposure reduces vaccination rates and trust in medicine, as measured by willingness to consent to a blood test. We examine relevance for present-day health initiatives; World Bank projects in the health sector are less successful in areas with greater exposure.

Five Facts about Beliefs and Portfolios

Abstract: We study a newly designed survey administered to a large panel of wealthy retail investors. The survey elicits beliefs that are important for macroeconomics and finance, and matches respondents with administrative data on their portfolio composition, their trading activity, and their login behavior. We establish five facts in these data. (i) Beliefs are reflected in portfolio allocations. The sensitivity of portfolios to beliefs is small on average, but varies significantly with investor wealth, attention, trading frequency, and confidence. (ii) Belief changes do not predict when investors trade, but conditional on trading, they affect both the direction and the magnitude of trades. (iii) Beliefs are mostly characterized by large and persistent individual heterogeneity. Demographic characteristics explain only a small part of why some individuals are optimistic and some are pessimistic. (iv) Expected cash flow growth and expected returns are positively related, both within and across investors. (v) Expected returns and the subjective probability of rare disasters are negatively related, both within and across investors. These five facts provide useful guidance for the design of macro-finance models.

Types of Contact: A Field Experiment on Collaborative and Adversarial Caste Integration

Abstract: I estimate the effects of collaborative and adversarial intergroup contact. I randomly assigned Indian men from different castes to participate in cricket leagues or to serve as a control group. League players faced variation in collaborative contact, through random assignment to homogeneous-caste or mixed-caste teams, and adversarial contact, through random assignment of opponents. Collaborative contact increases cross-caste friendships and efficiency in trade, and reduces own-caste favoritism. In contrast, adversarial contact generally reduces cross-caste interaction and efficiency. League participation reduces intergroup differences, suggesting that the positive aspects of intergroup contact more than offset the negative aspects in this setting.

The macroeconomic effects of oil supply news: Evidence from OPEC announcements

Abstract: This paper studies how changes in oil supply expectations affect the oil price and the macroeconomy. Using a novel identification design, exploiting institutional features of OPEC and high-frequency data, I identify an oil supply news shock. These shocks have statistically and economically significant effects. Negative news leads to an immediate increase in oil prices, a gradual fall in oil production and an increase in inventories. This has consequences for the U.S. economy: activity falls, prices and inflation expectations rise, and the dollar depreciates—providing evidence for a strong channel operating through supply expectations.

Unwatched Pollution: The Effect of Intermittent Monitoring on Air Quality

Abstract: Intermittent monitoring of environmental standards may induce strategic changes in polluting activities. This paper documents local strategic responses to a cyclical, once-every-six-day air quality monitoring schedule under the federal Clean Air Act. Using satellite data of monitored areas, I show that air quality is significantly worse on unmonitored days. This effect is explained by short-term suppression of pollution on monitored days, especially during high-pollution periods when the city's noncompliance risk is high. Cities' use of air quality warnings increases on monitored days, which suggests local governments' role in coordinating emission reductions.

Job Seekers' Perceptions and Employment Prospects: Heterogeneity, Duration Dependence and Bias

Abstract: This paper uses job seekers’elicited beliefs about job finding to disentangle the sources of the decline in job-finding rates by duration of unemployment. We document that beliefs have strong predictive power for job finding, but are not revised downward when remaining unemployed and are subject to optimistic bias, especially for the long-term unemployed. Leveraging the predictive power of beliefs, we find substantial heterogeneity in job finding with the resulting dynamic selection explaining most of the observed negative duration dependence in job finding. Moreover, job seekers’beliefs underreact to heterogeneity in job finding, distorting search behavior and increasing long-term unemployment.

Knowledge Spillovers and Corporate Investment in Scientific Research

Abstract: Using data on 800,000 corporate publications and patent citations to these publications between 1980 and 2015, we study how corporate investment in research is linked to its use in the firm's inventions, and to spillovers to rivals. We find that private returns to corporate research depend on the balance between two opposing forces: the benefits from the use of science in own downstream inventions, and the costs of spillovers to rivals. Consistent with this, firms produce more research when it is used internally, but less research when it is used by rivals. As firms become more sensitive to rivals using their science, they are likely to reduce the share of research in R&D.

The Intergenerational Effects of a Large Wealth Shock: White Southerners After the Civil War

Abstract: The nullification of slave wealth after the US Civil War (1861–1865) was one of the largest episodes of wealth compression in history. We document that White Southern households that owned more slaves in 1860 lost substantially more wealth by 1870, relative to Southern households that had been equally wealthy before the war. Yet, their sons almost entirely recovered from this wealth shock by 1900, and their grandsons completely converged by 1940. Marriage networks and connections to other elite families may have aided in recovery, whereas transmission of entrepreneurship and skills appear less central.

The Nature of Firm Growth

Abstract: Only half of all startups survive past the age of ve and surviving businesses grow at vastly di erent speeds. Using micro data on employment in the population of U.S. businesses, we estimate that the lion's share of these differences is driven by ex-ante heterogeneity across fi rms, rather than by ex-post shocks. We embed such heterogeneity in a fi rm dynamics model and study how ex-ante differences shape the distribution of fi rm size, "up-or-out" dynamics, and the associated gains in aggregate output. "Gazelles" - a small subset of startups with particularly high growth potential - emerge as key drivers of these outcomes. Analyzing changes in the distribution of ex-ante fi rm heterogeneity over time reveals that gazelles are driven towards extinction, creating substantial aggregate losses.

Equilibrium Technology Diffusion, Trade, and Growth

Abstract: We study how opening to trade affects economic growth in a model where heterogeneous firms can adopt new technologies already in use by other firms in their home country. We characterize the growth rate using a summary statistic of the profit distribution: the mean-min ratio. Opening to trade increases the profit spread through increased export opportunities and foreign competition, induces more rapid technology adoption, and generates faster growth. Quantitatively, these forces produce large welfare gains from trade by increasing an inefficiently low rate of technology adoption and economic growth.

Closing the Gap: The Effect of Reducing Complexity and Uncertainty in College Pricing on the Choices of Low-Income Students

Abstract: High-achieving, low-income students attend selective colleges at far lower rates than upper-income students with similar achievement. Behavioral biases, intensified by complexity and uncertainty in the admissions and aid process, may explain this gap. In a large-scale experiment we test an early commitment of free tuition at a flagship university. The intervention did not increase aid: rather, students were guaranteed before application the same grant aid that they would qualify for in expectation if admitted. The offer substantially increased application (68 percent versus 26 percent) and enrollment rates (27 percent versus 12 percent). The results suggest that uncertainty, present bias, and loss aversion loom large in students' college decisions.

Feedbacks: Financial Markets and Economic Activity

Abstract: Our structural VAR with 10 monthly variables and identified by heteroscedasticity shows that credit and output growth are mostly positively associated. Negative reduced form responses to credit growth are attributed in our model to the monetary policy response to credit expansion shocks. Financial stress, measured by rises in interest rate spreads, is followed by declines in output and shrinkage of credit. We find two distinct sources of financial stress shocks. Neither credit aggregates nor rate spreads provide much advance warning of the 2008-9 crisis, but the spreads improve the model forecasts during the crisis.

The abolition of immigration restrictions and the performance of firms and workers: Evidence from Switzerland

Abstract: We study a reform that granted European cross-border workers free access to the Swiss labor market and had a stronger effect on regions close to the border. The greater availability of cross-border workers increased foreign employment substantially. Although many cross-border workers were highly educated, wages of highly educated natives increased. The reason is a simultaneous increase in labor demand: the reform increased the size, productivity, and innovation performance of skill-intensive incumbent firms and attracted new firms, creating opportunities for natives to pursue managerial jobs. These effects are mainly driven by firms that reported skill shortages before the reform.

Place-Based Drivers of Mortality: Evidence from Migration

Abstract: We estimate the effect of current location on elderly mortality by analyzing outcomes of movers in the Medicare population. We control for movers' origin locations as well as a rich vector of pre-move health measures. We also develop a novel strategy to adjust for remaining unobservables, using the correlation of residual mortality with movers' origins to gauge the importance of omitted variables. We estimate substantial effects of current location. Moving from a tenth to a ninetieth percentile location would increase life expectancy at age 65 by 1.1 years, and equalizing location effects would reduce cross-sectional variation in life expectancy by 15 percent. Places with favorable life expectancy effects tend to have higher quality and quantity of health care, less extreme climates, lower crime rates, and higher socioeconomic status.

Employer Consolidation and Wages: Evidence from Hospitals

Abstract: We test whether wage growth slows following employer consolidation by examining hospital mergers. We find evidence of reduced wage growth in cases where both (i) the increase in concentration induced by the merger is large and (ii) workers' skills are industry-specific. In all other cases, we fail to reject zero wage effects. We consider alternative explanations and find that the observed patterns are unlikely to be explained by merger-related changes besides labor market power. Wage growth slowdowns are attenuated in markets with strong labor unions, and wage growth does not decline after out-of-market mergers that leave local employer concentration unchanged.

Can Policy Change Culture? Government Pension Plans and Traditional Kinship Practices

Abstract: Policies may change the incentives that allow cultural practices to persist. To test this, I study matrilocality and patrilocality, kinship traditions that determine daughters' and sons' post-marriage residences, and thus, which gender lives with and supports parents in their old age. Two separate policy experiments in Ghana and Indonesia show that pension policies reduce the practice of these traditions. I also show that these traditions incentivize parents to invest in the education of children who traditionally coreside with them. Consequently, when pension plans change cultural practices, they also reduce educational investment. This finding further demonstrates that policy can change culture.

The Effect of High-Tech Clusters on the Productivity of Top Inventors

Abstract: The high-tech sector is concentrated in a small number of cities. The ten largest clusters in computer science, semiconductors, and biology account for 69 percent, 77 percent, and 59 percent of all US inventors, respectively. Using longitudinal data on 109,846 inventors, I find that geographical agglomeration results in significant productivity gains. When an inventor moves to a city with a large cluster of inventors in the same field, she experiences a sizable increase in the number and quality of patents produced. The presence of significant productivity externalities implies that the agglomeration of inventors generates large gains in the aggregate amount of innovation produced in the United States.

Mortgage Prepayment and Path-dependent Effects of Monetary Policy

Abstract: How much ability does the Fed have to stimulate the economy by cutting interest rates? We argue that the presence of substantial debt in fixed-rate, prepayable mortgages means that the ability to stimulate the economy by cutting interest rates depends not just on their current level but also on their previous path. Using a household model of mortgage prepayment matched to detailed loan-level evidence on the relationship between prepayment and rate incentives, we argue that recent interest rate paths will generate substantial headwinds for future monetary stimulus.

A Few Bad Apples? Racial Bias in Policing

Abstract: We estimate the degree to which individual police officers practice racial discrimination. Using a bunching estimation design and data from the Florida Highway Patrol, we show that minorities are less likely to receive a discount on their speeding tickets than White drivers. Disaggregating this difference to the individual police officer, we estimate that 42 percent of officers practice discrimination. We then apply our officer-level discrimination measures to various policy-relevant questions in the literature. In particular, reassigning officers across locations based on their lenience can effectively reduce the aggregate disparity in treatment.

Dynastic Human Capital, Inequality, and Intergenerational Mobility

Abstract: We study the importance of the extended family – or the dynasty – for the persistence in human capital inequality across generations. We use data including the entire Swedish population, linking four generations. This data structure enables us to – in addition to parents, grandparents and great grandparents – identify parents’ siblings and cousins, as well as their spouses, and the spouses’ siblings. We introduce and estimate a new parameter, which we call the intergenerational transmission of dynastic inequality. This parameter measures the between-dynasty variation in intergenerational transmission of human capital. We use three different measures of human capital: years of schooling, family income and an index of occupational status. Our results show that traditional parent-child estimates miss about half of the persistence across generations estimated by the extended model.

Exchange Rates and Prices: Evidence from the 2015 Swiss Franc Appreciation

Abstract: The removal of the lower bound on the EUR/CHF exchange rate in January 2015 provides a unique setting to study the implications of a large and sudden appreciation in an otherwise stable macroeconomic environment. Using transaction-level data on non-durable goods purchases by Swiss consumers, we measure the response of border and consumer retail prices to the CHF appreciation and how household expenditures responded to these price changes. Consumer prices of imported goods and of competing Swiss-produced goods fell by more in product categories with larger reductions in border prices and a lower share of CHF-invoiced border prices. These price changes resulted in substantial expenditure switching between imported and Swiss-produced goods. While the frequency of import retail price reductions rose in the aftermath of the appreciation, the average size of these price reductions fell (and more so in product categories with larger border price declines and a lower share of CHF-invoiced border prices), contributing to low pass-through into import prices.