Knowledge that Transforms

Can a temporary economic shock to an important local industry influence long-run city population? To answer this question I study the large temporary shock to British cities caused by the U.S. CivilWar (1861–1865), which reduced cotton supplies to Britain’s important cotton textile industry. I show that this event temporarily reduced the growth rate of cities specializing in cotton textile production, relative to other English cities, and led to a persistent change in the level of city population.

How does a shock to sex ratios affect marriage markets and fertility? I use the drastic change in sex ratios caused by World War II to identify the effects of unbalanced sex ratios on Russian women. Using unique archival data, the results indicate that male scarcity led to lower rates of marriage and fertility, higher nonmarital births, and reduced bargaining power within marriage for women most affected by war deaths. The impact of sex ratio imbalance on marriage and family persisted for years after the war's end and was likely magnified by policies that promoted nonmarital births and discouraged divorce.

We measure selection among high-skilled emigrants from Germany using predicted earnings. Migrants to less equal countries are positively selected relative to nonmigrants, while migrants to more equal countries are negatively selected, consistent with the prediction in Borjas (1987). Positive selection to less equal countries reflects university quality and grades, and negative selection to more equal countries reflects university subject and gender. Migrants to the United States are highly positively selected and concentrated in STEM fields. Our results highlight the relevance of the Borjas model for high-skilled individuals when credit constraints and other migration barriers are unlikely to be binding.

When choices are made from ordered lists, individuals can exhibit biases toward selecting certain options as a result of the ordering. We examine this phenomenon in the context of consumer response to the ordering of economics papers in an e-mail announcement issued by the NBER. We show that despite the effectively random list placement, papers listed first each week are about 30% more likely to be viewed, downloaded, and subsequently cited. We suggest that a model of “skimming” behavior, where individuals focus on the first few papers in the list due to time constraints, would be most consistent with our findings.

This study examines household portfolio choice through the retirement transition. I show that couples significantly decrease their stock allocations after retirement, whereas singles’ allocations remain relatively unchanged. Reallocations are concentrated among couples in which the wife is more risk averse than her husband. Husbands’ and wives’ respective retirement events are followed by opposite-signed changes in stock allocations. These findings are consistent with a model of collective household decision making in which spouses have heterogeneous risk preferences, and suggest that dynamics in the distribution of intrahousehold bargaining power generate time-varying household risk aversion.

We evaluate the effect that payday loan access has on credit and labor market outcomes of individuals in the U.S. Army. Using the conditional random assignment of service members to different locations, we employ three identification strategies: cross-sectional variation in state policies, within-term variation in payday lending access, and a difference-in-difference analysis using the national Military Lending Act. We find few adverse effects of payday loan access on service members when using any of these methods, even when we examine dozens of subsamples that explore potential differential treatment effects.

I conduct a series of tests of peer influence in juvenile incarceration facilities motivated by three mechanisms: criminal skill transfer, the formation of new criminal networks, and the social contagion of crime-oriented noncognitive factors. Identifying peer influence off natural variation in small cohorts within the same facility, I find evidence consistent with social contagion: exposure to peers who come from unstable homes and have high levels of aggression leads to an increase in crime after release, as well as an increase in crime-oriented attitudes and behaviors. This effect persists despite controlling for the criminal experience and gang affiliation of the cohort, and is found in settings where youths are unlikely to interact after release.

Spending on big-time college athletics is often justified on the grounds that athletic success attracts students and raises donations. We exploit data on bookmaker spreads to estimate the probability of winning each game for college football teams. We then condition on these probabilities using a propensity score design to estimate the effects of winning on donations, applications, and enrollment. The resulting estimates represent causal effects under the assumption that, conditional on bookmaker spreads, winning is uncorrelated with potential outcomes. We find that winning reduces acceptance rates and increases donations, applications, academic reputation, in-state enrollment, and incoming SAT scores.

We examine the extent to which vertical and horizontal market structure can together explain incomplete retail pass-through. To answer this question, we use scanner data from a large U.S. retailer to estimate product level pass-through for three vertical structures: national brands, private label goods not manufactured by the retailer, and private label goods manufactured by the retailer. Our approach circumvents issues associated with internal firm prices and demonstrates that accounting for horizontal market structure is important for measuring the effects of vertical integration and reduced double marginalization on pass-through.

Policies to correct market power and selection can be misguided when these forces coexist. We build a model of symmetric imperfect competition in selection markets that parameterizes the degree of market power and selection. We use graphical price-theoretic reasoning to characterize the interaction between these forces. Using a calibrated model of health insurance, we show that the risk adjustment commonly used to offset adverse selection can reduce coverage and social surplus. Conversely, in a calibrated model of subprime auto lending, realistic levels of competition can generate an oversupply of credit, implying that greater market power is desirable.